Flowers Foods Inc: Form 10-Q for the period ended Apr 25, 2026

The following discussion of the financial condition and results of operations of the company as of and for the sixteen weeks ended April 25, 2026 should be read in conjunction with the Form 10-K. Any reference to sales refers to net sales inclusive of allowances and deductions against gross sales for variable consideration and consideration payable to customers.

Management’s Discussion and Analysis of Financial Condition and Results of Operations is segregated into four sections, including:

• Executive overview — provides a summary of our business, operating performance and cash flows, and strategic initiatives.
• Critical accounting estimates — describes the accounting areas where management makes critical estimates to report our financial condition and results of operations. There have been no changes to this section from the Form 10-K.
• Results of operations — analyzes the company’s consolidated results of operations for the comparative period presented in our Condensed Consolidated Financial Statements.
• Liquidity and capital resources — analyzes cash flow, contractual obligations, and certain other matters affecting the company’s financial position.

Matters Affecting Comparability

Comparative results from quarter to quarter are impacted by the company's fiscal reporting calendar. Internal financial results and key performance indicators are reported on a weekly basis to ensure the same number of Saturdays and Sundays in comparable months to allow for consistent four-week progression analysis. This structure results in our first quarter consisting of sixteen weeks while the remaining three quarters have twelve weeks (except in cases where there is an extra week every five or six years). Fiscal 2026 is a 52-week year. Fiscal 2025 was a 53-week year with the extra week in the fourth quarter. Accordingly, interim results may not be indicative of subsequent interim period results, or comparable to prior or subsequent interim period results, due to differences in the lengths of the interim periods.

Additionally, detailed below are expense items affecting comparability that will provide greater context while reading this discussion. For more information regarding these items, see the reference to the Notes to Condensed Consolidated Financial Statements of this Form 10-Q as indicated in the table:

(Amounts in thousands)

• Business process improvement costs The upgrade of our ERP system, which is part of our transformation strategy initiatives, is being deployed through a phased approach and is anticipated to be completed in Fiscal 2027. We currently estimate total costs for the ERP upgrade will be approximately $325 million (of which approximately 42% has been or is anticipated to be capitalized). As of April 25, 2026, we have incurred costs related to the project of approximately $272 million. We currently expect costs (a portion of which may be expensed as incurred, capitalized, recognized as a cloud computing arrangement, or recognized as a prepaid service contract) related to the upgrade of our ERP system to be approximately $25.0 million to $30.0 million for Fiscal 2026. The expensed portion of costs incurred related to these initiatives for the sixteen weeks ended April 25, 2026 and April 19, 2025, which was primarily consulting costs, are detailed in the table above and are reflected in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income. Costs from previously capitalized, cloud computing arrangements, or prepaid service contracts are recognized in operating costs and are not included in the business process improvement costs above.
• 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. Based on this review, we announced a restructuring program in the third quarter of Fiscal 2025 and incurred costs for employee termination benefits related to a reduction-in-force ("RIF") of $5.5 million and made payments of $4.8 million during Fiscal 2025. In the fourth quarter of Fiscal 2025, we expanded the scope to include a comprehensive review of our brands, operations, and financial strategy. Although this review is ongoing, it resulted in the impairment of two regional brands in the fourth quarter of Fiscal 2025. This aligns with our strategy to optimize our brand portfolio and invest in our national brands and key product categories.

In the first quarter of Fiscal 2026, we incurred additional RIF-related costs of $1.7 million and made RIF payments of $0.8 million. The RIF charges are included in the restructuring charges line item of the Condensed Consolidated Statements of Income. The company incurred consulting costs associated with these restructuring activities of $8.2 million and $4.3 million during the sixteen weeks ended April 25, 2026 and April 19, 2025, respectively, and these costs are included in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income. This review is ongoing and we anticipate additional restructuring charges and related implementation costs in subsequent quarters.

• 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.
• Legal settlements and related costs In the first quarter of Fiscal 2026, we reached agreements to settle certain distributor-related litigation and non-distributor-related litigation for total settlement payments, inclusive of plaintiffs' attorney fees, of $11.0 million and $3.4 million, respectively. In the first quarter of Fiscal 2025, we reached an agreement to settle certain distributor-related litigation for total settlement payments, inclusive of plaintiffs' attorney fees, of $1.9 million. Additionally, in the first quarter of Fiscal 2025, the company recognized a reduction of $1.2 million to the territory repurchase liability associated with a legal settlement originally recorded in Fiscal 2023. All of these amounts are recorded in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.
• Simple Mills acquisition and integration-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 $846.2 million. The acquisition expands our presence in the better-for-you snacking category, diversifying our category exposure, and enhancing the company's growth and margin prospects. Founded in 2012, Simple Mills is a market-leading natural brand and its products are made with simple ingredients, pioneered from using nutrient-dense nut, seed, and vegetable flours, attracting natural and mainstream consumers alike. Simple Mills' products are produced by co-manufacturers and distributed via warehouse distribution, and are available nationwide. The company funded the cash consideration and the related acquisition fees and expenses with the net proceeds of the 2035 notes and 2055 notes offerings completed on February 14, 2025. During the sixteen weeks ended April 25, 2026 and April 19, 2025, we incurred acquisition and integration-related costs as detailed in the table above and these costs are recorded in the selling, distribution, and administrative expenses line item of the Condensed Consolidated Statements of Income.

Executive Overview

Impact of the Inflationary Economic Environment and Other Macroeconomic Factors on Our Business

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, shifts in consumer preferences based on health trends, supply chain disruptions, including the impacts of tariffs (including retaliatory tariffs), increased labor costs, the conflict between Russia and Ukraine, and the conflicts in the Middle East. Our results for the first quarter of Fiscal 2026 as compared to the prior year period were negatively impacted by continued weakness in the fresh packaged bread category, most notably for branded traditional loaf breads, and market share contraction due to a competitive marketplace. The benefit of sales increases attributed to the Simple Mills acquisition, sales improvement for more differentiated products, such as organic, Keto, and gluten-free, growth in Wonder cake products (introduced in the first quarter of Fiscal 2025), and price increases we have implemented was more than offset by volume declines for other product categories and higher operating costs.

Supply chain and other disruptions have and could continue to negatively impact production costs and/or volumes, and the global and U.S. supply chain remains uncertain. Although the conflict between Russia and Ukraine and the conflicts in the Middle East 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 and distribution of our products. Tariffs (including retaliatory tariffs) have impacted our operations. 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.

We believe we have sufficient liquidity to satisfy our cash needs and we continue to execute on our strategic priorities, including the deployment of the upgrade of our ERP system, as further discussed in the “Liquidity and Capital Resources” section below.

Summary of Operating Results, Cash Flows and Financial Condition

Sales increased 1.1% for the sixteen weeks ended April 25, 2026 compared to the same quarter in the prior year due to the acquisition contribution (cycled on February 21, 2026) of 2.3% and positive price/mix of 2.1%, partially offset by volume declines of 3.3%. Branded Retail sales increased 3.4% with the acquisition contributing 3.6% and positive price/mix contributing 4.0%, somewhat offset by volume declines of 4.2% largely from weakness in sales of traditional loaf breads. Sales in the Other sales category decreased 3.1% due to declines in store branded retail sales, partially offset by increased non-retail sales. Softer volumes impacted both sales categories due to a competitive marketplace and a challenging consumer environment.

For the sixteen weeks ended April 25, 2026, income from operations was $79.8 million compared to $85.1 million in the prior year quarter. The decrease resulted mostly from greater outside purchases of product related to the Simple Mills products, higher legal settlements, increased employee compensation expense, and greater restructuring charges and related implementation costs. These increases were partially offset by lower acquisition and integration costs, the prior year plant closure costs, and lower ingredient costs and distributor distribution fees.

Net income for the sixteen weeks ended April 25, 2026 was $42.1 million compared to $53.0 million in the prior year quarter. The decrease quarter over quarter resulted primarily from lower income from operations, as described above, increased interest expense, and a significantly higher effective tax rate primarily due to shortfalls related to vesting of stock incentive awards.

During the sixteen weeks ended April 25, 2026, we generated net cash flows from operations of $107.9 million, invested $20.6 million in capital expenditures, and decreased our indebtedness by $32.0 million. Additionally, we paid $54.4 million in dividends to our shareholders. On April 6, 2026, we entered into a $400.0 million senior unsecured delayed draw term loan credit facility (the

"term loan facility") which provides us with a prepayable financing structure. The proceeds from the facility will be used to finance the repayment in full of the 2026 notes. Additionally, on April 6, 2026, we amended the $500.0 million senior unsecured revolving credit facility (the "credit facility") to, among other things, extend the covenant holiday currently in effect to October 9, 2027 and add an additional tier to the pricing grid. On April 14, 2026, we amended the accounts receivable repurchase facility (the "repurchase facility") to, among other things, extend the scheduled facility expiration date from April 14, 2027 to April 16, 2029.

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 $846.2 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. Also, in the prior year period, we paid $52.3 million in dividends to our shareholders.

CRITICAL ACCOUNTING POLICIES:

Our financial statements are prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP"). These principles are numerous and complex. Our significant accounting policies are summarized in the Form 10-K. In many instances, the application of GAAP requires management to make estimates or to apply subjective principles to particular facts and circumstances. A variance in the estimates used or a variance in the application or interpretation of GAAP could yield a materially different accounting result. Refer to the Form 10-K for a discussion of the areas where we believe that the estimates, judgments or interpretations that we have made, if different, could yield the most significant differences in our financial statements. There have been no significant changes to our critical accounting policies from those disclosed in the Form 10-K.

RESULTS OF OPERATIONS:

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 25, 2026 and April 19, 2025 are set forth in the tables below (dollars in thousands):

Percentages may not add due to rounding.

The company disaggregates its sales into two categories, Branded Retail and Other. These categories align with our brand-focused strategy to drive above-market growth via innovation and focusing on higher-margin products. The Other category includes store branded retail and non-retail sales (foodservice, restaurant, institutional, vending, thrift stores, and contract manufacturing).

SIXTEEN WEEKS ENDED APRIL 25, 2026 COMPARED TO SIXTEEN WEEKS ENDED APRIL 19, 2025

Sales (dollars in thousands)

(The table above presents certain sales by category that have been reclassified from amounts previously reported to conform to the current period presentation.)

The change in sales was generally attributable to the following:

31

Sales increased quarter over quarter due to the Simple Mills acquisition contribution (cycled on February 21, 2026) of 2.3% and favorable price/mix for the Branded Retail category, partially offset by lower volumes for both sales categories and negative price/mix for the Other category. We began implementing price increases in the fourth quarter of the prior year to offset input cost inflation. Branded Retail volumes were impacted by the challenging consumer environment and marketplace competition. Our promotional activity increased quarter over quarter, targeting more differentiated and premium-priced items which aligns with changing consumer preferences.

We anticipate our Fiscal 2026 sales will be lower than Fiscal 2025 due to the additional week in Fiscal 2025 and continued weakness in the fresh packaged bread category. The sales benefit from the Simple Mills acquisition contribution (acquired on February 21, 2025), growth in more differentiated products, including Simple Mills' products, and the benefit of price increases implemented in the fourth quarter of Fiscal 2025 are anticipated to partially offset the sales decrease.

Branded Retail Sales

Branded Retail sales increased 3.4% quarter over quarter due to the Simple Mills acquisition contribution and favorable price/mix, partially offset by volume declines. Volumes were negatively impacted by continued weakness in the fresh packaged bread category driven by changes in consumer preferences, inflationary pressure on consumer spending, and a competitive marketplace. The largest volume declines were in branded traditional loaf products. Growth in Simple Mills, Wonder cake (introduced near the end of the first quarter of Fiscal 2025), and Nature's Own Keto products partially offset the volume decline. To address changes in consumer preferences, we introduced additional varieties of Nature's Own small loaves and a Keto multi-grain loaf subsequent to the first quarter of Fiscal 2025 and a Keto protein loaf in the first quarter of Fiscal 2026. Other more recently introduced products include DKB sandwich rolls and sourdough loaf. Additionally, Simple Mills continues to innovate, introducing a number of new products and pack sizes. Price/mix benefitted from Simple Mills products comprising a larger percentage of our Branded Retail sales and positive pricing actions.

Other Sales

Sales in the Other category decreased 3.1% due to unfavorable price/mix and decreased volume for store-branded retail products, partially offset by improved non-retail sales. Store branded retail sales declined primarily due to discontinued business resulting in lower cake and traditional loaf volumes, and negative price/mix. Our non-retail sales increased primarily due to growth in vending, partially offset by unfavorable price/mix from foodservice comprising a smaller portion of our non-retail sales.

Materials, Supplies, Labor and Other Production Costs (exclusive of depreciation and amortization shown separately; as a percent of sales)

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) combined with lower production volumes. Lower ingredient costs as a percent of sales partially offset the increase. Outside purchases of product are included in the Other line item in the table above, the majority of which relate to purchases of Simple Mills products, all of which are co-manufactured. The decrease in ingredient costs as a percent of sales was due to increased outside purchases of product as well as lower pricing for commodities, particularly flour, sweeteners and eggs. Higher costs for other ingredients, such as oils and cocoa, and the impact of tariffs partially offset the decrease. We expect the impact of lower production volumes to continue to negatively impact our operations.

Prices of ingredient and packaging materials fluctuate due to various factors including, but not limited to, government policy and regulation (including tariffs), weather conditions, domestic and international demand, availability due to supply conditions, including livestock disease, or other unforeseen circumstances, and we monitor these markets closely. We enter into forward purchase agreements and other financial instruments to manage the impact of volatility in certain raw material prices. Any decrease in the availability of these agreements and instruments could increase the cost of these raw materials and significantly affect our earnings.

Selling, Distribution and Administrative Expenses (as a percent of sales)

Workforce-related costs increased as a percent of sales quarter over quarter primarily due to a shift away from distributor distribution fees and higher employee compensation costs, partially offset by benefits of cost savings programs implemented subsequent to the first quarter of the prior year. Distributor distribution fees decreased as a percent of sales primarily due to a smaller portion of our sales being made through IDPs due to Simple Mills' sales which are warehouse-delivered and converting to an employee-based model in California. 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 higher legal settlements and expenses and greater restructuring-related implementation costs, partially offset by higher acquisition and integration-related costs in the prior year quarter. The company anticipates increased marketing investments in the second and third quarters of Fiscal 2026 to promote the launch of a more consumer-relevant Nature's Own brand with fewer, simpler ingredients and new packaging.

Restructuring Charges and Plant Closure Costs and Impairment of Assets

Refer to the discussion in the “Matters Affecting Comparability” section above regarding these items.

Depreciation and Amortization Expense

Depreciation and amortization expense for the first quarter of Fiscal 2026 increased in dollars and as a percent of sales as compared to the prior year quarter primarily due to assets being placed in service and amortization expense associated with the intangible assets acquired in the Simple Mills acquisition.

Income from Operations

Income from operations for the sixteen weeks ended April 25, 2026 decreased in dollars and as a percent of sales compared to the prior year quarter primarily due to higher materials, supplies, labor, and other production costs, partially offset by the prior year plant closure costs.

Interest Expense, Net

Net interest expense increased in dollars and as a percent of sales as compared to the prior year quarter due to the issuance of the 2035 notes and 2055 notes on February 14, 2025 to fund the Simple Mills acquisition and related fees and expenses.

Income Tax Expense

The effective tax rate for the sixteen weeks ended April 25, 2026 was 30.0% compared to 25.6% in the prior year quarter. The increase in the rate quarter over quarter was primarily due to an increased shortfall tax expense on stock-based compensation, partially offset by a favorable tax impact recognized for acquisition-related costs. For both periods presented, the primary differences in the effective rate and statutory were state income taxes and shortfalls on the vesting of stock-based compensation awards.

Comprehensive Income

Comprehensive income decreased primarily due to the decrease in net income quarter over quarter, net of changes in the fair value of derivatives.

LIQUIDITY AND CAPITAL RESOURCES:

Strategy and Update on Impact of the Inflationary Economic Environment and Other Macroeconomic Factors on Our Business

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:

• implementing our strategic priorities, including our transformation strategy initiatives;
• paying dividends to our shareholders;
• maintaining a conservative financial position;
• making strategic acquisitions; and
• repurchasing shares of our common stock.

Although there has been no material adverse impact on our results of operations, liquidity or cash flows for the sixteen weeks ended April 25, 2026, volatility in global and U.S. economies, as a result of, among other things, the inflationary economic environment, weakness in the fresh packaged bread category, supply chain disruptions, tariffs (including retaliatory tariffs), increased labor costs, the conflict between Russia and Ukraine, and the conflicts 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, shifts in consumers' preferences and buying patterns away from packaged bread items, supply chain disruptions that have impacted, and could continue to impact, the procurement and cost of raw materials and packaging items (including the impacts of tariffs and retaliatory tariffs), the workforce available to us, among other risks.

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 25, 2026, we had total available liquidity of $1,065.3 million, consisting of cash on hand and the available balances under the term loan facility, credit facility, and the repurchase facility. As of April 25, 2026, the company has a $25.9 million federal income tax receivable.

Liquidity Discussion for the Sixteen Weeks Ended April 25, 2026 and April 19, 2025

Cash and cash equivalents were $11.5 million at April 25, 2026 and $12.1 million at January 3, 2026. The cash and cash equivalents were derived from the activities presented in the tables below (amounts in thousands):

Cash Flows Provided by Operating Activities:

• Refer to the Plant closure costs and impairment of assets discussion in the “Matters Affecting Comparability” section above for information regarding the impairment of assets.
• For the sixteen weeks ended April 25, 2026, the deferred income tax activity reflects the impact of the shortfall on the vesting of stock equity awards and changes in temporary differences year over year, including the impact of stock equity awards, initial year 100% bonus depreciation, and the partial deduction of research and development expenses previously capitalized under Internal Revenue Code Section 174. For the sixteen weeks ended April 19, 2025, 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.
• Changes in accounts receivable were mainly attributable to changes in sales period over period. Changes in inventories for the prior year period resulted primarily from volatility in input costs and the timing of sell-through of inventories. Changes in accounts payable for the current year period were mainly attributable to volatility in input prices, and changes for the prior year period were mainly due to extending payment terms and volatility in input prices.
• Hedging activities change due to market movements that affect the fair value and the associated required collateral of positions and the timing and recognition of deferred gains or losses. We expect these changes will continue to occur as part of our hedging program, though the degree and financial impact cannot be currently estimated.
• The change in other assets for the prior year period primarily resulted from changes in income tax receivables and prepaid assets. Changes in legal settlement, employee compensation, interest, and insurance liability accruals primarily resulted in the change in other accrued liabilities in each respective period. During the first quarter of Fiscal 2026 and Fiscal 2025, we paid $31.2 million and $53.8 million, respectively, including our share of employment taxes, in performance-based cash awards under our bonus plans. An additional $1.1 million and $1.4 million was paid during the first quarter of Fiscal 2026 and Fiscal 2025, respectively, for our share of employment taxes on the vesting of employee restricted stock awards in each respective year. During the sixteen weeks ended April 25, 2026, the company accrued $14.4 million in legal settlements and made payments of $3.4 million. During the sixteen weeks ended April 19, 2025, the company accrued $1.9 million of legal settlements and paid $1.7 million that had been accrued for in the prior year.

Cash Flows Disbursed for Investing Activities:

• We currently anticipate capital expenditures of $115.0 million to $125.0 million for Fiscal 2026 (inclusive of expenditures for the ERP upgrade of $4.0 million to $8.0 million).
• In the prior year period, the repurchases of the California distribution rights contributed to most of the change in the repurchases of distribution rights, net of principal payments on notes receivable. The company completed the California repurchases early in the second quarter of Fiscal 2025.
• As discussed in the "Executive Overview" section above, on February 21, 2025, we completed the Simple Mills acquisition for total consideration of $846.2 million of which $791.9 million, which is net of cash acquired, was paid in the first quarter of Fiscal 2025.

Cash Flows (Disbursed for) Provided by Financing Activities:

• Our Board of Directors declared the following quarterly dividends during the sixteen weeks ended April 25, 2026 (amounts in thousands, except per share data):

• The increase in dividends paid resulted from an increase in the dividend rate compared to the prior year. Additionally, we paid dividends of $2.2 million at the time of vesting of certain restricted stock awards.
• In the current year period, we paid financing fees associated with the term loan facility and amending the credit facility and repurchase facility. In the prior year period, we paid financing fees associated with issuing the 2035 notes and 2055 notes, refinancing and replacing the previous credit facility with the new credit facility, and amending the repurchase facility.
• Stock repurchase decisions are made based on our stock price, our belief of relative value, and our cash projections at any given time. During the sixteen weeks ended April 25, 2026 and April 19, 2025, we repurchased 378,398 and 286,980 shares of our common stock for $3.8 million and $5.5 million, respectively, under a share repurchase plan approved by our Board of Directors. All of the shares acquired in the current and prior year periods were acquired to satisfy employees’ tax withholding and payment obligations in connection with the vesting of restricted stock awards, which are repurchased by the company based on the fair market value on the vesting date.
• Changes in debt obligations in the prior year period primarily related to issuing the 2035 notes and 2055 notes to fund the Simple Mills acquisition. See the discussion below under the “Capital Structure” section for additional details regarding changes in debt obligations.

Capital Structure

Long-term debt and right-of-use lease obligations and stockholders’ equity were as follows at April 25, 2026 and January 3, 2025, respectively. For additional information regarding our debt and right-of-use lease obligations, see Note 6, Leases, and Note 14, Debt and Other Obligations, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q.

(Amounts in thousands)

In anticipation of the upcoming maturity of the 2026 notes, on April 6, 2026, we entered into the $400.0 million term loan facility with certain financial institutions party thereto as lenders and Wells Fargo Bank, National Association, as administrative agent. The term loan facility may be made available in a single drawing during the period from the closing date of the term loan facility through and including October 1, 2026, or the earlier termination of the commitments. The term loan facility has an initial maturity date occurring on the third anniversary of the funding date thereof. The term loan credit agreement requires that the company use the net proceeds of the term loan facility to, together with cash on hand, finance the repayment in full of the 2026 notes and to pay the fees, costs, and expenses incurred in connection therewith and with the execution of the term loan facility and the revolver amendment.

Borrowings under the term loan facility bear interest, at the option of the company, based on the SOFR or the “base rate”, in each case, plus an applicable margin. The applicable margin is determined by reference to a pricing grid based on the company’s leverage ratio and debt rating, with a range of 0.875% to 2.000% in the case of SOFR-based loans and range from 0.000% to 1.000% in the case of base rate loans. In addition, the term loan facility bears an additional ticking fee on the full amount of the unused commitments, also determined by reference to the pricing grid, and ranging from 0.060% to 0.250% based upon the company’s then applicable leverage ratio and debt rating.

The term loan credit agreement contains representations, covenants and events of default that are customary for financing transactions of this nature, which are substantially the same as the credit agreement (including, without limitation, with respect to financial covenants).

To provide enhanced financial flexibility, on April 6, 2026, the company entered into the First Amendment to the credit agreement (the "revolver amendment") in order to, among other things, (i) extend the covenant holiday currently in effect, to the period from the closing date of the revolver amendment through and including the company’s fiscal quarter ending October 9, 2027, (ii) add an additional tier to the pricing grid thereof for the case in which the company’s debt ratings fall to Ba2 or below from Moody’s and BB or below from S&P, consistent with the term loan credit agreement, and (iii) make certain other changes to align with the term loan credit agreement. On April 14, 2026, the company entered into Amendment No. 3 to the Master Framework Agreement to amend the repurchase facility and extend the scheduled facility expiration date from April 14, 2027 to April 16, 2029. The accounts receivable repurchase facility and the credit facility are generally used for short-term liquidity needs and are variable rate debt, providing us the greatest direct exposure to changing interest rates. In periods of rising interest rates, the cost of using these facilities increases, resulting in greater interest expense.

The following table details the amounts available and the highest and lowest balances outstanding under our debt facilities during the sixteen weeks ended April 25, 2026:

(Amounts in thousands)

(1) Amount excludes a provision in the repurchase facility agreement which allows the company to request up to $50.0 million in additional commitment.

(2) Amount excludes a provision in the credit facility agreement which allows the company to request an additional $200.0 million in additional revolving commitments.

(3) Amount represents the available funds for withdrawal under the company's term loan facility through October 1, 2026.

We believe we have sufficient liquidity to satisfy our cash needs, however, we continue to closely monitor our liquidity in light of the continued economic uncertainty in the U.S. and globally due to, among other things, the impact of the inflationary economic environment, weakness in the fresh packaged bread category, supply chain disruptions, tariffs (including retaliatory tariffs), increased labor costs, the conflict between Russia and Ukraine, and the conflicts in the Middle East. As discussed above, the 2026 notes will mature during the third quarter of Fiscal 2026 on October 1, 2026 and are anticipated to be repaid with proceeds from the term loan facility.

Similar to the term loan facility, restrictive financial covenants for our other borrowings can include ratios such as a minimum interest coverage ratio and a maximum leverage ratio. Our debt may also contain certain customary representations and warranties, affirmative and negative covenants, and events of default. The company believes that, given its current cash position, its cash flow from operating activities, and its available credit capacity, it can comply with the current terms of the debt agreements and can meet presently foreseeable financial requirements. As of April 25, 2026, the company was in compliance with all restrictive covenants under its debt agreements.

At April 25, 2026, the company did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which are established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes.

Accounting Pronouncements Recently Adopted and Not Yet Adopted

See Note 2, Recent Accounting Pronouncements, of Notes to Condensed Consolidated Financial Statements of this Form 10-Q for information regarding recently adopted accounting pronouncements and accounting pronouncements not yet adopted.

The company uses derivative financial instruments as part of an overall strategy to manage market risk. The company uses forward, futures, swap and option contracts to hedge existing or future exposure to changes in interest rates and commodity prices. The company does not enter into these derivative financial instruments for trading or speculative purposes. If actual market conditions are less favorable than those anticipated, raw material prices could increase significantly, adversely affecting the margins from the sale of our products.

Commodity Price Risk

The company enters into commodity forward, futures and option contracts and swap agreements for wheat and, to a lesser extent, other commodities in an effort to provide a predictable and consistent commodity price and thereby reduce the impact of market volatility of raw material and packaging prices. As of April 25, 2026, the company’s hedge portfolio contained commodity derivatives with a fair value (liability) of $3.6 million, based on quoted market prices. All this amount relates to instruments that will be utilized in Fiscal 2026 except for an immaterial amount to be utilized in Fiscal 2027.

A sensitivity analysis has been prepared to quantify the company’s potential exposure to commodity price risk with respect to the derivative portfolio. Based on the company’s derivative portfolio as of April 25, 2026, a hypothetical ten percent increase (decrease) in commodity prices would increase (decrease) the fair value of the derivative portfolio by $2.2 million. The analysis disregards changes in the exposures inherent in the underlying hedged items; however, the company expects that any increase (decrease) in fair value of the portfolio would be substantially offset by increases (decreases) in raw material and packaging prices.

Management’s Evaluation of Disclosure Controls and Procedures

We have established and maintain a system of disclosure controls and procedures that are designed to ensure that material information relating to the company, which is required to be timely disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is accumulated and communicated to management in a timely fashion and is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer ("CFO"), we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation and as of the end of the period covered by this report, the CEO and the CFO concluded that the company’s disclosure controls and procedures were effective to allow timely decisions regarding disclosure in its reports that the company files or submits to the SEC under the Exchange Act.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended April 25, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Refer to Part I, Item 1A., Risk Factors, in the Form 10-K for information regarding factors that could affect the company’s results of operations, financial condition and liquidity. Additional risks and uncertainties not presently known to us or that we currently deem to be immaterial also may affect us. The occurrence of any of these known or unknown risks could have a material adverse ultimate impact on our business, financial condition, or results of operations.