Heeth Varnedoe IV
FLOWERS FOODSAbout Heeth Varnedoe IV
Heeth Varnedoe IV is President and Chief Operating Officer of Flowers Foods (FLO), appointed President and COO effective September 1, 2023 after serving as COO since January 1, 2023; prior roles include Chief Transformation Officer, SVP DSD Regions/Sales, and Phoenix bakery President, with earlier tenure from 1990–2000 and rejoining in 2012 . He is age 58 as disclosed in the FY 2024 10-K executive officer section . Company performance drivers used for his incentive plans include adjusted EBITDA, net revenue (AIP), and long-term ROIC and TSR performance shares; in FY 2024 the company achieved adjusted EBITDA of $539M vs $541M target and net revenue of $5.10B vs $5.15B target, resulting in a 96.6% payout under the AIP . FY 2023 financial highlights included sales of $5.091B, adjusted EBITDA of $501.7M, and the AIP paid at 56.5% of target based on adjusted EBITDA achievement of 93.8% of goal .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Flowers Foods | President & Chief Operating Officer | Sep 2023–present | Expanded responsibilities over operations and growth; promoted based on transformative initiatives . |
| Flowers Foods | Chief Operating Officer | Jan 2023–Aug 2023 | Led enterprise operations; base salary adjusted with promotion . |
| Flowers Foods | Chief Transformation Officer | Dec 2020–Jan 2023 | Oversaw a number of transformative initiatives (company characterization) . |
| Flowers Foods | SVP, DSD Regions/Sales | Aug 2017–Dec 2020 | Led direct-store-delivery regional sales . |
| Flowers Foods | President, Phoenix bakery | Jan 2016–Aug 2017 | Operational leadership of Phoenix bakery . |
| Flowers Foods | Various roles | 1990–2000 | Early career roles before departing for other business interests . |
| Flowers Foods | Rejoined; Director DSD cake sales; VP National Accounts | 2012–2015 | National accounts and DSD category leadership after rejoining . |
External Roles
No external public company directorships or outside roles for Heeth Varnedoe IV are disclosed in company filings reviewed.
Fixed Compensation
| Metric | FY 2023 | FY 2024 |
|---|---|---|
| Base Salary Rate ($) | $700,000 | $700,000 |
| Target Annual Incentive (% of base salary) | 80% (increased from 60% upon promotion) | 80% |
Notes:
- Mr. Varnedoe’s 2023 base salary initially set at $500,000 effective January 1, 2023 upon promotion to COO, later increased to $700,000 effective September 1, 2023 with appointment to President .
Fiscal 2023 Nonqualified Deferred Compensation (EDCP):
| Item | Amount ($) |
|---|---|
| Employer contributions (registrant) | 22,422 |
| Above-market interest (SCT component) | 1,105 |
| Aggregate balance at 12/30/2023 | 78,421 |
Fiscal 2024 Nonqualified Deferred Compensation (EDCP):
| Item | Amount ($) |
|---|---|
| Executive contributions | 70,000 |
| Employer contributions (registrant) | 46,350 |
| Above-market interest (SCT component) | 1,738 |
| Aggregate balance at 12/30/2024 | 201,698 |
Performance Compensation
Annual Cash Incentive Plan (AIP) – FY 2024:
| Performance Measure | Weighting | Target | Actual | Payout % | Weighted Payout % |
|---|---|---|---|---|---|
| Adjusted EBITDA | 70% | $541M | $539M | 97.9% | 68.53% |
| Net Revenue | 30% | $5.15B | $5.10B | 93.4% | 28.02% |
| Final Payout Percentage | — | — | — | — | 96.6% |
Program design changes (2024): AIP metrics shifted to adjusted EBITDA (70%) and net revenue (30%) with potential ±20% individual performance adjustment; committee made no individual adjustments for 2024 .
Annual Cash Incentive Plan (AIP) – FY 2023:
| Performance Measure | Target Goal | Actual | % of Goal Achieved | Payout of Target |
|---|---|---|---|---|
| Adjusted EBITDA | $535,000,000 | $501,738,000 | 93.8% | 56.5% |
Long-Term Incentives – FY 2023 Performance Shares (granted Jan 2023):
| Award Type | Target Shares | Vesting Timing |
|---|---|---|
| ROIC-based Performance Shares | 14,860 | Vests after FY 2025 10-K is filed, no later than March 13, 2026 . |
| TSR-based Performance Shares | 14,860 | Same as above . |
Long-Term Incentives – FY 2024 Equity Program (mix and target value):
| Item | Value/Terms |
|---|---|
| Total target dollar value (Heeth Varnedoe IV) | $1,295,000 |
| Equity award mix | 30% RSUs; 70% Performance Shares (50% ROIC, 50% TSR) |
| Retirement definition update | Must be at least 55 years old and age + years of service ≥ 65; generally requires 6 months’ notice for retirement treatment |
Equity Ownership & Alignment
| As-of Date | Beneficial Ownership (shares) | Percent of Class |
|---|---|---|
| March 6, 2024 | 51,144 | * (less than 1%) |
| March 6, 2025 | 52,968 | * (less than 1%) |
- Executive stock ownership guideline for President & COO: 3x base salary; executives must retain at least 75% of net shares until guideline met; each Named Executive is in compliance, on track, or has a committee waiver .
- Anti-hedging policy applies to executives and outside directors; robust stock ownership guidelines in place .
- Double-trigger equity vesting upon a change of control is standard under the Omnibus Plan .
- Options: Company discloses “currently there are none” outstanding unvested stock options for Named Executives, implying no stock option overhang for Mr. Varnedoe .
Employment Terms
Change-of-Control Plan (structure):
- Severance multiple: 2x base salary plus target annual cash incentive for Mr. Varnedoe; CEO at 3x .
- Benefits: Lump sum equal to 18 months of medical premiums and up to $25,000 outplacement; “best net” excise tax cutback; no excise tax gross-up .
- Double-trigger: Equity awards vest upon a qualifying termination in connection with a change of control; ROIC and TSR performance shares generally vest at target (TSR may use actual if ≥12 months elapsed) .
- Policy cap: Without shareholder approval, cash severance may not exceed 2.99x salary + target bonus .
Estimated Potential Payments (Heeth Varnedoe IV):
| Scenario (as of FY end) | Cash Severance ($) | Equity Vesting ($) | Other Benefits ($) | Total ($) |
|---|---|---|---|---|
| Qualifying termination in connection with CoC (Dec 27, 2024) | 2,520,000 | 1,738,431 | 51,367 | 4,309,799 |
| Qualifying termination in connection with CoC (Dec 29, 2023) | 2,520,000 | 1,133,212 | 54,153 | 3,707,365 |
Compensation Structure Analysis
- Shift in LTI mix: 2024 program added time-based RSUs (30%) vs prior 100% PSUs, lowering downside risk and increasing retention value; performance shares remain majority (70%) split between ROIC and TSR .
- AIP metric evolution: 2024 broadened to adjusted EBITDA (70%) and net revenue (30%) with potential individual adjustments (none applied in 2024), improving line-of-sight vs 2023’s EBITDA-only design .
- Target LTI escalation: Mr. Varnedoe’s 2024 LTI target increased 40% vs 2023, reflecting role expansion and market alignment .
- Governance features: Multiple clawback policies including a 2023 recoupment policy complying with NYSE/SEC, double-trigger equity vesting, and no employment agreements or excise tax gross-ups .
Performance & Track Record
- FY 2024 AIP outcome: Adjusted EBITDA $539M vs $541M target and net revenue $5.10B vs $5.15B target yielded a 96.6% payout, indicating near-target operational performance under Mr. Varnedoe’s COO oversight .
- FY 2023 context: Sales $5.091B, adjusted EBITDA $501.7M; AIP paid 56.5% of target tied to adjusted EBITDA achieving 93.8% of goal, amidst enterprise transformation and leadership transitions .
- Leadership impact: Company acknowledged Mr. Varnedoe’s oversight of transformative initiatives contributing to his promotion to President & COO .
Board Governance and Say-on-Pay
- Compensation and Human Capital Committee: 2024 members included Ms. Lewis, Mr. Casey, Mr. Chubb, and Dr. Stith; independent consultant engaged; no interlocks reported .
- Say-on-Pay support: >98% approval at 2023 and 2024 annual meetings, indicating strong shareholder endorsement of executive compensation design .
Investment Implications
- Alignment and retention: Majority performance-based LTI with ROIC/TSR and AIP tied to EBITDA and revenue suggests solid pay-for-performance alignment; the introduction of RSUs modestly increases guaranteed value and retention, reducing downside risk for the executive .
- Upcoming vesting catalyst: 2023 PSUs vest after the FY 2025 10-K filing (no later than March 13, 2026), creating a potential supply event; executives must retain 75% of net shares until guidelines are met, which may mitigate immediate selling pressure .
- Change-of-control economics: A moderate 2x salary+target bonus severance with double-trigger equity and no excise gross-up supports governance-friendly structures, limiting transaction-related payout inflation risk .
- Ownership: Beneficial ownership is modest (<1%), but guidelines require 3x salary and the company reports compliance/on-track status, supporting longer-term alignment through required ownership and retention thresholds .