1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 9, 2001
FILE NO. 1-16247
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
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FLOWERS FOODS, INC.
(Exact Name of Registrant as Specified in Its Charter)
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GEORGIA 58-2582379
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1919 FLOWERS CIRCLE
THOMASVILLE, GEORGIA 31757
(Address of Principal Executive (Zip Code)
Offices)
(229) 226-9110
(Registrant's telephone number, including area code)
---------------------
COPIES TO:
LIZANNE THOMAS, ESQ.
MARK L. HANSON, ESQ.
JONES, DAY, REAVIS & POGUE
3500 SUNTRUST PLAZA
303 PEACHTREE STREET
ATLANTA, GA 30308-3242
TELEPHONE: (404) 521-3939
Securities to be registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
------------------- ------------------------------
Common Stock, $.01 per share The New York Stock Exchange
Rights to Purchase Series A Junior The New York Stock Exchange
Participating Preferred Stock
Securities to be registered pursuant to Section 12(g) of the Act: NONE
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2
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Registrant incorporates by reference into this Registration Statement
(i) certain portions of the Annual Report on Form 10-K for the fiscal year ended
January 1, 2000 of Flowers Industries, Inc. (File No. 1-9787) filed with the
Securities and Exchange Commission ("SEC") on March 31, 2000, and certain
portions of the Quarterly Report on Form 10-Q for the forty weeks ended October
7, 2000 of Flowers Industries, Inc. filed with the SEC on November 21, 2000,
(ii) the financial statements of Keebler Foods Company for the fiscal year ended
January 1, 2000 filed as an exhibit to the Flowers Industries, Inc. Annual
Report on Form 10-K on March 31, 2000, (iii) certain portions of the Quarterly
Report on Form 10-Q for the forty weeks ended October 7, 2000 of Keebler Foods
Company (File No. 1-3705) filed with the SEC on November 21, 2000 and (iv) the
Current Report on Form 8-K of Flowers Industries, Inc. filed with the SEC on
February 6, 2001.
Items of Flowers Industries Annual Report
on Form 10-K being incorporated
by reference
-----------------------------------------
PART II
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
PART IV
Item 14. Report of Independent Accountants
Consolidated Statement of Income for the fifty-two weeks
ended January 1, 2000 and January 2, 1999, the twenty-seven
weeks ended January 3, 1998 and the fifty-two weeks ended
June 28, 1997
Consolidated Balance Sheet at January 1, 2000 and January 2,
1999
Consolidated Statement of Changes in Stockholders' Equity
for the fifty-two weeks ended January 1, 2000 and January 2,
1999, the twenty-seven weeks ended January 3, 1998 and the
fifty-two weeks ended June 28, 1997
Consolidated Statement of Cash Flows for the fifty-two weeks
ended January 1, 2000 and January 2, 1999, the twenty-seven
weeks ended January 3, 1998 and the fifty-two weeks ended
June 28, 1997
Notes to Consolidated Financial Statements
i
3
Items of Flowers Industries Quarterly Report
on Form 10-Q being incorporated
by reference
--------------------------------------------
PART I
Item 1. Financial Statements
Consolidated Balance Sheet at
October 7, 2000 and January 1, 2000
Consolidated Statement of Income for the
Forty weeks ended October 7, 2000 and October 9, 1999
Consolidated Statement of Cash Flows for the
Forty weeks ended October 7, 2000 and October 9, 1999
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Items of Keebler
Quarterly Report on Form 10-Q being
incorporated by reference
-----------------------------------
PART I
Item 1. Financial Statements
Consolidated Balance Sheet at
October 7, 2000 and January 1, 2000
Consolidated Statement of Operations for the
Twelve weeks ended October 7, 2000 and October 9, 1999 and
for the
Forty weeks ended October 7, 2000 and October 9, 1999
Notes to Consolidated Financial Statements
ii
4
FLOWERS FOODS, INC.
INFORMATION REQUIRED IN INFORMATION STATEMENT AND INCORPORATED IN
FORM 10 BY REFERENCE
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS ON FORM 10
ITEM 1. BUSINESS
The information required by this item is contained under: (i) the sections
"Summary -- Flowers Foods, Inc.," "-- Strategic Focus," and "-- Corporate
Information," "Risk Factors," "Cautionary Note Regarding Forward Looking
Statements," "The Spin-off," "Agreements Between Flowers Industries and Flowers
Foods Relating to the Spin-Off" and "Business" of the Information Statement and
such sections are incorporated herein by reference, (ii) portions of the Flowers
Industries, Inc. Annual Report on Form 10-K for the fiscal year ended January 1,
2000 and Quarterly Report on Form 10-Q for the forty weeks ended October 7,
2000, each filed as an exhibit hereto, and such material is incorporated herein
by reference, (iii) the financial statements of Keebler Foods Company for the
fiscal year ended January 1, 2000 filed as an exhibit to the Flowers Industries,
Inc. Annual Report on Form 10-K for the fiscal year ended January 1, 2000 and
certain portions of the Quarterly Report on Form 10-Q for the forty weeks ended
October 7, 2000 of Keebler Foods Company filed with the SEC on November 21, 2000
and (iv) the Current Report on Form 8-K of Flowers Industries, Inc. filed with
the SEC on February 6, 2001, each filed as an exhibit hereto, and such material
is incorporated herein by reference.
ITEM 2. FINANCIAL INFORMATION
The information required by this item is contained under: (i) the sections
"Summary -- Summary Historical Financial Data," "-- Summary Pro Forma Financial
Data," "Selected Historical Financial Data," "Capitalization" and "Pro Forma
Financial Data," of the Information Statement and such sections are incorporated
herein by reference, (ii) portions of the Flowers Industries, Inc. Annual Report
on Form 10-K for the fiscal year ended January 1, 2000 and Quarterly Report on
Form 10-Q for the forty weeks ended October 7, 2000, each filed as an exhibit
hereto, and such material is incorporated herein by reference, (iii) the
financial statements of Keebler Foods Company for the fiscal year ended January
1, 2000 filed as an exhibit to the Flowers Industries, Inc. Annual Report on
Form 10-K for the fiscal year ended January 1, 2000 and certain portions of the
Quarterly Report on Form 10-Q for the forty weeks ended October 7, 2000 of
Keebler Foods Company filed with the SEC on November 21, 2000, and (iv) the
Current Report on Form 8-K of Flowers Industries, Inc. filed with the SEC on
February 6, 2001, each filed as an exhibit hereto, and such material is
incorporated herein by reference.
ITEM 3. PROPERTIES
The information required by this item is contained under the section
"Business -- Properties" of the Information Statement, and such section is
incorporated herein by reference.
iii
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ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained under the section
"Security Ownership of Certain Beneficial Owners and Management" of the
Information Statement, and such section is incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item is contained under the section
"Management" of the Information Statement, and such section is incorporated
herein by reference.
ITEM 6. EXECUTIVE COMPENSATION
The information required by this item is contained under the section
"Management" of the Information Statement, and such section is incorporated
herein by reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained under the sections
"Agreements between Flowers Industries and Flowers Foods Relating to the
Spin-Off," "Management" and "Certain Relationships and Related Transactions" of
the Information Statement, and such sections are incorporated herein by
reference.
ITEM 8. LEGAL PROCEEDINGS
The information required by this item is contained under the section
"Business -- Legal Proceedings" of the Information Statement, and such section
is incorporated herein by reference.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information required by this item is contained under the sections "The
Spin-Off," "Dividend Policy" and "Description of Capital Stock" of the
Information Statement, and such sections are incorporated herein by reference.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On October 19, 2000, Flowers Foods, Inc. issued 500 shares of its common
stock to Flowers Industries, Inc., its direct parent, for consideration of $500.
No underwriter was involved in this sale, and, in the opinion of Flowers Foods,
this transaction is exempt from registration under the Securities Act of 1933,
as amended, by virtue of Section 4(2) thereof in that such transaction did not
involve any public offering.
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The information required by this item is contained under the section
"Description of Capital Stock" of the Information Statement, and such section is
incorporated herein by reference.
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ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The information required by this item is contained in the section
"Description of Capital Stock -- Limited Liability and Indemnification
Provisions" of the Information Statement, and such section is incorporated
herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained under: (i) the sections
"Summary -- Summary Historical Financial Data," "-- Summary Pro Forma Financial
Data" "Selected Historical Financial Data," "Capitalization" and "Pro Forma
Financial Data," of the Information Statement, and such sections are
incorporated herein by reference, (ii) portions of the Flowers Industries, Inc.
Annual Report on Form 10-K for the fiscal year ended January 1, 2000 and
Quarterly Report on Form 10-Q for the forty weeks ended October 7, 2000, each
filed as an exhibit hereto, and such material is incorporated herein by
reference, (iii) the financial statements of Keebler Foods Company for the
fiscal year ended January 1, 2000 filed as an exhibit to the Flowers Industries,
Inc. Annual Report on Form 10-K for the fiscal year ended January 1, 2000 and
certain portions of the Quarterly Report on Form 10-Q for the forty weeks ended
October 7, 2000 of Keebler Foods Company filed with the SEC on November 21, 2000
and (iv) the Current Report on Form 8-K of Flowers Industries, Inc. filed with
the SEC on February 6, 2001, each filed as an exhibit hereto and such material
is incorporated herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) List of Financial Statements.
The information required by this section is contained in (i) portions of
the Flowers Industries, Inc. Annual Report on Form 10-K for the fiscal year
ended January 1, 2000 and the Flowers Industries, Inc. Quarterly Report on Form
10-Q for the forty weeks ended October 7, 2000, each filed as an exhibit hereto,
and such material is incorporated herein by reference and (ii) the financial
statements of Keebler Foods Company for the fiscal year ended January 1, 2000
filed as an exhibit to the Flowers Industries, Inc. Annual Report on Form 10-K
for the fiscal year ended January 1, 2000, (iii) certain portions of the
Quarterly Report on Form 10-Q for the forty weeks ended October 7, 2000 of
Keebler Foods Company filed with the SEC on November 21, 2000 and (iv) the
Current Report on Form 8-K of Flowers Industries, Inc. filed with the SEC on
February 6, 2001, each filed as an exhibit hereto and such material is
incorporated herein by reference.
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(b) Exhibits. The following documents are filed as exhibits hereto:
EXHIBIT
NO. NAME OF EXHIBIT
------- ---------------
2.1 -- Distribution Agreement by and between Flowers Industries,
Inc. and Flowers Foods, Inc., dated as of October 26,
2000.**
3.1 -- Form of Restated Articles of Incorporation of Flowers Foods,
Inc.
3.2 -- Form of Restated Bylaws of Flowers Foods, Inc.
4.1 -- Form of Share Certificate of Common Stock of Flowers Foods,
Inc.
4.2 -- Form of Rights Agreement between Flowers Foods, Inc. and
First Union National Bank as Rights Agent.
10.1 -- Employee Benefits Agreement by and between Flowers
Industries, Inc. and Flowers Foods, Inc., dated as of
October 26, 2000**.
10.2 -- First Amendment to Employee Benefits Agreement by and
between Flowers Industries, Inc. and Flowers Foods, Inc.
dated as of February 6, 2001.
10.3 -- Form of Flowers Foods, Inc. Retirement Plan No. 1
10.4 -- Form of Flowers Foods, Inc. 2001 Equity and Performance
Incentive Plan
21 -- Subsidiaries of Flowers Foods, Inc.
99.1 -- Portions of the Annual Report on Form 10-K for the fiscal
year ended January 1, 2000 of Flowers Industries, Inc.,
filed with the SEC on March 31, 2000.**
99.2 -- Portions of the Quarterly Report on Form 10-Q for the forty
weeks ended October 7, 2000 of Flowers Industries, Inc.,
filed with the SEC on November 21, 2000.**
99.3 -- Financial Statements of Keebler Foods Company for the fiscal
year ended January 1, 2000.**
99.4 -- Portions of the Quarterly Report on Form 10-Q for the forty
weeks ended October 7, 2000 of Keebler Foods Company filed
with the SEC on November 21, 2000.**
99.5 -- Current Report on Form 8-K of Flowers Industries, Inc. filed
with the SEC on February 6, 2001.
---------------
** Previously filed
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the undersigned registrant has duly caused this amendment to its
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized.
FLOWERS FOODS, INC.
By: /s/ G. ANTHONY CAMPBELL
-----------------------------------
Name: G. Anthony Campbell
Title: Secretary and General
Counsel
Dated: February 9, 2001
vii
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FLOWERS FOODS, INC.
Common Stock
$.01 Par Value
The board of directors of Flowers Industries, Inc. has approved an
agreement and plan of restructuring and merger and related agreements under
which Flowers Industries will:
- spin-off its Flowers Bakeries and Mrs. Smith's Bakeries businesses and
certain other corporate assets and liabilities to its shareholders in the
form of a new, publicly-traded company called Flowers Foods, Inc., as a
result of which Flowers Industries' primary asset will be its majority
interest in Keebler Foods Company; and
- merge with a wholly-owned subsidiary of Kellogg Company.
This information statement is being sent to you to describe the spin-off
and the business and financial position of Flowers Foods following the
transaction and requires no action by you.
Currently, Flowers Foods is a wholly-owned subsidiary of Flowers
Industries. Flowers Industries intends to distribute, in a taxable spin-off, all
of the outstanding shares of Flowers Foods to Flowers Industries shareholders on
a pro rata basis. As part of the spin-off, you will receive one share of Flowers
Foods common stock for every five shares of Flowers Industries common stock you
own as of the close of business on the record date for the spin-off, which is
currently expected to be in March 2001. We will issue a press release announcing
the record date/spin-off date at least 7 days in advance of such date.
The spin-off and the merger will each occur only if the other occurs. If
Flowers Industries shareholders do not approve the merger, or if certain other
conditions to the merger are not met, the spin-off will not occur.
The record date and the distribution date for the spin-off, as well as the
closing date for the merger, will all be the same day. When the spin-off and the
Flowers Industries/Kellogg merger are completed, Flowers Foods will own and
operate the traditional Flowers Industries bakery businesses, and Kellogg will
own Flowers Industries, which will have as its primary asset its majority
interest in Keebler. At the closing of the transaction, Flowers Industries
shareholders will own an interest in Flowers Foods in the same proportion as
their prior ownership interest in Flowers Industries.
If the merger is approved by Flowers Industries shareholders, no further
action on your part is necessary for you to receive the shares of Flowers Foods
common stock to which you are entitled in the spin-off. You do not need to take
any action for the spin-off to occur. You do not have to pay for the shares of
Flowers Foods common stock that you will receive in the spin-off, nor do you
have to surrender or exchange shares of Flowers Industries common stock in order
to receive shares of Flowers Foods common stock. However, you will be required
to surrender your shares of Flowers Industries common stock in order to receive
the cash consideration to be paid in connection with the Flowers
Industries/Kellogg merger. That process is described in more detail in the proxy
statement relating to the Flowers Industries/Kellogg merger.
There has been no public trading market for the Flowers Foods common stock.
The Flowers Foods common stock has been approved for listing on the New York
Stock Exchange and, following the spin-off and the merger, we expect that
Flowers Foods common stock will trade on the New York Stock Exchange under the
symbol "FLO."
As you review this information statement, you should carefully consider the
matters described in "Risk Factors," beginning on page 11.
-------------------------
NO VOTE OF SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THE SPIN-OFF.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
INFORMATION STATEMENT IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this information statement is February 9, 2001.
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TABLE OF CONTENTS
PAGE
----
Summary..................................................... 3
Risk Factors................................................ 11
Cautionary Note Regarding Forward Looking Statements........ 16
The Spin-Off................................................ 17
Agreements Between Flowers Industries and Flowers Foods
Relating to the Spin-Off.................................. 21
Capitalization.............................................. 25
Dividend Policy............................................. 26
Selected Historical Financial Data.......................... 27
Pro Forma Financial Data.................................... 30
Business.................................................... 42
Management.................................................. 53
Certain Relationships and Related Transactions.............. 64
Security Ownership of Certain Beneficial Owners and
Management................................................ 65
Description of Capital Stock................................ 67
Where You Can Find Additional Information................... 77
Incorporation of Certain Information by Reference........... 78
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SUMMARY
This summary highlights information relating to Flowers Industries, Flowers
Foods and the Flowers Foods common stock being distributed in the spin-off. To
fully understand the spin-off and Flowers Foods, you should read this
information statement carefully, including the risk factors as well as the
financial statements of Flowers Industries and the accompanying notes, which are
incorporated by reference herein and the pro forma financial information for
Flowers Foods which appear elsewhere in this information statement.
The information about us and our business contained in this information
statement assumes that the spin-off and related merger with Kellogg have been
completed. If Flowers Industries shareholders do not approve the merger, the
spin-off will not occur.
FLOWERS FOODS, INC.
Flowers Foods is one of the largest producers and marketers of frozen and
non-frozen bakery and dessert products in the United States. Flowers Foods
consists of the following businesses:
- Flowers Bakeries; and
- Mrs. Smith's Bakeries.
We have a leading presence in each of the major product categories in which
we compete. In our Flowers Bakeries business, our Flowers Bakeries brands rank
first in branded sales measured in dollars and units in the 22 major
metropolitan markets we serve. Our Mrs. Smith's Bakeries business is one of the
leading frozen dessert producers and marketers in the United States, and our
Mrs. Smith's pies are the leading national brand of frozen pies sold at retail.
FLOWERS BAKERIES. Our Flowers Bakeries business produces and markets baked
foods to customers in the super-regional 16 state area in and surrounding the
southeastern United States. We have devoted significant resources to modernize,
automate and expand our production facilities and distribution capabilities and
enhance our information technology. Flowers Bakeries is comprised of 27
production facilities which are generally within or contiguous to our existing
region and which can be served with our extensive direct store door delivery
system. Our strategy is to continue to better serve new and existing customers,
principally by:
- increasing the productivity and efficiency of our production facilities;
and
- using information technology to enhance our direct store door delivery
system.
MRS. SMITH'S BAKERIES. Our Mrs. Smith's Bakeries business produces and
markets frozen desserts as well as bread, rolls and buns for sale to retail and
foodservice customers. Traditionally, retail frozen pie sales are heavily
concentrated in the year-end holiday season. In an effort to increase sales
outside of the holiday season, we launched "Operation 365," a strategy aimed at
significantly expanding non-seasonal sales in the frozen dessert product line by
extending the well-recognized Mrs. Smith's brand name to existing and related
retail and foodservice products. Examples of significant product line extensions
include the introduction of Mrs. Smith's Restaurant Classics and Mrs. Smith's
Cookies and Cream frozen pies in the retail channel and Grand Finales frozen
pies in the foodservice channel.
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OUR STRATEGIC FOCUS
Our strategy is to be the country's leading producer and marketer of a
full-line of frozen and non-frozen bakery and dessert products serving all
categories of customers through all channels of distribution. Our Flowers
Bakeries and Mrs. Smith's Bakeries businesses each develop strategies based on
the requirements of their particular food category.
We employ the following five overall corporate strategies:
- maintain and extend strong brand recognition;
- invest in and operate efficient production facilities;
- provide customer service-oriented distribution;
- offer a broad range of products to customers in multiple channels of
distribution; and
- continue to pursue growth through strategic acquisitions and investments.
CORPORATE INFORMATION
Our principal executive offices are located at 1919 Flowers Circle,
Thomasville, Georgia 31757 and our telephone number is (229) 226-9110.
References in this information statement to "Flowers Foods," "we," "our" and
"us" collectively refer to Flowers Foods, Inc. We maintain internet sites at
www.flowersfoods.com, www.flowersbakeries.com and www.mrssmiths.com. The
information contained on, or connected to, our websites is not a part of this
information statement.
THE TRANSACTION
THE MERGER. Flowers Foods is currently a wholly-owned subsidiary of
Flowers Industries. On October 26, 2000, Flowers Industries entered into an
agreement and plan of restructuring and merger with Kellogg Company under which
a wholly-owned subsidiary of Kellogg will merge with Flowers Industries. Flowers
Industries, whose primary asset at the time of the merger will be its majority
ownership interest in Keebler, will survive the merger as a wholly-owned
subsidiary of Kellogg. As a condition to the merger, Flowers Industries has
agreed to transfer its fresh and frozen bakery operations, and certain other
corporate assets and liabilities, to Flowers Foods and to distribute all of the
outstanding shares of common stock of Flowers Foods to Flowers Industries'
shareholders on a pro-rata basis immediately prior to the merger.
THE SPIN-OFF. Effective virtually simultaneously with the completion of
the merger described above, Flowers Industries will distribute all of the
outstanding shares of Flowers Foods common stock. Following the effective time
of the spin-off, all of the outstanding shares of Flowers Foods common stock
will be held by shareholders of Flowers Industries who are shareholders as of
the record date for the spin-off. You will not pay for the
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Flowers Foods common stock you will receive in the spin-off, but the spin-off
will be taxable to you. The spin-off is summarized below:
Distributing Company: Flowers Industries, Inc., a Georgia corporation.
Spun-off Company: Flowers Foods, Inc., a Georgia corporation and
currently a wholly-owned subsidiary of Flowers
Industries, Inc.
Consideration to be Received
by Flowers Industries
Shareholders in the Spin-off
and Merger: The spin-off and merger will occur virtually
simultaneously. Flowers Industries shareholders
will receive an amount in cash estimated to be
between $12.45 and $12.60 per share in exchange
for each share of Flowers Industries common
stock that they own and one share of Flowers
Foods common stock in the spin-off for every
five shares of Flowers Industries common stock
they own at the close of business on the record
date for the spin-off. Flowers Industries
shareholders will be required to surrender their
shares of Flowers Industries common stock to
receive the cash consideration in the merger,
but will not be required to take any additional
action to receive shares of Flowers Foods common
stock in the spin-off.
Flowers Foods Common Stock: If the spin-off had occurred on January 30,
2001, approximately 20,061,064 shares of Flowers
Foods common stock would have been outstanding
and distributed in the spin-off and such shares
would have been held by approximately 7,741
shareholders of record.
Distribution Ratio: One share of Flowers Foods common stock for
every five shares of Flowers Industries common
stock that you hold on the record date for the
spin-off.
Record Date/Spin-off Date: The record date/spin-off date is expected to be
in March 2001. We will issue a press release
announcing the record date/spin-off date at
least 7 days in advance of such date.
Distribution Agent: First Union National Bank, which is also the
registrar and transfer agent for Flowers
Industries common stock and for Flowers Foods
common stock.
Proposed New York Stock
Exchange Symbol: "FLO"
Trading Market: Because Flowers Industries currently owns all of
Flowers Foods common stock, there has not been a
public
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trading market for the Flowers Foods common
stock. The Flowers Foods common stock has been
approved for listing on the New York Stock
Exchange and, following the spin-off and the
merger, we expect that Flowers Foods common
stock will be traded on the New York Stock
Exchange.
Federal Income Tax
Consequences: The spin-off and merger should be treated as a
single taxable transaction for United States
federal income tax purposes. We expect that
Flowers Industries shareholders will recognize
gain or loss in an amount equal to the
difference between:
- the sum of the fair market value of the shares
of Flowers Foods common stock distributed in
the spin-off plus the cash proceeds received
pursuant to the merger; and
- the shareholder's adjusted tax basis
immediately prior to the transaction in the
shares of Flowers Industries common stock
surrendered.
Such gain or loss should be a capital gain or
loss if the shares of Flowers Industries common
stock are held as a capital asset by the Flowers
Industries shareholder. However, if the receipt
of Flowers Foods common stock is treated as a
separate transaction for tax purposes, it would
be deemed to be a distribution taxable as an
ordinary income dividend to the extent of our
current or accumulated earnings and profits. For
a more detailed description of the federal
income tax consequences of the spin-off and the
merger, see "The Spin-Off -- Material United
States Federal Income Tax Consequences."
Our Management and Management
Compensation: Substantially all of the management team of
Flowers Industries will become the management of
Flowers Foods following the spin-off. The
compensation, awards and other benefits expected
to be available to members of Flowers Foods
management are described in "Management."
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SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary historical financial data of Flowers Industries,
Flowers Foods' predecessor, as of and for the 52 weeks ended January 1, 2000 and
January 2, 1999, the 27 week transition period ended January 3, 1998 and for the
52 weeks ended June 28, 1997, June 29, 1996 and July 1, 1995 have been derived
from the consolidated financial statements of Flowers Industries, which have
been audited by PricewaterhouseCoopers, LLP, independent accountants. The
summary historical financial data of Flowers Industries as of and for the 40
weeks ended October 7, 2000 and October 9, 1999 are derived from the unaudited
consolidated financial statements of Flowers Industries, which, in the opinion
of management, include all adjustments necessary for a fair presentation.
Operating results for the 40 weeks ended October 7, 2000 are not necessarily
indicative of the results that may be achieved for the 52 weeks ending December
30, 2000.
This historical data should be read in conjunction with Flowers Industries'
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Flowers Industries' consolidated financial statements and the
related notes, which are incorporated herein by reference and portions of which
have been filed as exhibits to Flowers Foods' registration statement on Form 10,
of which this information statement is a part.
FOR THE 52 WEEKS ENDED FOR THE 27
--------------------------------- WEEKS ENDED
JANUARY 1, 2000 JANUARY 2, 1999 JANUARY 3, 1998
--------------- --------------- ---------------
STATEMENT OF INCOME
DATA:
Sales................ $4,236,010 $3,765,367 $ 784,097
Net income........... 7,294 41,899 23,560
Diluted net income
per common share... $ 0.07 $ 0.43 $ 0.27
Weighted average
shares
outstanding........ 100,420 96,801 88,773
BALANCE SHEET DATA
(AT END OF PERIOD):
Total assets......... $2,900,478 $2,860,900 $ 898,880
Long-term debt....... $1,208,630 $1,038,998 $ 276,211
Stockholders'
equity............. $ 538,754 $ 572,961 $ 348,567
FOR THE 52 WEEKS ENDED
--------------------------------------------------------
JUNE 28, 1997 JUNE 29, 1996 JULY 1, 1995
------------- ------------------- ------------------
STATEMENT OF INCOME
DATA:
Sales................ $1,437,713 $1,238,564 $1,129,203
Net income........... 62,324 30,768 42,301
Diluted net income
per common share... $ 0.71 $ 0.35 $ 0.49
Weighted average
shares
outstanding........ 88,401 86,933 86,229
BALANCE SHEET DATA
(AT END OF PERIOD):
Total assets......... $ 898,187 $ 849,443 $ 655,921
Long-term debt....... $ 275,247 $ 274,698 $ 120,944
Stockholders'
equity............. $ 340,012 $ 305,324 $ 303,981
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FOR THE 40 WEEKS ENDED
---------------------------------
OCTOBER 7, OCTOBER 9,
2000 1999
--------------- ---------------
STATEMENT OF INCOME DATA:
Sales...................................................... $3,317,466 $3,222,157
Net income (loss).......................................... 35,245 (12,002)
Diluted net income (loss) per common share................. $ 0.35 $ (0.12)
Weighted average shares outstanding........................ 100,372 100,388
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets............................................... $3,134,622 $2,845,579
Long-term debt............................................. $1,374,105 $1,115,982
Stockholders' equity....................................... $ 545,070 $ 521,646
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SUMMARY PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table represents summary unaudited pro forma condensed
consolidated financial data for Flowers Foods. Flowers Foods consists of the
traditional bakery businesses of Flowers Industries. For accounting purposes, we
will treat the transaction as a disposition of Keebler. Accordingly, the
unaudited pro forma financial information, included here and elsewhere herein,
reflects the disposition of assets and liabilities and the exclusion of the
results of operations of Keebler from the Flowers Industries consolidated
financial statements. The summary pro forma condensed consolidated financial
data have been derived from the Flowers Foods unaudited pro forma condensed
consolidated financial statements which are included elsewhere in this
information statement. The unaudited pro forma condensed consolidated statement
of income data sets forth Flowers Foods' results of operations for the 52 week
period ended January 1, 2000 and the 40 week period ended October 7, 2000
assuming the spin-off and merger were completed as of January 3, 1999. In
addition, the unaudited pro forma condensed consolidated statement of income
data sets forth Flowers Foods' results of operations for the 52 weeks ended
January 2, 1999, the 27-week transition period ended January 3, 1998 and the 52
weeks ended June 28, 1997 assuming the spin-off and merger were completed as of
June 30, 1996. The unaudited pro forma condensed consolidated balance sheet data
sets forth Flowers Foods' financial position at October 7, 2000, and assumes the
spin-off and merger were completed on October 7, 2000.
The pro forma adjustments are based upon available information and upon
certain assumptions that Flowers Industries believes are reasonable and which
are described in the notes to the unaudited pro forma condensed consolidated
financial statements included elsewhere in this information statement. The
unaudited pro forma condensed consolidated financial data is presented for
informational purposes only and may not be indicative of the results of
operations or financial position that would have occurred had the spin-off and
merger occurred on the dates indicated, or which may be obtained in the future.
You should read the summary unaudited pro forma condensed consolidated financial
data presented below in conjunction with the unaudited pro forma condensed
consolidated financial statements and the related notes included elsewhere in
this information statement.
52 WEEKS ENDED
--------------------------------------- 27 WEEKS ENDED 52 WEEKS ENDED
JANUARY 1, 2000(A) JANUARY 2, 1999(B) JANUARY 3, 1998(C) JUNE 28, 1997(C)
------------------ ------------------ ------------------ ----------------
STATEMENT OF INCOME DATA:
Sales..................... $1,568,239 $1,538,887 $784,097 $1,437,713
Income (loss) from
operations.............. (6,971) 42,446 36,815 69,659
Net income (loss) from
continuing operations... $ (9,177) $ (4,339) $ 5,499 $ 54,603
Diluted net income (loss)
per share from
continuing operations... $ (0.46) $ (0.22) $ 0.31 $ 3.09
Weighted average shares
outstanding(d).......... 20,084 19,360 17,755 17,680
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40 WEEKS ENDED
------------------
OCTOBER 7, 2000(A)
------------------
STATEMENT OF INCOME
DATA:
Sales................... $1,205,831
Income from continuing
operations............ 13,395
Net loss from continuing
operations............ $ (669)
Diluted net loss per
share from continuing
operations............ $ (.03)
Weighted average shares
outstanding(d)........ 20,074
OCTOBER 7, 2000
---------------
BALANCE SHEET DATA:
Total assets................................................ $1,104,902
Long-term debt.............................................. $ 203,001
Stockholders' equity........................................ $ 634,704
-------------------------
(a) The summary unaudited pro forma condensed consolidated income data for
Flowers Foods has been derived from the historical consolidated statement
of income of Flowers Industries, adjusted to reflect (i) the exclusion of
the results of operations of Keebler that is included in Flowers
Industries' consolidated statement of income for the respective periods,
(ii) the change in interest expense resulting from the elimination of
approximately $625.0 million of long-term debt as a result of the merger,
(iii) the change in amortization expense resulting from the elimination of
Flowers Industries' investment in Keebler and (iv) the related income tax
effects of (i), (ii) and (iii).
(b) The summary unaudited pro forma condensed consolidated income data for
Flowers Foods has been derived from the historical consolidated statement
of income of Flowers Industries, adjusted to reflect the exclusion of the
results of operations of Keebler from Flowers Industries and the change in
amortization expense resulting from the elimination of Flowers Industries'
investment in Keebler.
(c) The summary unaudited pro forma condensed consolidated income data for
Flowers Foods has been derived from the historical consolidated statement
of income of Flowers Industries, adjusted to reflect the elimination of its
income from investment in its then unconsolidated affiliate, Keebler.
(d) Gives effect to the issuance of one share of Flowers Foods common stock for
every five shares of Flowers Industries common stock.
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RISK FACTORS
RISKS FACTORS RELATING TO OUR BUSINESS
OUR MRS. SMITH'S BAKERIES BUSINESS MAY CONTINUE TO PERFORM BELOW EXPECTATIONS,
WHICH COULD HARM OUR FINANCIAL RESULTS.
Our Mrs. Smith's Bakeries business has incurred net operating losses over
the past six quarters and may not be profitable in the near future. Our ability
to increase revenues, reduce costs and achieve profitability at Mrs. Smith's
Bakeries in the future will primarily depend on our ability to increase sales of
our products outside of the traditional holiday season through the retail and
foodservice channels and to reduce production, distribution and other costs. Our
Mrs. Smith's Bakeries business may not be able to increase revenues and reduce
costs at a rate required to generate profitable results.
BECAUSE OF THE DISPOSITION OF FLOWERS INDUSTRIES' MAJORITY INTEREST IN KEEBLER,
WE MAY INCUR OPERATING AND NET LOSSES.
The pro forma consolidated financial statements for Flowers Foods presented
in this information statement reflect the exclusion of Keebler's results of
operations that are included in Flowers Industries' consolidated statements of
income for the periods presented. Because of the disposition of Flowers
Industries' majority interest in Keebler, Flowers Foods' results of operations
would show an operating loss of $6,971,000 for the 52 weeks ended January 1,
2000 and net losses of $9,177,000, $4,339,000 and $669,000 for the 52 weeks
ended January 1, 2000, and January 2, 1999, and the 40 weeks ended October 7,
2000, respectively. Without the inclusion of Keebler's earnings, we may not be
profitable in the future.
OUR ABILITY TO COMPETE EFFECTIVELY IN THE HIGHLY COMPETITIVE FOOD INDUSTRY MAY
AFFECT OUR OPERATIONAL PERFORMANCE AND FINANCIAL RESULTS.
The food industry is highly competitive. We face competition in all of our
markets from large, national companies and smaller, regional operators, as well
as from supermarket chains with their own production facilities or private label
products and grocery stores with their own in-store bakeries. Some of our
competitors, including other diversified food companies, are larger and may have
greater financial resources than we do. From time to time we experience price
pressure in certain of our markets as a result of competitors' promotional
pricing practices as well as market conditions generally. Competition is based
on product quality, distribution effectiveness, brand loyalty, price, effective
promotional activities and the ability to identify and satisfy emerging consumer
preferences. We may not be able to effectively compete with these larger, more
diversified companies.
OUR BUSINESS IS SUBJECT TO THE RISK OF PRICE FLUCTUATIONS OF RAW MATERIALS.
Our principal ingredients are flour, sugar, shortening and fruit, all of
which are subject to price fluctuations. Any substantial fluctuation in the
prices of raw materials would, if not offset by product price increases or
commodities hedging activities, have an adverse impact on our profitability. We
attempt to recover our commodity cost increases by increasing prices, promoting
a higher-margin product mix and obtaining additional operating efficiencies. We
may not be able to continue to offset raw material price increases to the
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same extent in the future. We enter into contracts for the purchase of raw
materials at fixed prices, which are designed to protect us against raw material
price increases during their term. These contracts could cause us to pay higher
prices for our raw materials than would otherwise be available at the time we
utilize the raw materials. We also use paper products, such as corrugated
cardboard, aluminum products, such as pie plates, and films and plastics to
package our products. We are dependent upon natural gas and propane as a fuel
for firing ovens as well as gasoline and diesel as fuel for distribution
vehicles. Substantial fluctuations in prices of packaging materials or continued
higher prices of fuels could adversely affect our operating performance and
financial results.
THE LOSS OR CONTINUED CONSOLIDATION OF ANY OF OUR KEY CUSTOMERS COULD HAVE A
SIGNIFICANT NEGATIVE IMPACT ON OUR FINANCIAL RESULTS.
The largest purchaser of our products, Winn-Dixie, Inc., accounted for
approximately 10.2% of our sales during fiscal 1999. We expect that our sales to
Winn-Dixie will continue to constitute a significant percentage of our revenues.
The loss of Winn-Dixie as an outlet for our products could significantly harm
our competitive position and operating results. In addition, the continued
consolidation of food retailers and foodservice distributors has reduced the
number of customers for our products. The additional consolidation of customers
for our products could have a significant adverse impact on our financial
results.
THE PRESENCE OF POTENTIAL COMPETITORS FOR ACQUISITION OPPORTUNITIES MAY AFFECT
OUR STRATEGY OF GROWTH BY ACQUISITION OF ADDITIONAL FOODS BUSINESSES.
Our growth has depended, in significant part, on our ability to acquire
and, thereafter, integrate and operate additional food businesses. Our strategy
includes pursuing acquisition candidates that complement our existing product
lines, geographic presence, or both, and leverage our production capacity,
distribution network, purchasing power, brand management capabilities and
operating efficiencies. Presently, we have no material acquisition candidates
under active consideration. Potential competitors for acquisition opportunities
include larger companies that may have greater financial resources than we do.
Competition for acquiring food businesses may result in acquisitions on terms
that prove to be less advantageous to us than have been attainable in the past
or may increase acquisition prices to levels unacceptable to us. As a result, we
may not be able to find attractive acquisition candidates in the future. In
addition, we may not be successful in integrating future acquisitions into our
existing operations or succeed in reducing the costs and increasing the
profitability of any businesses we acquire in the future.
OUR BUSINESS IS SUBJECT TO FEDERAL, STATE AND LOCAL GOVERNMENT REGULATIONS, THE
IMPACT OF WHICH COULD HAVE A NEGATIVE IMPACT ON OUR BUSINESS AND FINANCIAL
POSITION.
Our operations are subject to regulation by various federal, state and
local government entities and agencies. As a producer of food products for human
consumption, our operations are subject to stringent production, packaging,
quality, labeling and distribution standards, including regulations mandated by
the following laws:
- Federal Food and Drug Act;
- Occupational Safety and Health Act;
- Fair Labor Standards Act;
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- Clean Air Act; and
- Clean Water Act.
We cannot predict whether future regulation by various federal, state and
local governmental entities and agencies would harm our business and financial
results.
IF OUR PRODUCTS CONTAIN DEFECTS, OUR SALES COULD SUFFER AND WE COULD INCUR
INCREASED COSTS, WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
PROFITABILITY.
We could be found liable if the consumption of any of our products cause
injury, illness or death. We also may be required to recall certain of our
products that become contaminated or are damaged. A product liability judgement
or product recall could severely affect our business or financial results.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS,
WHICH COULD HARM OUR COMPETITIVE POSITION, RESULTING IN DECREASED REVENUE.
We believe that our trademarks and other proprietary rights are important
to our success and competitive position. Accordingly, we devote substantial
resources to the establishment and protection of our trademarks and proprietary
rights. We have taken actions to establish and protect our trademarks and other
proprietary rights. However, these actions may be inadequate to prevent
imitation of our products by others or to prevent others from claiming
violations of their trademarks and proprietary rights by us.
RISKS FACTORS RELATING TO THE SECURITIES MARKETS AND OWNERSHIP OF FLOWERS FOODS
COMMON STOCK
FLOWERS FOODS DOES NOT HAVE AN OPERATING HISTORY AS AN INDEPENDENT COMPANY.
After completion of the spin-off, Flowers Foods will be an independent,
publicly-traded company. Although Flowers Foods will be operated by members of
senior management who operated Flowers Industries' bakery businesses prior to
the spin-off, we do not have an operating history as an independent company. The
pro forma financial information included in this information statement may not
necessarily reflect the results of operations and financial position that would
have been achieved had Flowers Foods and our subsidiaries operated as an
independent company during the periods presented nor is it necessarily
indicative of what our future results of operations will be. After the spin-off,
we will be responsible for obtaining our own financing and corporate
administrative services, including legal, human resources, information and
technology systems and tax and accounting services. We may have difficulty
obtaining financing or services on terms that are acceptable to us, if at all.
BECAUSE THERE HAS BEEN NO PRIOR TRADING MARKET FOR OUR COMMON STOCK, OUR STOCK
PRICE MAY BE VOLATILE.
There is no current trading market for Flowers Foods common stock. We have
applied to list Flowers Foods common stock on the New York Stock Exchange and,
following the spin-off and the merger, we expect that Flowers Foods common stock
will trade on the New York Stock Exchange under the symbol "FLO."
Our shares may not be actively traded, and the prices at which our shares
trade could be volatile. Some Flowers Industries shareholders who receive
Flowers Foods common stock may decide that they do not want to remain invested
in us and may sell their shares
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following the spin-off. This may delay the development of an orderly trading
market for Flowers Foods common stock for a period of time following the
spin-off. Prices for our shares will be determined in the marketplace and may be
influenced by many factors, including, but not limited to:
- the depth and liquidity of the market for the shares;
- our results of operations;
- investors' evaluations of the future prospects for Flowers Foods and the
food industry generally;
- our dividend policy; and
- general economic and market conditions.
In addition, the stock market often experiences significant price
fluctuations that are unrelated to the operating performance of the specific
companies whose stock is traded. These market fluctuations could have a material
adverse effect on the trading price of our shares.
OUR FAILURE TO ATTRACT AND RETAIN KEY MANAGEMENT PERSONNEL COULD HARM OUR
BUSINESS.
Our business requires managerial, financial and operational expertise and
our future success depends upon the continued service of key personnel. We do
not have employment agreements with any members of our current management. If we
lose any of our key personnel, our business operations could suffer.
OUR ARTICLES OF INCORPORATION AND BYLAWS, OUR SHAREHOLDER RIGHTS PLAN AND
PROVISIONS OF GEORGIA LAW COULD MAKE IT MORE DIFFICULT FOR A THIRD PARTY TO
ACQUIRE US, EVEN IF DOING SO COULD BE IN YOUR INTEREST.
Provisions of our articles of incorporation and bylaws could make it more
difficult for a third party to acquire us, even if doing so might be in the best
interest of our shareholders. It could be difficult for a potential bidder to
acquire us because:
- our directors serve for staggered terms;
- our directors may be removed only for a cause by a supermajority vote of
our shareholders;
- our directors plan to adopt a shareholder rights plan; and
- we are subject to the fair-price and business combination provisions of
the Georgia corporate law.
Also, our Board of Directors can issue preferred stock and determine the
price, rights, and preferences of this preferred stock without shareholder
approval. This authority gives our Board of Directors greater flexibility to
take actions such as making acquisitions. However, if we issue preferred stock,
a third party may find it more difficult to acquire control of us.
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WE MAY NOT PAY DIVIDENDS ON OUR COMMON STOCK.
The payment of dividends on our common stock is subject to the discretion
of our Board of Directors and will depend on factors such as our financial
position, results of operations and such other factors as our Board of Directors
may consider relevant. We may not pay any dividends in the future or if we do
they may not be at a level consistent with dividends paid by Flowers Industries
in the past.
WE HAVE AGREED TO INDEMNIFY FLOWERS INDUSTRIES FOR LIABILITIES WHICH MAY ACCRUE
FOLLOWING THE SPIN-OFF.
We have agreed in the distribution agreement and the employee benefits
agreement relating to the spin-off and in the merger agreement with Kellogg to
indemnify Flowers Industries and its respective officers, directors, employees,
successors and assigns, from and against any and all damages arising in
connection with the liabilities, including tax, litigation, environmental and
employee benefit liabilities and advisory fees, as more fully described
beginning on page 21 of this information statement, that arise in connection
with the spin-off and merger or the business of Flowers Industries prior to the
spin-off. If certain events occur or certain liabilities arise, we may be
required to pay substantial sums to meet our indemnification obligations. Such
payments could have a material adverse effect on our operating performance and
financial results.
THE CHARACTER AND AMOUNT OF INCOME, GAIN OR LOSS YOU MAY RECOGNIZE AS A RESULT
OF THE SPIN-OFF AND MERGER CANNOT BE PRECISELY DETERMINED.
Your receipt of cash and Flowers Foods common stock in connection with the
spin-off and the merger will be a taxable transaction. The spin-off and merger
are intended to constitute a single integrated transaction pursuant to which
each Flowers Industries shareholder generally will recognize capital gain or
loss equal, in each case, to the difference between (1) the fair market value of
the Flowers Foods shares distributed in the spin-off plus the cash proceeds
received pursuant to the merger and (2) the shareholder's adjusted tax basis in
the Flowers Industries common stock surrendered in exchange. However, if the
Internal Revenue Service were to successfully assert that receipt of Flowers
Foods stock should be treated as a separate transaction for tax purposes, it
would be deemed to be a distribution taxable as an ordinary income dividend to
the extent of our current or accumulated earnings and profits. In addition, the
amount of income, gain or loss, if any, that you will recognize will depend, in
part, on the fair market value of the Flowers Foods common stock you receive in
the spin-off and your basis in the Flowers Industries common stock you sell in
the merger.
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CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS
We have made forward-looking statements in this information statement,
including in the sections entitled "Summary," "Risk Factors" and "Business,"
that are based on our beliefs and assumptions and on information currently
available to us. Forward-looking statements include the information concerning
our possible or assumed future results of operations, business strategies,
financing plans, competitive position, potential growth opportunities, potential
operating performance improvements, benefits resulting from the spin-off and the
merger, the effects of competition and the effects of future legislation or
regulations. Forward-looking statements include all statements that are not
historical facts and can be identified by the use of forward-looking terminology
such as the words "believe," "continue," "may," "will," "should" or the negative
of these terms or similar expressions.
Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. You should not put undue reliance on any
forward-looking statements. Except as required by law, we do not have any
intention or obligation to update forward-looking statements after we distribute
this information statement.
Some of the risks and other factors that could affect our performance and
operating results are discussed under "Risk Factors" and elsewhere in this
information statement. There may also be other risks that we are unable to
predict at this time.
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THE SPIN-OFF
BACKGROUND OF THE SPIN-OFF
On October 26, 2000, Flowers Industries and Kellogg entered into an
agreement and plan of restructuring and merger under which a wholly-owned
subsidiary of Kellogg will merge with Flowers Industries. Flowers Industries,
whose primary asset at the time of the merger will be its majority ownership in
Keebler, will survive the merger as a wholly-owned subsidiary of Kellogg. As a
condition to the merger, Flowers Industries has agreed to transfer its fresh and
frozen bakery operations, and certain other corporate assets and liabilities, to
Flowers Foods. Effective virtually simultaneously with the merger, Flowers
Industries will distribute all of the outstanding shares of Flowers Foods common
stock on a pro-rata basis to its shareholders.
MANNER OF EFFECTING THE SPIN-OFF
Flowers Industries expects to effect the spin-off in March 2001 and will
deliver all of the outstanding shares of Flowers Foods common stock to First
Union National Bank, as transfer agent and registrar, for distribution to the
holders of record of Flowers Industries common stock as of the close of business
on that date. We will issue a press release announcing the record date/spin-off
date at least 7 days in advance of such date. Shareholders of Flowers Industries
will receive shares of Flowers Foods common stock in an amount equal to their
proportionate interest in Flowers Industries. The distribution of Flowers Foods
common stock will be made based on a ratio of one share of Flowers Foods common
stock for every five shares of Flowers Industries common stock held by Flowers
Industries shareholders as of the close of business on the record date. The
actual number of shares of Flowers Foods common stock to be distributed will
depend on the number of shares of Flowers Industries common stock outstanding as
of the record date/spin-off date. Any Flowers Industries shareholder who
transfers his or her Flowers Industries common stock prior to the record
date/spin-off date will not receive shares of Flowers Foods even though he or
she may have been a shareholder of record for purposes of voting at the Flowers
Industries special meeting to approve the merger.
Flowers Industries currently intends to distribute the Flowers Foods shares
by book entry. If you are a record holder of Flowers Industries common stock,
instead of physical stock certificates, you will receive a statement of your
book entry account for the Flowers Foods shares distributed to you. Following
the spin-off, you may request physical stock certificates if you wish, and
instructions for making that request will be furnished with your book entry
account statement.
If you hold your Flowers Industries shares through a stockbroker, bank or
other nominee, your shares are likely held in "street name," and you are
probably not a shareholder of record. In such a case, your receipt of Flowers
Foods common stock depends on your arrangements with the nominee that holds your
Flowers Industries shares for you.
NO ISSUANCE OF FRACTIONAL SHARES
No certificates representing fractional interests in shares of Flowers
Foods common stock will be issued to Flowers Industries shareholders as part of
the spin-off. After the spin-off, when regular trading in Flowers Foods common
stock has begun, the distribution
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agent, First Union National Bank, acting as agent for Flowers Industries
shareholders otherwise entitled to receive certificates representing fractional
shares of Flowers Foods common stock, will aggregate and sell all fractional
shares in the open market at then prevailing market prices and distribute to
each Flowers Industries shareholder who is entitled to payment in respect of
such fractional shares his or her proportionate interest in the proceeds from
the sale of the aggregated fractional shares.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material United States federal
income tax consequences of the distribution to Flowers Industries shareholders
of Flowers Foods common stock in the spin-off concurrent with the exchange of
shares of Flowers Industries common stock for cash in the merger. We will refer
to the spin-off and merger, collectively, as the "transaction." This discussion
is based on currently operative provisions of the Internal Revenue Code of 1986,
Treasury regulations under the Code and administrative rulings and court
decisions, all of which are subject to change. Any such change, which may or may
not be retroactive, could alter the tax consequences to Flowers Industries,
Flowers Foods or the Flowers Industries shareholders as described herein.
Flowers Industries shareholders should be aware that this discussion does
not address all federal income tax considerations that may be relevant to
particular shareholders of Flowers Industries in light of their particular
circumstances, such as shareholders who are banks, insurance companies, pension
funds, tax-exempt organizations, dealers in securities or foreign currencies,
shareholders who are not United States persons, as defined in the Code,
shareholders who acquired their shares in connection with stock option or stock
purchase plans or in other compensatory transactions, shareholders who hold
Flowers Industries common stock as part of an integrated investment (including a
"straddle") comprised of shares of Flowers Industries common stock and one or
more other positions, or shareholders who have previously entered into a
constructive sale of Flowers Industries common stock. In addition, the following
discussion does not address the tax consequences of the transaction under
foreign, state or local tax laws or the tax consequences of transactions
effectuated prior or subsequent to or concurrently with the transaction (whether
or not such transactions are in connection with the transaction), including,
without limitation, transactions in which Flowers Industries common stock is
acquired or Flowers Foods common stock is disposed of.
ACCORDINGLY, FLOWERS INDUSTRIES SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISORS CONCERNING THE SPECIFIC TAX CONSEQUENCES, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES, TO THEM OF THE TRANSACTION
IN THEIR PARTICULAR CIRCUMSTANCES.
For United States federal income tax purposes, the transaction is intended
to constitute a single integrated transaction with respect to Flowers Industries
and its shareholders in which the spin-off will be treated as a distribution in
redemption of outstanding common stock of Flowers Industries in connection with
the complete termination of the Flowers Industries shareholders' interest in
Flowers Industries. Although Flowers Industries believes that the foregoing
description correctly characterizes the transaction for United States federal
income tax purposes and, therefore, that the spin-off should qualify under
Section 302(b) of the Code, either because the integrated combination of the
spin-off and the merger results in a complete termination of the
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Flowers Industries shareholders' interests in Flowers Industries or because the
spin-off, in conjunction with the merger, is not essentially equivalent to a
dividend, there is no specific authority on this point and the issue is not free
from doubt.
Assuming the spin-off qualifies as an exchange within the meaning of
Section 302(b) of the Code and that the shares of Flowers Industries common
stock surrendered in the transaction were held as capital assets, then, subject
to the assumptions, limitations and qualifications referred to in this
information statement, the transaction would result in the following federal
income tax consequences:
- Each holder of Flowers Industries common stock will generally recognize
gain, if any, only to the extent of the excess of (i) the sum of the fair
market value, on the date of the spin-off, of the Flowers Foods common
stock distributed in the spin-off plus the cash proceeds received
pursuant to the merger over (ii) the holder's adjusted basis immediately
prior to the transaction in the Flowers Industries common stock
surrendered. Such gain generally should be capital gain, and generally
should be long-term capital gain if the Flowers Industries common stock
exchanged in the transaction has been held for more than one year. In the
event that a holder's adjusted basis in the Flowers Industries common
stock exceeds the sum of the fair market value of the Flowers Foods stock
and the amount of cash received by the holder in the transaction, the
holder will recognize a loss. Such loss generally should be capital loss,
and generally should be long-term capital loss if the Flowers Industries
common stock exchanged in the transaction has been held for more than one
year.
- The tax basis of the Flowers Foods common stock received by Flowers
Industries shareholders in the transaction will be equal to the fair
market value of such stock on the date of the spin-off. One reasonable
method of determining this would be to use the weighted average trading
price of Flowers Foods common stock on the first full day of trading
ending after the spin-off; however, please consult with your own tax
advisor with respect to your particular circumstances.
- The holding period of the Flowers Foods common stock received in the
spin-off will commence on the day after the spin-off.
Receipt of an opinion with respect to tax matters is not a condition to the
obligations of the parties to consummate this transaction. In addition, no
ruling has been or will be obtained from the Internal Revenue Service in
connection with the transaction, and the Internal Revenue Service could
challenge the status of the transaction as a single integrated transaction for
United States federal income tax purposes. Such a challenge, if successful,
could result in Flowers Industries shareholders being treated as receiving a
"dividend" distribution of Flowers Foods common stock in respect of their
Flowers Industries common stock in the spin-off and as selling, in a separate
transaction, their Flowers Industries common stock to Kellogg immediately after
the spin-off. The amount treated as distributed in the spin-off would be equal
to the fair market value of the Flowers Foods common stock on the date of the
spin-off and generally would be (1) treated as a dividend taxable as ordinary
income to the Flowers Industries shareholders to the extent of Flowers
Industries current or accumulated earnings and profits, (2) to the extent such
amount exceeded Flowers Industries earnings and profits, it would be applied to
reduce, but not below zero, each Flowers Industries shareholder's adjusted basis
in such shareholder's Flowers Industries stock, and (3) would be taxable as
capital gain to each Flowers Industries shareholder to the extent the amount
treated as received by such
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shareholder in the spin-off exceeded the amount described in (1) and (2) hereof.
Flowers Industries shareholders would have a basis in the Flowers Foods common
stock equal to its fair market value on the date of the spin-off, and the
holding period of such stock would commence on the day after the spin-off.
Flowers Industries shareholders generally would recognize gain on the sale of
their Flowers Industries common stock to Kellogg in the merger in an amount
equal to the excess, if any, of the amount of cash received from Kellogg in the
merger over their adjusted basis in the Flowers Industries common stock
immediately prior to the merger, taking into account the effect of the spin-off
of Flowers Foods common stock on such adjusted basis as described above. Such
gain generally would be capital gain and generally would be long-term capital
gain if the Flowers Industries common stock exchanged in the merger had been
held for more than one year. In the event that a holder's adjusted basis in the
Flowers Industries common stock, taking into account the effect of the spin-off
of Flowers Foods common stock on such adjusted basis as described above,
exceeded the amount of cash received from Kellogg in the merger, the holder
would recognize a loss. Such loss generally would be a capital loss and
generally would be a long-term capital loss if the Flowers Industries common
stock exchanged in the merger had been held for more than one year.
You may be subject to "backup withholding" at a rate of 31% on payments
(including the distribution of Flowers Foods common stock) received in
connection with the transaction unless you (1) provide a correct taxpayer
identification number (which, if you are an individual, is your social security
number) and any other required information to the exchange agent, or (2) are a
corporation or otherwise qualify under certain exempt categories and, when
required, demonstrate this fact, all in accordance with the requirements of the
backup withholding rules. If you do not provide a correct taxpayer
identification number, you may be subject to penalties imposed by the Internal
Revenue Service. Any amount paid as backup withholding does not constitute an
additional tax and will be creditable against your United States federal income
tax liability. You should consult with your own tax advisor as to your
qualification for exemption from backup withholding and the procedure for
obtaining such exemption. You may prevent backup withholding by completing a W-9
or substitute W-9 and submitting it to the exchange agent for the merger when
you submit your stock certificate(s) following the effective time of the merger.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF THE MATERIAL
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE TRANSACTION TO FLOWERS
INDUSTRIES SHAREHOLDERS. FLOWERS INDUSTRIES SHAREHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
TRANSACTION, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICABLE TAX
LAWS AND THE EFFECT OF ANY PROPOSED CHANGES IN THE TAX LAWS.
20
29
AGREEMENTS BETWEEN FLOWERS INDUSTRIES AND
FLOWERS FOODS RELATING TO THE SPIN-OFF
We have entered into the agreements described in this section with Flowers
Industries to facilitate an orderly transition and govern the ongoing
relationship between the companies after completion of the spin-off and merger.
The following descriptions include a summary of all material terms of such
agreements but are qualified in their entirety by reference to the agreements,
which are filed as exhibits to Flowers Foods' registration statement on Form 10
of which this information statement is a part. We urge all shareholders to read
these agreements carefully.
DISTRIBUTION AGREEMENT
Flowers Foods and Flowers Industries have entered into a distribution
agreement which, in general, provides that:
- Flowers Industries will transfer its Flowers Bakeries and Mrs. Smith's
Bakeries businesses and certain other corporate assets and liabilities to
Flowers Foods;
- Flowers Industries will distribute all of the outstanding shares of
Flowers Foods common stock to its shareholders on a pro-rata basis;
- following the spin-off, Flowers Foods will indemnify Flowers Industries
for liabilities incurred by Flowers Industries as set forth below; and
- following the spin-off, Flowers Industries will indemnify Flowers Foods
for liabilities incurred by Flowers Foods relating to certain liabilities
retained by Flowers Industries.
TRANSFER OF ASSETS. Under the distribution agreement, Flowers Industries
will transfer the Flowers Bakeries and Mrs. Smith's Bakeries businesses and
certain other corporate assets to Flowers Foods prior to the spin-off. As a
result of these transfers, Flowers Foods will consist of the traditional bakery
businesses owned and operated by Flowers Industries.
ALLOCATION OF LIABILITIES. Following the spinoff, Flowers Foods'
liabilities, which, except as described below, are not presently quantifiable or
known, will consist primarily of:
- long-term debt of approximately $250.0 million assumed from Flowers
Industries;
- current liabilities associated with the Flowers Bakeries and Mrs. Smith's
businesses of approximately $225.0 million; and
- the indemnification obligations to Flowers Industries and Kellogg as set
forth in the distribution agreement and employee benefits agreement
discussed below.
Following the spin-off, Flowers Industries' liabilities will consist of
approximately $625.0 million of debt, some or all of which will be paid off at
the closing of the Flowers Industries/Kellogg merger. Additional liabilities of
Flowers Industries are presently not determinable.
INDEMNIFICATION OBLIGATIONS. Flowers Industries (which will then be a
wholly-owned subsidiary of Kellogg) will generally be responsible for, and has
agreed to indemnify Flowers Foods, its affiliates and their respective officers,
directors, employees, successors
21
30
and assigns from and against, the following liabilities whether arising before
or after the spin-off:
- any debt retained by Flowers Industries (except liabilities arising from
the decision to pursue the transactions contemplated by the merger
agreement and related agreements or the treatment in the transactions of
any third party debt); and
- certain legal, accounting and financial advisory fees payable in
connection with the merger and spin-off, not to exceed $16.0 million.
Except for the liabilities retained by Flowers Industries, Flowers Foods
will be generally responsible for, and has agreed to indemnify Flowers
Industries, its affiliates (including Kellogg) and their respective officers,
directors, employees, successors and assigns from and against, all liabilities
whether arising before, at or after the spin-off, of or relating to Flowers
Industries, Flowers Foods or any subsidiary of Flowers Foods, whether arising
from the conduct of or relating to the business of Flowers Foods, discontinued
or divested businesses or operations of Flowers Industries or Flowers Foods or
otherwise. Included are the following which, except as described below, are not
presently quantifiable or known:
- liabilities (including tax liabilities) of Flowers Industries or any
subsidiary to the extent arising from the conduct of, in connection with
or relating to, any of Flowers Foods' assets or bakery businesses or the
ownership or use thereof or any business or operations which Flowers
Industries or Flowers Foods has discontinued or divested prior to the
spin-off;
- any environmental liabilities of or relating to Flowers Industries,
Flowers Foods or any business or operations which Flowers Industries or
Flowers Foods has discontinued or divested prior to the spin-off;
- the debt to be assumed by Flowers Foods, which is anticipated to total
approximately $250.0 million;
- legal, accounting and financial advisory fees payable in connection with
the merger and spin-off in excess of $16.0 million, the excess of which
we expect to total approximately $21.0 million;
- litigation matters in which Flowers Industries or its officers, directors
or employees are defendants;
- taxes, as discussed below; and
- employee benefits related liabilities allocated to Flowers Foods in the
employee benefits agreement referred to below.
In addition, Flowers Foods has agreed to indemnify Kellogg, its affiliates
(including Flowers Industries) and their respective directors, officers,
employees, controlling persons, agents and representatives and their successors
and assigns, from and against all liabilities arising out of, or relating to or
resulting from the breach or failure of any representation, warranty, obligation
or agreement of Flowers Industries contained in the agreement and plan of
restructuring and merger to be true and correct when made or at the closing of
the merger.
TAXES. Flowers Foods will be responsible for filing consolidated federal
and consolidated, combined or unitary state tax returns that include Flowers
Industries for
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31
periods through completion of the spin-off and paying the related taxes to the
Internal Revenue Service or other relevant taxing authority. Flowers Industries
shall be responsible for filing consolidated federal and consolidated, combined
or unitary state tax returns with respect to Flowers Industries for periods
following the spin-off and paying the related taxes to the Internal Revenue
Service or other relevant taxing authority.
In addition, the distribution agreement specifies the tax liabilities
against which each of Flowers Industries and Flowers Foods will indemnify the
other. In general, Flowers Foods will indemnify Flowers Industries against:
- any tax liabilities attributable to Flowers Industries for periods ending
on or prior to the spin-off;
- any tax liabilities relating to or resulting from the spin-off; and
- any tax liabilities resulting from the breach by Flowers Foods of its
obligations under the distribution agreement.
In general, Flowers Industries will indemnify Flowers Foods for tax
liabilities attributable to Flowers Industries for periods beginning after
completion of the spin-off, except for any tax liabilities relating to the
spin-off or to Flowers Foods and its businesses.
TRADEMARKS; TRADENAMES. The distribution agreement provides in general
that, when the spin-off is completed, Flowers Industries and its affiliates will
not use the name "Flowers," marks or names derived therefrom or other specified
marks and names.
CONDITIONS TO THE SPIN-OFF. The spin-off will not occur unless the
following conditions are satisfied or waived:
- effectiveness of Flowers Foods' registration statement on Form 10, of
which this information statement is a part;
- mailing of this information statement to Flowers Industries shareholders;
- approval to list Flowers Foods' common stock on the New York Stock
Exchange;
- effectiveness of our restated articles of incorporation;
- execution and delivery of the employee benefits agreement referred to
below;
- effectiveness of the contribution of the Flowers Bakeries and Mrs.
Smith's Bakeries capital stock to Flowers Foods and the assumption of the
liabilities set forth above by Flowers Foods; and
- the conditions to the Flowers Industries/Kellogg merger shall have been
satisfied or waived.
EMPLOYEE BENEFITS AGREEMENT
Below is a summary of material terms and conditions of the employee
benefits agreement entered into between Flowers Industries and Flowers Foods on
October 26, 2000.
Although the employment of all employees at Flowers Industries will be
terminated by Flowers Industries at the completion of the spin-off, the employee
benefits agreement
23
32
provides that Flowers Foods will offer employment to substantially all of the
people who were employees of Flowers Industries immediately prior to the
spin-off. Flowers Foods will be responsible for all obligations to employees
arising out of or related to their employment with Flowers Industries, including
as a result of the spin-off and any liabilities arising from an employee's
acceptance or rejection of an offer of employment from Flowers Foods.
Following the completion of the spin-off, Flowers Foods will assume
sponsorship of certain employee benefit plans of Flowers Industries. In
addition, Flowers Foods will be responsible for any liabilities of Flowers
Industries under the three multiemployer pension plans currently covering
employees of affiliates of Flowers Industries other than liabilities relating to
the employees of Keebler and its subsidiaries.
The agreement provides that all share equivalents held by employees that
have been issued under the Flowers Industries 1982 Incentive Stock Option Plan
and the Flowers Industries 1989 Executive Stock Incentive Plan, whether vested
or non-vested, shall remain outstanding according to their terms and be
unaffected by the spin-off. All outstanding share equivalents will be cancelled
at or immediately prior to the effective time of the merger and none will be
outstanding following the merger. Flowers will pay, for each cancelled share
equivalent issued under the 1989 Executive Stock Incentive Plan, an amount
determined as set forth in the agreement and plan of restructuring and merger
between Flowers Industries and Kellogg and will deduct that amount from the
merger consideration to be received by Flowers Industries shareholders.
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33
CAPITALIZATION
The following table sets forth the consolidated debt and capitalization at
October 7, 2000 of Flowers Industries on a historical basis and of Flowers Foods
on a pro forma basis to give effect to the spin-off and the merger. You should
read this table in conjunction with the information under the heading "Pro Forma
Financial Data" and the consolidated financial statements of Flowers Industries
and the related notes. You should not construe this pro forma information to be
indicative of our capitalization at the time of the spin-off and the merger.
This pro forma information also does not project the capitalization for any
future period or date.
OCTOBER 7, 2000
---------------------------
(IN THOUSANDS, EXCEPT
SHARE DATA)
FLOWERS
INDUSTRIES FLOWERS FOODS
HISTORICAL PRO FORMA
---------- -------------
Current maturities of long-term debt and capital
lease obligations.................................. $ 58,309 $ 7,649
Long-term debt and capital lease obligations......... 1,374,105(1) 203,001
SHAREHOLDERS' EQUITY:
Flowers Industries, Inc. Stock
Preferred stock -- $100 par value, authorized 10,467
shares and none issued.............................
Preferred stock -- $100 par value, authorized 249,533
shares and none issued.............................
Common stock -- $0.625 par value, authorized
350,000,000 shares, 100,527,893 shares issued...... 62,830
Treasury Stock....................................... (8,272)
Stock compensation adjustments....................... (13,900)
Flowers Foods, Inc. Stock
Preferred stock -- $100 par value, authorized 100,000
shares and none issued.............................
Preferred stock -- $0.01 par value, authorized
900,000 shares and none issued.....................
Common Stock -- $0.01 par value, authorized
100,000,000 shares, 20,105,579 shares issued....... 201(2)
Capital in excess of par value....................... 289,127 500,926(2)
Retained earnings.................................... 215,285 133,577
---------- --------
Total capitalization................................. $1,977,484 $845,354
========== ========
---------------
(1) Includes the long-term debt and capital lease obligations of Keebler.
(2) Gives effect to the issuance of one share of Flowers Foods common stock for
every five shares of Flowers Industries common stock.
25
34
DIVIDEND POLICY
Our Board of Directors has not yet determined whether to declare and pay
dividends on Flowers Foods common stock. The Board will base its decisions on,
among other things, general business conditions, our financial results,
contractual, legal and regulatory restrictions regarding dividend payments and
any other factors the Board may consider relevant.
26
35
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of
Flowers Industries, the predecessor of Flowers Foods. The selected historical
financial data as of and for the 52 weeks ended January 1, 2000 and January 2,
1999, the 27 week transition period ended January 3, 1998 and the 52 weeks ended
June 28, 1997, June 29, 1996 and July 1, 1995 have been derived from the
consolidated financial statements of Flowers Industries, which have been audited
by PricewaterhouseCoopers, LLP, independent accountants. The selected historical
financial data as of and for the 40 weeks ended October 7, 2000 and October 9,
1999 are derived from the unaudited consolidated financial statements of Flowers
Industries, which, in the opinion of management, include all adjustments
necessary for a fair presentation. Operating results for the 40 weeks ended
October 7, 2000 are not necessarily indicative of the results that may be
achieved for the year ending December 30, 2000.
The selected historical statement of income data set forth below do not
reflect the many significant changes that will occur in the operations and
capitalization of our company as a result of the spin-off and the merger. Before
the spin-off, we operated as part of Flowers Industries. Because the data
reflect periods during which we did not operate as an independent company, the
data may not reflect the results of operations or the financial position that
would have resulted if we had operated as a separate, independent company during
the periods shown. In addition, the data may not necessarily be indicative of
our future results of operations or financial position. Such historical data
should be read in conjunction with Flowers Industries' "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and Flowers
Industries' consolidated financial statements and the related notes thereto,
which are incorporated by reference herein and portions of which have been filed
as exhibits to Flowers Foods' registration statement on Form 10, of which this
information statement is a part.
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36
FLOWERS INDUSTRIES, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE 52 WEEKS ENDED FOR THE 27 FOR THE 52 WEEKS ENDED
--------------------------------- WEEKS ENDED --------------------------------------------
JANUARY 1, 2000 JANUARY 2, 1999 JANUARY 3, 1998 JUNE 28, 1997 JUNE 29, 1996 JULY 1, 1995
--------------- --------------- --------------- ------------- ------------- ------------
STATEMENT OF
INCOME DATA:
Sales..................... $4,236,010 $3,765,367 $784,097 $1,437,713 $1,238,564 $1,129,203
Materials, supplies, labor
and other production
costs................... 2,001,956 1,702,581 418,926 787,799 674,762 599,416
Selling, marketing and
administrative
expenses................ 1,845,101 1,633,319 301,426 534,285 461,610 418,082
Depreciation and
amortization............ 144,619 128,765 26,930 45,970 40,848 36,604
Non-recurring charge...... 60,355 68,313
Gain on sale of
distributor notes
receivable.............. (43,244)
Interest expense.......... 82,565 72,840 12,144 25,691 13,004 7,086
Interest income........... (1,700) (4,115) (348) (582)
Income before income
taxes, investment in
unconsolidated
affiliate, minority
interest, extraordinary
loss and cumulative
effect of changes in
accounting principles... 103,114 163,664 25,019 87,794 48,340 68,015
Income taxes.............. 56,260 74,391 9,632 33,191 18,185 25,714
Income from investment in
unconsolidated
affiliate............... 18,061 7,721 613
Income before minority
interest, extraordinary
loss and cumulative
effect of changes in
accounting principles... 46,854 89,273 33,448 62,324 30,768 42,301
Minority interest......... (39,560) (43,305)
Income before
extraordinary loss and
cumulative effect of
changes in accounting
principles.............. 7,294 45,968 33,448 62,324 30,768 42,301
Extraordinary loss due to
early extinguishment of
debt.................... (938)
Cumulative effect of
changes in accounting
principles, net of tax
benefit................. (3,131) (9,888)
Net income................ $ 7,294 $ 41,899 $ 23,560 $ 62,324 $ 30,768 $ 42,301
Diluted net income per
common share............ $ 0.07 $ 0.43 $ 0.27 $ 0.71 $ 0.35 $ 0.49
Weighted average shares
outstanding............. 100,420 96,801 88,773 88,401 86,933 86,229
BALANCE SHEET DATA (AT END
OF PERIOD):
Total assets.............. $2,900,478 $2,860,900 $898,880 $ 898,187 $ 849,443 $ 655,921
Long-term debt............ $1,208,630 $1,038,998 $276,211 $ 275,247 $ 274,698 $ 120,944
Stockholders' equity...... $ 538,754 $ 572,961 $348,567 $ 340,012 $ 305,324 $ 303,981
28
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FLOWERS INDUSTRIES, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE 40 WEEKS ENDED
---------------------------------
OCTOBER 7, 2000 OCTOBER 9, 1999
--------------- ---------------
STATEMENT OF
INCOME DATA:
Sales................................................ $3,317,466 $3,222,157
Materials, supplies, labor and other production
costs.............................................. 1,505,245 1,548,311
Selling, marketing and administrative expenses....... 1,445,318 1,408,420
Depreciation and amortization........................ 129,145 107,240
Non-recurring charge (credit)........................ (2,424) 69,208
Insurance proceeds................................... (4,774)
Interest expense..................................... 89,239 63,595
Interest income...................................... (3,002) (1,190)
Income before income taxes and minority interest..... 158,719 26,573
Income taxes......................................... 68,115 19,102
Income before minority interest...................... 90,604 7,471
Minority interest.................................... (55,359) (19,473)
Net income (loss).................................... $ 35,245 $ (12,002)
Diluted net income (loss) per common share........... $ 0.35 $ (0.12)
Weighted average shares outstanding.................. 100,372 100,388
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets......................................... $3,134,622 $2,845,579
Long-term debt....................................... $1,374,105 $1,115,982
Stockholders' equity................................. $ 545,070 $ 521,646
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PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed consolidated balance sheet as
of October 7, 2000 presents our combined financial position assuming the
transactions contemplated by the spin-off and merger had been completed on that
date. The following unaudited pro forma condensed consolidated income statement
for the 52 weeks ended January 1, 2000 and the 40 weeks ended October 7, 2000
presents our combined results of operations assuming that the transactions
contemplated by the spin-off and merger had been completed on January 3, 1999.
In the opinion of management, these statements include all material adjustments
necessary to reflect, on a pro forma basis, the impact of the transaction
contemplated by the spin-off and the merger on the historical financial
information of Flowers Industries. The adjustments are described in the Notes to
Unaudited Pro Forma Condensed Consolidated Financial Information and are set
forth in the "Pro Forma Adjustments" column.
Following the spin-off, Flowers Foods will consist of the traditional
bakery businesses of Flowers Industries. For accounting purposes, we will treat
the transactions as a disposition of Keebler. Consequently, the financial
statements of Flowers Foods will consist of the historical financial statements
of Flowers Industries, with Keebler presented as a discontinued operation.
Accordingly, the following unaudited pro forma financial information reflects
the exclusion of the assets and liabilities and the results of operations of
Keebler. The pro forma financial information for the 52 weeks ended January 1,
2000 and the 40 weeks ended October 7, 2000 also reflect the estimated reduction
in interest expense and amortization of intangibles that would have occurred had
the transaction occurred on January 3, 1999. As described in the notes to the
unaudited pro forma financial information, certain costs related to the
transaction will be charged to the operations of Flowers Foods. Since these
costs will be reimbursed by Kellogg or deducted from the proceeds to Flowers
Industries' shareholders, the costs charged to operations will be credited to
capital in excess of par value.
In addition, the unaudited pro forma condensed consolidated statement of
income of Flowers Foods for the 52 weeks ended January 2, 1999, the 27-week
transition period ended January 3, 1998 and the 52 weeks ended June 28, 1997 is
based on the historical consolidated statement of income of Flowers Industries
adjusted to reflect the disposition of Keebler. The unaudited pro forma
condensed consolidated statement of income for each such period differs from the
unaudited pro forma condensed consolidated statement of income for the 52 weeks
ended January 1, 2000 and the 40 weeks ended October 7, 2000 in that it does not
give effect to the reduction of debt and therefore to the decreased interest
expense which will result from the transaction since such interest expense will
not be included in discontinued operations.
Our unaudited pro forma condensed consolidated financial information should
be read in conjunction with the selected condensed consolidated historical
financial data of Flowers Industries and the related notes. The 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 Flowers Foods that would have existed had we operated as a
separate, independent company for the periods presented and should not be relied
upon as being indicative of our future results after the spin-off and merger.
30
39
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
The table below shows the unaudited pro forma condensed consolidated
balance sheet of Flowers Foods. This balance sheet is based on the historical
consolidated balance sheet of Flowers Industries at October 7, 2000 and assumes
that the spin-off and the merger had occurred on that date. It is intended to
show you what Flowers Foods' business would have looked like had the spin-off
and merger already occurred.
It is important that you read this unaudited pro forma condensed
consolidated balance sheet together with Flowers Industries' consolidated
financial statements, which are incorporated by reference herein and have been
filed as exhibits to Flowers Foods' registration statement on Form 10, of which
this information statement is a part. You should not rely on this balance sheet
as being indicative of the financial position of Flowers Foods that would have
resulted if the spin-off and merger had occurred on October 7, 2000.
OCTOBER 7, 2000
-------------------------------- PRO FORMA ADJUSTMENTS PRO FORMA
FLOWERS KEEBLER FOODS ---------------------- FLOWERS
INDUSTRIES, INC. COMPANY(A) DEBIT CREDIT FOODS, INC.
---------------- ------------- ---------- -------- -----------
ASSETS:
CURRENT ASSETS
Cash and cash equivalents................... $ 23,766 $ 20,469 $ 3,297
Accounts receivable......................... 191,140 52,367 138,773
Inventories................................. 302,401 184,643 117,758
Deferred income taxes....................... 69,289 34,668 34,621
Prepaid and other........................... 99,765 38,583 61,182
---------- ---------- ----------
686,361 330,730 355,631
Net property plant and equipment............ 1,195,007 610,337 584,670
Other assets and deferred charges........... 1,253,254 816,001 272,652(b) 164,601
---------- ---------- ----------
$3,134,622 $1,757,068 $1,104,902
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES
Current portion of long-term debt and
capital leases............................ $ 58,309 $ 50,660 $ 7,649
Accounts payable............................ 252,352 146,750 105,602
Income taxes................................ 1,138 1,138
Facility closing cost and severance......... 17,539 12,232 5,307
Other accrued liabilities................... 344,156 237,406 106,750
---------- ---------- ----------
673,494 448,186 225,308
Long-term debt and capital leases........... 1,374,105 546,104 625,000(c) 203,001
OTHER LONG-TERM LIABILITIES
Deferred income taxes....................... 158,456 127,544 8,197(b) 22,715
Postretirement/postemployment obligations... 64,038 63,546 492
Facility closing cost and severance......... 22,204 7,397 14,807
Other....................................... 60,772 46,710 10,187(d) 3,875
Minority interest........................... 236,483 236,483(b)
STOCKHOLDERS' EQUITY
Common stock................................ 62,830 283(f) 201
62,346(f)
Capital in excess of par value.............. 289,127 517,581 27,972(b) 625,000(c) 500,926
1,303(f) 24,809(d)
46,500(e)
62,346(f)
Retained earnings........................... 215,285 28,522(d) 133,577
46,500(e)
6,686(f)
Less: treasury stock........................ (8,272) 8,272(f)
Stock compensation adjustments.............. (13,900) 13,900(d)
---------- ---------- ----------
545,070 517,581 634,704
---------- ---------- ----------
$3,134,622 $1,757,068 $1,104,902
========== ========== ==========
The notes to this unaudited pro forma condensed consolidated balance sheet are
an integral part of the pro forma financial information presented.
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40
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The table below shows the unaudited pro forma condensed consolidated
statement of income of Flowers Foods for the 52 weeks ended January 1, 2000 and
the 40 weeks ended October 7, 2000. This statement of income is based on the
historical consolidated statement of income of Flowers Industries and assumes
that the spin-off and the merger occurred on January 3, 1999. It is intended to
show you what Flowers Foods' business would have looked like had the spin-off
and merger already occurred. Weighted average shares outstanding used to
calculate diluted net income or loss from continuing operations per common share
included in the unaudited pro forma condensed consolidated statement of income
gives effect to the issuance of one share of Flowers Foods common stock for
every five shares of Flowers Industries common stock outstanding. Flowers
Industries' historical weighted average shares outstanding for the respective
periods have been adjusted accordingly.
It is important that you read this unaudited pro forma condensed
consolidated statement of income together with Flowers Industries' historical
financial data and the related notes, which are incorporated by reference herein
and have been filed as exhibits to Flowers Foods' registration statement on Form
10, of which this information statement is a part. You should not rely on this
statement of income as being indicative of the historical results that Flowers
Foods would have experienced if the spin-off and merger had already occurred, or
the results that Flowers Foods will experience after the spin-off and the
merger.
52 WEEKS ENDED JANUARY 1, 2000
--------------------------------------------------------------------------
KEEBLER PRO FORMA ADJUSTMENTS PRO FORMA
FLOWERS FOODS ---------------------- FLOWERS
INDUSTRIES, INC. COMPANY(G) DEBIT CREDIT FOODS, INC.
---------------- ---------- -------- -------- -----------
Sales.................... $4,236,010 $2,667,771 $1,568,239
Materials, supplies,
labor and other
production costs....... 2,001,956 1,118,074 883,882
Selling, marketing and
administrative
expenses............... 1,845,101 1,201,669 643,432
Depreciation and
amortization........... 144,619 84,125 $ 6,604(h) 53,890
Non-recurring charge
(credit)............... 60,355 66,349 (5,994)
---------- ---------- ----------
Income (loss) from
operations............. 183,979 197,554 (6,971)
Interest expense......... 82,565 37,874 39,335(i) 5,356
Interest income.......... (1,700) (1,700)
---------- ---------- ----------
Interest expense, net.... 80,865 36,174 5,356
---------- ---------- ----------
Income (loss) before
income taxes and
minority interest...... 103,114 161,380 (12,327)
Income taxes............. 56,260 73,175 $ 13,765(j) (3,150)
---------- ---------- ----------
Income (loss) before
minority interest...... 46,854 88,205 (9,177)
Minority interest........ (39,560) (39,560)
---------- ---------- ----------
Net income (loss) from
continuing
operations............. $ 7,294 $ 48,645 $ (9,177)
========== ========== ==========
Diluted net income (loss)
from continuing
operations per common
share.................. $ 0.36 $ (0.46)
========== ==========
Weighted average shares
outstanding............ 20,084 20,084
The notes to this unaudited pro forma condensed consolidated statement of income
are an integral part of the pro forma financial information presented.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
40 WEEKS ENDED OCTOBER 7, 2000
-------------------------------------------------------------------------------------
KEEBLER PRO FORMA ADJUSTMENTS PRO FORMA
FLOWERS FOODS ----------------------------- FLOWERS
INDUSTRIES, INC. COMPANY(G) DEBIT CREDIT FOODS, INC.
---------------- ---------- --------- ---------- -----------
Sales................... $3,317,466 $2,111,635 $1,205,831
Materials, supplies,
labor and other
production costs...... 1,505,245 842,207 663,038
Selling, marketing and
administrative
expenses.............. 1,445,318 961,009 484,309
Depreciation and
amortization.......... 129,145 72,547 $ 5,307(h) 51,291
Proceeds from insurance
claims................ (4,774) (4,774)
Non-recurring charge
credit................ (2,424) (996) (1,428)
---------- ---------- ----------
Income from
operations............ 244,956 236,868 13,395
Interest expense........ 89,239 37,189 37,796(i) 14,254
Interest income......... (3,002) (3,002)
---------- ---------- ----------
Interest expense, net... 86,237 34,187 14,254
---------- ---------- ----------
Income (loss) before
income taxes and
minority interest..... 158,719 202,681 (859)
Income taxes............ 68,115 80,767 $ 12,462(j) (190)
---------- ---------- ----------
Income (loss) before
minority interest..... 90,604 121,914 (669)
Minority interest....... (55,359) (55,359)
---------- ---------- ----------
Net income (loss) from
continuing
operations............ $ 35,245 $ 66,555 $ (669)
========== ========== ==========
Diluted net income
(loss) from continuing
operations per common
share................. $ 1.76 $ (0.03)
========== ==========
Weighted average shares
outstanding........... 20,074 20,074
The notes to this unaudited pro forma condensed consolidated statement of income
are an integral part of the pro forma financial information presented.
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42
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The table below shows the unaudited pro forma condensed consolidated
statement of income of Flowers Foods for the 52 weeks ended January 2, 1999, the
27 week transition period ended January 3, 1998 and the 52 weeks ended June 28,
1997. This statement of income is based on the historical consolidated statement
of income of Flowers Industries adjusted to reflect the disposition of Keebler.
It assumes Keebler is accounted for as a discontinued operation from June 30,
1996. This unaudited pro forma condensed consolidated statement of income also
differs from the unaudited pro forma condensed consolidated statement of income
on the preceding pages in that it does not give effect to the reduction of debt
and accordingly to the decreased interest expense, which will result from the
transaction since such interest expense will not be included in discontinued
operations. Weighted average shares outstanding used to calculate diluted net
income or loss from continuing operations per common share included in this
unaudited pro forma condensed consolidated statement of income gives effect to
the issuance of one share of Flowers Foods common stock for every five shares of
Flowers Industries common stock outstanding. Flowers Industries' historical
weighted average shares outstanding for the respective periods have been
adjusted accordingly.
It is important that you read this pro forma condensed consolidated
statement of income together with Flowers Industries' historical financial data
and the related notes, which have been filed as exhibits to Flowers Foods'
registration statement on Form 10, of which this information statement is a
part. You should not rely on this statement of income as being indicative of the
historical results that would actually have resulted for Flowers Foods had the
spin-off and the merger occurred at the beginning of the respective periods.
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43
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
52 WEEKS ENDED JANUARY 2, 1999
---------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS PRO FORMA
FLOWERS KEEBLER ----------------- FLOWERS
INDUSTRIES, INC. FOODS COMPANY(G) DEBIT CREDIT FOODS, INC.
---------------- ---------------- ------ -------- -----------
Sales....................... $3,765,367 $2,226,480 $1,538,887
Materials, supplies, labor
and other production
costs..................... 1,702,581 907,497 795,084
Selling, marketing and
administrative expenses... 1,633,319 1,049,967 583,352
Depreciation and
amortization.............. 128,765 69,125 $6,096(h) 53,544
Non-recurring charge........ 68,313 3,852 64,461
---------- ---------- ----------
Income from operations...... 232,389 196,039 42,446
Interest expense............ 72,840 30,263 42,577
Interest income............. (4,115) (3,763) (352)
---------- ---------- ----------
Interest expense, net....... 68,725 26,500 42,225
---------- ---------- ----------
Income before income taxes,
minority interest,
extraordinary loss and
cumulative effect of
changes in accounting
principles................ 163,664 169,539 221
Income taxes................ 74,391 72,962 1,429
---------- ---------- ----------
Income (loss) before
minority interest......... 89,273 96,577 (1,208)
Minority interest........... (43,305) (43,305)
---------- ---------- ----------
Income (loss) before
extraordinary loss and
cumulative effect of
changes in accounting
principles................ 45,968 53,272 (1,208)
Extraordinary loss due to
early extinguishment of
debt, net of tax.......... (938) (938)
Cumulative effect of changes
in accounting principles,
net of tax................ (3,131) (3,131)
---------- ---------- ----------
Net income (loss) from
continuing operations..... $ 41,899 $ 52,334 $ (4,339)
========== ========== ==========
Diluted net income (loss)
from continuing operations
per share................. $ 2.16 $ (0.22)
========== ==========
Weighted average shares
outstanding............... 19,360 19,360
The notes to this unaudited pro forma condensed consolidated statement of income
are an integral part of the pro forma financial information presented.
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44
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
27 WEEKS ENDED JANUARY 3, 1998
--------------------------------------------------
PRO FORMA
ADJUSTMENTS
FLOWERS ----------------- FLOWERS
INDUSTRIES, INC. DEBIT CREDIT FOODS, INC.
---------------- ------- ------ -----------
Sales................................. $784,097 $784,097
Materials, supplies, labor and other
production costs.................... 418,926 418,926
Selling, marketing and administrative
expenses............................ 301,426 301,426
Depreciation and amortization......... 26,930 26,930
-------- --------
Income from operations................ 36,815 36,815
Interest expense...................... 12,144 12,144
Interest income....................... (348) (348)
-------- --------
Interest expense, net................. 11,796 11,796
-------- --------
Income before income taxes, income
from investment in unconsolidated
affiliate and cumulative effect of
changes in accounting principles.... 25,019 25,019
Income taxes.......................... 9,632 9,632
Income from investment in
unconsolidated affiliate............ 18,061 $18,061(k)
--------
Income before cumulative effect of
changes in accounting principles.... 33,448 15,387
Cumulative effect of changes in
accounting principles, net of tax... (9,888) (9,888)
-------- --------
Net income from continuing
operations.......................... $ 23,560 $ 5,499
======== ========
Diluted net income from continuing
operations per share................ $ 1.33 $ 0.31
======== ========
Weighted average shares outstanding... 17,755 17,755
The notes to this unaudited pro forma condensed consolidated statement of income
are an integral part of the pro forma financial information presented.
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT
OF INCOME -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
52 WEEKS ENDED JUNE 28, 1997
------------------------------------------------
PRO FORMA
ADJUSTMENTS
FLOWERS --------------- FLOWERS
INDUSTRIES, INC. DEBIT CREDIT FOODS, INC.
---------------- ------ ------ -----------
Sales................................. $1,437,713 $1,437,713
Materials, supplies, labor and other
production costs.................... 787,799 787,799
Selling, marketing and administrative
expenses............................ 534,285 534,285
Depreciation and amortization......... 45,970 45,970
---------- ----------
Income from operations................ 69,659 69,659
Interest expense...................... 25,691 25,691
Interest income....................... (582) (582)
---------- ----------
Net interest expense.................. 25,109 25,109
---------- ----------
Gain on sale of distributor notes..... 43,244 43,244
---------- ----------
Income before income taxes and income
from investment in unconsolidated
affiliate........................... 87,794 87,794
Income taxes.......................... 33,191 33,191
Income from investment in
unconsolidated affiliate............ 7,721 $7,721(k)
---------- ----------
Net income from continuing
operations.......................... $ 62,324 $ 54,603
========== ==========
Diluted net income from continuing
operations per share................ $ 3.53 $ 3.09
========== ==========
Weighted average shares outstanding... 17,680 17,680
The notes to this unaudited pro forma condensed consolidated statement of income
are an integral part of the pro forma financial information presented.
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46
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE
SHEET AND STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(a) Reflects the separation of the assets and liabilities of Keebler that are
included in Flowers Industries' consolidated balance sheet as of October 7,
2000. Amounts have been derived from the Keebler unaudited interim financial
statements as of October 7, 2000 filed with the Securities and Exchange
Commission on Form 10-Q on November 21, 2000 and Flowers Industries'
unaudited interim financial statements as of October 7, 2000, each of which
is filed as an exhibit to Flowers Foods' registration statement on Form 10,
of which this information statement is a part, and such material is
incorporated herein by reference.
(b) Reflects the elimination of (i) cost in excess of Keebler net tangible
assets acquired, (ii) Flowers Industries' minority interest in Keebler and
(iii) deferred taxes provided on (a) unremitted earnings prior to
consolidation by Flowers Industries and (b) Keebler stock transactions, as
follows:
DR/(CR)
---------
Goodwill and other intangible assets.................... $(272,652)
Minority interest....................................... 236,483
Deferred taxes.......................................... 8,197
---------
Capital in excess of par value.......................... $ 27,972
=========
(c) Reflects the elimination of $625.0 million of debt to be retained by Flowers
Industries as follows:
DR/(CR)
---------
Long-term debt.......................................... $ 625,000
---------
Capital in excess of par value.......................... $(625,000)
---------
At the effective date of the spin-off and merger, Flowers Foods'
liabilities will include approximately $250.0 million of debt. In order to
achieve this debt level, we estimate that Flowers Industries will retain
approximately $625.0 million of debt.
(d) In connection with the spin-off and merger, various separation agreements
and other employee costs will be incurred by Flowers Industries. These costs
will reduce the proceeds received by Flowers Industries shareholders and
include the $25.5 million in payments to Flowers Industries' executive
officers as well as payments to non-executive officers and employees. The
estimated payments expected to be made are as follows:
Separation agreements..................................... $13,583
Other contractual payments under benefit programs......... 28,919*
-------
Total estimated cash payments................... $42,502
=======
---------------
* Based on an estimated Flowers Industries stock price of $16.6875 per share.
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47
Of the total estimated cash payments, $10.2 million is already accrued in
Flowers Industries' liabilities and $3.8 million reflects equity
compensation in the form of value of stock options which has no effect on
the results of operations, as follows:
Total estimated cash payments............................ $ 42,502
Amount accrued........................................... (10,187)
Equity compensation...................................... (3,793)
--------
$ 28,522**
========
---------------
** The $28.5 million will be charged to income from continuing operations
in the Flowers Foods statement of income when a measurement date is reached
under discontinued operations accounting.
Accordingly, $28.5 million is reflected as a decrease in retained earnings
in the unaudited pro forma condensed consolidated balance sheet. The $28.5
million is not reflected in the unaudited pro forma condensed consolidated
statement of income because it is of a non-recurring nature. The pro forma
entry is outlined as follows:
DR/(CR)
--------
Decrease in retained earnings............................ $ 28,522
Decrease in other liabilities............................ 10,187
Stock compensation adjustments........................... (13,900)
--------
Net increase in capital in excess of par value........... $(24,809)
========
Stock compensation adjustments represent the termination of the 1989
Flowers Industries Executive Stock Incentive Plan as follows:
Reversal of notes receivable to capital in excess of par
value................................................... $10,102
Accelerated vesting of restricted stock awards............ 3,798+
-------
$13,900
=======
---------------
+ Accelerated vesting of restricted stock awards is included in the $28.5
million decrease in retained earnings.
(e) In connection with the spin-off and merger, various transaction and other
costs of approximately $41.0 million will be incurred by Flowers Industries
and approximately $10.0 million will be incurred by Keebler. Of the $41.0
million incurred by Flowers Industries, $16.0 million will be borne by
Kellogg and the balance will reduce the proceeds received by Flowers
Industries' shareholders. Estimated costs reflected on the unaudited pro
forma condensed consolidated balance sheet are outlined as follows:
Investment banking fees................................... $32,000
Legal and accounting...................................... 5,000
Debt prepayment penalty................................... 4,000
55% of Keebler transaction fees*.......................... 5,500
-------
$46,500
=======
This $46.5 million will be included in discontinued operations when a
measurement date is reached.
---------------
* Represents Flowers Industries' year to date weighted average ownership
interest in Keebler.
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(f) Represents necessary adjustments to par value and capital in excess of par
value to (i) reflect the retirement of Flowers Industries' treasury stock
upon completion of the merger and (ii) give effect to the issuance of one
share of Flowers Foods common stock for every five shares of Flowers
Industries common stock outstanding by adjusting Flowers Industries $0.625
par value common stock to newly issued Flowers Foods $0.01 par value common
stock as follows:
DR/(CR)
--------
(i) Retained earnings................................... $ 6,686
Capital in excess of par value...................... 1,303
Common stock........................................ 283
--------
Treasury stock...................................... $ (8,272)
========
(ii) Common stock........................................ $ 62,346
--------
Capital in excess of par value...................... $(62,346)
--------
(g) Represents the exclusion of the results of operations of Keebler that are
included in Flowers Industries' consolidated statements of income for the
periods presented.
(h) Reflects the change in amortization expense resulting from the elimination
of intangible assets related to the acquisition of Keebler. As a result of
Flowers Industries' acquisition of Keebler, Flowers Industries recorded cost
in excess of net tangible assets of approximately $272.7 million which was
being amortized over 40 years.
(i) Reflects the change in interest expense resulting from the elimination of
$625.0 million of debt as described in (c) above. The change in interest
expense for the respective periods is based on the average debt outstanding
after reflecting the reduction of $625.0 million, using interest rates in
effect during the applicable periods.
Flowers Industries anticipates that Flowers Foods will assume all of
Flowers Industries' rights and obligations under the Indenture, dated as of
April 27, 1998, relating to its $200 million 7.15% Debentures due 2028, or
the Debentures, through the execution of a supplemental indenture. In the
event that a supplemental indenture is not executed prior to the closing of
the merger, the Debentures will remain obligations of Flowers Industries,
not Flowers Foods, and Flowers Foods anticipates that it will assume
certain other debts amounting to approximately $200 million which it would
otherwise not assume, such that the cash payable to Flowers Industries
shareholders as a result of the merger would not change. Flowers Foods
would incur additional interest expense of approximately $1.4 million per
year, on a pro forma basis as a result of this debt assumption. The
aggregate principal amount of debt to be retained by Flowers Industries
would not change. See note (c). Flowers Industries and Flowers Foods have
filed a Petition for Declaratory Judgement and Ancillary Equitable Relief
seeking a declaration of Flowers Industries' and Flowers Foods' rights
under the Indenture. For more detailed information see "Business -- Legal
Proceedings."
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49
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 loss from
continuing operations:
INCREASE 1/8% DECREASE 1/8%
-------------- --------------
52 weeks ended January 1, 2000....... $(9,270) $(9,084)
40 weeks ended October 7, 2000....... $(1,270) $ (68)
(j) Represents the tax effect of the adjustments in (g), (h) and (i).
(k) Represents elimination of the results of operations of Keebler included in
the consolidated statements of income prior to acquisition by Flowers
Industries of a controlling ownership interest in Keebler, which occurred on
February 3, 1998.
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BUSINESS
OUR COMPANY
Flowers Foods is one of the largest producers and marketers of frozen and
non-frozen bakery and dessert products in the United States. Flowers Foods
consists of the following businesses:
- Flowers Bakeries; and
- Mrs. Smith's Bakeries.
Our core strategy is to be the country's leading producer and marketer of a
full line of frozen and non-frozen bakery and dessert products serving all
categories of customers through all channels of distribution. Our strategy
focuses on responding to current market trends for our products and changing
consumer preferences, which increasingly favor purchases of ready-made
convenience food products as opposed to traditional foods to be prepared at
home. To assist in accomplishing our core strategy, we have aggressively
invested capital to modernize and expand our production and distribution
capacity and have expanded a nationally branded business which complements our
traditional strengths. We have established a presence in all distribution
channels where bakery and dessert products are sold, including traditional
supermarkets and their in-store deli/bakeries, foodservice distributors,
convenience stores, mass merchandisers, club stores, wholesalers, restaurants,
fast food outlets, schools, hospitals and vending machines.
Our Flowers Bakeries business focuses on the production and marketing of
bakery products to customers in the super-regional 16 state area in and
surrounding the southeastern United States. We have devoted significant
resources to modernizing production facilities, improving our distribution
capabilities and enhancing our information technology. We have acquired numerous
local bakery operations which are generally within or contiguous to our existing
region and which can be served with our extensive direct store door delivery
system. Our strategy is to continue to better serve new and existing customers,
principally by using information technology to enhance the productivity and
efficiency of our production facilities and by extending our direct store door
delivery system. This system utilizes approximately 3,300 independent
distributors who own the right to sell our bakery products within their
respective territories.
Our Mrs. Smith's Bakeries business produces and markets frozen desserts as
well as bread, rolls and buns for sale to retail and foodservice customers.
Traditionally, retail frozen pie sales are heavily concentrated in the year-end
holiday season. In an effort to enhance sales outside of the holiday season, we
launched "Operation 365," a strategy aimed at significantly expanding
non-seasonal sales in the frozen dessert product line by extending the
well-recognized Mrs. Smith's brand name to existing and related retail and
foodservice products. Examples of significant product line extensions include
the introduction of Mrs. Smith's Restaurant Classics and Mrs. Smith's Cookies
and Cream frozen pies in the retail channel and Grand Finales frozen pies in the
foodservice channel.
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51
We have a leading presence in each of the major product categories in which
we compete. Our Flowers Bakeries brands rank first in branded sales measured in
dollars and units in the 22 major metropolitan markets we serve. Our Mrs.
Smith's Bakeries business is one of the leading frozen dessert producers and
marketers in the United States, and our Mrs. Smith's pies are the leading
national brand of frozen pies sold at retail. Our major branded products
include, among others, the following:
FLOWERS BAKERIES MRS. SMITH'S BAKERIES
---------------- ---------------------
Flowers Mrs. Smith's
Nature's Own Mrs. Freshley's
Cobblestone Mill Oregon Farms
BlueBird European Bakers
ButterKrust Stilwell
REGIONAL FRANCHISED BRANDS: Our Special Touch
Sunbeam Danish Kitchen
Roman Meal Pour a Quiche
Evangeline Maid Grand Finales
Bunny Pet-Ritz
Oronoque Orchard
We are committed to producing high quality products at the lowest price in
all of our operations, and we have made significant capital investments in
recent years to modernize, automate and expand our production and distribution
capabilities and enhance our information technology. Capital spending has been
primarily directed toward expanding and modernizing existing production
facilities. The most recent production facility expenditure in our Flowers
Bakeries business was the installation of a fully automated wrapping system for
three production lines in a new 6,000 square foot facility in Goldsboro, North
Carolina. Production capabilities at our Mrs. Smith's Bakeries business were
significantly realigned at an approximate cost of $230.0 million. This
realignment included the relocation and upgrading of 25 production lines at
seven of our 10 operating facilities, which offers us significantly more
capacity at fewer locations. We believe these facilities will give us the
ability to exploit many opportunities in the foodservice segment and continue
our growth in the retail market.
In order to provide prompt and responsive service to customers, we tailor
our distribution systems to the marketing and production aspects of our major
product lines. Flowers Bakeries distributes its baked foods through an extensive
direct store door delivery system of approximately 3,300 independent
distributors who, as owners of their territories, are motivated to maintain and
build retail brand shelf space and to monitor product freshness, which is
essential in the marketing of short shelf life products such as fresh bread,
rolls and buns. Mrs. Smith's Bakeries frozen foods are distributed through our
two strategically-located frozen distribution facilities, as well as through
additional commercial frozen warehouse space throughout the United States in
order to accommodate demands in the retail channel for seasonal products and to
provide staging to expedite distribution throughout the year.
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INDUSTRY OVERVIEW
The United States food industry is comprised of a number of distinct
product lines and distribution channels for frozen and non-frozen bakery
products and desserts. Changes in consumer preferences have shifted food
purchases away from the traditional grocery store aisles for home preparation
and consumption and toward home meal replacement purchases, either in
supermarket in-store deli/bakeries or in non-supermarket channels, such as mass
merchandisers, convenience stores, club stores, restaurants and other
convenience channels. Non-supermarket channels of distribution are extremely
important throughout the food industry.
NON-FROZEN AND FROZEN BAKERY PRODUCTS
Retail sales of bakery products continue to experience modest growth, with
expansion within the category occurring in a variety of premium and specialty
breads. However, foodservice sales of bakery products continue to grow at a rate
faster than retail sales as consumers who demand convenience increasingly are
purchasing food products from non-retail distribution channels. In addition to
Flowers Foods, several large baking and diversified food companies market bakery
products in the United States. Competitors in this category include Interstate,
Earthgrains, Bestfoods and Pepperidge Farm. There are also a number of smaller,
regional companies. We believe that the larger companies enjoy several
competitive advantages over smaller operations due principally to economies of
scale in areas such as information technology, purchasing, production,
advertising, marketing and distribution, as well as through greater brand
awareness.
A significant trend in the baking industry over the last several years has
been the consolidation of smaller bakeries into larger baking businesses.
Consolidation continues to be driven by factors such as capital constraints on
smaller companies that limit their ability to avoid technological obsolescence,
to increase productivity or to develop new products, generational changes at
family-owned businesses, and the need to serve the consolidated retail customers
and the foodservice channel. We believe that the consolidation trend in the
baking, food retailing and foodservice industries will continue to present
opportunities for strategic acquisitions that complement our existing businesses
and that extend our super-regional presence.
FROZEN DESSERT PRODUCTS
Sales of frozen desserts to foodservice institutions and other distribution
channels, including restaurants and in-store bakeries, have grown at a rate
faster than sales to retail channels. We are a preferred supplier of frozen
dessert products to the leading foodservice distributors in the United States.
While retail sales of frozen desserts have experienced declining sales, Mrs.
Smith's remains the leading brand in the frozen pie category. Primary
competitors in the frozen dessert market include Sara Lee, Pepperidge Farm,
Edwards and Pillsbury. We believe the increase in foodservice sales in the
frozen dessert industry will provide us with additional revenue opportunities.
STRATEGY
Our core strategy is to be the country's leading producer and marketer of a
full line of frozen and non-frozen bakery and dessert products serving all
categories of customers through all channels of distribution. Our Flowers
Bakeries and Mrs. Smith's Bakeries
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53
businesses each develop strategies based on the production, distribution and
marketing requirements of their particular food categories. We employ the
following five overall strategies:
- STRONG BRAND RECOGNITION. We intend to capitalize on the success of our
well-recognized brand names, which communicate product consistency and
quality, by extending those brand names to additional products and
channels of distribution. Many of our brands, including Nature's Own
bread and Mrs. Smith's retail frozen baked pies, are the top-selling
brands in their categories.
- EFFICIENT PRODUCTION AND DISTRIBUTION FACILITIES. We intend to maintain
a continuing level of capital improvements that, while substantially
lower than our level of capital improvements in recent years, will permit
us to fulfill our commitment to remaining among the most modern and
efficient frozen and non-frozen bakery and dessert producers in the
United States.
- CUSTOMER SERVICE-ORIENTED DISTRIBUTION. We intend to expand and refine
our distribution systems to respond quickly and efficiently to changing
customer service needs, consumer preferences and seasonal demands. We
have distribution systems that are tailored to the nature of each of our
food product categories and are designed to provide the highest levels of
service to our retail and foodservice customers. We have developed a
direct store door delivery network of approximately 3,300 independent
distributors for our Flowers Bakeries bakery products. Our Mrs. Smith's
Bakeries business utilizes a network of strategically located storage and
distribution facilities for our frozen bakery and dessert products and a
centralized distribution facility for our snack cake products.
- BROAD RANGE OF PRODUCTS SOLD THROUGH MULTIPLE DISTRIBUTION
CHANNELS. Recognizing that consumers are increasingly seeking home meal
replacements and other convenience food products, we intend to continue
to emphasize expansion of our product lines and distribution channels to
meet those preferences. Our product lines now include virtually every
category of fresh and frozen bakery and dessert products. These products
generally can be found in traditional supermarkets and their in-store
deli/bakeries, convenience stores, mass merchandisers, club stores,
wholesalers, restaurants, fast food outlets, schools, hospitals and
vending machines.
- STRATEGIC ACQUISITIONS. We have consistently pursued growth in sales,
geographic markets and products through strategic acquisitions. We intend
to pursue growth through strategic acquisitions and investments that will
complement and expand our existing markets, product lines and product
categories.
PRODUCTS
We produce packaged bakery, frozen dessert and frozen bakery products.
FLOWERS BAKERIES
We market our packaged bakery products in the super-regional 16 state area
in and surrounding the southeastern United States under numerous brand names,
including Nature's Own and Cobblestone Mill. We also market fresh bread under
regional franchised brands such as Sunbeam, Roman Meal, Evangeline Maid and
Bunny. Nature's Own is the best selling brand by volume of soft variety bread in
the United States, despite being marketed solely in the super-regional 16 state
area in and surrounding the southeastern United States. Pastries, doughnuts,
bakery snacks, cakes and english muffins are sold
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54
through our direct store door distribution system primarily under the BlueBird
brand, as well as under the ButterKrust, Sunbeam and Holsum trademarks. Our
branded products account for approximately 65% of sales by Flowers Bakeries.
In addition to our branded products, we also produce and distribute
packaged bakery products under private labels for such retailers as Winn-Dixie
and Kroger. While private label products carry lower margins than our branded
products, we use our private label offerings to expand our total shelf space and
to effectively utilize production and distribution capacity.
We utilize our direct store door distribution system to supply foodservice
companies, including Burger King, Krystal, Arby's, Hardees, Whataburger and
Outback Steakhouse, with bakery products. In addition, we supply frozen bakery
products to Wendy's.
MRS. SMITH'S BAKERIES
Mrs. Smith's frozen desserts are marketed throughout the United States, and
our frozen pies were the number one retail frozen pie brand in the United States
for 2000.
Mrs. Smith's frozen desserts are sold at retail under the Mrs. Smith's,
Pet-Ritz, Oregon Farms and Oronoque Orchard brand names. Frozen desserts in the
foodservice channel are sold under the Grand Finales brand and under private
labels for foodservice customers, such as Sysco.
We produce and distribute frozen bakery products such as bread, rolls and
buns for sale to foodservice customers. We also produce packaged bakery products
for distribution by Flowers Bakeries direct store door distribution network
under the BlueBird brand. In addition, we produce packaged bakery products under
the Mrs. Freshley's brand for sale to the vending channel and under various
private labels for sale through the retail channel.
PRODUCTION AND DISTRIBUTION
We design our production facilities and distribution systems to meet the
marketing and production demands of our major product lines. Through a
significant program of capital improvements and careful planning of plant
locations, which, among other things, allows us to establish reciprocal baking,
or product transfer arrangements among our bakeries, we seek to remain a low
cost producer and marketer of a full line of frozen and non-frozen bakery and
dessert products on a national and super-regional basis. In addition to the
independent distributor system for our fresh baked products, we also use both
owned and public warehouses and distribution centers in central locations for
the distribution of certain of our Mrs. Smith's products.
FLOWERS BAKERIES
We operate 27 packaged bakery product facilities in 10 states. We have
invested approximately $130.0 million over the past three years, primarily to
build new state-of-the-art baking facilities and to significantly upgrade
existing facilities. During this period, we also added 13 new highly-automated
production lines in eight of our facilities, and a fully automated wrapping
system for three production lines was installed in our new 6,000 square foot
facility in Goldsboro, North Carolina. We believe that these investments will
make us the most efficient major producer of packaged bakery products in the
United States. We believe that our capital investment yields long-term benefits
in the form of
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55
more consistent product quality, highly sanitary processes, and greater
production volume at a lower cost per unit. While our major capital improvement
program is largely complete, we intend to continue to invest in our production
facilities and equipment to maintain high levels of efficiency.
Distribution of packaged bakery products involves determining appropriate
order levels, delivering the product from the plant to the independent
distributor for direct store door delivery to the customer, stocking the product
on the shelves, visiting the customer daily to ensure that inventory levels
remain adequate, and removing stale goods. We utilize a network of approximately
3,300 independent distributors who own the rights to distribute our packaged
bakery products in their geographic territory. Distributor purchase arrangements
generally are made directly with a financial institution, and, pursuant to an
agreement, we manage and service these arrangements.
The distributors lease hand-held computers from us, which contain our
proprietary software. The software permits distributors to track and communicate
inventory data to the production facilities and to calculate recommended order
levels based on historical sales data and recent trends. These orders are
electronically transmitted to the appropriate production facility on a nightly
basis. This system, which we believe is more sophisticated than comparable
tracking programs currently used in the industry, is designed to ensure that
adequate product, and the right mix of products, are available to meet the
retail and foodservice customers' immediate needs. We believe our system
minimizes returns of unsold goods. In addition to the hand-held distributor
units, our main computer system permits tracking of sales, product returns and
profitability by customer location, plant, day and other bases. Managers receive
sales and profitability reports on a weekly basis, allowing prompt operational
adjustments when appropriate.
We believe the independent distributor system is unique in the industry as
to its size, with approximately 3,300 distributors, and with respect to its
geographic coverage. The program is designed to provide retail customers with
superior service because distributors, highly motivated by route ownership,
strive to increase sales by maximizing service. In turn, distributors have the
opportunity to benefit directly from the enhanced value of their routes
resulting from higher sales volume.
MRS. SMITH'S BAKERIES
We operate 10 production facilities with 43 production lines for our frozen
desserts, frozen bakery products and packaged bakery products. We significantly
realigned our production capabilities over the last three years, spending
approximately $230.0 million. This realignment included the relocation and
upgrading of 25 production lines at seven of our 10 operating facilities, which
offers us significantly more capacity at fewer locations. We believe product
realignment will give us the ability to exploit many opportunities in the retail
and foodservice channels.
Our distribution facilities are strategically located near our production
facilities to simplify distribution logistics. Our plant in Stilwell, Oklahoma
was the focus of a $60.0 million capital spending project in 1999 to add
production capacity and will be the primary producer of frozen fruit and custard
pies. This facility also serves as a principal point of distribution for our
frozen desserts. Our Suwanee, Georgia facility is located on a major interstate
corridor near four of our frozen dessert production facilities. This facility
contains such innovations as five 78-foot tall, laser-guided cranes specifically
designed for the facility, a six million cubic foot freezer, and
computer-controlled bar-coding and
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inventorying. The automation of this facility enables us to move extremely large
volumes of product without a significant labor component and enables the
facility to operate with extremely cold temperatures that preserve high product
quality. These features allow our Suwanee facility to better serve customers by
processing customer orders much more quickly than conventional freezer
facilities. Production capacity was added to this facility as part of the
overall realignment project, enhancing operating efficiencies by having
contiguous production and frozen storage and distribution.
In addition to our two strategically-located freezer and distribution
facilities in Suwanee and Stilwell, we own and lease additional freezer and
distribution facilities throughout the United States to facilitate distribution
of our products nationwide. These owned and leased facilities allow us to build
and store necessary inventory of raw materials and finished dessert products and
to expedite the national distribution of both our seasonal and non-seasonal
products.
We distribute our packaged bakery products from a centralized distribution
facility located near Knoxville, Tennessee. Centralized distribution allows us
to achieve both production and distributing efficiencies. The production
facilities are able to operate longer, more efficient production runs of a
single product, which are then shipped to the centralized distribution facility.
Products coming from different production facilities are then cross-docked and
shipped directly to customer warehouses.
CUSTOMERS
Our top 10 customers in 1999 accounted for 41.0% of Flowers Foods sales.
Winn-Dixie accounted for approximately 10.2% of sales during 1999. Pursuant to
an agreement with Winn-Dixie, which is terminable at the option of either party,
we are the exclusive supplier of its private label fresh bakery products and are
afforded preferred supplier status and preferential space allocation in
Winn-Dixie store locations.
FLOWERS BAKERIES
Our fresh baked foods have a highly diversified customer base, which
includes grocery retailers, restaurants, fast-food chains, food wholesalers,
institutions and vending companies. We also sell returned and surplus product
through a system of thrift outlets.
We supply numerous restaurants, institutions and foodservice companies with
bakery products, including buns for fast-food outlets such as Burger King,
Wendy's, Krystal, Hardees, Whataburger, Arby's and Outback Steakhouse. We also
sell packaged bakery products to wholesale distributors for ultimate sale to a
wide variety of food outlets.
MRS. SMITH'S BAKERIES
Our frozen desserts are marketed to traditional retail outlets, such as
grocery stores, as well as non-traditional outlets, ranging from club stores and
mass merchandisers to wholesalers, foodservice distributors and restaurants. Our
branded frozen desserts are sold primarily through grocery retailers. Our frozen
bakery products are sold to foodservice distributors, institutions, retail
in-store bakeries and restaurants.
Our packaged bakery products under the Mrs. Freshley's brand are sold
primarily through vending outlets. We produce packaged bakery products for our
own distribution
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under our BlueBird brand. In certain circumstances, we enter into co-packing
arrangements with some of our competitors. Through co-packing, we have produced
packaged bakery products for popular brands such as Weight Watchers, Stouffer,
Lance, Pepperidge Farm and Little Debbie.
MARKETING
Our marketing and advertising campaigns are conducted through targeted
television and radio advertising and coupons placed in printed media. We also
incorporate promotional tie-ins with other sponsors, on-package promotional
offers and sweepstakes into our marketing efforts. Additionally, we focus our
marketing and advertising campaigns on specific products throughout the year,
such as buns for Memorial Day, Independence Day and Labor Day and fruit cakes
and pies during the Thanksgiving and Christmas holiday season.
COMPETITION
FLOWERS BAKERIES
The United States packaged bakery category is intensely competitive and is
comprised of large food companies, large independent bakeries with national
distribution, and smaller regional and local bakeries. Primary national
competitors include Interstate, Earthgrains and Bestfoods. We also face
competition from private label brands. Competition is based on product
availability, product quality, brand loyalty, price effective promotions and the
ability to target changing consumer preferences. Customer service, including
frequent delivery and well-stocked shelves, is an increasingly important
competitive factor. While we experience price pressure from time to time,
primarily as a result of competitors' promotional efforts, we believe that our
customer relationships and the consumer's brand loyalty, as well as our
diversity within our region in terms of geographic markets, products, and sales
channels, limit the effects of such competition. Recent consolidation in the
industry has further enhanced the ability of the larger firms to compete with
small regional bakeries. We believe we have significant competitive advantages
over smaller regional bakeries due to economies of scale in areas such as
information technology, purchasing, production, advertising, marketing and
distribution as well as greater brand awareness.
MRS. SMITH'S BAKERIES
Mrs. Smith's Bakeries, Sara Lee, Pepperidge Farm and Pillsbury lead the
frozen dessert category. Other significant competitors in the frozen baked
dessert category include Edwards and private label brands. Competitors for
packaged bakery products produced by Mrs. Smith's Bakeries include Interstate
(Hostess) and McKee (Little Debbie).
Competition for frozen desserts depends primarily on brand recognition and
loyalty, perceived product quality, effective promotions and, to a lesser
extent, price. For the frozen bakery and packaged bakery products manufactured
by Mrs. Smith's Bakeries, competition is based upon the ability to meet
production and distribution demands of foodservice and vending customers at a
competitive price.
INTELLECTUAL PROPERTY
We own a number of trademarks and trade names, as well as certain patents
and licenses. Such trademarks and trade names are considered to be important to
our business
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since they have the effect of developing brand identification and maintaining
consumer loyalty. We are not aware of any fact that would negatively impact the
continuing use of any of our trademarks, trade names, patents or licenses.
Following the spin-off we will have the exclusive use of the "Flowers" name and
any trademark or tradename derived therefrom to the extent currently owned,
licensed or sublicensed by Flowers Industries or its subsidiaries (including
Flowers Foods) but excluding any intellectual property rights owned, licensed or
sublicensed by Keebler. Flowers Industries will change its name, and is expected
to be renamed Keebler Holding Corp.
RAW MATERIALS
Our primary baking ingredients are flour, sugar, shortening and fruit. We
also use paper products, such as corrugated cardboard, aluminum products, such
as pie plates, and films and plastics to package our baked foods. In addition,
we are also dependent upon natural gas and propane as fuel for firing ovens as
well as gasoline and diesel as fuel for distribution vehicles. On average,
baking ingredients constitute approximately 10% to 15%, and packaging represents
approximately 1% to 5% of the wholesale selling price of our baked foods. We
maintain diversified sources for all of our baking ingredients and packaging
products.
Commodities, such as our baking ingredients, periodically experience price
fluctuations and, for that reason, the market for these commodities is
continuously monitored. From time to time, we enter into forward purchase
agreements and derivative financial instruments to reduce the impact of
volatility in raw materials prices.
RESEARCH AND DEVELOPMENT
We engage in research and development activities that principally involve
developing new products, improving the quality of existing products and
improving and modernizing production processes. We also develop and evaluate new
processing techniques for both current and proposed product lines.
LEGAL PROCEEDINGS
We are engaged in various legal proceedings that arise in the ordinary
course of our business. We believe that the amount of the ultimate liability
with respect to those proceedings will not be material to our financial position
or results of operations.
On February 5, 2001, Flowers Industries and Flowers Foods filed a Petition
for Declaratory Judgment and Ancillary Equitable Relief, an Emergency Motion for
Expedited Relief, a Motion for Interlocutory Injunction and supporting documents
with the Superior Court of Fulton County, Georgia (No. 2001 CV 33653). The
petition and related motions seek a declaration of Flowers Industries' and
Flowers Foods' rights under the indenture between Flowers Industries and
SunTrust Bank, Atlanta, governing Flowers Industries' debentures. Although
Flowers Foods intends to replace Flowers Industries as sole obligor under the
indenture upon the closing of this transaction, certain holders of the
Debentures have objected and have indicated consideration of legal action to
prevent the substitution of Flowers Foods for Flowers Industries under the
indenture. Flowers Industries and Flowers Foods believe that Flowers Foods'
proposed assumption of the obligations under the indenture is both valid and
required under the terms of the indenture, and intend to pursue this matter
vigorously.
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REGULATION
As a producer and marketer of food items, our operations are subject to
regulation by various federal governmental agencies, including the Food and Drug
Administration, the Department of Agriculture, the Federal Trade Commission, the
Environmental Protection Agency and the Department of Commerce, as well as
various state agencies, with respect to production processes, product quality,
packaging, labeling, storage and distribution. Under various statutes and
regulations, such agencies prescribe requirements and establish standards for
quality, purity, and labeling. The finding of a failure to comply with one or
more regulatory requirements can result in a variety of sanctions, including
monetary fines or compulsory withdrawal of products from store shelves.
In addition, advertising of our businesses is subject to regulation by the
Federal Trade Commission, and we are subject to certain health and safety
regulations, including those issued under the Occupational Safety and Health
Act.
Our operations, like those of similar businesses, are subject to various
federal, state, and local laws and regulations with respect to environmental
matters, including air and water quality and underground fuel storage tanks, as
well as other regulations intended to protect public health and the environment.
Our operations and products also are subject to state and local regulation
through such measures as licensing of plants, enforcement by state health
agencies of various state standards and inspection of facilities. We believe
that we are currently in material compliance with applicable laws and
regulations.
PROPERTIES
Currently 30 of our production facilities are owned, four facilities are
leased and two facilities are owned by local industrial development authorities
under terms of industrial revenue bond financing agreements. The leased
properties are leased for terms of 10 to 15 years with certain renewal options.
Under the terms of the industrial revenue bond financing agreements, title to
these properties pass to us at maturity for little or no consideration. We
expect these bonds to be repaid in connection with the completion of the
spin-off and merger, and title to the facilities will be conveyed to us. We
consider that our properties are well maintained and sufficient for our present
operations. Our production plant locations are:
FLOWERS BAKERIES
----------------
Birmingham, Alabama Baton Rouge, Louisiana
Opelika, Alabama Lafayette, Louisiana
Tuscaloosa, Alabama New Orleans, Louisiana
Ft. Smith, Arkansas Goldsboro, North Carolina
Pine Bluff, Arkansas Jamestown, North Carolina
Texarkana, Arkansas Memphis, Tennessee
Bradenton, Florida Morristown, Tennessee
Jacksonville, Florida El Paso, Texas
Miami, Florida Houston, Texas
Atlanta, Georgia San Antonio, Texas
Chamblee, Georgia Tyler, Texas
Thomasville, Georgia Lynchburg, Virginia
Villa Rica, Georgia Bluefield, West Virginia
Charleston, West Virginia
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MRS. SMITH'S BAKERIES
---------------------
Montgomery, Alabama London, Kentucky
Atlanta, Georgia Pembroke, North Carolina
Forest Park, Georgia Stilwell, Oklahoma
Suwanee, Georgia Spartanburg, South Carolina
Tucker, Georgia Crossville, Tennessee
EMPLOYEES
We employ approximately 7,300 persons, approximately 535 of whom are
covered by collective bargaining agreements. We believe that we have good
relations with our employees.
EXECUTIVE OFFICES
The address and telephone number of our principal executive offices are
1919 Flowers Circle, Thomasville, Georgia 31757, (229) 226-9110.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of December 30, 2000
regarding the persons who are currently serving or will serve as the executive
officers and directors of Flowers Foods after the spin-off. The proposed
directors listed below are expected to begin serving as directors at the time
the merger and the spin-off are completed, assuming approval of the merger by
Flowers Industries shareholders. Our board of directors elects all executive
officers for one-year terms with the exception of the positions of President and
Chief Operating Officer, Flowers Bakeries and President and Chief Operating
Officer, Mrs. Smith's Bakeries, which are appointed by the Chairman of the Board
of Directors and Chief Executive Officer to serve until they resign or are
removed.
NAME AGE POSITION
---- --- --------
Amos R. McMullian......................... 63 Chairman of the Board of Directors and
Chief Executive Officer
Robert P. Crozer.......................... 53 Vice Chairman of the Board of Directors
G. Anthony Campbell....................... 48 Director, Secretary and General Counsel
Jimmy M. Woodward......................... 40 Vice President and Chief Financial
Officer
Edward L. Baker........................... 65 Proposed Director
Joe E. Beverly............................ 59 Proposed Director
Franklin L. Burke......................... 59 Proposed Director
Langdon S. Flowers........................ 78 Proposed Director
Joseph L. Lanier, Jr...................... 68 Proposed Director
J.V. Shields, Jr.......................... 62 Proposed Director
Jackie M. Ward............................ 62 Proposed Director
C. Martin Wood, III....................... 57 Proposed Director
George E. Deese........................... 54 President and Chief Operating Officer,
Flowers Bakeries
Gary L. Harrison.......................... 62 President and Chief Operating Officer,
Mrs. Smith's Bakeries
Marta Jones Turner........................ 46 Vice President of Communications and
Investor Relations
AMOS R. MCMULLIAN is Chairman of the Board of Directors and Chief Executive
Officer of Flowers Industries and Flowers Foods. Mr. McMullian has served in
that capacity at Flowers Foods since November, 2000. He will cease to serve as
Chairman of the Board and Chief Executive Officer of Flowers Industries upon
completion of the spin-off and merger. Mr. McMullian has served as Chairman of
the Board of Flowers Industries since 1985 and as its Chief Executive Officer
since 1981. He joined Flowers Industries in
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1963. Mr. McMullian also has served as a director of Keebler since 1996 and will
cease to serve as a director of Keebler upon the completion of the spin-off and
merger. Mr. McMullian is a director of Lanier Worldwide, Inc. (NYSE).
ROBERT P. CROZER is the Vice Chairman of the Board of Directors of Flowers
Industries and Flowers Foods. Mr. Crozer has served in that capacity at Flowers
Foods since November, 2000. Mr. Crozer joined Flowers Industries in 1973 and
became a director in 1979. He has served as Vice Chairman of the Board of
Flowers Industries since 1989. Mr. Crozer will cease to serve as Vice Chairman
of the Board of Flowers Industries and Flowers Foods upon completion of the
spin-off and merger but will remain as a director of Flowers Foods. Mr. Crozer
has served as a director of Keebler since 1996 and as Chairman of the Board of
Keebler Foods Company since 1998 and will resign as Chairman of the Board of
Keebler Foods Company upon completion of the spin-off and merger.
G. ANTHONY CAMPBELL joined Flowers Industries in 1983 and is currently
General Counsel and Secretary of Flowers Industries and Flowers Foods. Mr.
Campbell has served in that capacity at Flowers Industries since January, 1985
and at Flowers Foods since November, 2000. Mr. Campbell has served as a director
of Keebler since 1998 and will resign as a director of Keebler upon the
completion of the merger and spin-off. He has served as a director of Flowers
Industries since 1991 and will cease to serve as Secretary and General Counsel
and director of Flowers Industries upon completion of the spin-off and merger.
Mr. Campbell has been a director of Flowers Foods since November, 2000.
JIMMY M. WOODWARD is Vice President and Chief Financial Officer of Flowers
Industries and Flowers Foods. Mr. Woodward has served in that capacity at
Flowers Industries since March, 2000 and at Flowers Foods since November, 2000.
He will cease to serve as Vice President and Chief Financial Officer of Flowers
Industries upon completion of the spin-off and merger. Mr. Woodward previously
served as Treasurer and Chief Accounting Officer of Flowers Industries from
October, 1997 to March, 2000 and Assistant Treasurer of Flowers Industries for
more than five years prior to that time. He joined Flowers Industries in 1985.
Mr. Woodward also has served as a director of Keebler since 1998 and will cease
to serve as a director of Keebler upon completion of the spin-off and merger.
Mr. Woodward also serves as a director of Integrity, Inc. (Nasdaq).
EDWARD L. BAKER has served as Chairman of the Board of Directors of Florida
Rock Industries, Inc. (NYSE) since 1989. He has also served as Chairman of the
Board of Directors of Patriot Transportation Holding, Inc. (OTC) (formerly FRP
Properties, Inc.) since 1989. He has served as a director of Flowers Industries
since 1992 and will cease to serve as a director of Flowers Industries upon
completion of the spin-off and merger.
JOE E. BEVERLY has been Chairman of the Board of Commercial Bank in
Thomasville, Georgia, a wholly-owned subsidiary of Synovus Financial Corp.
(NYSE) since 1989. He is also the former Vice Chairman of the Board of Synovus
Financial Corp, and a director of Synovus Financial Corp. He was President of
Commercial Bank from 1973 to 1989. Mr. Beverly has served as a director of
Flowers Industries since August 1996 and will cease to serve as a director of
Flowers Industries upon completion of the spin-off and merger.
FRANKLIN L. BURKE, a private investor since 1991, is the former Senior
Executive Vice President and Chief Operating Officer of Bank South Corp.,
Atlanta, Georgia, and the former Chairman and Chief Executive Officer of Bank
South, N.A., the principal
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subsidiary of Bank South Corp. Mr. Burke has served as a director of Keebler
since 1998 and will cease to serve as a director of Keebler upon completion of
the merger and spin-off. He has served as a director of Flowers Industries since
1994 and will cease to serve as a director of Flowers Industries upon completion
of the spin-off and merger.
LANGDON S. FLOWERS retired as Chairman of the Board of Directors of Flowers
Industries in 1985. He has served as a director of Flowers Industries since 1968
and will cease to serve as a director of Flowers Industries upon completion of
the spin-off and merger.
JOSEPH L. LANIER, JR. has been Chairman of the Board of Directors and Chief
Executive Officer of Dan River Inc. (NYSE), Danville, Virginia, a textile
company, since 1989. He is also a director of Dimon, Inc. (NYSE), SunTrust
Banks, Inc. (NYSE), Torchmark Corp. (NYSE) and Waddell & Reed Financial, Inc.
(NYSE). Mr. Lanier has served as a director of Flowers Industries since 1977 and
will cease to serve as a director of Flowers Industries upon completion of the
spin-off and merger.
J.V. SHIELDS, JR. has been Chairman of the Board of Directors and Chief
Executive Officer of Shields & Company, New York, New York, a diversified
financial services company and member of the New York Stock Exchange, Inc. since
1982. Mr. Shields also is the Chairman of the Board of Directors and Chief
Executive Officer of Capital Management Associates, Inc., a registered
investment advisor, and the Chairman of the Board of Trustees of The 59 Wall
Street Trust, the Brown Brothers Harriman mutual funds group. He has served as a
director of Flowers Industries since 1989 and will cease to serve as a director
of Flowers Industries upon completion of the spin-off and merger.
JACKIE M. WARD has been Chairman of the Board of Directors of Computer
Generation Incorporated, a telecommunications company based in Atlanta, Georgia
since 1968. She is also a director of Bank of America Corporation (NYSE),
Equifax, Inc. (NYSE), Matria Healthcare, Inc. (Nasdaq), PTEK Holdings, Inc.
(Nasdaq), Profit Recovery Group International, Inc. (Nasdaq), SCI Systems, Inc.
(NYSE), and Trigon Healthcare, Inc. (NYSE). She has served as a director of
Flowers Industries since March 1999 and will cease to serve as a director of
Flowers Industries upon completion of the spin-off and merger.
C. MARTIN WOOD III retired as Senior Vice President and Chief Financial
Officer of Flowers Industries on January 1, 2000 a position that he had held
since 1978. Mr. Wood has continued to serve on Flowers Industries Board of
Directors, to which he was elected in 1975 and will cease to serve as a director
of Flowers Industries upon completion of the spin-off and merger. Mr. Wood also
has served as a director of Keebler since 1996 and will cease to serve as a
director of Keebler upon the completion of the spin-off and merger.
GEORGE E. DEESE has been President and Chief Operating Officer of Flowers
Bakeries since January, 1997. He previously served as President and Chief
Operating Officer, Baked Products Group of Flowers Industries from 1983 to
January, 1997, Regional Vice President, Baked Products Group of Flowers
Industries from 1981 to 1983 and President of Atlanta Baking Company from 1980
to 1981. Mr. Deese joined Flowers Industries in 1964.
GARY L. HARRISON has been President and Chief Operating Officer of Mrs.
Smith's Bakeries since January, 1997. He previously served as President and
Chief Operating Officer, Specialty Foods Group of Flowers Industries from 1989
to January, 1997, Executive Vice President, Baked Products Group of Flowers
Industries from 1987 to 1989, Regional Vice President, Baked Products Group of
Flowers Industries from 1977 to 1987
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and President of Flowers Baking Company of Thomasville from 1976 to 1977. Mr.
Harrison joined Flowers Industries in 1954.
MARTA JONES TURNER is Vice President of Communications and Investor
Relations of Flowers Industries and Flowers Foods. Ms. Turner has served in that
capacity at Flowers Industries since January, 2000 and at Flowers Foods since
November, 2000. She will cease to serve as Vice President of Communications and
Investor Relations of Flowers Industries upon completion of the spin-off and
merger. She previously served as Vice President of Public Affairs of Flowers
Industries from September, 1997 until January, 2000 and Director of Public
Affairs of Flowers Industries for more than five years prior to that time. She
joined Flowers Industries in 1978.
Robert P. Crozer, J.V. Shields, Jr. and C. Martin Wood III are married to
sisters, all of whom are nieces of Langdon S. Flowers.
BOARD OF DIRECTORS
The Flowers Foods Board of Directors currently has three members. Prior to
the spin-off, Flowers Foods will change the size and composition of the Flowers
Foods Board of Directors, and committees of the Board of Directors will be
established. At that time, it is expected that the eight proposed directors
listed above, each of whom currently is a director of Flowers Industries, will
join the Flowers Foods Board of Directors, and we will have eleven directors.
The Flowers Foods Board intends to hold four regularly scheduled meetings
each year.
COMMITTEES OF THE BOARD OF DIRECTORS
The Flowers Foods Board of Directors is expected to establish certain
standing committees, which include the audit, nominating and compensation
committees. The functions and responsibilities of the standing committees of our
Board of Directors are expected to be as described below.
The functions of the audit committee shall be: (a) recommending to the
Board of Directors the engagement or discharge of independent auditors; (b)
reviewing investigations into matters relating to audit functions; (c) reviewing
with independent auditors the plan for and results of the audit engagement; (d)
reviewing the scope and results of our internal auditing procedures; (e)
reviewing the independence of the auditors; (f) considering the range of audit
and non-audit fees; and (g) reviewing the adequacy of our system of internal
accounting controls.
The functions of the nominating committee shall be: (a) selecting or
recommending to the Board of Directors nominees for election as directors; and
(b) considering the performance of incumbent directors in determining whether to
nominate them for re-election.
The functions of the compensation committee shall be: (a) approving or
recommending to the Board of Directors approval of compensation plans for
officers and directors; (b) approving, or recommending to the Board of Directors
approval of, remuneration arrangements for directors and senior management; and
(c) granting benefits under compensation plans.
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DIRECTORS' FEES
Flowers Foods was formed in October, 2000. None of the directors of Flowers
Foods has received compensation from Flowers Foods since it was formed. Once the
Board has been expanded after the spin-off, each non-employee member of our
Board of Directors is expected to receive payments pursuant to a standard
arrangement. Flowers Foods expects to adopt compensation arrangements for its
directors prior to the spin-off.
2001 EQUITY AND PERFORMANCE INCENTIVE PLAN
Flowers Foods intends to establish an equity performance and incentive plan
in order to encourage ownership of Flowers Foods common stock by its executives
and to more closely align the interests of our executives with those of Flowers
Foods' shareholders. A summary of the plan is set forth below.
Certain key employees and officers of Flowers Foods and any of its
subsidiaries who are selected by the Board and the nonemployee directors of
Flowers Foods are expected to be eligible to receive awards under the plan.
PRINCIPAL FEATURES OF THE PLAN
GENERAL. Under the plan, Flowers Foods' Board will be authorized to make
awards of (1) options to purchase shares of Flowers Foods' common stock, (2)
performance stock and performance units, (3) restricted stock and (4) deferred
stock. Flowers Foods' compensation committee will be authorized to oversee the
plan and to make awards and grants under the plan.
SHARES AVAILABLE UNDER THE PLAN. The number of shares of Flowers Foods
common stock that may be issued or transferred (1) upon the exercise of options,
(2) as restricted stock and released from all substantial risks of forfeiture,
(3) as deferred stock, (4) in payment of performance stock or performance units
that have been earned, (5) in payment of dividend equivalents paid with respect
to awards made under the plan, or (6) in payment of appreciation rights, are not
expected to exceed a total of 2,000,000, subject to some adjustments pursuant to
the terms of the plan. These shares of common stock may be original issue or
treasury shares or a combination of both.
ELIGIBILITY. Officers, key employees and nonemployee directors of Flowers
Foods, as well as any person who has agreed to begin serving in such capacity
within 30 days of the date of the grant will be eligible to be selected by
Flowers Foods' Board to receive benefits under the plan. Flowers Foods'
compensation committee will select those who will receive grants on the basis of
management objectives.
OPTIONS. Options will entitle the optionee to purchase shares of Flowers
Foods common stock at a predetermined price per share (which may not be less
than the market value at the date of grant). Each grant will specify whether the
option price will be payable (1) in cash at the time of exercise, (2) by the
transfer to Flowers Foods of shares of common stock owned by the optionee for at
least six months, having a value at the time of exercise equal to the option
price, (3) if authorized by Flowers Foods' Board or its compensation committee,
the delivery of shares of restricted stock or other forfeitable shares, deferred
stock, performance stock, other vested options, or performance units, or (4) a
combination of those payment methods. Grants may provide for deferred payment of
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the option price from the proceeds of sale through a broker on the date of
exercise of some or all of the shares of Flowers Foods' common stock to which
the exercise relates.
No options will be exercisable more than ten years from the date of grant.
Each grant must specify the period of continuous employment with Flowers Foods
that is required before the options become exercisable. Grants may provide for
earlier exercise of an option in the event of retirement, disability, death or a
"change in control" of Flowers Foods or other similar transactions or events.
Grants may also specify management objectives that must be achieved as a
condition to the exercise of the option. Successive grants may be made to the
same optionee whether or not previously granted options remain unexercised.
RESTRICTED STOCK. An award of restricted stock will involve the immediate
transfer of ownership of a specific number of shares of Flowers Foods common
stock by Flowers Foods to a participant in consideration of the performance of
services. The participant will be immediately entitled to voting, dividend and
other ownership rights in such shares. The transfer or later elimination of
restrictions may be made without additional consideration or in consideration of
a payment by the participant that is less than current market value, as Flowers
Foods' Board may determine. Flowers Foods' Board may condition the award on the
achievement of specified management objectives.
Restricted stock must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Internal Revenue Code for a period to be
determined by Flowers Foods' Board in order for the award to avoid immediate
taxation. An example would be a provision that the restricted stock would be
forfeited if the participant ceased to serve as an officer or key employee of
Flowers Foods during a specified period of years. If service alone is the
criterion for non-forfeiture, the period of service must be at least three
years; if other management objectives are included, non-forfeiture may occur one
year from the date of grant. In order to enforce these forfeiture provisions,
the transferability of restricted stock will be prohibited or restricted in a
manner and to the extent prescribed by Flowers Foods' Board for the period
during which the forfeiture provisions are to continue. Flowers Foods' Board may
provide for a shorter period during which the forfeiture provisions are to apply
in the event of retirement, disability, death or a change in control of Flowers
Foods or other similar transaction or event.
DEFERRED STOCK. An award of deferred stock will constitute an agreement by
Flowers Foods to deliver shares of its common stock to the participant in the
future in consideration of the performance of services. However, the deferred
stock award may be subject to the fulfillment of certain conditions, such as
management objectives, during the deferral period specified by Flowers Foods'
Board. During the deferral period, the participant cannot transfer any rights in
the award and has no right to vote the shares of deferred stock, but Flowers
Foods' Board may, on or after the date of the award, authorize the payment of
dividend equivalents on such shares on a current, deferred or contingent basis,
either in cash or in additional shares of Flowers Foods common stock. Awards of
deferred stock can be made without additional consideration or in consideration
of a payment by the participant that is less than the market value per share on
the date of award. Deferred stock must be subject to performance of services for
at least three years; provided that if management objectives are included, the
performance of services must be for at least one year. Flowers Foods' Board will
determine the deferral period at the date of the award, and may provide for a
deferral period of less than three years in the event of retirement, disability,
death or a change in control of Flowers Foods or other similar transaction or
event.
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PERFORMANCE STOCK AND PERFORMANCE UNITS. Performance stock and performance
units will involve awards that become payable upon the achievement of specified
management objectives during a designated performance period. This performance
period may be subject to early termination in the event of retirement,
disability or death or a change in control of Flowers Foods or other similar
transaction or event. A minimum level of acceptable achievement may also be
established by Flowers Foods' Board. If, by the end of the performance period,
the participant has achieved the specified management objectives, the
participant will be deemed to have fully earned the performance stock and/or
performance units. If the participant has not achieved the management
objectives, but has attained or exceeded the predetermined minimum, the
participant will be deemed to have partly earned the performance stock and/or
performance units (such part to be determined in accordance with a formula). To
the extent earned, the performance stock and/or performance units will be paid
to the participant at the time and in the manner determined by Flowers Foods'
Board in cash, shares of Flowers Foods common stock or in any combination of
those methods. Each award of performance stock or performance units may be
subject to adjustment to reflect changes in compensation or other factors, so
long as no adjustment would result in the loss of an available exemption for the
award under Section 162(m) of the Internal Revenue Code. Flowers Foods' Board or
its compensation committee may provide for the payment of dividend equivalents
to the holder on a current, deferred or contingent basis, either in cash or in
additional Flowers Foods common stock.
MANAGEMENT OBJECTIVES. Under the plan, Flowers Foods' Board will be
required to establish performance goals for purposes of performance stock and
performance units. In addition, if Flowers Foods' Board so chooses, options,
restricted stock and deferred stock may also specify management objectives.
Management objectives may be described either in terms of firm-wide objectives,
individual participant objectives, or objectives related to performance of the
division, subsidiary, department or function within Flowers Foods in which the
participant is employed. Management objectives applicable to any award may
include specified levels of and/or growth in (1) cash flow, (2) earnings per
share, (3) earnings before interest and taxes, (4) earnings per share growth,
(5) net income, (6) return on assets, (7) return on assets employed, (8) return
on equity, (9) return on invested capital, (10) return on total capital, (11)
revenue growth, (12) stock price, (13) total return to shareholders, (14)
economic value added, (15) operating profit growth, or any combination of those
methods. If Flowers Foods' Board determines that a change in the business,
operations, corporate structure or capital structure of Flowers Foods, or the
manner in which it conducts its business, or other events or circumstances
render the management objectives unsuitable, Flowers Foods' Board may modify the
performance goals or the related minimum acceptable level of achievement, in
whole or in part, as Flowers Foods' Board deems appropriate and equitable,
unless the result would be to make an award otherwise eligible for an exemption
under Section 162(m) of the Internal Revenue Code ineligible for such an
exemption.
TRANSFERABILITY. Except as otherwise determined by Flowers Foods' Board,
no option or other award under the plan will be transferable by a participant
other than by will or the laws of descent and distribution, or (except for
incentive stock options) to the participant's immediate family or trusts
established solely for the benefit of one or more members of the immediate
family. Except as otherwise determined by Flowers Foods' Board, options are
exercisable during the optionee's lifetime only by him or her.
The Board of Directors may specify at the date of grant that part or all of
the shares of Flowers Foods common stock that are (1) to be issued or
transferred by Flowers Foods
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upon exercise of options, upon termination of the deferral period applicable to
deferred stock or upon payment under any grant of performance stock or
performance units or (2) no longer subject to the substantial risk of forfeiture
and restrictions on transfer referred to in the plan, shall be subject to
further restrictions on transfer.
ADJUSTMENTS. The plan will provide that the number of shares available for
awards will be adjusted to account for (a) shares relating to awards that expire
or are forfeited under the plan, or (b) shares that are transferred, surrendered
or relinquished in payment of the option exercise price for satisfaction of
withholding rules for the exercise or receipt of awards under the plan. This
will permit the grant of additional awards equal to the number of shares turned
in by award recipients. The maximum number of shares of Flowers Foods common
stock covered by outstanding options, deferred stock, performance stock and
restricted stock granted under the plan, and the prices per share applicable to
those shares, will be subject to adjustment in the event of stock dividends,
stock splits, combinations of shares, recapitalizations, mergers,
consolidations, spin-offs, reorganizations, liquidations, issuances of rights or
warrants, and similar events. In the event of any such transaction, Flowers
Foods' Board will be given discretion to provide a substitution of alternative
consideration for any or all outstanding awards under the plan, as it in good
faith determines to be equitable under the circumstances, and may require the
surrender of all awards so replaced. Flowers Foods' Board may also make or
provide for adjustments in the numerical limitations under the plan as Flowers
Foods' Board may determine appropriate to reflect any of the foregoing
transactions or events.
Flowers Foods' Board will be authorized to interpret the plan and related
agreements and other documents. Flowers Foods' Board may make awards to
employees under any or a combination of all of the various categories of awards
that are authorized under the plan, or in its discretion, make no awards. The
plan may be amended from time to time by Flowers Foods' Board. However, any
amendment that must be approved by the shareholders of Flowers Foods in order to
comply with applicable law or the rules of the principal national securities
exchange or quotation system upon which Flowers Foods common stock is traded or
quoted will not be effective unless and until such approval has been obtained in
compliance with those applicable laws or rules. These amendments would include
any increase in the number of shares issued or certain other increases in awards
available under the plan (except for increases caused by adjustments made
pursuant to the plan). Presentation of the plan or any amendment of the plan for
shareholder approval is not to be construed to limit Flowers Foods' authority to
offer similar or dissimilar benefits through plans that are not subject to
shareholder approval.
Flowers Foods' Board may provide for special terms for awards to
participants who are foreign nationals or who are employed by Flowers Foods
outside the United States of America as Flowers Foods' Board may consider
necessary or appropriate to accommodate differences in local law, tax policy or
custom.
The plan will provide that awards representing no more than 3% of the
shares available under the plan may not be required to meet certain restrictions
otherwise applicable to restricted stock, deferred stock and performance stock
awards under the plans.
Flowers Foods' Board may not, without further approval of its shareholders,
authorize the amendment of any outstanding option to reduce the option price.
Furthermore, no option may be canceled and replaced with awards having a lower
option price without
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further approval of the shareholders of Flowers Foods. The plan will not confer
on any participant a right to continued employment with Flowers Foods.
SEVERANCE POLICY
We intend to adopt a severance policy which would pay one year's
compensation to any employee (including those who are members of a collective
bargaining unit and bargain to be included in the policy) who is actually or
constructively terminated, other than for good cause, following a change in
control, as defined in our benefit plans.
RETIREMENT PLAN
We expect to adopt the Flowers Foods Retirement Plan No. 1, which provides
a pension benefit upon retirement on or after age 65 to qualified employees of
our adopting subsidiaries but not to employees of Flowers Foods. However, the
plan will credit all employees who were eligible under the Flowers Industries
Retirement Plan No. 1 prior to the spin-off for each year of service with
Flowers Industries. The pension will be the sum of annual credits earned during
employment. The basic annual credit is expected to be 1.35 percent of the first
$10,000 of W-2 earnings, subject to certain exclusions, for each year of service
and 2 percent of W-2 earnings, subject to certain exclusions, in excess of
$10,000 each year for each year of service. Certain additional credits will also
be provided for a limited group of participants in the retirement plan. The
table below includes the estimated amounts which would be payable to the persons
indicated upon their retirement at age 65 under the provisions of the retirement
plan and assuming that payment is made in the form of a 50% joint and survivor
annuity. Effective as of the spin-off, the individuals listed in the table below
have accrued certain benefits under Retirement Plan No. 1 but will not earn
additional benefits.
DISCLOSURE FOR CERTAIN INDIVIDUALS
CREDITED
YEARS OF PROJECTED ANNUAL
SERVICE BENEFIT
-------- ----------------
Amos R. McMullian..................................... 37 $128,855
Robert P. Crozer...................................... 27 $ 69,430
Jimmy M. Woodward..................................... 15 $ 35,843
George E. Deese....................................... 36 $ 70,729
Gary L. Harrison...................................... 44 $ 69,872
SEPARATION AGREEMENTS
We expect to enter into separation agreements with certain of our executive
officers to provide certain additional benefits in the event of termination of
employment following a change of control. Our Board of Directors has not yet
determined which executives will be offered such separation agreements or the
proposed terms and conditions of any such agreements.
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EXECUTIVE COMPENSATION
We were formed in October, 2000 and none of our executive officers has
received compensation or been granted stock options or otherwise awarded
securities by Flowers Foods since our formation. Accordingly, the information in
this section relates to compensation paid by Flowers Industries to certain of
its executive officers for the periods presented. Compensation of executive
officers of Flowers Foods for the periods following the spin-off will be
determined by Flowers Foods' Board of Directors or compensation committee
thereof and can be expected to take into account factors such as the size and
operating performance of Flowers Foods.
The following table provides certain summary information for the periods
indicated concerning compensation of the Chief Executive Officer and each of the
four other most highly compensated executive officers of Flowers Industries.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION(1)
ANNUAL COMPENSATION --------------------
------------------------------------- RESTRICTED
OTHER STOCK OPTION
FISCAL SALARY BONUS COMP. AWARDS AWARDS
NAME AND PRINCIPAL POSITION AT FLOWERS INDUSTRIES YEAR $ $ $ $ #
------------------------------------------------- ------ ------- ------- ----- ---------- -------
Amos R. McMullian.......................... 2000 850,000 0 0 0 198,000
Chairman of the Board and 1999 850,000 0 0 908,392 0
Chief Executive Officer 1998 736,000 552,000 0 730,509 198,000
Robert P. Crozer........................... 2000 725,000 0 0 0 146,000
Vice Chairman of the 1999 725,000 0 0 531,160 0
Board 1998 579,616 405,731 0 279,399 146,000
Jimmy M. Woodward.......................... 2000 265,000 0 0 0 28,000
Vice President and 1999 260,000 25,000 0 123,576 0
Chief Financial Officer 1998 238,462 90,769 0 39,200 28,000
George E. Deese............................ 2000 353,600 0 0 0 47,500
President and Chief 1999 353,600 0 0 1,413,044 0
Operating Officer, Flowers 1998 345,700 156,900 0 192,249 47,500
Bakeries
Gary L. Harrison........................... 2000 353,600 0 0 0 47,500
President and Chief 1999 353,600 0 0 1,413,044 0
Operating Officer, 1998 345,700 0 0 192,249 47,500
Mrs. Smith's Bakeries
-------------------------
(1) Reflects dollar value of restricted stock awards at the date of grant and
options to acquire that number of shares of Flowers Industries common stock
granted pursuant to Flowers Industries 1989 Executive Stock Incentive Plan.
No Flowers Industries options will be outstanding following the Flowers
Industries/Kellogg merger.
The individuals set forth in the table above held the following aggregate
number of restricted shares under the Flowers Industries 1989 Executive Stock
Incentive Plan, subject to the restrictions of each grant, and which are valued
at the 2000 fiscal year end closing market price ($15.75) of Flowers Industries
common stock, less the price required to be paid by the individual at the time
the restrictions lapse: Messrs. McMullian 140,782 shares, $810,332; Crozer
70,794 shares, $393,148; Woodward 14,457 shares, $77,373;
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Deese 134,096 shares, $567,753; and Harrison 134,096 shares, $567,753. The
shares are entitled to receive any dividends paid on Flowers Industries common
stock.
The following table sets forth the options granted to the Flowers
Industries executive officers included in the summary compensation table above
during fiscal year 2000.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE GRANT DATE
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION PRESENT VALUE
NAME (#) FISCAL YEAR ($/SHARE)(1) DATE(2) ($)(3)
---- ---------- --------------- ------------ ---------- -------------
Amos R. McMullian........... 198,000 16.67% 20.00 6/30/10 1,686,960
Robert P. Crozer............ 146,000 12.29% 20.00 6/30/10 1,243,970
Jimmy M. Woodward........... 28,000 2.36% 20.00 6/30/10 238,560
George E. Deese............. 47,500 4.00% 20.00 6/30/10 404,700
Gary L. Harrison............ 47,200 4.00% 20.00 6/30/10 404,700
-------------------------
(1) The exercise price is equal to the fair market value on the date of the
grant.
(2) Options have a ten-year term and become exercisable on the fourth
anniversary of the grant date.
(3) In accordance with the SEC rules, the Black-Scholes option pricing model was
used to estimate the Grant Date Present Value assuming: (i) an expected
volatility of 39.14%; (ii) an expected dividend yield of 2.67%; (iii) a
risk-free interest rate of 6.22%; (iv) an option term of ten years; and (v)
no discounts for non-transferability or risk of forfeiture.
The following table provides information on option exercises of Flowers
Industries common stock during fiscal year 2000 by the executive officers
included in the summary compensation table above and the value, at the 2000
fiscal year end closing market price ($15.75), of unexercised options for
Flowers Industries common stock held by each named executive officer.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
NUMBER OF
UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
AT YEAR END OPTIONS
SHARES ACQUIRED ON VALUE (#) AT YEAR END
EXERCISE REALIZED EXERCISABLE/ ($)
NAME (#) ($) UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------------ --------- --------------- -------------------------
Amos R. McMullian.... 0 0 None/396,000 None/None
Robert P. Crozer..... 134,294 1,313,761 135,000/292,000 986,175/None
Jimmy M. Woodward.... 0 0 None/56,000 None/None
George E. Deese...... 0 0 90,000/95,000 657,000/None
Gary L. Harrison..... 10,544 132,137 135,000/95,000 1,093,725/None
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Under the terms of an agreement between Flowers Industries and Merrily
Plantation, Inc., Flowers Industries was granted the use of approximately 6,000
acres of land owned by Merrily, together with the use of lodging, dining, and
conference room facilities located thereon. The facilities were used primarily
for the entertainment of customers. During fiscal 2000, Flowers Industries paid
Merrily $91,579. Flowers Foods expects to assume the agreement and continue with
those arrangements. We have surveyed facilities comparable to Merrily to assess
the relative quality and cost of such facilities and have determined that the
amount paid to Merrily for the use of its facilities is competitive with that
charged for the use of comparable facilities. We have further determined that
the use of the Merrily facilities in the past has been beneficial to the
business of Flowers Industries, that it will be beneficial to our business and
that its continued use for the entertainment of customers is in our best
interest. All of the outstanding capital stock of Merrily is owned by the
spouses of J. V. Shields, Jr., who is a proposed director of Flowers Foods,
Robert P. Crozer, who is currently the Vice Chairman of the Board of Directors
of Flowers Foods, C. Martin Wood III, who is a proposed director of Flowers
Foods, and by the Fontaine Flowers McFadden Trust, a trust formed for the
benefit of Ms. McFadden's descendants. The spouses of Messrs. Shields, Crozer
and Wood are the nieces of Langdon S. Flowers, who is a proposed director of
Flowers Foods.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the Flowers Foods common stock is currently owned by Flowers
Industries and thus none of the executive officers, directors or director
nominees of Flowers Foods will own any Flowers Foods common stock prior to the
spin-off. To the extent executive officers, directors and proposed directors of
Flowers Foods own shares of Flowers Industries common stock at the time of the
spin-off, they will receive shares of Flowers Foods common stock in the spin-off
on the same basis as all other holders of Flowers Industries common stock. The
following table sets forth the number of shares of Flowers Industries common
stock beneficially owned by each director, proposed director and each executive
officer of Flowers Foods and by all directors, proposed directors and executive
officers as a group, consisting of 15 persons, as of December 30, 2000. Any
options to acquire shares of Flowers Industries stock that are unexercised at
the time of the Flowers Industries/Kellogg merger will not represent the right
to acquire shares of Flowers Foods stock after the spin-off.
SHARES BENEFICIALLY OWNED
-------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
------------------------ ----------- --------
Edward L. Baker......................................... 73,302(1) *
Joe E. Beverly.......................................... 104,980(2) *
Franklin L. Burke....................................... 28,813(3) *
G. Anthony Campbell..................................... 392,697(4) *
Robert P. Crozer........................................ 3,816,202(5) 3.81%
George E. Deese......................................... 415,608(6) *
L. S. Flowers........................................... 674,434(7) *
Gary L. Harrison........................................ 494,035(8) *
Joseph L. Lanier, Jr. .................................. 97,849(9) *
Amos R. McMullian....................................... 943,983(10) *
J. V. Shields, Jr. ..................................... 5,400,855(11) 5.40%
Marta J. Turner......................................... 13,327(12) *
Jackie M. Ward.......................................... 6,250 *
C. Martin Wood III...................................... 3,469,144(13) 3.50%
Jimmy M. Woodward....................................... 27,881(14) *
All directors and executive officers as a group (15
persons).............................................. 15,959,360(15) 15.95%
-------------------------
* Represents beneficial ownership of less than 1% of Flowers Industries
common stock.
(1) Includes unexercised stock options for 17,340 shares and 23,300 shares held
by a family trust for which Mr. Baker is a co-trustee.
(2) Includes unexercised stock options for 7,584 shares. Also includes 45,982
shares owned by the spouse of Mr. Beverly and 11,164 shares held by a trust
for which his spouse is co-trustee, as to which shares Mr. Beverly
disclaims any beneficial ownership.
(3) Includes unexercised stock options for 16,353 shares and 8,750 shares owned
by the spouse of Mr. Burke, over which shares Mr. Burke has investment
authority.
(4) Includes restricted stock awards of 21,117 shares, all of which are subject
to forfeiture.
(5) Includes: (i) restricted stock awards of 70,794 shares, all of which are
subject to forfeiture; (ii) unexercised stock options for 135,000 shares;
and (iii) 982,780 shares held by limited partnerships in which Mr. Crozer
and his spouse are the general
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partners. Also includes the following shares as to which Mr. Crozer
disclaims any beneficial ownership: (i) 7,593 shares held by Mr. Crozer and
his spouse as custodians for their minor son; (ii) 292,776 shares held by
trusts for the benefit of Mr. Crozer's minor children; and (iii) 1,856,267
shares owned by the spouse of Mr. Crozer.
(6) Includes restricted stock awards of 134,096 shares, all of which are
subject to forfeiture, and unexercised stock options for 90,000 shares.
Also includes the following shares as to which Mr. Deese disclaims any
beneficial ownership: (i) 22,080 shares owned by the spouse of Mr. Deese;
and (ii) 1,210 shares held by Mr. Deese as custodian for his minor
grandchildren.
(7) Includes unexercised stock options for 10,432 shares. Also includes 336,843
shares owned by the spouse of Mr. Flowers, as to which Mr. Flowers
disclaims any beneficial ownership.
(8) Includes: (i) restricted stock awards of 134,096 shares, all of which are
subject to forfeiture; (ii) unexercised stock options for 135,000 shares;
and (iii) 30,000 shares held by a limited partnership in which Mr. Harrison
is a general partner. Also includes 40,000 shares owned by the spouse of
Mr. Harrison, as to which Mr. Harrison disclaims any beneficial ownership.
(9) Includes unexercised stock options for 17,340 shares. Also includes 23,890
shares owned by the spouse of Mr. Lanier, as to which Mr. Lanier disclaims
any beneficial ownership.
(10) Includes restricted stock awards of 140,782 shares, all of which are
subject to forfeiture.
(11) Includes unexercised stock options for 16,353 shares. Also includes: (i)
2,132,999 shares held by investment advisory clients of Capital Management
Associates, Inc., of which Mr. Shields is chairman of the board of
directors and chief executive officer, and (ii) 3,231,503 shares owned by
the spouse of Mr. Shields, as to which Mr. Shields disclaims beneficial
ownership. Mr. Shields' business address is Shields & Company, 140
Broadway, New York, NY 10005.
(12) Includes restricted stock awards of 2,952 shares, all of which are subject
to forfeiture.
(13) Includes: (i) restricted stock awards of 8,818 shares, all of which are
subject to forfeiture; and (ii) unexercised stock options for 28,000
shares. Also includes the following shares, as to which Mr. Wood disclaims
beneficial ownership: (i) 51,300 shares held by a trust of which Mr. Wood
is co-trustee; (ii) 5,591 shares held by a trust for which Mr. Wood serves
as a trustee; (iii) 2,877,696 shares owned by the spouse of Mr. Wood; and
(iv) 25,650 shares held by Mr. Wood as custodian for his nephew.
(14) Includes restricted stock awards of 14,457 shares, all of which are subject
to forfeiture.
(15) Includes restricted stock awards of 527,112 shares, all of which are
subject to forfeiture, and unexercised stock options for 473,402 shares.
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DESCRIPTION OF CAPITAL STOCK
The following discussion of our articles of incorporation, bylaws, rights
agreement and Georgia law is a summary of the material terms thereof and is
qualified in its entirety by the actual terms of such documents and Georgia law.
Copies of our restated articles of incorporation, restated bylaws and rights
agreement have been filed with the Securities and Exchange Commission as
exhibits to the registration statement on Form 10 of which this information
statement is a part.
INTRODUCTION
Our articles of incorporation provide that the authorized capital of
Flowers Foods consists of 100,000,000 shares of common stock having a par value
of $.01 per share and 1,000,000 shares of preferred stock, of which (a) 100,000
shares have been designated by our Board of Directors as Series A Junior
Participating Preferred Stock, having a par value per share of $100 and (b)
900,000 shares of preferred stock, having a par value per share of $.01, have
not been designated by the Board of Directors.
If the spin-off had occurred on January 30, 2001 approximately 20,061,064
million shares of Flowers Foods common stock would have been outstanding and
held by approximately 7,741 holders of record. No shares of preferred stock have
been issued by Flowers Foods and no shares of preferred stock will be issued in
the spin-off.
COMMON STOCK
The holders of Flowers Foods common stock are entitled to one vote for each
share held of record on all matters submitted to a vote of shareholders. Subject
to preferential rights of any issued and outstanding preferred stock, including
the Series A Preferred Stock, holders of Flowers Foods common stock are entitled
to receive ratably such dividends, if any, as may be declared by our Board of
Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding-up of Flowers Foods, holders of Flowers
Foods common stock are entitled to share ratably in all assets of Flowers Foods,
if any, remaining after payment of liabilities and the liquidation preferences
of any issued and outstanding preferred stock, including the Series A Preferred
Stock. Holders of Flowers Foods common stock have no preemptive rights, no
cumulative voting rights and no rights to convert their shares of Flowers Foods
common stock into any other securities of Flowers Foods or any other person.
PREFERRED STOCK
Our Board of Directors has the authority to issue up to 1,000,000 shares of
preferred stock in one or more series and to fix the designations, relative
powers, preferences, rights, qualifications, limitations and restrictions of all
shares of each such series, including without limitation, dividend rates,
conversion rights, voting rights, redemption and sinking fund provisions,
liquidation preferences and the number of shares constituting each such series,
without any further vote or action by the holders of Flowers Foods common stock.
Pursuant to such authority, the board of directors has designated 100,000 shares
of preferred stock as Series A Junior Participating Preferred Stock in
connection with the adoption of our rights agreement. Although our Board of
Directors does not presently intend to do so, it could issue from the 900,000
undesignated preferred shares, additional series of preferred stock, with rights
that could adversely affect the voting power and other
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rights of holders of Flowers Foods common stock without obtaining the approval
of Flowers Foods shareholders. In addition, the issuance of preferred shares
could delay or prevent a change in control of Flowers Foods without further
action by its shareholders.
ANTITAKEOVER EFFECTS OF GEORGIA LAW PROVISIONS
We have elected in our bylaws to be subject to the fair price provisions of
the Georgia Business Corporation Code, referred to in this information statement
as the GBCC. These provisions require that, in addition to any vote otherwise
required by law or our articles of incorporation, unless certain fair price
provisions are satisfied, a business combination must be:
- unanimously approved by continuing directors, if such continuing
directors constitute at least three members of the board of directors at
the time of the approval; or
- recommended by at least two-thirds of the continuing directors and
approved by a majority of the votes entitled to be cast by holders of
voting shares, other than voting shares beneficially owned by the
interested shareholder, unless fair price criteria are met.
INTERESTED SHAREHOLDERS UNDER THE FAIR PRICE PROVISIONS
An interested shareholder is defined by the GBCC to include any person
other than Flowers Foods or our subsidiaries that:
- with its affiliates, beneficially owns or has the right to own 10% or
more of the outstanding voting power of Flowers Foods; or
- is an affiliate of Flowers Foods and has, at any time within the
preceding two-year period, been the beneficial owner of 10% or more of
the voting power of Flowers Foods.
For purposes of determining whether a person is an interested shareholder,
the number of voting shares deemed to be outstanding shall not include any
unissued voting shares that may be issuable pursuant to any agreement,
arrangement or understanding or upon exercise of conversion rights, warrants or
options or otherwise.
CONTINUING DIRECTORS UNDER THE FAIR PRICE PROVISIONS
A continuing director means:
- any director who is not an affiliate or associate of an interested
shareholder or its affiliates other than Flowers Foods or our
subsidiaries and who was a director prior to the date the shareholder
became an interested shareholder, called the determination date; and
- any successor to that director who is not an affiliate or associate of an
interested shareholder or its affiliates other than Flowers Foods or our
subsidiaries and who is recommended or elected by a majority of all the
continuing directors.
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BUSINESS COMBINATIONS UNDER THE FAIR PRICE PROVISIONS
For the purposes of these provisions, a business combination includes:
- any merger of Flowers Foods or our subsidiaries with an interested
shareholder or any other corporation that is, or after the merger would
be, an affiliate of an interested shareholder that was an interested
shareholder prior to the completion of the transaction;
- any share exchange with an interested shareholder or any other
corporation that is, or after the merger would be, an affiliate of an
interested shareholder that was an interested shareholder prior to the
completion of the transaction;
- any sale, lease, transfer or other disposition of assets by us or any of
our subsidiaries to any interested shareholder or any affiliate of any
interested shareholder (other than Flowers Foods or any of our
subsidiaries) in a transaction or series of transactions occurring within
a twelve-month period and having an aggregate book value equal to 10% or
more of our net assets;
- the issuance or transfer by us or any of our subsidiaries of any equity
securities of Flowers Foods or any subsidiary in a transaction or series
of transactions occurring within a twelve-month period to any interested
shareholder or any affiliate of any interested shareholder (other than
Flowers Foods or any of our subsidiaries) and having an aggregate market
value of 5% or more of the total market value of our outstanding stock,
except through the exercise of warrants or rights offered pro-rata to all
holders of our voting securities;
- the adoption of any plan or proposal for our liquidation or dissolution
in which anything other than cash will be received by an interested
shareholder or its affiliates; and
- any reclassification of securities or merger or share exchange with any
subsidiary, which has the effect, in a transaction or series of
transactions occurring within a twelve-month period, of increasing by 5%
or more the proportionate amount of the outstanding shares of any class
or series of equity securities of Flowers Foods or any of our
subsidiaries that is beneficially owned by an interested shareholder or
its affiliates.
WHEN THE FAIR PRICE PROVISIONS DO NOT APPLY
The fair price provisions do not restrict a business combination if:
- the aggregate amount of the cash, and fair market value of any non-cash
property, to be received per share by the shareholders in the business
combination is at least equal to the highest of:
- the highest per share price, including brokerage commissions, transfer
taxes and soliciting dealers' fees, paid by the interested shareholder
for any shares of the same class or series acquired by it within two
years before the public announcement of the business combination,
referred to as the announcement date, or in the transaction in which it
became an interested shareholder, whichever is higher;
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- the higher of the fair market value per share as determined on the
announcement date or the determination date; or
- in the case of shares other than common shares, the highest amount per
share to which holders of such shares are entitled in the event of
liquidation, dissolution or winding up of the corporation, but only if
the interested shareholder acquired like shares within the two-year
period immediately before the announcement date;
- shareholders receive cash or the form of consideration used by the
interested shareholder to purchase the largest number of shares of the
same class or series previously acquired by such interested shareholder.
- during the period after the shareholder became an interested shareholder
and before the consummation of the business combination, without the
approval of a majority of the continuing directors, there generally shall
have been:
- no failure to declare and pay, at the regular date therefor, any full
periodic dividends on Flowers Foods' outstanding preferred shares unless
(i) the interested shareholder or its affiliate or associate did not
vote as a director in a manner inconsistent with this requirement, and
(ii) the interested shareholder notified the Board of Directors in
writing within ten days of such action or failure to act that it
disapproves of the action and that it requests the Board to rectify such
act or failure to act;
- no reduction in the annual rate of dividends paid on common shares,
except to reflect any subdivision of the shares unless (i) the
interested shareholder or its affiliate or associate did not vote as a
director in a manner inconsistent with this requirement, and (ii) the
interested shareholder notified the Board of Directors in writing within
ten days of such action or failure to act that it disapproves of the
action and that it requests the Board to rectify such act or failure to
act;
- an increase the annual rate of dividends to reflect any reclassification
of shares which has the effect of reducing the number of outstanding
shares; and
- no increase by more than 1% in the interested shareholder's ownership of
any class or series of Flowers Foods' shares in any twelve-month period;
- the interested shareholder has not received a direct or indirect benefit,
except proportionately as a shareholder, of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or
other tax advantages provided by the corporation or its subsidiaries.
The fair price provisions do not apply if the shareholder has been an
interested shareholder continuously and has not increased its percentage
interest in any class or series of Flowers Foods shares by more than 1% in any
twelve-month period, for the three year period immediately preceding
consummation of the business combination.
Repeal of the bylaw subjecting Flowers Foods to the fair price provisions
of the GBCC requires the affirmative vote of: (i) at least 2/3 of the continuing
directors, (ii) a majority of the shares of Flowers Foods other than shares
beneficially owned by any interested shareholder and affiliates and associates
of any interested shareholder, and (iii) 66 2/3% of the voting power of the then
outstanding shares of Flowers Foods common
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stock and preferred stock voting together, to the extent shares of preferred
stock have been afforded voting rights.
BUSINESS COMBINATION PROVISIONS
We have also elected in our bylaws to be subject to the business
combination provisions of the GBCC. These provisions prohibit business
combinations between a Georgia corporation with at least 100 beneficial owners
in Georgia and that meets other criteria and an interested shareholder or its
affiliates for a period of five years after the shareholder becomes an
interested shareholder of the corporation. During that five-year period, these
provisions prohibit any business combination with an interested shareholder
unless:
- prior to such time, the board of directors approved either the business
combination or the transaction in which the shareholder became an
interested shareholder;
- in the transaction that resulted in the shareholder becoming an
interested shareholder, the interested shareholder became the beneficial
owner of at least 90% of the outstanding voting stock of the corporation
which was not held by directors, officers, their affiliates, subsidiaries
or specified employee stock plans of the corporation; or
- after becoming an interested shareholder, that shareholder acquired
additional shares resulting in that shareholder owning at least 90% of
the outstanding voting stock of the corporation, excluding shares held by
directors, officers, their affiliates, subsidiaries or specified employee
stock plans of the corporation, and the business combination was approved
by a majority of voting stock not held by the interested shareholder,
directors, officers, their affiliates, subsidiaries or specified employee
stock plans of the corporation.
BUSINESS COMBINATIONS
For the purposes of these provisions, a business combination includes:
- any merger or consolidation of Flowers Foods or any of our subsidiaries
with an interested shareholder or any other corporation that is, or after
the merger or consolidation would be, an affiliate of an interested
shareholder that was an interested shareholder prior to consummation of
the transaction other than as a result of its ownership of Flowers Foods
stock;
- any sale, lease, transfer or other disposition of our assets or those of
any of our subsidiaries to an interested shareholder or its affiliates or
associates other than Flowers Foods or our subsidiaries in a transaction
or series of transactions having an aggregate book value of 10% or more
of our net assets;
- the issuance or transfer by us or any of our subsidiaries of any of our
or their equity securities to an interested shareholder or its affiliates
or associates other than Flowers Foods or our subsidiaries in a
transaction or series of transactions having an aggregate market value of
5% or more of the total market value of our outstanding stock, except
through the exercise of warrants or rights offered pro rata to all
holders of voting securities, or the exercise or conversion of securities
outstanding before the shareholder became an interested shareholder;
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- the adoption of any plan or proposal for our liquidation or dissolution;
- any reclassification of securities or merger of Flowers Foods with our
subsidiaries that has the effect of increasing by 5% or more the
proportionate amount of shares of any class or series of our equity
securities that is beneficially owned by the interested shareholder or
its affiliates;
- other than in the ordinary course of business, the receipt by an
interested shareholder, except proportionally as a shareholder, of any
benefit from any loan, advance, guarantee, pledge, financial benefit, tax
credit or tax advantage from us; and
- any share exchange with an interested shareholder or any other
corporation that is, or after the share exchange would be, an affiliate
of an interested shareholder that was an interested shareholder prior to
consummation of the transaction.
WHEN THE BUSINESS COMBINATION PROVISIONS DO NOT APPLY
The restrictions on business combinations do not apply to:
- any person who was an interested shareholder before the adoption of the
bylaw that made the provisions applicable to the corporation; or
- any person who becomes an interested shareholder inadvertently,
subsequently divests as soon as practicable sufficient shares so that the
shareholder ceases to be an interested shareholder and would not, at any
time within the five-year period immediately before the business
combination, have been an interested shareholder but for the inadvertent
acquisition.
Repeal of the bylaw subjecting Flowers Foods to the business combination
provisions of the GBCC requires the affirmative vote of: (i) at least 2/3 of the
continuing directors, (ii) a majority of the shares of Flowers Foods other than
shares beneficially owned by any interested shareholder and affiliates and
associates of any interested shareholder, and (iii) 66 2/3% of the voting power
of the then outstanding shares of Flowers Foods common stock and preferred stock
voting together, to the extent shares of preferred stock have been afforded
voting rights. However, any such repeal would not be effective until 18 months
after the shareholder vote to effect such repeal and would not exempt any
business combination with an interested shareholder who became an interested
shareholder prior to such repeal.
FLOWERS FOODS RIGHTS AGREEMENT
Our Board of Directors has determined that a dividend of one right will be
paid in respect of each outstanding share of Flowers Foods common stock to the
record holder of such share as of the record date of the spin-off. Pursuant to
the rights agreement, each right entitles the registered holder thereof to
purchase from Flowers Foods one thousandth of a share of series A preferred
stock, par value $100 per share, of Flowers Foods at a price of $45.00 per one
thousandth of a preferred share, subject to adjustment.
Under the rights agreement, the rights will be evidenced by the
certificates evidencing Flowers Foods common stock until the distribution date,
which is the earlier of: (i) the close of business on the tenth calendar day
following the first date of public announcement
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that a person or group (other than Flowers Foods, a subsidiary or employee
benefit or stock ownership plan of Flowers Foods or any of its affiliates or
associates), together with its affiliates and associates, has acquired
beneficial ownership of 15% or more of the outstanding Flowers Foods common
stock (any such person or group being hereinafter called an acquiring person) or
(ii) the close of business on the tenth business day (or such later date as may
be specified by the directors) following the commencement of a tender offer or
exchange offer by a person (other than Flowers Foods, a subsidiary or employee
benefit or stock ownership plan of Flowers Foods or any of its affiliates or
associates), the consummation of which would result in beneficial ownership by
such person of 15% or more of the outstanding Flowers Foods common stock.
The rights agreement provides that, until the distribution date, the rights
may be transferred with and only with the Flowers Foods common stock. Until the
distribution date (or earlier redemption, exchange or expiration of the rights),
any certificate evidencing Flowers Foods common stock issued upon transfer or
new issuance of the Flowers Foods common stock will contain a notation
incorporating the rights agreement by reference. Until the distribution date (or
earlier redemption, exchange or expiration of the rights), the surrender for
transfer of any certificates evidencing Flowers Foods common stock will also
constitute the transfer of the rights associated with such certificates. As soon
as practicable following the distribution date, separate certificates evidencing
the rights will be mailed to holders of record of Flowers Foods common stock as
of the close of business on the distribution date and such separate right
certificates alone will evidence the rights. No right is exercisable at any time
prior to the distribution date. The rights will expire on the tenth anniversary
of the record date unless earlier redeemed, exchanged or amended by Flowers
Foods as described below. Until a right is exercised, the holder thereof, as
such, will have no rights as a shareholder of Flowers Foods, including the right
to vote or to receive dividends.
The purchase price payable, and the number of the series A preferred stock
or other securities issuable, upon exercise of the rights will be subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the preferred
shares, (ii) upon the grant to holders of series A preferred stock of certain
rights or warrants to subscribe for or purchase the series A preferred stock at
a price, or securities convertible into the series A preferred stock with a
conversion price, less than the then-current market price of the series A
preferred stock, or (iii) upon the distribution to holders of the series A
preferred stock of evidences of indebtedness, cash (excluding regular periodic
cash dividends), assets, stock (excluding dividends payable on the series A
preferred stock) or subscription rights or warrants (other than those referred
to above). The number of outstanding rights and the number of one thousandths of
the series A preferred stock issuable upon exercise of each right will be
subject to adjustment in the event of a stock dividend on the Flowers Foods
common stock payable in Flowers Foods common stock or a subdivision, combination
or reclassification of Flowers Foods common stock occurring, in any such case,
prior to the distribution date.
Rights will be exercisable to purchase series A preferred stock only after
the distribution date occurs and prior to the occurrence of a flip-in event as
described below. A distribution date resulting from the commencement of a tender
offer or exchange offer described in clause (ii) of the second paragraph of this
summary could precede the occurrence of a flip-in event and thus result in the
rights being exercisable to purchase series A preferred stock. A distribution
date resulting from any occurrence described in clause (i) of the second
paragraph of this summary would necessarily follow the
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occurrence of a flip-in event and thus result in the rights being exercisable to
purchase Flowers Foods common stock or other securities as described below.
Under the rights agreement, in the event, referred to as a flip-in event,
that (i) any person or group, together with its affiliates and associates,
becomes an acquiring person, (ii) any acquiring person or any affiliate or
associate thereof merges into or combines with Flowers Foods and Flowers Foods
is the surviving corporation, (iii) any acquiring person or any affiliate or
associate thereof effects certain other transactions with Flowers Foods, or (iv)
during such time as there is an acquiring person, Flowers Foods effects certain
transactions, in each case as described in the rights agreement, then, in each
such case, proper provision will be made so that, from and after the latest of
the share acquisition date, the distribution date and the date of the occurrence
of such flip-in event, each holder of a right, other than rights that are or
were owned beneficially by an acquiring person (which, from and after the date
of a flip-in event, will be void), will have the right to receive, upon exercise
thereof at the then-current exercise price of the right, that number of shares
of Flowers Foods common stock (or, under certain circumstances, an economically
equivalent security or securities of Flowers Foods) that at the time of such
flip-in event has a market value of two times the exercise price of the right.
In the event referred to as a flip-over event, that, at any time after a
person has become an acquiring person, (i) Flowers Foods merges with or into any
person and Flowers Foods is not the surviving corporation, (ii) any person
merges with or into Flowers Foods and Flowers Foods is the surviving
corporation, but all or part of the Flowers Foods common stock is changed or
exchanged for stock or other securities of any other person or cash or any other
property, or (iii) 50% or more of our assets or earning power, including
securities creating obligations of Flowers Foods, are sold, in each case as
described in the rights agreement, then, and in each such case, proper provision
will be made so that from and after the latest of the share acquisition date,
the distribution date and the date of the occurrence of such flip-over event,
each holder of a right, other than rights which have become void, will
thereafter have the right to receive, upon the exercise thereof at the
then-current exercise price of the right, that number of shares of Flowers Foods
common stock (or, under certain circumstances, an economically equivalent
security or securities) of such other person that at the time of such flip-over
event has a market value of two times the exercise price of the right.
From and after the later of the first date of public announcement that a
person or group has acquired beneficial ownership of 15% or more of the
outstanding shares of Flowers Foods common stock, which is called the share
acquisition date and the distribution date, rights (other than any rights that
have become void) will be exercisable as described above, upon payment of the
aggregate exercise price in cash. In addition, at any time after the later of
the share acquisition date and the distribution date and prior to the
acquisition by any person or group of affiliated or associated persons of 50% or
more of the outstanding Flowers Foods common stock, we may exchange the rights
(other than any rights that have become void), in whole or in part, at an
exchange ratio of one share of Flowers Foods common stock per right (subject to
adjustment). Notwithstanding the foregoing, a majority of the continuing
directors on the Board (defined to include incumbent directors of Flowers Foods
and their successors who are nominated for election by a majority of the
incumbent directors, but specifically excluding representatives of acquiring
persons) must concur with the exchange of any of the rights on or following the
date (i) a person becomes an acquiring person as defined in the rights
agreement, or (ii) a
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majority of the Board is replaced due to the actions of any person or persons
who may become an acquiring person or who may cause a flip-in event or flip-over
event.
With certain exceptions, no adjustment in the purchase price will be
required until cumulative adjustments require an adjustment in the purchase
price of at least 1%. We will not be required to issue fractional shares of
series A preferred stock (other than fractions that are integral multiples of
one thousandth of a share of series A preferred stock, which may, at our option,
be evidenced by depositary receipts) or fractional shares of Flowers Foods
common stock or other securities issuable upon the exercise of rights. In lieu
of issuing such securities, we may make a cash payment, as provided in the
rights agreement.
We may, at our option, redeem the rights in whole, but not in part, at a
price of $.01 per right, subject to adjustment, at any time prior to the close
of business on the later of the distribution date and the share acquisition
date. Immediately upon any redemption of the rights, the right to exercise the
rights will terminate and the only right of the holders of rights will be to
receive the redemption price. Notwithstanding the foregoing, a majority of the
continuing directors on the Board (defined to include incumbent directors of
Flowers Foods and their successors who are nominated for election by a majority
of the incumbent directors, but specifically excluding representatives of
acquiring persons) must concur with the redemption of the rights on or following
the date (i) a person becomes an acquiring person or (ii) a majority of the
board is replaced due to the actions of any person or persons who may become an
acquiring person or who may cause a flip-in event or flip-over event.
The rights agreement may be amended in certain instances so long as there
are continuing directors and a majority of such continuing directors votes in
favor of the proposed amendment. The rights agreement may be amended without the
approval of any holders of rights certificates, including amendments that
increase or decrease the purchase price, that add other events requiring
adjustment to the purchase price payable and the number of shares of series A
preferred stock or other securities issuable upon the exercise of the rights or
that modify procedures relating to the redemption of the rights, except that no
amendment may be made that decreases the stated redemption price to an amount
less than $.01 per right.
Our directors will have the exclusive power and authority to administer the
rights agreement and to exercise all rights and powers specifically granted to
the directors or to Flowers Foods therein, or as may be necessary or advisable
in the administration of the rights agreement, including without limitation, the
right and power to interpret the provisions of the rights agreement and to make
all determinations deemed necessary or advisable for the administration of the
rights agreement (including any determination to redeem or not redeem the rights
or to amend or not amend the rights agreement). All such actions, calculations,
interpretations and determinations (including any omission with respect to any
of the foregoing) which are done or made by the directors in good faith will be
final, conclusive and binding on Flowers Foods, the rights agent, the holders of
the rights and all other parties and will not subject the directors to any
liability to any person, including without limitation, the rights agent and the
holders of the rights.
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ANTITAKEOVER EFFECTS OF THE PROVISIONS OF OUR ARTICLES AND BYLAWS
Our articles of incorporation and bylaws contain a number of provisions
relating to corporate governance and the rights of shareholders that could have
a potential anti-takeover effect. These provisions may delay or prevent a change
of control of Flowers Foods. These provisions include:
- the classification of our Board of Directors into three classes, each
class serving for a staggered three-year term;
- the requirement that shareholders may remove directors only for cause and
only by the affirmative vote of at least 66 2/3% of our outstanding
voting stock;
- the authority of our Board of Directors to issue series of preferred
stock with voting rights and other provisions as the Board of Directors
may determine;
- the requirement that shareholder action can be taken only at an annual or
special meeting of shareholders or by written consent of holders of at
least 75% of the common stock;
- an advance notice procedure in order for shareholders to nominate
candidates for election as directors;
- the power of the Board of Directors to consider constituencies other than
Flowers Foods shareholders in discharging their duties;
- the requirement that a special shareholders' meeting may only be called
by the chairman of the board or at the direction of the majority of the
Board of Directors, and not by shareholders; and
- a requirement that a vote of at least 66 2/3% of our voting stock is
required to amend provisions of the articles of incorporation and bylaws
relating to:
- the classification of the Board of Directors and removal of directors;
- special meetings of shareholders and the order of business of
shareholder meetings;
- nominations of directors to fill vacancies or newly created
directorships;
- the election to be subject to the fair price and business combination
provisions of the GBCC; or
- the power of the Board of Directors to make, amend or repeal bylaws.
These provisions have some anti-takeover effects and may discourage
proposals that could be viewed as favorable to shareholders. The description
above is intended only as a summary of the material provisions. You should refer
to our articles of incorporation and bylaws, which have been filed as exhibits
to the registration statement on Form 10 of which this information statement is
a part, for a more complete description.
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LIMITED LIABILITY AND INDEMNIFICATION PROVISIONS
LIMITATION ON LIABILITY
Our articles of incorporation provide that a director of Flowers Foods
shall not be liable to Flowers Foods or its shareholders for or with respect to
any acts or omissions in the performance of his duties as a director, except to
the extent such exemption from liability or limitation thereof is not permitted
under the GBCC as currently in effect or as the same may be amended or under any
other applicable law.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our articles of incorporation and bylaws provide that each person who is or
was or had agreed to become a director or officer of Flowers Foods, or each such
person who is or was serving or who had agreed to serve at the request of the
Board of Directors or an officer as an employee or agent of Flowers Foods or as
a director, officer, employee or agent of another entity, shall be indemnified
by us to the fullest extent permitted by the GBCC or any other applicable law as
presently or hereafter in effect. This right of indemnification includes the
advancement of expenses incurred in defending a proceeding. We may, by action of
the Board of Directors, provide indemnification to other employees and agents of
Flowers Foods with the same scope and effect as the foregoing indemnification of
our directors and officers.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Flowers Foods common stock will be
First Union National Bank.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form 10 to register our shares
being issued to you in the spin-off. This information statement is a part of
that registration statement and, as allowed by Securities and Exchange
Commission rules, does not include all of the information you can find in the
registration statement or the exhibits to the registration statement. For
additional information relating to us and the spin-off, reference is made to the
registration statement and the exhibits to the registration statement.
Statements contained in this information statement as to the contents of any
contract or document referred to are not necessarily complete and in each
instance, if the contract or document is filed as an exhibit to the registration
statement, reference is made to the copy of the contract or other document filed
as an exhibit to the registration statement. Each statement is qualified in all
respects by the relevant reference.
After the spin-off, we will file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. We intend to furnish our shareholders with annual reports containing
consolidated financial statements certified by an independent public accounting
firm. The registration statement is, and any of these future filings with the
Securities and Exchange Commission will be, available to the public over the
Internet at the Securities and Exchange Commission's website at
http://www.sec.gov. You may read and copy any filed document at the Securities
and Exchange Commission's public reference rooms in Washington, D.C. at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D. C. 20549, and at the
Securities and Exchange
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Commission's regional offices in New York at 7 World Trade Center, 13th Floor,
New York, NY 10048, and in Chicago at Suite 1400, Northwestern Atrium Center,
14th Floor, 500 W. Madison Street, Chicago, IL 60661. Please call the Securities
and Exchange Commission at 1-800-SEC-0330 for further information about the
public reference rooms.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Flowers Foods incorporates by reference into this registration statement
(i) certain portions of the Annual Report on Form 10-K for the fiscal year ended
January 1, 2000 of Flowers Industries, Inc. (File No. 1-9787) filed with the
Securities and Exchange Commission on March 31, 2000, (ii) certain portions of
the Quarterly Report on Form 10-Q for the forty weeks ended October 7, 2000 of
Flowers Industries, Inc. filed with the Securities and Exchange Commission on
November 21, 2000, (iii) the financial statements of Keebler Foods Company for
the fiscal year ended January 1, 2000 filed as an exhibit to the Flowers
Industries, Inc. Annual Report on Form 10-K on March 31, 2000, (iv) certain
portions of the Quarterly Report on Form 10-Q for the forty weeks ended October
7, 2000 of Keebler Foods Company filed with the Securities and Exchange
Commission on November 21, 2000 and (v) the Current Report on Form 8-K of
Flowers Industries, Inc. filed with the Securities and Exchange Commission on
February 6, 2001. Although certain statements in the documents incorporated by
reference into this registration statement are "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995, the
safe harbor provisions of the Act will not attach to any "forward looking
statements" made or incorporated by reference by Flowers Foods in this
information statement.
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