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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 23, 2022

OR

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)

 

 

Georgia

 

58-2582379

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

1919 FLOWERS CIRCLE, THOMASVILLE, Georgia

(Address of principal executive offices)

31757

(Zip Code)

(229)-226-9110

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value

 

FLO

 

NYSE

 

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☒

As of May 13, 2022, the registrant had 212,042,405 shares of common stock, $0.01 par value per share, outstanding.

 

 


 

FLOWERS FOODS, INC.

INDEX

 

 

PAGE

NUMBER

PART I. Financial Information

4

 

Item 1.

Financial Statements (Unaudited)

4

 

 

Condensed Consolidated Balance Sheets as of April 23, 2022 and January 1, 2022

4

 

 

Condensed Consolidated Statements of Income for the Sixteen Weeks Ended April 23, 2022 and April 24, 2021

5

 

 

Condensed Consolidated Statements of Comprehensive Income for the Sixteen Weeks Ended April 23, 2022 and April 24, 2021

6

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Sixteen Weeks Ended April 23, 2022 and April 24, 2021

7

 

 

Condensed Consolidated Statements of Cash Flows for the Sixteen Weeks Ended April 23, 2022 and April 24, 2021

9

 

 

Notes to Condensed Consolidated Financial Statements (unaudited)

10

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

33

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

44

 

Item 4.

Controls and Procedures

44

PART II. Other Information

45

 

Item 1.

Legal Proceedings

45

 

Item 1A.

Risk Factors

45

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

 

Item 3.

Defaults Upon Senior Securities

49

 

Item 4.

Mine Safety Disclosures

49

 

Item 5.

Other Information

49

 

Item 6.

Exhibits

50

Signatures

51

 

 


 

Forward-Looking Statements

Statements contained in this filing and certain other written or oral statements made from time to time by Flowers Foods, Inc. (the “company”, “Flowers Foods”, “Flowers”, “us”, “we”, or “our”) 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 the ultimate impact of the novel strain of coronavirus (“COVID-19”) on our business, results of operations and financial condition 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, liquidity, and achievements to differ materially from those projected are discussed in this Quarterly Report on Form 10-Q (this “Form 10-Q”) and may include, but are not limited to:

unexpected changes in any of the following: (i) general economic and business conditions; (ii) the competitive setting in which we operate, including advertising or promotional strategies by us or our competitors, as well as changes in consumer demand; (iii) interest rates and other terms available to us on our borrowings; (iv) supply chain conditions and any related impact on energy and raw materials costs and availability and hedging counter-party risks; (v) relationships with or increased costs related to our employees and third-party service providers; (vi) laws and regulations (including environmental and health-related issues); and (vii) accounting standards or tax rates in the markets in which we operate;
the ultimate impact of the COVID-19 pandemic and future responses and/or measures taken in response thereto, including, but not limited to, new and emerging variants of the virus and the efficacy and distribution of vaccines, which are highly uncertain and are difficult to predict;
the loss or financial instability of any significant customer(s), including as a result of product recalls or safety concerns related to our products;
changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store branded products;
the level of success we achieve in developing and introducing new products and entering new markets;
our ability to implement new technology and customer requirements as required;
our ability to operate existing, and any new, manufacturing lines according to schedule;
our ability to implement and achieve our environmental, social, and governance goals in accordance with suppliers, regulations, and customers;
our ability to execute our business strategies which may involve, among other things, (i) the ability to realize the intended benefits of planned or contemplated acquisitions, dispositions or joint ventures, (ii) the deployment of new systems (e.g., our enterprise resource planning ("ERP") system), distribution channels and technology, and (iii) an enhanced organizational structure;
consolidation within the baking industry and related industries;
changes in pricing, customer and consumer reaction to pricing actions (including decreased volumes), and the pricing environment among competitors within the industry;
our ability to adjust pricing to offset, or partially offset, inflationary pressure on the cost of our products;
disruptions in our direct-store-delivery distribution model, including litigation or an adverse ruling by a court or regulatory or governmental body that could affect the independent contractor classifications of the independent distributor partners;
increasing legal complexity and legal proceedings that we are or may become subject to;
labor shortages and turnover or increases in employee and employee-related costs;
the credit, business, and legal risks associated with independent distributor partners and customers, which operate in the highly competitive retail food and foodservice industries;
any business disruptions due to political instability, pandemics, armed hostilities (including the ongoing conflict between Russia and Ukraine), incidents of terrorism, natural disasters, labor strikes or work stoppages, technological breakdowns,

2


 

product contamination, product recalls or safety concerns related to our products, or the responses to or repercussions from any of these or similar events or conditions and our ability to insure against such events;
the failure of our information technology (“IT”) systems to perform adequately, including any interruptions, intrusions, cyber-attacks or security breaches of such systems or risks associated with the planned implementation of the upgrade of our ERP system; and
the potential impact of climate change on the company, including physical and transition risks, availability or restriction of resources, higher regulatory and compliance costs, reputational risks, and availability of capital on attractive terms.

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. Refer to Part I, Item 1A., Risk Factors, of our Annual Report on Form 10-K for the year ended January 1, 2022 (the “Form 10-K”) and Part II, Item 1A., Risk Factors, of this Form 10-Q for additional information regarding factors that could affect the company’s 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.

We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products and the formulations for such products. Solely for convenience, some of the trademarks, trade names and copyrights referred to in this Form 10-Q are listed without the © , ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, trade names and copyrights.

 

3


 

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

(Unaudited)

 

 

 

April 23, 2022

 

 

January 1, 2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

205,147

 

 

$

185,871

 

Accounts and notes receivable, net of allowances of $18,121 and $15,398, respectively

 

 

326,521

 

 

 

305,196

 

Inventories, net:

 

 

 

 

 

 

Raw materials

 

 

59,218

 

 

 

54,458

 

Packaging materials

 

 

25,457

 

 

 

24,580

 

Finished goods

 

 

63,761

 

 

 

55,942

 

Inventories, net

 

 

148,436

 

 

 

134,980

 

Spare parts and supplies

 

 

70,374

 

 

 

68,479

 

Other

 

 

68,388

 

 

 

51,592

 

Total current assets

 

 

818,866

 

 

 

746,118

 

Property, plant and equipment:

 

 

 

 

 

 

Property, plant and equipment

 

 

2,239,028

 

 

 

2,192,392

 

Less: accumulated depreciation

 

 

(1,422,562

)

 

 

(1,393,664

)

Property, plant and equipment, net

 

 

816,466

 

 

 

798,728

 

Financing lease right-of-use assets

 

 

2,944

 

 

 

3,476

 

Operating lease right-of-use assets

 

 

291,167

 

 

 

289,013

 

Notes receivable from independent distributor partners

 

 

148,786

 

 

 

154,310

 

Assets held for sale

 

 

13,956

 

 

 

11,369

 

Other assets

 

 

9,089

 

 

 

9,623

 

Goodwill

 

 

545,244

 

 

 

545,244

 

Other intangible assets, net

 

 

685,819

 

 

 

695,432

 

Total assets

 

$

3,332,337

 

 

$

3,253,313

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Current maturities of long-term debt

 

$

 

 

$

 

Current maturities of financing leases

 

 

1,752

 

 

 

1,584

 

Current maturities of operating leases

 

 

50,740

 

 

 

46,390

 

Accounts payable

 

 

297,408

 

 

 

268,500

 

Other accrued liabilities

 

 

188,124

 

 

 

203,443

 

Total current liabilities

 

 

538,024

 

 

 

519,917

 

 

 

 

 

 

 

 

Noncurrent long-term debt

 

 

891,007

 

 

 

890,609

 

Noncurrent financing lease obligations

 

 

1,314

 

 

 

1,910

 

Noncurrent operating lease obligations

 

 

250,911

 

 

 

250,638

 

Total long-term debt and right-of-use lease liabilities

 

 

1,143,232

 

 

 

1,143,157

 

Other liabilities:

 

 

 

 

 

 

Postretirement/post-employment obligations

 

 

7,134

 

 

 

7,249

 

Deferred taxes

 

 

146,430

 

 

 

133,757

 

Other long-term liabilities

 

 

38,093

 

 

 

37,959

 

Total other long-term liabilities

 

 

191,657

 

 

 

178,965

 

Commitments and Contingencies

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock — $100 stated par value, 200,000 authorized shares and none issued

 

 

 

 

 

 

Preferred stock — $.01 stated par value, 800,000 authorized shares and none issued

 

 

 

 

 

 

Common stock — $.01 stated par value and $.001 current par value, 500,000,000
   authorized shares and
228,729,585 shares issued

 

 

199

 

 

 

199

 

Treasury stock — 16,687,180 shares and 17,334,804 shares, respectively

 

 

(228,875

)

 

 

(232,304

)

Capital in excess of par value

 

 

674,017

 

 

 

678,414

 

Retained earnings

 

 

1,001,220

 

 

 

962,378

 

Accumulated other comprehensive income

 

 

12,863

 

 

 

2,587

 

Total stockholders’ equity

 

 

1,459,424

 

 

 

1,411,274

 

Total liabilities and stockholders’ equity

 

$

3,332,337

 

 

$

3,253,313

 

 

(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)

 

 

 

For the Sixteen Weeks Ended

 

 

 

April 23, 2022

 

 

April 24, 2021

 

Sales

 

$

1,435,932

 

 

$

1,302,168

 

Materials, supplies, labor and other production costs (exclusive
   of depreciation and amortization shown separately below)

 

 

724,592

 

 

 

643,576

 

Selling, distribution and administrative expenses

 

 

554,952

 

 

 

501,973

 

Depreciation and amortization

 

 

43,423

 

 

 

41,386

 

Loss on inferior ingredients

 

 

 

 

 

122

 

Impairment of assets

 

 

990

 

 

 

 

Income from operations

 

 

111,975

 

 

 

115,111

 

Interest expense

 

 

8,858

 

 

 

11,681

 

Interest income

 

 

(6,757

)

 

 

(7,480

)

Loss on extinguishment of debt

 

 

 

 

 

16,149

 

Other components of net periodic pension and postretirement
   benefit plans credit

 

 

(238

)

 

 

(125

)

Income before income taxes

 

 

110,112

 

 

 

94,886

 

Income tax expense

 

 

24,523

 

 

 

23,231

 

Net income

 

$

85,589

 

 

$

71,655

 

Net income per common share:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Net income per common share

 

$

0.40

 

 

$

0.34

 

Weighted average shares outstanding

 

 

211,999

 

 

 

211,889

 

Diluted:

 

 

 

 

 

 

Net income per common share

 

$

0.40

 

 

$

0.34

 

Weighted average shares outstanding

 

 

213,314

 

 

 

212,780

 

Cash dividends paid per common share

 

$

0.2100

 

 

$

0.2000

 

 

(See Accompanying Notes to Condensed Consolidated Financial Statements)

 

5


 

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

 

 

 

For the Sixteen Weeks Ended

 

 

 

April 23, 2022

 

 

April 24, 2021

 

Net income

 

$

85,589

 

 

$

71,655

 

Other comprehensive income, net of tax:

 

 

 

 

 

 

Pension and postretirement plans:

 

 

 

 

 

 

Amortization of prior service cost included in net income

 

 

(41

)

 

 

13

 

Amortization of actuarial loss included in net income

 

 

66

 

 

 

123

 

Pension and postretirement plans, net of tax

 

 

25

 

 

 

136

 

Derivative instruments:

 

 

 

 

 

 

Net change in fair value of derivatives

 

 

11,220

 

 

 

4,745

 

(Gain) loss reclassified to net income

 

 

(969

)

 

 

220

 

Derivative instruments, net of tax

 

 

10,251

 

 

 

4,965

 

Other comprehensive income, net of tax

 

 

10,276

 

 

 

5,101

 

Comprehensive income

 

$

95,865

 

 

$

76,756

 

 

(See Accompanying Notes to Condensed Consolidated Financial Statements)

6


 

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

(Unaudited)

 

 

 

 

For the Sixteen Weeks Ended April 23, 2022

 

 

 

Common Stock

 

 

Capital in

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

Excess

 

 

 

 

 

Other

 

 

Treasury Stock

 

 

 

 

 

 

Shares
Issued

 

 

Par
Value

 

 

of Par
Value

 

 

Retained
Earnings

 

 

Comprehensive
Income

 

 

Number of
Shares

 

 

Cost

 

 

Total

 

Balances at January 1, 2022

 

 

228,729,585

 

 

$

199

 

 

$

678,414

 

 

$

962,378

 

 

$

2,587

 

 

 

(17,334,804

)

 

$

(232,304

)

 

$

1,411,274

 

Net income

 

 

 

 

 

 

 

 

 

 

 

85,589

 

 

 

 

 

 

 

 

 

 

 

 

85,589

 

Derivative instruments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,251

 

 

 

 

 

 

 

 

 

10,251

 

Pension and postretirement
   plans, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25

 

 

 

 

 

 

 

 

 

25

 

Amortization of share-based
   compensation awards

 

 

 

 

 

 

 

 

9,081

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,081

 

Issuance of deferred compensation

 

 

 

 

 

 

 

 

(11

)

 

 

 

 

 

 

 

 

851

 

 

 

11

 

 

 

 

Time-based restricted stock units issued
   (Note 15)

 

 

 

 

 

 

 

 

(2,860

)

 

 

 

 

 

 

 

 

213,436

 

 

 

2,860

 

 

 

 

Performance-contingent restricted stock
   awards issued (Note 15)

 

 

 

 

 

 

 

 

(10,469

)

 

 

 

 

 

 

 

 

777,773

 

 

 

10,469

 

 

 

 

Issuance of deferred stock awards

 

 

 

 

 

 

 

 

(138

)

 

 

 

 

 

 

 

 

10,034

 

 

 

138

 

 

 

 

Stock repurchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(354,470

)

 

 

(10,049

)

 

 

(10,049

)

Dividends paid on vested
   share-based payment awards

 

 

 

 

 

 

 

 

 

 

 

(2,220

)

 

 

 

 

 

 

 

 

 

 

 

(2,220

)

Dividends paid — $0.2100 per
   common share

 

 

 

 

 

 

 

 

 

 

 

(44,527

)

 

 

 

 

 

 

 

 

 

 

 

(44,527

)

Balances at April 23, 2022

 

 

228,729,585

 

 

$

199

 

 

$

674,017

 

 

$

1,001,220

 

 

$

12,863

 

 

 

(16,687,180

)

 

$

(228,875

)

 

$

1,459,424

 

 

(See Accompanying Notes to Condensed Consolidated Financial Statements)

 

7


 

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

(Unaudited)

 

 

 

For the Sixteen Weeks Ended April 24, 2021

 

 

 

Common Stock

 

 

Capital in

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

Number of

 

 

 

 

 

Excess

 

 

 

 

 

Other

 

 

Treasury Stock

 

 

 

 

 

 

Shares
Issued

 

 

Par
Value

 

 

of Par
Value

 

 

Retained
Earnings

 

 

Comprehensive
Income (Loss)

 

 

Number of
Shares

 

 

Cost

 

 

Total

 

Balances at January 2, 2021

 

 

228,729,585

 

 

$

199

 

 

$

659,682

 

 

$

932,094

 

 

$

6,424

 

 

 

(17,126,261

)

 

$

(225,405

)

 

$

1,372,994

 

Net income

 

 

 

 

 

 

 

 

 

 

 

71,655

 

 

 

 

 

 

 

 

 

 

 

 

71,655

 

Derivative instruments, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,965

 

 

 

 

 

 

 

 

 

4,965

 

Pension and postretirement
   plans, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

136

 

 

 

 

 

 

 

 

 

136

 

Amortization of share-based
   compensation awards

 

 

 

 

 

 

 

 

7,182

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,182

 

Issuance of deferred compensation

 

 

 

 

 

 

 

 

(7

)

 

 

 

 

 

 

 

 

546

 

 

 

7

 

 

 

 

Time-based restricted stock units issued
   (Note 15)

 

 

 

 

 

 

 

 

(1,798

)

 

 

 

 

 

 

 

 

136,652

 

 

 

1,798

 

 

 

 

Issuance of deferred stock awards

 

 

 

 

 

 

 

 

(78

)

 

 

 

 

 

 

 

 

5,931

 

 

 

78

 

 

 

 

Stock repurchases

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(46,618

)

 

 

(1,058

)

 

 

(1,058

)

Dividends paid on vested share-based
   payment awards

 

 

 

 

 

 

 

 

 

 

 

(163

)

 

 

 

 

 

 

 

 

 

 

 

(163

)

Dividends paid — $0.2000 per
   common share

 

 

 

 

 

 

 

 

 

 

 

(42,340

)

 

 

 

 

 

 

 

 

 

 

 

(42,340

)

Balances at April 24, 2021

 

 

228,729,585

 

 

$

199

 

 

$

664,981

 

 

$

961,246

 

 

$

11,525

 

 

 

(17,029,750

)

 

$

(224,580

)

 

$

1,413,371

 

 

 

 

(See Accompanying Notes to Condensed Consolidated Financial Statements)

8


 

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

 

 

 

For the Sixteen Weeks Ended

 

 

 

April 23, 2022

 

 

April 24, 2021