UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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☐ | Preliminary Proxy Statement | |
☐ | CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE14a-6(e)(2)) | |
☑ | Definitive Proxy Statement | |
☐ | Definitive Additional Materials | |
☐ | Soliciting Material Pursuant toss.240.14a-12 |
FLOWERS FOODS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Dear Shareholder:
We would like to extend an invitation for you to join us at our annual meeting of shareholders on May 26, 201624, 2018 at 11:00 a.m., Eastern Time, at the Thomasville Municipal Auditorium in Thomasville, Georgia for the following purposes, as more fully described in this proxy statement:
1. | to elect as directors of the company the |
2. | to hold an advisory vote on the compensation of the company’s named executive officers; |
3. | to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for Flowers Foods, Inc. for the fiscal year ending December |
4. | to hold a vote on a shareholder proposal regarding |
to transact any other business as may properly come before the annual meeting and at any adjournment or postponement thereof.
In addition, Flowers Foods’ senior management team will report on the performance of the company and respond to questions from shareholders.
The company has implemented the “Notice and Access” rule of the Securities and Exchange Commission (the “SEC”) that permits companies to send their shareholders a Noticenotice that proxy materials are available — in electronic form on the Internet or in printed form by request — instead of mailing a printed proxy statement and annual report to every shareholder. By utilizing Notice and Access, we are able to speed delivery of the proxy materials, lower our distribution costs and reduce the environmental impact of proxy delivery. On or about April 14, 2016,2, 2018, we mailed to our shareholders a notice that contains instructions on how to access our 20162018 proxy statement and 20152017 annual report and vote online or to affirmatively elect to receive the proxy materials by mail.
Please carefully review the proxy materials. Your vote is important to us and to our business. We encourage you to vote using telephone or Internet voting prior to the annual meeting, so that your shares of Flowers Foods common stock will be represented and voted at the annual meeting even if you cannot attend. If you elected to receive paper copies of the proxy materials by mail, you may vote by signing, dating and mailing the proxy card in the envelope provided.
We hope to see you in Thomasville.
April 14, 20162, 2018
Thomasville, Georgia
George E. Deese | Allen L. Shiver | |
Non-Executive Chairman of the Board | President and Chief Executive Officer |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be held on May 26, 201624, 2018
Flowers Foods, Inc.’s 20162018 proxy statement and 20152017 annual report are available at www.proxyvote.com.
Notice of Annual Meeting of Shareholders
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May 26, 201624, 2018
11:00 a.m., Eastern Time
Thomasville Municipal Auditorium, 144 East Jackson Street, Thomasville, Georgia
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders of Flowers Foods, Inc. will be held on May 26, 201624, 2018 at 11:00 a.m., Eastern Time, at the Thomasville Municipal Auditorium, 144 East Jackson Street, Thomasville, Georgia for the following purposes:
(1) | to elect as directors of the company the |
(2) | to hold an advisory vote on the compensation of the company’s named executive officers; |
(3) | to ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for Flowers Foods, Inc. for the fiscal year ending December |
(4) | to hold a vote on a shareholder proposal regarding |
and to transact any other business as may properly come before the annual meeting and at any adjournment or postponement thereof; all as set forth in the proxy statement accompanying this notice.
Only record holders of issued and outstanding shares of our common stock at the close of business on March 24, 201622, 2018 are entitled to notice of, and to vote at, the annual meeting, or any adjournment or postponement thereof. A list of such shareholders will be open for examination by any shareholder at the annual meeting.
Shareholders can listen to a live audio webcast of the annual meeting on our website at www.flowersfoods.com. This webcast also will be archived on our website.
April 14, 20162, 2018
1919 Flowers Circle
Thomasville, Georgia 31757
By order of the Board of Directors,
Stephen R. Avera
Executive Vice President,
Secretary and GeneralChief Legal Counsel
FLOWERS FOODS, INC. - 2018 Proxy Statement 3
FLOWERS FOODS, INC. - 2016 Proxy Statement 3
4 FLOWERS FOODS, INC. - 2018 Proxy Statement
4 FLOWERS FOODS, INC. - 20162018 Proxy Statement 5
To assist you in reviewing Flowers Foods’ 20152017 performance and executive compensation, this summary highlights certain key elements of our financial performance and our proxy statement that are discussed in more detail elsewhere in the proxy materials. This summary does not contain all of the information that you should consider, and you should carefully review Flowers Foods’our Annual Report on Form10-K for the fiscal year ended January 2, 2016December 30, 2017 and the entire proxy statement before voting. Page references (“XX”) are supplied to help you find further information in this proxy statement.
20162018 Annual Meeting of Shareholders
Voting Matters and Board Recommendations (page 43)46)
Board Vote Recommendation | Page Reference
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Election of | FOR each Director-Nominee | |||||||
Advisory Vote on Executive Compensation | FOR | |||||||
Ratification of Independent Registered Public Accounting Firm | FOR | |||||||
Shareholder Proposal Regarding | AGAINST |
Business Highlights
(For more details, please see our Annual Report on Form10-K for the fiscal year ended January 2, 2016December 30, 2017 filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2016)21, 2018)
The key development atDuring 2017, Flowers Foods during 2015 was our entry intocontinued to execute on its strategic priorities established under Project Centennial. Among other things, Flowers Foods’ key developments in 2017 included:
To support our growth in the Midwest, in the second quarter we opened a bakery in Lenexa, Kansas. With the opening of Lenexa we improved product freshness in Kansas City and surrounding markets and reduced capacity constraints in our core southern markets, allowing the Tuscaloosa bakery to convert to organic production.
In addition to executing on growth opportunities, the team delivered expanded adjusted EBITDA margins this year, driven by branded sales making up a larger proportion of our total sales, lower input costs, and improved manufacturing efficiencies. These strong operating metrics resulted in record operating cash flow of $324 million, which provided capital for acquisitions, investments in our bakeries, and shareholder return through share repurchases and a growing dividend.
Financial highlights from the52-week fiscal 2015:2017 include:
• | Adjusted diluted earnings per share decreased $0.04 to $0.89.(1) |
• | Adjusted net income decreased 3.8% to $187.2 million.(1) |
• | Adjusted EBITDA decreased 0.7% to $449.8 million.(1) |
• | Adjusted EBITDA margin was unchanged at 11.5% of sales.(1) |
(1) | Adjusted EBITDA, adjusted EBITDA margin, adjusted diluted earnings per share and adjusted net income |
Governance of the Company (page 16)17)
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FLOWERS FOODS, INC. - 2016 Proxy Statement 5
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6 FLOWERS FOODS, INC.Director-Nominees - 2018 Proxy Statement
Directors (page 14)15)
Name | Age | Director since | Experience | Independent | Committee Memberships | Other Company Boards | Age | Director since | Experience | Independent | Committee Memberships | Other Company Boards | ||||||||||||||||
George E. Deese | 70 | 2004 | Retired Chairman and CEO of Flowers Foods | No | — | — | 72 | 2004 | Retired Chairman and Chief Executive Officer of Flowers Foods | Yes | — | — | ||||||||||||||||
Rhonda Gass | 52 | 2016 | Vice President and CIO of Stanley Black & Decker | Yes | Audit and Finance Committees | — | 54 | 2016 | Vice President and Chief Information Officer of Stanley Black & Decker | Yes | Audit and Finance Committees | — | ||||||||||||||||
Benjamin H. Griswold, IV | 77 | 2005 | Partner and Chairman of Brown Advisory; retired Senior Chairman of Deutsche Bank Securities | Yes | Nominating/Corporate Governance and Compensation Committees | W.P. Carey Inc. | ||||||||||||||||||||||
Richard Lan | 61 | 2016 | Chief Operating Officer of Maple Leaf Food Group and CEO of Canada Bread | Yes | Audit and Finance Committees | — | 63 | 2016 | Retired Chief Operating Officer of Maple Leaf Food Group and Chief Executive Officer of Canada Bread | Yes | Audit and Finance Committees | — | ||||||||||||||||
Margaret G. Lewis | 63 | 2014 | Former President of Hospital Corporation of America’s Capital Division | Yes | Audit and Finance Committees | Federal Reserve Bank of Richmond; W.P. Carey Inc. | ||||||||||||||||||||||
Amos R. McMullian | 78 | 2001 | Chairman Emeritus of Flowers Foods; retired Chairman of the Board and Chief Executive Officer of Flowers Foods | Yes | — | — | 80 | 2001 | Chairman Emeritus of Flowers Foods; retired Chairman of the Board and Chief Executive Officer of Flowers Foods | No | — | — | ||||||||||||||||
J. V. Shields, Jr. | 78 | 2001 | Chairman of Wellington Shields & Co., LLC | Yes | Nominating/Corporate Governance and Compensation Committees | — | ||||||||||||||||||||||
J.V. Shields, Jr. | 80 | 2001 | Chairman of Wellington Shields & Co., LLC | Yes | Nominating/Corporate Governance and Compensation Committees | Capital Management Associates, Inc.; Wellington Shields Capital Management, LLC | ||||||||||||||||||||||
Allen L. Shiver | 62 | 2013 | President and Chief Executive Officer of Flowers Foods | No | — | — | ||||||||||||||||||||||
David V. Singer | 60 | 2010 | Retired Chief Executive Officer of Snyder’s Lance, Inc. | Yes | Compensation and Nominating/Corporate Governance Committees | SPX Corporation; Hanes Brands | 62 | 2010 | Retired Chief Executive Officer of Snyder’s Lance, Inc. | Yes | Nominating/Corporate Governance and Compensation Committees | SPX Flow, Inc.; Brunswick Corporation; Hanesbrands, Inc. | ||||||||||||||||
James T. Spear | 61 | 2015 | Retired Executive Vice President and Chief Financial Officer of Cadence Health | Yes | Audit and Finance Committees | — | 63 | 2015 | Retired Executive Vice President and Chief Financial Officer of Cadence Health | Yes | Audit and Finance Committees | The Trust Company of Illinois | ||||||||||||||||
Melvin T. Stith | 69 | 2004 | Professor of Marketing at Syracuse University; former Dean of Whitman School of Management | Yes | Compensation and Nominating/Corporate Governance Committees | Synovus Financial Corp. Aflac Incorporated | ||||||||||||||||||||||
Melvin T. Stith, Ph.D. | 71 | 2004 | President, Norfolk State University; former Dean Emeritus, Whitman School of Management, Syracuse University | Yes | Nominating/Corporate Governance and Compensation Committees | Synovus Financial Corp.; Aflac Incorporated | ||||||||||||||||||||||
C. Martin Wood III | 74 | 2001 | Partner of Wood Associates; retired Senior Vice President and Chief Financial Officer of Flowers Foods | Yes | Audit and Finance Committees | Archbold Medical Center; Archbold Foundation |
FLOWERS FOODS, INC. - 2018 Proxy Statement 7
2017 Executive Compensation (page 26)27)
20152017 Compensation Developments
The only material change to the executive compensation program this year was that the compensation committee adopted a policy that, without shareholder approval, future cash severance arrangements may not exceed 2.99 times salary and bonus.
Under the established executive compensation program, our Named Executivesnamed executive officers earned the following compensation based upon 20152017 performance:
performance period ended December 30, 2017 exceeding the company’s “weighted average cost of capital” by 254 basis points. |
• | Vesting in 2018 of theTSR-Based Performance-Contingent Restricted Stock Award issued in 2016 at 12.5% of target as a result of the company’s TSR from January 3, 2016 through each of the last four quarters ended December 30, 2017, placing below the 30th percentile in three of the quarters and placing in the 30th percentile in one of the quarters of the TSR Peer Group companies. We ended thetwo-year performance period with cumulative TSR of negative 3.3%. |
6 FLOWERS FOODS, INC. - 2016 Proxy Statement
Summary of Our Compensation Practices (page 27)28)
Practices We Have Adopted | Practices We Do Not Engage In | |||
• Moderate pay targeted to thesize-adjusted 50th percentile of market data
• Long-term incentives that are performance-based
• Multiple performance measures used in incentive plans
• Capped incentives
• Clawback policy
•
• Moderate change of control severance arrangements
•
• Annual review of tally sheets by the compensation committee
• Incentives that are risk-mitigated through plan design and administration
• Compensation committee comprised solely of independent directors
• Independent compensation consultant who reports directly to the compensation committee
• Anti-hedging policy for executives and outside directors | • Employment agreements
• Dividend equivalents on unvested performance shares
• Income taxgross-ups
• Excise taxgross-ups on change of control severance
• Backdating or repricing of stock options
• Pension credited service for years not worked • Perquisites are not provided |
8 FLOWERS FOODS, INC. - 2018 Proxy Statement
20152017 Executive Compensation Summary (page 35)36)
Named Executive Compensation
Set forth below is a summary of the 20152017 compensation for each named executive officer of the company (the “Named Executives”) as determined under applicable SEC rules. Base salaries reflect increases of 14.9% for Mr. Shiver; 3.8% for Mr. Kinsey; 11.9% for Mr. Alexander; 3.2% for Mr. Averarules and 26.2% for Mr. Wheeler.regulations (the “Named Executives”). Stock awards made in 20152017 are performance-contingent and are established at market levels based on the industry survey data discussed under “Executive Compensation — Compensation Discussion and Analysis — Compensation Benchmarking” on page 28.30. All other compensation consists solely of employer contributions to retirement plans, as we offer no perquisites to our Named Executives. The information below should be read in connection with the explanatory information contained on page 2627 under “Compensation“Executive Compensation — Compensation Discussion and Analysis” and page 3536 under “Summary“Executive Compensation — Summary Compensation Table,” and is qualified in its entirety by reference to such information.
Name and Principal Position | Salary ($) | Stock Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Value and Compensation ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||
Allen L. Shiver President and Chief Executive Officer | 974,615 | 3,091,213 | 735,835 | 45,896 | 73,137 | 4,920,696 | ||||||||||||||||||
R. Steve Kinsey Executive Vice President and Chief Financial Officer | 501,539 | 706,528 | 265,063 | 22,830 | 36,068 | 1,532,028 | ||||||||||||||||||
Bradley K. Alexander Executive Vice President and Chief Operating Officer | 508,077 | 699,265 | 268,519 | 46,568 | 35,736 | 1,558,165 | ||||||||||||||||||
Stephen R. Avera Executive Vice President, Secretary and General Counsel | 456,538 | 545,128 | 224,046 | 20,029 | 32,409 | 1,278,150 | ||||||||||||||||||
D. Keith Wheeler President—Flowers Bakeries | 364,154 | 401,886 | 178,709 | 6,450 | 24,441 | 975,640 |
Name and Principal Position | Salary ($) | Stock Awards ($) | Non-Equity Incentive Plan Compensation ($) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($) | All Other Compensation ($) | Total ($) | ||||||||||||||||||
Allen L. Shiver President and Chief Executive Officer | 1,000,000 | 4,435,334 | 892,100 | 86,910 | 82,306 | 6,496,650 | ||||||||||||||||||
R. Steve Kinsey Chief Financial Officer and Chief Administrative Officer | 540,000 | 897,194 | 350,352 | 48,276 | 39,175 | 1,874,997 | ||||||||||||||||||
Bradley K. Alexander President, Fresh Packaged Bread Business Unit | 540,000 | 897,194 | 350,352 | 99,375 | 39,200 | 1,926,121 | ||||||||||||||||||
Stephen R. Avera Chief Legal Counsel | 475,000 | 678,198 | 269,658 | 47,497 | 33,753 | 1,504,106 | ||||||||||||||||||
D. Keith Wheeler Chief Sales Officer | 421,270 | 601,592 | 239,155 | 34,044 | 25,256 | 1,321,317 |
FLOWERS FOODS, INC. - 2016 Proxy Statement 7
20152017 Executive Total Compensation Mix (page 27)29)
The information below should be read in connection with the explanatory information contained on pages 27 to 28page 29 under “Compensation“Executive Compensation — Compensation Discussion and Analysis — Mix of Compensation Opportunity,” and is qualified in its entirety by reference to such explanatory information.
82% PERFORMANCE-BASED COMPENSATION 64% PERFORMANCE-BASED COMPENSATION SalaryNon-Equity Incentive Compensation Other Compensation Equity Compensation CEO COMPENSATION MIX OTHER NAMED EXECUTIVES COMPENSATION MIX
8
FLOWERS FOODS, INC. - 20162018 Proxy Statement 9
FLOWERS FOODS, INC.
1919 Flowers Circle
Thomasville, Georgia 31757
PROXY STATEMENT FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD MAY 26, 201624, 2018
This proxy statement and the accompanying form of proxy are being furnished to the shareholders of Flowers Foods, Inc. on or about April 14, 20162, 2018 in connection with the solicitation of proxies by the board of directors for use at the annual meeting of shareholders to be held on May 26, 201624, 2018 at 11:00 a.m., Eastern Time, at the Thomasville Municipal Auditorium, 144 East Jackson Street, Thomasville, Georgia, and any adjournment or postponement of the meeting.thereof.
THE ANNUAL MEETING AND VOTING
What is the purpose of the annual meeting?
At the annual meeting, shareholders will:
(1) | vote to elect as directors of the company the |
(2) | hold an advisory vote on compensation of the |
(3) | vote on the ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for Flowers Foods for the fiscal year ending December |
(4) | hold a vote on a shareholder proposal regarding |
The shareholders will also transact any other business that may properly come before the annual meeting and any adjournment or postponement of the annual meeting. In addition, Flowers Foods’ senior management team will report on the performance of the company and respond to questions from shareholders.
How do I attend the annual meeting in person?
Important note: If you plan to attend the annual meeting, you must follow these instructions to gain admission.
Pre-registration is required for attendance at the 20162018 annual meeting, and you must be a Flowers Foods shareholder to register. The deadline for registration is May 19, 2016.21, 2018. All attendees will be required to present a valid, government-issued photo ID, such as a passport or driver’s license, to gain admission.
Please visitwww.flowersfoods.com, and click on Shareholders Meeting Pre-Registration.Pre-registration.
How does the board of directors recommend that I vote on each proposal?
The board of directors recommends that you vote:
10 FLOWERS FOODS, INC. - 2018 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
A proxy is your legal designation of another person to vote the shares of Flowers Foods common stock you own as of the record date for the annual meeting. If you appoint someone as your proxy in a written document, that document is also called a proxy or a proxy card. We
have designated three of our executive officers as proxies for the annual
meeting. These three officers are Allen L. Shiver, our president and chief executive officer, R. Steve Kinsey, our executive vice presidentchief financial officer and chief financialadministrative officer, and Stephen R. Avera, our executive vice president, secretary and generalchief legal counsel.
FLOWERS FOODS, INC. - 2016 Proxy Statement 9
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Are the proxy materials available electronically?
Yes. Under SEC rules and regulations, Flowers Foods is making this proxy statement and its 20152017 annual report available to its shareholders electronically on the Internet at www.proxyvote.com. On or about April 14, 2016,2, 2018, we mailed to our shareholders a notice (the “Notice”) containing instructions on how to access this proxy statement and our 20152017 annual report online. If you received a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Rather, the Notice instructs you
on how to access and review all of the important
information contained in thethis proxy statement and our 2017 annual report on the Internet. The Notice also instructs you on how you may submit your proxy vote over the Internet.
If you received a Notice by mail but would like to receive a printed copy of thethis proxy statement and 2015our 2017 annual report, please follow the instructions contained on the Notice.
To be eligible to vote, you must have been a shareholder of record of the company’s common stock at the close of business on March 24, 2016,22, 2018, which is the record date for the annual meeting. There were 206,808,307210,805,519 shares of our common stock outstanding and entitled to vote on the record date.
You are entitled to one vote on each of the eighteleven director-nominees, and one vote on each other matter to be voted upon at the annual meeting, for each share of common stock you held on the record date for the annual meeting. For example, if you owned 100 shares of our common stock on the record date, you would be entitled to 100 votes for each of the eighteleven director-nominees and for each other matter to be voted upon at the annual meeting.
You can vote in the following ways:
• | Voting by Mail. If you elect to receive your proxy materials by mail, you may vote by completing and signing the enclosed proxy card and promptly mailing it in the enclosed postage-paid envelope. The envelope does not require additional postage if you mail it |
• | Internet Voting. If you have Internet access, you may vote your shares from any location in the world by following the “Vote by Internet” instructions set forth on the Notice or the proxy card. |
• | Telephone Voting. You may authorize the voting of your shares by following the “Vote by Telephone” instructions set forth on the proxy card. |
• | Vote at the Meeting. If you attend the annual meeting and you are a registered shareholder, you may vote by delivering your completed proxy card in person or you may vote by completing a ballot, which will be available at the annual meeting. If your shares are held in “street name” through a bank, broker |
eligible to vote your shares in person, you must obtain a legal proxy from your bank, broker or |
By executing and returning your proxy (either by returning the proxy card or by submitting your proxy electronically by the Internet or by telephone), you appoint Allen L. Shiver, R. Steve Kinsey and Stephen R. Avera to represent you at the annual meeting and to vote your shares at the annual meeting in accordance with your voting instructions. The Internet and telephone voting procedures are designed to authenticate shareholder identities, to allow shareholders to give voting instructions and to confirm that shareholders’ instructions have been recorded properly. Any shareholder voting by Internet or telephone should understand that there may be costs associated with electronic access, like usage charges from Internet access and telephone or cable service providers, that must be paid by the shareholder.
FLOWERS FOODS, INC. - 2018 Proxy Statement 11
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
If I am a registered holder,shareholder, what if I do not give any instructions on a particular matter described in this proxy statement when voting by mail?
Registered shareholders should specify their choice for each matter on the proxy card. If no specific instructions are given, proxies that are signed and returned will be voted:
10 FLOWERS FOODS, INC. - 2016 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Can I change my vote after I have mailed my proxy card or after I have authorized the voting of my shares over theby Internet or by telephone?
Yes. You can change your vote and revoke your proxy at any time before the polls close at the annual meeting by doing any one of the following things:
Your attendance at the annual meeting alone will not revoke your proxy.
How do I vote my 401(k) shares?
If you participate in the Flowers Foods, Inc. 401(k) Retirement Savings Plan (the “401(k) Plan”) and you received the Notice, you may vote by the Internet or telephone as previously described in this proxy statement. If you elect to receive your proxy materials by mail, you may vote by completing and signing the enclosed proxy card and promptly mailing it in the enclosed postage-paid envelope. In addition, if you received a Notice by mail but would like to receive a printed copy of thethis proxy statement and 2015our 2017 annual report, please follow the instructions contained on the Notice. By voting, you will direct Great-
direct Great-WestWest Trust Company, LLC, the Trusteeas trustee of the 401(k) plan,Plan (the “Trustee”), how to vote the shares of Flowers Foods common stock allocated to your account. Any unvoted or unallocated shares will be voted by the Trustee in the same proportion on each proposal as the Trustee votes the shares of common stock credited to the 401(k) planPlan participants’ accounts for which the Trustee receives voting directionsinstructions from the 401(k) planPlan participants. The number of shares you are eligible to vote is based on the number of shares of Flowers Foods common stock in your account on the record date for the annual meeting.
Can I vote if my shares are held in “street name” by a bank, broker or broker?other record holder?
If your shares of Flowers Foods common stock are held in “street name” throughby a bank, broker bank or other record holder, of record, you will receive instructions from the registered holder that you must follow in order for your shares to be voted for you by that bank, broker or other record holder. TelephoneInternet and Internettelephone voting are offered to shareholders who own their shares of Flowers Foods sharescommon stock through certain banks and brokers.
The election of directors (Proposal I), the advisory proposal to approvevote on the compensation of the company’s Named Executives (Proposal II), and the shareholder proposal regarding shareholder approvalwhether the chairman of certain future severance agreements for senior executives,the board of directors should be independent, if properly presented
at the annual
meeting (Proposal IV), are considerednon-discretionary matters under applicable NYSE Rules. A broker or other nominee cannot vote without instructions onnon-discretionary matters, and therefore there may be broker “non-votes”“non-votes” on Proposal I, Proposal II, and Proposal IV. The ratification of the appointment of our independent registered public accounting firm for the fiscal 2015year ending December 29, 2018 (Proposal III) is considered a discretionary matter under applicable rules,NYSE Rules, and a broker or other nominee may (but is not required to) vote “FOR” Proposal III without instructions. Accordingly, it is important that you follow the voting instructions sent to you by the registered holder of your shares held in “street name” if you want your vote to be counted.
12 FLOWERS FOODS, INC. - 2018 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
How will broker “non-votes”“non-votes” be treated?
Broker “non-votes”“non-votes” will be counted as present in determining whether the quorum requirement is satisfied, but will not be included in vote totals and generally will not affect the outcome of the vote. A “non-vote”“non-vote” occurs when a nominee holding shares for a beneficial owner does not vote on a proposal because the nominee has not received instructions from the beneficial owner and does not have discretionary power to vote.
In order for your shares to be voted on all matters presented at the annual meeting, including the election of directors, we urge all shareholders whose shares are held in street name by a brokerage firmbank, broker or other record holder to provide voting instructions to the brokerage firm.bank, broker or other record holder.
How will abstentions be treated?
Abstentions will be counted as present in determining whether the quorum requirement is satisfied. However, abstentionssatisfied, but will not be included in the vote totals and will have no effect onnot affect the outcome of the vote with respect to Proposals I, II, III and IV.
The holders of at least a majority of the shares of our common stock entitled to vote at the annual meeting are required to be present in person or represented by proxy to constitute a quorum for the transaction of business.business at the annual meeting. Abstentions and broker “non-votes”“non-votes” will be counted as present in determining whether the quorum requirement is satisfied. The
aggregate number of votes cast by
all shareholders present in person or represented by proxy at the annual meeting, whether those shareholders vote for or against the proposals, and the total number of votes cast for each of these proposals will be counted for purposes of determining whether the proposals have been approved by the shareholders.
FLOWERS FOODS, INC. - 2016 Proxy Statement 11
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
What if a quorum is not present at the meeting?
If a quorum is not present at the scheduled time of the annual meeting, we may adjourn or postpone the annual meeting until a quorum is present. The time and place of the adjourned or postponed annual meeting will be announced at the time the adjournment or postponement is taken, and, unless such adjournment or postponement is for more than 120 days, no other notice will be given. An adjournment or postponement will have no effect onnot affect the business that may be conducted at the annual meeting.
What vote is required for each matter to be voted upon at the annual meeting?
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Will any other business be conducted at the annual meeting or will other matters be voted on?
At this time, the board of directors does not know of any other business to be brought before the annual meeting, but if any other business is properly brought before the annual meeting, the persons named as proxies, Messrs. Shiver, Kinsey and Avera, will exercise their judgment in deciding how to vote or otherwise act at the annual meeting with respect to that matter or proposal.
Where can I find the voting results from the annual meeting?
We will report the voting results from the annual meeting on a current reportCurrent Report on Form8-K, which we expect to file with the SEC on or before June 1, 2016.May 29, 2018.
FLOWERS FOODS, INC. - 2018 Proxy Statement 13
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
How and when may I submit a shareholder proposal for the 20172019 annual meeting?
For information on how and when you may submit a shareholder proposal for the 20172019 annual meeting, please refer to the section entitled “2017“2019 Shareholder Proposals” in this proxy statement.
Who pays the costs of soliciting proxies?
We will pay the cost of soliciting proxies. We have engaged Okapi PartnersMorrow Sodali LLC to assist in the solicitation of votes for a fee of $9,000,$9,500, plusout-of-pocket expenses. In addition, our directors and officers may solicit proxies in person, by telephone or facsimile, but will not receive additional compensation for these services. Brokerage houses, nominees, custodians and fiduciaries will be requested to forward soliciting material to beneficial owners of common stock held of record by them, and we will reimburse those persons for their reasonable expenses in doing so.
How can I obtain an Annual Report on Form10-K?
The notice of the annual meeting, theNotice, this proxy statement and theour 2017 annual report are available on the Internet at www.proxyvote.com. You may also receive a copy of theour 2017 annual report free of charge by sending a written request to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, Georgia 31757, Attention: InvestorShareholder Relations Department.
If you elected to receive your proxy materials by mail, a copy of Flowers Foods’our 2017 annual report, which includes our Annual Report on Form10-K and our financial statements for the fiscal year ended January 2, 2016,December 30, 2017, is included in the mailing of this proxy statement.
The annual report does not form any part of the material for the solicitation of proxies.
12 FLOWERS FOODS, INC. - 2016 Proxy Statement
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
Can I elect to receive future notices and proxy materials electronically?
Yes. If you are a registered shareholder or if you participate in the Flowers Foods, Inc. 401(k) Retirement Savings Plan, go to the company’s website, www.flowersfoods.com, and follow the instructions for signing up for electronic delivery of proxy materials. Those shareholders signing up for this service will receive all future proxy materials, including the Notice, proxy statement and annual report electronically. Please call Lisa Hay, our manager of shareholder relations, at (229)226-9110, if you need assistance.
If you hold your shares in a brokerage account or bank you may also have the opportunity to receive these documents electronically. Please contact your brokerage service, bank or financial advisor to make arrangements for electronic delivery of your proxy materials.
If I cannot attend the annual meeting, will a webcast be available on the Internet?
Shareholders can listen to a live audio webcast of the annual meeting over the Internet on the company’s website at www.flowersfoods.com. This webcast also will be archived on the site.
We have included the website address for reference only. The information contained on our website is not incorporated by reference into this proxy statement and does not form any part of the materials used for the solicitation of proxies.
Who should I contact if I have any questions?
If you have any questions about the annual meeting or your ownership of our common stock, please contact Marta J. Turner,Lisa Hay, our executive vice presidentmanager of corporateshareholder relations, at the above address or by calling (229)226-9110.
14 FLOWERS FOODS, INC. - 20162018 Proxy Statement 13
DIRECTORS AND CORPORATE GOVERNANCE
Below is certain information about our directors, their principal occupation, business experience as well as other matters, and the board of directors’ assessment of their individual qualifications to serve on our board of directors. Each of the individuals named below, with the exception of Mr. Lan, has been nominated to serve as a director until the 2019 annual meeting of shareholders. Mr. Lan’s term as director will expire at the 2018 annual meeting of shareholders.
Benjamin H. Griswold, IV, age 75, is partner and chairman of Brown Advisory. Mr. Griswold retired in February 2005 as senior chairman of Deutsche Bank Securities, a position he had held since 1999. Prior to that time, Mr. Griswold held several positions with Alex. Brown & Sons, ultimately being elected the firm’s chairman of the board. Following the merger of Alex. Brown and Bankers Trust New York, he became senior chairman of BT Alex. Brown, which was acquired by Deutsche Bank in 1999. Mr. Griswold also served on the board of the New York Stock Exchange, completing his term in 1999. He has been non-executive chairman of W.P. Carey Inc. (NYSE) since 2012 and a director since 2006. He also serves as a director of Stanley Black & Decker, Inc. (NYSE) (2001-present; will retire from the board effective April 20, 2016) and as a trustee emeritus of Johns Hopkins University. Mr. Griswold joined the board of directors in February 2005. Mr. Griswold has extensive experience in investment banking, corporate finance and strategic planning.
Margaret G. Lewis, age 61, is the retired president of HCA’s Capital Division, which includes facilities in northern, central and southwestern Virginia, New Hampshire, Indiana and Kentucky, and has served as a director of the company since May 2014. She began her career with HCA in 1978 and held several positions in nursing management and quality management before becoming chief nursing officer of HCA’s Richmond Division in 1997. Ms. Lewis became chief operating officer of CJW Medical Center in 1998 and chief executive officer in 2001. She is a registered nurse and a diplomat of the American College of Healthcare Executives. Ms. Lewis has served as a director of the Federal Reserve Bank of Richmond since September 2013. She previously served as a director of Smithfield Foods from 2011 to 2013. Ms. Lewis brings extensive leadership experience and management skills to the board of directors. Her variety of senior management roles provides expertise in executive decision-making and strategic planning.
Allen L. Shiver, age 60, was elected president and chief executive officer of the company effective May 22, 2013 and has served as a director of the company since that date. Mr. Shiver was president of Flowers Foods from January 2010 to May 22, 2013. Mr. Shiver previously served as executive vice president and chief marketing officer of Flowers Foods from May 2008 to January 2010. He previously served as president and chief operating officer of the warehouse delivery segment from April 2003 until May 2008. Prior to that, he served as president and chief operating officer of Flowers Snack from July 2002 until April 2003. Prior to that, Mr. Shiver served as executive vice president of Flowers Bakeries from 1998 until 2002, as a regional vice president of Flowers Bakeries in 1998 and as president of Flowers Baking Company of Villa Rica from 1995 until 1998. Prior to that time, Mr. Shiver served in various sales and marketing positions at Flowers Bakeries. Mr. Shiver joined the company in 1979. Mr. Shiver has extensive operational and financial experience as an executive in various capacities during his over 33-year career with the company.
C. Martin Wood III, age 72, has been a partner in Wood Associates, a private investment firm, since January 2000. He retired as senior vice president and chief financial officer of Flowers Industries, Inc. on January 1, 2000, a position that he had held since 1978. Mr. Wood has served as a director of Flowers Foods since March 2001 and he previously served as a director of Flowers Industries, Inc. from 1975 until March 2001. Mr. Wood joined the company in 1970. Mr. Wood also serves as senior active trustee on the board of Archbold Medical Center and as a trustee for the Archbold Foundation. Mr. Wood has a high degree of financial literacy and extensive knowledge of the company gained through his 43 years of service with the company, 22 of which he served as its chief financial officer.
Director-Nominees Serving Until 2017
George E. Deese, age 70,72, served as executive chairman of the board of directors of the company from May 22, 2013 until he retired December 31, 2014 and continues to serve asnon-executive chairman. Mr. Deese was chief executive officer of Flowers Foods from January 2004 until May 2013. Mr. Deese has served as a director of Flowers Foods since June 2004 and chairman of the board of directors since January 1, 2006. Previously, he served as president and chief operating officer of Flowers Foods from May 2002 to January 2004 and as president and chief operating officer of Flowers Bakeries, the company’s core business division, from 1983 to May 2002. Mr. Deese joined the company in 1964. He previously served as a board member of the Grocery Manufacturers of America (GMA), and previously served as a trustee of the Georgia Research Alliance. Mr. Deese previously served as chairman of the American Bakers Association (ABA) and on the ABA board and executive committee. He previously served as vice chairman of the board for Quality Bakers of America (QBA) and as a member of the QBA board for 15 years. Mr. Deese has gained extensive operational and financial experience as an executive in various capacities during his50-year career with the company.
Rhonda Gass, age 52,54, has served as vice president and chief information officer for Stanley Black & Decker since 2012 and was named an executive officer of the company the same year. Mrs. Gass is responsible for Stanley Black & Decker’s comprehensive and cross business unit IT strategy, delivery and support, and security infrastructure. She also leads the functional transformation activities for the company, focusing on effectiveness and efficiency. Previously, she was vice president of strategy, technology, and governance for Dell, where she worked for 12 years in positions of increasing scope and responsibility. Ms. Gass brings extensive strategic and information technology experience to the board of directors.
Benjamin H. Griswold, IV, age 77, is partner and chairman of Brown Advisory. Mr. Griswold retired in February 2005 as senior chairman of Deutsche Bank Securities, a position he had held since 1999. Prior to that time, Mr. Griswold held several positions with Alex. Brown & Sons, ultimately being elected the firm’s chairman of the board. Following the merger of Alex. Brown and Bankers Trust New York, he became senior chairman of BT Alex. Brown, which was acquired by Deutsche Bank in 1999. Mr. Griswold also served on the board of the New York Stock Exchange, completing his term in 1999. He has beennon-executive chairman of W.P. Carey Inc. (NYSE) since 2012 and a director since 2006. Previously he served as a director of Stanley Black & Decker, Inc. (NYSE) from 2001 until his retirement from the board effective April 20, 2016, and is a trustee emeritus of Johns Hopkins University. Mr. Griswold has extensive experience in investment banking, corporate finance and strategic planning.
Margaret G. Lewis, age 63, is the retired president of HCA’s Capital Division, which includes facilities in northern, central and southwestern Virginia, New Hampshire, Indiana and Kentucky. She began her career with HCA in 1978 and held several positions in nursing management and quality management before becoming chief nursing officer of HCA’s Richmond Division in 1997. Ms. Lewis became chief operating officer of CJW Medical Center in 1998 and chief executive officer in 2001. She is a registered nurse and a fellow with the American College of Healthcare Executives. Ms. Lewis has served as a director of the Federal Reserve Bank of Richmond since September 2013, as a director of Flowers Foods since May 2014, and as a director of W.P. Carey Inc. (NYSE) since 2017. She previously served as a director of Smithfield Foods from 2011 to 2013. Ms. Lewis brings extensive leadership experience and management skills to the board of directors. Her variety of senior management roles provides expertise in executive decision-making and strategic planning.
14
Amos R. McMullian, age 80, chairman emeritus of Flowers Foods, retired as chairman of the board of directors of Flowers Foods effective January 1, 2006, a position he had held since November 2000. He previously served as chief executive officer of Flowers Foods from November 2000 to January 2004. Mr. McMullian previously served as chairman of the board of directors of Flowers Industries, Inc. from 1985 until March 2001 and as its chief executive officer from 1981 until March 2001. Mr. McMullian previously served on the board of directors of Hughes Supply (2001-2006). Mr. McMullian has extensive operational and financial experience as an executive in various capacities during his50-year career with the company, 24 years of which he served as the chief executive officer. Mr. McMullian joined the company in 1963.
J.V. Shields, Jr., age 80, has been chairman of Wellington Shields & Co., LLC, a diversified financial services company and member of the New York Stock Exchange, since 2009, following the merger of Shields & Co. with H.G. Wellington & Co. Prior to the merger, Mr. Shields had been chairman of the board of directors and chief executive officer of Shields & Co. since 1982. Mr. Shields also is chairman of Capital Management Associates, Inc., and chairman of Wellington Shields Capital Management LLC, both registered investment advisors, and was chairman and director of The BBH Funds, the Brown Brothers Harriman mutual funds group, from 1990-January 2014. He has served as a director of Flowers Foods since March 2001, and he previously served as a director of Flowers Industries, Inc. from March 1989 until March 2001. Mr. Shields has extensive corporate finance and investing experience and has operational and financial experience from his service as a chief executive officer of Shields & Co.
FLOWERS FOODS, INC. - 20162018 Proxy Statement 15
DIRECTORS AND CORPORATE GOVERNANCE
Allen L. Shiver, age 62, has served as president, chief executive officer, and director of the company since May 22, 2013. Mr. Shiver was president of Flowers Foods from January 2010 to May 22, 2013, and previously served as executive vice president and chief marketing officer of Flowers Foods from May 2008 to 2009. Mr. Shiver served as president and chief operating officer of Flowers Foods Specialty Food Group from 2003 until 2008 and as president and chief operating officer of Flowers Snack from 2002 to 2003. Prior to these positions, Mr. Shiver served as bakery president, regional vice president, and executive vice president of operations. He joined the company in 1978. Mr. Shiver is an American Bakers Association (ABA) board member and has served as ABA’s chairman of the board. He currently serves asco-chair of the Grain Foods Foundation Board of Trustees and on the Grocery Manufacturers Association’s President’s Advisory Council and Industry Affairs Council.
David V. Singer, age 62, is the retired chief executive officer ofSnyder’s-Lance, Inc. (NASDAQ), a position he served in from 2010, following the merger of Lance, Inc. and Snyder’s of Hanover, Inc, to 2014. He previously served as the president and chief executive officer of Lance, Inc. from 2005 until the merger with Snyder’s in 2010. He was the executive vice president and chief financial officer of Coca-Cola Bottling Co. Consolidated, Charlotte, NC, from 2001 until 2005 and vice president and chief financial officer of Coca-Cola Bottling Co. Consolidated from 1987 until 2001. Mr. Singer was a director ofSnyder’s-Lance, Inc. from 2010 to 2014 and previously served as a director of Lance, Inc. from 2003-2010. He joined Flowers Foods’ board of directors on January 1, 2010. Mr. Singer was elected as a director of SPX Flow, Inc. (NYSE) in 2015, having served previously as a director of its former parent company, SPX Corporation (NYSE) since 2013. He also has served as a director of Brunswick Corporation (NYSE) and as a director of Hanesbrands, Inc. (NYSE) since 2014. Mr. Singer has management and financial experience as well as operational and financial experience as the chief executive officer of a publicly traded consumer products company.
James T. Spear, age 63, joined the company’s board of directors on January 1, 2015. Mr. Spear is the retired executive vice president and chief financial officer of Cadence Health, where he served from 2006 to 2012. Prior to that Mr. Spear served as vice president finance at Keebler Foods and also operated an independent advisory and consulting business. Since his retirement, Mr. Spear has periodically engaged in various consulting activities. Mr. Spear also currently serves on the board of directors of both The Trust Company of Illinois and The Trinity Forum. He also serves on the board of advisors to the Wheaton College Center for Faith, Politics, and Economics, where he also serves as an adjunct professor. Since 2013, the National Association of Corporate Directors has designated Mr. Spear as a Board Leadership Fellow. Mr. Spear has extensive food and health care industry, and leadership experience with public and private companies along with expertise in acquisitions and divestitures, financial reporting and auditing, corporate finance, risk management, information technology, investor relations, and strategic planning.
Melvin T. Stith, Ph.D., age 71, is president of Norfolk State University. He previously served as dean emeritus of the Whitman School of Management at Syracuse University in New York. From June 2013 until he retired in December 2015, he was professor of marketing at the Whitman School of Management. He previously served as dean of the Whitman School of Management from 2005 to 2013. Prior to that time, he was dean of the College of Business at Florida State University and the Jim Moran Professor of Business Administration. He also is a director of Synovus Financial Corp. (NYSE) (1998-present) and Aflac Incorporated (NYSE) (2012-present). Dr. Stith previously served as a director of Keebler Foods Company from 1999 to 2001. He has served as a director of Flowers Foods since July 2004. Dr. Stith has a significant background in marketing and accounting, has a high level of financial literacy and brings a unique academic perspective to the board of directors.
C. Martin Wood III, age 74, has been a partner in Wood Associates, a private investment firm, since January 2000. He retired as senior vice president and chief financial officer of Flowers Industries, Inc. on January 1, 2000, a position that he had held since 1978. Mr. Wood has served as a director of Flowers Foods since March 2001 and he previously served as a director of Flowers Industries, Inc. from 1975 until March 2001. Mr. Wood joined the company in 1970. Mr. Wood also serves as senior active trustee on the board of Archbold Medical Center and as a trustee for the Archbold Foundation. Mr. Wood has a high degree of financial literacy and extensive knowledge of the company gained through his 48 years of service with the company, 22 of which he served as its chief financial officer.
Richard Lan, age 61,63, Mr. Lan spent 20 years with Maple Leaf Foods/Canada Bread Ltd., Canada’s largest food processing company. He was chief operating officer of Maple Leaf Food Group, which included both Maple Leaf’s animal protein and bakery businesses. Lan also served as chief executive officer of Canada Bread Ltd., which was publicly traded and 90% owned by Maple Leaf Foods until it was sold in 2014. Prior to his career with Maple Leaf, Lan held management positions at other food and beverage companies, including Dell Products Corp. and McCain Foods, Ltd. Mr. Lan has management, operational and financial experience as the chief operating officer and chief executive officer of publicly traded companies.
Amos R. McMullian, age 78, chairman emeritus of Flowers Foods, retired as chairman of the board of directors of Flowers Foods effective January 1, 2006, a position he had held since November 2000. He previously served as chief executive officer of Flowers Foods from November 2000 to January 2004. Mr. McMullian previously served as chairman of the board of directors of Flowers Industries, Inc. from 1985 until March 2001 and as its chief executive officer from 1981 until March 2001. Mr. McMullian previously served on the board of directors of Hughes Supply (2001-2006). Mr. McMullian has extensive operational and financial experience as an executive in various capacities during his 50-year career with the company, 24 years of which he served as the chief executive officer. Mr. McMullian joined the company in 1963.
J.V. Shields, Jr., age 78, has been chairman of Wellington Shields & Co., LLC, a diversified financial services company and member of the New York Stock Exchange, since 2009, following the merger of Shields & Co. with H.G. Wellington & Co. Prior to the merger, Mr. Shields had been chairman of the board of directors and chief executive officer of Shields & Co. since 1982. Mr. Shields also is chairman of Capital Management Associates, Inc., and chairman of Wellington Shields Capital Management LLC, both registered investment advisors, and was chairman and director of The BBH Funds, the Brown Brothers Harriman mutual funds group, from 1990-January 2014. He has served as a director of Flowers Foods since March 2001, and he previously served as a director of Flowers Industries, Inc. from March 1989 until March 2001. Mr. Shields has extensive corporate finance and investing experience and has operational and financial experience from his service as a chief executive officer of Shields & Co.
David V. Singer,age 60, is the retired chief executive officer of Snyder’s-Lance, Inc. (NASDAQ), a position he served in from 2010, following the merger of Lance, Inc. and Snyder’s of Hanover, Inc, to 2014. He previously served as the president and chief executive officer of Lance, Inc. from 2005 until the merger with Snyder’s in 2010. He was the executive vice president and chief financial officer of Coca-Cola Bottling Co. Consolidated, Charlotte, NC, from 2001 until 2005 and vice president and chief financial officer of Coca-Cola Bottling Co. Consolidated from 1987 until 2001. Mr. Singer was a director of Snyder’s-Lance, Inc. from 2010 to 2014 and previously served as a director of Lance, Inc. from 2003-2010. He joined Flowers Foods’ board of directors on January 1, 2010. Mr. Singer was elected as a director of SPX Corporation (NYSE) and Brunswick Corporation (NYSE) in 2013 and as a director of Hanesbrands, Inc. (NYSE) in 2014. Mr. Singer has management and financial experience as well as operational and financial experience as the chief executive officer of a publicly traded consumer products company.
James T. Spear, age 61, joined the company’s board of directors on January 1, 2015. Mr. Spear is the retired executive vice president and chief financial officer of Cadence Health, where he served from 2006 to 2012. Prior to that Mr. Spear served as vice president finance at Keebler Foods and also operated an independent advisory and consulting business. Since his retirement, Mr. Spear has periodically engaged in various consulting activities. Mr. Spear also currently serves on the board of directors of both The Trust Company of Illinois and The Trinity Forum. He also serves on the board of advisors to the Wheaton College Center for Faith, Politics, and Economics, where he also serves an adjunct professor. Since 2013, the National Association of Corporate Directors has designated Mr. Spear as a Board Leadership Fellow. Mr. Spear has extensive food and health care industry, and leadership experience with public and private companies along with expertise in acquisitions and divestitures, financial reporting and auditing, corporate finance, risk management, information technology, investor relations, and strategic planning.
Melvin T. Stith, Ph.D., age 69, is dean emeritus of the Whitman School of Management at Syracuse University in New York. From June 2013 until he retired in December 2015, he was professor of marketing at the Whitman School of Management. He previously served as dean of the Whitman School of Management from 2005 to 2013. Prior to that time, he was dean of the College of Business at Florida State University and the Jim Moran Professor of Business Administration. He also is a director of Synovus Financial Corp. (NYSE) (1998-present) and Aflac Incorporated (NYSE) (2012-present). Dr. Stith previously served as a director of Keebler Foods Company from 1999 to 2001. He has served as a director of Flowers Foods since July 2004. Dr. Stith has a significant background in marketing and accounting, has a high level of financial literacy and brings a unique academic perspective to the board of directors.
16 FLOWERS FOODS, INC. - 20162018 Proxy Statement 15
DIRECTORS AND CORPORATE GOVERNANCE
We believe that good corporate governance is essential to ensure that the company is effectively managed for the long-term benefit of our shareholders. We have thoroughly reviewed our corporate governance policies and practices and compared them with those recommended by corporate governance advisors and the policies and practices of other publicly-held companies.
Based upon this review we have adopted the following corporate governance documents:
You can access the full text of all these corporate governance documents on our website at www.flowersfoods.com by clicking on the “Investor Center” tab and selecting “Corporate Governance.” You can also receive a copy of these documents by writing to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, Georgia 31757, Attn: InvestorAttention: Shareholder Relations Department.
Pursuant to our corporate governance guidelines, the nominating/corporate governance committee and the board of directors are required to annually review the independence of each director and director-nominee. During this review, transactions and relationships among each director and director-nominee or any member of his or her immediate family and the company are considered, including, among others, all commercial, industrial, banking, consulting, legal, accounting, charitable and familial relationships and those reported in this proxy statement under the section entitled “Transactions with Management and Others.” In addition, transactions and relationships among directors or director-nominees or their affiliates and members of senior management and their affiliates are examined. The purpose of this annual review is to determine whether each director and director-nominee meets the applicable criteria for independence in accordance with the SEC rules and regulations, NYSE Rules and our corporate governance guidelines. Only those directors who meet the applicable criteria for independence and the board of directors affirmatively determines to have no direct or indirect material relationship with the company are considered independent directors.
As part of our corporate governance guidelines, we have adopted categorical standards, which provide that certain relationships will be considered material relationships and will preclude a director’s independence. Under these standards, an “independent” director is one who:
more than $120,000 per year in such compensation); provided that compensation received by an immediate family member for service as an employee of the company (other than as an executive officer) need not be considered; |
The nominating/corporate governance committee and the board of directors conducted the required annual independence review in February 2016.2018. Upon the recommendation of the nominating/corporate governance committee, the board of directors affirmatively determined that a majority of our directors and director-nominees are independent of the company and its management as required by the SEC rules and regulations, NYSE Rules and theour corporate governance guidelines. Mr. Lan, who has not been nominated for reelection to the board of directors, together with Messrs. Lan, McMullian,Deese, Griswold, Shields, Singer, Spear and Wood, Dr. Stith and Ms.Mses. Lewis and Gass are independent directors and director-nominees. Messrs. Griswold and Wood and Ms. Lewis are independent directors.director-nominees, as applicable. Mr. DeeseMcMullian is considered an inside director because of the proximity of his son’s
FLOWERS FOODS, INC. - 2018 Proxy Statement 17
DIRECTORS AND CORPORATE GOVERNANCE
employment with the company as executive chairmanchief strategy officer and Mr. Shiver is an inside director because he is currently the president and chief executive officer of the company. In determining the independence of Mr. Deese and Mr. McMullian, the board of directors considered the employment by the company of each of these director’s family members. Each director and director-nominee abstained from voting on his or her own independence.
The foregoing discussion of director independence is applicable only to service as a member of the board of directors, the compensation committee and the nominating/corporate governance committee. Additional guidelines apply to the members of the audit committee under the SEC rules and regulations and NYSE Rules.
16 FLOWERS FOODS, INC. - 2016 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
Pursuant to theour corporate governance guidelines, the board of directors created the position of “presiding director,” whose primary responsibilities are to preside over periodic executive sessions of the board of directors in which managementnon-independent directors and other members of management do not participate and to:
Each year at the meeting of the board of directors following the annual meeting, a presiding director is appointed among the independent directors to serve until the company’s annual meeting of shareholders the following year. On June 5, 2015,May 25, 2017, Benjamin H. Griswold, IV was appointedreappointed to serve as the presiding director until the 20162018 annual meeting of shareholders.
The Board of Directors and Committees of the Board of Directors
In accordance with the company’s amended and restated bylaws, the board of directors has set the number of members of the board of directors at twelve. Mr. Lan, who has served as a member of the board of directors since 2016, has not been nominated for reelection. His term will expire after the 2018 annual meeting of shareholders and, pursuant to the company’s amended and restated bylaws and resolutions adopted by the board of directors, the size of the board of directors will be set at eleven immediately following the meeting. The board of directors held elevenseven meetings in fiscal 2015,2017, and no incumbent director attended fewer than 75% of the aggregate of:
|
The board of directors has established several standing committees: an audit committee, a nominating/corporate governance committee, a compensation committee and a finance committee. The board of directors has adopted a written charter for each of these committees, all of which are available on the company’s website at www.flowersfoods.com.
The following table describes the current members of each of the committees and the number of meetings held during fiscal 2015:2017:
Audit Committee | Nominating/Corporate Governance Committee | Compensation Committee | Finance Committee | Audit Committee | Nominating/Corporate Governance Committee | Compensation Committee | Finance Committee | |||||||||
Joe E. Beverly*† | X | X | ||||||||||||||
Franklin L. Burke*† | X | X | ||||||||||||||
George E. Deese | ||||||||||||||||
George E. Deese*
| ||||||||||||||||
Rhonda Gass* | X | X |
X
|
X
| ||||||||||||
Benjamin H. Griswold, IV* | Chair | X |
Chair
|
X
| ||||||||||||
Richard Lan* | X | X | ||||||||||||||
Richard Lan*(1)
|
X
|
X
| ||||||||||||||
Margaret G. Lewis* | X | X |
X
|
X
| ||||||||||||
Amos R. McMullian* | ||||||||||||||||
Amos R. McMullian
| ||||||||||||||||
J.V. Shields, Jr.* | X | X |
X
|
X
| ||||||||||||
Allen L. Shiver | ||||||||||||||||
David V. Singer* | X | Chair |
X
|
Chair
| ||||||||||||
James T. Spear* | Chair | X |
Chair
|
X
| ||||||||||||
Melvin T. Stith* | X | X | ||||||||||||||
Melvin T. Stith, Ph.D.*
|
X
|
X
| ||||||||||||||
C. Martin Wood III* | X | Chair |
X
|
Chair
| ||||||||||||
NUMBER OF MEETINGS | 10 | 5 | 4 | 4 |
9
|
4
|
4
|
4
|
* | Independent Directors |
18 FLOWERS FOODS, INC. - 20162018 Proxy Statement 17
DIRECTORS AND CORPORATE GOVERNANCE
Under the terms of the audit committeeits charter, the audit committee represents and assists the board of directors in fulfilling its oversight responsibilities with respect to:
The audit committee’s duties and responsibilities include:
The board of directors has determined that all audit committee members serving during 2017 are “independent”or were ��independent” under NYSE rules,the SEC rules and regulations, and our corporate governance guidelines. Messrs. Beverly and Burke are retiring from the board of directors, effective at the 2016 annual meeting. Mr. Lan and Ms. Gass have been elected to the audit committee and both are independent under the NYSE rules, SEC rules and regulationsRules and our corporate governance guidelines.
The board of directors has also determined that Mr. Spear is an “audit committee financial expert” under Item 407(d)(5) of RegulationS-K of the Securities Act of 1933. Each member of the audit committee is financially literate, knowledgeable and qualified to review financial statements.
Nominating/Corporate Governance Committee
Under the terms of its charter, the nominating/corporate governance committee is responsible for considering and making recommendations to the board of directors with regard to the function and needs of the board of directors, and the review and development of our corporate governance guidelines. In fulfilling its duties, the nominating/corporate governance committee shall:
The board of directors has determined that all members of the nominating/corporate governance committee are “independent” under the SEC rules and regulations, NYSE Rules and our corporate governance guidelines. For information relating to nomination of directors by shareholders, please see “Selection“— Selection of Director-Nominees.”
FLOWERS FOODS, INC. - 2018 Proxy Statement 19
DIRECTORS AND CORPORATE GOVERNANCE
Under the terms of its charter, the compensation committee has overall responsibility for evaluating and approving the company’s compensation plans, policies and programs. The compensation committee’s duties and responsibilities include:
|
18 FLOWERS FOODS, INC. - 2016 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
For fiscal 2015,2017, the compensation committee completed its annual review of our compensation philosophies and practices with respect to our employees and concluded that the risks arising from such policies and practices are not reasonably likely to have a material adverse effect
on us. While risk is inherent in any strategy for growth, the company’s compensation programs minimize risk through the following design elements, among others:
The board of directors has determined that all members of the compensation committee are “independent” under NYSE Rules, SEC rules and regulations, NYSE Rules and our corporate governance guidelines.
Under the terms of its charter, the finance committee reviews and makes recommendations with respect to financial matters affecting the company. The finance committee’s duties and responsibilities of the finance committee are to:include:
– | leverage and debt service/cash |
– | access to |
– | deployment of |
– | mergers and |
– | benefit plan funding and multi-employer pension plan |
– | use of derivatives, including for commodity and foreign currency |
– | global procurement and interruption of supply |
– | volatility of inventory because of inflation or |
– | energy availability and cost, including unstable fuel |
20 FLOWERS FOODS, INC. - 2018 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
Mr. Deese, our former executive chairman of the board of directors, isnon-executive chairman and continues to provide guidance regarding the strategic direction of the company. Mr. Shiver, in his role as president and chief executive officer, has primary responsibility for theday-to-day operations of the company. In his role asnon-executive chairman of the board of directors, Mr. Deese continues to set the strategic priorities for the board of directors (with input from the presiding director), preside over its meetings and communicate its strategic findings and guidance to management. The board of directors believes that the close working relationship between the president and chief executive officer andnon-executive chairman of the board of directors will continue to provide consistent communication and coordination throughout the organization, which results in a more effective and efficient implementation of corporate strategy. The board of directors further believes that Mr. Deese’s continued active role on
the board of
directors is important in unifying the company’s strategy behind a consistent vision as the company transitions through its established succession plans.
As noted earlier, the independentnon-management directors appointedreappointed Mr. Griswold as independent presiding director in fiscal 2015,2017, which provides balance to the board’s leadership structure. With a supermajority of independent directors, an audit committee, compensation committee, nominating/corporate governance committee and finance committee each comprised entirely of independent directors, and an independent presiding director to oversee all meetings of the non-managementindependent directors, the company’s board of directors believes the existing leadership structure provides for an appropriate balance that best serves the company and its shareholders. The board of directors annually reviews its leadership structure to ensure that it remains the optimal structure for the company and ourits shareholders.
FLOWERS FOODS, INC. - 2016 Proxy Statement 19
DIRECTORS AND CORPORATE GOVERNANCE
The board of directors is actively involved in oversight of risks that could affect the company. This oversight is conducted primarily through the audit committee, as described above and in the audit committee charter, but the full board of directors has retained responsibility for general oversight of risks. Specifically, the board of directors has responsibility for overseeing, reviewing and monitoring the company’s overall risks, and each board committee is responsible for the oversight of specific risk areas relevant to its purpose as provided in the committee charters. The overall responsibility of the board of directors and its committees is enabled by an enterprise risk management model and process implemented by management that is designed to identify, assess, manage and mitigate risks. The board of directors satisfies this responsibility through full reports by each committee chair regarding the
committee’s considerations and actions, as well as through regular reports to the board of directors directly from executive officersmanagement responsible for oversight of particular risks within the company. In addition, the compensation committee, nominating/corporate governance committee and finance committee are responsible for the oversight of specific risks, as described above and in each committee’s charter. The company believes that itsthe board’s leadership structure, discussed in detail above, supports the risk oversight function of the board of directors. Strong directors chair the various board committees involved with risk oversight, there is open communication between management and directors and all directors are actively involved in the risk oversight function.
Relationships Among Certain Directors
J.V. Shields, Jr. and C. Martin Wood III are married to sisters.
In accordance with our corporate governance guidelines, directors are expected to rigorously prepare for, attend and participate in all meetings of the board of directors and meetings of the committees on which they serve and to devote the time necessary to appropriately discharge their
responsibilities. Aside from these requirements, the company does not
maintain a formal policy for attendance by directors at annual meetings of shareholders. However, all of our directors attended the annual meeting of shareholders held on June 5, 2015, except for Mr. Lan and Ms. Gass who were elected to board effective January 3, 2016.May 25, 2017.
Selection of Director-Nominees
The nominating/corporate governance committee identifies and considers director candidates recommended by its members and other board members,directors, as well as management and shareholders. A shareholder who wishes to recommend a prospective director-nominee for the committee’s consideration should submit the candidate’s name and qualifications to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, Georgia 31757, Attention: Executive Vice President, Secretary and GeneralChief Legal Counsel. The nominating/
corporate governance committee will also consider whether to recommend for nomination any person identified by a shareholder pursuant to the provisions of our amended and restated bylaws relating to shareholder nominations. Recommendations by shareholders that are made in accordance with these procedures will receive the same consideration given to nominees of the nominating/corporate governance committee.
FLOWERS FOODS, INC. - 2018 Proxy Statement 21
DIRECTORS AND CORPORATE GOVERNANCE
The nominating/corporate governance committee believes that any director-nominee must meet the director qualification criteria set forth in our corporate governance guidelines before such director-nominee can be recommended for election to the board of directors. These factors include:
The nominating/corporate governance committee considers these factors as it deems appropriate, as well as other factors it determines are pertinent in light of the current needs of the board of directors. The nominating/corporate governance committee may use the services of a third-party executive search firm to assist it in identifying and evaluating possible director-nominees.
In addition, our corporate governance guidelines state that no person may stand for election or reelection to the board of directors after turning 75 years old. However, the board of directors has granted a one-year waiver from this restriction for Amos R. McMullian and J.V. Shields, Jr. who are standing for reelection to the board of directors at the 2016 annual meeting. The board of directors deems Mr. McMullian’s experience as the former chairman of the board of directors and chief executive officer of the company and Mr. Shields’ financial markets experience as critical to the company.
20 FLOWERS FOODS, INC. - 2016 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
Shareholder & Other Interested Party Communication with Directors
The board of directors will give proper attention to written communications that are submitted by shareholders and other interested parties and will respond if appropriate. Shareholders and other interested parties interested in communicating directly with the board of directors as a group, the independent,non-management directors as a group or any individual director may do so by writing to Presiding Director, Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, GA 31757,
Thomasville, GA 31757.Attention: Presiding Director. Absent circumstances contemplated by committee charters, the chair of the nominating/corporate governance committee and the presiding director, with the assistance of our executive vice president, secretary and generalchief legal counsel, will monitor and review all correspondence from shareholders and other interested parties and provide copies or summaries of such communications to other directors as they deem appropriate.
Based upon the recommendations of the nominating/corporate governance committee, the board of directors considers and establishes director compensation. An employee of the company who also serves as a director does not receive any additional compensation for serving as a director or as a member or chair of a board committee.
20152017 Director Compensation Package
During 2015,2017, the directors’ compensation package fornon-employee directors was based on the following principles:
The nominating/corporate governance committee annually reviews the status of director compensation in relation to other comparable
companies and other factors it deems appropriate. In 2015 the2017, that committee engaged Meridian Compensation Partners (“Meridian”), an
independent compensation consultant, to assist the committeeit in its assessment. Asassessment of the competitiveness of director compensation.
Meridian developed two peer groups of comparable companies to Flowers Foods in size, an industry-specific group and a resultgeneral industry group, and provided details of this reviewthe values and in lightdesigns of compensationthe director pay programs at those companies. The nominating/corporate governance committee considered that data, provided by Meridian for 20 food industry companies, increases were madethe frequency of expected changes to the 2015-2016 director compensation program to establish a level of director pay at Flowers Foods, the expected rate of change in that data and other relevant factors to determine the 2017 program shown below. The resulting program is in the midrange of that data over the next two years, after taking into account expected changes in the market for director compensation.both peer groups.
22 FLOWERS FOODS, INC. - 2018 Proxy Statement
DIRECTORS AND CORPORATE GOVERNANCE
Based uponGiven the above principles and market data, thenon-employee director compensation program was modified from 2014 to increase director pay as shown below:package consisted of the following:
Compensation Element | 2014 Program | 2015 Program | 2016 Program | 2017 Program | ||||||||||||
Annual Cash Retainer | $ | 95,000 | 1 | $ | 100,000 | 1 | $ | 100,000 | (1) | $ | 100,000 | (1) | ||||
Committee Chair Retainer | ||||||||||||||||
Committee Chair Retainers | ||||||||||||||||
• Audit Committee | $ | 20,000 | 2 | $ | 20,000 | 2 | $ | 15,000 | $ | 15,000 | ||||||
• Compensation Committee | $ | 12,500 | $ | 15,000 | $ | 15,000 | $ | 15,000 | ||||||||
• Nominating and Corporate Governance Committee | $ | 10,000 | $ | 10,000 | ||||||||||||
• Nominating/Corporate Governance Committee | $ | 10,000 | $ | 10,000 | ||||||||||||
• Finance Committee | $ | 10,000 | $ | 10,000 | $ | 10,000 | $ | 10,000 | ||||||||
Audit Committee Member Retainer | $ | 5,000 | $ | 5,000 | $ | 5,000 | $ | 7,500 | (2) | |||||||
Presiding Director Retainer | $ | 17,500 | $ | 20,000 | $ | 20,000 | $ | 20,000 | ||||||||
Non-Executive Chairman Retainer | N/A | $ | 450,000 | $ | 400,000 | $ | 270,000 | (3) | ||||||||
Annual Stock Award | $ | 120,000 | $ | 130,000 | $ | 130,000 | $ | 130,000 | (4) |
Cash retainers may be deferred at the director’s option; see |
(3) | Lowered to $170,000 for 2018. |
(4) | Vests one year from the date of grant based upon the closing price of the |
FLOWERS FOODS, INC. - 2016 Proxy Statement 21
DIRECTORS AND CORPORATE GOVERNANCE
Additional Compensation Program Details
Non-employee directors are eligible to participate in the 2014 Omnibus Equity and Incentive Compensation Plan (the “Omnibus Plan”) and the Executive Deferred Compensation Plan (the “EDCP”).
Non-employee directors have the option to convert their annual cash board retainer fees into deferred stock equal in value to the cash payments they would otherwise have received. These deferred shares vest pro rata over aone-year period based on service. Accumulated dividends are paid upon the delivery of the vested shares.
Non-employee directors may alternatively elect to defer all or any portion of their annual retainers and cash committee fees into an interest-bearing account in the EDCP. Generally, the deferral plus interest is paid to the director upon retirement or termination from the company’s board of directors.
Stock appreciation rights granted in years prior to 2007 offered directors a cash payment equal to the difference between the value of the shares underlying the stock appreciation rights on the exercise date and the exercise price. Such stock appreciation rights vested one year from the date of issuance, with ten years from the date of issuance to exercise. Additionally, the holder of stock appreciation rights receives an amount equal to the dividends that would have been paid on an equivalent number of shares of the company’s common stock at the same time dividends are paid to all other shareholders. In 2015, these payments to all directors in the aggregate totaled $14,221. Stock appreciation rights are expensed in accordance with the fair value provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Certification (“ASC”) Topic 718, Stock Compensation.
In order to align the economic interests of directors with those of shareholders, all directors are expected to hold shares of common stock in the company. Anon-employee director must own shares of common stock with a value of at least six times the annual cash retainer paid to thenon-employee directors. In addition, our thenon-executive chairman of the board of directors is required to hold six times his annual board
annual board retainer plus his additional cash retainer. All direct holdings of our common stock, certain indirect holdings, and all vested and unvested shares of deferred stock are included for purposes of determining compliance. Directors have five years to meet the required guidelines. Allnon-employee directors were in compliance with the guidelines as of August 2015.March 8, 2018.
We reimburse all directors forout-of-pocket expenses incurred in connection with attendance at board of directors meetings, or when traveling in connection with the performance of their services for the company.
22 FLOWERS FOODS, INC. - 20162018 Proxy Statement 23
DIRECTORS AND CORPORATE GOVERNANCE
DIRECTOR SUMMARY COMPENSATION TABLE
The following table details compensation tonon-employee members of the board of directors for the 20152017 fiscal year:
Name | Fees Earned or ($)(2) | Stock Awards ($)(3) | Change in Pension Value and Deferred Comp. Earnings ($)(4) | All Other Comp. ($)(5) | Total ($) | Fees Earned or ($)(1) | Stock Awards ($)(2) | Change in Earnings ($)(3) | All Other Comp. ($)(4) | Total ($) | ||||||||||||||||||||||||||||||
Joe E. Beverly(1) | 5,000 | 227,917 | — | — | 232,917 | |||||||||||||||||||||||||||||||||||
Franklin L. Burke(1) | 20,000 | 227,917 | 28,709 | — | 276,626 | |||||||||||||||||||||||||||||||||||
George E. Deese | 547,917 | 130,000 | 153,116 | 75,403 | 906,436 | 370,000 | 130,000 | 97,165 | 46,514 | 643,679 | ||||||||||||||||||||||||||||||
Rhonda Gass(6) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Rhonda Gass | 106,458 | 130,000 | 5,182 | — | 241,640 | |||||||||||||||||||||||||||||||||||
Benjamin H. Griswold, IV | 126,875 | 130,000 | — | — | 256,875 | 130,000 | 130,000 | — | — | 260,000 | ||||||||||||||||||||||||||||||
Richard Lan(6) | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Richard Lan(5) | 106,458 | 130,000 | — | — | 236,458 | |||||||||||||||||||||||||||||||||||
Margaret G. Lewis | 102,917 | 130,000 | 1,995 | — | 234,912 | 106,458 | 130,000 | 7,043 | — | 243,501 | ||||||||||||||||||||||||||||||
Amos R. McMullian | 97,917 | 130,000 | 52,562 | 73,452 | 353,931 | 100,000 | 130,000 | 106,544 | 67,756 | 404,300 | ||||||||||||||||||||||||||||||
J.V. Shields, Jr. | — | 227,917 | — | — | 227,917 | — | 230,000 | — | — | 230,000 | ||||||||||||||||||||||||||||||
David V. Singer | 111,875 | 130,000 | — | — | 241,875 | 115,000 | 130,000 | — | — | 245,000 | ||||||||||||||||||||||||||||||
James T. Spear | 5,000 | 227,917 | — | — | 232,917 | 21,458 | 230,000 | — | — | 251,458 | ||||||||||||||||||||||||||||||
Melvin T. Stith, Ph. D. | 97,917 | 130,000 | — | — | 227,917 | |||||||||||||||||||||||||||||||||||
Melvin T. Stith, Ph.D. | 100,000 | 130,000 | — | — | 230,000 | |||||||||||||||||||||||||||||||||||
C. Martin Wood III | 112,917 | 130,000 | 9,509 | — | 252,426 | 116,458 | 130,000 | 31,961 | — | 278,419 |
(1) |
Directors have the option under the Omnibus Plan to convert their annual board of directors retainer fees into deferred stock equal in value to the cash payments these directors would have otherwise received. Directors may also elect to defer all or a portion of their annual retainer and cash committee fees, if any, through the EDCP. In |
The stock awards represent the grant date fair value computed in accordance with ASC 718 of deferred stock granted to eachnon-employee director under the Omnibus Plan in fiscal |
Name | Stock Appreciation Rights (#) | Deferred Stock (#) | Deferred Stock ($) | Deferred (#) | Deferred ($) | |||||||||||||||
Joe E. Beverly | — | 65,135 | 1,399,751 | |||||||||||||||||
Franklin L. Burke | — | 111,385 | 2,393,663 | |||||||||||||||||
George E. Deese | — | 6,026 | 129,499 | 7,020 | 135,556 | |||||||||||||||
Rhonda Gass | — | — | — | 7,020 | 135,556 | |||||||||||||||
Benjamin H. Griswold, IV | — | 6,026 | 129,499 | 7,020 | 135,556 | |||||||||||||||
Richard Lan | — | — | — | 7,020 | 135,556 | |||||||||||||||
Margaret G. Lewis | — | 6,026 | 129,499 | 7,020 | 135,556 | |||||||||||||||
Amos R. McMullian | — | 14,081 | 302,601 | 15,075 | 291,098 | |||||||||||||||
J.V. Shields, Jr. | 13,500 | 17,558 | 377,321 | 12,030 | 232,299 | |||||||||||||||
David V. Singer | — | 12,366 | 265,745 | 7,020 | 135,556 | |||||||||||||||
James T. Spear | — | 13,598 | 292,221 | 34,842 | 672,799 | |||||||||||||||
Melvin T. Stith, Ph. D. | — | 50,898 | 1,093,798 | |||||||||||||||||
Melvin T. Stith, Ph.D. | 64,852 | 1,252,292 | ||||||||||||||||||
C. Martin Wood III | — | 6,026 | 129,499 | 7,020 | 135,556 |
Amounts reported in this column represent above-market earnings on deferred compensation under the EDCP for Messrs. |
FLOWERS FOODS, INC. - 2016 Proxy Statement 23
DIRECTORS AND CORPORATE GOVERNANCE
Amounts reported as “All Other Compensation” in the Director Summary Compensation Table above are primarily administrative support provided to Mr. McMullian by the company for his service as chairman emeritus of the board of directors, and primarily administrative support provided to Mr. Deese by the company for his service asnon-executive chairman of the board of directors. |
24 FLOWERS FOODS, INC. - 2018 Proxy Statement
AND OTHERS
A. Ryals McMullian, the son of Amos R. McMullian, a director, was employed by the company throughout fiscal 2015since mid-fiscal 2017 as chief strategy officer and previously as vice president of mergers and acquisitions and deputy general counsel. In fiscal 20152017 he was paid an aggregate salary and bonus of $227,267$264,649 and was granted 4,0404,320 shares of performance-contingent restricted stock pursuant to the Omnibus Plan. Mr. McMullian is presently an executive officer of the company.
Chris Mulford, theson-in-law of George E. Deese, thenon-executive chairman of the company,board of directors, was employed by the company for a portionthe majority of fiscal 2015 as a vice president of sales, and for a portion of fiscal 20152017 as a plant president. Hepresident and a market vice-president later in the year. In fiscal 2017, he was paid an aggregate salary and bonus of $129,123$162,013 and was granted 1,2001,860 shares of performance-contingent restricted stock pursuant to the Omnibus Plan. Mr. Mulford is not an executive officer of the company.
Any transaction between the company and a related party is disclosed to the nominating/corporate governance committee and then presented to the full board of directors for evaluation and approval. The company’s policies with respect to related party transactions are set forth in our corporate governance guidelines, and our code of business conduct and ethics, which statesstate that the company does not engage in transactions with related parties if such a transaction would cast into doubt the independence of the director, present the appearance of a conflict of interest or violate any applicable law.law, rule or regulation. Each of the transactions set forth above were reviewed and approved by the full board of directors in accordance with the company’s policy.policies.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2017, Messrs. Griswold, Shields, Singer and Dr. Stith served on the compensation committee. No member of the compensation committee was, during 2017, an officer or employee of the company, was formerly an officer of the company, or had any relationship requiring disclosure by the company as a related party transaction under Item
404 of RegulationS-K. During 2017, none of the company’s executive officers served on the board of directors or the compensation committee of any other entity, any officers of which served either on the company’s board of directors or its compensation committee.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists information regarding the ownership of our common stock by the onlynon-affiliated individuals, entities or groups known to us to be the beneficial owner of more than 5% of our common stock:
Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Percent of Class(1) | Shares of Common Stock Beneficially Owned | Percent of Class(1) | ||||||||||||
The Vanguard Group 100 Vanguard Blvd. Malvern, PA 19355(2) | 14,532,095 | 7.03% | 15,754,325 | 7.47% | ||||||||||||
BlackRock, Inc. 40 East 52nd Street New York, NY 10022(3) | 12,998,692 | 6.29% | ||||||||||||||
BlackRock, Inc. 55 East 52nd Street New York, NY 10055(3) | 14,983,444 | 7.11% | ||||||||||||||
T. Rowe Price Associates, Inc. 100 E. Pratt Street Baltimore, MD 21202(4) | 11,674,339 | 5.65% | 11,522,013 | 5.47% |
(1) | Percent of class is based upon the number of shares of Flowers Foods common stock outstanding on March |
(2) | The beneficial ownership reported is based upon a Schedule 13G/A filed by The Vanguard Group on February |
(3) | The beneficial ownership reported is based upon a Schedule 13G/A filed by BlackRock, Inc. on |
(4) | The beneficial ownership reported is based upon a Schedule 13G/A filed by T. Rowe Price Associates, Inc. on February |
24 FLOWERS FOODS, INC. - 20162018 Proxy Statement 25
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Share Ownership of Certain Executive Officers Directors and Director-NomineesDirectors
The following table lists information as of March 21, 20168, 2018 regarding the number of shares owned by each director each director-nominee,and each executive officer listed on the Summary Compensation Table included later in this proxy statement and by all of our directors director-nominees and executive officers as a group:
Name of Beneficial Owner | Amount and Nature of Beneficial Ownership(1) | Percent of Class | Amount and Nature of Beneficial Ownership(1) | Percent of Class | ||||||||||||
Bradley K. Alexander | 484,295 | (2) | * | 286,700 | * | |||||||||||
Stephen R. Avera | 741,125 | (3) | * | 529,161 | (2) | * | ||||||||||
Joe E. Beverly | 204,746 | (4) | * | |||||||||||||
Franklin L. Burke | 197,839 | (5) | * | |||||||||||||
George E. Deese | 4,067,680 | (6) | 1.95% | 3,208,316 | (3) | 1.52% | ||||||||||
Rhonda Gass | 0 | * | 15,314 | (4) | * | |||||||||||
Benjamin H. Griswold, IV | 306,216 | (7) | * | 323,126 | (5) | * | ||||||||||
R. Steve Kinsey | 561,963 | (8) | * | 302,571 | * | |||||||||||
Richard Lan | 20,763 | * | 52,595 | (6) | * | |||||||||||
Margaret G. Lewis | 6,030 | * | 26,640 | (7) | * | |||||||||||
Amos R. McMullian | 3,628,504 | 1.75% | 3,361,184 | (8) | 1.59% | |||||||||||
J. V. Shields, Jr. | 15,135,533 | (9) | 7.32% | 14,952,350 | (9) | 7.09% | ||||||||||
Allen L. Shiver | 1,426,339 | (10) | * | 829,770 | (10) | * | ||||||||||
David V. Singer | 81,727 | * | 89,812 | (11) | * | |||||||||||
James T. Spear | 32,855 | (11) | * | 66,383 | (12) | * | ||||||||||
Melvin T. Stith, Ph.D. | 41,619 | * | 107,360 | (13) | * | |||||||||||
D. Keith Wheeler | 94,345 | (12) | * | 36,947 | * | |||||||||||
C. Martin Wood III | 7,851,238 | (13) | 3.80% | 7,867,847 | (14) | 3.73% | ||||||||||
All Directors, Director-Nominees and Executive Officers as a Group (18 persons) | 34,882,817 | 16.87% | ||||||||||||||
All Directors and Executive Officers as a Group (16 persons) | 32,056,076 | 15.20% |
* | Represents beneficial ownership of less than 1% of Flowers Foods common |
(1) | Unless otherwise indicated, each person has sole voting and dispositive power with respect to all shares listed opposite his or her name. |
(2) | Includes |
Includes (i) 50,301 shares owned by the spouse of Mr. Deese, as to which shares Mr. Deese disclaims any beneficial |
Includes 5,850 shares of deferred stock, which would be distributed to Ms. Gass if she had separated her service from the company on March 8, 2018. |
(5) | Includes (i) 5,062 shares owned by the spouse of Mr. Griswold, as to which shares Mr. Griswold disclaims any beneficial |
(6) | Includes 5,850 shares of deferred stock, which would be distributed to Mr. Lan if he had separated his service from the company on March 8, 2018. Mr. Lan’s term as a director will expire after the 2018 annual meeting of shareholders. |
(7) | Includes 5,850 shares of deferred stock, which would be distributed to Ms. Lewis if she had separated her service from the company on March 8, 2018. |
(8) | Includes |
(9) |
(10) | Includes |
(11) | Includes |
(12) | Includes (i) 100 shares held by Mr. Spear’s child, over which shares Mr. Spear shares voting and investment |
(13) | Includes 63,682 shares of deferred stock, which would be distributed to Dr. Stith if he had separated his service from the company on March 8, 2018. |
(14) | Includes (i) 116,865 shares held by a trust of which Mr. Wood is trustee and 6,527,872 shares owned by the spouse of Mr. Wood, in each case as to which shares Mr. Wood disclaims any beneficial |
26 FLOWERS FOODS, INC. - 20162018 Proxy Statement 25
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of our records and written representations by the persons required to file these reports, except as set forth below, all stock transaction reports required to be filed by Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), with the SEC were timely filed in fiscal 20152017 by directors and executive officers.
Due to an administrative error, late Form 4s reporting retainer deferrals into common stock for Messrs. Beverly, Burke, Shields that were due on June 9, 2015 were filed on June 22, 2015.
Due to administrative errors, (i) a late Form 4 reporting an awardawards of deferred stock granted to Mr.Messrs. Shields and Spear on February 20, 2015 that waswere due on February 24, 2015 wasJanuary 4, 2017 were filed on February 23, 2016 and (ii) late Form 4 reporting an award of deferred stock granted to Mr. Spear on JuneJanuary 9, 2015 was filed on March 24, 2016.2017.
COMPENSATION DISCUSSION AND ANALYSIS
Under ourpay-for-performance program, our Named Executives earned the following compensation based upon 20152017 performance:
• | Vesting in 2018 of theTSR-Based Performance-Contingent Restricted Stock Award issued in 2016 at 12.5% of target as a result of the company’s TSR from January 3, 2016 through each of the last four quarters ended December 30, 2017, placing below the 30th percentile in three of the quarters and placing in the 30th percentile in one of the quarters of the companies in the TSR Peer Group (as defined below). We ended thetwo-year performance period with cumulative TSR of negative 3.3%. |
In 2017, the company continued to execute on Project Centennial, an enterprise-wide business and operational review to evaluate opportunities to streamline our operations, drive efficiencies, and invest in strategic capabilities that we believe will strengthen our competitive position and drive profitable revenue growth. The named executive
officers played a critical role in designing and implementing Project Centennial. Recent accomplishments related to these efforts include:
Consideration of 20152017 Say on Pay Vote
We currently hold our say on pay vote every year. At our 20152017 annual meeting of shareholders, more than 97%98% of the shares voted were cast in support of the company’s executive compensation program. As a result of the significant level of approval, we continued to apply similar principles to our executive compensation decisions during the remainder of 20152017 and in early 2016.
26 FLOWERS FOODS, INC. - 20162018 Proxy Statement 27
EXECUTIVE COMPENSATION
Summary of Our Compensation Practices
Practices We Have Adopted | Practices We Do Not Engage in | |||
• Moderate pay targeted to thesize-adjusted 50th percentile of market data
• Long-term incentives that are performance-based
• Multiple performance measures used in incentive plans
• Capped incentives
• Clawback policy
• Stock ownership guidelines for executives and outside directors and share retention requirements for executives
• Moderate change of control severance arrangements
• Double-trigger equity vesting upon a change of control
• Annual review of tally sheets by the compensation committee
• Incentives that are risk-mitigated through plan design and administration
• Compensation committee comprised solely of independent directors •Independent compensation consultant who reports directly to the committee
• Anti-hedging policy for executives and outside directors | • Employment agreements
• Dividend equivalents on unvested performance shares
• Income taxgross-ups
• Excise taxgross-ups on change of control severance
• Backdating or repricing of stock options
• Pension credited service for years not worked • Perquisites are not provided |
Executive Compensation Generally
Objectives of Executive Compensation
The primary objective of our executive compensation program is to attract, retain and motivate qualified executives necessary for the future success of the company and the maximization of shareholder value. Our compensation program is designed to motivate our executives by rewarding them for the achievement of specific annual, long-term and strategic goals of the company. The program aligns our executives’ interests with those of the shareholders by rewarding performance above established goals, with the ultimate objective of improving shareholder value. We strive to foster a sense of ownership among our executives by establishing stock ownership guidelines that require them to maintain ownership of a specified amount of our common stock.
The compensation committee evaluates both performance and compensation to ensure that (i) the company maintains its ability to attract and retain the most qualified executives; (ii) each executive’s compensation remains competitive relative to the compensation paid to similarly situated executives in comparable companies; and (iii) each of the company’s primary objectives with respect to compensation is
being fulfilled. To meet those goals, our compensation program includes three primary components:
Certain retirement and other post-employment benefits are also included in the executives’ compensation package. In addition, see the section entitled “Potential Payments Upon Termination or Change of Control” of this proxy statement for details on payments and benefits payable (or realizable) upon termination of employment and a change of control of the company. We do not offer perquisites as part of our executive compensation program.
Each element of our compensation program is described in greater detail below, including a discussion of why the company chooses to pay each element, how we determine the amount of each element to pay and how each element and the company’s decisions regarding that element fit into our overall compensation objectives.
28 FLOWERS FOODS, INC. - 2018 Proxy Statement
EXECUTIVE COMPENSATION
Mix of Compensation Opportunity
The objectives of our executive compensation program are accomplished through a balance of pay components that are competitive with market practice and place considerable emphasis on performance-based compensation. Salary andnon-equity incentive compensation, equity compensation, and other compensation
expressed as a percentage of total compensation for each Named Executive for the fiscal year ended January 2, 2016December 30, 2017 were as shown below. There is no prescribed mix of our compensation elements; the mix below is driven by Relevant Market Data (as defined below) for each element of pay.
FLOWERS FOODS, INC. - 2016 Proxy Statement 27
EXECUTIVE COMPENSATION
Name and Principal Position | Salary Percentage | Non-Equity Incentive Comp. Percentage | Equity Comp. Percentage | Other Comp. Percentage | Total % | |||||||||||||||
Allen L. Shiver President and Chief Executive Officer | 20 | % | 15 | % | 63 | % | 2 | % | 100% | |||||||||||
R. Steve Kinsey Executive Vice President and Chief Financial Officer | 33 | % | 17 | % | 46 | % | 4 | % | 100% | |||||||||||
Bradley K. Alexander President of Flowers Bakeries/ Executive Vice President and Chief Operating Officer | 33 | % | 17 | % | 45 | % | 5 | % | 100% | |||||||||||
Stephen R. Avera Executive Vice President, Secretary and General Counsel | 36 | % | 18 | % | 43 | % | 3 | % | 100% | |||||||||||
D. Keith Wheeler President, Flowers Bakeries | 37 | % | 18 | % | 41 | % | 4 | % | 100% |
Name and Principal Position | Salary Percentage | Non-Equity Incentive Comp. Percentage | Equity Comp. Percentage | Other Comp. Percentage | Total % | |||||||||||||||
Allen L. Shiver President and Chief Executive Officer | 15 | % | 14 | % | 68 | % | 3 | % | 100% | |||||||||||
R. Steve Kinsey Chief Financial Officer and Chief Administrative Officer | 29 | % | 19 | % | 48 | % | 4 | % | 100% | |||||||||||
Bradley K. Alexander President, Fresh Packaged Bread Business Unit | 28 | % | 18 | % | 47 | % | 7 | % | 100% | |||||||||||
Stephen R. Avera Chief Legal Counsel | 32 | % | 18 | % | 45 | % | 5 | % | 100% | |||||||||||
D. Keith Wheeler Chief Sales Officer | 32 | % | 18 | % | 46 | % | 4 | % | 100% |
Role of Executive Officers in Compensation Decisions
The compensation committee, of the board of directors, which is comprised entirely of independent directors, has overall responsibility for evaluating, analyzing and approving the company’s compensation plans, policies and programs.
The president and chief executive officer consults with and advises the compensation committee with respect to the company’s compensation philosophy and makes recommendations regarding the compensation of other executive officers including the Named Executives, but not regarding his own compensation. All recommendations of the chief executive officer
to the compensation committee regarding
compensation of executive officers are independently evaluated by the committee.
The chief financial officer, or his designee, assists the compensation committee in understanding the key drivers of company performance, particularly those measures used in our annual cash bonus and long-term incentive plans and also provides the compensation committee with regular updates on company performance as it relates to certain performance measures used in our annual cash bonus and long-term incentive plans.
For fiscal 2015,2017, the compensation committee engaged Meridian as its independent compensation consultant. At the compensation committee’s request, Meridian evaluated the competitiveness of the base salaries, annual bonuses and long-term incentives awarded to the company’s Named Executives, provided competitive market data on new compensation arrangements and evaluated the continued appropriateness of existing arrangements. Meridian attended compensation committee meetings at the committee’s request and was available to provide guidance to the compensation committee on compensation questions and issues as they arose.
In December 2015,February 2018, the compensation committee, in accordance with SEC rules and regulations, considered various factors related to consultant conflicts of interest. In connection with this review, the compensation committee considered the following six factors established by the SEC:
As a result of its review of these six factors, the committee determined that the work of the compensation consultant did not raise any conflicts of interest.
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EXECUTIVE COMPENSATION
Because there are not many food companies the size of Flowers Foods, a specific set of peer companies is not used for market compensation comparisons. We use market pay data for base salary, bonus and long-term incentives opportunity based on available food industry and general industry peers’ pay data from published surveys. We use an average of food industry and general industry (the “Relevant Market Sector”) survey data when making market comparisons, and the data is adjusted to reflect pay for companies with annual revenues comparable to the company (the “Relevant Market Data”). When establishing pay levels for fiscal 2015,2017, data werewas collected from the Willis Towers Watson Executive Compensation
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EXECUTIVE COMPENSATION
Database using both general industry data (from 700+ companies) and data from the Food & Beverage industry cut comprised of the following companies:
WILLIS TOWERS WATSON EXECUTIVE COMPENSATION DATABASE — FOOD & BEVERAGE COMPANIES | ||||||||
ACH Food Companies, Inc. American Sugar Refining, Inc. The Andersons Inc. Arby’s Restaurant Group, Inc. Beam Suntory Inc.
The Brown-Forman Corporation Bush Brothers & Company Cargill, Incorporated The Coca-Cola Company Coca-Cola Enterprises Compass Group PLC ConAgra Foods, Inc.
Dean Foods Diageo North America, Inc. | General Mills, Inc. | Haribo Hearthside Food Solutions LLC The Hershey Company Hormel Foods Corporation Ingredion Incorporated Jack in the Box
Keurig Green Mountain, Inc. Keystone Foods
Land Leprino Foods | Mars, Incorporated McCain Foods USA, Inc. MillerCoors The Molson Coors Brewing Company
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Puratos Group NV Schreiber Foods Inc. Schwan’s
Snyder’s Lance, Inc. SunOpta, Inc. Tyson Foods, Inc. Ventura Foods, LLC |
The Relevant Market Data obtained from the companies above was for pay opportunity, not actual payout, and was regressed(size-adjusted) to reflect appropriate scope of revenue responsibility. The Relevant Market Data is calculated using the simple average of the regressed food industry and general industry market rates. Both are established at levels that approximate thesize-adjusted 50th percentile for each component of pay opportunity (i.e., base salary, target bonus and long-term incentive opportunity). This approach sets executive pay opportunities high enough to be competitive and to attract and retain a strong motivated leadership team but not so high that they create negative perception among other constituencies.
The compensation committee concluded that the proposed 20152017 compensation levels under the company’s incentive and equity compensation plans for each Named Executive, and their total compensation opportunities, were consistent with the pay philosophy, as well as appropriate to meet the company’s goal to retain each Named Executive and to align his interests with those of the company’s shareholders.
Base salary represents the fixed and recurring part of each Named Executive’s annual compensation. Its objective is to reward experience and expertise, functional progression (i.ei.e.., the development of the executive through a series of work experiences and duties and accountabilities relevant to the current position held), career development, skills and competencies. It rewards core competence in the executive role. We choose to pay base salary because it is a standard element of pay for executive positions and is required to attract and retain talent.
We have established a system of tiered salary grades, and executives are assigned an appropriate salary grade considering the position’s internal value as well as external comparisons to the Relevant Market Data. With respect to the position’s “internal value,” we have developed salary grades on the basis that a given position is at least one salary grade below that of the supervising position, which is the only weight assigned to internal value in establishing the salary grades.
Named Executives’ base salaries are related to a salary grade and the base salaries for the grades are determined based on (i) external competitive market base salaries, as determined through benchmarking analysis of the Relevant Market Data and (ii) the internal relationships (i.e., value and progression) of these positions. We periodically make adjustments to the base salaries based on the factors discussed above as well as the performance of the respective Named Executive.
Individual salaries for Named Executives reporting directly to the president and chief executive officer are subject to approval by the compensation committee after consideration of the recommendations he submits. The president and chief executive officer’s and the executive chairman of the board’s salaries aresalary is subject to review and approval by the compensation committee and the board of directors. Base salaries for all Named Executives are reviewed annually by the compensation committee and the board of directors.
30 FLOWERS FOODS, INC. - 20162018 Proxy Statement 29
EXECUTIVE COMPENSATION
The 2015 base salary for the following Named Executives increased as shown below and for the reasons provided:
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Annual Executive Cash Incentive Awards
For 2015,2017, the annual cash incentive awards were granted to Named Executives under our Omnibus Plan, which was designed to provide an incentive to achieve critical annual goals that lead to our long-term success. We choose to pay it in order to motivate achievement of annual performance metrics critical to continued company growth and shareholder value creation.
For 2015,2017, the compensation committee established target bonus levels under the Omnibus Plan, which are expressed as a percentage of each Named Executive’s base salary (the “Target Bonus Percentage”). Target Bonus Percentages for each Named Executive in 20152017 were as follows:
Named Executive | Target Bonus Percentage | |||
Allen L. Shiver | % | |||
R. Steve Kinsey | % | |||
Bradley K. Alexander | % | |||
Stephen R. Avera | % | |||
D. Keith Wheeler | % |
For 2015,2017, a bonus was awarded to participating executivesNamed Executives based on the following formula:
• | the Named Executive’s base salary;multiplied by |
• | the Target Bonus Percentage;multiplied by |
Level of Achievement | % of EBITDA Goal Achieved | Actual Bonus Percentage | % of EBITDA Goal Achieved | Actual Bonus Percentage | ||||||||||||
Maximum | 110 | % | 150 | % |
| 110
| %
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| 150
| %
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Target | 100 | % | 100 | % |
| 100
| %
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| 100
| %
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Actual | 95.10 | % | 75.50 | % |
| 96.22
| %
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| 81.10
| %
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Threshold | 80 | % | 0 | % |
| 80
| %
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| 0
| %
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Each Named Executive’s 20152017 bonus payment could not exceed the lesser of 150% of his base salary or $3.0 million. The Actual Bonus Percentage would have been zero if actual EBITDA were 80% or less of the EBITDA Goal. This mechanism provided motivation for each Named Executive to strive for improved company performance in 20152017 even if the EBITDA Goal itself were not attained.
The company does not pay bonuses under the Omnibus Plan to any Named Executive until such time as the compensation committee has certified the Actual Bonus Percentage and the annual report on Form10-K for the applicable fiscal year has been filed with the SEC.
Long-Term Incentive Compensation
The objective of providing long-term incentive compensation is to focus executives on metrics that lead to increased shareholder value over a longer period of time. It rewards achievement of the specific metrics described below. We choose to pay long-term incentive compensation because it aligns executives’Named Executives’ interests with those of shareholders and helps to retain a stable management team.
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EXECUTIVE COMPENSATION
Equity and Performance Compensation Awards
In keeping with the compensation committee’spay-for-performance philosophy, stock-based incentives comprise our entire long-term incentive program and a significant portion of total compensation opportunity for Named Executives. We believe our stock-based incentives, as designed, are fundamental to the enhancement of shareholder value, reward performance over the long-term and align the Named Executives’ interests with those of our shareholders. The 20152017 awards under the Omnibus Plan contain elements that helped focus the
Named Executive’sExecutives’ attention on one of the company’s primary goals — the long-term success of the company and, ultimately, the enhancement of shareholder value.
Individual long-term incentive grants are reviewed annually and approved by the compensation committee with reference to the Relevant Market Data it receives from its compensation consultant.
FLOWERS FOODS, INC. - 2018 Proxy Statement 31
Ongoing Stock-Based Incentive GrantsEXECUTIVE COMPENSATION
As in 2014, in 2015
Similar to 2016, the compensation committee allocated equity-based awards for 2017 between two types of performance-contingent restricted stock, as described below, and did not grant any stock options. The use of performance-contingent restricted stock is intended to encourage Named Executives to focus on capital investments that produce returns in excess of the Company WACC and that enhance the company’s total shareholder return relative to food industry peers.
The determination of 20152017 performance-contingent restricted stock award levels for the Named Executives was based on the Relevant Market Data, the expected allocation of value between types of equity award, and a value of 100.8%103.8% of face value for both types of performance-contingent restricted stock.
The 20152017 performance-contingent restricted stock agreement (the “Performance Restricted Stock Agreement”) provides the terms and conditions under which the shares of restricted stock will vest. Vesting of the awards occurs approximately two years from the date of grant (after the filing of the company’sour Annual Report on Form10-K) to the extent that the vesting conditions described below are satisfied.
ROIC-Based Performance-Contingent Restricted Stock AwardsAwards.. The Performance Restricted Stock Agreement provides that, as to 50% of the restricted stock underlying each executive’s performance-contingent restricted stock award (the “ROIC-Based Award”), vesting will occur in the manner set forth below:
ROIC minus WACC | Payment Percentage (% of Target) | |||
Less than 175 basis points | 0 | % | ||
175 basis points | 50 | % | ||
375 basis points | 100 | % | ||
475 basis points | 125 | % |
For performance between the levels described above, the degree of vesting is interpolated on a linear basis.
TSR-Based Performance-Contingent Restricted Stock Awards. The Performance Restricted Stock Agreement provides that, as to the remaining 50% of the restricted stock underlying each Named Executive’s performance-contingent restricted stock award (the “TSR-Based“TSR-Based Award”), vesting will occur based on the company’s performance, measured by Company TSR over thetwo-year performance period, as compared to the total shareholder return of the companies in a specified peer group (the “TSR Peer Group”).
For 2015,2016 and 2017, the TSR Peer Group consisted of the following 1920 publicly traded packaged food and meats companies:
B&G Foods Campbell Soup Conagra Foods Dean Foods General Mills Hain Celestial Group Hershey Co. Hormel Foods J&J Snack Foods J.M. Smucker | Kellogg The Kraft Heinz Company Lancaster Colony McCormick & Co. Mondelez International, Pinnacle Foods, Inc. Post Holdings, Inc. Snyders-Lance Treehouse Foods The Whitewave Foods Company |
Hypothetical payouts based on the total shareholder return for the company and each member of the TSR Peer Group are calculated at the end of each of the last four quarters of the Performance Period using the performance/payout schedule below and then averaged to determine the actual payout:
Percentile of Company TSR vs. Peer Group TSR | Payment Percentage (% of Target) | |||
Less than 30th | 0 | % | ||
30th | 50 | % | ||
50th | 100 | % | ||
70th | 150 | % | ||
90th or above | 200 | % |
For performance between the percentiles described above, the degree of vesting is interpolated on a linear basis.
Vesting Upon Death, Disability, Retirement or Change of Control. For the 2015 grant,2017 grants, if the grantee dies or becomes disabled, the performance-contingent restricted stock awards generally vest at the target level immediately. If the grantee retires at age 65 (or age 55 with at least ten years of service with the company) or later, on the normal vesting date the grantee will receive a prorated number of shares based upon the retirement date and actual performance for the entire performance period. For the 20152017 grants, “double-trigger” vesting applies if a change of control occurs. In addition to change of control, double-trigger vesting requires either that an award fail to be assumed by a successor employer or that the executive’s employment be terminated under specific circumstances within a specified period of time following the change of control before accelerated vesting can occur.
Dividends. Dividends accrue on the restricted stock and are paid in cash to the executive on the vesting date on all shares of restricted stock that vest. At the time of vesting, the executive will receive the shares of stock and will be liable for his or her portion of all federal and state income and payroll taxes based on the fair market value of the shares awarded on the vesting date.
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EXECUTIVE COMPENSATION
Timing of Grants. Grants of performance-contingent restricted stock were made on January 4, 2015.1, 2017. It is expected that this timing of granting awards will continue for consistency and planning purposes. Except in unusual circumstances, we typically do not grant equity awards to the Named Executives at other dates. The grant price of our performance-contingent restricted stock grants is the closing market price on the grant date.
Vesting of 2014 Awards2016 Awards::
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Recoupment (“Clawback”) Policy
The Omnibus Plan provides for the recoupment of grants and bonuses awarded under it. The recoupment policy provides that if the board of directors has reliable evidence of knowing misconduct by a participant that results in an overstatement of the company’s earnings or other financial measurements that were taken into consideration in awarding
grants or bonuses and, as a result of such overstatement, the participant (i) received a bonus and/or (ii) either received a grant or had a prior grant vest or become nonforfeitable, the participant shall be required to reimburse (or forfeit, as the case may be) the full amount of any grants or bonuses that resulted from the overstatement.
The company’s Insider Tradinginsider trading policy generally prohibits short-term, speculative trading practices and hedging by executive officers, including any Named Executives, and directors.
Retirement & Other Post-Employment Benefits
We provide retirement benefits to our Named Executives and other executives as noted below. The objective is to provide a competitive array of benefits that is affordable to the company. Retirement benefits reward continued employment and indirectly reward achievement of the metrics in the Omnibus Plan. We choose to pay them to remain competitive in the marketplace and to provide compensation that extends into employees’non-earning years.
Pension benefits are provided to executives under the Flowers Foods, Inc. Retirement Plan No. 1 (the “Retirement Plan”). The company also provides a defined contribution benefit to executives through the 401(k) planPlan and the EDCP.
The Retirement Plan is a qualified defined benefit pension plan that provides a pension upon retirement to eligible employees of participating subsidiaries (but not to employees of the company) that is based upon each year of service with the participating subsidiary until December 31, 2005. Additionally, the Retirement Plan provides a pension upon retirement to eligible employees (including employees ofnon-participating subsidiaries and of the company) who were participants under the Flowers Industries, Inc. Retirement Plan No. 1 prior to the company’sspin-off from Flowers Industries, Inc., which is based upon each year of service with Flowers Industries, Inc. and/or certain of its subsidiaries. No additional years of credited service have been granted other than for actual years of credited service in the Retirement Plan.
Participation in the Retirement Plan was closed to new employees beginning January 1, 1999, and effective December 31, 2005 benefits under the Retirement Plan were frozen and no additional benefits will accrue under the Retirement Plan. The frozen pension benefit is the sum of annual credits earned during eligible employment. The basic credit formula at the time the Retirement Plan was frozen was 1.35% of
the first $10,000 ofW-2 earnings (subject to certain exclusions) plus 2% ofW-2 earnings (subject to certain exclusions) in excess of $10,000 for each year of service up to 35 years. For each year of service in excess of 35 years, 1.8% ofW-2 earnings (subject to certain exclusions) was credited. Earnings in any calendar year may not exceed the maximum
limitations for that year as defined in the Internal Revenue Code. Certain additional fixed benefit amounts were provided for a limited group of participants in the Retirement Plan, including certain of the Named Executives.
Benefits can be paid in many forms under the terms of the Retirement Plan, including a life annuity option, joint and survivor option, period certain and life options, and a level income option and a lump sum option. During 2015, the Company amended the plan to allow for lump sums to be paid to participantsParticipants who terminate or retire on or after January 1, 2016.2016 may elect an unlimited lump sum. The payout option must be elected by the participant before benefit payments begin. Each available payout option is actuarially equivalent. Early retirement benefit payments are available to participants upon attainment of age 55 and completion of five years of vesting service. A participant’s full benefit under the Retirement Plan is payable at age 65. Benefits are reduced by 1/15 for each of the first five years and 1/30 for each of the next five years by which benefit
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EXECUTIVE COMPENSATION
commencement precedes age 65. The same benefits are payable upon retirement, termination, or disability with the adjustments described above for commencement before age 65 but on or after age 55. A 50% survivor annuity is payable to a participant’s spouse upon death prior to retirement. All Named Executives have fulfilled the required service
period and are either eligible for early retirement benefitsbenefit payments currently or will become eligible upon attainment of age 55. No payments were made to the Named Executives under the terms of the Retirement Plan during the 20152017 fiscal year.
Executive Deferred Compensation Plan
The EDCP provides additional deferred compensation opportunities to certain members of management. In particular, the EDCP allows these members of management to defer the receipt of a percentage of their salary and bonus. The EDCP is not atax-qualified plan.
The participants’ deferrals are credited to a book keeping account established for the participant that is deemed to be credited with interest until paid. Additionally, the company allocates matching contributions pursuant to the plan on behalf of the participant that are also deemed to be credited with interest until paid.
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EXECUTIVE COMPENSATION
Interest credited on deemed participant deferrals and company contributions to the EDCP are based on the Merrill Lynch U.S. Corp.,BBB-rated Fifteen-Year Bond Index plus 150 basis points. Interest is considered above-market if earned at a rate which is 120% or more of the applicable federal long-term rate. Earnings in the EDCP are interest-based credits that exceed this threshold. The company credits interest at above market rates because participants’ EDCP accounts are unfunded and unsecured and therefore subject to substantial risk of
loss should events ever befall the company causing it to reorganize or liquidate. Amounts deemed to be credited to the EDCP on behalf of the Named Executives amounted to $253,254$326,528 in fiscal 2015.2017.
Generally, the deemed deferrals and company contributions plus interest are paid to the participant upon termination of employment.
Distributions from the EDCP are made from the company’s general assets. During 2008, participants were given aone-time, irrevocable opportunity to convert their EDCP deemed cash account for some or all prior years’ deferrals to an account that tracks the performance of our common stock. Balances as of the end of the fiscal year for participants making such an election were converted, based on the closing price of our common stock on January 2, 2009. The EDCP tracking account will be distributed in shares of our common stock at the time elected by the participant for the deferral year(s) in question. The EDCP tracking account will be credited with dividends paid on company common stock for the number of shares deemed held in such account, and such dividends will then be deemed to be invested in the cash account and will earn interest as described above.
We maintain change of control severance arrangements with our executives, including the Named Executives, as set forth in the Flowers Foods, Inc. Change of Control Plan (the “Change of Control Plan”). Such arrangements have several business objectives important to the company, including stability of the executive team in the event of a threatened or pending change of control, and post-employment restrictive covenants (non-competition, (non-competition,non-solicitation and trade secret protection, among others). The Change of Control Plan rewards executives for remaining employed with the company on a timetable
convenient to the company rather than to the executive. We choose to make such payments to obtain the business objectives mentioned. The Change of Control Plan provides double-trigger severance at market-level amounts, has no excise taxgross-up provisions and is consistent with current corporate governance norms (see section entitled “Potential Payments upon Termination or Change of Control” in this proxy statement for additional details). In 2015, the compensation committee adopted a policy that, without shareholder approval, future cash severance arrangements may not exceed 2.99 times salary and bonus.
Executive Share Ownership Guidelines
Based on the view of the compensation committee that the ownership of an equity interest in the company by executives, including Named Executives, is a component of good corporate governance and aligns executive and shareholder interests, share ownership guidelines were adopted that require key members of the company’s management team to directly own minimum amounts of the company’s common stock. All direct holdings of our common stock, certain indirect holdings, and all vested and unvested shares of deferred stock are included for purposes of determining compliance. The guidelines for the Named Executives, which were amended by the board of directors in February 2016, are set forth below:
The holdings of each of the Named Executives are currently either at the guideline or on track to meet it, and progress toward the guidelines is reviewed annually by the nominating/corporate governance committee.
Executives subject to the guideline must hold at least 75% of all net shares received through vesting or realized through stock option exercises until the applicable guidelines are achieved.
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EXECUTIVE COMPENSATION
Tax Deductibility of Executive Compensation
Companies are not allowed a federal income tax deduction for compensation paid to certain executive officers in excess of $1 million, except to the extent that such compensation constitutes “performance-based compensation” (as defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”)). The compensation committee retains the ability to consider factors, including tax
deductibility, as it structures coordinated compensation packages of current and long-term compensation, to retain flexibility in rewarding efforts which prove to be of immediate or future benefit to the company and its shareholders. Certain incentive opportunities in 20152017 were structured with the intention to qualify as “performance-based” compensation under Code Section 162(m).
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The compensation committee is responsible for evaluating and approving the company’s compensation plans, policies and programs. The compensation committee has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with the company’s management and, based on this review and discussion, recommended to the board of directors that the Compensation Discussion and Analysis be included in the company’sour Annual Report on Form10-K for the fiscal year ended January 2, 2016December 30, 2017 filed with the SEC and proxy statement for the 20162018 annual meeting of shareholders.
The Compensation Committee of the Board of Directors:
David V. Singer,ChairmanChair
Benjamin H. Griswold, IV
Joseph V. Shields, Jr.
Melvin T. Stith, Ph.D.
34 FLOWERS FOODS, INC. - 20162018 Proxy Statement 35
EXECUTIVE COMPENSATION
The following table summarizes the compensation of the Named Executives, which include the chief executive officer, chief financial officer and each of the three other most highly compensated executive officers of Flowers Foods (the “Named Executives”) for the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, January 3, 2015 and December 28, 2013, with the exception of Mr. Alexander, as 2014 was the first year he was one of the other three most highly compensated executive officers and Messrs. Avera and Wheeler, as 2015 was the first year they were one of the other three most highly compensated executive officers.2016.
Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2) | Non-Equity Incentive Plan Comp. ($)(3) | Change in Pension Value and Nonqualified Deferred Comp. Earnings ($)(4) | All Comp. ($)(5) | Total ($) | |||||||||||||||||||||
Allen L. Shiver | 2015 | 974,615 | 3,091,213 | 735,835 | 45,896 | 73,137 | 4,920,696 | |||||||||||||||||||||
President and Chief | 2014 | 847,885 | 2,680,960 | 413,768 | 93,207 | 66,959 | 4,102,779 | |||||||||||||||||||||
Executive Officer | 2013 | 689,673 | 2,610,139 | 548,968 | 14,071 | 41,134 | 3,903,985 | |||||||||||||||||||||
R. Steve Kinsey | 2015 | 501,539 | 706,528 | 265,063 | 22,830 | 36,068 | 1,532,028 | |||||||||||||||||||||
Executive Vice President | 2014 | 483,074 | 624,800 | 165,018 | 54,479 | 36,978 | 1,364,349 | |||||||||||||||||||||
and Chief Financial Officer | 2013 | 447,852 | 574,469 | 267,270 | 10,821 | 49,482 | 1,349,894 | |||||||||||||||||||||
Bradley K. Alexander | 2015 | 508,077 | 699,265 | 268,519 | 46,568 | 35,736 | 1,558,165 | |||||||||||||||||||||
Executive Vice President and | 2014 | 454,232 | 483,936 | 149,772 | 112,645 | 33,281 | 1,233,866 | |||||||||||||||||||||
Chief Operating Officer | ||||||||||||||||||||||||||||
Stephen R. Avera | 2015 | 456,538 | 545,128 | 224,046 | 20,029 | 32,409 | 1,278,150 | |||||||||||||||||||||
Executive Vice President | ||||||||||||||||||||||||||||
Secretary and General Counsel | ||||||||||||||||||||||||||||
D. Keith Wheeler | 2015 | 364,154 | 401,886 | 178,709 | 6,450 | 24,441 | 975,640 | |||||||||||||||||||||
President, Flowers Bakeries |
Name and Principal Position | Year | Salary ($)(1) | Stock Awards ($)(2) | Non-Equity Incentive Plan Comp. ($)(3) | Change in Pension Value Deferred Comp. Earnings ($)(4) | All Other Comp. ($)(5) | Total ($) | |||||||||||||||||||||
Allen L. Shiver | 2017 | 1,000,000 | 4,435,334 | 892,100 | 86,910 | 82,306 | 6,496,650 | |||||||||||||||||||||
President and | 2016 | 1,000,000 | 3,975,616 | 536,800 | 52,212 | 84,366 | 5,648,994 | |||||||||||||||||||||
Chief Executive Officer | 2015 | 974,615 | 3,091,213 | 735,835 | 45,896 | 73,137 | 4,920,696 | |||||||||||||||||||||
R. Steve Kinsey | 2017 | 540,000 | 897,194 | 350,352 | 48,276 | 39,175 | 1,874,997 | |||||||||||||||||||||
Chief Financial Officer and | 2016 | 531,923 | 842,428 | 207,663 | 32,259 | 40,361 | 1,654,634 | |||||||||||||||||||||
Chief Administrative Officer | 2015 | 501,539 | 706,528 | 265,063 | 22,830 | 36,068 | 1,532,028 | |||||||||||||||||||||
Bradley K. Alexander | 2017 | 540,000 | 897,194 | 350,352 | 99,375 | 39,200 | 1,926,121 | |||||||||||||||||||||
President, Fresh Packaged | 2016 | 534,231 | 859,321 | 208,564 | 60,400 | 40,492 | 1,703,008 | |||||||||||||||||||||
Bread Business Unit | 2015 | 508,077 | 699,265 | 268,519 | 46,568 | 35,736 | 1,558,165 | |||||||||||||||||||||
Stephen R. Avera | 2017 | 475,000 | 678,198 | 269,658 | 47,497 | 33,753 | 1,504,106 | |||||||||||||||||||||
Chief Legal Counsel | 2016 | 471,539 | 637,870 | 161,078 | 19,641 | 35,424 | 1,325,552 | |||||||||||||||||||||
2015 | 456,538 | 545,128 | 224,046 | 20,029 | 32,409 | 1,278,150 | ||||||||||||||||||||||
D. Keith Wheeler | 2017 | 421,270 | 601,592 | 239,155 | 34,044 | 25,256 | 1,321,317 | |||||||||||||||||||||
Chief Sales Officer | 2016 | 410,592 | 520,067 | 140,258 | 14,400 | 25,726 | 1,111,043 | |||||||||||||||||||||
2015 | 364,154 | 401,886 | 178,709 | 6,450 | 24,441 | 975,640 |
(1) | Named Executives may elect to defer amounts into |
Name: | Salary Deferrals into 401(k) Plan ($) | Salary Deferrals into EDCP ($) | Total ($) | Salary Deferrals into 401(k) Plan ($) | Salary Deferrals ($) | Total ($) | ||||||||||||||||||
Allen L. Shiver | 24,000 | 48,625 | 72,625 | 24,000 | 100,000 | 124,000 | ||||||||||||||||||
R. Steve Kinsey | 18,000 | 25,063 | 43,063 | 24,000 | 27,000 | 51,000 | ||||||||||||||||||
Bradley K. Alexander | 24,000 | 63,066 | 87,066 | 24,000 | 122,713 | 146,713 | ||||||||||||||||||
Stephen R. Avera | 24,000 | 13,687 | 37,687 | 24,000 | 14,250 | 38,250 | ||||||||||||||||||
D. Keith Wheeler | 18,000 | 10,898 | 28,898 | 24,000 | — | 24,000 |
(2) | Grant date fair value of performance-contingent restricted stock (reported in the “Stock Awards” column) made under the |
(3) | Non-equity incentive plan compensation includes all performance-based cash awards under the Omnibus Plan earned by the Named Executives during the fiscal year. |
(4) | Amounts reported in the “Change in Pension Value and Nonqualified Deferred Comp. Earnings” column for |
Name | Change in Pension Value ($) | Above-Market Nonqualified ($) | Total ($) | Change in Pension Value ($) | Above-Market Nonqualified ($) | Total ($) | ||||||||||||||||||
Allen L. Shiver | 22,308 | 23,588 | 45,896 | 53,822 | 33,088 | 86,910 | ||||||||||||||||||
R. Steve Kinsey | 6,771 | 16,059 | 22,830 | 29,102 | 19,174 | 48,276 | ||||||||||||||||||
Bradley K. Alexander | 19,969 | 26,599 | 46,568 | 64,342 | 35,033 | 99,375 | ||||||||||||||||||
Stephen R. Avera | 16,812 | 3,217 | 20,029 | 44,471 | 3,026 | 47,497 | ||||||||||||||||||
D. Keith Wheeler | 5,845 | 605 | 6,450 | 32,633 | 1,411 | 34,044 |
36 FLOWERS FOODS, INC. - 2018 Proxy Statement
EXECUTIVE COMPENSATION
(5) | Amounts reported in the “All Other Comp.” column for |
Name | Employer Contributions to Section 401(k) Plan ($) | Employer Contributions to Nonqualified Deferred Comp. Plan ($) | Total ($) | Employer ($) | Employer Contributions to ($) | Total ($) | ||||||||||||||||||
Allen L. Shiver | 15,900 | 57,237 | 73,137 | 16,200 | 66,106 | 82,306 | ||||||||||||||||||
R. Steve Kinsey | 15,900 | 20,168 | 36,068 | 16,200 | 22,975 | 39,175 | ||||||||||||||||||
Bradley K. Alexander | 15,900 | 19,836 | 35,736 | 16,200 | 23,000 | 39,200 | ||||||||||||||||||
Stephen R. Avera | 15,900 | 16,509 | 32,409 | 16,200 | 17,553 | 33,753 | ||||||||||||||||||
D. Keith Wheeler | 15,900 | 8,541 | 24,441 | 16,200 | 9,056 | 25,256 |
Year | CEO Total Compensation ($) | Median Employee Total Compensation ($) | Ratio of CEO to Median Employee Total Compensation | |||
2017 | 6,518,086 | 61,961 | 105.2:1 |
Our chief executive officer’s annual total compensation is 105.2 times that of the median of the annual total compensation of all our employees. The pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u) of RegulationS-K. We used the following methodology in calculating the ratio:
1. | We included all employees active as of December 31, 2017, with the exception of our chief executive officer, to identify the median employee. We did not include (i) employees with 2017 compensation who were no longer active as of December 31, 2017, (ii) contract labor employees, (iii) independent distributors or (iv) leased labor employees. We do not have any employees located outside of the United States. |
2. | We found the median employee using 2017 gross compensation reported to the U.S. Internal Revenue Service on FormW-2 for the period of January 1, 2017 to December 31, 2017. Specifically, we used FormW-2, Box 5, Medicare Wages and Tips. |
3. | The compensation reported for our chief executive officer is from the Summary Compensation Table on page 36 of this proxy statement and also includes employer-provided health and wellness benefits. The compensation reported for the median employee is the total amount of compensation paid to the median employee during the period of January 1, 2017 to December 31, 2017 and also includes employer-provided health and wellness benefits. |
FLOWERS FOODS, INC. - 20162018 Proxy Statement 3537
EXECUTIVE COMPENSATION
The following table details grants made during the fiscal year ended January 2, 2016December 30, 2017 pursuant to incentive plans in place at Flowers Foods as of that date:
Grant Date for Equity- Based Awards | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | All Other Stock Awards (#) | Grant Date Fair Value of Equity Incentive Plan Awards ($)(3) | Grant Date
| Estimated Future Payouts UnderNon-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | Grant Date Fair
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Name and Grant | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allen L. Shiver | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Award | 0 | �� | 974,615 | 1,461,923 | — | 1,100,000 | 1,650,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROIC-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 76,610 | 95,763 | 1,466,315 | 1/1/2017 | — | 102,480 | 128,100 | 2,046,526 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSR-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 76,610 | 153,220 | 1,624,898 | 1/1/2017 | — | 102,480 | 204,960 | 2,388,808 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
R. Steve Kinsey | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Award | 0 | 351,077 | 526,616 | — | 432,000 | 648,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROIC-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 17,510 | 21,888 | 335,141 | 1/1/2017 | — | 20,730 | 25,913 | 413,978 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSR-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 17,510 | 35,020 | 371,387 | 1/1/2017 | — | 20,730 | 41,460 | 483,216 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bradley K. Alexander | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Award | 0 | 355,654 | 533,481 | — | 432,000 | 648,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROIC-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 17,330 | 21,663 | 331,696 | 1/1/2017 | — | 20,730 | 25,913 | 413,978 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSR-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 17,330 | 34,660 | 367,569 | 1/1/2017 | — | 20,730 | 41,460 | 483,216 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stephen R. Avera | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Award | 0 | 296,750 | 445,125 | — | 332,500 | 498,750 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROIC-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 13,510 | 16,888 | 258,581 | 1/1/2017 | — | 15,670 | 19,588 | 312,930 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSR-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 13,510 | 27,020 | 286,547 | 1/1/2017 | — | 15,670 | 31,340 | 365,268 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
D. Keith Wheeler | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Non-Equity Incentive Plan Award | 0 | 236,700 | 355,050 | — | 294,889 | 442,334 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ROIC-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 9,960 | 12,450 | 190,634 | 1/1/2017 | — | 13,900 | 17,375 | 277,583 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
TSR-Based Performance Contingent Restricted Stock Grant | 1/4/2015 | 0 | 9,960 | 19,920 | 211,252 | 1/1/2017 | — | 13,900 | 27,800 | 324,009 |
(1) | Under the terms of the Omnibus Plan, bonuses are awarded based on the achievement of a specified EBITDA goal. |
(2) | Under the terms of the Omnibus Plan and the Performance Restricted Stock Agreement, receipt of this award requires that the company meet certain performance requirements. Amounts shown under “threshold,” “target” and “maximum” headings above represent the minimum, expected and maximum possible number of shares of stock transferred to the Named Executive assuming that such requirements are met. |
(3) | Calculated in accordance with ASC 718 at (i) |
3638 FLOWERS FOODS, INC. - 20162018 Proxy Statement
EXECUTIVE COMPENSATION
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table details all equity awards granted and outstanding as of January 2, 2016,December 30, 2017, the company’s most recent fiscal year end:
Option Awards | Stock Awards | |||||||||||||||||||||||
Name and Grants | Number of Securities Underlying Unexercised Options: (#) Exercisable | Number of Securities Underlying Unexercised Options: (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or ($)(1) | |||||||||||||||||
Allen L. Shiver | ||||||||||||||||||||||||
2010 Nonqualified Stock Option Award(2) | 152,100 | 11.11 | 2/9/2017 | |||||||||||||||||||||
2011 Nonqualified Stock Option Award(3) | 226,125 | 10.87 | 2/10/2018 | |||||||||||||||||||||
2014 Performance-Contingent Restricted Stock Award(4) | 118,000 | 2,535,820 | ||||||||||||||||||||||
2015 Performance-Contingent Restricted Stock Award(5) | 153,220 | 3,292,698 | ||||||||||||||||||||||
Time- Based Restricted Stock Award(6) | 58,500 | 1,257,165 | ||||||||||||||||||||||
R. Steve Kinsey | ||||||||||||||||||||||||
2010 Nonqualified Stock Option Award(2) | 113,400 | 11.11 | 2/9/2017 | |||||||||||||||||||||
2011 Nonqualified Stock Option Award(3) | 149,400 | 10.87 | 2/10/2018 | |||||||||||||||||||||
2014 Performance-Contingent Restricted Stock Award(4) | 27,500 | 590,975 | ||||||||||||||||||||||
2015 Performance-Contingent Restricted Stock Award(5) | 35,020 | 752,580 | ||||||||||||||||||||||
Bradley K. Alexander | ||||||||||||||||||||||||
2010 Nonqualified Stock Option Award(2) | 88,200 | 11.11 | 2/9/2017 | |||||||||||||||||||||
2011 Nonqualified Stock Option Award(3) | 110,362 | 10.87 | 2/10/2018 | |||||||||||||||||||||
2014 Performance-Contingent Restricted Stock Award(4) | 21,300 | 457,737 | ||||||||||||||||||||||
2015 Performance-Contingent Restricted Stock Award(5) | 34,660 | 744,843 | ||||||||||||||||||||||
Stephen R. Avera | ||||||||||||||||||||||||
2010 Nonqualified Stock Option Award(2) | 96,862 | 11.11 | 2/9/2017 | |||||||||||||||||||||
2011 Nonqualified Stock Option Award(3) | 115,200 | 10.87 | 2/10/2018 | |||||||||||||||||||||
2014 Performance-Contingent Restricted Stock Award(4) | 22,000 | 472,780 | ||||||||||||||||||||||
2015 Performance-Contingent Restricted Stock Award(5) | 27,020 | 580,660 |
FLOWERS FOODS, INC. - 2016 Proxy Statement 37
EXECUTIVE COMPENSATION
Option Awards | Stock Awards | |||||||||||||||||||||||
Name and Grants | Number of Securities Underlying Unexercised Options: (#) Exercisable | Number of Securities Underlying Unexercised Options: (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($) | Option Expiration Date | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or ($)(1) | |||||||||||||||||
D. Keith Wheeler | ||||||||||||||||||||||||
2010 Nonqualified Stock Option Award(2) | 11,475 | 11.11 | 2/9/2017 | |||||||||||||||||||||
2011 Nonqualified Stock Option Award(3) | 25,987 | 10.87 | 2/10/2018 | |||||||||||||||||||||
2014 Performance-Contingent Restricted Stock Award(4) | 6,300 | 135,387 | ||||||||||||||||||||||
2015 Performance-Contingent Restricted Stock Award(5) | 19,920 | 428,081 |
Stock Awards | ||||||||
Name and Grants | Equity Incentive (#) | Equity Incentive ($)(1) | ||||||
Allen L. Shiver | ||||||||
2016 Performance-Contingent Restricted Stock Award(2) | 174,140 | 3,362,643 | ||||||
2017 Performance-Contingent Restricted Stock Award(3) | 204,960 | 3,957,778 | ||||||
R. Steve Kinsey | ||||||||
2016 Performance-Contingent Restricted Stock Award(2) | 36,900 | 712,539 | ||||||
2017 Performance-Contingent Restricted Stock Award(3) | 41,460 | 800,592 | ||||||
Bradley K. Alexander | ||||||||
2016 Performance-Contingent Restricted Stock Award(2) | 37,640 | 726,828 | ||||||
2017 Performance-Contingent Restricted Stock Award(3) | 41,460 | 800,592 | ||||||
Stephen R. Avera | ||||||||
2016 Performance-Contingent Restricted Stock Award(2) | 27,940 | 539,521 | ||||||
2017 Performance-Contingent Restricted Stock Award(3) | 31,340 | 605,175 | ||||||
D. Keith Wheeler | ||||||||
2016 Performance-Contingent Restricted Stock Award(2) | 22,780 | 439,882 | ||||||
2017 Performance-Contingent Restricted Stock Award(3) | 27,800 | 536,818 |
(1) | Based on December |
(2) |
The performance-contingent restricted stock award granted in |
The performance-contingent restricted stock award granted in |
38 FLOWERS FOODS, INC. - 20162018 Proxy Statement 39
EXECUTIVE COMPENSATION
STOCK VESTED AND OPTION EXERCISES
The following table details vesting of all restricted stock and all exercises of option awards during the fiscal year ended January 2, 2016.December 30, 2017.
Option Awards | Restricted Stock Awards | Option Awards | Restricted Stock Awards | |||||||||||||||||||||||||||||
Name | Number of Shares Acquired on (#) | Value on Exercise ($) | Number of Shares Acquired on (#) | Value ($) | Number of Shares (#) | Value Realized on Exercise ($) | Number of Shares (#) | Value Realized on Vesting ($) | ||||||||||||||||||||||||
Allen L. Shiver(1) | 117,168 | 1,623,948 | 85,146 | 1,834,045 |
|
226,125
|
|
|
1,815,784
|
|
|
125,150
|
|
|
2,360,760
|
| ||||||||||||||||
R. Steve Kinsey(2) | 0 | 0 | 37,381 | 805,187 |
|
149,400
|
|
|
1,304,262
|
|
|
15,233
|
|
|
292,474
|
| ||||||||||||||||
Bradley K. Alexander(3) | 15,000 | 212,250 | 28,435 | 612,490 |
|
110,362
|
|
|
886,207
|
|
|
15,077
|
|
|
289,478
|
| ||||||||||||||||
Stephen R. Avera(4) | 88,087 | 1,246,431 | 29,553 | 636,572 |
|
115,200
|
|
|
1,005,696
|
|
|
11,753
|
|
|
225,658
|
| ||||||||||||||||
D. Keith Wheeler(5) | 0 | 0 | 9,265 | 199,568 |
|
25,987
|
|
|
208,676
|
|
|
8,665
|
|
| 166,368
|
|
(1) | Mr. Shiver was granted |
(2) | Mr. Kinsey was granted |
(3) | Mr. Alexander was granted |
(4) | Mr. Avera was granted |
(5) | Mr. Wheeler was granted |
The following table details the number of years of service credited and the present value of the accumulated benefits as of the January 2, 2016December 30, 2017 measurement date related to the Retirement Plan.
Name | Plan Name | Number of Years Credited Service(1) | Present Value of Accumulated Benefit ($) | Plan Name | Number of Years Credited Service(1) | Present Value of Accumulated Benefit ($) | ||||||||||||||
Allen L. Shiver | Retirement | 24 | 455,519 |
Retirement
|
|
24
|
|
|
528,299
|
| ||||||||||
R. Steve Kinsey | Retirement | 13 | 202,294 |
Retirement
|
|
13
|
|
|
242,675
|
| ||||||||||
Bradley K. Alexander | Retirement | 25 | 484,868 |
Retirement
|
|
25
|
|
|
573,255
|
| ||||||||||
Stephen R. Avera | Retirement | 16 | 362,539 |
Retirement
|
|
16
|
|
|
422,987
|
| ||||||||||
D. Keith Wheeler | Retirement | 16 | 207,172 |
Retirement
|
|
16
|
|
| 252,899
|
|
40 FLOWERS FOODS, INC. - 2018 Proxy Statement
EXECUTIVE COMPENSATION
Amounts reported above as the actuarial present value of accumulated benefits under the Retirement Plan are computed using the interest and mortality assumptions that the company applies to amounts reported in its financial statement disclosures, and are assumed to be payable at age 65. The interestdiscount rate assumption at January 2,December 30, 2017 is 3.57% (3.99% as of December 31, 2016 isand 4.25% (4.0% as of January 3, 2015 and 4.75%2, 2016). The mortality assumption for benefits assumed to be paid as of December 28, 2013) andan annuity is the mortality table assumption is in accordance with the RP-2015 Annuitant
Mortality Table with 115.0% multiplier and MP-2015 mortality improvement scale. The RP-2014RP-2017 Annuitant Mortality Table with 115.9%130.0% multiplier and MP-2014
MP-2017 mortality improvement scale (theRP-2016 Annuitant Mortality Table with 130.0% multiplier andMP-2016 mortality improvement scale was used as of January 3, 2015.December 31, 2016). The mortality assumption for benefits assumed to be paid as a lump sum is based on Internal Revenue Service prescribed mortality rates for lump sum payments in 2018, projected generationally using theMP-2017 improvement scale.
No benefits or payments were made to any of the Named Executives in 20152017 under the Retirement Plan.
(1) | Credited service does not match actual service because the plan was frozen as of December 31, 2005. |
FLOWERS FOODS, INC. - 2016 Proxy Statement 39
EXECUTIVE COMPENSATION
NONQUALIFIED DEFERRED COMPENSATION
The following table provides details regarding executiveNamed Executive participation in the EDCP during the 20152017 fiscal year.
Name | Employee Contributions in FY 2015 ($)(1) | Employer Contributions in FY 2015 ($)(2) | Aggregate Earnings in FY 2015 ($)(3) | Aggregate Withdrawals/ Distributions in FY 2015 ($) | Aggregate Balance at ($)(4) | Employee Contributions in FY 2017 ($)(1) | Employer Contributions in FY 2017 ($)(2) | Aggregate Earnings in FY 2017 ($)(3) | Aggregate Withdrawals/ Distributions in FY 2017 ($) | Aggregate Balance at 12/30/2017 ($)(4) | ||||||||||||||||||||||||||||||
Allen L. Shiver | 48,625 | 57,237 | 44,105 | — | 782,079 |
|
100,000
|
|
|
66,106
|
|
|
67,985
|
|
|
—
|
|
|
1,240,501
|
| ||||||||||||||||||||
R. Steve Kinsey | 25,063 | 20,168 | 29,956 | — | 508,903 |
|
27,000
|
|
|
22,975
|
|
|
39,121
|
|
|
—
|
|
|
684,134
|
| ||||||||||||||||||||
Bradley K. Alexander | 63,066 | 19,836 | 49,594 | — | 833,138 |
|
122,713
|
|
|
23,000
|
|
|
71,507
|
|
|
—
|
|
|
1,256,118
|
| ||||||||||||||||||||
Stephen R. Avera | 13,687 | 16,509 | 6,134 | 35,204 | 116,038 |
|
14,250
|
|
|
17,553
|
|
|
6,362
|
|
|
35,285
|
|
|
124,939
|
| ||||||||||||||||||||
D. Keith Wheeler | 10,898 | 8,541 | 1,174 | — | 32,536 |
|
0
|
|
|
9,056
|
|
|
2,863
|
|
|
—
|
|
|
56,487
|
|
(1) | Amounts shown are deferrals of |
(2) | Amounts are included in “All Other Compensation” in the Summary Compensation Table for the |
(3) | Above-market interest on nonqualified deferred compensation is included in the Summary Compensation Table as “Nonqualified Deferred Compensation Earnings” for the |
(4) | The cumulative portion of the aggregate balance at |
FLOWERS FOODS, INC. - 2018 Proxy Statement 41
EXECUTIVE COMPENSATION
POTENTIAL PAYMENTS UPON TERMINATION OR
CHANGE OF CONTROL
Payments Made Upon Termination Following a
Change of Control
The Change of Control Plan is designed to provide for stability and continuity of management and the company’s operations in the event of a change of control. The compensation committee may designate, in its sole discretion, additional executives that are eligible to participate in the Change of Control Plan. If the company experiences a change of control and, during the protection period, (i) an executive’s employment is terminated for any reason other than for Cause (as defined in the Change of Control Plan), death or disability, or (ii) the executive terminates his employment for Good Reason (as defined in the Change of Control Plan), the executive is entitled to the following payments:
Pursuant to the terms of the Change of Control Plan, upon the attainment of age 65, the multiples applicable to a Named Executive’s annual base salary and target bonus award under the Omnibus Plan are reduced to one times such amounts.
In the event that actual payments to an executive under the Change of Control Plan are determined in certain instances to be subject to excise taxes, the payments to be paid will be set to the “best net” amount, representing either (i) the largest portion of the payments that would result in no portion being subject to excise taxes, or (ii) the entire payments, whichever amount, after taking into account all applicable taxes, including excise taxes, results in the executive receiving, on an after tax basis, the greater amount of payments notwithstanding that all or a portion of the payments may be subject to excise taxes.
In 2015, the compensation committee adopted a policy that, without shareholder approval, future cash severance arrangements may not exceed 2.99 times salary and bonus.
The following events would constitute a change of control under the Change of Control Plan:
40 FLOWERS FOODS, INC. - 2016 Proxy Statement
EXECUTIVE COMPENSATION
For purposes of the Change of Control Plan, the protection period includes:
The Change of Control Plan includes aone-year covenant not to compete with respect to the trade or business of the successor entity.
The Change of Control Plan also includes, for all executives,non-disclosure covenants that do not expire, certain trade secret protections, two yearnon-solicitation covenants andnon-disparagement covenants that do not expire. Payments under the Change of Control Plan are subject to the execution by the executive of a general release of the company. Breach of the release or of any covenant may result in the forfeiture of any payments or benefits that the executive is entitled to under the Change of Control Plan.
Pursuant to the Change of Control Plan, the only event that triggers cash payments and the provision of other benefits is a change of control followed by the termination of an executive’s employment, other than for death, disability or for Cause or voluntary resignation other than for Good Reason, within the protection period. For awards prior to 2015, if a change of control occurs, regardless of whether the executive’s employment is terminated, all unvested performance-contingent restricted stock (at the target level) and all unvested stock options held by the executive immediately vest, except that as to anyTSR-Based Awards, if 12 months of the Performance Period have been completed, vesting will be determined based on total shareholder return as of the date of the change of control without application of four-quarter averaging (see “Compensation“Executive Compensation — Compensation Discussion and Analysis — Long-Term Incentive Compensation — Equity and Performance Compensation Awards — Vesting Upon Death, Disability, Retirement or Change of Control”). In addition, any undistributed amounts under the company’s deferred compensation plan will be distributed upon a change of control.
42 FLOWERS FOODS, INC. - 2018 Proxy Statement
EXECUTIVE COMPENSATION
Payments Made Upon Death or Disability, Retirement or Change of Control
If a Named Executive dies, becomes permanently disabled or retires (at age 65 or after) he is generally entitled to the following items:
provided that as toTSR-Based Awards, if 12 months of the Performance Period have been completed, vesting is determined based on the total shareholder return as of the date of the change of control without application of the fourth quarter averaging. |
Beginning in 2015, all equity awards granted under the Omnibus Plan include a double-trigger vesting mechanism upon a change of control.
Amounts shown in the table below represent estimated amounts payable (or realizable) by the company to each Named Executive upon death, disability, or retirement, a change of control without termination or termination in connection with a change of control. Amounts shown in the tables below are the estimated payment amounts assuming that the triggering event occurred on January 2, 2016,December 29, 2017, the last business day of fiscal 2015.2017. Values in the tables for equity-basedequity- based awards are calculated using the closing market price of $21.49$19.31 of the company’s common stock on December 31, 2015.29, 2017.
Death/ Disability ($) | Retirement ($) | Change of ($) | Termination Following ($) | |||||||||||||
Allen L. Shiver | ||||||||||||||||
Cash Severance | — | — | — | 6,000,000 | ||||||||||||
Equity Payout | 7,085,683 | 3,205,878 | 2,525,075 | 5,817,773 | ||||||||||||
Other Benefits(2) | — | — | — | 53,795 | ||||||||||||
TOTAL | 7,085,683 | 3,205,878 | 2,525,075 | 11,871,568 |
FLOWERS FOODS, INC. - 2016 Proxy Statement 41
AUDIT COMMITTEE REPORT
Death/ Disability ($) | Retirement ($) | Change of ($) | Termination Following ($) | |||||||||||||||||||||||||||||
Name | Death/ ($) | Retirement ($) | Change of ($) | Termination ($) | ||||||||||||||||||||||||||||
Allen L. Shiver
| ||||||||||||||||||||||||||||||||
Cash Severance
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,300,000
|
| ||||||||||||||||||||
Equity Payout
|
|
7,320,421
|
|
|
3,365,979
|
|
|
—
|
|
|
6,292,133
|
| ||||||||||||||||||||
Other Benefits(2)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,153
|
| ||||||||||||||||||||
TOTAL
|
|
7,320,421
|
|
|
3,365,979
|
|
|
—
|
|
|
12,649,286
|
| ||||||||||||||||||||
R. Steve Kinsey | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | — | 1,717,000 |
|
—
|
|
|
—
|
|
|
—
|
|
|
1,944,000
|
| ||||||||||||||||
Equity Payout | 1,343,555 | — | 295,488 | 1,048,067 |
|
1,513,132
|
|
|
694,219
|
|
|
—
|
|
|
1,288,960
|
| ||||||||||||||||
Other Benefits(2) | — | — | — | 53,795 |
|
—
|
|
|
—
|
|
|
—
|
|
|
49,489
|
| ||||||||||||||||
TOTAL | 1,343,555 | — | 295,488 | 2,818,862 |
|
1,513,132
|
|
|
694,219
|
|
|
—
|
|
|
3,282,449
|
| ||||||||||||||||
Bradley K. Alexander | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | — | 1,751,000 |
|
—
|
|
|
—
|
|
|
—
|
|
|
1,944,000
|
| ||||||||||||||||
Equity Payout | 1,202,580 | 653,930 | 228,869 | 973,712 |
|
1,527,421
|
|
|
700,113
|
|
|
—
|
|
|
1,296,105
|
| ||||||||||||||||
Other Benefits(2) | — | — | — | 53,795 |
|
—
|
|
|
—
|
|
|
—
|
|
|
48,930
|
| ||||||||||||||||
TOTAL | 1,202,580 | 653,930 | 228,869 | 2,778,507 |
|
1,527,421
|
|
|
700,113
|
|
|
—
|
|
|
3,289,035
|
| ||||||||||||||||
Stephen R. Avera | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | — | 1,518,000 |
|
—
|
|
|
—
|
|
|
—
|
|
|
1,615,000
|
| ||||||||||||||||
Equity Payout | 1,053,440 | 581,090 | 236,390 | 817,050 |
|
1,144,697
|
|
|
525,140
|
|
|
—
|
|
|
974,790
|
| ||||||||||||||||
Other Benefits(2) | — | — | — | 53,795 |
|
—
|
|
|
—
|
|
|
—
|
|
|
52,836
|
| ||||||||||||||||
TOTAL | 1,053,440 | 581,090 | 236,390 | 2,388,845 |
|
1,144,697
|
|
|
525,140
|
|
|
—
|
|
|
2,642,626
|
| ||||||||||||||||
D. Keith Wheeler | ||||||||||||||||||||||||||||||||
Cash Severance | — | — | — | 618,750 |
|
—
|
|
|
—
|
|
|
—
|
|
|
1,432,318
|
| ||||||||||||||||
Equity Payout | 563,468 | — | 67,694 | 495,774 |
|
976,700
|
|
|
—
|
|
|
—
|
|
|
845,334
|
| ||||||||||||||||
Other Benefits(2) | — | — | — | 42,836 |
|
—
|
|
|
—
|
|
|
—
|
|
|
46,576
|
| ||||||||||||||||
TOTAL | 563,468 | — | 67,694 | 1,157,360 |
|
976,700
|
|
|
—
|
|
|
—
|
|
|
2,324,228
|
|
(1) | In addition to amounts payable under the Change of Control Plan, each Named Executive is entitled to his pro rata share of any award earned under the Omnibus Plan in the year of termination. |
(2) | Other Benefits includes the estimated cost of outplacement services and a lump sum amount equal to 18 months of continued health and welfare benefits in accordance with the terms of the Change of Control Plan. |
FLOWERS FOODS, INC. - 2018 Proxy Statement 43
OneThe audit committee oversees, among other things, the accounting and financial reporting processes of the company, the audit committee’s primary responsibilitiesof the company’s consolidated financial statements, the company’s compliance with legal and regulatory requirements, the effectiveness of the company’s internal control over financial reporting, the qualifications, independence and performance of the company’s independent registered public accounting firm and the performance of the company’s internal auditors.
The audit committee operates under a written charter adopted by the board of directors. It is to representavailable on the company’s website at https://www.flowersfoods.com/Global/Content/CorpGovernance/Documents/FlowersAuditCommitteeCharter.pdf. The charter, which was last amended effective November 20, 2015, is reviewed at least annually by the audit committee and assistis amended by the board of directors, as appropriate, to reflect the evolving role of the audit committee.
In 2017, the audit committee held nine meetings. Meeting agendas are established by the chair of the audit committee, in fulfillingconsultation with the other committee members, the independent auditors and the appropriate officers of the company. The audit committee’s meetings include, whenever appropriate, executive sessions in which the audit committee meets as a committee and also separately with management, the internal auditors and the independent auditors.
During 2017, the audit committee fulfilled its oversightduties and responsibilities as outlined in the charter. Among other things, the audit committee:
2017 Audited Financial Statements
The audit committee has reviewed and discussed the company’s audited consolidated financial statements for the fiscal year ended January 2, 2016December 30, 2017 with the company’s management and PricewaterhouseCoopers LLP,PwC, the company’s independent registered public accounting firm for the fiscal year ended January 2, 2016.December 30, 2017. Management represented to the audit committee that the company’s audited consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.GAAP. The audit committee has reviewed and discussed with management, the internal auditors and PricewaterhouseCoopers LLPPwC the results of their examinations and their assessmentassessments of the company’s internal controlscontrol over financial reporting and discussed with senior officers of the company the processes undertaken to evaluate the accuracy and fair presentation of the
company’s financial statements and the effectiveness of the company’s system of disclosure controls and procedures. The audit committee has also discussed with PricewaterhouseCoopers LLPPwC the matters required to be discussed by the Auditing Standard No. 16,1301, “CommunicationCommunications with AuditCommittees,” issued by the Public Company Accounting Oversight Board (“PCAOB”), as amended from time to time, including the auditors’ judgment aboutevaluation of the quality of the company’s accounting principles as applied in its financial reporting.
In addition, the audit committee has received the written disclosures and the letter from PricewaterhouseCoopers LLP required by PCAOB Ethics and Independence Rule 3526, “Communications with Audit Committees Concerning Independence,” and has discussed with PricewaterhouseCoopers LLP their independence from the company and its management.
Based on the reviews and discussions outlinedreferred to above, the audit committee recommended to the board of directors that the company’s audited consolidated financial statements be included in the company’s Annual Report onForm 10-K for the fiscal year ended January 2, 2016, which was filedDecember 30, 2017 for filing with the SECSEC.
44 FLOWERS FOODS, INC. - 2018 Proxy Statement
AUDIT COMMITTEE REPORT
Independent Auditor Selection and Evaluation
In 2017, the audit committee discussed the continued retention of PwC as our independent registered public accounting firm; evaluated the quality of the annual audit; and, the performance of the audit engagement partner. Noting the long tenure of 49 years that PwC has audited the company’s consolidated financial statements, the audit committee:
Based on February 24, 2016.the reviews and discussions referred to above, the audit committee recommended to the board of directors the continued retention of PwC as the company’s independent registered public accounting firm.
The Audit Committee of the Board of Directors:
James T. Spear,ChairmanChair
Joe E. Beverly
Franklin L. Burke
Rhonda Gass
Richard Lan
Margaret G. Lewis
C. Martin Wood III
42 FLOWERS FOODS, INC. - 20162018 Proxy Statement 45
This proxy statement contains four proposals requiring shareholder action. Proposal I proposes the election of eighteleven director-nominees to the board of directors. Proposal II requests an advisory vote on the compensation of the company’s Named Executives. Proposal III requests the ratification of the appointment of PricewaterhouseCoopers LLP as the
company’s independent registered public accounting firm
for the fiscal 2016.year ending December 29, 2018. Proposal IV concerns a shareholder proposal requesting that inwhether the futurechairman of the company seek shareholder approvalboard of future severance agreements with senior executives that provide benefits in an amount in excess of 2.99 times that senior executive’s base salary plus bonus.directors should be independent, if properly presented at the annual meeting. Each of the proposals is discussed in more detail below.
PROPOSAL I | ELECTION OF DIRECTORS |
Formerly, our board of directors was divided into three classes with the directors in each class serving for a term of three years. At the 2015 annual meeting, shareholders approved a proposal to declassify the company’s board of directors and provide for the annual election of directors. Beginning with the 2015 annual shareholder meeting and continuing with the 2016 annual shareholders meeting, directors will now be elected for one-year terms. The remaining directors who were elected in 2014 (formerly Class I directors whose terms expire in 2017) will also be nominated for election to a one-year term at the 2017 annual shareholders meeting, resulting in the entire board of directors being elected annually beginning with the 2017 annual shareholders meeting.
Background information concerning each of our director-nominees and the incumbent directors is provided above under the section entitled “Directors and Corporate Governance.” Mr. Lan, who has served as a member of the board of directors since 2016, has not been nominated for reelection. His term will expire after the 2018 annual meeting of shareholders and, pursuant to the company’s amended and restated bylaws and resolutions adopted by the board of directors, the size of the board of directors will be set at eleven immediately following the meeting.
The following nominees are proposed for election as directors to serve until the 2019 annual shareholder meeting for 2017:meeting:
Although Messrs. McMullian and Shields have attained the age of 75 and were thus precluded from standing for reelection under our Corporate Governance Guidelines, the board of directors has granted a one-year waiver from this restriction. The board of directors deems Mr. McMullian’s experience as the former chairman of the board of directors and chief executive officer of the company and Mr. Shields’ financial markets experience as critical to the company.
Unless instructed otherwise, the proxies will be voted for the election of the director-nominees named above to serve for the terms indicated or until their successors are elected and have been duly qualified. If any nominee is unable to serve, proxies may be voted for a substitute nominee selected by the board of directors. However, the board of directors has no reason to believe that any nominee will not be able to serve if elected.
Each of the eighteleven nominees for director who receive a majority of the votes cast at the meeting in person or by proxy will be elected (meaning the number of shares voted “for” a director-nominee must exceed the number of votes castshares voted “against” that nominee)director-nominee), subject to the board of directors’ existing policy regarding resignations by directors who do not receive a majority of “for” votes, which is described in our Corporate Governance Guidelines.corporate governance guidelines.
Your board of directors unanimously recommends that you vote “FOR” each of the above-named director-nominees.
46 FLOWERS FOODS, INC. - 20162018 Proxy Statement 43
PROPOSAL II | ADVISORY VOTE ON EXECUTIVE COMPENSATION |
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 or, the Dodd-Frank Act,(the “Dodd-Frank Act”) and Section 14A of the Exchange Act provide shareholders with the right to cast an advisory(non-binding) vote to approve the compensation of the Named Executives as disclosed pursuant to the compensation disclosure rules of the SEC. This proposal is commonly known as the “say-on-pay”“say-on-pay” vote.
In the company’s advisory say-on-pay vote at the 2015 annual meeting, more than 97% of votes cast were “for” approval of the compensation of the Named Executives as disclosed in the 2015 annual meeting proxy statement. At the 2011 annual meeting, we held an advisory vote on the frequency of future say-on-pay votes. A plurality of votes cast at the 2011 annual meeting in the advisory vote on the frequency of future say-on-pay votes were for such vote to occur annually, supporting the board of directors’ recommendation. Based upon such result, the board of directors determined that an advisory say-on-pay shareholder vote will be held every year until the next advisory vote on the frequency of future say-on-pay votes, which will be no later than our 2017 annual meeting of shareholders.shareholders, more than 98% of the shares voted were cast in support of the company’s executive compensation program.
As described in the Compensation Discussion and Analysis section of this proxy statement, the compensation committee evaluates both performance and compensation to ensure that the company maintains its ability to attract and retain the most qualified executives while motivating high company performance. Highlights of our executive compensation program, as described in the Compensation Discussion and Analysis section of this proxy statement, include:
appropriate to the size of the company when compared to peer companies; and |
heavily performance-based using multiple internal and stock-based performance measures; |
that is entirely performance-based and aligned with shareholder interests through links to stock performance and measurement of our return on invested capital performance versus our cost of capital; and |
whose payout potentials are capped at conservative levels; |
Thesay-on-pay vote gives our shareholders the opportunity to express their views on the compensation of our Named Executives. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executives and the compensation philosophy, policies and practices described in this proxy statement. Accordingly, we are asking shareholders to approve the following resolution:
“RESOLVED, that the shareholders approve the compensation of the Company’scompany’s Named Executives, as disclosed pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the compensation discussion and analysis, compensation tables and any related material disclosed in this proxy statement.”
Because this vote is advisory, it will not be binding on the compensation committee, the board of directors or the company. However, the compensation committee and the board of directors value the opinions of the company’s shareholders and will take into account the outcome of the vote when considering future compensation arrangements for the Named Executives.
Proposal II requires the affirmative vote of the holders of a majority of the shares of our common stock present at the annual meeting in person or by proxy.
Your board of directors unanimously recommends that you vote “FOR” Proposal II.
44 FLOWERS FOODS, INC. - 20162018 Proxy Statement 47
PROPOSAL III | RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
Our audit committee and board of directors have appointed PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2016.29, 2018. The board of directors recommends that this appointment be ratified.
Representatives of PricewaterhouseCoopers LLP will be present at the 2018 annual meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions.
We have been advised by PricewaterhouseCoopers LLP that neither the firm, nor any member of the firm, has any financial interest, direct or indirect, in any capacity in the company or its subsidiaries.
If the shareholders of the company do not ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal 2016,year ending December 29, 2018, the audit committee will reconsider the appointment.
Fiscal 20152017 and Fiscal 20142016 Audit Firm Fee Summary
During fiscal 20152017 and fiscal 2014,2016, we retained our principal accountant, PricewaterhouseCoopers LLP, to provide services in the following categories and amounts:
Audit Fees. Fees for audit services totaled approximately $3,322,000$3,036,000 in 20152017 and $2,463,000$3,338,000 in 2014,2016, including fees associated with annual audits, the reviews of our Quarterly Reports on Form10-Q and Annual Reports on Form 10-K.10-K in both years, and in 2016, comfort letter procedures related to a public debt offering.
Audit Related Fees. Fees for audit related services totaled approximately $191,000$199,000 in 20152017 and $178,000$140,000 in 2014.2016. Audit related services principally include services related to audits of certain employee benefit plans and accounting consultations and acquisition due diligence.consultations.
Tax Fees. Fees for tax services, including tax compliance, tax advice and tax planning, totaled approximately $347,000$524,000 in 20152017 and $593,000$500,000 in 2014.2016.
All Other Fees. Fees for all other services not described above totaled approximately $802,000$2,000 in 20152017 and $1,052,000 in 2016, related to a software licensing agreement in both years, and consulting fees for a pricing and trade capabilities assessment and a cybersecurity project and $32,000 in 2014 related primarily to a software licensing agreement and agreed upon procedures performed related to a review of the company’s 2014 proxy statement.2016.
Allnon-audit services were reviewed by the audit committee, which concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing function. On an ongoing basis all audit and permissiblenon-audit services provided by PricewaterhouseCoopers LLP arepre-approved by the audit committee on acase-by-case basis.
Proposal III requires the affirmative vote of the holders of a majority of the shares of our common stock present at the annual meeting in person or by proxy.
Your board of directors unanimously recommends that you vote “FOR” Proposal III.
We periodically receive suggestions from our shareholders, some as formal shareholder proposals. We give careful consideration to all suggestions, and assess whether they promote the best long-term interests of the company and its shareholders.
We expect Proposal IV to be presented by shareholdersa shareholder at the annual meeting. Following SEC rules and regulations, we are reprinting the proposals and supporting statements as they were submitted to us, other than minor formatting changes. We take no responsibility for them. On request to the Secretarycompany’s Investor Relations Department at the address listed under “Questions and Answers about the Annual
Meeting and Voting — How can I obtain an Annual Report
on Form10-K,” we will provide information about the sponsors’ shareholdings, as well as the names, addresses and shareholdings of anyco-sponsors. Approval of each of these two proposalsthis proposal requires the affirmative vote of the holders of at least a majority of the shares of our common stock present at the meeting in person or by proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE AGAINST“AGAINST” PROPOSAL IV FOR THE REASONS WE GIVE AFTER THE PROPOSAL.
48 FLOWERS FOODS, INC. - 20162018 Proxy Statement 45
PROPOSAL IV |
RESOLVED, that the shareholdersRESOLVED: Shareholders of Flowers Foods, Inc. (“the Company”(the “Company”), urge the Board of Directors (the “Board”) to seek shareholder approval of future severance agreements with senior executivestake the steps necessary to adopt a policy to require that, provide benefits in an amount exceeding 2.99 timesto the sumextent feasible, the Chairman of the executives’ base salary plus bonus.
“Future severance agreements” include, employment agreements containing severance provisions, special retirement provisions and agreements renewing, modifying or extending existing agreements.
Board shall be an independent director who has not previously served as an executive officer of the Company. The policy should be
“Benefits” include, lump-sum cash payments (including payments in lieu of medical and other benefits);implemented so as not to violate any contractual obligations. The policy should also specify the payment of any “gross-up” tax liability;process for selecting a new independent Chairman if the estimated present value of special retirement provisions; any stock or option awards that are awarded under any severance agreement; any prior stock or option awards as to which the executive’s access is accelerated under the severance agreement; fringe benefits; and, consulting fees (including reimbursable expenses)current Chairman ceases to be paidindependent between annual meetings of shareholders; or if no independent director is available and willing to the executive.serve as Chairman.
We believe that requiring shareholder ratification of “golden parachute” severance packages with a total cost exceeding 2.99 times an executive’s base salary plus bonus, will provide valuable feedback, encourage restraint, and strengthen the handA former CEO of the Company currently serves as the chairman of the Board. In our view, the chairman should be an independent director, who has not previously served as an executive, in order to promote the robust oversight and accountability of management, and to provide effective deliberation of corporate strategy, something we believe is difficult to accomplish when a former executive serves as the board’s leader. Even with robust responsibilities, we believe the position of a lead independent or presiding director is inadequate to this task because competing responsibilities for board leadership remain with thenon-independent chair.
In the case of the Company, this concern is compounded by the fact that, as of last year’s proxy statement, four former executives of the Company or its predecessor, Flowers Industries Inc., as well as a former executive of a majority-owned subsidiary of Flowers Industries, sit on the board; two of those directors serve on the Audit Committee. We also note that three directors have over a quarter of a century of board service at the company and its predecessor, Flowers Industries, and
that two of those directors exceeded the Board’s compensation committee.mandatory retirement age of 75 years, before the company eliminated the policy in February 2017.
AccordingIn our opinion these considerations are especially important as the company faces legal and regulatory challenges to page 45its business model. As of the end of the company’s third quarter 2017, the company’s independent contractor model is the subject of 32 lawsuits from drivers claiming they were incorrectly classified as independent contractors. On August 10, 2016, it was announced that the U.S. Department of Labor was reviewing the Company’s compliance with the Fair Labor Standards Act following which, shares closed down 9%.
In the midst of such scrutiny, we believe an independent chairman can be invaluable in ensuring that the board is appropriately reviewing and questioning the risks and opportunities of the Company’s 2015 Proxy Statement, if there were a change of control as of January 3, 2015 (the last business day of
fiscal year 2014)strategy, and the chief executive officer was terminated as a result of the change in control event, he would receive a cash severance of approximately $5.3 million, in addition to payments for equity awardsmaintaining good communications and other benefits. In total, he would be entitled to a severance package of approximately $9.9 million.
We urge shareholders to vote FOR this proposal to urge the Board to seek shareholder ratification of severance packagescredibility with a total cost exceeding 2.99 times an executive’s base salary plus bonus.key stakeholders.
Board of Directors Statement in Opposition of Proposal IV
The board of directors has carefully considered the shareholder proposal. As part of its consideration, the board of directors noted that a substantially identical proposal was submitted to the vote of the company’s shareholders at the 2017 Annual Meeting of Shareholders and did not receive the affirmative vote of a majority of the votes present in person or represented by proxy at the meeting (~24%). The board of directors unanimously recommends that you vote “AGAINST” Proposal IV because it believescontinues to believe its adoption is unnecessary and unwarranted for reasons discussed below.
Under the Omnibus Plan, there is no automatic acceleration of vesting upon a change of control. Rather, vesting of an executive’s equity award after a change of control requires either failure of the successor to assume the award or a qualifying termination of employment within a specified period of time following such change of control.
Further, the compensation committee already supports reasonable and appropriate limits on severance payments and thus limits the costs associated with change of control severance arrangements. For example, the company’s Change of Control Plan does not include excise tax gross ups, consulting fees, additional equity grants or special retirement provisions. Also, the compensation has adopted a policy stating that without shareholder approval, future cash severance arrangements may not exceed 2.99 times salary and bonus.
In addition, SEC rules already enable the Company’s shareholders to vote to approve, on an advisory basis, the compensation of our named executive officers (including severance arrangements) as disclosed in this proxy statement. The company’s severance agreements are part of an executive compensation program that has consistently been approved by more than 97% of the company’s shareholders. SEC rules further require a separate approval of golden parachute compensation agreements or understandings payable to named executive officers in connection with a sale, merger or related transaction.
The board of directors also disagrees with the proponent’s characterization of amounts payable under outstanding equity awards
after a qualifying termination of employment connected with a change of control as severance payments. In the board of directors’ view, it would be inappropriate to include an estimated value of these amounts in the severance calculation because they are earned by executives during the course of their employment. Long-term equity-based incentive awards represent 65% of our chief executive officer’s annual compensation opportunity and more than 50% of our other named executive officer’s annual compensation opportunities. Currently, these awards consist of ROIC-based and TSR-based performance contingent restricted stock units that are granted under the Omnibus Plan. Because in a change of control many of these employees would lose their positions, be assigned diminished responsibilities or transferred, the company wants to provide these already partially earned benefits to employees. These benefits are important so that while a change of control is pending, employees promote decisions in the best interests of shareholders, remain focused on the operations of the business and continue to create shareholder value.
The board of directors believes the compensation committee is in the best position to establish senior executive compensation arrangements in a manner it believes will allow the company to attract and retain the best possible executive talent and to motivate executives to maximize shareholder returns. The compensation committee believes that adopting the proposed severance approval policy would frustrate two primary goals of its executive compensation program — to attract and retain highly qualified executives. For these reasons, the board of directors believes that Proposal IV is not in the best interests of the company and its shareholders.shareholders for the reasons discussed below.
Proposal IV includes Meritless Claims about the Company.The supporting statement to Proposal IV contains statements that are irrelevant to the proposal’s subject matter, as well as a number of misleading statements. In particular, the proponent cites ongoing litigation in which the company is defending complaints filed by distributors alleging that such distributors were misclassified as independent contractors. As we have previously publicly disclosed, the company and/or its respective subsidiaries are vigorously defending all of these claims against our business model, and reached agreements in 2017 to settle distributor-related litigation in the aggregate amount of $6.0 million, including attorney’s fees. In addition, the proponent states that our current chairman is not independent. While Mr. Deese did serve previously as our chief executive officer, which is executive and operational experience that we consider highly valuable to board leadership, he became an “independent” director under NYSE Rules at the beginning of 2018.
Flexibility in Board Leadership is More Suitable for the Company than a Rigid and Prescriptive Approach.Our board of directors must take great care to select the right leadership structure for our company. We take this responsibility very seriously, and believe that the board of directors should be able to consider, on acase-by-case basis, the style of leadership best suited to meet the needs of the company and its shareholders based on the individuals available and the circumstances as they exist at the time. The adoption of a mandate that the chairman of the board be an independent director would impose an unnecessary restriction on the board of directors and would limit its ability to select the director best suited to serve as chairman based on the relevant facts, circumstances, and criteria as they exist at the time. In addition, in reviewing this proposal, the board of directors took into consideration relevant benchmarking data and concluded that the proposal’s rigid approach is not common practice. According to the 2017 Spencer Stuart U.S. Board Index, only 28% of S&P 500 companies reported having an independent chair.
Our Current Board Leadership Structure Best Serves the Company and its Shareholders.Our board of directors routinely evaluates the company’s leadership structure to ensure that there is strong, independent board leadership in place to provide effective oversight to management. As discussed in greater detail under “Directors and Corporate Governance-Corporate Governance-Board Leadership Structure”, the board of directors believes that at the present time, the company and its shareholders are best served by a leadership structure in which ournon-executive chairman is able to maintain a close working relationship with our chief executive officer, as the company transitions
FLOWERS FOODS, INC. - 2018 Proxy Statement 49
PROPOSAL IV
through its established succession plans, counterbalanced by an engaged independent board and presiding director. Indeed, as discussed above, Mr. Deese, ournon-executive chairman, became “independent” under the NYSE Rules at the beginning of 2018. In addition, we have a strong presiding director that is appointed annually by our independent directors and has specified responsibilities that provide the same leadership, oversight and benefits to the company and the board of directors that would be provided by an independent chairman that did not previously serve as our chief executive officer. These responsibilities include:
The Company’s Good Corporate Governance Practices Currently Provide Effective, Independent Board Oversight.We believe that good corporate governance is essential to ensure that the company is effectively managed for the long-term benefit of our shareholders. We have thoroughly reviewed our corporate governance policies and practices and compared them with those recommended by corporate governance advisors and the practices of other publicly-held
companies. We believe our policies and practices promote board independence and effective oversight of management, and provide shareholders with meaningful rights, including:
For the reasons discussed above, our board of directors believes that the current board leadership structure best serves the company and its shareholders. We will continue to review our leadership structure to ensure that the structure best addresses the company’s evolving and dynamic business. We believe that eliminating the flexibility to determine which type of leadership structure is not in the best interests of the company and its shareholders. Furthermore, we believe our shareholders have recognized the effectiveness of our current board leadership structure byre-electing ournon-executive chairman, the presiding director and other board members each year.
Your board of directors unanimously recommends that you vote “AGAINST” Proposal IV.
46 FLOWERS FOODS, INC. - 2016 Proxy Statement
20172019 SHAREHOLDER PROPOSALS
In order to properly submit a proposal for inclusion in the proxy statement for the 20172019 annual meeting, you must follow the procedures outlined in Rule14a-8 of the Exchange Act. To be eligible for inclusion, we must receive your shareholder proposal at our principal corporate offices in Thomasville, Georgia as set forth below no later than December 13, 2016.3, 2018.
If you wish to present a proposal before the 20172019 annual meeting, but do not wish to have the proposal considered for inclusion in the proxy statement and proxy card, you must follow the procedures outlined in our amended and restated bylaws. We must receive your shareholder proposal at the address noted below no earlier than January 26, 201724, 2019 and no later than February 25, 2017.23, 2019. If your proposal is not properly
brought before the annual meeting in accordance with our amended and restated bylaws, the chairman of the board of directors may declare such proposal not properly brought before the annual meeting, and it will not be acted upon.
Any proposals or notices should be sent to:
Stephen R. Avera
Executive Vice President, Secretary and GeneralChief Legal Counsel
Flowers Foods, Inc.
1919 Flowers Circle
Thomasville, Georgia 31757
50 FLOWERS FOODS, INC. - 2018 Proxy Statement
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
Under the rules of the SEC, the company is permitted to use a method of delivery, often referred to as “householding.” Householding permits the company to mail a single set of proxy materials to any household in which two or more different shareholders reside and are members of the same household or in which one shareholder has multiple accounts. The company did not household materials for the annual meeting. If the company households materials for future meetings, then only one copy of the company’s annual report and proxy statement will be sent to multiple shareholders of the company who share the same address and last name, unless the company has received contrary instructions from one or more of those shareholders. In addition, the company has been notified that certain intermediaries (i.e., banks, brokers or other nominees) will household proxy materials for the annual meeting. For voting purposes, a separate proxy card will be included for each
account at the shared address. The company will deliver promptly, upon oral or written request, a separate copy of the annual report and proxy statement to any shareholder at the same address. If you wish to receive a separate copy of the annual report and proxy statement, you may contact the company’s Investor Relations Department (a) by mail at 1919 Flowers Circle, Thomasville, GA 31757, (b) by telephone at (229)226-9110, or (c) bye-mail at lhay@flowersfoods.com. You may also contact your bank, broker or other nominee to make a similar request. Shareholders sharing an address who now receive multiple copies of the company’s annual report and proxy statement may request delivery of a single copy by contacting the company as indicated above, or by contacting their bank, broker or other nominee, provided the broker, bank or other nominee has elected to household proxy materials.
FLOWERS FOODS, INC. - 20162018 Proxy Statement 4751
ANNEX A (NON-GAAP(NON-GAAP FINANCIAL MEASURES)
Information RegardingNon-GAAP Financial Measures
The company prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP)generally accepted accounting principles (“GAAP”). However, from time to time, the company may present in its public statements, press releases and SEC filings with the Securities and Exchange Commission,non-GAAP financial measures such as EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted net income margin and adjusted net income per diluted common share to measure the performance of the company and its operating divisions (collectively, the “Non-GAAP“Non-GAAP Measures”). EBITDA is used as the primary performance measure in the company’s Annual Executive Bonus Plan.annual executive bonus plan. The company defines EBITDA as earnings from continuing operations before interest, income taxes, depreciation, amortization and income attributable tonon-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. 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 andnon-operating factors (such as historical cost). EBITDA is also a widely-accepted financial indicator of a
company’s ability to incur and service indebtedness. indebtedness
The Non-GAAP Measurescompany defines adjusted EBITDA, adjusted EBITDA margin and adjusted net income per diluted share, respectively, to exclude additional costs that we consider important to present to investors. These costs include, but are not limited to, the costs of closing a plant or costs associated with acquisition-related activities, certain impairment charges, legal settlements and othernon-recurring expenses. We believe that financial information excluding certain transactions not considered to be part of the ongoing business improves the comparability of earnings results. We believe investors will be able to better understand our earnings results if these transactions are excluded from the results.
These non-GAAP financial measuresNon-GAAP Measures are measures of performance not defined by accounting principles generally accepted in the United StatesGAAP and should be considered in addition to, not in lieu of, GAAP reported measures. The TheseNon-GAAP measures Measures 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. Our method of calculating the theseNon-GAAP measures Measures may differ from the methods used by other companies, and, accordingly, may not be comparable to similarly titled measures used by other companies. The reconciliations below provide a reconciliation of the non-GAAP measuresNon-GAAP Measures used in this proxy statement to the most comparable GAAP financial measure.
Net Income to Adjusted EBITDA
(Dollars in Thousands) | 2015 | 2017 | ||||||
Net income | $ | 189,191 | $ | 150,120 | ||||
Income tax expense | $ | 103,840 | ||||||
Income tax expense (benefit) | $ | (827 | ) | |||||
Interest expense, net | $ | 4,848 | $ | 13,619 | ||||
Depreciation and amortization | $ | 132,175 | $ | 144,875 | ||||
| ||||||||
EBITDA | $ | 430,054 | $ | 307,787 | ||||
Asset impairment and facility closure costs | $ | 4,507 | ||||||
Acquisition-related costs | $ | 6,187 | ||||||
Restructuring and related impairment charges | $ | 104,130 | ||||||
Pension plan settlement loss | $ | 4,649 | ||||||
Lease terminations and legal settlements | $ | 6,543 | ||||||
Project Centennial consulting costs | $ | 37,306 | ||||||
Gain on divestiture | $ | (28,875 | ) | |||||
Multi-employer pension plan withdrawal costs | $ | 18,268 | ||||||
| ||||||||
Adjusted EBITDA | $ | 440,748 | $ | 449,808 | ||||
MARGIN | 11.7% | 11.5% |
A-1 FLOWERS FOODS, INC. - 2018 Proxy Statement
ANNEX A(NON-GAAP FINANCIAL MEASURES)
Net Income Per Diluted Common Share to Adjusted Net Income Per Diluted Common Share
2015 | ||||
Earnings per diluted share | $ | 0.89 | ||
Asset impairment and facility closure costs | $ | 0.01 | ||
Acquisition-related costs | $ | 0.02 | ||
Adjusted earnings per diluted share | $ | 0.92 |
2017 | ||||
Earnings per diluted common share | $ | 0.71 | ||
Restructuring and related impairment charges | $ | 0.30 | ||
Pension plan settlement loss | $ | 0.01 | ||
Lease terminations and legal settlements | $ | 0.02 | ||
Project Centennial consulting costs | $ | 0.11 | ||
Gain on divestiture | $ | (0.09 | ) | |
Multi-employer pension plan withdrawal costs | $ | 0.05 | ||
Impact of the Tax Cuts and Jobs Act | $ | (0.23 | ) | |
Windfall tax benefit from stock option exercises | $ | (0.01 | ) | |
Adjusted earnings per diluted share | $ | 0.89 |
Certain amounts do not compute due to rounding.
Net Income to Adjusted Net Income
(Dollars in Thousands) | 2017 | |||
Net income | $ | 150,120 | ||
Gain on divestiture | $ | (17,758 | ) | |
Restructuring and related impairment charges | $ | 64,040 | ||
Project Centennial consulting costs | $ | 22,943 | ||
Lease terminations and legal settlements | $ | 4,023 | ||
Pension plan settlement loss | $ | 2,859 | ||
Multi-employer pension plan withdrawal costs | $ | 11,235 | ||
Impact of the Tax Cuts and Jobs Act | $ | (48,160 | ) | |
Windfall tax benefit from stock option exercises | $ | (2,082 | ) | |
Adjusted net income | $ | 187,220 |
FLOWERS FOODS, INC. - 20162018 Proxy Statement A-1A-2
FLOWERS FOODS, INC.
SHAREHOLDER RELATIONS DEPT.
1919 FLOWERS CIRCLE
THOMASVILLE, GA 31757
VOTE BY INTERNET -www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time on May
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by Flowers Foods, Inc. in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote
VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time on May
VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Flowers Foods, Inc., c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | ||||
KEEP THIS PORTION FOR YOUR RECORDS | ||||
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY | |
FLOWERS FOODS, INC. | ||||||||||||||
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ALL THE DIRECTOR-NOMINEES: | ||||||||||||||
1. | To elect as directors of the company the | For | Against | Abstain | ||||||||||
1a. | George E. Deese | |||||||||||||
1b. | Rhonda Gass | |||||||||||||
1c. | ||||||||||||||
1d. | ||||||||||||||
1e. | ||||||||||||||
1f. | ||||||||||||||
1g. | ||||||||||||||
1h. | ||||||||||||||
1i. | James T. Spear | ☐ | ☐ | ☐ | ||||||||||
1j. | Melvin T. Stith, Ph.D. | ☐ | ☐ | ☐ | ||||||||||
1k. | C. Martin Wood III | ☐ | ☐ | ☐ |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING PROPOSALS: | For | Against | Abstain | |||||||||||
2. | To approve by advisory vote the compensation of the company’s named executive officers; | ☐ |
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3. | To ratify the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting | |
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE “AGAINST” THE FOLLOWING PROPOSAL: | For | Against | Abstain | |||||||||||
4. |
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NOTE:In their discretion, the proxies are authorized to vote on any other matters that may properly come before the annual meeting or any adjournment or postponement thereof. |
Please date this Proxy and sign it exactly as your name or names appear(s) on the stock certificates or on a label affixed hereto. When shares are held jointly, EACH joint owner should sign. When signing as attorney, executor, administrator, trustee, guardian, corporate officer, etc., give full title as such. If shares are held by a corporation, please sign in full the corporate name by its president or other authorized officer. If shares are held by a partnership, please sign in the partnership name by an authorized person. |
Signature [PLEASE SIGN WITHIN BOX] | Date |
Signature (Joint Owners) | Date |
FLOWERS FOODS, INC.
Dear Shareholder,
Please take note of the important information enclosed with this Proxy. Your vote is important, and we encourage you to exercise your right to vote these shares. Please mark the boxes on the reverse side of this proxy card to indicate your vote. Then sign the card and return it in the enclosed postage-paid envelope, or follow the instructions on the reverse side of this proxy card for Internet or telephone voting. Your vote must be received prior to the Annual Meeting of Shareholders on May 26, 2016.24, 2018.
If you are a participant in the Flowers Foods, Inc. 401(k) Retirement Savings Plan, you have the right to directGreat-West Trust Company, LLC, the Trustee of the 401(k) plan, how to vote the Flowers Foods, Inc. common shares allocated to the account. Any unvoted or unallocated shares will be voted by the Trustee in the same proportion on each proposal as the Trustee votes the shares of stock credited to the 401(k) plan participants’ accounts for which the Trustee receives voting directions from the 401(k) plan participants. The number of shares that are eligible to vote is based on the balance in the 401(k) plan on March 24, 2016,22, 2018, the record date for the Annual Meeting. Because all of the shares in the 401(k) plan are registered in the name of Great-West Trust Company, LLC, as Trustee, you will not be able to vote these shares in the 401(k) plan in person at the Annual Meeting on May 26, 2016.24, 2018.
If stock is owned directly in your own name as well as in the 401(k) plan, separate share totals are indicated on the reverse side of this voting instruction form. If you own stock indirectly through a bank or broker, as well as in the 401(k) plan, you will receive a separate voting instruction form from the bank or broker.
Thank you. | ||
Flowers Foods, Inc. |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.
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E08380-P75751 —
E41369-P01608
FLOWERS FOODS, INC. 1919 Flowers Circle Thomasville, Georgia 31757 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MAY
The undersigned hereby appoints Allen L. Shiver, R. Steve Kinsey and Stephen R. Avera as proxies, with power to act without the other, and with full power of substitution, and hereby authorizes them to represent and vote, as designated on the reverse side, all the shares of common stock of Flowers Foods, Inc. held of record on March
If you are a participant in the Flowers Foods, Inc. 401(k) Retirement Savings Plan, you have the right to directGreat-West Trust Company, LLC, the Trustee of the 401(k) plan, how to vote the Flowers Foods, Inc. common shares allocated to
The proxies will vote on the proposals set forth in the Notice of Annual Meeting and Proxy Statement as specified on the reverse side and are authorized to vote, in their discretion, on any other |
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS INDICATED ON THE REVERSE SIDE. IF NO INDICATION IS MADE, ANY EXECUTED PROXY WILL BE VOTED “FOR” THE ELECTION OF ALL OF THE DIRECTOR-NOMINEES LISTED ON THE REVERSE SIDE, “FOR” PROPOSALS 2 AND 3 AND “AGAINST” PROPOSAL 4, AND IN THE DISCRETION OF THE PROXIES AS TO ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
PLEASE VOTE, DATE AND SIGN ON THE REVERSE SIDE AND RETURN THE PROXY
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