Exhibit 99.1

 

Company Press Release

 

February 7, 2018		Flowers Foods (NYSE: FLO)

FLOWERS FOODS, INC. REPORTS FOURTH QUARTER

AND FULL YEAR 2017 RESULTS

THOMASVILLE, Ga. – Flowers Foods, Inc. (NYSE: FLO), producer of Nature’s Own, Wonder, Tastykake, Dave’s Killer Bread, and other bakery foods, today reported financial results for the company’s 12-week fourth quarter and 52-week full year ended December 30, 2017.

Fourth Quarter Summary:

Compared to the prior year fourth quarter where applicable

 

•

Sales increased 0.6% to $873.6 million. Excluding sales related to a divestiture, sales increased 1.1%.

 

•

Diluted EPS increased $0.31 to $0.37, including approximately $0.23 related to tax reform.

 

•

Adjusted diluted EPS(1) was unchanged at $0.17.

 

•

Net income increased $65.5 million to $78.5 million.

 

•

Adjusted net income(1) decreased 2.1% to $35.8 million.

 

•

Adjusted EBITDA(2) decreased 0.7% to $91.0 million.

 

•

Adjusted EBITDA(2) margin decreased 10 basis points to 10.4% of sales.

Fiscal 2017 Summary:

Compared to the prior year where applicable

 

•

Sales decreased 0.2% to $3.921 billion. Excluding sales related to a divestiture, sales increased 0.4%.

 

•

Diluted EPS decreased $0.07 to $0.71, including approximately $0.23 related to tax reform.

 

•

Adjusted diluted EPS(1) decreased $0.04 to $0.89.

 

•

Net income decreased 8.3% to $150.1 million.

 

•

Adjusted net income(1) decreased 3.8% to $187.2 million.

 

•

Adjusted EBITDA(2) decreased 0.7% to $449.8 million.

 

•

Adjusted EBITDA(2) margin was unchanged at 11.5% of sales.

 

(1)	Adjusted for items affecting comparability. See reconciliations of non-GAAP measures in the financial statements following this release.

---

(2)	Earnings before Interest, Taxes, Depreciation and Amortization, adjusted for certain items affecting comparability. See reconciliations of non-GAAP measures in the financial statements following this release.

CEO’s Remarks:

“Our team delivered solid sales growth and great products and service in the fourth quarter, with consumer demand for organic Dave’s Killer Bread driving top line growth and offsetting a challenging marketplace for traditional bakery items,” said Allen Shiver, Flowers Foods president and CEO. “This was achieved in a quarter where we implemented new roles and responsibilities as part of our revamped organizational model. We also made headway in improving manufacturing efficiencies, lowering selling, distribution and administrative costs, while removing complexity from the business. These improvements, along with lower net interest expense and strong cash flow, enabled us to offset higher workforce-related expenses, reduce debt and support dividend growth.”

Mr. Shiver continued, “Our priority in 2018 is to create shareholder value by improving profit margins and driving sustainable sales growth, and we believe the progress we made in 2017 has us well-positioned for a promising 2018. We enter the year with strong momentum in our key initiatives. These efforts are expected to allow us to capture additional cost savings and drive brand growth in underdeveloped segments and geographies with new, innovative products and marketing investments.”

For the 52-week Fiscal 2018, the Company Expects:

 

•

Sales in the range of approximately $3.921 billion to $3.982 billion, representing growth of approximately 0.0% to 1.6%.

 

•

Adjusted diluted EPS in the range of approximately $1.04 to $1.16, representing growth of approximately 16.9% to 30.3%. Adjusted EPS guidance includes approximately $0.15 to $0.17 related to the impact of the lower effective tax rate described below, and excludes consulting and restructuring costs associated with Project Centennial expected to be in the range of $12 million to $15 million.

The company’s outlook includes the following assumptions:

 

•

Sales associated with incremental brand investment relative to fiscal 2017 are expected to primarily benefit results in the second-half of fiscal 2018.

 

•

Input cost inflation of approximately $40 million is expected to be offset through pricing actions taken in early first quarter fiscal 2018.

 

•

Depreciation and amortization is forecasted to be in the range of $145 million to $150 million

 

•

Net interest expense is forecasted to be in the range of $11 million to $12 million.

 

•

For the full year, the company expects an effective tax rate of approximately 25% to 26%, reflecting the effects of the new tax law. In the first quarter the tax rate will be approximately 27% due to the expected impact at vesting of stock-based compensation awards. The effective tax rate for the remaining quarters of the year is expected to be approximately 25%.

---

•

Weighted average diluted share count for the year of approximately 211 million shares.

 

•

Capital expenditures for the year are estimated to be in the range of $95 million to $105 million.

Update on Strategic Priorities:

The company continues to execute on its strategic priorities established under Project Centennial. During the fourth quarter, Flowers began transitioning to the new organizational model that includes enhanced focus on brand growth and operating efficiency. The company expects the organizational model to be fully implemented in fiscal 2019. The company also finalized its fiscal 2018 brand investment plans, which includes new internal capabilities intended to deliver innovative products that offer consumers a meaningful point of difference.

As part of Project Centennial, the company achieved gross cost savings of $32 million in fiscal 2017, primarily from reductions in spending on purchased goods and services (PG&S). The company is targeting additional gross savings in fiscal 2018 of $38 million to $48 million. This target reflects further savings through PG&S, as well as from a more efficient and productive organizational structure, continuous improvement, supply chain optimization, and improved ordering and stale reduction initiatives.

Matters Affecting Comparability:

Reconciliation of Earnings per Share to Adjusted Earnings per Share

 

		For the 12 Weeks Ended								For the 52 Weeks Ended
		Dec. 30, 2017				Dec. 31, 2016				Dec. 30, 2017				Dec. 31, 2016
Net income per diluted common share		$	0.37			$	0.06			$	0.71			$	0.78
Gain on divestiture			—				—				(0.09	)			—
Restructuring and related impairment charges			0.01				—				0.30				—
Project Centennial consulting costs			0.02				0.01				0.11				0.02
Impairment of assets (unrelated to restructuring)			—				0.07				—				0.07
Lease terminations/legal settlement/extinguishment loss			—				0.03				0.02				0.04
Pension plan settlement loss			—				—				0.01				0.02
Multi-employer pension plan withdrawal costs			—				—				0.05				—
Impact of tax reform			(0.23	)			—				(0.23	)			—
Windfall tax benefit from stock options			(0.01	)			—				(0.01	)			—
Adjusted net income per diluted common share		$	0.17			$	0.17			$	0.89			$	0.93

Certain amounts may not add due to rounding.    

Consolidated Fourth Quarter 2017 Summary

Compared to the prior year fourth quarter where applicable

 

•

Sales increased 0.6% to $873.6 million.

 

•

Percentage point change in sales attributed to:

 

•

Pricing/mix: 1.1%

 

•

Volume: 0.0%

 

•

Divestiture: -0.5%

---

•

Net income increased $65.5 million to $78.5 million. Excluding matters affecting comparability, adjusted net income decreased 2.1% to $35.8 million.

 

•

As a result of the Tax Cuts and Jobs Act, the company recorded an estimated tax benefit of $48.2 million related to the revaluation of the company’s net deferred tax liability.

 

•

Operating income increased $25.2 million to $46.4 million. Excluding matters affecting comparability, adjusted operating income decreased 1.3% to $58.5 million.

 

•

Adjusted EBITDA decreased 0.7% to $91.0 million, or 10.4% of sales, a 10 basis point decrease.

 

•

Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 52.3% of sales, up 40 basis points, primarily driven by workforce-related costs, partially offset by improved manufacturing efficiencies.

 

•

Selling, distribution and administrative (SD&A) expenses were 38.1% of sales, a 100 basis point decrease, driven primarily by lower workforce-related costs, and reduced legal settlement charges, partially offset by higher distributor distribution fees due to a larger portion of sales being sold by independent distributors, and incremental Project Centennial consulting costs.

 

•

Restructuring charges of $3.6 million and a pension plan settlement loss of $1.6 million in the current quarter, compared to $24.9 million of asset impairments and a $0.2 million pension plan settlement loss in in the prior year quarter.

 

•

Depreciation and amortization (D&A) expenses were $32.4 million, 3.7% of sales, flat when compared to the prior year quarter.

Continued sales growth from branded organic products and expansion markets, resulted in the sales increase, partially offset by the divestiture of a mix manufacturing business in January 2017 and by a competitive marketplace and cycling of certain promotions in the prior year quarter. Sales of Dave’s Killer Bread (DKB) branded products continue to increase, in part due to the introduction of breakfast items in the second quarter of fiscal 2017.

On a consolidated basis, branded retail sales increased 1.4% to $507.0 million and store branded retail sales decreased 0.6% to $127.4 million, while non-retail and other sales decreased 0.5% to $239.2 million. The sales increase in the branded retail category resulted primarily from increased sales of branded organic products, partially offset by volume declines in branded loaf breads, snack cakes, and buns and rolls. Store branded retail sales decreased primarily as a result of volume declines in loaf breads, offset partially by increased sales of buns and rolls. The impact of the mix manufacturing divestiture in the first quarter of fiscal 2017 somewhat offset by volume growth in vending and foodservice sales, principally resulted in the decrease of non-retail and other sales, which includes contract manufacturing, vending and foodservice.

DSD Segment Fourth Quarter Summary

Compared to the prior year fourth quarter where applicable

 

•

Sales increased 1.1% to $738.6 million

 

•

Percentage point change in sales attributed to:

 

•

Pricing/mix: 3.4%

 

•

Volume: -2.3%

---

•

Operating income increased $33.9 million to $56.0 million. Excluding matters affecting comparability, adjusted operating income increased 8.2% to $60.8 million.

 

•

Adjusted EBITDA increased 6.4% to $88.6 million, or 12.0% of sales, a 60 basis point increase.

 

•

Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 48.4% of segment sales, up 20 basis points, primarily driven by higher workforce-related costs, partially offset by improved price/mix.

 

•

SD&A expenses were 39.6% of segment sales, an 80 basis point decrease. This decrease was driven primarily by lower workforce-related costs, and reduced legal settlement charges, partially offset by higher distribution fees due to a larger portion of sales being sold by independent distributors.

 

•

Restructuring charges were $3.4 million. Prior year asset impairment charges were $24.9 million.

 

•

D&A expenses were $27.8 million, 3.8% of sales, a 10 basis point increase.

DSD segment branded retail sales increased 1.6% to $474.7 million and store branded retail sales decreased 1.6% to $102.7 million, while non-retail and other sales increased 1.5% to $161.2 million.

Branded retail sales increased due to significant sales growth for branded organic products, partially offset by volume declines in branded loaf breads, snack cakes, and buns and rolls. Sales of DKB branded products continue to increase, driven by volume gains and the addition of DKB breakfast items in the second quarter of fiscal 2017. A competitive marketplace and the cycling of certain promotions in the prior year drove the declines in other branded products. Store branded retail sales were down primarily due to soft volumes for loaf breads. Increased sales to fast food and institutional customers drove the increase in non-retail and other sales.

Warehouse Segment Fourth Quarter Summary

Compared to the prior year fourth quarter where applicable

 

•

Sales decreased 2.3% to $135.1 million.

 

•

Percentage point change in sales attributed to:

 

•

Pricing/mix: -5.6%

 

•

Volume: 6.5%

 

•

Divestiture: -3.2%

 

•

Operating income decreased $4.2 million to $7.5 million. Excluding matters affecting comparability, adjusted operating income decreased $4.1 million to $7.6 million.

 

•

Adjusted EBITDA decreased 24.5% to $12.4 million, or 9.2% of sales, a 260 basis point decline.

 

•

Materials, supplies, labor and other production costs (exclusive of depreciation and amortization) were 73.5% of segment sales, up 240 basis points, primarily driven by increased production for the DSD segment, higher workforce-related costs, and higher freight costs.

---

•

SD&A expenses were 17.3% of segment sales, a 20 basis point increase. This increase was primarily driven by significantly lower sales that spread the costs over a smaller sales base, and higher bad debt expense, partially offset by lower marketing expenses.

 

•

D&A expenses were $4.8 million, 3.6% of sales, a 20 basis point increase.

Branded retail sales declined 1.4% to $32.3 million and store branded retail sales increased 3.9% to $24.7 million, while non-retail and other sales decreased 4.5% to $78.0 million. Branded retail sales decreased largely due to a decline in warehouse-delivered branded organic bread, which was partially offset by increased sales of branded snack cakes. Volume increases in store branded items due to a new customer resulted in the increase in store branded retail sales. The decrease in non-retail and other sales, which include contract manufacturing, vending and foodservice, was due primarily to the impact of the mix manufacturing divestiture, and to a lesser extent, lost contract manufacturing business, partially offset by growth in vending volume.

Unallocated Corporate Expense Fourth Quarter Summary

Note: Comparisons are to consolidated sales

 

•

SD&A expenses increased 40 basis points to 1.8% of consolidated sales, including incremental Project Centennial consulting costs and pension settlement losses totaling $3.1 million, or 30 basis points as a percent of sales.

 

•

Restructuring charges and a pension plan settlement loss were $1.8 million in the current quarter compared to a $0.2 million pension plan settlement loss in the prior year quarter.

Cash Flow, Capital Allocation, and Capital Return

In the fourth quarter of fiscal 2017, cash flow from operating activities was $73.4 million, capital expenditures were $24.0 million, and dividends paid were $35.8 million. During the quarter, the company had a net decrease in debt and capital lease obligations of $22.8 million.

The company did not repurchase any shares of its common stock during the quarter. There are 6.6 million shares remaining under the company’s current share repurchase plan. As in the past, the company expects to continue to make opportunistic share repurchases under this plan.

Conference Call

Flowers Foods will hold a conference call to discuss its fourth quarter 2017 results at 8:30 a.m. (Eastern) on February 8, 2018. The call can be accessed by following the webcast link on flowersfoods.com. 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 fresh packaged bakery foods in the United States with 2017 sales of $3.9 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, Wonder, Tastykake, and Dave’s Killer Bread. 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, 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) general economic and business conditions and the competitive conditions in the baked foods industry, including promotional and price competition, (b) 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, (c) the success of productivity improvements and new product introductions, (d) a significant reduction in business with any of our major customers including a reduction from adverse developments in any of our customer’s business, (e) fluctuations in commodity pricing, (f) energy and raw material costs and availability and hedging and counterparty risk, (g) our ability to fully integrate recent acquisitions into our business, (h) our ability to achieve cash flow from capital expenditures and acquisitions and the availability of new acquisitions that build shareholder value, (i) 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, (j) consolidation within the baking industry and related industries, (k) 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, (l) increasing legal complexity and legal proceedings that we are or may become subject to, (m) product recalls or safety concerns related to our products, and (n) 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 operating income by segment, adjusted EBIT by segment, 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 as earnings from continuing operations before interest, income taxes, depreciation, amortization and income attributable to non-controlling interest. 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 operating income by segment, adjusted EBIT by segment, adjusted EPS, adjusted income tax expense, adjusted selling, distribution and administrative expenses (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.

Consolidated Statement of Operations

 

(000’s omitted, except per share data)

 

		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Sales		$	873,623			$	868,717			$	3,920,733			$	3,926,885
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below)			456,800				450,462				2,009,063				2,026,367
Selling, distribution and administrative expenses			332,805				339,763				1,503,867				1,464,236
Gain on divestiture			—				—				(28,875	)			—
Restructuring and related impairment charges			3,581				—				104,130				—
Impairment of assets (unrelated to restructuring)			—				24,877				—				24,877
Pension plan settlement loss			1,619				173				4,649				6,646
Multi-employer pension plan withdrawal costs			—				—				18,268				—
Depreciation and amortization expense			32,431				32,274				146,719				140,869
Income from operations			46,387				21,168				162,912				263,890
Interest expense, net			2,563				3,882				13,619				14,353
Income before income taxes			43,824				17,286				149,293				249,537
Income tax expense (benefit)			(34,709	)			4,244				(827	)			85,761
Net income		$	78,533			$	13,042			$	150,120			$	163,776
Net income per diluted common share		$	0.37			$	0.06			$	0.71			$	0.78
Diluted weighted average shares outstanding			211,049				209,624				210,435				210,354

---

Flowers Foods, Inc.

Segment Reporting

 

(000’s omitted)

 

		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Sales:
Direct-Store-Delivery		$	738,556			$	730,487			$	3,318,563			$	3,284,177
Warehouse Delivery			135,067				138,230				602,170				642,708
		$	873,623			$	868,717			$	3,920,733			$	3,926,885
Gain on Divestiture:
Warehouse Delivery		$	—			$	—			$	(28,875	)		$	—
		$	—			$	—			$	(28,875	)		$	—
Restructuring and related impairment charges:
Direct-Store-Delivery		$	3,401			$	—			$	80,026			$	—
Warehouse Delivery			31				—				20,122				—
Unallocated Corporate			149				—				3,982				—
		$	3,581			$	—			$	104,130			$	—
Impairment of assets (unrelated to restructuring):
Direct-Store-Delivery		$	—			$	24,877			$	—			$	24,877
		$	—			$	24,877			$	—			$	24,877
Multi-employer pension plan withdrawal costs:
Direct-Store-Delivery		$	—			$	—			$	18,268			$	—
		$	—			$	—			$	18,268			$	—
Pension plan settlement loss:
Unallocated Corporate		$	1,619			$	173			$	4,649			$	6,646
		$	1,619			$	173			$	4,649			$	6,646
EBITDA:
Direct-Store-Delivery		$	83,732			$	49,183			$	329,154			$	380,504
Warehouse Delivery			12,337				16,379				75,380				78,603
Unallocated Corporate			(17,251	)			(12,120	)			(94,903	)			(54,348	)
		$	78,818			$	53,442			$	309,631			$	404,759
Depreciation and Amortization:
Direct-Store-Delivery		$	27,782			$	27,103			$	126,485			$	120,009
Warehouse Delivery			4,801				4,676				20,642				20,138
Unallocated Corporate			(152	)			495				(408	)			722
		$	32,431			$	32,274			$	146,719			$	140,869
EBIT income:
Direct-Store-Delivery		$	55,950			$	22,080			$	202,669			$	260,495
Warehouse Delivery			7,536				11,703				54,738				58,465
Unallocated Corporate			(17,099	)			(12,615	)			(94,495	)			(55,070	)
		$	46,387			$	21,168			$	162,912			$	263,890

---

Flowers Foods, Inc.

Condensed Consolidated Balance Sheet

 

(000’s omitted)

 

		December 30, 2017
Assets
Cash and Cash Equivalents		$	5,129
Other Current Assets			478,097
Property, Plant & Equipment, net			732,026
Distributor Notes Receivable (includes $22,793 current portion)			211,702
Other Assets			25,551
Cost in Excess of Net Tangible Assets, net			1,207,219
Total Assets		$	2,659,724
Liabilities and Stockholders’ Equity
Current Liabilities		$	381,856
Long-term Debt and Capital Leases (includes $12,095 current portion)			832,236
Other Liabilities			194,955
Stockholders’ Equity			1,250,677
Total Liabilities and Stockholders’ Equity		$	2,659,724

---

Flowers Foods, Inc.

Condensed Consolidated Statement of Cash Flows

 

(000’s omitted)

 

		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Cash flows from operating activities:
Net income		$	78,533			$	13,042			$	150,120			$	163,776
Adjustments to reconcile net income (loss) to net cash from operating activities:
Total non-cash adjustments			(7,040	)			49,091				143,111				182,178
Changes in assets and liabilities and pension contributions			1,870				4,828				4,158				10,608
Net cash provided by operating activities			73,363				66,961				297,389				356,562
Cash flows from investing activities:
Purchase of property, plant and equipment			(24,019	)			(34,327	)			(75,232	)			(101,727	)
Divestiture of assets			—				—				41,230				—
Proceeds from sale of property, plant and equipment			2,241				14,722				3,935				17,667
Other			(813	)			2,167				(5,328	)			7,346
Net cash disbursed for investing activities			(22,591	)			(17,438	)			(35,395	)			(76,714	)
Cash flows from financing activities:
Dividends paid			(35,775	)			(33,265	)			(140,982	)			(131,073	)
Exercise of stock options			10,017				8,769				19,313				27,631
Stock repurchases, including accelerated stock repurchases			—				—				(2,671	)			(126,300	)
Net change in debt borrowings			(22,750	)			(32,750	)			(124,000	)			(55,608	)
Other			(4,209	)			6,598				(14,935	)			(2,466	)
Net cash disbursed for financing activities			(52,717	)			(50,648	)			(263,275	)			(287,816	)
Net decrease in cash and cash equivalents			(1,945	)			(1,125	)			(1,281	)			(7,968	)
Cash and cash equivalents at beginning of period			7,074				7,535				6,410				14,378
Cash and cash equivalents at end of period		$	5,129			$	6,410			$	5,129			$	6,410

---

Flowers Foods, Inc.

Reconciliation of GAAP to Non-GAAP Measures

 

(000’s omitted, except per share data)

 

		Reconciliation of Earnings per Share to Adjusted Earnings per Share
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Net income per diluted common share		$	0.37			$	0.06			$	0.71			$	0.78
Gain on divestiture			—				—				(0.09	)			—
Restructuring and related impairment charges			0.01				—				0.30				—
Project Centennial consulting costs			0.02				0.01				0.11				0.02
Impairment of assets (unrelated to restructuring)			—				0.07				—				0.07
Lease terminations/legal settlement/extinguishment loss			—				0.03				0.02				0.04
Pension plan settlement loss			—				—				0.01				0.02
Multi-employer pension plan withdrawal costs			—				—				0.05				—
Impact of tax reform			(0.23	)			—				(0.23	)			—
Windfall tax benefit from stock option exercises			(0.01	)			—				(0.01	)			—
Adjusted net income per diluted common share		$	0.17			$	0.17			$	0.89			$	0.93
Certain amounts may not add due to rounding.
		Reconciliation of Gross Margin
		For the 12 Week Period Ended				For the 12 Week Period Ended
		December 30, 2017				December 31, 2016
Sales		$	873,623			$	868,717
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization)			456,800				450,462
Gross Margin excluding depreciation and amortization			416,823				418,255
Less depreciation and amortization for production activities			19,586				19,682
Gross Margin		$	397,237			$	398,573
Depreciation and amortization for production activities		$	19,586			$	19,682
Depreciation and amortization for selling, distribution and administrative activities			12,845				12,592
Total depreciation and amortization		$	32,431			$	32,274
		Reconciliation of Net Income to Adjusted EBIT and Adjusted EBITDA
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Net income		$	78,533			$	13,042			$	150,120			$	163,776
Income tax expense (benefit)			(34,709	)			4,244				(827	)			85,761
Interest expense, net			2,563				3,882				13,619				14,353
Earnings before interest and income taxes			46,387				21,168				162,912				263,890
Gain on divestiture			—				—				(28,875	)			—
Restructuring and related impairment charges			3,581				—				104,130				—
Project Centennial consulting costs			5,461				3,849				37,306				6,324
Impairment of assets (unrelated to restructuring)			—				24,877				—				24,877
Lease terminations and legal settlement			1,475				9,250				6,543				10,500
Pension plan settlement loss			1,619				173				4,649				6,646
Multi-employer pension plan withdrawal costs			—				—				18,268				—
Adjusted EBIT			58,523				59,317				304,933				312,237
Depreciation and amortization			32,431				32,274				146,719				140,869
Lease termination depreciation impact			—				—				(1,844	)			—
Adjusted EBITDA		$	90,954			$	91,591			$	449,808			$	453,106
Sales		$	873,623			$	868,717			$	3,920,733			$	3,926,885
Adjusted EBITDA margin			10.4	%			10.5	%			11.5	%			11.5	%
		Reconciliation of Adjusted EBITDA to Cash Flow from Operations
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Adjusted EBITDA		$	90,954			$	91,591			$	449,808			$	453,106
Adjustments to reconcile net income to net cash provided by operating activities			(39,471	)			16,817				(3,608	)			41,309
Changes in assets and liabilities and pension contributions			1,870				4,828				4,158				10,608
Income tax expense (benefit)			34,709				(4,244	)			827				(85,761	)
Interest expense, net			(2,563	)			(3,882	)			(13,619	)			(14,353	)
Gain on divestiture			—				—				28,875				—
Restructuring and related impairment charges			(3,581	)			—				(104,130	)			—
Project Centennial consulting costs			(5,461	)			(3,849	)			(37,306	)			(6,324	)
Impairment of assets (unrelated to restructuring)			—				(24,877	)			—				(24,877	)
Lease terminations and legal settlement			(1,475	)			(9,250	)			(4,699	)			(10,500	)
Pension plan settlement loss			(1,619	)			(173	)			(4,649	)			(6,646	)
Multi-employer pension plan withdrawal costs			—				—				(18,268	)			—
Cash Flow From Operations		$	73,363			$	66,961			$	297,389			$	356,562
		Reconciliation of Income Tax Expense to Adjusted Income Tax Expense
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Income tax expense (benefit)		$	(34,709	)		$	4,244			$	(827	)		$	85,761
Tax impact of:
Gain on divestiture			—				—				(11,117	)			—
Restructuring and related impairment charges			1,379				—				40,090				—
Project Centennial consulting costs			2,103				1,481				14,363				2,434
Impairment of assets (unrelated to restructuring)			—				9,578				—				9,578
Loss on extinguishment of debt			—				—				—				732
Lease terminations and legal settlement			568				3,561				2,520				4,042
Pension plan settlement loss			623				67				1,790				2,559
Multi-employer pension plan withdrawal costs			—				—				7,033				—
Impact of tax reform			48,160								48,160
Windfall tax benefit from stock option exercises			2,082				—				2,082				—
Adjusted income tax expense		$	20,206			$	18,931			$	104,094			$	105,106

---

Flowers Foods, Inc.

Reconciliation of GAAP to Non-GAAP Measures

 

(000’s omitted, except per share data)

 

		Reconciliation of Net Income to Adjusted Net Income
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Net income		$	78,533			$	13,042			$	150,120			$	163,776
Gain on divestiture			—				—				(17,758	)			—
Restructuring and related impairment charges			2,202				—				64,040				—
Project Centennial consulting costs			3,358				2,368				22,943				3,890
Impairment of assets (unrelated to restructuring)			—				15,299				—				15,299
Lease terminations and legal settlement			907				5,689				4,023				6,458
Loss on extinguishment of debt			—				—				—				1,168
Pension plan settlement loss			996				106				2,859				4,087
Multi-employer pension plan withdrawal costs			—				—				11,235				—
Impact of tax reform			(48,160	)							(48,160	)
Windfall tax benefit from stock option exercises			(2,082	)			—				(2,082	)			—
Adjusted net income		$	35,754			$	36,504			$	187,220			$	194,678
		Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - DSD
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Earnings before interest and income taxes		$	55,950			$	22,080			$	202,669			$	260,495
Restructuring and related impairment charges			3,401				—				80,026				—
Impairment of assets (unrelated to restructuring)			—				24,877				—				24,877
Lease terminations and legal settlement			1,475				9,250				6,543				10,500
Multi-employer pension plan withdrawal costs			—				—				18,268				—
Adjusted EBIT			60,826				56,207				307,506				295,872
Depreciation and amortization			27,782				27,103				126,485				120,009
Depreciation on lease terminations			—				—				(1,844	)			—
Adjusted EBITDA		$	88,608			$	83,310			$	432,147			$	415,881
Sales		$	738,556			$	730,487			$	3,318,563			$	3,284,177
Adjusted EBITDA margin			12.0	%			11.4	%			13.0	%			12.7	%
		Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Warehouse Delivery
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Earnings before interest and income taxes		$	7,536			$	11,703			$	54,738			$	58,465
Gain on divestiture			—				—				(28,875	)			—
Restructuring and related impairment charges			31				—				20,122				—
Adjusted EBIT			7,567				11,703				45,985				58,465
Depreciation and amortization			4,801				4,676				20,642				20,138
Adjusted EBITDA		$	12,368			$	16,379			$	66,627			$	78,603
Sales		$	135,067			$	138,230			$	602,170			$	642,708
Adjusted EBITDA margin			9.2	%			11.8	%			11.1	%			12.2	%
		Reconciliation of EBIT to Adjusted EBIT and Adjusted EBITDA - Corporate
		For the 12 Week Period Ended				For the 12 Week Period Ended				For the 52 Week Period Ended				For the 52 Week Period Ended
		December 30, 2017				December 31, 2016				December 30, 2017				December 31, 2016
Earnings before interest and income taxes		$	(17,099	)		$	(12,615	)		$	(94,495	)		$	(55,070	)
Restructuring and related impairment charges			149				—				3,982				—
Project Centennial consulting costs			5,461				3,849				37,306				6,324
Pension plan settlement loss			1,619				173				4,649				6,646
Adjusted EBIT		$	(9,870	)		$	(8,593	)		$	(48,558	)		$	(42,100	)
Depreciation and amortization			(152	)			495				(408	)			722
Adjusted EBITDA		$	(10,022	)		$	(8,098	)		$	(48,966	)		$	(41,378	)
		Reconciliation of Earnings per Share - Full Year Fiscal 2018 Guidance
		Range Estimate
Net income per diluted common share		$	1.00	to		$	1.11
Project Centennial reorganization and consulting costs			0.04				0.05
Adjusted net income per diluted common share		$	1.04	to		$	1.16

---

Flowers Foods, Inc.

Sales Bridge

 

 

						Net								Total Sales
For the 12 Week Period Ended December 30, 2017		Volume				Price/Mix				Divestiture				Change
Direct-Store-Delivery			-2.3	%			3.4	%			0.0	%			1.1	%
Warehouse Delivery			6.5	%			-5.6	%			-3.2	%			-2.3	%
Total Flowers Foods			0.0	%			1.1	%			-0.5	%			0.6	%
						Net								Total Sales
For the 52 Week Period Ended December 30, 2017		Volume				Price/Mix				Divestiture				Change
Direct-Store-Delivery			-0.3	%			1.3	%			0.0	%			1.0	%
Warehouse Delivery			0.0	%			-3.3	%			-3.0	%			-6.3	%
Total Flowers Foods			-0.2	%			0.6	%			-0.6	%			-0.2	%