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Debt, Lease and Other Commitments | 12 Months Ended
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Dec. 31, 2016
Debt Disclosure [Abstract] |
Debt, Lease and Other Commitments |
Note 12. | Debt, Lease and Other Commitments
Long-term debt, including capital lease obligations, consisted of the following at December 31, 2016 and January 2, 2016:
|  | Interest Rate at December 31, 2016 |  |  | Final Maturity |  |  | December 31, 2016 |  |  | January 2, 2016 |
|  |  |  |  |  |  |  |  |  | (Amounts in thousands) |
Unsecured credit facility |  |  | 4.08% |  |  | 2020 |  |  | $ | 24,000 |  |  | $ | 160,000 |
Unsecured 2013 term loan |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 238,515 |
3.5% senior notes due 2026 |  |  | 3.50% |  |  | 2026 |  |  |  | 394,406 |  |  |  | — |
4.375% senior notes due 2022 |  |  | 4.38% |  |  | 2022 |  |  |  | 397,458 |  |  |  | 396,975 |
Accounts receivable securitization |  |  | 1.59% |  |  | 2018 |  |  |  | 95,000 |  |  |  | 170,000 |
Capital lease obligations |  |  | 3.70% |  |  | 2024 |  |  |  | 30,427 |  |  |  | 20,228 |
Other notes payable |  |  | 2.10% |  |  | 2020 |  |  |  | 16,866 |  |  |  | 18,989 |
|  |  |  |  |  |  |  |  |  |  | 958,157 |  |  |  | 1,004,707 |
Current maturities of long-term debt and capital lease obligations |  |  |  | 11,490 |  |  |  | 74,685 |
Long-term debt and capital lease obligations |  |  | $ | 946,667 |  |  | $ | 930,022 |
Bank overdrafts occur when checks have been issued but have not been presented to the bank for payment. Certain of our banks allow us to delay funding of issued checks until the checks are presented for payment. The delay in funding results in a temporary source of financing from the bank. The activity related to bank overdrafts is shown as a financing activity in our Consolidated Statements of Cash Flows. Bank overdrafts are included in other current liabilities on our Consolidated Balance Sheets. As of December 31, 2016 and January 2, 2016, the bank overdraft balance was $19.9 million and $18.0 million, respectively. The company also had standby letters of credit (“LOCs”) outstanding of $9.1 million and $16.9 million at December 31, 2016 and January 2, 2016, respectively, which reduce the availability of funds under the credit facility. The outstanding LOCs are for the benefit of certain insurance companies and lessors. None of the LOCs are recorded as a liability on the Consolidated Balance Sheet. 2026 Notes, 2016 Term Loan, Accounts Receivable Securitization Facility, 2013 Term Loan, 2022 Notes, and Credit Facility 2026 Notes. On September 28, 2016, the company issued $400.0 million of senior notes (the “2026 notes”). The company will pay semiannual interest on the 2026 notes on each April 1 and October 1, beginning on April 1, 2017, and the 2026 notes will mature on October 1, 2026. The notes bear interest at 3.500% per annum. The 2026 notes are subject to interest rate adjustments if either Moody’s or S&P downgrades (or downgrades and subsequently upgrades) the credit rating assigned to the 2026 notes. On any date prior to July 1, 2026, the company may redeem some or all of the notes at a price equal to the greater of (1) 100% of the principal amount of the notes redeemed and (2) a “make-whole” amount plus, in each case, accrued and unpaid interest. The make-whole amount is equal to the sum of the present values of the remaining scheduled payments of principal and interest on the 2026 notes to be redeemed that would be due if such notes matured July 1, 2026 (exclusive of interest accrued to, but not including, the date of redemption), discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate (as defined in the indenture governing the notes), plus 30 basis points, plus in each case accrued and unpaid interest. At any time on or after July 1, 2026, the company may redeem some or all of the 2026 notes at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest. If the company experiences a “change of control triggering event” (which involves a change of control of the company and related rating of the notes below investment grade), it is required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon unless the company exercised its option to redeem the notes in whole. The 2026 notes are also subject to customary restrictive covenants, including certain limitations on liens and sale and leaseback transactions. The face value of the 2026 notes is $400.0 million. There was a debt discount representing the difference between the net proceeds, after expenses, received upon issuance of debt and the amount repayable at its maturity. The company also paid issuance costs (including underwriting fees and legal fees) on the 2026 notes. Debt issuance costs and the debt discount are being amortized to interest expense over the term of the 2026 notes. As of December 31, 2016, the company was in compliance with all restrictive covenants under the indenture governing the 2026 notes. The table below presents the debt discount, underwriting fees and the legal and other fees for issuing the 2026 notes (amounts in thousands):
Total fees for 2026 notes |  | Amount at Issuance |
Debt discount |  | $ | 2,108 |
Underwriting, legal, and other fees |  |  | 3,900 |
Total fees |  | $ | 6,008 |
2016 Term Loan. We entered into an unsecured term facility (the “2016 term loan”) on April 19, 2016. The 2016 term loan provided for a five-year, syndicated, unsecured term loan pursuant to which we may incur term loan borrowings in a single draw up to an aggregate principal amount of $150.0 million. The proceeds of the 2016 term loan borrowings were used to finance working capital and for general corporate purposes and to pay fees and expenses related to the 2016 term loan. The company drew down the full amount of the 2016 term loan at execution. The company paid financing costs of $0.6 million in connection with the 2016 term loan. The 2016 term loan was paid off in full on September 28, 2016, at the time the company issued the 2026 notes. The payoff was accounted for as an extinguishment of debt with the loss on extinguishment recorded as interest expense. The extinguishment loss of $0.6 million was immediately recognized at the time the 2016 term loan was paid off. The company has no further obligations under this agreement. Accounts Receivable Securitization Facility. On July 17, 2013, the company entered into an accounts receivable securitization facility (the “facility”). On August 7, 2014, the company entered into an amendment to the facility. The amendment (i) increased the revolving commitments under the facility to $200.0 million from $150.0 million, (ii) extended the term one year to July 17, 2016, and (iii) made certain other conforming changes. On December 17, 2014, the company executed a second amendment to the facility to add a bank to the lending group. The original commitment amount was split between the original lender and the new lender in the proportion of 62.5% for the original lender and 37.5% for the new lender. This modification, which was accounted for as an extinguishment of the debt, resulted in a charge of $0.1 million, or 37.5%, of the unamortized financing costs. On August 20, 2015, the company executed a third amendment to the facility to extend the term to August 11, 2017 and to add a leverage pricing grid. This amendment was accounted for as a modification. On September 30, 2016, the company executed a fourth amendment to the facility to extend the term to September 28, 2018. This amendment was accounted for as a modification. Under the facility, a wholly-owned, bankruptcy-remote subsidiary purchases, on an ongoing basis, substantially all trade receivables. As borrowings are made under the facility, the subsidiary pledges the receivables as collateral. In the event of liquidation of the subsidiary, its creditors would be entitled to satisfy their claims from the subsidiary’s pledged receivables prior to distributions of collections to the company. We include the subsidiary in our Consolidated Financial Statements. The facility contains certain customary representations and warranties, affirmative and negative covenants, and events of default. As of December 31, 2016, there was $95.0 million outstanding under the facility compared to $170.0 million amounts outstanding as of January 2, 2016. As of December 31, 2016 and January 2, 2016, the company was in compliance with all restrictive covenants under the facility. On December 31, 2016, the company had $85.2 million available under its facility for working capital and general corporate purposes. Amounts available for withdrawal under the facility are determined as the lesser of the total commitments and a formula derived amount based on qualifying trade receivables. Optional principal repayments may be made at any time without premium or penalty. Interest is due two days after our reporting periods end in arrears on the outstanding borrowings and is computed as the cost of funds rate plus an applicable margin of 70 basis points. An unused fee of 25 basis points is applicable on the unused commitment at each reporting period. The company paid financing costs of $0.8 million in connection with the facility at the time we entered into the facility, which are being amortized over the life of the facility. During fiscal 2014, we incurred $0.2 million in issuance costs with the first and second amendments. An additional $0.1 million in financing costs was paid during fiscal 2015 for the second and third amendments. An additional $0.1 million in financing costs were paid during fiscal 2016 for the fourth amendment. 2013 Term Loan. We entered into a senior unsecured delayed-draw term facility (the “2013 term loan”) on April 5, 2013 with a commitment of up to $300.0 million. The company drew down the full amount of the 2013 term loan on July 18, 2013. The 2013 term loan was paid off in full on September 28, 2016, at the time the company issued the 2026 notes, and an extinguishment of $1.3 million was recognized. The company has no further obligations under this agreement. The payoff was accounted for as an extinguishment of debt with the loss on extinguishment recorded as interest expense. 2022 Notes. On April 3, 2012, the company issued $400.0 million of senior notes (the “2022 notes”). The company pays semiannual interest on the notes on each April 1 and October 1, beginning on October 1, 2012, and the notes will mature on April 1, 2022. The notes bear interest at 4.375% per annum. On any date prior to January 1, 2022, the company may redeem some or all of the notes at a price equal to the greater of (1) 100% of the principal amount of the notes redeemed and (2) a “make-whole” amount plus, in each case, accrued and unpaid interest. The make-whole amount is equal to the sum of the present values of the remaining scheduled payments of principal thereof (not including any interest accrued thereon to, but not including, the date of redemption), discounted to the date of redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the treasury rate (as defined in the indenture governing the notes), plus 35 basis points, plus in each case, unpaid interest accrued thereon to, but not including, the date of redemption. At any time on or after January 1, 2022, the company may redeem some or all of the notes at a price equal to 100% of the principal amount of the notes redeemed plus accrued and unpaid interest. If the company experiences a “change of control triggering event” (which involves a change of control of the company and related rating of the notes below investment grade), it is required to offer to purchase the notes at a purchase price equal to 101% of the principal amount, plus accrued and unpaid interest thereon unless the company exercised its option to redeem the notes in whole. The notes are also subject to customary restrictive covenants, including certain limitations on liens and sale and leaseback transactions. The face value of the notes is $400.0 million and the current discount on the notes is $0.5 million. The company paid issuance costs (including underwriting fees and legal fees) for issuing the notes of $3.9 million. The issuance costs and the debt discount are being amortized to interest expense over the term of the notes. As of December 31, 2016 and January 2, 2016, the company was in compliance with all restrictive covenants under the indenture governing the notes. Credit Facility. On April 19, 2016, the company amended its senior unsecured credit facility (the “credit facility”), which was accounted for as a modification of the debt, that addressed changes in law affecting the terms of the existing agreement, makes certain terms of the existing agreement consistent with the terms of the 2016 term loan, and amends the terms to permit the indebtedness to be incurred under the 2016 term loan. In addition, the amendment increases the highest applicable margin applicable to base rate loans to 0.75% and the Eurodollar rate loans to 1.75%, in each case, based on the leverage ratio of the company. It also increases the highest applicable facility fee to 0.50%, due quarterly on all commitments under the facility. Previously, on April 21, 2015, the company amended its senior unsecured credit facility (the “credit facility”) to extend the term to April 21, 2020, reduce the applicable margin on base rate and Eurodollar loans and reduce the facility fees, described below. The amendment was accounted for as a modification of the debt. The credit facility is a five-year, $500.0 million senior unsecured revolving loan facility. The credit facility contains a provision that permits Flowers to request up to $200.0 million in additional revolving commitments, for a total of up to $700.0 million, subject to the satisfaction of certain conditions. Proceeds from the credit facility may be used for working capital and general corporate purposes, including capital expenditures, acquisition financing, refinancing of indebtedness, dividends 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 amended credit facility and can meet its presently foreseeable financial requirements. As of December 31, 2016 and January 2, 2016, the company was in compliance with all restrictive covenants under the credit facility. Interest is due quarterly in arrears on any outstanding borrowings at a customary Eurodollar rate or the base rate plus applicable margin. The underlying rate is defined as rates offered in the interbank Eurodollar market, or the higher of the prime lending rate or the federal funds rate plus 0.50%, with a floor rate defined by the one-month interbank Eurodollar market rate plus 1.00%. The applicable margin ranges from 0.0% to 0.50% for base rate loans and from 0.70% to 1.50% for Eurodollar loans. In addition, a facility fee ranging from 0.05% to 0.25% is due quarterly on all commitments under the credit facility. Both the interest margin and the facility fee are based on the company’s leverage ratio. The company paid additional financing costs of $0.4 million in connection with the April 21, 2015 amendment of the credit facility, which, in addition to the remaining balance of the original $1.3 million in financing costs, is being amortized over the life of the credit facility. The company recognized $0.1 million as interest expense for the modification at the time of the April 21, 2015 amendment. Amounts outstanding under the credit facility vary daily. Changes in the gross borrowings and repayments can be caused by cash flow activity from operations, capital expenditures, acquisitions, dividends, share repurchases, and tax payments, as well as derivative transactions which are part of the company’s overall risk management strategy as discussed in Note 9, Derivative Financial Instruments. The table below presents the borrowings and repayments under the credit facility during fiscal 2016:
|  | Amount (thousands) |
Balance as of January 2, 2016 |  | $ | 160,000 |
Borrowings |  |  | 1,391,600 |
Payments |  |  | (1,527,600 | )
Balance as of December 31, 2016 |  | $ | 24,000 |
The table below presents the net amount available under the credit facility as of December 31, 2016:
|  | Amount (thousands) |
Gross amount available |  | $ | 500,000 |
Outstanding |  |  | (24,000 | )
Letters of credit |  |  | (9,080 | )
Available for withdrawal |  | $ | 466,920 |
The table below presents the highest and lowest outstanding balance under the credit facility during fiscal 2016:
|  | Amount (thousands) |
High balance |  | $ | 244,200 |
Low balance |  | $ | — |
Credit Ratings. Currently, the company’s credit ratings by Fitch Ratings, Moody’s Investors Service, and Standard & Poor’s are BBB, Baa2, and BBB, respectively. Changes in the company’s credit ratings do not trigger a change in the company’s available borrowings or costs under the 2026 notes, facility, 2022 notes, or credit facility, but could affect future credit availability and cost. Aggregate debt maturities. Aggregate maturities of debt outstanding, including capital leases, as of December 31, 2016, are as follows (excluding unamortized debt discount and issuance costs) (amounts in thousands):
2017 |  | $ | 11,490 |
2018 |  |  | 106,794 |
2019 |  |  | 10,314 |
2020 |  |  | 29,028 |
2021 |  |  | 3,276 |
2022 and thereafter |  |  | 806,025 |
Total |  | $ | 966,927 |
Debt issuance costs and debt discount. In fiscal 2016, the company adopted guidance, as discussed in Note 3, Recent Accounting Pronouncements, that requires debt issuances costs be presented in the balance sheet as a direct reduction from the carrying amount of the liability. The table below reconciles the debt issuance costs and debt discounts to the net carrying value of each of our debt obligations (excluding line-of-credit arrangements) at December 31, 2016 (amounts in thousands):
|  | Face Value |  |  | Debt issuance costs and debt discount |  |  | Net carrying value |
3.5% senior notes due 2026 |  | $ | 400,000 |  |  | $ | 5,594 |  |  | $ | 394,406 |
4.375% senior notes due 2022 |  |  | 400,000 |  |  |  | 2,542 |  |  |  | 397,458 |
Other notes payable |  |  | 17,500 |  |  |  | 634 |  |  |  | 16,866 |
Total |  | $ | 817,500 |  |  | $ | 8,770 |  |  | $ | 808,730 |
The table below reconciles the debt issuance costs and debt discounts to the net carrying value of each of our debt obligations (excluding line-of-credit arrangements) at January 2, 2016 (amounts in thousands):
|  | Face Value |  |  | Debt issuance costs and debt discount |  |  | Net carrying value |
Unsecured 2013 term loan |  | $ | 240,000 |  |  | $ | 1,485 |  |  | $ | 238,515 |
4.375% senior notes due 2022 |  |  | 400,000 |  |  |  | 3,025 |  |  |  | 396,975 |
Other notes payable |  |  | 20,000 |  |  |  | 1,011 |  |  |  | 18,989 |
Total |  | $ | 660,000 |  |  | $ | 5,521 |  |  | $ | 654,479 |
Leases The company leases certain property and equipment under various operating and capital lease arrangements that expire over the next 18 years. The property leases include distribution facilities, thrift store locations, and two manufacturing facilities. The equipment leases include production, sales, distribution, and office equipment. Initial lease terms range from two to 26 years. Many of the operating leases provide the company with the option, after the initial lease term, either to purchase the property at the then fair value or renew its lease at fair value rents for periods from one month to ten years. Rent escalations vary in these leases, from no escalation over the initial lease term, to escalations linked to changes in economic variables such as the Consumer Price Index. Rental expense is recognized on a straight-line basis. The capital leases are primarily used for distribution vehicle financing and are discussed in Note 13, Variable Interest Entities, below. Future minimum lease payments under scheduled capital leases that have initial or remaining non-cancelable terms in excess of one year are as follows (amounts in thousands):
|  | Capital Leases |
2017 |  | $ | 7,203 |
2018 |  |  | 7,336 |
2019 |  |  | 5,704 |
2020 |  |  | 2,822 |
2021 |  |  | 3,502 |
2022 and thereafter |  |  | 6,346 |
Total minimum payments |  |  | 32,913 |
Amount representing interest |  |  | 2,486 |
Obligations under capital leases |  |  | 30,427 |
Obligations due within one year |  |  | 6,490 |
Long-term obligations under capital leases |  | $ | 23,937 |
The table below presents the total future minimum lease payments under scheduled operating leases that have initial or remaining non-cancelable terms in excess of one year (amounts in thousands):
|  | Operating Leases |
2017 |  | $ | 63,861 |
2018 |  |  | 59,304 |
2019 |  |  | 53,005 |
2020 |  |  | 46,141 |
2021 |  |  | 36,934 |
2022 and thereafter |  |  | 283,915 |
Total minimum payments |  | $ | 543,160 |
Rent expense for all operating leases was as follows (amounts in thousands):
|  | Rent expense |
Fiscal 2016 |  | $ | 97,357 |
Fiscal 2015 |  | $ | 87,864 |
Fiscal 2014 |  | $ | 88,700 |
Deferred Compensation The Executive Deferred Compensation Plan (“EDCP”) consists of unsecured general obligations of the company to pay the deferred compensation of, and our contributions to, participants in the EDCP. The obligations will rank equally with our other unsecured and unsubordinated indebtedness payable from the company’s general assets. The company’s directors and certain key members of management are eligible to participate in the EDCP. Directors may elect to defer all or any portion of their annual retainer fee and meeting fees. Deferral elections by directors must be made prior to the beginning of each year and are thereafter irrevocable. Eligible employees may elect to defer up to 75% of their base salaries, and up to 100% of any cash bonuses and other compensation through December 31, 2015. Effective January 1, 2016, employees may elect to defer up to 75% of their base salaries, any cash bonuses, and other compensation. Deferral elections by eligible executives must be made prior to the beginning of each year and are thereafter irrevocable during that year. The portion of the participant’s compensation that is deferred depends on the participant’s election in effect with respect to his or her elective contributions under the EDCP. The amounts outstanding at December 31, 2016 and January 2, 2016 were as follows (amounts in thousands):
|  | December 31, 2016 |  |  | January 2, 2016 |
Deferral elections outstanding |  | $ | 14,883 |  |  | $ | 14,812 |
Current portion of deferral elections |  |  | 1,675 |  |  |  | 2,204 |
Long-term portion of deferral elections |  | $ | 13,208 |  |  | $ | 12,608 |
Guarantees and Indemnification Obligations The company has provided various representations, warranties, and other standard indemnifications in various agreements with customers, suppliers, and other parties as well as in agreements to sell business assets or lease facilities. In general, these provisions indemnify the counterparty for matters such as breaches of representations and warranties, certain environmental conditions and tax matters, and, in the context of sales of business assets, any liabilities arising prior to the closing of the transactions. Non-performance under a contract could trigger an obligation of the company. The ultimate effect on future financial results is not subject to reasonable estimation because considerable uncertainty exists as to the final outcome of any potential claims. No material guarantees or indemnifications have been entered into by the company through December 31, 2016.

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- Definition The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease. + References No definition available. + Details
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- References No definition available. + Details
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