FLOWERS FOODS INC

Previous wording

The following discussion of the financial condition and results of operations of the company as of and for the sixteen weeks ended April 19, 2025 should be read in conjunction with the Form 10-K and Part II., Item 1A., Risk Factors, of this Form 10-Q. Any reference to sales refers to net sales inclusive of allowances and deductions against gross sales for variable consideration and consideration payable to customers.

Current wording

The following discussion of the financial condition and results of operations of the company as of and for the twelve and twenty-eight weeks ended July 12, 2025 should be read in conjunction with the Form 10-K and Part II., Item 1A., Risk Factors, of the Form 10-Q for the quarterly period ended April 19, 2025. Any reference to sales refers to net sales inclusive of allowances and deductions against gross sales for variable consideration and consideration payable to customers.

Previous wording

Results of operations — analyzes the company’s consolidated results of operations for the comparative period presented in our Condensed Consolidated Financial Statements.

Current wording

Results of operations — analyzes the company’s consolidated results of operations for the two comparative periods presented in our Condensed Consolidated Financial Statements.

Previous wording

Restructuring charges and related implementation costs During the first quarter of Fiscal 2025, we began a review of our cost to serve focused on improving efficiencies and identifying cost reduction opportunities. We expect this analysis to continue in subsequent quarters of Fiscal 2025. The company incurred $4.3 million of consulting costs associated with this review and these costs are included in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Current wording

Restructuring charges and related implementation costs During the first quarter of Fiscal 2025, we began a review of our cost to serve focused on improving efficiencies and identifying cost reduction opportunities. The company incurred consulting costs associated with this review of $4.3 million and $2.9 million in the first and second quarters of Fiscal 2025, respectively, and these costs are included in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income. We anticipate this analysis to continue in subsequent quarters of Fiscal 2025.

Previous wording

In April 2024, the company announced a cost savings program to improve operational performance, which includes employee termination benefits associated with a reduction-in-force ("RIF") and other expense optimization initiatives. In the first quarter of Fiscal 2024, the company incurred $0.6 million of RIF costs and made payments of $0.2 million. The company incurred final RIF charges totaling $0.6 million and made payments of $0.7 million in the first quarter of Fiscal 2025. The RIF charges are included in the restructuring charges line item of the Condensed Consolidated Statements of Income. The company also incurred consulting costs associated with implementing the restructuring program of $1.3 million in the first quarter of Fiscal 2024 and these costs are included in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Current wording

In April 2024, the company announced a cost savings program to improve operational performance, which included employee termination benefits associated with a reduction-in-force ("RIF") and other expense optimization initiatives. In the first and second quarters of Fiscal 2024, the company incurred $0.6 million and $6.8 million of RIF costs and made $0.2 million and $6.7 million of RIF payments, respectively. The company incurred final RIF charges totaling $0.6 million and made payments of $0.7 million in the first quarter of Fiscal 2025. The RIF charges are included in the restructuring charges line item of the Condensed Consolidated Statements of Income. The company also incurred consulting costs associated with implementing the restructuring program of $1.3 million and $1.6 million in the first and second quarters of Fiscal 2024, respectively, and these costs are included in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Previous wording

Plant closure costs and impairment of assets On February 12, 2025, the company announced the closure of its Bailey Street Bakery located in Atlanta, Georgia. The bakery produced bread and bun products and ceased production on April 16, 2025. This bakery closure is part of our strategy to optimize capacity within our supply chain. Closure costs included asset impairment charges and equipment relocation costs of $6.1 million and severance costs of $1.3 million and are recorded in the first quarter of Fiscal 2025.

Current wording

Plant closure costs and impairment of assets On February 12, 2025, the company announced the closure of its Bailey Street Bakery located in Atlanta, Georgia. The bakery produced bread and bun products and ceased production on April 16, 2025. This bakery closure is part of our strategy to optimize capacity within our supply chain. Closure costs included equipment asset impairment charges and equipment relocation costs of $6.1 million and severance costs of $1.3 million and were recognized in the first quarter of Fiscal 2025. In the second quarter of Fiscal 2025, the company classified the bakery as held for sale.

Previous wording

In the first quarter of Fiscal 2024, we recognized an impairment loss of $4.0 million related to our investment in Base Culture, a Clearwater, Florida-based company with one manufacturing facility. This investment is being accounted for at cost, less any impairment, as we do not control, nor do we have the ability to significantly influence Base Culture. The company recorded impairment losses on this investment in previous years and the current carrying value is approximately $1.5 million.

Current wording

In the first quarter of Fiscal 2024, we recognized an impairment loss of $4.0 million related to our investment in Base Culture, a Clearwater, Florida-based company with one manufacturing facility. This investment is being accounted for at cost, less any impairment, as we do not control, nor do we have the ability to significantly influence Base Culture. The company recorded impairment losses on this investment in previous years and the current carrying value is approximately $1.5 million. During the second quarter of Fiscal 2024, the company recorded an asset impairment charge of $1.4 million to write-off certain cake distribution territories classified as held for sale that the company no longer intends to sell.

Previous wording

Legal settlements and related costs In the first quarter of Fiscal 2025, we reached an agreement to settle certain distributor-related litigation for a settlement payment, inclusive of plaintiffs' attorney fees, of $1.9 million. In the third quarter of Fiscal 2023, we reached an agreement to settle certain distributor-related litigation for a settlement payment, inclusive of plaintiffs’ attorney fees, of $55.0 million which was paid in the second quarter of Fiscal 2024. The settlement also required a phased repurchase of approximately 350 distribution territories in California and the company previously estimated this cost, along with the cost to repurchase approximately 50 other California distribution territories that are not part of the settlement, to be approximately $80.2 million. The repurchases of the distribution rights commenced at the end of the first quarter of Fiscal 2024 and were completed early in the second quarter of Fiscal 2025 for a total cost of $79.0 million. The company recognized an adjustment to the repurchase liability of $1.2 million in the first quarter of Fiscal 2025 in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Current wording

Legal settlements and related costs In the first and second quarters of Fiscal 2025, we reached agreements to settle certain distributor-related litigation for total settlement payments, inclusive of plaintiffs' attorney fees, of $2.1 million. In the third quarter of Fiscal 2023, we reached an agreement to settle certain distributor-related litigation for a settlement payment, inclusive of plaintiffs’ attorney fees, of $55.0 million which was paid in the second quarter of Fiscal 2024. The settlement also required a phased repurchase of approximately 350 distribution territories in California and the company previously estimated this cost, along with the cost to repurchase approximately 50 other California distribution territories that are not part of the settlement, to be approximately $80.2 million. The repurchases of the distribution rights commenced at the end of the first quarter of Fiscal 2024 and were completed early in the second quarter of Fiscal 2025 for a total cost of $79.0 million. The company recognized an adjustment to the repurchase liability of $1.2 million in the first quarter of Fiscal 2025 in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Previous wording

Acquisition-related costs On February 21, 2025, the company completed the acquisition of Simple Mills, maker of a premium brand of better-for-you crackers, cookies, snack bars, and baking mixes, for total consideration of approximately $848.5 million. The goodwill, identifiable intangible assets, taxes, and certain other assets and liabilities and post-close purchase price adjustments are still under review. The company funded the cash consideration and related acquisition fees and expenses with the net proceeds of the Notes (as defined below) offerings completed on February 14, 2025. In the first quarter of Fiscal 2025, we incurred acquisition-related costs of $13.8 million and these costs are recorded in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Current wording

Acquisition-related costs On February 21, 2025, the company completed the acquisition of Simple Mills, maker of a premium brand of better-for-you crackers, cookies, snack bars, and baking mixes, for total consideration of approximately $848.6 million. The goodwill, identifiable intangible assets, taxes, and certain other assets and liabilities are still under review. The company funded the cash consideration and related acquisition fees and expenses with the net proceeds of the Notes (as defined below) offerings completed on February 14, 2025. We incurred acquisition-related costs of $13.8 million and $0.9 million in the first and second quarters of Fiscal 2025, respectively, and these costs are recorded in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Previous wording

Nature’s Own is the best-selling loaf bread in the U.S., DKBis the #1 selling organic brand in the U.S., and Canyon Bakehouse is the #1 selling gluten-free bread brand in the U.S. (Source: Circana Total US MultiOutlet+ w/ Conv 16 Weeks Ended 4/20/25).

Current wording

Nature’s Own is the best-selling loaf bread in the U.S., DKBis the #1 selling organic brand in the U.S., and Canyon Bakehouse is the #1 selling gluten-free bread brand in the U.S. (Source: Circana Total US MultiOutlet+ w/ Conv 12 Weeks Ended 7/13/25).

Previous wording

We acquired Simple Mills on February 21, 2025 with its brand of better-for-you snacks and baking mixes which contributed $24.3 million of sales in the first quarter of Fiscal 2025.

Current wording

We acquired Simple Mills on February 21, 2025 with its brand of better-for-you snacks and baking mixes which contributed $85.7 million of sales through the second quarter of Fiscal 2025.

Previous wording

Our Branded Retail sales comprised 65.1% of total sales for the sixteen weeks ended April 19, 2025 as compared to 64.4% for the sixteen weeks ended April 20, 2024.

Current wording

Our Branded Retail sales comprised 65.7% of total sales for the twenty-eight weeks ended July 12, 2025 as compared to 64.3% for the twenty-eight weeks ended July 13, 2024.

Previous wording

We continue to monitor the impact of a variety of factors on our business, including the impact of the inflationary economic environment on our costs and the buying patterns of our consumers, supply chain disruptions, including any impact from the imposition of tariffs, increased labor costs, the conflict between Russia and Ukraine, and the conflict in the Middle East. Our results for the first quarter of Fiscal 2025 were negatively impacted by softer sales due to increased weakness in the fresh packaged bread category, most notably for branded traditional loaf breads, and in the cake category. However, sales of our more premium, better-for-you branded products, such as organic, Keto, and gluten-free, increased quarter over quarter. Additionally, sales attributed to the Simple Mills acquisition, which diversifies our category exposure, partially offset the overall sales decline. We introduced Wonder snack cakes in the first quarter of Fiscal 2025 to improve our sales in the cake category.

Current wording

We continue to monitor a variety of factors on our business, including the impact of the inflationary economic environment on our costs and the buying patterns of our consumers, supply chain disruptions, including the impacts of tariffs, increased labor costs, the conflict between Russia and Ukraine, and the conflict in the Middle East. Our results through the second quarter of Fiscal 2025 as compared to the prior year period were negatively impacted by increased weakness in the fresh packaged bread category, most notably for branded traditional loaf breads. However, sales attributed to the Simple Mills acquisition along with growth from sales of certain of our other more-premium, better-for-you branded organic and Keto products partially offset the overall sales decline. Additionally, the introduction of Wonder snack cakes in the first quarter of Fiscal 2025 drove higher branded retail cake sales as compared to the prior year period.

Previous wording

Supply chain and other disruptions could negatively impact production volumes as the global and U.S. supply chain remains uncertain. Although the conflict between Russia and Ukraine, the conflict in the Middle East, and the imposition of tariffs (including retaliatory tariffs) have not impacted our operations directly, we are closely monitoring the impact on the broader economy including on the availability and price of commodities used in or for the production of our products. Disruptions in our operations, related to factors including, but not limited to, the procurement of raw materials and packaging items, transport of our products, and workforce availability, could negatively impact, our operations, results of operations, cash flows, and liquidity.

Current wording

Supply chain and other disruptions could negatively impact production volumes, and the global and U.S. supply chain remains uncertain. Although the conflict between Russia and Ukraine and the conflict in the Middle East have not impacted our operations directly, and tariffs (including retaliatory tariffs) have not had a material impact on our operations, we are closely monitoring the impact on the broader economy including on the availability and price of commodities used in or for the production of our products. Disruptions in our operations related to factors including, but not limited to, the procurement of raw materials and packaging items, transport of our products, and workforce availability, could negatively impact our operations, results of operations, cash flows, and liquidity.

Previous wording

Labor shortages and turnover could negatively impact our results. These and other factors, including, but not limited to, high employment rates and additional government regulations, may continue to adversely affect labor availability and labor costs. These challenges may negatively impact the efficiency of our production lines and our ability to operate at, or near, full capacity, and could result in increased labor costs, including additional overtime to meet demand, and higher wage rates to attract and retain workers. An overall labor shortage, lack of skilled labor, or increased turnover has and could continue to have a negative impact on the company’s operations, results of operations, liquidity, or cash flows.

Current wording

Labor shortages and turnover could negatively impact our results. These and other factors, including, but not limited to, a competitive labor market and additional government regulations, may continue to adversely affect labor availability and labor costs. These challenges may negatively impact the efficiency of our production lines and our ability to operate at, or near, full capacity, and could result in increased labor costs, including additional overtime to meet demand, and higher wage rates to attract and retain workers. An overall labor shortage, lack of skilled labor, or increased turnover has and could continue to have a negative impact on the company’s operations, results of operations, liquidity, or cash flows.

Previous wording

Sales decreased 1.4% for the sixteen weeks ended April 19, 2025 compared to the same quarter in the prior year due to volume declines of 2.7% and negative price/mix of 0.3%, partially offset by the acquisition contribution of 1.6%. Branded Retail sales declined 0.4% and sales in the Other sales category decreased 3.3%. Negative price/mix in Branded Retail resulted from competitive marketplace dynamics, partially offset by positive price/mix in the Other sales category from optimizing our foodservice business. Both sales categories experienced softer volumes with the largest decline in sales of branded traditional loaf breads.

Current wording

Sales increased 1.5% for the twelve weeks ended July 12, 2025 compared to the same quarter in the prior year due to the acquisition contribution of 5.1%, partially offset by volume declines of 2.4% and negative price/mix of 1.2%. Branded Retail sales increased 5.0% with the acquisition contributing 7.8%, while sales in the Other sales category decreased 4.9%. Negative price/mix from competitive marketplace dynamics and softer volumes impacted both sales categories. The largest volume declines were in sales of branded traditional loaf breads.

Previous wording

For the sixteen weeks ended April 19, 2025, income from operations was $85.1 million compared to $101.5 million in the prior year period. The decrease resulted mostly from softer sales, greater outside purchases of product, increased expenses for labor, rent, and acquisition-related costs, and lower production volumes. Moderating input costs and, to a lesser extent, benefits from optimizing our foodservice business and lower distributor distribution fees partially offset the decrease quarter over quarter.

Current wording

For the twelve weeks ended July 12, 2025, income from operations was $93.4 million compared to $95.2 million in the prior year period. The decrease resulted mostly from greater outside purchases of product related to the Simple Mills acquisition and increased expenses for labor and rent. Lower distributor distribution fees and ingredient costs and the prior year restructuring charges partially offset the decrease quarter over quarter.

Previous wording

Net income for the sixteen weeks ended April 19, 2025 was $53.0 million compared to $73.0 million in the prior year quarter. The decrease quarter over quarter resulted primarily from the decrease in income from operations, as described above, combined with increased interest expense from funding the acquisition and the impact of a higher effective tax rate in the current year quarter.

Current wording

Net income for the twelve weeks ended July 12, 2025 was $58.4 million compared to $67.0 million in the prior year quarter. The decrease quarter over quarter resulted primarily from reduced income from operations, as described above, combined with increased interest expense from funding the acquisition.

Previous wording

During the sixteen weeks ended April 19, 2025, we generated net cash flows from operations of $135.6 million, paid $791.9 million of the total consideration of approximately $848.5 million for the Simple Mills acquisition, invested $25.6 million in capital expenditures, and increased our indebtedness by $776.6 million primarily to fund the acquisition. Additionally, we paid $52.3 million in dividends to our shareholders. On February 5, 2025, we entered into a $500.0 million five-year senior unsecured revolving credit facility (the "new credit facility") which refinanced and replaced our existing credit facility (the "previous credit facility"). On February 14, 2025, we issued $500.0 million aggregate principal amount of 5.750% Senior Notes (the "2035 Notes") and $300.0 million aggregate principal amount of 6.200% Senior Notes (the "2055 Notes"). On April 14, 2025, we amended the accounts receivable repurchase facility (the "repurchase facility") to, among other things, extend the scheduled facility expiration date to April 14, 2027.

Current wording

During the twenty-eight weeks ended July 12, 2025, we generated net cash flows from operations of $266.5 million, paid $791.9 million of the total consideration of approximately $848.6 million for the Simple Mills acquisition, invested $56.4 million in capital expenditures, and increased our indebtedness by $734.9 million primarily to fund the acquisition. Additionally, we paid $104.8 million in dividends to our shareholders. On February 5, 2025, we entered into a $500.0 million five-year senior unsecured revolving credit facility (the "new credit facility") which refinanced and replaced our existing credit facility (the "previous credit facility"). On February 14, 2025, we issued $500.0 million aggregate principal amount of 5.750% Senior Notes (the "2035 Notes") and $300.0 million aggregate principal amount of 6.200% Senior Notes (the "2055 Notes"). On April 14, 2025, we amended the accounts receivable repurchase facility (the "repurchase facility") to, among other things, extend the scheduled facility expiration date to April 14, 2027.

Previous wording

During the sixteen weeks ended April 20, 2024, we generated net cash flows from operations of $105.1 million, invested $33.3 million in capital expenditures, and decreased our indebtedness $5.0 million. Also, in the prior year period, we paid $51.1 million in dividends to our shareholders and repurchased $8.9 million of company stock.

Current wording

During the twenty-eight weeks ended July 13, 2024, we generated net cash flows from operations of $168.4 million, invested $61.3 million in capital expenditures, and increased our indebtedness by $20.0 million. Also, in the prior year period, we paid $101.9 million in dividends to our shareholders and repurchased $22.7 million of company stock.

Previous wording

In the second half of Fiscal 2020, we launched initiatives to transform our business operations. The primary goals of these initiatives are: (1) enable a more agile business model, empowering the organization by fundamentally redesigning core business processes; (2) embed digital capabilities and transform the way we engage with our consumers, customers and employees; and (3) modernize and simplify our application and technology infrastructure landscape, inclusive of the upgrade of our ERP system.

Current wording

In the second half of Fiscal 2020, we launched initiatives to transform our business operations. The primary goals of these initiatives are to: (1) enable a more agile business model, empowering the organization by fundamentally redesigning core business processes; (2) embed digital capabilities and transform the way we engage with our consumers, customers and employees; and (3) modernize and simplify our application and technology infrastructure landscape, inclusive of the upgrade of our ERP system.

Previous wording

Our ERP initiative includes upgrading our information system platform and is expected to improve data management and efficiencies while automating many of our processes. We completed the initial planning and road mapping phase of the ERP upgrade at the end of Fiscal 2020. In the first quarter of Fiscal 2021, we transitioned into the design phase and engaged a leading, global consulting firm to assist us in designing and implementing the upgrade of our ERP platform and to serve as the system integrator for the project. We transitioned into the build phase at the beginning of Fiscal 2022 and during the second quarter of Fiscal 2023, we began deploying the ERP upgrade. The deployment is anticipated to be completed in Fiscal 2026. We currently estimate total costs for the upgrade of our ERP system will be approximately $350 million (of which approximately 34% has been or is anticipated to be capitalized). As of April 19, 2025, we have incurred costs related to the project of approximately $247 million.

Current wording

Our ERP initiative includes upgrading our information system platform and is expected to improve data management and efficiencies while automating many of our processes. We completed the initial planning and road mapping phase of the ERP upgrade at the end of Fiscal 2020. In the first quarter of Fiscal 2021, we transitioned into the design phase and engaged a leading, global consulting firm to assist us in designing and implementing the upgrade of our ERP platform and to serve as the system integrator for the project. We transitioned into the build phase at the beginning of Fiscal 2022 and during the second quarter of Fiscal 2023, we began deploying the ERP upgrade. The deployment is anticipated to be completed in Fiscal 2026. We currently estimate total costs for the upgrade of our

Previous wording

Results of operations, expressed as a percentage of sales and the dollar and percentage change from period to period, for the sixteen weeks ended April 19, 2025 and April 20, 2024, respectively, are set forth in the tables below (dollars in thousands):

Current wording

Results of operations, expressed as a percentage of sales and the dollar and percentage change from period to period, for the twelve and twenty-eight weeks ended July 12, 2025 and July 13, 2024 are set forth in the tables below (dollars in thousands):

Previous wording

Sales in the Other category decreased 3.3% due to softer volumes for both store branded retail and non-retail sales due to inflationary pressure on consumer spending and from executing our non-retail margin optimization strategies. Store branded retail sales declined due to negative price/mix and lower volumes. Our non-retail sales experienced softer volumes in all categories except contract manufacturing. This was partially offset by favorable price/mix from optimizing our foodservice business subsequent to the first quarter of Fiscal 2024.

Current wording

Sales in the Other category decreased 4.9% due to softer volumes in store branded retail sales and to a lesser extent non-retail sales from executing our non-retail margin optimization strategies. Store branded retail sales declined primarily due to lower loaf and cake volumes and negative price/mix. Our non-retail sales experienced softer volumes in all categories except contract manufacturing. This weakness was partially offset by favorable price/mix from optimizing our foodservice business subsequent to the first quarter of Fiscal 2024.

Previous wording

Materials, supplies, labor and other production costs as a percent of sales decreased quarter over quarter primarily due to moderating ingredient costs. Lower production volumes, higher workforce-related costs, and increased outside purchases of product (sales with no associated ingredient costs) partially offset the overall improvement. The decrease in ingredient costs was mostly attributed to lower pricing for commodities such as flour, fats, and oils and increased outside purchases of product. Higher costs for other ingredients such as sweeteners, eggs, and cocoa partially offset the decrease. Wage inflation and lower production volumes resulted in increased workforce-related costs as a percent of sales. We expect the impact of lower production volumes to continue to negatively impact our operations. Outside purchases of product are included in the Other line item in the table above and largely relate to purchases of Simple Mills products, all of which are co-manufactured, and certain DKBproducts. We expect greater outside purchases of product to continue due to the Simple Mills acquisition.

Current wording

Materials, supplies, labor and other production costs as a percent of sales increased quarter over quarter primarily due to increased outside purchases of product (sales with no associated ingredient costs) and lower production volumes, partially offset by lower ingredient and workforce-related costs. Outside purchases of product are included in the Other line item in the table above and largely relate to purchases of Simple Mills products, all of which are co-manufactured, and we expect this trend to continue. The decrease in ingredient costs was primarily due to increased outside purchases of product and lower pricing for commodities, particularly flour. Higher costs for other ingredients such as cocoa and eggs and lower sales price/mix partially offset the decrease. Workforce-related costs decreased as a percent of sales due to a greater portion of our products being co-manufactured as well as lower incentive compensation costs. We expect the impact of lower production volumes to continue to negatively impact our operations.

Previous wording

Sales decreased quarter over quarter due to softer volumes in both sales categories and overall negative price/mix, partially offset by the Simple Mills acquisition contribution. Volumes continue to be pressured by weakness in the fresh packaged bread and cake categories. Negative price/mix for Branded Retail sales and store branded retail sales was partially offset by improved price/mix for our foodservice business from executing our portfolio optimization strategies beginning in the second quarter of the prior year. To remain competitive in a promotional environment, we increased our promotional activity quarter over quarter.

Current wording

Sales decreased slightly period over period due to softer volumes and negative price/mix in both sales categories, partially offset by the Simple Mills acquisition contribution. Weakness in the fresh packaged bread category contributed to the volume declines. Negative price/mix for Branded Retail sales and store branded retail sales was partially offset by improved price/mix for our foodservice business from executing our portfolio optimization strategies beginning in the second quarter of the prior year. To remain competitive in a promotional environment, we increased our differentiated products promotional activity period over period.

Previous wording

We anticipate our Fiscal 2025 sales will be higher than Fiscal 2024 sales due to the acquisition contribution, optimizing our non-retail business, new product innovation, and the additional week in Fiscal 2025. However, category headwinds, changes in consumer buying patterns, and increases in promotional activity could partially offset that improvement.

Current wording

We anticipate our Fiscal 2025 sales to increase compared to Fiscal 2024 sales due to the acquisition contribution, optimization of our non-retail business, new product innovation, and the additional week in Fiscal 2025. However, category headwinds, changes in consumer buying patterns, and increases in promotional activity could partially offset that improvement.

Previous wording

Branded Retail sales decreased 0.4% quarter over quarter due to volume declines and unfavorable price/mix resulting from increased promotional activity, partially offset by the acquisition contribution. Further weakening in the fresh packaged bread and cake categories from changes in consumer buying patterns and inflationary pressure on consumer spending also negatively impacted sales year over year. Declines for branded traditional loaf products drove the volume decrease. Volume growth in more-premium branded products such as DKBorganic, Nature's Own Keto, and Canyon Bakehouse gluten-free, partially offset the decrease.

Current wording

Branded Retail sales increased 2.0% compared to the prior year period due to the acquisition contribution, partially offset by volume declines and unfavorable price/mix resulting from increased targeted promotional activity. Continued weakness in the fresh packaged bread category negatively impacted volumes year over year with the largest declines in sales of branded traditional loaf products. Volume growth in branded organic, branded Keto, and branded retail cake sales partially offset the decrease.

Previous wording

We continue to invest in these more-premium and better-for-you products and the Simple Mills acquisition increases our investment in the better-for-you category. Simple Mills' branded snack items, combined with the DKBorganic snack bars and bites, further diversifies our category exposure beyond fresh packaged breads and buns. The nationwide roll out of DKBsnack bites is in progress during Fiscal 2025.

Current wording

We continue to invest in more-premium and better-for-you products, and the Simple Mills acquisition increases our investment in the better-for-you category. Simple Mills' branded snack items, combined with the DKBorganic snack bars and bites, further diversifies our category exposure beyond fresh packaged breads and buns. The nationwide roll out of DKBsnack bites is expected to progress throughout Fiscal 2025.

Previous wording

To grow our cake sales, we introduced our Wonder branded cake products towards the end of the first quarter of Fiscal 2025. Additionally, sales from newer product introductions, such as Nature's Ownsmall loaves and Keto buns and Wonder bagels and English muffins, all introduced subsequent to the first quarter of Fiscal 2024, partially offset the Branded Retail sales decrease.

Current wording

The introduction of Wonder branded cake products towards the end of the first quarter of Fiscal 2025 drove higher branded retail cake sales as compared to the prior year period. Additionally, sales from other newer product introductions, such as Nature's Ownsmall loaves and Keto buns, DKBsandwich rolls, and Wonder bagels and English muffins, partially offset sales decreases in other Branded Retail products.

Previous wording

Workforce-related costs increased as a percent of sales quarter over quarter primarily due to a shift from distributor distribution fees and wage inflation on lower sales, partially offset by benefits of cost savings programs implemented subsequent to the first quarter of the prior year and lower incentive compensation costs. Distributor distribution fees decreased as a percent of sales primarily due to a smaller portion of our sales being made through IDPs, mostly due to the company converting to an employee-based model in California, and sales declines. The conversion was completed early in the second quarter of Fiscal 2025. The increase in the Other line item in the table above mostly relates to the acquisition-related costs and, to a lesser extent, increased vehicle rent expenses related to the California conversion. See the “Matters Affecting Comparability” section above for a discussion of the acquisition-related expenses.

Current wording

Workforce-related costs increased as a percent of sales period over period primarily due to a shift from distributor distribution fees and wage inflation on lower sales. The benefits of cost savings programs implemented subsequent to the first quarter of the prior year and lower incentive compensation costs partially offset the increase. Distributor distribution fees decreased as a percent of sales primarily due to a smaller portion of our sales being made through IDPs mostly resulting from the company converting to an employee-based model in California, and because Simple Mills' products are distributed via warehouse-delivery. The California conversion was completed early in the second quarter of Fiscal 2025. The increase in the Other line item in the table above mostly relates to the current year acquisition-related expenses, higher restructuring-related implementation costs, and increased vehicle rent expenses associated with the California conversion. Lower business process improvement costs partially offset the increase. See the “Matters Affecting Comparability” section above for a discussion of the acquisition-related expenses, restructuring-related implementation costs and business process improvement costs.

Previous wording

Depreciation and amortization expense for the first quarter of Fiscal 2025 increased in dollars and as a percent of sales primarily due to amortization expense associated with the intangible assets acquired in the Simple Mills acquisition and we expect this trend to continue for the remainder of Fiscal 2025.

Current wording

Depreciation and amortization expense for the first half of Fiscal 2025 increased in dollars and as a percent of sales primarily due to amortization expense associated with the intangible assets acquired in the Simple Mills acquisition and we expect this trend to continue for the remainder of Fiscal 2025.

Previous wording

Income from operations for the sixteen weeks ended April 19, 2025 decreased as a percent of sales compared to the prior year quarter primarily due to sales declines, higher selling, distribution, and administrative costs, as described above, lower production volumes, and greater outside purchases of product. Moderating ingredient costs and benefits from optimizing our foodservice business partially offset the decrease.

Current wording

Income from operations for the twenty-eight weeks ended July 12, 2025 decreased as a percent of sales compared to the prior year period primarily due to sales declines, greater outside purchases of product, higher selling, distribution, and administrative costs, as described above, and lower production volumes. Moderating ingredient costs and benefits from optimizing our foodservice business partially offset the decrease.

Previous wording

The effective tax rate for the sixteen weeks ended April 19, 2025 was 25.6% compared to 24.0% in the prior year quarter. The increase in the rate quarter over quarter was primarily due to a shortfall tax expense on stock-based compensation. For the periods presented, the primary differences in the effective rate relate to state income taxes, shortfalls in the current period and windfalls in the prior year period on the vesting of stock-based compensation awards, and benefits recognized from tax credits.

Current wording

The effective tax rate for the twenty-eight weeks ended July 12, 2025 was 25.6% compared to 24.9% in the prior year period. The increase in the rate was primarily due to a shortfall tax expense on stock-based compensation. For the periods presented, the primary differences in the effective rate relate to state income taxes, shortfalls in the current year period and windfalls in the prior year period on the vesting of stock-based compensation awards, and benefits recognized from tax credits.

Previous wording

We believe that our ability to consistently generate cash flows from operating activities to meet our liquidity needs is one of our key financial strengths. Furthermore, we strive to maintain a conservative financial position as we believe it allows us flexibility to make investments and acquisitions and is a strategic competitive advantage. Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures, and obligated debt repayments. We believe that we currently have access to available funds and financing sources to meet our short and long-term capital requirements. The company’s strategy for use of its excess cash flows includes:

Current wording

We believe that our ability to consistently generate cash flows from operating activities to meet our liquidity needs is one of our key financial strengths. Furthermore, we strive to maintain a conservative financial position which we believe is a strategic competitive advantage, allowing us flexibility to make investments and acquisitions. Currently, our liquidity needs are primarily related to working capital requirements, capital expenditures, and obligated debt repayments. We believe that we currently have access to available funds and financing sources to meet our short and long-term capital requirements. The company’s strategy for use of its excess cash flows includes:

Previous wording

Although there has been no material adverse impact on our results of operations, liquidity or cash flows for the sixteen weeks ended April 19, 2025, volatility in global and U.S. economic environments, as a result of, among other things, the inflationary economic environment, supply chain disruptions, including any impact from the imposition of tariffs, labor shortages, the conflict between Russia and Ukraine, and the conflict in the Middle East, could significantly impact our ability to generate future cash flows and we continue to evaluate these various potential business risks. Those potential risks include the possibility of future economic downturns that could shift consumer demand away from our Branded Retail products to store branded products, supply chain disruptions that have impacted, and could continue to impact, the procurement and expense of raw materials and packaging items, the workforce available to us, among other risks.

Current wording

Although there has been no material adverse impact on our results of operations, liquidity or cash flows for the twenty-eight weeks ended July 12, 2025, volatility in global and U.S. economies, as a result of, among other things, the inflationary economic environment, supply chain disruptions, including the impacts of tariffs, increased labor costs, the conflict between Russia and Ukraine, and the conflict in the Middle East, could significantly impact our ability to generate future cash flows. We continue to evaluate these various potential business risks, which include the possibility of future economic downturns that could shift consumer demand away from our Branded Retail products to store branded products, supply chain disruptions that have impacted, and could continue to impact, the procurement and cost of raw materials and packaging items, the workforce available to us, among other risks.

Previous wording

The macroeconomic-related factors discussed above remain fluid and the future impact on our business, results of operations, liquidity or capital resources cannot be reasonably estimated with any degree of certainty. In the event of a significant reduction in revenues, we would have additional alternatives to maintain liquidity, including the availability on our debt facilities, capital expenditure reductions, adjustments to our capital allocation policy, and cost reductions. Although we do not currently anticipate a need, we also believe that we could access the capital markets to raise additional funds. We believe that we have sufficient liquidity on hand to continue business operations during the volatile global and U.S. economic environments. As of April 19, 2025, we had total available liquidity of $592.2 million, consisting of cash on hand and the available balances under the new credit facility and the repurchase facility.

Current wording

The macroeconomic-related factors discussed above remain fluid and the future impact on our business, results of operations, liquidity or capital resources cannot be reasonably estimated with any degree of certainty. In the event of a significant reduction in revenues, we would have additional alternatives to maintain liquidity, including the availability on our debt facilities, capital expenditure reductions, adjustments to our capital allocation policy, and cost reductions. Although we do not currently anticipate a need, we also believe that we could access the capital markets to raise additional funds. We believe that we have sufficient liquidity on hand to continue business operations during the volatile global and U.S. economic environments. As of July 12, 2025, we had total available liquidity of $637.6 million, consisting of cash on hand and the available balances under the new credit facility and the repurchase facility. The impact of the Act will decrease the company's anticipated federal tax payments for the remainder of Fiscal 2025. As of July 12, 2025, the company has a $26.5 million federal income tax receivable. The Act does not impact the company's effective federal tax rate.

Previous wording

Liquidity Discussion for the Sixteen Weeks Ended April 19, 2025 and April 20, 2024

Current wording

Liquidity Discussion for the Twenty-Eight Weeks Ended July 12, 2025 and July 13, 2024

Previous wording

Cash and cash equivalents were $7.3 million at April 19, 2025 and $5.0 million at December 28, 2024. The cash and cash equivalents were derived from the activities presented in the tables below (amounts in thousands):

Current wording

Cash and cash equivalents were $11.0 million at July 12, 2025 and $5.0 million at December 28, 2024. The cash and cash equivalents were derived from the activities presented in the tables below (amounts in thousands):

Previous wording

For the sixteen weeks ended April 19, 2025 and April 20, 2024, respectively, the deferred income tax activity was composed of changes in temporary differences year over year, including the impact of the vesting of stock equity awards, the impact of payments for a previously accrued legal settlement for the repurchase of distribution rights, and activity related to the capitalization of research and development expenses as defined under Internal Revenue Code Section 174.

Current wording

For the twenty-eight weeks ended July 12, 2025, the deferred income tax activity reflects the impact of the newly enacted federal tax legislation under the Act which reinstated the 100% bonus depreciation deduction in the initial year that assets are placed in service and the partial deduction of research and development expenses previously capitalized under Internal Revenue Code Section 174. Additionally, for the current and prior year periods ended July 12, 2025 and July 13, 2024, the deferred income tax activity was composed of changes in temporary differences year over year, including the impact of the vesting of stock equity awards, the impact of payments for a previously accrued legal settlement for the repurchase of distribution rights, and activity related to the capitalization of research and development expenses as defined under Internal Revenue Code Section 174.

Previous wording

Changes in accounts receivable were mainly attributable to changes in sales quarter over quarter. Changes in inventories resulted primarily from volatility in input costs and timing of sell-through of inventories. Changes in accounts payable for the first quarter of Fiscal 2025 were mainly attributable to extending payment terms, and changes for the first quarter of Fiscal 2024 were mainly due to volatility in input prices.

Current wording

Changes in accounts receivable were mainly attributable to changes in sales period over period. Changes in inventories resulted primarily from volatility in input costs. Changes in accounts payable for the first half of Fiscal 2025 were mainly attributable to extending payment terms and volatility in input prices, and changes for the first half of Fiscal 2024 were mainly due to volatility in input prices.