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What changed in FLOWERS FOODS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of FLOWERS FOODS INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+308 added−315 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in FLOWERS FOODS INC's 2024 10-K

308 paragraphs added · 315 removed · 230 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+10 added−13 removed40 unchanged
Biggest changeAny decrease in the supply available under these agreements and instruments could increase the effective price of these raw materials to us and significantly impact our earnings. Regulations As a producer and marketer of food items, our operations are subject to regulation by various federal governmental agencies, including the U.S. Food and Drug Administration, the U.S.
Biggest changeRegulations As a producer and marketer of food items, our operations are subject to regulation by various federal governmental agencies, including the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the U.S. Federal Trade Commission, the U.S. Environmental Protection Agency, the U.S. Department of Commerce, and the U.S. Department of Labor (the “DOL”).
These digital domains are expected to improve data visibility and efficiencies while automating many of our processes. When fully implemented, we expect this work will further our brand efforts, bring us ever closer to the consumer, increase operational efficiencies, and deliver higher-quality, real-time insights, which will in turn enable more predictive business decision-making.
These digital domains are expected to improve data visibility and efficiencies while automating many of our processes. When fully implemented, we expect this work will further our brand efforts, bring us closer to the consumer, increase operational efficiencies, and deliver higher-quality, real-time insights, which will in turn enable more predictive business decision-making.
Also, we believe our flexible bakery system allows us to quickly shift production to high demand products and adjust distribution where needed. We are continuing to optimize our distribution system by reducing network complexity through depot consolidation and reducing transport miles. M&A has always been, and we expect will continue to be, an important part of our long-term growth strategy.
We believe our flexible bakery system allows us to quickly shift production to high demand products and adjust distribution where needed. We are continuing to optimize our distribution system by reducing network complexity through depot consolidation and reducing transport miles. M&A has always been, and we expect will continue to be, an important part of our long-term growth strategy.
The company also sells products under franchised and licensed trademarks and trade names which we do not own pursuant to contractual arrangements. We consider our trademarks and trade names important to our business since we use them to build strong brand awareness and consumer loyalty. 8 Raw Materials Our primary baking ingredients are flour, sweeteners, shortening, yeast and water.
The company also sells products under franchised and licensed trademarks and trade names which we do not own pursuant to contractual arrangements. We consider our trademarks and trade names important to our business since we use them to build strong brand awareness and consumer loyalty. Raw Materials Our primary baking ingredients are flour, sweeteners, shortening, yeast and water.
For example, in Fiscal 2022, we increased production capacity for our organic products by adding a production line at our Henderson, Nevada bakery to better serve the West Coast market. Additionally, we ceased production at our Phoenix, Arizona bakery, an older, less efficient bakery that produced traditional bread and bun products.
In Fiscal 2022, we increased production capacity for our organic products by adding a production line at our Henderson, Nevada bakery to better serve the West Coast market. Additionally, we ceased production at our Phoenix, Arizona bakery, an older, less efficient bakery that produced traditional bread and bun products.
The DSD distribution system involves aggregating order levels and delivering products from bakeries to independent distributors for sale and direct delivery to customer stores. The independent distributors are responsible for ordering products, stocking shelves, maintaining special displays, and developing and maintaining good customer relations to ensure adequate inventory and removing unsold goods.
The DSD distribution system primarily involves aggregating order levels and delivering products from bakeries to independent distributors for sale and direct delivery to customer stores. The independent distributors are responsible for ordering products, stocking shelves, maintaining special displays, and developing and maintaining good customer relations to ensure adequate inventory and removing unsold goods.
We have established clear roles for the brands and product lines within our portfolio to enable more targeted decision-making on brand investment. Over the past several years, we have completed brand rationalization initiatives resulting in a more streamlined brand and product assortment, and reduced brand portfolio complexity.
We have established clear roles for the brands and product lines within our portfolio to enable more targeted decision-making on brand investment. Over the past several years, we have completed sales rationalization initiatives resulting in a more streamlined brand and product assortment, and reduced brand portfolio complexity.
We employ a disciplined approach to M&A, seeking out candidates primarily in the grain-based foods arena that will enhance our branded portfolio, extend our geographic presence, are a strong cultural fit, and add enhanced capabilities to our company.
We employ a disciplined approach to M&A, seeking out candidates primarily in the grain-based foods arena that enhance our branded portfolio, extend our geographic presence, are a strong cultural fit, and add enhanced capabilities to our company.
Walmart/Sam’s Club was the only customer to account for 10% or more of our sales during Fiscal 2022, 2021, and 2020. Fresh baked foods’ customers include mass merchandisers, supermarkets and other retailers, restaurants, quick-serve chains, food wholesalers, institutions, dollar stores, and vending companies. We also sell returned and surplus product through a system of thrift stores.
Walmart/Sam’s Club was the only customer to account for 10% or more of our sales during Fiscal 2023, 2022, and 2021. Fresh baked foods’ customers include mass merchandisers, supermarkets and other retailers, restaurants, quick-serve chains, food wholesalers, institutions, dollar stores, and vending companies. We also sell returned and surplus product through a system of thrift stores.
Marketing We support our key brands with an advertising and marketing effort that targets consumers through electronic and in-store coupons, social media (such as Facebook and Twitter), digital media (including e-newsletters to consumers), websites (our brand sites and third-party sites), event and sports marketing, on-package promotional offers and sweepstakes, and print advertising.
Marketing We support our key brands with an advertising and marketing effort that targets consumers through electronic and in-store coupons, social media (such as Facebook and X (formerly Twitter)), digital media (including e-newsletters to consumers), websites (our brand sites and third-party sites), event and sports marketing, on-package promotional offers and sweepstakes, and print advertising.
For additional discussion on the impact of macroeconomic factors and the COVID-19 pandemic on our business, refer to Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Form 10-K. 4 Strategic Initiatives We are a brand-focused company dedicated to the consumer and committed to growing our most profitable brands through innovation, market expansion, and prudent mergers and acquisitions (“M&A”).
For additional discussion on the impact of macroeconomic factors on our business, refer to Part II, Item 7., Management’s Discussion and Analysis of Financial Condition and Results of Operations , of this Form 10-K. 4 Strategic Initiatives We are a brand-focused company dedicated to the consumer and committed to growing our most profitable brands through innovation, market expansion, and prudent mergers and acquisitions (“M&A”).
Labor shortages and turnover at some of our bakeries in Fiscal 2022 and 2021 hampered production levels. These and other factors, including, but not limited to, high employment rates and additional government regulations, may continue to adversely affect labor availability and labor costs.
Labor shortages and turnover at some of our bakeries in Fiscal 2023 and 2022 hampered production levels. These and other factors, including, but not limited to, high employment rates and additional government regulations, may continue to adversely affect labor availability and labor costs.
Invest in our brands to align with consumers to maximize our return on investment. • Prioritize margins: Optimize the portfolio and supply chain. • Smart M&A: Disciplined approach to acquisitions in the grain-based foods arena that enhance our branded portfolio and margin profile.
Invest in our brands to align with consumers to maximize our return on investment. • Prioritize margins: Optimize the portfolio and supply chain. • Smart M&A: Disciplined approach to acquisitions in the grain-based foods arena that enhances our branded portfolio and margin profile.
We currently anticipate the upgrade of our ERP system will cost approximately $350 million (of which approximately 32% has been or is anticipated to be capitalized) and anticipate the upgrade to be completed in 2026. Previously, these costs were estimated to be approximately $275 million.
We currently anticipate the upgrade of our ERP system will cost approximately $350 million (of which approximately 34% has been or is anticipated to be capitalized) and anticipate the upgrade to be completed in 2026. Previously, these costs were estimated to be approximately $275 million.
The company provides its employees with resources to enhance their skills and careers, including: • Promoting education and development by investing in our internal Learning Management System in Fiscal 2022 and 2023. • Providing a range of formal and informal learning programs designed to help employees continuously develop skills throughout their careers.
The company provides its employees with resources to enhance their skills and careers, including: • Promoting education and development by investing in our internal Learning Management System and providing a range of formal and informal learning programs designed to help employees continuously develop skills throughout their careers.
The following corporate governance documents may be obtained free of charge through our website in the “CORPORATE GOVERNANCE” section of the “INVESTORS” tab or by sending a written request to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, GA 31757, Attention: Investor Relations. • Corporate Governance Guidelines • Finance Committee Charter • Audit Committee Charter • Nominating/Corporate Governance Committee Charter • Compensation and Human Capital Committee Charter • Flowers Foods Employee Code of Conduct • Political Contribution and Activity Policy • Code of Business Conduct and Ethics • Disclosure Policy • Stock Ownership Guidelines
The following corporate governance documents may be obtained free of charge through our website in the “CORPORATE GOVERNANCE” section of the “INVESTORS” tab or by sending a written request to Flowers Foods, Inc., 1919 Flowers Circle, Thomasville, GA 31757, Attention: Investor Relations. • Corporate Governance Guidelines • Finance Committee Charter • Audit Committee Charter • Nominating/Corporate Governance Committee Charter • Compensation and Human Capital Committee Charter • Political Contribution and Activity Policy • Code of Business Conduct and Ethics • Flowers Foods Employee Code of Conduct • Animal Welfare Commitment • Stock Ownership Guidelines 12
We believe having a well-diversified portfolio of brands allows us to be more competitive in the marketplace and appeal to a broader range of consumers. Our principal products are breads, buns, rolls, snack items, and tortillas.
We believe having a well-diversified portfolio of brands allows us to be more competitive in the marketplace and appeal to a broader range of consumers. Our principal products are breads, buns, rolls, snack items, bagels, English muffins, and tortillas.
Additionally, we have made and are continuing to make marketing investments to target e-commerce sales as consumers shift to more online shopping alternatives, such as grocery delivery sites, retailer websites and apps, among others. 7 Customers Our top 10 customers in Fiscal 2022 accounted for 54.5% of sales.
Additionally, we have made and are continuing to make marketing investments to target e-commerce sales as consumers shift to more online shopping alternatives, such as grocery delivery sites, retailer websites and apps, among others. 7 Customers Our top 10 customers in Fiscal 2023 accounted for 55.5% of sales.
Our benefits package includes: • comprehensive health insurance coverage to employees working 30 hours or more each week; • parental leave to all new parents for birth, adoption or foster placement; 11 • short-term disability to provide wage protection for up to six months; • a tuition reimbursement program; and • a 401(k) plan (certain union-affiliated employees participate in a company-sponsored pension or multi-employer plan) with generous company match.
Our benefits package includes: • comprehensive health insurance coverage to employees working 30 hours or more each week; • parental leave to all new parents for birth, adoption or foster placement; • adoption reimbursement of up to $20,000 per employee, per lifetime; 11 • short-term disability to provide wage protection for up to six months; • a tuition reimbursement program; and • a 401(k) plan (certain union-affiliated employees participate in a company-sponsored pension or multi-employer plan) with generous company match.
The primary goals of these new initiatives are: (1) enable a more agile business model, empowering the organization by fundamentally redesigning core business processes and our ways of working; (2) embed digital capabilities and transform the way we engage with our consumers, customers and employees; and (3) modernize and simplify our application and technology infrastructure landscape, inclusive of the upgrade of our ERP system.
The primary goals of these initiatives are to: (1) enable a more agile business model, empowering the organization by fundamentally redesigning core business 5 processes; (2) embed digital capabilities and transform the way we engage with our consumers, customers and employees; and (3) modernize and simplify our application and technology infrastructure landscape, inclusive of the upgrade of our ERP system.
(Source: IRI Flowers custom database, 52 weeks ending 1/1/23 ): The current competitive landscape for breads and rolls in the U.S. baking industry consists of Bimbo Bakeries USA (BBU), Flowers Foods, and Campbell Soup Company, under the Pepperidge Farm brand, along with a number of smaller independent regional bakers, local bakeries, and retailer-owned bakeries.
(Source: Circana Flowers custom database, 52 weeks ending 12/31/23 ): The current competitive landscape for breads and rolls in the U.S. baking industry consists of Bimbo Bakeries USA (BBU), Flowers Foods, and Campbell Soup Company, under the Pepperidge Farm brand, along with a number of smaller independent regional bakers, local bakeries, and retailer-owned bakeries.
Our principal products include breads, buns, rolls, snack cakes, and tortillas and are sold under a variety of brand names, including Nature’s Own, Dave’s Killer Bread (“DKB”), Wonder, Canyon Bakehouse, Tastykake, and Mrs. Freshley’s. Our brands are among the best known in the baking industry.
Our principal products include breads, buns, rolls, snack items, bagels, English muffins, and tortillas and are sold under a variety of brand names, including Nature’s Own, Dave’s Killer Bread (“DKB”), Wonder, Canyon Bakehouse, Tastykake, and Mrs. Freshley’s. Our brands are among the best known in the baking industry.
Through this partnership, we have donated more than $1.8 million to the USO and some of our marketing campaigns and packaging tie-ins recognize the service and sacrifices of the military. Presently, Flowers employs more than 530 veterans. Flowers offers team members competitive wages, benefits, and training opportunities, while also promoting a safe and healthy workplace.
Through this partnership, we have donated $2.3 million to the USO and some of our marketing campaigns and packaging tie-ins recognize the service and sacrifices of the military. Presently, Flowers employs more than 490 veterans. Flowers offers team members competitive wages, benefits, and training opportunities, while also promoting a safe and healthy workplace.
Programs available at our bakeries include Skillsoft online learning and a Mentor Up Mentoring Program. • Offering a variety of programs that contribute to our leadership, training and development goals, including the “Flowers Front-Line Leadership Program,” “Lead Now” for leaders at all levels, and “Leading The Flowers Way” for our high potential leaders. • Encouraging employees to discuss their professional development during annual performance reviews with their supervisors. • Offering Career Conversations training for supervisory employees to discuss career pathing and employee development.
Programs available at our bakeries include Skillsoft online learning and a Mentor Up Mentoring Program. • Offering a variety of programs that contribute to our leadership, training and development goals, including the “Flowers Front-Line Leadership Program,” “Lead Now” for leaders at all levels, and “Leading The Flowers Way” for our high potential leaders. • Encouraging employees to discuss their professional development during annual performance reviews with their supervisors. • Offering the Continuous Performance Management module which supports ongoing performance conversations between employees and their managers. • Offering Career Conversations training for supervisory employees to discuss career pathing and employee development.
In Fiscal 2022, Branded Retail sales represented 65.3% of our total sales. Our brands are some of the best-known in the U.S. fresh packaged bread industry and many of them hold leading market positions in the categories in which they compete.
In Fiscal 2023, Branded Retail sales represented 64.1% of our total sales. Our brands are some of the best-known in the U.S. fresh packaged bread industry and many of them hold leading market positions in the categories in which they compete.
During Fiscal 2022, our largest customer, Walmart/Sam’s Club, represented 21.7% of the company’s sales. The loss of, or a material negative change in our relationship with, Walmart/Sam’s Club or any other major customer could have a material adverse effect on our business.
During Fiscal 2023, our largest customer, Walmart/Sam’s Club, represented 22.3% of the company’s sales. The loss of, or a material negative change in our relationship with, Walmart/Sam’s Club or any other major customer could have a material adverse effect on our business.
While the conflict between Russia and Ukraine has not impacted us directly, we are closely monitoring its effects on the broader economy, including on the availability and price of commodities used in or for the production of our products.
Although the conflict between Russia and Ukraine and the conflict in the Middle East have not impacted us directly, we are closely monitoring the effects on the broader economy, including on the availability and price of commodities used in or for the production of our products.
Store brands (also known as “private label”) have been offered by food retailers for decades. With the growth of mass merchandisers like Walmart and the ongoing consolidation of regional supermarkets into larger operations, store brands have become a significant competitor to the company in those areas where the company does not have the contract to produce the store brand.
Store brands (also known as “private label”) have been offered by food retailers for decades. With the growth of mass merchandisers like Walmart and the ongoing consolidation of regional supermarkets into larger operations, store brands have become a significant competitor to the company.
The company is currently in substantial compliance with all material environmental laws and regulations affecting the company and its properties. 9 Competitive Overview The U.S. market for fresh and frozen bakery products is estimated at $47 billion at retail. This category is intensely competitive and has continued to experience consolidation.
The company is currently in substantial compliance with all material environmental laws and regulations affecting the company and its properties. 9 Competitive Overview The U.S. market for fresh and frozen bakery products is estimated at $50 billion at retail. The fresh packaged bread category is intensely competitive and has continued to experience industry consolidation and volume decreases in recent years.
Digital logistics includes real-time operational visibility, improving our routing efficiency, and automating the freight bill pay audit process. Finally, digital sales focuses on improving our sales execution through new data and insights, improved visibility to in-store activities, streamlined reporting and dashboards, and improved collaboration tools across our sales ecosystem.
Digital logistics includes real-time operational visibility, improving our routing efficiency, and automating the freight bill pay audit process. Finally, digital sales is focused on improving our sales execution through improved visibility to in-store activities, streamlined reporting, focusing in-store priorities, and improved collaboration tools across our sales ecosystem.
We believe this centralized distribution system allows us to achieve both production and distribution efficiencies. Products coming from different bakeries are then cross-docked and shipped directly to customers’ warehouses nationwide. Our frozen bread and roll products are shipped to various outside freezer facilities for distribution to our customers. Intellectual Property We own many trademarks, trade names, patents, and licenses.
Products coming from different bakeries are then cross-docked and shipped directly to customers’ warehouses nationwide. Our frozen bread and roll products are shipped to various outside freezer facilities for distribution to our customers. 8 Intellectual Property We own many trademarks, trade names, patents, and licenses.
(Source: IRI Total US MultiOutlet+C-Store L52 Weeks Ending 1/1/23 ) Canyon Bakehouse’s sales, at estimated retail, were $159 million for Fiscal 2022. • Wonder , over 100 years old, enjoys 94% brand awareness (Source: Kantar Brand Health Tracking Study - Summer 2022 ).
(Source: Circana Total US MultiOutlet+C-Store L52 Weeks Ending 12/31/23 ) Canyon Bakehouse’s sales, at estimated retail, were $164 million for Fiscal 2023. • Wonder , over 100 years old, enjoys 97% brand awareness (Source: Kantar Brand Health Tracking Study - Summer 2023 ).
The warehouse delivery system involves primarily delivering our products to customers’ warehouses. The company has sold the majority of the distribution rights to market certain brands within a geographic territory to independent distributors under long-term financing arrangements.
In certain markets, we utilize a sales employee model to facilitate the distribution of product through our DSD distribution system. The warehouse delivery system involves primarily delivering our products to customers’ warehouses. The company has sold the majority of the distribution rights to market certain brands within a geographic territory to independent distributors under long-term financing arrangements.
The company currently operates 238 such stores and reported sales of $64.5 million during Fiscal 2022 from these outlets.
The company currently operates 238 such stores and reported sales of $70.3 million during Fiscal 2023 from these outlets.
We believe our strong balance sheet and cash flow generation enables us to execute our M&A strategy and on February 17, 2023, we completed the purchase of Papa Pita, a manufacturer and distributor of bagels, tortillas, breads, buns, English muffins, and flat breads.
We believe our strong balance sheet and cash flow generation enables us to execute our M&A strategy and, as discussed above, on February 17, 2023, we completed the purchase of Papa Pita, a manufacturer and distributor of bagels, tortillas, breads, buns, English muffins, and flat breads. Founded in 1983, Papa Pita operates one production facility in West Jordan, Utah.
The key to our success in achieving our goals is our talented and dedicated team. We recognize the importance of investing in our people as further discussed in the “Human Capital Resources” section below, which details how we attract, retain, and develop our team. Additionally, we recognize the importance of realigning people and responsibilities in successfully implementing our long-term strategies.
A key to our success in achieving our strategic priorities is our talented and dedicated team. We recognize the importance of investing in our people as further discussed in the “Human Capital Resources” section below, which details how we attract, retain, and develop our team.
The increase in estimated costs resulted from expanding the project scope and anticipation of greater reliance on external resources for bakery deployments due to labor constraints. As of December 31, 2022, we have incurred costs related to the project of approximately $153 million. Costs related to the digital initiatives are more fluid and cannot be estimated.
The increase in estimated costs resulted from expanding the project scope and anticipation of greater reliance on external resources for bakery deployments due to labor constraints. As of December 30, 2023, we have incurred costs related to the project of approximately $214 million.
This realignment can take the form of organizational changes or providing crucial tools, including investments in our information systems. Our cross-functional transformation office is responsible for overseeing the implementation of our strategic priorities, including our digital and ERP initiatives, which are discussed in more detail under the “Transformation Strategy Initiatives” section below.
Our cross-functional transformation office is responsible for overseeing the implementation of our strategic priorities, including our digital and ERP initiatives, which are discussed in more detail under the “Transformation Strategy Initiatives” section below.
(Source: IRI Total US MultiOutlet+C-Store L52 Weeks Ending 1/1/23 ) DKB’s sales, at estimated retail, were $965 million for Fiscal 2022. • Canyon Bakehouse, acquired at the end of Fiscal 2018, is the #1 selling gluten-free bread brand in the U.S.
(Loaf, Bagels, Breakfast Bread, and English Muffins). (Source: Circana Total US MultiOutlet+C-Store L52 Weeks Ending 12/31/23 ) DKB’s sales, at estimated retail, were $1.0 billion for Fiscal 2023. • Canyon Bakehouse, acquired at the end of Fiscal 2018, is the #1 selling gluten-free bread brand in the U.S.
Approximately 930 employees are covered by collective bargaining agreements and there are no material outstanding labor disputes. Our legacy of excellence is built on 100+ years of hard work by thousands of Flowers team members. As W.H. Flowers, Jr. said, “ The key to any enterprise or goal is people.
Our legacy of excellence is built on 100+ years of hard work by thousands of Flowers team members. As W.H. Flowers, Jr. said, “ The key to any enterprise or goal is people.
We believe that because employees drive our success, they should share in that success. In addition to competitive wages and benefits, when annual company goals are met, eligible team members at all levels are rewarded with a bonus.
We believe that because employees drive our success, they should share in that success. In addition to competitive wages and benefits, when annual company goals are met, eligible team members at all levels are rewarded with a bonus. Other Available Information Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the SEC.
Nature’s Own’s sales, at estimated retail, were $1.4 billion for Fiscal 2022. • Nature’s Own Honey Wheat is the #1 Universal Product Code (“UPC”) in the U.S. Fresh Packaged Bread category based on dollars and units. Nature’s Own Butterbread is the #2 UPC in the loaf category based on dollars and units.
(Source: Circana Total US MultiOutlet+C-Store L52 Weeks Ending 12/31/23 ) Nature’s Own’s sales, at estimated retail, were $1.5 billion for Fiscal 2023. • Nature’s Own Honey Wheat is the #1 Universal Product Code (“UPC”) in the U.S. Fresh Packaged Bread category based on dollars and units. In the U.S.
An overall labor shortage, lack of skilled labor, or increased turnover could have a material adverse impact on the company’s operations, results of operations, liquidity, or cash flows.
An overall labor shortage, lack of skilled labor, or increased turnover could have a material adverse impact on the company’s operations, results of operations, liquidity, or cash flows. We believe we have sufficient liquidity to satisfy our cash needs and we continue to execute on our strategic priorities, including our transformation strategy initiatives.
During the first quarter of Fiscal 2021, we engaged a leading, global consulting firm to assist us in planning and implementing the upgrade of our ERP platform and serve as the system integrator for the project. We expect the transformation strategy initiatives to require significant capital investment and expense over the next several years.
In the first quarter of Fiscal 2021, we transitioned into the design phase and engaged a leading, global consulting firm to assist us in designing and implementing the upgrade of our ERP platform and to serve as the system integrator for the project.
The company’s board of directors (the “Board” or “Board of Directors”) receives regular updates from management on our inclusion and diversity efforts.
In Fiscal 2023, Flowers continued implementing our diversity, equity, and inclusion (DE&I) training and added DE&I to the onboarding process. The company’s board of directors (the “Board” or “Board of Directors”) receives regular updates from management on our inclusion and diversity efforts.
Founded in 1983, Papa Pita operates one production facility in West Jordan, Utah. 5 Transformation Strategy Initiatives In the second half of Fiscal 2020, we launched initiatives to transform our business operations.
Transformation Strategy Initiatives In the second half of Fiscal 2020, we launched initiatives to transform our business operations.
Other Available Information Throughout this Form 10-K, we incorporate by reference information from parts of other documents filed with the SEC. The SEC allows us to disclose important information by referring to it in this manner, and you should review this information in addition to the information contained in this report.
The SEC allows us to disclose important information by referring to it in this manner, and you should review this information in addition to the information contained in this report.
(Source: IRI Total US MultiOutlet+C-Store L52 Weeks Ending 1/1/23 ) • DKB is the #1 selling organic brand in the U.S. and the company’s #2 brand, with the top-selling organic brand in four different segments. (Loaf, Bagels, Breakfast Bread, and English Muffins).
Fresh Packaged Bread category, Nature’s Own Butterbread is the #2 UPC based on units and the #3 UPC based on dollars. (Source: Circana Total US MultiOutlet+C-Store L52 Weeks Ending 12/31/23 ) • DKB is the #1 selling organic brand in the U.S. and the company’s #2 brand, with the top-selling organic brand in four different segments.
Although we were able to mitigate these packaging shortages earlier than originally anticipated, our operating results were negatively impacted. These and other supply chain disruptions could continue to negatively impact production volumes due to uncertainty in the global and U.S. supply chain.
These and other supply chain disruptions could continue to negatively impact production volumes due to uncertainty in the global and U.S. supply chain.
In early Fiscal 2023, we launched DKB Crunchy Snack Bites in test markets. The DKB snack bars and snack bites are part of an initiative to extend our presence beyond the traditional bread category and into the snacking category. Our brands and products are sold through various channels throughout the U.S.
The DKB snack bars and snack bites are part of an initiative to extend our presence beyond the traditional bread category and into the snacking category. Our brands and products are sold through various channels throughout the U.S. These channels include supermarkets, drugstores, mass merchandisers, discount stores, club stores, convenience stores, thrift outlet stores, and foodservice, among others.
We believe executing on our strategic priorities will drive future growth and margin expansion and deliver meaningful shareholder value over time. Current Inflationary Economic Environment, Other Macroeconomic Factors, and COVID-19 We continue to monitor the impact of the inflationary economic environment, supply chain disruptions, labor shortages, the conflict between Russia and Ukraine, and the COVID-19 pandemic on our business.
Current Inflationary Economic Environment and Other Macroeconomic Factors We continue to monitor the impact of the inflationary economic environment, supply chain disruptions, labor shortages, the conflict between Russia and Ukraine, and the conflict in the Middle East on our business.
Flowers aims to attract a qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting platforms, campus outreach, apprenticeships, internships, and job fairs. In 2023, we plan to advance our partnership with the Thurgood Marshall College Fund by leveraging its Talent Sourcing program in our recruiting efforts.
Flowers aims to attract a qualified workforce through an inclusive and accessible recruiting process that utilizes online recruiting platforms, campus outreach, apprenticeships, internships, and job fairs. In 2023, we established relationships with historically black colleges and universities (HBCUs) to expand our reach and recruit more diverse talent.
Wonder’s sales, at estimated retail, were $484 million for Fiscal 2022 (Source: IRI Total US MultiOutlet+C-Store L52 Weeks Ending 1/1/23 ) In Fiscal 2022, we introduced Nature's Own Hawaiian loaf bread, Nature's Own Perfectly Crafted Sourdough loaf bread, DKB Organic Everything Bread, and Canyon Bakehouse Gluten-Free Brioche and Hawaiian dinner roll varieties, among other new products.
New product introductions in Fiscal 2022 included Nature's Own Hawaiian loaf bread, Nature's Own Perfectly Crafted Sourdough loaf bread, DKB Organic Everything Bread, and Canyon Bakehouse Gluten-Free Brioche and Hawaiian dinner roll varieties, among other new products.
Additionally, in Fiscal 2022, we introduced new varieties of DKB Organic Snack Bars, including protein bars, and, in December announced the nationwide rollout of three varieties of the DKB Organic Snack Bars. Previously, the DKB bars were only available for purchase in certain test markets or from our consumer testing website - www.creationsbyflowersfoods.com .
Additionally, in Fiscal 2022, we introduced new varieties of DKB Organic Snack Bars, including protein bars, and began the nationwide rollout of three varieties of the DKB Organic Snack Bars in Fiscal 2023. In early Fiscal 2023, we launched DKB Crunchy Snack Bites in test markets.
Remote and hybrid-work arrangements spurred by the pandemic endured through Fiscal 2022 which resulted in continued greater at-home food consumption as compared to pre-pandemic periods and a more optimized sales mix. As we implement our targeted sales portfolio strategy, the flexibility of our production and distribution systems allows us to pivot capacity to meet this changing demand.
As we implement our targeted sales portfolio strategy, the flexibility of our production and distribution systems allows us to pivot capacity to meet this changing demand.
The store brand share of retail fresh packaged bread in the U.S. accounts for approximately 20% of the dollar sales and approximately 30% of unit sales.
The store brand share of retail fresh packaged bread in the U.S. accounts for approximately 21% of the dollar sales and approximately 31% of unit sales. Its dollar share had been steadily declining for a number of years prior to Fiscal 2022, however that trend reversed in Fiscal 2022 and expanded in Fiscal 2023.
Our results for Fiscal 2022 continued to benefit from a more optimized sales mix of branded retail products as compared to pre-pandemic periods. Remote and hybrid-work arrangements spurred by the pandemic endured in Fiscal 2022 which resulted in greater at-home food consumption than in pre-pandemic periods.
Our results for Fiscal 2023 continued to benefit from a more optimized sales mix of branded retail products as compared to pre-pandemic periods. However, we experienced significant input cost inflation for commodities and transportation, and, to a lesser extent, for labor in the current and prior year periods.
To date, we have rolled out supply chain-focused domains to more than thirteen bakeries and plan to continue to invest in these new ways of working. ERP Upgrade This initiative includes upgrading our information system platform and is expected to improve data management and efficiencies while automating many of our processes.
ERP Upgrade This initiative includes upgrading our information system platform and is expected to improve data management and efficiencies while automating many of our processes. We completed the initial planning and road mapping phase of the ERP upgrade at the end of Fiscal 2020.
We enter into forward purchase agreements and other derivative financial instruments in an effort to manage the impact of such volatility in raw material prices, but some organic and specialty ingredients do not offer the same hedging opportunities to reduce the impact of price volatility.
We enter into forward purchase agreements and other financial instruments to manage the impact of volatility in certain raw material prices. Any decrease in the availability of these agreements and instruments could increase the price of these raw materials and significantly affect our earnings.
Prices of ingredients and packaging materials fluctuate and we continually monitor these markets. Ingredient and packaging costs are currently experiencing significant volatility. The cost of these inputs has fluctuated widely, and may continue to do so, due to government policy and regulation, weather conditions, domestic and international supply and demand, global logistics dynamics, or other unforeseen circumstances.
Prices of ingredient and packaging materials fluctuate due to various factors including, but not limited to, government policy and regulation, weather conditions, domestic and international demand, or other unforeseen circumstances, and we monitor these markets closely. Ingredient and packaging costs were volatile in both Fiscal 2023 and 2022 but are expected to be more favorable in Fiscal 2024.
The table below presents the approximate number of territories used by the company as of December 31, 2022: Type of territory Number of territories Independent distributor-owned and operated territories 5,137 Territories classified as available for sale 507 Other company operated territories 143 Total territories 5,787 Our warehouse distribution system delivers a portion of our packaged bakery snack products from a central distribution facility located near our Crossville, Tennessee snack cake bakery.
Once repurchased, the territories will not be resold and will be classified as company operated territories. Our warehouse distribution system delivers a portion of our packaged bakery snack products from a central distribution facility located near our Crossville, Tennessee snack cake bakery. We believe this centralized distribution system allows us to achieve both production and distribution efficiencies.
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We experienced significant input cost inflation for commodities and transportation, and, to a lesser extent, for labor in the current year which partially offset this benefit. To mitigate the ongoing cost pressures, we implemented price increases in Fiscal 2022 and in early Fiscal 2023.
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We believe executing on our strategic priorities will drive future growth and margin expansion and deliver meaningful shareholder value over time.
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Additionally, in the latter half of the first quarter and into the second quarter of Fiscal 2022, we experienced heightened supply chain disruptions which impacted our ability to procure adequate quantities of certain raw materials and particularly packaging items, resulting in lower production volumes.
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To mitigate the ongoing cost pressures, we implemented price increases during the first quarter of Fiscal 2023 and midway through the second quarter of Fiscal 2023. Additionally, in both the current and prior year, we experienced supply chain disruptions and capacity constraints (largely for gluten-free production) resulting in lower production volumes and sales.
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Our operations may continue to experience disruption due to the continued uncertainty caused by the pandemic, including, but not limited to, additional variants of the COVID-19 virus, new geographic hotspots, changes in the number of COVID-19 cases, the rate of vaccination within the U.S. population, the efficacy, or lack thereof, of the vaccines, changes in the global and U.S. economic environment, supply chain disruptions and labor shortages, and changes in pandemic safety policies.
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Additionally, we recognize the importance of realigning people and responsibilities in successfully implementing our long-term strategies. This realignment can take the form of organizational changes or providing crucial tools, including investments in our information systems.
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Our main focus throughout the pandemic has been and continues to be the health and safety of our team members and independent distributor partners. We continue to follow the COVID-19 guidance of the U.S. Centers for Disease Control and Prevention (CDC).
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For example, Fiscal 2023, we acquired the Papa Pita Bakery business ("Papa Pita") expanding our production capacity, including for bagels, pitas, and flat breads, the majority of which Papa Pita previously co-manufactured for us, and increasing our direct-store-delivery distribution in the western U.S.
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We believe we have sufficient liquidity to satisfy our cash needs and we continue to execute on our strategic priorities, including our transformation strategy initiatives. The company completed the acquisition of the Papa Pita Bakery business ("Papa Pita") on February 17, 2023 as further discussed below.
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In February 2023, we announced a restructuring of plant operation responsibilities from the sales function to the supply chain function to improve operational effectiveness, increase profitable sales, and better meet customer requirements. This restructuring has now transitioned to digitally enabling these key functions, driving accountability, and improving operational performance and sales execution.
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We funded the purchase price with cash on-hand and from our senior unsecured revolving credit facility (the "credit facility"). The credit facility is variable rate debt and exposes the company to greater interest rate risk.
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To date, we have rolled out bakery of the future to 33 bakeries, digital logistics to all bakery locations, and autonomous planning and our digital sales tools across our entire sales organization. Costs related to the digital initiatives are fluid and cannot be currently estimated.
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In Fiscal 2020, our sales mix shifted to more profitable branded retail products due to increases in at-home dining resulting from COVID-19, which led to increased sales and operating income, further illustrating the potential of an optimized portfolio.
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We transitioned into the build phase at the beginning of Fiscal 2022 and during the second quarter of Fiscal 2023, we began deploying the ERP upgrade. We plan to continue the deployment across the organization over the next few years. We expect the transformation strategy initiatives to require significant capital investment and expense over the next several years.
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We completed the initial planning and road mapping phase of this multi-year initiative at the end of Fiscal 2020, then transitioned into the design phase in early Fiscal 2021 and the build phase at the beginning of Fiscal 2022.
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Wonder’s sales, at estimated retail, were $512 million for Fiscal 2023 (Source: Circana Total US MultiOutlet+C-Store L52 Weeks Ending 12/31/23 ) In Fiscal 2023, we introduced Nature's Own Keto bread, Nature's Own Hawaiian and Everything hamburger buns, Tastykake Dipp'n Sticks , and Mrs. Freshley's Donut Sticks , among others.
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These channels include supermarkets, drugstores, mass merchandisers, discount stores, club stores, convenience stores, thrift outlet stores, and foodservice, among others.
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The table below presents the approximate number of territories used by the company as of December 30, 2023: Type of territory Number of territories Independent distributor-owned and operated territories 5,105 Territories classified as available for sale 567 Other company operated territories 251 Total territories 5,923 The company expects to repurchase approximately 400 territories in California during Fiscal 2024 and convert them to company operated territories mostly as a result of the settlement of litigation as further discussed in Note 23, Commitments and Contingencies, of Notes to Consolidated Financial Statements of this Form 10-K.
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Department of Agriculture, the U.S. Federal Trade Commission, the U.S. Environmental Protection Agency, the U.S. Department of Commerce, and the U.S. Department of Labor (the “DOL”).

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePreviously, she served as vice president, chief compliance officer, and deputy general counsel from April 2011 to January 2020. Prior to that, Ms. Tillman served in various roles in the legal department since joining the company in 1995. D. Keith Wheeler Age 59 Chief Sales Officer Mr. Wheeler was named chief sales officer in May 2017.
Biggest changeThomas served on Flowers’ board of directors as an independent director. Stephanie B. Tillman Age 53 Chief Legal Counsel Ms. Tillman was named chief legal counsel and corporate secretary effective January 2020. Previously, she served as vice president, chief compliance officer, and deputy general counsel from April 2011 to January 2020. Prior to that, Ms.
Our focus on our long-term goals of being consumer-focused and committed to growing our most profitable brands is dependent on our success in achieving our strategic priorities: (i) develop team; (ii) brands focus; (iii) prioritize margins; and (iv) smart M&A activity. These and related demands on our resources may divert the organization’s attention from other business issues.
Our focus on our long-term goals of being consumer-focused and committed to growing our most profitable brands is dependent on our success in achieving our strategic priorities: (i) develop team; (ii) focus on brands; (iii) prioritize margins; and (iv) smart M&A. These and related demands on our resources may divert the organization’s attention from other business issues.
Investments in partnerships, joint ventures, or other entities may, under certain circumstances, involve risks not present were a third-party not involved, including the possibility that our joint venture partners might become bankrupt, fail to fund their share of required capital contributions, make poor business decisions, or block or delay necessary decisions.
Investments in partnerships, joint ventures, or other entities may, under certain 14 circumstances, involve risks not present were a third-party not involved, including the possibility that our joint venture partners might become bankrupt, fail to fund their share of required capital contributions, make poor business decisions, or block or delay necessary decisions.
Before joining Flowers, she served as vice president of human resources for the Refrigeration segment of Carrier Corporation, the leading global provider of healthy, safe, sustainable, and intelligent building and cold chain solutions (“Carrier”), since July 2017. During her 27-year tenure with Carrier and Pratt & Whitney, she held multiple human resources roles of increasing scale and responsibility.
Before joining Flowers, she served as vice president of human resources for the Refrigeration segment of Carrier Corporation, the leading global provider of healthy, safe, sustainable, and intelligent building and cold chain solutions (“Carrier”), since July 2017. During her 27-year tenure with Carrier and Pratt & Whitney, she held multiple human resources roles of increasing scale and responsibility. H.
Before joining Flowers, he served as senior vice president of supply chain at PepsiCo, overseeing supply chain functions for two of the company's North American divisions. During his 19-year tenure at PepsiCo, he also held a number of operations and production roles with responsibility for the management of internal plants, warehouses, and contract manufacturers.
Before joining Flowers, he served as senior vice president of supply chain at PepsiCo, Inc., overseeing supply chain functions for two of the company's North American divisions. During his 19-year tenure at PepsiCo, he also held a number of operations and production roles with responsibility for the management of internal plants, warehouses, and contract manufacturers.
Increased competition could result in reduced sales, margins, profits and market share. Product removals, damaged product or safety concerns could adversely impact our results of operations. We may be required to recall certain of our products should they be mislabeled, contaminated, spoiled, tampered with or damaged.
Increased competition could result in reduced sales, margins, profits and market share. 16 Product removals, damaged product or safety concerns could adversely impact our results of operations. We may be required to recall certain of our products should they be mislabeled, contaminated, spoiled, tampered with or damaged.
Disputes with significant suppliers could also adversely affect our ability to supply products to our customers. If our sales to one or more of these customers are reduced, this reduction may adversely affect our business, financial condition or results of operations. Our large customers may impose requirements on us that may adversely affect our results of operations.
Disputes with significant suppliers could also adversely affect our ability to supply products to our customers. If our sales to one or more of these customers are reduced, this reduction may adversely affect our business, financial condition or results of operations. 17 Our large customers may impose requirements on us that may adversely affect our results of operations.
The willingness of our customers and consumers to purchase our products may depend in part on economic conditions. Worsening economic conditions or future challenges to economic growth could have a negative impact on consumer demand, which could adversely 12 affect our business.
The willingness of our customers and consumers to purchase our products may depend in part on economic conditions. Worsening economic conditions or future challenges to economic growth could have a negative impact on consumer demand, which could adversely affect our business.
Failure to take adequate steps to mitigate the likelihood or potential impact of such events and disruption to our manufacturing or distribution 15 capabilities, or to effectively manage such events if they occur, could adversely affect our business, financial conditions and results of operations.
Failure to take adequate steps to mitigate the likelihood or potential impact of such events and disruption to our manufacturing or distribution capabilities, or to effectively manage such events if they occur, could adversely affect our business, financial conditions and results of operations.
Future annual amounts could be impacted by various factors, such as changes in the number of plan participants, changes in the discount rate, changes in the expected long-term rate of return, changes in the level of contributions to the plan, and other factors.
Future annual amounts could be impacted by 13 various factors, such as changes in the number of plan participants, changes in the discount rate, changes in the expected long-term rate of return, changes in the level of contributions to the plan, and other factors.
The independent distributors and third-party transportation companies are dependent upon gasoline and diesel for their vehicles. The cost of these fuels may fluctuate widely due to economic and political conditions, government policy and regulation, war or other conflicts (including the current situation in Ukraine), or other unforeseen circumstances.
The independent distributors and third-party transportation companies are dependent upon gasoline and diesel for their vehicles. The cost of these fuels may fluctuate widely due to economic and political conditions, government policy and regulation, war or other conflicts (including the current situation in Ukraine and the Middle East), or other unforeseen circumstances.
Mark Courtney Age 62 Chief Brand Officer Mr. Courtney was named chief brand officer in July 2020. He previously served as president of the Fresh Packaged Bread Business Unit from May 2019 to July 2020, senior vice president of retail accounts from May 2017 to May 2019, and senior vice president of sales from June 2008 to May 2017.
Mark Courtney Age 63 Chief Brand Officer Mr. Courtney was named chief brand officer in July 2020. He previously served as president of the Fresh Packaged Bread Business Unit from May 2019 to July 2020, senior vice president of retail accounts from May 2017 to May 2019, and senior vice president of sales from June 2008 to May 2017.
In an inflationary environment, such as the current economic environment, depending on the market conditions of the baking industry and the raising of interest rates by the United States Federal Reserve, we may be unable to raise the prices of our products enough to keep up with the rate of inflation, which would reduce our profit margins, and continued inflationary pressures could impact our business, financial condition, and results of operations.
In an inflationary environment, such as the current economic environment, depending on the market conditions of the baking industry and the raising of interest rates by the United States Federal Reserve (and the duration of the currently elevated interest rates), we may be unable to raise the prices of our products enough to keep up with the rate of inflation, which would reduce our profit margins, and continued inflationary pressures could impact our business, financial condition, and results of operations.
If we fail to anticipate, identify, or react to changes in consumer preferences, or if we fail to introduce new and improved products on a timely basis, we could experience reduced demand for our products, which could cause our sales, profitability, and our operating results to suffer.
If we fail to anticipate, identify, or react to changes in consumer preferences, or if we fail to introduce new and improved products on a timely basis, we could experience reduced demand for our products, which could cause our sales, profitability, financial condition, and operating results to suffer.
Moreover, terrorist activity, armed conflict or political instability, including any escalation of hostility arising out of the conflict between Russia and the Ukraine, or natural disasters that may occur within or outside the U.S. may disrupt manufacturing, labor, and other business operations.
Moreover, terrorist activity, armed conflict or political instability, including any escalation of hostility arising out of the conflict between Russia and the Ukraine and the conflict in the Middle East, or natural disasters that may occur within or outside the U.S. may disrupt manufacturing, labor, and other business operations.
Such factors could adversely affect our sales and results of operations. 18 In addition, our operations are subject to extensive and increasingly stringent regulations administered by the Environmental Protection Agency related to the discharge of materials into the environment and the handling and disposition of wastes.
Such factors could adversely affect our sales and results of operations. In addition, our operations are subject to extensive and increasingly stringent regulations administered by the Environmental Protection Agency related to the discharge of materials into the environment and the handling and disposition of waste.
While we do not expect our operations to be directly impacted by the conflict at this time, changes in global grain and commodity flows could impact the markets in which we operate, which may in turn negatively impact our business, results of operations, supply chain and financial condition.
While we do not expect our operations to be directly impacted by these conflicts at this time, changes in global grain and commodity flows and increased supply chain costs could impact the markets in which we operate, which may in turn negatively impact our business, results of operations, supply chain and financial condition.
A number of factors may adversely affect the labor force available to us, including high employment levels, federal unemployment subsidies, including unemployment benefits offered in response to the COVID-19 pandemic, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices, and immigration.
A number of factors may adversely affect the labor force available to us, including high employment levels, federal unemployment subsidies and benefits offered, and other government regulations, which include laws and regulations related to workers’ health and safety, wage and hour practices, and immigration.
In particular, among other things, (i) the integration of acquisitions or the acquisition or disposition of assets at presently targeted values, (ii) the deployment of new systems and technology, and (iii) an enhanced organizational structure.
In particular, these operating strategies include, among other things, (i) the integration of acquisitions or the acquisition or disposition of assets at presently targeted values, (ii) the deployment of new systems and technology, and (iii) an enhanced organizational structure.
If we are not able to successfully maintain our brand recognition or were to suffer damage to our reputation or loss of consumer confidence in our products for any of these reasons, our revenues and profitability could be adversely affected.
If we are not able to successfully maintain our brand recognition or were to suffer damage to our reputation or loss of consumer confidence in our products for any of these reasons, our revenues and profitability could be adversely affected. Our inability to execute our business strategy could adversely affect our business.
In addition, the risk of cyber-attacks has increased in connection with the military conflict between Russia and Ukraine and the resulting geopolitical conflict.
In addition, the risk of cyber-attacks has increased in connection with the military conflict between Russia and Ukraine, the conflict in the Middle East, and the resulting geopolitical conflicts.
Uncertainty regarding labeling standards has led to customer confusions and legal challenges.
Uncertainty regarding labeling standards has led to customer confusion and legal challenges.
We expect consolidations among our retail and foodservice customers to continue. If this trend continues and our retail and foodservice customers continue to grow larger due to consolidation in their respective industries, they may demand lower pricing and increased promotional programs.
Consolidation in the retail and foodservice industries could adversely affect our sales and profitability. We expect consolidations among our retail and foodservice customers to continue. If this trend continues and our retail and foodservice customers continue to grow larger due to consolidation in their respective industries, they may demand lower pricing and increased promotional programs.
If we are unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, we may suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers or employees.
If we are unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, we may suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties because of the unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers or employees. 15 We may experience difficulties in designing and implementing the upgrade of our ERP system.
We have several large customers that account for a significant portion of sales, and the loss of one of our large customers could adversely affect our financial condition and results of operations. Our top ten customers accounted for 54.5% of sales during Fiscal 2022. Our largest customer, Walmart/Sam’s Club, accounted for 21.7% during this period.
We have several large customers that account for a significant portion of sales, and the loss of one of our large customers could adversely affect our financial condition and results of operations. Our top ten customers accounted for 55.5% of sales during Fiscal 2023. Our largest customer, Walmart/Sam’s Club, accounted for 22.3% during this period.
Similarly, demand for our products could be negatively affected by consumer concerns or perceptions regarding the health effects of specific ingredients such as, but not limited to, sodium, trans fats, sugar, processed wheat, or other product ingredients or attributes. Introduction of new products and product extensions requires significant development and marketing investment.
Similarly, demand for our products could be negatively affected by consumer concerns or perceptions regarding the health effects of specific ingredients such as, but not limited to, sodium, trans fats, sugar, processed wheat, or other product ingredients or attributes.
During fiscal years 2018 through 2022, we have been required, and may be required in future periods, to remove certain of our products from the market should they be mislabeled, contaminated, spoiled, tampered with or damaged, including as a result of inferior ingredients provided by any of our suppliers. 17 Consolidation in the retail and foodservice industries could adversely affect our sales and profitability.
During fiscal years 2018 through 2023, we have been required, and may be required in future periods, to remove certain of our products from the market should they be mislabeled, contaminated, spoiled, tampered with or damaged, including as a result of inferior ingredients provided by any of our suppliers.
Damage or disruption to our manufacturing or distribution capabilities, or the manufacturing or distribution capabilities of our suppliers, due to weather, natural disaster, fire or explosion, terrorism, pandemics, inferior product or ingredient supply, labor strikes or work stoppages, or adverse outcomes in litigation involving our independent distributor model, could impair our ability to make, move or sell our products.
Damage or disruption to our manufacturing or distribution capabilities, or the manufacturing or distribution capabilities of our suppliers, due to weather, including any potential effects of climate change, natural disaster, fire or explosion, terrorism, pandemics (such as COVID-19 and any variants), inferior product or ingredient supply, labor strikes or work stoppages, or adverse outcomes in litigation involving our independent distributor model, could impair our ability to make, move or sell our products.
Information about our Executive Officers The following table sets forth certain information regarding the persons who currently serve as the executive officers of Flowers Foods. 19 EXECUTIVE OFFICERS Name, Age and Office Business Experience A. Ryals McMullian Age 53 President and Chief Executive Officer Mr. McMullian was elected president and chief executive officer in May 2019.
Information about our Executive Officers The following table sets forth certain information regarding the persons who currently serve as the executive officers of Flowers Foods. 19 EXECUTIVE OFFICERS Name, Age and Office Business Experience A. Ryals McMullian Age 54 Chairman and Chief Executive Officer Mr. McMullian serves as chairman and chief executive officer of Flowers.
Our inability to execute our business strategy could adversely affect our business. 14 We employ various operating strategies to maintain our position as one of the nation’s leading producers and marketers of bakery products available to customers through multiple channels of distribution.
We employ various operating strategies to maintain our position as one of the nation’s leading producers and marketers of bakery products available to customers through multiple channels of distribution.
The global economy has been negatively impacted by the military conflict between Russia and Ukraine. The Russia-Ukraine conflict is fast-moving and uncertain. Global grain markets have exhibited increased volatility as sanctions have been imposed on Russia by the United States, the United Kingdom, the European Union, and others in response to Russia’s invasion of Ukraine.
Both conflicts are fast-moving and uncertain. Global grain markets have exhibited increased volatility as sanctions have been imposed on Russia by the United States, the United Kingdom, the European Union, and others in response to Russia’s invasion of Ukraine.
He previously served as president of cake operations from July 2020 until August 2022, president of the Snacking/Specialty Business Unit from May 2017 to July 2020, and senior vice president of organics from September 2015 until May 2017. Mr.
He previously served as president of cake operations from July 2020 until August 2022, president of the Snacking/Specialty Business Unit from May 2017 to July 2020, and senior vice president of organics from September 2015 until May 2017. Mr. Roach served in various sales and management positions since joining the company in 1992.
If we are unable to implement the ERP system upgrade as planned, the effectiveness of our internal control over financial reporting could be adversely affected, our ability to assess those controls adequately could be delayed, and our financial condition, results of operations and cash flows could be negatively impacted. 16 Industry Risks Increases in costs and/or shortages of raw materials, fuels and utilities could adversely impact our profitability.
If we are unable to implement the ERP system upgrade as planned, the effectiveness of our internal control over financial reporting could be adversely affected, our ability to assess those controls adequately could be delayed, and our financial condition, results of operations and cash flows could be negatively impacted.
The upgrade of the ERP system is designed to accurately maintain our financial records, enhance our operational functionality and provide timely information to our management team related to the operations of the business.
We are in the midst of implementing an upgrade to our ERP system to a more robust platform. The upgrade of the ERP system is designed to accurately maintain our financial records, enhance our operational functionality and provide timely information to our management team related to the operations of the business.
McMullian served as vice president and associate general counsel from 2011 until 2015 and as associate general counsel from 2003, when he joined the company, until 2011. R. Steve Kinsey Age 62 Chief Financial Officer and Chief Accounting Officer Mr. Kinsey was named chief financial officer (“CFO”) and chief accounting officer (“CAO”) in April 2020.
McMullian served as vice president of mergers and acquisitions and deputy general counsel from 2015 until 2017, vice president and associate general counsel from 2011 until 2015, and as associate general counsel from 2003, when he joined the company, until 2011. R. Steve Kinsey Age 63 Chief Financial Officer and Chief Accounting Officer Mr.
We may not be able to attract or retain the highly skilled people we need to support our business. We depend on the skills and continued service of key personnel, including our experienced management team.
Any of these developments could materially and/or negatively affect our financial condition, results of operations and cash flows. We may not be able to attract or retain the highly skilled people we need for our business. We depend on the skills and continued service of key personnel, including our experienced management team.
Previously, he served as executive vice president, CFO and chief administrative officer from May 2017 to April 2020. Mr. Kinsey served as executive vice president and CFO from 2008 until 2017, and as senior vice president and CFO from 2007 to 2008. Prior to those appointments, Mr. Kinsey served in various accounting roles since joining the company in 1989.
Kinsey was named chief financial officer (“CFO”) and chief accounting officer (“CAO”) in April 2020. Previously, he served as executive vice president, CFO and chief administrative officer from May 2017 to April 2020. Mr. Kinsey served as executive vice president and CFO from 2008 until 2017, and as senior vice president and CFO from 2007 to 2008.
Inability to anticipate or respond to changes in consumer preferences may result in decreased demand for our products, which could have an adverse impact on our future growth and operating results.
Inability to anticipate or respond to changes in consumer preferences may result in decreased demand for our products, which could have an adverse impact on our future growth and operating results. The fresh packaged bread category has experienced volume declines in recent years reflecting, among other factors, shifts in consumer behavior and preferences.
In addition, changes in tax or interest rates, whether due to recession, efforts to combat inflation, financial and credit market disruptions or other reasons, could negatively impact us.
In addition, changes in tax or interest rates, whether due to recession, efforts to combat inflation, financial and credit market disruptions or other reasons, could negatively impact us. A disruption or change in the operation of our DSD distribution system could materially and/or negatively affect our results of operations, financial condition and cash flows.
Increasing legal complexity may continue to affect our operations and results in material ways.
We are subject to increasing legal complexity and could be party to litigation that may adversely affect our business. Increasing legal complexity may continue to affect our operations and results in material ways.
Prior to that, Mr. Courtney served in various sales positions since joining the company in 1983. Cindy L. Cox Age 56 Chief Human Resources Officer Ms. Cox joined Flowers as chief human resources officer in February 2023.
Tillman served in various roles in the legal department since joining the company in 1995. Cindy L. Cox Age 57 Chief Human Resources Officer Ms. Cox joined Flowers as chief human resources officer in February 2023.
He began his career with Proctor and Gamble in 1988, serving in a number of operational leadership roles at production facilities in the U.S. and Puerto Rico until joining PepsiCo in 2003. Item 1B. Unresolve d Staff Comments. None
He began his career with The Proctor & Gamble Company in 1988, serving in a number of operational leadership roles at production facilities in the U.S. and Puerto Rico until joining PepsiCo in 2003. David M. Roach Age 54 Chief Strategic Projects Officer Mr. Roach was named chief strategic projects officer in August 2022.
Previously, he served as chief operating officer from July 2018 until May 2019. Mr. McMullian served as chief strategy officer from May 2017 to July 2018, and as vice president of mergers and acquisitions and deputy general counsel from 2015 until 2017. Mr.
He served as chief operating officer from July 2018 until May 2019 and as chief strategy officer from May 2017 to July 2018. Prior to those appointments, Mr.
Heeth Varnedoe IV Age 56 Chief Operating Officer Mr. Varnedoe was named chief operating officer effective January 1, 2023. He previously served as chief transformation officer from December 2020 until January 2023, senior vice president of DSD Regions/Sales from August 2017 until December 2020, and president of Flowers’ Phoenix, Arizona bakery from January 2016 to August 2017. Mr.
He served as chief transformation officer from December 2020 until January 2023, senior vice president of DSD Regions/Sales from August 2017 until December 2020, and president of Flowers’ Phoenix, Arizona bakery from January 2016 to August 2017. Mr. Varnedoe joined Flowers in 1990 and held a number of positions before leaving the company in 2000 to pursue other business interests.
Prior to that, he held various manufacturing positions since joining the company in 1980. Mark Chaffin Age 52 Chief Information Officer Mr. Chaffin was named chief information officer (“CIO”) in February 2020 after serving four months in an interim capacity. Prior to joining Flowers, Mr.
Mark Chaffin Age 53 Chief Information Officer Mr. Chaffin was named chief information officer (“CIO”) in February 2020 after serving four months in an interim capacity. Prior to joining Flowers, Mr. Chaffin was a partner in the Southeast practice of Fortium Partners, a provider of technology leadership services, from 2019 until joining Flowers.
In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products. As a result, climate change could negatively affect our business and operations. We are subject to increasing legal complexity and could be party to litigation that may adversely affect our business.
In particular, increasing regulation of fuel emissions could substantially increase the distribution and supply chain costs associated with our products.
Chaffin was a partner in the Southeast practice of Fortium Partners, a provider of technology leadership services, from 2019 until joining Flowers. He also served as CIO at SGSCO, a global package and brand design and marketing company, from 2015 to 2019 and as CIO for Acosta Sales and Marketing from 2007 to 2015. H.
He also served as CIO at SGSCO, a global package and brand design and marketing company, from 2015 to 2019 and as CIO for Acosta Sales and Marketing from 2007 to 2015. Item 1B. Unresolve d Staff Comments. None
Raw materials, such as flour, sweeteners, shortening, yeast, and water, which are used in our bakery products, are subject to price fluctuations. The cost of these inputs may fluctuate widely due to foreign and domestic government policies and regulations, inflation, weather conditions, domestic and international demand, availability due to supply chain conditions, or other unforeseen circumstances.
The cost of these inputs may fluctuate widely due to foreign and domestic government policies and regulations, inflation, weather conditions, domestic and international demand, availability due to supply chain conditions, or other unforeseen circumstances. The global economy has been negatively impacted by the military conflict between Russia and Ukraine and the conflict in the Middle East.
In addition, these changes could result from regulatory developments based on the manner in which the U.S. Department of Labor applies the Fair Labor Standards Act. Any of these developments could materially and negatively affect our financial condition, results of operations and cash flows.
These changes could also result from regulatory developments based on the manner in which the U.S. Department of Labor applies the Fair Labor Standards Act. In addition, as a result of California distributor-related litigation, we plan to convert our DSD distribution model in California to an employment model in 2024.
Previously, he served as president of Flowers Bakeries from July 2014 until May 2017. Prior to that, Mr. Wheeler served in various leadership roles, including regional senior vice president, regional controller, and bakery president. He joined the company in 1988. Tom Winters Age 59 Chief Supply Chain Officer Mr. Winters joined Flowers as chief supply chain officer in April 2022.
Prior to that, Mr. Courtney served in various sales positions since joining the company in 1983. 20 Name, Age and Office Business Experience Tom Winters Age 60 Chief Supply Chain Officer Mr. Winters joined Flowers as chief supply chain officer in April 2022.
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The extent to which the outbreak of the novel strain of coronavirus (“COVID-19”) and measures taken in response thereto, including any new and emerging variants of the virus and the efficacy and distribution of vaccines, may impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict.
Added
In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks. There can be no assurance that the policies, protocols, and practices that we follow to address cybersecurity, including our controls or procedures, will be fully implemented, complied with or effective in protecting our systems and information.
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COVID-19 has spread throughout the world, including the U.S., and has resulted in governmental and other regulatory authorities throughout the U.S. implementing numerous measures to try to contain the virus and any variants of the virus.
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Industry Risks Increases in costs and/or shortages of raw materials, fuels and utilities could adversely impact our profitability. Raw materials, such as flour, sweeteners, shortening, yeast, and water, which are used in our bakery products, are subject to price fluctuations.
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These measures have impacted and may further impact the consumer, our workforce and operations, as well as the workforce, operations and financial prospects of our customers, vendors and suppliers. There is considerable uncertainty regarding such measures and potential future measures.
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Furthermore, the conflict in the Middle East may impact oil production capacity, oil prices, and cause disruptions in global supply chains and shipping routes.
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The spread of COVID-19 has caused us to modify our business practices and we may take further actions as may be required by governmental and other regulatory authorities or as we determine are in the best interests of our employees, customers, vendors and suppliers.
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Also, certain weight loss drugs and glucagon-like peptide 1 (GLP-1) agonists, which may suppress a person's appetite, may impact demand for our products. The introduction of new products and product extensions requires significant development and marketing investment.
Removed
We can provide no assurance that such measures will be sufficient to mitigate the risks posed by the virus or will otherwise be satisfactory to governmental authorities. COVID-19 has had, and will continue to have, a widespread and broad-reaching effect on the economy and our business.
Added
As a result, climate change could negatively affect our business and operations. 18 Additionally, as concerns about climate change and other environmental issues continue to increase, we may be required to comply with new laws and regulations which may result in increased/not yet identified compliance costs, the scale of which is to be evaluated.
Removed
Some of the impacts our business has experienced, is experiencing or may experience as a result of COVID-19 include, but are not limited to, the following: • We experienced a favorable shift in sales mix to our branded retail products as compared to pre-pandemic periods due to the change in consumer buying patterns as a result of COVID-19, which positively impacted our business operations, including our sales, operating income and cash flows; • Consumer fears about contracting the disease have altered preferences and spending habits, including significant increases in purchases of fresh and frozen breads during the pendency of quarantines, shelter-in-place orders and other shutdowns; and these trends have moderated in recent periods, which could negatively affect our performance in future periods as compared to prior periods if consumers were to purchase fewer products from us; • We have experienced, and may experience in the future, temporary facility closures or partial shutdowns in response to government mandates in certain jurisdictions in which we operate and in response to positive diagnoses for COVID-19 in certain facilities for the safety of our employees; • Our distribution networks, including our DSD distribution system and our warehouse delivery system, where we manage our inventory, or the operations of our logistics and other service providers may be disrupted, temporarily closed or experience worker shortages; • Disruptions to our suppliers that supply our ingredients, packaging, and other materials necessary to produce, distribute, and sell our products may affect the ability of our suppliers to fulfill their obligations to us and may cause disruptions to our operations; and • We also implemented a work from home policy for many of our corporate employees, which may negatively impact productivity and cause other disruptions to our business.
Added
We continue to evaluate the possible impact of such new laws and regulations, including those mentioned in the following sentence. In October 2023, California passed new laws that mandate the disclosure of GHG emissions, including Scope 3 emissions, and climate-related financial risks and measures adopted to reduce and adapt to such risks. Both California laws require initial disclosures in 2026.
Removed
The extent to which the spread of COVID-19 impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and are difficult to predict, including, but not limited to, the duration and spread of the outbreak and additional variants, its severity, the actions to contain the virus or treat its impact, including the distribution and efficacy of vaccines, and how quickly and to what extent normal economic and operating conditions can resume.
Added
He was elected as chairman of the board of directors effective May 25, 2023 and has served as chief executive officer since May 2019. Previously, Mr. McMullian served as president and chief executive officer from May 2019 to August 2023.
Removed
Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of COVID-19’s global economic impact, including the availability of credit, adverse impacts on our liquidity and any recession that has occurred or may occur in the future.
Added
Prior to those appointments, Mr. Kinsey served in various accounting roles since joining the company in 1989. Heeth Varnedoe IV Age 57 President and Chief Operating Officer Mr. Varnedoe was named president and chief operating officer effective September 2023. Previously, he served as chief operating officer from January 2023 to August 2023.
Removed
Any of these events could exacerbate the other risks and uncertainties described herein, or in other reports filed with the SEC from time to time, and could materially adversely affect our business, results of operations and financial condition. 13 A disruption in the operation of our DSD distribution system could negatively affect our results of operations, financial condition and cash flows.
Added
He rejoined Flowers in 2012. Terry S. Thomas Age 54 Chief Growth Officer Mr. Thomas joined Flowers as chief growth officer in September 2023. Prior to joining the company, Mr.
Removed
We may experience difficulties in designing and implementing the upgrade of our ERP system. We are in the midst of implementing an upgrade to our ERP system to a more robust platform.
Added
Thomas served as global chief customer officer of Unilever, a global food, personal care, and household products company, from January 2022 to July 2023, and executive vice president, chief customer officer of Unilever from July 2019 to July 2023.
Removed
Varnedoe joined Flowers in 1990 and held a number of positions before leaving the company in 2000 to pursue other business interests. He rejoined Flowers in 2012. Robert L. Benton, Jr. Age 65 Executive Vice President of Network Optimization Mr. Benton was named executive vice president of network optimization in November 2019.
Added
During his career with Unilever, he was named senior vice president of customer development in 2013 and senior vice president of customer development, U.S. grocery channel, DSD & natural channel in 2018. Prior to joining Unilever, Mr.
Removed
He previously served as chief supply chain officer from May 2017 until November 2019. Mr. Benton served as senior vice president and chief manufacturing officer from January 2015 to May 2017 and as senior vice president of manufacturing and operations support from March 2011 until January 2015.
Added
Thomas worked for PepsiCo, Inc. for 13 years, serving as vice president and general manager of various business channels, including small format, global convenience, gas, drug, dollar, and super regional grocery. Mr. Thomas also held management positions at the Coca-Cola Company, Clorox Company, and The Procter & Gamble Company. From August 2020 to August 2023, Mr.
Removed
Debo Mukherjee Age 55 Chief Marketing Officer Mr. Mukherjee joined Flowers as chief marketing officer in October 2017. Before joining Flowers, Mr. Mukherjee was founder and owner of Intacta Consulting Group, LLC, a marketing consulting firm, since 2015.
Removed
Prior to that, he served as CEO of Redco Foods, Inc. from 2011 to 2015 and held marketing roles at Mars Inc., Unilever, H.J. Heinz Co. and The Hershey Company. David M. Roach Age 53 Chief Strategic Projects Officer Mr. Roach was named chief strategic projects officer in August 2022.
Removed
Roach served in various sales and management positions since joining the company in 1992. 20 Name, Age and Office Business Experience Stephanie B. Tillman Age 52 Chief Legal Counsel Ms. Tillman was named chief legal counsel and corporate secretary effective January 2020.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe table below sets forth the production and sales operations in our bakeries: Alabama Kansas Tennessee Birmingham (PS) Lenexa (PS) Cleveland (P) Montgomery (P) Kentucky Crossville (PS)* Tuscaloosa (P) Bardstown (PS) Knoxville (PS) Arizona London (PS)* Texas Mesa (PS)* Louisiana Denton (PS) Tolleson (P) Baton Rouge (PS) El Paso (PS) Arkansas Lafayette (P) Houston (P) Batesville (PS) New Orleans (PS) Houston (PS) Texarkana (P) Maine San Antonio (PS) California Lewiston (P) Tyler (PS) Modesto (Leased) (PS) Lewiston (PS) Utah Colorado Nevada West Jordan (PS) Johnstown (P) Henderson (PS) Virginia Florida North Carolina Lynchburg (P) Bradenton (PS) Goldsboro (PS) Norfolk (PS) Jacksonville (PS) Jamestown (PS) Lakeland (PS) Newton (PS) Miami (PS) Oregon Georgia Milwaukie (PS) Atlanta (P) Pennsylvania Savannah (PS) Oxford (PS) Suwanee (P) Philadelphia (Leased) (PS) Thomasville (PS) Tucker (P) Villa Rica (PS) P - Production Only PS - Production and Sales *Only thrift store sales We believe our facilities are well-maintained and adequate, that they are being appropriately utilized and that they have sufficient production utilization for their present intended purposes.
Biggest changeAdditionally, across the continental U.S. in the markets we serve, we own approximately 140 warehouse/distribution centers and lease approximately 509 warehouse/distribution centers. 22 The table below sets forth the production and sales operations in our bakeries: Alabama Kansas Tennessee Birmingham (P) Lenexa (PS) Cleveland (P) Montgomery (P) Kentucky Crossville (PS)* Tuscaloosa (P) Bardstown (PS) Knoxville (PS) Arizona London (PS)* Texas Mesa (PS)* Louisiana Denton (PS) Tolleson (P) Baton Rouge (PS) El Paso (PS) Arkansas Lafayette (P) Houston (P) Batesville (PS) New Orleans (PS) Houston (PS) Texarkana (P) Maine San Antonio (PS) California Lewiston (P) Tyler (PS) Modesto (Leased) (P) Lewiston (PS) Utah Colorado Nevada West Jordan (PS) Johnstown (P) Henderson (PS) Virginia Florida North Carolina Lynchburg (P) Bradenton (PS) Goldsboro (PS) Norfolk (PS) Jacksonville (PS) Jamestown (PS) Lakeland (P) Newton (PS) Miami (PS) Oregon Georgia Milwaukie (PS) Atlanta (P) Pennsylvania Savannah (P) Oxford (PS) Suwanee (P) Philadelphia (Leased) (PS) Thomasville (PS) Tucker (P) Villa Rica (P) P - Production Only PS - Production and Sales *Only thrift store sales We believe our facilities are well-maintained and adequate, that they are being appropriately utilized and that they have sufficient production utilization for their present intended purposes.
Utilization is actual labor time as a percent of available hours of production in a week (based on 120 hours/week for three shifts). On a consolidated basis during Fiscal 2022, our average quarterly production utilization ranged from 92% to 97% across all bakeries.
Utilization is actual labor time as a percent of available hours of production in a week (based on 120 hours/week for three shifts). On a consolidated basis during Fiscal 2023, our average quarterly production utilization ranged from 89% to 98% across all bakeries.
Item 2. Pr operties Our principal executive offices are company owned and located in Thomasville, Georgia. The company also leases properties that are used for shared services functions and our IT group and owns several properties for our corporate offices.
Item 2. Pr operties Our principal executive offices are company owned and located in Thomasville, Georgia. The company also leases properties that are used for shared services functions and our IT group and owns several properties for our corporate offices. The company also has an additional shared services center in Phoenix, Arizona. We operate 46 bakeries across the continental U.S.
The company also has an additional shared services center in Phoenix, Arizona. 21 We operate 46 bakeries across the continental U.S. Each of the listed bakeries is company owned except for Modesto, California and Philadelphia, Pennsylvania. We believe that our bakeries have adequate production utilization and can meet the current operational requirements for the operation of the business.
Each of the listed bakeries is company owned except for Modesto, California and Philadelphia, Pennsylvania. We believe that our bakeries have adequate production utilization and can meet the current operational requirements for the operation of the business.
Removed
Additionally, across the continental U.S. in the markets we serve, we own approximately 140 warehouse/distribution centers and lease approximately 480 warehouse/distribution centers.
Added
As discussed in Item 1., Business, of this Form 10-K, the company is restructuring its plant operation responsibilities from the sales function to the supply chain function. This transition began in Fiscal 2023 and is anticipated to be completed for the remaining bakeries in Fiscal 2024.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings For a description of all material pending legal proceedings, See Note 22, Commitments and Contingencies , of Notes to Consolidated Financial Statements of this Form 10-K. Item 4. Mine Saf ety Disclosures Not Applicable 22 PART II
Biggest changeItem 3. Legal Proceedings For a description of all material pending legal proceedings, See Note 23, Commitments and Contingencies , of Notes to Consolidated Financial Statements of this Form 10-K. Item 4. Mine Saf ety Disclosures Not Applicable 23 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePurchases of Equity Securities by the Issuer The company did not purchase any shares of its common stock during the fourth quarter of Fiscal 2022. 23 Stock Performance Graph The chart below is a comparison of the cumulative total return (assuming the reinvestment of all dividends paid) of our common stock, Standard & Poor’s 500 Index, Standard & Poor’s 500 Packaged Foods and Meats Index, and Standard & Poor’s MidCap 400 Index for the period December 30, 2017 through December 31, 2022 the last day of our 2022 fiscal year.
Biggest changeThe table below sets forth the common stock repurchased by the company during the twelve weeks ended December 30, 2023 (amounts in thousands, except share price data): Period Total Number of Shares Purchased Weighted Average Price Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs October 8, 2023 — November 4, 2023 — $ — — 23,229 November 5, 2023 — December 2, 2023 700 $ 21.30 700 22,529 December 3, 2023 — December 30, 2023 — $ — — 22,529 Total 700 $ 21.30 700 24 Stock Performance Graph The chart below is a comparison of the cumulative total return (assuming the reinvestment of all dividends paid) of our common stock, Standard & Poor’s 500 Index, Standard & Poor’s 500 Packaged Foods and Meats Index, and Standard & Poor’s MidCap 400 Index for the period December 29, 2018 through December 30, 2023 the last day of our 2023 fiscal year.
Item 5. Market for the Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Market Information Shares of the company’s common stock are quoted on the New York Stock Exchange (the “NYSE”) under the symbol “FLO.” Holders As of February 16, 2023, there were approximately 3,281 holders of record of the company’s common stock.
Item 5. Market for the Registrant’s Common Equity, Related S tockholder Matters and Issuer Purchases of Equity Securities Market Information Shares of the company’s common stock are quoted on the New York Stock Exchange (the “NYSE”) under the symbol “FLO.” Holders As of February 15, 2024, there were approximately 3,225 holders of record of the company’s common stock.
Flowers Foods’ share price is also indexed to $100 at December 30, 2017. Item 6. [Reserved] 24
Flowers Foods’ share price is also indexed to $100 at December 29, 2018. Item 6. [Reserved] 25
December 30, 2017 December 29, 2018 December 28, 2019 January 2, 2021 January 1, 2022 December 31, 2022 FLOWERS FOODS INC 100.00 98.11 120.67 130.00 163.32 176.34 S&P 500 INDEX 100.00 94.80 126.06 148.85 191.58 156.88 S&P 500 PACKAGED FOODS & MEATS INDEX 100.00 81.05 106.09 111.04 125.56 137.34 S&P MIDCAP 400 INDEX 100.00 88.01 112.15 127.54 159.12 138.34 Companies in the S&P 500 Index, the S&P 500 Packaged Foods and Meats Index, and the S&P MidCap 400 Index are weighted by market capitalization and indexed to $100 at December 30, 2017.
December 29, 2018 December 28, 2019 January 2, 2021 January 1, 2022 December 31, 2022 December 30, 2023 FLOWERS FOODS INC 100.00 123.00 132.50 166.47 179.74 146.26 S&P 500 INDEX 100.00 132.97 157.02 202.09 165.49 209.00 S&P 500 PACKAGED FOODS & MEATS INDEX 100.00 130.90 137.01 154.93 169.46 156.66 S&P MIDCAP 400 INDEX 100.00 127.42 144.91 180.79 157.18 183.01 Companies in the S&P 500 Index, the S&P 500 Packaged Foods and Meats Index, and the S&P MidCap 400 Index are weighted by market capitalization and indexed to $100 at December 29, 2018.
Added
Purchases of Equity Securities by the Issuer As originally announced on December 19, 2002, and subsequently increased, our Board of Directors had approved a plan that authorized share repurchases of up to 74.6 million shares. On May 26, 2022, the company announced that the Board of Directors increased the company's share repurchase authorization by 20.0 million shares.
Added
Under the share repurchase plan, the company may repurchase its common stock in open market or privately negotiated transactions or under an accelerated share repurchase program at such times and at such prices as determined to be in the company’s best interest.
Added
These repurchases may be commenced or suspended without prior notice depending on then-existing business or market conditions and other factors. During the twelve weeks ended December 30, 2023, 0.7 million shares, at a cost of $14.9 million, of the company’s common stock were repurchased under the share repurchase plan.
Added
From the inception of the share repurchase plan through December 30, 2023, 72.0 million shares, at a cost of $733.3 million, have been repurchased. The company currently has 22.5 million shares remaining available for repurchase under the share repurchase plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations Consolidated Results - Fiscal 2022 compared to Fiscal 2021 The company’s results of operations, expressed as a percentage of sales, are set forth below for Fiscal 2022 and Fiscal 2021: Percentage of Sales Increase (Decrease) Fiscal 2022 Fiscal 2021 Fiscal 2022 Fiscal 2021 Dollars % 52 weeks 52 weeks 52 weeks 52 weeks (Amounts in thousands, except percentages) Sales $ 4,805,822 $ 4,330,767 100.0 100.0 $ 475,055 11.0 Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below) 2,501,995 2,175,247 52.1 50.2 326,748 15.0 Selling, distribution, and administrative expenses 1,850,594 1,719,797 38.5 39.7 130,797 7.6 FASTER Act and loss on inferior ingredients 236 944 0.0 0.0 (708 ) NM Plant closure costs and impairment of assets 7,825 — 0.2 — 7,825 NM Multi-employer pension plan withdrawal costs — 3,300 — 0.1 (3,300 ) NM Depreciation and amortization 141,957 136,559 3.0 3.2 5,398 4.0 Income from operations 303,215 294,920 6.3 6.8 8,295 2.8 Other components of net periodic pension and postretirement benefits credit (773 ) (405 ) (0.0 ) (0.0 ) (368 ) NM Pension plan settlement loss — 403 — 0.0 (403 ) NM Interest expense, net 5,277 8,001 0.1 0.2 (2,724 ) (34.0 ) Loss on extinguishment of debt — 16,149 — 0.4 (16,149 ) NM Income before income taxes 298,711 270,772 6.2 6.3 27,939 10.3 Income tax expense 70,317 64,585 1.5 1.5 5,732 8.9 Net income $ 228,394 $ 206,187 4.8 4.8 $ 22,207 10.8 Comprehensive income $ 227,281 $ 202,350 4.7 4.7 $ 24,931 12.3 NM – the computation is not meaningful Percentages may not add due to rounding. 32 Sales Fiscal 2022 Fiscal 2021 52 weeks 52 weeks $ % $ % % Change (Amounts in thousands) (Amounts in thousands) Branded retail $ 3,139,220 65.3 $ 2,874,714 66.4 9.2 Other 1,666,602 34.7 1,456,053 33.6 14.5 Total $ 4,805,822 100.0 $ 4,330,767 100.0 11.0 (The table above presents certain sales by category that have been reclassified from amounts previously reported to conform to the current period presentation.) The change in sales was attributable to the following: Percentage point change in sales attributed to: Branded Retail Other Total Favorable (Unfavorable) Pricing/Mix* 14.3 18.1 15.4 Volume* (5.1 ) (3.6 ) (4.4 ) Total percentage point change in sales 9.2 14.5 11.0 * Computations above are calculated as follows: Price/Mix $ = Current fiscal year units x change in price per unit Price/Mix % = Price/Mix $ ÷ P rior fiscal year Sales $ Volume $ = Prior fiscal year price per unit x change in units Volume % = Volume $ ÷ P rior fiscal year Sales $ The company disaggregates its sales into two categories, Branded Retail and Other.
Biggest changeResults of Operations Consolidated Results - Fiscal 2023 compared to Fiscal 2022 The company’s results of operations, expressed as a percentage of sales, are set forth below for Fiscal 2023 and Fiscal 2022: Percentage of Sales Increase (Decrease) Fiscal 2023 Fiscal 2022 Fiscal 2023 Fiscal 2022 Dollars % 52 weeks 52 weeks 52 weeks 52 weeks (Amounts in thousands, except percentages) Sales $ 5,090,830 $ 4,805,822 100.0 100.0 $ 285,008 5.9 Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below) 2,632,136 2,501,995 51.7 52.1 130,141 5.2 Selling, distribution, and administrative expenses 2,119,718 1,850,594 41.6 38.5 269,124 14.5 Restructuring charges 7,099 — 0.1 — 7,099 NM FASTER Act, net of recovery on inferior ingredients — 236 — 0.0 (236 ) NM Plant closure costs and impairment of assets 7,298 7,825 0.1 0.2 (527 ) NM Depreciation and amortization 151,709 141,957 3.0 3.0 9,752 6.9 Income from operations 172,870 303,215 3.4 6.3 (130,345 ) (43.0 ) Other components of net periodic pension and postretirement benefits credit (269 ) (773 ) (0.0 ) (0.0 ) 504 NM Interest expense, net 16,032 5,277 0.3 0.1 10,755 203.8 Income before income taxes 157,107 298,711 3.1 6.2 (141,604 ) (47.4 ) Income tax expense 33,691 70,317 0.7 1.5 (36,626 ) (52.1 ) Net income $ 123,416 $ 228,394 2.4 4.8 $ (104,978 ) (46.0 ) Comprehensive income $ 122,563 $ 227,281 2.4 4.7 $ (104,718 ) (46.1 ) NM – the computation is not meaningful.
In Fiscal 2022, we generated net cash flows from operations of $360.9 million and invested $169.1 million in capital expenditures (inclusive of $61.3 million for the ongoing ERP upgrade) and $9.0 million in a cost-method investment as further discussed below. Additionally, we made stock repurchases of $34.6 million and paid $186.5 million in dividends to our shareholders.
In Fiscal 2022, we generated net cash flows from operations of $360.9 million and invested $169.1 million in capital expenditures (inclusive of $61.3 million for the ongoing ERP upgrade) and $9.0 million in a cost-method investment as further discussed below. Additionally, we made $34.6 million in stock repurchases and paid $186.5 million in dividends to our shareholders in Fiscal 2022.
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 10, Derivative Financial Instruments, of Notes to Consolidated Financial Statements of this Form 10-K.
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, of Notes to Consolidated Financial Statements of this Form 10-K.
The company recognized severance costs of $1.7 million, multi-employer pension plan withdrawal costs of $1.3 million, and asset impairment and equipment 25 relocation charges for bakery equipment of $3.8 million in the third quarter of Fiscal 2022. The severance payments were substantially complete as of December 31, 2022.
The company recognized severance costs of $1.7 million, multi-employer pension plan withdrawal costs of $1.3 million, and asset impairment and equipment relocation charges for bakery equipment of $3.8 million in the third quarter of Fiscal 2022. The severance payments were substantially complete as of December 31, 2022.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is segregated into four sections, including: • Executive overview — provides a summary of our operating performance and cash flows, industry trends, and our strategic initiatives. • Critical accounting estimates — describes the accounting areas where management makes critical estimates to report our financial condition and results of operations. • Results of operations — an analysis of the company’s consolidated results of operations for Fiscal 2022 compared to Fiscal 2021 as presented in the Consolidated Financial Statements.
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is segregated into four sections, including: • Executive overview — provides a summary of our operating performance and cash flows, industry trends, and our strategic initiatives. • Critical accounting estimates — describes the accounting areas where management makes critical estimates to report our financial condition and results of operations. • Results of operations — an analysis of the company’s consolidated results of operations for Fiscal 2023 compared to Fiscal 2022 as presented in the Consolidated Financial Statements.
Item 1., Business, of this Form 10-K for additional information regarding our customers and brands, business strategies, strengths and core competencies, and competition and risks.
See Item 1., Business, of this Form 10-K for additional information regarding our customers and brands, business strategies, strengths and core competencies, and competition and risks.
MATTERS AFFECTING COMPARABILITY The company operates on a 52-53 week fiscal year ending the Saturday nearest December 31. Fiscal 2022 and Fiscal 2021 each consisted of 52 weeks and Fiscal 2023 will also consist of 52 weeks. Furthermore, comparative results from quarter to quarter are impacted by the company's fiscal reporting calendar.
MATTERS AFFECTING COMPARABILITY The company operates on a 52-53 week fiscal year ending the Saturday nearest December 31. Fiscal 2023 and Fiscal 2022 each consisted of 52 weeks and Fiscal 2024 will also consist of 52 weeks. Furthermore, comparative results from quarter to quarter are impacted by the company's fiscal reporting calendar.
In the fourth quarter of Fiscal 2022, the company completed the lease buyouts and subsequent sale of two aircrafts and recorded gains on these sales totaling $6.1 million. These amounts are reflected in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income.
In the fourth quarter of Fiscal 2022, the company completed the lease buyouts and subsequent sale of two aircraft and recorded gains on these sales totaling $6.1 million. These amounts are reflected in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income.
The company is no longer subject to federal examination for years prior to Fiscal 2019, and with limited exceptions, for years prior to 2018 in state jurisdictions. Postretirement Plans. The company records pension costs and benefit obligations related to its defined benefit plans based on actuarial valuations.
The company is no longer subject to federal examination for years prior to Fiscal 2020, and with limited exceptions, for years prior to 2019 in state jurisdictions. Postretirement Plans. The company records pension costs and benefit obligations related to its defined benefit plans based on actuarial valuations.
We currently anticipate the upgrade of our ERP system will cost approximately $350 million (of which approximately 32% has been or is anticipated to be capitalized) and anticipate the upgrade to be completed in 2026. Previously, these costs were estimated to be approximately $275 million.
We currently anticipate the upgrade of our ERP system will cost approximately $350 million (of which approximately 34% has been or is anticipated to be capitalized) and anticipate the upgrade to be completed in 2026. Previously, these costs were estimated to be approximately $275 million.
Changes in our forecasted operating results and other assumptions could materially affect these estimates. This test is performed in the fourth quarter of each fiscal year unless 29 circumstances require this analysis be completed sooner.
Changes in our forecasted operating results and other assumptions could materially affect these estimates. This test is performed in the fourth quarter of each fiscal year unless circumstances require this analysis to be completed sooner.
In Fiscal 2023, the company does not expect to make any cash contributions to Plan No. 2 and expects to pay $0.3 million in nonqualified pension benefits from corporate assets. 31 Stock-based compensation. Stock-based compensation expense for all share-based payment awards granted is determined based on the grant date fair value.
In Fiscal 2024, the company does not expect to make any cash contributions to Plan No. 2 and expects to pay $0.3 million in nonqualified pension benefits from corporate assets. Stock-based compensation. Stock-based compensation expense for all share-based payment awards granted is determined based on the grant date fair value.
In the second half of Fiscal 2020, we launched initiatives to transform how we operate our business, including upgrading our information system to a more robust platform, as well as investments in e-commerce, autonomous planning, and our “bakery of the future” initiative. In the first quarter of Fiscal 2022, we launched the digital logistics and digital sales initiatives.
In the second half of Fiscal 2020, we launched initiatives to transform our business, including upgrading our information system to a more robust platform, as well as investments in e-commerce, autonomous planning, and our “bakery of the future” initiatives. In the first quarter of Fiscal 2022, we launched the digital logistics and digital sales initiatives.
A 1% decrease in the discount rate would increase the fair value of the reporting unit by $1.1 billion and a 1% increase in the discount rate would decrease the fair value by $0.9 billion. Based on management’s evaluation, no impairment charges relating to goodwill were recorded for Fiscal 2022 or 2021.
A 1% decrease in the discount rate would increase the fair value of the reporting unit by $0.9 billion and a 1% increase in the discount rate would decrease the fair value by $0.7 billion. Based on management’s evaluation, no impairment charges relating to goodwill were recorded for Fiscal 2023 or Fiscal 2022.
Our product offerings include a wide range of fresh breads, buns, rolls, snack items and tortillas, as well as frozen breads and rolls, which we produce at 46 plants in 19 states. Our products are sold under leading brands such as Nature’s Own, Dave’s Killer Bread, Canyon Bakehouse, Tastykake, Mrs. Freshley’s, and Wonder .
Our product offerings include a wide range of fresh breads, buns, rolls, snack items, bagels, English muffins, and tortillas, as well as frozen breads and rolls, which we produce at 46 plants in 19 states. Our products are sold under leading brands such as Nature’s Own, Dave’s Killer Bread ("DKB"), Canyon Bakehouse, Tastykake, Mrs. Freshley’s, and Wonder .
The company’s strategy for allocating excess cash flows includes: • implementing our strategic priorities, including our transformation strategy initiatives; • paying dividends to our shareholders; • maintaining a conservative financial position; • making strategic acquisitions; and • repurchasing shares of our common stock.
The company’s strategy for use of its excess cash flows includes: • implementing our strategic priorities, including our transformation strategy initiatives; • paying dividends to our shareholders; • maintaining a conservative financial position; • making strategic acquisitions; and • repurchasing shares of our common stock.
For the details of our pension plan assets, see Note 20, Postretirement Plans , of Notes to Consolidated Financial Statements of this Form 10-K.
For the details of our pension plan assets, see Note 21, Postretirement Plans , of Notes to Consolidated Financial Statements of this Form 10-K.
At December 31, 2022 and January 1, 2022, the company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Guarantees.
At December 30, 2023 and December 31, 2022, the company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Guarantees.
The company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
The company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The income approach is tested using a sensitivity analysis to changes in the discount rate and yield a sufficient buffer to significant variances in our estimates. The estimated fair value of our reporting unit exceeded its carrying value in excess of $4.6 billion in Fiscal 2022.
The income approach is tested using a sensitivity analysis to changes in the discount rate and yield a sufficient buffer to significant variances in our estimates. The estimated fair value of our reporting unit exceeded its carrying value in excess of $3.4 billion in Fiscal 2023.
See Note 18, Stock-Based Compensation , of Notes to Consolidated Financial Statements of this Form 10-K for additional information. In early Fiscal 2023, the company granted stock awards to certain employees. The company expects stock-based compensation expense for Fiscal 2023 to be relatively consistent with Fiscal 2022.
See Note 19, Stock-Based Compensation , of Notes to Consolidated Financial Statements of this Form 10-K for additional information. In early Fiscal 2024, the company granted stock awards to certain employees. The company expects stock-based compensation expense for Fiscal 2024 to be relatively consistent with Fiscal 2023.
See Note 17, Stockholders’ Equity , of Notes to Consolidated Financial Statements of this Form 10-K for additional information.
See Note 18, Stockholders’ Equity , of Notes to Consolidated Financial Statements of this Form 10-K for additional information.
Under the CARES Act, the company deferred approximately $30.0 million of the employer share of Social Security tax for the period from the beginning of the second quarter of Fiscal 2020 through December 31, 2020 and paid approximately $15.0 million in December 2021 and the remainder in December 2022. • During Fiscal 2022, we made a voluntary qualified defined benefit pension plan cash contribution of $1.0 million to Plan No 2.
Under the CARES Act, the company deferred approximately $30.0 million of the employer share of Social Security tax for the period from the beginning of the second quarter of Fiscal 2020 through December 31, 2020 and paid approximately $15.0 million in December 2021 and the remainder in December 2022. • During both Fiscal 2023 and Fiscal 2022, we made voluntary defined benefit pension plan cash contributions of $1.0 million to Plan No 2.
In October 2019, the SOA published its final report on their “standard” mortality table (“Pri-2012”). For purposes of measuring pension benefit obligations of Plan No. 2, the company used a blue color adjustment to the Pri-2012 base table and a projection scale of MP-2021. No other collar adjustments are applied for any other plans.
In October 2019, the SOA published its final report on their “standard” mortality table (“Pri-2012”). For purposes of measuring pension benefit obligations of Plan No. 2, the company used the Pri-2012 base table with blue collar adjustment, and 117.1% multiplier, and a projection scale of MP-2021. No other collar adjustments are applied for any other plans.
Refer to the Annual Report on Form 10-K for the fiscal year ended January 1, 2022 for a discussion of the results of operations for Fiscal 2021 compared to Fiscal 2020. • Liquidity, capital resources and financial position — an analysis of cash flow, contractual obligations, and certain other matters affecting the company’s financial position.
Refer to the Annual Report on Form 10-K for the fiscal year ended December 31, 2022 for a discussion of the results of operations for Fiscal 2022 compared to Fiscal 2021. • Liquidity, capital resources and financial position — an analysis of cash flow, contractual obligations, and certain other matters affecting the company’s financial position.
Following that conversion, a significant strengthening of the U.S. dollar relative to the target company's currency resulted in the foreign currency exchange loss upon conversion back into U.S. dollars following the failure of the deal. Acquisition-related costs are recorded in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income. 26 Pension plan settlement loss.
Following that conversion, a significant strengthening of the U.S. dollar relative to the target company's currency resulted in the foreign currency exchange loss upon conversion back into U.S. dollars following the failure of the deal. Acquisition-related costs are recorded in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income. Legal settlements and related costs.
Impairment charges recorded in Fiscal 2022 are discussed above in the “Matters Affecting Comparability” section.
Impairment charges recorded in Fiscal 2023 and Fiscal 2022 are discussed above in the “Matters Affecting Comparability” section.
In Fiscal 2023, we expect costs for the upgrade of our ERP system (a portion of which may be expensed as incurred, capitalized, recognized as a cloud computing arrangement, or recognized as a prepaid service contract) to be approximately $80 million to $90 million. Costs related to our digital initiatives are more fluid and cannot currently be estimated.
In Fiscal 2024, we expect costs for the upgrade of our ERP system (a portion of which may be expensed as incurred, capitalized, recognized as a cloud computing arrangement, or recognized as a prepaid service contract) to be approximately $25 million to $35 million. Costs related to our digital initiatives are more fluid and cannot currently be estimated.
The increase in estimated costs resulted from expanding the project scope and anticipation of greater reliance on external resources for bakery deployments due to labor constraints. As of December 31, 2022, we have incurred costs related to the project of approximately $153 million.
The increase in estimated costs resulted from expanding the project scope and anticipation of greater reliance on external resources for bakery deployments due to labor constraints. As of December 30, 2023, we have incurred costs related to the project of approximately $214 million.
Additional detail can be found in the following notes: Critical Accounting Estimate Note Revenue recognition — Derivative financial instruments 10 Long-lived assets — Goodwill and other intangible assets 9 Leases 13 Self-insurance reserves 22 Income tax expense and accruals 21 Postretirement plans 20 Stock-based compensation 18 Commitments and contingencies 22 Revenue Recognition.
Additional detail can be found in the following notes: Critical Accounting Estimate Note Revenue recognition — Derivative financial instruments 11 Long-lived assets — Goodwill and other intangible assets 10 Leases 14 Self-insurance reserves 23 Income tax expense and accruals 22 Postretirement plans 21 Stock-based compensation 19 Commitments and contingencies 23 Revenue Recognition.
We estimate a 1% change in the claim severity and frequency would result in immaterial changes in the workers’ compensation liability. Income Tax Expense and Accruals. The annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate.
We estimate a 1% change in the claim severity and frequency would result in an approximately $0.6 million change in the workers’ compensation liability. Income Tax Expense and Accruals. The annual tax rate is based on our income, statutory tax rates, and tax planning opportunities available to us in the various jurisdictions in which we operate.
These changes will occur as part of our hedging program, although the degree and financial impact cannot be estimated. 38 • The change in other assets primarily resulted from changes in prepaid assets, service contracts, and income tax receivable balances in each respective period.
We expect these changes will continue to occur as part of our hedging program, though the degree and financial impact cannot be currently estimated. 38 • The change in other assets primarily resulted from changes in prepaid assets, service contracts, and income tax receivable balances in each respective period.
During the first quarter of Fiscal 2022, the company decided to sell two of the twenty-seven warehouses acquired at the end of Fiscal 2021, as further discussed below, and recorded an impairment charge of $1.0 million. The company completed the sale of the impaired warehouse at the end of the first quarter of Fiscal 2022.
During the first quarter of Fiscal 2022, the company decided to sell two warehouses acquired at the end of Fiscal 2021 and recorded an impairment charge of $1.0 million. The company completed the sale of the impaired warehouse at the end of the first quarter of Fiscal 2022.
During Fiscal 2022, the company borrowed $230.0 million in revolving borrowings under the credit facility and repaid $230.0 million in revolving borrowings. The amount available under the credit facility is reduced by $8.4 million for letters of credit. The AR facility and the credit facility are variable rate debt.
During Fiscal 2023, the company borrowed $540.0 million in revolving borrowings under the credit facility and repaid $540.0 million in revolving borrowings. The amount available under the credit facility is reduced by $8.4 million for letters of credit. The repurchase facility and the credit facility are variable rate debt.
Based upon performance and other measures and recommendations from its investment advisors, the investment committee rebalances the plan’s assets to the targeted allocation when considered appropriate. The asset allocation for Plan No. 2 as of December 31, 2022 is equal to 0-70% equity securities, 30-100% fixed-income securities, and 0-10% short-term investments and cash.
Based upon performance and other measures and recommendations from its investment advisors, the investment committee rebalances the plan’s assets to the targeted allocation when considered appropriate. The asset allocation for Plan No. 2 as of December 31, 2023 is equal to 23% equity securities, 75% fixed-income securities, and 2% short-term investments and cash.
These purchases may be commenced or suspended without prior notice depending on then-existing business or market conditions and other factors. During Fiscal 2022, 1.32 million shares of the company’s common stock were repurchased under the plan at a cost of $34.6 million and during Fiscal 2021, 0.41 million shares were repurchased under the plan at a cost of $9.5 million.
These purchases may be commenced or suspended without prior notice depending on then-existing business or market conditions and other factors. During Fiscal 2023, 1.9 million shares of the company’s common stock were repurchased under the plan at a cost of $45.8 million and during Fiscal 2022, 1.3 million shares were repurchased under the plan at a cost of $34.6 million.
The recall was initiated following notification by a vendor of the possible contamination in a supplied ingredient. The company incurred costs of $1.8 million related to the recall in Fiscal 2021 and received a full reimbursement for the loss in the fourth quarter of Fiscal 2022.
The recall was initiated following notification by a vendor of the possible contamination in a supplied ingredient. The company incurred costs of $1.8 million related to the recall in Fiscal 2021 and received a full reimbursement for the loss in the fourth quarter of Fiscal 2022. These costs and related reimbursements are recorded in our Consolidated Statements of Income.
While this is our best estimate of the ultimate cost of the withdrawal from this plan, additional withdrawal liability may be incurred based on the final IAM Fund assessment or in the event of a mass withdrawal, as defined by statute, occurring anytime within the next three years.
While this is our best estimate of the ultimate cost of the withdrawal from this plan, additional withdrawal liability may be incurred based on the final IAM Fund assessment or in the event of a mass withdrawal, as defined by statute, occurring anytime up to July 19, 2025.
Capital Structure Long-term debt and right-of-use lease obligations and stockholders’ equity were as follows at December 31, 2022 and January 1, 2022.
Capital Structure Long-term debt and right-of-use lease obligations and stockholders’ equity were as follows as of December 30, 2023 and December 31, 2022.
On July 19, 2022, the company announced the closure of the Holsum Bakery in Phoenix, Arizona. The bakery, which, produced bread and bun products, ceased production on October 31, 2022. This closure is part of our strategy to optimize our sales portfolio and improve supply chain and manufacturing efficiency.
The bakery, which, produced bread and bun products, ceased production on October 31, 2022. This closure is part of our strategy to optimize our sales portfolio and improve supply chain and manufacturing efficiency.
An additional $1.8 million and $0.4 million was paid during Fiscal 2022 and 2021, respectively, for our share of employment taxes on the vesting of the performance-contingent restricted stock awards in each respective year.
An additional $2.2 million and $1.8 million were paid in Fiscal 2023 and Fiscal 2022, respectively, for our share of employment taxes on the vesting of performance-contingent restricted stock awards in each respective year.
Gain on sale, severance costs, and lease termination (gain) loss. In the second quarter of Fiscal 2022, the company committed to a plan to outsource its aviation services and recorded severance and lease termination charges totaling $1.7 million.
The plant closure costs and impairment of assets are reflected in the Consolidated Statements of Income. Gain on sale, severance costs, and lease termination (gain) loss. In the second quarter of Fiscal 2022, the company committed to a plan to outsource its aviation services and recorded severance and lease termination charges totaling $1.7 million.
Price promotion discount expense is recorded as a reduction to gross sales when the discounted product is sold to the customer. Derivative Financial Instruments. The company’s cost of primary raw materials is highly correlated to certain commodities markets. Raw materials, such as our baking ingredients, experience price fluctuations.
Estimates are made based on historical experience and other factors. Price promotion discount expense is recorded as a reduction to gross sales when the discounted product is sold to the customer. Derivative Financial Instruments. The company’s cost of certain raw materials is highly correlated to underlying commodities markets. Raw materials, such as our baking ingredients, experience price fluctuations.
Key items impacting our liquidity, capital resources and financial position in Fiscal 2022 and 2021: Fiscal 2022: • Generated $360.9 million of net cash from operating activities. • Paid dividends to our shareholders of $186.5 million. • Invested in our business through capital expenditures of $169.1 million (inclusive of $61.3 million of capital expenditures, including amounts recognized in accounts payable at year end, for the ERP upgrade). • Repurchased $34.6 million of our common stock. • Incurred business process improvement consulting costs of $33.2 million related to the ongoing transformation strategy initiatives (exclusive of capitalized or deferred costs).
Fiscal 2022: • Generated $360.9 million of net cash from operating activities. • Paid dividends to our shareholders of $186.5 million. • Invested in our business through capital expenditures of $169.1 million (inclusive of $61.3 million of capital expenditures, including amounts recognized in accounts payable at year end, for the ERP upgrade). • Repurchased $34.6 million of our common stock. • Incurred business process improvement costs of $33.2 million related to the ongoing transformation strategy initiatives (exclusive of capitalized or deferred costs). 37 Liquidity Discussion Flowers Foods’ cash and cash equivalents were $22.5 million at December 30, 2023 and $165.1 million at December 31, 2022.
Those potential risks include the possibility of future economic downturns which could result in a significant shift away from our branded retail products to store branded products, supply chain disruptions that have impacted, and could continue to impact, the procurement of raw materials and packaging items, workforce availability, and our ability to implement additional pricing actions to offset rising inflation, among other risks.
Those potential risks include the possibility of future economic downturns that could result in a significant shift away from our branded retail 36 products to store branded products, supply chain disruptions that have impacted, and could continue to impact, the procurement of raw materials and packaging items, and the workforce available to us, among other risks.
This estimate is inclusive of an additional $1.5 million of expense anticipated to be recognized in the first quarter of Fiscal 2023 due to the payout for the Fiscal 2021 grant currently trending at 125% of target. Commitments and contingencies.
This estimate is inclusive of an additional $2.0 million of expense anticipated to be recognized in the first quarter of Fiscal 2024 due to the payout for the Fiscal 2022 grant currently trending since the grant date at 125% of target. 32 Commitments and contingencies.
While the company considers future taxable income and ongoing prudent and feasible tax strategies in assessing the need for a valuation allowance, if these estimates and assumptions change in the future, the company may be required to adjust its valuation allowance, which could result in a charge to, or an increase in, income in the period such determination is made. 30 Periodically, we face audits from federal and state tax authorities, which can result in challenges regarding the timing and amount of income or deductions.
While the company considers future taxable income and ongoing prudent and feasible tax strategies in assessing the need for a valuation allowance, if these estimates and assumptions change in the future, the company may be required to adjust its valuation allowance, which could result in a charge to, or an increase in, income in the period such determination is made.
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.
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.
The company had total available liquidity of $852.3 million as of December 31, 2022, consisting of cash on hand and the available balances under the credit facility and the AR facility. 36 We expect the transformation strategy initiatives will require significant capital investment and expense over the next several years.
The company had total available liquidity of $559.1 million as of December 30, 2023, consisting of cash on hand and the available balances under the credit facility (as defined below) and the repurchase facility. We expect the transformation strategy initiatives will require significant capital investment and expense over the next several years.
A sensitivity analysis of pension costs has been prepared to quantify the impact of changes in the discount rate. We estimate a 0.25% change in the discount rate would result in approximately $0.1 million change in pension costs on a pre-tax basis.
A sensitivity analysis of pension costs has been prepared to quantify the impact of changes in the discount rate. We estimate a 0.25% change in the discount rate would result in approximately $0.1 million change in pension costs on a pre-tax basis. 31 The company sponsors a defined benefit pension plan for union employees, the Flowers Foods, Inc.
On May 26, 2022, the Board increased the company's share repurchase authorization by 20.0 million shares. At the close of the company’s fourth quarter on December 31, 2022, 24.4 million shares remained under the existing authorization.
On May 26, 2022, the company announced that the Board increased the company's share repurchase authorization by 20.0 million shares. At the close of the company’s fourth quarter on December 30, 2023, 22.5 million shares remained under the existing authorization.
Based on these factors, the long-term rate of return assumption for Plan No. 2 was set at 5.9% for Fiscal 2022 and is unchanged for Fiscal 2023. The company utilizes the Society of Actuaries’ (“SOA”) published mortality tables and improvement scales in developing their best estimates of mortality.
Based on these factors, the long-term rate of return assumption for Plan No. 2 is set at 5.9% (net of investment and administrative fees, assumed to be 0.4% per annum) for Fiscal 2024. The company utilizes the Society of Actuaries’ (“SOA”) published mortality tables and improvement scales in developing their best estimates of mortality.
The decrease in the rate year over year was primarily due to windfalls on stock-based compensation awards that vested in Fiscal 2022. For the current year, the primary differences in the effective rate and the statutory rate related to state income taxes and windfalls on the vesting of stock-based compensation awards in the current year.
The decrease in the rate year over year was primarily due to tax credits and windfalls on stock-based compensation awards that vested in Fiscal 2023. For both periods presented, the primary differences in the effective rate and the statutory rate relate to state income taxes, windfalls on the vesting of stock-based compensation awards, and benefits recognized from tax credits.
In the prior year period, we paid financing costs associated with the issuance of the 2031 notes in the first quarter of Fiscal 2021 and for the amendments of the AR facility and credit facility in the third quarter of Fiscal 2021. • Stock repurchase decisions are made based on our stock price, our belief of relative value, and our cash projections at any given time.
In Fiscal 2022, we paid additional financing costs associated with the Fiscal 2021 amendment of the credit facility and for the amendment of the securitization facility. • Stock repurchase decisions are made based on our stock price, our belief of relative value, and our cash projections at any given time.
Note 2, Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements of this Form 10-K includes a summary of the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements.
The selection and disclosure of the company’s critical accounting estimates have been discussed with the company’s audit committee. Note 2, Summary of Significant Accounting Policies, of Notes to Consolidated Financial Statements of this Form 10-K includes a summary of the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements.
The table below presents net cash disbursed for financing activities for Fiscal 2022 and 2021 (amounts in thousands): Fiscal 2022 Fiscal 2021 Dividends paid, including dividends on share-based payment awards $ (186,501 ) $ (175,903 ) Payment of financing fees (282 ) (6,022 ) Stock repurchases (34,586 ) (9,510 ) Change in bank overdrafts 799 261 Net change in debt obligations — (81,858 ) Payments on financing leases (1,597 ) (1,745 ) Net cash disbursed for financing activities $ (222,167 ) $ (274,777 ) • Our annual dividend rate increased from $0.84 per share in Fiscal 2021 to $0.88 per share in Fiscal 2022.
The table below presents net cash disbursed for financing activities for Fiscal 2023 and 2022 (amounts in thousands): Fiscal 2023 Fiscal 2022 Dividends paid, including dividends on share-based payment awards $ (195,215 ) $ (186,501 ) Payment of financing fees (533 ) (282 ) Stock repurchases (45,801 ) (34,586 ) Change in bank overdrafts 220 799 Net change in debt obligations 155,000 — Payments on financing leases (1,819 ) (1,597 ) Net cash disbursed for financing activities $ (88,148 ) $ (222,167 ) • Our annual dividend rate increased from $0.88 per share in Fiscal 2022 to $0.92 per share in Fiscal 2023.
The cash and cash equivalents were derived from the activities presented in the table below (amounts in thousands): Cash flow component Fiscal 2022 Fiscal 2021 Cash flows provided by operating activities $ 360,889 $ 344,610 Cash disbursed for investing activities (151,088 ) (191,438 ) Cash disbursed for financing activities (222,167 ) (274,777 ) Effect of exchange rates in cash (8,371 ) — Total change in cash $ (20,737 ) $ (121,605 ) 37 Cash Flows Provided by Operating Activities.
The cash and cash equivalents were derived from the activities presented in the table below (amounts in thousands): Cash flow component Fiscal 2023 Fiscal 2022 Cash flows provided by operating activities $ 349,353 $ 360,889 Cash disbursed for investing activities (403,812 ) (151,088 ) Cash disbursed for financing activities (88,148 ) (222,167 ) Effect of exchange rates on cash — (8,371 ) Total change in cash $ (142,607 ) $ (20,737 ) Cash Flows Provided by Operating Activities.
The settlement accrued for in the second quarter of Fiscal 2022 was paid in the third quarter of Fiscal 2022. In Fiscal 2021, we reached an agreement to settle certain distributor-related litigation for a settlement payment, inclusive of plaintiffs’ attorney fees, of $16.5 million. The payment was made in the second quarter of Fiscal 2022.
In the third quarter of Fiscal 2023, we reached an agreement to settle certain distributor-related litigation for a settlement payment, inclusive of plaintiffs’ attorney fees, of $55.0 million.
During Fiscal 2022, the company reached a settlement and made a partial payment and anticipates making the final payment in Fiscal 2023. Legal settlements and related costs. During the second and third quarters of Fiscal 2022, we reached agreements to settle certain distributor-related litigation in the aggregate amount of $7.5 million, inclusive of attorney fees.
During the second and third quarters of Fiscal 2022, we reached agreements to settle certain distributor-related litigation in the aggregate amount of $7.5 million, inclusive of attorney fees.
Materials, Supplies, Labor, and Other Production Costs (exclusive of depreciation and amortization shown separately; as a percent of sales) Line item component Fiscal 2022 % of sales Fiscal 2021 % of sales Change as a % of sales Ingredients and packaging 31.8 28.1 3.7 Workforce-related costs 13.8 14.9 (1.1 ) Other 6.5 7.2 (0.7 ) Total 52.1 50.2 1.9 Overall, costs increased significantly year over year as a percent of sales due to considerable input cost inflation.
Materials, Supplies, Labor, and Other Production Costs (exclusive of depreciation and amortization shown separately; as a percent of sales) Line item component Fiscal 2023 % of sales Fiscal 2022 % of sales Change as a % of sales Ingredients and packaging 32.0 31.8 0.2 Workforce-related costs 13.8 13.8 — Other 5.9 6.5 (0.6 ) Total 51.7 52.1 (0.4 ) Materials, supplies, labor and other production costs as a percent of sales decreased year over year due to implementing inflation-driven pricing actions to combat considerable input cost inflation experienced over the past two years.
Although there has been no material adverse impact on the company’s results of operations, liquidity or cash flows in Fiscal 2022, volatility in global and U.S. economic environments could significantly impact our ability to generate future cash flows and w e continue to evaluate these various potential business risks.
Although there has been no material adverse impact on the company’s results of operations, liquidity or cash flows in Fiscal 2023, volatility in global and U.S. economic environments, including as a result of, among other things, the inflationary economic environment, supply chain disruptions, labor shortages, the conflict between Russia and Ukraine, and the conflict in the Middle East, could significantly impact our ability to generate future cash flows and w e continue to evaluate these various potential business risks.
See Item 1A., Risk Factors , “We may experience difficulties in designing and implementing the upgrade of our ERP system.” On February 17, 2023, we funded the purchase price of the Papa Pita transaction with cash on hand and from our credit facilities. The company leases certain property and equipment under various financing and operating lease arrangements.
See Item 1A., Risk Factors , “We may experience difficulties in designing and implementing the upgrade of our ERP system.” The company leases certain property and equipment under various financing and operating lease arrangements.
We believe we currently have access to available funds and financing sources to meet our short and long-term capital requirements.
Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures, and obligated debt repayments. We believe we currently have access to available funds and financing sources to meet our short and long-term capital requirements.
We use the multi-period excess earnings and relief from royalty methods to value these intangibles. The method used for impairment testing purposes is consistent with the valuation method employed at acquisition of the intangible asset. No impairment charges related to amortizing intangible assets were recorded in Fiscal 2022 or 2021.
We use the multi-period excess earnings and relief from royalty methods to value these intangibles. The method used for impairment testing purposes is consistent with the valuation method employed at acquisition of the intangible asset. In Fiscal 2023, we recorded a $2.3 million charge to fully impair held and used distribution rights classified as intangibles assets.
Additionally, detailed below are expense (recovery) items affecting comparability that will provide additional context while reading this discussion: Fiscal 2022 Fiscal 2021 Footnote 52 weeks 52 weeks Disclosure (Amounts in thousands) Business process improvement consulting costs $ 33,169 $ 31,293 Note 2 Plant closure costs and impairment of assets 7,825 — Note 2 Gain on sale, severance costs, and lease termination (gain) loss (4,390 ) (2,644 ) Note 12, 13 FASTER Act and loss on inferior ingredients 236 944 Note 4 Acquisition-related costs 12,518 — Note 2 Acquisition consideration adjustment — 3,400 Note 12 Legal settlements and related costs 7,500 23,089 Note 22 Loss on extinguishment of debt — 16,149 Note 14 Pension plan settlement loss — 403 Note 20 Multi-employer pension plan withdrawal costs — 3,300 Note 20 $ 56,858 $ 75,934 Business process improvement consulting costs related to the transformation strategy initiatives.
Additionally, detailed below are expense (recovery) items affecting comparability that will provide additional context while reading this discussion: Fiscal 2023 Fiscal 2022 Footnote 52 weeks 52 weeks Disclosure (Amounts in thousands) Business process improvement costs $ 21,521 $ 33,169 Note 2 Restructuring charges 7,099 — Note 5 Plant closure costs and impairment of assets 7,298 7,825 Note 2 Gain on sale, severance costs, and lease termination (gain) loss — (4,390 ) Note 2 FASTER Act, net of recovery on inferior ingredients — 236 Note 4 Acquisition-related costs 3,712 12,518 Note 2, 6 Legal settlements and related costs 137,529 7,500 Note 23 $ 177,159 $ 56,858 Business process improvement costs related to the transformation strategy initiatives.
The primary differences in the effective rate and statutory rate for the prior year were state income taxes. The Inflation Reduction Act ("IRA") did not have a material impact on the effective tax rate for Fiscal 2022 and there is no anticipated material impact on the effective tax rate in future periods.
The Inflation Reduction Act ("IRA") did not have a material impact on the effective tax rate for Fiscal 2023 or 2022 and there is no anticipated material impact on the effective tax rate in future periods. Comprehensive Income The decrease in comprehensive income year over year resulted primarily from decreased net income.
In addition to customary acquisition costs, we incurred $8.4 million related to realized foreign currency exchange losses. Although the majority of the target company's sales were made in the U.S., the target company's foreign domicile required us to convert funds from U.S. dollars to complete the transaction.
Although the majority of the target company's sales were made in the U.S., the target company's foreign domicile required us to convert funds from U.S. dollars to complete the transaction.
The transition payments were paid in December 2021 and the withdrawal liability was paid in April 2022. EXECUTIVE OVERVIEW We are the second-largest producer and marketer of packaged bakery foods in the U.S. with Fiscal 2022 sales of $4.8 billion. We operate in the highly competitive fresh bakery market.
EXECUTIVE OVERVIEW We are the second-largest producer and marketer of packaged bakery foods in the U.S. with Fiscal 2023 sales of $5.1 billion. We operate in the highly competitive fresh bakery market.
Although we do not currently anticipate a need, we also believe that we could access the capital markets to raise additional funds. We believe the fundamentals of the company remain strong and that we have sufficient liquidity on hand to continue business operations during the volatile global and U.S. economic environments and the pandemic.
We believe the fundamentals of the company remain strong and that we have sufficient liquidity on hand to continue business operations during the volatile global and U.S. economic environments.
As of December 31, 2022, the company also owns trademarks acquired through acquisitions with a total carrying value of $127.1 million that are indefinite-lived intangible assets not subject to amortization.
This was in conjunction with costs related to a California legal settlement. No impairment charges related to amortizing intangible assets were recorded in Fiscal 2022. 30 As of December 30, 2023, the company also owns trademarks acquired through acquisitions with a total carrying value of $127.1 million that are indefinite-lived intangible assets not subject to amortization.
There were no repurchases of the company’s common stock during the fourth quarter of Fiscal 2022. 41 New Accounting Pronouncements Not Yet Adopted See Note 3, Recent Accounting Pronouncements, of Notes to Consolidated Financial Statements of this Form 10-K regarding this information.
New Accounting Pronouncements Not Yet Adopted See Note 3, Recent Accounting Pronouncements, of Notes to Consolidated Financial Statements of this Form 10-K regarding this information.
Consideration payable to a customer is recognized at the time control transfers and is a reduction to revenue. The recognition of costs for promotion programs involves the use of judgment related to performance and redemption estimates. Estimates are made based on historical experience and other factors.
These allowances include price promotion discounts, coupons, customer rebates, cooperative advertising, and 29 product returns. Consideration payable to a customer is recognized at the time control transfers and is a reduction to revenue. The recognition of costs for promotion programs involves the use of judgment related to performance and redemption estimates.
Previously, the DKB snack bars were only available for purchase in certain test markets or from our consumer testing website. In early Fiscal 2023, we launched DKB Crunchy Snack Bites in test markets. The DKB snack bars and snack bites are part of an initiative to extend our presence beyond the traditional bread category and into the snacking category.
The DKB snack bars, which rolled out nationally in Fiscal 2023, and snack bites, which were sold in test markets in Fiscal 2023, are part of an initiative to extend our presence beyond the traditional bread category and into the snacking category.
Net cash provided by operating activities included the following items for non-cash adjustments to net income (amounts in thousands): Fiscal 2022 Fiscal 2021 Depreciation and amortization $ 141,957 $ 136,559 Loss on foreign currency exchange rates 8,371 — Impairment of assets 3,897 — Stock-based compensation 25,822 21,343 Allowances for accounts receivable 8,518 6,071 Deferred income taxes 1,446 6,777 Gain reclassified from accumulated comprehensive income to net income (5,813 ) (2,115 ) Other non-cash items (708 ) 3,795 Net non-cash adjustment to net income $ 183,490 $ 172,430 • Refer to the Acquisition-related costs (loss on foreign currency exchange rates) and Plant closure costs and impairment of assets discussion in the “Matters Affecting Comparability” section above regarding these items. • For Fiscal 2022 and 2021, deferred income tax activity was primarily composed of changes in temporary differences year over year. • Other non-cash items include non-cash interest expense for the amortization of debt discounts and deferred financing costs (including $0.7 million related to the write-off of unamortized costs upon the early redemption of the 2022 notes in the first quarter of Fiscal 2021), activity in the allowances for inventory obsolescence, and gains or losses on the sale of assets.
Net cash provided by operating activities included the following items for non-cash adjustments to net income (amounts in thousands): Fiscal 2023 Fiscal 2022 Depreciation and amortization $ 151,709 $ 141,957 Loss on foreign currency exchange rates — 8,371 Impairment of assets 9,611 3,897 Stock-based compensation 26,945 25,822 Allowances for accounts receivable 8,412 8,518 Deferred income taxes (43,340 ) 1,446 Loss (gain) reclassified from accumulated comprehensive income to net income 2,920 (5,813 ) Other non-cash items 4,559 (708 ) Net non-cash adjustment to net income $ 160,816 $ 183,490 • Refer to the Acquisition-related costs (loss on foreign currency exchange rates) and Plant closure costs and impairment of assets discussion in the “Matters Affecting Comparability” section above regarding these items. • For Fiscal 2023, deferred income tax activity was comprised of changes year over year, including the impact of the capitalization of research and development and certain information technology costs and accrued legal settlements and related costs.
For a detailed description of our debt and right-of-use lease obligations and information regarding our distributor arrangements, deferred compensation, and guarantees and indemnification obligations, see Note 13, Leases, and Note 14, Debt and Other Commitments , of Notes to Consolidated Financial Statements of this Form 10-K: Interest Rate at Final Balance at Fixed or December 31, 2022 Maturity December 31, 2022 January 1, 2022 Variable Rate (Amounts in thousands) 2031 notes 2.40% 2031 $ 493,994 $ 493,333 Fixed Rate 2026 notes 3.50% 2026 397,848 397,276 Fixed Rate Credit facility 5.42% 2026 — — Variable Rate AR facility 5.27% 2024 — — Variable Rate Right-of-use lease obligations 2036 282,862 300,522 1,174,704 1,191,131 Less: Current maturities of long-term debt and right-of-use lease obligations (45,769 ) (47,974 ) Long-term debt and right-of-use lease obligations $ 1,128,935 $ 1,143,157 Total stockholders’ equity was as follows at December 31, 2022 and January 1, 2022: Balance at December 31, 2022 January 1, 2022 (Amounts in thousands) Total stockholders' equity $ 1,443,290 $ 1,411,274 On March 9, 2021, the company issued $500.0 million of senior notes with a maturity date of March 15, 2031.
For a detailed description of our debt and right-of-use lease obligations and information regarding our distributor arrangements, deferred compensation, and guarantees and indemnification obligations, see Note 14, Leases, and Note 15, Debt and Other Commitments , of Notes to Consolidated Financial Statements of this Form 10-K: Interest Rate at Final Balance at Fixed or December 30, 2023 Maturity December 30, 2023 December 31, 2022 Variable Rate (Amounts in thousands) 2031 notes 2.40% 2031 $ 494,723 $ 493,994 Fixed Rate 2026 notes 3.50% 2026 398,421 397,848 Fixed Rate Unsecured credit facility 6.38% 2026 — — Variable Rate Accounts receivable securitization facility* — — Variable Rate Accounts receivable repurchase facility 6.16% 2025 155,000 — Variable Rate Right-of-use lease obligations 2036 284,501 282,862 1,332,645 1,174,704 Less: Current maturities of long-term debt and right-of-use lease obligations (47,606 ) (45,769 ) Long-term debt and right-of-use lease obligations $ 1,285,039 $ 1,128,935 * The securitization facility was terminated on April 14, 2023.
The expensed portion of the consulting costs related to both the ERP upgrade and digital strategy initiatives incurred in Fiscal 2022 and Fiscal 2021 was $33.2 million and $31.3 million, respectively, and is reflected in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income. Plant closure costs and impairment of assets.
The expensed portion of costs incurred related to these initiatives, which was primarily consulting costs, was $21.5 million in Fiscal 2023 and $33.2 million in Fiscal 2022, and is reflected in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income. 26 Restructuring charges.
The company incurred $0.9 million of acquisition-related costs associated with the acquisition in Fiscal 2022 and anticipates additional costs to be incurred in the first quarter of Fiscal 2023. In the third quarter of Fiscal 2022, we incurred $11.6 million in costs from the pursuit of an acquisition that failed to materialize.
We incurred acquisition-related costs of $3.7 million and $0.9 million in Fiscal 2023 and 2022, respectively. 27 In the third quarter of Fiscal 2022, we incurred $11.6 million in costs from the pursuit of an acquisition that failed to materialize. In addition to customary acquisition costs, we incurred $8.4 million related to realized foreign currency exchange losses.
These initiatives are further discussed in Item 1., Business, of this Form 10-K.
Implementation of the ERP upgrade is anticipated to be completed in Fiscal 2026. These initiatives are further discussed in Item 1., Business, of this Form 10-K.
All amounts related to legal settlements and related costs are recorded in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income. At December 31, 2022, $5.9 million of settlements were accrued (inclusive of obligations for repurchase of distribution rights). Loss on extinguishment of debt.
All amounts related to legal settlements and related costs are recorded in the selling, distribution, and administrative expenses line item of the Consolidated Statements of Income. As of December 30, 2023, $119.6 million of settlements were accrued (inclusive of obligations for the repurchase of distribution territories) and the remaining reserve for the related distributor notes receivable was $14.8 million.
Impact of the Inflationary Economic Environment, Other Macroeconomic Factors, and COVID-19 on Our Business We continue to monitor the impact of the inflationary economic environment, supply chain disruptions, labor shortages, the conflict between Russia and Ukraine, and the COVID-19 pandemic on our business as further discussed in Item 1., Business, of this Form 10-K. 27 Summary of Operating Results, Cash Flows and Financial Condition: Our results in Fiscal 2022 continued to benefit from a more optimized sales mix of branded retail products as compared to pre-pandemic periods.
Impact of the Inflationary Economic Environment and Other Macroeconomic Factors on Our Business We continue to monitor the impact of the inflationary economic environment, supply chain disruptions, labor shortages, the conflict between Russia and Ukraine, and the conflict in the Middle East on our business as further discussed in Item 1., Business, of this Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs of December 31, 2022, the company’s hedge portfolio contained commodity derivatives with a fair value (liability) of $(0.5) million and is based on quoted market prices. Approximately $(0.4) million relates to instruments that will be utilized in Fiscal 2023 and the remaining $(0.1) million will be utilized in Fiscal 2024.
Biggest changeAs of December 30, 2023, the company’s hedge portfolio contained commodity derivatives with a fair value (liability) of $(1.9) million and is based on quoted market prices, all of which relates to instruments that will be utilized in Fiscal 2024 except for an immaterial amount that will be utilized in Fiscal 2025.
A sensitivity analysis has been prepared to quantify the company’s potential exposure to commodity price risk with respect to its derivative portfolio. Based on the company’s derivative portfolio as of December 31, 2022, a hypothetical ten percent change in commodity prices would increase or decrease the fair value of the derivative portfolio by $4.7 million.
A sensitivity analysis has been prepared to quantify the company’s potential exposure to commodity price risk with respect to its derivative portfolio. Based on the company’s derivative portfolio as of December 30, 2023, a hypothetical ten percent change in commodity prices would increase or decrease the fair value of the derivative portfolio by $1.9 million.

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