SECURITIES AND EXCHANGE COMMISSION
Washington, D C 20549
FORM 8-K(A)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 14, 1996
(May 31, 1996)
Flowers Industries, Inc.
Georgia 1-9787 58-0244940
(State or Other (Commission (I.R.S. Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
<PAGE>
U. S. Highway 19, P O Box 1338, Thomasville, Georgia 31799
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 912/226-9110
Exhibit index is on page 2
Item 7. Financial Statements and Exhibits
Item 7 of the Form 8K of Flowers Industries, Inc., dated June 13, 1996
is hereby amended in its entirety as follows:
(a) Financial statements of business acquired.
The following financial statements of Mrs. Smith's, Inc. as of April
30, 1996 and for the year ended April 30, 1996, which are required by
Item 7, are attached as Exhibit 99(a):
Report of independent auditors
Balance sheet
Statement of operations
Statement of cash flows
Notes to financial statements
The financial information in these financial statements has been
audited by Ernst & Young LLP, independent public accountants, in
accordance with established professional standards and procedures as
set forth in the Report of Independent Auditors which is attached as
part of Exhibit 99(a).
(b) Unaudited pro forma financial information.
The following unaudited pro forma financial information for the
thirty-six week fiscal period ended March 9, 1996, and the fiscal year
ended July 1, 1995, which is required by Item 7, is attached as
Exhibit 99(b):
Flowers Industries, Inc. Unaudited Pro Forma Condensed
Consolidated Combined Balance Sheet at March 9, 1996
Flowers Industries, Inc. Unaudited Pro Forma Condensed
Consolidated Combined Statements of Income for the year
ended July 1, 1995 and the thirty-six weeks
ended March 9, 1996
The accompanying Unaudited Pro Forma Condensed Consolidated Combined
Financial Information gives effect to the acquisition by Flowers
Industries, Inc. ("Flowers") of the trademark and certain other
intangible assets of Mrs. Smith's, Inc. (Mrs. Smith's) as well as the
lease of certain property from The J.M. Smucker Company. The
Unaudited Pro Forma Condensed Consolidated Combined Statement of
Income for the year ended July 1, 1995 and the thirty-six weeks ended
March 9, 1996 present the pro forma combined results assuming that the
acquisition occurred at the beginning of the periods presented. The
Unaudited Pro Forma Consolidated Combined Balance Sheet at March 9,
1996 presents the pro forma combined financial position of Flowers
assuming the acquisition had occurred at that date.
The unaudited pro forma financial information is provided for
informational purposes only and does not purport to be indicative of
the future results or financial position of Flowers or what the
results of operations or financial position would have been had the
acquisition been effected on the dates indicated. This information
should be read in conjunction with the historical financial statements
of Flowers and Mrs. Smith's.
(c)Exhibits
23 Consent of Ernst and Young LLP
99(a) Mrs. Smith's, Inc. financial statements as of and
for the year ended April 30, 1996
99(b) Flowers Industries, Inc. pro forma condensed
consolidated combined financial statements
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
FLOWERS INDUSTRIES, INC.
Date: August 14, 1996 By: /s/ C Martin Wood III
C Martin Wood III
Senior Vice President and
Chief Financial Officer
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-91198) pertaining to the Flowers
Industries, Inc. 401(k) Retirement Savings Plan filed April 13, 1995,
and in the Registration Statements on Form S-8 and Form S-3 (No.
33-34855) for the Flowers Industries, Inc. 1982 Incentive Stock Option
Plan and the Flowers Industries, Inc. 1989 Executive Stock Incentive
Plan dated May 18, 1990, of our report dated May 23,1996, with respect
to the financial statements of Mrs. Smith's, Inc. for the year ended
April 30, 1996, included in Flowers Industries Inc.'s Current Report
on Form 8-K dated August 14, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
August 9, 1996
Report of Independent Auditors
Board of Directors and Shareholders
The J.M. Smucker Company
We have audited the accompanying balance sheet of Mrs. Smith's, Inc.
as of April 30, 1996, and the related statements of operations and
cash flows for the year then ended. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Mrs.
Smith's, Inc. as of April 30, 1996, and the results of its operations
and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
/s/ERNST & YOUNG LLP
May 23, 1996
<TABLE>
Mrs. Smith's, Inc.
Balance Sheet
April 30, 1996
(Dollars In Thousands)
<S> <C>
Assets
Current assets:
Cash $ 474
Trade receivables, net 8,934
Inventories:
Finished products 14,673
Raw materials, containers, and supplies 12,012
26,685
Deferred federal income taxes 1,378
Intercompany receivable from the J.M. Smucker Company 940
Other receivables 682
Prepaid expenses 306
State income taxes receivable 220
Noncompete agreement 183
Total current assets 39,802
Property, plant, and equipment:
Land and land improvements 955
Buildings and fixtures 10,144
Machinery and equipment 25,305
Construction in progress 1,888
38,292
Accumulated depreciation (6,320)
Total property, plant, and equipment 31,972
Other noncurrent assets:
Notes receivable--employees 632
Trademark, net of accumulated amortization of $1,427 25,973
Goodwill, net of accumulated amortization of $447 8,133
Total other noncurrent assets 34,738
$106,512
Liabilities and shareholder's equity
Current liabilities:
Accounts payable $ 4,671
Salaries, wages, and additional compensation 1,579
Accrued marketing and merchandising 4,564
Accrued product returns 261
Accrued expenses 52
Total current liabilities 11,127
Noncurrent liabilities:
Note payable to The J.M. Smucker Company 46,016
Intercompany payable to The J.M. Smucker Company 34,945
Deferred federal income taxes 3,038
Deferred retirement benefits 94
Total noncurrent liabilities 84,093
Shareholder's equity:
Common shares--no par value:
Authorized--750 shares; outstanding--100,
at stated value (one dollar) --
Additional capital 10,000
Retained income 1,292
Total shareholder's equity 11,292
$106,512
</TABLE>
See accompanying notes.
<TABLE>
Mrs. Smith's, Inc.
Statement of Operations
Year ended April 30, 1996
(Dollars In Thousands)
<S> <C>
Net sales $113,205
Cost of products sold 72,563
Gross profit 40,642
Selling, distribution, and administrative expenses 34,193
Operating income 6,449
Other expense--net 884
Interest expense 3,244
Income before income taxes 2,321
Provision for income taxes 943
Net income $ 1,378
</TABLE>
See accompanying notes.
<TABLE>
Mrs. Smith's, Inc.
Statement of Cash Flows
Year ended April 30, 1996
(Dollars In Thousands)
<S> <C>
Operating activities
Net income $ 1,378
Adjustments to reconcile net income to net cash
used for operating activities:
Depreciation and amortization 4,140
Deferred income taxes 1,663
Loss on sale of equipment 17
Changes in assets and liabilities:
Trade receivables 214
Inventories (2,003)
Other current assets (4,942)
Accounts payable and accrued items (6,651)
Net cash used for operating activities (6,184)
Investing activities
Additions to property, plant, and equipment (4,826)
Proceeds from sale of property, plant, and equipment 21
Net cash used for investing activities (4,805)
Financing activities
Advances from The J.M. Smucker Company 10,930
Net cash provided from financing activities 10,930
Net decrease in cash and cash equivalents (59)
Cash and cash equivalents at beginning of year 533
$ 474
</TABLE>
See accompanying notes.
Mrs. Smith's, Inc.
Notes to Financial Statements
April 30, 1996
1. Sale of the Business
Mrs. Smith's, Inc. (the Company), a wholly owned subsidiary of The
J.M. Smucker Company, manufactures and markets branded frozen pies and
pie shells under the Mrs. Smith's brand name and produces aluminum
pans for its pie operations and steel magnetic shielding for sale to
third parties. The Company, which maintains its headquarters and
principal manufacturing facility in Pottstown, Pennsylvania, sells
its products primarily in the United States.
Effective May 31, 1996, The J.M. Smucker Company completed the sale of
the Company to a subsidiary of Flowers Industries, Inc. for a
combination of cash, notes receivable, and assumption of certain
liabilities. In connection with this divestiture, The J.M. Smucker
Company has entered agreements to lease certain property, plant, and
equipment of the Company to a Flowers subsidiary called Mrs. Smith's
Bakeries Inc. under operating lease agreements.
2. Accounting Policies
Inventories
The Company values its inventories at the lower of first-in, first-out
(FIFO) cost or market, with market considered as replacement value.
Intangible Assets
The excess of cost over the fair value of net assets acquired and the
trademark are being amortized using the straight-line method over 40
years. The Company continually evaluates whether events or
circumstances have occurred that would indicate the carrying value may
not be recoverable or the useful life warrants revision. When factors
indicate that goodwill and other intangible assets should be evaluated
for possible impairment, the Company analyzes the future
recoverability of the asset using an estimate of the related
undiscounted future cash flows of the business, and recognizes any
adjustment to its carrying value on a current basis.
Property, Plant, and Equipment
Property, plant, and equipment are carried at cost with depreciation
computed over the estimated useful life by the straight-line method
for financial reporting purposes and accelerated methods for income
tax purposes.
Advertising Expense
Advertising costs are expensed as incurred. Advertising expense was
$4,522,000 in 1996.
Income Taxes
The Company is included in the consolidated federal income tax return
of The J.M. Smucker Company. The amount of income taxes allocated to
the Company is based on the amount of taxes determined as if the
Company filed a separate return. Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the
amounts used for income tax reporting.
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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from
these estimates.
Risks and Uncertainties
The Company's products are primarily sold through brokers to chain,
wholesale, cooperative and independent grocery accounts and other
consumer markets. The fruit raw materials used by the Company are
generally purchased from independent growers and suppliers. Because of
the seasonal volatility of the quantities of most of the crops on
which the Company depends, it is necessary to prepare and freeze
stocks of fruit and fruit juices and maintain them in cold storage
warehouses. The Company believes there is no concentration of risk
with any single customer or supplier whose failure or non-performance
would materially affect the Company's results.
In addition, the Company insures its business and assets against
insurable risks in a manner that it deems appropriate. It believes
that the risk of loss from noninsurable events would not have a
material adverse effect on the Company's operations as a whole.
3. Employee Benefit Plans
Defined Benefit Pension Plan: All employees of the Company are
covered under The J.M. Smucker Company's pension plan. Benefits are
based on the employee's years of service and compensation. The plan is
funded in conformity with the funding requirements of applicable
government regulations. The costs of the plan have been actuarially
determined. No separate determination has been made of the actuarial
present value of the accumulated benefits and the plan's net assets as
they relate to employees of the Company. Pension expense, as allocated
to the Company, was $49,000 for the year ended April 30, 1996.
Savings Plan: The J.M. Smucker Company also sponsors an employee
savings plan under Section 401(k) of the Internal Revenue Code for all
employees not covered by collective bargaining agreements. The
contributions made by The J.M. Smucker Company under the plan are
based on a specified percentage of employee contributions. The charge
to operations for this plan, as allocated to the Company, was
$144,000 for the year ended April 30, 1996.
Deferred Retirement Benefit Plan: In addition to providing pension
benefits, The J.M. Smucker Company sponsors an unfunded defined
postretirement plan which provides health care and life insurance
benefits to substantially all active and retired, domestic,
nonrepresented employees, and their covered dependents and
beneficiaries. The plan is contributory, with retiree contributions
adjusted periodically, and contains other cost-sharing features, such
as deductibles and coinsurance. Covered employees generally are
eligible for these benefits when they have reached age 55 and attained
10 years of service. The costs of the plan have been actuarially
determined. No separate determination has been made of the actuarial
present value of accumulated benefits as they relate to employees of
the Company.
4. Related Party Transactions
Intercompany charges for the year ended April 30, 1996 were as
follows:
<TABLE>
<S> <C>
Cost of products sold $ 7,329,000
Selling, distribution, and administrative expenses 7,841,000
Interest expense 3,244,000
State income taxes 231,000
Other 2,212,000
$20,857,000
</TABLE>
5. Leases
The Company leases certain land, buildings, equipment, and cold
storage facilities under operating leases which primarily are one year
in duration and contain annual renewal options. Rental expense in 1996
totaled $3,987,000, including charges based on quantities stored
amounting to $970,000.
6. Income Taxes
Significant components of the Company's deferred tax assets and
liabilities at April 30, 1996 are as follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Depreciation $3,048,000
Goodwill 482,000
Other 118,000
Total deferred tax liabilities 3,648,000
Deferred tax assets:
Vacation 236,000
Trademark 466,000
Coupon accrual 664,000
Inventory capitalization 226,000
Package design costs 239,000
Noncompete amortization 130,000
Other 27,000
Total deferred tax assets 1,988,000
Net deferred tax liabilities $1,660,000
</TABLE>
Significant components of the provision for income taxes are as
follows:
<TABLE>
1996
<S> <C>
Current:
Federal $ (951,000)
State and local 231,000
Deferred 1,663,000
$ 943,000
</TABLE>
A reconciliation of the statutory federal income tax rate and the
effective tax rate follows:
<TABLE>
1996
<S> <C>
Statutory federal income tax rate 35%
Increase in income taxes resulting from
state and local income taxes, net of
federal income tax benefit 6
Effective income tax rate 41%
Estimated state income taxes paid $631,000
</TABLE>
<TABLE>
Flowers Industries, Inc.
Unaudited Pro Forma Condensed Consolidated Combined Balance Sheet
At March 9, 1996
(Amounts in thousands)
Flowers Mrs. Smith's Pro Forma Pro Forma
March 9, 1996 January 31, 1996 Adjustments Combined
Historical Historical
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and temporary investments $ 6,865 $ (1,233) $ 1,233 <F1> $ 6,865
Accounts Receivable 104,482 12,780 (12,780) <F1> 104,482
Inventories 59,427 21,322 (21,322) <F1> 59,427
Prepaid expenses and other 5,973 181 (181) <F1> 5,973
Deferred income taxes 9,285 9,285
186,032 33,050 (33,050) 186,032
Property, Plant and Equipment
Land 22,774 955 (955) <F1> 22,774
Buildings 154,866 9,990 (9,990) <F1> 154,866
Machinery and equipment 376,710 20,704 (20,704) <F1> 376,710
Furniture, fixtures and transportation 24,212 2,110 (2,110) <F1> 24,212
equipment
Construction in progress 100,494 3,243 (3,243) <F1> 100,494
679,056 37,002 (37,002) 679,056
Less: accumulated depreciation (287,173) (5,504) 5,504 <F1> (287,173)
391,883 31,498 (31,498) 391,883
Other Assets and Deferred Charges
Notes receivable from distributors 60,751 60,751
Investment in unconsolidated affiliate 62,054 62,054
Other long-term assets 23,861 866 (866) <F1> 23,861
146,666 866 (866) 146,666
Cost in excess of net tangible assets 11,690 36,580 (36,580) <F1> 11,690
30,000 <F2> 30,000
Less: accumulated amortization (1,215) (393) 393 <F1> (1,215)
10,475 36,187 (6,187) 40,475
$735,056 $101,601 $(71,601) $765,056
LIABILITIES
Notes payable $ 5,784 $ 5,784
Obligations under capital leases 1,559 1,559
Accounts payable 57,701 $ 4,340 $ (4,340) <F1> 57,701
Accrued taxes other than income taxes 3,201 3,201
Income taxes 5,293 (1,573) 1,573 <F1> 5,293
Accrued compensation , interest
and other liabilities 55,261 10,056 (10,056) <F1> 55,261
128,799 12,823 (12,823) 128,799
Long-term notes payable 198,909 30,000 <F3> 228,909
Obligations under capital leases 2,268 2,268
Industrial revenue bonds 17,920 17,920
Deferred income taxes 41,818 1,344 (1,344) <F1> 41,818
Deferred income 41,708 41,708
Intercompany payable and other 76,991 (76,991) <F1>
COMMON STOCK
Par value 36,932 1 (1) <F1> 36,932
Capital in excess of par value 54,899 10,000 (10,000) <F1> 54,899
Retained earnings 233,359 442 (442) <F1> 233,359
Less: common stock in treasury (13,805) (13,805)
Less: restricted stock award and
executive incentive award (7,751) (7,751)
303,634 10,443 (10,443) <F1> 303,634
$735,056 $101,601 $(71,601) $765,056
</TABLE>
[FN]
<F1> Elimination of all assets not acquired, liabilities not assumed
and Mrs. Smith's equity.
<F2> Represents addition of the Mrs. Smith's, Inc. trademark and other
intangible assets valued at $30,000,000.
<F3> Represents a note payable to The J.M. Smucker Company for
$15,000,000 and an increase in Flowers line of credit borrowings
of $15,000,000.
<TABLE>
FLOWERS INDUSTRIES, INC.
Unaudited Pro Forma Condensed Consolidated Combined Statement of Income
For the year ended July 1, 1995
(in thousands, except per share data)
Flowers Mrs. Smith's Pro Forma Pro Forma
July 1, 1995 April 30, 1995 Adjustments Combined
Historical Historical
<S> <C> <C> <C> <C>
Sales $1,129,203 $120,258 $1,249,461
Other Income 10,751 1,853 12,604
1,139,954 122,111 1,262,065
Materials, Supplies, labor and other
manufacturing costs 599,416 77,725 $3,000 <F1> 680,141
Selling, delivery and administration expense 428,833 33,604 462,437
Depreciation and amortization 36,604 3,944 (944)<F2> 37,367
763 <F3>
(3,000)<F4>
Interest 7,086 3,988 1,140 <F5> 9,099
873 <F6>
(3,988)<F7>
1,071,939 119,261 (2,156) 1,189,044
Income before taxes 68,015 3,579 2,156 73,021
Federal and state income taxes 25,714 1,435 815 27,964
Net income 42,301 2,144 1,341 45,057
Net income per common share 0.75 0.03 0.01 0.79
Weighted average number of shares outstanding
used in calculation of net income per
common share 56,868 56,868 56,868 56,868
</TABLE>
[FN]
<F1> Represents increase in lease expense as a result of the operating
lease of certain assets of Mrs. Smith's.
<F2> Reduction of Mrs. Smith's goodwill amortization previously
recorded.
<F3> Represents increase in Flowers amortization as a result of
the acquisition of Mrs. Smith's trademark and other intangible
assets.
<F4> Decrease in Mrs. Smith's fixed asset depreciation.
<F5> Increase in interest expense resulting from a note payable to
The J.M. Smucker Company.
<F6> Increase in interest expense resulting from an increase in
Flowers line of credit borrowing.
<F7> Elimination of Mrs. Smith's, Inc. intercompany interest expense.
<TABLE>
FLOWERS INDUSTRIES, INC.
Unaudited Pro Forma Condensed Consolidated Combined Statement of Income
For the thirty-six weeks ended March 9, 1996
(in thousands, except per share data)
Flowers Mrs. Smith's Pro Forma Pro Forma
March 9, 1996 January 31, 1996 Adjustments Combined
Historical Historical
<S> <C> <C> <C> <C>
Sales $835,225 $108,266 $943,491
Other Income 3,842 1,504 5,346
839,067 109,770 948,837
Materials, supplies, labor and other
manufacturing costs 453,258 80,887 $2,250 <F1> 536,395
Selling, delivery and administrative expense 315,941 23,251 339,192
Depreciation and amortization 27,644 2,958 (788) <F2> 28,137
573 <F3>
(2,250) <F4>
Interest 7,644 3,027 855 <F5> 9,154
655 <F6>
(3,027) <F7>
804,487 110,123 (1,732) 912,878
Income (loss) before taxes 34,580 (353) 1,732 35,959
Federal and state income tax (benefit) 13,071 (140) 655 13,586
Net income (loss) $21,509 $ (213) $1,077 $ 22,373
Net income per common share $ 0.38 $ 0.00 $ 0.01 $ 0.39
Weighted average number of shares outstanding
used in calculation of net income per
common share 57,333 57,333 57,333 57,333
</TABLE>
[FN]
<F1> Represents increase in lease expense as a result of the operating
lease of certain assets of Mrs. Smith's.
<F2> Reduction of Mrs. Smith's goodwill amortization previously
recorded.
<F3> Represents increase in Flowers amortization as a result of the
acquisition of Mrs. Smith's trademark and other intangible
assets.
<F4> Decrease in Mrs. Smith's fixed asset depreciation.
<F5> Increase in interest expense resulting from a note payable to
The J.M. Smucker Company.
<F6> Increase in interest expense resulting from an increase in
Flowers line of credit borrowing.
<F7> Elimination of Mrs. Smith's, Inc. intercompany interest expense.
