Edgar Filing: FLOWERS FOODS INC

e10vqza

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A


(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 12, 2003

OR

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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o

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


		OUTSTANDING AT
TITLE OF EACH CLASS		August 22, 2003

Common Stock, $.01 par value with Preferred Share Purchase Rights		45,171,170

Explanatory Note:

Flowers Foods, Inc. (the “company”) is filing this Form 10-Q/A solely to correct certain amounts in Part I, Item 1 (Financial Statements) of its Form 10-Q for the period ended July 12, 2003 filed with the Securities and Exchange Commission on August 26, 2003. Specifically this amendment corrects the following classification errors that resulted from the incorrect summarization of the costs and accumulated depreciation of certain assets within the property, plant and equipment category of the condensed consolidated balance sheet as of July 12, 2003 during the consolidation process. These classification errors were limited to the property, plant and equipment category.


		Amount as Previously			Corrected Amount as
		Reported in the			Reported in this
		Company’s Form 10-Q			Amendment to the
		filed August 26, 2003			Company’s Form 10-Q

Property, Plant and Equipment:
	Land	$	86,990		$	33,300
	Buildings		178,340			204,676
	Machinery and equipment		447,369			518,383
	Furniture, fixtures and transportation equipment		41,866			43,286
	Construction in Progress		15,812			22,374

			770,377			822,019
Less accumulated depreciation			(341,990	)		(393,632	)

		$	428,387		$	428,387

This amendment has no effect on the net amount of property, plant and equipment or any other balance sheet items, or the company’s condensed consolidated statements of income or cash flows. This amendment amends only the specified items in the Form 10-Q and does not otherwise update the disclosures in the Form 10-Q as originally filed and does not reflect events occurring after the original filing of the Form 10-Q.

FLOWERS FOODS, INC.
INDEX


			PAGE
			NUMBER

PART I. Financial Information
	Item 1. Financial Statements (unaudited)
		Condensed Consolidated Balance Sheet as of July 12, 2003 (Restated) and December 28, 2002		3
		Condensed Consolidated Statement of Income for the Twelve and Twenty Eight Weeks Ended July 12, 2003 and July 13, 2002		4
		Condensed Consolidated Statement of Cash Flows for the Twenty Eight Weeks Ended July 12, 2003 and July 13, 2002		5
		Notes to Condensed Consolidated Financial Statements		6
PART II. Other Information
	Item 6. Exhibits			15
SIGNATURES				16

FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands except share data)
(Unaudited)


			JULY 12, 2003 (Restated)			DECEMBER 28, 2002

ASSETS
	Current Assets:
	Cash and cash equivalents		$	36,351		$	69,826

	Accounts and notes receivable, net of allowances of $2,454 and $1,475, respectively			104,144			104,121

	Inventories, net:
		Raw materials		9,743			7,872
		Packaging materials		7,725			7,806
		Finished goods		13,846			14,311

				31,314			29,989

	Spare parts and supplies			19,496			19,840

	Assets held for sale			15,957			18,563

	Assets to be disposed of – discontinued operations			—			243,061

	Deferred taxes			8,585			—

	Other			20,066			10,009

				235,913			495,409

Property, Plant and Equipment:
	Land			33,300			33,073
	Buildings			204,676			200,713
	Machinery and equipment			518,383			509,879
	Furniture, fixtures and transportation equipment			43,286			43,689
	Construction in progress			22,374			12,174

				822,019			799,528
	Less: accumulated depreciation			(393,632	)		(363,403	)

				428,387			436,125

Notes Receivable				72,605			71,599

Deferred Taxes				15,712			22,267

Other Assets				4,354			10,225

Goodwill, net				63,482			54,249

Other Intangible Assets, net				7,857			6,506

			$	828,310		$	1,096,380

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
	Current maturities of long-term debt and capital leases		$	1,528		$	27,231
	Accounts payable			86,668			82,827
	Facility closing costs and severance			2,123			4,516
	Liabilities related to assets to be disposed of – discontinued operations			—			2,553
	Other accrued liabilities			71,928			89,151

				162,247			206,278

Long-Term Debt and Capital Leases				5,095			223,133

Other Liabilities:
	Facility closing costs and severance			3,225			7,337
	Postretirement/postemployment obligations			60,605			54,486
	Other			18,701			12,150

				82,531			73,973

Shareholders’ Equity:
	Preferred stock-$100 par value, 100,000 authorized and none issued Preferred stock-$.01 par value, 900,000 authorized and none issued Common stock-$.01 par value, 100,000,000 authorized 45,185,121 and 29,985,375 shares issued			452			300
	Treasury stock			(283	)		—
	Capital in excess of par value			486,834			483,142
	Retained earnings			110,325			131,388
	Accumulated other comprehensive loss			(18,891	)		(21,834	)

				578,437			592,996

			$	828,310		$	1,096,380

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands except per share data)
(Unaudited)


	FOR THE TWELVE WEEKS ENDED						FOR THE TWENTY EIGHT WEEKS ENDED

	JULY 12, 2003			JULY 13, 2002			JULY 12, 2003			JULY 13, 2002

Sales	$	337,193		$	317,945		$	771,745		$	714,103
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below)		165,565			153,900			379,202			344,292
Selling, marketing and administrative expenses		137,695			129,549			320,180			297,383
Depreciation and amortization		12,489			13,089			29,651			30,518

Income from continuing operations before interest, income taxes and cumulative effect of a change in accounting principle		21,444			21,407			42,712			41,910

Interest income		1,295			1,295			3,021			3,032
Interest expense		(342	)		(786	)		(1,136	)		(1,684	)

Interest income, net		953			509			1,885			1,348

Income from continuing operations before income taxes and cumulative effect of a change in accounting principle		22,397			21,916			44,597			43,258
Income tax expense		8,623			8,437			17,170			16,654

Income from continuing operations before cumulative effect of a change in accounting principle		13,774			13,479			27,427			26,604
Discontinued operations, net of tax		(23,118	)		(7,430	)		(42,431	)		(18,832	)

(Loss) income before cumulative effect of a change in accounting principle		(9,344	)		6,049			(15,004	)		7,772
Cumulative effect of a change in accounting principle, net of tax		—			—			—			(23,078	)

Net (loss) income	$	(9,344	)	$	6,049		$	(15,004	)	$	(15,306	)

Net (loss) Income Per Common Share:
Basic:
Income from continuing operations before cumulative effect of a change in accounting principle	$	0.31		$	0.30		$	0.61		$	0.60
Discontinued operations, net of tax		(0.52	)		(0.16	)		(0.94	)		(0.42	)
Cumulative effect of a change in accounting principle, net of tax		—			—			—			(0.52	)

Net (loss) income per share	$	(0.21	)	$	0.14		$	(0.33	)	$	(0.34	)

Weighted average shares outstanding		45,082			44,697			45,030			44,697

Diluted:
Income from continuing operations before cumulative effect of a change in accounting principle	$	0.30		$	0.30		$	0.60		$	0.58
Discontinued operations, net of tax		(0.50	)		(0.17	)		(0.93	)		(0.41	)
Cumulative effect of a change in accounting principle, net of tax		—			—			—			(0.50	)

Net (loss) income per share	$	(0.20	)	$	0.13		$	(0.33	)	$	(0.33	)

Weighted average shares outstanding		45,861			45,650			45,691			46,110

Cash dividends paid per common share	$	0.100		$	0.000		$	0.130		$	0.000

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)


			FOR THE TWENTY EIGHT WEEKS ENDED

			JULY 12, 2003			JULY 13, 2002

CASH FLOWS PROVIDED BY (DISBURSED FOR) OPERATING ACTIVITIES:
Net loss			$	(15,004	)	$	(15,306	)
	Adjustments to reconcile net loss to net cash provided by operating activities:
		Discontinued operations		18,145			8,040
		Goodwill impairment		—			23,078
		Stock appreciation rights		776			(224	)
		Depreciation and amortization		29,651			30,518
		Deferred income taxes		3,694			4,452
		Provision for inventory obsolescence		916			1,845
		Allowances for accounts receivable		2,408			1,869
		Other		427			1,782
Payment of legal settlement				(9,000	)		—
Changes in assets and liabilities:
		Accounts and notes receivable, net		(2,321	)		(10,735	)
		Inventories, net		(2,126	)		(16,312	)
		Other assets		(4,082	)		(5,428	)
		Accounts payable and other accrued liabilities		11,132			(1,772	)
		Facility closing costs and severance		(6,505	)		(1,046	)

NET CASH PROVIDED BY OPERATING ACTIVITIES				28,111			20,761

CASH FLOWS PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES:
		Purchase of property, plant and equipment		(24,232	)		(31,843	)
		(Purchase of) proceeds from notes receivable		(1,116	)		1,772
		Acquisition of business, net of cash received		(14,534	)		—
		Proceeds from sale of Mrs. Smith’s Bakeries frozen dessert business		231,551			—
		Other		110			625

NET CASH PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES				191,779			(29,446	)

CASH FLOWS PROVIDED BY (DISBURSED FOR) FINANCING ACTIVITIES:
		Dividends paid		(6,062	)		—
		Exercise of stock options		1,695			—
		Payment for termination of derivative instruments		(5,330	)		—
		Debt and capital lease obligation (payments) proceeds		(243,668	)		59

NET CASH (DISBURSED FOR) PROVIDED BY FINANCING ACTIVITIES:				(253,365	)		59

Net decrease in cash and cash equivalents				(33,475	)		(8,626	)
Cash and cash equivalents at beginning of period				69,826			12,280

Cash and cash equivalents at end of period			$	36,351		$	3,654

(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”) have been prepared by the company’s management in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of July 12, 2003 and December 28, 2002, the results of operations for the twelve and twenty eight week periods ended July 12, 2003 and July 13, 2002 and statement of cash flows for the twenty eight week periods ended July 12, 2003 and July 13, 2002. The results of operations for the twelve and twenty eight week periods ended July 12, 2003 and July 13, 2002 are not necessarily indicative of the results to be expected for a full year. 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 December 28, 2002.

ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements: revenue recognition, allowance for doubtful accounts, derivative instruments, reserves for obsolete and unmarketable inventory, valuation of long-lived assets and goodwill and other intangibles, deferred tax asset valuation allowances and pension obligations. These policies are the same as those summarized in the company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2002.

REPORTING PERIODS — Fiscal 2003 will consist of 53 weeks, with the company’s quarterly reporting periods as follows: first quarter ended April 19, 2003 (sixteen weeks), second quarter ended July 12, 2003 (twelve weeks), third quarter ending October 4, 2003 (twelve weeks) and fourth quarter ending January 3, 2004 (thirteen weeks).

RECLASSIFICATIONS — Certain reclassifications of prior period data have been made to conform with the current period reporting.

STOCK SPLIT — On May 30, 2003, the board of directors declared a 3 for 2 stock split of the company’s common stock in the form of a stock dividend. The record date for the split was June 13, 2003 and new shares were issued on June 27, 2003. Earnings (loss) per common share have been restated for all periods presented giving retroactive effect to the stock split.

SEGMENTS — On April 24, 2003, the company announced it had completed the sale of substantially all the assets of its Mrs. Smith’s Bakeries, LLC (“Mrs. Smith’s Bakeries”) frozen dessert business to The Schwan Food Company (“Schwan”). The company retained the frozen bread and roll portion of the Mrs. Smith’s Bakeries business. As a result, the frozen bread and roll business as well as the Birmingham, Alabama production facility, formerly a part of Flowers Foods Bakeries Group, LLC (“Flowers Bakeries”), became a part of our Flowers Snack, LLC (“Flowers Snack”) segment, with Flowers Snack being renamed Flowers Foods Specialty Group, LLC (“Flowers Specialty”). For purposes of this Form 10-Q, discussion will relate to our Flowers Bakeries and Flowers Specialty business units as such businesses are currently operated. The frozen dessert business of Mrs. Smith’s Bakeries’ that was sold is reported as a discontinued operation. Because Mrs. Smith’s Bakeries frozen dessert and frozen bread and roll businesses historically shared certain administrative and division expenses, certain allocations and assumptions have been made in order to present historical comparative information for them as separate segments. In most instances, administrative and division expenses have been allocated between the two segments based on cases of product sold. Management believes that the amounts are reasonable estimations of the costs that would have been incurred had the Mrs. Smith’s Bakeries’ frozen dessert and frozen bread and rolls businesses performed these functions as separate divisions.

SIGNIFICANT CUSTOMER — During the twelve weeks ended July 12, 2003, sales to the company’s largest customer, Wal-Mart, represented 12.1% of the consolidated company’s sales with 10.9% attributable to Flowers Bakeries and 1.2% attributable to Flowers

Specialty. During the twenty eight weeks ended July 12, 2003, sales to the company’s largest customer, Wal-Mart, represented 11.8% of the consolidated company’s sales with 10.6% attributable to Flowers Bakeries and 1.2% attributable to Flowers Specialty.

2. DISCONTINUED OPERATIONS

On January 30, 2003, the company entered into an agreement to sell its Mrs. Smith’s Bakeries frozen dessert business to Schwan. Included in those assets were the Stilwell, Oklahoma and Spartanburg, South Carolina production facilities and a portion of the company’s Suwanee, Georgia property. On that date, the assets and liabilities related to the portion of the Mrs. Smith’s Bakeries business to be sold were classified as held for sale in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” and recorded at estimable fair value less costs to dispose. On April 24, 2003, the company announced the completion of the sale of substantially all the assets of its Mrs. Smith’s Bakeries frozen dessert business to Schwan. The value received by the company was determined on the basis of arm’s length negotiations between the parties. For accounting purposes, the frozen dessert business sold to Schwan is presented as discontinued operations for the twelve and twenty eight weeks ended July 12, 2003 and July 13, 2002. Accordingly, the operations and certain transaction costs are included in “Discontinued operations, net of tax” in the Condensed Consolidated Statement of Income. An analysis of this line item is as follows:


		For the Twelve Weeks Ended						For the Twenty Eight Weeks Ended

		July 12, 2003			July 13, 2002			July 12, 2003			July 13, 2002

		(amounts in thousands)
Operating loss		$	(3,779	)	$	(7,435	)	$	(22,569	)	$	(20,102	)
Financial advisor fees			—			—			(1,870	)		—
Legal, accounting and other			—			—			(1,454	)		—
Lease termination fees (see Note 7)			(53	)		—			(4,281	)		—
Interest (see Note 7)			(132	)		(4,646	)		(5,664	)		(10,519	)
Derivative activity (see Note 6)			73			—			543			—
Loss on sale of assets			(6,224	)		—			(6,224	)		—
Deferred financing costs			(4,191	)		—			(4,191	)		—
Derivative terminations (see Note 6)			(5,776	)		—			(5,776	)		—
Separation and severance payments			(4,962	)		—			(4,962	)		—
SAP license transfer fees			(1,214	)		—			(1,214	)		—
Indemnification insurance premium			(2,691	)		—			(2,691	)		—
Other			(546	)		—			(546	)		—

	Pre-tax discontinued operations		(29,495	)		(12,081	)		(60,899	)		(30,621	)
Tax benefit			6,377			4,651			18,468			11,789

	Discontinued operations, net of tax	$	(23,118	)	$	(7,430	)	$	(42,431	)	$	(18,832	)

On April 24, 2003, in connection with the sale of the Mrs. Smith’s Bakeries frozen dessert business to Schwan, the company agreed to provide customary indemnifications to Schwan for matters such as breaches of representations and warranties, certain tax matters and liabilities arising prior to the consummation of the transaction. In most, but not all, circumstances the indemnity is limited to an 18 month period and a maximum liability of $70 million. The fair value of the indemnification was determined as the insurance premium paid by the company. A related prepaid asset was recorded for the payment of the insurance premium and, together with the indemnification liability, are being amortized over the eighteen month indemnification period. The balance as of July 12, 2003 was $2.3 million.

Revenue related to the discontinued operation of $3.6 million and $60.4 million are included in the operating losses above for the twelve weeks ended July 12, 2003 and July 13, 2002, respectively. Revenue related to the discontinued operation of $68.0 million and $127.9 million are included in the operating losses above for the twenty eight weeks ended July 12, 2003 and July 13, 2002, respectively.

As of July 12, 2003, substantially all of the costs associated with the operation and sale of the Mrs. Smith’s Bakeries frozen dessert business have been reported.

At December 28, 2002, “Net assets to be disposed of — discontinued operations” and “Liabilities related to assets to be disposed of – discontinued operations” were comprised of (amounts in thousands):


	December 28, 2002

Net assets to be disposed of:
Inventory	$	51,908
Spare parts		3,628
Prepaid assets		5,844
Property, plant and equipment		143,614
Intangible assets		38,067

	$	243,061

Liabilities related to assets to be disposed of:
Market access fee liability	$	2,553

On April 24, 2003, the company relieved “Net assets to be disposed of - discontinued operations” and “Liabilities related to assets to be disposed of – discontinued operations” of $241.0 million with an offsetting entry to cash and loss on the sale of assets identified in “Discontinued operations, net of tax” in the Condensed Consolidated Statement of Income.

3. COMPREHENSIVE INCOME

The company has other comprehensive income resulting from its accounting for derivative financial instruments and additional minimum pension liabilities. Total comprehensive (loss) income, determined as net (loss) income adjusted by other comprehensive income, was $(5.9) million and $6.2 million for the twelve weeks ended July 12, 2003 and July 13, 2002, respectively. Total comprehensive loss, determined as net loss adjusted by other comprehensive income, was $12.1 million and $13.3 million for the twenty eight weeks ended July 12, 2003 and July 13, 2002, respectively.

During the twenty eight weeks ended July 12, 2003, changes to accumulated other comprehensive income, net of tax, were as follows (amounts in thousands):


		2003

Accumulated other comprehensive loss, beginning balance		$	21,834
Derivative transactions:
	Net deferred gains on closed contracts, net of tax of $191		306
	Reclassified to earnings (materials, labor and other production costs), net of tax of $0.6		1
	Reclassified to discontinued operations, net of tax of $(2,035)		(3,250	)

Accumulated other comprehensive loss ending balance		$	18,891

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the twenty eight weeks ended July 12, 2003 are as follows (amounts in thousands):


		Flowers			Flowers
		Bakeries			Specialty		Total

Balance as of December 28, 2002		$	53,362		$	887	$	54,249
	Segment change (see Note 1)		(4,344	)		4,344		—
	Acquisition (see Note 12)		—			9,233		9,233

Balance as of July 12, 2003		$	49,018		$	14,464	$	63,482

The company adopted Statement of Financial Accounting Standards No. 142, (“SFAS 142”), “Goodwill and Other Intangible Assets” on December 30, 2001 (the first day of fiscal 2002). A transitional impairment that resulted from the company’s adoption of this statement was recorded as of December 30, 2001 at Mrs. Smith’s Bakeries for $23.1 million, net of tax of $1.8 million as a cumulative effect of a change in accounting principle.

The changes in the carrying amount of intangible assets, which consist primarily of trademarks and non-compete agreements, for the twenty eight weeks ended July 12, 2003 are as follows (amounts in thousands):


		Flowers
		Bakeries

Balance as of December 28, 2002		$	6,506
	Purchase accounting adjustment		1,850
	Amortization expense		(499	)

Balance as of July 12, 2003		$	7,857

The purchase accounting adjustment of $1.9 million was related to the completion of the final independent valuations prepared as a result of the Ideal Baking acquisition which occurred in fiscal 2002.

5. NEW ACCOUNTING PRONOUNCEMENTS

Asset Retirement. In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement was effective for the company beginning in the first quarter of fiscal 2003. This statement did not have a material effect on the company’s results of operations or financial position.

Extraordinary Gain on Early Extinguishment of Debt. In April 2002, the FASB issued SFAS No. 145, (“SFAS 145”), “Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. SFAS 145 rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, and an amendment of that Statement, FASB Statement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements”. SFAS 145 also rescinds FASB Statement No. 13, “Accounting for Leases”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. This statement was effective for the company beginning in fiscal 2003. The application of this statement will result in the company reclassifying in its consolidated financial statements, the $6.4 million ($4.0 million, net of tax) fiscal 2001 extraordinary gain on the early extinguishment of debt to continuing operations in its January 3, 2004 Consolidated Financial Statements. This statement did not affect net income.

Guarantees. In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34.” FIN 45 clarifies the requirements of SFAS No. 5, “Accounting for Contingencies,” relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. The disclosure provisions of FIN 45 were effective for fiscal 2002. The provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantor’s year-end. On April 24, 2003, in connection with the sale of the Mrs. Smith’s Bakeries frozen dessert business to Schwan, the company agreed to provide customary indemnifications to Schwan for matters such as breaches of representations and warranties, certain tax matters and liabilities arising prior to the consummation of the transaction. In most, but not all, circumstances the indemnity is limited to an 18 month period and a maximum liability of $70 million. The company has purchased insurance to cover possible claims (or occurrences) under this indemnification. In the second quarter of fiscal 2003, a liability of $2.7 million was recorded representing the fair value of the indemnification agreement (see Note 2). The fair value was determined as the insurance premium paid by the company. A related prepaid asset was recorded for the payment of the insurance premium and, together with the indemnification liability, is being amortized over the eighteen month indemnification period. No other guarantees or indemnifications have been entered into by the company through July 12, 2003.

Stock Based Compensation. In December 2002, the FASB issued SFAS No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation — Transition and Disclosure, Amendment of FASB Statement No. 123.” SFAS 148 provides additional transition guidance for those entities that elect to voluntarily adopt the provisions of SFAS No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation.” Furthermore, SFAS 148 mandates new disclosures in both interim and year-end financial statements. The company has elected not to adopt the recognition provisions of SFAS 123, as amended by SFAS 148. However, as permitted by SFAS 123, the company continues to apply intrinsic value accounting for its stock option plans under Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” Compensation cost for stock options, if any, is measured as the excess of the market price of the company’s common stock at the date of grant over the exercise price to be paid by the grantee to acquire the stock. The company’s pro forma net earnings and pro forma

earnings per share based upon the fair value at the grant dates for awards under the company’s plans are disclosed below.

If the company had elected to recognize compensation expense based upon the fair value at the grant dates for awards under these plans, the company’s net (loss) income and (loss) income per share would have been affected as follows (amounts in thousands except per share data):


		FOR THE TWELVE WEEKS ENDED						FOR THE TWENTY EIGHT WEEKS ENDED

		July 12, 2003			July 13, 2002			July 12, 2003			July 13, 2002

Net (loss) income, as reported		$	(9,344	)	$	6,049		$	(15,004	)	$	(15,306	)
Deduct: Total additional stock-based employee compensation cost, net of tax, that would have been included in net (loss) income under fair value method			(437	)		(486	)		(1,085	)		(1,159	)

Pro forma net (loss) income		$	(9,781	)	$	5,563		$	(16,089	)	$	(16,465	)

Basic (loss) income per share as reported		$	(0.21	)	$	0.14		$	(0.33	)	$	(0.34	)
	pro forma	$	(0.22	)	$	0.12		$	(0.36	)	$	(0.37	)
Diluted (loss) income per share as reported		$	(0.20	)	$	0.13		$	(0.33	)	$	(0.33	)
	pro forma	$	(0.21	)	$	0.12		$	(0.35	)	$	(0.36	)

Variable Interest Entities. In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” FIN 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 applies immediately to variable interest entities (“VIE’s”) created after January 31, 2003, and to VIE’s in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003 to VIE’s in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46 applies to public enterprises as of the beginning of the applicable interim or annual period. The company currently has an interest in one potential VIE. The assets and liabilities of this entity are not consolidated within the company’s consolidated financial statements. Flowers Bakeries maintains a transportation agreement with this entity, which represents substantially all of the entity’s revenue. We are in the process of assessing the impact of FIN 46 on the company’s relationship with this entity. If it is determined that this entity is a VIE, the company has the following options under FIN 46: (i) consolidate the VIE into the company’s financial statements; (ii) purchase selected assets from the VIE; or (iii) modify or replace the financing sources currently being utilized. None of these options, if required, are expected to have a material impact on the company’s consolidated financial position, liquidity, or results of operations.

In April 2003, the FASB issued SFAS No. 149 (“SFAS 149”), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133 (“SFAS 133”), “Accounting for Derivative Instruments and Hedging Activities.” SFAS 149 is effective for contracts entered into or modified after June 30, 2003. The company is currently assessing the impact of this statement.

In May 2003, the FASB issued SFAS No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. SFAS 150 requires that those instruments be classified as liabilities in statements of financial position. SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The company is currently assessing the impact of this statement and does not anticipate any material changes to its financial statements.

6. DERIVATIVE FINANCIAL INSTRUMENTS

The company enters into commodity derivatives, designated as cash flow hedges of existing or future exposure to changes in commodity prices. The company’s primary raw materials are flour, sugar, shortening and dairy products, along with pulp and paper and petroleum-based packaging products. The company also enters into interest rate derivatives to hedge exposure to changes in interest rates.

Of the $1.6 million in accumulated other comprehensive loss, approximately $0.8 million and $0.4 million were related to instruments expiring in fiscal 2003 and 2004, respectively, and $0.4 amount was related to deferred gains and losses on cash-flow hedge positions.

As of July 12, 2003, the company’s hedge portfolio contained commodity derivatives with a fair value of $(2.0) million, which is primarily recorded in other current liabilities and other long term liabilities. The positions held in the portfolio are used to hedge economic exposure to changes in various raw material prices and effectively fix the price, or limit increases in prices, for a period of time extending into fiscal 2004. Under SFAS 133, instruments with a fair value of $(2.0) million on July 12, 2003 are designated as cash-flow hedges. The effective portion of changes in fair value for these derivatives is recorded each period in other comprehensive income, and any ineffective portion of the change in fair value is recorded to current period earnings in selling, marketing and administrative expenses. The company held no commodity derivatives at July 12, 2003 that do not qualify for hedge accounting under SFAS 133.

In April 2001, the company entered into an interest rate swap transaction with a notional amount of $150.0 million, expiring on December 31, 2003, in order to effectively convert a designated portion of its borrowings under its credit agreement dated March 26, 2001 to a fixed rate instrument. On December 26, 2002, that swap was amended to reduce the notional value to $105.0 million. In addition, the company entered into a new interest rate swap with a notional amount of $45.0 million, expiring on December 31, 2003, in order to effectively convert variable rate interest payments on a designated portion of its capital lease obligations to fixed rate payments. In accordance with SFAS 133, on January 30, 2003, pursuant to the announcement of the sale of the Mrs. Smith’s Bakeries frozen dessert business, hedge accounting was discontinued for these swaps, since the hedged debt and capital leases would be paid off and the swaps would be terminated at the close of the transaction. On April 24, 2003, at the close of the transaction, the interest rate swaps were terminated for cash, and the related balance in other accumulated comprehensive income of $3.3 million, net of tax of $2.0 million, was reclassified to discontinued operations.

Additionally, on October 25, 2002, in conjunction with the acquisition of Ideal Baking Company, the company acquired two interest rate swaps with notional amounts of $1.7 million each, designated as cash flow hedges of the outstanding borrowings of that company.

The interest rate swap agreements result in the company paying or receiving the difference between the fixed and floating rates at specified intervals calculated based on the notional amounts. The interest rate differential to be paid or received is accrued as interest rates change and is recorded as interest expense. Under SFAS 133, these swap transactions are designated as cash-flow hedges. Accordingly, the effective portion of the change in the fair value of the swap transaction is recorded each period in other comprehensive income. The ineffective portion of the change in fair value is recorded to current period earnings in selling, marketing and administrative expenses. The fair value of the interest rate swaps on July 12, 2003 was a liability of $(0.1) million which is recorded in other accrued liabilities and other long term liabilities. During the twelve and twenty eight weeks ended July 12, 2003, interest expense was not materially impacted by periodic settlements of the swaps. However, $2.2 million of interest expense was recognized in discontinued operations during the twenty eight weeks ended July 12, 2003, as a result of periodic settlements of the swaps. Additionally, $0.5 million was recorded as a credit to discontinued operations resulting from the change in fair value of the swaps between January 30, 2003, when hedging accounting was discontinued, and April 24, 2003, when the swaps were terminated. An immaterial amount was recorded to current continuing earnings during the twenty eight weeks ended July 12, 2003.

7. DEBT AND OTHER OBLIGATIONS

Long-term debt consisted of the following at July 12, 2003 and December 28, 2002 (amounts in thousands):


	JULY 12, 2003		DECEMBER 28, 2002

Senior secured credit facilities	$	—	$	180,258
Capital lease obligations		107		56,887
Other notes payable		6,516		13,219

		6,623		250,364
Less current maturities		1,528		27,231

Total long-term debt	$	5,095	$	223,133

The company’s credit agreement provides for total borrowings of up to $130.0 million on its revolving loan facility.

As of December 28, 2002, the company was not in compliance with certain restrictive financial covenants under the credit agreement. Subsequent to December 28, 2002, the company completed an amendment to the credit agreement, which among other things, permitted the company to exclude the effects of the SFAS 142 and SFAS 144 impairment charges from its fiscal 2002 covenant calculations, bringing the company into compliance with all financial covenants under the credit agreement. The credit agreement was also amended to allow for completion of the sale of Mrs. Smith’s Bakeries’ frozen dessert business to Schwan, an increase in the amount of dividends the company can pay, an increase in the company’s ability to repurchase its common stock and make acquisitions within certain limits and an increase in the amount of allowable capital expenditures. With the completion of the amendment, the company was in compliance with all covenants under the credit agreement and believes that, given its current cash position, its cash flow from operating activities and its available credit facilities, it can comply with the current terms of its credit facilities and can meet presently foreseeable financial requirements. Pursuant to the amendment to the company’s credit agreement, upon the closing of the transaction with Schwan, proceeds from the sale, net of certain outstanding debt and lease obligations, transaction costs and post closing adjustments, were applied to the outstanding Term Loan A and Term Loan B balances on a pro rata basis. On April 24, 2003, $159.7 million of the net proceeds from the Schwan transaction and $13.7 million of the company’s cash were used to payoff Term Loan A and Term Loan B. Therefore, the balance on the credit facility was $0 as of April 24, 2003. Also on April 24, 2003, proceeds from the Schwan transaction were used to payoff $54.8 million in capital leases and $6.1 million in other notes payable. As such, debt of $6.6 million, primarily related to the acquisition of Ideal Baking, remains outstanding at July 12, 2003.

In anticipation of the pending transactions, during the first quarter of fiscal 2003, the company gave notice to lessors of its intent to payoff certain equipment leases. As a result, the company accrued $4.8 million in lease termination fees, of which $4.3 million was included in discontinued operations during the first quarter of fiscal 2003 (see Note 2).

Interest expense related to the debt and lease obligations required to be repaid of $5.7 million and $10.5 million for the twenty eight weeks ended July 12, 2003 and July 13, 2002, respectively, was included in discontinued operations (see Note 2).

8. FACILITY CLOSING COSTS AND SEVERANCE

The company has continuing obligations in connection with certain plant closings completed in the current and prior years. Activity with respect to these obligations is as follows (amounts in thousands):


	December 28, 2002		Spending			July 12, 2003

Noncancelable lease obligations and other facility closing costs	$	10,195	$	(5,882	)	$	4,313
Severance		537		(537	)		—
Other		1,121		(86	)		1,035

Total	$	11,853	$	(6,505	)	$	5,348

On April 24, 2003, the company used a portion of the proceeds from the sale of the Mrs. Smith’s Bakeries frozen dessert business to extinguish the remaining $4.3 million equipment lease obligation associated with the closed facility in Pottstown, Pennsylvania. These lease payments had been accrued for at the time of the plant closing in fiscal 1997. The payoff of the lease was recorded to the reserve in the second quarter of fiscal 2003 and is reflected in spending above.

9. LITIGATION

The company and its subsidiaries from time to time are parties to, or targets of, lawsuits, claims, investigations and proceedings, including personal injury, commercial, contract, environmental, antitrust, product liability, health and safety and employment matters, which are being handled and defended in the ordinary course of business. While the company is unable to predict the outcome of these matters, it believes, based upon currently available facts, that it is remote that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations or cash flows in the future. However, adverse developments could negatively impact earnings in a particular future fiscal period.

On March 25, 2002, in Trans American Brokerage, Inc. (“TAB”) vs. Mrs. Smith’s Bakeries, Inc., an arbitration brought before the American Arbitration Association, an arbitrator found against Mrs. Smith’s Bakeries and issued an interim award for damages in the amount of $9.8 million plus approximately $0.8 million representing costs and attorneys’ fees incurred relating to an alleged breach of a distributorship agreement. The company recorded a $10.0 million charge ($6.2 million after tax) against its results for the fiscal year ended December 29,

2001 for estimated total probable costs (including attorney’s fees and expenses) of this dispute. On June 11, 2002, an arbitrator issued a final award for damages in the amount of the interim award. The award also provided for the accrual of interest until it was settled or paid. As of December 28, 2002, the company had accrued a total of $11.5 million related to this award. On April 22, 2003, the company paid $9.0 million to TAB to settle the arbitration award. As a result, the company reversed $2.5 million from accrued reserves into discontinued operations under Mrs. Smith’s Bakeries operating loss for the first quarter of fiscal 2003.

10. EARNINGS PER SHARE

On May 30, 2003, the board of directors declared a 3 for 2 stock split of the company’s common stock in the form of a stock dividend. The record date for the split was June 13, 2003 and new shares were issued on June 27, 2003. Earnings (loss) per common share have been restated for all periods presented giving retroactive effect to the stock split.

The following table calculates basic earnings per common share and diluted earnings per common share at July 12, 2003 and July 13, 2002 (amounts in thousands, except per share data):


	FOR THE TWELVE WEEKS ENDED				FOR THE TWENTY EIGHT WEEKS ENDED

	JULY 12, 2003		JULY 13, 2002		JULY 12, 2003		JULY 13, 2002

Basic Earnings Per Common Share:
Income from continuing operations	$	13,774	$	13,479	$	27,427	$	26,604

Basic weighted average shares outstanding		45,082		44,697		45,030		44,697

Basic earnings per common share	$	0.31	$	0.30	$	0.61	$	0.60

Diluted Earnings Per Common Share:
Income from continuing operations	$	13,774	$	13,479	$	27,427	$	26,604

Basic weighted average shares outstanding		45,082		44,697		45,030		44,697
Add: Shares of common stock assumed upon exercise of stock options		641		577		521		863
Add: Shares of common stock assumed upon contingent stock agreement		138		376		140		550

Diluted weighted average shares outstanding		45,861		45,650		45,691		46,110

Diluted earnings per common share	$	0.30	$	0.30	$	0.60	$	0.58

11. SEGMENT REPORTING

On April 24, 2003, the company announced it had completed the sale of substantially all the assets of Mrs. Smith’s Bakeries’ frozen dessert business to Schwan. The company retained the frozen bread and roll portion of the Mrs. Smith’s Bakeries business. As a result, the frozen bread and roll business as well as the Birmingham, Alabama production facility, formerly a part of Flowers Bakeries, became a part of our Flowers Snack segment, with Flowers Snack being renamed Flowers Specialty. For purposes of this Form 10-Q, discussion will relate to our Flowers Bakeries and Flowers Specialty business units as such businesses are currently operated. Prior year data has been restated to reflect the segment reorganization.

The segments are managed as strategic business units due to their distinct production processes and marketing strategies. The company evaluates each segment’s performance based on income or loss before interest and income taxes, excluding unallocated expenses and charges which the company’s management deems to be unusual and not reflective of the segments’ core operating businesses. Information regarding the operations in these reportable segments is as follows (amounts in thousands):


		FOR THE TWELVE WEEKS ENDED						FOR THE TWENTY EIGHT WEEKS ENDED

		JULY 12, 2003			JULY 13, 2002			JULY 12, 2003			JULY 13, 2002

SALES:
	Flowers Bakeries	$	261,031		$	249,378		$	599,046		$	565,050
	Flowers Specialty		76,162			68,567			172,699			149,053

		$	337,193		$	317,945		$	771,745		$	714,103

DEPRECIATION AND AMORTIZATION:
	Flowers Bakeries	$	10,130		$	10,126		$	23,679		$	23,618
	Flowers Specialty		2,480			2,920			5,968			6,799
	Unallocated corporate expenses		(121	)		43			4			101

		$	12,489		$	13,089		$	29,651		$	30,518

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
	Flowers Bakeries	$	25,137		$	24,450		$	51,378		$	50,639
	Flowers Specialty		4,575			2,824			8,035			4,224
	Unallocated corporate expenses		(8,268	)		(5,867	)		(16,701	)		(12,953	)
	Unallocated interest income, net		953			509			1,885			1,348

		$	22,397		$	21,916		$	44,597		$	43,258

12. ACQUISITION

On December 30, 2002 (fiscal 2003), the company acquired certain assets of Bishop Baking Company, Inc. (“Bishop”) from Kellogg Company. Bishop has annual sales of approximately $30.0 million from its sole bakery in Cleveland, Tennessee. Bishop’s products, which include a line of snack cake items that the company did not previously produce, are distributed nationwide.

13. SUBSEQUENT EVENTS

Subsequent to the close of the second quarter, on July 30, 2003, the company issued a product recall of certain bread products due to the possibility that they contained small pieces of metal mesh screen. The product and other costs incurred related to the recall will be approximately $1.2 million and will be reflected in the company’s third quarter fiscal 2003 financial statements in materials, supplies, labor and other production costs. These costs do not include any potential legal claims, as the company does not anticipate any material impact from such possible claims.

On August 20, 2003, the Board of Directors declared a dividend of $0.10 per share on the company’s common stock to be paid on September 18, 2003 to shareholders of record on September 4, 2003.

14. RESTATEMENT OF THE CONDENSED CONSOLIDATED BALANCE SHEET AS OF JULY 12, 2003

The company is filing this Form 10-Q/A solely to correct certain amounts in Part I, Item 1 (Financial Statements) of its Form 10-Q for the period ended July 12, 2003 filed with the Securities and Exchange Commission on August 26, 2003. Specifically this amendment corrects the following classification errors that resulted from the incorrect summarization of the costs and accumulated depreciation of certain assets within the property, plant and equipment category of the condensed consolidated balance sheet as of July 12, 2003 during the consolidation process. These classification errors were limited to the property, plant and equipment category.


		Amount as Previously			Corrected Amount as
		Reported in the			Reported in this
		Company’s Form 10-Q			Amendment to the
		filed August 26, 2003			Company’s Form 10-Q

Property, Plant and Equipment:
	Land	$	86,990		$	33,300
	Buildings		178,340			204,676
	Machinery and equipment		447,369			518,383
	Furniture, fixtures and transportation equipment		41,866			43,286
	Construction in Progress		15,812			22,374

			770,377			822,019
Less accumulated depreciation			(341,990	)		(393,632	)

		$	428,387		$	428,387

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS

(a) Exhibits filed as part of this report are listed in the Exhibit Index attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FLOWERS FOODS, INC

By: /s/ Amos R. McMullian

Name: Amos R. McMullian
Title: Chairman of the Board and
Chief Executive Officer

By: /s/ Jimmy M. Woodward

Name: Jimmy M. Woodward
Title: Senior Vice President,
Chief Financial Officer and Chief Accounting Officer

Date: September 12, 2003

EXHIBIT INDEX


Exhibit
No.		Name of Exhibit


*31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*32		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Amos R. McMullian, Chief Executive Officer, and Jimmy M. Woodward, Chief Financial Officer.

Filed herewith