<PAGE> 1
UNITED STATES
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): OCTOBER 17, 1997
IMPERIAL HOLLY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
TEXAS 001-10307 74-0704500
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
</TABLE>
ONE IMPERIAL SQUARE, SUITE 200
8016 HIGHWAY 90-A
SUGAR LAND, TEXAS 77487
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES
AND ZIP CODE)
(281) 491-9181
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
<PAGE> 2
This Current Report on Form 8-K/A amends the report on Form 8-K (the "Form 8-K")
filed by Imperial Holly Corporation in connection with its successful completion
of the Tender Offer for 50.1% of the outstanding common stock of Savannah Foods
& Industries, Inc. Capitalized terms used but not defined herein or in the
exhibits filed herewith shall have the meanings set forth in the Form 8-K.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Included as Exhibits 99.4 and 99.5 to this Form 8-K/A are the audited
consolidated financial statements of Savannah Foods as of and for the year ended
September 29, 1996 and the unaudited consolidated financial statements of
Savannah Foods as of and for the nine months ended June 29, 1997, respectively.
(b) PRO FORMA FINANCIAL INFORMATION.
Included as Exhibit 99.6 to this Form 8-K/A is the unaudited pro forma
combined condensed financial statements of the Company and Savannah Foods as of
and for the year ended March 31, 1997 and for the six months ended September 30,
1996 and 1997.
(c) EXHIBITS
Exhibit 23.1 -- Consent of Price Waterhouse LLP
*Exhibit 99.1 -- Press Release issued by Imperial Holly
Corporation on October 17, 1997
*Exhibit 99.2 -- Agreement and Plan of Merger, dated September
12, 1997, among Imperial Holly Corporation,
IHK Merger Sub Corporation and Savannah
Foods & Industries, Inc.
*Exhibit 99.3 -- Press Release issued by Imperial Holly
Corporation on October 31, 1997
Exhibit 99.4 -- Audited Consolidated Financial Statements
of Savannah Foods & Industries, Inc. as of
September 29, 1996 and October 1, 1995 and
for the fiscal years ended September 29,
1996, October 1, 1995 and October 2, 1994.
Exhibit 99.5 -- Unaudited Condensed Consolidated Financial
Statements of Savannah Foods & Industries,
Inc. as of and for the nine months ended June
30, 1997.
Exhibit 99.6 -- Pro Forma Combined Condensed Financial
Statements of Imperial Holly Corporation and
Savannah Foods & Industries, Inc. as of
and for the year ended March 31, 1997 and
for the six months ended September 30, 1996
and 1997.
- --------------
* Previously Filed.
<PAGE> 3
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 hereunto duly authorized.
IMPERIAL HOLLY CORPORATION
Date: December 8, 1997
By: /s/ H. P. MECHLER
-----------------------------------
H. P. Mechler
Vice President -- Accounting
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C> <C>
Exhibit 23.1 -- Consent of Price Waterhouse LLP
*Exhibit 99.1 -- Press Release issued by Imperial Holly
Corporation on October 17, 1997
*Exhibit 99.2 -- Agreement and Plan of Merger, dated September
12, 1997, among Imperial Holly Corporation,
IHK Merger Sub Corporation and Savannah
Foods & Industries, Inc.
*Exhibit 99.3 -- Press Release issued by Imperial Holly
Corporation on October 31, 1997
Exhibit 99.4 -- Audited Consolidated Financial Statements
of Savannah Foods & Industries, Inc. as of
September 29, 1996 and October 1, 1995 and
for the fiscal years ended September 29,
1996, October 1, 1995 and October 2, 1994.
Exhibit 99.5 -- Unaudited Condensed Consolidated Financial
Statements of Savannah Foods & Industries,
Inc. as of and for the nine months ended June
30, 1997.
Exhibit 99.6 -- Pro Forma Combined Condensed Financial
Statements of Imperial Holly Corporation and
Savannah Foods & Industries, Inc. as of
and for the year ended March 31, 1997 and
for the six months ended September 30, 1996
and 1997.
</TABLE>
- -----------------
* Previously Filed.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-30328, No. 33-41769 and No. 33-67786) of
Imperial Holly Corporation of our report dated November 18, 1996 relating to
the financial statements of Savannah Foods & Industries, Inc. which appears in
the Current Report on Form 8-K/A of Imperial Holly Corporation dated December
8, 1997.
Price Waterhouse LLP
Atlanta, Georgia
December 5, 1997
<PAGE> 1
EXHIBIT 99.4
Report of Independent Accountants
To the Stockholders and Board of Directors
of Savannah Foods & Industries, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Savannah Foods & Industries, Inc. and its subsidiaries at September 29, 1996 and
October 1, 1995, and the results of their operations and their cash flows for
the fifty-two weeks ended September 29, 1996, October 1, 1995 and October 2,
1994, 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.
PRICE WATERHOUSE LLP
Atlanta, Georgia
November 18, 1996
1
<PAGE> 2
SAVANNAH FOODS & INDUSTRIES, INC.
Consolidated Balance Sheets
(In thousands except for shares and per share amounts)
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
Assets -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,300 $ 11,574
Accounts receivable 76,109 66,991
Inventories (net of LIFO reserve of $8,018 in 1996 and
$10,460 in 1995) (Note 3) 83,929 103,121
Other current assets 5,214 16,116
------------ ------------
Total current assets 180,552 197,802
Property, plant and equipment (Note 4) 186,546 230,891
Other assets 31,163 47,814
------------ ------------
$ 398,261 $ 476,507
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings (Note 5) $ 7,500 $ 22,300
Current portion of long-term debt (Note 5) 2,170 6,300
Trade accounts payable 52,701 63,259
Other liabilities and accrued expenses 23,575 22,881
------------ ------------
Total current liabilities 85,946 114,740
------------ ------------
Long-term debt (Note 5) 59,754 106,864
------------ ------------
Deferred employee benefits 78,834 85,254
------------ ------------
Stockholders' equity (Note 7):
Common stock $.25 par value; $.55 stated value;
64,000,000 shares authorized; 31,306,800 shares issued 17,365 17,365
Capital in excess of stated value 31,764 12,190
Retained earnings 193,524 190,176
Treasury stock, at cost (2,568,604 shares in 1996 and
5,068,604 shares in 1995) (15,849) (31,275)
Minimum pension liability adjustment (14,038) (14,842)
Stock held by benefit trust, at market (2,500,000 shares
in 1996) (35,000) -
Other (4,039) (3,965)
------------ ------------
Total stockholders' equity 173,727 169,649
------------ ------------
Commitments and contingencies (Note 10) - -
------------ ------------
$ 398,261 $ 476,507
============ ============
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
2
<PAGE> 3
SAVANNAH FOODS & INDUSTRIES, INC.
Consolidated Statements of Operations
(In thousands except for shares and per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------- ------------- -------------
<S> <C> <C> <C>
Net sales $ 1,146,332 $ 1,098,544 $ 1,074,367
------------- ------------- -------------
Operating expenses:
Cost of sales and operating expenses 1,028,218 1,002,679 969,621
Selling, general and
administrative expenses 54,667 55,866 53,392
Depreciation and amortization 27,994 28,314 28,972
Impairment of long-lived assets (Note 2) 10,280 - -
Other costs (Note 11) 3,374 4,284 2,950
------------- ------------- -------------
1,124,533 1,091,143 1,054,935
------------- ------------- -------------
Income from operations 21,799 7,401 19,432
------------- ------------- -------------
Other income and (expenses):
Interest and other investment income 847 1,258 2,170
Interest expense (12,355) (14,847) (13,380)
Other income (expense) (610) 110 384
------------- ------------- -------------
(12,118) (13,479) (10,826)
------------- ------------- -------------
Income (loss) before income taxes
and extraordinary item 9,681 (6,078) 8,606
Provision for (benefit from)
income taxes (Note 6) 2,738 (2,585) 2,863
------------- ------------- -------------
Income (loss) before extraordinary
item 6,943 (3,493) 5,743
Extraordinary item, net of tax (Note 5) (971) - -
------------- ------------- -------------
Net income (loss) $ 5,972 $ (3,493) $ 5,743
============= ============= =============
Per share:
Income (loss) before
extraordinary item $ 0.27 $ (0.13) $ 0.22
Extraordinary item (Note 5) (0.04) - -
------------- ------------- -------------
Net income (loss) $ 0.23 $ (0.13) $ 0.22
============= ============= =============
Dividends $ 0.10 $ 0.32 $ 0.54
============= ============= =============
Weighted average shares outstanding 26,238,196 26,238,196 26,238,196
============= ============= =============
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
3
<PAGE> 4
SAVANNAH FOODS & INDUSTRIES, INC.
Consolidated Statements of Changes in Stockholders' Equity
(In thousands)
<TABLE>
<CAPTION>
Capital in Minimum
Excess of Pension Stock Held
Common Stated Retained Treasury Liability By Benefit
Stock Value Earnings Stock Adjustment Trust Other Total
-------- --------- --------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 3, 1993 $ 17,365 $ 12,190 $ 210,491 $ (31,275) $ (9,453) $ - $ (4,604) $ 194,714
Net income 5,743 5,743
Cash dividends declared (14,169) (14,169)
Decrease in minimum pension
liability adjustment 1,243 1,243
Decrease in note receivable
from employee stock
ownership plan 643 643
-------- -------- --------- ---------- ---------- --------- --------- ---------
Balance at October 2, 1994 17,365 12,190 202,065 (31,275) (8,210) - (3,961) 188,174
Net loss (3,493) (3,493)
Cash dividends declared (8,396) (8,396)
Increase in minimum pension
liability adjustment (6,632) (6,632)
Increase in cumulative
translation adjustment (425) (425)
Decrease in note receivable
from employee stock
ownership plan 421 421
-------- -------- --------- ---------- ---------- --------- --------- ---------
Balance at October 1, 1995 17,365 12,190 190,176 (31,275) (14,842) - (3,965) 169,649
Net income 5,972 5,972
Cash dividends declared (2,624) (2,624)
Decrease in minimum pension
liability adjustment 804 804
Establish benefit trust with
treasury stock (Note 7) 11,449 15,426 (26,875) -
Increase in fair market
value of stock held by
benefit trust (Note 7) 8,125 (8,125) -
Increase in cumulative
translation adjustment (74) (74)
-------- -------- --------- ---------- ---------- --------- --------- ---------
Balance at September 29, 1996 $ 17,365 $ 31,764 $ 193,524 $ (15,849) $ (14,038) $ (35,000) $ (4,039) $ 173,727
======== ======== ========= ========== ========== ========= ========= =========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
4
<PAGE> 5
SAVANNAH FOODS & INDUSTRIES, INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------- ------------ ----------
<S> <C> <C> <C>
Cash flows from operations:
Net income (loss) $ 5,972 $ (3,493) $ 5,743
Adjustments to reconcile net income (loss) to
net cash provided by operations -
Depreciation and amortization 27,994 28,314 28,972
Impairment of long-lived assets (Note 2) 10,280 - -
Extraordinary item, net of tax, related to
financing activities 971 - -
Provision for deferred income taxes (5,173) (207) (5,283)
Net loss on disposal of assets 2,595 674 460
Decreases (increases) in working capital -
Accounts receivable (9,118) 8,785 11,254
Inventories 20,565 (17,781) 60,299
Other current assets 7,924 (6,952) 2,657
Trade accounts payable (10,558) 6,306 (49,457)
Other liabilities and accrued expenses 1,110 (777) 3,373
Other (2,713) 1,122 1,431
---------- ---------- ----------
Cash provided by operations 49,849 15,991 59,449
---------- ---------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment (7,916) (16,303) (22,218)
Proceeds from sale of property, plant and
equipment 2,538 784 3,309
Sale of investments 13,869 3,615 18,559
Business sales and (acquisitions) 12,500 (7,050) -
Use of escrowed industrial revenue bond funds
for additions to property, plant and equipment 3,253 - 3,669
Other (182) (2,182) (2,930)
---------- ---------- ----------
Cash provided by (used for) investing activities 24,062 (21,136) 389
---------- ---------- ----------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings (14,800) 22,300 (26,300)
Payments of long-term debt (51,240) (28,703) (2,632)
Debt prepayment charge, net of tax (971) - -
Liquidation of unused industrial revenue
bond escrow balances - 5,742 -
Dividends paid (3,280) (11,282) (10,627)
Other 106 226 676
---------- ---------- ----------
Cash used for financing activities (70,185) (11,717) (38,883)
---------- ---------- ----------
Cash flows for year 3,726 (16,862) 20,955
Cash and cash equivalents, beginning of year 11,574 28,436 7,481
---------- ---------- ----------
Cash and cash equivalents, end of year $ 15,300 $ 11,574 $ 28,436
========== ========== ==========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
5
<PAGE> 6
SAVANNAH FOODS & INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
Nature of operations - The Company is engaged in the production,
marketing and distribution of food products, primarily refined sugar. The
Company produces a complete line of bulk and liquid sugars, packaged sugar,
sugar envelopes and sugar products, including edible molasses and liquid animal
feeds. The Company also packages and distributes other products such as custom
made meal kits, salt, pepper, artificial sweetener, non-diary creamer and
certain other products which complement its sugar business. Industrial and
grocery markets served by the Company are the southeastern, midwestern and
eastern parts of the United States, as well as Louisiana and Texas. Products for
the foodservice market are distributed throughout the United States. The Company
has one primary business segment - Sugar Products.
Fiscal year - The Company's fiscal year ends on the Sunday closest to
September 30. Fiscal 1996, 1995 and 1994 each included 52 weeks.
Principles of consolidation - The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries. Business
entities in which the Company owns 50% or less are accounted for using the
equity method.
Cash and cash equivalents - Cash and cash equivalents include all
investments purchased with an original maturity of 90 days or less which have
virtually no risk of loss of the principal value of the investment.
Inventories - Inventories are valued at the lower of cost or market.
Cost is determined by the last-in, first-out (LIFO) method for sugar, packaging
materials, and certain other items. Costs for maintenance parts and other
non-sugar products are determined using the first-in, first-out (FIFO) and
moving average methods.
Futures transactions and interest rate swaps - The Company uses futures,
options and interest rate swaps as hedges in its inventory purchasing and cash
management programs. Gains and losses on such transactions related to inventory
are matched to specific inventory purchases and charged or credited to cost of
sales as such inventory is sold. The net cash paid or received on interest rate
swaps is included in interest expense.
6
<PAGE> 7
Amortization of intangibles - The Company has intangible assets included
in "Other assets" aggregating $9,529,000 and $11,912,000 at September 29, 1996
and October 1, 1995, respectively. Goodwill of $5,378,000 at September 29, 1996,
and $5,781,000 at October 1, 1995, is being amortized over fifteen years on a
straight-line basis, and other intangible assets are being amortized over five
years on a straight-line basis. Amortization expense was $2,341,000, $2,169,000
and $2,617,000 for fiscal 1996, 1995 and 1994, respectively.
Property, plant and equipment - Property, plant and equipment is valued
at cost, less accumulated depreciation and amortization. For financial reporting
purposes, depreciation is computed on the straight-line method over the
estimated useful lives of the assets. In general, buildings are depreciated over
20 years, machinery and equipment over 3 to 15 years and leasehold improvements
over 10 years.
Accrued expenses related to beet operations - The Company's beet
processing plants are generally operated from October through February and then,
from March through September, are repaired for the next processing cycle. As
sugar is processed from October through February, the Company accrues estimated
repair costs and other costs to be incurred in March through September and
includes such costs in inventory and, as the sugar is sold, in cost of sales. In
contrast, certain other sugarbeet processors capitalize such costs and include
them as prepaid expenses related to the next processing cycle.
Fair value of financial instruments - For cash, cash equivalents,
accounts receivable, trade accounts payable, other liabilities and accrued
expenses and short-term borrowings, the carrying amounts approximate fair value
because of the short maturities of these instruments.
Revenue recognition - The Company recognizes revenue as product is
shipped.
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 those
estimates.
Reclassifications - Certain prior year amounts have been reclassified to
conform to current year presentation.
7
<PAGE> 8
Note 2 - Impairment Loss:
In the fourth quarter of fiscal 1996, the Company recorded a non-cash
impairment loss of $10,280,000 ($6,476,000, or $.25 per share, net of tax)
related to a write-down of the property, plant and equipment of the Company's
Fremont, Ohio beet sugar facility. A decision was made in 1996 not to run the
Fremont facility during fiscal 1997 due to the lack of a viable supply of
sugarbeets and beet molasses. As a result, the projected future cash flows from
this facility are less than the carrying value of the assets; therefore, an
impairment loss has been recognized. The impaired assets include buildings and
machinery and equipment used to manufacture, ship, and store refined sugar and
its by-products. These assets were written down to their fair value based on the
salvage value of the assets. The recognition of this impairment was in
accordance with the provisions of Statement of Financial Accounting Standards
No. 121 - Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of and is not materially different than the amount that
would have been recognized under the Company's previous policies.
Note 3 - Inventories:
A summary of inventories by method of pricing and class is as follows:
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------- ----------
(In thousands)
<S> <C> <C>
Last-in, first-out $35,311 $ 64,642
First-in, first-out 9,682 9,807
Moving average 29,462 28,672
Specific identification 9,474 -
------- --------
$83,929 $103,121
======= ========
Raw materials and work-in-process $17,693 $ 46,533
Packaging materials, parts and supplies 20,713 26,245
Finished goods 36,049 30,343
Payments related to future inventory
purchases 9,474 -
------- --------
$83,929 $103,121
======= ========
</TABLE>
The replacement cost of inventories exceeded reported cost by
approximately $8,233,000 at September 29, 1996 and $11,101,000 at October 1,
1995. In fiscal 1994 there was a LIFO liquidation which decreased cost of goods
sold by $1,762,000 and increased net income by $1,097,000, or $.04 per share.
8
<PAGE> 9
Note 4 - Property, Plant and Equipment:
Property, plant and equipment is summarized as follows:
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------- ----------
(In thousands)
<S> <C> <C>
Land $ 7,498 $ 8,143
Buildings 89,194 94,670
Machinery and equipment 305,717 326,842
Leasehold improvements 1,201 1,201
Projects-in-process 3,119 6,135
-------- --------
406,729 436,991
Less -
Accumulated depreciation
and amortization (220,183) (206,100)
-------- --------
$186,546 $230,891
======== ========
</TABLE>
Repairs and maintenance expense was $31,699,000, $35,241,000 and
$31,584,000 for fiscal 1996, 1995 and 1994, respectively.
Note 5 - Long-term Debt, Credit Arrangements and Leases:
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------- ----------
(In thousands)
<S> <C> <C>
Senior Notes - Series A at 8.35% of
$19,941 and $47,857, respectively,
and Series B at 7.15% of
$5,059 and $12,143,
respectively $25,000 $ 60,000
Long-term debt supported by revolving
credit facilities with banks - 10,000
Notes payable to banks related to
the ESOP 9,815 14,100
Industrial revenue bonds 22,500 22,500
Other long-term debt 4,609 6,564
------- --------
61,924 113,164
Less - Current portion (2,170) (6,300)
------- --------
$59,754 $106,864
======= ========
</TABLE>
The Company elected to prepay $35,000,000 of the Senior Notes in 1996.
The Company incurred $971,000 (net of $570,000 income tax benefits), or $.04 per
share, of related prepayment penalties which are reflected as an extraordinary
item in the Consolidated Statement of Operations.
9
<PAGE> 10
The remaining Senior Notes are payable in amounts of $8,750,000 in
fiscal 1999, $14,792,000 in fiscal 2000, and $1,458,000 in fiscal 2001. The
market value of this $25,000,000 fixed rate long-term debt at September 29, 1996
is approximately $26,301,000 based on interest rates at that date.
At September 29, 1996, the Company had $9,815,000 in notes payable
related to the Employee Stock Ownership Plan (ESOP) and $22,500,000 of
industrial revenue bonds. These notes and bonds carry tax-advantaged variable
rates of interest equal to approximately 4.99% in 1996. The ESOP loans are
payable as follows: $6,215,000 in fiscal 1998 and $3,600,000 payable in fiscal
1999 through fiscal 2001. The $22,500,000 industrial revenue bonds are payable
as follows: $4,500,000 in 2000; $4,500,000 in 2001; $6,000,000 in $1,000,000
annual installments in 2002 through 2007; $3,500,000 in 2004; $2,500,000 in
$500,000 installments from 2001 through 2005; and $1,500,000 due in 2017. These
bonds are secured by financing statements on project-related equipment, the
cost of which approximates the bond amounts.
On April 1, 1996, the Company entered into a $120,000,000 revolving
credit facility which expires on January 1, 2000, and automatically extends by
one year on each anniversary date of the agreement. In general, this facility
enables the Company to borrow funds at LIBOR plus 1/2% to 3/4%, depending upon
achievement of specified financial targets. The Company pays an annualized
facility fee of 1/10% and an annualized fee of 1/10% of the unused portion of
the facility. At September 29, 1996, $7,500,000 was outstanding as short-term
debt. The Company has a Standby Letter of Credit (SLC) in favor of the Senior
Note lenders drawn under the revolving credit agreement. The SLC is maintained
at 105% of the Senior Notes outstanding and was $26,250,000 at September 29,
1996. In connection with the execution of this agreement, the Senior Note
agreement was amended to remove all of the financial ratio covenants. As of
September 29, 1996 the Company was in compliance with all of its debt covenants.
Short-term borrowings, including borrowings under the Company's
revolving credit facilities which were for temporary working capital needs, are
summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Daily average outstanding borrowings $39,004 $31,373 $27,953
Daily weighted average interest rate 5.66% 6.29% 3.82%
Maximum borrowings $71,980 $68,500 $62,300
Amount outstanding at year-end $ 7,500 $22,300 $ -
</TABLE>
The Company uses interest rate exchange agreements, more commonly called
interest rate swaps, to manage its interest rate exposure. Swaps were entered
into to fix the interest rate on variable debt at rates which the Company
considered attractive at the time the agreements were consummated. When the
Company entered into these agreements, it compared its anticipated interest
costs to other long-term borrowing sources such as private placements and other
fixed rate borrowing options. The notional amounts of swaps outstanding at
September 29, 1996 and October 1, 1995 were $30,000,000 and $50,000,000,
respectively. The fixed rates of interest for swaps outstanding during fiscal
1996 and 1995 were 8.66% and 8.52%, respectively. These swaps expire from
December 1997 to February 1998. The effective fixed rate of swapped debt
instruments during fiscal 1996 and 1995 was 7.76% and 8.00%, respectively.
Accordingly, the Company has realized its desired objectives in the use of
these financing instruments. If the Company had canceled these agreements as of
September 29, 1996, it would have been required to pay the counter-parties to
the agreements an aggregate amount of $1,342,000.
10
<PAGE> 11
The Company has also entered into forward swap agreements for periods
ranging from 1998 to 2004 which fix the rate on debt as follows: $20,000,000 in
1998-1999, $30,000,000 in 2000, $50,000,000 in 2001, $90,000,000 in 2002 and
$80,000,000 in 2003-2004. The Company entered into these agreements to fix the
rate on variable rated debt intended to be borrowed during this time period.
The swaps require the Company to pay fixed rates ranging from 6.5% to 7.0%
against 90 day LIBOR. These transactions were entered into to protect the
Company against interest rate increases and to fix future interest rates at
rates the Company considers attractive. If the Company had canceled these
agreements as of September 29, 1996, it would have received from the
counter-parties to the agreements an aggregate amount of $734,000.
Interest expense was $12,355,000 in fiscal 1996, $14,847,000 in fiscal
1995, and $13,380,000 in fiscal 1994. Cash payments of interest were $12,945,000
in fiscal 1996, $13,620,000 in fiscal 1995, and $12,321,000 in fiscal 1994.
11
<PAGE> 12
Annual maturities of long-term debt each year for the next five fiscal
years are $2,170,000 in 1997, $7,894,000 in 1998, $9,440,000 in 1999,
$19,982,000 in 2000, $9,248,000 in 2001, and $13,190,000 in subsequent years
through 2017.
Lease expense related to operating leases aggregated $2,081,000,
$1,552,000, and $1,887,000 in fiscal 1996, 1995 and 1994, respectively. Lease
commitments on operating leases exceeding one year for fiscal 1997, 1998, 1999,
2000 and 2001 are $1,265,000, $1,245,000, $837,000, $802,000 and $564,000,
respectively.
Note 6 - Income Taxes:
Pre-tax income for all years presented was taxed exclusively in the
United States. The provision for (benefit from) income taxes is comprised of the
following:
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------ ---------- ----------
(In thousands)
<S> <C> <C> <C>
Current federal $6,092 $(1,515) $8,071
Current state 1,249 (863) 75
Deferred federal (4,357) (271) (4,794)
Deferred state (816) 64 (489)
------ ------- ------
Provision for (benefit from)
income taxes $2,168 $(2,585) $2,863
====== ======= ======
Tax effect of change in:
Minimum pension liability adjustment $ 507 $(4,716) $ 720
Cumulative translation adjustment (45) (261) -
------ ------- ------
$ 462 $(4,977) $ 720
====== ======= ======
</TABLE>
Cash payments for income taxes amounted to $537,000, $6,637,000 and
$7,504,000 for fiscal 1996, 1995 and 1994, respectively.
12
<PAGE> 13
Deferred income tax assets (liabilities) are comprised of the
following:
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------- ----------
(In thousands)
<S> <C> <C>
Loss on impairment of long-lived assets $ 3,906 $ -
Depreciation (21,658) (22,854)
Other postretirement benefits 12,565 12,316
Accrued pension liability 8,796 12,769
Deferred compensation 7,743 6,227
Tax benefit purchases (1,143) (2,616)
Other non-current 4,009 659
------- --------
Total net non-current asset 14,218 6,501
------- --------
Other accrued expenses 2,288 847
Inventory (243) (411)
Other current 980 1,226
------- --------
Total net current asset 3,025 1,662
------- --------
Net deferred asset $17,243 $ 8,163
======= ========
</TABLE>
A reconciliation between the provision for (benefit from) income taxes and
the amount computed by applying the U. S. federal income tax rate to income
before income taxes and extraordinary item is as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Computed "expected" tax expense (benefit) $3,292 $(2,127) $3,012
Increases (reductions) in taxes
resulting from:
State income taxes, net of federal
income tax benefit 224 280 (269)
Tax-free income earned (221) (120) (104)
ESOP dividends (17) (254) (506)
Tax rate benefit of NOL carryback (600) - -
Other 60 (364) 730
------ ------- ------
2,738 (2,585) 2,863
Extraordinary item (570) - -
------ ------- ------
Provision for (benefit from) income taxes $2,168 $(2,585) $2,863
====== ======= ======
</TABLE>
Note 7 - Stockholders' Equity:
The Certificate of Incorporation of the Company, as amended, authorizes a
class of preferred stock to consist of up to 1,000,000 shares of $.50 par value
stock. The Board of Directors can determine the characteristics of the
preferred stock without further stockholder approval.
13
<PAGE> 14
During fiscal 1996, the Company established a Benefit Trust (the "Trust")
with 2,500,000 shares of treasury stock. The Trust will enhance the Company's
financial flexibility to provide funds to satisfy its obligations under various
employee benefit plans and agreements. The shares may be sold at the Company's
discretion, until March 31, 2011. However, the shares do not have to be sold.
Proceeds from the sales, if any, will be used to fund eligible employee
benefits. The employee benefits payable from the Trust are primarily included in
the $78,834,000 "Deferred employee benefits" liability. Shares held by the Trust
are not considered outstanding for earnings per share calculations until they
are sold, but are considered outstanding for shareholder voting purposes. The
shares are voted based upon the voting results of the shares held in the
Company's Employee Stock Ownership Plan.
To record this transaction, the Company reduced "Treasury stock" by the
average cost of these shares to the Company, or $15,426,000, and the fair market
value of the stock was recorded as "Stock held by benefit trust". "Capital in
excess of stated value" was increased for the difference of $11,449,000 between
the cost of the shares and their fair value. Each quarter, "Stock held by
benefit trust" is adjusted to the fair market value of the shares held in the
Trust, and an adjustment for the same amount is made to "Capital in excess of
stated value". At September 29, 1996, the market value of the stock was $14.00
per share. Total stockholders' equity will increase as the shares are sold from
the Trust.
Effective April 23, 1996, the Company entered into a one-year employment
agreement with the Chairman of the Board of Directors of the Company. The
employment agreement grants an option to purchase from the Company 100,000
shares of the Company's common stock at the price of $11.00 per share. The
option price coincided with the market price of the Company's common stock on
the date the options were granted. The options are exercisable until April 24,
2001. None of the options have yet been exercised.
Note 8 - Pension Plans:
Substantially all employees and retirees of the Company are covered by
noncontributory defined benefit pension plans. The Company also provides
supplemental pension benefits to certain retired employees. The supplemental
pension benefits are determined annually by the Board of Directors.
The Company's largest defined benefit plan provides employees a retirement
benefit based on a percentage of their final three year average pay. Effective
July 1, 1996, this percentage of final pay was
14
<PAGE> 15
modified, and provisions to reduce pension benefits for early retirement were
incorporated into this plan. These modifications, along with some other minor
changes, reduced the "projected benefit obligation" at September 29, 1996 by
$3,009,000.
Benefits under the noncontributory defined benefit pension plans for
bargaining employees are primarily based on years of service.
The Company's contribution policy for all pension plans is to contribute
at least the minimum amount required by the Employee Retirement Income Security
Act. At September 29, 1996, the assets of these plans are invested primarily in
cash equivalents and commingled institutional stock and bond funds.
The following table sets forth the status of the Company's qualified
defined benefit pension plans and the pertinent assumptions used in computing
this information as of the end of each respective year:
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------- ----------
(In thousands)
<S> <C> <C>
Actuarial present value of benefit
obligation based on current
compensation:
Vested $(80,235) $(78,364)
Nonvested (6,216) (6,927)
-------- --------
Accumulated benefit obligation (86,451) (85,291)
Increase in present value of benefit
obligation to reflect projected
compensation increases (4,846) (7,524)
-------- --------
Projected benefit obligation (91,297) (92,815)
Plan assets at fair value 72,533 62,852
-------- --------
Projected benefit obligation
in excess of plan assets (18,764) (29,963)
Unrecognized prior service cost (193) 3,386
Unrecognized net loss 29,810 31,876
Unrecognized net asset at transition (1,276) (2,352)
Adjustment required to recognize
minimum liability (23,495) (25,386)
-------- --------
Pension liability included in
"Deferred employee benefits" $(13,918) $(22,439)
======== ========
Actuarial assumptions:
Discount rate 7.5% 7.5%
Projected salary increases 4.5% 4.5%
</TABLE>
15
<PAGE> 16
Pension expense and the assumed rate of return on plan assets used to
calculate it are summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------- ---------- -----------
(In thousands)
<S> <C> <C> <C>
Costs related to services provided
by employees during the year $2,070 $2,250 $2,401
Interest cost on projected benefit
obligation 6,874 6,601 6,274
Actual gain on plan assets (5,939) (6,390) (1,172)
Net amortization and deferrals 659 437 (4,564)
------ ------ ------
Pension expense related to defined
benefit plans 3,664 2,898 2,939
Supplemental pension benefits 205 190 126
------ ------ ------
Total pension expense $3,869 $3,088 $3,065
====== ====== ======
Actuarial assumption:
Expected long-term rate of
return on plan assets 9.5% 9.5% 9.5%
</TABLE>
The Company has an unqualified Supplemental Executive Retirement Plan
(SERP) which it amended in 1996 by freezing the years of credited service for
participants as of June 30, 1996. This modification reduced the "projected
benefit obligation" at September 29, 1996 by $3,689,000. The actuarially
determined expense related to the SERP is summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------ ---------- ----------
(In thousands)
<S> <C> <C> <C>
Costs related to services provided
by employees during the year $ 316 $ 283 $ 285
Interests cost on projected benefit
obligation 928 912 781
Net amortization and deferrals 203 169 189
Net curtailment gain (189) - -
------ ------ ------
Total pension expense related to
SERP plan $1,258 $1,364 $1,255
====== ====== ======
</TABLE>
16
<PAGE> 17
The table below summarizes the status of the SERP plan and the pertinent
assumptions used in computing this information at the end of each respective
year:
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------- ----------
(In thousands)
<S> <C> <C>
Actuarial present value of benefit
obligation based on current
compensation:
Vested $ (7,770) $(11,097)
Nonvested (648) (917)
-------- --------
Accumulated benefit obligation (8,418) (12,014)
Increase in present value of benefit
obligation to reflect projected
compensation increases (2,613) (850)
-------- --------
Projected benefit obligation (11,031) (12,864)
Unrecognized prior service cost - 197
Unrecognized net loss 700 2,893
Unrecognized net obligation at
transition - 70
Adjustment required to recognize
minimum liability (273) (2,310)
-------- --------
Pension liability included in
"Deferred employee benefits" $(10,604) $(12,014)
======== ========
Actuarial assumptions:
Discount rate 7.5% 7.5%
Projected salary increases 4.5% 4.5%
</TABLE>
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87 - Employers' Accounting for Pensions, the Company has recorded
an additional minimum liability at September 29, 1996 and at October 1, 1995
representing the excess of the accumulated benefit obligation over the fair
value of plan assets and accrued (prepaid) pension expense for its pension and
SERP plans. The additional liability has been offset by an intangible asset
which is included in "Other assets" to the extent of previously unrecognized
prior service cost. Amounts in excess of previously unrecognized prior service
cost are recorded net of the related deferred tax benefit as a reduction of
stockholders' equity of $14,038,000 at September 29, 1996 and $14,842,000 at
October 1, 1995.
Note 9 - Other Retirement and Benefit Plans:
The Company has a deferred compensation program, which it modified in
1996. This program allowed directors and certain management employees to defer
their compensation and earn a guaranteed interest rate on the deferred amounts.
In effect, such amounts deferred are unsecured loans to the Company. The
deferred salaries
17
<PAGE> 18
and interest at the market rate are accrued as incurred. Interest above the
market rate is accrued over the vesting period. The expense related to the
Company's deferral plan was $2,523,000 in 1996, $2,320,000 in 1995, and
$1,915,000 in 1994.
The 1996 amendment terminated all additional employee deferrals
effective June 30, 1996. The nonemployee directors' deferral plan was also
modified to reduce the guaranteed rate of interest on amounts deferred to 8%,
and then to the prime rate in effect each January 1. The effect of this
amendment is estimated to have reduced the present value of the payments which
ultimately will be paid to the directors under the plan by $2,600,000.
As consideration for the reduction in the interest rate on the directors'
deferred compensation, a Supplemental Share Unit Plan (the "Plan") was
established for nonemployee directors. The Plan granted a number of Share Units
(a Share Unit is the equivalent of one share of Company common stock) to each
nonemployee director equal to one-half of the director's deferred compensation
account balance as of June 30, 1996 divided by a price of $11.00 per Share Unit.
These Share Units fully vested on June 30, 1996 and the value of each unit is
adjusted upward or downward based on the highest daily closing price of the
Company's common stock during the preceding twelve month period. At retirement
from the Board of Directors, each nonemployee director will receive, in cash,
the value of the Share Units in their deferral account. During 1996, the Company
expensed $1,563,000 related to this plan. Future expenses related to this plan
will only be incurred as the Company's stock price increases.
The Company has included in "Deferred employee benefits" $20,524,000 at
September 29, 1996 and $17,694,000 at October 1, 1995 to reflect its liability
under its deferred compensation programs. Payments required to be made to
participants in these programs for the next five fiscal years are approximately
$1,460,000 in 1997, $1,460,000 in 1998, $1,555,000 in 1999, $1,878,000 in 2000
and $2,706,000 in 2001.
The Company sponsors 401(k) plans in which substantially all non-
bargaining employees and certain bargaining unit employees are eligible to
participate. These plans allow eligible employees to save a portion of their
salary on a pre-tax basis. The Company makes monthly contributions to these
plans which aggregated $449,000, $437,000 and $408,000 in fiscal 1996, 1995 and
1994, respectively.
18
<PAGE> 19
The Company also sponsors benefit plans that provide postretirement health
care and life insurance benefits to certain employees who meet the applicable
eligibility requirements. The cost of postretirement health care and life
insurance benefits is summarized as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------
September 29, October 1, October 2,
1996 1995 1994
------------- ---------- ----------
(In thousands)
<S> <C> <C> <C>
Costs related to services provided by
employees during the year $ 520 $ 476 $ 669
Interest cost on accumulated benefit
obligation 2,408 2,447 2,369
------ ------ ------
Total postretirement benefit expense $2,928 $2,923 $3,038
====== ====== ======
</TABLE>
The actuarial and recorded liabilities for these postretirement benefits,
none of which have been funded, and the pertinent assumptions used to compute
this information are as follows:
<TABLE>
<CAPTION>
September 29, October 1,
1996 1995
------------- ----------
(In thousands)
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $(20,594) $(20,473)
Active participants (11,865) (11,634)
-------- --------
Accumulated benefit obligation (32,459) (32,107)
Unrecognized net gain (1,329) (1,000)
-------- --------
Accrued postretirement benefit
obligation included in
"Deferred employee benefits" $(33,788) $(33,107)
======== ========
Actuarial assumptions:
Discount rate 7.5% 7.5%
Health care cost trend rate -
Fiscal 1996 - 7.5%
Fiscal 1997 - 1999 7.5% 7.5%
Fiscal 2000 - 2004 6.0% 6.0%
Thereafter 5.0% 5.0%
</TABLE>
Increasing the health care cost trend rate assumption by one percentage point
would have increased the accumulated postretirement benefit obligation as of
September 29, 1996 by approximately $1,983,000 and would have increased
postretirement benefit expense by approximately $221,000 in fiscal 1996.
19
<PAGE> 20
The Company also sponsors an Employee Stock Ownership Plan (ESOP).
Substantially all non-bargaining employees participate and receive shares in
their account at the discretion of the Board of Directors. Expenses related to
this plan have been immaterial in 1996, 1995, and 1994.
Note 10 - Commitments and Contingencies:
The Company has contracted for the purchase of a substantial portion of
its future raw sugar requirements. Prices to be paid for raw sugar under these
contracts are based in some cases on market prices during the anticipated
delivery month. In other cases prices are fixed and, in these instances, the
Company generally obtains commitments from its customers to buy the sugar prior
to fixing the price, or enters into futures transactions to hedge the
commitment.
The Company is exposed to loss in the event of non-performance by the
other party to the interest rate swap agreements discussed in Note 5. However,
the Company does not anticipate non-performance by the counter-parties to the
transactions.
As of the end of fiscal 1996, approximately $2,500,000 of a claim by the
United States Customs Service (Customs) remains unresolved. Customs has alleged
that drawback claims prepared by the Company for certain export shipments of
sugar during the years 1984 to 1988 are technically and/or substantively
deficient and that the Company, therefore, is not entitled to amounts previously
received under these drawback claims. The Company disputes Customs' findings and
has been vigorously protesting this matter with Customs. The ultimate resolution
of this matter is not expected to have a materially adverse effect on the
Company's financial position or results of operations.
20
<PAGE> 21
Note 11 - Quarterly Financial Information (Unaudited):
Unaudited quarterly financial information for fiscal 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands except for per share amounts)
Fiscal 1996
<S> <C> <C> <C> <C>
Net sales $304,409 $250,804 $287,462 $303,657
Gross profit 27,937 24,951 31,151 34,075
Impairment loss - - - (10,280)
Other costs 1,525 (3,800) - (1,099)
Income from operations 8,550 162 10,906 2,181
Income (loss) before
extraordinary item 3,543 (2,043) 4,726 717
Per share .14 (.08) .18 .03
Net income (loss) 3,543 (2,043) 4,028 444
Per share .14 (.08) .15 .02
Fiscal 1995
Net sales $282,477 $253,377 $275,554 $287,136
Gross profit 28,848 20,907 20,472 25,638
Other costs - - - (4,284)
Income (loss) from operations 8,428 299 199 (1,525)
Net income (loss) 3,618 (1,927) (2,428) (2,756)
Per share .14 (.07) (.10) (.10)
</TABLE>
"Other costs" included above and in the Consolidated Statements of Operations
includes the following:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
Fiscal 1996 ------- ------- ------- -------
<S> <C> <C> <C> <C>
Net gain (loss) on asset disposals $1,525 $(3,800) $ - $ (376)
Cost of workforce reduction - - - (723)
------ ------- ------- -------
Other costs $1,525 $(3,800) $ - $(1,099)
====== ======= ======= =======
Fiscal 1995
Net loss on asset disposals $(1,197)
Litigation settlement (1,615)
Cost of workforce reduction (1,472)
-------
Other costs $(4,284)
=======
</TABLE>
A $1,514,000 net gain on the disposal of assets in the first quarter of
fiscal 1996 has been reclassified to income from operations from other income
(expense), where it was shown in the first quarter 10-Q.
21
<PAGE> 22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
(a) Previous independent accountants
On October 17, 1996, the Registrant notified Price Waterhouse LLP that it
would be dismissed as the Registrant's independent accountants upon completion
of its audit of the consolidated financial statements as of and for the fiscal
year ended September 29, 1996. This audit was completed on November 18, 1996.
The reports of Price Waterhouse LLP on the consolidated financial
statements of the Registrant as of and for the fiscal years ended September 29,
1996 and October 1, 1995 contained no adverse opinion or disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope or accounting
principle.
The Registrant's Audit Committee and Board of Directors made and approved
the decision to change independent accountants.
In connection with its audits for the fiscal years ended September 29,
1996 and October 1, 1995 and through November 18, 1996, there have been no
disagreements with Price Waterhouse LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which disagreements if not resolved to the satisfaction of Price Waterhouse LLP
would have caused them to make reference thereto in their report on the
consolidated financial statements for such years.
During the fiscal years ended September 29, 1996 and October 1, 1995 and
through November 18, 1996, there have been no reportable events (as defined in
Regulation S-K Item 304(a)(1)(v)).
The Registrant has requested that Price Waterhouse LLP furnish it with a
letter addressed to the SEC stating whether or not it agrees with the above
statements. Copies of such letters, one dated October 22, 1996 and one dated
November 18, 1996 were filed as Exhibits 16-1 to two Form 8-K's filed with the
SEC. The Form 8-K's were dated October 17, 1996 and November 18, 1996,
respectively.
22
<PAGE> 23
(b) New independent accountants
The Registrant engaged Arthur Andersen LLP as its new independent
accountants as of December 16, 1996. During the fiscal years ended September 29,
1996 and October 1, 1995 and through December 16, 1996, the Registrant has not
consulted with Arthur Andersen LLP on items which (1) were or should have been
subject to SAS 50 (Reports on the Application of Accounting Principles) or (2)
concerned the subject matter of a disagreement or reportable event with the
former independent accountants, (as described in Regulation S-K Item 304(a)(2)).
23
<PAGE> 1
EXHIBIT 99.5
Savannah Foods & Industries, Inc.
Consolidated Balance Sheets
(In thousands except for shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
June 29, September 29,
1997 1996
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 11,249 $ 15,300
Accounts receivable 70,580 76,109
Inventories (net of LIFO reserve of $7,970 in fiscal
1997 and $8,018 in fiscal 1996) (Note 2) 141,386 83,929
Other current assets 6,716 5,214
------------ ------------
Total current assets 229,931 180,552
Property, plant and equipment (net of accumulated
depreciation of $231,333 in fiscal 1997 and
$220,183 in fiscal 1996) 175,927 186,546
Other assets 29,234 31,163
------------ ------------
$ 435,092 $ 398,261
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 3,800 $ 7,500
Current portion of long-term debt 8,253 2,170
Trade accounts payable 88,463 52,701
Accrued expenses related to beet operations 9,730 -
Other liabilities and accrued expenses 23,898 23,575
------------ ------------
Total current liabilities 134,144 85,946
------------ ------------
Long-term debt (Note 3) 26,230 59,754
------------ ------------
Deferred employee benefits 73,785 78,834
------------ ------------
Stockholders' equity:
Common stock $.25 par value; $.55 stated value;
64,000,000 shares authorized; 31,306,800 shares issued 17,365 17,365
Capital in excess of stated value 39,108 31,764
Retained earnings 220,231 193,524
Treasury stock, at cost (2,568,604 shares) (15,849) (15,849)
Minimum pension liability adjustment (14,038) (14,038)
Stock held by benefit trust, at market (2,500,000 shares) (42,344) (35,000)
Other (3,540) (4,039)
------------ ------------
Total stockholders' equity 200,933 173,727
------------ ------------
$ 435,092 $ 398,261
============ ============
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
1
<PAGE> 2
Savannah Foods & Industries, Inc.
Consolidated Statements of Operations
(In thousands except for shares and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the
For the Quarter Ended Three Quarters Ended
---------------------------- ----------------------------
June 29, June 30, June 29, June 30,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 303,546 $ 287,462 $ 883,156 $ 842,675
------------ ------------ ------------ ------------
Operating expenses:
Cost of sales and operating expenses 263,100 256,336 768,703 760,957
Selling, general and
administrative expenses 15,102 13,475 44,241 41,026
Depreciation and amortization 5,663 6,745 17,769 21,074
------------ ------------ ------------ ------------
283,865 276,556 830,713 823,057
------------ ------------ ------------ ------------
Income from operations 19,681 10,906 52,443 19,618
------------ ------------ ------------ ------------
Other income and (expenses):
Interest and other investment income 339 163 661 575
Interest expense (1,530) (3,013) (5,412) (9,678)
Other income (expense) (94) (481) (301) (632)
------------ ------------ ------------ ------------
(1,285) (3,331) (5,052) (9,735)
------------ ------------ ------------ ------------
Income before income taxes and
extraordinary item 18,396 7,575 47,391 9,883
Provision for income taxes (6,994) (2,849) (18,012) (3,657)
------------ ------------ ------------ ------------
Income before extraordinary item 11,402 4,726 29,379 6,226
Extraordinary item, net of tax (Note 3) (376) (698) (376) (698)
------------ ------------ ------------ ------------
Net income $ 11,026 $ 4,028 $ 29,003 $ 5,528
============ ============ ============ ============
Per share:
Income before extraordinary item $ 0.43 $ 0.18 $ 1.12 $ 0.24
Extraordinary item (Note 3) (0.01) (0.03) (0.01) (0.03)
------------ ------------ ------------ ------------
Net income $ 0.42 $ 0.15 $ 1.11 $ 0.21
============ ============ ============ ============
Dividends $ 0.0375 $ 0.0250 $ 0.0875 $ 0.0750
============ ============ ============ ============
Weighted average shares outstanding 26,238,196 26,238,196 26,238,196 26,238,196
============ ============ ============ ============
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
2
<PAGE> 3
Savannah Foods & Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Quarters Ended
------------------------------
June 29, June 30,
1997 1996
----------- -----------
(In thousands of dollars)
<S> <C> <C>
Cash flows from operations:
Net income $ 29,003 $ 5,528
Adjustments to reconcile net income to
net cash provided by operations -
Depreciation and amortization 17,769 21,074
Extraordinary item, net of tax, related to
financing activities 376 698
Net loss on disposal of assets 186 1,871
Decreases (increases) in working capital -
Accounts receivable 5,529 (7,406)
Inventories (57,457) (40,850)
Other current assets (1,502) 5,652
Trade accounts payable 35,762 9,983
Accrued expenses related to beet operations 9,730 15,815
Other liabilities and accrued expenses 323 (3,806)
(Decrease) increase in deferred employee benefits (5,049) 473
Other 1,343 200
----------- -----------
Cash provided by (used for) operations 36,013 9,232
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (6,432) (5,412)
Proceeds from sale of property, plant and
equipment 812 2,458
Sale of investments - 13,869
Liquidation of business - 12,500
Use of escrowed industrial revenue bond funds
for additions to property, plant and equipment - 2,862
Other - (381)
----------- -----------
Cash (used for) provided by investing activities (5,620) 25,896
----------- -----------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings (3,700) (951)
Payments of long-term debt (27,441) (22,907)
Debt prepayment charge, net of tax (376) (698)
Dividends paid (2,296) (1,968)
Other (631) (412)
----------- -----------
Cash (used for) provided by financing activities (34,444) (26,936)
----------- -----------
Cash flows for period (4,051) 8,192
Cash and cash equivalents, beginning of period 15,300 11,574
----------- -----------
Cash and cash equivalents, end of period $ 11,249 $ 19,766
=========== ===========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
Savannah Foods & Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(1) The information furnished reflects all adjustments (consisting of only
normal recurring accruals) which are, in the opinion of Management,
necessary for a fair statement of the results for the interim periods.
These consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's
latest Annual Report on Form 10-K. Certain prior year amounts have been
reclassified to conform to the current year presentation.
(2) A summary of inventories by class is as follows:
<TABLE>
<CAPTION>
June 29, September 29,
1997 1996
--------- -------------
(In thousands of dollars)
<S> <C> <C>
Raw materials and work-in-process $ 52,033 $17,693
Packaging materials, parts and supplies 16,198 20,713
Finished goods 73,155 36,049
Payments related to future inventory
purchases - 9,474
-------- -------
$141,386 $83,929
======== =======
</TABLE>
(3) The Company elected to prepay the remaining $25 million of its Senior
Notes in May 1997. The Company incurred $376,000 (net of $236,000 income
tax benefits), or $.01 per share, of related prepayment penalties which
are reflected as an extraordinary item in the Consolidated Statement of
Operations.
(4) Futures Transactions and Interest Rate Swaps:
The Company uses futures contracts to manage its inventory and fuel
positions, both to set pricing on purchases and to reduce the Company's
exposure to price fluctuations. It also uses interest rate hedges to fix
interest rates on current and anticipated borrowings to reduce exposure to
interest rate fluctuations. Under existing accounting literature, these
activities are accounted for as hedging activities.
To qualify as a hedge the item to be hedged must expose the Company to
inventory pricing or interest rate risk and the related contract must
reduce that exposure and be designated by the Company as a hedge. To
hedge expected transactions, the significant characteristics and expected
terms of such transactions must be identified and it must be probable that
the transaction will occur.
4
<PAGE> 5
Gains and losses on futures contracts, including gains and losses upon
termination of the contract, are matched to inventory purchases and are
included in the carrying value of inventory and charged or credited to
cost of sales as such inventory is sold or used in production.
The net cash paid or received on interest rate hedges is included in
interest expense. Gains or losses on the termination of hedges are
deferred and recognized in interest over the period covered by the
interest rate hedge.
If derivative transactions do not meet the criteria for hedges, the
Company recognizes unrealized gains or losses as they occur. If a hedged
transaction no longer exists or a hedged anticipated transaction is deemed
no longer probable to occur, cumulative gains and losses on the hedge are
recognized immediately in income and subsequent changes in fair market
value of the derivative transaction are recognized in the period the
change occurs.
(5) Commitments and Contingencies:
The Company has contracted for the purchase of a substantial portion of
its future raw sugar requirements. Prices to be paid for raw sugar under
these contracts are based in some cases on market prices during the
anticipated delivery month. In other cases prices are fixed and, in these
instances, the Company generally obtains commitments from its customers to
buy the sugar prior to fixing the price, or enters into futures
transactions to hedge the commitment.
The Company uses interest rate swap agreements to manage its interest rate
exposure. The Company is exposed to loss in the event of non-performance
by the other party to these swaps. However, the Company does not
anticipate non-performance by the counter-parties to the transactions.
On April 14, 1997, the Company received a ruling favorable in all material
respects on its protest against a claim of approximately $2,500,000 by the
United States Customs Service (Customs). Customs had alleged that
drawback claims prepared by the Company for certain export shipments were
deficient and that the Company may have to repay such claims. The Company
is currently preparing specific documentation requested by Customs in
order to enable the agency to process and finalize the drawback claims in
accordance with the favorable ruling. The pending resolution of this
matter is not expected to have a material effect on the Company's cash
flows, financial position or results of operations.
5
<PAGE> 1
EXHIBIT 99.6
PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the Tender Offer and the Merger, using the purchase method of
accounting for the Company's acquisition of Savannah Foods, after giving effect
to the pro forma reclassifications and adjustments described in the
accompanying notes. These unaudited pro forma combined condensed financial
statements have been prepared from, and should be read in conjunction with, the
historical consolidated financial statements and notes thereto of the Company
and of Savannah Foods.
The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to:
the Tender Offer; the Merger; the funding of a $255 million senior secured
credit facility, a $250 million subordinated notes offering, and the replacement
of existing revolving lines of credit (collectively the "Debt Financing") to
replace the Tender Credit Facility and to provide for the cash portion of the
consideration in the Merger; the purchase of $5 million of Imperial Common Stock
by H. Kempner Trust Association (the "H. Kempner Trust Financing"); and the
successful tender offer for $75.4 million principal amount of the Company's
8 3/8% Senior Notes due 1999 (the "Debt Tender Offer"), as if each had occurred
on September 30, 1997. The Unaudited Pro Forma Combined Condensed Statements of
Earnings for the year ended March 31, 1997 and the six months ended September
30, 1997 and 1996 give effect to the Tender Offer, the Debt Tender Offer, the
Debt Financing, the H. Kempner Trust Financing and the Merger as if each had
occurred at the beginning of the earliest period presented. Savannah Foods'
results of operations, which are reported on a fiscal year ending on the Sunday
closest to September 30, have been adjusted to a March 31 year end. The
estimates of the fair value of Savannah Foods' assets and liabilities are based
on valuations which are preliminary. Such valuations will be updated to the
effective date of the Merger and may change from the amounts shown herein;
however the Company and Savannah Foods do not expect such changes to be
material. The unaudited pro forma combined condensed financial statements are
intended for informational purposes and are not necessarily indicative of the
future financial position or future results of the combined companies or of the
financial position or the results of operations that would have actually
occurred had the Merger been in effect as of the date or for the periods
presented. The Unaudited Pro Forma Combined Condensed Statements of Earnings do
not reflect any benefits from cost savings or revenue enhancements that are
anticipated to result from the integration of operations of the Company and
Savannah Foods. Such cost savings and revenue enhancements are discussed in Note
8 to the Unaudited Pro Forma Combined Condensed Statements of Earnings.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
---------- ------------ ------------- -------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................ $752,595 $1,170,729 $ -- $ 1,923,324
Cost of sales............................ 651,677 1,031,475 (944)(1) 1,682,208
Selling, general and administrative...... 57,722 56,255 -- 113,977
Depreciation & amortization.............. 14,773 25,771 9,328 (2) 47,156
(2,716)(3)
Impairment of long-lived assets.......... -- 10,280 -- 10,280
Cost of workforce reduction.............. -- 723 -- 723
-------- ---------- -------- -----------
Operating income............... 28,423 46,225 (5,668) 68,980
Interest expense......................... 12,430 9,572 33,844 (5) 55,846
Other (income) expense................... (1,695) 285 -- (1,410)
-------- ---------- -------- -----------
Income before income taxes............... 17,688 36,368 (39,512) 14,544
Income tax provision..................... 6,170 12,948 (11,310)(6) 7,808
-------- ---------- -------- -----------
Income before extraordinary item......... $ 11,518 $ 23,420 $(28,202) $ 6,736
======== ========== ======== ===========
Average shares outstanding............... 12,576,489
Shares sold to H. Kempner Trust.......... 377,358 (7)
Shares issued in Merger.................. 12,029,962 (7)
-----------
Pro forma average shares outstanding..... 24,983,809
===========
Pro forma earnings per share............. $ 0.27
===========
</TABLE>
1
<PAGE> 2
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
----------- ----------- -------------- --------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................. $406,682 $612,229 -- $ 1,018,911
Cost of sales............................. 348,869 531,899 (308)(1) 880,460
Selling, general and administrative....... 30,668 30,711 -- 61,379
Depreciation & amortization............... 6,786 11,329 4,664(2) 22,883
104(3)
Merger related costs...................... -- 13,394 (13,394)(4) --
-------- -------- -------- -----------
Operating income................ 20,359 24,896 8,934 54,189
Interest expense.......................... 5,301 2,968 17,262(5) 25,531
Other (income) expense.................... (735) (294) -- (1,029)
-------- -------- -------- -----------
Income before income taxes................ 15,793 22,222 (8,328) 29,687
Income tax provision...................... 5,842 8,118 (1,431)(6) 12,529
-------- -------- -------- -----------
Income before extraordinary item.......... $ 9,951 $ 14,104 $ (6,897) $ 17,158
======== ======== ======== ===========
Average shares outstanding................ 14,247,193
Shares sold to H. Kempner Trust........... 377,358(7)
Shares issued in Merger................... 12,029,962(7)
-----------
Pro forma average shares outstanding...... 26,654,513
===========
Pro forma earnings per share.............. $ 0.64
===========
</TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL
--------------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
----------- ----------- -------------- --------------
(IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales................................. $393,955 $591,119 $ -- $ 985,074
Cost of sales............................. 341,157 525,872 (636)(1) 866,393
Selling, general and administrative....... 29,057 27,116 -- 56,173
Depreciation & amortization............... 7,293 13,665 4,664(2) 24,618
(1,004)(3)
Cost of workforce reduction............... -- 723 -- 723
Impairment of long-lived assets........... -- 10,280 -- 10,280
-------- -------- -------- -----------
Operating income................ 16,448 13,463 (3,024) 26,887
Interest expense.......................... 6,337 5,690 16,765(5) 28,792
Other (income) expense.................... (1,046) 400 -- (646)
-------- -------- -------- -----------
Income before income taxes................ 11,157 7,373 (19,789) (1,259)
Income tax provision...................... 4,080 1,930 (5,667)(6) 343
-------- -------- -------- -----------
Income before extraordinary item.......... $ 7,077 $ 5,443 $(14,122) $ (1,602)
======== ======== ======== ===========
Average shares outstanding................ 11,009,476
Shares sold to H. Kempner Trust........... 377,358(7)
Shares issued in Merger................... 12,029,962(7)
-----------
Pro forma average shares outstanding...... 23,416,796
===========
Pro forma earnings per share.............. (0.07)
===========
</TABLE>
2
<PAGE> 3
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED MARCH 31, 1997 AND THE SIX MONTHS ENDED SEPTEMBER 30, 1997
AND 1996
(1) Represents the adjustment of pension and other employee benefit costs due to
elimination of the amortization of deferred gains and losses on a purchase
accounting basis.
(2) Represents the amortization of goodwill and brand related intangibles over
40 years and debt issuance costs related to the Debt Financing over the
terms of the respective loans.
(3) Represents the adjustment in depreciation due to the step-up of Savannah
Foods' property, plant and equipment to fair value. Pro forma depreciation
is calculated on the straight-line method over estimated useful lives of
eight to 37 years for real property improvements and five to ten years for
machinery and equipment.
(4) Represents elimination of the charge for costs related to the Merger
recognized in the Savannah Foods historical financial results.
(5) Represents additional interest under the Debt Financing. Interest rates on
the Debt Financing are assumed to be:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED SEPTEMBER 30,
MARCH 31, -------------
1997 1997 1996
----------- ---- ----
<S> <C> <C> <C>
Six-year Senior Secured Loan...................... 7.31% 7.44% 7.23%
Eight-year Senior Secured Loan.................... 7.56 7.69 7.48
Ten-year Senior Subordinated Notes................ 9.32 9.32 9.32
Revolving Credit Facility......................... 7.31 7.44 7.23
</TABLE>
If interest rates were 1/8% higher during the periods, pro forma interest
expense on variable rate debt for the year ended March 31, 1997 and the six
months ended September 30, 1997 and 1996 would have increased $338,000,
$173,000 and $165,000, respectively.
(6) Represents the tax effect of the adjustments above, excluding amortization
of goodwill and brand related intangibles, based on the statutory rate in
effect for the periods shown.
(7) Represents the additional shares issued in the Merger and the H. Kempner
Trust Financing, assuming the closing price (as defined in the Merger
Agreement) of Imperial Common Stock is $13.25. If the closing price were
assumed to be $17.25, the number of additional shares issued in the Merger
and the H. Kempner Trust Financing would be 9,585,234, and pro forma
earnings per share would be $0.30, $0.72 and $(0.08) for the year ended
March 31, 1997 and the six months ended September 30, 1997 and 1996,
respectively.
3
<PAGE> 4
(8) The Unaudited Pro Forma Combined Condensed Statements of Earnings do not
give any effect to the costs savings and revenue enhancements which the
Company expects will result from integrating the operations of the companies
after the Merger. Management expects to begin to realize such cost savings
and revenue enhancements in the fiscal year ending September 30, 1998. The
full annual impact of such cost savings and revenue enhancements is expected
to be achieved in the fiscal year ending September 30, 1999, and is
preliminarily estimated to include the following (in millions of dollars):
<TABLE>
<S> <C>
Reduction of administrative costs resulting from elimination
of duplicate functions.................................... $13.5
Reduction of freight and distribution costs resulting from
more efficient sourcing of customer orders................ 7.0
Reductions in costs resulting from refocused selling,
marketing and promotion expense........................... 7.5
Reduction of costs resulting from optimizing the operating
schedules of the combined production facilities........... 5.0
Reduction of costs of procuring operating and packaging
supplies of the combined production facilities............ 7.0
-----
Total............................................. $40.0
=====
</TABLE>
Additionally, the Company believes, based upon preliminary analysis, that
there are potential opportunities to achieve improved operating results by
expanding the distribution of high value added products to each companies
respective markets, to expand sugar beet acreage supplying Savannah Foods'
sugar beet processing plants and to achieve reductions in working capital by
negotiating new arrangements with suppliers.
4
<PAGE> 5
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
HISTORICAL
---------------------
IMPERIAL SAVANNAH PRO FORMA PRO FORMA
HOLLY FOODS ADJUSTMENTS COMBINED
-------- --------- ------------ ----------
(IN THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Cash...................................... $ 9,354 $ 14,677 $ -- $ 24,031
Marketable securities..................... 55,883 -- -- 55,883
Accounts receivable....................... 62,158 68,635 -- 130,793
Inventories............................... 127,375 90,908 9,949(1) 228,232
Manufacturing costs prior to production... 22,357 -- 16,747(2) 39,104
Prepaid expenses.......................... 5,448 6,175 -- 11,623
-------- -------- --------- ----------
Total current assets............ 282,575 180,395 26,696 489,666
Notes receivable & other investments...... 13,250 -- -- 13,250
Property, plant & equipment -- net........ 154,309 179,993 73,000(3) 407,302
Intangible assets......................... -- -- 302,954(4) 302,954
Investment in Savannah Foods.............. 3,123 -- (3,123)(11) --
Other assets.............................. 4,642 38,683 (3,636)(5) 39,689
-------- -------- --------- ----------
Total Assets.................... $457,899 $399,071 $ 395,891 $1,252,861
======== ======== ========= ==========
Accounts payable.......................... $ 53,923 $ 55,756 $ -- $ 109,679
Short-term borrowings..................... 43,091 -- (43,091)(7) --
Current maturities of long-term debt...... 1,173 7,824 5,600 14,597
Other current liabilities................. 54,525 23,644 -- 78,169
-------- -------- --------- ----------
Total current liabilities....... 152,712 87,224 (37,491) 202,445
Long-term debt............................ 81,304 26,100 432,669(7) 540,073
Deferred taxes and other credits.......... 30,924 69,058 33,086(6) 154,773
21,705(8)
Common stock.............................. 83,707 17,365 164,397(9) 271,485
23,381(10)
(17,365)(11)
Additional paid in capital................ -- 43,639 (43,639)(11) --
Retained earnings......................... 90,870 221,949 (221,949)(11) 89,084
(1,786)(7)
Treasury stock............................ -- (15,849) 15,849(11) --
Benefit Trust............................. -- (46,875) 46,875(11) (23,381)
(23,381)(10)
Other equity.............................. 18,382 (3,540) 3,540(11) 18,382
-------- -------- --------- ----------
Total equity.................... 192,959 216,689 (54,078) 355,570
-------- -------- --------- ----------
Total........................... $457,899 $399,071 $ 395,891 $1,252,861
======== ======== ========= ==========
</TABLE>
5
<PAGE> 6
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(1) Represents the adjustment of Savannah Foods' finished goods inventories to
net realizable value, less an allowance for a normal profit margin, and of
raw material inventories to replacement cost.
(2) Represents an adjustment to conform Savannah Foods' accounting policy for
certain manufacturing costs incurred between processing periods which are
necessary to prepare the factory for the next processing campaign, to that
of the Company's.
(3) Represents the adjustment to fair value of Savannah Foods' property, plant
and equipment as follows (in thousands):
<TABLE>
<S> <C>
Land............................................... $10,000
Real property improvements......................... 39,000
Machinery and equipment............................ 24,000
-------
Total.................................... $73,000
=======
</TABLE>
(4) Represents intangible assets including an estimate of the excess purchase
price over the book value of Savannah Foods' net assets acquired
("Goodwill"), brand related intangibles and debt acquisition cost.
(5) Represents the adjustment of other assets to fair value.
(6) Represents the adjustment to fair value of pension and other employee
benefit plan liabilities.
(7) Represents the adjustment to reflect the borrowings under the Alternative A
Senior Credit Facility to finance the cash consideration paid in the Offer
and the Merger, to purchase the Senior Notes in the Debt Tender Offer and
to pay related fees and expenses estimated at $24.4 million. (The cash
consideration paid in the Offer, the amount required to repurchase the
Senior Notes in the Debt Tender Offer and certain of such expenses were
originally financed with borrowings under the Tender Credit Facility, which
amounts were repaid with borrowings under the Senior Credit Facility).
(8) Represents the net deferred tax effect of various adjustments to the
Combined Condensed Balance Sheet.
(9) Represents the issuance of Imperial Common Stock to Savannah Foods
stockholders in the Merger, and sale of Imperial Common Stock in the H.
Kempner Trust Financing, the proceeds of which were used to reduce the
borrowing requirements.
(10) Represents the effect of transactions with a Savannah Foods' benefit trust
as a result of the Tender Offer, the Merger and the use of the related cash
received by the trust to repay the benefit trust's note to Savannah Foods
and purchase additional shares of Imperial Common Stock.
(11) Represents the elimination of Savannah Foods' historical equity and
Imperial Holly's costs of the acquisition capitalized at September 30,
1997.
6
