Edgar Filing: FLOWERS FOODS INC

flo-10q_20160716.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 16, 2016

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 5, 2016
Common Stock, $.01 par value		206,870,338

FLOWERS FOODS, INC.

INDEX

			PAGE NUMBER
PART I. Financial Information
	Item 1.	Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets as of July 16, 2016 and January 2, 2016	3
		Condensed Consolidated Statements of Income For the Twelve and Twenty-Eight Weeks Ended July 16, 2016 and July 18, 2015	4
		Condensed Consolidated Statements of Comprehensive Income For the Twelve and Twenty-Eight Weeks Ended July 16, 2016 and July 18, 2015	5
		Condensed Consolidated Statement of Changes in Stockholders’ Equity For the Twenty-Eight Weeks Ended July 16, 2016	6
		Condensed Consolidated Statements of Cash Flows For the Twenty-Eight Weeks Ended July 16, 2016 and July 18, 2015	7
		Notes to Condensed Consolidated Financial Statements	8
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
	Item 4.	Controls and Procedures	52
PART II. Other Information
	Item 1.	Legal Proceedings	53
	Item 1A.	Risk Factors	53
	Item 2.	Unregistered Sales of Securities and Use of Proceeds	54
	Item 6.	Exhibits	54
Signatures			55
Exhibit index			56

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 model, including litigation or an adverse ruling by a court or regulatory or governmental body that could affect the independent contractor classifications of the independent distributors;

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

the credit, business, and legal risks associated with independent distributors and 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 on January 2, 2016 (the “Form 10-K”) 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 Quarterly Report on Form 10-Q (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 16, 2016			January 2, 2016
ASSETS
Current assets:
Cash and cash equivalents	$	11,592		$	14,378
Accounts and notes receivable, net of allowances of $2,459 and $1,341, respectively		293,519			269,683
Inventories, net:
Raw materials		40,725			42,336
Packaging materials		23,446			21,853
Finished goods		48,185			46,988
Inventories, net		112,356			111,177
Spare parts and supplies		58,928			57,288
Other		35,877			47,782
Total current assets		512,272			500,308
Property, plant and equipment, net:
Property, plant and equipment, gross		1,902,564			1,881,264
Less: accumulated depreciation		(1,124,404	)		(1,076,296	)
Property, plant and equipment, net		778,160			804,968
Notes receivable		149,739			154,311
Assets held for sale		43,018			36,191
Other assets		7,672			7,881
Goodwill		464,926			464,926
Other intangible assets, net		862,073			875,466
Total assets	$	2,817,860		$	2,844,051
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current maturities of long-term debt and capital lease obligations	$	130,359		$	74,685
Accounts payable		179,268			171,923
Other accrued liabilities		160,474			157,130
Total current liabilities		470,101			403,738
Long-term debt:
Total long-term debt and capital lease obligations		895,815			930,022
Other liabilities:
Post-retirement/post-employment obligations		129,061			76,541
Deferred taxes		126,733			146,462
Other long-term liabilities		43,360			44,206
Total other long-term liabilities		299,154			267,209
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 — 21,859,247 shares and 16,463,137 shares, respectively		(281,834	)		(174,635	)
Capital in excess of par value		638,327			636,501
Retained earnings		923,726			877,817
Accumulated other comprehensive loss		(127,628	)		(96,800	)
Total stockholders’ equity		1,152,790			1,243,082
Total liabilities and stockholders’ equity	$	2,817,860		$	2,844,051

(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 16, 2016			July 18, 2015			July 16, 2016			July 18, 2015
Sales	$	935,025		$	888,795		$	2,139,377		$	2,034,840
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below)		477,955			457,253			1,099,145			1,043,169
Selling, distribution and administrative expenses		338,396			318,758			782,935			742,532
Impairment of assets		—			2,275			—			2,275
Pension plan settlement loss		4,641			—			4,641			—
Depreciation and amortization		32,598			30,468			76,065			70,285
Income from operations		81,435			80,041			176,591			176,579
Interest expense		7,649			5,998			16,717			14,357
Interest income		(4,639	)		(5,138	)		(10,929	)		(11,915	)
Income before income taxes		78,425			79,181			170,803			174,137
Income tax expense		27,270			27,421			60,285			60,988
Net income	$	51,155		$	51,760		$	110,518		$	113,149
Net income per common share:
Basic:
Net income per common share	$	0.25		$	0.25		$	0.53		$	0.54
Weighted average shares outstanding		207,211			210,334			209,183			210,093
Diluted:
Net income per common share	$	0.24		$	0.24		$	0.52		$	0.53
Weighted average shares outstanding		209,014			212,872			211,230			212,798
Cash dividends paid per common share	$	0.1600		$	0.1450		$	0.3050		$	0.2775

(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 16, 2016			July 18, 2015			July 16, 2016			July 18, 2015
Net income	$	51,155		$	51,760		$	110,518		$	113,149
Other comprehensive income, net of tax:
Pension and postretirement plans:
Settlement loss		2,854			—			2,854			—
Net gain (loss) for the period		(36,407	)		—			(36,407	)		—
Amortization of prior service cost (credit) included in net income		17			(67	)		50			(156	)
Amortization of actuarial loss included in net income		646			624			1,666			1,456
Pension and postretirement plans, net of tax		(32,890	)		557			(31,837	)		1,300
Derivative instruments:
Net change in fair value of derivatives		(3,525	)		5,818			(937	)		1,390
Loss reclassified to net income		803			1,251			1,946			2,838
Derivative instruments, net of tax		(2,722	)		7,069			1,009			4,228
Other comprehensive income (loss), net of tax		(35,612	)		7,626			(30,828	)		5,528
Comprehensive income	$	15,543		$	59,386		$	79,690		$	118,677

(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 2, 2016		228,729,585	$	199	$	636,501		$	877,817		$	(96,800	)		(16,463,137	)	$	(174,635	)	$	1,243,082
Net income									110,518												110,518
Derivative instruments, net of tax												1,009									1,009
Pension and postretirement plans, net of tax												(31,837	)								(31,837	)
Exercise of stock options						(1,555	)								960,796			12,033			10,478
Amortization of share-based compensation awards						11,318															11,318
Issuance of deferred compensation						(81	)								4,053			81			—
Tax effect related to share- based payment awards						(871	)														(871	)
Performance-contingent restricted stock awards issued (Note 13)						(4,449	)								419,367			4,449			—
Issuance of deferred stock awards						(1,411	)								111,868			1,411			—
Stock repurchases						(1,125	)								(6,892,194	)		(125,173	)		(126,298	)
Dividends paid on vested share-based payment awards									(579	)											(579	)
Dividends paid — $0.305 per common share									(64,030	)											(64,030	)
Balances at July 16, 2016		228,729,585	$	199	$	638,327		$	923,726		$	(127,628	)		(21,859,247	)	$	(281,834	)	$	1,152,790

(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 16, 2016			July 18, 2015
CASH FLOWS PROVIDED BY (DISBURSED FOR) OPERATING ACTIVITIES:
Net income	$	110,518		$	113,149
Adjustments to reconcile net income to net cash provided by operating activities:
Stock-based compensation		11,306			10,808
Loss reclassified from accumulated other comprehensive income to net income		3,030			4,481
Depreciation and amortization		76,065			70,285
Deferred income taxes		(3,528	)		6,346
Impairment of assets		—			2,275
Provision for inventory obsolescence		675			678
Allowances for accounts receivable		2,411			2,053
Pension and postretirement plans expense (income)		1,607			(3,275	)
Other		(3,730	)		(1,256	)
Qualified pension plan contributions		—			(7,500	)
Changes in operating assets and liabilities, net of acquisitions and disposals:
Accounts receivable, net		(26,090	)		(26,590	)
Inventories, net		(1,854	)		(6,589	)
Hedging activities, net		1,040			463
Other assets		3,617			3,370
Accounts payable		7,912			30,063
Other accrued liabilities		10,878			17,173
NET CASH PROVIDED BY OPERATING ACTIVITIES		193,857			215,934
CASH FLOWS PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(41,722	)		(40,573	)
Proceeds from sale of property, plant and equipment		1,965			10,008
Repurchase of independent distributor territories		(10,930	)		(11,428	)
Principal payments from notes receivable		13,939			13,624
Acquisition of intangible assets		—			(5,000	)
NET CASH DISBURSED FOR INVESTING ACTIVITIES		(36,748	)		(33,369	)
CASH FLOWS PROVIDED BY (DISBURSED FOR) FINANCING ACTIVITIES:
Dividends paid, including dividends on share-based payment awards		(64,609	)		(59,181	)
Exercise of stock options		10,478			2,795
Excess windfall tax benefit related to share-based payment awards		2,126			2,301
Payments for financing fees		(624	)		(486	)
Stock repurchases, including accelerated stock repurchases		(126,298	)		(6,858	)
Change in bank overdrafts		(4,718	)		(14,115	)
Proceeds from debt borrowings		1,359,100			401,000
Debt and capital lease obligation payments		(1,335,350	)		(469,000	)
NET CASH DISBURSED FOR FINANCING ACTIVITIES		(159,895	)		(143,544	)
Net (decrease) increase in cash and cash equivalents		(2,786	)		39,021
Cash and cash equivalents at beginning of period		14,378			7,523
Cash and cash equivalents at end of period	$	11,592		$	46,544

(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 (the “Exchange Act”). 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 16, 2016 and July 18, 2015 are not necessarily indicative of the results to be expected for a full fiscal year. The Condensed Consolidated Balance Sheet at January 2, 2016 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 2, 2016.

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 2, 2016.

REPORTING PERIODS — The company operates on a 52-53 week fiscal year ending the Saturday nearest December 31. Fiscal 2016 consists of 52 weeks, with the company’s quarterly reporting periods as follows: first quarter ended April 23, 2016 (sixteen weeks), second quarter ended July 16, 2016 (twelve weeks), third quarter ending October 8, 2016 (twelve weeks) and fourth quarter ending December 31, 2016 (twelve weeks).

SEGMENTS — Flowers Foods currently operates two business segments: a direct-store-delivery (“DSD”) 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 produce 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, the Midwest and the Pacific Northwest. The Warehouse Segment (16% of total year to date sales) currently operates ten 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 16, 2016 and July 18, 2015. Walmart/Sam’s Club is the only customer to account for greater than 10% of the company’s sales.

	For the Twelve Weeks Ended				For the Twenty-Eight Weeks Ended
	July 16, 2016		July 18, 2015		July 16, 2016		July 18, 2015
	(% of Sales)				(% of Sales)
DSD Segment		17.6		17.2		16.9		17.0
Warehouse Segment		2.6		2.5		2.7		2.5
Total		20.2		19.7		19.6		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 was 20.7% and 18.9%, on a consolidated basis, as of July 16, 2016 and January 2, 2016, 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 16, 2016 from those disclosed in the company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2016.

2. RECENT ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

In May 2014, the Financial Accounting Standards Board (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. In March 2016, the FASB amended the initial guidance to clarify the implementation guidance on principal versus agent considerations. In April 2016, the FASB amended the initial guidance to clarify the identification of performance conditions and the licensing implementation guidance. In May 2016, the FASB amended the initial guidance to update certain narrow scopes within the revenue recognition guidance. Early application is permitted, but not before January 1, 2017. Entities will have the option to apply the final standard retrospectively or use a modified retrospective method, recognizing the cumulative effect of the standards in retained earnings at the date of initial application. An entity will not restate prior periods if uses the modified retrospective method, but will be required to disclose the amount by which each financial statement line item is affected in the current reporting period by the application of the standard as compared to the guidance in effect prior to the change, as well as reasons for significant changes. The company intends to adopt the updated standard in the first quarter of fiscal 2018. The company is currently evaluating the impact that implementing this standard will have on its financial statements and disclosures, as well as whether it will use the retrospective or modified retrospective method of adoption.

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.

In February 2016, the FASB issued guidance that requires an entity to recognize lease liabilities and a right-of-use asset for virtually all leases (other than those that meet the definition of a short-term lease) on the balance sheet and to disclose key information about the entity’s leasing arrangements. This guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, with earlier adoption permitted. This guidance must be adopted using a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. The company intends to adopt the updated standard in the first quarter of fiscal 2019. The company is evaluating the potential impact of this guidance on our Condensed Consolidated Financial Statements.

In March 2016, the FASB issued guidance to simplify several aspects of the accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. The company is evaluating the potential impact of this guidance on our Condensed Consolidated Financial Statements and the timing of when we will adopt the guidance.

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 upon future adoption.

3. RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

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. This guidance was adopted as of January 3, 2016 (the first day of our fiscal 2016) with application of the provisions retrospectively. Debt issuance costs associated with line-of-credit arrangements is not addressed by this guidance. The company’s accounts receivable securitization facility and credit facility, discussed in Note 9, Debt and Other Obligations, are excluded from this guidance and are still presented as other long-term assets in the Condensed Consolidated Balance Sheet. As a result of adopting this standard, the debt issuance costs of our other debt obligations were reclassified as a reduction to the carrying amount of the debt liability for the Condensed Consolidated Balance Sheets as of July 16, 2016 and January 2, 2016. The balance sheet as of January 2, 2016 was retrospectively adjusted, which resulted in a $3.9 million decrease to other non-current assets and to total long-term debt and capital lease obligations.

In November 2015, the FASB issued guidance that requires entities to report deferred tax liabilities and assets as noncurrent in a classified statement of financial position. The previous requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by this guidance. This guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. The company adopted this standard for the annual period beginning on January 3, 2016 (the first day of our fiscal 2016) and applied it retrospectively. As a result of adopting this standard, all deferred tax assets and liabilities have been classified as noncurrent for the Condensed Consolidated Balance Sheets as of July 16, 2016 and January 2, 2016. The balance sheet as of January 2, 2016 was retrospectively adjusted, which resulted in a $37.2 million decrease in the current deferred income tax asset balance and in the long-term deferred income tax liability balance.

The table below presents the adjustments for each of the line items impacted for these pronouncements (amounts in thousands):

			As adjusted
	January 2, 2016		January 2, 2016
ASSETS
Deferred taxes	$	37,207	$	—
Total current assets		537,515		500,308
Other assets		11,791		7,881
Total assets	$	2,885,168	$	2,844,051
LIABILITIES AND STOCKHOLDERS’ EQUITY
Total long-term debt and capital lease obligations		933,932		930,022
Deferred taxes		183,669		146,462
Total other long-term liabilities		304,416		267,209
Total liabilities and stockholders’ equity	$	2,885,168	$	2,844,051

In September 2015, the FASB issued guidance that entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete by the end of the reporting period in which the combination occurs and during the measurement period have an adjustment to provisional amounts recognized. This update requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. This guidance also requires that an entity present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. This guidance is effective for our fiscal 2016. This is applied prospectively to adjustments to provisional amounts that occur after the effective date of the guidance. The potential impact of the guidance on the company’s Condensed Consolidated Financial Statements will only be known after a measurement period adjustment for an acquisition is recognized. The adoption of this guidance had no impact on the company during the twenty-eight weeks ended July 16, 2016.

4. ACQUISITIONS

Alpine Valley Bread Company

On October 13, 2015, the company completed the acquisition of 100% of the capital stock of Alpine Valley Bread Company (“Alpine”), a leading organic bread baker, from its shareholders for total consideration of approximately $121.9 million inclusive of payments for certain tax benefits. We paid cash of $109.3 million and issued 481,540 shares of our common stock to the sellers in a private placement. Alpine operates two production facilities in Mesa, Arizona and has widespread distribution across the U.S. The Alpine acquisition has been accounted for as a business combination and is included in our Warehouse Segment. The results of Alpine’s operations were included in the company’s Condensed Consolidated Financial Statements beginning on October 14, 2015. The total preliminary goodwill recorded for this acquisition was $36.0 million and it is deductible for tax purposes.

During fiscal 2015, the company incurred $1.6 million of acquisition-related costs for Alpine. The acquisition-related costs for Alpine were recorded in the selling, distribution and administrative expense line item in our Condensed Consolidated Statements of Income. Alpine contributed $11.9 million in sales during fiscal 2015. Alpine’s operating income since the acquisition was immaterial to our fiscal 2015 results of operations.

The following table summarizes the consideration paid for Alpine based on the fair value at the acquisition date. This table is based on preliminary valuations for the assets acquired and liabilities assumed. The identifiable intangible assets, property, plant and equipment, and certain financial assets and taxes are still under review. We will continue reviewing the final recognized amounts of identifiable assets acquired and liabilities assumed until the fourth quarter of our fiscal 2016 when the allocation will be final (amounts in thousands):

Fair Value of consideration transferred:
Cash consideration paid	$	109,340
Stock consideration paid		12,602
Total consideration paid		121,942

Recognized amounts of identifiable assets acquired and liabilities assumed:
Property, plant, and equipment		15,614
Identifiable intangible assets		64,600
Financial assets		5,687
Net recognized amounts of identifiable assets acquired		85,901
Goodwill	$	36,041

The following table presents the acquired intangible assets subject to amortization (amounts in thousands, except amortization periods):

	Total		Weighted average amortization years		Attribution Method
Trademarks	$	20,900		40.0	Straight-line
Customer relationships		43,700		25.0	Sum of year digits
	$	64,600		29.9

The fair value of trade receivables is $4.8 million with an immaterial amount determined to be uncollectible. We did not acquire any other class of receivables as a result of the acquisition.

Dave’s Killer Bread

On September 12, 2015, the company completed the acquisition of 100% of the capital stock of Dave’s Killer Bread (“DKB”), the nation’s best-selling organic bread, from its shareholders for total cash payments of approximately $282.1 million inclusive of payments for certain tax benefits. DKB operates one production facility in Milwaukie, Oregon and has widespread distribution across the U.S. We believe the acquisition of DKB strengthens our position as the second-largest baker in the U.S. by giving us access to the fast growing organic bread category and expanding our geographic reach into the Pacific Northwest. The DKB acquisition has been accounted for as a business combination and is included in our DSD Segment. The results of DKB’s operations are included in the company’s Condensed Consolidated Financial Statements beginning on September 13, 2015. The total preliminary goodwill recorded for this acquisition was $145.9 million and it is not deductible for tax purposes.

During fiscal 2015, the company incurred $4.6 million of acquisition-related costs for DKB. The acquisition-related costs for DKB were recorded in the selling, distribution and administrative expense line item in our Condensed Consolidated Statements of Income. DKB contributed $37.6 million in sales during fiscal 2015. DKB’s operating income since the acquisition was immaterial to our fiscal 2015 results of operations.

The following table summarizes the consideration paid for DKB based on the fair value at the acquisition date. This table is based on preliminary valuations for the assets acquired and liabilities assumed. The identifiable intangible assets, property, plant and equipment, and certain financial assets and taxes are still under review. We will also continue reviewing the final recognized amounts of identifiable assets acquired and liabilities assumed until the third quarter of our fiscal 2016 when the allocation will be final (amounts in thousands):

Fair Value of consideration transferred:
Cash consideration paid	$	282,115

Recognized amounts of identifiable assets acquired and liabilities assumed:
Property, plant, and equipment		9,769
Identifiable intangible assets		176,300
Deferred income taxes		(60,142	)
Financial assets		10,263
Net recognized amounts of identifiable assets acquired		136,190
Goodwill	$	145,925

The following table presents the acquired intangible assets subject to amortization (amounts in thousands, except amortization periods):

	Total		Weighted average amortization years		Attribution Method
Trademarks	$	107,700		40.0	Straight-line
Customer relationships		68,000		25.0	Sum of year digits
Non-compete agreements		600		2.0	Straight-line
	$	176,300		34.1

The fair value of trade receivables is $14.2 million. The gross amount of the receivable is $14.4 million of which $0.2 million is determined to be uncollectible. We did not acquire any other class of receivables as a result of the acquisition.

Unaudited pro forma consolidated results of operations for the Alpine and DKB acquisitions are not included because the company determined that they are immaterial.

5. ACCUMULATED OTHER COMPREHENSIVE INCOME