SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| (Mark One) | ||
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly period ended July 12, 2003 | ||
| OR |
||
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the transition period from _____________ to _____________ | ||
Commission file number 1-16247
FLOWERS FOODS, INC.
| GEORGIA | 58-2582379 | |
|
|
||
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
1919 FLOWERS CIRCLE, THOMASVILLE, GEORGIA
31757
229/226-9110
N/A
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No o
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| OUTSTANDING AT | ||
| TITLE OF EACH CLASS | August 22, 2003 | |
| Common Stock, $.01 par value with Preferred Share Purchase Rights |
45,171,170 |
FLOWERS FOODS, INC.
INDEX
| PAGE | ||||||
| NUMBER | ||||||
PART I. Financial Information |
||||||
Item 1. Financial Statements (unaudited) |
||||||
Condensed Consolidated Balance Sheet as of July 12, 2003 and December 28, 2002 |
3 | |||||
Condensed Consolidated Statement of Income for the Twelve and Twenty Eight Weeks Ended
July 12, 2003 and July 13, 2002 |
4 | |||||
Condensed Consolidated Statement of Cash Flows for the Twenty Eight Weeks Ended July
12, 2003 and July 13, 2002 |
5 | |||||
Notes to Condensed Consolidated Financial Statements |
6 | |||||
Item 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition |
14 | |||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
22 | |||||
Item 4. Controls and Procedures |
22 | |||||
PART II. Other Information |
||||||
Item 1. Legal Proceedings |
22 | |||||
Item 4. Submission of Matters to a Vote of Security Holders |
23 | |||||
Item 5. Other Information |
23 | |||||
Item 6. Exhibits and Reports on Form 8-K |
23 | |||||
SIGNATURES |
25 | |||||
2
FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands except share data)
(Unaudited)
| JULY 12, 2003 | DECEMBER 28, 2002 | |||||||||
ASSETS |
||||||||||
Current Assets: |
||||||||||
Cash and cash equivalents |
$ | 36,351 | $ | 69,826 | ||||||
Accounts and notes receivable, net of
allowances of $2,454 and $1,475, respectively |
104,144 | 104,121 | ||||||||
Inventories, net: |
||||||||||
Raw materials |
9,743 | 7,872 | ||||||||
Packaging materials |
7,725 | 7,806 | ||||||||
Finished goods |
13,846 | 14,311 | ||||||||
| 31,314 | 29,989 | |||||||||
Spare parts and supplies |
19,496 | 19,840 | ||||||||
Assets held for sale |
15,957 | 18,563 | ||||||||
Assets to be disposed of – discontinued operations |
— | 243,061 | ||||||||
Deferred taxes |
8,585 | — | ||||||||
Other |
20,066 | 10,009 | ||||||||
| 235,913 | 495,409 | |||||||||
Property, Plant and Equipment: |
||||||||||
Land |
86,990 | 33,073 | ||||||||
Buildings |
178,340 | 200,713 | ||||||||
Machinery and equipment |
447,369 | 509,879 | ||||||||
Furniture, fixtures and transportation equipment |
41,866 | 43,689 | ||||||||
Construction in progress |
15,812 | 12,174 | ||||||||
| 770,377 | 799,528 | |||||||||
Less: accumulated depreciation |
(341,990 | ) | (363,403 | ) | ||||||
| 428,387 | 436,125 | |||||||||
Notes Receivable |
72,605 | 71,599 | ||||||||
Deferred Taxes |
15,712 | 22,267 | ||||||||
Other Assets |
4,354 | 10,225 | ||||||||
Goodwill, net |
63,482 | 54,249 | ||||||||
Other Intangible Assets, net |
7,857 | 6,506 | ||||||||
| $ | 828,310 | $ | 1,096,380 | |||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
||||||||||
Current Liabilities: |
||||||||||
Current maturities of long-term debt and capital leases |
$ | 1,528 | $ | 27,231 | ||||||
Accounts payable |
86,668 | 82,827 | ||||||||
Facility closing costs and severance |
2,123 | 4,516 | ||||||||
Liabilities related to assets to be disposed of – discontinued operations |
— | 2,553 | ||||||||
Other accrued liabilities |
71,928 | 89,151 | ||||||||
| 162,247 | 206,278 | |||||||||
Long-Term Debt and Capital Leases |
5,095 | 223,133 | ||||||||
Other Liabilities: |
||||||||||
Facility closing costs and severance |
3,225 | 7,337 | ||||||||
Postretirement/postemployment obligations |
60,605 | 54,486 | ||||||||
Other |
18,701 | 12,150 | ||||||||
| 82,531 | 73,973 | |||||||||
Shareholders’ Equity: |
||||||||||
| Preferred stock-$100 par value,
100,000 authorized and none issued Preferred stock-$.01 par value, 900,000 authorized and none issued Common stock-$.01 par value, 100,000,000 authorized 45,185,121 and 29,985,375 shares issued |
452 | 300 | ||||||||
Treasury stock |
(283 | ) | — | |||||||
Capital in excess of par value |
486,834 | 483,142 | ||||||||
Retained earnings |
110,325 | 131,388 | ||||||||
Accumulated other comprehensive loss |
(18,891 | ) | (21,834 | ) | ||||||
| 578,437 | 592,996 | |||||||||
| $ | 828,310 | $ | 1,096,380 | |||||||
(See Accompanying Notes to Condensed Consolidated Financial Statements)
3
FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Amounts in thousands except per share data)
(Unaudited)
| FOR THE TWELVE WEEKS ENDED | FOR THE TWENTY EIGHT WEEKS ENDED | |||||||||||||||
| JULY 12, 2003 | JULY 13, 2002 | JULY 12, 2003 | JULY 13, 2002 | |||||||||||||
Sales |
$ | 337,193 | $ | 317,945 | $ | 771,745 | $ | 714,103 | ||||||||
Materials, supplies, labor and other
production costs (exclusive of
depreciation and amortization shown
separately below) |
165,565 | 153,900 | 379,202 | 344,292 | ||||||||||||
Selling, marketing and administrative
expenses |
137,695 | 129,549 | 320,180 | 297,383 | ||||||||||||
Depreciation and amortization |
12,489 | 13,089 | 29,651 | 30,518 | ||||||||||||
Income from continuing operations before
interest, income taxes and cumulative effect
of a change in accounting principle |
21,444 | 21,407 | 42,712 | 41,910 | ||||||||||||
Interest income |
1,295 | 1,295 | 3,021 | 3,032 | ||||||||||||
Interest expense |
(342 | ) | (786 | ) | (1,136 | ) | (1,684 | ) | ||||||||
Interest income, net |
953 | 509 | 1,885 | 1,348 | ||||||||||||
Income from continuing operations before
income taxes and cumulative effect of a
change in accounting principle |
22,397 | 21,916 | 44,597 | 43,258 | ||||||||||||
Income tax expense |
8,623 | 8,437 | 17,170 | 16,654 | ||||||||||||
Income from continuing operations before
cumulative effect of a change in accounting
principle |
13,774 | 13,479 | 27,427 | 26,604 | ||||||||||||
Discontinued operations, net of tax |
(23,118 | ) | (7,430 | ) | (42,431 | ) | (18,832 | ) | ||||||||
(Loss) income before cumulative effect of a
change in accounting principle |
(9,344 | ) | 6,049 | (15,004 | ) | 7,772 | ||||||||||
Cumulative effect of a change in accounting
principle, net of tax |
— | — | — | (23,078 | ) | |||||||||||
Net (loss) income |
$ | (9,344 | ) | $ | 6,049 | $ | (15,004 | ) | $ | (15,306 | ) | |||||
Net (loss) Income Per Common Share: |
||||||||||||||||
Basic: |
||||||||||||||||
Income from continuing operations before
cumulative effect of a change in accounting
principle |
$ | 0.31 | $ | 0.30 | $ | 0.61 | $ | 0.60 | ||||||||
Discontinued operations, net of tax |
(0.52 | ) | (0.16 | ) | (0.94 | ) | (0.42 | ) | ||||||||
Cumulative effect of a change in accounting
principle, net of tax |
— | — | — | (0.52 | ) | |||||||||||
Net (loss) income per share |
$ | (0.21 | ) | $ | 0.14 | $ | (0.33 | ) | $ | (0.34 | ) | |||||
Weighted average shares outstanding |
45,082 | 44,697 | 45,030 | 44,697 | ||||||||||||
Diluted: |
||||||||||||||||
Income from continuing operations before
cumulative effect of a change in accounting
principle |
$ | 0.30 | $ | 0.30 | $ | 0.60 | $ | 0.58 | ||||||||
Discontinued operations, net of tax |
(0.50 | ) | (0.17 | ) | (0.93 | ) | (0.41 | ) | ||||||||
Cumulative effect of a change in accounting
principle, net of tax |
— | — | — | (0.50 | ) | |||||||||||
Net (loss) income per share |
$ | (0.20 | ) | $ | 0.13 | $ | (0.33 | ) | $ | (0.33 | ) | |||||
Weighted average shares outstanding |
45,861 | 45,650 | 45,691 | 46,110 | ||||||||||||
Cash
dividends paid per common share |
$ | 0.100 | $ | 0.000 | $ | 0.130 | $ | 0.000 | ||||||||
(See Accompanying Notes to Condensed Consolidated Financial Statements)
4
FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| FOR THE TWENTY EIGHT WEEKS ENDED | |||||||||||
| JULY 12, 2003 | JULY 13, 2002 | ||||||||||
CASH FLOWS PROVIDED BY (DISBURSED FOR) OPERATING
ACTIVITIES: |
|||||||||||
Net loss |
$ | (15,004 | ) | $ | (15,306 | ) | |||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
|||||||||||
Discontinued operations |
18,145 | 8,040 | |||||||||
Goodwill impairment |
— | 23,078 | |||||||||
Stock appreciation rights |
776 | (224 | ) | ||||||||
Depreciation and amortization |
29,651 | 30,518 | |||||||||
Deferred income taxes |
3,694 | 4,452 | |||||||||
Provision for inventory obsolescence |
916 | 1,845 | |||||||||
Allowances for accounts receivable |
2,408 | 1,869 | |||||||||
Other |
427 | 1,782 | |||||||||
Payment of legal settlement |
(9,000 | ) | — | ||||||||
Changes in assets and liabilities: |
|||||||||||
Accounts and notes receivable, net |
(2,321 | ) | (10,735 | ) | |||||||
Inventories, net |
(2,126 | ) | (16,312 | ) | |||||||
Other assets |
(4,082 | ) | (5,428 | ) | |||||||
Accounts payable and other accrued liabilities |
11,132 | (1,772 | ) | ||||||||
Facility closing costs and severance |
(6,505 | ) | (1,046 | ) | |||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES |
28,111 | 20,761 | |||||||||
CASH FLOWS PROVIDED BY (DISBURSED FOR) INVESTING
ACTIVITIES: |
|||||||||||
Purchase of property, plant and equipment |
(24,232 | ) | (31,843 | ) | |||||||
(Purchase
of) proceeds from notes receivable |
(1,116 | ) | 1,772 | ||||||||
Acquisition of business, net of cash received |
(14,534 | ) | — | ||||||||
Proceeds from sale of Mrs. Smith’s Bakeries frozen dessert business |
231,551 | — | |||||||||
Other |
110 | 625 | |||||||||
NET CASH PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES |
191,779 | (29,446 | ) | ||||||||
CASH FLOWS PROVIDED BY (DISBURSED FOR) FINANCING
ACTIVITIES: |
|||||||||||
Dividends paid |
(6,062 | ) | — | ||||||||
Exercise of stock options |
1,695 | — | |||||||||
Payment for termination of derivative instruments |
(5,330 | ) | — | ||||||||
Debt and capital lease obligation (payments) proceeds |
(243,668 | ) | 59 | ||||||||
NET CASH (DISBURSED FOR) PROVIDED BY FINANCING ACTIVITIES: |
(253,365 | ) | 59 | ||||||||
Net decrease in cash and cash equivalents |
(33,475 | ) | (8,626 | ) | |||||||
Cash and cash equivalents at beginning of period |
69,826 | 12,280 | |||||||||
Cash and cash equivalents at end of period |
$ | 36,351 | $ | 3,654 | |||||||
(See Accompanying Notes to Condensed Consolidated Financial Statements)
5
FLOWERS FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
INTERIM FINANCIAL STATEMENTS — The accompanying unaudited condensed consolidated financial statements of Flowers Foods, Inc. (“the company”) have been prepared by the company’s management in accordance with generally accepted accounting principles for interim financial