FLOWERS FOODS, INC.
United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 19, 2008
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)
31757
(Zip Code)
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 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)
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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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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 23, 2008 |
Common Stock, $.01 par value with
Preferred Share Purchase Rights
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92,147,045 |
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 changes in pricing, 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; |
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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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customer and consumer reaction to pricing actions; and |
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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. |
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, in the companys
Form 10-K for the year ended December 29, 2007 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 19, 2008 |
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DECEMBER 29, 2007 |
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ASSETS |
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Current Assets: |
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Cash and cash equivalents |
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$ |
42,478 |
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$ |
19,978 |
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Accounts and notes receivable, net of allowances of $421 and $131, respectively |
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151,763 |
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137,682 |
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Inventories, net: |
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Raw materials |
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15,582 |
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14,257 |
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Packaging materials |
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11,127 |
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10,809 |
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Finished goods |
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24,743 |
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22,271 |
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51,452 |
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47,337 |
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Spare parts and supplies |
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29,632 |
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28,574 |
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Deferred taxes |
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1,863 |
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Other |
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53,274 |
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33,800 |
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Total current assets |
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328,599 |
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269,234 |
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Property, Plant and Equipment, net of accumulated depreciation of $575,766 and $556,960, respectively |
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489,083 |
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486,522 |
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Notes Receivable |
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90,268 |
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88,469 |
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Assets Held for Sale Distributor Routes |
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10,795 |
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12,396 |
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Other Assets |
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36,645 |
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32,525 |
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Goodwill |
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76,338 |
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76,338 |
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Other Intangible Assets, net |
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21,570 |
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22,051 |
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Total assets |
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$ |
1,053,298 |
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$ |
987,535 |
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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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$ |
4,414 |
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$ |
6,920 |
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Accounts payable |
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103,882 |
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98,302 |
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Deferred taxes |
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11,212 |
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Other accrued liabilities |
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116,103 |
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108,423 |
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Total current liabilities |
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235,611 |
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213,645 |
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Long-Term Debt and Capital Leases |
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23,107 |
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22,508 |
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Other Liabilities: |
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Deferred taxes |
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50,001 |
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50,974 |
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Other |
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37,652 |
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36,391 |
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Total other liabilities |
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87,653 |
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87,365 |
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Minority Interest in Variable Interest Entity |
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8,735 |
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7,802 |
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Commitments and Contingencies
Stockholders Equity: |
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Preferred stock $100 par value, 100,000 authorized and none issued
Preferred stock $.01 par value, 900,000 authorized and none issued
Common stock $.01 par value, 120,000,000 authorized shares, 101,659,924 shares and 101,659,924
shares issued, respectively |
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1,017 |
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1,017 |
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Treasury stock 9,512,879 shares and 9,755,350 shares, respectively |
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(152,677 |
) |
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(154,801 |
) |
Capital in excess of par value |
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483,734 |
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484,472 |
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Retained earnings |
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327,635 |
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303,386 |
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Accumulated other comprehensive income |
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38,483 |
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22,141 |
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Total stockholders equity |
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698,192 |
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656,215 |
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Total liabilities and stockholders equity |
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$ |
1,053,298 |
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$ |
987,535 |
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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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FOR THE SIXTEEN WEEKS ENDED |
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APRIL 19, 2008 |
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APRIL 21, 2007 |
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Sales |
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$ |
676,707 |
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$ |
609,947 |
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Materials, supplies, labor and other production
costs (exclusive of depreciation and
amortization shown separately below) |
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349,971 |
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306,952 |
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Selling, marketing and administrative expenses |
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251,675 |
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237,963 |
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Depreciation and amortization |
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20,912 |
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|
20,117 |
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Income from operations |
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54,149 |
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44,915 |
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Interest expense |
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|
(679 |
) |
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(1,409 |
) |
Interest income |
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|
4,176 |
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|
3,342 |
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|
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Income before income taxes and minority interest |
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57,646 |
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|
46,848 |
|
Income tax expense |
|
|
20,562 |
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|
16,500 |
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|
|
|
|
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Income before minority interest |
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37,084 |
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|
30,348 |
|
Minority interest in variable interest entity |
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(1,301 |
) |
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|
(1,855 |
) |
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Net income |
|
$ |
35,783 |
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$ |
28,493 |
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Net Income Per Common Share: |
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Basic: |
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Net income per share |
|
$ |
0.39 |
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$ |
0.32 |
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Weighted average shares outstanding |
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91,700 |
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|
90,542 |
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Diluted: |
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Net income per share |
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$ |
0.39 |
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$ |
0.31 |
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|
|
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Weighted average shares outstanding |
|
|
92,352 |
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|
91,958 |
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Cash dividends paid per common share |
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$ |
0.125 |
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$ |
0.08 |
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(See Accompanying Notes to Condensed Consolidated Financial Statements)
5
FLOWERS FOODS, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
AND COMPREHENSIVE INCOME
(Unaudited)
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Capital |
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Accumulated |
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Common Stock |
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in Excess |
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Other |
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Treasury Stock |
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Comprehensive |
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Number of |
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Par |
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of Par |
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Retained |
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Comprehensive |
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Number of |
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Income |
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Shares Issued |
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Value |
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Value |
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Earnings |
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Income |
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Shares |
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Cost |
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Total |
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(Amounts in thousands, except for share data) |
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Balances at December 29, 2007 |
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|
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101,659,924 |
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|
$ |
1,017 |
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$ |
484,472 |
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$ |
303,386 |
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$ |
22,141 |
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(9,755,350 |
) |
|
$ |
(154,801 |
) |
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$ |
656,215 |
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Net Income |
|
$ |
35,783 |
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|
35,783 |
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|
35,783 |
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Derivative instruments |
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|
16,279 |
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16,279 |
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|
16,279 |
|
Amortization of prior
service costs |
|
|
63 |
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|
|
|
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|
|
63 |
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|
63 |
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Comprehensive income |
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$ |
52,125 |
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Exercise of stock
options |
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(1,564 |
) |
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|
248,839 |
|
|
|
3,969 |
|
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|
2,405 |
|
Issuance of
restricted stock
award |
|
|
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|
|
|
|
|
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|
|
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(3,984 |
) |
|
|
|
|
|
|
|
|
|
|
249,880 |
|
|
|
3,984 |
|
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|
0 |
|
Amortization of
deferred and
restricted stock
awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,708 |
|
Stock option
compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,270 |
|
Tax benefits related
to share based awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,832 |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,832 |
|
Stock repurchases |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(256,248 |
) |
|
|
(5,829 |
) |
|
|
(5,829 |
) |
Dividends paid
$0.125 per common
share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,534 |
) |
|
|
|
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|
|
|
|
|
|
|
|
|
(11,534 |
) |
|
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Balances at April 19,
2008 |
|
|
|
|
|
|
101,659,924 |
|
|
$ |
1,017 |
|
|
$ |
483,734 |
|
|
$ |
327,635 |
|
|
$ |
38,483 |
|
|
|
(9,512,879 |
) |
|
$ |
(152,677 |
) |
|
$ |
698,192 |
|
|
|
|
|
|
|
|
|
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|
|
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|
|
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|
(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 19, 2008 |
|
|
APRIL 21, 2007 |
|
CASH FLOWS PROVIDED BY (DISBURSED FOR) OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
35,783 |
|
|
$ |
28,493 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
3,399 |
|
|
|
6,573 |
|
Depreciation and amortization |
|
|
20,912 |
|
|
|
20,117 |
|
Deferred income taxes |
|
|
1,873 |
|
|
|
(1,464 |
) |
Provision for inventory obsolescence |
|
|
305 |
|
|
|
284 |
|
Allowances for accounts receivable |
|
|
322 |
|
|
|
570 |
|
Minority interest in variable interest entity |
|
|
1,301 |
|
|
|
1,855 |
|
Other |
|
|
(120 |
) |
|
|
(219 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts and notes receivable, net |
|
|
(14,118 |
) |
|
|
(11,693 |
) |
Inventories, net |
|
|
(4,420 |
) |
|
|
(524 |
) |
Other assets |
|
|
1,892 |
|
|
|
(4,034 |
) |
Accounts payable and other accrued liabilities |
|
|
14,474 |
|
|
|
9,398 |
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES |
|
|
61,603 |
|
|
|
49,356 |
|
|
|
|
|
|
|
|
CASH FLOWS PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
(23,324 |
) |
|
|
(14,173 |
) |
Increase of notes receivable |
|
|
(2,084 |
) |
|
|
(5,098 |
) |
Other |
|
|
(102 |
) |
|
|
1,377 |
|
|
|
|
|
|
|
|
NET CASH DISBURSED FOR INVESTING ACTIVITIES |
|
|
(25,510 |
) |
|
|
(17,894 |
) |
|
|
|
|
|
|
|
CASH FLOWS PROVIDED BY (DISBURSED FOR) FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Dividends paid |
|
|
(11,534 |
) |
|
|
(7,562 |
) |
Exercise of stock options |
|
|
2,405 |
|
|
|
3,015 |
|
Income tax benefit related to stock awards |
|
|
1,598 |
|
|
|
1,655 |
|
Stock repurchases |
|
|
(5,829 |
) |
|
|
|
|
Change in book overdraft |
|
|
1,675 |
|
|
|
(1,148 |
) |
Proceeds from debt borrowings |
|
|
3,500 |
|
|
|
75,500 |
|
Debt and capital lease obligation payments |
|
|
(5,408 |
) |
|
|
(101,879 |
) |
|
|
|
|
|
|
|
NET CASH DISBURSED FOR FINANCING ACTIVITIES |
|
|
(13,593 |
) |
|
|
(30,419 |
) |
|
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
22,500 |
|
|
|
1,043 |
|
Cash and cash equivalents at beginning of period |
|
|
19,978 |
|
|
|
13,914 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
42,478 |
|
|
$ |
14,957 |
|
|
|
|
|
|
|
|
(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 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 19, 2008 and April 21, 2007 are not necessarily indicative of the results to be
expected for a full year. The balance sheet at December 29, 2007 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 December 29, 2007.
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 December 29, 2007.
REPORTING PERIODS The company operates on a 52-53 week fiscal year ending the Saturday nearest
December 31. Fiscal 2008 consists of 53 weeks, with the companys quarterly reporting periods as
follows: first quarter ended April 19, 2008 (sixteen weeks), second quarter ending July 12, 2008
(twelve weeks), third quarter ending October 4, 2008 (twelve weeks) and fourth quarter ending
January 3, 2009 (thirteen weeks).
SEGMENTS The company consists of two business segments: direct-store-delivery (DSD), formerly
referred to as Flowers Foods Bakeries Group and warehouse delivery, formerly referred to as Flowers Foods Specialty
Group. The DSD segment focuses on the production and marketing of bakery products to customers in
the southeastern, southwestern and mid-Atlantic areas of the United States primarily through its
direct-store-delivery system. The warehouse delivery segment produces snack cakes for sale to
co-pack, retail and vending customers as well as frozen bread, rolls and buns for sale to retail
and foodservice customers primarily through warehouse distribution.
STOCK SPLIT On June 1, 2007, the board of directors declared a 3-for-2 stock split of the
companys common stock in the form of a 50% stock dividend. The record date for the split was June
15, 2007, and new shares were issued on June 29, 2007. All share and per share information has been
restated for all prior periods presented giving retroactive effect to the stock split.
SIGNIFICANT CUSTOMER Following is the effect our largest customer, Wal-Mart/Sams Club, had on
the companys sales for the sixteen weeks ended April 19, 2008 and April 21, 2007. No other
customer accounted for 10% or more of the companys sales.
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 19, 2008 |
|
|
APRIL 21, 2007 |
|
|
|
(Percent of Sales) |
|
DSD |
|
|
17.9 |
% |
|
|
16.7 |
% |
Warehouse delivery |
|
|
2.4 |
|
|
|
2.7 |
|
|
|
|
|
|
|
|
Total |
|
|
20.3 |
% |
|
|
19.4 |
% |
|
|
|
|
|
|
|
8
2. COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) results from derivative financial instruments and
amortization of prior service costs related to the companys defined benefit and postretirement
plans pursuant to Statement of Financial Accounting Standard (SFAS) No. 158, Employers Accounting for Defined Benefit Pension and other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132R (SFAS 158). Total
comprehensive income, determined as net income adjusted by other comprehensive income (loss), was
$52.1 million and $29.4 million for the sixteen weeks ended April 19, 2008 and April 21, 2007,
respectively.
During the sixteen weeks ended April 19, 2008, changes to accumulated other comprehensive
loss, net of income tax, were as follows (amounts in thousands):
|
|
|
|
|
|
|
2008 |
Accumulated other comprehensive income, December 29, 2007
|
|
$ |
22,141 |
|
Derivative transactions: |
|
|
|
|
Net deferred gains on closed contracts, net of income tax of $1,282
|
|
|
2,047 |
|
Reclassified to earnings, net of income tax benefit of $(135)
|
|
|
(215 |
) |
Effective portion of change in fair value of hedging instruments,
net of income tax of $9,044
|
|
|
14,447 |
|
Amortization of prior service costs, net of income tax of $39
|
|
|
63 |
|
|
|
|
|
|
Accumulated other comprehensive income, April 19, 2008
|
|
$ |
38,483 |
|
|
|
|
|
|
3. GOODWILL AND OTHER INTANGIBLES
There were no changes in the carrying amount of goodwill for the sixteen weeks ended April 19,
2008. The balance as of April 19, 2008 is as follows (amounts in thousands):
|
|
|
|
|
DSD |
|
$ |
71,861 |
|
Warehouse delivery |
|
|
4,477 |
|
|
|
|
|
Total |
|
$ |
76,338 |
|
|
|
|
|
As of April 19, 2008 and December 29, 2007, the Company had the following amounts related to
amortizable intangible assets (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 19,2008 |
|
|
December 29, 2007 |
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
Asset |
|
Cost |
|
|
Amortization |
|
|
Net Value |
|
|
Cost |
|
|
Amortization |
|
|
Net Value |
|
Trademarks |
|
$ |
12,208 |
|
|
$ |
948 |
|
|
$ |
11,260 |
|
|
$ |
12,208 |
|
|
$ |
826 |
|
|
$ |
11,382 |
|
Customer relationships |
|
|
13,434 |
|
|
|
3,806 |
|
|
|
9,628 |
|
|
|
13,434 |
|
|
|
3,426 |
|
|
|
10,008 |
|
Non-compete agreements |
|
|
1,874 |
|
|
|
1,192 |
|
|
|
682 |
|
|
|
1,874 |
|
|
|
1,213 |
|
|
|
661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
27,516 |
|
|
$ |
5,946 |
|
|
$ |
21,570 |
|
|
$ |
27,516 |
|
|
$ |
5,465 |
|
|
$ |
22,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In connection with the sale of Mrs. Smiths Bakeries frozen dessert business, the company
entered into a 5-year non-compete agreement (agreement) with Schwan valued at $3.0 million
recorded as an intangible liability. The company is recognizing income related to this agreement
as a reduction of amortization expense over the life of the agreement. The carrying amount of this
liability at April 19, 2008 and December 29, 2007, respectively, was $.01 million and $.2 million.
The remaining intangible liability balance will be fully accreted to income during the second
quarter of 2008.
Aggregate amortization expense for the sixteen weeks ending April 19, 2008 and April 21, 2007
was as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2007 |
|
Amortizable intangible assets expense |
|
$ |
481 |
|
|
$ |
720 |
|
Amortizable intangible liabilities (income) |
|
|
(185 |
) |
|
|
(185 |
) |
Other |
|
|
(14 |
) |
|
|
(14 |
) |
|
|
|
|
|
|
|
Total |
|
$ |
282 |
|
|
$ |
521 |
|
|
|
|
|
|
|
|
9
Estimated amortization of intangibles for each of the next five years is as follows (amounts
in thousands):
|
|
|
|
|
|
|
Amortization of |
|
|
|
Intangibles |
|
Remainder of 2008 |
|
$ |
1,148 |
|
2009 |
|
|
1,658 |
|
2010 |
|
|
1,633 |
|
2011 |
|
|
1,633 |
|
2012 |
|
|
1,633 |
|
4. RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board
(FASB) issued SFAS No.
157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a common definition for
fair value to be applied to U.S. GAAP requiring use of fair value, establishes a framework for
measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is
effective for financial assets and financial liabilities for fiscal years beginning after November
15, 2007. The implementation of SFAS No. 157 for financial assets and financial liabilities,
effective January 1, 2008, did not have a material impact on our consolidated financial position
and results of operations. Please refer to Note 5 Derivative Financial Instruments for a detailed
discussion.
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS
No. 141R). SFAS No. 141R provides revised guidance on how acquirers recognize and
measure the consideration transferred, identifiable assets acquired, liabilities assumed,
noncontrolling interests, and goodwill acquired in a business combination. SFAS No. 141R also
expands required disclosures surrounding the nature and financial effects of business combinations.
SFAS No. 141R is effective, on a prospective basis, for fiscal years beginning after December 15,
2008. The Company is currently assessing the impact of SFAS No. 141R on its consolidated balance
sheet and statements of income.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements (SFAS No. 160). SFAS No. 160 establishes requirements for ownership interests
in subsidiaries held by parties other than the company (sometimes called minority interests) be
clearly identified, presented, and disclosed in the consolidated statement of financial position
within equity, but separate from the parents equity. All changes in the parents ownership
interests are required to be accounted for consistently as equity transactions and any
noncontrolling equity investments in unconsolidated subsidiaries must be measured initially at fair
value. SFAS No. 160 is effective, on a prospective basis, for fiscal years beginning after December
15, 2008. However, presentation and disclosure requirements must be retrospectively applied to
comparative financial statements. The company is currently assessing the impact of SFAS No. 160 on
its consolidated financial position and results of operations.
In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 expands
quarterly disclosure requirements in SFAS No. 133 about an entitys derivative instruments and
hedging activities. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008.
The company is currently assessing the impact of SFAS No. 161 on its consolidated financial
position and results of operations.
5. DERIVATIVE FINANCIAL INSTRUMENTS
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.
Beginning with the first fiscal quarter of fiscal 2008, the company began measuring the fair
value of the derivative portfolio using common definitions under SFAS No. 157, which defines 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. Under SFAS No. 157, 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.
10
As of April 19, 2008, the companys hedge portfolio contained commodity derivatives with a
fair value of $45.4 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 |
|
$ |
40.9 |
|
|
$ |
2.0 |
|
|
$ |
|
|
|
$ |
42.9 |
|
Other long-term |
|
|
0.3 |
|
|
|
2.3 |
|
|
|
|
|
|
|
2.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
41.2 |
|
|
|
4.3 |
|
|
|
|
|
|
|
45.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Fair Value |
|
$ |
41.1 |
|
|
$ |
4.3 |
|
|
$ |
|
|
|
$ |
45.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2009. Under SFAS 133, 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, marketing and administrative expenses. The
company held no commodity derivatives at April 19, 2008 or December 29, 2007 that did not qualify
for hedge accounting under SFAS 133. During the sixteen weeks ended April 19, 2008, an immaterial
amount was recorded to income due to changes in fair value of these instruments.
As of April 19, 2008, the balance in accumulated other comprehensive income related to
derivative transactions was $35.8 million. Of this total, approximately $25.1 million and $2.8
million were related to instruments expiring in 2008 and 2009, respectively, and $7.9 million was
related to deferred gains on cash flow hedge positions.
6. DEBT AND OTHER OBLIGATIONS
Long-term debt and capital leases consisted of the following at April 19, 2008 and December
29, 2007 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
APRIL 19, 2008 |
|
|
DECEMBER 29, 2007 |
|
Unsecured credit facility |
|
$ |
|
|
|
$ |
|
|
Capital lease obligations |
|
|
23,550 |
|
|
|
23,796 |
|
Other notes payable |
|
|
3,971 |
|
|
|
5,632 |
|
|
|
|
|
|
|
|
|
|
|
27,521 |
|
|
|
29,428 |
|
Less current maturities |
|
|
4,414 |
|
|
|
6,920 |
|
|
|
|
|
|
|
|
Total long-term debt and capital leases |
|
$ |
23,107 |
|
|
$ |
22,508 |
|
|
|
|
|
|
|
|
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 19, 2008 and
December 29, 2007, 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 either 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
11
under the credit facility. Both the interest margin and the facility
fee are based on the companys leverage ratio. There were no outstanding borrowings under the
credit facility at April 19, 2008 or December 29, 2007.
The
company paid financing costs of $0.9 million during fiscal 2007 in connection with its credit facility. These
costs were deferred and are being amortized over the term of the credit facility.
Currently, the companys credit ratings by Standard and Poors and Fitch Ratings are BBB- and
BBB, respectively. During the first quarter of fiscal 2008, Moodys Investor Services revised the
companys credit rating up to Baa2. Changes in the companys credit ratings do not trigger a change
in the companys available borrowings or costs under the credit facility, but could affect future
credit availability.
Included in accounts payable in the condensed consolidated balance sheets are book overdrafts
of $13.9 million and $12.2 million as of April 19, 2008 and December 29, 2007, respectively.
7. VARIABLE INTEREST ENTITY
The company maintains a transportation agreement with a thinly capitalized entity. This entity
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 Variable Interest Entity (VIE), but
not a Special Purpose Entity and under FASB Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities, the company is the primary beneficiary. In accordance with FIN 46, the
company consolidates this entity. 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.
Following is the effect of the VIE during the sixteen weeks ended April 19, 2008 and April 21,
2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIXTEEN WEEKS |
|
|
SIXTEEN WEEKS |
|
|
|
ENDED APRIL 19, 2008 |
|
|
ENDED APRIL 21, 2007 |
|
|
|
|
|
|
|
% OF |
|
|
|
|
|
|
% OF |
|
|
|
VIE |
|
|
TOTAL |
|
|
VIE |
|
|
TOTAL |
|
|
|
(Dollars in thousands) |
|
Assets as of respective quarter ends |
|
$ |
34,432 |
|
|
|
3.2 |
% |
|
$ |
32,270 |
|
|
|
3.5 |
% |
Sales |
|
$ |
2,800 |
|
|
|
0.4 |
% |
|
$ |
3,208 |
|
|
|
0.5 |
% |
Income before income taxes and minority
interest |
|
$ |
1,301 |
|
|
|
2.3 |
% |
|
$ |
1,855 |
|
|
|
4.0 |
% |
The assets consist primarily of $23.6 million and $23.1 million as of April 19, 2008 and April
21, 2007, respectively, of transportation equipment recorded as capital lease obligations.
8. LITIGATION
The company and its subsidiaries from time to time are parties to, or targets of, lawsuits,
claims, investigations and proceedings, including personal injury, commercial, contract,
environmental, antitrust, product liability, health and safety and employment matters, 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.
12
9. EARNINGS PER SHARE
On June 1, 2007, the board of directors declared a 3-for-2 stock split of the companys common
stock in the form of a 50% stock dividend. The record date for the split was June 15, 2007, and new
shares were issued on June 29, 2007. All share and earnings per common share have been restated for
all prior periods presented giving retroactive effect to the stock split.
The following table calculates basic earnings per common share and diluted earnings per common
share for the sixteen weeks ended April 19, 2008 and April 21, 2007 (amounts in thousands, except
per share data):
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 19, 2008 |
|
|
APRIL 21, 2007 |
|
Basic Earnings Per Common Share: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
35,783 |
|
|
$ |
28,493 |
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
91,700 |
|
|
|
90,542 |
|
|
|
|
|
|
|
|
Basic earnings per common share |
|
$ |
0.39 |
|
|
$ |
0.32 |
|
|
|
|
|
|
|
|
Diluted Earnings Per Common Share: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
35,783 |
|
|
$ |
28,493 |
|
|
|
|
|
|
|
|
Basic weighted average shares outstanding |
|
|
91,700 |
|
|
|
90,542 |
|
Add: Shares of common stock assumed upon vesting and exercise of stock awards |
|
|
652 |
|
|
|
1,416 |
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding |
|
|
92,352 |
|
|
|
91,958 |
|
|
|
|
|
|
|
|
Diluted earnings per common share |
|
$ |
0.39 |
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
Stock options to purchase 850,200 shares and 1,484,625 shares of common stock were not
included in the computation of diluted earnings per share for the sixteen weeks ended April 19,
2008 and April 21, 2007, respectively, because their effect would have been anti-dilutive.
10. STOCK BASED COMPENSATION
The company accounts for its stock-based compensation in accordance with SFAS 123R,
Share-Based Payment (SFAS 123R).
Flowers Foods 2001 Equity and Performance Incentive Plan (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 performance 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 14,625,000 shares. Over the life of the EPIP, the
company has only issued options, restricted stock and deferred stock. Options granted prior to
January 3, 2006 may not be exercised later than ten years after the date of grant and become
exercisable four years from the date of grant and generally vest at that time or upon death,
disability or retirement of the optionee or upon change in control of Flowers Foods. Options
granted on January 3, 2006 and thereafter may not be exercised later than seven years after the
date of grant and become exercisable three years from the date of grant and generally vest at that
time or upon death, disability or retirement of the optionee or upon change in control of Flowers
Foods. In order to exercise these options the optionees are required to pay the market value
calculated as the average high/low trading value at date of grant for
pre-2007 awards and the
closing market price on the date of grant for post-2006 awards. Non-employee director options
generally become exercisable one year from the date of grant and vest at that time. 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date |
|
|
1/3/2006 |
|
|
|
2/5/2007 |
|
|
|
2/4/2008 |
|
|
|
|
|
|
|
|
|
|
|
Shares granted |
|
|
656 |
|
|
|
832 |
|
|
|
850 |
|
Exercise price |
|
|
18.68 |
|
|
|
19.57 |
|
|
|
24.75 |
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
Vesting date |
|
|
1/3/2009 |
|
|
|
2/5/2010 |
|
|
|
2/4/2011 |
|
|
|
|
|
|
|
|
|
|
|
Fair value per share ($) |
|
|
6.20 |
|
|
|
6.30 |
|
|
|
5.80 |
|
Dividend yield (%)1 |
|
|
1.60 |
|
|
|
1.70 |
|
|
|
1.90 |
|
Expected volatility (%)2 |
|
|
36.00 |
|
|
|
33.90 |
|
|
|
27.30 |
|
Risk-free interest rate (%)3 |
|
|
4.25 |
|
|
|
4.74 |
|
|
|
2.79 |
|
Expected option life (years)4 |
|
|
5.00 |
|
|
|
5.00 |
|
|
|
5.00 |
|
Outstanding at April 19, 2008 |
|
|
647 |
|
|
|
826 |
|
|
|
850 |
|
|
|
|
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 for the 2006 and 2007 grants the assumption is based on the
simplified formula determined in accordance with Staff Accounting Bulletin No. 107. The
2008 grant assumption is 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 and the terms of the awards
issued in 2008 are different from the awards that have fully vested. |
The stock option activity for the sixteen weeks ended April 19, 2008 pursuant to the EPIP is set
forth below (amounts in thousands, except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Options |
|
|
Exercise Price |
|
|
Contractual Term |
|
|
Intrinsic Value |
|
Outstanding at December 29, 2007 |
|
|
2,417 |
|
|
$ |
15.15 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
850 |
|
|
$ |
24.75 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(247 |
) |
|
$ |
9.65 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 19, 2008 |
|
|
3,020 |
|
|
$ |
18.30 |
|
|
|
5.64 |
|
|
$ |
22,919 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at April 19, 2008 |
|
|
697 |
|
|
$ |
8.59 |
|
|
|
4.91 |
|
|
$ |
12,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of April 19, 2008, all options outstanding under the EPIP had an average exercise price of
$18.30 and a weighted average remaining contractual life of 5.6 years.
During the sixteen weeks ended April 19, 2008 and April 21, 2007, the company recorded
stock-based compensation expense of $1.3 million and $1.6 million, respectively, relating to NQSOs
using the Black-Scholes option-pricing model.
As of April 19, 2008, there was $8.3 million of total unrecognized compensation expense
related to outstanding stock options. This cost is expected to be recognized on a straight-line
basis over a weighted-average period of 2.5 years.
Cash received from option exercises for the sixteen weeks ended April 19, 2008 and April 21,
2007 was $2.4 million and $3.0 million, respectively. The cash tax benefit realized for the tax
deductions from option exercises was $1.8 million and $1.7 million, respectively, for the sixteen
weeks ended April 19, 2008 and April 21, 2007. The total intrinsic value of stock options exercised
was $3.6 million and $4.3 million for the sixteen weeks ended April 19, 2008 and April 21, 2007,
respectively.
Restricted Stock
On January 4, 2004, the effective date of his election as Chief Executive Officer, George
Deese was granted 112,500 shares of restricted stock pursuant to the EPIP. The fair value of these
restricted shares on the date of grant was approximately $1.3 million. These shares became fully
vested on January 4, 2008. The company recorded $0.0 million and $0.1 million in compensation
expense during the sixteen weeks ended April 19, 2008 and April 21, 2007, respectively, related to
this restricted stock.
During the second quarter of fiscal 2006, non-employee
directors were granted an aggregate of 38,460 shares of restricted
stock. The fair value of these restricted shares on the date of grant was $0.7 million. These shares fully vested on the first anniversary of the date of
grant. The company recorded $0.0 million and $0.2 million in compensation expense during the
sixteen weeks ended April 19, 2008 and April 21, 2007, respectively, related to this restricted
stock.
14
Certain key employees have been granted restricted stock. Vesting generally occurs two years
from the date of grant for the 2006 and 2007 awards if, on this date, the companys average return
on invested capital over the vesting period equals or exceeds its weighted average cost of
capital for the same period (the ROI Target). The 2008 awards require the return on invested
capital to exceed the weighted average cost of capital by 2.5% for the same period.
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 the
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%. |
If the grantee dies, becomes disabled or retires, the performance-contingent restricted stock
generally vests immediately. 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. 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.
The following restricted stock awards have been granted under the EPIP (amounts in
thousands, except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant date |
|
|
1/3/2006 |
|
|
|
2/5/2007 |
|
|
|
2/4/2008 |
|
|
|
|
|
|
|
|
|
|
|
Shares granted |
|
|
204 |
|
|
|
224 |
|
|
|
210 |
|
Vesting date |
|
|
1/3/2008 |
|
|
|
2/5/2009 |
|
|
|
2/4/2010 |
|
Fair value per share ($) |
|
$ |
19.44 |
|
|
$ |
20.98 |
|
|
$ |
27.03 |
|
Expense
during the sixteen weeks ended April 19, 2008 ($) |
|
$ |
|
|
|
$ |
679 |
|
|
$ |
655 |
|
Expense
during the sixteen weeks ended April 21, 2007 ($) |
|
$ |
604 |
|
|
$ |
542 |
|
|
$ |
|
|
A summary of the status of the companys nonvested shares as of April 19, 2008, and changes
during the quarter ended April 19, 2008, is presented below
(amounts in thousands, except price
data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average |
|
|
|
Shares |
|
|
Grant Date Fair Value |
|
Nonvested at December 29, 2007 |
|
|
537 |
|
|
$ |
18.42 |
|
Granted |
|
|
210 |
|
|
$ |
27.03 |
|
Vested |
|
|
(314 |
) |
|
$ |
16.59 |
|
Forfeited |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Nonvested at April 19, 2008 |
|
|
433 |
|
|
$ |
23.92 |
|
|
|
|
|
|
|
|
As of April 19, 2008, there was $6.7 million of total unrecognized compensation cost related
to nonvested share-based compensation arrangements 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 19, 2008 was $7.1 million.
Stock Appreciation Rights
The company previously awarded stock appreciation rights (rights) to key employees
throughout the company. These rights vest at the end of four years and are payable in cash equal to
the difference between the grant price and the fair market value of the
15
rights on the vesting date.
On July 16, 2007 (the companys third quarter), 448,350 rights granted in 2003 vested. The company
recorded compensation expense for these rights on measurement dates based on changes between the
grant price and an estimated fair value of the rights using the Black-Scholes option-pricing model.
During the sixteen weeks ended April 21, 2007, the company recorded expense of $2.6 million related to these 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 19, 2008 ranged from $11.48 to $22.35. The following
assumptions were used to determine fair value of the rights discussed above using the Black-Scholes
option-pricing model at April 19, 2008: dividend yield 2.0%; expected volatility 28.0%; risk-free
interest rate 2.81% and expected life of 1.70 years to 4.05 years. During the sixteen weeks ended
April 19, 2008 and April 21, 2007 the company recorded expense of $0.4 million and $0.8 million,
respectively, related to these rights.
The rights activity for the sixteen weeks ended April 19, 2008 is
set forth below (amounts in thousands except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Rights |
|
|
Exercise Price |
|
|
Contractual Term |
|
|
Intrinsic Value |
|
Outstanding at December 29, 2007 |
|
|
231 |
|
|
$ |
11.14 |
|
|
|
|
|
|
|
|
|
Rights exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rights forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 19, 2008 |
|
|
231 |
|
|
$ |
11.14 |
|
|
|
5.63 |
|
|
$ |
3,427 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Stock
The company allows non-employee directors to convert their retainers into deferred stock. The
deferred stock vests two years from the date of grant and is delivered to the grantee at a
designated time selected by the grantee at the date of the grant.
The company records compensation
expense for this deferred stock over the two-year vesting period based on the closing price of the
companys common stock on the date of grant. During the second quarter of fiscal 2007, non-employee directors were
granted an aggregate of 34,350 shares of deferred stock that fully
vest on the first anniversary of the grant date and the compensation
expense is recorded on this deferred stock over the one year vesting
period. The company recorded compensation expense of $0.4
million and $0.1 million during the first quarter of fiscal 2008 and fiscal 2007, respectively,
relating to deferred stock.
The
deferred stock activity for the sixteen weeks ended April 19,
2008 is set forth below (amounts in thousands, except price data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
Weighted Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
Shares |
|
|
Grant Price |
|
|
Contractual Term |
|
|
Intrinsic Value |
|
Outstanding at December 29, 2007 |
|
|
55 |
|
|
$ |
21.03 |
|
|
|
|
|
|
|
|
|
Deferred stock issued |
|
|
22 |
|
|
$ |
23.05 |
|
|
|
|
|
|
|
|
|
Deferred stock exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at April 19, 2008 |
|
|
77 |
|
|
$ |
21.61 |
|
|
|
1.22 |
|
|
$ |
329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11. POST-RETIREMENT PLANS
On September 29, 2006, the FASB issued SFAS No. 158, which requires recognition of the
overfunded or underfunded status of pension and other postretirement benefit plans on the balance
sheet. Under SFAS 158, gains and losses, prior service costs and credits, and any remaining
transition amounts under SFAS 87 and FASB Statement No. 106, Employers Accounting for
Postretirement Benefits Other Than Pensions (SFAS 106) that have not yet been recognized through
net periodic benefit costs will be recognized in accumulated other comprehensive income, net of tax
benefits, until they are amortized as a component of net periodic cost. SFAS 158 does not change
how pensions and other postretirement benefits are accounted for and reported in the income
statement. Companies will continue to follow the existing guidance in SFAS 87, FASB Statement No.
88, Employers Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits and SFAS 106. SFAS 158 was effective for public companies for fiscal years
ending after December 15, 2006. The company adopted the balance sheet recognition provisions of
SFAS 158 at December 30, 2006, the end of its fiscal year 2006. SFAS 158 also requires that
employers measure the benefit obligation and plan assets as of the fiscal year end for fiscal years
ending after December 15, 2008 (the
16
companys fiscal 2008). In fiscal 2006 and earlier, the company
used a September 30 measurement date for its pension and other postretirement benefit plans. The
company eliminated the early measurement date in fiscal 2007 and applied the remeasurement
alternative in accordance with SFAS 158. Under this alternative, postretirement benefit income
measured for the three-month period October 1, 2006 to December 31, 2006 (determined using the
September 2006 measurement date) was credited to beginning 2007 retained earnings. As result, the
company increased retained earnings $0.7 million, net of taxes of $0.5 million and increased the
postretirement benefit asset and liability by $1.3 million and $0.1 million, respectively. The
funded status of the companys postretirement benefit plans was then remeasured at January 1, 2007,
resulting in an adjustment to the balance sheet asset, liability and accumulated other
comprehensive income. As a result, the postretirement benefit asset was increased $7.4 million and
the postretirement benefit liability was decreased $0.7 million, with an offsetting credit to
accumulated other comprehensive income of $5.0 million, net of taxes of $3.1 million.
The following summarizes the companys balance sheet related pension and other postretirement
benefit plan accounts at April 19, 2008 as compared to accounts at December 29, 2007 (amounts in
thousands):
|
|
|
|
|
|
|
|
|
|
|
AS OF |
|
|
|
APRIL 19, |
|
|
DECEMBER 29, |
|
|
|
2008 |
|
|
2007 |
|
Noncurrent benefit asset |
|
$ |
36,687 |
|
|
$ |
34,471 |
|
Current benefit liability |
|
$ |
403 |
|
|
$ |
403 |
|
Noncurrent benefit liability |
|
$ |
6,849 |
|
|
$ |
6,599 |
|
Accumulated other comprehensive income |
|
$ |
2,688 |
|
|
$ |
2,625 |
|
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 19, 2008,
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.
The net periodic pension cost for the companys plans include the following components
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 19, 2008 |
|
|
APRIL 21, 2007 |
|
Service cost |
|
$ |
90 |
|
|
$ |
80 |
|
Interest cost |
|
|
5,226 |
|
|
|
5,026 |
|
Expected return on plan assets |
|
|
(7,531 |
) |
|
|
(7,076 |
) |
|
|
|
|
|
|
|
Total net periodic benefit income |
|
$ |
(2,215 |
) |
|
$ |
(1,970 |
) |
|
|
|
|
|
|
|
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 plan. The plan
incorporates an up-front deductible, coinsurance payments and retiree contributions at COBRA
premium levels. Eligibility and maximum period of coverage is based on age and length of service.
The life insurance plan offers coverage to a closed group of retirees.
The net periodic postretirement benefit cost for the company includes the following components
(amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 19, 2008 |
|
|
APRIL 21, 2007 |
|
Service cost |
|
$ |
118 |
|
|
$ |
93 |
|
Interest cost |
|
|
132 |
|
|
|
120 |
|
Amortization of prior service cost |
|
|
102 |
|
|
|
102 |
|
|
|
|
|
|
|
|
Total net periodic benefit cost |
|
$ |
352 |
|
|
$ |
315 |
|
|
|
|
|
|
|
|
17
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 19, 2008 and April 21, 2007, the total cost and contributions were $4.9
million and $4.8 million, respectively.
12. INCOME TAXES
The companys effective tax rate for the first quarter of fiscal 2008 was 35.7%. This rate is
down slightly from the 2007 annual effective tax rate of 35.9%, due to favorable discrete items
recognized during the quarter. The difference in the effective rate and the statutory rate is
primarily due to state income taxes, the non-taxable earnings of the consolidated variable interest
entity and the Section 199 qualifying production activities deduction.
During the first quarter of fiscal 2008, 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.
13. SEGMENT REPORTING
The DSD segment produces fresh and frozen packaged bread and rolls and the warehouse delivery
segment produces frozen bread and rolls and fresh and frozen 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 (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
APRIL 19, 2008 |
|
APRIL 21, 2007 |
SALES: |
|
|
|
|
|
|
|
|
DSD |
|
$ |
562,982 |
|
|
$ |
496,301 |
|
Warehouse delivery |
|
|
150,252 |
|
|
|
140,232 |
|
Eliminations: |
|
|
|
|
|
|
|
|
Sales from warehouse delivery to DSD |
|
|
(27,479 |
) |
|
|
(19,297 |
) |
Sales from DSD to warehouse delivery |
|
|
(9,048 |
) |
|
|
(7,289 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
676,707 |
|
|
$ |
609,947 |
|
|
|
|
|
|
|
|
|
|
DEPRECIATION AND AMORTIZATION: |
|
|
|
|
|
|
|
|
DSD |
|
$ |
16,338 |
|
|
$ |
16,207 |
|
Warehouse delivery |
|
|
4,341 |
|
|
|
3,968 |
|
Unallocated |
|
|
233 |
|
|
|
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
$ |
20,912 |
|
|
$ |
20,117 |
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST |
DSD |
|
$ |
54,573 |
|
|
$ |
45,117 |
|
Warehouse delivery |
|
|
7,078 |
|
|
|
8,131 |
|
Unallocated |
|
|
(7,502 |
) |
|
|
(8,333 |
) |
Interest income, net |
|
|
3,497 |
|
|
|
1,933 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
57,646 |
|
|
$ |
46,848 |
|
|
|
|
|
|
|
|
|
|
18
Sales by product category in each reportable segment are as follows (amounts in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended April 19, 2008 |
|
|
For the 16 Weeks Ended April 21, 2007 |
|
|
|
DSD |
|
|
Warehouse Delivery |
|
|
Total |
|
|
DSD |
|
|
Warehouse Delivery |
|
|
Total |
|
Branded Retail |
|
$ |
329,708 |
|
|
$ |
30,993 |
|
|
$ |
360,701 |
|
|
$ |
287,758 |
|
|
$ |
29,092 |
|
|
$ |
316,850 |
|
Store Branded Retail |
|
|
72,758 |
|
|
|
14,499 |
|
|
|
87,257 |
|
|
|
61,979 |
|
|
|
14,110 |
|
|
|
76,089 |
|
Foodservice and Other |
|
|
151,468 |
|
|
|
77,281 |
|
|
|
228,749 |
|
|
|
139,275 |
|
|
|
77,733 |
|
|
|
217,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
553,934 |
|
|
$ |
122,773 |
|
|
$ |
676,707 |
|
|
$ |
489,012 |
|
|
$ |
120,935 |
|
|
$ |
609,947 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion of the financial condition and results of operations of the company as of
and for the sixteen week period ended April 19, 2008 should be read in conjunction with the
companys Annual Report on Form 10-K for the fiscal year ended December 29, 2007.
The
company consists of two business segments: direct-store-delivery
(DSD), formerly referred to as
Flowers Foods Bakeries Group and warehouse delivery, formerly
referred to as Flowers Foods Specialty Group.
The DSD segment focuses on the production and
marketing of bakery products to customers in the southeastern, southwestern and mid-Atlantic areas
of the United States primarily through its direct store delivery system. The warehouse delivery
segment produces snack cakes for sale to co-pack, retail and vending customers as well as frozen
bread, rolls and buns for sale to retail and foodservice customers primarily through warehouse
distribution.
OVERVIEW:
Flowers Foods, Inc. is one of the nations leading producers and marketers of packaged bakery
foods for retail and foodservice customers. The company produces breads, buns, rolls, snack cakes
and pastries that are distributed fresh in the Southeast, Southwest and Mid-Atlantic regions and
frozen to customers nationwide. Our businesses are organized into two reportable segments. The DSD
segment produces fresh and frozen packaged bread and rolls and the warehouse delivery segment
produces frozen bread and rolls, as well as fresh snack products. This organizational structure is
the basis of the operating segment data presented in this report.
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 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. Sales for the sixteen
weeks ended April 19, 2008 increased 10.9% as compared to the sixteen weeks ended April 21, 2007.
Contributing to this increase were favorable pricing/mix, volume, and the December 2007 Key Mix
acquisition.
For the first quarter of fiscal 2008, diluted net income per share was $0.39 as compared to
$0.31 per share, after a stock split during the second quarter of 2007, for the first quarter of
fiscal 2007, a 25.8% increase. For the first quarter of fiscal 2008, net income was $35.8 million,
a 25.6% increase over $28.5 million reported for the first quarter of fiscal 2007.
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 December 29,
2007. 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. In our Form 10-K for the fiscal year ended December 29, 2007, we discuss the areas where we
believe that the estimates, judgments or interpretations that we have made, if different, would
have yielded the most significant differences in our financial statements and we urge you to review
that discussion.
19
RESULTS OF OPERATIONS:
Results of operations, expressed as a percentage of sales, for the sixteen week periods ended
April 19, 2008 and April 21, 2007, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
FOR THE SIXTEEN WEEKS ENDED |
|
|
|
APRIL 19, 2008 |
|
|
APRIL 21, 2007 |
|
Sales |
|
|
100.00 |
% |
|
|
100.00 |
% |
Gross margin |
|
|
48.28 |
|
|
|
49.68 |
|
Selling, marketing and administrative expenses |
|
|
37.19 |
|
|
|
39.01 |
|
Depreciation and amortization |
|
|
3.09 |
|
|
|
3.30 |
|
Interest income, net |
|
|
0.52 |
|
|
|
0.32 |
|
Income before income taxes and minority interest |
|
|
8.52 |
|
|
|
7.69 |
|
Income tax expense |
|
|
3.04 |
|
|
|
2.71 |
|
Minority interest in variable interest entity |
|
|
(0.19 |
) |
|
|
(0.30 |
) |
Net income |
|
|
5.29 |
% |
|
|
4.68 |
% |
CONSOLIDATED AND SEGMENT RESULTS
SIXTEEN WEEKS ENDED APRIL 19, 2008 COMPARED TO SIXTEEN WEEKS ENDED APRIL 21, 2007
Consolidated Sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended |
|
|
For the 16 Weeks Ended |
|
|
|
|
|
|
April 19, 2008 |
|
|
April 21, 2007 |
|
|
|
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
% Increase |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
|
|
|
Branded Retail |
|
$ |
360,701 |
|
|
|
53.3 |
% |
|
$ |
316,850 |
|
|
|
51.9 |
% |
|
|
13.8 |
% |
Store Branded Retail |
|
|
87,257 |
|
|
|
12.9 |
|
|
|
76,089 |
|
|
|
12.5 |
|
|
|
14.7 |
% |
Foodservice and Other |
|
|
228,749 |
|
|
|
33.8 |
|
|
|
217,008 |
|
|
|
35.6 |
|
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
676,707 |
|
|
|
100.0 |
% |
|
$ |
609,947 |
|
|
|
100.0 |
% |
|
|
10.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 10.9% increase in sales was attributable to a favorable pricing/mix of 9.5% and unit
volume increases of 1.4%. The 1.4% increase in volume resulted from
expansion markets and the December 2007 acquisition
of Key Mix. The increase in branded retail sales was due primarily to
increases in pricing/mix and increased sales of brand soft variety and white bread. The companys
Natures Own products and its branded white bread labels were the key components of these sales.
The increase in store branded retail sales was due to favorable pricing/mix and, to a lesser
extent, volume increases. The increase in foodservice and other sales was due to favorable
pricing/mix, partially offset by volume declines.
Direct-Store-Delivery Sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended |
|
|
For the 16 Weeks Ended |
|
|
|
|
|
|
April 19, 2008 |
|
|
April 21, 2007 |
|
|
|
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
% Increase |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
|
|
|
Branded Retail |
|
$ |
329,708 |
|
|
|
59.5 |
% |
|
$ |
287,758 |
|
|
|
58.8 |
% |
|
|
14.6 |
% |
Store Branded Retail |
|
|
72,758 |
|
|
|
13.1 |
|
|
|
61,979 |
|
|
|
12.7 |
|
|
|
17.4 |
% |
Foodservice and Other |
|
|
151,468 |
|
|
|
27.4 |
|
|
|
139,275 |
|
|
|
28.5 |
|
|
|
8.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
553,934 |
|
|
|
100.0 |
% |
|
$ |
489,012 |
|
|
|
100.0 |
% |
|
|
13.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 13.3% increase in sales was attributable to favorable pricing/mix of 10.4% and volume
increases of 2.9%. The increase in branded retail sales was due to
favorable pricing/mix and, to a lesser
extent, volume increases. Natures Own products and branded white bread
labels were the key components of these sales. The increase in store branded retail sales was
primarily due to increased volume and favorable pricing/mix. The increase in foodservice and other
sales was primarily due to pricing/mix.
20
Warehouse Delivery Sales.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the 16 Weeks Ended |
|
|
For the 16 Weeks Ended |
|
|
|
|
|
|
April 19, 2008 |
|
|
April 21, 2007 |
|
|
% Increase |
|
|
|
$ |
|
|
% |
|
|
$ |
|
|
% |
|
|
(Decrease) |
|
|
|
(Amounts in |
|
|
|
|
|
|
(Amounts in |
|
|
|
|
|
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
thousands) |
|
|
|
|
|
|
|
|
|
Branded Retail |
|
$ |
30,993 |
|
|
|
25.2 |
% |
|
$ |
29,092 |
|
|
|
24.0 |
% |
|
|
6.5 |
% |
Store Branded Retail |
|
|
14,499 |
|
|
|
11.8 |
|
|
|
14,110 |
|
|
|
11.7 |
|
|
|
2.8 |
% |
Foodservice and Other |
|
|
77,281 |
|
|
|
63.0 |
|
|
|
77,733 |
|
|
|
64.3 |
|
|
|
(0.6 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
122,773 |
|
|
|
100.0 |
% |
|
$ |
120,935 |
|
|
|
100.0 |
% |
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
1.5% increase in sales was attributable to favorable pricing/mix of
2.8%, partially offset by volume
declines of 1.3%. The increase in branded retail sales was primarily the result of favorable
pricing/mix. The increase in store branded retail sales was primarily
due to volume, partially
offset by unfavorable pricing/mix. The decrease in foodservice and other sales, which include
contract production and vending, was due to lower volume.
Gross Margin (defined as sales less materials, supplies, labor and other production costs,
excluding depreciation, amortization and distributor discounts). Gross margin for the first quarter
of fiscal 2008 was $326.7 million, or 7.8% higher than gross margin reported for the same period of
the prior year of $303.0 million. As a percent of sales, gross margin was 48.3% as compared to
49.7% for the first quarter of fiscal 2007. This decrease as a percent of sales was primarily due
to significantly higher ingredient costs, partially offset by sales gains, better stales control,
and improved manufacturing efficiencies. The significantly higher ingredient costs were primarily
driven by increases in flour costs.
The DSD segments gross margin decreased to 52.9% of sales for the first quarter of fiscal
2008, compared to 54.7% of sales for the prior years first quarter. This decrease as a percent of
sales was primarily due to the higher ingredient costs, partially offset by sales gains and better
stales control, improved manufacturing efficiencies and lower labor costs as a percent of sales.
The higher ingredient costs were driven primarily by flour costs.
The warehouse delivery segments gross margin decreased to 27.3% of sales for the first
quarter of fiscal 2008, compared to 29.2% of sales for the same period of fiscal 2007. This
decrease as a percent of sales was primarily a result of the higher ingredient costs and labor
costs, partially offset by improved manufacturing efficiencies.
Selling, Marketing and Administrative Expenses. For the first quarter of fiscal 2008, selling,
marketing and administrative expenses were $251.7 million, or 37.2% of sales as compared to $238.0
million, or 39.0% of sales reported for the first quarter of fiscal 2007. This decrease as a
percent of sales was due to sales gains and lower labor, distribution, stock-based
compensation, and advertising expense as a percent of sales, partially offset by higher distributor discounts. Sales
gains and the sale of certain routes to independent distributors resulted in the increase in
distributor discounts. The $3.2 million decrease in stock-based compensation was the result of the
companys higher stock appreciation rights expense during the
first quarter of fiscal 2007, partially
offset by the issuance of new stock option and restricted stock awards during the first quarter of
fiscal 2008. See Note 10 of Notes to Condensed Consolidated Financial Statements of this Form 10-Q
for further information regarding the companys stock-based compensation.
The DSD segments selling, marketing and administrative expenses include discounts paid to the
independent distributors utilized in our DSD system. The DSD segments selling, marketing and
administrative expenses were $222.3 million, or 40.1% of sales during the first quarter of fiscal
2008, as compared to $206.3 million, or 42.2% of sales during the same period of fiscal 2007. The
decrease as a percent of sales was primarily due to sales gains, lower labor, stock-based
compensation and advertising expense as a percent of sales, partially offset by significantly higher distributor
discounts and greater bad debt expense.
The warehouse delivery segments selling, marketing and administrative expenses were $22.1
million, or 18.0% of sales during the first quarter of fiscal 2008, as compared to $23.3 million,
or 19.2% of sales during the first quarter of fiscal 2007. This decrease as a percent of sales was
primarily attributable to sales gains and lower advertising and distribution costs as a percent of sales.
Depreciation and Amortization. Depreciation and amortization expense was $20.9 million for the
first quarter of fiscal 2008, an increase of 4.0% from the first quarter of fiscal 2007, which was
$20.1 million.
The DSD segments depreciation and amortization expense increased to $16.3 million for the
first quarter of fiscal 2008 from $16.2 million in the same period of fiscal 2007. This increase
was primarily the result of increased depreciation expense due to capital expenditures placed in
service subsequent to the first quarter of fiscal 2007.
21
The warehouse delivery segments depreciation and amortization expense increased to $4.3
million for the first quarter of fiscal 2008 from $4.0 in the same period of fiscal 2007. This
increase was primarily the result of increased depreciation expense due to capital expenditures
placed in service subsequent to the first quarter of fiscal 2007.
Income from operations. Income from operations for the first quarter of fiscal 2008 was $54.1 million, an
increase of $9.2 million from the $44.9 million reported for the first quarter of fiscal 2007.
The improvement was primarily the result of improvements in the operating results of the DSD
segment of $9.5 million and a decrease in unallocated corporate expenses of $.8 million, partially
offset by a decrease in the warehouse delivery segment of $1.1 million. The increase in the DSD
segment was primarily attributable to higher sales, better stales
control and improved manufacturing efficiencies. The decrease in unallocated corporate expenses
was primarily due to lower stock based compensation discussed above. The decrease in the warehouse
delivery segment was primarily a result of higher commodity prices and secondarily to lower sales
volume in foodservice.
Net Interest Income. For the first quarter of fiscal 2008, net interest income was $3.5
million, an increase of $1.6 million from the first quarter of fiscal 2007, which was $1.9 million.
The increase was related to lower interest expense due to payments on the credit facility after the
first quarter of fiscal 2007 and increased interest income related to the sale of new territories
to independent distributors.
Income Taxes. The effective tax rate for the first quarter of fiscal 2008 was 35.7% compared
to 35.2% in the first quarter of the prior year. The difference in the effective rate and the
statutory rate is primarily due to state income taxes, the non-taxable earnings of the consolidated
variable interest entity and the Section 199 qualifying production activities deduction.
Minority Interest. Minority interest represents all the earnings of the companys variable
interest entity (VIE) under the consolidation provisions of Financial Accounting Standards Board
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. All the earnings of
the VIE are eliminated through minority interest due to the company not having any equity ownership
in the VIE. The company is required to consolidate this VIE due to the VIE being capitalized with a
less than substantive amount of legal form capital investment and the company accounting for a
significant portion of the VIEs revenues. See Note 7 of Notes to Condensed Consolidated Financial
Statements of this Form 10-Q for further information regarding the companys VIE.
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 increased to $42.5 million at April 19, 2008 from
$20.0 million at December 29, 2007. The increase resulted from $61.6 million provided by operating
activities, partially offset by $25.5 million and $13.6 million disbursed for investing activities
and financing activities, respectively.
Cash Flows Provided by Operating Activities. Net cash of $61.6 million provided by operating
activities during the sixteen weeks ended April 19, 2008 consisted primarily of $35.8 million in
net income, adjusted for the following non-cash items (amounts in thousands):
|
|
|
|
|
Depreciation and amortization |
|
$ |
20,912 |
|
Stock-based compensation |
|
|
3,399 |
|
Deferred income taxes |
|
|
1,873 |
|
Provision for inventory obsolescence |
|
|
305 |
|
Allowances for accounts receivable |
|
|
322 |
|
Minority interest in variable interest entity |
|
|
1,301 |
|
Other |
|
|
(120 |
) |
|
|
|
|
Total |
|
$ |
27,992 |
|
|
|
|
|
22
Cash
disbursed for working capital and other activities was $2.2 million.
Cash Flows Disbursed for Investing Activities. Net cash disbursed for investing activities
during the sixteen weeks ended April 19, 2008 of $25.5 million consisted primarily of capital
expenditures of $23.3 million. Capital expenditures in the DSD segment and the warehouse delivery
segment were $17.8 million and $4.8 million, respectively. The company estimates capital
expenditures of approximately $95.0 million to $100.0 million during fiscal 2008. 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
$13.6 million during the sixteen weeks ended April 19, 2008 consisted primarily of dividends paid
of $11.5 million, stock repurchases of $5.8 million, and net debt repayments of $1.9 million,
partially offset by proceeds of $2.4 million from the exercise of stock options.
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 19, 2008 and December 29, 2007, 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 0.00% 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 no outstanding borrowings under the
credit facility at April 19, 2008 or December 29, 2007.
The
company paid financing costs of $0.9 million during fiscal 2007 in connection with its credit facility. These
costs were deferred and are being amortized over the term of the credit facility.
Currently, the companys credit ratings by Standard and Poors and Fitch Ratings are BBB- and
BBB, respectively. During the first quarter of fiscal 2008, Moodys Investor Services revised the
companys credit rating up to Baa2. Changes in the companys credit ratings do not trigger a change
in the companys available borrowings or costs under the credit facility, but could affect future
credit availability.
Uses of Cash
On
February 8, 2008, the board of directors declared a dividend of $0.125 per share on the
companys common stock that was paid on March 7, 2008 to shareholders of record on February 22,
2008. This dividend payment was $11.5 million.
On December 19, 2002, the board of directors approved a plan that authorized stock repurchases
of up to 16.9 million shares of the companys common stock.
On November 18, 2005, the board of
directors further increased the number of authorized shares to 22.9 million shares. On February 8, 2008,
the board of directors increased the number of authorized shares to 30.0 million shares. 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 2008, 256,248
shares, at a cost of $5.8 million, of the companys common stock were purchased under the plan. From
the inception of the plan through April 19, 2008,
19.4 million shares, at a cost of $286.2 million,
have been purchased under the plan.
23
During the first quarter of fiscal 2008, the company paid $21.9 million in performance-based
cash awards under the companys bonus plan.
NEW ACCOUNTING PRONOUNCEMENTS:
In
September 2006, the FASB issued SFAS No.
157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 establishes a common definition for
fair value to be applied to U.S. GAAP requiring use of fair value, establishes a framework for
measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is
effective for financial assets and financial liabilities for fiscal years beginning after November
15, 2007. The implementation of SFAS No. 157 for financial assets and financial liabilities,
effective January 1, 2008, did not have a material impact on our consolidated financial position
and results of operations. Please refer to Note 5, Derivative Financial Instruments for a detailed
discussion.
In December 2007, the FASB issued SFAS No. 141(revised 2007), Business Combinations (SFAS
No. 141R). SFAS No. 141R provides revised guidance on how acquirors recognize and
measure the consideration transferred, identifiable assets acquired, liabilities assumed,
noncontrolling interests, and goodwill acquired in a business combination. SFAS No. 141R also
expands required disclosures surrounding the nature and financial effects of business combinations.
SFAS No. 141R is effective, on a prospective basis, for fiscal years beginning after December 15,
2008. The Company is currently assessing the impact of SFAS No. 141R on its consolidated financial
position and results of operations.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements (SFAS No. 160). SFAS No. 160 establishes requirements for ownership interests
in subsidiaries held by parties other than the company (sometimes called minority interests) be
clearly identified, presented, and disclosed in the consolidated statement of financial position
within equity, but separate from the parents equity. All changes in the parents ownership
interests are required to be accounted for consistently as equity transactions and any
noncontrolling equity investments in unconsolidated subsidiaries must be measured initially at fair
value. SFAS No. 160 is effective, on a prospective basis, for fiscal years beginning after December
15, 2008. However, presentation and disclosure requirements must be retrospectively applied to
comparative financial statements. The company is currently assessing the impact of SFAS No. 160 on
its consolidated financial position and results of operations.
In March 2008, the FASB issued SFAS No. 161, Disclosures About Derivative Instruments and
Hedging Activities an amendment of FASB Statement No. 133 (SFAS No. 161). SFAS No. 161 expands
quarterly disclosure requirements in SFAS No. 133 about an entitys derivative instruments and
hedging activities. SFAS No. 161 is effective for fiscal years beginning after November 15, 2008.
The company is currently assessing the impact of SFAS No. 161 on its 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, 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 19, 2008, the companys hedge portfolio contained commodity
derivatives with a fair value of $45.4 million.
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 19, 2008, a hypothetical ten percent increase (decrease) in commodity prices
would increase (decrease) the fair value of the derivative portfolio by $27.5 million. The analysis
disregards changes in the exposures inherent in the underlying hedged items;
24
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.
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 19, 2008 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, including personal injury, commercial, contract,
environmental, antitrust, product liability, health and safety and employment matters, 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.
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
December 29, 2007 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 2008.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On
December 19, 2002 our board of directors approved a plan that authorized stock repurchases
of up to 16.9 million shares of the companys common stock.
On November 18, 2005, the board of
directors increased the number of authorized shares to
22.9 million shares. On February 8, 2008, the board of
directors further increased the number of authorized shares to 30.0
million shares. 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 2008 under the stock repurchase plan.
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
Maximum Number |
|
|
|
|
|
|
|
|
|
|
Shares Purchased |
|
of Shares that |
|
|
|
|
|
|
|
|
|
|
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) |
December 30, 2007 January 26, 2008
|
|
|
127 |
|
|
$ |
22.76 |
|
|
|
127 |
|
|
|
10,736 |
|
January 27, 2008 February 23, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,736 |
|
February 24, 2008 March 22, 2008
|
|
|
129 |
|
|
$ |
22.74 |
|
|
|
129 |
|
|
|
10,607 |
|
March 23, 2008 April 19, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
256 |
|
|
$ |
22.75 |
|
|
|
256 |
|
|
|
|
|
ITEM 6. EXHIBITS
Exhibits filed as part of this report are listed in the Exhibit Index attached hereto.
26
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.
|
|
|
|
|
|
|
|
|
By: |
/s/ GEORGE E. DEESE
|
|
|
|
Name: |
George E. Deese |
|
|
|
Title: |
Chairman of the Board, President and Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ R. STEVE KINSEY
|
|
|
|
Name: |
R. Steve Kinsey |
|
|
|
Title: |
Executive Vice President and Chief Financial Officer |
|
|
|
|
|
|
|
|
|
|
|
By: |
/s/ KARYL H. LAUDER
|
|
|
|
Name: |
Karyl H. Lauder |
|
|
|
Title: |
Senior Vice President and Chief Accounting Officer |
|
|
Date: May 29, 2008
27
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
|
|
Name of Exhibit |
2.1
|
|
|
|
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 February 9, 2001, File No. 1-16247). |
|
|
|
|
|
2.2
|
|
|
|
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). |
|
|
|
|
|
3.1
|
|
|
|
Restated Articles of Incorporation of Flowers Foods, Inc. as amended on June 1, 2007 (Incorporated
by reference to Flowers Foods Quarterly Report on Form 10-Q, dated August 23, 2007, File No.
1-16247). |
|
|
|
|
|
3.2
|
|
|
|
Amended and Restated Bylaws of Flowers Foods, Inc. as amended on February 8, 2008 (Incorporated by
reference to Flowers Foods Current Report on Form 8-K/A dated February 25, 2008, File No.
1-16247). |
|
|
|
|
|
4.1
|
|
|
|
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). |
|
|
|
|
|
4.2
|
|
|
|
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). |
|
|
|
|
|
4.3
|
|
|
|
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). |
|
|
|
|
|
10.1
|
|
|
|
Flowers Foods, Inc. Retirement Plan No. 1 (Incorporated by reference to Flowers Foods Annual
Report on Form 10-K, dated March 30, 2001, File No. 1-16247). |
|
|
|
|
|
10.2
|
|
|
|
Flowers Foods, Inc. 2001 Equity and Performance Incentive Plan, as amended and restated as of
February 11, 2005 (Incorporated by reference to Flowers Foods Proxy Statement on Schedule 14A,
dated April 29, 2005, File No. 1-16247). |
|
|
|
|
|
10.3
|
|
|
|
Flowers Foods, Inc. Stock Appreciation Rights Plan. (Incorporated by reference to Flowers Foods
Annual Report on Form 10-K, dated March 27, 2002, File No. 1-16247). |
|
|
|
|
|
10.4
|
|
|
|
Flowers Foods, Inc. Annual Executive Bonus Plan. (Incorporated by reference to Flowers Foods
Annual Report on Form 10-K, dated March 27, 2002, File No. 1-16247). |
|
|
|
|
|
10.5
|
|
|
|
First Amendment to the Flowers Foods, Inc. Annual Executive Bonus Plan. (Incorporated by reference
to Flowers Foods Annual Report on Form 10-K, dated February 27, 2008, File No. 1-16247). |
|
|
|
|
|
10.6
|
|
|
|
Flowers Foods, Inc. Supplemental Executive Retirement Plan. (Incorporated by reference to Flowers
Foods Annual Report on Form 10-K, dated March 27, 2002, File No. 1-16247). |
|
|
|
|
|
10.7
|
|
|
|
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). |
28
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
|
|
Name of Exhibit |
10.8
|
|
|
|
Form of Separation 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 1, 2006, File No. 1-16247). |
|
|
|
|
|
10.9
|
|
|
|
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). |
|
|
|
|
|
10.10
|
|
|
|
Form of 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 1, 2006, File No. 1-16247). |
|
|
|
|
|
10.11
|
|
|
|
Form of 2008 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 February 27, 2008, File No. 1-16247). |
|
|
|
|
|
10.12
|
|
|
|
Form of 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 1, 2006, File No. 1-16247). |
|
|
|
|
|
10.13
|
|
|
|
Form of 2008 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). |
|
|
|
|
|
10.14
|
|
|
|
Amended and Restated Credit Agreement, dated as of June 6, 2006, among Flowers Foods, Inc., the
Lenders Party thereto from time to time, Bank of America N.A., Harris N.A. and Cooperative Centrale
Raiffeisen-Boerenleen Bank, B.A., Rabsbank International, New York Branch, 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
June 7, 2006, File No. 1-16247). |
|
|
|
|
|
10.15
|
|
|
|
First Amendment dated August 25, 2006 to the Flowers Foods, Inc. 2001 Equity and Performance
Incentive Plan, as previously amended and restated as of February 11, 2005. (Incorporated by
reference to Flowers Foods Annual Report on Form 10-K dated February 28, 2007, File No. 1-16247). |
|
|
|
|
|
10.16
|
|
|
|
Second Amendment dated January 2, 2007 to the Flowers Foods, Inc. 2001 Equity and Performance
Incentive Plan, as previously amended and restated as of February 11, 2005. (Incorporated by
reference to Flowers Foods Annual Report on Form 10-K dated February 28, 2007, File No. 1-16247). |
|
|
|
|
|
10.17
|
|
|
|
Third Amendment dated January 23, 2007 to the Flowers Foods, Inc. 2001 Equity and Performance
Incentive Plan, as previously amended and restated as of February 11, 2005. (Incorporated by
reference to Flowers Foods Annual Report on Form 10-K dated February 28, 2007, File No. 1-16247). |
|
|
|
|
|
10.18
|
|
|
|
Fourth Amendment to the Flowers Foods, Inc. 2001 Equity and Performance Incentive Plan, as
previously amended and restated as of February 11, 2005. (Incorporated by reference to Flowers
Foods Annual Report on Form 10-K dated February 27, 2008, Nile No. 1-16247). |
|
|
|
|
|
10.19
|
|
|
|
Employment Agreement, effective September 15, 2007, by and between Flowers Foods, Inc. and Jimmy M.
Woodward. (Incorporated by reference to Flowers Foods Current Report on Form 8-K dated August 31,
2007, File No. 1-16247). |
29
|
|
|
|
|
Exhibit |
|
|
|
|
No. |
|
|
|
Name of Exhibit |
10.20
|
|
|
|
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). |
|
|
|
|
|
21
|
|
|
|
Subsidiaries of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods Annual Report on
Form 10-K dated February 28, 2007, File No. 1-16247). |
|
|
|
|
|
*31.1
|
|
|
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
*31.2
|
|
|
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
*31.3
|
|
|
|
Certification of Chief Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
|
|
*32
|
|
|
|
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 19,
2008. |
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