SAVANNAH FOODS & INDUSTRIES INC, 10-K, 1997-12-15

SAVANNAH FOODS & INDUSTRIES INC
10-K, 1997-12-15
SUGAR & CONFECTIONERY PRODUCTS

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark one)

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

For the fiscal year ended September 28, 1997 or
------------------

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
_______________ ______________________________

Commission file number: 1-11420
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SAVANNAH FOODS & INDUSTRIES, INC.
---------------------------------
(Exact name of Registrant as specified in its Charter)

Delaware 58-1089367
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)

P. O. Box 339, Savannah, Georgia 31402
---------------------------------------
(Address of principal executive offices with zip code)

Registrant's telephone number, including area code (912)234-1261
-------------
Securities registered pursuant to Section 12(b) of the Act:

Common Stock - Par Value: $.25 per share
----------------------------------------
(Title of Class)

Securities registered pursuant to Section 12(g) of the Act:

None
----
(Title of Class)

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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in any amendment to this Form 10-K. ( )

At December 1, 1997, there were 28,738,196 shares of Common Stock outstanding
for shareholder voting purposes. As of September 28, 1997, 2,500,000 shares were
held by the Registrant's Benefit Trust, which are not considered outstanding for
earnings per share purposes. The aggregate market value of the voting stock held
by non-affiliates of the Registrant on December 1, 1997 was $255,429,683.

The exhibit index is located on page 55 of this filing.

Page 1 of 78 pages

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I
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Page
----
<S> <C> <C>
Item 1. Business ......................................................... 3
Statement on Business Risks and Forward Looking
Information ..................................................... 5
Item 2. Properties ....................................................... 6
Item 3. Legal Proceedings ................................................ 6
Item 4. Submission of Matters to a Vote of Security Holders .............. 6

PART II
-------

Item 5. Market for the Registrant's Common Stock and Related
Stockholder Matters ................................... 7
Item 6. Selected Financial Data .......................................... 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................... 9
Item 8. Financial Statements and Supplementary Data ...................... 14
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ................... 38

PART III
--------

Item 10. Directors and Executive Officers of the Registrant ............... 39
Item 11. Executive Compensation ........................................... 45
Item 12. Security Ownership of Certain Beneficial Owners and
Management ............................................ 52
Item 13. Certain Relationships and Related Transactions ................... 54

PART IV
-------

Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K ........................................... 55
</TABLE>

FORWARD LOOKING STATEMENTS - SAFE HARBOR PROVISIONS

Any statements in this Form 10-K regarding future market prices or
operating results or any other statements that are not historical facts
constitute "forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
All forward looking statements involve risks and uncertainties. Any forward
looking statements in this document are intended to be subject to the safe
harbor protection provided by Sections 27A and 21E. For a discussion identifying
some important factors that could cause actual results to vary materially from
those anticipated in forward looking statements, see the "Competition" and
"Statement on Business Risks and Forward Looking Information" sections on pages
4 and 5 of this Form 10-K.

2
<PAGE> 3
PART I

Item 1. Business

Savannah Foods & Industries, Inc. (the "Registrant") was incorporated
in Delaware on February 19, 1969, as the successor to Savannah Sugar Refining
Corporation, which was originally incorporated in New York in 1916.

As discussed in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, on September 12, 1997, the
Registrant entered into an agreement and plan of merger (the "Merger Agreement")
with Imperial Holly Corporation ("Imperial Holly"). On October 16, 1997,
Imperial Holly successfully completed its tender offer for 50.1% of the
Registrant's outstanding Common Stock. The merger is expected to close in
December 1997 with Imperial Holly acquiring the remaining Common Stock of the
Registrant.

The Registrant and its subsidiaries collectively comprise one business
segment and are engaged in the production, marketing, and distribution of food
products, primarily refined sugar.

The Registrant and its wholly-owned subsidiaries, Savannah Foods
Industrial, Inc. and Dixie Crystals(R) Brands, Inc., are engaged in the refining
and marketing of a complete line of bulk and liquid sugars and sugar products,
including edible molasses and liquid animal feeds. They also produce and market
a complete line of packaged sugars and portion control items consisting of sugar
envelopes, artificial sweeteners, salt, pepper, non-dairy creamer, and certain
other products. Industrial and grocery products are marketed primarily in the
southeastern portion of the United States, Louisiana, and Texas, but are also
widely distributed into other states generally east of the Mississippi and south
of New England. Foodservice products are marketed throughout the United States.
Products are marketed under the trade names Dixie Crystals(R), Evercane(R),
Savannah Gold(R), and Quick'n Sweet(TM) but are also sold under the Registrant's
other controlled labels and under customers' private label brands. The
Registrant's saccharin-based sweetener is marketed under the trade name Sweet
Thing(R) and its aspartame-based sweetener is marketed under the trade name
Sweet Thing II(R). These products are marketed both by means of direct sales and
through brokers and are primarily distributed directly to the customer by common
carrier truck or railcar, including Registrant-owned vehicles.

Michigan Sugar Company, a wholly-owned subsidiary of the Registrant,
and its wholly-owned subsidiary, Great Lakes Sugar Company, are engaged in the
processing of sugarbeets into refined sugar and the production of beet pulp and
molasses. The refined sugar is marketed primarily in the states of Michigan and
Ohio, but is also distributed in the midwestern and eastern parts of the United
States. Packaged sugar is marketed under the trade name PIONEER(R), but is also
sold under customers' private label brands. These products are marketed both by
means of direct sales and through brokers and are primarily distributed directly
to the customer by common carrier truck or railcar. Most of the beet pulp is
pelletized and sold for export. The balance is sold in the domestic market.

<PAGE> 4

King Packaging Company, Inc., a wholly-owned subsidiary of Dixie
Crystals(R) Brands, Inc., packs custom made meal kits for the foodservice
industry and provides complementary products to the sugar and portion control
products manufactured at the Registrant's other locations. These products are
marketed to the foodservice trade throughout the United States both by means of
direct sales and through brokers and are primarily shipped directly to customers
by common carrier truck.

Raw Materials. A large portion of the raw sugar for the Registrant's
Port Wentworth, GA refinery, and all the raw sugar for the Clewiston, FL
refinery, is normally supplied by cane sugar producers in the state of Florida.
A large portion of the raw sugar for the Registrant's Gramercy, LA refinery is
normally supplied by cane sugar producers in the state of Louisiana. In the case
of the Savannah and Gramercy refineries, the remaining raw sugar requirements
are purchased on the open market, and consist of off-shore cargoes purchased
directly and through raw sugar trade houses. The Registrant uses the futures
market as a hedging and purchasing mechanism, as circumstances warrant.

Michigan Sugar Company and its subsidiary, Great Lakes Sugar Company,
process sugarbeets under annual contracts from Michigan and Ohio farmers. The
land around the processing plants of the company is well suited to growing
sugarbeets. Until 1996, the company had not experienced difficulty in obtaining
a sufficient quantity of beets to support successful operation of its plants.
Under the contracts with the farmers, certain sales expenses and other
non-processing expenses are first deducted from the proceeds of refined sugar,
pulp, and molasses sales after which the balance is divided between the company
and the farmers.

Competition. All phases of the refined sugar business and all
geographic markets of the business engaged in by the Registrant and its
subsidiaries are highly competitive. This competition is not only with other
cane sugar refiners and beet sugar processors, but also with corn sweeteners,
artificial sweeteners, and with resellers who purchase all of these sweeteners.
Other cane sugar refineries are located in Florida, Louisiana, Maryland, New
York, Texas, and California. Other beet sugar processors are located in
California, Colorado, Idaho, Michigan, Minnesota, Montana, Nebraska, North
Dakota, Oregon, Texas, and Wyoming.

Competition is primarily based upon price, but is also based upon
product quality and customer service. At times, the cane sugar refiners are at a
competitive disadvantage to the beet sugar producers

<PAGE> 5
due to differing methods by which raw materials are purchased. In the beet
industry, the beet farmers participate in any increase or decrease in the
selling price of refined sugar. However, in the cane industry, refiners purchase
raw sugar at prices which are influenced by the United States Government's
policy to support sugar farmers, and which do not fluctuate in tandem with
refined sugar selling prices. Consequently, when competitive pressures reduce
refined sugar prices, the margins of cane sugar refiners are affected more
adversely than those of beet sugar producers.

Number of Employees. At September 28, 1997, the Registrant and its
subsidiaries had 1,760 full-time employees. In addition, Michigan Sugar Company
and Great Lakes Sugar Company employ a number of seasonal workers during the
beet processing campaigns.

Statement on Business Risks and Forward Looking Information. The
Registrant generally does not make specific projections about future income or
provide other specific forward looking information. However, due to changes
brought about by the Private Securities Litigation Reform Act of 1995, the
Registrant believes it is appropriate to outline several key factors which
impact its future performance.

All phases of the Registrant's business are very competitive with the
primary competitors being other sugar cane refiners and beet sugar processors.
Because sugar is a commodity, competition is based primarily upon price, but is
also based upon product quality and customer service. The Registrant is
diversified into all marketing and production (i.e. cane and beet) phases of the
refined sugar industry, but the majority of its capacity, approximately 85%, is
cane sugar, with the remaining 15% being beet sugar. Thus, its operating results
are influenced mostly by factors which affect the cane sugar industry.

Cane sugar refiners operate on large volumes and small margins.
Consequently, a small percentage change in sales prices or in the cost of raw
materials or manufacturing costs can result in a large percentage change in
income from operations.

In today's market, the primary driver of refined sugar sales prices is
the amount of beet sugar produced. A large amount of beet sugar generally means
lower prices as beet producers sell their larger production. The amount of beet
sugar produced not only affects selling prices, but also affects the per unit
manufacturing costs of the sugar industry. Many of the costs in the
manufacturing process, whether beet or cane, are fixed and must be divided among
the actual production. As volume increases or decreases, per unit manufacturing
costs decrease or increase, respectively. Thus, forecasting the amount of beet
sugar which will be produced is an essential element in predicting the Company's
profitability.

In addition to sales prices and per unit manufacturing costs, the other
primary factor in determining operating income is the cost of raw sugar, which
is by far the largest single cost of producing

<PAGE> 6
refined cane sugar. Raw sugar is a commodity, and while the Registrant
purchases it using many different pricing methods, the price is always based in
some manner on the market price of raw sugar as determined by the commodities
market. Thus, its price is subject to the numerous variables that affect the
price of any commodity. In general, however, the price of raw sugar is supported
through the sugar program portion of the U.S. Government's Farm Bill.

Forward looking information affecting the Registrant and the sugar
industry should be considered within this context.

Item 2. Properties.

Registrant and its wholly-owned subsidiaries own and operate three cane
sugar refineries, two sugar melt and transfer facilities, four sugarbeet
processing plants and four foodservice production facilities. In 1996, Michigan
Sugar closed its sugarbeet processing plant in Fremont, Ohio because it was
unable to contract for enough sugarbeet acres to make operation of the facility
economical.

The three cane sugar refineries are located in Port Wentworth, Georgia;
Gramercy, Louisiana and Clewiston, Florida and are owned by Savannah Foods
Industrial, Inc. The Port Wentworth facility borders the Savannah River and the
Gramercy facility borders the Mississippi River. Both of these locations include
a deep water dock with facilities for shipping and receiving ocean-going
vessels.

Savannah Foods Industrial, Inc. also owns sugar melt and transfer
facilities in St. Louis, Missouri and Ludlow, Kentucky. The St. Louis facility
borders on the Mississippi River and has a dock for receiving sugar and molasses
shipments.

Michigan Sugar Company owns and operates four sugarbeet processing
plants which are located in Caro, Carrollton, Sebewaing, and Croswell, Michigan.
Great Lakes Sugar Company owns and operates a storage facility in Findlay, Ohio.

Dixie Crystals(R) Brands, Inc. owns production facilities in
Perrysburg, Ohio; Visalia, California and Savannah, Georgia. Also, King
Packaging Company, Inc. owns and operates a packaging facility in Bremen,
Georgia.

The facilities listed above provide the Registrant with sufficient
productive capacity to meet the demands of its current markets.

Item 3. Legal Proceedings.

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the
fourth quarter of fiscal 1997.

6
<PAGE> 7

PART II

Item 5. Market for Registrant's Common Stock and Related Stockholder Matters.

The Registrant's common stock, par value $.25 per share ("Common
Stock"), is listed and traded on the New York Stock Exchange ("NYSE") under the
symbol "SFI". The following table sets forth for the periods indicated the high
and low sales prices on the NYSE composite tape. The information provided has
been adjusted to the nearest 1/8 and was compiled from quotations furnished by
the New York Stock Exchange. The Registrant has paid cash dividends on its
Common Stock every year since 1924. The following information is for the
twelve-month periods ended September 28, 1997 and September 29, 1996:
<TABLE>
<CAPTION>

Quarter Dividends
Ended High Low Paid
----- ---- --- ----
<S> <C> <C> <C>
12/29/96 $16.750 $13.125 $.0250
03/30/97 15.750 12.500 .0250
06/29/97 17.625 12.375 .0375
09/28/97 19.250 12.625 .0375
------
$.1250
======

12/31/95 $13.875 $11.375 $.025
03/31/96 13.000 10.500 .025
06/30/96 13.625 10.750 .025
09/29/96 14.000 11.250 .025
-----
$.100
=====
</TABLE>

As of September 28, 1997, the following indicates the number of holders
of record of equity securities:

<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
Common Stock 2,919
</TABLE>

After the merger with Imperial Holly is completed, the Company's Common
Stock will be delisted from the NYSE.

<PAGE> 8
Item 6. Selected Financial Data.

SAVANNAH FOODS & INDUSTRIES, INC.
SUMMARY OF OPERATIONS

(In thousands except for per share amounts and ratios)
<TABLE>
<CAPTION>

Fiscal Period Ended
--------------------------------------------------------------------
September 28, September 29, October 1, October 2, October 3,
1997 1996 1995 1994 1993 (1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS FOR THE FISCAL PERIOD
Net sales......................................... $1,191,839 $1,146,332 $1,098,544 $1,074,367 $ 818,116
Income from operations............................ 57,658 21,799 7,401 19,432 11,839
Income (loss) before change in accounting
principle and extraordinary item.......... 32,081 6,943 (3,493) 5,743 1,986
Net income (loss) (2)............................. 31,705 5,972 (3,493) 5,743 2,586
Other income statement information -
Depreciation and amortization expense..... 23,435 27,994 28,314 28,972 19,362
Interest expense.......................... 6,850 12,355 14,847 13,380 10,226
Provision for (benefit from) income taxes. 19,136 2,738 (2,585) 2,863 1,155
Cash dividends declared........................... 3,280 2,624 8,396 14,169 10,627
Capital expenditures (3).......................... 15,664 7,916 17,303 22,218 39,877

- -------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION AT THE END OF THE FISCAL YEAR
Current assets.................................... $ 180,395 $ 180,552 $ 197,802 $ 198,880 $ 269,990
Current liabilities............................... 87,224 85,946 114,740 85,140 154,760
Working capital................................... 93,171 94,606 83,062 113,740 115,230
Property, plant and equipment - gross............. 416,087 406,729 436,991 421,312 407,924
Accumulated depreciation.......................... 236,094 220,183 206,100 180,810 159,111
Total assets...................................... 399,071 398,261 476,507 486,127 567,852
Long-term debt.................................... 26,100 59,754 106,864 140,224 142,078
Stockholders' equity.............................. 216,689 173,727 169,649 188,174 194,714

- -------------------------------------------------------------------------------------------------------------------------
PER SHARE

Weighted average shares outstanding............... 26,238 26,238 26,238 26,238 26,238
Shares outstanding at end of fiscal period........ 26,238 26,238 26,238 26,238 26,238
Income (loss) per weighted average share
outstanding -
Income (loss) before change in accounting
principle and extraordinary item............ $ 1.22 $ 0.27 $ (0.13) $ 0.22 $ 0.08
Net income (loss).............................. 1.21 0.23 (0.13) 0.22 0.10
Dividends declared per share...................... 0.125 0.10 0.32 0.54 0.405
Stockholders' equity per share (4)................ 8.26 6.62 6.47 7.17 7.42

- -------------------------------------------------------------------------------------------------------------------------
RATIOS
Current assets divided by current liabilities..... 2.07 2.10 1.72 2.34 1.74
Long-term debt divided by long-term debt
and stockholders' equity....................... 10.8% 25.6% 38.6% 42.7% 42.2%
Provision for (benefit from) income taxes divided
by pre-tax income (loss)....................... 37.4% 28.3% 42.5% 33.3% 36.8%
</TABLE>

(1) During the fiscal period ended October 3, 1993, the Company changed its year
end from the Sunday closest to December 31 to the Sunday closest to
September 30. As a result, the fiscal period ended October 3, 1993
represents a 39 week period.

(2) The Company recorded an extraordinary item for penalties incurred on the
prepayment of long-term debt during the fiscal periods ended September 28,
1997 and September 29, 1996. For more information, see Note 6 to the
accompanying consolidated financial statements. The Company adopted FAS 109,
"Accounting for Income Taxes" during the fiscal period ended October 3,
1993.

(3) Includes acquisition of Reckitt & Colman, Inc. fixed assets in January 1995
totalling $1,000,000, and King Packaging Company, Inc. fixed assets in July
1993 totalling $4,757,000.

(4) Based on shares outstanding at end of fiscal period.

<PAGE> 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Recent Developments - Pending Merger of the Company:

On September 12, 1997, the Company entered into the Merger Agreement
providing for the acquisition of the Company by Imperial Holly. Imperial Holly
is a sugar refiner and beet processor headquartered in Sugar Land, Texas.
Pursuant to the Merger Agreement, a wholly-owned subsidiary of Imperial Holly
("IHK Sub") successfully completed a tender offer for 50.1% of the Company's
outstanding Common Stock at a price of $20.25 per share in cash, resulting in a
change of control of the Company. Pursuant to the Merger Agreement, IHK Sub will
be merged with and into the Company, with the Company surviving as a
wholly-owned subsidiary of Imperial Holly (the "Merger"). Upon consummation of
the Merger, the remaining shares of Company Common Stock will be exchanged for
cash and common stock of Imperial Holly so that the aggregate number of shares
of the Company's Common Stock to be converted into Imperial Holly common stock
will be equal to 30% of all outstanding shares of the Company's Common Stock
prior to the tender offer. The Merger is expected to close in December 1997.

Prior to entering into the Merger Agreement with Imperial Holly, the
Company, on July 14, 1997, entered into a merger agreement with Flo-Sun
Incorporated ("Flo-Sun"), a Florida based raw sugar producer and refiner. On
August 25, 1997, Imperial Holly submitted a proposal to acquire the Company, and
after negotiations between the Company and the two parties, the Company's Board
of Directors approved the Merger Agreement with Imperial Holly. In accordance
with the Flo-Sun merger agreement, the Company paid Flo-Sun a $5,000,000
termination fee and reimbursed Flo-Sun $3,000,000 for expenses in connection
with the proposed merger. This $8,000,000 along with the Company's legal fees
and other expenses related to the proposed Flo-Sun merger comprise the majority
of the $13,394,000 of merger expenses discussed below.

Results of Operations:

Fiscal 1997 compared to fiscal 1996

The Company's net income for fiscal 1997 was $31,705,000, or $1.21 per
share, on sales of $1,191,839,000, compared to net income of $5,972,000, or $.23
per share, on sales of $1,146,332,000 for fiscal 1996. Fiscal 1997 net income
includes an after-tax extraordinary charge of $376,000, or $.01 per share, for
prepayment penalties incurred on the Company's Senior Notes. Fiscal 1996
includes a similar after-tax extraordinary charge of $971,000, or $.04 per
share.

Income from operations for fiscal 1997 and fiscal 1996 include four
transactions which affect comparability between the two years. In the fourth
quarter of fiscal 1997, the Company recorded $13,394,000, or $.33 per share, of
costs related to the merger of the

9
<PAGE> 10

Company (see Note 2 to the consolidated financial statements), and in fiscal
1996, the Company recorded three significant transactions. First in fiscal 1996,
the Company sold its plane resulting in a gain of $2,289,000. Second in fiscal
1996, the Company recognized a $3,800,000 loss on the sale of the property,
plant and equipment and certain other assets of Raceland Sugars, Inc., its raw
sugar mill subsidiary. These amounts are included in the caption "Other costs"
in the accompanying Consolidated Statement of Operations. Third, the Company
recorded a non-cash charge of $10,280,000 in fiscal 1996 for the impairment of
long-lived assets located at the Company's Fremont, Ohio beet sugar
manufacturing facility. This amount is included in the caption "Impairment of
long-lived assets" in the accompanying Consolidated Statement of Operations. For
further discussion of the fiscal 1996 items, see "Fiscal 1996 compared to fiscal
1995" below.

Excluding the impairment of long-lived assets and other costs, income
from operations for fiscal 1997 was $71,052,000, or double the comparable amount
in fiscal 1996 of $35,453,000.

Income from operations for fiscal 1997 improved significantly from
fiscal 1996 due to increased operating profits in the cane sugar division.
Volumes and margins for cane refiners were favorably impacted by the reduction
of national beet sugar production. At approximately 4,050,000 tons, production
from the 1996 beet crop was up slightly from the 1995 beet crop, which was down
about 600,000 tons, or 13%, from the 1994 beet crop's record production. Over
the same two years, domestic consumption of sugar increased by about 300,000
tons. With less beet sugar on the market and with increased consumption, cane
sugar volumes expanded to meet the overall demand for refined sugar. Refined
sugar selling prices rose as a result of the tightened supply. Also, average raw
sugar costs were lower than in fiscal 1996. Reduced raw sugar costs and
increased selling prices resulted in higher operating profit margins for fiscal
1997 compared to fiscal 1996.

The Company's beet sugar division was only modestly profitable in
fiscal 1997 and profits were slightly lower than fiscal 1996. Higher selling
prices in fiscal 1997 offset lower volumes resulting from a reduction in
contracted acres harvested for the Company.

Selling, general and administrative expense is up $5,183,000, or 9%,
from fiscal 1996. The increase is primarily due to an incentive compensation
program which links employee compensation to the Company's earnings and to an
increase in advertising expense.

Depreciation and amortization expense is down $4,559,000, or 16%, from
fiscal 1996 due to asset sales and write-downs in fiscal 1996, and a reduction
in depreciation expense related to the Company's Colonial Sugars refinery which
was purchased in 1986.

Interest expense is down $5,505,000, or 45%, from fiscal 1996. Average
short-term borrowings were down about $33,000,000 for the year due to higher net
income and a lower investment in inventories. Average long-term debt was down
about $45,000,000 compared to last year.

<PAGE> 11

In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130 - Reporting Comprehensive Income, and
Statement of Financial Accounting Standards No. 131 - Disclosure about Segments
of an Enterprise and Related Information. The Company is required to adopt these
Statements in fiscal 1999. Management does not expect either of these Statements
to have a material impact on the Company's results of operations.

Fiscal 1996 compared to fiscal 1995

The Company's net income for fiscal 1996 was $5,972,000, or $.23 per
share, on sales of $1,146,332,000, compared to a net loss of ($3,493,000), or
($.13) per share, on sales of $1,098,544,000 for fiscal 1995. Fiscal 1996 net
income includes an after-tax extraordinary charge of $971,000, or $.04 per
share, for the prepayment of long-term debt. Domestic sugar sales volumes
increased 5% over fiscal 1995, but overall sugar sales volume was flat as export
volume decreased significantly from fiscal 1995. Domestic sugar sales prices
increased 4% and average raw sugar costs decreased 2%.

Fiscal 1996 income from operations includes three significant
transactions which affect the comparability between fiscal 1996 and fiscal 1995.
First, in the first quarter of 1996, the Company sold its plane resulting in a
gain of $2,289,000. Second, in the second quarter of fiscal 1996, the Company
sold the property, plant and equipment and certain other assets of Raceland
Sugars, Inc., its raw sugar mill subsidiary, for $12,500,000 cash and recognized
a loss on the sale of $3,800,000. These amounts are included in the caption
"Other costs" in the accompanying Consolidated Statement of Operations. After
liquidation of the inventories and other working capital accounts, the Company
received net proceeds of approximately $15,000,000 on the sale of Raceland.
Third, in accordance with Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long- Lived Assets and for Assets to be
Disposed Of, the Company recorded a non-cash charge in the fourth quarter of
1996 of $10,280,000 ($6,476,000, or $.25 per share, net of tax) for the
impairment of long-lived assets located at the Company's Fremont, Ohio beet
sugar manufacturing facility. A decision was made not to run the Fremont
facility during fiscal 1997 due to a lack of a viable supply of sugarbeets and
molasses. Future operation of the facility is dependent on an adequate supply of
sugarbeets and molasses. However, the projected future cash flows from this
facility are less than the carrying value of the assets; therefore, an
impairment loss has been recognized. This amount is included in the caption
"Impairment of long-lived assets" in the accompanying Consolidated Statement of
Operations.

Fiscal 1996 income from operations before the impairment of long-lived
assets and other costs was $35,453,000, up $23,768,000 from fiscal 1995. The
large increase resulted from smaller domestic beet sugar production of 3.9
million tons in fiscal 1996 compared to 4.5 million tons in fiscal 1995. The
reduction in beet sugar improved refined sugar selling prices and, therefore,
the Company's profitability. Additionally, average raw

<PAGE> 12

sugar costs have decreased from fiscal 1995 which has also increased
profitability.

The Company's cane sugar divisions experienced significant domestic
volume and margin increases over fiscal 1995 as the reduced domestic beet crop
and increased sugar consumption provided more sales opportunities for cane
refiners.

The Company's beet sugar division benefited from the higher refined
sales prices, but reported much lower operating profit due to significantly
reduced sugar production. The sugarbeet crop was smaller and of lesser quality
due to poor growing conditions and an insect infestation.

Selling, general and administrative expenses decreased $1,199,000 in
fiscal 1996 from fiscal 1995 despite a $1,177,000 increase in advertising costs
related to the Company's new products.

Interest expense decreased compared to fiscal 1995 as a result of lower
long-term debt levels throughout the year resulting from the prepayment of the
Senior Notes.

Liquidity and Capital Resources:

During fiscal 1997, the Company generated $65,000,000 of cash from net
income before noncash items. This cash was used primarily to repay $28,000,000
of long-term debt, fund additions to property, plant and equipment of
$15,664,000 and to make contributions to the Company's qualified employee
retirement plans aggregating $18,271,000.

To provide liquidity for short-term operating needs, the Company
maintains a $120,000,000 Revolving Credit Facility (see Note 6 to the
consolidated financial statements for an amendment to the credit facility) and
has the ability to fund seasonal increases in beet sugar inventory through
borrowings from the Commodity Credit Corporation. These sources of short-term
funds, along with cash generated by the Company's operations, provide ample
liquidity to meet the Company's operating cash requirements. At September 28,
1997, the Company had no short-term borrowings outstanding.

During fiscal 1997, the Company paid the remaining $25,000,000 balance
of the Senior Notes ahead of scheduled maturities. This payment, together with
regularly scheduled payments, resulted in total payments on long-term debt of
$28,000,000.

Stockholders' equity increased primarily by earnings of $31,705,000 and
a reduction in the minimum pension liability of $14,038,000 and decreased by
dividends of $3,280,000. The minimum pension liability decreased primarily due
to the Company's contributions to the qualified employee retirement plans.
Changes in debt and equity resulted in a decrease in the ratio of long-term debt
to total capital from 26% at the end of fiscal 1996 to 11% at the end of fiscal
1997.

During fiscal 1997, the Company increased its annual dividend from $.10
per share to $.15 per share.

12
<PAGE> 13

Fixed asset additions during fiscal 1997 were $15,664,000 compared to
depreciation for the same period of $21,147,000. Major projects included the
development of new sugarbeet receiving stations in Michigan and the replacement
and upgrade of packaging and production equipment. The investment in sugarbeet
receiving stations is planned to assist in maintaining and expanding sugarbeet
acreage. The other expenditures are expected to benefit the Company through new
packaging, increased efficiency, improved quality control and expanded
operational capabilities. The Company anticipates that fixed asset additions
will approximate $20,000,000 in fiscal 1998.

<PAGE> 14

Item 8. Financial Statements and Supplementary Data.

<TABLE>
<CAPTION>
(a) Financial Statements: Page
----
<S> <C>
Report of Independent Accountants 15

Report of Independent Accountants 16

Consolidated Balance Sheets at September 28, 1997
and September 29, 1996 17

Consolidated Statements of Operations for the
fiscal years ended September 28, 1997,
September 29, 1996, and October 1, 1995 18

Consolidated Statements of Changes in
Stockholders' Equity for the fiscal years ended
September 28, 1997, September 29, 1996, and October
1, 1995 19

Consolidated Statements of Cash Flows for the fiscal
years ended September 28, 1997, September 29, 1996,
and October 1, 1995 20

Notes to Consolidated Financial Statements 21
</TABLE>

(b) Financial Statement Schedules for the fiscal years
ended September 28, 1997, September 29, 1996,
and October 1, 1995:

Schedules are omitted because they are not applicable, or the required
information is shown in the financial statements or notes thereto.

<PAGE> 15
Report of Independent Public Accountants

To the Stockholders and Board of Directors of
Savannah Foods & Industries, Inc.

We have audited the accompanying consolidated balance sheet of Savannah Foods &
Industries, Inc. and Subsidiaries as of September 28, 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Savannah Foods & Industries,
Inc. and Subsidiaries as of September 28, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.

ARTHUR ANDERSEN LLP
Atlanta, Georgia
November 17, 1997

<PAGE> 16

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 years then ended 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. We have not audited the consolidated financial statements of Savannah
Foods & Industries, Inc. for any period subsequent to September 29, 1996.

PRICE WATERHOUSE LLP
Atlanta, Georgia
November 18, 1996

16
<PAGE> 17

SAVANNAH FOODS & INDUSTRIES, INC.
Consolidated Balance Sheets
(In thousands except for shares and per share amounts)

September 28, September 29
1997 1996
-------------- -------------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 14,677 $ 15,300
Accounts receivable 68,635 76,109
Inventories (net of LIFO reserve of $9,949 in 1997 and
$8,018 in 1996) (Note 4) 90,908 83,929
Other current assets 6,175 5,214
-------------- --------------
Total current assets 180,395 180,552
Property, plant and equipment (Note 5) 179,993 186,546
Other assets 38,683 31,163
-------------- --------------

$ 399,071 $ 398,261
============== ==============

Liabilities and Stockholders' Equity

Current liabilities:
Short-term borrowings (Note 6) $ - $ 7,500
Current portion of long-term debt (Note 6) 7,824 2,170
Trade accounts payable 55,756 52,701
Other liabilities and accrued expenses 23,644 23,575
-------------- --------------
Total current liabilities 87,224 85,946
-------------- --------------
Long-term debt (Note 6) 26,100 59,754
-------------- --------------
Deferred employee benefits 69,058 78,834
-------------- --------------
Stockholders' equity (Note 11):
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 43,639 31,764
Retained earnings 221,949 193,524
Treasury stock, at cost (2,568,604 shares) (15,849) (15,849)
Minimum pension liability adjustment - (14,038)
Stock held by benefit trust, at market (2,500,000 shares) (46,875) (35,000)
Other (3,540) (4,039)
-------------- --------------
Total stockholders' equity 216,689 173,727
-------------- --------------
Commitments and contingencies (Note 12) - -
-------------- --------------

$ 399,071 $ 398,261
============== ==============

</TABLE>

(The accompanying notes are an integral part of the
consolidated financial statements.)

<PAGE> 18
SAVANNAH FOODS & INDUSTRIES, INC.
Consolidated Statements of Operations
(In thousands except for shares and per share amounts)

<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
September 28, September 29, October 1,
1997 1996 1995
---------------- ----------------- ----------------

<S> <C> <C> <C>
Net sales $ 1,191,839 $ 1,146,332 $ 1,098,544
---------------- ---------------- ----------------
Operating expenses:
Cost of sales and operating expenses 1,037,502 1,028,218 1,002,679
Selling, general and
administrative expenses 59,850 54,667 55,866
Depreciation and amortization 23,435 27,994 28,314
Impairment of long-lived assets (Note 3) - 10,280 -
Other costs (Notes 2, 13) 13,394 3,374 4,284
---------------- ---------------- ----------------
1,134,181 1,124,533 1,091,143
---------------- ---------------- ----------------

Income from operations 57,658 21,799 7,401
---------------- ---------------- ----------------

Other income and (expenses):
Interest and other investment income 874 847 1,258
Interest expense (6,850) (12,355) (14,847)
Other (expense) income (465) (610) 110
---------------- ---------------- ----------------
(6,441) (12,118) (13,479)
---------------- ---------------- ----------------

Income (loss) before income taxes
and extraordinary item 51,217 9,681 (6,078)
Provision for (benefit from)
income taxes (Note 7) 19,136 2,738 (2,585)
---------------- ---------------- ----------------
Income (loss) before extraordinary
item 32,081 6,943 (3,493)
Extraordinary item, net of tax (Note 6) (376) (971) -
---------------- ---------------- ----------------
Net income (loss) $ 31,705 $ 5,972 $ (3,493)
================ ================ ================

Per share:
Income (loss) before
extraordinary item $ 1.22 $ 0.27 $ (0.13)
Extraordinary item (Note 6) (0.01) (0.04) -
---------------- ---------------- ----------------
Net income (loss) $ 1.21 $ 0.23 $ (0.13)
================ ================ ================

Dividends $ 0.125 $ 0.10 $ 0.32
================ ================ ================

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.)

<PAGE> 19
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 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 11) 11,449 15,426 (26,875) -
Increase in fair market
value of stock held by
benefit trust (Note 11) 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
Net income 31,705 31,705
Cash dividends declared (3,280) (3,280)
Increase in fair market
value of stock held by
benefit trust (Note 11) 11,875 (11,875) -
Decrease in minimum pension
liability adjustment 14,038 14,038
Decrease in cumulative
translation adjustment 499 499
-------- -------- -------- -------- -------- -------- -------- --------
Balance at September 28, 1997 $ 17,365 $ 43,639 $221,949 $(15,849) $ - $(46,875) $ (3,540) $216,689
======== ======== ======== ======== ======== ======== ======== ========
</TABLE>

(The accompanying notes are an integral part of the
consolidated financial statements.)

<PAGE> 20

SAVANNAH FOODS & INDUSTRIES, INC.
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------
September 28, September 29, October 1,
1997 1996 1995
------------- ------------- -----------

<S> <C> <C> <C>
Cash flows from operations:
Net income (loss) $ 31,705 $ 5,972 $ (3,493)
Adjustments to reconcile net income (loss) to
net cash provided by operations -
Depreciation and amortization 23,435 27,994 28,314
Impairment of long-lived assets (Note 3) - 10,280 -
Extraordinary item, net of tax, related to
financing activities 376 971 -
Provision for deferred income taxes 9,410 (5,173) (207)
Net loss on disposal of assets 110 2,595 674
Decreases (increases) in working capital -
Accounts receivable 7,474 (9,118) 8,785
Inventories (6,979) 20,565 (17,781)
Other current assets (3,985) 7,924 (6,952)
Trade accounts payable 3,055 (10,558) 6,306
Other liabilities and accrued expenses (904) 1,110 (777)
Funding of deferred employee benefits in
excess of expense accrual (11,241) - -
Other 892 (2,713) 1,122
--------- --------- ---------
Cash provided by operations 53,348 49,849 15,991
--------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (15,664) (7,916) (16,303)
Proceeds from sale of property, plant and
equipment 960 2,538 784
Sale of investments - 13,869 3,615
Business sales and (acquisitions) - 12,500 (7,050)
Use of escrowed industrial revenue bond funds
for additions to property, plant and equipment - 3,253 -
Other - (182) (2,182)
--------- --------- ---------
Cash (used for) provided by investing activities (14,704) 24,062 (21,136)
--------- --------- ---------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings (7,500) (14,800) 22,300
Payments of long-term debt (28,000) (51,240) (28,703)
Debt prepayment charge, net of tax (376) (971) -
Liquidation of unused industrial revenue
bond escrow balances - - 5,742
Dividends paid (3,280) (3,280) (11,282)
Other (111) 106 226
--------- --------- ---------
Cash used for financing activities (39,267) (70,185) (11,717)
--------- --------- ---------
Cash flows for year (623) 3,726 (16,862)
Cash and cash equivalents, beginning of year 15,300 11,574 28,436
--------- --------- ---------
Cash and cash equivalents, end of year $ 14,677 $ 15,300 $ 11,574
========= ========= =========

</TABLE>

(The accompanying notes are an integral part of the
consolidated financial statements.)

<PAGE> 21

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 plastic cutlery meal kits, salt, pepper, artificial sweetener, non-dairy
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 1997, 1996 and 1995 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
contracts to manage its inventory and fuel positions, both to set pricing 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.

21
<PAGE> 22

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.

Amortization of intangibles - The Company has intangible assets
included in "Other assets" aggregating $7,637,000 and $9,529,000 at September
28, 1997 and September 29, 1996, respectively. Goodwill of $4,974,000 at
September 28, 1997, and $5,378,000 at September 29, 1996, 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 $2,288,000, $2,341,000 and $2,169,000 for fiscal 1997, 1996 and 1995,
respectively.

When factors indicate that goodwill should be evaluated for impairment,
the Company uses an estimate of the related operation's discounted cash flows
over the remaining life of goodwill in measuring whether or not the goodwill is
recoverable.

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.

22
<PAGE> 23

Revenue recognition - The Company recognizes revenue as product is
shipped.

Stock options - The Company measures stock-based compensation expense
using the intrinsic value approach of Accounting Principles Board Opinion No.
25. Pro forma disclosures required by Statement of Financial Accounting
Standards No. 123 - Accounting for Stock-Based Compensation are included in Note
10.

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 the current year presentation.

Note 2 - Pending Merger of the Company:

On September 12, 1997, the Company entered into the Merger Agreement
providing for the acquisition of the Company by Imperial Holly. Imperial Holly
is a sugar refiner and beet processor headquartered in Sugar Land, Texas.
Pursuant to the Merger Agreement, a wholly-owned subsidiary of Imperial Holly
("IHK Sub") initiated a cash tender offer on September 18, 1997 for 50.1% of
the Company's outstanding Common Stock at a price of $20.25 per share. The
tender offer was closed on October 16, 1997, resulting, on October 24, 1997,
in the funding of the acquisition of 14,397,836 shares, or 50.1%, of the
Company's Common Stock and a change in control of the Company. Pursuant to the
Merger Agreement, IHK Sub will be merged with and into the Company, with the
Company surviving as a wholly-owned subsidiary of Imperial Holly (the
"Merger"). Upon consummation of the Merger, the remaining shares of Company
Common Stock will be exchanged for cash and common stock of Imperial Holly so
that the aggregate number of shares of the Company's Common Stock to be
converted into Imperial Holly common stock will be equal to 30% of all
outstanding shares of the Company's Common Stock prior to the time of the cash
tender offer. The Merger is expected to close in December 1997.

Prior to entering into the Merger Agreement with Imperial Holly, the
Company, on July 14, 1997, entered into a merger agreement with Flo-Sun
Incorporated ("Flo-Sun"), a Florida based raw sugar producer and refiner. On
August 25, 1997, Imperial Holly submitted a proposal to acquire the Company, and
after negotiations between the Company and the two parties, the Company's
Board of Directors approved the Merger Agreement with Imperial Holly. In
accordance with the Flo-Sun merger agreement, the Company paid Flo-Sun a
$5,000,000 termination fee and reimbursed Flo-Sun $3,000,000 for expenses in
connection with the proposed merger. This $8,000,000 along with the Company's
legal fees and other expenses related to the proposed Flo-Sun merger comprise
the majority of the $13,394,000 of merger expenses summarized in Note 13.

<PAGE> 24

Note 3 - 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. As of
September 28, 1997 the Company does not plan on operating the Fremont facility
during fiscal 1998.

Note 4 - Inventories:

A summary of inventories by method of pricing and class is as follows:

<TABLE>
<CAPTION>
September 28, September 29,
1997 1996
------------ ------------
(In thousands)

<S> <C> <C>
Last-in, first-out $55,713 $35,311
First-in, first-out 7,501 9,682
Moving average 27,694 29,462
Specific identification - 9,474
------- -------
$90,908 $83,929
======= =======

Raw materials and work-in-process $30,720 $17,693
Packaging materials, parts and supplies 16,912 20,713
Finished goods 43,276 36,049
Payments related to future inventory
purchases - 9,474
------- -------
$90,908 $83,929
======= =======
</TABLE>

The replacement cost of inventories exceeded reported cost by
approximately $10,246,000 at September 28, 1997 and $8,233,000 at September 29,
1996.

<PAGE> 25

Note 5 - Property, Plant and Equipment:

Property, plant and equipment is summarized as follows:

September 28, September 29,
1997 1996
------------- ------------
(In thousands)

<S> <C> <C>
Land $ 7,769 $ 7,498
Buildings 93,081 89,194
Machinery and equipment 314,482 305,717
Leasehold improvements 1,202 1,201
Projects-in-process 9,833 3,119
--------- --------
426,367 406,729
Less -
Accumulated depreciation
and amortization (246,374) (220,183)
--------- --------
$ 179,993 $186,546
========= ========
</TABLE>

Repairs and maintenance expense was $26,460,000, $31,699,000 and
$35,241,000 for fiscal 1997, 1996 and 1995, respectively.

Note 6 - Long-term Debt, Credit Arrangements and Leases:

Long-term debt is summarized as follows:

September 28, September 29,
1997 1996
------------ -------------
(In thousands)

<S> <C> <C>
Senior Notes - Series A at 8.35% of
$19,941 and Series B at 7.15% of
$5,059 $ - $ 25,000
Notes payable to banks related to
the ESOP 9,815 9,815
Industrial revenue bonds 22,500 22,500
Other long-term debt 1,609 4,609
-------- --------
33,924 61,924
Less - Current portion (7,824) (2,170)
-------- --------
$ 26,100 $ 59,754
======== ========

</TABLE>

The Company elected to prepay $25,000,000 of the Senior Notes in 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. The Company prepaid
$35,000,000 of the Senior Notes in 1996 and incurred $971,000 (net of $570,000
income tax benefits), or $.04 per share, of related prepayment penalties.

At September 28, 1997, 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 5.59% in 1997. 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

<PAGE> 26

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. On October 16, 1997, the
Company reduced the amount of this revolving credit facility from $120,000,000
to $60,000,000 and amended the expiration date to a date not later than January
31, 1998. 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. As of September 28, 1997 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:

Fiscal Year Ended
------------------------------------------
September 28, September 29, October 1,
1997 1996 1995
------------- ------------- ----------
(In thousands)

<S> <C> <C> <C>
Daily average outstanding borrowings $ 5,789 $39,004 $31,373
Daily weighted average interest rate 5.79% 5.66% 6.29%
Maximum borrowings $45,000 $71,980 $68,500
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 28, 1997 and September 29, 1996 were $30,000,000. The fixed rates of
interest for swaps outstanding during fiscal 1997 and 1996 were 8.83% and 8.66%,
respectively. These swaps expire from December 1997 to February 1998. The
effective fixed rate of swapped debt instruments during fiscal 1997 and 1996 was
7.53% and 7.76%, 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 28, 1997, it would have been required
to pay the counter-parties to the agreements an aggregate amount of $188,047.

The Company has also entered into forward swap agreements for periods
ranging from 1998 to 2004 which fix the rate on the following debt: $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

<PAGE> 27

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 28, 1997, it would have been
required to pay an aggregate amount of $187,794.

Interest expense was $6,850,000 in fiscal 1997, $12,355,000 in fiscal
1996, and $14,847,000 in fiscal 1995. Cash payments of interest were $6,138,000
in fiscal 1997, $12,945,000 in fiscal 1996, and $13,620,000 in fiscal 1995.

Annual maturities of long-term debt each year for the next five fiscal
years are $7,824,000 in 1998, $500,000 in 1999, $5,000,000 in 2000, $7,600,000
in 2001, $1,500,000 in 2002, and $11,500,000 in subsequent years through 2017.

Lease expense related to operating leases aggregated $2,098,000,
$2,081,000, and $1,552,000 in fiscal 1997, 1996 and 1995, respectively. Lease
commitments on operating leases exceeding one year for fiscal 1998, 1999, 2000,
2001 and 2002 are $1,255,000, $1,156,000, $1,124,000, $504,000 and $504,000,
respectively.

Note 7 - 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:

Fiscal Year Ended
-----------------------------------------
September 28, September 29, October 1,
1997 1996 1995
------------- ------------- ------------
(In thousands)

<S> <C> <C> <C>
Current federal $ 7,990 $ 6,092 $(1,515)
Current state 1,500 1,249 (863)
Deferred federal 8,564 (4,357) (271)
Deferred state 846 (816) 64
------- ------- -------
Provision for (benefit from)
income taxes $18,900 $ 2,168 $(2,585)
======= ======= =======

Tax effect of change in:
Minimum pension liability adjustment $ 8,607 $ 507 $(4,716)
Cumulative translation adjustment 306 (45) (261)
------- ------- -------
$ 8,913 $ 462 $(4,977)
======= ======= =======
</TABLE>

Cash payments for income taxes amounted to $19,837,000, $537,000 and
$6,637,000 for fiscal 1997, 1996 and 1995, respectively.

<PAGE> 28

Deferred income tax assets (liabilities) are comprised of the
following:

<TABLE>
<CAPTION>
September 28, September 29,
1997 1996
------------- -------------
(In thousands)

<S> <C> <C>
Loss on impairment of long-lived assets $ 3,906 $ 3,906
Depreciation (23,916) (21,658)
Other postretirement benefits 12,928 12,565
Accrued pension liability (5,407) 8,796
Deferred compensation 8,968 7,743
Tax benefit purchases - (1,143)
Other non-current 3,133 4,009
-------- --------
Total net non-current (liability) asset (388) 14,218
-------- --------

Other accrued expenses 885 2,288
Inventory (2,078) (243)
Other current 609 980
-------- --------
Total net current (liability) asset (584) 3,025
-------- --------
Net deferred (liability) asset $( 972) $ 17,243
======== ========
</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:

Fiscal Year Ended
-----------------------------------------
September 28, September 29, October 1,
1997 1996 1995
------------- ------------- ----------
(In thousands)

<S> <C> <C> <C>
Computed "expected" tax expenses (benefit) $ 17,712 $ 3,292 $(2,127)
Increases (reductions) in taxes
resulting from:
State income taxes, net of federal
income tax benefit 1,524 224 280
Tax-free income earned (756) (221) (120)
Tax rate benefit of NOL carryback - (600) -
Merger costs 177 - -
Other 479 43 (618)
--------- ------- -------
19,136 2,738 (2,585)
Extraordinary item (236) (570) -
--------- ------- -------
Provision for (benefit from) income taxes $ 18,900 $ 2,168 $(2,585)
======== ======= =======
</TABLE>

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 modified, and
provisions to reduce pension benefits for early retirement were incorporated
into this plan. These modifications,

<PAGE> 29

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 28, 1997, the assets of these plans are
invested primarily in commingled institutional stock and bond funds and cash
equivalents.

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 28, September 29,
1997 1996
------------- -------------
(In thousands)
<S> <C> <C>
Actuarial present value of benefit
obligation based on current
compensation:
Vested $ (90,985) $ (80,235)
Nonvested (1,580) (6,216)
--------- ---------
Accumulated benefit obligation (92,565) (86,451)
Increase in present value of benefit
obligation to reflect projected
compensation increases (9,371) (4,846)
--------- ---------
Projected benefit obligation (101,936) (91,297)
Plan assets at fair value 100,537 72,533
--------- ---------
Projected benefit obligation
in excess of plan assets (1,399) (18,764)
Unrecognized prior service cost (162) (193)
Unrecognized net loss 26,990 29,810
Unrecognized net asset at transition (230) (1,276)
Adjustment required to recognize
minimum liability - (23,495)
--------- ---------
Pension asset included in
"Other assets" and pension
(liability) included in "Deferred
employee benefits" $ 25,199 $ (13,918)
========= =========

Actuarial assumptions:
Discount rate 7.5% 7.5%
Projected salary increases 4.5% 4.5%

</TABLE>

29
<PAGE> 30

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 28, September 29, October 1,
1997 1996 1995
------------ ------------ ---------
(In thousands)

<S> <C> <C> <C>
Costs related to services provided
by employees during the year $ 2,104 $ 2,070 $ 2,250

Interest cost on projected benefit
obligation 6,846 6,874 6,601
Actual gain on plan assets (17,023) (5,939) (6,390)
Net amortization and deferrals 10,689 659 437
-------- ------- -------
Pension expense related to defined
benefit plans 2,616 3,664 2,898

Supplemental pension benefits 217 205 190
-------- ------- -------

Total pension expense $ 2,833 $ 3,869 $ 3,088
======== ======= =======

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:

Fiscal Year Ended
-------------------------------------
September 28, September 29, October 1,
1997 1996 1995
------------- ------------- ----------
(In thousands)

<S> <C> <C> <C>
Costs related to services provided
by employees during the year $ - $ 316 $ 283
Interest cost on projected benefit
obligation 908 928 912
Net amortization and deferrals 136 203 169
Net curtailment gain - (189) -
Total pension expense related to ------ ------- ------
SERP plan $1,044 $ 1,258 $1,364
====== ======= ======

</TABLE>

30
<PAGE> 31

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:

Unrecognized prior service cost - -
Unrecognized net loss 2,666 700
Adjustment required to recognize
minimum liability - (273)
-------- --------
Pension liability included in
"Deferred employee benefits" $(10,598) $(10,604)
======== ========

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 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. As a result of significant funding and
improved asset performance during fiscal 1997, the Company was not required to
record an additional minimum pension liability at September 28, 1997.

Note 9 - Other Retirement and Benefit Plans:

The Company has a deferred compensation program, which it modified in
1996. The modification, effective June 30, 1996, terminated all additional
employee deferrals and reduced the guaranteed rate of interest paid on amounts
deferred by active nonemployee directors to 8% initially, and then to the prime
rate in effect on each January 1. This program allowed directors and certain
management employees to defer all or a portion of 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 and interest
at the market rate are accrued as incurred. Interest above the market rate is
accrued over the vesting period. The interest expense related to the Company's
deferral plan was $2,529,000 in 1997, $2,523,000 in 1996, and $2,320,000 in
1995.

<PAGE> 32

In addition to the above deferred compensation program for directors
and certain management employees, the Company maintains two stock-based deferred
compensation programs for non-employee directors. See Note 10 - Stock-Based
Compensation for an explanation of these programs.

The Company has included in "Deferred employee benefits" $23,661,000 at
September 28, 1997 and $20,524,000 at September 29, 1996 to reflect its
liability under its deferred compensation programs. As of September 28, 1997,
payments required to be made to participants in these programs for the next five
fiscal years are approximately $1,510,000 in 1998, $1,607,000 in 1999,
$1,939,000 in 2000, $2,921,000 in 2001 and $2,323,000 in 2002.

Subsequent to September 28, 1997, Imperial Holly purchased
50.1% of the Company's Common Stock. As a result, the "change in control"
provisions of the nonemployee directors deferred compensation programs were
implemented. These provisions allow the nonemployee directors the option of
electing to receive immediate payment of their vested balances in these
programs. After these elections were made, payments required to be made to
participants in these programs for the next five fiscal years are approximately
$7,707,000 in 1998, $1,607,000 in 1999, $1,930,000 in 2000, $2,029,000 in 2001
and $2,058,000 in 2002.

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 $416,000 in 1997, $449,000 in 1996, and $437,000 in 1995.

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 1997, 1996, and 1995.

Under the terms of the Company's short-term incentive compensation
program, $5,635,000 was accrued in "Other liabilities and accrued expenses" at
September 28, 1997.

<PAGE> 33

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:

Fiscal Year Ended
--------------------------------------
September 28, September 29, October 1,
1997 1996 1995
------------ ------------- ---------
(In thousands)
<S> <C> <C> <C>
Costs related to services provided by
employees during the year $ 430 $ 520 $ 476
Interest cost on accumulated benefit
obligation 2,370 2,408 2,447
------ ------ ------
Total postretirement benefit expense $2,800 $2,928 $2,923
====== ====== ======
</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:

September 28, September 29,
1997 1996
------------- -------------
(In thousands)

<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $(23,513) $(20,594)
Active participants (5,961) (11,865)
-------- --------
Accumulated benefit obligation (29,474) (32,459)
Unrecognized net gain (5,325) (1,329)
-------- --------
Accrued postretirement benefit
obligation included in
"Deferred employee benefits" $(34,799) $(33,788)
======= ========

Actuarial assumptions:
Discount rate 7.5% 7.5%
Health care cost trend rate -
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 28, 1997 by approximately $1,597,000 and would have increased
postretirement benefit expense by approximately $221,000 in fiscal 1997.

Note 10 - Stock-Based Compensation:

The Company has four stock-based compensation plans which are described
below.

On December 16, 1996, the Board of Directors adopted the 1996 Equity
Incentive Plan and granted options for employees to purchase 187,558 shares of
Common Stock. The options granted vested over a three-year period. Under the
terms of the Merger Agreement with Imperial Holly, the 187,558 options became
vested, and

<PAGE> 34

employees holding these options will, in general, receive cash for the
difference between $20.25 and their exercise price of $13.94, and the options
and the plan will be canceled. The cost related to this plan was $43,000 in
fiscal 1997.

In fiscal 1996 the Company had entered into an agreement which granted
the Company's Chairman of the Board an option to purchase 100,000 shares of
Common Stock. This option was surrendered back to the Company in 1997
unexercised and there are no continuing rights under this option.

To make accounting estimates to calculate the fair value of the above
options at the date of grant using the Black-Scholes option pricing model, the
Company assumed a dividend yield of 1.0%, expected volatility of 36.5%, a risk
free interest rate of 6.2%, and an expected life of 5 years. If compensation
costs for options had been recorded based on the fair value of the options at
the date of grant, such costs, and reported net income, would have changed by
insignificant amounts.

The Company maintains two share unit plans for the non-employee members
of its Board of Directors ("Outside Directors"). One plan relates to the
modification of prior deferred compensation agreements and the other relates to
annual retainers paid to the Directors after June 30, 1996.

Effective June 30, 1996, the existing deferred compensation agreements
with all active Outside Directors were modified to reduce the guaranteed
interest rate to 8%, and then to the prime rate in effect on each January 1. The
effect of this modification is estimated to have reduced the present value, as
of June 30, 1996, of the payments which ultimately will be paid to the Outside
Directors under the related deferred compensation agreements by $2,600,000. As
consideration for the reduction in the interest rate credited on the Outside
Directors' deferred compensation, a Supplemental Share Unit Plan was established
for these Directors. This plan granted 111,619 share units (a share unit is the
equivalent of one share of Company Common Stock) to these Directors at an $11.00
per share unit price. At the $11.00 per share unit price these share units had a
value of $1,228,000 compared to the $2,600,000 reduced value of the deferred
compensation agreements. The value of each share unit fluctuates based on the
highest daily closing price of the Company's Common Stock during the preceding
twelve-month period. Dividend equivalents are reinvested in additional share
units.

Under the terms of the Merger Agreement with Imperial Holly
Corporation, these share units were valued at $20.25 and the Outside Directors
have the option to receive cash upon consummation of the Merger, or to defer the
cash value of such share units and to receive interest at the prime rate.

The Board of Directors adopted a Non-Employee Directors' Compensation
Plan as of July 1, 1996. Under this plan, the annual compensation paid to the
Directors as a retainer was set at 1,820 share units per year for 5 1/2 years.
Each Director vests in 455

<PAGE> 35

share units on the last day of each calendar quarter, as long as the Director
remains on the Board of Directors.

Under this plan, 110,110 share units were granted which covered the 5
1/2 year term of the Plan. In fiscal 1997, 8,645 shares were forfeited. In
fiscal 1996 and fiscal 1997, respectively, 5,005 and 19,110 share units vested.
Under the terms of the Plan, when Imperial Holly successfully tendered for 50.1%
of the outstanding shares of the Company, 69,615 share units, which would have
been received through the 5 1/2 year Plan term, became vested. All vested share
units were valued at $20.25 and the Outside Directors have the option to
receive cash upon consummation of the Merger, or to defer the cash value of
such share units and to receive interest at the prime rate.

The expense related to the two share unit plans for the Outside
Directors was $951,000 in fiscal 1997 and $1,633,000 in fiscal 1996.

Note 11 - Stockholders' Equity and Benefit Trust:

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.

During fiscal 1996, the Company established a Benefit Trust (the
"Trust") with 2,500,000 shares of treasury stock. The purpose of this Trust was
to enhance the Company's financial flexibility to provide funds to satisfy its
obligations under various employee benefit plans and agreements. The employee
benefits payable from the Trust are primarily included in the $69,058,000
"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" to reflect a
note payable to the Company for the market value of the 2,500,000 shares of
stock. "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 28, 1997, the market value of the stock
was $18.75 per share.

Once the tender offer and Merger with Imperial Holly is completed as
discussed in Note 2, the Benefit Trust will have received an estimated
$38,415,000 and 921,000 shares of Imperial Holly Corporation common stock. Under
the terms of the Trust, as amended, the cash received from the tender offer was
used to repay to the Company the

<PAGE> 36
note payable due for the shares, plus accrued interest, aggregating $27,621,000.
The balance of the cash will be used to purchase common stock of Imperial Holly.
This purchased stock, along with the 921,000 shares of Imperial Holly common
stock received in the Merger, can only be used to either make, or to reimburse
Imperial Holly for, payments due to Savannah Foods employees and retirees for
liabilities under deferred compensation plans aggregating $23,661,000 and under
supplemental executive retirement plans aggregating $10,598,000 at September 28,
1997.

Note 12 - 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 6. However,
the Company does not anticipate non-performance by the counter-parties to the
transactions.

As of the end of fiscal 1997, the Company has resolved substantially
all of the claims by the United States Customs Service (Customs) in the
Company's favor. Customs had alleged that drawback claims prepared by the
Company for certain export shipments of sugar during the years 1984 to 1988 were
technically and/or substantively deficient and that the Company, therefore, was
not entitled to amounts previously received under these drawback claims. The
Company disputed Customs' findings and has been vigorously protesting this
matter with Customs.

The Company has employment agreements with certain senior management
which contain "change in control" provisions. The Company could be required to
pay up to $5,900,000 to these employees as a result of Imperial Holly's
purchase of 50.1% of the Company's Common Stock.

<PAGE> 37

Note 13 - Quarterly Financial Information (Unaudited):

Unaudited quarterly financial information for fiscal 1997 and 1996 is
as follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands except for per share amounts)
<S> <C> <C> <C> <C>
Fiscal 1997
- -----------

Net sales $303,121 $276,489 $303,546 $308,683
Gross profit 37,652 36,355 40,446 39,884
Other costs - - - (13,394)
Income from operations 16,408 16,354 19,681 5,215

Income before extraordinary item 9,148 8,829 11,402 2,702
Per share .35 .34 .43 .10

Net income 9,148 8,829 11,026 2,702
Per share .35 .34 .42 .10

Fiscal 1996
- -----------

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
</TABLE>

"Other costs" included above and in the Consolidated Statements of Operations
include the following:

<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C>
Fiscal 1997
- -----------

Merger related costs:
Termination fee and expenses $ - $ - $ - $ (8,000)
Legal and administrative expenses - - - (3,894)
Cost of workforce reduction - - - (1,500)
------- ------- ------- --------
Other costs $ - $ - $ - $(13,394)
======= ======= ======= ========
Fiscal 1996
- -----------

Net gain (loss) on asset disposals $1,525 $(3,800) $ - $ (376)
Cost of workforce reduction - - - (723)
------- ------- ------- --------
Other costs $1,525 $(3,800) $ - $ (1,099)
======= ======= ======= ========

</TABLE>

<PAGE> 38

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.

(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)).

38
<PAGE> 39

PART III

Item 10. Directors and Executive Officers of the Registrant

Directors of Savannah Foods & Industries, Inc.

Pursuant to the terms of the Agreement and Plan of Merger, dated as of
September 12, 1997 among Imperial Holly Corporation, IHK Merger Sub Corporation
and Savannah Foods & Industries, Inc. (the "Merger Agreement"), on October 24,
1997, Lee B. Durham, Jr., Robert L. Harrison, James M. Reed, F. Sprague Exley,
John D. Carswell, Dale C. Critz and Arthur M. Gignilliat, Jr. resigned from the
Board of Directors of the Company and seven representatives of Imperial Holly
were appointed to the Board.

The Board of Directors currently consists of 12 members. Each Director
holds office until such Director's successor is elected and qualified or until
such Director's earlier resignation, death or removal.

Set forth below is information with respect to standing members of the
Board of Directors as of December 1, 1997.

<TABLE>
<S> <C>
W. WALDO BRADLEY Chairman of the Board of Bradley Plywood
Chairman, Corporation, Savannah, Georgia, a
Bradley Plywood Corporation wholesale distributor of building materials.
Age: 63 He also serves as a Director of First Union
Director since: 1979 Corporation, Charlotte, North Carolina, and
Present term expires: 1999 AGL Resources, Inc., Atlanta, Georgia.

PETER C. CARROTHERS Officer of Imperial Holly Corporation
Managing Director, since 1994. Managing Director and Senior
Imperial Holly Corporation Vice President - Operations from 1994 to
Age: 58 present. PepsiCo Foods International, Vice
Director since: 1997 President - Logistics from 1990 to 1994.
Present term expires: 2000
</TABLE>

39
<PAGE> 40

<TABLE>
<S> <C>
R. EUGENE CARTLEDGE Former Chairman of the Board of Directors
Director, of Savannah Foods & Industries, Inc., a
Savannah Foods & Industries, Inc. position he held from April 1996 to October
Age: 68 1997. Retired Chairman and Chief
Director since: 1995 Executive Officer of Union Camp Corporation,
Present term expires: 2000 a position he held from 1986 to 1994. He is
also a Director of Union Camp Corporation,
The Sun Company, Delta Airlines, Inc.,
Blount, Inc., Chase Brass Industries, and
UCAR International Inc.

DOUGLAS W. EHRENKRANZ Officer of Imperial Holly Corporation
Managing Director, since 1995. Managing Director from April
Imperial Holly Corporation 1997 to present and Vice President - Sales
Age: 40 and Marketing from 1995 to present.
Director since: 1997 Marketing Manager with PepsiCo's Taco Bell
Present term expires: 1999 subsidiary from 1993 to 1994 and served in
various positions at Procter & Gamble
Corporation from 1979. His last position at
Procter & Gamble before joining PepsiCo was
Category Sales Manager for Folgers Coffee.

ROGER W. HILL Director of Imperial Holly Corporation
Managing Director, since 1988. Managing Director of Imperial
Imperial Holly Corporation Holly Corporation from 1996 to present.
Age: 58 President and CEO Holly Sugar Corporation
Director since: 1997 from 1988 to present.
Present term expires: 2000

JAMES C. KEMPNER Director of Imperial Holly Corporation
President, since 1988. President, Chief Executive
Chief Executive Officer and Officer and Chief Financial Officer of
Chief Financial Officer, Imperial Holly Corporation from 1993 to
Imperial Holly Corporation present. Executive Vice President and Chief
Age: 58 Financial Officer of Imperial Holly
Director since: 1997 Corporation from 1988 to 1993. He is also a
Present term expires: 2000 Director of Bouygues Offshore S.A.
</TABLE>

<PAGE> 41
<TABLE>
<S> <C>
KAREN L. MERCER Officer of Imperial Holly Corporation
Vice President and Treasurer, since 1994. Vice President and Treasurer from
Imperial Holly Corporation April 1997 to present. Treasurer from
Age: 35 1994 to April 1997. Texas Commerce Bank,
Director since: 1997 N.A. Vice President - Commercial Lending in
Present term expires: 1998 1993. First City, Texas - Houston, N.A.
various positions from 1988 to 1993.

JOHN A. RICHMOND Officer of Imperial Holly Corporation
Managing Director, since 1991. Managing Director from April 1997
Imperial Holly Corporation to present and Vice President -
Age: 50 Operations from 1995 to present. Holly Sugar
Director since: 1997 Corporation, Senior Vice President and General
Present term expires: 1999 Manager - Beet Sugar Operations from 1993
to 1995. Holly Sugar Corporation, Senior
Vice President and General Manager - Eastern
Division from 1992 to 1993.

WILLIAM F. SCHWER Officer of Imperial Holly Corporation
Managing Director, since 1989. Managing Director from 1995 to
Imperial Holly Corporation present. Senior Vice President and General
Age: 50 Counsel from 1993 to 1995. Vice President
Director since: 1997 and General Counsel from 1990 to 1993.
Present term expires: 1998

WILLIAM W. SPRAGUE III President and Chief Executive Officer of
President and Chief Executive Savannah Foods & Industries, Inc. since
Officer, 1995. President and Chief Operating Officer
Savannah Foods & Industries, Inc. from 1993 to 1995. Vice President -
Age: 41 Sales from 1991 to 1993. Mr. Sprague first
Director since: 1990 joined the Company in 1983.
Present term expires: 1999

HUGH M. TARBUTTON President of Sandersville Railroad
President, Company, Sandersville, Georgia. Vice-President
Sandersville Railroad Company & Treasurer of B-H Transfer Co.
Age: 65
Director since: 1971
Present term expires: 1999
</TABLE>

<PAGE> 42

<TABLE>
<S> <C>
ARNOLD TENENBAUM President of Chatham Steel Corporation.
President, Chatham Steel is a wholesale distributor of
Chatham Steel Corporation metal products. It has branches in five
Age: 61 states. Mr. Tenenbaum is on the Board of
Director since: 1989 Directors of First Union Bank of Savannah,
Present term expires: 1998 First Union Bank of Georgia, Savannah
Electric and Power Company, Blue Cross and
Blue Shield of Georgia, Cerulean Workplace
Health, and the Georgia Lottery
Corporation.
</TABLE>

On October 24, 1997 R. Eugene Cartledge resigned as Chairman of the
Board of Directors.

On April 17, 1997 Robert S. Jepson, Jr. resigned from the Board of
Directors of the Company.

42
<PAGE> 43

Management of Savannah Foods & Industries, Inc.

In addition to William W. Sprague III, who also serves as a Director,
the following individuals serve as Executive Officers of the Company:

<TABLE>
<S> <C>
DAVID H. ROCHE Mr. Roche, age 50, first joined Michigan
Senior Vice President Sugar Company in 1976, and assumed his present
President - Savannah Foods office in 1996. Prior to that he served
Industrial, Inc. Michigan Sugar Company as President and Chief
President - Michigan Sugar Operating Officer, Executive Vice President and
Company Vice President - Administration.

JAMES M. KELLEY Mr. Kelley, age 54, first joined the Company
Senior Vice President in 1973, and was elected to his present
President - Dixie Crystals(R) office in 1995. Prior to that he served as
Brands, Inc. President - Dixie Crystals(R) Foodservice, Inc.
and as Assistant Vice President - Foodservice
Division.

GREGORY H. SMITH Mr. Smith, age 48, first joined the Company
Senior Vice President in 1978, and was elected to his present
Chief Financial Officer and office in 1995. Prior to that he served as Vice
Treasurer President - Finance, Treasurer, Vice President
- Corporate Development, Chief Information
Officer, and Corporate Controller.

BENJAMIN A. OXNARD, JR. Mr. Oxnard, age 63, first joined the Company
Senior Vice President - Raw in 1983 as Vice President - Raw Sugar. He
Sugar was elected to his present office in 1996.
</TABLE>

<PAGE> 44

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's Executive Officers and Directors, and persons who own more than 10% of
its Common Stock, to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Such persons are required by SEC regulations
to furnish the Company with copies of all Section 16(a) forms filed by such
person.

Based solely upon the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes that all filing requirements applicable to the Company's Executive
Officers, Directors and more than 10% stockholders were complied with, except
that 1) in May 1997, Mr. Exley, the Company's Senior Vice President - Human
Resources & Administration, reported the sale of 100 shares which should have
been reported in March 1997, and 2) in October 1997, Mr. Sprague III, the
Company's President and CEO, reported that he had resigned as trustee from a
trust of which he was a trustee and a beneficiary. His resignation should have
been reported in September 1997.

<PAGE> 45

Item 11. Executive Compensation

The following tables sets forth the compensation awarded to, earned by,
or paid to each person who served as the Company's Chief Executive Officer
during its most recent fiscal year and of its four other most highly compensated
Executive Officers during such year:

Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>

Long-Term Compensation
-------------------------------------
Annual Compensation Awards Payouts
---------------------------------- -------------------------- ---------- ------------
Other
Annual Restricted All Other
Compen- Stock Option/ LTIP Compen-
Name and Fiscal Salary Bonus sation Awards SARs Payous sation
Principal Position Year(1) ($) ($) ($)(2) ($) (#) ($) ($)(3)
- --------------------------------- ---------- ------------ --------- ----------- -------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William W. Sprague III 1997 414,595 306,801 0 0 9,256 0 5,276
President & Chief 1996 365,400 0 0 0 0 0 5,704
Executive Officer 1995 362,460 0 0 0 0 0 13,131

James M. Kelley 1997 245,000 145,040 0 0 5,274 0 9,843
Senior Vice President 1996 211,768 0 0 0 0 0 7,095
President - Dixie 1995 209,396 0 0 0 0 0 6,809
Crystals(R) Brands, Inc.

David H. Roche 1997 245,000 145,040 0 0 5,274 0 641
Senior Vice President 1996 194,230 0 0 0 0 0 3,801
President - Savannah 1995 195,896 0 0 0 0 0 4,073
Foods Industrial, Inc.
President - Michigan
Sugar Company

Gregory H. Smith 1997 192,615 99,775 0 0 4,197 0 2,166
Senior Vice President 1996 185,000 0 0 0 0 0 280
Chief Financial Officer 1995 160,834 0 0 0 0 0 352
and Treasurer

F. Sprague Exley (4) 1997 189,569 98,197 0 0 4,111 0 7,886
Senior Vice President - 1996 185,000 0 0 0 0 0 9,911
Human Resources & 1995 147,898 0 0 0 0 0 15,570
Administration
- ------------------------------------------------------------------------------- --------------------------------------------------
</TABLE>

(1) The Company's fiscal year ends on the Sunday closest to September 30.

(2) "Perquisites" do not exceed $50,000 or 10% of total salary and bonus.

(3) "All Other Compensation" for fiscal 1997 includes: (i) above market
earnings accrued on deferred compensation (Mr. Sprague III - $2,872;
Mr. Kelley - $7,903; Mr. Roche - $0; Mr. Smith - $0; Mr. Exley -
$7,396), and (ii) amounts contributed to defined contribution
retirement plans (Mr. Sprague III - $2,404; Mr. Kelley - $1,940; Mr.
Roche - $641; Mr. Smith - $2,166; Mr. Exley - $490).

(4) Mr. Exley terminated his employment with the Company effective
November 30, 1997.

<PAGE> 46

Option/SAR Grants in Last Fiscal Year
-------------------------------------

<TABLE>
<CAPTION>
Number of
securities % of total
underlying options/SARs Market Grant
Individual Grants (1) options/SARs granted to Exercise price on date
Name granted employees in or base date of Expiration present
(#) fiscal year price grant date value (2)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William W. Sprague III 9,256 4.9% $13.9375 $13.9375 12/16/2006 $55,999

James M. Kelley 5,274 2.8% $13.9375 $13.9375 12/16/2006 $31,908

David H. Roche 5,274 2.8% $13.9375 $13.9375 12/16/2006 $31,908

Gregory H. Smith 4,197 2.2% $13.9375 $13.9375 12/16/2006 $25,392

F. Sprague Exley 4,111 2.2% $13.9375 $13.9375 12/16/2006 $24,872
- ---------------------------------------------------------------------------------------------------------------
</TABLE>

(1) The options were granted by the Board of Directors on December 16, 1996
pursuant to the 1996 Equity Incentive Plan (the "Plan") and became
exercisable as follows: 33 1/3%, 66 2/3% and 100% on the first, second
and third anniversary, respectively, of the date the option was
granted. As a result of Imperial Holly's successful tender offer for
50.1% of the Company's Common Stock, a "change in control" as defined
in the Plan occurred and in accordance with the terms of the Plan, the
options became fully vested and immediately exercisable with the
holders of the options having the right to require, within 10 business
days of such change in control, the Company to purchase the options
from the holder for an aggregate amount of the then fair market value
of the Common Stock less the $13.9375 exercise price. On October 31,
1997, Mr. Smith elected to receive cash for his options in conjunction
with this provision. Pursuant to the Merger Agreement, at the
completion of the Merger, each unexpired and unexercised option shall,
at the election of the holder, i) be converted into an option to
purchase Imperial Holly common stock or ii) be canceled with the holder
receiving in cash the difference between $20.25 per share and the
$13.9375 exercise price.

(2) The grant date present value was calculated using the Black-Scholes
model. The assumptions used in the valuation were as follows: expected
volatility - 36.52%, risk-free rate of return - 6.17%, dividend yield -
1.0%, and time of exercise - 5 years.

Pension Plans

The Company has in effect a non-contributory pension plan which applies
to substantially all non-bargaining unit employees, including Executive
Officers. The normal retirement age under the plan is 65. When an employee
retires, several forms of benefit payments are available, including an
actuarially reduced benefit to provide a surviving spouse's annuity of 50%, 75%,
or 100% of the employee's reduced pension. The basic payment formula is 1.75% of
the final three-year average of earnings, times credited years of service (up to
30) minus a Social Security allowance. A reduced benefit can be received at age
55 with 10 or more years of credited service or at age 62 with five or more
years of credited service. The following table shows the estimated annual
pension benefits payable to participants upon normal retirement from the
Company's pension plan in specified remuneration classes and years of credited
service:

46
<PAGE> 47

Pension Plan Table
------------------

Years of Service
----------------
<TABLE>
<CAPTION>
30 &
Remuneration 10 15 20 25 above
- ------------ -- -- -- -- -----
<S> <C> <C> <C> <C> <C>
$125,000 $19,700 $29,500 $39,400 $49,200 $59,000
$160,000 & above 25,800 38,700 51,600 64,500 77,400
</TABLE>

Covered compensation is defined as base salary, as presented under the
Salary column in the Summary Compensation Table, however, it is subject to
Internal Revenue Code limits. The amounts set forth in the table are calculated
on a straight-life annuity basis payable at age 65 and are offset by an
allowance for Social Security. The estimated credited years of service for each
of the named Executive Officers are: William W. Sprague III: 14; James M.
Kelley: 24; David H. Roche: 21; Gregory H. Smith: 19; and F. Sprague Exley: 32.

In addition to benefits paid under the Company's pension plan for
substantially all employees, all Executive Officers of the Company receive
coordinated benefits from the Supplemental Executive Retirement Plan (the
"SERP"). The SERP includes each of the Executive Officers listed in the
foregoing Summary Compensation Table, and provides a benefit based upon the
following formula: 65% of base salary, less the amount payable from the pension
plan (frozen as of June 30, 1996), less a social security allowance (frozen as
of June 30, 1996), all multiplied by a fraction the numerator of which is the
Executive Officer's years of service as of June 30, 1996 and the denominator of
which is the years of potential service at normal retirement.

The estimated annual benefits payable upon retirement at normal
retirement age, using current earnings, for each of the named Executive Officers
from the Company's non-contributory pension plan and the SERP are as follows:
William W. Sprague III: $166,200; James M. Kelley: $147,700; David H. Roche:
$142,800; Gregory H. Smith: $121,600 and F. Sprague Exley: $129,800.

Compensation of Directors

Effective April 23, 1996, the Company entered into a one-year agreement
with R. Eugene Cartledge to serve as the Chairman of the Board of Directors of
the Company. After the expiration of this agreement, Mr. Cartledge continued to
serve as Chairman of the Board, but declined any further remuneration. Also, on
June 18, 1997, Mr. Cartledge relinquished his option to purchase 100,000 shares
of Common Stock from the Company which had been awarded to him by his one-year
agreement. Mr. Cartledge resigned as Chairman of the Board on October 24, 1997,
but continues to serve as a Director of the Company.

Directors who are also employees of the Company are not compensated for
service as Directors or as members of any Committee of the Board of Directors.
Non-employee Directors are paid $1,000 for

<PAGE> 48

each Board meeting attended and $750 for each Committee meeting attended except
for meetings of the Committee of Outside Directors. Directors may elect to defer
meeting fees pursuant to the Deferred Compensation Plan for Directors of
Savannah Foods & Industries, Inc. (the "Plan"). The terms of the Plan provide
that the Directors earn interest on their deferred balances equal to the prime
rate in effect on each January 1. During fiscal 1997, the Company expensed
$183,000 in meeting fees and $211,000 in interest related to the Plan.

The Company's Non-Employee Directors' Compensation Plan (the "Plan")
pays a retainer to non-employee Directors in Share Units (a Share Unit is the
equivalent of one share of Company Common Stock). Under the Plan, each Director
was granted 10,010 Share Units which vest over the 5 1/2 year Plan term (from
July 1, 1996 to December 31, 2001) at the rate of 455 Share Units per quarter,
as long as the Director remains on the Board of Directors. In the event of a
change in control of the Company, as defined in the Plan, all Directors serving
on June 1, 1996 immediately vest in all remaining Share Units. Unvested Share
Units are forfeited to the Company. Upon vesting, the Director is paid, in cash,
the value of such Share Units, based upon the fair market value of the Company's
Common Stock at the time of vesting. The fair market value is defined as the
closing price of a share of the Company's Common Stock. The Plan permits a
Director to defer all or a portion of his or her vested Share Units until after
termination of the Director's service on the Board, in which case the Share
Units are valued at the highest closing price of a share during the twelve
months preceding the Director's termination of service. Dividend equivalents are
reinvested in additional Share Units. During fiscal 1997, the Company expensed
$385,000 related to this Plan.

Effective June 30, 1996, the existing deferred compensation agreements
with all active non-employee Directors were modified to reduce the guaranteed
interest rate to the prime rate. The effect of this modification is estimated to
have reduced the present value, as of June 30, 1996, of the payments which
ultimately will be paid to these Directors under the related deferred
compensation agreements by $2,600,000. As consideration for this reduction, the
Company established the Supplemental Share Unit Plan (the "Plan"). The Plan
granted 111,619 Share Units (a Share Unit is the equivalent of one share of
Company Common Stock) to these Directors at an $11.00 per Share Unit price. At
the $11.00 per Share Unit price, these Share Units had a value of $1,228,000
compared to the $2,600,000 reduced value of the deferred compensation
agreements. The value of each Share Unit fluctuates based on the highest daily
closing price of the Company's Common Stock during the preceding twelve-month
period. Dividend equivalents are reinvested in additional Share Units. At
retirement from the Board of Directors, each non-employee Director will receive,
in cash, the value of the Share Units in his deferral account. During fiscal
1997, the Company expensed $586,000 related to this Plan.

Under the terms of the Non-Employee Directors' Compensation Plan (the
"Plan"), upon the successful completion of Imperial Holly's tender offer for
50.1% of the Company's outstanding Common Stock (the "Tender Offer"), each of
the 10,020 Share Units to which each of the non-employee Directors are

<PAGE> 49

entitled became fully vested (other than James M. Reed who holds 2,285 fully
vested Share Units). Seven of the ten participant Directors have elected to
receive a payout of the value of their Share Units upon consummation of the
Merger. Lee B. Durham, Jr.'s existing election under the Plan provided for him
to receive payment upon the termination of his service on the Company's Board of
Directors, which occurred on October 24, 1997. Robert L. Harrison has elected to
retain his original deferral election, which will result in his receiving payout
of his benefits quarterly over a fifteen-year period beginning the January 1
after his 66th birthday. John D. Carswell has elected to retain his original
deferral election, which will result in his receiving payout of his benefits
quarterly over a ten-year period beginning the quarter following the date of his
departure from the Company's Board of Directors. In each case, the value of a
Share Unit will be based on the $20.25 per share offer price (the "Offer
Price"), with deferred payouts accruing interest at the prime rate in effect on
the first business day of each year until payment in full. The value of the
Share Units outstanding under the Non-Employee Directors' Compensation Plan (net
of any interest accruing after completion of the Tender Offer), based on the
Offer Price, is $1,872,447 ($46,274 for Mr. Reed and $202,908 for each of the
other nine participant Directors).

Six of the eight Directors participating in the Supplemental Share Unit
Plan (the "Plan") (Messrs. Cartledge and Reed were not eligible to participate)
have elected to receive, upon consummation of the Merger, a lump sum payment of
the value of their Share Units granted under the Plan. Mr. Durham's existing
election under the Plan provided for him to receive payment upon the termination
of his service on the Company's Board of Directors, which occurred on October
24, 1997. Mr. Harrison has elected to retain his original deferral election,
which will result in his receiving payout of his benefits quarterly over a
fifteen-year period beginning on January 1 after his 66th birthday. In each
case, the value of a Share Unit will be based on the Offer Price, with deferred
payouts accruing interest at the prime rate in effect on the first business day
of each year until payment in full. The aggregate value of the Share Units
outstanding under the Supplemental Share Unit Plan (net of any interest accruing
after completion of the Tender Offer), based on the Offer Price, is $2,282,397,
as follows: W. Waldo Bradley, $495,081; John D. Carswell, $401,369; Dale C.
Critz, $73,428; Lee B. Durham, Jr., $380,471; Arthur M. Gignilliat, Jr.,
$194,683; Robert L. Harrison, $158,122; Hugh M. Tarbutton, $504,303; and Arnold
Tenenbaum, $74,941.

Pursuant to the provisions of the Deferred Compensation Plan for
Directors (the "Plan"), six of the eight Directors participating in the Plan
(Messrs. Cartledge and Reed elected not to participate) have elected to receive,
upon consummation of the Merger, a lump sum payment of the value of their
deferral accounts under the Plan aggregating $2,135,824. Mr. Durham's existing
election under the Plan provided for him to receive payment upon the termination
of his service on the Company's Board of Directors, which occurred on October
24, 1997. Mr. Harrison has elected to retain his original deferral election,
which will result in his receiving payout of his benefits quarterly over a
fifteen-year period beginning the January 1 after his

<PAGE> 50

66th birthday. Deferred payouts will accrue interest at the prime rate in effect
on the first business day of each year until payment in full. The aggregate
value of the deferral accounts under the Plan (net of any interest accruing
after completion of the Tender Offer) is $2,818,289 (of which amount $2,605,755
will be paid upon consummation of the Merger); the amount owed to the current
and former Directors of Savannah Foods is as follows: Mr. Bradley, $592,549; Mr.
Carswell, $480,404; Mr. Critz, $107,985; Mr. Durham, $469,931; Mr. Gignilliat,
$233,012; Mr. Harrison, $212,534; Mr. Tarbutton, $622,421; and Mr. Tenenbaum,
$99,452.

Pursuant to the Merger Agreement with Imperial Holly, on October 24,
1997, seven Directors resigned and seven representatives of Imperial Holly were
appointed to the Board of Directors. The new members of the Board are all
employees of Imperial Holly and will not receive any remuneration for their
service on the Company's Board.

Employment Contracts

The Company had entered into contracts with all Executive Officers to
reduce the risk of their departure or distraction to the detriment of the
Company and its stockholders in the event of a "change in control" of the
Company as defined in such contracts. If these Executive Officers are terminated
after a change in control, as defined therein, the contract provides for a lump
sum payment of 2.99 times average annual taxable compensation for the past five
years. Imperial Holly's successful Tender Offer constitutes a change in control
under the provisions of these contracts.

Two of the Executive Officers of the Company, Gregory H. Smith and F.
Sprague Exley, executed severance and non-compete agreements in fiscal 1997,
which will become effective on or before December 31, 1997. The Company ascribed
$150,000 of the total amount payable to each of these individuals as non-compete
payments under the terms of each agreement. The balance of the amounts payable
to these individuals is less than the 2.99 times average annual taxable
compensation for the past five years as prescribed in the contracts they
relinquished when they executed their severance and non-compete agreements.

In the event that the other three Executive Officers listed in the
Summary Compensation Table above are paid under the change in control provisions
of their employment contracts, the aggregate amount payable to these individuals
would be $1,928,000.

<PAGE> 51

Compensation Committee Interlocks and Insider Participation

During fiscal 1997, Messrs. Arthur M. Gignilliat, Jr. (chairman) W.
Waldo Bradley, R. Eugene Cartledge, Dale C. Critz, Robert L. Harrison, and James
M. Reed served as members of the Compensation Committee. No member of this
Committee is a former or current Executive Officer or employee of the Company or
any of its subsidiaries. R. Eugene Cartledge, who resigned as a member of the
Committee in December 1996, is the former Chairman of the Board of Directors of
the Company. In honor of Mr. Cartledge, the Company made a $1,000,000
contribution to the Cartledge Foundation, a Private Charitable Foundation
recognized as exempt from tax under IRC Section 501(c)3 and controlled by Mr.
Cartledge. Robert L. Harrison is President of Stevens Shipping & Terminal
Company in Savannah, Georgia. The Company conducts business with this firm
related to port activities associated with the importation of raw sugar. In
fiscal 1997, the Company purchased services from this firm in the amount of
approximately $1,845,000. James M. Reed is Vice Chairman and Chief Financial
Officer of Union Camp Corporation. The Company purchases packaging supplies from
this firm. During fiscal 1997, the Company purchased goods from this firm in the
amount of approximately $6,527,000.

51
<PAGE> 52

Item 12. Security Ownership of Certain Beneficial Owners and Management

Pursuant to the terms of the Merger Agreement, Imperial Holly's
Tender Offer for 50.1% of the Company's outstanding Common Stock was
successfully completed on October 16, 1997.

The following table sets forth, as of December 1, 1997, certain
information with respect to the beneficial ownership of Common Stock of the
Company by Directors, each Non-Director Executive Officer named in the Summary
Compensation Table above, all Directors and Executive Officers of the Company as
a group, and each holder known by the Company to be the beneficial owner of more
than 5% of the Company's issued and outstanding Common Stock. Except as
disclosed in the notes to the table, each person has sole voting and investment
powers with respect to the whole number of shares shown as beneficially owned by
him.

Amount and Nature of Percent
Name Beneficial Ownership of Class(1)
- ---- -------------------- -----------
<S> <C> <C>
Archer-Daniels-Midland Company(2) 1,661,900 (3) 5.78%
Imperial Holly Corporation(4) 14,398,284 (5) 50.10%

W. Waldo Bradley 7,268 *
Peter C. Carrothers 2,200 *
R. Eugene Cartledge 12,059 *
Douglas W. Ehrenkranz 0 *
Roger W. Hill 14,398,324 (6) 50.10%
James C. Kempner 14,401,284 (6) 50.11%
Karen L. Mercer 0 *
John A. Richmond 0 *
William F. Schwer 0 *
William W. Sprague III 18,341 (7) *
Hugh M. Tarbutton 92,409 (8) *
Arnold Tenenbaum 722 (9) *

F. Sprague Exley 33,211 (10) *
James M. Kelley 14,022 (11) *
David H. Roche 8,348 (12) *
Gregory H. Smith 5,391 *

All Directors and Executive
Officers as a group
(17 individuals) 14,615,485 (13) 50.86%
</TABLE>

* Indicates less than 1.00%

(1) Amounts are calculated based upon 28,738,196 shares outstanding, which
includes the 1,004,921 shares held in the Company's Benefit Trust.

<PAGE> 53

(2) The business address of Archer-Daniels-Midland Company is:
4666 Faries Parkway
P. O. Box 1470
Decatur, Illinois 62525

(3) Information is based on Schedule 13D filed by Archer-Daniels-Midland
Company, dated May 17, 1995 and amended on September 1, 1995, disclosing
voting and investment power held by such person with respect to shares of
Common Stock.

(4) The business address of Imperial Holly Corporation is:
One Imperial Square
Suite 200 8016 Highway 90-A
Sugar Land, Texas 77478

(5) Information is based on a Schedule 13D filed by Imperial Holly Corporation,
dated October 17, 1997, disclosing voting and investment power held by such
person with respect to shares of Common Stock. Includes 14,397,836 shares
acquired by IHK Sub in the Tender Offer.

(6) Includes 14,398,284 shares beneficially owned by Imperial Holly, of which
Mr. Kempner is the Chief Executive Officer and a director and Mr. Hill is a
Managing Director and a director. Both Messrs. Kempner and Hill disclaim
beneficial ownership of such shares.

(7) Includes 9,256 shares which Mr. Sprague may acquire at his discretion
through the exercise of stock options. Includes 1,227 shares owned by his
wife and 3,597 shares owned by his children, in which Mr. Sprague disclaims
any beneficial ownership.

(8) Includes 11,012 shares held by Mr. Tarbutton's wife as custodian for their
children, in which he disclaims any beneficial ownership.

(9) Includes 481 shares held by Mr. Tenenbaum's wife as custodian for their
children, in which he disclaims any beneficial ownership.

(10) Includes 4,111 shares which Mr. Exley may acquire at his discretion through
the exercise of stock options.

(11) Includes 5,274 shares which Mr. Kelley may acquire at his discretion
through the exercise of stock options.

(12) Includes 5,274 shares which Mr. Roche may acquire at his discretion through
the exercise of stock options.

(13) Includes 23,893 shares which the Executive Officers may acquire at their
discretion through the exercise of stock options.

53
<PAGE> 54
Item 13. Certain Relationships and Related Transactions

Archer-Daniels-Midland Company reported ownership of 5.78% of the
outstanding Common Stock of the Company during fiscal 1997. During fiscal 1997,
the Company purchased goods from this firm in the amount of approximately
$172,000.

Messrs. R. Eugene Cartledge, Robert L. Harrison, and James M. Reed,
Directors of the Company, had certain relationships and related transactions
with the Company as disclosed in the Compensation of Directors and Compensation
Committee Interlocks and Insider Participation sections of Item 11, Executive
Compensation.

Imperial Holly Corporation reports ownership of 50.1% of the
outstanding Common Stock of the Company. The Company purchases from and sells
sugar to this firm. In fiscal 1997, the Company purchased/sold goods from/to
this firm in the amount of approximately $7,816,000 and $1,276,000,
respectively.

Arnold Tenenbaum, a Director of the Company, is President of Chatham
Steel Corporation. The Company purchases steel products from this firm. During
fiscal 1997, the Company purchased goods from this firm in the amount of
approximately $74,000.

Wachovia Bank of North Carolina, N.A. is the trustee of the Company's
Benefit Trust. An affiliate of Wachovia Bank of North Carolina, N.A. (Wachovia)
serves as agent for a syndicate of banks for the Company's $120,000,000 credit
facility dated April 1, 1996, of which Wachovia has committed $37,500,000. No
amounts were outstanding under this facility at September 28, 1997. The Company
also has several standby letters of credit with Wachovia supporting various
commercial and debt transactions totaling $9,660,000 at September 28, 1997. For
fiscal 1997, the Company paid Wachovia $393,000 in interest and $116,000 in fees
related these credit instruments. In the opinion of management, the terms of
such arrangements are fair and reasonable and as favorable to the Company as
could have been obtained from a wholly unrelated party.

<PAGE> 55

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

(a)(1) and (2): See index of Financial Statements, Item 8(a)
and 8(b), page 15.

(a)(3) Exhibits:

<TABLE>
<CAPTION>
Page Exhibit
No. Number Description
- --- ------ -----------
<S> <C> <C>
2-1 Agreement and Plan of Merger Among Imperial Holly
Corporation, IHK Merger Sub Corporation and Savannah
Foods & Industries, Inc. is hereby incorporated by
reference to Commission File No. 1-11420 filed on
Form 8-K dated September 12, 1997 as Exhibit 99.8.

3-1 Articles of Incorporation, as amended, is hereby
incorporated by reference to Commission File No.
1-11420 on Form 10-K for the year ended January 3,
1993 as Exhibit 3-1.

3-2 By-Laws, as amended, are hereby incorporated by
reference to Commission File No. 1-11420 on Form 10-Q
for the quarter ended March 30, 1997 as Exhibit 3-2.

4-1 Credit Agreement, dated as of April 1, 1996, among
Savannah Foods & Industries, Inc., as the borrower,
the banks listed therein, and Wachovia Bank of
Georgia, N.A., as agent is hereby incorporated by
reference to Commission File No. 1-11420 on Form 10-Q
for the quarter ended March 31, 1996 as Exhibit 4-1.

62 4-2 Consent and Waiver Under and First Amendment to
Credit Agreement.

68 4-3 Second Consent and Waiver Under Credit Agreement.

4-4 In reliance upon Item 601(b) (4) (iii) of Regulation
S-K, various instruments defining the rights of
holders of long-term debt of Registrant are not being
filed herewith because the total of securities
authorized under each such instrument does not exceed
10% of the total assets of Registrant. Registrant
hereby agrees to furnish a copy of any such
instrument to the Commission upon request.

10-1* Short-term Incentive Compensation Program is hereby
incorporated by reference to Commission File No.
1-11420 on Form 10-Q for the quarter ended December
29, 1996 as Exhibit 10-1.

</TABLE>
55
<PAGE> 56
10-2* Supplemental Executive Retirement Plan, as amended
and restated, is hereby incorporated by reference to
Commission File No. 1-11420 on Form 10-K for the year
ended January 3, 1993 as Exhibit 10-2.

10-3* Amendment No. 1 to the Supplemental Executive
Retirement Plan is hereby incorporated by reference
to Commission File No. 1-11420 on Form 10-K for the
year ended January 3, 1993 as Exhibit 10-3.

10-4* Amendment No. 2 to the Supplemental Executive
Retirement Plan is hereby incorporated by reference
to Commission File No. 1-11420 on Form 10-K for the
year ended September 29, 1996 as Exhibit 10-4.

72 10-5* Amendment No. 2a to the Supplemental Executive
Retirement Plan.

10-6* Amendment No. 3 to the Supplemental Executive
Retirement Plan is hereby incorporated by reference
to Commission File No. 1-11420 to Schedule 14D-9,
filed with the Commission on September 18, 1997 as
Exhibit (c)(5).

10-7* Amendment No. 4 to the Supplemental Executive
Retirement Plan is hereby incorporated by reference
to Commission File No. 1-11420 to Schedule 14D-9,
filed with the Commission on September 18, 1997 as
Exhibit (c)(6).

10-8* Deferred Compensation Plan for Key Employees, as
amended and restated, is hereby incorporated by
reference to Commission File No. 1-11420 on Form 10-K
for the year ended January 3, 1993 as Exhibit 10-4.

10-9* Amendment No. 1 to the Deferred Compensation Plan for
Key Employees is hereby incorporated by reference to
Commission File No. 1-11420 on Form 10-K for the year
ended January 3, 1993 as Exhibit 10-5.

10-10* Amendment No. 2 to the Deferred Compensation Plan for
Key Employees is hereby incorporated by reference to
Commission File No. 1-11420 on Form 10-K for the year
ended October 2, 1994 as Exhibit 10-6.

10-11* Amendment No. 3 to the Deferred Compensation Plan For
Key Employees is hereby incorporated by reference to
Commission File No. 1-11420 to Schedule 14D-9, filed
with the Commission on September 18, 1997 as Exhibit
(c)(7).

56
<PAGE> 57

10-12* Amendment No. 4 to the Deferred Compensation Plan For
Key Employees is hereby incorporated by reference to
Commission File No. 1-11420 to Schedule 14D-9, filed
with the Commission on September 18, 1997 as Exhibit
(c)(8).

10-13* Amendment No. 5 to the Deferred Compensation Plan For
Key Employees is hereby incorporated by reference to
Commission File No. 1-11420 to Schedule 14D-9, filed
with the Commission on September 18, 1997 as Exhibit
(c)(9).

10-14* Deferred Compensation Plan for Directors of Savannah
Foods & Industries, Inc. as amended and restated is
hereby incorporated by reference to Commission File
No. 1-11420 on Form 10-K for the year ended September
29, 1996 as Exhibit 10-8.

10-15* Savannah Foods & Industries, Inc. Non-Employee
Directors' Compensation Plan is hereby incorporated
by reference to Commission File No. 1-11420 on Form
10-K for the year ended September 29, 1996 as Exhibit
10-9.

10-16* Savannah Foods & Industries, Inc. Non-Employee
Directors' Supplemental Share Unit Plan is hereby
incorporated by reference to Commission File No.
1-11420 on Form 10-K for the year ended September 29,
1996 as Exhibit 10-10.

10-17* Employment Agreements with all other Executive
Officers of the Company are incorporated by reference
to Commission File No. 1-11420 filed on Form 10-K for
the year ended January 1, 1989 as Exhibit 10-10.

10-18* Employment Agreement - W. W. Sprague, III is
incorporated by reference to Commission File No.
1-11420 filed on Form 10-K for the year ended
December 29, 1991 as Exhibit 10-10.

10-19* Employment Agreement - David H. Roche is incorporated
by reference to Commission File No. 1-11420 filed on
Form 10-K for the year ended October 1, 1995 as
Exhibit 10-9.

10-20* 1996 Equity Incentive Plan is hereby incorporated by
reference to Commission File No. 1-11420 on Form 10-Q
for the quarter ended March 30, 1997 as Exhibit 10-1.

57
<PAGE> 58
16-1 Letters re: change in certifying accountant are
incorporated by reference to Commission File No.
1-11420 filed on Form 8-K dated October 17, 1996 as
Exhibit 16-1 and by reference to Commission File No.
1-11420 filed on Form 8-K dated November 18, 1996 as
Exhibit 16-1.

75 21-1 Subsidiaries of Registrant

76 23-1 Consents of Independent Accountants

78 27-1 Financial Data Schedules (for SEC use only)

* Indicates exhibits which are management contracts or
compensatory agreements.

(b) Reports on Form 8-K:

On July 14, 1997, the Company filed a Form 8-K announcing that it had
entered into an Agreement and Plan of Merger with a wholly owned
subsidiary of Flo-Sun, Incorporated.

On July 18, 1997, the Company filed a Form 8-K announcing that three
purported class action lawsuits were filed by purported stockholders of
the Company in connection with the Company's proposed merger with
Flo-Sun, Incorporated.

On September 12, 1997, the Company filed a Form 8-K announcing that it
had entered into an Agreement and Plan of Merger with Imperial Holly
Corporation and had terminated the Agreement and Plan of Merger with
Flo-Sun, Incorporated.

On October 17, 1997, the Company filed a Form 8-K announcing a change
in control of the Company. In accordance with the Agreement and Plan of
Merger with Imperial Holly Corporation, Imperial Holly acquired 50.1%
of the outstanding shares of the Company's Common Stock.

(d) Not applicable.

58
<PAGE> 59
UNDERTAKINGS

For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933,
the undersigned Registrant hereby undertakes as follows, which undertaking shall
be incorporated by reference into Registrant's Registration Statement on Form
S-8 Number 2-94678, Employee Retirement Savings Account Plan (filed December 22,
1984 as amended on October 18, 1994).

Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to Directors, Officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Director, Officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, Officer or controlling persons in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

<PAGE> 60

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

SAVANNAH FOODS & INDUSTRIES, INC.

Dated: December 12, 1997 By:/S/ William W. Sprague III
----------------- -------------------------
William W. Sprague III
President and
Chief Executive Officer

60
<PAGE> 61

Pursuant to the requirements of the Securities Act of 1934, this report
has been signed by the following persons on behalf of Registrant in the
capacities and on the dates indicated:

<TABLE>
<S> <C> <C>
/S/William W. Sprague III President and December 12, 1997
- ------------------------- Chief Executive Officer
William W. Sprague III and Director

/S/Gregory H. Smith Senior Vice President December 12, 1997
- ------------------- Chief Financial Officer
Gregory H. Smith and Treasurer (PRINCIPAL
FINANCIAL AND PRINCIPAL
ACCOUNTING OFFICER)

/S/W. Waldo Bradley Director December 12, 1997
- ------------------
W. Waldo Bradley

/S/Peter C. Carrothers Director December 12, 1997
- ----------------------
Peter C. Carrothers

/S/R. Eugene Cartledge Director December 12, 1997
- ----------------------
R. Eugene Cartledge

/S/Douglas W. Ehrenkranz Director December 12, 1997
- ------------------------
Douglas W. Ehrenkranz

/S/Roger W. Hill Director December 12, 1997
- ---------------
Roger W. Hill

/S/James C. Kempner Director December 12, 1997
- -------------------
James C. Kempner

/S/Karen L. Mercer Director December 12, 1997
- ------------------
Karen L. Mercer

/S/John A. Richmond Director December 12, 1997
- -------------------
John A. Richmond

/S/William F. Schwer Director December 12, 1997
- --------------------
William F. Schwer

/S/Hugh M. Tarbutton Director December 12, 1997
- --------------------
Hugh M. Tarbutton

/S/Arnold Tenenbaum Director December 12, 1997
- -------------------
Arnold Tenenbaum
</TABLE>

<PAGE> 1
EXHIBIT 4.2

CONSENT AND WAIVER UNDER AND FIRST AMENDMENT TO CREDIT AGREEMENT

THIS CONSENT AND WAIVER UNDER AND FIRST AMENDMENT TO CREDIT AGREEMENT
(this "Consent and First Amendment") is dated as of the 16th day of October,
1997 among SAVANNAH FOODS & INDUSTRIES, INC. (the "Borrower"), WACHOVIA BANK,
N.A. (successor by merger to Wachovia Bank of Georgia, N.A.), as Agent (the
"Agent") and WACHOVIA BANK, N.A., THE CHASE MANHATTAN BANK, THE FIRST NATIONAL
BANK OF CHICAGO, CITIZENS BANK (formerly Second National Bank of Saginaw),
SUNTRUST BANK, ATLANTA, and COOPERATIEVE CENTRALERAIFFEISEN-BOERENLEEENBANK
B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH (collectively, the "Banks");

WITNESSETH:

WHEREAS, the Borrower, the Agent and the Banks executed and delivered
that certain Credit Agreement, dated as of April 1, 1996 (the "Credit
Agreement");

WHEREAS, the Borrower has requested that the Agent and the Banks
consent to the acquisition of Capital Stock of the Borrower in an amount which
will exceed the amount permitted by Section 7.01(l) of the Credit Agreement and
waive the Event of Default which otherwise occurs as a result thereof, and the
Agent and the Banks have agreed to such consent and waiver, provided that
certain provisions of the Credit Agreement are amended as set forth herein, and
subject to the terms and conditions hereof;

NOW, THEREFORE, for and in consideration of the above premises and
other good and valuable consideration, the receipt and sufficiency of which
hereby is acknowledged by the parties hereto, the Borrower, the Agent and the
Banks hereby covenant and agree as follows:

1. Definitions. Unless otherwise specifically defined herein, each term
used herein which is defined in the Credit Agreement shall have the meaning
assigned to such term in the Credit Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Credit Agreement shall from and after the date hereof refer to the Credit
Agreement as amended hereby.

2. Consent and Waiver. Reference hereby is made to the following
(collectively, the "LCPI Commitment"): (i) the Commitment

<PAGE> 2

Letter dated September 10, 1997, from Lehman Commercial Paper Inc. ("LCPI") to
Imperial Holly Corporation ("IHC"), as amended by Commitment Letter Amendment
dated September 18, 1997, for Senior Secured Credit Facilities described in term
sheets attached to the LCPI Commitment as Exhibits A, B and C, as such term
sheets were amended by such Commitment Letter Amendment, (ii) such term sheets
and (iii) any amendment to such Commitment Letter or such term sheets which has
been expressly consented to by the Agent and each of the Banks. Capitalized
terms used in this Section 2 which are defined in the LCPI Commitment shall have
the meaning assigned to such terms in the LCPI Commitment. Effective upon
satisfaction of each of the conditions to effectiveness set forth in Section 20
hereof, the Agent and the Banks (x) consent to the acquisition of the Shares by
IHC pursuant to the Tender Offer, provided that such acquisition is financed
solely by the Tender Facilities or other sources which do not include any
Borrowings under the Credit Agreement (the "Approved Change in Control"), and
(y) solely for purposes of the Approved Change in Control, waive the provisions
of Section 7.01(l) of the Credit Agreement, and agree that no Default or Event
of Default shall occur under the Credit Agreement by reason of the Approved
Change in Control.

3. Amendments to Section 1.01. Section 1.01 of the Credit Agreement
hereby is amended by deleting the definition of "Termination Date" and adding
the following new definitions in appropriate alphabetical order:

"IHC" means Imperial Holly Corporation, a Texas corporation.

"IHC Merger" means (i) the "Merger", as defined in the LCPI
Commitment, or (ii) any other merger of the Borrower with IHC or any Person
which is Affiliate thereof, other than a Person which was an Affiliate of the
Borrower prior to the IHC Tender Date.

"IHC Tender Date" means the "Tender Date", as defined in the LCPI
Commitment.

"LCPI" means Lehman Commercial Paper, Inc., 3 World Financial
Center, New York, New York 10285.

"LCPI Commitment" means, collectively (i) the Commitment Letter
dated September 10, 1997, from LCPI to IHC, as amended by Commitment Letter
Amendment dated September 18, 1997, for Senior Secured Credit Facilities
described in term sheets attached to the LCPI Commitment as Exhibits A, B and C,
as such term sheets were amended by such Commitment Letter Amendment, (ii) such
term sheets and (iii) any amendment to such Commitment Letter or such term
sheets which has been expressly consented to by the Agent and each of the Banks.

<PAGE> 3

"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's Capital Stock (except dividends payable solely in
shares of its Capital Stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
Capital Stock (except shares acquired upon the conversion thereof into other
shares of its Capital Stock) or (b) any option, warrant or other right to
acquire shares of the Borrower's Capital Stock.

"Termination Date" means: (i) the earlier of (A) January 31, 1998,
(B) 90 days after the IHC Tender Date or (C) the date of any IHC Merger; or (ii)
such later date to which the Agent and each of the Banks may agree in writing,
in their sole and absolute discretion.

4. Replacement of Section 2.05(b). Section 2.05(b) of the Credit
Agreement hereby is deleted in its entirety, and the following new Section
2.05(b) is substituted therefor:

(b) Notwithstanding the foregoing, the outstanding
principal amount of the Loans, if any, together with all accrued but
unpaid interest thereon, if any, and the Face Amount of the outstanding
Banker's Acceptances, shall be due and payable on the Termination Date.

5. Replacement of Section 6.03. Section 6.03 of the Credit Agreement
hereby is deleted in its entirety, and the following new Section 6.03 is
substituted therefor:

SECTION 6.03. Maintenance of Existence and
Operations. The Borrower shall, and shall cause each Subsidiary to,
maintain its corporate existence and carry on its business in
substantially the same manner and in substantially the same fields as
such business is now carried on and maintained, and maintain its
operations in the ordinary course of business in accordance with
historical practices existing on September 30, 1997.

6. Amendment to Section 6.05. Section 6.05 of the Credit Agreement
hereby is amended by inserting the words ", subject to the definition of
Termination Date and the provisions of Section 2.05(b), if applicable," after
the words "provided that" in the sixth line thereof.

7. Amendment to Section 6.14. Section 6.14 of the Credit Agreement
hereby is amended by inserting the words "(including, without limitation, any
transaction or arrangement involving or pertaining to transfer pricing)" after
the word "transaction" in the third line thereof.

<PAGE> 4

8. Amendment to Section 6.16. Section 6.16 of the Credit Agreement
hereby is amended by adding the following at the end thereof:

, and provided, further, that, notwithstanding anything to the contrary
in this Section 6.16, no loans or advances may be made to IHC or to any
Person which is Affiliate thereof, other than a Person which was an
Affiliate of the Borrower prior to the IHC Tender Date, if otherwise
permitted pursuant to this Section 6.16.

9. Amendment to Section 6.17. Section 6.17 of the Credit Agreement
hereby is amended by adding the following at the end thereof:

, and provided, further, that, notwithstanding anything to the contrary
in this Section 6.17, no Investments may be made in IHC or to any
Person which is Affiliate thereof, other than a Person which was an
Affiliate of the Borrower prior to the IHC Tender Date, if otherwise
permitted pursuant to this Section 6.17.

10. New Section 6.25. The following new Section 6.25 hereby is added to
the Credit Agreement:

SECTION 6.25. Restricted Payments. The Borrower
will not declare or make any Restricted Payment during any
Fiscal Year.

11. Replacement of Section 7.01(b). Section 7.01(b) of the Credit
Agreement hereby is deleted in its entirety, and the following new Section
7.01(b) is substituted therefor:

(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 6.01(e), 6.02(ii), 6.03 through 6.06, inclusive,
Sections 6.14 through 6.16, inclusive, or Sections 6.18 through 6.25,
inclusive; or

12. Restatement of Representations and Warranties. The Borrower hereby
restates and renews each and every representation and warranty heretofore made
by it in the Credit Agreement and the other Loan Documents as fully as if made
on the date hereof and with specific reference to this Consent and First
Amendment and all other loan documents executed and/or delivered in connection
herewith.

13. Effect of Consent and First Amendment. Except as set forth
expressly hereinabove, all terms of the Credit Agreement and the other Loan
Documents shall be and remain in full force and effect, and shall constitute the
legal, valid, binding and enforceable obligations of the Borrower. The consent
and waiver set forth in Section 2 hereof shall relate only to the Approved

<PAGE> 5

Change in Control, and the amendments contained herein shall be deemed to have
prospective application only, unless otherwise specifically stated herein.

14. Ratification. The Borrower hereby restates, ratifies and reaffirms
each and every term, covenant and condition set forth in the Credit Agreement
and the other Loan Documents effective as of the date hereof.

15. Counterparts. This Consent and First Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts, taken together, shall constitute but
one and the same instrument.

16. Section References. Section titles and references used in this
Consent and First Amendment shall be without substantive meaning or content of
any kind whatsoever and are not a part of the agreements among the parties
hereto evidenced hereby.

17. No Default. To induce the Agent and the Banks to enter into this
Consent and First Amendment and to continue to make advances pursuant to the
Credit Agreement, the Borrower hereby acknowledges and agrees that, as of the
date hereof, and after giving effect to the terms hereof, there exists (i) no
Default or Event of Default and (ii) no right of offset, defense, counterclaim,
claim or objection in favor of the Borrower arising out of or with respect to
any of the Loans or other obligations of the Borrower owed to the Banks under
the Credit Agreement.

18. Further Assurances. The Borrower agrees to take such further
actions as the Agent shall reasonably request in connection herewith to evidence
the amendments herein contained to the Borrower.

19. Governing Law. This Consent and First Amendment shall be governed
by and construed and interpreted in accordance with, the laws of the State of
Georgia.

20. Conditions Precedent. This Consent and First Amendment shall become
effective only upon (i) execution and delivery of this Consent and First
Amendment by each of the parties hereto, and (ii) payment to the Agent, for the
ratable account of the Banks, of a consent, waiver and amendment fee in an
aggregate amount equal to 0.20% of the aggregate Commitments of the Banks.

<PAGE> 6

IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Consent and First Amendment to be duly executed, under seal, by its
duly authorized officer as of the day and year first above written.

<TABLE>
<S> <C>
SAVANNAH FOODS & INDUSTRIES, WACHOVIA BANK, N.A. (successor by
INC., as Borrower (SEAL) merger to Wachovia Bank of Georgia,
N.A.), as Agent and as a Bank (SEAL)

By: By:
----------------------------------- ----------------------------------
Title: Title:

THE CHASE MANHATTAN BANK, THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank (SEAL) as a Bank (SEAL)

By: By:
----------------------------------- ----------------------------------
Title: Title:

CITIZENS BANK (formerly SUNTRUST BANK, ATLANTA,
Second National Bank as a Bank (SEAL)
of Saginaw, as a Bank (SEAL)

By: By:
----------------------------------- ----------------------------------
Title: Title:

COOPERATIEVE CENTRALERAIFFEISEN-
BOERENLEEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH,
as a Bank (SEAL)

By:
-----------------------------------
Title:

By:
-----------------------------------
Title:
</TABLE>

<PAGE> 1
EXHIBIT 4.3

SECOND CONSENT AND WAIVER UNDER CREDIT AGREEMENT

THIS SECOND CONSENT AND WAIVER UNDER CREDIT AGREEMENT (this "Consent
and Waiver") is dated as of the 12th day of November, 1997 among SAVANNAH FOODS
& INDUSTRIES, INC. (the "Borrower"), WACHOVIA BANK, N.A. (successor by merger to
Wachovia Bank of Georgia, N.A.), as Agent (the "Agent") and WACHOVIA BANK, N.A.,
THE CHASE MANHATTAN BANK, THE FIRST NATIONAL BANK OF CHICAGO, CITIZENS BANK
(formerly Second National Bank of Saginaw), SUNTRUST BANK, ATLANTA, and
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEEENBANK B.A., "RABOBANK NEDERLAND", NEW
YORK BRANCH (collectively, the "Banks");

WITNESSETH:

WHEREAS, the Borrower, the Agent and the Banks executed and delivered
that certain Credit Agreement, dated as of April 1, 1996, as amended by the
Consent and Waiver under and First Amendment to Credit Agreement, dated as of
October 16, 1997 (as so amended, the "Credit Agreement");

WHEREAS, the Borrower has requested that the Agent and the Banks
consent to a certain transfer of funds from the Borrower to IHC which would not
be permitted under Section 6.05, 6.16, 6.17 or 6.25, as applicable, of the
Credit Agreement and waive any Event of Default which otherwise would occur
under Section 6.05, 6.16, 6.17 or 6.25 as a result thereof, and the Agent and
the Banks have agreed to such consent and waiver, subject to the terms and
conditions hereof;

68
<PAGE> 2

2. Consent and Waiver. IHC is making a tender offer for Capital Stock
of the Borrower, which tender offer is more particularly described in the LCPI
Commitment (the "IHC Tender Offer"). The Borrower has proposed that, if the IHC
Tender Offer is successful, in connection therewith, on or after the IHC Tender
Date, the following actions be taken (collectively, the "Flexitrust Tender
Proceeds Actions): (i) IHC would, for a purchase price of approximately
$29,900,000, buy approximately 1,475,000 of the 2,500,000 shares of Capital
Stock of the Borrower held by the Flexitrust (a benefits trust established in
connection with the Borrower's employee benefits plans, the trustee of which is
Wachovia Bank, N.A.); (ii) approximately $27,600,000 of the proceeds of such
acquisition (the "Flexitrust Tender Proceeds") would be used by the Flexitrust
to repay in full the purchase money note of the Flexitrust to the Borrower which
was executed by the Flexitrust in connection with the original purchase of such
Capital Stock of the Borrower by the Flexitrust; and (iii) the Flexitrust Tender
Proceeds so paid to the Borrower in repayment of such purchase money note would
be distributed by the Borrower to IHC, either as a loan or other Investment or
as a Restricted Payment (any such type of distribution being the "Flexitrust
Tender Proceeds Distribution"). Effective upon satisfaction of the conditions to
effectiveness set forth in Section 11 hereof, the Agent and the Banks (x)
consent to the Flexitrust Tender Proceeds Distribution, as part of the
Flexitrust Tender Proceeds Actions, and (y) solely in connection with the
Flexitrust Tender Proceeds Actions, waive the provisions of Sections 6.05, 6.16,
6.17 and 6.25 of the Credit Agreement and agree that no Default or Event of
Default shall occur under the Credit Agreement by virtue of the Flexitrust
Tender Proceeds Distribution.

3. Restatement of Representations and Warranties. The Borrower hereby
restates and renews each and every representation and warranty heretofore made
by it in the Credit Agreement and the other Loan Documents as fully as if made
on the date hereof and with specific reference to this Consent and Waiver and
all other loan documents executed and/or delivered in connection herewith.

4. Effect of Consent and Waiver. Except as set forth expressly
hereinabove, all terms of the Credit Agreement and the other Loan Documents
shall be and remain in full force and effect, and shall constitute the legal,
valid, binding and enforceable obligations of the Borrower. The consent and
waiver set forth in Section 2 hereof shall relate only to the Flexitrust Tender
Proceeds Distributions as part of the Flexitrust Tender Proceeds Actions, and
shall be deemed to have prospective application only, unless otherwise
specifically stated herein.

5. Ratification. The Borrower hereby restates, ratifies and reaffirms
each and every term, covenant and condition set forth in the Credit Agreement
and the other Loan Documents effective as of the date hereof.

<PAGE> 3

6. Counterparts. This Consent and Waiver may be executed in any number
of counterparts and by different parties hereto in separate counterparts and
transmitted by facsimile to the other parties, each of which when so executed
and delivered by facsimile shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.

7. Section References. Section titles and references used in this
Consent and Waiver shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreements among the parties hereto
evidenced hereby.

8. No Default. To induce the Agent and the Banks to enter into this
Consent and Waiver and to continue to make advances pursuant to the Credit
Agreement, the Borrower hereby acknowledges and agrees that, as of the date
hereof, and after giving effect to the terms hereof, there exists (i) no Default
or Event of Default and (ii) no right of offset, defense, counterclaim, claim or
objection in favor of the Borrower arising out of or with respect to any of the
Loans or other obligations of the Borrower owed to the Banks under the Credit
Agreement.

9. Further Assurances. The Borrower agrees to take such further actions
as the Agent shall reasonably request in connection herewith to evidence the
amendments herein contained to the Borrower.

10. Governing Law. This Consent and Waiver shall be governed by and
construed and interpreted in accordance with, the laws of the State of Georgia.

11. Conditions Precedent. This Consent and Waiver shall become
effective only upon execution and delivery of this Consent and Waiver by each of
the parties hereto.

<PAGE> 4

IN WITNESS WHEREOF, the Borrower, the Agent and each of the Banks has
caused this Consent and Waiver to be duly executed, under seal, by its duly
authorized officer as of the day and year first above written.

<TABLE>
<S> <C>
SAVANNAH FOODS & INDUSTRIES, WACHOVIA BANK, N.A. (successor by
INC., as Borrower (SEAL) merger to Wachovia Bank of Georgia,
N.A.), as Agent and as a Bank (SEAL)

By: By:
----------------------------------- ----------------------------------
Title: Title:

THE CHASE MANHATTAN BANK, THE FIRST NATIONAL BANK OF CHICAGO,
as a Bank (SEAL) as a Bank (SEAL)

By: By:
----------------------------------- ----------------------------------
Title: Title:

CITIZENS BANK (formerly SUNTRUST BANK, ATLANTA,
Second National Bank as a Bank (SEAL)
of Saginaw, as a Bank (SEAL)

By: By:
----------------------------------- ----------------------------------
Title: Title:

COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEEENBANK B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH,
as a Bank (SEAL)

By:
-----------------------------------
Title:

By:
-----------------------------------
Title:
</TABLE>

<PAGE> 1

Exhibit 10-5
AMENDMENT 2A TO THE
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP)
OF
SAVANNAH FOODS & INDUSTRIES, INC.
AND SUBSIDIARIES

WHEREAS, Savannah Foods & Industries, Inc. (the "Employer") maintains the
Supplemental Executive Retirement Plan (SERP), hereinafter referred to as the
"Plan," for selected key employees and which was restated effective January 1,
1989;

WHEREAS, pursuant to the power reserved by the Employer by Article 11.1 of
the Plan, on April 18, 1996, the Board of Directors of the Employer adopted a
resolution amending the plan effective June 30, 1996; and

WHEREAS, the Board of Directors wishes to document the resolution adopted
as of June 30, 1996, by incorporating it into the Plan by way of this Amendment
2a;

NOW THEREFORE, effective as of June 30, 1996, the Plan is amended as set
forth below:

ARTICLE 1. REFERENCES, CONSTRUCTION AND DEFINITIONS

1.11 Credited Service. The entire paragraph shall be replaced by the following
paragraph:

"Credited Service shall mean for any Participant his total number of
years and months of employment, minus any Breaks in Service as defined
below, beginning with the date the Participant enters employment with the
Company, or is re-employed, and shall accrue up to and including June 30,
1996. No Credited Service shall accrue after June 30, 1996. Twelve months
shall be deemed to constitute a completed year; any remaining fraction of
a year of service shall be counted as an entire year of service. The
determination of all Participant's Credited Service shall be subject to
the following rules:

(a) A Break in Service shall occur if an employee has ceased
Employment for 12 consecutive months or longer. In determining the
length of each Break in Service, 30 days shall be deemed to
constitute a completed month. Such Break in Service shall begin on
the date the Employee is discharged, quits or retires. If a
severed Employee reenters Employment within 12 months following
his severance date, there will be no Break in Service and the
entire period shall be included in the Employee's Credited
Service.

(b) The Employee's period of absence shall not constitute a
Break in Service in the event the Employee is:

(i) on an authorized leave of absence granted by the
Company in accordance with standard personnel policies
applied to all Employees in a non-discriminatory manner to
all Employee's similarly situated, including but not
limited to a leave of absence for disability or maternity;
or

<PAGE> 2

(ii) on an authorized military leave while the
Employee's reinstatement rights are protected by law
provided that such Employee directly entered military
service from the Employer's service and shall not have
voluntarily reenlisted after the date of his first
entering active military service;

(c) In the event an Employee transfers between the Company
and its subsidiaries or affiliates, the total combined employment
in each position shall be deemed Credited Service under the Plan.

(d) Any period of Total Disability by a Totally Disabled
Participant prior to June 30, 1996 shall be counted as Credited
Service."

1.34 SERP Death Benefit. Subparagraphs (a) and (b) shall be deleted and
replaced by the following sentences:

"(a) The Participant's accrued benefit from the Retirement Income Plan
determined as of June 30, 1996, and listed in the attached Supplement
I;

(b) the Participant's Social Security Amount as determined as of June
30, 1996, and listed in the attached Supplement I."

1.35 SERP Retirement Benefit. Subparagraphs (a) and (b) shall be deleted
and replaced by the following sentences:

"(a) The Participant's accrued benefit from the Retirement Income Plan
determined as of June 30, 1996, and listed in the attached Supplement
I;

(b) the Participant's Social Security Amount as determined as of June
30, 1996, and listed in the attached Supplement I."

1.37 Social Security Amount. The entire paragraph shall be deleted and
replaced by the following paragraph:

"1.37 Social Security Amount. Effective June 30, 1996, the Social
Security Amount shall be determined in accordance with Article 2.39 of
the Savannah Foods & Industries, Inc. Retirement Income Plan. The
precise amount of social security offset, as of June 30, 1996, has been
calculated and listed in the attached Supplement I."

The following paragraph shall be added to the Plan:

"1.43 Supplement I. Supplement I is hereby incorporated herein, and made a
part of, the Plan as an attachment."

73
<PAGE> 3

ARTICLE 3. RETIREMENT BENEFITS

3.1 Normal Retirement Benefits. The last sentence of subparagraph (b)
shall be replaced with the following sentence:

"Each monthly payment of the Normal Retirement Benefit to the
Participant shall equal the Participant's Accrued SERP Retirement
Benefit."

3.3 Postponed Retirement Benefits. The last sentence of subparagraph (b)
shall be replaced with the following sentence:

"Each monthly payment of the Postponed Retirement Benefit to the
Participant shall equal the Participant's Accrued SERP Retirement
Benefit."

3.4 Disability Retirement Benefit. The last sentence of subparagraph (b)
shall be replaced by the following sentence:

"Each monthly payment of the Disability Retirement Benefit to the
Participant shall equal the Participant's Accrued SERP Retirement
Benefit."

ARTICLE 4. PRE-RETIREMENT DEATH BENEFIT

4.3 Amount. This paragraph shall be replaced with the following paragraph:

"Each monthly payment of the Pre-Retirement Death Benefit shall equal
the Participant's SERP Death Benefit multiplied by the Accrual
Fraction."

IN WITNESS WHEREOF, Savannah Foods & Industries, Inc. has caused this
Amendment 2a to be executed by its duly authorized officers and its Corporate
Seal to be affixed hereunder this 10th day of July, 1997.

SAVANNAH FOODS & INDUSTRIES, INC.

By: /S/ F. Sprague Exley
----------------------------------------------
Sr. Vice President Human Resources and
Administration

Attest: /S/ John M. Tatum
----------------------------------------------
Secretary

[Corporate Seal]

<PAGE> 1

Exhibit 21-1

Savannah Foods & Industries, Inc.
List of Subsidiaries

<TABLE>
<CAPTION>
Name of Subsidiary Jurisdiction of Incorporation
- ------------------ -----------------------------
<S> <C>
Biomass Corporation Delaware

Dixie Crystals Brands, Inc. Delaware
Subsidiaries of Dixie Crystals Brands, Inc.
Dixie Crystals Foodservice, Inc. Delaware
King Packaging Company, Inc. Georgia

Food Carrier, Inc. Georgia

Michigan Sugar Company Michigan
Subsidiaries of Michigan Sugar Company
Great Lakes Sugar Company Ohio
Pioneer Trading Corporation Virgin Islands

Refined Sugar Trading Institute Delaware

Savannah Foods Industrial, Inc. Delaware
Subsidiary of Savannah Foods Industrial, Inc.
Phoenix Packaging Corporation Delaware

Savannah International Company Delaware
Subsidiary of Savannah International Company
Savannah Packaging Company Delaware

Savannah Investment Company Delaware

Savannah Molasses & Specialties Company Delaware

Savannah Sugar Refining Corporation Georgia

Savannah Total Invert Company Delaware
</TABLE>

<PAGE> 1

Exhibit 23-1
Page 1 of 2

Consent of Independent Public Accountants

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-94678), as amended October 18, 1994, pertaining to
the Employee Retirement Savings Account Plan of Savannah Foods & Industries,
Inc., of our report dated November 17, 1997, appearing on page 15 of this Form
10-K.

ARTHUR ANDERSEN LLP
Atlanta, Georgia
December 12, 1997

<PAGE> 2
Exhibit 23-1
Page 2 of 2

Consent of Independent Accountants

PRICE WATERHOUSE LLP
Atlanta, Georgia
December 12, 1997

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SAVANNAH FOODS & INDUSTRIES, INC. FOR THE YEAR ENDED
SEPTEMBER 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-END> SEP-28-1997
<CASH> 14,677
<SECURITIES> 0
<RECEIVABLES> 68,635
<ALLOWANCES> 0
<INVENTORY> 90,908
<CURRENT-ASSETS> 180,395
<PP&E> 426,367
<DEPRECIATION> 246,374
<TOTAL-ASSETS> 399,071
<CURRENT-LIABILITIES> 87,224
<BONDS> 26,100
0
0
<COMMON> 17,365
<OTHER-SE> 199,324
<TOTAL-LIABILITY-AND-EQUITY> 399,071
<SALES> 1,191,839
<TOTAL-REVENUES> 1,191,839
<CGS> 1,037,502
<TOTAL-COSTS> 1,037,502
<OTHER-EXPENSES> 36,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,850
<INCOME-PRETAX> 51,217
<INCOME-TAX> 19,136
<INCOME-CONTINUING> 32,081
<DISCONTINUED> 0
<EXTRAORDINARY> (376)
<CHANGES> 0
<NET-INCOME> 31,705
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 0

</TABLE>