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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 28, 2013
Summary of Significant Accounting Policies |
Note 2. | Summary of Significant Accounting Policies
Principles of Consolidation. The Consolidated Financial Statements include the accounts of the company and its wholly-owned subsidiaries. Intercompany transactions and balances are eliminated in consolidation. Variable Interest Entities. The incorporated independent distributors (“IDs”) who deliver our products qualify as variable interest entities (“VIEs”). The company typically finances the ID and also enters into a contract with the ID to sell product at a fixed discount for distribution in the ID’s territory. The combination of the company’s loans to the IDs and the ongoing supply arrangements with the IDs provides a level of protection to the equity owners of the various IDs that would not otherwise be available. However, the company is not considered to be the primary beneficiary of the VIEs because the company does not (i) have the ability to direct the significant activities of the VIEs that would affect their ability to operate their respective distributor territories or (ii) provide any implicit or explicit guarantees or other financial support to the VIEs, other than the financing described above, for specific return or performance benchmarks. The company’s maximum exposure related to the distributor route notes receivable of these VIEs is less than 10% of the total distributor route notes receivable for the consolidated company. See Note 12, Variable Interest Entity, for additional disclosure. Fiscal Year End. The company operates on a 52-53 week fiscal year ending the Saturday nearest December 31. Fiscal 2013, fiscal 2012, and fiscal 2011 consisted of 52 weeks. Fiscal 2014 will consist of 53 weeks. Revenue Recognition. The company recognizes revenue from the sale of product at the time of delivery when title and risk of loss pass to the customer. The company records both direct and estimated reductions to gross revenue for customer programs and incentive offerings at the time the incentive is offered or at the time of revenue recognition for the underlying transaction that results in progress by the customer towards earning the incentive. These allowances include price promotion discounts, coupons, customer rebates, cooperative advertising, and product returns. Price promotion discount expense is recorded as a reduction to gross sales when the discounted product is sold to the customer. Coupon expense estimates are calculated and recorded as a reduction to gross sales using the number of coupons dropped to consumers and the estimated redemption percentage and value, at the time the coupons are issued. Estimates for customer rebates assume that customers will meet the estimates of required quantities to qualify for payment and are recorded as a reduction to gross sales. Cooperative advertising expense is recorded as a reduction to gross sales based on our proportion of the estimated advertising costs of the underlying program and are recognized at the time the advertising takes place. Product returns are recorded as a reduction to gross sales based on the actual returns in the week following the quarter end. The consumer packaged goods industry has used scan-based trading technology over several years to share information between the supplier and retailer. An extension of this technology allows the retailer to take ownership of our goods when the consumer purchases the goods rather than at the time they are delivered to the retailer. Consequently, revenue on these sales is not recognized until the product is purchased by the consumer. This technology is referred to as pay-by-scan (“PBS”). In fiscal years 2013, 2012, and 2011, the company recorded $1,116.4 million, $863.4 million, and $821.0 million, respectively, in sales through PBS. Revenue on PBS sales is recognized when the product is purchased by the end consumer because that is when title and risk of loss is transferred. Non-PBS sales are recognized when the product is delivered to the customer since that is when title and risk of loss is transferred. The company’s production facilities deliver our products to independent distributors, who deliver our products to outlets of retail accounts that are within the distributors’ geographic territory. PBS is utilized primarily in certain national and regional retail accounts (“PBS Outlet”). Generally, no revenue is recognized by the company upon delivery of our products by the company to the distributor or upon delivery of our products by the distributor to a PBS Outlet. It is recognized when our products are purchased by the end consumer. Product inventory in the PBS Outlet is reflected as inventory on the company’s balance sheet. The balance of PBS inventory at December 28, 2013 and December 29, 2012 was $6.4 million and $5.6 million, respectively. A distributor performs a physical inventory of our products at each PBS Outlet weekly and reports the results to the company. The inventory data submitted by the distributor for each PBS Outlet is compared with the product delivery data. Product delivered to a PBS Outlet that is not recorded in the inventory data has been purchased by the consumer/customer of the PBS Outlet and is recorded as sales revenue by the company. The company repurchases territories from and sells territories to independent distributors from time to time. At the time the company purchases a territory from an independent distributor, the fair value purchase price of the territory is recorded as “Assets Held for Sale — Distributor Routes”. Upon the sale of that territory to a new independent distributor, generally a note receivable of up to ten years is recorded for the sales price of the territory (for those situations when the company provides direct financing to the distributor) with a corresponding credit to assets held for sale to relieve the carrying amount of the territory. Any difference between the amount of the note receivable (i.e., the sales price) and the territory’s carrying value is recorded as a gain or a loss in selling, distribution and administrative expenses because the company considers its distributor activity a cost of distribution. Since the distributor has the right to require the company to repurchase the territory at the original purchase price within the first six-month period following the date of sale, no gain is recorded on the sale of the territory until after the six-month period is completed (except that gains of $5,000 or less are recognized immediately upon the sale). Upon expiration of the six-month period, the amount deferred during this period is recorded and the remaining gain on the sale is recorded over the remaining term of the note. In instances where a territory is sold for less than its carrying value, a loss is recorded at the date of sale and any impairment of a territory held for sale is recorded at such time when the impairment occurs. The deferred gains were $22.4 million and $17.3 million at December 28, 2013 and December 29, 2012, respectively, and are recorded in other long-term liabilities on the Consolidated Balance Sheet. The company recorded net gains of $5.5 million during fiscal 2013, $2.6 million during fiscal 2012, and $2.4 million during fiscal 2011 related to the sale of territories as a component of selling, distribution and administrative expenses. Cash and Cash Equivalents. The company considers deposits in banks, certificates of deposits, and short-term investments with original maturities of three months or less as cash and cash equivalents. Accounts Receivable. Accounts receivable consists of trade receivables, current portions of distributor notes receivable, and miscellaneous receivables. The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments for trade receivables, distributor notes receivable, and miscellaneous receivables. Bad debts are charged to this reserve after all attempts to collect the balance are exhausted. If the financial condition of the company’s customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. In determining past due or delinquent status of a customer, the aged trial balance is reviewed on a weekly basis by sales management and generally any accounts older than seven weeks are considered delinquent. Activity in the allowance for doubtful accounts is as follows (amounts in thousands):
|  | Beginning Balance |  |  | Charged to Expense |  |  | Write-Offs and Other |  |  | Ending Balance |
Fiscal 2013 |  | $ | 386 |  |  | $ | 4,110 |  |  | $ | 2,898 |  |  | $ | 1,598 |
Fiscal 2012 |  | $ | 171 |  |  | $ | 1,991 |  |  | $ | 1,776 |  |  | $ | 386 |
Fiscal 2011 |  | $ | 522 |  |  | $ | 414 |  |  | $ | 765 |  |  | $ | 171 |
The increase from fiscal 2012 to fiscal 2013 for the amount charged to the allowance for accounts receivable was from a significant increase in the number of new customers added during the year. These new customers contributed to the volume increases recognized in our overall sales increases. Concentration of Credit Risk. The company performs periodic credit evaluations and grants credit to customers, who are primarily in the grocery and foodservice markets, and generally does not require collateral. Our top 10 customers in fiscal years 2013, 2012 and 2011 accounted for 43.5%, 45.1% and 45.6% of sales, respectively. Our largest customer, Walmart/Sam’s Club, percent of sales for fiscal years 2013, 2012 and 2011 was as follows:
|  | Percent of Sales |
|  | DSD |  |  | Warehouse |  |  | Total |
Fiscal 2013 |  |  | 17.0 | % |  |  | 3.1 | % |  |  | 20.1 | %
Fiscal 2012 |  |  | 17.5 | % |  |  | 3.2 | % |  |  | 20.7 | %
Fiscal 2011 |  |  | 17.8 | % |  |  | 3.8 | % |  |  | 21.6 | %
Inventories. Inventories at December 28, 2013 and December 29, 2012 are valued at lower of cost or market. Costs for raw materials and packaging are recorded at moving average cost. Finished goods inventories are at average costs. The company will write down inventory to market for estimated unmarketable inventory equal to the difference between the cost of inventory and the estimated market value for situations when the inventory is impaired by damage, deterioration, or obsolescence. Activity in the inventory reserve allowance is as follows (amounts in thousands):
|  | Beginning Balance |  |  | Charged to Expense |  |  | Write-Offs and Other |  |  | Ending Balance |
Fiscal 2013 |  | $ | 38 |  |  | $ | 1,210 |  |  | $ | 1,155 |  |  | $ | 93 |
Fiscal 2012 |  | $ | 58 |  |  | $ | 947 |  |  | $ | 967 |  |  | $ | 38 |
Fiscal 2011 |  | $ | 231 |  |  | $ | 765 |  |  | $ | 938 |  |  | $ | 58 |
Shipping Costs. Shipping costs are included in the selling, distribution and administrative line item of the Consolidated Statements of Income. For fiscal years 2013, 2012, and 2011, shipping costs were $815.8 million, $675.6 million, and $630.1 million, respectively, including delivery fees paid to independent distributors. Spare Parts and Supplies. The company maintains inventories of spare parts and supplies, which are used for repairs and maintenance of its machinery and equipment. These spare parts and supplies allow the company to react quickly in the event of a mechanical breakdown. These parts are valued using the moving average method and are expensed as the part is used. Periodic physical inventories of the parts are performed, and the value of the parts is adjusted for any obsolescence or difference from the physical inventory count. Property, Plant and Equipment and Depreciation. Property, plant and equipment is stated at cost. Depreciation expense is computed using the straight-line method based on the estimated useful lives of the depreciable assets. Certain equipment held under capital leases of $22.5 million and $15.6 million at December 28, 2013 and December 29, 2012, respectively, is classified as property, plant and equipment and the related obligations are recorded as liabilities. Depreciation of assets held under capital leases is included in depreciation and amortization expense. Total accumulated depreciation for assets held under capital leases was $7.0 million and $5.6 million at December 28, 2013 and December 29, 2012, respectively. Buildings are depreciated over ten to forty years, machinery and equipment over three to twenty-five years, and furniture, fixtures, and transportation equipment over three to fifteen years. Property under capital leases and leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the property. Depreciation expense for fiscal years 2013, 2012, and 2011 was $106.7 million, $93.4 million and $87.5 million, respectively. The company recorded an immaterial amount of capitalized interest during fiscal 2013, 2012, and 2011. The cost of maintenance and repairs is charged to expense as incurred. Upon disposal or retirement, the cost and accumulated depreciation of assets are eliminated from the respective accounts. Any gain or loss is reflected in the company’s income from operations. Goodwill and Other Intangible Assets. The company accounts for goodwill in a purchase business combination as the excess of the cost over the fair value of net assets acquired. Business combinations can also result in other intangible assets being recognized. Amortization of intangible assets, if applicable, occurs over their estimated useful lives. The company tests goodwill for impairment on an annual basis (or an interim basis if an event occurs that indicates the fair value of a reporting unit may be below its carrying value) using a two-step method. We have elected not to perform the qualitative approach. The company conducts this review during the fourth quarter of each fiscal year absent any triggering events. No impairment resulted from the annual review performed in fiscal years 2013, 2012, or 2011. Identifiable intangible assets that are determined to have an indefinite useful economic life are not amortized, but are separately tested for impairment, at least annually, using a one-step fair value based approach or when certain indicators of potential impairment are present. We also reassess the indefinite-lived classification to determine if it is appropriate to reclassify these as finite lived assets that will require amortization. See Note 6, Goodwill and Other Intangible Assets, for additional disclosure. Impairment of Long-Lived Assets. The company determines whether there has been an impairment of long-lived assets, excluding goodwill, and identifiable intangible assets that are determined to have indefinite useful economic lives, when indicators of potential impairment are present. In the event that facts and circumstances indicate that the cost of any long-lived assets may be impaired, an evaluation of recoverability would be performed. If an evaluation is required, the estimated future gross, undiscounted cash flows associated with the asset would be compared to the asset’s carrying amount to determine if a write-down to market value is required. Future adverse changes in market conditions or poor operating results of underlying long-lived assets could result in losses or an inability to recover the carrying value of the long-lived assets that may not be reflected in the assets’ current carrying values, thereby possibly requiring an impairment charge in the future. There were no impairment charges during fiscal years 2013, 2012, or 2011. 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 company’s primary raw materials are flour, sweeteners, and shortening, along with pulp, paper, and petroleum-based packaging products. The company uses natural gas as fuel for firing ovens. The company also periodically enters into interest rate derivatives to hedge exposure to changes in interest rates. The company measures the fair value of its derivative portfolio using the fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal market for that asset or liability. When quoted market prices for identical assets or liabilities are not available, the company bases fair value upon internally developed models that use current market observable inputs, such as exchange-quoted futures prices and yield curves. See Note 8, Derivative Financial Instruments, for additional disclosure. Treasury Stock. The company records acquisitions of its common stock for treasury at cost. Differences between proceeds for reissuances of treasury stock and average cost are credited or charged to capital in excess of par value to the extent of prior credits and thereafter to retained earnings. See Note 14, Stockholders’ Equity, for additional disclosure. Advertising and Marketing Costs. Advertising and marketing costs are expensed the first time the advertising takes place. Advertising and marketing costs were $28.1 million, $19.1 million, and $16.8 million for fiscal years 2013, 2012, and 2011, respectively. Advertising and marketing costs are recorded in the selling, distribution and administrative expense line item in our Consolidated Statements of Income. Stock-Based Compensation. Stock-based compensation expense for all share-based payment awards granted is determined based on the grant date fair value. The company recognizes compensation costs only for those shares expected to vest on a straight-line basis over the requisite service period of the award, which is generally the vesting term of the share-based payment award. See Note 15, Stock-Based Compensation, for additional disclosure. Software Development Costs. The company expenses internal and external software development costs incurred in the preliminary project stage, and, thereafter, capitalizes costs incurred in developing or obtaining internally used software. Certain costs, such as maintenance and training, are expensed as incurred. Capitalized costs are amortized over a period of three to eight years and are subject to impairment evaluation. The net balance of capitalized software development costs included in plant, property and equipment was $14.8 million and $7.5 million at December 28, 2013 and December 29, 2012, respectively. Amortization expense of capitalized software development costs, which is included in depreciation and amortization expense in the Consolidated Statements of Income, was $3.2 million, $1.6 million, and $1.4 million in fiscal years 2013, 2012, and 2011, respectively. Income Taxes. The company accounts for income taxes using the asset and liability method and recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The company has considered carryback, future taxable income, and prudent and feasible tax planning strategies in assessing the need for the valuation allowance. In the event the company were to determine that it would be more likely than not able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the valuation allowance would increase income in the period such a determination was made. Likewise, should the company determine that it would not more likely than not be able to realize all or part of its net deferred tax asset in the future, an adjustment to the valuation allowance would decrease income in the period such determination was made. The company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation process. Interest related to unrecognized tax benefits is recorded within the interest expense line in the accompanying Consolidated Statements of Income. See Note 19, Income Taxes, for additional disclosure. Activity in the deferred tax asset valuation allowance is as follows (amounts in thousands):
|  | Beginning Balance |  |  | Charged to (Income) |  |  | Other |  |  | Ending Balance |
Fiscal 2013 |  | $ | 4,545 |  |  | $ | (1,650 | ) |  | $ | 0 |  |  | $ | 2,895 |
Fiscal 2012 |  | $ | 4,874 |  |  | $ | (782 | ) |  | $ | 453 |  |  | $ | 4,545 |
Fiscal 2011 |  | $ | 2,691 |  |  | $ | (415 | ) |  | $ | 2,598 |  |  | $ | 4,874 |
Self-Insurance Reserves. The company is self-insured for various levels of general liability, auto liability, workers’ compensation, and employee medical and dental coverage. Insurance reserves are calculated on an undiscounted basis based on actual claim data and estimates of incurred but not reported claims developed utilizing historical claim trends. Projected settlements of incurred but not reported claims are estimated based on pending claims and historical trends and data. Though the company does not expect them to do so, actual settlements and claims could differ materially from those estimated. Material differences in actual settlements and claims could have an adverse effect on our results of operations and financial condition. Net Income Per Common Share. Basic net income per share is computed by dividing net income by weighted average common shares outstanding for the period. Diluted net income per share is computed by dividing net income by the weighted average common and common equivalent shares outstanding for the period. Common stock equivalents consist of the incremental shares associated with the company’s stock compensation plans, as determined under the treasury stock method. Our nonvested performance contingent restricted stock awards granted prior to the February 9, 2010 grant are considered participating securities since the share-based awards contain a non-forfeitable right to dividend equivalents irrespective of whether the awards ultimately vest. As a result, we computed basic earnings per common share under the two-class method for those awards. The performance contingent restricted stock awards granted on and after February 9, 2010 do not contain a non-forfeitable right to dividend equivalents and are included in the computation for diluted net income per share. See Note 17, Earnings Per Share, for additional disclosure. Pension/OPEB Obligations. The company records net periodic benefit costs and obligations related to its three defined benefit pension and two other post employment benefit (“OPEB”) plans based on actuarial valuations. These valuations reflect key assumptions determined by management, including the discount rate and expected long-term rate of return on plan assets. The expected long-term rate of return assumption considers the asset mix of the plans’ portfolios, past performance of these assets, the anticipated future economic environment, and long-term performance of individual asset classes, and other factors. Material changes in benefit costs and obligations may occur in the future due to experience different than assumed and changes in these assumptions. Future benefit obligations and annual benefit costs could be impacted by changes in the discount rate, changes in the expected long-term rate of return, changes in the level of contributions to the plans’, and other factors. Effective January 1, 2006, the company curtailed its largest defined benefit pension plan that covered the majority of its workforce. Benefits under this plan were frozen, and no future benefits will accrue under this plan. The company still maintains a smaller unfrozen pension plan for certain eligible unionized employees. The company determines the fair value of substantially all its plans’ assets utilizing market quotes rather than developing “smoothed” values, “market related” values, or other modeling techniques. Plan asset gains or losses in a given year are included with other actuarial gains and losses due to remeasurement of the plans’ projected benefit obligations (“PBO”). If the total unrecognized gain or loss exceeds 10% of the larger of (i) the PBO or (ii) the market value of plan assets, the excess of the total unrecognized gain, or loss is amortized over the expected average future lifetime of participants in the frozen pension plans. The company uses a calendar year end for the measurement date since the plans are based on a calendar year and because it approximates the company’s fiscal year end. See Note 18, Postretirement Plans, for additional disclosure. Use of 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. Other Comprehensive Income. The company reports comprehensive income in two separate but consecutive financial statements. In December 2011, the FASB issued guidance to present reclassifications out of accumulated other comprehensive income. See Note 16, Accumulated Other Comprehensive Income (Loss), for these additional required disclosure.

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