FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
(Mark One) Washington, D. C. 20549
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 29, 1996
OR
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 1-9787
Flowers Industries, Inc.
(Exact name of registrant as specified in its charter)
Georgia 58-0244940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
U.S. Highway 19, P. O. Box 1338,
Thomasville, Georgia 31792
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (912) 226-9110
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of Each Exchange
Title of Each Class On Which Registered
Common Stock, $.625 Par Value,
Together with Preferred Share
Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
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 preceeding 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 [check mark] No __
Aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the closing sales price on
the New York Stock Exchange on August 9, 1996: $1,034,140,854.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Title of Each Class Outstanding at August 9, 1996
Common Stock, $.625 Par Value 58,437,031
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive proxy statement for the annual
meeting of shareholders on October 18, 1996 are incorporated by
reference into Part III.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [box]
<PAGE>
FORM 10-K REPORT
Sequential
Table of Contents Page
Part I
Item No.
1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. Executive Officers of the Registrant. . . . . . . . . . . . . . . . .2
2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . .3
4. Submission of Matters to a Vote of Security Holders . . . . . . . . .3
Part II
Item No.
5. Market for the Registrant's Common Stock and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . .4
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . .4
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . .5
8. Financial Statements and Supplementary Data . . . . . . . . . . . . .7
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure (Not Applicable). . . . . . . . .
Part III
Item No.
10. Directors and Executive Officers of the Registrant. . . . . . . . . 26
11. Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . 26
12. Security Ownership of Certain Beneficial Owners
and Management. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
13. Certain Relationships and Related Transactions. . . . . . . . . . . 26
Part IV
Item No.
14. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 27
Financial Statement Schedule. . . . . . . . . . . . . . . . . . . . 27
Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . 27
<PAGE>
PART I
ITEM 1. BUSINESS
Flowers Industries, Inc. (the "Company") was incorporated in
the state of Delaware in 1968 as a successor by merger to Flowers
Baking Company, Inc., a Georgia corporation which began business in
1919. In December 1987, the Company changed its state of incorporation
from Delaware to Georgia. The Company operates in the highly
competitive packaged foods industry principally serving the grocery,
foodservice, restaurant and fast-food markets. The primary methods of
competition are pricing, quality, service and variety of the product
lines.
Sales to Winn-Dixie Stores, Inc. accounted for more than 10%
of consolidated sales during fiscal year 1996. The loss of this
customer could have a materially adverse effect on the Company's
business.
At the end of the fiscal year, the Company and its
subsidiaries had approximately 7,600 employees. Approximately 17% of
these employees are covered by collective bargaining agreements,
scheduled to expire at various times over the next three years.
The Company produces a full line of breads, rolls, snack
cakes, sweet goods, doughnuts, cakes, pies, frozen fruit and
vegetables and batter-dipped and breaded vegetables. These food
products are distributed primarily in the Southeast, Central and
Western United States through a distribution system of approximately
2,900 independent distributor and company-owned territories, leased
and company-owned tractor-trailer trucks and common carriers. These
products are sold by distributors, salesmen and food brokers primarily
to restaurants, fast-food chains, foods wholesalers, institutions,
supermarkets and vending companies. The Company also sells returned
and surplus product through a system of independently operated and
company-owned thrift outlets.
The Company's products are marketed under a variety of
trademarks including both trademarks owned by the Company and certain
franchised trademarks. Company-owned trademarks consist primarily of
Flowers, BeeBo, Nature's Own, Stilwell, Breads International,
Cobblestone Mill, Rich Grain, Evangeline Maid, Buttermaid, Dandee,
Purity, Betsy Ross, Ideal, Holsum, Griffin, Bamby, Aunt Hannah,
Jubilee, Our Special Touch, BlueBird, Oregon Farms and Mrs. Smith's.
Franchised trademarks are primarily Sunbeam and Bunny.
The Company operates forty-two production facilities. The
primary raw materials are flour, sugar and processed agricultural
products. Commodities periodically experience price fluctuations and,
for that reason, the market for these commodities is continuously
monitored. The vegetable products are purchased under contract from an
outside supplier. Inventories, which consist mainly of finished goods
and have a modest aggregate dollar value in relation to sales,
experience seasonal fluctuations associated primarily with harvest
cycles.
As discussed in Note 13 of Notes to Consolidated Financial
Statements, in January 1996, the Company acquired, for $62,000,000, an
interest in INFLO Holdings Corporation, a newly formed joint venture
between the Company and Artal Luxembourg S.A., which owns the Keebler
Corporation.
1<PAGE>
Executive Officers of the Registrant
The following table sets forth the names and ages of the
Company's Executive Officers, together with all offices held with the
Company by such Executive Officers.
Name, Age and Office Business Experience
AMOS R. McMULLIAN Chairman of the Board since
Age 59 January, 1985; Chairman of the
Chairman of the Board, Chairman Executive Committee since
of the Executive Committee and January, 1984; Chief Executive
Chief Executive Officer Officer since April, 1981;
Vice Chairman of the Board
(1984 - 1985); Co-Chairman of
the Executive Committee (1983
- 1984); President and Chief
Operating Officer (1976 -
1984); joined the Company in
1963.
ROBERT P. CROZER Vice Chairman of the Board
Age 49 since January, 1989; Vice
Vice Chairman of the Board President-Marketing (1985 -
1989); President and Chief
Operating Officer, Convenience
Products Group (1979 - 1989);
Corporate Director of
Marketing Planning (1979 -
1985); joined the Company in
1973.
HEETH VARNEDOE III President and Chief Operating
Age 59 Officer since January, 1986;
President and Chief Operating Officer Executive Vice President (1983
- 1986); President and Chief
Operating Officer, Baked
Products Group (1976 - 1983);
joined the Company in 1960.
C. MARTIN WOOD III Senior Vice President and
Age 53 Chief Financial Officer since
Senior Vice President September, 1978; Vice
and Chief Financial Officer President-Finance (1976 -
1978); joined the Company in
1970.
RUSSELL M. FRYAR Vice President, Treasurer and
Age 57 Chief Accounting Officer since
Vice President, Treasurer and April, 1986; Treasurer,
Chief Accounting Officer Controller and Chief
Accounting Officer (1974 -
1986); Controller (1972 -
1974); joined the Company in
1972.
G. ANTHONY CAMPBELL Secretary and General Counsel
Age 44 since January, 1985; Assistant
Secretary and General Counsel General Counsel (1983 - 1985);
joined the Company in 1983.
GEORGE E. DEESE President and Chief Operating
Age 50 Officer, Baked Products Group,
President and Chief Operating Officer, since January, 1983; Regional
Baked Products Group Vice President, Baked Products
Group (1981 - 1983); President
of Atlanta Baking Company,
Atlanta, Georgia (1980 -
1981); joined the Company
in 1964.
GARY L. HARRISON President and Chief Operating
Age 58 Officer, Specialty Foods
President and Chief Operating Officer, Group, since November, 1989;
Specialty Foods Group Executive Vice President,
Baked Products Group (1987 -
1989); Regional Vice
President, Baked Products
Group (1977 - 1987); President
of Flowers Baking Company of
Thomasville, Thomasville,
Georgia (1976 - 1977); joined
the Company in 1954.
All Executive Officers are elected by the Board of Directors
for one year terms with the exception of the positions of President,
Baked Products Group and President, Specialty Foods Group, which are
appointed offices.
2
<PAGE>
Item 2. PROPERTIES
Thirty-five of the Company's production facilities are
owned, three facilities are leased and four facilities are owned by
local industrial development authorities under terms of Industrial
Revenue Bond (IRB) financing agreements. The leased properties are
leased for terms of ten to fifteen years with certain renewal options.
Under the terms of the IRB financing agreements, title to these
properties passes back to the Company at maturity for little or no
consideration. Production plant locations are:
Montgomery, Alabama
Opelika, Alabama
Tuscaloosa, Alabama
Pine Bluff, Arkansas
Texarkana, Arkansas
Fresno, California (Leased)
Bradenton, Florida
Jacksonville, Florida
Miami, Florida (IRB financed)
Atlanta, Georgia
Chamblee, Georgia
Forest Park, Georgia
Rome, Georgia
Thomasville, Georgia
Tucker, Georgia (Leased)
Villa Rica, Georgia (IRB financed)
London, Kentucky
Baton Rouge, Louisiana
Lafayette, Louisiana
New Orleans, Louisiana
Chaska, Minnesota (IRB financed)
Jamestown, North Carolina
Pembroke, North Carolina
Columbus, Ohio
Stilwell, Oklahoma
North East, Pennsylvania
Pottstown, Pennsylvania (Leased)
Fountain Inn, South Carolina
Spartanburg, South Carolina (IRB financed)
Crossville, Tennessee
Morristown, Tennessee
Corpus Christi, Texas
El Paso, Texas
Houston, Texas
San Antonio, Texas (2)
Tyler, Texas
Lynchburg, Virginia
Norfolk, Virginia
Bluefield, West Virginia
Charleston, West Virginia
Parkersburg, West Virginiaa
Management considers that its properties are well maintained
and sufficient for its present operations.
Item 3. LEGAL PROCEEDINGS
The Company is engaged in various legal proceedings which
arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to those
proceedings will not be material to the Company's financial position
or results of operations. A reserve of $4,935,000 was recorded during
fiscal 1996, which represents the anticipated costs of final
settlement of certain pending litigation involving subsidiary
operations in Texas.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted during the fourth quarter of
fiscal 1996 to a vote of security holders, through the solicitation of
proxies or otherwise.
3
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Quarterly Common Stock Price Ranges and Dividends
<TABLE>
1996 1995(1)
Quarter High Low Dividend High Low Dividend
<S> <C> <C> <C> <C> <C> <C>
1st..................................... 14 1\2 12 1\8 .1400 12 1\8 10 5\8 .1333
2nd..................................... 15 3\8 12 3\8 .1425 12 3\8 11 1\8 .1350
3rd..................................... 15 12 3\8 .1450 12 1\2 11 3\4 .1367
4th..................................... 18 12 3\4 .1475 13 1\8 11 1\4 .1383
</TABLE>
(1) Restated to give effect to the three-for-two stock split
effected in the form of a stock dividend paid on November
17, 1995.
Equity Security Holders
Number of Shareholders of
Title of Class Record at August 9, 1996
Common Stock $.625 par value,
together with Preferred Share
Purchase Rights........................... 6,087
The preceding table presents the high and low market and
dividend information for each fiscal quarter as it relates to
the Company's common stock, $.625 par value. Flowers common stock is
traded on the New York Stock Exchange. Cash dividends have been paid
on these shares every quarter since December, 1971.
Long-term debt agreements include certain restrictive
covenants. These, among other things, prohibit certain aggregate
amounts of the Company's dividends and distributions on its stock from
exceeding specified levels. The most restrictive provision, contained
in a long-term debt agreement, permitted $113,135,000 of consolidated
earnings retained in the business at June 29, 1996 to be available for
cash dividends.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
(Amounts in Thousands except Per Share Data)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Operating Results:
Sales............................................... $1,238,564 $1,129,203 $989,782 $962,132 $879,193
Net income.......................................... 30,768 42,301 29,496 39,161 31,665
Net income per common share (1)..................... .54 .75 .53 .71 .61
Cash dividends paid per common share (1)............ .5750 .5433 .5167 .4900 .4633
At Year End:
Total assets........................................ 849,443 655,921 559,682 490,948 462,113
Long-term notes payable............................. 254,355 99,251 77,422 22,307 32,495
Industrial revenue bonds............................ 17,770 17,895 11,564 13,508 15,661
Convertible subordinated debentures................. 47,241
</TABLE>(1) Years prior to fiscal 1996 have been restated to give effect to
the three-for-two stock split effected in the form of a stock
dividend paid on November 17, 1995.
4
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and temporary investments decreased during fiscal 1996
from $31,836,000 to $25,039,000, and working capital increased during
the year from $42,380,000 to $48,479,000. The working capital
increase is primarily due to the building of inventories, particularly
in the frozen food area of the Specialty Foods Group as a result of
increases in existing locations, and the new Mrs. Smith's business
acquired during the fourth quarter of fiscal 1996. Increased
receivables as a result of sales increases was also a contributing
factor to the working capital increase. Cash flow from operating
activities decreased in fiscal 1996 to $59,359,000 from $93,536,000
due to decreased profits and increased working capital.
During fiscal 1996, the Company spent approximately
$76,000,000 for capital expenditures to expand production facilities
and increase efficiencies in both production and distribution. Over
the past five years, expenditures have totaled approximately
$299,000,000 with an additional $44,000,000 of expenditures
attributable to acquisitions during that period. Major projects
initiated at the Company's Jamestown, North Carolina and Miami,
Florida facilities during fiscal 1995 were completed during fiscal
1996. Two ground-up construction projects initiated during fiscal
1995 were also completed during fiscal 1996. First was the
construction of a bakery in Villa Rica, Georgia, which was financed
with a local industrial revenue bond issue, and second was the
construction of a frozen distribution center in Suwanee, Georgia.
Major projects at the Company's Jacksonville, Florida; London,
Kentucky; Forest Park, Georgia and Stilwell, Oklahoma facilities were
initiated and completed during fiscal 1996. Major projects at the
Company's Thomasville, Georgia; El Paso, Texas and San Antonio, Texas
facilities were initiated during fiscal 1996 with completion
anticipated during fiscal 1997. This capital spending, with the
exception of the Villa Rica, Georgia facility, was funded during
fiscal 1996 from cash flow from operating activities and the Company's
revolving-term loan agreements. Capital expenditures for
fiscal 1997 are expected to be less than the fiscal 1996 expenditures.
These expenditures will not only improve the efficiency of production
and distribution but will also continue to provide the Company with
facilities to supply our markets with high quality food products at a
lower cost.
The Company has sold a majority of its territories to
independent distributors under long-term financing arrangements. The
amounts receivable under this program at June 29, 1996 total
$67,239,000.
During fiscal 1996, the Company had three $60,000,000
revolving-term loan agreements and a $10,000,000 revolving-term loan
agreement, for an aggregate available credit under these agreements of
$190,000,000. During fiscal 1996, the Company borrowed varying
amounts totaling $231,625,000, of which $214,990,000 was repaid, thus
adding $16,635,000 to the $86,740,000 outstanding at July 1, 1995 for
a total outstanding at June 29, 1996 of $103,375,000. These
borrowings were primarily used to partially fund fiscal 1996 capital
spending, acquisitions of businesses, and an investment in an
unconsolidated affiliate as discussed in Note 13 of Notes to
Consolidated Financial Statements. Subsequent to fiscal year-end, the
Company paid off these borrowings from proceeds borrowed
under a five-year $300,000,000 syndicated loan facility with seven
different banks. This agreement was closed on July 10, 1996,
replacing the three $60,000,000 revolving term-loan agreements.
During fiscal 1996, the Company completed a private
placement of $125,000,000 of long-term Senior Notes. A portion of the
proceeds was used to pay off $114,150,000 outstanding at that time
under the revolving credit and term loan agreements. The remaining
proceeds were used for working capital and for other general corporate
purposes. Also outstanding at June 29, 1996 are long-term borrowings
of $15,000,000 scheduled to mature in equal instalments over the next
three years.
During fiscal 1996, the Company completed a $50,000,000
ten-year master lease agreement to finance the automated production
lines at several of its facilities.
Cash dividends have grown at a compound annual rate of 6%
for the past five years, increasing from an annual payout of $.437 in
1991 to $.575 in 1996.
The Company believes that, in light of its current cash
position, its cash flow from operating activities and its credit
arrangements, it can adequately meet presently foreseeable financing
requirements.
5
<PAGE>
RESULTS OF OPERATIONS
1996 as compared with 1995 - Sales for 1996 increased 10%
to $1,238,564,000 from $1,129,203,000 in 1995. Acquisitions
consummated during the last three quarters of fiscal 1995 and during
fiscal 1996 contributed approximately one-half of the increase.
Increased volume of 10%, exclusive of the acquisitions and the
divestiture of the Company's McAllen, Texas facility during the fourth
quarter of fiscal 1995, along with selling price increases
and the addition of 160 new routes were also factors in the sales
increase. Other income decreased during fiscal 1996 from fiscal 1995
primarily due to gains on the sale of certain fixed assets during
fiscal 1995. Income before income taxes decreased 29% to $48,340,000
in fiscal 1996 from the $68,015,000 reported in fiscal 1995. Income
before income taxes as a percent of sales was 4% in fiscal 1996 as
compared to 6% in fiscal 1995.
The profit decrease was primarily the result of increased
raw material and packaging costs, particularly flour, the Company's
primary raw material, which was at a 21-year high during the year.
Over the past several years the quality and quantity of baking-quality
wheat has been low due to poor weather conditions, thus increasing the
cost of flour. Start-up costs associated with the addition of 160 new
sales routes in Georgia, Alabama, Mississippi and North Carolina also
contributed to the profit decrease. Additionally, poor winter weather
all along the eastern seaboard had a negative impact on the Company's
sales and distribution costs in this region.
Two other factors had an impact on pre-tax profit during
fiscal 1996. First, as discussed in Note 13 of Notes to Consolidated
Financial Statements, the Company recorded a gain of $4,111,000 on the
issuance of Keebler stock to G. F. Industries, Inc. shareholders as
part of the Sunshine Biscuit transaction. Secondly, as discussed in
Note 11 of Notes to Consolidated Financial Statements, the Company
recorded a reserve of $4,935,000 representing the anticipated costs of
a final settlement of certain pending litigation involving subsidiary
operations in Texas.
1995 as compared with 1994 - Sales for 1995 increased 14% to
$1,129,203,000 from $989,782,000 in 1994. Acquisitions consummated
during fiscal 1995 contributed approximately one-half of the increase,
while increased volume of 3% (exclusive of the acquisitions), product
mix changes and selling price increases were also factors in the sales
increase. Other income increased in 1995 primarily due to the gain on
the sale of certain fixed assets sold during 1995. Income before
income taxes increased 44% to $68,015,000 in fiscal 1995 from the
$47,240,000 reported in fiscal 1994. Income before income taxes as a
percent of sales was 6% in fiscal 1995 compared to 5% in fiscal 1994.
The profit increase was primarily the result of selling
price increases obtained during fiscal 1995, broadened and
strengthened product lines, increased volume and the Company's ongoing
cost containment program where unnecessary expenses were eliminated
and a measure of control was gained over other escalating costs. The
profit increase was partially offset by the overall escalation of raw
material costs. The supply of baking-quality wheat, one of the
Company's primary raw materials, was critically low, therefore
increasing the cost of flour.
During the second quarter of fiscal 1995, the Company
recognized an after-tax gain of $912,000, or $.02 per share, relating
to a reduction in the number of Company employees as a result of the
sale of a portion of the Company's route territories to independent
distributors. The gain was calculated in accordance with Statement of
Financial Accounting Standards No. 88 -- "Employers' Accounting for
Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits."
6
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Page
Index to Financial Statements
Report of independent accountants. . . . . . . . . . . . . . . . . . . . .8
Management responsibility for financial statements . . . . . . . . . . . .9
Consolidated balance sheet at June 29, 1996 and July 1,
1995. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Consolidated statement of income for the fiscal years
ended June 29, 1996, July 1, 1995, and July 2, 1994 . . . . . . . . . 11
Consolidated statement of changes in common stockholders'
equity for the fiscal years ended June 29, 1996,
July 1, 1995, and July 2, 1994. . . . . . . . . . . . . . . . . . . . 12
Consolidated statement of cash flows for the fiscal years
ended June 29, 1996, July 1, 1995, and July 2, 1994 . . . . . . . . . 13
Notes to consolidated financial statements . . . . . . . . . . . . . . . 14
7
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders
of Flowers Industries, Inc.
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, of changes in common
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Flowers Industries, Inc. and its
subsidiaries at June 29, 1996 and July 1, 1995, and the results of
their operations and their cash flows for each of the three fiscal
years in the period ended June 29, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Atlanta, Georgia
July 31, 1996
8
<PAGE>
Management Responsibility for Financial Statements
July 31, 1996
The consolidated financial statements included in this
report were prepared by the Company in conformity with generally
accepted accounting principles. Management's best estimates and
judgments were used, where appropriate. Management is responsible for
the integrity of the financial statements and for other financial
information included in this report. The financial statements have
been audited by the Company's independent accountants, Price
Waterhouse LLP. As set forth in their report, their audit was
conducted in accordance with generally accepted auditing standards and
formed the basis for their opinion on the accompanying financial
statements. They evaluate the system of internal accounting control
and perform such tests and other procedures as they deem necessary to
reach and express an opinion on the fairness of the financial
statements.
The Company maintains a system of internal accounting
controls which is designed to provide a reasonable assurance that
assets are safeguarded and that the financial records reflect the
authorized transactions of the Company. As a part of this process, the
Company has an internal audit function which evaluates the adequacy
and effectiveness of internal accounting controls.
The Audit Committee of the Board of Directors consists of
directors who are neither officers nor employees of the Company. The
Committee meets periodically with management, internal auditors and
the independent accountants to discuss auditing, internal accounting
control and financial reporting matters. The Director of Internal
Audit and the independent accountants have full and free access to
meet with the Audit Committee with and without management being
present.
/s/ C. M. Wood III /s/ Russell M. Fryar
Senior Vice President and Vice President, Treasurer
Chief Financial Officer and Chief Accounting
Officer
9
<PAGE>
<TABLE>
Consolidated Balance Sheet
(Amounts in Thousands except Share Data)
June 29, July 1,
1996 1995
<S> <C> <C>
Assets
Current Assets:
Cash and temporary investments....................................................... $ 25,039 $ 31,836
Accounts receivable.................................................................. 120,301 93,134
Inventories.......................................................................... 68,576 53,634
Prepaid expenses..................................................................... 5,319 3,675
Deferred income taxes................................................................ 10,992 6,755
230,227 189,034
Property, Plant and Equipment:
Land................................................................................. 23,386 21,439
Buildings............................................................................ 183,502 153,947
Machinery and equipment.............................................................. 393,319 371,869
Furniture, fixtures and transportation equipment..................................... 21,365 22,264
Construction in progress............................................................. 63,005 60,865
684,577 630,384
Less: accumulated depreciation....................................................... (264,107) (255,919)
420,470 374,465
Other Assets and Deferred Charges:
Notes receivable from distributors................................................... 61,236 55,699
Investment in unconsolidated affiliate............................................... 68,326
Other long-term assets............................................................... 24,567 27,442
154,129 83,141
Cost in Excess of Net Tangible Assets.................................................... 45,962 10,337
Less: accumulated amortization....................................................... (1,345) (1,056)
44,617 9,281
$ 849,443 $ 655,921
Liabilities and Stockholders' Equity
Current Liabilities:
Current portion of long-term debt.................................................... $ 6,593 $ 6,243
Obligations under capital leases..................................................... 1,988 1,677
Accounts payable..................................................................... 98,796 66,159
Accrued taxes other than income taxes................................................ 5,369 4,599
Income taxes......................................................................... 1,264 3,321
Accrued compensation, interest and other liabilities................................. 67,738 64,655
181,748 146,654
Long-Term Notes Payable.................................................................. 254,355 99,251
Obligations Under Capital Leases......................................................... 2,573 3,798
Industrial Revenue Bonds................................................................. 17,770 17,895
Deferred Income Taxes.................................................................... 47,270 39,538
Deferred Income.......................................................................... 40,403 44,804
Commitments and Contingencies............................................................
Common Stockholders' Equity:
Common stock--$.625 par value, authorized 100,000,000 shares,
issued 59,090,726 shares............................................................. 36,932 36,932
Capital in excess of par value....................................................... 58,783 55,306
Retained earnings................................................................... 234,069 236,645
Less: Common stock in treasury, 506,749 and 1,478,006 shares, respectively........... (6,493) (17,763)
Restricted Stock Award and Executive Incentive Award.............................. (17,967) (7,139)
305,324 303,981
$ 849,443 $ 655,921
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
10
<PAGE>
<TABLE>
Consolidated Statement of Income
(Amounts in Thousands except Per Share Data)
For the year ended
June 29, July 1, July 2,
1996 1995 1994
<S> <C> <C> <C>
Sales.................................................................. $1,238,564 $1,129,203 $989,782
Other income........................................................... 7,909 10,751 4,690
Gain on issuance of additional stock of unconsolidated affiliate....... 4,111
1,250,584 1,139,954 994,472
Materials, supplies, labor and other manufacturing costs............... 674,762 599,416 525,731
Selling, delivery and administrative expenses.......................... 468,695 428,833 383,073
Depreciation and amortization.......................................... 40,848 36,604 34,110
Interest............................................................... 13,004 7,086 4,318
Accrual for settlement of pending litigation........................... 4,935
1,202,244 1,071,939 947,232
Income before income taxes............................................. 48,340 68,015 47,240
Federal and state income taxes......................................... 18,185 25,714 17,744
Equity in net income of unconsolidated affiliate....................... 613
Net income............................................................. $ 30,768 $ 42,301 $ 29,496
Net income per common share............................................ $ .54 $ .75 $ .53
Weighted average number of shares outstanding used in
calculation of net income per common share......................... 57,449 56,868 55,611
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
11
<PAGE>
<TABLE>
Consolidated Statement of Changes in Common Stockholders' Equity
(Amounts in Thousands except Share Data)
Restricted
Stock
Capital Award and
Common Stock in excess Treasury Stock Executive
Number Par of par Retained Number Incentive
of shares value value earnings of shares Cost Award
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at July 3, 1993,
as previously reported. 38,342,075 $23,964 $ 51,183 $225,207 (643,480) $(10,577) $ (9,623)
Three-for-two common
stock split............ 19,171,038 11,982 (11,982) (323,044)
Balances at July 3, 1993
as adjusted............ 57,513,113 35,946 39,201 225,207 (966,524) (10,577) (9,623)
Stock issued for acquisition (115) 293,526 3,540
Exercise of employee
stock options.......... (359) 52,545 372
Purchase of treasury stock. 2 (767,900) (9,799)
Net income for the year.... 29,496
Stock issued into escrow in
connection with Restricted
Stock Award............ 227 209,300 2,294 (2,445)
Exercise of Executive
Incentive Award........ 100 (82,703) (1,030) 610
Amortization of Restricted
Stock Award and Executive
Incentive Award........ 1,786
Dividends paid -
$.5167 per common share (29,102)
Balances at July 2, 1994... 57,513,113 35,946 39,056 225,601 (1,261,756) (15,200) (9,672)
Stock issued for acquisitions 1,577,613 986 16,365 132,393 1,594
Exercise of employee
stock options.......... (178) 69,636 841
Purchase of treasury stock. (369,830) (4,426)
Net income for the year.... 42,301
Exercise of Restricted
Stock Award............ 63 (49,754) (572) 708
Amortization of Restricted
Stock Award and Executive
Incentive Award........ 1,825
Dividends paid -
$.5433 per common share (31,257)
Balances at July 1, 1995... 59,090,726 36,932 55,306 236,645 (1,479,311) (17,763) (7,139)
Stock issued for acquisitions 180 91,335 1,119
Exercise of employee
stock options.......... (764) 190,244 2,337
Purchase of treasury stock. (96,560) (1,303)
Net income for the year.... 30,768
Exercise of Restricted
Stock Award............ 769 (125,064) (1,650) 1,526
Exercise of Executive
Incentive Award........ 301 (113,287) (1,830) 1,434
Stock issued into escrow in
connection with Restricted
Stock Award............ 2,286 786,863 9,640 (11,918)
Stock issued into escrow in
connection with Executive
Incentive Award........ 705 239,031 2,957 (3,662)
Amortization of Restricted
Stock Award and Executive
Incentive Award........ 1,792
Dividends paid -
$.5750 per common share (33,344)
Balances at June 29, 1996.. 59,090,726 $36,932 $ 58,783 $234,069 (506,749) $ (6,493) $(17,967)
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
12
<PAGE>
<TABLE>
Consolidated Statement of Cash Flows
(Amounts in Thousands)
For the year ended
June 29, July 1, July 2,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers.................................... $1,232,963 $1,117,262 $984,133
Interest received............................................... 7,741 7,159 2,890
Other........................................................... 5,416 5,890 3,646
Cash provided by operating activities............................... 1,246,120 1,130,311 990,669
Cash paid to suppliers and employees............................. 1,161,431 1,009,931 919,332
Interest paid................................................... 8,582 6,465 3,753
Income taxes paid............................................... 16,748 20,379 21,805
Cash disbursed for operating activities............................. 1,186,761 1,036,775 944,890
Net cash provided by operating activities (See Schedule 1).......... 59,359 93,536 45,779
Cash flows from investing activities:
Purchase of property, plant and equipment....................... (75,542) (73,466) (63,929)
Acquisition of businesses....................................... (28,118) (17,018) (383)
Divestiture of business......................................... 1,061 22,679
Decrease in divestiture receivables............................. 173 2,359
Investment in unconsolidated affiliate.......................... (61,352)
Escrow funds.................................................... 4,835
Other........................................................... (6,485) (1,845) 2,064
Net cash disbursed for investing activities......................... (170,263) (64,815) (59,889)
Cash flows from financing activities:
Dividends paid.................................................. (33,344) (31,257) (29,102)
Purchase of treasury stock...................................... (1,303) (4,426) (9,799)
Increase in long-term notes payable............................. 356,625 151,391 74,619
Payments of long-term notes payable............................. (217,871) (132,351) (19,012)
Net cash received from (disbursed for) financing activities......... 104,107 (16,643) 16,706
Net (decrease) increase in cash and temporary investments........... $ (6,797) $ 12,078 $ 2,596
Schedule 1.
Schedule Reconciling Earnings to Net Cash Provided by
Operating Activities
Net income..................................................... $ 30,768 $ 42,301 $ 29,496
Noncash expenses, revenues, losses and gains included in income:
Depreciation and amortization.................................. 40,848 36,604 34,110
Deferred income taxes........................................... 3,494 2,847 853
Gain on issuance of additional stock of unconsolidated
affiliate.................................................... (4,111)
Equity in net income of unconsolidated affiliate................ (613)
Changes in assets and liabilities, net of acquisitions
and divestitures:
(Increase) in accounts receivable.............................. (17,742) (5,510) (7,723)
(Increase) in inventories...................................... (12,821) (4,651) (10,696)
(Increase) in prepaid expenses................................. (1,650) (86) (678)
Increase in accounts payable.................................. 28,029 5,859 6,947
(Decrease) increase in accrued taxes and other liabilities..... (6,843) 16,172 (6,530)
$ 59,359 $ 93,536 $ 45,779
Schedule 2.
Schedule of Noncash Investing and Financing Activities
Common stock received in connection with the exercise of
employee stock options.......................................... $ 1,573 $ 663 $ 15
Stock issued and held in escrow in connection with
Restricted Stock Award and Executive Incentive Award............ 15,588 3,299
Stock issued for acquisitions................................... 1,299 18,946 3,425
Note receivable from divestiture of business.................... 2,500
Note payable issued in acquisition of business.................. 15,000
Undisbursed escrow funds available.............................. 2,165
Exercise of Restricted Stock Award and
Executive Incentive Award..................................... 3,480 535
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
13
<PAGE>
Notes to Consolidated Financial Statements
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts
of Flowers Industries, Inc. and its wholly owned subsidiaries.
Intercompany accounts and transactions are eliminated in
consolidation. Investments in affiliated companies 50% or less owned
are accounted for using the equity method.
Revenue Recognition
Revenue from sale of products is recognized at the time of
shipment to the customer. Sales to a single customer accounted for
$150,000,000, or 12% of total consolidated sales during fiscal 1996,
$142,000,000, or 13% of total consolidated sales during fiscal 1995
and $136,000,000, or 14% of total consolidated sales during fiscal
1994.
Cash and Temporary Investments
The Company considers deposits in banks, certificates of
deposits and short-term investments with original maturities of three
months or less as cash and cash equivalents for the purposes of the
statement of cash flows.
The major components of cash and temporary investments are
as follows (Amounts in Thousands):
<TABLE>
June 29, July 1,
1996 1995
<S> <C> <C>
Cash........................ $10,484 $10,456
Time deposits............... 14,555 21,380
Total................... $25,039 $31,836
</TABLE>
Accounts Receivable
Accounts receivable consists of trade receivables, the
current portion of distributor notes receivable and miscellaneous
receivables. When a receivable balance is determined to be
uncollectible, it is charged directly to expense.
Concentration of Credit Risk
The Company grants credit to its customers, who are
primarily in the grocery, foodservice, restaurant and fast-food
markets. The Company's sales are made primarily to customers in the
Southeastern, Central and Western United States, with a majority of
sales occurring in the Southeast.
Inventory
Inventories are carried at the lower of cost (primarily
first-in, first-out) or market.
Hedging Transactions-Raw Material Costs
The Company's primary raw materials are flour, sugar,
shortening and raw fruits and vegetables. The Company has only
limited involvement with derivative financial instruments and does not
use them for trading purposes. The Company enters into various
forward purchase agreements and derivative financial instruments to
reduce the impact of volatility in raw materials ingredients prices.
Amounts payable or receivable under the agreements which qualify as
hedges are recognized as deferred gains or losses and included in
other assets or other liabilities. These deferred amounts are charged
or credited to cost of sales as the related raw materials costs are
charged to operations. Gains and losses on agreements which do not
qualify as hedges are recognized immediately as other income or
expense. At June 29, 1996, the Company had no material commitments
outstanding relating to derivative financial instruments.
14
<PAGE>
Property, Plant and Equipment and Depreciation
The Company provides depreciation for financial reporting
purposes over the estimated useful lives of fixed assets using the
straight-line method. Upon retirement or sale of fixed assets, the
book value is removed from the accounts and the difference between
such net book value and salvage value received is recorded in income.
Expenditures for maintenance and repairs are charged to income;
renovations and improvements are capitalized.
The approximate annual rates of depreciation are 2.5% to 5%
for buildings, 8.33% for machinery and equipment and 10% to 25% for
furniture, fixtures and transportation equipment.
Notes Receivable and Deferred Income
The Company has sold a majority of its territories to
independent distributors. The income from these sales is recognized as
the cash payments are received after the Company's contractual
obligation under a repurchase option granted to the distributor
expires. The sales of the territories are financed with ten year
notes which have remaining balances of $67,239,000 and $60,943,000 at
June 29, 1996 and July 1, 1995, respectively.
Amortization of Intangible Assets
Costs in excess of the net tangible assets acquired are, in
the opinion of management, attributable to long-lived intangibles
having continuing value. Excess amounts related to the purchases of
businesses are being amortized over forty years from the acquisition
date using the straight-line method. Costs of purchased trademark
rights are amortized over the period of expected future benefit, which
is forty years for Mrs. Smith's, Inc. and ten years for Oregon Farms.
At each balance sheet date, the Company evaluates the realizability of
goodwill and other intangible assets.
Treasury Stock
The Company records acquisitions of its capital stock for
treasury at cost. Differences between proceeds for reissuances of
treasury stock and average cost are credited to capital in excess of
par value or charged to capital in excess of par value to the extent
of prior credits and thereafter to retained earnings.
Pension Plans
The Company accounts for pensions in accordance with
Statement of Financial Accounting Standards No. 87 -- "Employers'
Accounting for Pensions." Pension accounting information is disclosed
in Note 8 to the consolidated financial statements.
Income Taxes
The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 -- "Accounting for Income
Taxes" (SFAS 109). SFAS 109 is an asset and liability approach that
requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally
considers all expected future events other than enactments of changes
in the tax law or rates. Income tax accounting information is
disclosed in Note 9 to the consolidated financial statements.
Net Income Per Common Share
Net income per common share is computed by dividing (a) net
income plus interest and other costs on Convertible Subordinated
Debentures outstanding prior to fiscal 1994, net of applicable income
taxes, by (b) common and common equivalent shares outstanding plus
shares which would be issued upon conversion of the subordinated
debentures.
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
15
<PAGE>
Business Segments
The Company's only business is to provide quality food
products to grocery, foodservice, restaurant and fast-food markets.
Note 2. INVENTORIES
The major components of inventories are as follows (Amounts
in Thousands):
<TABLE>
June 29, July 1,
1996 1995
<S> <C> <C>
Ingredients and raw materials.......................... $14,951 $15,936
Packaging materials.................................... 10,988 11,856
Finished goods......................................... 25,527 12,530
Supplies............................................... 17,110 13,312
Total.............................................. $68,576 $53,634
</TABLE>
Note 3. FINANCIAL INSTRUMENTS FAIR VALUE
Statement of Financial Accounting Standards No. 107 --
"Disclosure about Fair Value of Financial Instruments" (SFAS 107)
requires disclosure of fair value information about financial
instruments, whether or not recognized in the balance sheet, for which
it is practicable to estimate that value.
The carrying value of cash and temporary investments, notes
receivable from distributors, other notes receivable, industrial
revenue bonds and long-term debt payable to financial institutions
approximates fair value at June 29, 1996 and July 1, 1995.
Note 4. LONG-TERM DEBT
Long-Term Notes Payable
In July, August and November of 1995, the Company
renegotiated three of its three-year revolving-term loan agreements
with three separate banks increasing them from $50,000,000 each to
$60,000,000 each. The Company also has a $10,000,000 revolving-term
loan agreement entered into in March of 1993. At June 29, 1996, the
Company had a total of $103,375,000 borrowed under three of these
agreements. On July 10, 1996, the Company paid off these borrowings
from proceeds under a new five-year $300,000,000 syndicated
loan facility. This agreement replaced the three $60,000,000
revolving-term loan agreements discussed above.
In January, 1996, the Company completed a private placement
of $125,000,000 of long-term Senior Notes. These notes are due in
three tranches: $100,000,000 due January 5, 2008; $20,000,000 due
January 5, 2011; and $5,000,000 due January 5, 2016. A portion of the
proceeds was used to pay off $114,150,000 outstanding at that time
under the revolving credit and term loan agreements. The remaining
proceeds were used for working capital and for other general corporate
purposes.
Also outstanding at June 29, 1996 are long-term borrowings
of $15,000,000 scheduled to mature in equal instalments over the next
three years.
Several loan agreements of the Company contain restrictions
which, among other things, require maintenance of certain financial
ratios, restrict encumbrance of assets and creation of indebtedness,
and limit the payment of dividends. At June 29, 1996, the Company was
in compliance with these financial ratio requirements. At June 29,
1996, $113,135,000 of the Company's retained earnings of $234,069,000
was unrestricted and available for the payment of dividends under the
most restrictive terms of the agreements.
16
<PAGE>
Long-term notes payable consist of (Amounts in Thousands):
<TABLE>
June 29, July 1,
1996 1995
<S> <C> <C>
Private placement long-term Senior Notes with interest from
6.80% to 7.08% payable in instalments from 2004
through 2016................................................... $125,000
Borrowings under revolving-term loan agreements.................. 103,375 $ 86,740
Various industrial revenue bonds with interest from 3.75%
to 8.50% or a percentage of prime (60% to 71% with
a minimum of 5.5%) payable in instalments through
2014 secured by escrowed funds, construction in
progress and property......................................... 18,170 18,970
Borrowings scheduled to mature in equal instalments
over the next three years with interest ranging
from 4.98% to 6.49% (Federal Funds rate plus
20 to 35 basis points)........................................ 15,000 15,000
Various unsecured notes payable with interest from
3.0% to 8.0% payable in instalments through 2004.............. 17,173 2,679
278,718 123,389
Due within one year.............................................. 6,593 6,243
Due after one year............................................... $272,125 $117,146
</TABLE>
Annual maturities of long-term debt for each of the five
years following June 29, 1996 are $6,593,000, $6,737,000, $8,887,000,
$3,366,000 and $1,424,000, respectively.
Note 5. COMMITMENTS AND CONTINGENCIES
Description of Operating Lease Arrangements
The Company leases certain property and equipment, including
warehouses and certain distribution and other equipment, under
operating leases which expire over the next twenty years. Most of
these operating leases provide the Company with the option after the
initial lease term either to purchase the property at the then fair
value or renew its lease at the then fair rental value for periods of
one month to ten years. Generally, management expects that leases will
be renewed or replaced by other leases in the normal course of
business. Payments for certain truck rentals are based on a minimum
rental plus additional rent based on mileage.
Minimum payments for operating leases having initial or
remaining noncancelable terms in excess of one year are as follows
(Amounts in Thousands):
Fiscal Year(s)
1997................................ $ 16,598
1998................................ 14,081
1999................................ 12,821
2000................................ 10,942
2001................................ 8,982
2002 to termination (aggregate)..... 39,848
Total minimum lease payments........ $103,272
Total rent expense for all operating leases amounted to
$30,863,000 for 1996, $23,487,000 for 1995 and $22,021,000 for 1994.
Other Commitments
The Company's various commodity purchase agreements
effectively commit the Company to purchase raw materials in amounts
totaling approximately $69,365,000, at June 29, 1996, which will be
used in production in future periods.
17
<PAGE>
Note 6. ACCRUED COMPENSATION, INTEREST AND OTHER LIABILITIES
Accrued compensation, interest and other liabilities consist
of (Amounts in Thousands):
<TABLE>
June 29, July 1,
1996 1995
<S> <C> <C>
Compensation........................................ $ 7,518 $15,657
Vacation cost....................................... 10,030 8,117
Pension cost........................................ 8,729 5,483
Workers' compensation insurance..................... 10,881 12,136
Other insurance..................................... 5,013 5,010
Interest............................................ 6,041 1,619
Other............................................... 19,526 16,633
Total............................................. $67,738 $64,655
</TABLE>
Note 7. COMMON STOCKHOLDERS' EQUITY
General
On October 20, 1995, the Board of Directors declared a
three-for-two split of the Company's common stock, effected in the
form of a stock dividend paid on November 17, 1995 to shareholders of
record on November 3, 1995. All agreements concerning stock options
and other commitments payable in shares of the Company's common stock
provide for the issuance of additional shares due to the declaration
of the stock split. An amount equal to the par value of the common
shares issued plus cash paid in lieu of fractional shares was
transferred from capital in excess of par value to the common stock
account. This transfer has been reflected in the Consolidated
Statement of Changes in Common Stockholders' Equity at July 3,
1993. All references to number of shares, except shares authorized,
and to per share information in the consolidated financial statements
have been adjusted to reflect the stock split on a retroactive basis.
Shareholder Rights Plan
On March 17, 1989, the Company's Board of Directors declared
a dividend of one preferred share purchase right (collectively, the
"Rights") for each share of common stock held of record on April 3,
1989. Under certain circumstances, a Right may be exercised to
purchase one one-thousandth of a share of Series A Junior
Participating Preferred Stock (the "Preferred Stock") at an exercise
price of $50.
The Rights become exercisable 10 days after (i) a person or
group acquires 10% or more of the Company's outstanding common stock,
or (ii) an announcement of a tender offer for 30% or more of the
Company's outstanding common stock.
If the Rights become exercisable, each Right will entitle
the holder thereof to purchase one one-thousandth of a share of the
Preferred Stock. If a person or group acquires 10% or more of the
outstanding common stock of the Company, the holder of each Right not
owned by the 10% or more shareholder would be entitled to purchase for
$50 (the exercise price of the Right) common stock of the Company
having market value equal to $100. If the Company is a party to
certain mergers or business combination transactions or transfers 50%
or more of its assets or earning power, each Right will entitle
its holder to buy a number of shares of common stock of the acquiring
or surviving entity (or of the Company in certain instances) having a
market value of twice the exercise price of the Right, or $100. If the
Rights are fully exercised, the shares issued thereby would have a
dilutive effect on the shares previously outstanding.
The Rights expire April 2, 1999, and may be redeemed by the
Company for $.01 per Right at any time prior to the close of business
on the tenth day after a public announcement of an acquisition of 10%
or more of the common stock of the Company.
The principal terms of the Rights are set forth in a
registration statement on Form 8-A filed with the Securities and
Exchange Commission and dated as of March 20, 1989.
18
<PAGE>
Stock Option Plan
The Company has 546,474 shares of common stock authorized
for issuance to key employees under the Company's Stock Option Plan.
Option prices must be 100% of the market value of the common stock at
the time of the grant. The Plan expired on October 15, 1992,
therefore no additional grants will be made pursuant to this Plan.
During fiscal 1991 this Plan was amended to provide for the issuance
of "non-qualified options" in addition to "incentive stock options"
under the applicable provisions of the Internal Revenue Code. Changes
in the Stock Option Plan are as follows:
<TABLE>
Number of Shares
Granted and
Authorized Outstanding Available
<S> <C> <C> <C>
Balance at July 3, 1993.............................................. 1,053,990 1,053,990 0
Exercised ..................................................... (239,498) (239,498)
Balance at July 2, 1994.............................................. 814,492 814,492 0
Exercised...................................................... (72,076) (72,076)
Balance at July 1, 1995.............................................. 742,416 742,416 0
Exercised...................................................... (195,942) (195,942)
Balance at June 29, 1996............................................. 546,474 546,474 0
</TABLE>
At June 29, 1996 the options yet to be exercised are as
follows (Amounts in Thousands except Share Data):
<TABLE>
Number Option Price
of Shares Per Share Total Value
<S> <C> <C> <C>
Granted in fiscal 1991............................................... 311,474 $8.25 $2,570
Granted in fiscal 1991............................................... 235,000 $9.08 $2,134
</TABLE>
Information with respect to options exercised at the date of
exercise is as follows (Amounts in Thousands except Share Data):
<TABLE>
Per Share
Number Option Price Average Quoted
of Shares Per Share Total Market Price
<S> <C> <C> <C>
For the year ended July 2, 1994
Granted in fiscal 1985.......................... 3,074 $6.00 $ 18 $12.72
Granted in fiscal 1986.......................... 4,611 $8.00 $ 37 $12.72
Granted in fiscal 1991.......................... 188,913 $8.25 $1,559 $12.72
Granted in fiscal 1991.......................... 42,900 $9.08 $ 390 $12.72
For the year ended July 1, 1995
Granted in fiscal 1985.......................... 4,577 $6.00 $ 27 $12.13
Granted in fiscal 1991.......................... 67,500 $8.25 $ 557 $12.13
For the year ended June 29, 1996
Granted in fiscal 1986.......................... 11,885 $8.00 $ 95 $13.58
Granted in fiscal 1991.......................... 149,058 $8.25 $1,230 $13.58
Granted in fiscal 1991.......................... 35,000 $9.08 $ 318 $13.58
</TABLE>
Proceeds received from the exercise of stock options are
credited to the Company's capital accounts.
19
<PAGE>
Executive Stock Incentive Plan
The Company has 5,700,000 shares of common stock authorized
for issuance to eligible employees under the Executive Stock Incentive
Plan (ESIP). The ESIP authorizes the Compensation Committee of the
Board of Directors to grant to eligible participants of the Company
and its subsidiaries, through October 1999, stock options, stock
appreciation rights, restricted or deferred stock awards, stock
purchase rights and other stock-based awards.
During fiscal 1996 and 1994, 780,043 and 209,300 shares,
respectively, of the Company's common stock were granted as restricted
stock awards (RSA). These shares are held in escrow by the Company
and will be released to the grantee upon the grantee's satisfaction of
continued employment at the same or a higher level during the
restriction periods, which end June 15, 1999, May 20, 2000 and June
18, 2000, for the fiscal 1996 awards, and June 15, 1997 for the fiscal
1994 award, and upon payment of the purchase price of $6.33, $7.66,
$8.83 and $6.02 per share, respectively. The purchase price is fifty
percent of the mean of the high and low market value of the Company's
common stock at the date of grant. The difference between the market
price at the date of grant and the purchase price to be paid by
the grantee is recognized ratably by the Company as compensation
expense over the restriction period. This expense for fiscal 1996,
1995 and 1994 was $1,299,000, $901,000 and $862,000, respectively.
During fiscal 1996 and 1992, 239,031 and 478,068 shares,
respectively, of the Company's common stock were granted as executive
incentive awards (EIA). These shares are held in escrow by the
Company and may be released ratably to the grantee upon the grantee's
satisfaction of continued employment at the same or a higher level
during the restriction periods which end May 20, 2000 and November 15,
1996, respectively, and upon payment of the purchase price of $7.66
and $4.67 per share, respectively. The purchase price is fifty
percent of the mean of the high and low market value of the Company's
common stock at the date of grant. The difference between the market
value at the date of grant and the purchase price to be paid by the
grantee is recognized ratably by the Company as compensation expense
over the restriction period. This expense for fiscal 1996 was
$493,000 and for 1995 and 1994 was $924,000 in each year.
During fiscal 1996, 562,500 shares of the Company's common
stock were granted as non-qualified stock options (NQSOs). The NQSOs
are exercisable at any time, commencing on the first anniversary of
the grant date, until the year 2005. The optionees are required to
pay the market value of the shares, determined as of the grant date,
which was $12.67. As of fiscal year end June 29, 1996, all NQSOs
granted remained outstanding.
Information as to activity under the ESIP is as follows:
<TABLE>
Number of Shares
Authorized Granted Reserved Available
<S> <C> <C> <C> <C>
Balance at July 3, 1993..................... 2,700,000 1,320,820 239,035 1,140,145
Granted (RSA)............................. 209,300 (209,300)
Reserved (RSA)............................ 209,300 (209,300)
Terminated (RSA).......................... (7,062) (1,659) 8,721
Balance at July 2, 1994..................... 2,700,000 1,523,058 446,676 730,266
Terminated (RSA).......................... (3,563) (3,522) 7,085
Balance at July 1, 1995..................... 2,700,000 1,519,495 443,154 737,351
Authorized................................ 3,000,000 3,000,000
Granted (NQSO)............................ 562,500 (562,500)
Granted (RSA)............................. 780,043 (170,602) (609,441)
Granted (EIA)............................. 239,031 (239,031)
Terminated (RSA).......................... (26,400) (33,521) 59,921
Balance at June 29, 1996.................... 5,700,000 3,074,669 0 2,625,331
</TABLE>
20
<PAGE>
Note 8. PENSION PLANS
The Company has noncontributory defined benefit pension
plans covering certain employees who have completed prescribed service
requirements. The benefits are based on years of service and the
employee's career earnings. The Company also has a supplemental
defined benefit pension plan covering certain Company employees which
provides benefits to participants commencing at retirement calculated
according to the formula contained in the Company's tax-qualified
retirement plan, but without regard to statutory limitations on the
maximum amount of compensation which may be taken into account by, nor
the maximum benefits which may be paid from such plans. In addition,
certain executive employees at Flowers Industries, Inc. are subject to
provisions of the tax-qualified plan which limit their benefits to an
even greater degree if necessary to permit the tax-qualified plan to
meet the nondiscrimination requirements of the Internal Revenue Code;
the supplemental plan will also restore any benefits which are reduced
as a consequence of this new provision. Benefits provided by this
supplemental plan are reduced by benefits provided by the
noncontributory defined benefit pension plans. Pension expense was
$5,660,000, $5,003,000 and $5,974,000 in fiscal 1996, 1995 and 1994,
respectively. Pension plans are funded at amounts deductible for
income tax purposes but not less than the minimum funding
required by the Employee Retirement Income Security Act of 1974
(ERISA). As of June 29, 1996 and July 1, 1995, the assets of the
plans include certificates of deposit, marketable equity securities,
mutual funds, corporate and government debt securities and annuity
contracts. The marketable equity securities include 337,500 shares of
common stock of the Company with a fair value of approximately
$5,442,000 and $4,388,000 at June 29, 1996 and July 1, 1995,
respectively.
During the second quarter of fiscal 1995 and the fourth
quarter of fiscal 1994, the Company recognized after-tax curtailment
gains of $912,000 or $.02 per share and $831,000 or $.02 per share,
respectively, in accordance with Statement of Financial Accounting
Standards No. 88 -- "Employers' Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination
Benefits." These gains arose from the sale of a portion of the
Company's territories to independent distributors and the consequent
termination of participation in the Flowers Industries, Inc.
Retirement Plans of certain employees.
Net periodic pension cost of these plans for fiscal 1996,
1995 and 1994 included the following components (Amounts in
Thousands):
<TABLE>
June 29, July 1, July 2,
1996 1995 1994
<S> <C> <C> <C>
Service cost-benefit earned during the period........................... $ 5,765 $ 5,538 $ 6,104
Interest cost on projected benefit obligation........................... 9,341 8,261 7,849
Reduction of pension costs due to actual return on plan assets.......... (9,073) (8,593) (5,914)
Net amortization and deferral........................................... (373) (203) (2,065)
$ 5,660 $ 5,003 $ 5,974
</TABLE>
Assumptions used to determine net periodic pension cost
for these plans for fiscal 1996, 1995 and 1994 are as follows
(measurement dates are June 29, 1996, July 1, 1995 and July 2, 1994,
respectively):
<TABLE>
June 29, July 1, July 2,
1996 1995 1994
<S> <C> <C> <C>
Discount rate........................................................... 8.00% 8.25% 8.00%
Rate of increase in compensation levels................................. 5.50% 5.75% 5.50%
Expected long-term rate of return on assets............................. 9.00% 9.00% 9.00%
</TABLE>
21
<PAGE>
The Company's main pension plan, Flowers Industries, Inc.
Retirement Plan No. 01, has plan assets that exceed accumulated
benefit obligations. There are certain plans, however, with
accumulated benefit obligations which exceed plan assets. The
following table summarizes the funded status of the Company's pension
plans and the related amounts that are recognized in the Company's
balance sheet at June 29, 1996 and July 1, 1995 (Amounts in
Thousands):
<TABLE>
Plans for Plans for Plans for Plans for
Which Which Which Which
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
June 29, 1996 June 29, 1996 July 1, 1995 July 1, 1995
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation
Accumulated benefit obligations:
Vested . . . . . . . . . . . . . . . . . . . . . . $ (98,543) $(4,615) $(78,597) $(13,115)
Nonvested. . . . . . . . . . . . . . . . . . . . . (1,937) (136) (2,118) (266)
$(100,480) $(4,751) $(80,715) $(13,381)
Plan assets at fair value. . . . . . . . . . . . . . . . $ 114,508 $ 2,047 $ 86,558 $ 12,375
Projected benefit obligations. . . . . . . . . . . . . . (117,730) (6,932) (98,379) (15,401)
Plan assets (less than) projected benefit obligations. . (3,222) (4,885) (11,821) (3,026)
Items not yet recognized in earnings:
Unrecognized net asset at transition. . . . . . . . (5,207) (6,154) 106
Unrecognized prior service cost . . . . . . . . . . (110) 348 (222) 869
Unrecognized net loss . . . . . . . . . . . . . . . 2,929 1,417 14,369 396
Contribution payable. . . . . . . . . . . . . . . . . . . $ (5,610) $(3,120) $ (3,828) $ (1,655)
</TABLE>
The Company made contributions of approximately $271,000 in
fiscal 1996, $441,000 in fiscal 1995 and $432,000 in fiscal 1994 to
collectively bargained, multiemployer pension plans based on specific
rates per hour worked by participating employees.
Note 9. INCOME TAXES
The provision for income taxes consists of the following
(Amounts in Thousands):
<TABLE>
For the year ended
June 29, July 1, July 2,
1996 1995 1994
<S> <C> <C> <C>
Current taxes:
Federal............................................................. $13,915 $21,886 $15,754
State............................................................... 2,621 2,723 2,643
16,536 24,609 18,397
Deferred taxes:
Federal............................................................. 1,636 1,358 801
State............................................................... 347 854 63
1,983 2,212 864
Tax credits............................................................. (33)
Benefit of operating loss carryforwards................................. (334) (1,107) (1,484)
(334) (1,107) (1,517)
Provision for income taxes.............................................. $18,185 $25,714 $17,744
</TABLE>
22
<PAGE>
Deferred tax liabilities (assets) are comprised of the
following (Amounts in Thousands):
<TABLE>
For the year ended
June 29, July 1,
1996 1995
<S> <C> <C>
Depreciation......................................................................... $47,999 $41,776
Other................................................................................ 7,902 7,267
Gross deferred tax liabilities................................................... 55,901 49,043
Self-insurance accrual............................................................... (5,926) (6,587)
Vacation accrual..................................................................... (2,554) (2,184)
Pension accrual...................................................................... (2,547) (371)
Loss carryforwards................................................................... (3,805) (3,329)
Other................................................................................ (7,565) (5,448)
Gross deferred tax assets........................................................ (22,397) (17,919)
Deferred tax assets valuation allowance.............................................. 2,774 1,659
$36,278 $32,783
</TABLE>
The net change in the valuation allowance for deferred tax
assets was an increase of $1,115,000, related to operating loss
carryforwards.
The provision for income taxes on income differs from the
amount computed by applying the U.S. federal income tax rate (35%)
because of the effect of the following items (Amounts in Thousands):
<TABLE>
For the year ended
June 29, July 1, July 2,
1996 1995 1994
<S> <C> <C> <C>
Tax at U.S. federal income tax rate..................................... $16,919 $23,805 $16,534
State income taxes, net of U.S. federal income tax benefit.............. 1,929 2,325 1,759
Benefit of operating loss carryforwards................................. (334) (1,107) (1,484)
Tax credits............................................................. (33)
Retroactive rate increase............................................... 894
Other................................................................... (329) 691 74
Provision for income taxes .......................................... $18,185 $25,714 $17,744
</TABLE>
The Omnibus Budget Reconciliation Act of 1993 (the "1993
Act"), enacted on August 10, 1993, increased the Company's
statutory federal tax rate from 34% to 35% and further limited the
deductibility of meals and entertainment expense. These changes
resulted in a $1,356,000, or $.02 per share, charge for the year ended
July 2, 1994, of which $894,000, or $.01 per share, was due to an
increase of the Company's deferred tax liability account balance and
the retroactive provision of the increase in the statutory federal tax
rate.
The amount of federal operating loss carryforwards generated
by certain subsidiaries prior to their acquisition is $4,523,000 with
expiration dates through the fiscal year 2009. The use of
pre-acquisition operating losses and tax credit carryforwards is
subject to limitations imposed by the Internal Revenue Code. The
Company does not anticipate that these limitations will affect
utilization of the carryforwards prior to their expiration.
Various subsidiaries have state operating loss carryforwards of
$62,889,000 with expiration dates through the fiscal year 2011.
The Company's fiscal 1993, 1994 and 1995 federal income tax
returns are presently under examination by the Internal Revenue
Service. In the opinion of management, any additional tax liability
resulting from this matter would not have a material adverse impact on
the consolidated financial position or operating results of the
Company.
Note 10. OTHER EMPLOYEE BENEFIT PLANS
Under the Company's Bonus Plan, approved annually by the
Compensation Committee, certain key employees may receive bonus
compensation based on attainment of specified income goals. Total
compensation under the Bonus Plan was approximately $877,000,
$6,157,000 and $387,000 for fiscal 1996, 1995 and 1994, respectively.
23
<PAGE>
The Company's Employee Stock Ownership Plan (the "Plan"),
which established accounts for substantially all employees who
completed certain service requirements and to which were credited
shares of the Company's common stock purchased by the Plan, was
terminated during fiscal l995. The total stock purchased was based on
a percentage of payroll for eligible employees and the stock was
allocated equally to all participants. The shares of stock were held
in a trust and were distributed to the employees upon termination of
the Plan. The Company's contributions to the Plan amounted to
approximately $450,000 in fiscal 1994.
During fiscal 1995, the Company established the Flowers
Industries, Inc. 401(k) Retirement Savings Plan ("FIRST"). FIRST
covers substantially all employees who have completed certain service
requirements. The cost and contributions for employees who
participate in the defined benefit pension plan is 25% of the first
$400 contributed by the employee. The costs and contributions for
employees who do not participate in the defined benefit pension plan
is 2% of compensation and 25% of the employees contributions up
to 6% of compensation. During fiscal 1996 and fiscal 1995, the total
cost and contributions was $1,268,000 and $265,000, respectively.
Note 11. LEGAL MATTERS AND CONTINGENCIES
The Company is engaged in various legal proceedings which
arise in the ordinary course of its business. In the opinion of
management, the amount of ultimate liability with respect to those
proceedings will not be material to the Company's financial position
or results of operations. A reserve of $4,935,000 was recorded during
fiscal 1996, which represents the anticipated costs of final
settlement of certain pending litigation involving subsidiary
operations in Texas.
Note 12. ACQUISITIONS
On May 31, 1996, the Company acquired certain assets of Mrs.
Smith's, Inc. including its brand name and trademarks from The J. M.
Smucker Company. Mrs. Smith's, Inc. primarily manufactures and
distributes frozen pies. Under the terms of the acquisition agreement,
the Company paid $30,000,000, consisting of $15,000,000 in cash at
closing and a $15,000,000 note payable. In addition, the Company
entered into ten year leases for the property, plant and equipment
used in the business.
The acquisition has been accounted for as a purchase, and,
accordingly, the results of operations of the acquired business is
included in the consolidated statement of income from the date of
acquisition.
The following unaudited condensed consolidated combined pro
forma results of operations assume the acquisition occurred as of the
beginning of each fiscal year:
<TABLE>
For the year ended
June 29, 1996 July 1, 1995
<S> <C> <C>
Sales................... $1,351,769 $1,249,461
Net income.............. 33,056 45,057
Earnings per share...... .58 .79
</TABLE>
The pro forma financial information is not necessarily
indicative of the operating results that would have occurred had
the acquisition been consummated as of the beginning of the fiscal
year, nor are they necessarily indicative of future operating results.
In addition, the Company acquired certain other businesses
during fiscal 1996 which have been accounted for as purchases. These
acquisitions are immaterial to the results of operations of the
Company.
24
<PAGE>
Note 13. INVESTMENT IN UNCONSOLIDATED AFFILIATE
In January 1996, the Company acquired, for $62,000,000, a
49.6% interest in INFLO Holdings Corporation (INFLO), a newly formed
joint venture between the Company and Artal Luxembourg S.A. On January
26, 1996, INFLO acquired 100% of Keebler Corporation (Keebler) for an
aggregate consideration of $454,900,000. Prior to the acquisition by
INFLO, Keebler was an indirect wholly owned subsidiary of United
Biscuits (Holdings) plc. Keebler is the second largest cookie and
cracker manufacturer in the United States. The acquisition of Keebler
was financed through the equity of INFLO and bank borrowings. The
Company accounts for its investment in INFLO using the equity method
of accounting.
Condensed financial information of INFLO is as follows
(amounts in thousands):
<TABLE>
April 20, 1996
<S> <C>
Current assets.................................................... $252,791
Total assets...................................................... 867,429
Current liabilities............................................... 384,635
Total liabilities................................................ 741,174
Partners' capital................................................. 126,255
Total liabilities and Partners' capital........................... 867,429
For the period from
inception through April 20, 1996
Sales............................................................. $345,600
Gross profit...................................................... 177,900
Net income........................................................ 1,255
</TABLE>
The Company recorded $613,000 as its share of INFLO's
earnings through April 20, 1996, which is the joint venture's first
quarter end.
On June 4, 1996, Keebler acquired 100% of Sunshine Biscuits,
Inc. from G. F. Industries, Inc. (GFI) for an aggregate purchase price
of $171,600,000. The acquisition was funded by Keebler's working
capital, bank financing and the issuance to GFI of $23,600,000 of
INFLO common stock and warrants. The Company recognized a pre-tax
gain on the shares issued to GFI of $4,111,000.
Note 14. UNAUDITED QUARTERLY FINANCIAL INFORMATION
Results of operations for each of the four quarters of the
fiscal years ended June 29, 1996 and July 1, 1995 follow (each quarter
represents a period of twelve weeks except the fourth quarter, which
includes sixteen weeks):
<TABLE>
(Amounts in Thousands except Per Share Data)
Quarter First Second Third Fourth
1996 1996 1996 1996
1995 1995 1995 1995
<S> <C> <C> <C> <C>
Sales...................................................... $269,674 $290,538 $275,013 $403,339
233,491 269,987 256,553 369,172
Gross profit............................................... 125,893 130,676 125,398 181,835
109,700 127,098 119,661 173,328
Income before income taxes................................. 12,696 12,749 9,135 13,760
9,983 17,001 14,553 26,478
Net income................................................. 7,897 7,930 5,682 9,259
6,239 10,626 9,096 16,340
Net income per common share ............................... .14 .14 .10 .16
.11 .19 .16 .29
</TABLE>
25
<PAGE>
PART III
Item 10.
Directors and Executive Officers of the Registrant is
incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of shareholders on October 18, 1996,
except that a description of the Executive Officers of the Registrant
is set forth in Item 1 hereof.
Item 11.
Executive Compensation is incorporated herein by reference
from the Company's definitive proxy statement for the annual meeting
of shareholders on October 18, 1996.
Item 12.
Security Ownership of Certain Beneficial Owners and
Management is incorporated herein by reference from the Company's
definitive proxy statement for the annual meeting of shareholders on
October 18, 1996.
Item 13.
Certain Relationships and Related Transactions is
incorporated herein by reference from the Company's definitive proxy
statement for the annual meeting of shareholders on October 18, 1996.
26
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
Sequential
Page
a. List of documents filed as part of this report
1. Financial Statements*
Report of independent accountants. . . . . . . . . . . . . . . . .8
Consolidated balance sheet at June 29, 1996 and
July 1, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 10
Consolidated statement of income for the fiscal
years ended June 29, 1996, July 1, 1995 and
July 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 11
Consolidated statement of changes in common
stockholders' equity for the fiscal years ended
June 29, 1996, July 1, 1995 and July 2, 1994 . . . . . . . . . 12
Consolidated statement of cash flows for the
fiscal years ended June 29, 1996, July 1, 1995
and July 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . 13
Notes to consolidated financial statements . . . . . . . . . . . 14
2. Financial Statement Schedules
Report of Independent Accountants on Financial
Statement Schedule . . . . . . . . . . . . . . . . . . . . . . 28
Schedule -- for the fiscal years ended June 29,
1996, July 1, 1995 and July 2, 1994
II Valuation and qualifying accounts. . . . . . . . . . . 31
3. Exhibits
3(a) Second Restated Articles of Incorporation,
as corrected (Incorporated by reference to
the Company's Annual Report on Form 10-K for
the fiscal year ended June 27, 1992, File No.
1-9787). . . . . . . . . . . . . . . . . . . . . . . . .
3(b) Restated By-Laws, as of October 20, 1989
(Incorporated by reference to the Company's
Annual Report on Form 10-K for the fiscal
year ended June 27, 1992, File No. 1-9787) . . . . . . .
4(a) Rights Agreement dated as of March 17, 1989
between the Company and the Rights Agent
(Incorporated by reference to the Company's
Registration Statement on Form 8-A filed
March 21, 1989, as amended, File No.
1-9787). . . . . . . . . . . . . . . . . . . . . . . . .
4(a)(1) First Addendum to Rights Agreement dated as of
June 6, 1992 (Incorporated by reference to the
Company's Annual Report on Form 10-K for the
fiscal year ended June 27, 1992, File No. 1-9787)
10(a) Flowers Industries, Inc. Annual Executive Bonus
Plan dated August 4, 1995 (Incorporated by
reference to the Company's Annual Report on Form
10-K for the fiscal year ended July 1, 1995, File
No. 1-9787)**. . . . . . . . . . . . . . . . . . . . . .
10(b) Flowers Industries, Inc. 401(k) Retirement
Savings Plan (Incorporated by reference to the
Company's Registration Statement on Form S-8
filed April 13, 1995, File No. 33-91198)** . . . . . . .
10(c) Severance Policy (Incorporated by reference to
the Company's Annual Report on Form 10-K for the
fiscal year ended July 1, 1989, File No.
1-9787)**. . . . . . . . . . . . . . . . . . . . . . . .
10(d) 1982 Incentive Stock Option Plan, as amended
(Incorporated by reference to the Company's
Registration Statement on Form S-3/S-8 filed
May 18, 1990, File No. 33-34855)** . . . . . . . . . . .
10(e) 1989 Executive Stock Incentive Plan
(Incorporated by reference to the Company's
Registration Statement on Form S-3/S-8 filed May
18, 1990, File No. 33-34855)** . . . . . . . . . . . . .
10(e)(1) Amendment to the 1989 Executive Stock Incentive
Plan, dated as of August 4, 1995 (Incorporated by
reference to the Company's Annual Report on Form
10-K for the fiscal year ended July 1, 1995, File
No. 1-9787)**. . . . . . . . . . . . . . . . . . . . . .
10(f) Flowers Industries, Inc. 1990 Supplemental
Executive Retirement Plan (Incorporated by
reference to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30,
1990, File No. 1-9787)** . . . . . . . . . . . . . . . .
10(g) Stock Purchase Agreement dated as of November 5,
1995, between INFLO Holdings Corporation and UB
Investments (Netherlands) BV, as amended by
agreement dated January 26, 1996 (Incorporated
by reference to the Company's Current Report on
Form 8-K(A) dated April 10, 1996, File No.
1-9787 . . . . . . . . . . . . . . . . . . . . . . . . .
10(h) Acquisition Agreement dated as of May 1, 1996,
among Flowers Industries, Inc., Mrs. Smith's
Bakeries, a wholly-owned subsidiary of Flowers
Industries, Inc., The J.M. Smucker Company, and
Mrs. Smith's, Inc., a wholly-owned subsidiary of
The J. M. Smucker Company (Incorporated by
reference to the Company's Current Report on
Form 8-K dated June 13, 1996, File No.
1-9787 . . . . . . . . . . . . . . . . . . . . . . . . .
11 Statement re computation of per share
earnings . . . . . . . . . . . . . . . . . . . . . . 32
22 Subsidiaries of the Registrant . . . . . . . . . . . . 33
23 Consent of Independent Accountants . . . . . . . . . . 35
b. Reports on Form 8-K
On June 13, 1996, the Company filed a Form 8-K containing certain
information relating to the acquisition of certain assets of Mrs.
Smith's Inc. from Mrs. Smith's Inc. and its parent company, The
J.M. Smucker Company. This Form 8-K was amended on August 14, 1996
by a Form 8-K(A) containing certain historical and proforma
financial information.
* The individual financial statements of the Registrant have been
omitted since the Registrant is primarily an operating company and
all subsidiaries included in the consolidated financial
statements, in the aggregate, do not have minority equity interest
and/or indebtedness to any person other than the Registrant or its
consolidated subsidiaries in amounts which exceed 5 percent of
total consolidated assets at June 29, 1996, excepting indebtedness
incurred in the ordinary course of business which is not overdue
and which matures within one year from the date of its creation.
** Management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto pursuant to Item 14(c) of Form
10-K.
27
<PAGE>
Report of Independent Accountants On
Financial Statement Schedule
To the Board of Directors and Stockholders
of Flowers Industries, Inc.
Our audits of the consolidated financial statements referred to in our
report dated July 31, 1996 of this Annual Report on Form 10-K also
included an audit of the Financial Statement Schedule listed in Item
14(a) of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related
consolidated financial statements.
/s/ Price Waterhouse LLP
Atlanta, Georgia
July 31, 1996
28
<PAGE>
For purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act
of 1933, the undersigned registrant hereby undertakes as follows,
which undertaking shall be incorporated by reference into registrant's
Registration Statements on Form S-3/S-8, File No. 33-34855; and on
Form S-8, File No. 33-91198.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be
governed by the final adjudication of such issue.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Flowers Industries, Inc. has duly
caused this Form 10-K to be signed on its behalf by the undersigned,
thereunto duly authorized.
FLOWERS INDUSTRIES, INC.
/s/Heeth Varnedoe III /s/C. Martin Wood III /s/Russell M. Fryar
By: Heeth Varnedoe III By: C. Martin Wood III By: Russell M. Fryar
President and Senior Vice President and Vice President
Chief Operating Chief Financial Officer and Treasurer,
Officer Chief Accounting
Officer
Date: August 9, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates
indicated:
/s/Amos R. McMullian Chairman of the Board, August 9, 1996
Amos R. McMullian Chairman of the Executive
Committee and Chief
Executive Officer
/s/Robert P. Crozer Vice Chairman of the Board August 9, 1996
Robert P. Crozer and a Director
/s/Edward L. Baker Director August 9, 1996
Edward L. Baker
/s/Joe E. Beverly Director August 9, 1996
Joe E. Beverly
/s/Franklin L. Burke Director August 9, 1996
Franklin L. Burke
/s/G. Anthony Campbell General Counsel and August 9, 1996
G. Anthony Campbell Secretary and a Director
/s/John B. Ellis Director August 9, 1996
John B. Ellis
/s/Langdon S. Flowers Director August 9, 1996
Langdon S. Flowers
/s/Russell M. Fryar Vice President and August 9, 1996
Russell M. Fryar Treasurer, Chief
Accounting Officer
and a Director
/s/Joseph L. Lanier, Jr. Director August 9, 1996
Joseph L. Lanier, Jr.
/s/J. V. Shields, Jr. Director August 9, 1996
J. V. Shields, Jr.
/s/Heeth Varnedoe III President and a Director August 9, 1996
Heeth Varnedoe III
/s/C. Martin Wood III Senior Vice President and August 9, 1996
C. Martin Wood III Chief Financial Officer
and a Director
30
<PAGE>
<TABLE>
Valuation and Qualifying Accounts (Schedule II)
CLASSIFICATION (Amounts in Thousands)
Balance at
Beginning Additions Balance at
of Year at Cost Deductions End of Year
<S> <C> <C> <C> <C>
Year Ended June 29, 1996
Amortization of Cost in Excess of Net Tangible Assets......... $9,281 $35,625 $(289) $44,617
Year Ended July 1, 1995
Amortization of Cost in Excess of Net Tangible Assets......... $9,618 $ 393 $(730) $ 9,281
Year Ended July 2, 1994
Amortization of Cost in Excess of Net Tangible Assets......... $7,429 $ 2,362 $(173) $ 9,618
</TABLE>
See Note 1 of Notes to Consolidated Financial Statements for
accounting policy for capitalization and amortization of intangible
assets.
31
<PAGE>
<TABLE>
Exhibit 11. Computation of Net Income Per Common Share
(Amounts in Thousands except Share Data)
For the Year Ended
June 29, 1996 July 1, 1995 July 2, 1994 July 3, 1993 June 27, 1992
<S> <C> <C> <C> <C> <C>
Net income............................. $ 30,768 $ 42,301 $ 29,496 $ 39,161 $ 31,665
Add - Interest and other costs of
convertible subordinated debentures, net
of applicable income taxes......... 444 2,536
Net income for net income per common
share................................. $ 30,768 $ 42,301 $ 29,496 $ 39,605 $ 34,201
Number of shares used in calculation
of per common share data:
Weighted average number of common
shares outstanding during the year. 57,955,348 57,486,165 56,347,376 55,481,502 51,098,004
Add (deduct) incremental shares
composed of:
Shares issuable upon conversion of
8.25% subordinated debentures..... 949,038 4,428,845
Shares issuable upon exercise of
employee stock options based on
year-end market price............. 204,347 143,570 179,400 294,768 352,014
Shares issuable upon award of
performance shares and restricted
stock award based on year-end
market price...................... (710,204) (762,444) (915,174) (976,235) 109,889
Weighted average number of shares used in
calculation of net income per common
share................................ 57,449,491 56,867,291 55,611,602 55,749,073 55,988,752
Net income per common share.............. $ .54 $ .75 $ .53 $ .71 $ .61
</TABLE>
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Exhibit 22. Subsidiaries of the Registrant
There is no parent of Registrant. The Registrant owns 100%
of the voting securities of each subsidiary listed below, expect that
each subsidiary marked with an asterisk owns 100% of the voting
securities of the subsidiary or subsidiaries indented immediately
below such marked subsidiary. All subsidiaries listed below are
included in the consolidated financial statements of the Registrant.
State of
Subsidiary Incorporation
*Flowers Family Bakeries, Inc. . . . . . . . . . . . . . . . . . . Delaware
*Flowers Baking Co. of Alabama, Inc. . . . . . . . . . . . . Alabama
Flowers Distributing Company of Birmingham, Inc. . . . . . . Alabama
Flowers Baking Co. of Opelika, Inc.. . . . . . . . . . . . . Alabama
Hardin's Bakery, Incorporated. . . . . . . . . . . . . . . . Alabama
Flowers Specialty Foods of Montgomery, Inc.. . . . . . . . . Alabama
*Flowers Baking Co. of Arkansas, Inc.. . . . . . . . . . . . Arkansas
Flowers Baking Co. of Texarkana, Inc.. . . . . . . . . . . . Arkansas
Holsum Baking Company. . . . . . . . . . . . . . . . . . . . Arkansas
*Flowers Baking Co. of California, Inc.. . . . . . . . . . . California
Flowers Baking Co. of Fresno, Inc. . . . . . . . . . . . . . California
Flowers Baking Co. of Chattanooga, Inc.. . . . . . . . . . Tennessee
*Flowers Baking Co. of Florida, Inc. . . . . . . . . . . . . Florida
Flowers Baking Co. of Bradenton, Inc.. . . . . . . . . . . . Florida
Flowers Baking Co. of Jacksonville, Inc. . . . . . . . . . . Florida
Flowers Baking Co. of Miami, Inc.. . . . . . . . . . . . . . Florida
*Flowers Baking Co. of Georgia, Inc. . . . . . . . . . . . . Georgia
Atlanta Baking Company, Incorporated . . . . . . . . . . . . Georgia
European Bakers, Ltd . . . . . . . . . . . . . . . . . . . . Georgia
Dan-Co Bakery, Inc.. . . . . . . . . . . . . . . . . . . . . Georgia
Flowers Baking Co. of Thomasville, Inc.. . . . . . . . . . . Georgia
Flowers Specialty Baked Foods, Inc.. . . . . . . . . . . . . Georgia
Table Pride, Inc.. . . . . . . . . . . . . . . . . . . . . . Georgia
*Flowers Baking Co. of Villa Rica, Inc.. . . . . . . . . . . Georgia
Flowers Baking Co. of Gadsden, Inc.. . . . . . . . . . . . . Alabama
Flowers Specialty of Suwanee, Inc. . . . . . . . . . . . . . Georgia
Flowers Frozen Bakery Distributors, Inc. . . . . . . . . . . Georgia
Aunt Fanny's Bakery, Inc.. . . . . . . . . . . . . . . . . . Georgia
Aunt Fanny's Bakery of Rome, Inc.. . . . . . . . . . . . . . Georgia
*Flowers Baking Co. of North Carolina, Inc.. . . . . . . . . North
Carolina
Flowers Baking Co. of Jamestown, Inc.. . . . . . . . . . . . North
Carolina
Daniels Home Bakery of North Carolina, Inc.. . . . . . . . . North
Carolina
Flowers Baking Co. of Ohio, Inc. . . . . . . . . . . . . . Ohio
*Flowers Holding Co. of S. C., Inc.. . . . . . . . . . . . . South
Carolina
FBC, Inc. (d/b/a Flowers Snack Distributors) . . . . . . . . South
Carolina
Flowers Baking Co. of Fountain Inn, Inc. . . . . . . . . . . South
Carolina
Flowers Baking Company of South Carolina, Inc. . . . . . . . South
Carolina
South Carolina Banking Co., Inc. . . . . . . . . . . . . . . South
Carolina
*Flowers Baking Co. of Tennessee, Inc. . . . . . . . . . . . Tennessee
Flowers Baking Co. of Morristown, Inc. . . . . . . . . . . . Tennessee
Flowers Fresh Bakery Distributors, Inc.. . . . . . . . . . . Tennessee
*Flowers Baking Co. of Texas, Inc. . . . . . . . . . . . . . Texas
El Paso Baking Co., Inc. . . . . . . . . . . . . . . . . . . Texas
Flowers Baking Co. of Tyler, Inc.. . . . . . . . . . . . . . Georgia
Richter's Bakery of San Antonio, Inc.. . . . . . . . . . . . Texas
Richter's Bakery of Austin, Inc. . . . . . . . . . . . . . . Texas
Richter's Bakery of Corpus Christi, Inc. . . . . . . . . . . Texas
Colonial Cake Company, Inc.. . . . . . . . . . . . . . . . . Texas
San Angelo Distributing Co., Inc.. . . . . . . . . . . . . . Texas
*Flowers Baking Co. of Virginia, Inc.. . . . . . . . . . . . Virginia
33
<PAGE>
Flowers Baking Co. of Lynchburg, Inc.. . . . . . . . . . . . Virginia
Flowers Baking Co. of Norfolk, Inc.. . . . . . . . . . . . . Virginia
Flowers Baking Co. of West Virginia, Inc.. . . . . . . . . . . West
Virginia
Allegheny Bakery Distributing Co., Inc.. . . . . . . . . . . . West
Virginia
Storck Baking Company. . . . . . . . . . . . . . . . . . . . . West
Virginia
Columbus Baking Company, Inc.. . . . . . . . . . . . . . . . . Ohio
Aunt Fanny's Bakery of Pennsylvania, Inc.. . . . . . . . . . . Pennsylvania
Griffin Pie Company, Inc.. . . . . . . . . . . . . . . . . . . Kentucky
*Huval Bakery, Incorporated . . . . . . . . . . . . . . . . . . Louisiana
*Bunny Bread, Inc.. . . . . . . . . . . . . . . . . . . . Louisiana
Flowers Baking Co. of Baton Rouge, Inc. . . . . . . . Louisiana
Schott's Bakery, Inc. . . . . . . . . . . . . . . . . . . . . Texas
Pies, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . Minnesota
Pies, Inc. Foodservice Sales Co. . . . . . . . . . . . . . . . Minnesota
*Stilwell Foods, Inc.. . . . . . . . . . . . . . . . . . . . . . . Oklahoma
Stilwell Foods of Texas, Inc.. . . . . . . . . . . . . . . . Oklahoma
Mrs. Smith's Bakeries, Inc.. . . . . . . . . . . . . . . . . . . Georgia
34
<PAGE>
Exhibit 23. Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-8 and Form
S-3 (No. 33-34855) of the Flowers Industries, Inc. 1982 Incentive
Stock Option Plan and the Flowers Industries, Inc. 1989 Executive
Stock Incentive Plan and in the Registration Statement on Form S-8
(No. 33-91198) of the Flowers Industries, Inc. 401(k) Retirement
Savings Plan of our report dated July 31, 1996 in this Form 10-K. We
also consent to the incorporation by reference of our report on the
Financial Statement Schedule in this Form 10-K.
/s/ Price Waterhouse LLP
Atlanta, Georgia
August 14, 1996
35
