e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended April 24, 2010
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-16247
FLOWERS FOODS, INC.
(Exact name of registrant as specified in its charter)
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GEORGIA
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58-2582379 |
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(State or other jurisdiction
of incorporation or organization)
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(I.R.S. Employer Identification
Number) |
1919 FLOWERS CIRCLE, THOMASVILLE, GEORGIA
(Address of principal executive offices)
229/226-9110
(Registrants telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ |
Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
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TITLE OF EACH CLASS
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OUTSTANDING AT MAY 28, 2010 |
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Common Stock, $.01 par value with
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91,744,247 |
Preferred Share Purchase Rights |
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FLOWERS FOODS, INC.
INDEX
2
Forward-Looking Statements
Statements contained in this filing and certain other written or oral statements made from time to
time by the company and its representatives that are not historical facts are forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking
statements relate to current expectations regarding our future financial condition and results of
operations and are often identified by the use of words and phrases such as anticipate,
believe, continue, could, estimate, expect, intend, may, plan, predict,
project, should, will, would, is likely to, is expected to or will continue, or the
negative of these terms or other comparable terminology. These forward-looking statements are based
upon assumptions we believe are reasonable.
Forward-looking statements are based on current information and are subject to risks and
uncertainties that could cause our actual results to differ materially from those projected.
Certain factors that may cause actual results, performance, and achievements to differ materially
from those projected are discussed in this report and may include, but are not limited to:
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unexpected changes in any of the following: (i) general economic and business conditions; (ii)
the competitive setting in which we operate, including, advertising or promotional strategies by us
or our competitors, as well as changes in consumer demand; (iii) interest rates and other terms
available to us on our borrowings; (iv) energy and raw materials costs and availability and hedging
counter-party risks; (v) relationships with our employees, independent distributors and third party
service providers; and (vi) laws and regulations (including environmental and health-related
issues), accounting standards or tax rates in the markets in which we
operate; |
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the loss or financial instability of any significant customer(s); |
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our ability to execute our business strategy, which may involve integration of recent
acquisitions or the acquisition or disposition of assets at presently
targeted values; |
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our ability to operate existing, and any new, manufacturing lines according to schedule; |
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the level of success we achieve in developing and introducing new products and entering new
markets; |
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changes in consumer behavior, trends and preferences, including health and whole grain trends,
and the movement toward more inexpensive store-branded products; |
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our ability to implement new technology as required; |
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the credit and business risks associated with our independent distributors and customers which
operate in the highly competitive retail food and foodservice industries, including the amount of
consolidation in these industries; |
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changes in pricing, customer and consumer reaction to pricing actions, and the pricing
environment among competitors within the industry; |
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any business disruptions due to political instability, armed hostilities, incidents of terrorism,
natural disasters or the responses to or repercussions from any of these or similar events or
conditions and our ability to insure against such events; and |
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regulation and legislation related to climate change that could affect our ability to procure our
commodity needs or that necessitate additional unplanned capital expenditures. |
The foregoing list of important factors does not include all such factors, nor necessarily present
them in order of importance. In addition, you should consult other disclosures made by the company
(such as in our other filings with the Securities and Exchange Commission (SEC) or in company
press releases) for other factors that may cause actual results to differ materially from those
projected by the company. Please refer to Part I, Item 1A., Risk Factors, of the companys Form
10-K filed on March 3, 2010 for additional information regarding factors that could affect the
companys results of operations, financial condition and liquidity.
We caution you not to place undue reliance on forward-looking statements, as they speak only as of
the date made and are inherently uncertain. The company undertakes no obligation to publicly revise
or update such statements, except as required by law. You are advised, however, to consult any
further public disclosures by the company (such as in our filings with the SEC or in company press
releases) on related subjects.
3
FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
(Unaudited)
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APRIL 24, 2010 |
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JANUARY 2, 2010 |
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ASSETS |
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Current Assets: |
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|
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Cash and cash equivalents |
|
$ |
8,421 |
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$ |
18,948 |
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|
|
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|
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Accounts and notes receivable, net of allowances of $566 and $469, respectively |
|
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180,406 |
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|
178,708 |
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|
|
|
|
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Inventories, net: |
|
|
|
|
|
|
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Raw materials |
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20,407 |
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|
20,952 |
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Packaging materials |
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12,244 |
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|
12,065 |
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Finished goods |
|
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31,026 |
|
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|
27,979 |
|
|
|
|
|
|
|
|
|
|
|
63,677 |
|
|
|
60,996 |
|
|
|
|
|
|
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Spare parts and supplies |
|
|
36,198 |
|
|
|
35,437 |
|
|
|
|
|
|
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|
Deferred taxes |
|
|
19,441 |
|
|
|
20,714 |
|
|
|
|
|
|
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Other |
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|
16,775 |
|
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|
24,152 |
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|
|
|
|
|
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Total current assets |
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324,918 |
|
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|
338,955 |
|
|
|
|
|
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Property, Plant and Equipment, net of accumulated depreciation of $649,525 and
$652,587, respectively |
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589,930 |
|
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602,576 |
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|
|
|
|
|
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Notes Receivable |
|
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92,414 |
|
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|
94,457 |
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Assets Held for Sale Distributor Routes |
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8,611 |
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6,535 |
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|
|
|
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Other Assets |
|
|
6,191 |
|
|
|
4,157 |
|
|
|
|
|
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Goodwill |
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200,153 |
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|
201,682 |
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|
|
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Other Intangible Assets, net |
|
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101,219 |
|
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|
103,080 |
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Total assets |
|
$ |
1,323,436 |
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$ |
1,351,442 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current Liabilities: |
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Current maturities of long-term debt and capital leases |
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$ |
24,398 |
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$ |
25,763 |
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Accounts payable |
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101,341 |
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|
92,692 |
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Other accrued liabilities |
|
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100,834 |
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|
103,317 |
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|
|
|
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Total current liabilities |
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226,573 |
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|
221,772 |
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|
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Long-Term Debt and Capital Leases |
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173,559 |
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225,905 |
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|
|
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Other Liabilities: |
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|
|
|
|
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Post-retirement/post-employment obligations |
|
|
67,660 |
|
|
|
68,140 |
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Deferred taxes |
|
|
63,552 |
|
|
|
63,748 |
|
Other |
|
|
44,043 |
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43,851 |
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|
|
|
|
|
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Total other liabilities |
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175,255 |
|
|
|
175,739 |
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|
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Flowers Foods, Inc. Stockholders Equity: |
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Preferred stock $100 par value, 100,000 authorized and none issued |
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Preferred stock $.01 par value, 900,000 authorized and none issued |
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Common stock $.01 par value, 500,000,000 authorized shares, 101,659,924
shares and 101,659,924 shares issued, respectively |
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1,017 |
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1,017 |
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Treasury stock 9,930,003 shares and 10,200,387 shares, respectively |
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(184,715 |
) |
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(189,250 |
) |
Capital in excess of par value |
|
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531,747 |
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|
531,326 |
|
Retained earnings |
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|
462,191 |
|
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|
437,524 |
|
Accumulated other comprehensive loss |
|
|
(62,191 |
) |
|
|
(64,672 |
) |
|
|
|
|
|
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|
Total Flowers Foods, Inc. stockholders equity |
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|
748,049 |
|
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|
715,945 |
|
Noncontrolling interest |
|
|
|
|
|
|
12,081 |
|
|
|
|
|
|
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Total stockholders equity |
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|
748,049 |
|
|
|
728,026 |
|
|
|
|
|
|
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|
Total liabilities and stockholders equity |
|
$ |
1,323,436 |
|
|
$ |
1,351,442 |
|
|
|
|
|
|
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|
(See Accompanying Notes to Condensed Consolidated Financial Statements)
4
FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
(Unaudited)
|
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|
|
|
|
|
|
|
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|
FOR THE SIXTEEN WEEKS ENDED |
|
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APRIL 24, 2010 |
|
|
APRIL 25, 2009 |
|
|
|
|
|
|
|
|
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|
Sales |
|
$ |
795,026 |
|
|
$ |
807,007 |
|
Materials, supplies, labor and other production costs (exclusive
of depreciation and amortization shown separately below) |
|
|
414,798 |
|
|
|
429,462 |
|
Selling, distribution and administrative expenses |
|
|
292,551 |
|
|
|
294,022 |
|
Depreciation and amortization |
|
|
25,637 |
|
|
|
24,277 |
|
|
|
|
|
|
|
|
Income from operations |
|
|
62,040 |
|
|
|
59,246 |
|
Interest expense |
|
|
(2,784 |
) |
|
|
(3,595 |
) |
Interest income |
|
|
3,915 |
|
|
|
4,054 |
|
|
|
|
|
|
|
|
Income before income taxes |
|
|
63,171 |
|
|
|
59,705 |
|
Income tax expense |
|
|
22,484 |
|
|
|
21,872 |
|
|
|
|
|
|
|
|
Net income |
|
|
40,687 |
|
|
|
37,833 |
|
Less: net income attributable to noncontrolling interest |
|
|
|
|
|
|
(452 |
) |
|
|
|
|
|
|
|
Net income attributable to Flowers Foods, Inc. |
|
$ |
40,687 |
|
|
$ |
37,381 |
|
|
|
|
|
|
|
|
Net Income Per Common Share: |
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
Net income attributable to Flowers Foods, Inc. common shareholders |
|
$ |
0.44 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
91,517 |
|
|
|
92,723 |
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
Net income attributable to Flowers Foods, Inc. common shareholders |
|
$ |
0.44 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
92,204 |
|
|
|
93,238 |
|
|
|
|
|
|
|
|
Cash dividends paid per common share |
|
$ |
0.175 |
|
|
$ |
0.150 |
|
|
|
|
|
|
|
|
(See Accompanying Notes to Condensed Consolidated Financial Statements)
5
FLOWERS FOODS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME
(Amounts in thousands, except share data)
(Unaudited)
|
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|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Common Stock |
|
|
in |
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|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Number of |
|
|
|
|
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|
Excess |
|
|
|
|
|
|
Other |
|
|
Treasury Stock |
|
|
|
|
|
|
|
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Comprehensive |
|
|
shares |
|
|
Par |
|
|
of Par |
|
|
Retained |
|
|
Comprehensive |
|
|
Number of |
|
|
|
|
|
|
Noncontrolling |
|
|
|
|
|
|
Income (Loss) |
|
|
issued |
|
|
Value |
|
|
Value |
|
|
Earnings |
|
|
Income (Loss) |
|
|
shares |
|
|
Cost |
|
|
interest |
|
|
Total |
|
Balances at January 2, 2010 |
|
|
|
|
|
|
101,659,924 |
|
|
$ |
1,017 |
|
|
$ |
531,326 |
|
|
$ |
437,524 |
|
|
$ |
(64,672 |
) |
|
|
(10,200,387 |
) |
|
$ |
(189,250 |
) |
|
$ |
12,081 |
|
|
$ |
728,026 |
|
Deconsolidation of Variable
Interest Entity (Note 9) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,081 |
) |
|
|
(12,081 |
) |
Net income |
|
$ |
40,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,687 |
|
Derivative instruments |
|
|
2,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,096 |
|
Amortization of prior service credits |
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(19 |
) |
Amortization of actuarial loss |
|
|
404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
404 |
|
|
|
|
|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
43,168 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
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|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86 |
|
|
|
|
|
|
|
|
|
|
|
131,475 |
|
|
|
2,445 |
|
|
|
|
|
|
|
2,531 |
|
Deferred stock issuance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(103 |
) |
|
|
|
|
|
|
|
|
|
|
5,540 |
|
|
|
103 |
|
|
|
|
|
|
|
|
|
Issuance of restricted stock award |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,102 |
) |
|
|
|
|
|
|
|
|
|
|
220,640 |
|
|
|
4,102 |
|
|
|
|
|
|
|
|
|
Amortization of share-based
payment compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,387 |
|
Tax benefits related to share
based payment awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153 |
|
Stock repurchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(87,271 |
) |
|
|
(2,115 |
) |
|
|
|
|
|
|
(2,115 |
) |
Dividends paid $0.175 per
common share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(16,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at April 24, 2010 |
|
|
|
|
|
|
101,659,924 |
|
|
$ |
1,017 |
|
|
$ |
531,747 |
|
|
$ |
462,191 |
|
|
$ |
(62,191 |
) |
|
|
(9,930,003 |
) |
|
$ |
(184,715 |
) |
|
$ |
|
|
|
$ |
748,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(See Accompanying Notes to Condensed Consolidated Financial Statements)
6
FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 24, 2010 |
|
|
APRIL 25, 2009 |
|
CASH FLOWS PROVIDED BY (DISBURSED FOR) OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
40,687 |
|
|
$ |
37,833 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
4,753 |
|
|
|
3,527 |
|
Loss reclassified from accumulated other comprehensive income to net income |
|
|
11,525 |
|
|
|
9,144 |
|
Depreciation and amortization |
|
|
25,637 |
|
|
|
24,277 |
|
Deferred income taxes |
|
|
(476 |
) |
|
|
(1,723 |
) |
Provision for inventory obsolescence |
|
|
358 |
|
|
|
325 |
|
Allowances for accounts receivable |
|
|
564 |
|
|
|
1,614 |
|
Pension and postretirement plans expense |
|
|
599 |
|
|
|
1,573 |
|
Other |
|
|
(61 |
) |
|
|
76 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and notes receivable, net |
|
|
(2,468 |
) |
|
|
(2,994 |
) |
Pension contributions |
|
|
(187 |
) |
|
|
(225 |
) |
Inventories, net |
|
|
(3,350 |
) |
|
|
(8,189 |
) |
Other assets |
|
|
3,557 |
|
|
|
3,951 |
|
Accounts payable and other accrued liabilities |
|
|
1,411 |
|
|
|
(10,848 |
) |
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
|
82,549 |
|
|
|
58,341 |
|
|
|
|
|
|
|
|
CASH FLOWS PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(29,125 |
) |
|
|
(14,889 |
) |
Proceeds from sale of property, plant and equipment |
|
|
335 |
|
|
|
552 |
|
Issuance of notes receivable |
|
|
(1,880 |
) |
|
|
(3,604 |
) |
Proceeds from notes receivable |
|
|
3,806 |
|
|
|
3,645 |
|
Deconsolidation of variable interest entity (See Note 9) |
|
|
(8,804 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
144 |
|
|
|
|
|
|
|
|
NET CASH DISBURSED FOR INVESTING ACTIVITIES |
|
|
(35,668 |
) |
|
|
(14,152 |
) |
|
|
|
|
|
|
|
CASH FLOWS PROVIDED BY (DISBURSED FOR) FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(16,020 |
) |
|
|
(13,960 |
) |
Exercise of stock options |
|
|
2,531 |
|
|
|
1,397 |
|
Income tax benefit related to stock awards |
|
|
191 |
|
|
|
1,382 |
|
Stock repurchases |
|
|
(2,115 |
) |
|
|
(21,616 |
) |
Change in book overdraft |
|
|
(2,698 |
) |
|
|
1,440 |
|
Proceeds from debt borrowings |
|
|
213,000 |
|
|
|
243,500 |
|
Debt and capital lease obligation payments |
|
|
(252,297 |
) |
|
|
(257,779 |
) |
|
|
|
|
|
|
|
NET CASH DISBURSED FOR FINANCING ACTIVITIES |
|
|
(57,408 |
) |
|
|
(45,636 |
) |
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(10,527 |
) |
|
|
(1,447 |
) |
Cash and cash equivalents at beginning of period |
|
|
18,948 |
|
|
|
19,964 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
8,421 |
|
|
$ |
18,517 |
|
|
|
|
|
|
|
|
(See Accompanying Notes to Condensed Consolidated Financial Statements)
7
FLOWERS FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
INTERIM FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated financial
statements of Flowers Foods, Inc. (the company) have been prepared by the companys management in
accordance with generally accepted accounting principles (GAAP) for interim financial information
and applicable rules and regulations of the Securities Exchange Act of 1934, as amended.
Accordingly, they do not include all of the information and footnotes required by generally
accepted accounting principles for annual financial statements. In the opinion of management, the
unaudited condensed consolidated financial statements included herein contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly the companys financial
position, the results of its operations and its cash flows. The results of operations for the
sixteen week periods ended April 24, 2010 and April 25, 2009 are not necessarily indicative of the
results to be expected for a full year. The balance sheet at January 2, 2010 has been derived from
the audited financial statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete financial statements.
These financial statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the companys Annual Report on Form 10-K for the fiscal
year ended January 2, 2010.
ESTIMATES The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates. The
company believes the following critical accounting estimates affect its more significant judgments
and estimates used in the preparation of its consolidated financial statements: revenue
recognition, derivative instruments, valuation of long-lived assets, goodwill and other
intangibles, self-insurance reserves, income tax expense and accruals and pension obligations.
These estimates are summarized in the companys Annual Report on Form 10-K for the fiscal year
ended January 2, 2010.
REPORTING PERIODS The company operates on a 52-53 week fiscal year ending the Saturday nearest
December 31. Fiscal 2010 consists of 52 weeks, with the companys quarterly reporting periods as
follows: first quarter ended April 24, 2010 (sixteen weeks), second quarter ending July 17, 2010
(twelve weeks), third quarter ending October 9, 2010 (twelve weeks) and fourth quarter ending
January 1, 2011 (twelve weeks).
SEGMENTS The company consists of two business segments: direct-store-delivery (DSD) and
warehouse delivery. The DSD segment focuses on producing and marketing bakery products to U.S.
customers in the Southeast, Mid-Atlantic, and Southwest as well as select markets in California and
Nevada primarily through its DSD system. The warehouse delivery segment produces snack cakes for
sale to retail, vending and co-pack customers as well as frozen bread, rolls and buns for sale to
retail and foodservice customers primarily through warehouse distribution.
SIGNIFICANT CUSTOMER Following is the effect our largest customer, Wal-Mart/Sams Club, had on
the companys sales for the sixteen weeks ended April 24, 2010 and April 25, 2009. No other
customer accounted for 10% or more of the companys sales.
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
APRIL 24, 2010 |
|
APRIL 25, 2009 |
|
|
(Percent of Sales) |
DSD |
|
|
18.3 |
% |
|
|
17.8 |
% |
Warehouse delivery |
|
|
3.0 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
21.3 |
% |
|
|
20.8 |
% |
|
|
|
|
|
|
|
|
|
SIGNIFICANT ACCOUNTING POLICIES The following discussion provides the significant changes to our
critical accounting policies from those disclosed in our Form 10-K filed for the year ended January
2, 2010.
Variable Interest Entities. In 2009, the Financial Accounting Standards Board (FASB) amended
the consolidation principles associated with variable interest entities (VIE). The new
accounting guidance resulted in a change in our accounting policy effective January 3, 2010. The
new qualitative approach, generally, replaced the quantitative-based risks and rewards calculation
for determining which enterprise, if any, has a controlling financial interest in the VIE. The qualitative approach is focused on identifying which company has both
the power to direct the activities of a VIE that most significantly impact
8
the entitys economic performance and the obligation to absorb losses of the entity or the
right to receive benefits from the entity. As a result of this qualitative analysis, effective
January 3, 2010, the company is no longer required to consolidate the VIE that delivers a
significant portion of its fresh bakery products from the companys production facilities to
outlying distribution centers under a transportation agreement. The company has elected to
prospectively deconsolidate the VIE. Please see Note 9, Variable Interest Entity, for additional
disclosure.
2. COMPREHENSIVE INCOME
The companys total comprehensive income presently consists of net income, adjustments for our
derivative financial instruments accounted for as cash flow hedges, and various pension and other
postretirement benefit related items. Total comprehensive income attributable to Flowers Foods,
Inc., determined as net income adjusted by other comprehensive income and net income attributable
to noncontrolling interest, was $43.2 million and $44.6 million for the sixteen weeks ended April
24, 2010 and April 25, 2009, respectively.
During the sixteen weeks ended April 24, 2010, changes to accumulated other comprehensive
loss, net of income tax, were as follows (amounts in thousands):
|
|
|
|
|
|
|
2010 |
|
Accumulated other comprehensive loss, January 2, 2010 |
|
$ |
(64,672 |
) |
Derivative transactions: |
|
|
|
|
Net deferred (loss) on closed contracts, net of income tax of $(3,368) |
|
|
(5,381 |
) |
Reclassified to earnings, net of income tax of $4,437 |
|
|
7,088 |
|
Effective portion of change in fair value of hedging instruments, net of income tax of $243 |
|
|
389 |
|
Amortization of prior service credits, net of income tax of $(12) |
|
|
(19 |
) |
Amortization of actuarial loss, net of income tax of $253 |
|
|
404 |
|
|
|
|
|
Accumulated other comprehensive loss, April 24, 2010 |
|
$ |
(62,191 |
) |
|
|
|
|
3. GOODWILL AND OTHER INTANGIBLES
The changes in the carrying amount of goodwill for the sixteen weeks ended April 24, 2010, are
as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehouse |
|
|
|
|
|
|
DSD |
|
|
delivery |
|
|
Total |
|
Balance as of January 2, 2010 |
|
$ |
194,581 |
|
|
$ |
7,101 |
|
|
$ |
201,682 |
|
Adjustment for deconsolidation of VIE (Note 9) |
|
|
(1,529 |
) |
|
|
|
|
|
|
(1,529 |
) |
|
|
|
|
|
|
|
|
|
|
Balance as of April 24, 2010 |
|
$ |
193,052 |
|
|
$ |
7,101 |
|
|
$ |
200,153 |
|
|
|
|
|
|
|
|
|
|
|
As of April 24, 2010 and January 2, 2010, the company had the following amounts related to
amortizable intangible assets (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 24, 2010 |
|
|
January 2, 2010 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
Asset |
|
Cost |
|
|
Amortization |
|
|
Net Value |
|
|
Cost |
|
|
Amortization |
|
|
Net Value |
|
Trademarks |
|
$ |
35,268 |
|
|
$ |
3,619 |
|
|
$ |
31,649 |
|
|
$ |
35,268 |
|
|
$ |
3,144 |
|
|
$ |
32,124 |
|
Customer relationships |
|
|
75,434 |
|
|
|
10,950 |
|
|
|
64,484 |
|
|
|
75,434 |
|
|
|
9,738 |
|
|
|
65,696 |
|
Non-compete agreements |
|
|
1,874 |
|
|
|
1,322 |
|
|
|
552 |
|
|
|
1,874 |
|
|
|
1,309 |
|
|
|
565 |
|
Distributor relationships |
|
|
2,600 |
|
|
|
293 |
|
|
|
2,307 |
|
|
|
2,600 |
|
|
|
240 |
|
|
|
2,360 |
|
Supply agreement |
|
|
1,050 |
|
|
|
323 |
|
|
|
727 |
|
|
|
1,050 |
|
|
|
215 |
|
|
|
835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
116,226 |
|
|
$ |
16,507 |
|
|
$ |
99,719 |
|
|
$ |
116,226 |
|
|
$ |
14,646 |
|
|
$ |
101,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There is an additional $1.5 million indefinite life intangible asset separately identified
from goodwill.
Aggregate amortization expense for the sixteen weeks ending April 24, 2010 and April 25, 2009
was as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
Amortizable intangible assets expense |
|
$ |
1,861 |
|
|
$ |
1,714 |
|
Amortizable intangible liabilities (income) |
|
|
(14 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
1,847 |
|
|
$ |
1,700 |
|
|
|
|
|
|
|
|
9
Estimated amortization of intangibles for each of the next five years is as follows (amounts
in thousands):
|
|
|
|
|
|
|
Amortization of |
|
|
Intangibles |
Remainder of 2010 |
|
$ |
4,156 |
|
2011 |
|
$ |
5,948 |
|
2012 |
|
$ |
5,677 |
|
2013 |
|
$ |
5,488 |
|
2014 |
|
$ |
5,389 |
|
4. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2009, the FASB issued a staff position requiring fair value disclosures in both
interim as well as annual financial statements in order to provide more timely information about
the effects of current market conditions on financial instruments. The guidance was effective for
interim and annual periods ending after June 15, 2009. Upon adoption during the second quarter of
fiscal 2009, the implementation of this standard did not have a material impact on our consolidated
financial position and results of operations.
In May 2009, the FASB issued new guidance on subsequent events. The standard provides guidance
on managements assessment of subsequent events and incorporates this guidance into accounting
literature. The standard was effective prospectively for interim and annual periods ending after
June 15, 2009. See Note 16, Subsequent Events, for the required disclosures. In February 2010, the
FASB issued new guidance that amended certain recognition and disclosure requirements for
subsequent events. The guidance changed the requirement for public companies to report the date
through which subsequent events were reviewed. This guidance was effective at issuance. The
implementation of the standard and new guidance did not have a material impact on our consolidated
financial position and results of operations.
In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for
the consolidation of VIEs. The guidance affects the overall consolidation analysis and requires
enhanced disclosures on involvement with VIEs. The guidance is effective for fiscal years
beginning after November 15, 2009. Prior to January 3, 2010, we consolidated a VIE because we
determined the company was the primary beneficiary. Under the new guidance, we have determined that
the company no longer qualifies as the primary beneficiary and ceased consolidating the VIE
beginning in the first quarter of fiscal 2010. The company will continue to record certain of the
trucks and trailers the VIE uses for distributing our products as right to use leases. See Note 9,
Variable Interest Entity, for the required disclosures.
In June 2009, the FASB Accounting Standards Codification (Codification) was issued. The
Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities. The Codification was effective for financials statements issued for
interim and annual periods ending after September 15, 2009. The implementation of this standard did
not have a material impact on our consolidated financial position and results of operations.
5. ACQUISITIONS
On October 17, 2009, the company acquired 100% of the outstanding shares of capital stock of
Leos Foods, Inc. (Leos). Leos operates one tortilla facility in Ft. Worth, Texas and makes an
extensive line of flour and corn tortillas and tortilla chips that are sold to foodservice and
institutional customers nationwide. This acquisition is recorded in the companys warehouse
delivery segment and resulted in goodwill of $2.6 million, none of which is deductible for tax
purposes.
On May 15, 2009, the company acquired substantially all the assets of a bakery mix operation
in Cedar Rapids, Iowa. Based on the purchase price allocation, the fair value of the identifiable
assets acquired and liabilities assumed exceeded the fair value of the consideration paid. As a
result, we recognized a gain of $3.0 million in the second quarter of fiscal 2009, which is
included in the line item Gain on acquisition to derive income from operations in the
consolidated statement of income for the fifty-two weeks ended January 2, 2010. We believe the gain
on acquisition resulted from the sellers strategic intent to exit a non-core business operation.
This acquisition is recorded in the companys warehouse delivery segment.
10
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts receivable and short-term debt
approximates fair value because of the short-term maturity of the instruments. Notes receivable are
entered into in connection with the purchase of distributors territories by independent
distributors. These notes receivable are recorded in the consolidated balance sheet at carrying
value which represents the closest approximation of fair value. In accordance with GAAP, fair value
is defined as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. As a result, the
appropriate interest rate that should be used to estimate the fair value of the distributor notes
is the prevailing market rate at which similar loans would be made to distributors with similar
credit ratings and for the same maturities. However, the company utilizes approximately 3,500
independent distributors all with varied financial histories and credit risks. Considering the
diversity of credit risks among the independent distributors, the company has no method to
accurately determine a market interest rate to apply to the notes. The territories are generally
financed over ten years bearing an interest rate of 12% and the distributor notes are
collateralized by the independent distributors territories. The fair value of the companys
long-term debt at April 24, 2010 approximates the recorded value.
During the sixteen weeks ending April 24, 2010 and April 25, 2009, $3.9 million and $4.1
million, respectively, was recorded as interest income relating to the distributor notes. At April
24, 2010 and January 2, 2010, the carrying value of the distributor notes was $105.1 million and
$107.1 million, respectively, of which the current portion of $12.7 million and $12.6 million,
respectively, is recorded in accounts and notes receivable, net. At April 24, 2010 and January 2,
2010, the company has evaluated the collectibility of the distributor notes and determined that a
reserve is not necessary. Payments on these distributor notes are collected by the company weekly
in the distributor settlement process.
7. DERIVATIVE FINANCIAL INSTRUMENTS
In the first fiscal quarter of fiscal 2008, the company began measuring the fair value of its
derivative portfolio using the fair value as the price that would be received to sell an asset or
paid to transfer a liability in the principal market for that asset or liability. These
measurements are classified into a hierarchy by the inputs used to perform the fair value
calculation as follows:
Level 1: Fair value based on unadjusted quoted prices for identical assets or liabilities in
active markets
Level 2: Modeled fair value with model inputs that are all observable market values
Level 3: Modeled fair value with at least one model input that is not an observable market value
This change in measurement technique had no material impact on the reported value of our derivative
portfolio.
COMMODITY PRICE RISK
The company enters into commodity derivatives, designated as cash-flow hedges of existing or
future exposure to changes in commodity prices. The companys primary raw materials are flour,
sweeteners and shortening, along with pulp, paper and petroleum-based packaging products. Natural
gas, which is used as oven fuel, is also an important commodity input to production.
As of April 24, 2010, the companys hedge portfolio contained commodity derivatives with a
fair value of $(2.9) million, which is recorded in the following accounts with fair values measured
as indicated (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current |
|
$ |
1.3 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1.3 |
|
Other long-term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
1.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current |
|
|
(1.4 |
) |
|
|
(2.3 |
) |
|
|
|
|
|
|
(3.7 |
) |
Other long-term |
|
|
|
|
|
|
(0.5 |
) |
|
|
|
|
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(1.4 |
) |
|
|
(2.8 |
) |
|
|
|
|
|
|
(4.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair Value |
|
$ |
(0.1 |
) |
|
$ |
(2.8 |
) |
|
$ |
|
|
|
$ |
(2.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
11
The positions held in the portfolio are used to hedge economic exposure to changes in various
raw material prices and effectively fix the price, or limit increases in prices, for a period of
time extending into fiscal 2011. These instruments are designated as cash-flow hedges. The
effective portion of changes in fair value for these derivatives is recorded each period in other
comprehensive income (loss), and any ineffective portion of the change in fair value is recorded to
current period earnings in selling, distribution and administrative expenses. The company held no
commodity derivatives at April 24, 2010 or January 2, 2010 that did not qualify for hedge
accounting.
As of April 24, 2010, the balance in accumulated other comprehensive loss related to commodity
derivative transactions was $5.5 million. Of this total, approximately $1.7 million and $0.1
million were related to instruments expiring in 2010 and 2011, respectively, and $3.7 million was
related to deferred losses on cash flow hedge positions.
INTEREST RATE RISK
The company entered into interest rate swaps with notional amounts of $85.0 million, and $65.0
million, respectively, to fix the interest rate on the $150.0 million term loan secured on August
1, 2008 to fund the acquisitions of ButterKrust Bakery and Holsum Bakery, Inc. On October 27, 2008,
the company entered an interest rate swap with a notional amount of $50.0 million to fix the
interest rate on borrowings outstanding under the companys unsecured credit facility through
September 30, 2009.
The interest rate swap agreements result in the company paying or receiving the difference
between the fixed and floating rates at specified intervals calculated based on the notional
amount. The interest rate differential to be paid or received will be recorded as interest expense.
These swap transactions are designated as cash-flow hedges. Accordingly, the effective portion of
changes in the fair value of the swaps is recorded each period in other comprehensive income. Any
ineffective portions of changes in fair value are recorded to current period earnings in selling,
distribution and administrative expenses.
As of April 24, 2010, the fair value of the interest rate swaps was $(6.9) million, which is
recorded in the following accounts with fair values measured as indicated (amounts in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current |
|
$ |
|
|
|
$ |
(4.1 |
) |
|
$ |
|
|
|
$ |
(4.1 |
) |
Other long-term |
|
|
|
|
|
|
(2.8 |
) |
|
|
|
|
|
|
(2.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
(6.9 |
) |
|
|
|
|
|
|
(6.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair Value |
|
$ |
|
|
|
$ |
(6.9 |
) |
|
$ |
|
|
|
$ |
(6.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
During the sixteen weeks ended April 24, 2010, interest expense of $1.5 million was recognized
due to periodic settlements of the swap agreements.
As of April 24, 2010, the balance in accumulated other comprehensive loss related to interest
rate derivative transactions was $4.3 million. Of this total, approximately $1.9 million, $1.7
million, $0.6 million, and $0.1 million was related to instruments expiring in 2010, 2011, 2012,
and 2013, respectively.
The company has the following derivative instruments located on the consolidated balance
sheet, utilized for risk management purposes detailed above (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative Assets |
|
|
Derivative Liabilities |
|
|
|
April 24, 2010 |
|
|
January 2, 2010 |
|
|
April 24, 2010 |
|
|
January 2, 2010 |
|
|
|
Balance |
|
|
|
|
|
Balance |
|
|
|
|
|
Balance |
|
|
|
|
|
Balance |
|
|
|
Derivatives designated as hedging |
|
Sheet |
|
Fair |
|
|
Sheet |
|
Fair |
|
|
Sheet |
|
Fair |
|
|
Sheet |
|
Fair |
|
instruments |
|
location |
|
Value |
|
|
location |
|
Value |
|
|
location |
|
Value |
|
|
location |
|
Value |
|
Interest rate contracts |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
Other current liabilities |
|
$ |
4,108 |
|
|
Other current liabilities |
|
$ |
4,271 |
|
Interest rate contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long term liabilities |
|
|
2,839 |
|
|
Other long term liabilities |
|
|
2,459 |
|
Commodity contracts |
|
Other long term assets |
|
|
1,260 |
|
|
Other current assets |
|
|
2,501 |
|
|
Other current liabilities |
|
|
3,657 |
|
|
Other current liabilities |
|
|
6,143 |
|
Commodity contracts |
|
|
|
|
|
|
|
Other long term assets |
|
|
|
|
|
Other long term liabilities |
|
|
475 |
|
|
Other long term liabilities |
|
|
78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
1,260 |
|
|
|
|
|
|
$ |
2,501 |
|
|
|
|
|
|
$ |
11,079 |
|
|
|
|
|
|
$ |
12,951 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
The company has the following derivative instruments located on the consolidated
statement of income, utilized for risk management purposes detailed above (amounts in thousands and
net of tax):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss) |
|
|
|
|
|
|
Amount of Gain or (Loss) Reclassified |
|
|
|
Recognized in OCI on |
|
|
|
|
|
|
from Accumulated OCI into Income |
|
Derivatives in |
|
Derivative (Effective Portion) |
|
|
Location of Gain or (Loss) |
|
|
(Effective Portion) |
|
Cash Flow Hedge |
|
For the sixteen weeks ended |
|
|
Reclassified from AOCI into Income |
|
|
For the sixteen weeks ended |
|
Relationships |
|
April 24, 2010 |
|
|
April 25, 2009 |
|
|
(Effective Portion) |
|
|
April 24, 2010 |
|
|
April 25, 2009 |
|
Interest rate contracts |
|
$ |
135 |
|
|
$ |
666 |
|
|
Interest expense (income) |
|
$ |
|
|
|
$ |
|
|
Commodity contracts |
|
|
|
|
|
|
|
|
|
Selling, distribution and administrative expenses |
|
|
|
|
|
|
(522 |
) |
Commodity contracts |
|
|
(5,127 |
) |
|
|
(610 |
) |
|
Production costs(1) |
|
|
(7,088 |
) |
|
|
(6,649 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(4,992 |
) |
|
$ |
56 |
|
|
|
|
|
|
$ |
(7,088 |
) |
|
$ |
(7,171 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. |
|
Included in Materials, supplies, labor and other production costs (exclusive of
depreciation and amortization shown separately). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain or (Loss) |
|
|
|
|
|
|
|
Recognized in Income on |
|
|
|
|
|
|
|
Derivatives (Ineffective Portion |
|
|
|
Location of Gain or(Loss) Recognized |
|
|
and Amount Excluded from |
|
|
|
in Income on Derivatives (Ineffective |
|
|
Effectiveness Testing) (net of tax) |
|
Derivatives in Cash |
|
Portion and Amount Excluded from |
|
|
For the sixteen weeks ended |
|
Flow Hedge Relationships |
|
Effectiveness Testing) |
|
|
April 24, 2010 |
|
|
April 25, 2009 |
|
Interest rate contracts |
|
Selling, distribution and administrative expenses |
|
$ |
|
|
|
$ |
|
|
Commodity contracts |
|
Selling, distribution and administrative expenses |
|
|
|
|
|
|
(617 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
(617 |
) |
|
|
|
|
|
|
|
|
|
|
|
As of April 24, 2010, the company had the following outstanding financial contracts that were
entered to hedge commodity and interest rate risk:
|
|
|
|
|
Derivative in Cash Flow Hedge Relationship |
|
Notional amount (millions) |
|
Interest rate contracts |
|
$ |
127.5 |
|
Wheat contracts |
|
|
70.2 |
|
Soybean oil contracts |
|
|
9.4 |
|
Natural gas contracts |
|
|
12.4 |
|
|
|
|
|
Total |
|
$ |
219.5 |
|
|
|
|
|
The companys derivative instruments contain no credit-risk-related contingent features at
April 24, 2010.
8. DEBT AND OTHER OBLIGATIONS
Long-term debt and capital leases consisted of the following at April 24, 2010 and January 2,
2010 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
April 24, 2010 |
|
|
January 2, 2010 |
|
Unsecured credit facility |
|
$ |
55,000 |
|
|
$ |
89,000 |
|
Unsecured term loan |
|
|
127,500 |
|
|
|
131,250 |
|
Capital lease obligations |
|
|
12,244 |
|
|
|
26,555 |
|
Other notes payable |
|
|
3,213 |
|
|
|
4,863 |
|
|
|
|
|
|
|
|
|
|
|
197,957 |
|
|
|
251,668 |
|
Less current maturities |
|
|
24,398 |
|
|
|
25,763 |
|
|
|
|
|
|
|
|
Total long-term debt and capital leases |
|
$ |
173,559 |
|
|
$ |
225,905 |
|
|
|
|
|
|
|
|
On August 1, 2008, the company entered into a Credit Agreement (term loan) with various
lending parties for the purpose of completing two acquisitions. The term loan provides for
amortizing $150.0 million of borrowings through the maturity date of August 4, 2013. The term loan
includes certain customary restrictions, which, among other things, require maintenance of
financial covenants and limit encumbrance of assets and creation of indebtedness. Restrictive
financial covenants include such ratios as a
minimum interest coverage ratio and a maximum leverage ratio. The company believes that, given
its current cash position, its cash flow from operating activities and its available credit
capacity, it can comply with the current terms of the term loan and can meet presently foreseeable
financial requirements. As of April 24, 2010 and January 2, 2010, the company was in compliance
with all restrictive financial covenants under the term loan.
13
Interest is due quarterly in arrears on outstanding borrowings at a customary Eurodollar rate
or the base rate plus the applicable margin. The underlying rate is defined as the rate offered in
the interbank Eurodollar market or the higher of the prime lending rate or federal funds rate plus
0.5%. The applicable margin ranges from 0.0% to 1.375% for base rate loans and from 0.875% to
2.375% for Eurodollar loans and is based on the companys leverage ratio. Principal payments began on December 31, 2008 and are
due quarterly under the term loan at an annual amortization of 10%
of the principal balance for the first two years, 15% during the third year, 20% during the fourth
year, and 45% during the fifth year. The company paid financing costs of $0.8 million in connection
with the term loan, which is being amortized over the life of the term loan.
The company has a five-year, $250.0 million unsecured revolving loan facility (the credit
facility) expiring October 5, 2012. The company may request to increase its borrowings under the
credit facility up to an aggregate of $350.0 million upon the satisfaction of certain conditions.
Proceeds from the credit facility may be used for working capital and general corporate purposes,
including acquisition financing, refinancing of indebtedness and share repurchases. The credit
facility includes certain customary restrictions, which, among other things, require maintenance of
financial covenants and limit encumbrance of assets and creation of indebtedness. Restrictive
financial covenants include such ratios as a minimum interest coverage ratio and a maximum leverage
ratio. The company believes that, given its current cash position, its cash flow from operating
activities and its available credit capacity, it can comply with the current terms of the credit
facility and can meet presently foreseeable financial requirements. As of April 24, 2010 and
January 2, 2010, the company was in compliance with all restrictive financial covenants under its
credit facility.
Interest is due quarterly in arrears on any outstanding borrowings at a customary Eurodollar
rate or the base rate plus the applicable margin. The underlying rate is defined as rates offered
in the interbank Eurodollar market or the higher of the prime lending rate or federal funds rate
plus 0.5%. The applicable margin ranges from 0.0% to 0.30% for base rate loans and from 0.40% to
1.275% for Eurodollar loans. In addition, a facility fee ranging from 0.10% to 0.35% is due
quarterly on all commitments under the credit facility. Both the interest margin and the facility
fee are based on the companys leverage ratio. Financing costs of $0.9 million were deferred and
are being amortized over the term of the credit facility.
Book overdrafts occur when checks have been issued but have not been presented to the bank for
payment. These bank accounts allow us to delay funding of issued checks until the checks are
presented for payment. A delay in funding results in a temporary source of financing from the bank.
The activity related to book overdrafts is shown as a financing activity in our consolidated
statements of cash flows. Book overdrafts are included in other current liabilities on our
consolidated balance sheets. As of April 24, 2010 and January 2, 2010, the book overdraft balance
was $8.4 million and $11.1 million, respectively.
9. VARIABLE INTEREST ENTITY
The company maintains a transportation agreement with an entity that transports a significant
portion of the companys fresh bakery products from the companys production facilities to outlying
distribution centers. The company represents a significant portion of the entitys revenue. This
entity qualifies as a VIE. Under previous accounting guidance, we consolidated the VIE in our
consolidated financial statements from the first quarter of 2004 through the fourth quarter of 2009
because during that time the company was considered to be the primary beneficiary. Under the
revised principles, which became effective January 3, 2010, we have determined that the company is
no longer the primary beneficiary and we deconsolidated the VIE in our financial statements. The
VIE does not effect the line item Net income attributable to Flowers Foods, Inc. since the company
has no interest in any net earnings or losses of the VIE through equity participation. The VIE has
collateral that is sufficient to meet its capital lease and other debt obligations and the owner of
the VIE personally guarantees the obligations of the VIE. The VIEs creditors have no recourse
against the general credit of the company.
The company has no exposure to gains or losses of the VIE in reporting its net income. In
addition, the company does not have explicit or implied power over any of the significant
activities to operate the VIE. The primary beneficiary of the VIE realizes the economic benefits
and losses incurred and has the power to direct most of the significant activities. The VIE is
permitted to pass along increases in their costs, with company approval, at a capped increase of 2%
per year. The company and the VIE also agree on a rebate paid or credited to the company depending
on the profitability of the VIE in the preceding year. We do not guarantee the VIEs specific
returns or performance benchmarks. In addition, if a manufacturing facility closes or there is a
loss of market share causing the VIE to have to move their equipment the company will make an
effort to move the equipment to another manufacturing facility. If the company is unable to do so,
we will reimburse the VIE for any losses incurred in the disposal of the equipment and will pay the
cost to transfer the equipment. The companys maximum loss exposure for the truck disposals is the
difference in the estimated fair value of the trucks from the book value.
As part of the deconsolidation of the VIE, the company concluded that certain of the trucks
and trailers the VIE uses for distributing our products from the manufacturing facilities to the
distribution centers qualify as right to use leases. The amount for property, plant
14
and equipment
and capital lease obligations was $11.9 million at January 3, 2010. As of April 24, 2010, there
was $11.0 million in net property, plant and equipment and capital lease obligations associated
with the right to use leases.
Following is the effect of the VIE during the sixteen weeks ended April 25, 2009:
|
|
|
|
|
|
|
|
|
|
|
SIXTEEN WEEKS |
|
|
|
ENDED APRIL 25, 2009 |
|
|
|
|
|
|
|
% OF |
|
|
|
VIE |
|
|
TOTAL |
|
|
|
(Dollars in thousands) |
|
Assets as of respective quarter ends |
|
$ |
33,268 |
|
|
|
2.5 |
% |
Sales |
|
$ |
1,528 |
|
|
|
0.2 |
% |
Income before income taxes |
|
$ |
452 |
|
|
|
0.8 |
% |
The assets consisted primarily of $22.9 million as of April 25, 2009 of transportation
equipment recorded as capital lease obligations.
10. LITIGATION
The company and its subsidiaries from time to time are parties to, or targets of, lawsuits,
claims, investigations and proceedings, which are being handled and defended in the ordinary course
of business. While the company is unable to predict the outcome of these matters, it believes,
based upon currently available facts, that it is remote that the ultimate resolution of any such
pending matters will have a material adverse effect on its overall financial condition, results of
operations or cash flows in the future. However, adverse developments could negatively impact
earnings in a particular future fiscal period.
On July 23, 2008, a wholly-owned subsidiary of the company filed a lawsuit against Hostess Brands, Inc.
(Hostess) (formerly Interstate Bakeries Corporation) in
the United States District Court for the Northern District of Georgia. The complaint alleges that
Hostess is infringing upon Flowers Natures Own trademarks by using or intending to use the
Natures Pride trademark. Flowers asserts that Hostess sale or intended sale of baked goods under
the Natures Pride trademark is likely to cause confusion with, and likely to dilute the
distinctiveness of, the Natures Own mark and constitutes unfair competition and deceptive trade
practices. Flowers is seeking actual damages, an accounting of Hostess profits from its sales of
Natures Pride products, and injunctive relief.
The companys facilities are subject to various federal, state and local laws and regulations
regarding the discharge of material into the environment and the protection of the environment in
other ways. The company is not a party to any material proceedings arising under these regulations.
The company believes that compliance with existing environmental laws and regulations will not
materially affect the consolidated financial condition or the competitive position of the company.
The company is currently in substantial compliance with all material environmental regulations
affecting the company and its properties.
11. EARNINGS PER SHARE
The following is a reconciliation of net income attributable to Flowers Foods, Inc. and
weighted average shares for calculating basic and diluted earnings per common share for the sixteen
weeks ended April 24, 2010 and April 25, 2009 (amounts in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
For the Sixteen Weeks Ended |
|
|
|
April 24, |
|
|
April 25, |
|
|
|
2010 |
|
|
2009 |
|
Net income attributable to Flowers Foods, Inc. |
|
$ |
40,687 |
|
|
$ |
37,381 |
|
Dividends on participating securities not expected to vest* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to common and participating shareholders |
|
$ |
40,687 |
|
|
$ |
37,381 |
|
|
|
|
|
|
|
|
Basic Earnings Per Common Share: |
|
|
|
|
|
|
|
|
Weighted average shares outstanding for common stock |
|
|
91,251 |
|
|
|
92,311 |
|
Weighted average shares outstanding for participating securities |
|
|
266 |
|
|
|
412 |
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding for common stock |
|
|
91,517 |
|
|
|
92,723 |
|
|
|
|
|
|
|
|
Basic earnings per common share attributable to Flowers Foods,
Inc. common shareholders |
|
$ |
0.44 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share: |
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding for common stock |
|
|
91,517 |
|
|
|
92,723 |
|
Add: Shares of common stock assumed issued upon exercise of
stock options and vesting of restricted stock |
|
|
687 |
|
|
|
515 |
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding for common stock |
|
|
92,204 |
|
|
|
93,238 |
|
|
|
|
|
|
|
|
Diluted earnings per common share attributable to Flowers
Foods, Inc. common shareholders |
|
$ |
0.44 |
|
|
$ |
0.40 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
The company expects all participating securities share awards outstanding at April 24,
2010 and April 25, 2009 to vest. |
Stock options to purchase 2,128,925 shares and 1,841,417 shares of common stock were not
included in the computation of diluted earnings per share for the sixteen weeks ended April 24,
2010 and April 25, 2009, respectively, because their effect would have been anti-dilutive.
15
12. STOCK BASED COMPENSATION
Our 2001 Equity and Performance Incentive Plan, as amended and restated as of April 1, 2009,
(EPIP) authorizes the compensation committee of the Board of Directors to make awards of options
to purchase our common stock, restricted stock, performance stock and units and deferred stock. Our
officers, key employees and non-employee directors (whose grants are generally approved by the full
Board of Directors) are eligible to receive awards under the EPIP. The aggregate number of shares
that may be issued or transferred under the EPIP is 18,625,000 shares. Over the life of the EPIP,
the company has only issued options, restricted stock and deferred stock. The following is a
summary of stock options, restricted stock, and deferred stock outstanding under the EPIP.
Information relating to the companys stock appreciation rights which are not issued under the EPIP
is also disclosed below.
Stock Options
The following non-qualified stock options (NQSOs) have been granted under the EPIP with
service period remaining. The Black-Scholes option-pricing model was used to estimate the grant
date fair value (amounts in thousands, except price data and as indicated):
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date |
|
2/9/2010 |
|
|
2/9/2009 |
|
|
2/4/2008 |
|
Shares granted |
|
|
1,136 |
|
|
|
993 |
|
|
|
850 |
|
Exercise price($) |
|
|
25.01 |
|
|
|
23.84 |
|
|
|
24.75 |
|
Vesting date |
|
|
2/9/2013 |
|
|
|
2/9/2012 |
|
|
|
2/4/2011 |
|
Fair value per share($) |
|
|
5.54 |
|
|
|
5.87 |
|
|
|
5.80 |
|
Dividend yield(%)(1) |
|
|
3.00 |
|
|
|
2.20 |
|
|
|
1.90 |
|
Expected volatility(%)(2) |
|
|
30.60 |
|
|
|
31.80 |
|
|
|
27.30 |
|
Risk-free interest rate(%)(3) |
|
|
2.35 |
|
|
|
2.00 |
|
|
|
2.79 |
|
Expected option life (years)(4) |
|
|
5.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
Outstanding at April 24, 2010 |
|
|
1,136 |
|
|
|
993 |
|
|
|
848 |
|
|
|
|
1. |
|
Dividend yield estimated yield based on the historical dividend payment for the four most
recent dividend payments prior to the grant date. |
|
2. |
|
Expected volatility based on historical volatility over the expected term using daily
stock prices. |
|
3. |
|
Risk-free interest rate United States Treasury Constant Maturity rates as of the grant
date over the expected term. |
|
4. |
|
Expected option life The 2008, 2009, and 2010 grant assumptions are based on the simplified
formula determined in accordance with Staff Accounting Bulletin No. 110. The company does not
have sufficient historical exercise behavior data to reasonably estimate the expected option
life. |
The stock option activity for the sixteen weeks ended April 24, 2010 pursuant to the EPIP is
set forth below (amounts in thousands, except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Options |
|
|
Price |
|
|
Term (Years) |
|
|
Value |
|
Outstanding at January 2, 2010 |
|
|
3,734 |
|
|
$ |
20.34 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,136 |
|
|
$ |
25.01 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(131 |
) |
|
$ |
19.25 |
|
|
|
|
|
|
|
|
|
Outstanding at April 24, 2010 |
|
|
4,739 |
|
|
$ |
21.49 |
|
|
|
4.89 |
|
|
$ |
20,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at April 24, 2010 |
|
|
1,792 |
|
|
$ |
16.46 |
|
|
|
3.25 |
|
|
$ |
16,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 24, 2010, all options outstanding under the EPIP had an average exercise price of
$21.49 and a weighted average remaining contractual life of 4.9 years.
As of April 24, 2010, there was $9.8 million of total unrecognized compensation expense
related to nonvested stock options. This cost is expected to be recognized over a weighted-average
period of 1.7 years.
16
The cash received, the (shortfall) windfall tax (expense) benefit, and intrinsic value from
stock option exercises for the sixteen weeks ended April 24, 2010 and April 25, 2009 were as
follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
April 24, |
|
April 25, |
|
|
2010 |
|
2009 |
Cash received from option exercises |
|
$ |
2,531 |
|
|
$ |
1,397 |
|
Cash tax (shortfall) windfall, net |
|
$ |
(34 |
) |
|
$ |
921 |
|
Intrinsic value of stock options exercised |
|
$ |
736 |
|
|
$ |
2,700 |
|
Generally, if the employee dies, becomes disabled or retires, the nonqualified stock options
immediately vest and must be exercised within two years. In addition, nonqualified stock options
will vest if the company undergoes a change in control.
Performance-Contingent Restricted Stock
Certain key employees have been granted performance-contingent restricted stock. The 2009 and
2010 awards generally vest two years from the date of grant and the 2009 award requires the return
on invested capital to exceed the weighted average cost of capital by 2.5% (the ROI Target)
over the two fiscal years immediately preceding the vesting date. The 2010 award requires the ROI
target to be 3.75% over the two fiscal years immediately preceding the vesting date. If the ROI
Target is not met the awards are forfeited. Furthermore, each grant of performance-contingent
restricted stock will be adjusted as set forth below:
|
|
|
if the ROI Target is satisfied, then the performance-contingent restricted stock grant
may be adjusted based on the companys total return to shareholders (Company TSR) percent
rank as compared to the total return to shareholders of the S&P Packaged Food & Meat Index
(S&P TSR) in the manner set forth below: |
|
|
|
If the Company TSR rank is equal to the 50th percentile of the S&P TSR, then
no adjustment; |
|
|
|
|
If the Company TSR rank is less than the 50th percentile of the S&P TSR, the
grant shall be reduced by 1.3% for each percentile below the 50th percentile that the
Company TSR is less than the 50th percentile of S&P TSR, but in no event shall such
reduction exceed 20%; or |
|
|
|
|
If the Company TSR rank is greater than the 50th percentile of the S&P TSR,
the grant shall be increased by 1.3% for each percentile above the 50th percentile
that Company TSR is greater than the 50th percentile of S&P TSR, but in no event shall
such increase exceed 20%. |
In connection with the vesting of 209,950 shares of restricted stock granted in February 2008,
during the sixteen weeks ended April 24, 2010, an additional 41,990 common shares were issued in
the aggregate to these certain key employees because the company exceeded the S&P TSR by the
maximum amount.
The performance-contingent restricted stock generally vests immediately if the grantee dies or
becomes disabled. However, at retirement the grantee will receive a pro-rata number of shares
through the grantees retirement date at the normal vesting date. In addition, the
performance-contingent restricted stock will immediately vest at the grant date award level without
adjustment if the company undergoes a change in control. During the vesting period, the grantee is
treated as a normal shareholder with respect to dividend and voting rights on the restricted shares
for the 2009 grant. The 2010 grant does not include the right to receive dividends until vesting.
Dividends declared and paid during the vesting period will accrue and will be paid at vesting. The
fair value estimate was determined using a Monte Carlo simulation model, which utilizes multiple
input variables to determine the probability of the company achieving the market condition
discussed above. Inputs into the model included the following for the company and comparator
companies: (i) total stockholder return from the beginning of the performance cycle through the
measurement date; (ii) volatility; (iii) risk-free interest rates; and (iv) the correlation of the
comparator companies total stockholder return. The inputs are based on historical capital market
data.
17
The following restricted stock awards have been granted under the EPIP since fiscal 2008
(amounts in thousands, except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date |
|
2/9/2010 |
|
2/9/2009 |
|
2/4/2008 |
Shares granted |
|
|
179 |
|
|
|
204 |
|
|
|
210 |
|
Vesting date |
|
|
2/9/2012 |
|
|
|
2/9/2011 |
|
|
|
2/4/2010 |
|
Fair value per share |
|
$ |
26.38 |
|
|
$ |
24.96 |
|
|
$ |
27.03 |
|
Expense during the sixteen weeks ended April 24, 2010 |
|
$ |
544 |
|
|
$ |
784 |
|
|
$ |
218 |
|
Expense during the sixteen weeks ended April 25, 2009 |
|
$ |
|
|
|
$ |
588 |
|
|
$ |
873 |
|
A summary of the status of the companys nonvested shares as of April 24, 2010, and changes
during the quarter ended April 24, 2010, is presented below (amounts in thousands, except price
data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
Grant Date |
|
|
|
Shares |
|
|
Fair Value |
|
Nonvested at January 2, 2010 |
|
|
414 |
|
|
$ |
26.01 |
|
Granted |
|
|
179 |
|
|
$ |
26.38 |
|
Vested |
|
|
(210 |
) |
|
$ |
27.03 |
|
Forfeited |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Nonvested at April 24, 2010 |
|
|
383 |
|
|
$ |
25.62 |
|
|
|
|
|
|
|
|
As of April 24, 2010, there was $6.1 million of total unrecognized compensation cost related
to nonvested restricted stock granted by the EPIP. That cost is expected to be recognized over a
weighted-average period of 1.3 years. The total fair value of shares vested during the period ended
April 24, 2010 was $5.1 million.
Stock Appreciation Rights
Prior to 2007, the company allowed non-employee directors to convert their retainers and
committee chairman fees into rights. These rights vest after one year and can be exercised over
nine years. The company records compensation expense for these rights at a measurement date based
on changes between the grant price and an estimated fair value of the rights using the
Black-Scholes option-pricing model.
The fair value of the rights at April 24, 2010 ranged from $9.67 to $22.95. The following
assumptions were used to determine fair value of the rights discussed above using the Black-Scholes
option-pricing model at April 24, 2010: dividend yield 3.0%; expected volatility 30.0%; risk-free
interest rate 2.63% and expected life of 0.70 years to 3.05 years. During the sixteen weeks ended
April 24, 2010 and April 25, 2009 the company recorded expense of $0.4 million and $0.01 million,
respectively, related to these rights.
The rights activity for the sixteen weeks ended April 24, 2010 is set forth below (amounts in
thousands except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Rights |
|
|
Price |
|
|
Term (Years) |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at January 2, 2010 |
|
|
231 |
|
|
$ |
11.14 |
|
|
|
|
|
|
|
|
|
Rights exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rights forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 24, 2010 |
|
|
231 |
|
|
$ |
11.14 |
|
|
|
3.61 |
|
|
$ |
3,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Stock
Pursuant to the EPIP, the company allows non-employee directors to convert their retainers
into deferred stock. The deferred stock has a minimum two year vesting period and will be
distributed to the individual at a time designated by the individual at the date of conversion.
During the first quarter of fiscal 2010 an aggregate of 17,960 shares were converted. The company records
compensation expense for this deferred stock over the two-year minimum vesting period based on the
closing price of the companys common stock on the date of conversion.
18
Pursuant to the EPIP non-employee directors also receive annual grants of deferred stock. This
deferred stock vests over one year from the grant date. During the second quarter of fiscal 2009,
non-employee directors were granted an aggregate of 47,300 shares of deferred stock. There was an additional grant of 1,860 shares during the First quarter of fiscal 2010 based on a pro-rated share amount for a new director whose term began on January 1, 2010.
The deferred
stock will be distributed to the grantee at a time designated by the grantee at the date of grant.
Compensation expense is recorded on this deferred stock over the one year minimum vesting period.
During the second quarter of fiscal 2009 a total of 14,320 shares were exercised for deferred
shares issued under the fiscal 2008 grant.
The deferred stock activity for the sixteen weeks ended April 24, 2010 is set forth below
(amounts in thousands, except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Grant |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Price |
|
|
Term (Years) |
|
|
Value |
|
Outstanding at January 2, 2010 |
|
|
130 |
|
|
$ |
21.90 |
|
|
|
|
|
|
|
|
|
Deferred stock issued |
|
|
20 |
|
|
$ |
21.83 |
|
|
|
|
|
|
|
|
|
Deferred stock exercised |
|
|
(6 |
) |
|
$ |
23.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 24, 2010 |
|
|
144 |
|
|
$ |
21.84 |
|
|
|
0.62 |
|
|
$ |
584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the companys stock based compensation expense for the sixteen
weeks ended April 24, 2010 and April 25, 2009 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
April 24, |
|
|
April 25, |
|
|
|
2010 |
|
|
2009 |
|
Stock options |
|
$ |
2,410 |
|
|
$ |
1,457 |
|
Restricted stock |
|
|
1,546 |
|
|
|
1,631 |
|
Stock appreciation rights |
|
|
366 |
|
|
|
10 |
|
Deferred stock |
|
|
431 |
|
|
|
429 |
|
|
|
|
|
|
|
|
Total stock based compensation |
|
$ |
4,753 |
|
|
$ |
3,527 |
|
|
|
|
|
|
|
|
13. POST-RETIREMENT PLANS
The following summarizes the companys balance sheet related pension and other postretirement
benefit plan accounts at April 24, 2010 as compared to accounts at January 2, 2010 (amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
AS OF |
|
|
April 24, |
|
January 2, |
|
|
2010 |
|
2010 |
Noncurrent benefit asset |
|
$ |
|
|
|
$ |
|
|
Current benefit liability |
|
$ |
841 |
|
|
$ |
841 |
|
Noncurrent benefit liability |
|
$ |
67,660 |
|
|
$ |
68,140 |
|
Accumulated other comprehensive loss |
|
$ |
52,423 |
|
|
$ |
52,808 |
|
Defined Benefit Plans
The company has trusteed, noncontributory defined benefit pension plans covering certain
employees. The benefits are based on years of service and the employees career earnings. The plans
are funded at amounts deductible for income tax purposes but not less than the minimum funding
required by the Employee Retirement Income Security Act of 1974 (ERISA). As of April 24, 2010,
the assets of the plans included certificates of deposit, marketable equity securities, mutual
funds, corporate and government debt securities, private and public real estate partnerships, other
diversifying strategies and annuity contracts. Effective January 1, 2006, the company curtailed the
defined benefit plan that covers the majority of its workforce. Benefits under this plan were
frozen, and no future benefits will accrue under this plan. The company continues to maintain a
plan that covers a small number of certain union employees. During the sixteen weeks ended April
24, 2010 the company contributed $0.2 million to company pension plans.
19
The net periodic pension cost for the companys plans include the following components
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 24, |
|
|
APRIL 25, |
|
|
|
2010 |
|
|
2009 |
|
Service cost |
|
$ |
119 |
|
|
$ |
96 |
|
Interest cost |
|
|
5,743 |
|
|
|
5,744 |
|
Expected return on plan assets |
|
|
(6,358 |
) |
|
|
(5,826 |
) |
Amortization of net loss |
|
|
670 |
|
|
|
839 |
|
|
|
|
|
|
|
|
Total net periodic benefit cost |
|
$ |
174 |
|
|
$ |
853 |
|
|
|
|
|
|
|
|
The company also has several smaller Defined Benefit Plans associated with recent acquisitions
that will be merged into the Flowers Foods Defined Benefit Plans after receipt of final
determination letters.
Post-retirement Benefit Plan
The company provides certain medical and life insurance benefits for eligible retired
employees. The medical plan covers eligible retirees under the active medical plans. The plan
incorporates an up-front deductible, coinsurance payments and retiree contributions at various
premium levels. Eligibility and maximum period of coverage is based on age and length of service.
The net periodic postretirement benefit cost for the company includes the following components
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 24, |
|
|
APRIL 25, |
|
|
|
2010 |
|
|
2009 |
|
Service cost |
|
$ |
198 |
|
|
$ |
265 |
|
Interest cost |
|
|
271 |
|
|
|
342 |
|
Amortization of net (gain) loss |
|
|
(13 |
) |
|
|
11 |
|
Amortization of prior service (credit) cost |
|
|
(31 |
) |
|
|
102 |
|
|
|
|
|
|
|
|
Total net periodic benefit cost |
|
$ |
425 |
|
|
$ |
720 |
|
|
|
|
|
|
|
|
401(k) Retirement Savings Plan
The Flowers Foods 401(k) Retirement Savings Plan (the Plan) covers substantially all of the
companys employees who have completed certain service requirements. The cost and contributions for
those employees who also participate in the defined benefit pension plan is 25% of the first $400
contributed by the employee. Prior to January 1, 2006, the costs and contributions for employees
who do not participate in the defined benefit pension plan was 2% of compensation and 50% of the
employees contributions, up to 6% of compensation. Effective January 1, 2006, the costs and
contributions for employees who do not participate in the defined benefit pension plan increased to
3% of compensation and 50% of the employees contributions, up to 6% of compensation. During the
sixteen weeks ended April 24, 2010 and April 25, 2009, the total cost and contributions were $5.5
million and $5.2 million, respectively.
The company also has several smaller 401(k) Plans associated with recent acquisitions that
will be merged into the Flowers Foods 401(k) Retirement Savings Plan after receipt of final
determination letters.
14. INCOME TAXES
The companys effective tax rate for the first quarter of fiscal 2010 was 35.6%. This rate is
equal to the 2009 annual effective rate which included the benefit of favorable discrete items and
the non-taxable earnings of the previously consolidated VIE. The companys current effective rate
is favorably impacted by the increase in the Section 199 qualifying production activities
deduction. The difference in the effective rate and the statutory rate is primarily due to state
income taxes and the Section 199 qualifying production activities deduction.
During the first quarter of fiscal 2010, the companys activity with respect to its FIN 48
reserve and related interest expense accrual was immaterial. At this time, we do not anticipate
significant changes to the amount of gross unrecognized tax benefits over the next twelve months.
20
15. SEGMENT REPORTING
DSD produces fresh and frozen packaged bread and rolls and warehouse delivery produces frozen
bread and rolls,tortillas and snack products. The company evaluates each segments performance
based on income or loss before interest and income taxes, excluding unallocated expenses and
charges which the companys management deems to be an overall corporate cost or a cost not
reflective of the segments core operating businesses. Information regarding the operations in
these reportable segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 24, |
|
|
APRIL 25, |
|
|
|
2010 |
|
|
2009 |
|
SALES: |
|
|
|
|
|
|
|
|
DSD |
|
$ |
653,778 |
|
|
$ |
672,993 |
|
Warehouse delivery |
|
|
184,945 |
|
|
|
174,631 |
|
Eliminations: |
|
|
|
|
|
|
|
|
Sales from warehouse delivery to DSD |
|
|
(36,093 |
) |
|
|
(35,899 |
) |
Sales from DSD to warehouse delivery |
|
|
(7,604 |
) |
|
|
(4,718 |
) |
|
|
|
|
|
|
|
|
|
$ |
795,026 |
|
|
$ |
807,007 |
|
|
|
|
|
|
|
|
DEPRECIATION AND AMORTIZATION: |
|
|
|
|
|
|
|
|
DSD |
|
$ |
20,102 |
|
|
$ |
19,537 |
|
Warehouse delivery |
|
|
5,536 |
|
|
|
4,646 |
|
Other |
|
|
(1 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
$ |
25,637 |
|
|
$ |
24,277 |
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS: |
|
|
|
|
|
|
|
|
DSD |
|
$ |
60,683 |
|
|
$ |
56,930 |
|
Warehouse delivery |
|
|
13,533 |
|
|
|
14,224 |
|
Other |
|
|
(12,176 |
) |
|
|
(11,908 |
) |
|
|
|
|
|
|
|
|
|
$ |
62,040 |
|
|
$ |
59,246 |
|
|
|
|
|
|
|
|
NET INTEREST INCOME |
|
$ |
1,131 |
|
|
$ |
459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
|
$ |
63,171 |
|
|
$ |
59,705 |
|
|
|
|
|
|
|
|
Sales by product category in each reportable segment are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended April 24, 2010 |
|
|
For the 16 Weeks Ended April 25, 2009 |
|
|
|
|
|
|
|
Warehouse |
|
|
|
|
|
|
|
|
|
|
Warehouse |
|
|
|
|
|
|
DSD |
|
|
Delivery |
|
|
Total |
|
|
DSD |
|
|
Delivery |
|
|
Total |
|
Branded Retail |
|
$ |
380,015 |
|
|
$ |
43,007 |
|
|
$ |
423,022 |
|
|
$ |
374,959 |
|
|
$ |
40,185 |
|
|
$ |
415,144 |
|
Store Branded Retail |
|
|
99,669 |
|
|
|
19,728 |
|
|
|
119,397 |
|
|
|
110,062 |
|
|
|
18,891 |
|
|
|
128,953 |
|
Non-retail and Other |
|
|
166,490 |
|
|
|
86,117 |
|
|
|
252,607 |
|
|
|
183,254 |
|
|
|
79,656 |
|
|
|
262,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
646,174 |
|
|
$ |
148,852 |
|
|
$ |
795,026 |
|
|
$ |
668,275 |
|
|
$ |
138,732 |
|
|
$ |
807,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16. SUBSEQUENT EVENTS
The company has evaluated subsequent events since April 24, 2010, the date of these financial
statements. There were no events or transactions discovered during this evaluation that require
recognition or disclosure in the financial statements.
21
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the financial condition and results of operations of the company
as of and for the sixteen week period ended April 24, 2010 should be read in conjunction with the
companys Annual Report on Form 10-K for the fiscal year ended January 2, 2010.
OVERVIEW:
Flowers Foods is one of the nations leading producers and marketers of packaged bakery foods
for retail and foodservice customers. The company produces breads, buns, rolls, tortillas, snack
cakes and pastries that are distributed fresh to U.S. customers in the Southeast, Mid-Atlantic, and
Southwest as well as select markets in California and Nevada and frozen to customers nationwide.
Our businesses are organized into two reportable segments: direct-store-delivery (DSD) and
warehouse delivery. The DSD segment focuses on the production and marketing of bakery products to
U.S. customers in the Southeast, Mid-Atlantic, and Southwest as well as select markets in
California and Nevada primarily through its DSD system. The warehouse delivery segment produces
snack cakes for sale to co-pack, retail and vending customers nationwide as well as frozen bread,
rolls, buns and tortillas for sale to retail and foodservice customers nationwide primarily through
warehouse distribution.
We aim to achieve consistent and sustainable growth in sales and earnings by focusing on
improvement in the operating results of our existing businesses and, after detailed analysis,
acquiring businesses and properties that add value to the company. We believe this consistent and
sustainable growth will build value for our shareholders.
Sales are principally affected by pricing, quality, brand recognition, new product
introductions and product line extensions, marketing and service. The company manages these factors
to achieve a sales mix favoring its higher-margin branded products, while using private label
products to absorb overhead costs and maximize use of production capacity. During the first quarter
of 2010, our results were negatively impacted by the competitive landscape and higher promotional
activity within the baking industry. Sales for the
quarter ended April 24, 2010 decreased 1.5% from the quarter ended April 25, 2009. This decrease
was primarily due to negative pricing and mix shifts of 2.4%, a decrease in volume of 0.7% and the
effect of the variable interest entity (VIE) deconsolidation negatively impacted sales 0.2%.
Acquisitions contributed 1.8%, partially offsetting these decreases.
Commodities, such as our baking ingredients, periodically experience price fluctuations, and,
for that reason, we continually monitor the market for these commodities. The cost of these inputs
may fluctuate widely due to government policy and regulation, weather conditions, domestic and
international demand or other unforeseen circumstances. We enter into forward purchase agreements
and derivative financial instruments to reduce the impact of such volatility in raw materials
prices. Any decrease in the availability of these agreements and instruments could increase the
price of these raw materials and significantly affect our earnings.
CRITICAL ACCOUNTING POLICIES:
Our financial statements are prepared in accordance with generally accepted accounting
principles (GAAP). These principles are numerous and complex. Our significant accounting policies
are summarized in the companys Annual Report on Form 10-K for the fiscal year ended January 2,
2010. In many instances, the application of GAAP requires management to make estimates or to apply
subjective principles to particular facts and circumstances. A variance in the estimates used or a
variance in the application or interpretation of GAAP could yield a materially different accounting
result. Please see our Form 10-K for the fiscal year ended January 2, 2010, for a discussion of the
areas where we believe that the estimates, judgments or interpretations that we have made, if
different, could yield the most significant differences in our financial statements. The following
discussion provides the significant changes to our critical accounting policies from those
disclosed in our Form 10-K filed for the year ended January 2, 2010.
Variable Interest Entities. In 2009, the Financial Accounting Standards Board (FASB) amended
the consolidation principles associated with VIEs. The new accounting principles resulted in a
change in our accounting policy effective January 3, 2010. The new qualitative approach,
generally, replaced the quantitative-based risks and rewards calculation for determining which
enterprise, if any, has a controlling financial interest in the VIE.
The qualitative approach is focused on identifying which company has both the power to direct the
activities of a VIE that most significantly impact the entitys economic performance and the
obligation to absorb losses of the entity or the right to receive benefits from the entity. As a
result of this qualitative analysis,
22
the company is no longer required to consolidate the VIE that delivers a significant portion of its fresh bakery products from the
companys production facilities to outlying distribution centers under a transportation
agreement. The company has elected to prospectively deconsolidate the VIE. Please see Note 9,
Variable Interest Entity, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q
for additional disclosure.
RESULTS OF OPERATIONS:
Results of operations, expressed as a percentage of sales and the dollar and percentage change
from period to period, for the sixteen week periods ended April 24, 2010 and April 25, 2009, are
set forth below (Dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the sixteen weeks ended |
|
|
|
|
|
|
|
|
|
|
|
Percentage of Sales |
|
|
Increase (Decrease) |
|
|
|
April 24, 2010 |
|
|
April 25, 2009 |
|
|
April 24, 2010 |
|
|
April 25, 2009 |
|
|
Dollars |
|
|
% |
|
Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DSD |
|
$ |
646,174 |
|
|
$ |
668,275 |
|
|
|
81.3 |
|
|
|
82.8 |
|
|
$ |
(22,101 |
) |
|
|
(3.3 |
) |
Warehouse delivery |
|
|
148,852 |
|
|
|
138,732 |
|
|
|
18.7 |
|
|
|
17.2 |
|
|
|
10,120 |
|
|
|
7.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
795,026 |
|
|
$ |
807,007 |
|
|
|
100.0 |
|
|
|
100.0 |
|
|
$ |
(11,981 |
) |
|
|
(1.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Materials, supplies,
labor and other
production costs
(exclusive of
depreciation and
amortization shown
separately below) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DSD (1) |
|
$ |
308,830 |
|
|
$ |
332,627 |
|
|
|
47.8 |
|
|
|
49.8 |
|
|
$ |
(23,797 |
) |
|
|
(7.2 |
) |
Warehouse delivery(1) |
|
|
105,968 |
|
|
|
96,835 |
|
|
|
71.2 |
|
|
|
69.8 |
|
|
|
9,133 |
|
|
|
9.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
414,798 |
|
|
$ |
429,462 |
|
|
|
52.2 |
|
|
|
53.2 |
|
|
$ |
(14,664 |
) |
|
|
(3.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, distribution
and administrative
expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DSD(1) |
|
$ |
256,559 |
|
|
$ |
259,181 |
|
|
|
39.7 |
|
|
|
38.8 |
|
|
$ |
(2,622 |
) |
|
|
(1.0 |
) |
Warehouse delivery(1) |
|
|
23,815 |
|
|
|
23,027 |
|
|
|
16.0 |
|
|
|
16.6 |
|
|
|
788 |
|
|
|
3.4 |
|
Corporate(2) |
|
|
12,177 |
|
|
|
11,814 |
|
|
|
|
|
|
|
|
|
|
|
363 |
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
292,551 |
|
|
$ |
294,022 |
|
|
|
36.8 |
|
|
|
36.4 |
|
|
$ |
(1,471 |
) |
|
|
(0.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
Amortization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DSD(1) |
|
$ |
20,102 |
|
|
$ |
19,537 |
|
|
|
3.1 |
|
|
|
2.9 |
|
|
$ |
565 |
|
|
|
2.9 |
|
Warehouse delivery(1) |
|
|
5,536 |
|
|
|
4,646 |
|
|
|
3.7 |
|
|
|
3.3 |
|
|
|
890 |
|
|
|
19.2 |
|
Corporate(2) |
|
|
(1 |
) |
|
|
94 |
|
|
|
|
|
|
|
|
|
|
|
(95 |
) |
|
|
(101.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
25,637 |
|
|
$ |
24,277 |
|
|
|
3.2 |
|
|
|
3.0 |
|
|
$ |
1,360 |
|
|
|
5.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DSD(1) |
|
$ |
60,683 |
|
|
$ |
56,930 |
|
|
|
9.4 |
|
|
|
8.5 |
|
|
$ |
3,753 |
|
|
|
6.6 |
|
Warehouse delivery(1) |
|
|
13,533 |
|
|
|
14,224 |
|
|
|
9.1 |
|
|
|
10.3 |
|
|
|
(691 |
) |
|
|
(4.9 |
) |
Corporate(2) |
|
|
(12,176 |
) |
|
|
(11,908 |
) |
|
|
|
|
|
|
|
|
|
|
(268 |
) |
|
|
(2.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
62,040 |
|
|
$ |
59,246 |
|
|
|
7.8 |
|
|
|
7.3 |
|
|
$ |
2,794 |
|
|
|
4.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
$ |
1,131 |
|
|
$ |
459 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
$ |
672 |
|
|
|
146.4 |
|
Income taxes |
|
$ |
22,484 |
|
|
$ |
21,872 |
|
|
|
2.8 |
|
|
|
2.7 |
|
|
$ |
612 |
|
|
|
2.8 |
|
Net income |
|
$ |
40,687 |
|
|
$ |
37,833 |
|
|
|
5.1 |
|
|
|
4.7 |
|
|
$ |
2,854 |
|
|
|
7.5 |
|
Net income
attributable to
noncontrolling
interest |
|
$ |
|
|
|
$ |
(452 |
) |
|
|
|
|
|
|
(.1 |
) |
|
$ |
452 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
attributable to
Flowers Foods, Inc. |
|
$ |
40,687 |
|
|
$ |
37,381 |
|
|
|
5.1 |
|
|
|
4.6 |
|
|
$ |
3,306 |
|
|
|
8.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. |
|
As a percentage of revenue within the reporting segment |
|
2. |
|
The corporate segment has no revenues |
23
CONSOLIDATED AND SEGMENT RESULTS
SIXTEEN WEEKS ENDED APRIL 24, 2010 COMPARED TO SIXTEEN WEEKS ENDED APRIL 25, 2009
Consolidated Sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended |
|
|
For the 16 Weeks Ended |
|
|
|
|
|
|
April 24, 2010 |
|
|
April 25, 2009 |
|
|
|
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
% Increase |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
|
|
|
Branded Retail |
|
$ |
423,022 |
|
|
|
53.2 |
% |
|
$ |
415,144 |
|
|
|
51.4 |
% |
|
|
1.9 |
% |
Store Branded Retail |
|
|
119,397 |
|
|
|
15.0 |
|
|
|
128,953 |
|
|
|
16.0 |
|
|
|
(7.4 |
)% |
Non-retail and Other |
|
|
252,607 |
|
|
|
31.8 |
|
|
|
262,910 |
|
|
|
32.6 |
|
|
|
(3.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
795,026 |
|
|
|
100.0 |
% |
|
$ |
807,007 |
|
|
|
100.0 |
% |
|
|
(1.5 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 1.5% decrease in sales was attributable to the following:
|
|
|
|
|
|
|
Favorable |
Percentage Point Change in Sales Attributed to: |
|
(Unfavorable) |
Pricing/Mix |
|
|
(2.4 |
)% |
Volume |
|
|
(0.7 |
)% |
Deconsolidation of VIE |
|
|
(0.2 |
)% |
Acquisitions |
|
|
1.8 |
% |
|
|
|
|
|
Total Percentage Change in Sales |
|
|
(1.5 |
)% |
|
|
|
|
|
The increase in branded retail sales was due primarily to increased sales of branded soft
variety and branded buns, rolls and sandwich rounds partially offset by decreases in branded white
bread. The decrease in store branded retail sales was due to negative price/mix, and to a lesser
extent, volume declines. The decrease in non-retail and other sales was due primarily to volume
declines, partially offset by acquisition sales.
Direct-Store-Delivery Sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended |
|
|
For the 16 Weeks Ended |
|
|
|
|
|
|
April 24, 2010 |
|
|
April 25, 2009 |
|
|
|
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
% Increase |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
|
|
|
Branded Retail |
|
$ |
380,015 |
|
|
|
58.8 |
% |
|
$ |
374,959 |
|
|
|
56.1 |
% |
|
|
1.3 |
% |
Store Branded Retail |
|
|
99,669 |
|
|
|
15.4 |
|
|
|
110,062 |
|
|
|
16.5 |
|
|
|
(9.4 |
)% |
Non-retail and Other |
|
|
166,490 |
|
|
|
25.8 |
|
|
|
183,254 |
|
|
|
27.4 |
|
|
|
(9.1 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
646,174 |
|
|
|
100.0 |
% |
|
$ |
668,275 |
|
|
|
100.0 |
% |
|
|
(3.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 3.3% decrease in sales was attributable to the following:
|
|
|
|
|
|
|
Favorable |
Percentage Point Change in Sales Attributed to: |
|
(Unfavorable) |
Pricing/Mix |
|
|
(2.4 |
)% |
Volume |
|
|
(0.7 |
)% |
Deconsolidation of VIE |
|
|
(0.2 |
)% |
|
|
|
|
|
Total Percentage Change in Sales |
|
|
(3.3 |
)% |
|
|
|
|
|
The increase in branded retail sales was due primarily to growth in branded soft variety and
branded buns, rolls and sandwich rounds, partially offset by decreases in branded white bread. The
decrease in store branded retail sales was due to negative price/mix, and
volume declines. The decrease in non-retail and other sales was due to volume declines, and to a
lesser extent, negative price/mix.
24
Warehouse Delivery Sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended |
|
|
For the 16 Weeks Ended |
|
|
|
|
|
|
April 24, 2010 |
|
|
April 25, 2009 |
|
|
% Increase |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
(Decrease) |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
|
|
|
Branded Retail |
|
$ |
43,007 |
|
|
|
28.9 |
% |
|
$ |
40,185 |
|
|
|
29.0 |
% |
|
|
7.0 |
% |
Store Branded Retail |
|
|
19,728 |
|
|
|
13.3 |
|
|
|
18,891 |
|
|
|
13.6 |
|
|
|
4.4 |
% |
Non-retail and Other |
|
|
86,117 |
|
|
|
57.8 |
|
|
|
79,656 |
|
|
|
57.4 |
|
|
|
8.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
148,852 |
|
|
|
100.0 |
% |
|
$ |
138,732 |
|
|
|
100.0 |
% |
|
|
7.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 7.3% increase in sales was attributable to the following:
|
|
|
|
|
|
|
Favorable |
Percentage Point Change in Sales Attributed to: |
|
(Unfavorable) |
Pricing/Mix |
|
|
(2.9 |
)% |
Volume |
|
|
(0.2 |
)% |
Acquisitions |
|
|
10.4 |
% |
|
|
|
|
|
Total Percentage Change in Sales |
|
|
7.3 |
% |
|
|
|
|
|
The increase in branded retail sales was primarily the result of favorable multi-pak cake
volume. The increase in store branded retail sales was primarily due to store branded cake volume
increases, partially offset by negative price/mix. The increase in non-retail and other sales, which
include contract production and vending, was due to the acquisitions partially offset by a negative
mix shift and volume declines.
Materials, Supplies, Labor and Other Production Costs (exclusive of depreciation and
amortization shown separately). The decrease as a percent of sales was primarily due to significant
decreases in ingredient costs, improved manufacturing efficiencies, and the Bardstown, Kentucky
plant start-up costs in the prior year of $1.0 million, of which $0.8 million was included in cost
of sales. These were partially offset by higher employee related costs as a percent of sales and higher costs as a percent of sales for the acquired companies.
The DSD segments decrease as a percent of sales was primarily the result of significant
decreases in ingredient costs, improved manufacturing efficiencies and the Bardstown, Kentucky
plant start-up costs in the prior year. These were offset by sales decreases and higher employee related costs
as a percent of sales.
The warehouse delivery segments increase as a percent of sales was primarily a result of
higher ingredient and employee-related costs as a percent of sales, partially offset by improved
manufacturing efficiencies. Acquisitions were the primary reason for the higher ingredient costs
as a percent of sales.
Selling, Distribution and Administrative Expenses. The increase as a percent of sales was due
to sales decreases and higher employee-related, distribution and advertising costs as a percent of
sales. These increases were partially offset by lower pension and bad debt expenses as a percent
of sales.
The DSD segments selling, distribution and administrative expenses increased as a percent of
sales primarily due to sales decreases and higher employee-related and advertising costs as a percent
of sales, partially offset by gains on territory sales.
The warehouse delivery segments selling, distribution and administrative expenses decreased
as a percent of sales primarily due to lower distribution, storage, and rent costs as a percent of
sales.
Depreciation and Amortization. Depreciation and amortization increased primarily due to
increased depreciation expense related to capital expenditures subsequent to the first quarter of
fiscal 2009 and acquisitions.
The DSD segments depreciation and amortization expense increased primarily due to assets
placed in service subsequent to the first quarter of fiscal 2009. The warehouse delivery segments
depreciation and amortization expense increased primarily as a result of acquisitions.
Income From Operations. The increase in the DSD segments income from operations was primarily
attributable to lower ingredient costs and improved manufacturing efficiencies, partially offset by
sales declines. The decrease in the warehouse delivery segments income from operations was primarily
a result of higher materials, supplies, labor and other production costs. The increase in
25
unallocated corporate expenses was primarily due to higher share-based payment expenses.
Net Interest Income. The increase was related to lower interest expense on the term loan
because principal payments have been made quarterly since the fourth quarter of 2008. As this loan
is amortized through August 4, 2013, interest expense will decrease for the term loan. Lower
amounts outstanding under the companys unsecured credit facility also contributed to the increase.
Income Taxes. The effective tax rate for the first quarter of fiscal 2010 was 35.6% compared
to 36.6% in the first quarter of the prior year. The decrease in the rate is due mainly to the
increase in the Section 199 qualifying production activities deduction in the current quarter
compared to the prior year quarter. The difference in the effective rate and the statutory rate is
primarily due to state income taxes and the Section 199 qualifying production activities deduction.
Net Income Attributable to Noncontrolling Interest. The company maintains a transportation
agreement with an entity that transports a significant portion of the companys fresh bakery
products from the companys production facilities to outlying distribution centers. The company
represents a significant portion of the entitys revenue. This entity qualified as a VIE for
reporting periods prior to January 3, 2010 under previous accounting guidance and all the earnings
of the VIE were eliminated through noncontrolling interest because the company did not have an
equity ownership interest in the VIE. In 2009, the FASB amended the consolidation principles
associated with VIE accounting by replacing the quantitative-based risks and rewards calculation
for determining which enterprise, if any, has a controlling financial interest in the VIE with a
qualitative approach. The qualitative approach is focused on identifying which company has both
the power to direct the activities of a VIE that most significantly impact the entitys economic
performance and the obligation to absorb losses of the entity or the right to receive benefits from
the entity. As a result of this qualitative analysis, the company is no longer required to
consolidate the VIE beginning on January 3, 2010 at adoption. Please see Note 9, Variable Interest
Entity, of this Form 10-Q for additional disclosure.
LIQUIDITY AND CAPITAL RESOURCES:
Liquidity represents our ability to generate sufficient cash flows from operating activities
to meet our obligations and commitments as well as our ability to obtain appropriate financing and
convert into cash those assets that are no longer required to meet existing strategic and financing
objectives. Therefore, liquidity cannot be considered separately from capital resources that
consist primarily of current and potentially available funds for use in achieving long-range
business objectives. Currently, the companys liquidity needs arise primarily from working capital
requirements, capital expenditures and stock repurchases. The companys strategy for use of its
cash flow includes paying dividends to shareholders, making acquisitions, growing internally and
repurchasing shares of its common stock when appropriate.
Cash Flows
Flowers Foods cash and cash equivalents decreased to $8.4 million at April 24, 2010 from
$18.9 million at January 2, 2010. The decrease resulted from $82.5 million provided by operating
activities, offset by $35.6 million and $57.4 million disbursed for investing activities and
financing activities, respectively. Included in cash and cash equivalents at January 2, 2010 was
$8.8 million related to the companys VIE which was not available for use by the company. The
company deconsolidated the VIE on January 3, 2010 as discussed in Note 9, Variable Interest Entity,
of this Form 10-Q.
Cash Flows Provided by Operating Activities. Net cash of $82.5 million provided by operating
activities during the sixteen weeks ended April 24, 2010 consisted primarily of $40.7 million in
net income, adjusted for the following non-cash items (amounts in thousands):
|
|
|
|
|
Depreciation and amortization |
|
$ |
25,637 |
|
Loss reclassified from accumulated other comprehensive income to net income |
|
|
11,525 |
|
Stock-based compensation |
|
|
4,753 |
|
Deferred income taxes |
|
|
(476 |
) |
Provision for inventory obsolescence |
|
|
358 |
|
Allowances for accounts receivable |
|
|
564 |
|
Pension and postretirement plans expense |
|
|
599 |
|
Other |
|
|
(61 |
) |
|
|
|
|
Total |
|
$ |
42,899 |
|
|
|
|
|
Cash disbursed for working capital and other activities was $1.1 million. As of April 24,
2010, the company had $4.4 million recorded in other current assets representing collateral for
hedged positions. As of January 2, 2010, the company had $7.0 million recorded in other current
assets representing collateral for hedged positions.
26
Cash Flows Disbursed for Investing Activities. Net cash disbursed for investing activities
during the sixteen weeks ended April 24, 2010 of $35.6 million consisted primarily of capital
expenditures of $29.1 million. In addition, the deconsolidation of the VIE (as discussed in Note 9,
Variable Interest Entities, of this Form 10-Q) includes a deduction for $8.8 million of the VIEs
cash and cash equivalents balance at January 2, 2010. Capital expenditures in the DSD segment and
the warehouse delivery segment were $20.4 million and $7.6 million, respectively. The company
estimates capital expenditures of approximately $85.0 million to $95.0 million during fiscal 2010.
The company also leases certain production machinery and equipment through various operating
leases.
Cash Flows Disbursed for Financing Activities. Net cash disbursed for financing activities of
$57.4 million during the sixteen weeks ended April 24, 2010 consisted primarily of dividends paid
of $16.0 million, stock repurchases of $2.1 million, and net debt repayments of $39.3 million,
partially offset by proceeds of $2.5 million from the exercise of stock options and the related
share-based payments income tax benefit of $0.2 million.
Credit Facility and Term Loan
Credit Facility. The company has a five-year, $250.0 million unsecured revolving loan facility
(the credit facility) that expires October 5, 2012. The company may request to increase its
borrowings under the credit facility up to an aggregate of $350.0 million upon the satisfaction of
certain conditions. Proceeds from the credit facility may be used for working capital and general
corporate purposes, including acquisition financing, refinancing of indebtedness and share
repurchases. The credit facility includes certain customary restrictions, which, among other
things, require maintenance of financial covenants and limit encumbrance of assets and creation of
indebtedness. Restrictive financial covenants include such ratios as a minimum interest coverage
ratio and a maximum leverage ratio. The company believes that, given its current cash position, its
cash flow from operating activities and its available credit capacity, it can comply with the
current terms of the credit facility and can meet presently foreseeable financial requirements. As
of April 24, 2010 and January 2, 2010, the company was in compliance with all restrictive financial
covenants under its credit facility.
Interest is due quarterly in arrears on any outstanding borrowings at a customary Eurodollar
rate or the base rate plus the applicable margin. The underlying rate is defined as the rate
offered in the interbank Eurodollar market or the higher of the prime lending rate or federal funds
rate plus 0.5%. The applicable margin ranges from 0.00% to 0.30% for base rate loans and from 0.40%
to 1.275% for Eurodollar loans. In addition, a facility fee ranging from 0.10% to 0.35% is due
quarterly on all commitments under the credit facility. Both the interest margin and the facility
fee are based on the companys leverage ratio. There were $55.0 million and $89.0 million in
outstanding borrowings under the credit facility at April 24, 2010 and January 2, 2010,
respectively.
Term Loan. On August 1, 2008, the company entered into a credit agreement (term loan) with
various lending parties for the purpose of completing acquisitions. The term loan provides for
borrowings through the maturity date of August 4, 2013. The initial maximum amount permitted to be
outstanding under the term loan is $150.0 million. The term loan includes certain customary
restrictions, which, among other things, require maintenance of financial covenants and limit
encumbrance of assets and creation of indebtedness. Restrictive financial covenants include such
ratios as a minimum interest coverage ratio and a maximum leverage ratio. The company believes
that, given its current cash position, its cash flow from operating activities and its available
credit capacity, it can comply with the current terms of the term loan and can meet presently
foreseeable financial requirements. As of April 24, 2010 and January 2, 2010, the company was in
compliance with all restrictive financial covenants under the term loan. As of April 24, 2010 and
January 2, 2010, the amounts outstanding under the term loan were $127.5 million and $131.3
million, respectively.
Interest is due quarterly in arrears on outstanding borrowings at a customary Eurodollar rate
or the base rate plus the applicable margin. The underlying rate is defined as the rate offered in
the interbank Eurodollar market or the higher of the prime lending rate or federal funds rate plus
0.5%. The applicable margin ranges from 0.0% to 1.375% for base rate loans and from 0.875% to
2.375% for Eurodollar loans and is based on the companys leverage ratio. Principal payments began on December 31, 2008 and are
due quarterly under the term loan at an annual amortization of 10%
of the principal balance for each of the first two years, 15% during the third year, 20% during the
fourth year, and 45% during the fifth year. The company paid financing costs of $0.8 million in
connection with the term loan, which is being amortized over the life of the term loan.
Currently, the companys credit ratings by Fitch Ratings, Moodys, and Standard & Poors are
BBB, Baa2, and BBB-, respectively. Changes in the companys credit ratings do not trigger a change
in the companys available borrowings or costs under the credit facility or term loan, but could
affect future credit availability.
27
Uses of Cash
On February 16, 2009, the Board of Directors declared a dividend of $0.175 per share on the
companys common stock that was paid on March 16, 2010 to shareholders of record on March 2, 2010.
This dividend payment was $16.0 million.
Our Board of Directors has approved a plan that authorizes share repurchases of up to 30.0
million shares of the companys common stock. Under the plan, the company may repurchase its common
stock in open market or privately negotiated transactions at such times and at such prices as
determined to be in the companys best interest. These purchases may be commenced or suspended
without prior notice depending on then-existing business or market conditions and other factors.
During the first quarter of fiscal 2010, 87,271 shares, at a cost of $2.1 million of the companys
common stock were purchased under the plan. From the inception of the plan through April 24, 2010,
22.7 million shares, at a cost of $367.1 million, have been purchased.
During the first quarter of fiscal 2010, the company paid $16.2 million in performance-based
cash awards under the companys bonus plan.
NEW ACCOUNTING PRONOUNCEMENTS:
In April 2009, the FASB issued a staff position requiring fair value disclosures in both
interim as well as annual financial statements in order to provide more timely information about
the effects of current market conditions on financial instruments. The guidance was effective for
interim and annual periods ending after June 15, 2009. Upon adoption during the second quarter of
fiscal 2009, the implementation of this standard did not have a material impact on our consolidated
financial position and results of operations.
In May 2009, the FASB issued new guidance on subsequent events. The standard provides guidance
on managements assessment of subsequent events and incorporates this guidance into accounting
literature. The standard was effective prospectively for interim and annual periods ending after
June 15, 2009. See Note 16, Subsequent Events, of Notes to Condensed Consolidated Financial
Statements of this Form 10-Q for the required disclosures. In February 2010, the FASB issued new
guidance that amended certain recognition and disclosure requirements for subsequent events. The
guidance changed the requirement for public companies to report the date through which subsequent
events were reviewed. This guidance was effective at issuance. The implementation of the standard
and new guidance did not have a material impact on our consolidated financial position and results
of operations.
In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for
the consolidation of VIEs. The guidance affects the overall consolidation analysis and requires
enhanced disclosures on involvement with VIEs. The guidance is effective for fiscal years
beginning after November 15, 2009. Prior to January 3, 2010, we consolidated a VIE because we
determined the company was the primary beneficiary. Under the new guidance, we have determined that
the company no longer qualifies as the primary beneficiary and ceased consolidating the VIE
beginning in the first quarter of fiscal 2010. The company will continue to record certain of the
trucks and trailers the VIE uses for distributing our products from the manufacturing facility to
the distribution centers as right to use leases. See Note 9, Variable Interest Entity, of Notes to
Condensed Consolidated Financial Statements of this Form 10-Q for the required disclosures.
In June 2009, the FASB Accounting Standards Codification (Codification) was issued. The
Codification is the source of authoritative U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities. The Codification was effective for financials statements issued for
interim and annual periods ending after September 15, 2009. The implementation of this standard did
not have a material impact on our consolidated financial position and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The company uses derivative financial instruments as part of an overall strategy to manage
market risk. The company uses forward, futures, swap and option contracts to hedge existing or
future exposure to changes in interest rates and commodity prices. The company does not enter into
these derivative financial instruments for trading or speculative purposes. If actual market
conditions are less favorable than those anticipated, raw material prices could increase
significantly, adversely affecting the margins from the sale of our products.
COMMODITY PRICE RISK
The company enters into commodity forward, futures and option contracts and swap agreements
for wheat and, to a lesser extent,
28
other commodities in an effort to provide a predictable and
consistent commodity price and thereby reduce the impact of market
volatility in its raw material and packaging prices. As of April 24, 2010, the companys hedge
portfolio contained commodity derivatives with a fair value of $(2.9) million. Of this fair value,
$(0.1) million is based on quoted market prices and $(2.8) million is based on models and other
valuation methods. Approximately $(2.8) million and $(0.1) million of this fair value relates to
instruments that will be utilized in fiscal 2010 and fiscal 2011, respectively.
A sensitivity analysis has been prepared to quantify the companys potential exposure to
commodity price risk with respect to the derivative portfolio. Based on the companys derivative
portfolio as of April 24, 2010, a hypothetical ten percent increase (decrease) in commodity prices
would increase (decrease) the fair value of the derivative portfolio by $8.9 million. The analysis
disregards changes in the exposures inherent in the underlying hedged items; however, the company
expects that any increase (decrease) in fair value of the portfolio would be substantially offset
by increases (decreases) in raw material and packaging prices.
INTEREST RATE RISK
The company entered into interest rate swaps with notional amounts of $85.0 million, and $65.0
million, respectively, to fix the interest rate on the $150.0 million term loan secured on August
1, 2008 to fund the acquisitions of ButterKrust Bakery and Holsum Bakery, Inc. On October 27, 2008,
the company entered an interest rate swap with a notional amount of $50.0 million to fix the
interest rate on borrowings outstanding under the companys unsecured credit facility through
September 30, 2009. As of April 24, 2010, the fair value of these interest rate swaps was $(6.9)
million. All of this fair value is based on valuation models and $(3.0) million, $(2.8) million,
$(1.0) million, and $(0.1) million of this fair value is related to instruments expiring in 2010
through 2013, respectively.
A sensitivity analysis has been prepared to quantify the companys potential exposure to
interest rate risk with respect to the interest rate swaps. As of April 24, 2010, a hypothetical
ten percent increase (decrease) in interest rates would increase (decrease) the fair value of the
interest rate swap by $0.5 million. The analysis disregards changes in the exposures inherent in
the underlying debt; however, the company expects that any increase (decrease) in payments under
the interest rate swap would be substantially offset by increases (decreases) in interest expense.
ITEM 4. CONTROLS AND PROCEDURES
Managements Evaluation of Disclosure Controls and Procedures
We have established and maintain a system of disclosure controls and procedures that are
designed to ensure that material information relating to the company, which is required to be
timely disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934,
as amended (the Exchange Act), is accumulated and communicated to management in a timely fashion
and is recorded, processed, summarized and reported within the time periods specified by the SECs
rules and forms. An evaluation of the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) was performed as of
the end of the period covered by this quarterly report. This evaluation was performed under the
supervision and with the participation of management, including our Chief Executive Officer
(CEO), Chief Financial Officer (CFO) and Chief Accounting Officer (CAO). Based upon that
evaluation, our CEO, CFO and CAO have concluded that these disclosure controls and procedures were
effective as of the end of the period covered by this quarterly report.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during
our last fiscal quarter ended April 24, 2010 that have materially affected or are reasonably likely
to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company and its subsidiaries from time to time are parties to, or targets of, lawsuits,
claims, investigations and proceedings, which are being handled and defended in the ordinary course
of business. While the company is unable to predict the outcome of these matters, it believes,
based upon currently available facts, that it is remote that the ultimate resolution of any such
pending matters will have a material adverse effect on its overall financial condition, results of
operations or cash flows in the future. However, adverse developments could negatively impact
earnings in a particular future fiscal period.
29
On July 23, 2008, a wholly-owned subsidiary of the company filed a lawsuit against Hostess in
the United States District Court for
the Northern District of Georgia. The complaint alleges that Hostess is infringing upon
Flowers Natures Own trademarks by using or intending to use the Natures Pride trademark. Flowers
asserts that Hostess sale or intended sale of baked goods under the Natures Pride trademark is
likely to cause confusion with, and likely to dilute the distinctiveness of, the Natures Own mark
and constitutes unfair competition and deceptive trade practices. Flowers is seeking actual
damages, an accounting of Hostess profits from its sales of Natures Pride products, and
injunctive relief.
The companys facilities are subject to various federal, state and local laws and regulations
regarding the discharge of material into the environment and the protection of the environment in
other ways. The company is not a party to any material proceedings arising under these regulations.
The company believes that compliance with existing environmental laws and regulations will not
materially affect the consolidated financial condition or the competitive position of the company.
The company is currently in substantial compliance with all material environmental regulations
affecting the company and its properties.
ITEM 1A. RISK FACTORS
Please refer to Part I, Item 1A., Risk Factors, in the companys Form 10-K for the year ended
January 3, 2010 for information regarding factors that could affect the companys results of
operations, financial condition and liquidity. There have been no changes to our risk factors
during the first quarter of fiscal 2010.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our Board of Directors has approved a plan that authorizes share repurchases of up to 30.0
million shares of the companys common stock. Under the plan, the company may repurchase its common
stock in open market or privately negotiated transactions at such times and at such prices as
determined to be in the companys best interest. These purchases may be commenced or suspended
without prior notice depending on then-existing business or market conditions and other factors.
The following chart sets forth the amounts of our common stock purchased by the company during the
first quarter of fiscal 2010 under the stock repurchase plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
of Shares that |
|
|
|
|
|
|
Weighted |
|
as Part of |
|
May Yet Be |
|
|
Total Number |
|
Average Price |
|
Publicly Announced |
|
Purchased Under the |
Period |
|
of Shares Purchased |
|
Per Share |
|
Plan or Programs |
|
Plan or Programs |
|
|
(Amounts in thousands, except price data) |
January 3, 2010 January 30, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,349 |
|
January 31, 2010 February 27, 2010 |
|
|
87 |
|
|
$ |
24.24 |
|
|
|
87 |
|
|
|
7,262 |
|
February 28, 2010 March 27, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,262 |
|
March 28, 2010 April 24, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
87 |
|
|
$ |
24.24 |
|
|
|
87 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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ITEM 6. EXHIBITS
Exhibits filed as part of this report are listed in the Exhibit Index attached hereto.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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FLOWERS FOODS, INC.
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By: |
/s/ GEORGE E. DEESE
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Name: |
George E. Deese |
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Title: |
Chairman of the Board and
Chief Executive Officer |
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By: |
/s/ R. STEVE KINSEY
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Name: |
R. Steve Kinsey |
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Title: |
Executive Vice President and Chief Financial Officer |
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By: |
/s/ KARYL H. LAUDER
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Name: |
Karyl H. Lauder |
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Title: |
Senior Vice President and Chief Accounting Officer |
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Date: June 3, 2010
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EXHIBIT INDEX
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Exhibit |
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No |
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Name of Exhibit |
2.1
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Distribution Agreement by and between Flowers Industries, Inc. and Flowers Foods, Inc., dated as of
October 26, 2000 (Incorporated by reference to Flowers Foods Registration Statement on Form 10,
dated December 1, 2000, File No. 1-16247). |
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2.2
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Amendment No. 1 to Distribution Agreement, dated as of March 12, 2001, between Flowers Industries,
Inc. and Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual Report on Form
10-K, dated March 30, 2001, File No. 1-16247). |
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3.1
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Restated Articles of Incorporation of Flowers Foods, Inc. as amended May 30, 2008 (Incorporated by
reference to Flowers Foods Quarterly Report on Form 10-Q
dated June 4, 2009, File No. 1-16247). |
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3.2
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Amended and Restated Bylaws of Flowers Foods, Inc. as amended and restated on November 14, 2008
(Incorporated by reference to Flowers Foods Current Report on Form 8-K dated November 18, 2008,
File No. 1-16247). |
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4.1
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Share Certificate of Common Stock of Flowers Foods, Inc. (Incorporated by reference to Flowers
Foods Annual Report on Form 10-K, dated March 30,
2001, File No. 1-16247). |
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4.2
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Rights Agreement between Flowers Foods, Inc. and First Union National Bank, as Rights Agent, dated
March 23, 2001 (Incorporated by reference to Flowers Foods Annual Report on Form 10-K, dated March
30, 2001, File No. 1-16247). |
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4.3
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Amendment No. 1, dated November 15, 2002, to Rights Agreement between Flowers Foods, Inc. and
Wachovia Bank, N.A. (as successor in interest to First Union National Bank), as rights agent, dated
March 23, 2001. (Incorporated by reference to Flowers Foods Registration Statement on Form 8-A,
dated November 18, 2002, File No. 1-16247). |
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10.1
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Flowers Foods, Inc. Retirement Plan No. 1 as amended and restated effective March 26, 2001
(Incorporated by reference to Flowers Foods Annual Report on Form 10-K, dated March 30, 2001, File
No. 1-16247). |
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10.2
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Flowers Foods, Inc. 2001 Equity and Performance Incentive Plan, as amended and restated as of April
1, 2009 (Incorporated by reference to Flowers Foods Proxy Statement on Schedule 14A, dated April
24, 2009, File No. 1-16247). |
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10.3
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Flowers Foods, Inc. Stock Appreciation Rights Plan. (Incorporated by reference to Flowers Foods
Annual Report on Form 10-K, dated March 29, 2002, File
No. 1-16247). |
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10.4
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Flowers Foods, Inc. Annual Executive Bonus Plan. (Incorporated by reference to Flowers Foods Proxy
Statement on Schedule 14A, dated April 24, 2009, File
No. 1-16247). |
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10.5
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Flowers Foods, Inc. Supplemental Executive Retirement Plan. (Incorporated by reference to Flowers
Foods Annual Report on Form 10-K, dated March 29,
2002, File No. 1-16247). |
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10.6
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Form of Indemnification Agreement, by and between Flowers Foods, Inc., certain executive officers
and the directors of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual Report
on Form 10-K, dated March 28, 2003, File
No. 1-16247). |
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10.7
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Form of Continuation of Employment Agreement, by and between Flowers Foods, Inc. and certain
executive officers of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual
Report on Form 10-K dated March 4, 2009, File
No. 1016247) |
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10.8
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Ninth Amendment dated November 7, 2005 to the Flowers Foods, Inc. Retirement Plan No. 1 as Amended
and restated effective as of March 26, 2001. (Incorporated by reference to Flowers Foods Quarterly
Report on Form 10-Q dated November 17, 2005, File
No. 1-16247). |
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10.9
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Form of Nonqualified Stock Option Agreement, by and between Flowers Foods, Inc. and certain
executive officers |
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Exhibit |
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No |
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Name of Exhibit |
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of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual
Report on Form 10-K dated March 1, 2006, File
No. 1-16247). |
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10.10
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Form of 2008 Nonqualified Stock Option Agreement, by and between Flowers Foods, Inc. and certain
executive officers of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual
Report on Form 10-K dated February 27, 2008, File
No. 1-16247). |
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10.11
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First Amendment and Waiver, dated October 5, 2007, among Flowers Foods, Inc., a Georgia
corporation, the lenders party to the Credit Agreement and Deutsche Bank AG New York Branch, as
Administrative Agent. (Incorporated by reference to Flowers Foods Current Report on Form 8-K dated
October 11, 2007, File No. 1-16247). |
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10.12
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Agreement and Plan of Merger, dated June 23, 2008, by and among, Flowers Foods, Inc., Peachtree
Acquisition Co., LLC, Holsum Bakery, Inc., Lloyd Edward Eisele, Jr. and The Lloyd Edward Eisele,
Jr. Revocable Trust (Incorporated by reference to Flowers Foods Current Report on Form 8-K/A dated
June 25, 2008, File No. 1-16247). |
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10.13
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Credit Agreement, dated as of August 1, 2008, among Flowers Foods, Inc., the Lenders Party thereto
from time to time, Bank of America N.A., Cooperative Centrale Raiffeisen-Boerenleen Bank, B.A.,
Rabobank International, New York Branch, and Branch Banking & Trust Company as co-documentation
agents, SunTrust Bank, as syndication agent, and Deutsche Bank AG, New York Branch, as
administrative agent (Incorporated by reference to Flowers Foods Current Report on Form 8-K dated
August 6, 2008, File No. 1-16247). |
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10.14
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Form of 2009 Restricted Stock Agreement, by and between Flowers Foods, Inc. and certain executive
officers of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual Report on Form
10-K dated March 4, 2009, File No. 1-16247). |
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10.15
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Form of 2009 Nonqualified Stock Option Agreement, by and between Flowers Foods, Inc. and certain
executive officers of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual
Report on Form 10-K dated March 4, 2009, File
No. 1-16247). |
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10.16
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Form of 2009 Deferred Shares Agreement, by and between Flowers Foods, Inc. and certain members of
the Board of Directors of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual
Report on Form 10-K dated March 4, 2009, File
No. 1-16247). |
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10.17
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Form of 2010 Restricted Stock Agreement, by and between Flowers Foods, Inc. and certain executive
officers of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual Report on Form
10-K dated March 3, 2010, File No. 1-16247). |
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10.18
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Form of 2010 Nonqualified Stock Option Agreement, by and between Flowers Foods, Inc. and certain
executive officers of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual
Report on Form 10-K dated March 3, 2010, File
No. 1-16247). |
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21
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Subsidiaries of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual Report on
Form 10-K dated March 3, 2010, File No. 1-16247). |
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*31.1
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Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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*31.2
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Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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*31.3
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Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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*32
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Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, by George E. Deese, Chief Executive Officer, R. Steve Kinsey, Chief
Financial Officer and Karyl H. Lauder, Chief Accounting Officer for the Quarter Ended April 24,
2010. |
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