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Debt and Other Commitments | 12 Months Ended
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Dec. 28, 2019
Debt Disclosure [Abstract] |
Debt and Other Commitments |
Note 1 5. | Debt and Other Commitments
Long-term debt, including capital lease obligations, consisted of the following at December 28, 2019 and December 29, 2018:
|  | Interest Rate at December 28, 2019 |  |  | Final Maturity |  | December 28, 2019 |  |  | December 29, 2018 |
|  |  |  |  |  |  |  | (Amounts in thousands) |
Unsecured credit facility |  | 3.30% |  |  | 2022 |  | $ | 41,750 |  |  | $ | — |
2026 notes |  | 3.50% |  |  | 2026 |  |  | 396,122 |  |  |  | 395,550 |
2022 notes |  | 4.38% |  |  | 2022 |  |  | 398,906 |  |  |  | 398,423 |
Accounts receivable securitization facility |  | 2.94% |  |  | 2021 |  |  | 26,000 |  |  |  | 177,000 |
Other notes payable |  | 2.10% |  |  | 2020 |  |  | 3,730 |  |  |  | 8,621 |
|  |  |  |  |  |  |  |  | 866,508 |  |  |  | 979,594 |
Current maturities of long-term debt |  |  | (3,730 | ) |  |  | (5,000 | )
Long-term debt |  | $ | 862,778 |  |  | $ | 974,594 |
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 28, 2019 and December 29, 2018, the bank overdraft balance was $13.8 million and $10.6 million, respectively. The company also had standby letters of credit (“LOCs”) outstanding of $8.4 million and $8.4 million at December 28, 2019 and December 29, 2018, 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 Sheets. 2026 Notes, Accounts Receivable Securitization Facility, 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 28, 2019, 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 |  |  | 3,634 |
Total fees |  | $ | 5,742 |
Accounts Receivable Securitization Facility. On July 17, 2013, the company entered into an accounts receivable securitization facility (the “AR facility”). The company has amended the AR facility seven times since execution, most recently on September 27, 2019. These amendments include provisions which (i) increased the revolving commitments under the AR facility to $200.0 million from $150.0 million, (ii) added a leverage pricing grid, (iii) added an additional bank to the lending group, (iv) made certain other conforming changes, and (v) extended the term, most recently one additional year to September 27, 2021. The amendment that added the additional bank was accounted for as an extinguishment of the debt. The remaining amendments were accounted for as modifications. Under the AR facility, a wholly-owned, bankruptcy-remote subsidiary purchases, on an ongoing basis, substantially all trade receivables. As borrowings are made under the AR 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 AR facility contains certain customary representations and warranties, affirmative and negative covenants, and events of default. Restrictive covenants require adherence to company credit and collections policies, depository account control agreements, and certain other customary restrictions including limitations to consolidations, mergers, and liens. As of December 28, 2019 and December 29, 2018, respectively, the company was in compliance with all restrictive covenants under the AR facility. The company currently has $163.4 million available under its AR facility for working capital and general corporate purposes. Amounts available for withdrawal under the AR 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 85 basis points. An unused fee of 30 basis points is applicable on the unused commitment at each reporting period. Financing costs paid at inception of the AR facility and at the time amendments are executed are being amortized over the life of the AR facility. The balance of unamortized financing costs was $0.2 million on December 28, 2019 and December 29, 2018 and are recorded in other assets on the Consolidated Balance Sheets. 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 $0.2 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 28, 2019 and December 29, 2018, the company was in compliance with all restrictive covenants under the indenture governing the notes. Credit Facility. On November 29, 2017 the company entered into the sixth amendment to its amended and restated credit agreement, dated as of October 24, 2003, with the lenders party thereto and Deutsche Bank AG New York Branch, as administrative agent, the swingline lender and issuing lender. The amendment, among other things (i) extends the maturity date of the existing credit agreement to November 29, 2022; (ii) amends the applicable margin for revolving loans maintained as (1) base rate loans and swingline loans to a range of 0.00% to 0.575% (from a range of 0.00% to 0.75% in the existing credit agreement) and (2) Eurodollar loans to a range of 0.575% to 1.575% (from a range of 0.70% to 1.75% in the existing credit agreement), in each case, based on the leverage ratio of the company and its subsidiaries; (iii) amends the applicable facility fee to a range of 0.05% to 0.30% (from a range of 0.05% to 0.50% in the existing credit agreement), due quarterly on all commitments under the amended credit agreement, based on the leverage ratio of the company and its subsidiaries; and (iv) amends the maximum leverage ratio covenant to permit the company, at its option, in connection with certain acquisitions and investments and subject to the terms and conditions provided in the amended credit agreement, to increase the maximum ratio permitted thereunder on one or more occasions to 4.00 to 1.00 for a period of four consecutive fiscal quarters, including and/or immediately following the fiscal quarter in which such acquisitions or investments were completed (the “covenant holiday”), provided that each additional covenant holiday will not be available to the company until it has achieved and maintained a leverage ratio of at least 3.75 to 1.00 and has been complied with for at least two fiscal quarters. 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 28, 2019 and December 29, 2018, the company was in compliance with all restrictive covenants under the credit facility. The company paid additional financing costs of $0.6 million in connection with the sixth amendment of the credit facility, which, in addition to the remaining balance in financing costs, is being amortized over the life of the credit facility. The company recognized an immaterial amount as interest expense for the modification at the time of the sixth 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 11, Derivative Financial Instruments. The table below presents the borrowings and repayments under the credit facility during fiscal 2019:
|  | Amount (thousands) |
Balance as of December 29, 2018 |  | $ | — |
Borrowings |  |  | 297,250 |
Payments |  |  | (255,500 | )
Balance as of December 28, 2019 |  | $ | 41,750 |
The table below presents the net amount available under the credit facility as of December 28, 2019:
|  | Amount (thousands) |
Gross amount available |  | $ | 500,000 |
Outstanding |  |  | (41,750 | )
Letters of credit |  |  | (8,400 | )
Available for withdrawal |  | $ | 449,850 |
The table below presents the highest and lowest outstanding balance under the credit facility during fiscal 2019:
|  | Amount (thousands) |
High balance |  | $ | 122,200 |
Low balance |  | $ | — |
Aggregate debt maturities. Aggregate maturities of debt outstanding as of December 28, 2019, are as follows (excluding unamortized debt discount and issuance costs) (amounts in thousands):
2020 |  | $ | 3,750 |
2021 |  |  | 26,000 |
2022 |  |  | 441,750 |
2023 |  |  | — |
2024 |  |  | — |
Thereafter |  |  | 400,000 |
Total |  | $ | 871,500 |
Debt issuance costs and debt discount. 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 28, 2019 (amounts in thousands):
|  | Face Value |  |  | Debt issuance costs and debt discount |  |  | Net carrying value |
2026 notes |  | $ | 400,000 |  |  | $ | 3,878 |  |  | $ | 396,122 |
2022 notes |  |  | 400,000 |  |  |  | 1,094 |  |  |  | 398,906 |
Other notes payable |  |  | 3,750 |  |  |  | 20 |  |  |  | 3,730 |
Total |  | $ | 803,750 |  |  | $ | 4,992 |  |  | $ | 798,758 |
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 29, 2018 (amounts in thousands):
|  | Face Value |  |  | Debt issuance costs and debt discount |  |  | Net carrying value |
2026 notes |  | $ | 400,000 |  |  | $ | 4,450 |  |  | $ | 395,550 |
2022 notes |  |  | 400,000 |  |  |  | 1,577 |  |  |  | 398,423 |
Other notes payable |  |  | 8,750 |  |  |  | 129 |  |  |  | 8,621 |
Total |  | $ | 808,750 |  |  | $ | 6,156 |  |  | $ | 802,594 |
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 28, 2019 and December 29, 2018 were as follows (amounts in thousands):
|  | December 28, 2019 |  |  | December 29, 2018 |
Deferral elections outstanding |  | $ | 17,308 |  |  | $ | 15,996 |
Current portion of deferral elections |  |  | (1,750 | ) |  |  | (1,015 | )
Long-term portion of deferral elections |  | $ | 15,558 |  |  | $ | 14,981 |
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 28, 2019.

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- Definition The entire disclosure for 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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