Flowers Foods, Inc. · NYSE:FLO
Flowers Foods — Investor Presentation (September 2013)
53 slides from Flowers Foods's investor presentation, Sep 3, 2013
Slide 1: Flowers Foods, September 2013
= Flowers September 2013
Slide 2: Highlights YTD 2013
Highlights YTD 2013 First Half 2013 Sales of $2.029 billion, up 28% Net income of $115.0 million, up 68%* Earnings per share of $.54, up 64%* Acquired Sara Lee/CA Acquired Wonder, Home Pride, Merita, Butternut, Nature’s Pride brands, 20 bakeries & 36 depots Poised to take advantage of marketplace op
Slide 3: U.S. Fresh Baking Industry
U.S. Fresh Baking Industry 2000: 8 key players Today: 3 key players
Slide 4: U.S. Fresh Bakery Category: Total $31.2 Billion
U.S. Fresh Bakery Category: Total $31.2 Billion Retail outlets total sales IRi MultiOutlet plus Convenience $24.5 billion White bread Soft variety bread Specialty bread Buns & rolls Breakfast breads Bagels English muffins Dinner breads & rolls Foodservice +$6.7 billion in bread and rolls sales Fresh
Slide 5: Category – Fresh Breads and Rolls at Retail
Category – Fresh Breads and Rolls at Retail Unit Share - Latest 52-weeks ending July 7, 2013 3.3% Other $14.1 billion in sales* 10.5% Dinner Bread/Rolls 22.1% White Loaf 10.8% Breakfast Items 22.9% Sandwich Buns & Rolls 20.0% Soft Variety Loaf 10.4% Specialty Premium Loaf Source: IRi MulitOutlet for
Slide 6: FLO – Strong #2 Position 2013 YTD
FLO – Strong #2 Position 2013 YTD Fresh bakery retail category $14.1 billion in sales Includes breads, buns, rolls, breakfast breads, English muffins, bagels, dinner breads/rolls 13.3% Flowers branded 4.0% Flowers store brand 32.5% Bimbo Bakeries 22.4% Other store brands 5.7% Pepperidge Farm 22.1% O
Slide 7: Category – Cake at Retail
Category – Cake at Retail $8.5 billion in sales 8.8% Flowers branded 2.6% Flowers store brand 14.2% Bimbo Bakeries 23.8% McKee 24.3% Other store brands 26.2% All other Source: IRi for Total US Multi Outlet plus Convenience (YTD through 7/7/13)
Slide 8: Flowers Foods
Flowers Foods Focused on Fresh Baked Foods for 94 Years One family-owned bakery in Thomasville, GA 1968 Listed publicly as FLO 1968 to 2013 More than 100 acquisitions Flowers Foods Today Proven business model Efficient bakeries/distribution Experienced team #1 bread in U.S. Strong cake brand Powerfu
Slide 9: Growing the Flowers Way
Growing the Flowers Way Approximately 35% of U.S. population served Sales $1.5 billion More than 77% of U.S. population served Sales of $3.79 billion to $3.82 billion (est.)
Slide 10: A Strategy That Works…
A Strategy That Works… Bake Smart Innovate to improve processes, enhance quality, reduce costs, conserve resources Give Extraordinary Service Go beyond the expected to meet customer needs Grow Sales Develop new and expand core markets through new customers, new products, strong brands, acquisitions
Slide 11: Acquisitions since 2001
Acquisitions since 2001 2004 Sara Lee TX bakery 2005 Royal Cake Co. 2006 Derst Baking Co. 2007 Key Mix 2008 Holsum Bakery 2008 ButterKrust Bakery 2009 Specialty Blending 2009 Leo’s Foods 2011 Tasty Baking 2012 Lepage Bakeries 2013 Sara Lee/CA 2013 Hostess Bread Bakeries/Brands Approximately $1.7 bil
Slide 12: Successful integration
Successful integration Lepage Bakeries July 2012 Acquisition of Lepage Bakeries Fall 2012 Introduced Tastykake & Nature’s Own Today Tastykakes in more than 2,700 stores Nature’s Own in almost 1,900 stores Sara Lee/California February 2013 Acquisition of distribution rights in CA June 2013 Rollout co
Slide 13: Acquisition – Hostess Bread Assets
Acquisition – Hostess Bread Assets Strategic Rationale Iconic Brands with power in the marketplace 96% brand awareness* Highest household penetration of any white loaf Regional brands have strong consumer loyalty * Hostess Brands data
Slide 14: Acquisition – Hostess Bread Assets
Acquisition – Hostess Bread Assets Strategic Rationale Brand Portfolio Opportunity Acquired brands strengthen Flowers’ brand portfolio Opportunity to consolidate portfolio with the re-introduction of Wonder and super regional brands. NATIONAL REGIONAL Healthy, soft-variety bread White bread for fami
Slide 15: Acquisition – Hostess Bread Assets
Acquisition – Hostess Bread Assets Strategic Rationale Provides production capacity that can be reopened as consumer demand grows Bread facility Cake facility Combined facility
Slide 16: Strength of Acquired Brands
Strength of Acquired Brands Sales at retail prior to Hostess’ exit $397 million $156 million $123 million $109 million $43 million Wonder Brand highest household penetration of any white loaf vendor highest white bread branded trial and repeat rate in U.S. Home Pride Wheat #4 overall SKU in fresh pa
Slide 17: Brands Reintroduction – early Fall 2013
Brands Reintroduction – early Fall 2013
Slide 18: Wonder Bread – Classic. Delicious. Bread.
Wonder Bread – Classic. Delicious. Bread. 96% brand awareness 57% have purchased within the last year 40% will probably/definitely purchase within the next six months 42% somewhat/completely agree Wonder Bread is fun 66% feel Wonder bread is not just for kids 74% feel Wonder bread is a legendary par
Slide 19: Marketing Initiative NASCAR Sponsorship
Marketing Initiative NASCAR Sponsorship
Slide 20: Children’s Miracle Network Sponsorship
Children’s Miracle Network Sponsorship Wonder’s back—and gives back!
Slide 21: Strength of Acquired Brands
Strength of Acquired Brands Opportunity for growth in FLO expansion markets Acquired brands dollar share prior to Hostess’ exit Kansas City 20.1 Cleveland 10.2 Cincinnati/Dayton 10.2 New York 8.6 Columbus 7.1 Indianapolis 6.7 Source: Symphony IRi Scan data 52 weeks thru 10.28.12
Slide 22: Strength of Acquired Brands
Strength of Acquired Brands Opportunity for growth in Flowers’ expansion markets Acquired brands dollar share FLO Current prior to Hostess’ exit Dollar Share Kansas City 20.1 0 Cleveland 10.2 0 Cincinnati/Dayton 10.2 4.3 New York 8.6 0.5 St. Louis 8.6 7.7 Columbus 7.1 1.3 Indianapolis 6.7 6.2 Source
Slide 23: Flowers Newer Markets Offer Tremendous Growth Potential
Flowers Newer Markets Offer Tremendous Growth Potential 77% of U.S. population currently has access to Flowers’ fresh breads, buns, rolls Indicates FLO share in individual expansion markets Indicates FLO share in expansion states IRi South Market FLO DSD Territory outside IRi South 48% of FLO popula
Slide 24: Expansion Markets Growth – 2009 to 2013
Expansion Markets Growth – 2009 to 2013 FLO share growth 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Calendar Year 2009 Calendar Year 2010 Calendar Year 2011 Calendar Year 2012 YTD Ending Aug 4, 2013 Market Date Entered Baltimore/Washington 2003 Louisville, KY 2005 St. Louis 2008 Indianapolis 2009
Slide 25: Brand Strength
Brand Strength Sales at Retail Value $343 million 2003 2013 Projected Sales estimated using internal sales data. All dollars shown as retail; includes Whitewheat
Slide 26: Brand Strength
Brand Strength Sales at Retail Value $408 million $225 million Projected Flowers Foods acquired Tasty Baking in 2011. Sales estimated using internal sales data; all dollars shown as retail.
Slide 27: Top selling branded breads prior to Hostess’ exit
10 top selling branded breads prior to Hostess’ exit With acquired brands, Flowers now has 6 of top 10 items In millions ACV Item Dollar Sales Unit Sales Wtd Dist. Nature’s Own Honey Wheat $253.9 96.0 49.8 Thomas Original English Muffins $185.5 76.7 87.9 Nature’s Own 100% Whole Wheat $155.1 59.2 49.
Slide 28: Brand Portfolio
Brand Portfolio National Brands Regional Brands Sara Lee (bread, buns, rolls) Earthgrains California Distribution Rights
Slide 29: Flowers Newer Markets Offer Tremendous Growth Potential
Flowers Newer Markets Offer Tremendous Growth Potential 77% of U.S. population currently have access to Flowers’ fresh breads, buns, rolls FLO share total U.S. Market 13.3% YTD through 7/7/13 13.9% 4 weeks ended 8/4/13 48% of FLO population served is in the IRi South Market FLO share IRi South: 29.5
Slide 30: Growing the Flowers Way
Growing THE FLOWERS WAY
Slide 31: Long-Term Growth Objectives announced 2011
Long-Term Growth Objectives announced 2011 Sales growth of 5% to 10% Organic growth 3% to 5% Acquisitions 2% to 5% ROI – 13% to 15% EBITDA Margin – 11% to 13% EPS double digits
Slide 32: Revenue Drivers
Revenue Drivers Volume from acquired brands Volume from core brands Price/Mix
Slide 33: Financial Update
Financial Update Sales 10-year CAGR: 8.65% EBITDA* 10-year CAGR: 10.44% In billions $3.05 $1.33 In millions $330.8 $122.6 2002 2012 2002 2012(1) (1)Adjusted EBITDA excluding acquisition-related charges *Earnings before interest, taxes, depreciation, and amortization. See reconciliation of non-GAAP m
Slide 34: Financial Update
Financial Update Net Income 10-year CAGR: 12.26% EPS 10-year CAGR: 13.77% In millions $44.8 $142.4 $.19 $.69 2012(1) (1) (1)Adjusted net income and EPS excluding acquisition-related charges. See reconciliation of non-GAAP measures at the end of this slide presentation.
Slide 35: Gross Margin
Gross Margin(1) In thousands $334,774 $358,776 $545,512 $426,539 Gross Margin Drivers Efficiencies Volume Commodities Revenue 3Q12 4Q12 1Q13 (3) 2Q13 Margin2 46.7% 47.9% 48.2% 47.5% 1Gross margin is defined as sales less materials, supplies, labor, and other production costs, excluding depreciation
Slide 36: Free Cash Flow
Free Cash Flow* $584 million 5 Years 2008 - 2012 Uses of Cash Debt Repayment Dividends Capital Expenditures Share Repurchases $129 million Current Year 1H 2013 *Cash provided by operating activities less capital expenditures. See reconciliation of non-GAAP measures at the end of this slide presentat
Slide 37: Debt Capital Summary Following Hostess Transaction
Debt Capital Summary Following Hostess Transaction 10-Year Senior Notes $400,000,000 Q2 2013 Unsecured Term Loan $300,000,000 Unsecured Credit Facility* $500,000,000 A/R Securitization** $150,000,000 As of Aug 8, Total Debt $905,028,000 EBITDA-LTM*** $397,239,000 Leverage Ratio 2.3x *$79 million out
Slide 38: Cash Deployment
Cash Deployment 2008 to 2012 (millions) Return to Shareholders 33% Share repurchases $169.0 Dividends $351.8 Invested in Growth 67% Acquisitions $677.5 Capital expenditures $404.2
Slide 39: Capital Expenditures
Capital Expenditures In millions $89.1 $2.1 $87.0 $86.9 $14.7 $72.2 $112.0 $13.5 $98.5 $79.2 $67.3 $90.0 to $100.0 2008* 2009 2010 2011** 2012** 2013 Projected New bakery in Bardstown, KY 6 new production lines 2010 – to date Shipping automation at 22 bakeries Construction of new bread line in Oxfor
Slide 40: Creating Shareholder Value
Creating Shareholder Value 2008 to 2Q2012 (millions) Cash Dividends $397.3 Share repurchases $172.8 TOTAL $570.1 Market Capitalization In billions 78.0% increase $2.466 8/29/2008 8/29/2013
Slide 41: First Half 2013
First Half 2013 Dollars in thousands $ % increase % of sales Sales $2,028,963 28.4% EBITDA(1) $244,928 51.2% 12.1% EBIT(1) $184,996 68.1% 9.1% EPS(1) $0.54 63.6% (1)Excluding bargain purchase accounting gain and acquisition-related costs. See reconciliation of non-GAAP measures at the end of this sl
Slide 42: Second Half 2013
Second Half 2013 Cost Factors Incremental Interest Expense One-time Acquisitions Costs Plant Carrying Costs* Depreciation and Amortization* $3.4 million $5.0 million to $6.0 million $8.0 million to $9.0 million $5.5 million to $6.0 million *Related to acquired bakeries
Slide 43: Flowers Foods 2013 Guidance
Flowers Foods 2013 Guidance Sales $3.79 billion to $3.82 billion Earnings Per Share* $.92 to $.98 Gross Margin Forecast (full year) 47.5% to 48.0% Interest Expense Forecast (full year) $29 million to $31 million Tax Rate* 35.5% to 36.0% Average Shares Outstanding Forecast 211 million Capital Expendi
Slide 44: Acquisition – Hostess Bread Assets
Acquisition – Hostess Bread Assets Financial Summary Purchase Price: $355 million Assets: 5 brands 20 bakeries 36 depots Funding: $300 million unsecured term loan $150 million A/R securitization* * $100 million drawn
Slide 45: Financial View
Financial View Hostess acquisition differs from traditional acquisitions —Idled assets —Exited market prior to acquisition —Financial aspects Opportunities for growth with Hostess acquisition Leverage assets and brands —Incremental revenue growth —Margin expansion Capacity utilization Logistics impr
Slide 46: Flowers Foods Strengths
Flowers Foods Strengths Clear strategy for growth Proven ability to execute, create value Strong brands, delicious products Efficient bakeries, effective distribution Outstanding team Culture and leadership continuity
Slide 47: Growing the Flowers Way
Growing THE FLOWERS WAY
Slide 48: Safe Harbor
Safe Harbor Today’s presentation includes forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, particularly statements regarding future financial and operating results of Flowers Foods and its business. These statements
Slide 49: Information Regarding Non-GAAP Financial Measures
Information Regarding Non-GAAP Financial Measures The company prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). However, from time to time, the company may present in its public statements, press releases, and SEC filings, non-GAA
Slide 50: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Net Income to Adjusted Net Income (Dollars in thousands) 1H2012 1H2013 Net Income $66,323 $159,735 Bargain Purchase Accounting Gain ------- <51,320> Acquisition-Related Costs 2,168 6,610 Adjusted Net Income $68,491 $115,025 % Increase 68% Diluted EPS to
Slide 51: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Diluted EPS Reported EPS $0.66 Bargain Purchase Accounting Gain ------- Acquisition-Related Costs $0.03 Adjusted EPS $0.69 Net Income to Adjusted EBITDA (in thousands) 2Q13 LTM 2012 Ended July 13, 2013 1H2013 Net Income $136,121 $229,533 $159,735 Income
Slide 52: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Net Income to Adjusted Net Income (in thousands) Reported Net Income $136,121 Acquisition-Related Costs, Net of Tax $6,242 Adjusted Net Income $142,363 Gross Margin (in thousands) 3Q12 4Q12 1Q13(1) 2Q13 Sales $717,282 $749,442 $1,130,810 $898,153 Materia
Slide 53: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures Free Cash Flow (in thousands) 2008 to 2012 1H2013 Cash Provided by Operating Activites $988,101 $175,602 Additions to Property, Plant and Equipment <$403,779> <$46,335> Free Cash Flow $584,322 $129,267 EBIT to Adjusted EBIT (in thousands) 1H2013 Reported
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