FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D C 20549
(Mark One)
(CHECK MARK) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 21, 1996
( ) 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
(Address of principal executive offices)
31799
(Zip Code)
912/226-9110
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes [CHECK MARK] No __________
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Yes _________ No __________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Title of Each Class Outstanding at October 25, 1996
Common Stock, $.625 Par Value 58,736,203
<PAGE>
FLOWERS INDUSTRIES, INC.
INDEX
Page Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet
September 21, 1996 and June 29, 1996 3
Consolidated Statement of Income
Twelve Weeks Ended September 21, 1996
and September 23, 1995 5
Consolidated Statement of Cash Flows
Twelve Weeks Ended September 21, 1996
and September 23, 1995 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 9
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
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<TABLE>
FLOWERS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
(000's Omitted)
CURRENT ASSETS: September 21, June 29,
1996 1996
<S> <C> <C>
Cash and temporary investments $ 19,897 $ 25,039
Accounts receivable 125,750 120,301
Inventories:
Raw materials 36,708 25,939
Finished goods 51,064 25,527
Supplies 11,627 17,110
99,399 68,576
Deferred income taxes 11,322 10,992
Prepaid expenses 5,756 5,319
262,124 230,227
PROPERTY, PLANT & EQUIPMENT:
Land 23,386 23,386
Buildings 182,994 183,502
Machinery and equipment 389,622 393,319
Furniture, fixtures, and transportation equipment 21,271 21,365
Construction and capital projects in progress 79,561 63,005
696,834 684,577
Less: accumulated depreciation (270,939) (264,107)
425,895 420,470
OTHER ASSETS AND DEFERRED CHARGES:
Notes receivable from distributors 0 61,236
Investment in unconsolidated affiliate 67,728 68,326
Other long-term assets 28,094 24,567
95,822 154,129
COST IN EXCESS OF NET TANGIBLE ASSETS:
Cost in excess of net tangible assets 45,286 45,962
Less: accumulated amortization (1,601) (1,345)
43,685 44,617
$827,526 $849,443
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
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<TABLE>
FLOWERS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(000's Omitted except share data)
September 21, June 29,
1996 1996
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable $ 6,593 $ 6,593
Obligations under capital leases 1,950 1,988
Accounts payable 81,356 98,796
Accrued taxes other than income taxes 9,088 5,369
Income taxes 12,901 1,264
Accrued compensation, interest and other
liabilities 70,264 67,738
182,152 181,748
LONG-TERM NOTES PAYABLE 266,168 254,355
OBLIGATIONS UNDER CAPITAL LEASES 2,009 2,573
INDUSTRIAL REVENUE BONDS 17,770 17,770
DEFERRED INCOME TAXES 44,753 47,270
DEFERRED INCOME 0 40,403
COMMON STOCK:
Par value $.625 authorized 100,000,000 shares,
issued 59,090,726 36,932 36,932
Capital in excess of par value 58,783 58,783
Retained earnings 245,331 234,069
Less - common stock in treasury, 659,737
and 506,749 shares, respectively (9,057) (6,493)
Less - Restricted Stock Award and Equity
Incentive Award (17,315) (17,967)
Total common stockholders' equity 314,674 305,324
$827,526 $849,443
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
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<TABLE>
FLOWERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF INCOME
(000's Omitted except share data)
For the 12 Weeks Ended
September 21, September 23,
1996 1995
<S> <C> <C>
Sales $ 322,710 $ 269,674
Sale of distributor notes 43,244 0
Other (loss) income (3,753) 1,897
362,201 271,571
Materials, supplies, labor and other manufacturing costs 182,272 143,781
Selling, delivery and administrative expenses 129,512 104,169
Depreciation and amortization 10,045 8,960
Interest 7,447 1,965
329,276 258,875
Pre-tax income 32,925 12,696
Federal and state income taxes 12,446 4,799
Equity in net loss of unconsolidated affiliate (531) 0
Net income $ 19,948 $ 7,897
Net income per common share $0.35 $0.14
Weighted average number of shares outstanding used in
calculation of net income per common share 57,645,106 57,182,822
Cash dividends paid per common share $0.1500 $0.1400
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
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<TABLE>
FLOWERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(000's Omitted)
For the 12 Weeks Ended
September 21, September 23,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $317,825 $271,288
Interest received 390 121
Sale of distributor notes receivable 65,954 0
Other (1,010) 608
Cash provided by operating activities 383,159 272,017
Cash paid to suppliers and employees 361,481 278,882
Interest paid 7,567 2,436
Income taxes paid 4,365 3,899
Cash disbursed for operating activities 373,413 285,217
Net cash flow from operating activities (See Schedule 1) 9,746 (13,200)
Cash flows from investing activities:
Purchase of property, plant and equipment (15,820) (18,987)
Acquisition of businesses 0 (3,043)
Divestiture of business 200 1,061
Other (1,753) 1,676
Net cash disbursed for investing activities (17,373) (19,293)
Cash flows from financing activities:
Dividends paid (8,764) (8,109)
Purchases of treasury stock 0 (255)
Increase in long-term notes payable 17,625 24,510
Payments of long-term notes payable (6,376) (951)
Net cash provided by financing activities 2,485 15,195
Net decrease in cash $ (5,142) $(17,298)
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
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<TABLE>
FLOWERS INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(000's Omitted)
For the 12 Weeks Ended
September 21, September 23,
Schedule 1 1996 1995
<S> <C> <C>
Schedule reconciling earnings to net cash flow from operating activities:
Net income $ 19,948 $ 7,897
Noncash expenses, revenues, losses and gains included in income:
Depreciation and amortization 10,045 8,960
Deferred income taxes 0 (1)
Increase in accounts receivable (11,390) (3,256)
Increase in inventories (31,102) (6,929)
Increase in prepaids (437) (650)
Decrease in distributor notes receivable 65,954 0
Decrease in accounts payable (17,440) (12,584)
Increase (decrease) in accrued taxes and other liabilities 16,881 (6,637)
Decrease in deferred distributor income (43,244) 0
Equity in net loss of unconsolidated affiliate 531 0
$ 9,746 $(13,200)
Schedule 2
Schedule of noncash financing activities:
Common stock received in connection with the exercise of employee
stock options $ 0 $ 1,007
Stock issued and held in escrow in connection with Restricted Stock
Awards $ 0 $ 3,310
Exercise of Equity Incentive Awards $ 0 $ 1,104
Stock received from Richter's escrow -(Anti-trust settlement) $ 2,565 $ 0
Note receivable from divestiture of business $ 1,311 $ 0
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
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FLOWERS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all
adjustments(consisting of only normal recurring accruals)
necessary to present fairly the financial position as of
September 21,1996 and June 29, 1996, the results of operations
for the twelve weeks ended September 21, 1996 and September 23,
1995 and statement of cash flows for the twelve weeks ended
September 21, 1996 and September 23, 1995.
2. The results of operations for the twelve week periods ended
September 21, 1996 and September 23, 1995, are not necessarily
indicative of the results to be expected for a full year.
3. During September 1996, the Company accrued for certain claims
by the Internal Revenue Service ("IRS"), relating primarily to
the Company's independent distributor program. The IRS asserted
that the independent distributor program generated ordinary income
upon the initial sale of the territory.
In a related, but separate transaction, on September 21, 1996, the
Company sold $66,000,000 of notes receivable from independent
distributors to a financial institution. Of the $66,000,000 of
notes sold, $44,000,000 was initially without recourse to the
Company with the remaining $22,000,000 having limited recourse.
Concurrently, approximately $43,000,000 of deferred income was
recognized by the Company. The Company will act as the servicing
agent for the financial institution and will receive a fee for
these services.
4. Net Income Per Common Share - Net income per common share is
computed by dividing (a) net income by (b) the average number of
common shares outstanding, increased by common equivalent shares
(options and Restricted Shares) determined using the treasury
stock and if converted methods.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
The Company's working capital increased $31,493,000 to $79,972,000 at
the end of the first quarter of fiscal 1997, with cash and temporary
investments decreasing to $19,897,000 from $25,039,000 at June 29,
1996. The working capital increase is primarily due to the building
of inventories, particularly in the frozen food area, as a result of
the increases in existing locations, and the new Mrs. Smith's pie
business acquired during the fourth quarter of fiscal 1996. The
decrease in cash and temporary investments was primarily due to cash
expended for capital projects throughout the Company.
At the end of the first quarter of fiscal 1997, the Company had a
total of $121,000,000 borrowed under a five-year $300,000,000
syndicated loan facility. Also, currently outstanding are
$125,000,000 of long-term Senior Notes issued through a private
placement completed during the third quarter of fiscal 1996.
During the first quarter of fiscal 1997, the Company sold $66,000,000
of distributor notes receivable to a bank. The proceeds from this
sale were used to pay a portion of the Company's debt outstanding at
that time.
Dividends paid per share increased 7% to $.15 in the first quarter of
fiscal 1997 from $.14 paid in the first quarter of fiscal 1996.
Results of Operations:
Sales for the first quarter of fiscal 1997 were $322,710,000, an
increase of 20% from $269,674,000 for the first quarter
of fiscal 1996. Acquisitions consummated during the last three
quarters of fiscal 1996 contributed approximately one-half of the
increase, while increased volume of 9%, exclusive of the acquisitions
also contributed to the increase.
Pre-tax income for the first quarter of fiscal 1997 increased 159% to
$32,925,000 from $12,696,000 in the first quarter of fiscal 1996. The
sale of the distributor notes receivable discussed above generated
$43,244,000 of pre-tax income during the first quarter. The sale of
these notes was necessitated by the Company's decision to settle
claims by the Internal Revenue Service that the notes constituted
current rather than deferred income. The gain generated by the sale
of the notes was partially offset primarily by approximately
$19,000,000 of expenses relating to the Internal Revenue Service audit
and the write-down of certain idle facilities. Operationally, income
for the first quarter of fiscal 1997 was adversely impacted by
significantly higher raw material costs, particularly flour, the
Company's primary raw material, high operating costs at Mrs. Smith's
Pies, which the Company acquired on May 31, 1996 and the Company's
share of Keebler's minor net loss for the quarter. Management
anticipates that flour costs will decline and initial operating
costs of Mrs. Smith's will settle during the second quarter of fiscal
1997.
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PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibit 11 - Computation of Earnings Per Common Share. (Page
11)
(b) Exhibit 27 - Financial Data Schedule. (Page 12)
(c) 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.
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<TABLE>
Exhibit 11
FLOWERS INDUSTRIES, INC.
COMPUTATION OF NET INCOME PER SHARE
(000's Omitted except share data)
For the 12 Weeks Ended
September 21, September 23,
1996 1995
<S> <C> <C>
Net income for net income per common share $ 19,948 $ 7,897
Number of shares used in calculation of per common
share data:
Weighted average number of common shares
outstanding during the period 58,507,281 57,736,224
Add (Deduct) - Shares issuable upon exercise of employee
stock options based on quarter-end market price 286,254 157,394
Shares issuable upon award of performance shares
and restricted stock award based on quarter-end
market price (1,148,429) (710,796)
Weighted average number of shares used in
calculation of net income per common share 57,645,106 57,182,822
Net income per common share $ 0.35 $ 0.14
</TABLE>
(See Accompanying Notes to Consolidated Financial Statements)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
FLOWERS INDUSTRIES, INC.
/s/ Amos R. McMullian
By: Amos R. McMullian
Chairman of the Board
/s/ Russell M. Fryar
By: Russell M. Fryar
Vice President, Treasurer and
Chief Accounting Officer
October 25, 1996
Date
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Flowers
Industries, Inc. Consolidated Statement of Income for the twelve weeks ended
September 21, 1996 and the Flowers Industries, Inc. Consolidated Balance Sheet
at September 21, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> SEP-21-1996
<CASH> 19,897
<SECURITIES> 0
<RECEIVABLES> 125,750
<ALLOWANCES> 0
<INVENTORY> 99,399
<CURRENT-ASSETS> 262,124
<PP&E> 696,834
<DEPRECIATION> 270,939
<TOTAL-ASSETS> 827,526
<CURRENT-LIABILITIES> 182,152
<BONDS> 0
0
0
<COMMON> 36,932
<OTHER-SE> 277,742
<TOTAL-LIABILITY-AND-EQUITY> 827,526
<SALES> 322,710
<TOTAL-REVENUES> 362,201
<CGS> 182,272
<TOTAL-COSTS> 329,276
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,447
<INCOME-PRETAX> 32,925
<INCOME-TAX> 12,446
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,948
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
