Flowers Foods, Inc. · NYSE:FLO
Flowers Foods — Investor Day (March 2013)
51 slides from Flowers Foods's investor day presentation, Mar 20, 2013
Slide 1: Analysts Event at the NYSE
Analysts Event at the NYSE March 20, 2013 1
Slide 2: Forward-looking Statement
Forward-looking Statement 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. The
Slide 3: Operating Environment Continues to Improve
Operating Environment Continues to Improve YTD FY13 Sales up 20% to 25% Earnings outlook strong Future looks bright Baking industry consolidation 3
Slide 4: U.S. Fresh Baking Industry Consolidation
U.S. Fresh Baking Industry Consolidation 2000 2005 2013* *Does not include the more than 80 independent and specialty bakers serving markets across the country today. 4
Slide 5: Flowers Foods Acquisitions
Flowers Foods Acquisitions 2004 Sara Lee TX bakery 2005 Royal 2006 Derst 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 $871 million in total acquired sales 5
Slide 6: Long-Term Objectives
Long-Term Objectives 2000 2012 Approximately 35% of U.S. population served More than 70% of U.S. population served Sales $1.5 billion Sales $3.1 billion 6
Slide 7: FLO Reach in Mid-2013
FLO Reach in Mid-2013 FLO brands available to a minimum of 77% of U.S. population Note: Long-term goal announced 2011 was to reach at least 75% of the U.S. population by 2016 7
Slide 8: Performance Summary 2003-2012
Performance Summary 2003 - 2012 SALES DILUTED EPS CAGR: 8.65% CAGR: 13.51% At 2003 Analysts Day, the FLO team announced its initiative to expand market reach strategically, increase sales, and deliver earnings in line with goals. 8
Slide 9: Long-Term Growth Objectives announced 2011
Long-Term Growth Objectives announced 2011 Sales growth of 5% to 10% Organic growth Acquisitions 3% to 5% 2% to 5% ROI – 13% to 15% EBITDA Margin – 11% to 13% EPS double digits 9
Slide 10: FLO Heritage – Foundation for the Future
FLO Heritage – Foundation for the Future Focused on baking for 94 years Baking expertise Growth through more than 100 acquisitions Second-largest baker in the U.S. Work the FLOWERS Way 10
Slide 11: The Flowers Way
THE FLOWERS WAY Our Vision Together we work to be a truly exceptional company focused on growth opportunities for grain-based foods Our Mission To drive sustainable growth that enhances value for our shareholders, team members, distributors, customers, consumers, and communities Our Guiding Principl
Slide 12: The Flowers Way
THE FLOWERS WAY Grow Sales Develop new and core markets through new customers, new products, strong brands, and acquisitions Invest Wisely Use technology and efficiencies to be the low-cost producer of delicious bakery foods Give Extraordinary Service Go beyond the expected to meet customer needs Ba
Slide 13: Flowers' Overarching Purpose
Flowers’ Overarching Purpose Deliver delicious bakery foods consumers love! 13
Slide 14: U.S. Fresh Bakery Category Total $27.5 Billion
U. S. Fresh Bakery Category Total $27.5 Billion Retail outlets total sales Foodservice and Outlets Symphony IRI Panel for All Outlets +$6.3 billion in bread and rolls sales $21.2 billion White bread Soft variety bread Cake Specialty bread Fresh $4.9 billion Buns & rolls packaged breads Bre
Slide 15: FLO – Strong #2 Position 2012
FLO – Strong #2 Position 2012 11.1% Flowers branded 2.4% Flowers store brand 32.4% BBU/Sara Lee 23.0% Other bakers’ store brands 19.6% 5.2% Independent/ Pepperidge Farm Specialty bakers 6.3% Hostess Brands Exited market November 2012 IRI Total US Census Region MultiOutlet data latest 52 weeks ending
Slide 16: FLO – Strong #2 Position 2013 YTD
FLO – Strong #2 Position 2013 YTD 12.7% Flowers branded 2.3% Flowers store brand 33.8% BBU/Sara Lee 23.5% Other store brands 21.9% 5.8% Independent/ Pepperidge Farm Specialty bakers IRI Total US Census Region MultiOutlet YTD through 2/17/13; chart data should not be used for historical comparison be
Slide 17: FLO Overview
FLO Overview Distribution Sales Channels 18% Direct to customers’ warehouses 26% Foodservice 82% 74% Direct store delivery (DSD) Retail Pie chart data for FY 2012. Chart data should not be used for historical comparisons since some business has shifted between segments and because of changes in geog
Slide 18: Flowers' Strengths Today
Flowers’ Strengths Today Clear strategy for growth Proven ability to execute, create value Strong brands, delicious products Efficient bakeries, effective distribution Outstanding team Culture and leadership continuity 18
Slide 19: Brand Portfolio
BRAND PORTFOLIO Regional Brands California Sara Lee (bread, buns, rolls) Earthgrains 19
Slide 20: Brand Strength
Sales at retail BRAND STRENGTH $1 billion $343 million 2003 2013 Projected Sales estimated using internal sales data; All dollars shown as retail; Includes Whitewheat 20
Slide 21: Brand Strength
Food, fitness, health magazine ads, FSI coupons, digital ads, Facebook banners, PR BRAND STRENGTH 21
Slide 22: More than $350 million in retail sales
More than $350 million in retail sales On 4,600 routes serving almost 50,000 stores Fastest-growing cake brand in the South Arizona and Nevada expansion underway 22
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Slide 24: Tasty sales in millions
Sales in millions $276 $90 FLO DSD territory $170* $186 Tasty core market 2010 2013 Projected *Net sales reported by Tasty Baking Co. in 2010. Flowers Foods acquired Tasty in 2011. 24
Slide 25: Brand Strength
TV, radio, digital, event PR; sweepstakes; blogger reviews BRAND STRENGTH 25
Slide 26: Acquisition Update
Acquisition Update Lepage : Bakeries Bakers of | Barowsky's and \ Country Kitchen ‘| Breads s =i FlowersFoods
Slide 27: Integration Progress
Integration Progress 07/12 Acquired Lepage Bakeries 10/12 Introduced Tastykake– 433 stores 11/12 Introduced Nature’s Own – 249 stores Tastykake in more than 2,000 stores Today Nature’s Own in more than 1,750 stores 27
Slide 28: Opportunities in core and new markets
Opportunities in core and new markets Adding distribution routes Product innovation Potential for products in FLO markets 28
Slide 29: Sara Lee CA
Sara Lee CA Acquired brands in CA ($134 million in sales) and Stockton, CA bakery for $50 million May 20 Four-phase rollout in CA June 17 Growing sales April 22 Statewide distribution by mid-June Feb 25 Great support from all CA customers Adding 15 million in new population in N CA 29
Slide 30: DSD Growth 2012 - 2013
DSD Growth 2012 - 2013 Number of store locations served companywide 135,528 114,001 March 2012 Jan-12 March 2013 Jan-13 Store count through Week 10 2012 vs. Week 10 2013 30
Slide 31: Hostess Timeline
Hostess Timeline 11/16/12 Hostess exits market FLO teams begin serving new customers; 11/17/12 new business across DSD territory 1/11/13 FLO agrees to buy certain Hostess brands, assets 2/28/13 FLO declared winning bidder Bid review by bankruptcy court; 3/19/13 regulatory review underway 31
Slide 32: Hostess Transaction
Hostess Transaction 5 Hostess brands 20 closed bakeries 38 depots $360 million purchase price 32
Slide 33: Supply Chain: Focus on Efficiency
Supply Chain: Focus on Efficiency Efficiency improvement positioned FLO for current market needs 93.3% 87.9% This 5.4% increase in efficiency represents the equivalent capacity of 2 ½ bakeries. 2008 2012 33
Slide 34: Continuous Improvement in Productivity
Continuous Improvement in Productivity Capacity expansion New Oxford bread line Logistics optimization Acquisition integration Efficiency improvements Waste reduction / recovery Innovation Summer Blitz campaign 34
Slide 35: The Flowers Way – Key Strength
The Flowers Way – Key Strength Nurturing our unique culture for future generations Team spirit Respect Appreciation Understanding the business Going the extra mile to serve customers, consumers, the team Opportunity for advancement 35
Slide 36: FLO Long-Term Growth
FLO Long-Term Growth By mid-2013, FLO brands will be available to more than 77% of U.S. population. Potential growth 36
Slide 37: Financial Update
Financial Update $343 Sales EBITDA* 10-year CAGR: 8.65% 10-year CAGR: 10.44% In billions In millions $330.8 $3.05 $1.33 $122.6 2002 2012 2002 2012 (1) (1)Adjusted EBITDA excluding one-time acquisition-related charges *Earnings before interest, taxes, depreciation, and amortization. See reconciliatio
Slide 38: Financial Update
Financial Update $343 Net Income EPS 10-year CAGR: 12.26% 10-year CAGR: 13.51% In millions $142.4 $1.03 $44.8 $.29 2002 2012 (1) 2002 2012 (1) (1)Adjusted net income and EPS excluding one-time acquisition-related charges. See reconciliation of non-GAAP measures at the end of this slide presentation.
Slide 39: Financial Update
Financial Update Improving EBIT margin 8.0% 8.0% 7.4% 7.2% 7.3% 6.6% 5.5% Q2* Q3* Q4* Q1 Q2* Q3* Q4* 2011 2012 *Adjusted EBIT margin excluding one-time acquisition-related and facility closing costs. See reconciliation of non-GAAP measures at the end of this slide presentation. 39
Slide 40: Free Cash Flow
Free Cash Flow* $150 In millions 5-year total: $584 million $8 2008 2012 *Cash provided by operating activities less capital expenditures. See reconciliation of non-GAAP measures at the end of this slide presentation. 40
Slide 41: Cash Deployment
Cash Deployment 2008 to 2012 (millions) Return to Shareholders 33% Share repurchases $169.0 Dividends $373.9 (Includes quarterly dividend paid March 15, 2013) Invested in Growth 67% Acquisitions $677.5 Capital Expenditures $404.2 41
Slide 42: Capital Expenditures
Capital Expenditures In millions 2009 Bardtown, KY – $55.5 million $112.0 2010 $13.5 6 new lines added (1 bun, 2 $89.1 $86.9 sandwich rounds, & 3 cake) $2.1 $14.7 2010 – 2012 Shipping automation implemented at 18 bakeries $75.0 2012 $87.0 $72.2 $98.5 $79.2 $67.3 to Began construction of $80.0 bread
Slide 43: Debt
Debt (000 omitted) 2008 2009 2010 2011 2012 Debt $286,417 $251,668 $127,302 $326,174 $607,012 Interest Expense $6,137 $11,587 $8,164 $10,172 $23,411 Leverage** 1.1X 0.9X 0.4X 1.1X 1.9X Interest Coverage*** 41.7X 24.8X 35.6X 27.9X 13.7X Debt Maturities* 2013 $72.0 million 2014 $3.7 million 2015 $1.4
Slide 44: Committed to Creating Shareholder Value
Committed to Creating Shareholder Value 2008 to 1Q2013 (millions) Dividends $373.9 (Includes quarterly dividend paid March 15, 2013) Share Repurchases $169.0 Total $542.9 44
Slide 45: Market Capitalization
Market Capitalization 5-year CAGR: 7.61% In billions $3.991 $3.172 $2.198 2007 2012 3/15/2013 45
Slide 46: Factors Affecting 2013 Outlook
Factors Affecting 2013 Outlook Lepage integration Sara Lee CA integration Tastykake expansion Hostess bread brands Cake business Input costs 46
Slide 47: 2013 Outlook
2013 Outlook* Long-Term Q1 2013 Full-Year Growth Objectives Tracking 2013 Net Sales 5% to 10% Up 20% to 25% Strong double-digits EBITDA 11% to 13% margin In line In line EPS Double-digits Strong Strong *Excluding one-time acquisition-related costs 47
Slide 48: Key Messages
Key Messages Clear strategy for growth Focus on acquisition integration Innovation and acquisitions key growth drivers Strong cash flow growth 48
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 Measures
Reconciliation of Non-GAAP Measures Diluted EPS 2012 Reported EPS $0.98 One-time acquisition-related costs $0.05 EPS excluding one-time charges $1.03 Net Income to Adjusted EBITDA (in thousands) 2012 Net income $136,121 Income tax expense $72,651 Interest expense, net $9,739 Depreciation and amortiz
Slide 51: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures Free Cash Flow (in thousands) 2008 2012 Cash provided by operating activities $94,872 $216,880 Additions to property, plant and equipment ($86,861) ($67,259) Free cash flow $8,011 $149,621 Net Income to EBITDA (in thousands) 2008 2009 2010 2011 2012 Net income $11