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Basis of Presentation | 9 Months Ended
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Oct. 09, 2021
Accounting Policies [Abstract] |
Basis of Presentation | 1. BASIS OF PRESENTATION BASIS OF ACCOUNTING — The accompanying unaudited Condensed Consolidated Financial Statements of Flowers Foods, Inc. (the “company”, “Flowers Foods”, “Flowers”, “us”, “we”, or “our”) have been prepared by the company’s management in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, they do not include all the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the unaudited Condensed Consolidated Financial Statements included herein contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the company’s financial position, results of operations and cash flows. The results of operations for the twelve and forty weeks ended October 9, 2021 and October 3, 2020 are not necessarily indicative of the results to be expected for a full fiscal year. The Condensed Consolidated Balance Sheet at January 2, 2021 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended January 2, 2021 (the “Form 10-K”). COVID-19 — On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide, which has led to adverse impacts on the United States (“U.S.”) and global economies. Due to the drastic change in consumer buying patterns at the beginning of the COVID-19 pandemic, we experienced a more favorable shift in sales mix to our branded retail products due to increased at-home consumption of food products. As shutdowns and capacity restrictions imposed at the onset of the pandemic have eased and COVID-19 vaccines are now widely available in the U.S., our year to date sales have moderated as compared to the prior year period, which included the peak period of demand for our branded retail products. Improved price/mix during the forty weeks ended October 9, 2021 resulting from favorable pricing we have implemented and the continued favorable shift in mix from store branded retail to branded retail sales has mostly offset the volume declines. In light of COVID-19, the company has taken actions to safeguard its capital position. We continue to maintain higher levels of cash on hand compared to pre-pandemic levels and, in the first quarter of Fiscal 2021, we issued $500.0 million of 2.400% senior notes due 2031 (the “2031 notes”) and used the net proceeds to redeem in full the $400.0 million of 4.375% senior notes due 2022 (the “2022 notes”), extending the earliest maturity date of our non-revolving debt to 2026. Additionally, we repaid the outstanding balances on both the accounts receivable securitization facility (the “facility”) and the credit facility (the “credit facility”) with proceeds from the issuance of the 2031 notes and from cash flows from operations. If the company experienced a significant reduction in revenues, the company would have additional alternatives to maintain liquidity, including $678.9 million of remaining availability on our debt facilities as of October 9, 2021, capital expenditure reductions, adjustments to its capital allocation policy, and cost reductions. Although we do not currently anticipate a need, we also believe that we could access the capital markets to raise additional funds. ESTIMATES — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The company believes the following critical accounting estimates affect its more significant judgments and estimates used in the preparation of its consolidated financial statements: revenue recognition, derivative financial instruments, valuation of long-lived assets, goodwill and other intangible assets, leases, self-insurance reserves, income tax expense and accruals, postretirement plans, stock-based compensation, and commitments and contingencies. These estimates are summarized in the Form 10-K. REPORTING PERIODS — The company operates on a 52-53 week fiscal year ending the Saturday nearest December 31. Fiscal 2021 consists of 52 weeks, with the company’s quarterly reporting periods as follows: first quarter ended April 24, 2021 (sixteen weeks), second quarter ended July 17, 2021 (twelve weeks), third quarter ended October 9, 2021 (twelve weeks) and fourth quarter ending January 1, 2022 (twelve weeks). REPORTING SEGMENT — The company has one operating segment based on the nature of products the company sells, intertwined production and distribution model, the internal management structure and information that is regularly reviewed by the chief executive officer (“CEO”), who is the chief operating decision maker, for the purpose of assessing performance and allocating resources. SIGNIFICANT CUSTOMER — Below is the effect that our largest customer, Walmart/Sam’s Club, had on the company’s sales for the twelve and forty weeks ended October 9, 2021 and October 3, 2020. Walmart/Sam’s Club is the only customer to account for greater than 10% of the company’s sales.
|  | For the Twelve Weeks Ended |  |  | For the Forty Weeks Ended |
|  | October 9, 2021 |  |  | October 3, 2020 |  |  | October 9, 2021 |  |  | October 3, 2020 |
|  | (% of Sales) |  |  | (% of Sales) |
Total |  |  | 21.2 |  |  |  | 21.1 |  |  |  | 21.4 |  |  |  | 21.3 |
Walmart/Sam’s Club is our only customer with greater than 10% of outstanding trade receivables, representing 20.5% and 18.8%, on a consolidated basis, as of October 9, 2021 and January 2, 2021, respectively, of our trade receivables. BUSINESS PROCESS IMPROVEMENT COSTS – In the second half of Fiscal 2020, we launched a digital strategy initiative to transform our business systems and processes. This includes upgrading our information system to a more robust Enterprise Resource Planning (“ERP”) platform, as well as investments in e-commerce, autonomous planning, and our “bakery of the future” initiatives. Costs incurred totaled $9.2 million and $27.4 million for the twelve and forty weeks end October 9, 2021, respectively. These costs were primarily for consulting services associated with these activities and are recognized in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income. There were no material costs associated with these initiatives during the forty weeks ended October 3, 2020. RECOVERY ON INFERIOR INGREDIENTS – In the fourth quarter of Fiscal 2020, we incurred costs of $1.0 million related to receiving inferior ingredients used in the production of certain of our gluten-free products and incurred an additional $0.1 million of these costs in the first quarter of Fiscal 2021. In the third quarter of Fiscal 2021, we received reimbursements of approximately $1.0 million for these previously incurred costs. There were no costs incurred during the second or third quarters of Fiscal 2021.

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