Flowers Foods : 4Q & FY 2020 Results Presentation

Regarding Forward-Looking Statements

Statements contained in this slide presentation and certain other written or oral statements made from time to time by Flowers Foods, Inc. (the "company", "Flowers Foods", "Flowers", "us", "we", or "our") and its representatives that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to current expectations regarding our future financial condition and results of operations and the ultimate impact of the novel strain of coronavirus ("COVID-19") on our business, results of operations and financial condition and are often identified by the use of words and phrases such as "anticipate," "believe," "continue," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "will," "would," "is likely to," "is expected to" or "will continue," or the negative of these terms or other comparable terminology. These forward-looking statements are based upon assumptions we believe are reasonable. Forward-looking statements are based on current information and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. Certain factors that may cause actual results, performance, liquidity, and achievements to differ materially from those projected are discussed in our Annual Report on Form 10-K (the "Form 10-K") and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission ("SEC") and may include, but are not limited to, (a) unexpected changes in any of the following: (1) general economic and business conditions; (2) the competitive setting in which we operate, including advertising or promotional strategies by us or our competitors, as well as changes in consumer demand; (3) interest rates and other terms available to us on our borrowings; (4) energy and raw materials costs and availability and hedging counter-party risks; (5) relationships with or increased costs related to our employees and third-party service providers; (6) laws and regulations (including environmental and health-related issues); and (7) accounting standards or tax rates in the markets in which we operate, (b) the ultimate impact of the COVID-19 outbreak and measures taken in response thereto on our business, results of operations and financial condition, which are highly uncertain and are difficult to predict, (c) the loss or financial instability of any significant customer(s), including as a result of product recalls or safety concerns related to our products, (d) changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store branded products, (e) the level of success we achieve in developing and introducing new products and entering new markets, (f) our ability to implement new technology and customer requirements as required, (g) our ability to operate existing, and any new, manufacturing lines according to schedule, (h) our ability to execute our business strategies which may involve, among other things, (1) the integration of acquisitions or the acquisition or disposition of assets at presently targeted values, (2) the deployment of new systems and technology, and (3) an enhanced organizational structure, (i) consolidation within the baking industry and related industries, (j) changes in pricing, customer and consumer reaction to pricing actions, and the pricing environment among competitors within the industry, (k) disruptions in our direct-store-delivery distribution model, including litigation or an adverse ruling by a court or regulatory or governmental body that could affect the independent contractor classifications of the independent distributors, (l) increasing legal complexity and legal proceedings that we are or may become subject to, (m) increases in employee and employee-related costs, (n) the credit, business, and legal risks associated with independent distributors and customers, which operate in the highly competitive retail food and foodservice industries, (o) any business disruptions due to political instability, armed hostilities, incidents of terrorism, natural disasters, labor strikes or work stoppages, technological breakdowns, product contamination, product recalls or safety concerns related to our products, or the responses to or repercussions from any of these or similar events or conditions and our ability to insure against such events, (p) the failure of our information technology ("IT") systems to perform adequately, including any interruptions, intrusions or security breaches of such systems or risks associated with the planned implementation of a new enterprise resource planning ("ERP") system; and (q) regulation and legislation related to climate change that could affect our ability to procure our commodity needs or that necessitate additional unplanned capital expenditures. The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the company (such as in our other filings with the SEC or in company press releases) for other factors that may cause actual results to differ materially from those projected by the company. Refer to Part I, Item 1A., Risk Factors, of our Form 10-K and Part II, Item 1A., Risk Factors, of our Quarterly Reports on Form 10-Q for additional information regarding factors that could affect the company's results of operations, financial condition and liquidity. We caution you not to place undue reliance on forward-looking statements, as they speak only as of the date made and are inherently uncertain. The company undertakes no obligation to publicly revise or update such statements, except as required by law. You are advised, however, to consult any further public disclosures by the company (such as in our filings with the SEC or in company press releases) on related subjects.

Key Messages

• • Q4 reflected continued strength in branded retail, helped by new product introductions

• • Margin improvement in Q4 driven by mix shift and portfolio and supply chain optimization benefits

• • Four strategic priorities guiding our investment in future growth, including transformational digital strategy initiative

• • Provided 2021 sales and EPS guidance reflecting one fewer week, some COVID-related mix reversion, investments to drive growth and efficiencies, including our digital initiative, as well as potential increased promotional environment and 2H cost inflation

Q4 2020 Financial Highlights

• • Sales increase reflecting the continued impact of the COVID-19 pandemic, extra week, new product introductions, improved promotional efficiency, and a reduction in product returns

• • Mix shift to branded retail products drove cost leverage and margin increase

• • Extra week added 8.2% to sales

COMPONENTS OF Q4'20 SALES GROWTH (MILLIONS)

ADJUSTED EBITDA (MILLIONS)1

GROWTH

$113

$120

+11.5%

$100

$80

$60

$40

$20

$-

Q4'19

Q4'20

(1) Earnings before interest, taxes, depreciation & amortization, adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

Q4 2020 Financial Review

NET SALES $1.023B +11.5% v PY

• • Price/Mix +7.7%; Volume -4.4%; Extra week +8.2%

• • Growth from branded retail more than offsetting lower store-branded retail and foodservice sales

ADJ. EBITDA1 $113.5M +34.3% v PYCASH FLOWS - FY20

Cash from Ops $454.5MDividends $167.3M

Capex $97.9M

GAAP DILUTED EPS
$0.26 +$0.25 v PY
11.1% of sales, up 190 bps	ADJ. DILUTED EPS2
•
•	Increased primarily due to improved product mix,
$0.28 +$0.10 v PY
partially offset by higher employee incentive costs
and IDP fees
Increased adj. EBITDA partially offset by higher
tax rate

• (1) Earnings before interest, taxes, depreciation & amortization (EBITDA), adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

• (2) Earnings per share (EPS), adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this slide presentation.

Fiscal 2021 Guidance (Provided February 11, 2021)

OTHER

Depreciation & amortization - $133 to $138 million

Effective tax rate - Approx. 24.0% to 24.5%Net interest expense - $12 million

Diluted shares outstanding - Approx. 212.5 million

Capital expenditures - $140 to $150 million

Fiscal 2021

Considerations

• • Persistence of pandemic and impact on mix

• • Promotional environment

• • Ability to offset potential inflationary costs

• • Investments and benefits from internal initiatives to grow sales and increase efficiencies

• (1) One fewer week expected to contribute 1.8% of overall sales decline.

• (2) Adjusted for matters affecting comparability. See non-GAAP reconciliations at the end of this presentation.

Flowers' Market Share

FLO Bread ShareFLO Cake Share

7.5	7.5	7.7
7.4	7.3
7.0	7.1	7.2	7.1
Q4 2018	Q1 2019	Q2 2019	Q3 2019	Q4 2019	Q1 2020	Q2 2020	Q3 2020	Q4 2020

Category Review

FRESH PACKAGED BREADS

Dollar Sales % ChgUnit Sales % Chg

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Category Review

COMMERCIAL CAKE

Dollar Sales % ChgUnit Sales % Chg

11.0%

-4.0%

-9.0%

6.0%

1.0%

Q3 2019

Q4 2018

Q1 2019

Q2 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Organics Generating Growth

ORGANIC FRESH PACKAGED BREADS XFLOFLOWERS ORGANICSFLOWERS SHARE OF ORGANICS

$1,000.0

80.0

67.9

$900.0

$800.0

$700.0

$600.0

$500.0

$400.0

$300.0

$200.0

$100.0

$0.0

FY 2015

70.0

60.0

50.0

40.0

30.0

20.0

10.0

-

FY 2016

FY 2017

FY 2018

FY 2019

Gluten-free Generating Growth

GLUTEN FREE FRESH PACKAGED BREADS XFLOFLOWERS GLUTEN FREEFLOWERS SHARE OF GLUTEN FREE

$350.0

40.0

31.7

$300.0

$250.0

$200.0

$150.0

$100.0

$50.0

$0.0

FY 2015

30.0

20.0

10.0

-(10.0)

(20.0)

(30.0)

(40.0)

(50.0)

FY 2016

FY 2017

FY 2018

FY 2019

Branded Products Gaining Share from Store Brands

Fresh Packaged Breads Store Brand Share

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

Source: IRI Custom Database Total US + Convenience

Key Drivers to Achieving our Long-term Growth Targets

ROADMAP TO DELIVERING LONG-TERM TARGETS

FY2020

FY2021

FY2022

• • Favorable mix shift

• • Accelerate optimization initiatives

  • • Adjust to the new-normal

  • • Deliver operational improvements

    • • Brands driving above-category sales growth

• • Performance above long-term targets

• • 53-week year

• • Expected headwinds as consumer behavior normalizes

  • • Performance expected in-line with long- term targets

  • • 52-week year

• • 52-week year

(1)	Sales and adjusted EBITDA targets reflect organic business growth; adjusted EPS target includes the potential impact of future M&A and share repurchases.
(2)	Earnings before interest, taxes, depreciation & amortization (EBITDA), adjusted for matters affecting comparability. See non-GAAP disclosure at the end of this slide presentation for a
13	discussion of these forward-looking, long-term targets.
(3)	Earnings per share (EPS), adjusted for matters affecting comparability. See non-GAAP disclosure at the end of this slide presentation for a discussion of these forward-looking, long-term targets.

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-GAAP financial measures such as, EBITDA, adjusted EBITDA, adjusted EBIT, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income, adjusted EPS, adjusted income tax expense, adjusted selling, distribution and administrative expenses (SD&A), gross margin excluding depreciation and amortization, free cash flow, and the ratio of net debt to adjusted EBITDA. The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure. The company's definitions of these non-GAAP measures may differ from similarly titled measures used by others. These non-GAAP measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP.

The company defines EBITDA as earnings before interest, taxes, depreciation and amortization. The company defines free cash flow as operating cash flow minus capital expenditures. The company believes that free cash flow provides investors a better understanding of the company's liquidity position. The company believes that EBITDA is a useful tool for managing the operations of its business and is an indicator of the company's ability to incur and service indebtedness and generate free cash flow. EBITDA is used as the primary performance measure in the company's 2014 Omnibus Equity and Incentive Compensation Plan. Furthermore, pursuant to the terms of our credit facility, EBITDA is used to determine the company's compliance with certain financial covenants. The company also believes that EBITDA measures are commonly reported and widely used by investors and other interested parties as measures of a company's operating performance and debt servicing ability because EBITDA measures assist in comparing performance on a consistent basis without regard to depreciation or amortization, which can vary significantly depending upon accounting methods and non-operating factors (such as historical cost). EBITDA is also a widely-accepted financial indicator of a company's ability to incur and service indebtedness.

EBITDA should not be considered an alternative to (a) income from operations or net income (loss) as a measure of operating performance; (b) cash flows provided by operating, investing and financing activities (as determined in accordance with GAAP) as a measure of the company's ability to meet its cash needs; or (c) any other indicator of performance or liquidity that has been determined in accordance with GAAP.

The company defines adjusted EBITDA, adjusted EBIT, EBITDA margin, adjusted EBITDA margin, adjusted net income, adjusted operating income, adjusted EPS, adjusted income tax expense, adjusted SD&A, respectively, excluding the impact of asset impairment charges, Project Centennial consulting costs, ERP road mapping consulting costs, lease terminations and legal settlements, acquisition-related costs, and pension plan settlements. Adjusted income tax expense also excludes the impact of tax reform. The company believes that these measures, when considered together with its GAAP financial results, provides management and investors with a more complete understanding of its business operating results, including underlying trends, by excluding the effects of certain charges.

The company defines net debt as total debt less cash and cash equivalents. Net debt to EBITDA is used as a measure of financial leverage employed by the company. Gross margin excluding depreciation and amortization is used as a performance measure to provide additional transparent information regarding our results of operations on a consolidated and segment basis. Changes in depreciation and amortization are separately discussed and include depreciation and amortization for materials, supplies, labor and other production costs and operating activities.

Presentation of gross margin includes depreciation and amortization in the materials, supplies, labor and other production costs according to GAAP. Our method of presenting gross margin excludes the depreciation and amortization components, as discussed above.

The reconciliations attached provide reconciliations of the non-GAAP measures used in this presentation or release to the most comparable GAAP financial measure.

Reconciliation of Earnings per Share to Adjusted Earnings per Share

Net income per diluted common share Loss (recovery) on inferior ingredients Restructuring and related impairment charges Project Centennial consulting costs

ERP road mapping consulting costs Legal settlements

Other lease termination gain Pension plan settlement gain

Forthe 13Week Period Ended January2,2021

$

0.26 NM 0.02 0.01 NM NM (0.01) NM

Forthe 12Week

Period Ended December 28, 2019

$

0.01 NM 0.06 NM - 0.10 - -

Adjusted net income per diluted common share

$

0.28

$

0.18

Reconciliation of Gross Margin (000s omitted)

Forthe 13 Week

Period Ended January 2, 2021

Forthe 12Week

Period Ended December 28, 2019

Sales

$

1,023,036

$ 917,759

501,459 431,799

Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) Gross Margin excluding depreciation and amortization

Less depreciation and amortization for production activities Gross M argin

521,577 485,960

17,427 18,937

$

484,032

$

412,862

Depreciation and amortization for production activities

Depreciation and amortization for selling, distribution and administrative activities Total depreciation and amortization

$

17,427 $ 18,937 13,952 13,947

$

31,379

$

32,884

Reconciliation of Selling, Distribution and Administrative Expenses to Adjusted SD&A (000s omitted)

Selling, distribution and administrative expenses (SD&A) Project Centennial consulting costs

ERP road mapping consulting costs Legal settlements

Other lease termination gain Adjusted SD&A

Forthe 13 Week

Period Ended January 2, 2021

$

387,709

(1,504)

(1,284)

(1,019)

4,066

$

387,968

Forthe 12Week

Period Ended December 28, 2019

$

377,196

(784)

- (29,150)

-

$

347,262

Reconciliation of Net Income to EBITDA and Adjusted EBITDA (000s omitted)

Forthe 13 Week

Period Ended January 2, 2021

Forthe 12Week

Period Ended December 28, 2019

Net income

$

55,824 $

2,219

3,156 2,170

Income tax expense (benefit) Interest expense, net Depreciation and amortization EBITDA

Other pension (benefit) cost

Pension plan settlement and curtailment (gain) Loss on inferior ingredients

18,806 (1,047)

31,379 32,884

109,165

(73) (297)

36,226 519 -

107 376

4,848 17,482

Restructuring and related impairment charges Project Centennial consulting costs

ERP road mapping consulting costs Legal settlements

Other lease termination gain Adjusted EBITDA

1,504 784

1,284 1,019 (4,066)

- 29,150 -

$

113,491 $ 84,537

Sales

$

1,023,036 $ 917,759

Adjusted EBITDA margin

11.1%

9.2%

Reconciliation of Income Before Income Taxes to Adjusted EBT (000s omitted)

For the 13 Week

Period Ended January 2, 2021

For the 12 Week Period

Ended December 28, 2019

Income before income taxes Project Centennial consulting costs ERP road mapping consulting costs

Restructuring and related impairment charges Pension plan settlement and curtailment gain Legal settlements

Loss on inferior ingredients Other lease termination gain Adjusted income before income taxes

$

• 74,630 $

1,172

1,504

784

1,284

-

4,848

(297)

17,482 -

1,019

29,150

(4,066)

107

376 -

$

79,029

$

48,964

Reconciliation of Income Tax Expense to Adjusted Income Tax Expense (000s omitted)

Income tax expense (benefit) Tax impact of:

Forthe 13 Week

Period Ended January 2, 2021

Forthe 12Week

Period Ended December 28, 2019

$

18,806

$

(1,047)

Loss on inferior ingredients

27 95

376 198

Restructuring and related impairment charges Project Centennial consulting costs

ERP road mapping consulting costs Legal settlements

Other lease termination gain

Pension plan settlement and curtailment (gain) Adjusted income tax expense

1,212 4,414

321 255 (1,017)

(75)

$

19,905

- 7,238 - -

$

10,898

Reconciliation of Net Income to Adjusted Net Income (000s omitted)

Forthe 13 Week

Period Ended January 2, 2021

Forthe 12Week

Period Ended December 28, 2019

Net income

$

55,824

$ 2,219

Loss on inferior ingredients

80 281

3,636 13,068

Restructuring and related impairment charges Project Centennial consulting costs

ERP road mapping consulting costs Legal settlements

1,128 586

Other lease termination gain

Pension plan settlement and curtailment (gain) Adjusted net income

963 764 (3,049)

(222)

$

59,124

- 21,912 - -

$

38,066

Reconciliation of Net Income to EBITDA and Adjusted EBITDA (000s omitted)

$

152,318 $ 164,538

Net income Income tax expense Interest expense, net Depreciation and amortization EBITDA

Forthe 53 Week	Forthe 52WeekPeriod
Period Ended	Ended
January 2, 2021	December 28, 2019

48,393 47,545

12,094 11,097

141,384 144,228

354,189 367,408

Other pension (benefit) cost

(74) 2,248

107 (37)

Pension plan settlement and curtailment Other pension plan termination costs Loss on inferior ingredients

108,757 133

- -

15,548 784

Restructuring and related impairment charges Project Centennial consulting costs

ERP road mapping consulting costs Legal settlements

35,483 23,524

Other lease termination gain Executive retirement agreement Canyon acquisition costs Adjusted EBITDA

4,363 7,250 (4,066)

- 28,014 -

- 763

- 22

$

521,690

$

422,726

Sales

Adjusted EBITDA margin

$

4,387,991 11.9%

$

4,123,974 10.3%

Reconciliation of Debt to Net Debt and Calculation of Net Debt to Trailing Twelve Month Adjusted EBITDA Ratio (000s omitted)

As of January 2, 2021

Current maturities of long-term debt	$	-
Long-term debt	960,103
Total debt	960,103
Less: Cash and cash equivalents	307,476
Net Debt	652,627
Adjusted EBITDA for the Trailing Twelve Months Ended January 2, 2021	$	521,690
Ratio of Net Debt to Trailing Twelve Month Adjusted EBITDA	1.3