8-K
FLOWERS FOODS INC (FLO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): May 14, 2020 (May 13, 2020)
FLOWERS FOODS, INC.
(Exact name of registrant as specified in its charter)
| Georgia | 1-16247 | 58-2582379 |
|---|---|---|
| (State or other jurisdiction<br>of incorporation) | (Commission<br> <br>File Number) | (I.R.S. Employer<br> <br>Identification No.) |
| 1919 Flowers Circle, Thomasville, GA | 31757 | |
| --- | --- | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (229) 226-9110
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br> <br>Symbol(s) | Name of each exchange<br> <br>on which registered |
|---|---|---|
| Common Stock, par value $0.01 per share | FLO | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02. | Results of Operations and Financial Condition. |
|---|
On May 13, 2020, Flowers Foods, Inc. issued a press release announcing its financial condition and results of operations as of and for the 16 weeks ended April 18, 2020. A copy of the press release is furnished with this Report as Exhibit 99.1.
| Item 9.01. | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
| Exhibit <br>Number | Description | |
|---|---|---|
| 99.1 | Press Release of Flowers Foods, Inc. dated May 13, 2020. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| FLOWERS FOODS, INC. | |
|---|---|
| By: | /s/ R. Steve Kinsey |
| Name: | R. Steve Kinsey |
| Title: | Chief Financial Officer and Chief Administrative Officer |
Date: May 14, 2020
EX-99.1
Exhibit 99.1
Company Press Release
| May 13, 2020 | Flowers Foods (NYSE: FLO) |
|---|
FLOWERS FOODS, INC. REPORTS FIRST QUARTER 2020 RESULTS
THOMASVILLE, Ga. – Flowers Foods, Inc. (NYSE: FLO), producer of Nature’s Own, Dave’s Killer Bread, Wonder, Tastykake, and other bakery foods, today reported financial results for the company’s 16-week first quarter ended April 18, 2020.
First Quarter Summary:
Compared to the prioryear first quarter where applicable
| • | Sales increased 6.8% to $1.349 billion, including an estimated 6.5% to 7.5% increase attributable to the<br>impact of the COVID-19 pandemic. |
|---|---|
| • | Diluted EPS decreased $0.34 to a loss of $0.03, including a non-cash<br>settlement and curtailment charge of $0.41 per share related to the termination of a defined benefit pension plan. |
| --- | --- |
| • | Adjusted diluted EPS^(1)^ increased $0.09 to $0.41.<br> |
| --- | --- |
| • | GAAP and adjusted EPS includes an estimated $0.09 to $0.10 increase attributable to the COVID-19 pandemic. |
| --- | --- |
| (1) | Adjusted for items affecting comparability. See reconciliations ofnon-GAAP measures in the financial statements following this release. |
| --- | --- |
CEO’sRemarks:
“First of all, there are no words to sufficiently describe how incredibly proud I am of our entire team,” said Ryals McMullian, Flowers Foods president and CEO. “Their performance, from plant operations, to sales, to distribution, to head office and support staff, has been nothing short of remarkable. They have demonstrated once again the power of shared purpose and they are the embodiment of our core values. Because of the team’s extraordinary commitment to feed America and serve our customers, consumers, and communities, we were able to deliver a record quarter in terms of both sales and earnings.”
McMullian continued, “Our top priority is ensuring the health and safety of our team members. In keeping with guidance from health authorities, we have taken measures to safeguard their wellness, including enhanced sanitation and cleaning procedures, restricted admittance to company facilities, daily wellness screening, suspension of non-essential business travel,
company-provided masks, and remote work for business office team members. I am especially grateful for the hard work and dedication of our frontline workers. To recognize their extraordinary efforts, we announced $6.2 million in appreciation bonuses in April.”
McMullian added, “During the first quarter, our retail business benefitted from a significant increase in demand, while foodservice was pressured by the slowdown in restaurant sales. Although the unknown duration and severity of the pandemic makes forecasting results difficult for the remainder of 2020, we believe Flowers is uniquely positioned to succeed during this period of great uncertainty. We have weathered many crises during our 100 years in business. However, more important than our ability to manage through this crisis, is our ability to manage out of it. It is critical that we stay focused on the future and on our strategic priorities even as we continue to operate in what still is a fluid environment. As we look ahead to the balance of 2020, we remain committed to our portfolio and supply chain optimization initiatives, which are expected to deliver approximately $10 million to $20 million of savings this year. While there is uncertainty around the pace of recovery in our foodservice business and the duration of elevated in-home eating, we are confident that our increased digital investments and ongoing optimization projects will allow us to exit this crisis in an improved competitive position and with strong business fundamentals.”
For the 53-week Fiscal 2020, the Company Expects:
| • | Sales in the range of approximately $4.206 billion to $4.289 billion, representing growth of<br>approximately 2.0% to 4.0%. |
|---|---|
| • | Diluted EPS in the range of approximately $0.57 to $0.65, including a $0.41 per share charge related to the<br>termination of a defined benefit pension plan. |
| --- | --- |
| • | Adjusted diluted EPS in the range of approximately $1.00 to $1.08, adjusted for items affecting comparability,<br>representing growth of approximately 4.2% to 12.5%. |
| --- | --- |
The company’s outlook includes the following assumptions:
| • | Portfolio and supply chain optimization benefit of $10 million to $20 million |
|---|---|
| • | Depreciation and amortization in the range of $140 million to $145 million |
| --- | --- |
| • | Other pension expense of approximately $2 million |
| --- | --- |
| • | Net interest expense in the range of $8 million to $10 million |
| --- | --- |
| • | An effective tax rate of approximately 24% |
| --- | --- |
| • | Weighted average diluted share count for the year of approximately 212.5 million shares<br> |
| --- | --- |
| • | Capital expenditures for the year in the range of $95 million to $105 million |
| --- | --- |
Matters Affecting Comparability:
| Reconciliation of (Loss) Earnings per Share toAdjusted Earnings per Share | |||||
|---|---|---|---|---|---|
| For the 16 Weeks Ended | |||||
| Apr. 18, 2020 | Apr. 20, 2019 | ||||
| Net (loss) income per diluted common share | $ | (0.03 | ) | $ | 0.31 |
| Recovery on inferior ingredients | — | NM | |||
| Restructuring and related impairment charges | — | NM | |||
| Project Centennial consulting costs | 0.01 | — | |||
| Legal settlements | 0.01 | NM | |||
| Executive retirement agreement | — | NM | |||
| Acquisition costs | — | NM | |||
| Pension plan settlement and curtailment loss | 0.41 | — | |||
| Other pension plan termination costs | NM | — | |||
| Adjusted net income per diluted common share | $ | 0.41 | $ | 0.32 | |
| NM - Not Meaningful | |||||
| Certain amounts may not compute due to rounding. |
Consolidated First Quarter Operating Highlights
Compared to the prior year first quarter where applicable
| • | Sales increased 6.8% to $1.349 billion with a 6.5% to 7.5% increase attributable to the COVID-19 pandemic. |
|---|---|
| • | Percentage point change in sales attributed to: |
| --- | --- |
| • | Pricing/mix: 6.2%, primarily driven by mix |
| --- | --- |
| • | Volume: 0.6% |
| --- | --- |
| • | On a consolidated basis, branded retail sales increased $133.8 million or 17.7% to $891.5 million,<br>store branded retail sales decreased $0.9 million or 0.5% to $190.2 million, while non-retail and other sales decreased $47.3 million or 15.0% to $267.8 million. |
| --- | --- |
| • | A significant increase in branded retail sales due to the COVID-19<br>pandemic helped drive a positive mix shift from non-retail and other to branded retail products. |
| --- | --- |
| • | Store branded retail sales decreased modestly due primarily to lost store branded breakfast bread business and<br>volume declines for store branded cake, partially offset by increases in store branded gluten-free products produced by Canyon Bakehouse. |
| --- | --- |
| • | Foodservice and other non-retail sales declined significantly due to<br>business disruptions for most of our non-retail customers caused by the COVID-19 pandemic. |
| --- | --- |
| • | Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 49.7% of<br>sales, a 190-basis point decrease. These costs were lower as a percentage of sales due to the positive mix shift from non-retail products to branded retail products.<br>Partially offsetting the cost leverage were $4.1 million of appreciation bonuses paid to frontline workers and $1.7 million in start-up costs related to the conversion of our Lynchburg, Virginia<br>plant to an organic bakery. |
| --- | --- |
| • | Selling, distribution and administrative (SD&A) expenses were 38.7% of sales, a 100-basis point increase. Higher distributor distribution fees were driven by a shift in product mix, which resulted in a larger portion of our sales being made through independent distributor partners.<br>Workforce-related costs increased primarily due to $2.1 million of appreciation bonuses paid to frontline workers as a result of the COVID-19 pandemic and higher employee incentive costs.<br> |
| --- | --- |
| • | Depreciation and amortization (D&A) expenses were relatively consistent quarter over quarter.<br> |
| --- | --- |
| • | Net income declined $71.6 million to a loss of $5.8 million due primarily to the $116.2 million<br>charge related to the termination of the pension plan. Adjusted net income increased $19.2 million to $86.4 million. |
| --- | --- |
| • | Adjusted EBITDA increased 19.0% to $163.3 million, representing 12.1% of sales, a 120-basis point increase compared to the prior year. |
| --- | --- |
| • | GAAP EPS decreased $0.34 to a loss of $0.03 due primarily to the $0.41 per share charge related to the<br>termination of the pension plan. Adjusted EPS was $0.41 compared to $0.32 in the prior year quarter, including a $0.09 to $0.10 increase attributable to the COVID-19 pandemic. |
| --- | --- |
Cash Flow, Capital Allocation, and Capital Return
In the first quarter of fiscal 2020, cash flow from operating activities was $106.2 million, capital expenditures were $21.7 million, and dividends paid were $40.3 million. To ensure liquidity, out of an abundance of caution and uncertainty of the impact of the COVID-19 pandemic, the company drew an additional $200 million on our credit facility. Total indebtedness increased by $203.8 million in the quarter. Cash and cash equivalents were $252.7 million at quarter-end.
There are 6.2 million shares authorized for repurchase under the company’s current share repurchase plan. The company expects to continue to make opportunistic share repurchases from time to time under this plan.
Conference Call
Flowers Foods will hold a conference call to discuss its first quarter 2020 results at 8:30 a.m. (Eastern) on May 14, 2020. The call can be accessed by following the webcast link at flowersfoods.com/investors. The call also will be archived on the company’s website.
About Flowers Foods
Headquartered in Thomasville, Ga., Flowers Foods, Inc. (NYSE: FLO) is one of the largest producers of packaged bakery foods in the United States with 2019 sales of $4.1 billion. Flowers operates bakeries across the country that produce a wide range of bakery products. Among the company’s top brands are Nature’s Own, Dave’s Killer Bread, Wonder, and Tastykake. Learn more at www.flowersfoods.com.
Investor Contact: J.T. Rieck (229) 227-2253
Media Contact: Paul Baltzer (229) 227-2380
Forward-Looking Statements
Statements contained in this press release that are not historical facts are forward-looking statements. Forward-looking statements relate to current expectations regarding our future financial condition, performance and results of operations and the ultimate impact of the novel strain of coronavirus (COVID-19) pandemic on our business, results of operations and financial condition, planned capital expenditures, long-term objectives of management, supply and demand, pricing trends and market forces, and integration plans and expected benefits of transactions 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. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ from those projected. Other factors that may cause actual results to differ from the forward-looking statements contained in this release and that may affect the company’s prospects in general include, but are not limited to, (a) 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, (b) general economic and business conditions and the competitive conditions in the baked foods industry, including promotional and price competition, (c) changes in consumer demand for our products, including changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store-branded products, (d) the success of productivity improvements and new product introductions, (e) a significant reduction in business with any of our major customers including a reduction from adverse developments in any of our customer’s business, (f) fluctuations in commodity pricing, (g) energy and raw material costs and availability and hedging and counterparty risk, (h) our ability to fully integrate recent acquisitions into our business, (i) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value, (j) our ability to successfully implement our business strategies, including those strategies the company has initiated under Project Centennial, which may involve, among other things, the integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values, the deployment of new systems and technology and an enhanced organizational structure, (k) consolidation within the baking industry and related industries, (l) disruptions in our direct-store delivery system, including litigation or an adverse ruling from a court or regulatory or government body that could affect the independent contractor classification of our independent distributors, (m)
increasing legal complexity and legal proceedings that we are or may become subject to, (n) product recalls or safety concerns related to our products, and (o) the failure of our information technology systems to perform adequately, including any interruptions, intrusions or security breaches of such systems. 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 public disclosures made by the company, including the risk factors included in our most recently filed Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (“SEC”) and disclosures made in other filings with the SEC and company press releases, for other factors that may cause actual results to differ materially from those projected by the company. 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.
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 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 earnings before interest, taxes, depreciation and amortization. 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, 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.
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.
Flowers Foods, Inc.
Condensed Consolidated Balance Sheets
(000’s omitted)
| April 18, 2020 | December 28, 2019 | |||
|---|---|---|---|---|
| Assets | ||||
| Cash and Cash Equivalents | $ | 252,683 | $ | 11,044 |
| Other Current Assets | **** | 551,119 | 515,165 | |
| Property, Plant & Equipment, net | **** | 697,067 | 717,822 | |
| Right-of-Use<br>Leases, net | **** | 385,066 | 399,302 | |
| Distributor Notes Receivable (1) | **** | 221,144 | 226,348 | |
| Other Assets | **** | 20,085 | 12,644 | |
| Cost in Excess of Net Tangible Assets, net | **** | 1,285,909 | 1,295,451 | |
| Total Assets | $ | 3,413,073 | $ | 3,177,776 |
| Liabilities and Stockholders’ Equity | ||||
| Current Liabilities | $ | 442,850 | $ | 463,431 |
| Long-term Debt (2) | **** | 1,070,597 | 866,508 | |
| Right-of-Use Lease<br>Liabilities (3) | **** | 395,369 | 404,503 | |
| Other Liabilities | **** | 183,646 | 179,904 | |
| Stockholders’ Equity | **** | 1,320,611 | 1,263,430 | |
| Total Liabilities and Stockholders’ Equity | $ | 3,413,073 | $ | 3,177,776 |
| (1) | Includes current portion of $28,018 and $27,709, respectively. | |||
| --- | --- | |||
| (2) | Includes current portion of $1,245 and $3,730, respectively. | |||
| --- | --- | |||
| (3) | Includes current portion of $60,819 and $60,982, respectively. | |||
| --- | --- |
Flowers Foods, Inc.
Consolidated Statement of Operations
(000’s omitted, except per share data)
| For the 16 WeekPeriod Ended | For the 16 Week Period<br>Ended | |||||
|---|---|---|---|---|---|---|
| April 18, 2020 | April 20, 2019 | |||||
| Sales | $ | 1,349,444 | **** | $ | 1,263,895 | |
| Materials, supplies, labor and other production costs (exclusive of depreciation and<br>amortization shown separately below) | **** | 670,873 | **** | 652,141 | ||
| Selling, distribution and administrative expenses | **** | 522,035 | **** | 476,049 | ||
| Recovery on inferior ingredients | **** | — | **** | (413 | ) | |
| Restructuring and related impairment charges | **** | — | **** | 718 | ||
| Depreciation and amortization expense | **** | 44,663 | **** | 44,819 | ||
| Income from operations | **** | 111,873 | **** | 90,581 | ||
| Other pension cost | **** | 143 | **** | 692 | ||
| Pension plan settlement and curtailment loss | **** | 116,207 | **** | — | ||
| Interest expense, net | **** | 3,314 | **** | 3,824 | ||
| (Loss) income before income taxes | **** | (7,791 | ) | 86,065 | ||
| Income tax (benefit) expense | **** | (2,019 | ) | 20,199 | ||
| Net (loss) income | $ | (5,772 | ) | $ | 65,866 | |
| Net (loss) income per diluted common share | $ | (0.03 | ) | $ | 0.31 | |
| Diluted weighted average shares outstanding | **** | 211,754 | **** | 211,884 |
Flowers Foods, Inc.
Condensed Consolidated Statement of Cash Flows
(000’s omitted)
| For the 16 Week PeriodEnded | For the 16 Week Period<br>Ended | |||||
|---|---|---|---|---|---|---|
| April 18, 2020 | April 20, 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net (loss) income | $ | (5,772 | ) | $ | 65,866 | |
| Adjustments to reconcile net (loss) income to net cash from operating activities: | ||||||
| Total non-cash adjustments | **** | 143,651 | **** | 54,777 | ||
| Changes in assets and liabilities and pension contributions | **** | (31,694 | ) | (24,465 | ) | |
| Net cash provided by operating activities | **** | 106,185 | **** | 96,178 | ||
| Cash flows from investing activities: | ||||||
| Purchase of property, plant and equipment | **** | (21,700 | ) | (20,761 | ) | |
| Proceeds from sale of property, plant and equipment | **** | 862 | **** | 235 | ||
| Other | **** | 4,021 | **** | 136 | ||
| Net cash disbursed for investing activities | **** | (16,817 | ) | (20,390 | ) | |
| Cash flows from financing activities: | ||||||
| Dividends paid | **** | (40,286 | ) | (39,296 | ) | |
| Payment of contingent consideration | **** | (4,700 | ) | — | ||
| Stock repurchases | **** | (783 | ) | (7,054 | ) | |
| Net change in debt borrowings | **** | 203,750 | **** | (40,500 | ) | |
| Payments on financing leases | **** | (2,180 | ) | (1,872 | ) | |
| Other | **** | (3,530 | ) | (788 | ) | |
| Net cash provided by (disbursed for) financing activities | **** | 152,271 | **** | (89,510 | ) | |
| Net increase (decrease) in cash and cash equivalents | **** | 241,639 | **** | (13,722 | ) | |
| Cash and cash equivalents at beginning of period | **** | 11,044 | **** | 25,306 | ||
| Cash and cash equivalents at end of period | $ | 252,683 | **** | $ | 11,584 |
Sales by Sales Class and Sales Bridge
(000’s omitted)
| Sales by Sales Class | For the 16 WeekPeriod Ended | For the 16 Week Period<br>Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
| April 18, 2020 | April 20, 2019 | Change | % Change | ||||||
| Branded Retail | $ | 891,449 | $ | 757,685 | 17.7 | % | |||
| Store Branded Retail | **** | 190,181 | 191,062 | ) | -0.5 | % | |||
| Non-Retail and Other | **** | 267,814 | 315,148 | ) | -15.0 | % | |||
| Total Sales | $ | 1,349,444 | $ | 1,263,895 | 6.8 | % |
All values are in US Dollars.
| Sales Bridge<br> <br><br><br><br>For the 16 Week Period Ended April 18, 2020 | Volume | Net<br>Price/Mix | TotalSales Change | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Flowers Foods | **** | 0.6 | % | **** | 6.2 | % | **** | 6.8 | % |
Flowers Foods, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(000’s omitted, except per share data)
| Reconciliation of (Loss) Earnings per Share to Adjusted<br>Earnings per Share | ||||||
|---|---|---|---|---|---|---|
| For the 16 Week Period<br>Ended | For the 16 Week Period<br>Ended | |||||
| April 18, 2020 | April 20, 2019 | |||||
| Net (loss) income per diluted common share | $ | (0.03 | ) | $ | 0.31 | |
| Recovery on inferior ingredients | **** | — | **** | NM | ||
| Restructuring and related impairment charges | **** | — | **** | NM | ||
| Project Centennial consulting costs | **** | 0.01 | **** | — | ||
| Legal settlements | **** | 0.01 | **** | NM | ||
| Executive retirement agreement | **** | — | **** | NM | ||
| Canyon acquisition costs | **** | — | **** | NM | ||
| Pension plan settlement and curtailment loss | **** | 0.41 | **** | — | ||
| Other pension plan termination costs | **** | NM | **** | — | ||
| Adjusted net income per diluted common share | $ | 0.41 | **** | $ | 0.32 | |
| NM - not meaningful. | ||||||
| Certain amounts may not add due to rounding. | ||||||
| Reconciliation of Gross Margin | ||||||
| For the 16 Week Period<br>Ended | For the 16 Week Period<br>Ended | |||||
| April 18, 2020 | April 20, 2019 | |||||
| Sales | $ | 1,349,444 | **** | $ | 1,263,895 | |
| Materials, supplies, labor and other production costs (exclusive of depreciation and<br>amortization) | **** | 670,873 | **** | 652,141 | ||
| Gross Margin excluding depreciation and amortization | **** | 678,571 | **** | 611,754 | ||
| Less depreciation and amortization for production activities | **** | 24,258 | **** | 24,978 | ||
| Gross Margin | $ | 654,313 | **** | $ | 586,776 | |
| Depreciation and amortization for production activities | $ | 24,258 | **** | $ | 24,978 | |
| Depreciation and amortization for selling, distribution and administrative activities | **** | 20,405 | **** | 19,841 | ||
| Total depreciation and amortization | $ | 44,663 | **** | $ | 44,819 | |
| Reconciliation of Selling, Distribution and Administrative<br>Expenses to Adjusted SD&A | ||||||
| For the 16 Week Period<br>Ended | For the 16 Week Period<br>Ended | |||||
| April 18, 2020 | April 20, 2019 | |||||
| Selling, distribution and administrative expenses (SD&A) | $ | 522,035 | **** | $ | 476,049 | |
| Project Centennial consulting costs | **** | (3,392 | ) | — | ||
| Legal settlements | **** | (3,220 | ) | (150 | ) | |
| Executive retirement agreement | **** | — | **** | (1,331 | ) | |
| Canyon acquisition costs | **** | — | **** | (22 | ) | |
| Other pension plan termination costs | **** | (133 | ) | — | ||
| Adjusted SD&A | $ | 515,290 | **** | $ | 474,546 | |
| Reconciliation of Net (Loss) Income to EBITDA and<br>Adjusted EBITDA | ||||||
| For the 16 Week Period<br>Ended | For the 16 Week Period<br>Ended | |||||
| April 18, 2020 | April 20, 2019 | |||||
| Net (loss) income | $ | (5,772 | ) | $ | 65,866 | |
| Income tax (benefit) expense | **** | (2,019 | ) | 20,199 | ||
| Interest expense, net | **** | 3,314 | **** | 3,824 | ||
| Depreciation and amortization | **** | 44,663 | **** | 44,819 | ||
| EBITDA | **** | 40,186 | **** | 134,708 | ||
| Other pension cost | **** | 143 | **** | 692 | ||
| Pension plan settlement and curtailment loss | **** | 116,207 | **** | — | ||
| Other pension plan termination costs | **** | 133 | **** | — | ||
| Recovery on inferior ingredients | **** | — | **** | (413 | ) | |
| Restructuring and related impairment charges | **** | — | **** | 718 | ||
| Project Centennial consulting costs | **** | 3,392 | **** | — | ||
| Legal settlements | **** | 3,220 | **** | 150 | ||
| Executive retirement agreement | **** | — | **** | 1,331 | ||
| Canyon acquisition costs | **** | — | **** | 22 | ||
| Adjusted EBITDA | $ | 163,281 | **** | $ | 137,208 | |
| Sales | $ | 1,349,444 | **** | $ | 1,263,895 | |
| Adjusted EBITDA margin | **** | 12.1 | % | 10.9 | % |
Flowers Foods, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(000’s omitted, except per share data)
| Reconciliation of Income Tax (Benefit) Expense to<br>Adjusted Income Tax Expense | |||||||
|---|---|---|---|---|---|---|---|
| For the 16 Week<br>Period Ended | For the 16 Week<br>Period Ended | ||||||
| April 18, 2020 | April 20, 2019 | ||||||
| Income tax (benefit) expense | $ | (2,019 | ) | $ | 20,199 | ||
| Tax impact of: | |||||||
| Recovery on inferior ingredients | — | (104 | ) | ||||
| Restructuring and related impairment charges | — | 181 | |||||
| Project Centennial consulting costs | **** | 848 | **** | — | |||
| Legal settlements | **** | 805 | **** | 38 | |||
| Executive retirement agreement | **** | — | **** | 336 | |||
| Canyon acquisition costs | **** | — | **** | 6 | |||
| Pension plan settlement and curtailment loss | **** | 29,052 | **** | — | |||
| Other pension plan termination costs | **** | 33 | **** | — | |||
| Adjusted income tax expense | $ | 28,719 | **** | $ | 20,656 | ||
| Reconciliation of Net (Loss) Income to Adjusted Net<br>Income | |||||||
| For the 16 Week<br>Period Ended | For the 16 Week<br>Period Ended | ||||||
| April 18, 2020 | April 20, 2019 | ||||||
| Net (loss) income | $ | (5,772 | ) | $ | 65,866 | ||
| Recovery on inferior ingredients | **** | — | **** | (309 | ) | ||
| Restructuring and related impairment charges | **** | — | **** | 537 | |||
| Project Centennial consulting costs | **** | 2,544 | **** | — | |||
| Legal settlements | **** | 2,415 | **** | 112 | |||
| Executive retirement agreement | **** | — | **** | 995 | |||
| Canyon acquisition costs | **** | — | **** | 16 | |||
| Pension plan settlement and curtailment loss | **** | 87,155 | **** | — | |||
| Other pension plan termination costs | **** | 100 | **** | — | |||
| Adjusted net income | $ | 86,442 | **** | $ | 67,217 | ||
| Reconciliation of Earnings per Share - Full Year<br>Fiscal 2020 Guidance | |||||||
| Range Estimate | |||||||
| Net income per diluted common share | $ | 0.57 | **** | to | $ | 0.65 | **** |
| Project Centennial consulting costs | **** | 0.01 | **** | **** | 0.01 | **** | |
| Legal settlements | **** | 0.01 | **** | **** | 0.01 | **** | |
| Pension plan settlement and curtailment loss | **** | 0.41 | **** | **** | 0.41 | **** | |
| Other pension plan termination costs | **** | NM | **** | **** | NM | **** | |
| Adjusted net income per diluted common share | $ | 1.00 | **** | to | $ | 1.08 | **** |
| Certain amounts may not add due to rounding. |