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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): May 9, 2003 (April 24, 2003)

FLOWERS FOODS, INC.

(Exact name of registrant as specified in its charter)
         
Georgia   1-16247   58-2582379
 
 
(State or other jurisdiction   (Commission   (IRS Employer
of incorporation)   File Number)   Identification No.)
     
1919 Flowers Circle, Thomasville, GA   31757
 
(Address of principal executive offices)   (Zip Code)
 
Registrant’s telephone number, including area code:   (229) 226-9110
   

 

 

ITEM 2. Acquisition or Disposition of Assets.

     On April 24, 2003 Flowers Foods, Inc. (the “Company”) issued a press release announcing the completion of the sale of substantially all the assets of its Mrs. Smith’s Bakeries frozen desert business to The Schwan Food Company (“Schwan”). The transaction was valued at approximately $240 million. The value received by the Company was determined on the basis of arm’s length negotiations between the parties. The sale was completed in accordance with the Asset Purchase Agreement dated January 29, 2003 by and among the Company, Mrs. Smith’s Bakeries, LLC and Schwan. The final purchase price is subject to a net prepayment and inventory adjustment which is to be calculated within ninety (90) days following the closing of the transaction. A copy of the press release is furnished with this report as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.

ITEM 7. Financial Statements and Exhibits.

a.   Financial statements of business acquired.
 
    Not applicable.
 
b.   Pro Forma financial information.
 
    The required pro forma financial information is filed herewith as part of this report.
 
c.   Exhibits.
 
    The following exhibits are furnished as part of this Report:
     
EXHIBIT NUMBER   EXHIBIT
2.1   Asset Purchase Agreement dated January 29, 2003 by and among The Schwan Food Company, Flowers Foods, Inc. and Mrs. Smith’s Bakeries, LLC
2.2   First Amendment to Asset Purchase Agreement dated April 24, 2003 by and among The Schwan Food Company, Flowers Foods, Inc. and Mrs. Smith’s Bakeries, LLC
99.1   Press release of Flowers Foods, Inc. dated April 24, 2003

 

 

Unaudited Pro Forma Financial Information

     The following unaudited pro forma condensed consolidated balance sheet as of December 28, 2002 presents our combined financial position assuming the sale of certain assets of Mrs. Smith’s Bakeries’ frozen dessert business to The Schwan Food Company (the “transaction”) had been completed on that date. The following unaudited pro forma condensed consolidated income statements for the 52 weeks ended December 28, 2002, December 29, 2001 and December 30, 2000 presents our combined results of operations assuming that the transaction had been completed on January 2, 2000. In the opinion of management, these statements include all material adjustments necessary to reflect, on a pro forma basis, the impact of the transaction on the historical financial information of the Company. The adjustments set forth in the “Pro Forma Adjustments” column are described in the Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

     Following the transaction, the Company will consist of Flowers Foods Bakeries Group, LLC, our producer and marketer of fresh packaged bakery products and Flowers Foods Specialty Group, LLC, our producer and marketer of frozen bakery products and fresh bakery snack products. Consequently, the financial statements of the Company will consist of the historical financial statements of the Company, with Mrs. Smith’s Bakeries’ frozen dessert business presented as a discontinued operation. Accordingly, the following unaudited pro forma financial information reflects the exclusion of the assets and liabilities disposed of and the results of operations of Mrs. Smith’s Bakeries’ frozen dessert business.

     Our unaudited pro forma condensed consolidated financial information should be read in conjunction with the consolidated financial statements and the related notes contained in our Form 10-K for the fiscal year ended December 28, 2002 as filed with the Securities and Exchange Commission on March 28, 2003. Our unaudited pro forma condensed consolidated financial information has been presented for informational purposes only and does not reflect the results of operations or financial position of the Company that would have existed had we operated without the Mrs. Smith’s Bakeries’ frozen dessert business for the periods presented and should not be relied upon as being indicative of our future results after the transaction.

 

 

Flowers Foods, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
(Amounts in thousands, except share data)

                                               
          December 28, 2002    
         
     
              Pro forma adjustments        
             
  Pro forma
          Flowers Foods   Mrs. Smith's (a)   Debit   Credit   Flowers Foods
         
 
 
 
 
     
ASSETS
                                        
Current Assets:
                                        
 
Cash and cash equivalents
   $ 69,826     $ 0     $ 231,551 (b)   $ 249,972 (b)   $ 28,235  
 
 
                             23,170 (c)        
 
    
     
                     
 
 
Accounts and notes receivable, net
     104,121       0                       104,121  
 
    
     
                     
 
 
Inventories, net
     81,897       53,998                       27,899  
 
    
     
                     
 
 
Spare parts and supplies
     23,468       3,649                       19,819  
 
    
     
                     
 
 
Assets held for sale
     18,563       0                       18,563  
 
    
     
                     
 
 
Other
     12,689       2,615                       10,074  
 
    
     
                     
 
 
     310,564       60,262                       208,711  
 
    
     
                     
 
Net Property, Plant and Equipment
     579,739       141,592                       438,147  
 
    
     
                     
 
Deferred Taxes
     22,267       0       13,400 (c)             35,667  
 
    
     
                     
 
Other Assets
     13,390       3,179               4,600 (c)     5,611  
 
    
     
                     
 
Notes Receivable
     71,599       0                       71,599  
 
    
     
                     
 
Goodwill, net
     54,249       0                       54,249  
 
    
     
                     
 
Other Intangible Assets, net
     44,572       34,468                       10,104  
 
    
     
                     
 
 
   $ 1,096,380                             $ 824,088  
 
    
                             
 
   
LIABILITIES AND STOCKHOLDERS’ EQUITY
                                        
Current Liabilities:
                                        
 
Current maturities of long-term debt
   $ 27,231     $ 0     $ 25,844 (b)           $ 1,387  
 
Accounts payable
     82,827       0                       82,827  
 
Other accrued liabilities
     94,461       794       3,948 (b)             82,919  
 
 
                     6,800 (d)                
 
    
     
                     
 
 
     204,519       794                       167,133  
 
    
     
                     
 
Long-Term Debt and Capital Leases
     223,133       0       217,733 (b)             5,400  
 
    
     
                     
 
Other Liabilities:
                                        
 
Postretirement/postemployment obligations
     54,486       0                       54,486  
 
Facility closing costs and severance
     7,337       0                       7,337  
 
Other
     13,909       2,133       570 (b)             11,206  
 
    
     
                     
 
 
     75,732       2,133                       73,029  
 
    
     
                     
 
Stockholders’ Equity:
                                        
 
Preferred stock — $100 par value
                                        
 
Preferred stock — $.01 par value
                                        
 
Common stock
     300       0                       300  
 
Capital in excess of par value
     483,142       0                       483,142  
 
Retained earnings
     131,388       0       17,070 (c)             110,118  
 
 
                     4,200 (c)                
 
Accumulated other comprehensive loss
     (21,834 )     0               6,800 (d)     (15,034 )
 
    
     
                     
 
 
     592,996       0                       578,526  
 
    
     
                     
 
 
   $ 1,096,380                             $ 824,088  
 
    
                             
 

The notes to this unaudited pro forma condensed consolidated balance sheet are an integral part of the pro forma financial information presented.

 

 

Flowers Foods, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
(Amounts in thousands, except per share data)

                                         
    52 Weeks Ended December 28, 2002
   
                    Pro forma adjustments        
                   
  Pro forma
    Flowers Foods   Mrs. Smith’s (e)   Debit   Credit   Flowers Foods
   
 
 
 
 
Net sales
   $ 1,652,162     $ 323,555                     $ 1,328,607  
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown below)
     910,369       258,483                       651,886  
Selling, marketing and administrative expenses
     613,020       62,965                       550,055  
Depreciation and amortization
     73,965       17,192                       56,773  
Asset impairment
     26,500       24,368                       2,132  
Unusual charges
     1,111       1,111                       0  
 
    
     
                     
 
Income from operations
     27,197       (40,564 )                     67,761  
Interest income
     (5,686 )     0                       (5,686 )
Interest expense
     22,167       3,454             $ 15,973 (f)     2,740  
 
    
     
                     
 
Income (loss) from continuing operations before income taxes
     10,716       (44,018 )                     70,707  
Income tax expense
     4,593       0     $ 22,629 (g)             27,222  
 
    
     
                     
 
Net income (loss) from continuing operations
   $ 6,123     $ (44,018 )                   $ 43,485  
 
    
     
                     
 
Net Income Per Common Share:
                                        
Basic
   $ 0.20                             $ 1.46  
Weighted average shares outstanding
     29,836                               29,836  
Diluted
   $ 0.20                             $ 1.42  
Weighted average shares outstanding
     30,528                               30,528  

The notes to this unaudited pro forma condensed consolidated statement of income are an integral part of the pro forma financial information presented.

 

 

Flowers Foods, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
(Amounts in thousands, except per share data)

                                         
    52 Weeks Ended December 29, 2001
   
                    Pro forma adjustments    
                   
  Pro forma
    Flowers Foods(h)   Mrs. Smith’s(e)   Debit   Credit   Flowers Foods
   
 
 
 
 
Net sales
   $ 1,627,004     $ 327,514                     $ 1,299,490  
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown below)
     888,824       247,955                       640,869  
Selling, marketing and administrative expenses
     622,132       68,017                       554,115  
Depreciation and amortization
     73,815       16,691                       57,124  
Insurance proceeds
     (7,473 )     (7,473 )                     0  
Unusual charges
     43,898       17,393                       26,505  
Extraordinary gain on early extinguishment of debt
     (6,422 )     0                       (6,422 )
 
    
     
                     
 
Income from operations
     12,230       (15,069 )                     27,299  
Interest income
     (4,278 )     0                       (4,278 )
Interest expense
     36,466       1,993             $ 19,154 (f)     15,319  
 
    
     
                     
 
Income (loss) from continuing operations before income taxes
     (19,958 )     (17,062 )                     16,258  
Income tax expense (benefit)
     (5,665 )     0     $ 11,924 (g)             6,259  
 
    
     
                     
 
Net income (loss) from continuing operations
   $ (14,293 )   $ (17,062 )                   $ 9,999  
 
    
     
                     
 
Net Income (Loss) Per Common Share:
                                        
Basic
   $ (0.48 )                           $ 0.34  
Weighted average shares outstanding
     29,798                               29,798  
Diluted
   $ (0.48 )                           $ 0.34  
Weighted average shares outstanding
     29,798                               29,798  

The notes to this unaudited pro forma condensed consolidated statement of income are an integral part of the pro forma financial information presented.

 

 

Flowers Foods, Inc.
Unaudited Pro Forma Condensed Consolidated Statement of Income
(Amounts in thousands, except per share data)

                                         
    52 Weeks Ended December 30, 2000
   
                    Pro forma adjustments        
                   
  Pro forma
    Flowers Foods   Mrs. Smith's(e)   Debit   Credit   Flowers Foods
   
 
 
 
 
Net sales
   $ 1,562,879     $ 316,696                     $ 1,246,183  
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown below)
     900,198       256,251                       643,947  
Selling, marketing and administrative expenses
     585,434       66,496                       518,938  
Depreciation and amortization
     67,102       16,847                       50,255  
Insurance proceeds
     (17,193 )     (17,193 )                     0  
Asset impairment
     17,383       17,383                       0  
Unusual charges
     321       1,475                       (1,154 )
 
    
     
                     
 
Income (loss) from operations
     9,634       (24,563 )                     34,197  
Interest income
     0       0                       0  
Interest expense
     68,373       4,423             $ 15,727 (f)     48,223  
 
    
     
                     
 
(Loss) from continuing operations before income taxes
     (58,739 )     (28,986 )                     (14,026 )
Income tax expense (benefit)
     (16,457 )     0     $ 12,530 (g)             (3,927 )
 
    
     
                     
 
Net (loss) from continuing operations
   $ (42,282 )   $ (28,986 )                   $ (10,099 )
 
    
     
                     
 
Net (Loss) Per Common Share:
                                        
Basic
   $ (1.41 )                           $ (0.34 )
Weighted average shares outstanding
     30,036                               30,036  
Diluted
   $ (1.41 )                           $ (0.34 )
Weighted average shares outstanding
     30,036                               30,036  

The notes to this unaudited pro forma condensed consolidated statement of income are an integral part of the pro forma financial information presented.

 

 

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information
(Amounts in Thousands)

(a)   Reflects the separation of the assets and liabilities of the Mrs. Smith’s Bakeries’ frozen dessert business sold to The Schwan Food Company that are included in the Company’s consolidated balance sheet as of December 28, 2002.
 
(b)   Reflects the payment of the Company’s senior secured credit facility as required by such facility upon consummation of the transaction, capital lease obligations, related interest and certain other liabilities. Proceeds from the transaction of $231.6 million, as well as a portion of the Company’s cash holdings were used for this payment.
 
(c)   In connection with the transaction, an estimate of the various transaction and other costs are as follows. Approximately $26.1 million of these costs will be reported in discontinued operations in fiscal year 2003.
           
Investment banking fees
   $ 1,870  
Legal and accounting fees
     1,400  
Deferred financing costs
     4,600 (1)
Lease breakage fees
     4,800  
Settlement of interest rate swap
     5,500  
Separation and severance
     4,800 (2)
System license transfer fees
     1,600  
Indemnification insurance premium
     2,700  
Other
     500  
 
    
 
 
Total
   $ 27,770  
 
    
 

  (1) Represents a non-cash write-off of deferred financing costs.
 
  (2) Total cash payments for separation and severance was approximately $5.8 million, of which $1.0 million was already accrued in the Company’s liabilities.
 
    As a result of the sale, the Company expects to record a loss of approximately $21.2 million, (net of a $13.4 million tax benefit) which includes the transaction costs detailed above and approximately $4.2 million, net of tax, resulting from the sale of the assets.

(d)   Represents the settlement of the interest rate swap at December 28, 2002. The cash payment of this settlement is included in the liabilities discussed in footnote (b) above.
 
(e)   Represents the exclusion of the results of operations of the Mrs. Smith’s Bakeries’ frozen dessert business that are included in the Company’s consolidated statements of income for the periods presented.
 
(f)   Reflects the change in interest expense as a result of the payment of the Company’s senior secured credit facility and capital lease obligations.
 
    A 1/8% change in the interest rates used to calculate the change in interest expense in the respective pro forma condensed consolidated statements of income would yield the following pro forma net income (loss) from continuing operations:
                 
    Increase 1/8%   Decrease 1/8%
   
 
52 weeks ended December 28, 2002
   $ 43,379     $ 43,591  
52 weeks ended December 29, 2001
   $ 9,757     $ 10,242  
52 weeks ended December 30, 2000
   $ (10,667 )   $ (9,531 )

(g)   For fiscal 2002 and fiscal 2001, adjustment reflects the Company’s pro forma tax rate at 38.5%, which historically approximates its rate during profitable years. For fiscal 2000, the adjustment approximates the effective tax rate of 28% for that year.
 
(h)   Reflects a reclassification to income from operations an extraordinary gain on early extinguishment of debt of $3.9 million, net of tax, pursuant to Statement of Financial Accounting Standards No. 145, “Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections”.

 

 

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
        FLOWERS FOODS, INC.
 
    By:   /s/ Jimmy M. Woodward
Name: Jimmy M. Woodward
Title: Sr. Vice-President, Chief
Financial Officer and
Chief Accounting Officer
 
         
 
Date: May 9, 2003        

 

 

EXHIBIT INDEX

     
EXHIBIT NUMBER   EXHIBIT
2.1   Asset Purchase Agreement dated January 29, 2003 by and among The Schwan Food Company, Flowers Foods, Inc. and Mrs. Smith’s Bakeries, LLC
2.2   First Amendment to Asset Purchase Agreement dated April 24, 2003 by and among The Schwan Food Company, Flowers Foods, Inc. and Mrs. Smith’s Bakeries, LLC
99.1   Press release of Flowers Foods, Inc. dated April 24, 2003