FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D C 20549

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended April 20, 2002

[ ] 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 1-6247

FLOWERS FOODS, INC.
-------------------
(Exact name of registrant as specified in its charter)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS

Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

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

TITLE OF EACH CLASS OUTSTANDING AT MAY 31, 2002
------------------- ---------------------------

Common Stock, $.01 par value with
Preferred Share Purchase Rights 29,797,513

FLOWERS FOODS, INC.
INDEX

PAGE
NUMBER
------

PART I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheet April 20, 2002 and December 29, 2001............................ 3
Condensed Consolidated Statement of Income for the Sixteen Weeks Ended April 20, 2002
and April 21, 2001................................................................................... 4
Condensed Consolidated Statement of Cash Flows for the Sixteen Weeks Ended April 20, 2002
and April 21, 2001................................................................................... 5
Notes to Condensed Consolidated Financial Statements................................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................... 16
PART II. Other Information
Item 1. Legal Proceedings.................................................................................. 17
Item 4. Submission of Matters to a Vote of Security Holders................................................ 17
Item 5. Other Information.................................................................................. 17
Item 6. Exhibits and Reports on Form 8-K................................................................... 17

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

APRIL 20, 2002 DECEMBER 29, 2001
-------------- -----------------
(Unaudited)

ASSETS
Current Assets:
Cash and cash equivalents .............................................. $ 6,030 $ 12,280
Accounts and notes receivable, net of allowances
of $2,512 and $1,271, respectively ..................................... 112,361 104,104
Inventories, net:
Raw materials ........................................................ 16,339 18,593
Packaging materials .................................................. 13,137 13,942
Finished goods ....................................................... 68,085 56,466
----------- -----------
97,561 89,001
----------- -----------
Spare parts and supplies ............................................... 22,022 20,981
----------- -----------
Assets held for sale ................................................... 18,299 18,025
----------- -----------
Other .................................................................. 10,754 8,149
----------- -----------
267,027 252,540
----------- -----------
Property, Plant and Equipment:
Land ................................................................... 33,345 33,324
Buildings .............................................................. 267,207 267,184
Machinery and equipment ................................................ 660,766 656,727
Furniture, fixtures and transportation equipment ....................... 68,536 67,797
Construction in progress ............................................... 21,192 8,570
----------- -----------
1,051,046 1,033,602
Less: accumulated depreciation ........................................ (443,598) (423,170)
----------- -----------
607,448 610,432
----------- -----------
Notes Receivable ......................................................... 71,659 72,940
----------- -----------
Deferred Taxes ........................................................... 11,487 16,084
----------- -----------
Other Assets ............................................................. 25,594 22,015
----------- -----------
Cost in Excess of Net Tangible Assets:
Cost in excess of net tangible assets .................................. 175,428 174,913
Less: accumulated amortization ........................................ (50,662) (49,233)
----------- -----------
124,766 125,680
----------- -----------

$ 1,107,981 $ 1,099,691
=========== ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt and capital leases ................ $ 36,744 $ 15,648
Accounts payable ....................................................... 85,586 83,980
Facility closing costs and severance ................................... 5,490 4,830
Other accrued liabilities .............................................. 76,637 81,756
----------- -----------
204,457 186,214
----------- -----------
Long-Term Debt and Capital Leases ........................................ 234,703 242,057
----------- -----------
Other Liabilities:
Facility closing costs and severance ................................... 8,285 11,571
Postretirement/postemployment obligations .............................. 21,000 25,466
Other .................................................................. 14,316 12,746
----------- -----------
43,601 49,783
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 and
29,797,513 and 29,797,513 shares issued, respectively .................. 298 298
Capital in excess of par value ......................................... 476,401 476,401
Retained earnings ...................................................... 151,565 149,842
Accumulated other comprehensive loss ................................... (3,044) (4,904)
----------- -----------
625,220 621,637
----------- -----------

$ 1,107,981 $ 1,099,691
=========== ===========

(See Accompanying Notes to Condensed Consolidated Financial Statements)

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

FOR THE SIXTEEN WEEKS ENDED
------------------------------------
APRIL 20, 2002 APRIL 21, 2001
-------------- --------------

Sales .................................................... $ 463,613 $ 466,015
Materials, supplies, labor and other
production costs ......................................... 249,081 253,492
Selling, marketing and administrative expenses ........... 184,793 186,869
Depreciation and amortization ............................ 21,903 21,617
Insurance proceeds, net .................................. -- (6,789)
Unusual charges .......................................... -- 27,952
--------- ---------
Income (loss) from operations ............................ 7,836 (17,126)
--------- ---------
Interest (income) ........................................ (1,736) (435)
Interest expense ......................................... 6,770 18,013
--------- ---------
Interest expense, net .................................... 5,034 17,578
--------- ---------
Income (loss) before income taxes and extraordinary gain.. 2,802 (34,704)
Income tax expense (benefit) ............................. 1,079 (9,023)
--------- ---------
Income (loss) before extraordinary gain .................. 1,723 (25,681)
Extraordinary gain on early extinguishment of debt ....... -- 5,000
--------- ---------

Net income (loss) ........................................ $ 1,723 $ (20,681)
========= =========

Net Income (Loss) Per Common Share:
Basic:
Income (loss) before extraordinary gain on early
extinguishment of debt ................................ $ 0.06 $ (0.86)
Extraordinary gain on early extinguishment of debt .... -- 0.17
--------- ---------
Net income (loss) per share ........................... $ 0.06 $ (0.69)
========= =========

Weighted average shares outstanding ..................... 29,798 29,799

Diluted:
Income (loss) before extraordinary gain on early
extinguishment of debt ................................ $ 0.06 $ (0.86)
Extraordinary gain on early extinguishment of debt .... -- 0.17
--------- ---------
Net income (loss) per share ........................... $ 0.06 $ (0.69)
========= =========

Weighted average shares outstanding ...................... 30,878 29,799

Cash Dividends Paid Per Common Share ..................... -- --

(See Accompanying Notes to Condensed Consolidated Financial Statements)

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

FOR THE SIXTEEN WEEKS ENDED
------------------------------------
APRIL 20, 2002 APRIL 21, 2001
-------------- --------------

CASH FLOWS (DISBURSED FOR) RECEIVED FROM OPERATING ACTIVITIES:
Net income (loss) ...................................................... $ 1,723 $ (25,681)
Adjustments to reconcile net income (loss) to net cash
(disbursed for) received from operating activities:
Extraordinary gain, net of tax .................................... -- 5,000
Depreciation and amortization ..................................... 21,903 21,617
Deferred income taxes ............................................. 1,079 (9,023)
Provision for inventory obsolescence .............................. 1,013 1,307
Allowances for accounts receivable ................................ 1,125 973
Non-cash effect of derivative instruments ......................... -- 6,283
Other ............................................................. -- (13)
Changes in assets and liabilities:
Accounts and notes receivable, net ................................ (9,265) (17,960)
Inventories, net .................................................. (11,253) (14,430)
Other assets ...................................................... (2,219) 5,925
Accounts payable and other accrued liabilities .................... (6,306) (8,250)
Facility closing costs and severance .............................. (1,437) (1,245)
-------- ---------
NET CASH DISBURSED FOR OPERATING ACTIVITIES ............................ $ (3,637) $ (35,497)
-------- ---------
CASH FLOWS (DISBURSED FOR) RECEIVED FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment ......................... (15,991) (13,765)
Proceeds from / (purchase of) notes receivable .................... 1,164 (77,646)
Dividends received ................................................ -- 5,197
Proceeds from property disposals .................................. 409 50
Other ............................................................. (76) 699
-------- ---------
NET CASH DISBURSED FOR INVESTING ACTIVITIES ............................ $(14,494) $ (85,465)
-------- ---------
CASH FLOWS (DISBURSED FOR) RECEIVED FROM FINANCING ACTIVITIES:
Stock compensation and warrants exercised ......................... -- (504)
Proceeds from new credit agreement ................................ -- 251,000
Purchase of debentures ............................................ -- (193,776)
Other debt and capital lease obligation proceeds / (payments) ..... 11,881 (1,317)
Other net changes in debt and other liabilities in connection --
with the spin-off and merger ...................................... -- 65,044
-------- ---------
NET CASH RECEIVED FROM FINANCING ACTIVITIES ............................ $ 11,881 $ 120,447
-------- ---------
Net decrease in cash and cash equivalents .............................. (6,250) (515)
Cash and cash equivalents at beginning of period ....................... 12,280 11,845
-------- ---------
Cash and cash equivalents at end of period ............................. $ 6,030 $ 11,330
======== =========

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 April 20, 2002 and December 29, 2001 (audited), the
results of operations for the sixteen-week periods ended April 20, 2002 and
April 21, 2001 and statement of cash flows for the sixteen-week periods ended
April 20, 2002 and April 21, 2001. The results of operations for the
sixteen-week periods ended April 20, 2002 and April 21, 2001, 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 29, 2001. The accounting
policies used in preparing these financial statements are the same as those
summarized in the company's Annual Report on Form 10-K for the fiscal year ended
December 29, 2001, except as discussed in Notes 4 and 5 below.

REPORTING PERIODS - The company's quarterly reporting periods for fiscal 2002
are as follows: first quarter ended April 20, 2002 (sixteen weeks), second
quarter ending July 13, 2002 (twelve weeks), third quarter ending October 5,
2002 (twelve weeks) and fourth quarter ending December 28, 2002 (twelve weeks).

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

2. SPIN-OFF AND MERGER TRANSACTION

On March 26, 2001, Flowers Industries, Inc. ("FII") shareholders
approved a transaction that resulted in the spin-off of Flowers Foods and the
merger of FII with a wholly-owned subsidiary of the Kellogg Company
("Kellogg"). In the transaction, FII transferred the stock of its two
wholly-owned subsidiaries, Flowers Bakeries, Inc. ("Flowers Bakeries") and Mrs.
Smith's Bakeries, Inc. ("Mrs. Smith's Bakeries") and all other assets and
liabilities directly held by FII (except for its majority interest in Keebler
Foods Company ("Keebler") and certain debt, other liabilities and transaction
costs) to Flowers Foods. FII distributed all of the outstanding shares of
common stock of Flowers Foods to then existing FII shareholders such that FII
shareholders received one share of Flowers Foods common stock for every five
shares of FII they owned. FII, which consisted solely of its majority interest
in Keebler and the aforementioned liabilities, was simultaneously merged with a
wholly-owned subsidiary of Kellogg. The cash purchase price paid by Kellogg,
less the aforementioned liabilities and certain other transaction costs,
resulted in net proceeds paid directly to FII shareholders of $1,241.6 million.

In connection with the spin-off and merger transaction, various
separation and other contractual payments under FII's stock and incentive
programs of $39.0 million were paid to executive and non-executive officers and
employees. Of this amount, $5.7 million was accrued at March 26, 2001, and $5.3
million was amortized to earnings prior to March 26, 2001. Accordingly, in the
first quarter of fiscal 2001, a charge of $28.0 million was recorded as an
unusual charge to the company's continuing operations, with a corresponding
credit to capital in excess of par value, as a result of payments being settled
from the proceeds of the spin-off and merger transaction.

3. COMPREHENSIVE INCOME

The company has other comprehensive income resulting from its
accounting for derivative financial instruments (see Note 7). Total
comprehensive income (loss) was $3.6 million and $(24.6) million for the
sixteen weeks ended April 20, 2002 and April 21, 2001, respectively.

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The company adopted Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets ("SFAS 142") on December
30, 2001 (the first day of fiscal 2002). This standard provides accounting and
disclosure guidance for acquired intangibles. Under this standard, goodwill and
"indefinite-lived" intangibles are no longer amortized, but are tested at least
annually for impairment. If the asset is determined to be impaired, an
impairment loss would be recognized to reduce carrying value to fair value.
Transitional impairment tests of goodwill and non-amortized intangibles are
also performed upon adoption of SFAS No. 142, with any recognized impairment
loss reported as the cumulative effect of an accounting change in the first
period of adoption.

SFAS 142 requires that goodwill be tested annually for impairment using
a two-step process. The first step is to identify a potential impairment and,
in transition, this step must be measured as of the beginning of the fiscal
year. Further, the company has six months from the date of adoption to complete
the first step. The second step of the impairment test measures the amount of
the impairment loss (measured as of the beginning of the year), if any, and
must be completed by the end of the company's 2002 fiscal year. The company
expects to complete these steps in the goodwill impairment test within the
required timeframe. While the company has not yet completed its transitional
impairment test, management believes an impairment provision upon adoption of
SFAS 142 could approximate $20 - $30 million. Further, management expects the
adoption of SFAS 142 to reduce the company's amortization expense for goodwill
and other intangibles by approximately $4.0 million annually ($2.5 million, net
of tax), beginning on December 30, 2001 (the first day of fiscal 2002).

Intangible assets deemed to have an indefinite life were tested for
impairment using a one-step process that compares the fair value of the asset
to the carrying amount of the asset as of the date of adoption (the beginning
of this fiscal year). Pursuant to the requirements of SFAS 142, this
transitional impairment test was completed during the first quarter of fiscal
2002 and no impairment losses were required to be recognized.

The following table sets forth the information for goodwill and other
intangible assets:

APRIL 20, DECEMBER 29,
2002 2001
--------- ------------
(amounts in thousands)

Goodwill, net .................................. $ 79,249 $ 79,975
Intangible assets not subject to
amortization:
Trademarks ............................... 29,538 29,538
Other .................................... 903 903
Intangible assets subject to amortization:
Trademarks ............................... 3,210 3,237
Customer relationships, .................. 7,590 8,056
Non-compete agreements ................... 1,864 2,567
Other .................................... 2,412 1,404
-------- --------
Total intangible assets, net ............. $124,766 $125,680
======== ========

During the first quarter of fiscal 2002, Mrs. Smith's Bakeries recorded
a $1.2 million adjustment to its purchase accounting reserve with an offsetting
entry of $0.7 million and $0.5 million, to goodwill and deferred taxes,
respectively. This reserve and the related goodwill and deferred taxes were
recorded in fiscal 1996 as a result of the closure of its Pottstown,
Pennsylvania production facility. This adjustment is the result of more accurate
information regarding medical and worker's compensation expenses.

The provisions of SFAS No. 142 are adopted prospectively and
prior-period financial statements are not restated. Comparative earnings
information for prior periods is presented in the following tables:

FOR THE SIXTEEN WEEKS ENDED
-----------------------------------
APRIL 20, 2002 APRIL 21, 2001
-------------- --------------
(amounts in thousands)

Reported income (loss) before extraordinary gain $ 1,723 $ (25,681)
Add back: goodwill amortization, net of tax -- 697
Add back: trademark amortization, net of tax -- 201
--------- ----------
Adjusted income (loss) before extraordinary gain $ 1,723 $ (24,783)
========= ==========

BASIC EARNINGS PER SHARE:
Reported income (loss) before extraordinary gain $ .06 $ (0.86)
Goodwill amortization, net of tax -- 0.02
Trademark amortization, net of tax -- 0.01
--------- ----------
Adjusted income (loss) before extraordinary gain $ .06 $ (0.83)
========= ==========

DILUTED EARNINGS PER SHARE:
Reported income (loss) before extraordinary gain $ .06 $ (0.86)
Goodwill amortization, net of tax -- 0.02
Trademark amortization, net of tax -- 0.01
--------- ----------
Adjusted income (loss) before extraordinary gain $ .06 $ (0.83)
========= ==========

FOR THE SIXTEEN WEEKS ENDED
-----------------------------------
APRIL 20, 2002 APRIL 21, 2001
-------------- --------------
(amounts in thousands)

Reported net income (loss) $ 1,723 $ (20,681)
Add back: goodwill amortization, net of tax -- 697
Add back: trademark amortization, net of tax -- 201
--------- ----------
Adjusted net income (loss) $ 1,723 $ (19,783)
========= ==========

BASIC EARNINGS (LOSS) PER SHARE:
Reported net income (loss) $ .06 $ (0.69)
Goodwill amortization, net of tax -- 0.02
Trademark amortization, net of tax -- 0.01
--------- ----------
Adjusted net income (loss) $ .06 $ (0.66)
========= ==========

DILUTED EARNINGS (LOSS) PER SHARE:
Reported net income (loss) $ .06 $ (0.69)
Goodwill amortization, net of tax -- 0.02
Trademark amortization, net of tax -- 0.01
--------- ----------
Adjusted net income (loss) $ .06 $ (0.66)
========= ==========

5. RECLASSIFICATION OF COUPON AND SLOTTING COSTS

Effective December 30, 2001 (the first day of fiscal 2002), the
company adopted the provisions of Emerging Issues Task Force ("EITF") Issue No.
01-9, "Accounting for Consideration Given by a Vendor to a Customer or a
Reseller of the Vendor's Products." EITF Issue No. 01-9 codifies and reconciles
the Task Force consensuses on all or specific aspects of EITF Issues No. 00-14,
"Accounting for Certain Sales Incentives," No. 00-22, "Accounting for 'Points'
and Certain Other Time-Based or Volume-Based Sales Incentives Offers, and
Offers for Free Products or Services to be Delivered in the Future," and No.
00-25, "Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products" and identifies other related interpretive
issues. The company adopted the provisions of EITF Issue No. 00-22 on December
31, 2000. EITF Issue No. 01-9 requires certain selling expenses incurred by the
company, not previously reclassified (primarily coupon and slotting costs), to
be classified as reductions of sales. The adoption of the remaining items
included in EITF Issue No. 01-9 (EITF 00-14 and EITF 00-25) resulted in the
company reducing both sales and selling, marketing and administrative expenses
by an aggregate of approximately $2.2 million for the sixteen weeks ended April
20, 2002. Prior year aggregate amounts of $1.2 million have also been
reclassified to reflect this change. These reclassifications have no impact on
net income.

6. NEW ACCOUNTING PRONOUNCEMENTS

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" which addresses the financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. This statement will be effective for the
company beginning in the first quarter of fiscal 2003. Management does not
expect the adoption of this statement to have a material impact on the company's
results of operations or financial position.

In October 2001, the FASB issued SFAS No. 144 ("SFAS 144"),
"Accounting for Impairment or Disposal of Long-lived Assets" which supercedes
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" and the accounting and reporting
provisions of APB Opinion No. 30, "Reporting the Results of Operations --
Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions" for
the disposal of a segment of a business. SFAS 144 clarifies and revises
existing guidance on accounting for impairment of plant, property, and
equipment, amortizable intangibles and other long-lived assets not specifically
addressed in other accounting literature. SFAS 144 also broadens the
presentation of discontinued operations to include a component of an entity
rather than only a segment of a business. The company adopted this statement on
December 30, 2001 (the first day of fiscal 2002) on a prospective basis.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FAS Nos.
4,44,and 64, Amendment of FAS 13, and Technical Corrections as of April 2002."
This statement 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." This
Statement also rescinds FASB Statement No. 44, "Accounting for

Intangible Assets of Motor Carriers". This Statement amends 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. Management does not expect the adoption of this
statement to have a material impact on the company's results of operations or
financial position.

7. 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, fruits and dairy
products, along with pulp and paper, aluminum and petroleum-based packaging
products. The company also enters into interest rate derivatives to hedge
exposure to changes in interest rates.

During the first quarter of fiscal 2002, changes to accumulated other
comprehensive income, net of tax, resulting from hedging activities were as
follows:

DR./(CR.)
-----------
(amounts in
thousands)

Accumulated other comprehensive income at December 29,
2001 ......................................................... $ 4,904
Net deferred gains on closed contracts ......................... 365
Reclassified to earnings (materials, supplies, labor and
other production costs) ...................................... (345)
Effective portion of change in fair value of hedging
instruments .................................................. (1,880)
-------
Accumulated other comprehensive income at April 20, 2002 ....... $ 3,044
=======

Of the $3.0 million in accumulated other comprehensive income,
approximately $1.9 million, $1.4 million and $(0.3) million were related to
instruments expiring in fiscal 2002, 2003 and 2004, respectively, and an
immaterial amount was related to deferred gains and losses on cash flow hedge
positions.

As of April 20, 2002, the company's hedge portfolio contained
commodity derivatives with a fair value of $(1.1) million. The positions held
in the portfolio are used to hedge economic exposure to changes in various raw
material prices and effectively fix or limit increases in prices for a period
of time extending into fiscal 2004. Under Statement of Financial Accounting
Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), instruments with a fair value of $(0.8) million on
April 20, 2002 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 remaining $(0.3) million in fair value of commodity derivatives
at April 20, 2002 is related to hedge instruments that do not qualify for hedge
accounting under SFAS 133. For these instruments, changes in fair value are
recorded each period in selling, marketing and administrative expense. During
the first quarter of fiscal 2002, $0.2 million in income was recorded to
current earnings due to changes in fair value of these instruments.

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. The
interest rate swap agreement results 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, this swap transaction is designated as a
cash-flow hedge. 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 swap on April 20, 2002 was $(4.2) million.
During the first quarter of fiscal 2002, $1.9 million of additional interest
expense was recognized due to periodic settlements of the swap. There was no
ineffectiveness recorded to current earnings related to the interest rate swap.

8. DEBT

Long-term debt consisted of the following at April 20, 2002 and
December 29, 2001, (amounts in thousands):

INTEREST
RATE MATURITY APRIL 20, 2002 DECEMBER 29, 2001
-------- -------- -------------- -----------------

Senior Secured Credit Facilities ..... 4.96% 2007 $203,253 $189,250
Capital Lease Obligations ............ 4.39% 2008 60,523 60,389
Other Note Payable ................... 7.48% 2004 7,671 8,066
-------- --------
$271,447 $257,705
Less Current Maturities ............ 36,744 15,648
-------- --------
Total Long-Term Debt ............... $234,703 $242,057
======== ========

In fiscal 2001, the company purchased certain fixed assets which were
previously leased under operating leases. In addition, on March 26, 2001, the
company purchased the notes receivable ("distributor notes") from the
independent distributors which had been previously owned by a third party
financial institution and serviced by the company or a wholly-owned subsidiary
of the company. On March 26, 2001, the company completed a tender offer for the
$200 million aggregate principal amount of 7.15% Debentures due 2028 (the
"debentures") and repurchased substantially all the debentures at a discount.
Accordingly, in the first quarter of fiscal 2001, the company recorded an
extraordinary gain of approximately $5.0 million, net of tax, related to the
early extinguishment of these debentures.

The purchases of the fixed assets, distributor notes and debentures
were financed primarily from the proceeds of a credit agreement entered into by
the company on March 26, 2001. The credit agreement provides for total
borrowings of up to $380 million, consisting of Term Loan A of $100 million and
Term Loan B of $150 million and a revolving loan facility of $130 million.

The credit agreement includes certain restrictions, which, among other
things, require maintenance of financial covenants, restrict encumbrance of
assets and creation of indebtedness and limit capital expenditures, repurchase
of common shares and dividends that can be paid. Restrictive financial
covenants include such ratios as a consolidated interest coverage ratio, a
consolidated fixed charge coverage ratio and a maximum total leverage ratio.
Capital expenditures cannot exceed $50.0 million in fiscal 2002. No dividends
were allowed to be paid in fiscal 2001. In fiscal 2002, the maximum amount of
dividends that can be paid cannot exceed $5.0 million, unless certain
conditions are met. Loans under the credit agreement are collateralized by
substantially all of the assets of the company, excluding real property. At
April 20, 2002, the company was in compliance with these restrictive financial
covenants.

9. FACILITY CLOSING COSTS AND SEVERANCE

During the first quarter of fiscal 2002, Mrs. Smith's Bakeries
recorded a $1.2 million adjustment to its purchase accounting reserve recorded
in fiscal 1996 as a result of the closure if its Pottstown, Pennsylvania
production facility. This adjustment is a result of more accurate information
regarding medical and worker's compensation expenses.

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):

PROVISION/
12/29/2001 ADJUSTMENT SPENDING 4/20/2002
---------- ---------- -------- ---------

Noncancelable lease obligations
and other facility closing costs... $13,489 $ -- $(1,044) $12,445
Severance ........................... 239 -- (196) 43
Other ............................... 2,673 (1,189) (197) 1,287
------- ------- ------- -------

Total ............................... $16,401 $(1,189) $(1,437) $13,775
======= ======= ======= =======

10. LITIGATION

On March 25, 2002, in Trans American Brokerage, Inc. 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 dispute, the claimant alleges breach of a
sales brokerage agreement by Mrs. Smith's Bakeries and seeks lost profits as
well as attorneys' fees and costs. As a result of the award, the company
recorded a $10.0 million charge ($6.2 million after tax) to its results for the
fiscal year ended December 29, 2001 as required by Generally Accepted
Accounting Principles. The charge represents the company's estimate of the
total costs (including attorney's fees and expenses) which it could incur in
connection with this dispute. The company disagrees with the arbitrator's award
and intends to continue to vigorously contest it including a request that the
arbitrator reconsider the interim award.

11. SEGMENT REPORTING

The company has two reportable segments, Flowers Bakeries and Mrs.
Smith's Bakeries. Flowers Bakeries produces fresh breads and rolls and Mrs.
Smith's Bakeries produces fresh and frozen baked desserts, snacks, breads and
rolls. 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 unusual charges. Information
regarding the operations in these reportable segments is as follows (amounts in
thousands):

FOR THE SIXTEEN WEEKS ENDED
------------------------------------
APRIL 20, 2002 APRIL 21, 2001
-------------- --------------
(UNAUDITED)

SALES:
Flowers Bakeries ................. $ 320,481 $ 321,565
Mrs. Smith's Bakeries ............ 161,574 165,799
Elimination (1) .................. (18,442) (21,349)
--------- ---------
$ 463,613 $ 466,015
========= =========

DEPRECIATION AND AMORTIZATION:
Flowers Bakeries ................. $ 13,488 $ 13,142
Mrs. Smith's Bakeries ............ 8,357 8,417
Other ............................ 58 58
--------- ---------
$ 21,903 $ 21,617
========= =========

INCOME (LOSS) FROM OPERATIONS:
Flowers Bakeries ................. $ 25,275 $ 20,438
Mrs. Smith's Bakeries ............ (10,356) (7,096)
Other ............................ (7,083) (9,305)
Insurance proceeds ............... -- 6,789
Unusual charges .................. -- (27,952)
--------- ---------
$ 7,836 $ (17,126)
========= =========

(1) Represents elimination of intersegment sales from Mrs. Smith's
Bakeries to Flowers Bakeries.

12. SUBSEQUENT EVENT

On May 31, 2002, the company announced that its board of directors
elected George E. Deese to the newly-created position of President and Chief
Operating Officer of Flowers Foods, Inc.

In connection with Mr. Deese's election to President and Chief
Operating Officer, the company also announced that its two current operating
segments, Flowers Bakeries and Mrs. Smith's Bakeries, will be restructured to
form three operating segments. These segments are Flowers Bakeries, Mrs. Smith's
Bakeries and Flowers Snack. Flowers Snack will consist of the snack business
currently operated by Mrs. Smith's Bakeries. The three operating segments intend
to share administrative services, and each segment president will report
directly to Mr. Deese. The restructuring will be effective July 14, 2002, the
beginning of the company's third fiscal quarter.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:

MATTERS AFFECTING ANALYSIS:

The following discussion of the financial condition and results of operations
for the sixteen-week period ended April 20, 2002 should be read in conjunction
with Flowers Foods, Inc.'s (the "company's") annual report on Form 10-K for the
fiscal year ended December 29, 2001, filed with the Securities and Exchange
Commission on March 28, 2002.

In addition, in connection with the spin-off and merger transaction,
various separation and other contractual payments under FII's stock and
incentive programs of $39.0 million were paid to executive and non-executive
officers and employees. Of this amount, $5.7 million was accrued at March 26,
2001, and $5.3 million was amortized to earnings prior to March 26, 2001.
Accordingly, in the first quarter of fiscal 2001, a charge of $28.0 million was
recorded as an unusual charge to the company's continuing operations, with a
corresponding credit to capital in excess of par value, as a result of payments
being settled from the proceeds of the spin-off and merger transaction.

On March 26, 2001, the company completed a tender offer for the $200
million aggregate principal amount of 7.15% Debentures due 2028 (the
"debentures") and repurchased substantially all the debentures at a discount.
Accordingly, in

the first quarter of fiscal 2001, the company recorded an extraordinary gain of
$5.0 million, net-of-tax, related to the early extinguishment of these
debentures. The discount of $12.3 million was partially offset by $4.2 million
in debt issuance costs and $3.1 million in taxes.

On March 26, 2001, the company entered into a credit agreement that
provided for total borrowings of up to $380.0 million, consisting of Term Loan
A of $100.0 million, Term Loan B of $150.0 million and a revolving loan
facility of $130.0 million. In December 2001, the company made a voluntary debt
payment of $50.0 million which, in combination with contractually required debt
reductions during fiscal 2001 of $10.8 million, resulted in a total permanent
reduction of Term Loan A and Term Loan B borrowings of $58.0 million and $2.8
million, respectively. As a result of the voluntary debt payment, the company
reduced its unamortized financing costs resulting in an early extinguishment
debt charge of $1.1 million, net of tax, which was recorded in the fourth
quarter of fiscal 2001 as an extraordinary loss. Also on March 26, 2001, the
company purchased the notes receivable (the "distributor notes") from the
independent distributors which had previously been owned by a third party
financial institution and serviced by the company or a wholly-owned subsidiary
of the company. The principal balance of the distributor notes at that date was
$77.6 million. In addition in fiscal 2001, the company purchased certain fixed
assets which were previously leased under operating leases. The purchase of the
debentures, distributor notes and fixed assets were financed from the
borrowings under the credit agreement discussed above.

The company maintains insurance for property damage, mechanical
breakdown, product liability, product contamination and business interruption
applicable to its production facilities. During fiscal 1999, Mrs. Smith's
Bakeries incurred substantial costs related to mechanical breakdown and product
contamination at certain plants. Mrs. Smith's Bakeries filed claims under the
company's insurance policies for a portion of these costs that it believed to be
insured. During fiscal 2000, Mrs. Smith's Bakeries recovered net insurance
proceeds of $17.2 million. During the first quarter of fiscal 2001, Mrs. Smith's
Bakeries received $6.8 million as partial payment on a final settlement of $7.5
million. The final $0.7 million payment was received in the second quarter of
fiscal 2001.

SFAS 142 requires that goodwill be tested annually for impairment using
a two-step process. The first step is to identify a potential impairment and, in
transition, this step must be measured as of the beginning of the fiscal year.
Further, the company has six months from the date of adoption to complete the
first step. The second step of the impairment test measures the amount of the
impairment loss (measured as of the beginning of the year), if any, and must be
completed by the end of the company's 2002 fiscal year. The company expects to
complete these steps in the goodwill impairment test within the required
timeframe. While the company has not yet completed its transitional impairment
test, management believes an impairment provision upon adoption of SFAS 142
could approximate $20 - $30 million. Further, management expects the adoption of
SFAS 142 to reduce the company's amortization expense for goodwill and other
intangibles by approximately $4.0 million annually ($2.5 million, net of tax),
beginning on December 30, 2001 (the first day of fiscal 2002).

RESULTS OF OPERATIONS:

Results of operations, expressed as a percentage of sales, for the sixteen-week
periods ended April 20, 2002 and April 21, 2001, are set forth below:

FOR THE SIXTEEN WEEKS ENDED
--------------------------------
APRIL 20, 2002 APRIL 21, 2001
-------------- --------------
(UNAUDITED)

Sales .................................... 100.00% 100.00%
Gross margin ............................. 46.27% 45.60%
Selling, marketing and administrative
expenses ................................. 39.86% 40.10%
Depreciation and amortization ............ 4.72% 4.64%
Insurance proceeds ....................... -- (1.46)%
Unusual charges .......................... -- 6.00%
Interest, net ............................. 1.09% 3.77%
Income (loss) before income taxes and
extraordinary gain ....................... 0.60% (7.45)%
Income tax expense (benefit) ............. 0.23% (1.94)%
Net income (loss) ........................ 0.37% (4.44)%

CONSOLIDATED AND SEGMENT RESULTS

SIXTEEN WEEKS ENDED APRIL 20, 2002 COMPARED TO SIXTEEN WEEKS ENDED APRIL 21,
2001

Sales. For the first quarter ended April 20, 2002, sales were $463.6
million, or 0.5% lower than sales in the

comparable quarter of the prior year, which were $466.0 million.

Flowers Bakeries' sales for the first quarter of fiscal 2002, were
$320.5 million, a decrease of 0.3% from sales of $321.6 million reported for the
first quarter of fiscal 2001. Branded products distributed through the company's
DSD system to supermarkets, convenience stores, mass merchandisers and club
stores represent approximately 64% of Flowers Bakeries' sales. These sales,
driven by the company's Natures Own brand of soft variety breads, increased
approximately 1.4% over the same period in the prior year. This increase is
primarily attributable to increased selling prices and a favorable product mix.
Sales in the foodservice channel represent approximately 18% of Flowers
Bakeries' sales. These sales decreased approximately 3.3% from the same period
in the prior year. This decrease was primarily due to product and customer mix
changes. Store branded retail sales represent approximately 13% of Flowers
Bakeries' sales. These sales decreased approximately 0.9% over the same period
in the prior year. This decrease is primarily a result of a price decrease.

Mrs. Smith's Bakeries' sales for first quarter of fiscal 2002,
excluding intersegment sales of $18.4 million, were $143.1 million, a decrease
of 1.0% from sales of $144.5 million, excluding intersegment sales of $21.3
million, reported during the first quarter of fiscal 2001. Branded products
distributed frozen and non-frozen to supermarkets, convenience stores, mass
merchandisers, club stores and the vending trade represent approximately 40% of
Mrs. Smith's Bakeries' sales. These sales decreased approximately 9.5% over the
same period in the prior year. This decrease was primarily a result of product
cuts made to customer orders due to production equipment start up issues at the
Spartanburg, South Carolina facility. The start up issues were a result of the
closing of the Pembroke, North Carolina facility and the resulting shift of
production to Spartanburg. Although the company built up finished goods
inventory in anticipation of this move, the company did not have sufficient
inventory of the right product at the right time to fully fill orders. Sales to
foodservice customers represent approximately 30% of Mrs. Smith's Bakeries'
sales. Foodservice sales increased approximately 6.2% over the same period in
the prior year. This increase is primarily attributable to increased volume and
pricing. Sales to in-store bakery customers represent approximately 15% of Mrs.
Smith's Bakeries' sales. In-store bakery sales increased approximately 9.0%
over the same period in the prior year. This increase is primarily attributable
to increased volume and pricing. The balance of Mrs. Smith's Bakeries' sales is
primarily to non-affiliated food companies under contract production
arrangements. These sales were essentially flat year over year.

Gross Margin (defined as net sales less materials, supplies, labor and
other production costs). Gross margin for the first quarter of fiscal 2002 was
$214.5 million, or 0.9% higher than gross margin reported in the same period of
the prior year of $212.5 million. As a percent of sales, gross margin was 46.3%
for the first quarter of fiscal 2002, compared to 45.6% for the first quarter
of fiscal 2001.

Flowers Bakeries' gross margin increased to 56.9% of sales for the
first quarter of fiscal 2002, compared to 55.7% of sales for the first quarter
of fiscal 2001. This increase can be attributed to lower utility, packaging and
ingredient costs as well as a more favorable product mix. Additionally, there
were reductions in lease costs due to the buyout of certain leases as a part of
the spin-off and merger transaction. These improvements were partially offset
by higher labor costs. The increase in labor costs can primarily be attributed
to increases in insurance expenses.

Mrs. Smith's Bakeries' gross margin decreased to 23.2% of sales for the
first quarter of fiscal 2002, compared to 25.1% of sales for the first quarter
of fiscal 2001. Improvements due to increased production in the Suwanee facility
and favorable variances in overhead expenses were more than offset by the
startup costs at Spartanburg mentioned above. A lower net selling price and a
shift in product mix also adversely impacted the gross margin.

Selling, Marketing and Administrative Expenses. During the first
quarter of fiscal 2002, selling, marketing and administrative expenses were
$184.8 million, or 39.9% of sales, as compared to $186.9 million, or 40.1% of
sales reported for the first quarter of fiscal 2001.

Flowers Bakeries' selling, marketing and administrative expenses were
$143.5 million, or 44.8% of sales during the first quarter of fiscal 2002 as
compared to $145.4 million, or 45.2% of sales during the first quarter of
fiscal 2001. The decrease was comprised of decreases in labor and utility
expenses. These decreases were partially offset by increases in advertising and
bad debt expenses.

Mrs. Smith's Bakeries' selling, marketing and administrative expenses
were $35.2 million, or 24.6% of sales during the first quarter of fiscal 2002
as compared to $35.0 million, or 24.2% of sales during the first quarter of
fiscal 2001. Mrs. Smith's Bakeries is currently undertaking a review of these
categories and is in the process of taking appropriate action to reduce costs.

Depreciation and Amortization. Depreciation and amortization expense
was $21.9 million for the first quarter of fiscal 2002, an increase of 1.4%
over the same period in the prior year, which was $21.6 million.

Flowers Bakeries' depreciation and amortization expense increased
slightly to $13.5 million for the first quarter of fiscal 2002 from $13.1
million in the first quarter of fiscal 2001. The increase is primarily
attributable to the depreciation of assets that were leased in the prior year
as well as an increase in capital expenditures. Partially offsetting these
increases was a decrease in amortization expense of $0.7 million as a result of
the implementation of SFAS 142.

Mrs. Smith's Bakeries' depreciation and amortization expense for the
first quarter of fiscal 2002 was $8.4 million as compared to the same amount in
the first quarter of fiscal 2001. An increase in depreciation expenses,
primarily as a result of an increase in capital expenditures and the purchase
of assets that were leased in the prior year, was offset by a decrease in
amortization expense of $0.5 million as a result of the implementation of SFAS
142.

Proceeds From Insurance Policies. The company maintains insurance for
property damage, mechanical breakdown, product liability, product contamination
and business interruption applicable to its production facilities. During
fiscal 1999, Mrs. Smith's Bakeries incurred substantial costs related to
mechanical breakdown and product contamination at certain plants. Mrs. Smith's
Bakeries filed claims under the company's insurance policies for a portion of
these costs that it believed to be insured. During the first quarter of fiscal
2001, Mrs Smith's Bakeries received $6.8 million as partial payment on a final
settlement of $7.5 million. The final $0.7 million payment was received in the
second quarter of fiscal 2001.

Unusual Charges. During the first quarter of fiscal 2001, in connection
with the spin-off and merger transaction, various separation and other
contractual payments under FII's stock and incentive programs of $39.0 million
were paid to executive and non-executive officers and employees. Of this amount,
$11.0 million had already been expensed as of December 30, 2000. Accordingly, a
charge of $28.0 million was recorded in the company's continuing operations in
the first quarter of 2001.

Interest Expense. For the first quarter of fiscal 2002, net interest
expense was $5.0 million, a decrease of $12.6 million from the same period in
the prior year, which was $17.6 million. The decrease is primarily related to a
reduction in debt that resulted from the spin-off and merger transaction. In
addition, the company made a voluntary debt payment of $50.0 million in the
fourth quarter of fiscal 2001 resulting in decreased interest expense.

Income (Loss) Before Income Taxes and Extraordinary Gain. Income
before income taxes and extraordinary gain for the first quarter of fiscal 2002
was $2.8 million, an improvement of $37.5 million from the $34.7 million loss
reported in the first quarter of fiscal 2001.

The improvement is primarily a result of a decrease in unusual charges
of $28.0 million. In addition there were significant improvements in the
operating results of Flowers Bakeries of $4.8 million and a decrease in
interest expense of $12.6 million as a result of the decrease in debt resulting
from the spin-off and merger transaction and voluntary debt payment discussed
above. Also, other operating losses decreased by $2.2 million, primarily as a
result of decreased hedging losses. Partially offsetting these positive items
was an increase in Mrs. Smith's Bakeries operating loss of $3.3 million and a
decrease in insurance proceeds of $6.8 million.

Extraordinary Gain on the Early Extinguishment of Debt. On March 26,
2001, the company completed a tender offer for the $200 million aggregate
principal amount of the debentures and repurchased substantially all the
debentures at a discount. Accordingly, the company recorded an extraordinary
gain of approximately $5.0 million, net of tax, related to the early
extinguishment of these debentures in the first quarter of fiscal 2001. The
discount, of $12.3 million was partially offset by the write-off of $4.2
million in debt issuance costs and $3.1 million in taxes.

Income Taxes. The income tax expense during the first quarter of
fiscal 2002 was provided for at an estimated effective rate of 38.5%. The
effective rate differs from the statutory rate due to non-deductible expenses.

LIQUIDITY AND CAPITAL RESOURCES:

Flowers Foods' cash and cash equivalents decreased to $6.0 million at
April 20, 2002 from $12.3 million at December 29, 2001. The decrease resulted
primarily from $3.6 million and $14.5 million disbursed for operating and
investing activities, respectively, offset in part by $11.9 million provided by
financing activities.

Net cash of $3.6 million disbursed for operating activities consisted
primarily of $30.5 million in working capital partially offset by $1.7 million
in net income, adjusted for certain non-cash items of $25.2 million. Net cash
disbursed for working capital and other activities resulted from an increase in
inventories and other assets of $11.3 million and $9.9 million, respectively.
Operating net cash flows were also negatively affected by a decrease in
accounts payable and other accrued liabilities of $6.0 million.

Net cash disbursed for investing activities during the first quarter
of fiscal 2002 of $14.5 million included capital expenditures of $16.0 million.
Capital expenditures at Flowers Bakeries and Mrs. Smith's Bakeries were $7.5
million and $8.5 million, respectively.

Net cash provided by financing activities of $11.9 million consisted
primarily of an increase in debt and capital lease obligations.

The credit agreement includes certain restrictions, which, among other
things, require maintenance of financial covenants, restrict encumbrance of
assets and creation of indebtedness and limit capital expenditures, purchases
of common shares and dividends that can be paid. Restrictive financial
covenants include such ratios as a consolidated interest coverage ratio, a
consolidated fixed charge coverage ratio and a maximum leverage ratio. Annual
capital expenditures are restricted between $50.0 million and $57.5 million
during the periods beginning in fiscal 2001 and ending with fiscal 2005. No
dividends were paid in fiscal 2001. Commencing in fiscal 2002, the maximum
amount of dividends that can be paid cannot exceed $5.0 million unless certain
conditions are met. Loans under the credit agreement are collateralized by
substantially all of the assets of the company, excluding real property. As of
April 20, 2002, the company was in compliance with all covenants and believes
that, given its current cash position, its cash flow from operating activities,
and its available credit facilities, it can continue to comply with the current
terms of its credit facilities and can meet presently foreseeable financial
requirements.

At April 20, 2002 and April 21, 2001, 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 would have been established for the purpose of facilitating off-balance
sheet arrangements or other contractually narrow or limited purposes.

NEW ACCOUNTING PRONOUNCEMENTS:

In June 2001, the FASB issued 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 will be effective for the
company beginning in the first quarter of fiscal 2003. Management does not
expect the adoption of this statement to have a material impact on the
company's results of operations or financial position.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FAS Nos. 4,
44, and 64, Amendment of FAS 13, and Technical Corrections as of April 2002."
This statement 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". This
Statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets
of Motor Carriers". This Statement amends 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.
Management does not expect the adoption of this statement to have a material
impact on the company's results of operations or financial position.

FORWARD-LOOKING STATEMENTS:

Statements contained in this filing that are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. All forward-looking statements are subject to
risks and uncertainties that could cause actual results to differ from those
projected. Other factors that may cause actual results to differ from
forward-looking statements and that may affect the company's prospects in
general include, but are not limited to, changes in general economic and
business conditions (including the baked foods markets), energy and raw
materials costs, the company's ability to operate the manufacturing lines
according to schedule, actions of competitors and customers and the extent to
which the company is able to develop new products and markets for its products.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:

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 volatility in its raw material and packaging prices. At
April 20, 2002, the fair market value of the company's commodity derivative
portfolio was $(1.1) million. Of this fair value, an immaterial amount is based
on quoted market prices and $(1.1) million is based on models and other
valuation methods. Additionally, of this fair value, $(1.1) million, $(0.5)
million and $0.5 million, relate to instruments that will be utilized in fiscal
2002, 2003 and 2004, respectively. A sensitivity analysis has been prepared to
estimate the company's exposure to commodity price risk. Based on the company's
derivative portfolio as of April 20, 2002, a hypothetical ten percent adverse
change in commodity prices under normal market conditions could potentially have
a $(3.7) million effect on the fair value of the derivative portfolio. The
analysis disregards changes in the exposures inherent in the underlying hedged
item; however, the company expects that any loss in fair value of the portfolio
would be substantially offset by reductions in raw material and packaging
prices.

INTEREST RATE RISK

The company enters into interest rate swap agreements in order to
reduce its overall interest rate risk. At April 20, 2002, the fair market value
of the company's interest rate swap was $(4.2) million. The fair value of the
swap is based on a valuation model using quoted market prices. The swap
agreement expires in December 2003. A sensitivity analysis has been prepared to
estimate the company's exposure to interest rate risk. Assuming a ten percent
increase in market price, the fair value of the company's interest rate swap
agreement at April 20, 2002, with a notional amount of $150.0 million, would
increase by $0.9 million. A ten percent decrease in market price would reduce
the fair value by $0.9 million.

Based on the company's floating rate debt at April 20, 2002, including
the effect of the interest rate swap agreement, assuming a ten percent increase
in interest rates, the company's interest expense would increase by $0.2
million, while the impact of a ten percent decrease in interest rates would
reduce interest expense by $0.2 million.

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities." The standard, as amended by
SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities
Deferral of the Effective Date of SFAS No. 133, an amendment of SFAS No. 133,"
and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities, an amendment of SFAS No. 133" (referred to hereafter as
"SFAS 133"), was adopted by the company on December 31, 2000 (the first day of
fiscal 2001).

In accordance with SFAS 133, all derivatives are recognized on the
Consolidated Balance Sheet in current or other assets or other accrued
liabilities or other liabilities at their fair value. On the date the company
enters into a derivative contract, it designates the derivative as (1) a hedge
of the fair value of (a) a recognized asset or liability or (b) an unrecognized
firm commitment (a "fair value" hedge) or (2) a hedge of the variability of
cash flows that are to be received or paid in connection with (a) a forecasted
transaction or (b) a recognized asset or liability (a "cash flow" hedge).
Changes in the fair value of a derivative that is highly effective as, and that
is designated and qualifies as, a fair-value hedge, along with changes in the
fair value of the hedged asset or liability that are attributable to the hedged
risk (including changes that reflect losses or gains on firm commitments), are
recorded in current-period earnings. Changes in the fair value of a derivative
that is highly effective as, and that is designated and qualifies as, a
cash-flow hedge, to the extent that the hedge is effective, are recorded in
other comprehensive income, until earnings are affected by the variability of
cash flows of the hedged transaction (e.g., until periodic settlements of a
variable-rate asset or liability are recorded in earnings or when the
underlying commodity being hedged is used in production and recorded to
earnings). Any hedge ineffectiveness (which represents the amount by which the
changes in the fair value of the derivative exceeds the variability in the cash
flows of the forecasted transaction) is recorded in current-period earnings in
selling, marketing and administrative expenses. Changes in the fair value of
derivative instruments that do not qualify for hedge accounting are also
reported in current-period earnings in selling, marketing and administrative
expenses.

While SFAS 133 provides a significant change in the accounting
guidance related to derivative instruments and hedging activities, the company
has determined that the more stringent accounting and documentation
requirements under SFAS 133 does not cause any significant changes in its
overall risk management strategy and in its overall hedging activities.

The cash effects of the company's commodity derivatives and interest
rate swap are included in the Consolidated Statement of Cash Flows as cash flow
from operating activities.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On March 25, 2002, in Trans American Brokerage, Inc. 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 dispute, the claimant alleges breach of a
sales brokerage agreement by Mrs. Smith's Bakeries and seeks lost profits as
well as attorneys' fees and costs. As a result of the award, the company
recorded a $10.0 million charge ($6.2 million after tax) to its results for the
fiscal year ended December 29, 2001 as required by Generally Accepted
Accounting Principles. The charge represents the company's estimate of the
total costs (including attorney's fees and expenses) which it could incur in
connection with this dispute. The company disagrees with the arbitrator's award
and intends to continue to vigorously contest it, including a request that the
arbitrator reconsider the interim award.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

On May 31, 2002, the company announced that its board of directors
elected George E. Deese to the newly-created position of President and Chief
Operating Officer of Flowers Foods, Inc.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

None

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.

/s/ Amos R. McMullian
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By: Amos R. McMullian
Chairman of the Board

/s/ Jimmy M. Woodward
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By: Jimmy M. Woodward
Vice President and Chief Financial Officer

June 4, 2002
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Date