Greetings and welcome to the Flowers Foods' second quarter 2011 earnings conference call and webcast. (Operator Instructions) It is now my pleasure to introduce your host, Marta Jones Turner, Executive Vice President, Corporate Relations for Flowers Foods. Thank you, Ms. Jones Turner. You may begin.

Thank you and good morning everyone. Our second quarter results were released earlier and if you need a copy, of course that's posted on our website. We also filed the 10-Q this morning, so that information is available with our SEC filing. During the call, we'll be using a PowerPoint presentation to support our speakers and you can find that presentation on the webcast listen page. Of course, before we get started I have to remind you that our presentation may include forward-looking statements about our company's performance. Although we believe those segments to be reasonable, they are subject to risks and uncertainties that could cause actual results to differ materially. In addition to the matters we'll discuss during the call, important factors relating Flowers' business are detailed fully in our filing with the SEC. A quick review of our schedule this morning, George Deese, Flowers' Chairman and CEO will give opening remarks. Steve Kinsey, our Chief Financial Officer will give you more details on the financials. Then Allen Shiver, President of Flowers Foods will talk to you about sales and operation. And then George, of course will come back and will open the call for your questions. So I'm very pleased to turn the call over to Flowers Foods' Chairman and CEO, George Deese.

Thank you, Marta. Good morning to each of you and thank you for your continued interest in Flowers Foods. I'm sure by now you have received and read our 2011 second quarter sales and earnings report. As Marta told you, Steve will give you the detailed financial information and Allen Shiver will follow up on the operational segment of the company. Before I turn the call over to Steve, let me give you a quick overview for the quarter. First, we're pleased to announce the 3-for-2 stock split, which is effective June 24. We also increased our annual dividend rate by $0.10 or 12% per share. In the quarter, we completed the acquisition of Tasty Baking Company, which will add about $200 million to our annual sales. We believe Tasty Baking will give Flowers Foods a national platform to grow our fresh cake business. Just as important we feel we can leverage our Nature's Own brand for breads and rolls across the mid-Atlantic and into the Northeastern portion of the United States. Our serve in this important area, we reached 61% of the U.S. population, moving toward our five-year target of serving 75% of the U.S. population through out DSD network. Also pleased to report that integration of Tasty Baking is well underway and right on schedule and is going as expected. Getting back to the quarter, sale for the quarter increased 5.7% year-over-year and excluding one-time charges related to the Tasty acquisition, earnings per share was $0.23 versus $0.24, a decrease of some 4.2%. Looking more closely to our results, you will note that our DSD business came in right at expectations. By the way that represents some 75% of our business and the main portion of our business, which had a very good quarter. We were up against…

Thank you, George, and good morning everyone. Before we move to the financial review, I do want to remind you that we did file our second quarter Form 10-Q with the SEC this morning simultaneous with our earnings release. Now turning to the financial information, during the second quarter, sales were up 5.7%. This increase as shown was driven by price/mix of 4.5%, primarily attributable to price. And a contribution from the Tasty Baking acquisition of 3.3%, partially offsetting these increases was a decline in volume of 2.1%. The volume decline was a result of pressure in the branded retail channel, and as George mentioned tough comps in the warehouse segment. GAAP EBIT of $43.1 million was down approximately 15.9% compared to the prior quarter. However, excluding the one-time cost for $4.5 million associated with the Tasty Baking acquisition. EBIT on an adjusted basis was down 7% or $3.6 million quarter-over-quarter, and decreased to 100 basis points to 7.4% of sales on an adjusted basis compared to the prior-year quarter. GAAP EPS was 21% per share, down 12.5%. Excluding the one-time cost related to the Tasty Baking acquisition, EPS was $0.23 per share compared to last year's $0.24 per share, down approximately 4.2%. Though, the second quarter earning were somewhat pressured, year-to-date earning per share, as you can see, excluding one-time cost was up 3.7% over the prior year. As George said, sales performance in the second quarter was solid. As shown here, sales have been improving sequentially, since we began seeing pressure back in early 2010. Excluding the Tasty Baking acquisition sale in the second quarter of this year, sales were up approximately 2.4% in the quarter. This gives us confidence as we enter the back half that we can meet the sale target discussed in today's call. Gross…

Thank you, Steve, and good morning. As George mentioned earlier consumers continue to adjust their shopping patterns as they experience financial pressure from the tough economy. In the fresh bakery category, volume continues to be soft and consumers focus on core items and resist incremental purchases. In the quarter, IRI reports that fresh packaged bread category in the total U.S. was down 3.5% in units and up 2.3% in dollars. In IRI South, the fresh bakery category at retail was down 2.7% in units and up 3% in dollars. In the total U.S., IRI shows that Flowers is down 2.5% in units and up 4.3% in dollars. In the IRI South market, Flowers' branded sales in reported channels were down 2.9% in units and up 3.6% in dollars. I'm pleased to report that IRI shows that our market share held steady. In the South market our brands hold 23.1% share of dollars and 18.9% share of units. For the total U.S., Flowers' dollar branded share is 7.9% and unit share is 7%. For the quarter, IRI for the total U.S. shows a 6% increase in average price across the fresh packaged bread category. In the South market, the category increased in average price of about 5.9% or about $0.11 per unit. Store brands did show some growth in the quarter, up 40 basis points in dollar share and 80 basis points in unit share. In general store brand continues to be below share levels held in previous years. Flowers' overall store brand business increased as a result of continued growth in store brand snake cake and incremental growth from new store brand business in the DSD segment. Our internal data shows growth in channel is not reported by IRI. As a reminder, current IRI data captures 49% of our retail…

Thank you, Steve, and thank you Allen. Before we take your questions, let me take just a few minutes to summarize where I see our business. I believe we are on track to achieve our five-year plan that we discussed with you in March. Let me remind you that over the long-term we expect sales growth of 5% to 10%, with 3% to 5% from organic growth and 2% to 5% from acquisitions; and EBITDA margin of 11% to 13%; and return on invested capital range of 13% to 15%; and double-digit growth in earnings per share. I have full confidence that everything we are looking at and working on, and focused on, will deliver the five-year plan. From time-to-time we do face volatility in commodities. Pricing may not always be what we expect due to competitors or customer pressures. As you know, we had a weak economy with high unemployment and that impacts consumers, our business as well as other businesses. But whatever circumstances we face, we will continue to conduct our business, the Flowers' way. We will right the ship and reward our shareholders over the long-term, which we've always proven that we can do that. I have to say that I have full confidence because of an outstanding team throughout Flowers Foods. This has never been a one person show or just the top management team. It is all about what the team can achieve throughout our operation as well as outstanding support from our distributors in the marketplace. With that I'll now turn the podium back to you for Q&A.

(Operator Instructions) Our first question comes from Heather Jones of BB&T Capital Markets. Heather Jones - BB&T Capital Markets: I had a couple of questions. Wondering given your note of caution you sounded particularly with regards to consumer demand. I was wondering if you could give us a sense with as much visibility as you have, I guess given that we're in mid-August, your sense of comfort with your updated guidance for 2011?

Heather, I'll certainly do it, and you might Steve and Allen add to it. I would say, as we looked at and really focused on the softness in the marketplace. We did do a lot of study through IRI as well as our sales at Warehouse, et cetera. I guess, it's one of the first times that's staying the course. We did look back quarter-to-quarter 2008 going forward and we saw the same trend, exact same trend in quarter one of '08 was similar. And it did take two or three quarters that work to step out. I think there's lack of confidence. I think people are being very cautious. I think they're trying to wise with their money. And I think they are taking less visits to the store, supermarket. And I think just a cautious time until we see unemployment get seasonal improvement there and comps us back with the consumer. It's not a drop off the bridge situation, but you do see that the volume and units down pretty significant in the bread business. But I do believe that good times or bad times that Flowers Foods will perform. And I think it will be because of what I said earlier, the team, the innovation, the quality of products, great execution in supermarkets. So it was cautious, but not to the point where anybody's jumping off the bridge. It's not that kind of caution. It's just saying we're seeing a little difference with that consumer lack of confidence at this point. And looking then at the sales guidance, looking at the last few weeks and knowing what's coming ahead, we feel very confident that sales guidance given this morning, see to it indicate the risk on the earnings in the back half will be the consumer as well as pricing activity and how that works out. But we're as confident I think as anybody can be with given the circumstances and the new announcement we made on this morning. Heather Jones - BB&T Capital Markets: And looking to 2012, this seems to be a different scenario than '08, given that in '08 in the back half you had input cost start to plunge and continue to trend down as you went through '09. And clearly anything can happen, but the fundamentals for input costs do seem somewhat different this time. So if you could give us a sense of not guidance for 2012, but more of a qualitative outlook of your ability to put through more pricing for 2012 that's needed. And how you think the consumer's going to react, because again it looks like the pricing environment is going to be different than it was in the '09 timeframe?

I think as we look at 2012, I think all of us can see that the commodity situation has firmed up. You look back 90 days going forward, we might see some relief and all of a sudden it firms back up again, and we see the firmness as we speak even now. We don't forecast in our minds big spike from where it is today. I think I said early on it, though we see more of the same, but we have seen, and if you look at IRI I think the baking industry and all the people in the food industry that are buying these commodities, most everyone is taking pricing in the marketplace as you review it through IRI and other report on marketplace and seeing it. So I think we will be able to price and that today I feel very good about 2012. Heather Jones - BB&T Capital Markets: And my final question is, is you affirmed your long-term goals. Just wondering should we expect some potential movement in that year-to-year, given that we are in a soft economy. Don't know when that's going to improve, given we're in a high-price environment. Is that your long-term goal that potentially like I said could be some movement year-to-year?

I think that's a wonderful question, and that's one thing that I always like to remind our long-term shareholders about. This is a long-term business and that's why we like to look at it over time, and we set five-year targets. So things can change from quarter-to-quarter. This is a daily business. Fresh DSD bread business is day-to-day. So we do stay focused daily, and weekly, and yearly, and quarterly. But things can change quarter-to-quarter and it can change year-to-year. But if you look at it over time and always look back to that five-year timeframe, you will see that Flowers' on a compounded growth and earnings per share sales and all of the above. And that's what gives us confidence. Commodities and pricings do change. But over the long haul, it always means work out. You can have pressure for a couple of quarters. You could have pressure for a year. But over time, with a proven business model that Flowers has, the efficient bakeries that we have, the investment we continue to make in our people and their bakeries and our products, with our customers, it all comes together to be a wonderful company called Flowers Foods. And we have full confidence in our ability to move this company forward.

Our next question has from Farha Aslam for Stephens.

I have a question about the volume that you've assessed that was delayed from this period to later in the year. Could you give us some color around the size of that and what were the factors that had it fall more through the back half?

Farha, I can't give you all the specifics that you'd like to know. Obviously, there was a delay in the timing that we had anticipated for a number of reasons that I can't go into completely. As you know, we said last year we had invested in our cake business and anticipating new business coming our way. It's not that we're not getting the business. It's just that it didn't play out and time out exactly the way we anticipate it. But we have confidence that we will work out for the back half of the year.

And just kind of roughly the size of that business?

I'm sorry I just can't specifically give you that number.

When you look at pricing, it says that pricing lags commodities. Was it that when you went in you got pushed back from your retailers and you have to just work through it? Did they put it out for a bid? You have had your commodities hedged pretty nicely. I just want to understand pricing and the pushback you saw.

I would say that I'm real pleased that 75% of our business, DSD, did have nice pricing and things did improve. If you think about our DSD business, and I have heard other food companies say the same thing, it's basically wrapped around branded products. And we look at our vast programs, we are unfortunately a little more unbranded and we were not as successful as we would like to be in pushing all of our commodities through. Some of that also is timing due to different agreements with different people. But we should see some improvement in third and fourth quarters against those commodity costs. So it's just a delay, but the delay will be eliminated.

And my final question is regarding your commodity position. Normally you share with us the degree that you're hedged on wheat going forward and your non-wheat cost. Could you just give us some color on your coverage of food?

I'll repeat what Steve always repeats. We always think about six to nine months as our targeted area. And I would still repeat that today that's our philosophy and we try to stay as close to that as we can. At some point, if it's low, we're going to get longer. If it's higher, we're going to get a little shorter. So that's about all I can see. But that's our philosophy and we're pretty well sticking to that.

I would comment on that as well. For 2011, we gave the cost increases of 8% to 10% on the input cost basket, and we're pretty confident of that number.

Our next question comes from Eric Katzman of Deutsche Bank.

Following up as far as on the warehouse volume that was deferred, was that basically because you built the capacity ahead of time and because the volume wasn't there? Normally you guys run at a pretty high efficiency and I wouldn't have assumed that one contract was that as much of an impact.

Eric, I would say, number one, it's more than one contract. It's not just one company. We just didn't get there as quick as we thought we would. It was a major event though in addition to that. But you are right. And we said last year, we saw great opportunities with this business. A little back the past several years in that business have been very productive, and this is just a lapse in time that commodity increase didn't get as fast as we thought it would and the volume did not come through on the time horizon that we had thought. Steve is going to follow up on that fixed cost.

I think you're right. If you recall, last year we talked about all the production capacity we added to that division. And as George mentioned, we get new branded products as well as other opportunities in that arena, and the timing just seems to have slipped a little bit.

And just a housekeeping items, first of all, the Tasty Baking plus-$4 million cost, in terms of the segment model, was that below in DSD or was it in incorporated or split, how do we exclude that on the segment model?

The acquisition costs are in the corporate number.

Just going back to our discussion again on Tasty, is my memory faulty or did you indicate that you would expect it to be possibly modestly accretive this year. But it sounds like now you're just factoring in neutral or it's like splitting hair in a tough environment.

Yes. I would say that those opportunities were to be slightly up, but it won't be material.

I got to also say that it brings opportunities for next year. They had corporate overhead. We got a corporate overhead. And obviously we don't need the one and some of that cost is there and some other areas, but it's all about the synergies that we know are there in and we are pretty well getting there. But there is a cost associated with fixing that. So we can sort out exactly where we thought we need to be.

It seems as if what's happening is kind of the very low-end private label is doing all right. The premium brands like Nature's Own or Pepperidge or something like that are doing okay. And it's really like the local and regional brands that are suffering. Is that how you see it and what do you think other than the economy getting better that can help those brands that are in the middle?

Eric, I think you're right. If you look at the entire category, loaf breads, and we all purchase the core items, specifically Nature's Own brand is doing well. As far as being able to absorb additional pricing, there is something that we feel like the Nature's Own brand can do. In fact in 2008, the whole category was really trending similar to the category trend that we're seeing today. But in 2008, the category actually absorbed more pricing than the category has absorbed now. So we feel like given the commodity situation that there is more pricing to come. In terms of what's going to make a difference, I think our strength is really on those core items. And I mentioned in my comments earlier that some of the discretionary impulse purchases I think are the first to go when consumers run through financial pressure. But I have confidence in our guidance based on our strength in the core items, I think those will be the items that are not as affected by our pricing in the overall demand situation.

Our next question comes from Akshay Jagdale of KeyBanc.

This is Adam Joseph in for Akshay. George, you talked on the last call that how consumers were buying much more probably at the beginning of every month and at the end of the month owing to their financial problems and that this buying behavior is broadening or was broadening. What patterns, if any, did you see in the second quarter?

It's amazing at midnight that the first of the month, the day the checks come out or other economic thing comes to a lot of people, the check is at the bank and you go shopping at the end of the month. So that tells me there is tremendous pressure on the consumer for the tail-end of the month. They are just waiting for that check to be downloaded into the bank. So first of month you still see a significant uptake. And the worst is when you have a five-week month. You're not close to what the first of the month is. In fresh baking business, that makes it even tougher, because you still have a space to take care of, you're still trying to take care of the marketplace. So you have to get smarter and smarter on how we distribute our product toward the tail-end of the month and manage that category versus the first of the month.

In terms of price increases, to what extent do you think higher prices are contributing to the categories' ongoing volume weakness and what if anything can you do to prevent continued volume decline?

You're seeing heavy promotions obviously, but we did see heavy promotions in the second quarter.

I think higher prices did impact volume. But again, our confidence and our strength is really in those core items. There is still a very good value in bread and buns. And in terms of fit in the household, it's still a very much of a routine purchase. As long as we keep our brand strong and our product quality is extremely high and differentiated versus our competition, we should be to handle the price increases as they come.

On a dollar basis, what was your input cost basket up in the first and roughly what do you expect it to be up in the second half?

We haven't really given the dollar magnitude. The full year, it was about 8% to 10%. The first quarter was down roughly 2% to 3%. The second quarter was up 8%. So does that help you get there?

Your next question comes from Tim Ramey of D.A. Davidson & Company. Tim Ramey - D.A. Davidson & Company: Are you preserving volume and growing the basic business or are you doing kind of like what Frito-Lay did last quarter. You're kind of somewhere in the middle, and I don't totally understand that strategy. I guess historically I would think of Flowers as being more kind of we have to price to maintain market share and maintain our volumes. Can you talk to that question a little bit?

Tim, I will. There is always a question in judgment. And I think we've displayed over time that we do use the right judgment. I've to say that over time if you look at our market share, we have protected and our market share is up slightly. As you know, in this business, there are big volumes. So you don't two, three points in any given time. It takes more of a percent. Bug again, if you look five years or 10 years, you would see that we have increased our market share. Our main point is we will always try to grow at or above the category. If the category is down 3% in units, we try to beat that. That's more of a guiding light to us and fewer volumes. If the volume is not there, if the volume is truly down, sometimes that's hard to predict how to beat that number. So that's our philosophy and I think it's proven well for us over time. There might be a quarter here or there that it didn't work out, but we get it right. And that's in my closing remarks and something is not right, we write this up, whatever it takes. And I'd say that about protecting our business and growing our business. Tim Ramey - D.A. Davidson & Company: If I can just follow-up on your comments on the economic context on your markets, if we were having this discussion 10 years ago, I think we both would have said bread is the ultimate form of proof of consumers' defensive stable business. And for some, it's going to go down and it's a faulty grill in a weak economy. Now you are telling that this is overly-sensitive to the economy and immediate more upscale things that people can do with the money. How do you think about that?

I hope I didn't give that complete impression. All I was pointing to was our similar trend in '08. We are seeing the similar trend now. We didn't just look at the bakery category. We went back and looked at all of the alternatives for people to purchase that supermarket. And we didn't find any great signals that people traded all for bread to buy something else. We looked at numerous, numerous categories in examining this. I always believe that in this baking category, you won't see huge gains, but you'll also not see huge losses either. But I think it is a stable business. I think there are times and we did see it back in the low-carb issues. There are times when you do see some reduction. But it always comes back. And I have full confidence we'll come back. I do see people feeding out of different restaurants or they go into fast foods. And as much as they did, I do feel restaurants are doing good. So it is a different economy. And depending on where you're at, I believe that people are wasting less than ever, because they are still stretched. Less ways does mean you have sometimes less volume, because less goes out the door. But at the end of the day, Flowers Foods will find the way to increase its volume and its presence in the market as we continue to expand that five-year horizon.

Our next question comes from Bill Chappell of SunTrust Robinson Humphrey Incorporated.

On the CapEx number, I guess you fine-tuned it more to the $90 million versus the $90 million to $100 million. I didn't know if that was just fine-tuning or is that kind of selective of the acquisition opportunities you see out there, or how I should look at that?

Really what it is, Bill, is kind of a combination. We look at some projects that Tasty Baking had on schedule, a few minor projects that finish out of a couple of lines at new plant. And then we looked at our projections for future production capacity and markets where we may lead some and then looking at M&A activities and what's going on there and looking at the opportunities kind of across the whole, we pulled back some, put a few projects on hold. So it's kind of a combination of both.

I guess with all that in mind, would you expect CapEx to be up in 2012 versus 2011?

No, I think it will come back, and it'd really depend on the M&A activity. We will continue to invest in projects that give us better quality and reduce our costs. Those would always be front of mind. But I mentioned that earlier on all that we're doing this year and previous years. But I think it has to do a lot with the M&A activity that we already had and looking to some that might come. As Steve said, we just slowed down, but we have been busy the last several years on capital investments. We will next quarter talk more about 2012, but it depends on so much on what happens. And that's not trying to be vague, but it does.

On the Sara Lee refrigerated dough business, is that something you would have been interested in or are you really focused more on fresh baking?

There are still a lot of opportunities in fresh bread baking and cake business. That is the focus. It goes back to what I talked about earlier, so much M&A activity. We are not experts in that type of business, even though you can make the case well. It's the same ingredients. It's a slightly different process. But at this point in time in our career and stage of the company, we just don't want to get sidetracked with something that's not exactly non-core of the business. In fact, most people who are divesting business are trying to get more core like we've been core for a while.

Just trying to understand kind of the price versus promotion. If I'm looking at pricing year-over-year being up, is that more indicative of list prices or just that promotion really has been eased off within the category? I mean do you expect anything near term as I assume the Bimbo-Sara Lee transaction is consummated at some point in the future?

I think if you look at everyday our regular prices, that is really reflective of $0.13 on a national basis with the category. So the everyday prices are up. Promotional activity continues to be high, but the price points of those promotions are gradually moving up. So an item, looking in the rearview mirror, may have entered a nice price in the future, it may be higher than that based on commodity costs are having to the passed through. And we see that really across the entire category.

In terms of just kind of the merger and how that might change the landscape?

Of course, Bimbo and Sara Lee, there is no news at this point. As far as changing the landscape, I think that remains to be seen. There is still a lot of variables that could influence the category based on that transaction, and I don't think we need to speculate here.

Our next question comes from Ann Gurkin of Davenport.

Regarding the pricing you talked about in the second half, is that in the marketplace or are those situations that you're still discussing with customers?

I think most of it has been announced.

Most of it is either going in as we speak or very soon.

Regarding foodservice, some companies have talked about foodservice demand dropping off after Mother's Day, and I was just curious if you saw a similar reaction in your business?

Overall, our foodservice year-to-date is relatively flat. However, looking at recent weeks, we are showing an uptick in our foodservice business, but it's primarily because we're acquiring new foodservice business. It's not reflective of an increase in our base customers. It's really being driven by new business.

George, I'd love '12 guidance. Do you want to give us that?

Got the money, but I can't say yet.

Our next question comes from Amit Sharma of BMO Capital Markets.

George, I just wanted to focus on the snack cake portfolio. I mean relative to 2008, it's a much bigger portfolio, especially if you include Tastykake. Now, is that one of the business more impacted by the economic environment, given that it's more impulse discretionary spending, and do you see more evidence for price elasticity in that portfolio versus fresh bread?

When I talked about the '08 timeframe versus now, that strictly had to do with the bread and bun category, loaf bread in particular. As to the economics in the overall cake business, I'd say that always the summer is the slowest time of the year for the cake business, as always a big back-to-school time horizon, and that's back around to the May timeframe is probably the best time for the cake business. As you know, a lot of times people who are not going to the supermarket just buy cake. To me, it's a lot about impulse, being in the right location, the displays, great product, looks good, good quality, the right price is for me what drives the cake business. So I've not seen any big fall-off because of the pricing and yet we got a lot to learn in this category.

Really just to add to that, one reason we're excited about that Tastykake brand is not only is the brand very strong from a consumer standpoint, but Tastykake has some very unique items that are inherent with the brand that we feel long-term can position us to gain more pricing over time.

The Q shows that white bread sales declined again. Can you give us some idea of what the magnitude of the decline is? Is it mostly in line with what we're seeing in the previous quarters or is it more than that? As white bread sales continue to decline, what kind of impact it has on your gross margin? Can you just provide some color on that please?

As you know, the white bread category is in decline. We speculate on the reasons why. But I'd say looking back at this past quarter, our rate of decline in the white bread category has been less than the category in general. We're working hard to try to grow our white bread business. It is important to our gross margin. Our goal is to beat the category trend. And at the same time, if consumers are moving from white bread to other categories, it's important that we capture those sales through our Nature's Own brand in those other categories, whether they might be soft variety or specialty white wheat breads. But looking at the past quarter, our white bread trend is slightly better than the category trend, but the category does continue to trend down on white bread.

Was 2Q volume impacted by any tornadoes? You had tornadoes and flood in some of your territories. Was there any material impact of those weather events?

It was devastating to the people involved, especially in Tuscaloosa and Birmingham and then over into Missouri. We lost electricity in our Tuscaloosa plant, but because of our cyclical baking, we were able to get product from other plants and get it into the marketplace. So it is not a measurable financial hit to the company because of that.

There are no further questions at this time. I would now like to turn the floor back to management for closing comments.

I thank all of you for your continued interest in the company. We feel great about our position and the business model that we have in place. And with the team we have, we just march forward and continue to do the great job as we have always done and continue to reward our shareholders. Thank you.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation.