Edgar Filing: FLOWERS FOODS INC

flo-10q_20150718.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 18, 2015

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-16247

FLOWERS FOODS, INC.

(Exact name of registrant as specified in its charter)

GEORGIA		58-2582379
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1919 FLOWERS CIRCLE, THOMASVILLE, GEORGIA

(Address of principal executive offices)

31757

(Zip Code)

229/226-9110

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

TITLE OF EACH CLASS		OUTSTANDING AT AUGUST 6, 2015
Common Stock, $.01 par value		210,184,183

FLOWERS FOODS, INC.

INDEX

			PAGE NUMBER
PART I. Financial Information
	Item 1.	Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets as of July 18, 2015 and January 3, 2015	3
		Condensed Consolidated Statements of Income for the Twelve and Twenty-Eight Weeks Ended July 18, 2015 and July 12, 2014	4
		Condensed Consolidated Statements of Comprehensive Income for the Twelve and Twenty-Eight Weeks Ended July 18, 2015 and July 12, 2014	5
		Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Twenty-Eight Weeks Ended July 18, 2015	6
		Condensed Consolidated Statements of Cash Flows for the Twenty-Eight Weeks Ended July 18, 2015 and July 12, 2014	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50
	Item 4.	Controls and Procedures	50
PART II. Other Information
	Item 1.	Legal Proceedings	51
	Item 1A.	Risk Factors	51
	Item 6.	Exhibits	51
Signatures			52
Exhibit index			53

Forward-Looking Statements

Statements contained in this filing and certain other written or oral statements made from time to time by the company and its representatives that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to current expectations regarding our future financial condition and results of operations and are often identified by the use of words and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “would,” “is likely to,” “is expected to” or “will continue,” or the negative of these terms or other comparable terminology. These forward-looking statements are based upon assumptions we believe are reasonable.

Forward-looking statements are based on current information and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. Certain factors that may cause actual results, performance, liquidity, and achievements to differ materially from those projected are discussed in this report and may include, but are not limited to:

unexpected changes in any of the following: (i) general economic and business conditions; (ii) the competitive setting in which we operate, including advertising or promotional strategies by us or our competitors, as well as changes in consumer demand; (iii) interest rates and other terms available to us on our borrowings; (iv) energy and raw materials costs and availability and hedging counter-party risks; (v) relationships with or increased costs related to our employees and third party service providers; and (vi) laws and regulations (including environmental and health-related issues), accounting standards or tax rates in the markets in which we operate;

·	the loss or financial instability of any significant customer(s);

·	changes in consumer behavior, trends and preferences, including health and whole grain trends, and the movement toward more inexpensive store-branded products;

·	the level of success we achieve in developing and introducing new products and entering new markets;

·	our ability to implement new technology and customer requirements as required;

·	our ability to operate existing, and any new, manufacturing lines according to schedule;

·	our ability to execute our business strategy, which may involve integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values;

·	consolidation within the baking industry and related industries;

·	changes in pricing, customer and consumer reaction to pricing actions, and the pricing environment among competitors within the industry;

·	disruptions in our direct-store-delivery distribution system, including litigation or an adverse ruling by a court or regulatory or governmental body that could affect the independent contractor classifications of our independent distributors;

·	increases in employee and employee-related costs, including funding of pension plans;

·	the credit and business risks associated with independent distributors and our customers, which operate in the highly competitive retail food and foodservice industries;

·	any business disruptions due to political instability, armed hostilities, incidents of terrorism, natural disasters, technological breakdowns, product contamination or the responses to or repercussions from any of these or similar events or conditions and our ability to insure against such events;

·	the failure of our information technology systems to perform adequately, including any interruptions, intrusions or security breaches of such systems; and

·	regulation and legislation related to climate change that could affect our ability to procure our commodity needs or that necessitate additional unplanned capital expenditures.

The foregoing list of important factors does not include all such factors, nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the company (such as in our other filings with the Securities and Exchange Commission (“SEC”) or in company press releases) for other factors that may cause actual results to differ materially from those projected by the company. Refer to Part I, Item 1A., Risk Factors, of our Annual Report on Form 10-K for the year ended January 3, 2015 and Part II, Item 1A., Risk Factors, of our Quarterly Report on Form 10-Q for the quarter ended April 25, 2015 for additional information regarding factors that could affect the company’s results of operations, financial condition and liquidity.

We caution you not to place undue reliance on forward-looking statements, as they speak only as of the date made and are inherently uncertain. The company undertakes no obligation to publicly revise or update such statements, except as required by law. You are advised, however, to consult any further public disclosures by the company (such as in our filings with the SEC or in company press releases) on related subjects.

We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products and the formulations for such products. Solely for convenience, some of the trademarks, trade names and copyrights referred to in this Form 10-Q are listed without the ^©, ^® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our trademarks, trade names and copyrights.

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

(Unaudited)

	July 18, 2015			January 3, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	46,544		$	7,523
Accounts and notes receivable, net of allowances of $2,960 and $2,723, respectively		260,864			235,911
Inventories, net:
Raw materials		36,487			33,579
Packaging materials		20,924			19,591
Finished goods		41,600			39,930
Inventories, net		99,011			93,100
Spare parts and supplies		55,107			54,058
Deferred taxes		25,696			26,823
Other		29,110			43,148
Total current assets		516,332			460,563
Property, plant and equipment, net:
Property, plant and equipment, gross		1,820,009			1,792,626
Less: accumulated depreciation		(1,042,536	)		(985,168	)
Property, plant and equipment, net		777,473			807,458
Notes receivable		164,853			161,905
Assets held for sale		30,748			39,108
Other assets		11,577			12,011
Goodwill		282,960			282,960
Other intangible assets, net		643,684			644,969
Total assets	$	2,427,627		$	2,408,974
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and capital lease obligations	$	34,180		$	34,496
Accounts payable		171,612			142,643
Other accrued liabilities		138,512			138,414
Total current liabilities		344,304			315,553
Long-term debt:
Total long-term debt and capital lease obligations		659,094			728,940
Other liabilities:
Post-retirement/post-employment obligations		80,206			93,589
Deferred taxes		102,832			94,153
Other long-term liabilities		49,657			53,695
Total other long-term liabilities		232,695			241,437
Stockholders’ equity:
Preferred stock — $100 stated par value, 200,000 authorized and none issued		—			—
Preferred stock — $.01 stated par value, 800,000 authorized and none issued		—			—
Common stock — $.01 stated par value and $.001 current par value, 500,000,000 authorized shares, 228,729,585 shares and 228,729,585 shares issued, respectively		199			199
Treasury stock — 18,545,401 shares and 19,382,272 shares, respectively		(196,769	)		(202,062	)
Capital in excess of par value		617,560			613,859
Retained earnings		863,036			809,068
Accumulated other comprehensive loss		(92,492	)		(98,020	)
Total stockholders’ equity		1,191,534			1,123,044
Total liabilities and stockholders’ equity	$	2,427,627		$	2,408,974

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands except per share data)

(Unaudited)

	For the Twelve Weeks Ended						For the Twenty-Eight Weeks Ended
	July 18, 2015			July 12, 2014			July 18, 2015			July 12, 2014
Sales	$	888,795		$	872,791		$	2,034,840		$	2,026,708
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below)		457,253			458,019			1,043,169			1,053,896
Selling, distribution and administrative expenses		318,758			314,995			742,532			735,542
Impairment of assets		2,275			4,489			2,275			4,489
Depreciation and amortization		30,468			29,907			70,285			69,199
Income from operations		80,041			65,381			176,579			163,582
Interest expense		5,998			6,494			14,357			15,618
Interest income		(5,138	)		(4,760	)		(11,915	)		(10,712	)
Income before income taxes		79,181			63,647			174,137			158,676
Income tax expense		27,421			21,583			60,988			55,546
Net income	$	51,760		$	42,064		$	113,149		$	103,130
Net income per common share:
Basic:
Net income per common share	$	0.25		$	0.20		$	0.54		$	0.49
Weighted average shares outstanding		210,334			209,639			210,093			209,354
Diluted:
Net income per common share	$	0.24		$	0.20		$	0.53		$	0.48
Weighted average shares outstanding		212,872			212,919			212,798			212,906
Cash dividends paid per common share	$	0.1450		$	0.1200		$	0.2775		$	0.2325

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in thousands)

(Unaudited)

	For the Twelve Weeks Ended						For the Twenty-Eight Weeks Ended
	July 18, 2015			July 12, 2014			July 18, 2015			July 12, 2014
Net income	$	51,760		$	42,064		$	113,149		$	103,130
Other comprehensive income, net of tax:
Pension and postretirement plans:
Amortization of prior service credit included in net income		(67	)		(67	)		(156	)		(156	)
Amortization of actuarial loss included in net income		624			191			1,456			446
Pension and postretirement plans, net of tax		557			124			1,300			290
Derivative instruments:
Net change in fair value of derivatives		5,818			(16,202	)		1,390			(900	)
Loss reclassified to net income		1,251			442			2,838			3,514
Derivative instruments, net of tax		7,069			(15,760	)		4,228			2,614
Other comprehensive income (loss), net of tax		7,626			(15,636	)		5,528			2,904
Comprehensive income	$	59,386		$	26,428		$	118,677		$	106,034

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(Amounts in thousands, except share data)

(Unaudited)

	Common Stock				Capital in						Accumulated
	Number of				Excess						Other			Treasury Stock
	shares issued		Par Value		of Par Value			Retained Earnings			Comprehensive Income (Loss)			Number of Shares			Cost			Total
Balances at January 3, 2015		228,729,585	$	199	$	613,859		$	809,068		$	(98,020	)		(19,382,272	)	$	(202,062	)	$	1,123,044
Net income									113,149												113,149
Derivative instruments, net of tax												4,228									4,228
Pension and postretirement plans, net of tax												1,300									1,300
Exercise of stock options						79									257,999			2,716			2,795
Amortization of share-based compensation awards						10,756															10,756
Issuance of deferred compensation						(132	)								5,995			132			—
Income tax benefits related to share-based payment awards						2,301															2,301
Performance-contingent restricted stock awards issued (Note 12)						(8,899	)								853,206			8,899			—
Issuance of deferred stock awards						(404	)								38,070			404			—
Stock repurchases															(318,399	)		(6,858	)		(6,858	)
Dividends paid on vested share-based payment awards									(879	)											(879	)
Dividends paid — $0.2775 per common share									(58,302	)											(58,302	)
Balances at July 18, 2015		228,729,585	$	199	$	617,560		$	863,036		$	(92,492	)		(18,545,401	)	$	(196,769	)	$	1,191,534

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(Unaudited)

	For the Twenty-Eight Weeks Ended
	July 18, 2015			July 12, 2014
CASH FLOWS PROVIDED BY (DISBURSED FOR) OPERATING ACTIVITIES:
Net income	$	113,149		$	103,130
Adjustments to reconcile net income to net cash provided by operating activities:
Impairment of assets		2,275			4,489
Stock-based compensation		10,808			10,474
Loss reclassified from accumulated other comprehensive income to net income		4,481			5,578
Depreciation and amortization		70,285			69,199
Deferred income taxes		6,346			8,913
Provision for inventory obsolescence		678			754
Allowances for accounts receivable		2,053			2,585
Pension and postretirement plans income		(3,275	)		(5,411	)
Other		(1,256	)		(1,453	)
Qualified pension plan contributions		(7,500	)		(5,029	)
Changes in operating assets and liabilities, net of acquisitions and disposals:
Accounts and notes receivable, net		(26,590	)		(17,047	)
Inventories, net		(6,589	)		1,950
Hedging activities, net		463			(466	)
Other assets		3,370			(11,228	)
Accounts payable		30,063			(2,121	)
Other accrued liabilities		17,173			8,594
NET CASH PROVIDED BY OPERATING ACTIVITIES		215,934			172,911
CASH FLOWS PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(40,573	)		(45,008	)
Proceeds from sale of property, plant and equipment		10,008			7,175
Repurchase of independent distributor territories		(11,428	)		(12,772	)
Principal payments from notes receivable		13,624			12,217
Contingently refundable consideration		—			7,500
Acquisition of intangible assets		(5,000	)		—
NET CASH DISBURSED FOR INVESTING ACTIVITIES		(33,369	)		(30,888	)
CASH FLOWS PROVIDED BY (DISBURSED FOR) FINANCING ACTIVITIES:
Dividends paid, including dividends on share-based payment awards		(59,181	)		(49,271	)
Exercise of stock options		2,795			6,888
Excess windfall tax benefit related to share-based payment awards		2,301			5,070
Payments for financing fees		(486	)		(564	)
Stock repurchases		(6,858	)		(9,459	)
Change in bank overdrafts		(14,115	)		1,252
Proceeds from debt borrowings		401,000			679,200
Debt and capital lease obligation payments		(469,000	)		(775,137	)
NET CASH DISBURSED FOR FINANCING ACTIVITIES		(143,544	)		(142,021	)
Net increase in cash and cash equivalents		39,021			2
Cash and cash equivalents at beginning of period		7,523			8,530
Cash and cash equivalents at end of period	$	46,544		$	8,532

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. BASIS OF PRESENTATION

INTERIM FINANCIAL STATEMENTS — The accompanying unaudited Condensed Consolidated Financial Statements of Flowers Foods, Inc. (the “company”, “Flowers Foods”, “Flowers”, “us”, “we”, or “our”) have been prepared by the company’s management in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934, as amended. Accordingly, they do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the unaudited Condensed Consolidated Financial Statements included herein contain all adjustments (consisting of only normal recurring adjustments) necessary to state fairly the company’s financial position, the results of its operations and its cash flows. The results of operations for the twelve and twenty-eight weeks ended July 18, 2015 and July 12, 2014 are not necessarily indicative of the results to be expected for a full fiscal year. The Condensed Consolidated Balance Sheet at January 3, 2015 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2015.

ESTIMATES — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The company believes the following critical accounting estimates affect its more significant judgments and estimates used in the preparation of its consolidated financial statements: revenue recognition, derivative instruments, valuation of long-lived assets, goodwill and other intangibles, self-insurance reserves, income tax expense and accruals and pension obligations. These estimates are summarized in the company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2015.

REPORTING PERIODS — The company operates on a 52-53 week fiscal year ending the Saturday nearest December 31. Fiscal 2015 consists of 52 weeks, with the company’s quarterly reporting periods as follows: first quarter ended April 25, 2015 (sixteen weeks), second quarter ended July 18, 2015 (twelve weeks), third quarter ending October 10, 2015 (twelve weeks) and fourth quarter ending January 2, 2016 (twelve weeks).

SEGMENTS — Flowers Foods currently operates two business segments: a direct-store-delivery segment (“DSD Segment”) and a warehouse delivery segment (“Warehouse Segment”). The DSD Segment (84% of total year to date sales) currently operates 39 bakeries that market a wide variety of fresh bakery foods, including fresh breads, buns, rolls, tortillas, and snack cakes. These products are sold through a DSD route delivery system to retail and foodservice customers in the Southeast, Mid-Atlantic, New England, Southwest, California and select markets in Nevada and the Midwest. The Warehouse Segment (16% of total year to date sales) operates eight bakeries that produce snack cakes, breads and rolls for national retail, foodservice, vending, and co-pack customers and deliver through customers’ warehouse channels. The Warehouse Segment also operates one baking ingredient mix facility.

SIGNIFICANT CUSTOMER — Following is the effect our largest customer, Walmart/Sam’s Club, had on the company’s sales for the twelve and twenty-eight weeks ended July 18, 2015 and July 12, 2014. Walmart is the only customer to account for greater than 10% of the company’s sales.

	For the Twelve Weeks Ended				For the Twenty-Eight Weeks Ended
	July 18, 2015		July 12, 2014		July 18, 2015		July 12, 2014
	(% of Sales)				(% of Sales)
DSD Segment		17.2		16.9		17.0		16.8
Warehouse Segment		2.5		2.5		2.5		2.7
Total		19.7		19.4		19.5		19.5

Walmart/Sam’s Club is our only customer with a balance greater than 10% of outstanding trade receivables. Their percentage of trade receivables were 18.1% and 17.2%, on a consolidated basis, as of July 18, 2015 and January 3, 2015, respectively. No other customer accounted for greater than 10% of the company’s outstanding trade receivables.

SIGNIFICANT ACCOUNTING POLICIES — There were no significant changes to our critical accounting policies for the quarter ended July 18, 2015 from those disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2015.

2. RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In May 2014, the FASB issued guidance for recognizing revenue in contracts with customers. This guidance requires entities to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. There are five steps outlined in the guidance to achieve this core principle. This guidance was originally effective January 1, 2017 the first day of our fiscal 2017. In July 2015, the FASB issued a deferral for one year making the effective date December 31, 2017, the first day of our fiscal 2018. Early application is permitted but not before January 1, 2017. The standard permits the use of either the modified retrospective or cumulative effect transition method. We are in the process of determining the effect this guidance will have on our Condensed Consolidated Financial Statements and which transition method we will apply.

In April 2015, the FASB issued guidance to simplify the presentation of debt issuance costs. This guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction from the carrying amount of that debt liability, consistent with debt discount presentation. This guidance is effective for financial statements for fiscal years beginning after December 15, 2015, and interim periods within those years. This guidance is applied on a retrospective basis at adoption and the disclosures for a change in an accounting principle apply. Earlier application is permitted. Based on the balances as of July 18, 2015, the adoption of this guidance will require us to reclassify $4.2 million of unamortized debt issuance costs from other long term assets to long term debt.

In April 2015, the FASB issued guidance to provide a practical expedient permitting applicable entities to measure defined benefit plan assets and obligations using the month-end that is closest to the entity’s fiscal year-end and apply that practical expedient consistently from year to year. This guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Earlier application is permitted. The company is still analyzing the potential impact of this guidance on the company’s Condensed Consolidated Financial Statements.

In May 2015, the FASB issued guidance to remove the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share expedient. The amendments also remove the requirement to make certain disclosures for all investments that are eligible to be measured at fair value using the net asset value per share practical expedient. These disclosures are limited to investments for which the entity has elected to measure the fair value using that practical expedient. This guidance is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. These are to be applied retrospectively to all periods presented. Earlier adoption is permitted. The company is still analyzing the potential impact of this guidance on the company’s Condensed Consolidated Financial Statements.

In July 2015, the FASB issued guidance that entities should measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. This guidance shall be applied prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The company is still analyzing the potential impact of this guidance on the company’s Condensed Consolidated Financial Statements.

We have reviewed other recently issued accounting pronouncements and concluded that they are either not applicable to our business or that no material effect is expected as a result of future adoption.

3. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (“AOCI”)

The company’s total comprehensive income presently consists of net income, adjustments for our derivative financial instruments accounted for as cash flow hedges, and various pension and other postretirement benefit related items.

During the twelve and twenty-eight weeks ended July 18, 2015 and July 12, 2014, reclassifications out of accumulated other comprehensive loss were as follows (amounts in thousands):

	Amount Reclassified from AOCI
	For the Twelve Weeks Ended						Affected Line Item in the Statement
Details about AOCI Components (Note 2)	July 18, 2015			July 12, 2014			Where Net Income is Presented
Gains and losses on cash flow hedges:
Interest rate contracts	$	(57	)	$	(57	)	Interest income (expense)
Commodity contracts		(1,977	)		(661	)	Cost of sales, Note 3
Total before tax		(2,034	)		(718	)	Total before tax
Tax benefit		783			276		Tax benefit
Total net of tax		(1,251	)		(442	)	Net of tax
Amortization of defined benefit pension items:
Prior-service credits		108			108		Note 1, below
Actuarial losses		(1,014	)		(311	)	Note 1, below
Total before tax		(906	)		(203	)	Total before tax
Tax benefit		349			79		Tax benefit
Total net of tax		(557	)		(124	)	Net of tax
Total reclassifications	$	(1,808	)	$	(566	)	Net of tax

	Amount Reclassified from AOCI
	For the Twenty-Eight Weeks Ended						Affected Line Item in the Statement
Details about AOCI Components (Note 2)	July 18, 2015			July 12, 2014			Where Net Income is Presented
Gains and losses on cash flow hedges:
Interest rate contracts	$	(135	)	$	(135	)	Interest income (expense)
Commodity contracts		(4,481	)		(5,578	)	Cost of sales, Note 3
Total before tax		(4,616	)		(5,713	)	Total before tax
Tax benefit		1,778			2,199		Tax benefit
Total net of tax		(2,838	)		(3,514	)	Net of tax
Amortization of defined benefit pension items:
Prior-service credits		252			252		Note 1, below
Actuarial losses		(2,366	)		(725	)	Note 1, below
Total before tax		(2,114	)		(473	)	Total before tax
Tax benefit		814			183		Tax benefit
Total net of tax		(1,300	)		(290	)	Net of tax
Total reclassifications	$	(4,138	)	$	(3,804	)	Net of tax

_______________

Note 1:

These items are included in the computation of net periodic pension cost. See Note 13, Postretirement Plans, for additional information.

Note 2:

Amounts in parentheses indicate debits to determine net income.

Note 3:

Amounts are presented as an adjustment to reconcile net income to net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.

During the twenty-eight weeks ended July 18, 2015, changes to accumulated other comprehensive loss, net of income tax, by component were as follows (amounts in thousands):

	Gains/Losses on Cash Flow Hedges			Defined Benefit Pension Plan Items			Total
Accumulated other comprehensive loss, January 3, 2015	$	(11,408	)	$	(86,612	)	$	(98,020	)
Other comprehensive income before reclassifications		1,390			—			1,390
Reclassified to earnings from accumulated other comprehensive loss		2,838			1,300			4,138
Accumulated other comprehensive loss, July 18, 2015	$	(7,180	)	$	(85,312	)	$	(92,492	)

During the twenty-eight weeks ended July 12, 2014, changes to accumulated other comprehensive loss, net of income tax, by component were as follows (amounts in thousands):

Gains/Losses

on Cash

Flow Hedges

Defined

Benefit Pension

Plan Items

Total