Exhibit 99.3
Unaudited Pro Forma Condensed Consolidated Financial Information
On July 21, 2012, Flowers Foods, Inc. (“Flowers”) completed its acquisition of Lepage Bakeries, Inc. and certain of its affiliated companies (collectively, “Lepage”) for approximately $320 million in cash and deferred cash payments and 2,178,648 shares of Flowers common stock (the “Acquisition”).
The Acquisition has been accounted for using the purchase method of accounting, with Flowers as the acquirer and Lepage as the acquiree, assuming that the Acquisition had been completed on January 1, 2011 for the unaudited pro forma condensed consolidated statements of operations and on April 21, 2012 for the unaudited pro forma condensed consolidated balance sheet. Flowers’ and Lepage’s fiscal years each ended on December 31, 2011.
The unaudited pro forma condensed consolidated balance sheet of Flowers is derived from the interim unaudited condensed consolidated balance sheet of each of Flowers and Lepage as of April 21, 2012. The full-year unaudited pro forma condensed consolidated income statement of Flowers is derived from the audited consolidated statement of income of each of Flowers and Lepage for the year ended December 31, 2011. The interim unaudited pro forma condensed consolidated statement of income is derived from the interim unaudited condensed consolidated statement of income of each of Flowers and Lepage for the sixteen weeks ended April 21, 2012.
You should read the unaudited pro forma condensed consolidated financial information in conjunction with the following information, including the applicable underlying financial information of Flowers and Lepage:
• | The accompanying notes to the unaudited pro forma condensed consolidated financial information. |
• | Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on July 23, 2012, as amended by Current Report on Form 8-K/A filed herewith (the “Form 8-K/A”). |
• | Audited Consolidated Financial Statements of Flowers Foods, Inc., and notes thereto, as of and for the year ended December 31, 2011, included in Flowers’ Annual Report on Form 10-K filed with the SEC on February 29, 2012. |
• | Unaudited Condensed Consolidated Financial Statements of Flowers Foods, Inc., and notes thereto, as of and for the sixteen weeks ended April 21, 2012, included in Flowers’ Quarterly Report on Form 10-Q filed with the SEC on May 24, 2012. |
• | Audited Consolidated Financial Statements of Lepage Bakeries, Inc. and Affiliates, and notes thereto, as of and for the year ended December 31, 2011, which are included in Exhibit 99.1 of the Form 8-K/A. |
• | Unaudited Condensed Consolidated Financial Statements of Lepage Bakeries, Inc. and Affiliates, and notes thereto, as of and for the sixteen weeks ended April 21, 2012, which are included in Exhibit 99.2 of the Form 8-K/A. |
The following unaudited pro forma condensed consolidated financial information is provided for informational purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of operating results that would have been achieved had the Acquisition been completed as of January 1, 2011 and does not intend to project the future financial results of Flowers after the Acquisition. The unaudited pro forma condensed consolidated balance sheet does not purport to reflect Flowers’ financial condition had the Acquisition closed on April 21, 2012 or for any future or historical period.
The preparation of this pro forma financial information is based upon a tax election that would provide a step-up for certain Lepage assets. We believe this election will be made and finalized in the near future. If this election is not made this pro forma financial information will be materially different, primarily due to changes in intangible asset fair values and deferred taxes.
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Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of April 21, 2012
(amounts in thousands)
Flowers Foods, Inc. | Lepage | Pro Forma Adjustments | Note/ Ref Note 4 | Pro Forma of Flowers Foods, Inc. | ||||||||||||||
ASSETS | ||||||||||||||||||
Current Assets: | ||||||||||||||||||
Cash and cash equivalents | $ | 186,147 | $ | 30,015 | $ | (216,162 | ) | (a) | $ | — | ||||||||
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Accounts and notes receivable | 200,851 | 6,337 | — | 207,188 | ||||||||||||||
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Inventories, net: | ||||||||||||||||||
Raw materials | 27,753 | 2,208 | — | 29,961 | ||||||||||||||
Packaging materials | 16,240 | 1,772 | — | 18,012 | ||||||||||||||
Finished goods | 35,728 | 662 | — | 36,390 | ||||||||||||||
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79,721 | 4,642 | — | 84,363 | |||||||||||||||
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Spare parts and supplies | 41,044 | 2,496 | 251 | (a) | 43,791 | |||||||||||||
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Deferred taxes | 33,137 | — | — | 33,137 | ||||||||||||||
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Other | 21,751 | 2,247 | — | 23,998 | ||||||||||||||
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Total current assets | 562,651 | 45,737 | (215,911 | ) | 392,477 | |||||||||||||
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Property, Plant and Equipment, net of accumulated depreciation | 676,835 | 44,734 | 15,161 | (g) | 736,730 | |||||||||||||
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Notes Receivable | 101,823 | 78 | — | 101,901 | ||||||||||||||
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Assets Held for Sale — Distributor Routes | 13,989 | — | 10,000 | (j) | 23,989 | |||||||||||||
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Other Assets | 16,129 | 1,605 | 437 | (j) | 18,171 | |||||||||||||
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Goodwill | 219,730 | — | 52,351 | #3 | 272,081 | |||||||||||||
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Other Intangible Assets, net | 138,724 | 177 | 256,223 | (h) | 395,124 | |||||||||||||
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Total assets | $ | 1,729,881 | $ | 92,331 | $ | 118,261 | $ | 1,940,473 | ||||||||||
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LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||
Current Liabilities: | ||||||||||||||||||
Current maturities of long-term debt | $ | 53,571 | $ | — | $ | — | $ | 53,571 | ||||||||||
Accounts payable | 115,434 | 5,309 | — | 120,743 | ||||||||||||||
Other accrued liabilities | 109,169 | 4,031 | 8,031 | (a)(e)(i)(k) | 121,231 | |||||||||||||
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Total current liabilities | 278,174 | 9,340 | 8,031 | 295,545 | ||||||||||||||
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Long-Term Debt and Capital Leases | 43,955 | — | 149,942 | (a)(f) | 193,897 | |||||||||||||
4.375% senior notes due 2022 | 399,045 | — | — | 399,045 | ||||||||||||||
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Total long-term debt | 443,000 | — | 149,942 | 592,942 | ||||||||||||||
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Other Liabilities: | ||||||||||||||||||
Post-retirement/post-employment obligations | 141,921 | — | — | 141,921 | ||||||||||||||
Deferred taxes | 35,419 | — | 1,318 | (l) | 36,737 | |||||||||||||
Other | 49,730 | 98 | — | 49,828 | ||||||||||||||
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Total other liabilities | 227,070 | 98 | 1,318 | 228,486 | ||||||||||||||
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Stockholders’ Equity: | ||||||||||||||||||
Preferred stock — $100 stated par value, 200,000 authorized and none issued | — | — | — | — | ||||||||||||||
Preferred stock — $.01 stated par value, 800,000 authorized and none issued | — | — | — | — | ||||||||||||||
Common stock — $.01 stated par value and $.001 current par value, 500,000,000 authorized shares, 152,488,088 shares issued | 199 | 2,040 | (2,040 | ) | (n) | 199 | ||||||||||||
Treasury stock | (222,653 | ) | (18,938 | ) | 48,197 | (n) | (193,394 | ) | ||||||||||
Capital in excess of par value | 546,650 | 4,246 | 12,382 | (n) | 563,278 | |||||||||||||
Retained earnings | 565,604 | 95,068 | (99,092 | ) | (n) | 561,580 | ||||||||||||
Accumulated other comprehensive loss | (108,163 | ) | 477 | (477 | ) | (n) | (108,163 | ) | ||||||||||
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Total stockholders’ equity | 781,637 | 82,893 | (41,030 | ) | 823,500 | |||||||||||||
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Total liabilities and stockholders’ equity | $ | 1,729,881 | $ | 92,331 | $ | 118,261 | $ | 1,940,473 | ||||||||||
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(See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information)
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Unaudited Pro Forma Condensed Consolidated Statement of Income
For the Fiscal Year Ended December 31, 2011
(amounts in thousands, except per share data)
Flowers Foods, Inc. | Lepage | Pro Forma Adjustments | Ref Note 4 | Pro Forma of Flowers Foods, Inc. | ||||||||||||||
Sales | $ | 2,773,356 | $ | 166,434 | $ | — | $ | 2,939,790 | ||||||||||
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below) | 1,473,201 | 82,402 | (5,618 | ) | (m) | 1,549,985 | ||||||||||||
Selling, distribution and administrative expenses | 1,016,491 | 60,816 | (2,000 | ) | (m) | 1,075,307 | ||||||||||||
Depreciation and amortization | 94,638 | — | 11,630 | (g)(h)(m) | 106,268 | |||||||||||||
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Income from operations | 189,026 | 23,216 | (4,012 | ) | 208,230 | |||||||||||||
Interest expense | (10,172 | ) | (14 | ) | (14,946 | ) | (b)(f) | (25,132 | ) | |||||||||
Interest income | 13,112 | 42 | — | 13,154 | ||||||||||||||
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Income before income taxes | 191,966 | 23,244 | (18,958 | ) | 196,252 | |||||||||||||
Income tax expense | 68,538 | 201 | 1,650 | (c) | 70,389 | |||||||||||||
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Net income | $ | 123,428 | $ | 23,043 | $ | (20,608 | ) | $ | 125,863 | |||||||||
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Net Income Per Common Share: | ||||||||||||||||||
Basic: | ||||||||||||||||||
Net income per common share | $ | 0.91 | $ | 0.91 | ||||||||||||||
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Weighted average shares outstanding | 135,387 | 2,179 | (d) | 137,566 | ||||||||||||||
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Diluted: | ||||||||||||||||||
Net income per common share | $ | 0.90 | $ | 0.91 | ||||||||||||||
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Weighted average shares outstanding | 136,881 | 2,179 | (d) | 139,060 | ||||||||||||||
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(See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information)
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Unaudited Pro Forma Condensed Consolidated Statement of Income
For the Sixteen Weeks Ended April 21, 2012
(amounts in thousands, except per share data)
Flowers Foods, Inc. | Lepage | Pro Forma Adjustments | Ref Note 4 | Pro Forma of Flowers Foods, Inc. | ||||||||||||||
Sales | $ | 898,206 | $ | 50,176 | $ | — | $ | 948,382 | ||||||||||
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below) | 478,978 | 25,443 | (1,537 | ) | (m) | 502,884 | ||||||||||||
Selling, distribution and administrative expenses | 330,272 | 16,099 | (733 | ) | (m) | 345,638 | ||||||||||||
Depreciation and amortization | 29,739 | — | 3,579 | (g)(h)(m) | 33,318 | |||||||||||||
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Income from operations | 59,217 | 8,634 | (1,309 | ) | 66,542 | |||||||||||||
Interest expense | (4,229 | ) | (59 | ) | (3,791 | ) | (b)(f) | (8,079 | ) | |||||||||
Interest income | 4,205 | 13 | — | 4,218 | ||||||||||||||
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Income before income taxes | 59,193 | 8,588 | (5,100 | ) | 62,681 | |||||||||||||
Income tax expense | 21,250 | 113 | 1,343 | (c) | 22,706 | |||||||||||||
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Net income | $ | 37,943 | $ | 8,475 | $ | (6,443 | ) | $ | 39,975 | |||||||||
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Net Income Per Common Share: | ||||||||||||||||||
Basic: | ||||||||||||||||||
Net income per common share | $ | 0.28 | $ | 0.29 | ||||||||||||||
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Weighted average shares outstanding | 135,496 | 2,179 | (d) | 137,675 | ||||||||||||||
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Diluted: | ||||||||||||||||||
Net income per common share | $ | 0.28 | $ | 0.29 | ||||||||||||||
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Weighted average shares outstanding | 137,182 | 2,179 | (d) | 139,361 | ||||||||||||||
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(See Accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information)
4
Notes to Unaudited Pro Forma Condensed Consolidated Financial Information
1. Basis of Presentation
The unaudited pro forma financial information has been compiled from underlying financial statements prepared in accordance with U.S. GAAP (“GAAP”). Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to SEC rules and regulations based on assumptions that Flowers believes are reasonable under the circumstances.
The Acquisition has been accounted for using the purchase method of accounting, with Flowers as the acquirer and Lepage as the acquiree, assuming that the Acquisition had been completed on January 1, 2011 for the unaudited pro forma condensed consolidated statements of operations and on April 21, 2012 for the unaudited pro forma condensed consolidated balance sheet.
You should read the unaudited pro forma condensed consolidated financial information in conjunction with the following information, including the applicable underlying financial information of Flowers and LePage:
• | The accompanying notes to the unaudited pro forma condensed consolidated financial information. |
• | Current Report on Form 8-K filed with the SEC on July 23, 2012, as amended by the Form 8-K/A. |
• | Audited Consolidated Financial Statements of Flowers Foods, Inc., and notes thereto, as of and for the year ended December 31, 2011, included in Flowers’ Annual Report on Form 10-K filed with the SEC on February 29, 2012. |
• | Unaudited Condensed Consolidated Financial Statements of Flowers Foods, Inc., and notes thereto, as of and for the sixteen weeks ended April 21, 2012, included in Flowers’ Quarterly Report on Form 10-Q filed with the SEC on May 24, 2012. |
• | Audited Consolidated Financial Statements of Lepage Bakeries, Inc. and Affiliates, and notes thereto, as of and for the year ended December 31, 2011, which are included in Exhibit 99.1 of the Form 8-K/A. |
• | Unaudited Condensed Consolidated Financial Statements of Lepage Bakeries, Inc. and Affiliates, and notes thereto, as of and for the sixteen weeks ended April 21, 2012, which are included in Exhibit 99.2 of the Form 8-K/A. |
The following unaudited pro forma condensed consolidated financial information is provided for informational purposes only. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of operating results that would have been achieved had the Acquisition been completed as of January 1, 2011 and does not intend to project the future financial results of Flowers after the Acquisition. The unaudited pro forma condensed consolidated balance sheet does not purport to reflect Flowers’ financial condition had the Acquisition closed on April 21, 2012 or for any future or historical period.
The preparation of this pro forma financial information is based upon a tax election that would provide a step-up for certain Lepage assets. We believe this election will be made and finalized in the near future. If this election is not made this pro forma financial information will be materially different, primarily due to changes in intangible asset fair values and deferred taxes.
2. Accounting Policies
The audited pro forma condensed consolidated financial information has been prepared in a manner consistent with Flowers’ accounting policies. Certain accounting policies at Lepage were different than Flowers’ adopted policies, and adjustments are required. The unaudited pro forma condensed consolidated financial information adjustments related to these accounting policies are described in note 4(m).
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3. Transaction
The unaudited pro forma condensed consolidated financial information reflects the acquisition of Lepage for a purchase price of $386.0 million funded from corporate cash, net proceeds from the issuance in April 2012 of $400 million of 4.375% senior notes due 2022 (the “Senior Notes”) and issuance of 2,178,648 shares of Flowers common stock.
The preliminary allocation of the total purchase price of Lepage’s tangible and intangible assets and liabilities based on our preliminary estimates of fair value is summarized below (amounts in thousands):
Reference Note #4 | ||||||
Fair value of consideration transferred: | ||||||
Cash, including working capital adjustment estimate | $ | 301,881 | (a) | |||
Cash paid for preliminary tax adjustment | 18,426 | (e) | ||||
Accrued preliminary tax adjustment | 2,126 | (e) | ||||
Deferred payment obligations | 17,663 | (f) | ||||
Flowers Foods, Inc. common stock | 45,887 | (d) | ||||
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Total fair value of consideration transferred | $ | 385,983 | ||||
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Recognized amounts of identifiable assets acquired and liabilities assumed: | ||||||
Financial assets | $ | 13,451 | (a) | |||
Inventories | 4,642 | (a) | ||||
Property, plant, and equipment | 59,895 | (g) | ||||
Assets Held for sale – Distributor routes | 10,000 | (j) | ||||
Identifiable intangible assets | 256,400 | (h) | ||||
Deferred income taxes | (1,318 | ) | (l) | |||
Financial liabilities | (9,438 | ) | (a) | |||
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Net recognized amounts of identifiable assets acquired | $ | 333,632 | ||||
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Goodwill | $ | 52,351 | ||||
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4. Adjustments
The unaudited pro forma condensed consolidated balance sheet includes adjustments made to historical financial information that were calculated assuming the Acquisition had been completed as of April 21, 2012. Flowers based the unaudited pro forma adjustments on available information and certain assumptions that it believes are reasonable under the circumstances. The adjustments reflect Flowers’ preliminary estimates of the purchase price allocation, which may change upon finalization of appraisals and other valuation analyses yet to be completed.
The unaudited pro forma condensed consolidated statements of income includes adjustments made to historical financial information that were calculated assuming the Acquisition had been completed as of January 1, 2011.
The following items resulted in adjustments that are reflected in the unaudited pro forma condensed consolidated financial information:
(a) | The table below outlines the cash used for the Acquisition (amounts in thousands): |
Amount paid | ||||
Cash on hand | $ | 186,147 | ||
Withdrawal from the revolving credit facility | 132,279 | |||
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Total cash paid at closing | $ | 318,426 | ||
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There is a working capital requirement of $2.0 million per the acquisition agreement. The Lepage equityholders are required to remit any amount less than the working capital requirement. Flowers is required to remit any amount in excess of the working capital requirement. For purposes of the working capital adjustment computation, maintenance inventory (spare parts and supplies) is excluded from current assets. There is a preliminary adjustment to fair value for maintenance inventory of $0.3 million. The working capital balance on April 21, 2012 would yield the following adjustment amount (amounts in thousands):
Total working capital requirement | $ | 2,005 | ||
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Recognized amounts of current assets acquired and current liabilities assumed: | ||||
Cash and cash equivalents | $ | 30,015 | ||
Accounts receivable | 6,337 | |||
Inventories | 4,642 | |||
Prepaid expenses | 2,247 | |||
Accounts payable | (5,309 | ) | ||
Accrued expenses | (4,031 | ) | ||
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Net recognized amounts of current assets/liabilities | $ | 33,901 | ||
Total working capital requirement | $ | 2,005 | ||
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Amount applied to working capital threshold | $ | 31,896 | ||
Cash applied to working capital threshold | $ | 30,015 | ||
Accrued liabilities for estimated working capital adjustment (note (k)) | $ | 1,881 |
(b) | Flowers funded the Acquisition primarily with additional long-term debt. While the funding described in (a) above and on the April 21, 2012 balance sheet reflects the withdrawal from the revolving credit facility to fund the Acquisition, net proceeds from the Senior Notes were the primary source of funding for the Acquisition and are considered the debt issued for interest cost purposes. Between April 1, 2012 and April 21, 2012, Flowers repaid outstanding amounts under the revolving credit facility, which lowered its cash on hand as of April 21, 2012. Debt issued to fund the Acquisition and the calculation of pro forma interest for the periods presented are as follows (amounts in thousands): |
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Interest Expense | ||||||||||||||||
Effective Interest Rate | Balance Outstanding | Fiscal 2011 | For the 16 weeks ended April 21, 2012 | |||||||||||||
4.375% senior notes | 4.5733 | % | $ | 318,426 | $ | 14,563 | $ | 3,673 | ||||||||
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The $3.7 million of interest expense for the sixteen weeks ended April 21, 2012 is the incremental expense for the period from January 1, 2012 to the issue date of April 1, 2012. The expense from April 1, 2012 to April 21, 2012 is already recorded in the Flowers consolidated statement of income for the first quarter of 2012.
(c) | Income tax impacts from pro forma adjustments and Lepage’s income before income taxes are calculated at our statutory rate of 38.5% for the periods presented and are computed in the table below: |
Fiscal 2011 | For the 16 weeks ended April 21, 2012 | |||||||
Lepage income before income taxes | $ | 23,244 | $ | 8,588 | ||||
Pro Forma adjustments to income before income taxes | (18,958 | ) | (5,100 | ) | ||||
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Total income before income taxes | 4,286 | 3,488 | ||||||
Income tax rate | 38.5 | % | 38.5 | % | ||||
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Total Pro Forma adjustment for income tax expense | $ | 1,650 | $ | 1,343 | ||||
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(d) | Reflects the issuance of 2,178,648 shares of Flowers common stock to certain equityholders of Lepage. The shares issued were computed by dividing $50.0 million by the average closing price of Flowers Foods, Inc. common stock for the twenty consecutive trading day period ending five trading days prior to the closing. The shares issued to the equityholders were separated into five categories with each category having a different holding period requirement. As a result, each holding period had a fair value assignment based on an implied fair value which was determined using the Black-Scholes call option formula for an option expiring on each restriction lapse date. The estimated exercise price is equal to the stock price on the last trading day before the closing on July 21, 2012 of $20.48. This value was then multiplied by the dollar value of the stock issued. The table below outlines the determination of fair value and provides the assumptions used in the calculation. The fair value of the stock consideration is computed in the following table: |
Restriction lapse year | 2012 | 2013 | 2014 | 2015 | 2016 | Total | ||||||||||||||||||
Value of Flowers shares issued (thousands) | $ | 25,000 | $ | 10,000 | $ | 5,000 | $ | 5,000 | $ | 5,000 | $ | 50,000 | ||||||||||||
Implied fair value of restricted shares (thousands) | $ | 23,626 | $ | 9,154 | $ | 4,447 | $ | 4,363 | $ | 4,297 | $ | 45,887 | ||||||||||||
Exercise price (per share) | $ | 20.48 | $ | 20.48 | $ | 20.48 | $ | 20.48 | $ | 20.48 | ||||||||||||||
Expected term (yrs) | .37 | 1.00 | 2.00 | 3.00 | 4.00 | |||||||||||||||||||
Volatility (%) | 25.0 | % | 25.0 | % | 25.0 | % | 25.0 | % | 25.0 | % | ||||||||||||||
Risk-free rate (%) | 0.1 | % | 0.2 | % | 0.2 | % | 0.3 | % | 0.4 | % | ||||||||||||||
Dividend yield (%) | 3.0 | % | 3.0 | % | 3.0 | % | 3.0 | % | 3.0 | % |
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(e) | The $18.4 million preliminary tax adjustment is the amount paid to the Lepage equityholders at the closing of the Acquisition in connection with certain incremental tax liabilities that will be incurred by those equityholders if the parties jointly make an election under Section 338(h)(10) of the Internal Revenue Code. In the event the parties decide not to make such an election, this payment will be returned to the company. There is an additional $2.1 million preliminary tax adjustment Flowers will pay for entity level state taxes. |
(f) | The $17.7 million adjustment for the deferred payments represents the fair value of the fixed payments of $1.3 million beginning on the first business day of each of the sixteen calendar quarters following the fourth anniversary of the closing of the Acquisition (a total of $20.0 million in gross payments). The first payment will be made by Flowers on October 1, 2016 and the final payment will be made on July 1, 2020. The difference between the fair value and the gross payments of $2.3 million is recorded as a reduction to the deferred payment liability and will be amortized to interest expense over eight years. The pro forma adjustment for the expense in 2011 is $0.4 million and the adjustment for the sixteen weeks ended April 21, 2012 is $0.1 million. |
(g) | The Lepage property and equipment was adjusted to reflect Flowers’ estimate of fair value. These values are based on preliminary estimates since Flowers has not finalized the property and equipment appraisals. Property and equipment will be depreciated on a straight-line basis as follows (amounts in thousands, except for estimated lives): |
Classification | Estimated life (years) | Lepage net carrying value | Fair value at acquisition date | Purchase price adjustment | ||||||||||
Land | N/A | $ | 3,189 | $ | 3,680 | $ | 491 | |||||||
Buildings | 10-40 | 6,891 | 11,378 | 4,487 | ||||||||||
Machinery and equipment | 3-25 | 28,753 | 38,928 | 10,175 | ||||||||||
Furniture, fixtures and transportation equipment | 3-15 | 5,876 | 5,884 | 8 | ||||||||||
Construction in progress | N/A | 25 | 25 | — | ||||||||||
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Property, plant and equipment, net | $ | 44,734 | $ | 59,895 | $ | 15,161 | ||||||||
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Depreciation expense for property and equipment is in the table below (amounts in thousands):
Classification | Lepage depreciation | Fair value depreciation | Purchase price adjustment | |||||||||
For the fiscal year ended December 31, 2011 | $ | 7,618 | $ | 8,270 | $ | 652 | ||||||
For the sixteen weeks ended April 21, 2012 | 2,269 | 2,545 | 275 |
(h) | Intangible assets were adjusted to reflect the assets purchased at the closing of the Acquisition. These values are based on preliminary estimates since Flowers has not finalized the appraisals of these assets. Lepage had a $0.2 million intangible trademark asset that is included in the fair value analysis in the table below. The total adjustment is $256.2 million. Trademarks are considered indefinite-lived intangible assets. Customer relationship and non-compete intangible assets are amortized on a straight-line basis in the table below (amounts in thousands, except for amortizable years). |
Amount | Weighted average amortization years | |||||||
Trademarks | $ | 185,000 | — | |||||
Customer relationships | 69,000 | 25.0 | ||||||
Non-compete agreements | 2,400 | 4.0 | ||||||
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$ | 256,400 | 24.3 | ||||||
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Amortization expense for intangible assets is in the table below (amounts in thousands):
Classification | Fair value amortization | |||
For the fiscal year ended December 31, 2011 | $ | 3,360 | ||
For the sixteen weeks ended April 21, 2012 | 1,034 |
Goodwill of $52.4 million was created as a result of the Acquisition. Goodwill is allocated to our direct-store-delivery (“DSD”) segment and $10.6 million will be deductible for tax purposes based on our preliminary estimates.
(i) | Acquisition costs of $6.5 million were accrued as a current liability with a corresponding adjustment to retained earnings. These costs include legal, consulting, auditing and other Acquisition-related fees. These costs are not included in the pro forma condensed consolidated statements of income because they are non-recurring. For purposes of this pro forma this amount is recorded in accrued liabilities. |
(j) | Assets held for sale includes routes held for sale of $10.0 million. The routes held for sale is our preliminary estimate of the amount of Lepage owned routes that we intend to sell to independent distributors. An additional $0.4 million of trucks held for sale are included as an adjustment to other long-term assets. |
(k) | Approximately $1.9 million was accrued for an estimate of the working capital adjustment as of April 21, 2012. The working capital adjustment will be different from the July 21, 2012 closing date working capital adjustment that will be finalized in future periodic filings. For purposes of this pro forma this amount is recorded in accrued liabilities. |
(l) | Lepage did not have any deferred income taxes recorded due to its corporate structure, which provided for pass through taxation. The preliminary deferred income taxes for the acquisition were recorded for certain property, plant and equipment of $1.3 million. |
(m) | Reclassification adjustments were necessary to the Lepage financial statements so that the presentation would be consistent with Flowers’ presentation. Lepage separately identifies the amount of depreciation in materials, labor and other production costs and selling, distribution and administrative expenses. Flowers’ records maintenance inventory (spare parts and supplies) as a current asset. The historical Lepage financial statements record maintenance inventory as a long-term asset. We have conformed the pro forma presentation to Flowers’ policy. Flowers records these together as one amount in determining operating income. The table below shows the reclassification adjustments to conform Lepage’s policy to Flowers’ policy (amounts in thousands): |
Fiscal 2011 | For the 16 weeks ended April 21, 2012 | |||||||
Lepage depreciation in materials, labor and other production costs (exclusive of depreciation and amortization shown separately below) | $ | 5,618 | $ | 1,537 | ||||
Lepage depreciation in selling, distribution and administrative expenses | 2,000 | 733 | ||||||
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Total Lepage depreciation | $ | 7,618 | $ | 2,270 | ||||
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(n) | Elimination of Lepage shareholders’ equity and issuance of Flowers common stock for the Acquisition |
The stockholders’ equity for Lepage is eliminated in the unaudited pro forma condensed consolidated balance sheet as of April 21, 2012. Adjustments to eliminate Lepage’s shareholders’ equity and the issuance of Flowers common stock for the acquisition are as follows (amounts in thousands):
Classification | Purchase price adjustment | |||
Common stock (for elimination of Lepage equity) | $ | (2,040 | ) | |
Treasury stock (for elimination of Lepage equity) | 18,938 | |||
Capital in excess of par value (for elimination of Lepage equity) | (4,246 | ) | ||
Retained earnings (for elimination of Lepage equity) | (95,068 | ) | ||
Accumulated other comprehensive income (for elimination of Lepage equity) | (477 | ) | ||
Treasury stock (for common shares issued, see reference (d)) | 29,259 | |||
Capital in excess of par value (for common shares issued, see reference (d)) | 16,628 | |||
Retained earnings (for acquisition costs, see reference (i)) | (4,024 | ) | ||
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Total stockholders’ equity | $ | (41,030 | ) | |
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(o) | Earnings per share |
Pro forma earnings per share for the year ended December 31, 2011, have been calculated based on the estimated weighted average number of shares of Flowers common stock outstanding on a pro forma basis, as described below. The pro forma weighted average number of shares of Flowers common stock outstanding for the year ended December 31, 2011 and the 16 weeks ended April 21, 2012, have been calculated as if the Acquisition shares had been issued and outstanding on January 1, 2011.
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The following table presents the basic and diluted earnings per share for the fiscal year ended December 31, 2011 (amounts in thousands, except per share data):
Flowers Foods, Inc. Historical | Lepage | Purchase Price Adjustments | Pro Forma of Flowers Foods, Inc. | |||||||||||||
Net income | $ | 123,428 | 23,043 | $ | (20,608 | ) | $ | 125,863 | ||||||||
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Basic Earnings Per Common Share: | ||||||||||||||||
Weighted average shares outstanding for common stock | 135,343 | 2,179 | 137,521 | |||||||||||||
Weighted average shares outstanding for participating securities | 44 | — | — | 44 | ||||||||||||
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Basic weighted average shares outstanding for common stock | 135,387 | — | 2,179 | 137,566 | ||||||||||||
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Basic earnings per common share | $ | 0.91 | $ | 0.91 | ||||||||||||
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Diluted Earnings Per Common Share: | ||||||||||||||||
Basic weighted average shares outstanding for common stock | 135,387 | — | 2,179 | 137,566 | ||||||||||||
Add: Shares of common stock assumed issued upon exercise of stock options and vesting of restricted stock | 1,494 | — | — | 1,494 | ||||||||||||
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Diluted weighted average shares outstanding for common stock | 136,881 | — | 2,179 | 139,060 | ||||||||||||
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Diluted earnings per common share | $ | 0.90 | $ | 0.91 | ||||||||||||
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The following table presents the basic and diluted earnings per share for the sixteen weeks ended April 21, 2012 (amounts in thousands, except per share data):
Flowers Foods, Inc. Historical | Lepage | Purchase Price Adjustments | Pro Forma of Flowers Foods, Inc. | |||||||||||||
Net income | $ | 37,943 | 8,475 | $ | (6,443 | ) | $ | 39,975 | ||||||||
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Basic Earnings Per Common Share: | ||||||||||||||||
Basic weighted average shares outstanding for common stock | 135,496 | — | 2,179 | 137,675 | ||||||||||||
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Basic earnings per common share | $ | 0.28 | $ | 0.29 | ||||||||||||
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Diluted Earnings Per Common Share: | ||||||||||||||||
Basic weighted average shares outstanding for common stock | 135,496 | — | 2,179 | 137,675 | ||||||||||||
Add: Shares of common stock assumed issued upon exercise of stock options and vesting of restricted stock | 1,686 | — | — | 1,686 | ||||||||||||
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Diluted weighted average shares outstanding for common stock | 137,182 | — | 2,179 | 139,361 | ||||||||||||
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Diluted earnings per common share | $ | 0.28 | $ | 0.29 | ||||||||||||
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