FLOWERS FOODS, INC

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OhemLqBxrpP3YbqRniJmJ69xtx7DhD9+4VKqtzbnrlDutVTsM0g5HmyVNDfiiWCf maAlaenmHuf0lxbkt5dwNg== 0000950144-03-007473.txt : 20030603 0000950144-03-007473.hdr.sgml : 20030603 20030603170359 ACCESSION NUMBER: 0000950144-03-007473 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030419 FILED AS OF DATE: 20030603 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FLOWERS FOODS INC CENTRAL INDEX KEY: 0001128928 STANDARD INDUSTRIAL CLASSIFICATION: FOOD & KINDRED PRODUCTS [2000] IRS NUMBER: 582582379 STATE OF INCORPORATION: GA FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-16247 FILM NUMBER: 03730866 BUSINESS ADDRESS: STREET 1: 1919 FLOWERS CIRCLE CITY: THOMASVILLE STATE: GA ZIP: 31757 BUSINESS PHONE: 9122269110 MAIL ADDRESS: STREET 1: 1919 FLOWERS CIRCLE CITY: THOMASVILLE STATE: GA ZIP: 31757 10-Q 1 g83148e10vq.htm FLOWERS FOODS, INC FLOWERS FOODS, INC

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D C 20549

FORM 10-Q


(Mark One)		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[x]		SECURITIES EXCHANGE ACT OF 1934


		For the quarterly period ended April 19, 2003

		OR


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

For the transition period from to

Commission file number 1-16247

FLOWERS FOODS, INC.

(Exact name of registrant as specified in its charter)


GEORGIA (State or other jurisdiction of incorporation or organization)		58-2582379 (I.R.S. Employer Identification Number)

1919 FLOWERS CIRCLE, THOMASVILLE, GEORGIA

(Address of principal executive offices)

31757
(Zip Code)

229/226-9110

(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year,
if changed since last report)

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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

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 Common Stock, $.01 par value with Preferred Share Purchase Rights		May 23, 2003 30,051,071

TABLE OF CONTENTS


		CONDENSED CONSOLIDATED BALANCE SHEET
		CONDENSED CONSOLIDATED INCOME STATEMENT
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
		NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 1. LEGAL PROCEEDINGS
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
CERTIFICATIONS
EXHIBIT INDEX
EX-3.2 AMENDED AND RESTATED BYLAWS
EX-21 SUBSIDIARIES OF FLOWERS FOODS, INC
EX-99 906 CERTIFICATION OF THE CEO AND CFO

FLOWERS FOODS, INC.
INDEX


			PAGE
			NUMBER

PART I. Financial Information
	Item 1. Financial Statements (unaudited)
		Condensed Consolidated Balance Sheet as of April 19, 2003 and December 28, 2002		3
		Condensed Consolidated Statement of Income for the Sixteen Weeks Ended April 19, 2003 and April 20, 2002		4
		Condensed Consolidated Statement of Cash Flows for the Sixteen Weeks Ended April 19, 2003 and April 20, 2002		5
		Notes to Condensed Consolidated Financial Statements		6
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
	Item 3. Quantitative and Qualitative Disclosures About Market Risk			21
	Item 4. Controls and Procedures			21
PART II. Other Information
	Item 1. Legal Proceedings			22
	Item 4. Submission of Matters to a Vote of Security Holders			22
	Item 5. Other Information			22
	Item 6. Exhibits and Reports on Form 8-K			22
SIGNATURES				23
CERTIFICATIONS				24

FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(Amounts in thousands except share data)
(Unaudited)


					APRIL 19, 2003			DECEMBER 28, 2002

ASSETS
	Current Assets:
		Cash and cash equivalents			$	27,008		$	69,826

		Accounts and notes receivable, net of allowances of $3,112 and $1,475, respectively				119,797			104,121

			Inventories, net:
				Raw materials		9,040			7,872
				Packaging materials		7,912			7,806
				Finished goods		12,679			14,311

						29,631			29,989

			Spare parts and supplies			19,501			19,840

			Assets held for sale			17,725			18,563

			Assets to be disposed of – discontinued operations			244,338			243,061

			Deferred taxes			8,745			—

			Other			9,466			10,009

						476,211			495,409

Property, Plant and Equipment:
			Land			33,023			33,073
			Buildings			201,974			200,713
			Machinery and equipment			512,144			509,879
			Furniture, fixtures and transportation equipment			42,659			43,689
			Construction in progress			20,363			12,174

						810,163			799,528
			Less: accumulated depreciation			(381,037	)		(363,403	)

						429,126			436,125

Notes Receivable						71,524			71,599

Deferred Taxes						18,779			22,267

Other Assets						2,966			10,225

Goodwill, net						63,348			54,249

Other Intangible Assets, net						7,982			6,506

					$	1,069,936		$	1,096,380

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
			Current maturities of long-term debt and capital leases		$	235,892		$	27,231
			Accounts payable			71,340			82,827
			Facility closing costs and severance			5,639			4,516
			Liabilities related to assets to be disposed of – discontinued operations			2,902			2,553
			Other accrued liabilities			85,979			89,151

						401,752			206,278

Long-Term Debt and Capital Leases						5,213			223,133

Other Liabilities:
			Facility closing costs and severance			5,008			7,337
			Postretirement/postemployment obligations			57,812			54,486
			Other			14,894			12,150

						77,714			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 29,985,375 shares issued			300			300
			Capital in excess of par value			483,144			483,142
			Retained earnings			124,231			131,388
			Accumulated other comprehensive loss			(22,418	)		(21,834	)

						585,257			592,996

					$	1,069,936		$	1,096,380

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED INCOME STATEMENT
(Amounts in thousands except per share data)
(Unaudited)


	FOR THE SIXTEEN WEEKS ENDED

	APRIL 19, 2003			APRIL 20, 2002

Sales	$	434,552		$	396,158
Materials, supplies, labor and other production costs (exclusive of depreciation and amortization shown separately below)		213,637			190,392
Selling, marketing and administrative expenses		182,485			167,834
Depreciation and amortization		17,162			17,429

Income from continuing operations before interest, income taxes and cumulative effect of a change in accounting principle		21,268			20,503

Interest income		1,726			1,736
Interest expense		(794	)		(897	)

Interest income, net		932			839

Income from continuing operations before income taxes and cumulative effect of a change in accounting principle		22,200			21,342
Income tax expense		8,547			8,217

Income from continuing operations before cumulative effect of a change in accounting principle		13,653			13,125
Discontinued operations, net of tax		(19,313	)		(11,402	)

(Loss) income before cumulative effect of a change in accounting principle		(5,660	)		1,723
Cumulative effect of a change in accounting principle, net of tax		—			(23,078	)

Net loss	$	(5,660	)	$	(21,355	)

Net Loss Per Common Share:
Basic:
Income from continuing operations before cumulative effect of a change in accounting principle	$	0.46		$	0.44
Discontinued operations, net of tax		(0.65	)		(0.38	)
Cumulative effect of a change in accounting principle, net of tax		—			(0.78	)

Net loss per share		(0.19	)		(0.72	)

Weighted average shares outstanding		29,985			29,798

Diluted:
Income from continuing operations before cumulative effect of a change in accounting principle	$	0.44		$	0.43
Discontinued operations, net of tax		(0.62	)		(0.37	)
Cumulative effect of a change in accounting principle, net of tax		—			(0.75	)

Net loss per share		(0.18	)		(0.69	)

Weighted average shares outstanding		31,124			30,878

Cash Dividends Paid Per Common Share	$	0.05			—

(See Accompanying Notes to Condensed Consolidated Financial Statements)

FLOWERS FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)


			FOR THE SIXTEEN WEEKS ENDED

			APRIL 19, 2003			APRIL 20, 2002

CASH FLOWS PROVIDED BY (DISBURSED FOR) OPERATING ACTIVITIES:
Net loss			$	(5,660	)	$	(21,355	)
	Adjustments to reconcile net loss to net cash disbursed for operating activities:
		Discontinued operations		6,170			4,474
		Goodwill impairment		—			23,078
		Depreciation and amortization		17,162			17,429
		Stock appreciation rights		2,568			403
		Deferred income taxes		5,846			1,079
		Provision for inventory obsolescence		688			1,013
		Allowances for accounts receivable		2,003			1,125
		Non-cash effect of derivative instruments		(89	)		—
Changes in assets and liabilities:
		Accounts and notes receivable, net		(17,687	)		(9,265	)
		Inventories, net		(4,974	)		(11,253	)
		Other assets		(933	)		(2,219	)
		Accounts payable and other accrued liabilities		(10,813	)		(6,709	)
		Facility closing costs and severance		(1,206	)		(1,437	)

NET CASH DISBURSED FOR OPERATING ACTIVITIES				(6,925	)		(3,637	)

CASH FLOWS PROVIDED BY (DISBURSED FOR) INVESTING ACTIVITIES:
		Purchase of property, plant and equipment		(11,037	)		(15,991	)
		Proceeds from notes receivable		83			1,164
		Acquisition of business, net of cash received		(14,534	)		—
		Proceeds from property disposals		—			409
		Other		353			(76	)

NET CASH DISBURSED FOR INVESTING ACTIVITIES				(25,135	)		(14,494	)

CASH FLOWS PROVIDED BY (DISBURSED FOR) FINANCING ACTIVITIES:
		Dividends paid		(1,499	)		—
		Debt and capital lease obligation (payments) proceeds		(9,259	)		11,881

NET CASH (DISBURSED FOR) PROVIDED BY FINANCING ACTIVITIES				(10,758	)		11,881

Net decrease in cash and cash equivalents				(42,818	)		(6,250	)
Cash and cash equivalents at beginning of period				69,826			12,280

Cash and cash equivalents at end of period			$	27,008		$	6,030

(See Accompanying Notes to Condensed Consolidated Financial Statements)

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 information and applicable rules and regulations of the Securities Exchange Act of 1934. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for annual financial statements. The unaudited condensed consolidated financial statements included herein contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of April 19, 2003 and December 28, 2002, the results of operations for the sixteen week periods ended April 19, 2003 and April 20, 2002 and statement of cash flows for the sixteen week periods ended April 19, 2003 and April 20, 2002. The results of operations for the sixteen week periods ended April 19, 2003 and April 20, 2002 are not necessarily indicative of the results to be expected for a full year. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2002.

ESTIMATES — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The company believes the following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements: revenue recognition, allowance for doubtful accounts, derivative instruments, reserves for obsolete and unmarketable inventory, valuation of long-lived assets and goodwill and other intangibles, deferred tax asset valuation allowances and pension obligations. These policies are the same as those summarized in the company’s Annual Report on Form 10-K for the fiscal year ended December 28, 2002.

REPORTING PERIODS — Fiscal 2003 will consist of 53 weeks, with the company’s quarterly reporting periods as follows: first quarter ended April 19, 2003 (sixteen weeks), second quarter ending July 12, 2003 (twelve weeks), third quarter ending October 4, 2003 (twelve weeks) and fourth quarter ending January 3, 2004 (thirteen weeks).

RECLASSIFICATIONS — Certain reclassifications of prior period data have been made to conform with the current period reporting.

SEGMENTS — On April 24, 2003, the company announced it had completed the sale of substantially all the assets of its Mrs. Smith’s Bakeries, LLC (“Mrs. Smith’s Bakeries”) frozen dessert business to The Schwan Food Company (“Schwan”). The company retained the frozen bread and roll portion of the Mrs. Smith’s Bakeries business. As a result, the frozen bread and roll business as well as the Birmingham, Alabama production facility formerly a part of Flowers Bakeries, LLC (“Flowers Bakeries”) became a part of our Flowers Snack, LLC (“Flowers Snack”) segment, with Flowers Snack being renamed Flowers Foods Specialty Group, LLC (“Flowers Specialty”). For purposes of this Form 10-Q, discussion will relate to our Flowers Bakeries and Flowers Specialty business units as such businesses are currently operated. The frozen dessert business of Mrs. Smith’s Bakeries sold is reported as a discontinued operation. As Mrs. Smith’s Bakeries dessert and frozen bread and roll businesses historically shared certain administrative and division expenses, certain allocations and assumptions have been made in order to present historical comparative information for them as separate segments. In most instances, administrative and division expenses have been allocated between the two segments based on cases of product sold. Management believes that the amounts are reasonable estimations of the costs that would have been incurred had Mrs. Smith’s Bakeries dessert and frozen bread and rolls businesses performed these functions as separate divisions.

SIGNIFICANT CUSTOMER — During the sixteen weeks ended April 19, 2003, sales to the company’s largest customer, Wal-Mart, represented 11.5% of the consolidated company’s sales with 10.3% attributable to Flowers Bakeries and 1.2% attributable to Flowers Specialty.

2. DISCONTINUED OPERATIONS

On January 30, 2003, the company entered into an agreement to sell its Mrs. Smith’s Bakeries frozen dessert business to Schwan. Included in those assets are the Stilwell, Oklahoma and Spartanburg, South Carolina production facilities and a portion of the company’s Suwanee, Georgia property. On that date, the assets and liabilities related to the portion of the Mrs. Smith’s Bakeries business to be sold were classified as held for sale in accordance with SFAS 144 and recorded at estimable fair value less costs to dispose. On April 24, 2003, the company announced the completion of the sale of substantially all the assets of its Mrs. Smith’s Bakeries frozen dessert business to Schwan. The transaction was valued at approximately $240 million. The value received by the company was determined on the basis of arm’s length negotiations between the parties. For accounting purposes, the frozen dessert business sold to Schwan is presented as discontinued operations for the sixteen weeks ended April 19, 2003 and April 20, 2002. Accordingly, the operations and certain transaction costs are included in “Discontinued operations, net of tax” in the Condensed Consolidated Statement of Income. An analysis of this line item is as follows:


		For the Sixteen Weeks Ended
		April 19, 2003			April 20, 2002

		(amounts in thousands)
Operating loss		$	(18,790	)	$	(12,667	)
Financial advisor fees			(1,870	)		—
Legal, accounting and other			(1,336	)		—
Lease termination fees (see Note 7)			(4,334	)		—
Interest (see Note 7)			(5,545	)		(5,873	)
Derivative activity (see Note 6)			471			—

	Pre-tax discontinued operations		(31,404	)		(18,540	)
Tax benefit			12,091			7,138

	Discontinued operations, net of tax	$	(19,313	)	$	(11,402	)

Revenue related to the discontinued operation of $64.4 million and $67.5 million are included in the operating losses above for the sixteen weeks ended April 19, 2003 and April 20, 2002, respectively.

In addition, the following estimated transaction costs will be included in discontinued operations in the company’s second quarter ending July 12, 2003 (amounts in thousands):


Loss on sale of assets		$	(6,860	)
Deferred financing costs			(4,190	)
Interest rate swap terminations			(4,765	)
Separation and severance payments			(4,720	)
SAP license transfer fees			(1,210	)
Indemnification insurance premium			(2,690	)
Other			(450	)

	Pre-tax discontinued operations		(24,885	)
Tax benefit			9,580

	Discontinued operations, net of tax	$	(15,305	)

In addition to the above costs, operating results from the dessert business sold for the second quarter will be included in discontinued operations in the second quarter. The company is currently analyzing state net operating loss carryforwards in states in which it no longer transacts business as a result of the sale of Mrs. Smith’s Bakeries frozen dessert business to Schwan. If the company is unable to utilize these loss carryforwards, for which a deferred tax asset has been recorded, a charge to discontinued operations in the second quarter will be necessary.

At April 19, 2003 and December 28, 2002, “Net assets to be disposed of - discontinued operations” and “Liabilities related to assets to be disposed of – discontinued operations” were comprised of:


	April 19, 2003		December 28, 2002

	(amounts in thousands)
Net assets to be disposed of:
Inventory	$	55,304	$	51,908
Spare parts		3,222		3,628
Prepaid assets		5,413		5,844
Property, plant and equipment		142,518		143,614
Intangible assets		37,881		38,067

	$	244,338	$	243,061

Liabilities related to assets to be disposed of:
Market access fee liability	$	2,902	$	2,553

3. COMPREHENSIVE INCOME

The company has other comprehensive income resulting from its accounting for derivative financial instruments and additional minimum pension liabilities. Total comprehensive loss, determined as net loss adjusted by other comprehensive loss, was $(6.2) million and $(19.5) million for the sixteen weeks ended April 19, 2003 and April 20, 2002, respectively.

During the first quarter of fiscal 2003, changes to accumulated other comprehensive income, net of tax, were as follows (amounts in thousands):


		2003

Accumulated other comprehensive loss, beginning balance		$	(21,834	)
Derivative transactions:
	Net deferred gains on closed contracts, net of tax of $14		21
	Reclassified to earnings (materials, labor and other production costs), net of tax of $14		20
	Effective portion of change in fair value of hedging instruments, net of tax of $(399)		(625	)

Accumulated other comprehensive loss ending balance		$	(22,418	)

4. GOODWILL AND OTHER INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the sixteen weeks ended April 19, 2003 are as follows (amounts in thousands):


		Flowers		Flowers
		Bakeries		Specialty		Total

Balance as of December 28, 2002		$	53,362	$	887	$	54,249
	Acquisition (see Note 12)		—		9,099		9,099

Balance as of April 19, 2003		$	53,362	$	9,986	$	63,348

The company adopted Statement of Financial Accounting Standards No. 142, (“SFAS 142”), “Goodwill and Other Intangible Assets” on December 30, 2001 (the first day of fiscal 2002). A transitional impairment that resulted from the company’s adoption of this statement was recorded as of December 30, 2001 at Mrs. Smith’s Bakeries for $23.1 million, net of tax of $1.8, million as a cumulative effect of a change in accounting principle.

The changes in the carrying amount of intangible assets for the sixteen weeks ended April 19, 2003 are as follows (amounts in thousands):


		Flowers			Flowers
		Bakeries			Specialty		Total

Balance as of December 28, 2002		$	6,506			—	$	6,506
	Purchase accounting adjustment		1,850			—		1,850
	Amortization expense		(374	)		—		(374	)

Balance as of April 19, 2003		$	7,982			—	$	7,982

The purchase accounting adjustment of $1.85 million was related to the completion of the final independent valuations prepared as a result of the Ideal Baking acquisition which occurred in fiscal 2002.

5. NEW ACCOUNTING PRONOUNCEMENTS

Asset Retirement. In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS “) No. 143, “Accounting for Asset Retirement Obligations” which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This statement was effective for the company beginning in the first quarter of fiscal 2003. This statement did not effect net income.

Extraordinary Gain on Early Extinguishment of Debt. In April 2002, the FASB issued SFAS No. 145, (“SFAS 145”), “Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections”. SFAS 145 rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt”, and an amendment of that Statement, FASB Statement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements”. SFAS 145 also rescinds FASB Statement No. 13, “Accounting for Leases”, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. SFAS 145 also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. This statement was effective for the company beginning in fiscal 2003. The application of this statement will result in the company reclassifying in its consolidated financial statements, the $6.4 million ($4.0 million, net of tax) fiscal 2001 extraordinary gain on the early extinguishment of debt to continuing operations in its January 3, 2004, Consolidated Financial Statements. This statement did not affect net income.

Guarantees. In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an Interpretation of FASB Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34.” FIN 45 clarifies the requirements of SFAS No. 5, “Accounting for Contingencies,” relating to the guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. The disclosure provisions of FIN 45 were effective for fiscal 2002. The provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or modified after December 31, 2002, irrespective of a guarantor’s year-end. The company did not enter into any new guarantees in the first quarter of fiscal 2003. However, in the second quarter of fiscal 2003, the company entered into an eighteen month indemnification agreement, limited to $70.0 million, with Schwan as a result of the sale of Mrs. Smith’s Bakeries frozen dessert business related to the inventory sold. The company has purchased insurance to cover possible claims (or occurrences) under this indemnification. In the second quarter of fiscal 2003, a liability of $2.7 million was recorded to discontinued operations representing the fair value of the indemnification agreement (see Note 2). The fair value was determined as the insurance premium paid by the company. A related prepaid asset was recorded for the payment of the insurance premium and, together with the indemnification liability, will be amortized over the eighteen month indemnification period.

Stock Based Compensation. In December 2002, the FASB issued SFAS No. 148 (“SFAS 148”), “Accounting for Stock-Based Compensation — Transition and Disclosure, Amendment of FASB Statement No. 123.” SFAS 148 provides additional transition guidance for those entities that elect to voluntarily adopt the provisions of SFAS No. 123 (“SFAS 123”), “Accounting for Stock-Based Compensation.” Furthermore, SFAS 148 mandates new disclosures in both interim and year-end financial statements. The company has elected not to adopt the recognition provisions of SFAS 123, as amended by SFAS 148. However, as permitted by SFAS 123, the company continues to apply intrinsic value accounting for its stock option plans under Accounting Principles Board Opinion No. 25 (“APB 25”), “Accounting for Stock Issued to Employees.” Compensation cost for stock options, if any, is measured as the excess of the market price of the company’s common stock at the date of grant over the exercise price to be paid by the grantee to acquire the stock. The company’s pro forma net earnings and pro forma earnings per share based upon the fair value at the grant dates for awards under the company’s plans are disclosed below.

If the company had elected to recognize compensation expense based upon the fair value at the grant dates for awards under these plans, the company’s net loss and loss per share would have increased as follows:


		April 19, 2003			April 20, 2002

Net loss, as reported		$	(5,660	)	$	(21,355	)
Deduct: Total additional stock-based employee compensation cost, net of tax, that would have been included in net loss under fair value method			(648	)		(673	)

Pro forma net loss		$	(6,308	)	$	(22,028	)

Basic loss per share as reported		$	(0.19	)	$	(0.72	)
	Pro forma		(0.21	)		(0.74	)
Diluted loss per share as reported		$	(0.18	)	$	(0.69	)
	Pro forma		(0.20	)		(0.71	)

Variable Interest Entities. In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” FIN 46 clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements,” to certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 applies immediately to variable interest entities (“VIE’s”) created after January 31, 2003, and to VIE’s in which an enterprise obtains an interest after that date. It applies in the first fiscal year or interim period beginning after June 15, 2003 to VIE’s in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46 applies to public enterprises as of the beginning of the applicable interim or annual period. The company currently has an interest in one potential VIE. The assets and liabilities of this entity are not consolidated within the company’s consolidated financial statements. Flowers Bakeries maintains a transportation agreement with this entity, which represents substantially all of the entity’s revenue. We are in the process of assessing the impact of FIN 46 on the company’s relationship with this entity. If it is determined that this entity is a VIE, the company has the following options under FIN 46: (i) consolidate the VIE into the company’s financial statements; (ii) purchase selected assets from the VIE; or (iii) modify or replace the financing sources currently being utilized. None of these options, if required, are expected to have a material impact on the company’s consolidated financial position, liquidity, or results of operations.

In April 2003, the FASB issued SFAS No. 149 (“SFAS 149”), “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133 (“SFAS 133”), “Accounting for Derivative Instruments and Hedging Activities.” SFAS 149 is effective for contracts entered into or modified after June 30, 2003. The company is currently assessing the impact of this statement.

In May 2003, the FASB issued SFAS No. 150 (“SFAS 150”), “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” SFAS 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity. SFAS 150 requires that those instruments be classified as liabilities in statements of financial position. SFAS 150 is effective for all financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The company is currently assessing the impact of this statement.

6. DERIVATIVE FINANCIAL INSTRUMENTS

The company enters into commodity derivatives, designated as cash flow hedges of existing or future exposure to changes in commodity prices. The company’s primary raw materials are flour, sugar, shortening and dairy products, along with pulp and paper and petroleum-based packaging products. The company also enters into interest rate derivatives to hedge exposure to changes in interest rates.

Of the $5.1 million in accumulated other comprehensive loss, approximately $4.7 million and $0.4 million were related to instruments expiring in fiscal 2003 and 2004, respectively, and an immaterial amount was related to deferred gains and losses on cash-flow hedge positions.

As of April 19, 2003, the company’s hedge portfolio contained commodity derivatives with a fair value of $(3.1) million which is primarily recorded in other current liabilities and other long term liabilities. The positions held in the portfolio are used to hedge economic exposure to

changes in various raw material prices and effectively fix the price, or limit increases in prices, for a period of time extending into fiscal 2004. Under SFAS 133, instruments with a fair value of $(3.1) million on April 19, 2003 are designated as cash-flow hedges. The effective portion of changes in fair value for these derivatives is recorded each period in other comprehensive income, and any ineffective portion of the change in fair value is recorded to current period earnings in selling, marketing and administrative expenses. An immaterial amount of commodity derivatives at April 19, 2003 is related to hedge instruments that do not qualify for hedge accounting under SFAS 133. For these instruments, changes in fair value are recorded each period in selling, marketing and administrative expense. During the sixteen weeks ended April 19, 2003, an immaterial amount was recorded to current earnings due to changes in fair value of these instruments.

In April 2001, the company entered into an interest rate swap transaction with a notional amount of $150.0 million, expiring on December 31, 2003, in order to effectively convert a designated portion of its borrowings under its credit agreement dated March 26, 2001 to a fixed rate instrument. On December 26, 2002, that swap was amended to reduce the notional value to $105.0 million. In addition, the company entered into a new interest rate swap with a notional amount of $45.0 million, expiring on December 31, 2003, in order to effectively convert variable rate interest payments on a designated portion of its capital lease obligations to fixed rate payments. In accordance with SFAS 133, on January 30, 2003, pursuant to the announcement of the sale of Mrs. Smith’s Bakeries frozen dessert business, hedge accounting was discontinued for these swaps, as the hedged debt and capital leases would be paid off at the close of the transaction. The existing balance in other comprehensive income of $3.2 million, net of tax, at April 19, 2003, was reclassified to earnings at the close of the transaction on April 24, 2003. The change in fair values of the interest rate swaps from January 30, 2003 to April 19, 2003 of $0.5 million was recognized in discontinued operations in the first quarter of fiscal 2003.

Additionally, on October 25, 2002, in conjunction with the acquisition of Ideal Baking Company, the company acquired two interest rate swaps with notional amounts of $1.7 million each, designated as cash flow hedges of the outstanding borrowings of that company.

The interest rate swap agreements result in the company paying or receiving the difference between the fixed and floating rates at specified intervals calculated based on the notional amounts. The interest rate differential to be paid or received is accrued as interest rates change and is recorded as interest expense. Under SFAS 133, these swap transactions are designated as cash-flow hedges. Accordingly, the effective portion of the change in the fair value of the swap transaction is recorded each period in other comprehensive income. The ineffective portion of the change in fair value is recorded to current period earnings in selling, marketing and administrative expenses. The fair value of the interest rate swap on April 19, 2003 was a liability of $4.9 million which is recorded in other accrued liabilities and other long term liabilities. During the sixteen weeks ended April 19, 2003, $0.2 million of additional interest expense was recognized due to periodic settlements of the swaps. In addition, $1.9 million of interest expense was recognized in discontinued operations as a result of periodic settlements of the swaps. An immaterial amount was recorded to current earnings related to the interest rate swap.

7. DEBT AND OTHER OBLIGATIONS

Long-term debt consisted of the following at April 19, 2003 and December 28, 2002 (amounts in thousands):


	INTEREST
	RATE			MATURITY		APRIL 19, 2003		DECEMBER 28, 2002

Senior secured credit facilities		3.96	%		2007	$	173,388	$	180,258
Capital lease obligations		3.65	%		2008		55,055		56,887
Other notes payable		5.93	%		2013		12,662		13,219

							241,105		250,364
Less current maturities							235,892		27,231

Total long-term debt						$	5,213	$	223,133

The company’s credit agreement provides for total borrowings of up to $303.4 million, consisting of Term Loan A of $28.0 million and Term Loan B of $145.4 million and a revolving loan facility of $130.0 million (the “revolving loan facility”).

As of December 28, 2002, the company was not in compliance with certain restrictive financial covenants under the credit agreement. Subsequent to December 28, 2002, the company completed an amendment to the credit agreement, which among other things, permitted the company to exclude the effects of the SFAS 142 and SFAS 144 impairment charges from its fiscal 2002 covenant calculations, bringing the company into compliance with all financial covenants under the credit agreement. The credit agreement was also amended to allow for completion of the sale of Mrs. Smith’s Bakeries’ frozen dessert assets to Schwan, an increase in the amount of dividends the company can pay, an increase in the company’s ability to repurchase its common stock and make acquisitions within certain limits and an increase in the amount of allowable capital expenditures. With the completion of the amendment, the company was in compliance with all covenants under the credit agreement and believes that, given its current cash position, its cash flow from operating activities and its available credit facilities, it can comply with the current terms of its credit facilities and can meet presently foreseeable financial requirements. Pursuant to the amendment to the company’s credit agreement, upon the closing of the transaction with Schwan, proceeds from the sale, net of certain outstanding debt and lease obligations, transaction costs and post closing adjustments, were applied to the outstanding Term Loan A and Term Loan B balances on a pro rata basis. On April 24, 2003, $159.7 million of the net proceeds from the Schwan transaction and $13.7 million of the company’s cash were used to pay off Term Loan A and Term Loan B. Therefore, the balance on the credit facility was zero as of April 24, 2003. Also on April 24, 2003, proceeds from the Schwan transaction were used to pay-off $54.8 million in capital leases and $6.1 million in other notes payable. As such, debt of approximately $6.8 million remains outstanding at April 24, 2003.

In anticipation of the pending transactions, during the first quarter of fiscal 2003, the company gave notice to lessors of its intent to pay off its equipment leases. As a result, the company accrued $4.3 million in lease termination fees which were included in discontinued operations during the first quarter of fiscal 2003.

Interest expense related to the debt required to be repaid of $5.5 million and $5.9 million in the first quarter of fiscal 2003 and fiscal 2002, respectively, was included in discontinued operations (see Note 2).

8. FACILITY CLOSING COSTS AND SEVERANCE

The company has continuing obligations in connection with certain plant closings completed in the current and prior years. Activity with respect to these obligations is as follows (amounts in thousands):


	December 28, 2002		Spending			April 19, 2003

Noncancelable lease obligations and other facility closing costs	$	10,195	$	(1,062	)	$	9,133
Severance		537		(88	)		449
Other		1,121		(56	)		1,065

Total	$	11,853	$	(1,206	)	$	10,647

9. LITIGATION

The company and its subsidiaries from time to time are parties to, or targets of, lawsuits, claims, investigations and proceedings, including personal injury, commercial, contract, environmental, antitrust, product liability, health and safety and employment matters, which are being handled and defended in the ordinary course of business. While the company is unable to predict the outcome of these matters, it believes, based upon currently available facts, that it is remote that the ultimate resolution of any such pending matters will have a material adverse effect on its overall financial condition, results of operations or cash flows in the future. However, adverse developments could negatively impact earnings in a particular future fiscal period.

On March 25, 2002, in Trans American Brokerage, Inc. (“TAB”) vs. Mrs. Smith’s Bakeries, Inc., an arbitration brought before the American Arbitration Association, an arbitrator found against Mrs. Smith’s Bakeries and issued an interim award for damages in the amount of $9.8 million plus approximately $0.8 million representing costs and attorneys’ fees incurred relating to an alleged breach of a distributorship agreement. The company recorded a $10.0 million charge ($6.2 million after tax) against its results for the fiscal year ended December 29, 2001 for estimated total probable costs (including attorney’s fees and expenses) of this dispute. On June 11, 2002 an arbitrator issued a final award for damages in the amount of the interim award. The award also provided for the accrual of interest until it was settled or paid. As of December 28, 2002, the company had accrued a total of $11.5 million related to this award. On April 24, 2003, the company announced it had concluded settlement of the arbitration award in return for payment of $9.0 million to TAB. As a result, the company reversed $2.5 million from accrued reserves into discontinued operations under Mrs. Smith’s Bakeries operating loss.

10. EARNINGS PER SHARE

The following table calculates basic earnings per common share and diluted earnings per common share at April 19, 2003 and April 20, 2002.


	FOR THE SIXTEEN WEEKS ENDED

	APRIL 19, 2003		APRIL 20, 2002

Basic Earnings Per Common Share:
Income from continuing operations	$	13,653	$	13,125
Basic weighted average shares outstanding		29,985		29,798
Basic earnings per common share	$	0.46	$	0.44

Diluted Earnings Per Common Share:
Income from continuing operations	$	13,653	$	13,125
Basic weighted average shares outstanding		29,985		29,798
Add: Shares of common stock assumed upon exercise of stock options		1,063		1,080
Add: Shares of common stock assumed upon contingent stock agreement		76		—

Diluted weighted average shares outstanding		31,124		30,878
Diluted earnings per common share	$	0.44	$	0.43

11. SEGMENT REPORTING

On April 24, 2003, the company announced it had completed the sale of substantially all the assets of Mrs. Smith’s Bakeries’ frozen dessert business to Schwan. The company retained the frozen bread and roll portion of the Mrs. Smith’s Bakeries business. As a result, the frozen bread and roll business as well as the Birmingham, Alabama production facility formerly a part of Flowers Bakeries became a part of our Flowers Snack segment, with Flowers Snack being renamed Flowers Specialty. For purposes of this Form 10-Q, discussion will relate to our Flowers Bakeries and Flowers Specialty business units as such businesses are currently operated. Prior year data has been restated to reflect the segment reorganization.

The segments are managed as strategic business units due to their distinct production processes and marketing strategies. The company evaluates each segment’s performance based on income or loss before interest and income taxes, excluding unallocated expenses and charges which the company’s management deems to be unusual and not reflective of the segments’ core operating businesses. Information regarding the operations in these reportable segments is as follows (amounts in thousands):


		FOR THE SIXTEEN WEEKS ENDED

		APRIL 19, 2003			APRIL 20, 2002

SALES:
	Flowers Bakeries	$	338,015		$	315,672
	Flowers Specialty		96,537			80,486

		$	434,552		$	396,158

DEPRECIATION AND AMORTIZATION:
	Flowers Bakeries	$	13,549		$	13,492
	Flowers Specialty		3,488			3,879
	Unallocated corporate expenses		125			58

		$	17,162		$	17,429

INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES:
	Flowers Bakeries	$	26,241		$	26,189
	Flowers Specialty		3,460			1,400
	Unallocated corporate expenses		(8,433	)		(7,086	)
	Unallocated interest income, net		932			839

		$	22,200		$	21,342

12. ACQUISITION

On December 30, 2002 (fiscal 2003), the company acquired all the assets of Bishop Baking Company, Inc. from Kellogg Company. Bishop has annual sales of approximately $30 million from its sole bakery in Cleveland, Tennessee. Bishop’s products, which include a line of snack cake items that the company did not previously produce, are distributed nationwide.

13. SUBSEQUENT EVENTS

On April 24, 2003, the company announced the completion of the sale of substantially all the assets of Mrs. Smith’s Bakeries’ frozen dessert business to Schwan. The transaction was valued at approximately $240 million. See Note 2 for additional information.

On April 24, 2003, the company announced it had concluded settlement of an arbitration award of $9.0 million in Trans American Brokerage, Inc. vs. Mrs. Smith’s Bakeries, Inc. See Note 9 for additional information.

On April 24, 2003, the company paid all outstanding borrowings under its senior secured credit facilities, substantially all its capital lease obligations and a portion of other notes payable, leaving a debt balance of approximately $6.8 million outstanding. Proceeds from the sale of Mrs. Smith’s Bakeries frozen dessert business to Schwan, as well as a portion of the company’s cash holdings were used for these payments. See note 7 for additional information.

On May 30, 2003, the board of directors declared a 3 for 2 stock split of the company’s common stock in the form of a stock dividend. The record date for the split will be June 13, 2003 and new shares will be issued on a payment date of June 27, 2003. Pro forma earnings (loss) per common share, giving retroactive effect to the stock split, are as follows:


	For the Sixteen Weeks Ended

	April 19, 2003			April 20, 2002

Net Loss Per Common Share:
Basic:
Income from continuing operations	$	.30		$	.29
Discontinued operations, net of tax		(.43	)		(.25	)
Cumulative effect of a change in accounting principle, net of tax		—			(.52	)

Net loss per share	$	(.13	)	$	(.48	)

Net Loss Per Common Share:
Diluted:
Income from continuing operations	$	.29		$	.28
Discontinued operations		(.41	)		(.24	)
Cumulative effect of a change in accounting principle, net of tax		—			(.50	)

Net loss per share	$	(.12	)	$	(.46	)

On May 30, 2003, the Board of Directors declared a dividend of $.10 per share (post stock split discussed above) on the company’s common stock to be paid on June 27, 2003 to shareholders of record on June 13, 2003.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

The following discussion of the results of operations of the company for the sixteen week period ended April 19, 2003 and its financial condition should be read in conjunction with the company’s annual report on Form 10-K for the fiscal year ended December 28, 2002.

CRITICAL ACCOUNTING POLICIES:

Our financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”). These principles are numerous and complex. Our significant accounting policies are summarized in the company’s annual report on Form 10-K for the fiscal year ended December 28, 2002. In many instances, the application of GAAP requires management to make estimates or to apply subjective principles to particular facts and circumstances. A variance in the estimates used or a variance in the application or interpretation of GAAP could yield a materially different accounting result. In our Form 10-K for the fiscal year ended December 28, 2002, we discuss the areas where we believe that the estimations, judgments or interpretations that we have made, if different, would have yielded the most significant differences in our financial statements and we urge you to review that discussion.

MATTERS AFFECTING ANALYSIS:

On April 24, 2003, the company announced it had completed the sale of substantially all the assets of its Mrs. Smith’s Bakeries, LLC (“Mrs. Smith’s Bakeries”) frozen dessert business to The Schwan Food Company (“Schwan”). The company retained the frozen bread and roll portion of the Mrs. Smith’s Bakeries business. As a result, the frozen bread and roll business as well as the Birmingham, Alabama production facility formerly a part of Flowers Bakeries, LLC (“Flowers Bakeries”) became a part of our Flowers Snack, LLC (“Flowers Snack”) segment, with Flowers Snack being renamed Flowers Foods Specialty Group, LLC (“Flowers Specialty”). For purposes of this Form 10-Q, discussion will relate to our Flowers Bakeries and Flowers Specialty business units as such businesses are currently operated. The frozen dessert business of Mrs. Smith’s Bakeries sold is reported as a discontinued operation. As Mrs. Smith’s Bakeries dessert and frozen bread and roll businesses historically shared certain administrative and division expenses, certain allocations and assumptions have been made in order to present historical comparative information for them as separate segments. In most instances, administrative and division expenses have been allocated between the two segments based on cases of product sold. Management believes that the amounts are reasonable estimations of the costs that would have been incurred had Mrs. Smith’s Bakeries dessert and frozen bread and rolls businesses performed these functions as separate divisions.

RESULTS OF OPERATIONS:

Results of operations, expressed as a percentage of sales, for the sixteen week periods ended April 19, 2003 and April 20, 2002, are set forth below:


	FOR THE SIXTEEN WEEKS ENDED

	APRIL 19, 2003			APRIL 20, 2002

Sales		100.00	%		100.00	%
Gross margin		50.84			51.94
Selling, marketing and administrative expenses		41.99			42.37
Depreciation and amortization		3.95			4.40
Interest income, net		0.21			0.21
Income from continuing operations before income taxes		5.11			5.39
Income tax expense		1.97			2.07
Discontinued operations		(4.44	)		(2.88	)
Cumulative effect of a change in accounting principle, net of tax		—			(5.83	)
Net loss		(1.30	)		(5.39	)

CONSOLIDATED AND SEGMENT RESULTS

SIXTEEN WEEKS ENDED APRIL 19, 2003 COMPARED TO SIXTEEN WEEKS ENDED APRIL 20, 2002

Sales. For the first quarter ended April 19, 2003, sales were $434.6 million, or 9.7% higher than sales in the comparable quarter of the prior year, which were $396.2 million.

Flowers Bakeries’ sales for the first quarter of fiscal 2003 were $338.0 million, an increase of 7.1% from sales of $315.7 million reported for the first quarter of fiscal 2002. Flowers Bakeries had volume increases of 5.4% and pricing increases of 1.7%. The acquisition of Ideal Baking Company, completed by the company during fiscal 2002, contributed 1.4% of the 5.4% increase in volume. Branded products distributed through the company’s DSD system to supermarkets, convenience stores, mass merchandisers and club stores represent approximately 67% of Flowers Bakeries’ sales. These sales, driven by the company’s Nature’s Own brand of soft variety breads, increased approximately 9% over the same period in the prior year. This increase is primarily attributable to increased volume. Sales in the foodservice channel represent approximately 16% of Flowers Bakeries’ sales and were relatively flat as compared to the first quarter of fiscal 2002. Store branded retail sales represent approximately 13% of Flowers Bakeries’ sales. These sales increased approximately 8% from the same period in the prior year. This increase was primarily a result of volume increases.

Flowers Specialty’s sales for the first quarter of fiscal 2003 were $96.5 million, an increase of 19.9% from its sales of $80.5 million for the first quarter of fiscal 2002, primarily as a result of the acquisition of Bishop Baking Company in the first quarter of fiscal 2003. Sales in the foodservice channel represent approximately 30% of Flowers Specialty’s sales. These sales increased approximately 11% from the same period in the prior year primarily due to volume increases. Branded sales distributed to supermarkets, convenience stores, mass merchandisers and club stores represent approximately 17% of Flowers Specialty’s sales. These sales increased approximately 5% from the same period in the prior year primarily due to volume increases related to the Bishop acquisition. Sales in the vending channel represent approximately 16% of Flowers Specialty’s sales. These sales increased approximately 31% from the same period in the prior year primarily as a result of volume and price increases. Sales to non-affiliated food companies under contract production arrangements represent approximately 24% of Flowers Specialty’s sales. These sales increased by approximately 12% over the same period in the prior year primarily due to volume and price increases. Sales to in-store bakeries and store branded retail sales represent approximately 14% of Flowers Specialty’s sales. These sales increased significantly as a result of an expanded presence in the market due to the Bishop acquisition.

Gross Margin (defined as net sales less materials, supplies, labor and other production costs excluding depreciation, amortization and distributor discounts). Gross margin for the first quarter of fiscal 2003 was $220.9 million, or 7.3% higher than gross margin reported in the same period of the prior year of $205.8 million. As a percent of sales, gross margin decreased to 50.8% for the first quarter of fiscal 2003, as compared to 51.9% for the first quarter of fiscal 2002.

Flowers Bakeries’ gross margin decreased to 56.7% of sales for the first quarter of fiscal 2003, compared to 57.5% of sales for the first quarter of fiscal 2002. This decrease was primarily attributable to start-up costs at the Batesville, Arkansas facility acquired during the fourth quarter of fiscal 2002 in the Ideal acquisition and higher ingredient, packaging and labor costs.

Flowers Specialty’s gross margin decreased to 30.4% of sales for the first quarter of fiscal 2003, compared to 31.2% of sales for the first quarter of fiscal 2002. The decrease in margin was primarily attributable to higher ingredient and labor costs.

Selling, Marketing and Administrative Expenses. During the first quarter of fiscal 2003, selling, marketing and administrative expenses were $182.5 million, or 42.0% of sales, as compared to $167.8 million, or 42.4% of sales reported for the first quarter of fiscal 2002.

Flowers Bakeries’ selling, marketing and administrative expenses include discounts paid to the company’s independent distributors in its DSD system. Flowers Bakeries’ selling, marketing and administrative expenses were $151.9 million, or 44.9% of sales during the first quarter of fiscal 2003 as compared to $141.9 million, or 45.0% of sales during the first quarter of fiscal 2002. The decrease as a percent of sales was primarily a result of lower bad debt expense partially offset by increased advertising, distributor discounts and labor costs.

Flowers Specialty’s selling, marketing and administrative expenses were $22.4 million, or 23.2% of sales during the first quarter of fiscal 2003 as compared to $19.8 million, or 24.6% of sales during the first quarter of fiscal 2002. The decrease as a percent of sales was primarily attributable to increased sales and the reduction in headcount and shared administrative functions resulting from the segment reorganization discussed above.

Depreciation and Amortization. Depreciation and amortization expense was $17.2 million for the first quarter of fiscal 2003, a decrease of 1.5% from the same period in the prior year, which was $17.4 million.

Flowers Bakeries’ depreciation and amortization expense for the first quarter of fiscal 2003 of $13.5 million remained relatively unchanged from the first quarter of fiscal 2002.

Flowers Specialty’s depreciation and amortization expense for the first quarter of fiscal 2003 of $3.5 million remained relatively unchanged from the first quarter of fiscal 2002.

Net Interest Income. For the first quarter of fiscal 2003, net interest income was $0.9 million, an increase of $0.1 million from the same period in the prior year, which was $0.8 million. The increase was primarily related to a decrease in interest expense as a result of lower debt outstanding.

Income from Continuing Operations Before Income Taxes. Income from continuing operations before income taxes for the first quarter of fiscal 2003 was $22.2 million, an improvement of $0.9 million from the $21.3 million reported in the first quarter of fiscal 2002.

The increase was primarily a result of improvements in the operating results of Flowers Bakeries and Flowers Specialty of $0.1 million and $2.1 million, respectively. Contributing to the increase was an increase in interest income of $0.1 million. Partially offsetting these increases in continuing income was an increase in unallocated corporate expenses of $1.4 million.

Income Taxes. The income tax expense during the first quarter of fiscal 2003 was provided for at an estimated effective rate of 38.5%. The effective rate differs from the statutory rate primarily due to state income taxes.

Discontinued Operations. The loss from discontinued operations for the first quarter of fiscal 2003 increased $7.9 million to $19.3 million as compared to $11.4 million for the first quarter of fiscal 2002. The increase was primarily attributable to the recording of $4.6 million, net of tax, in transaction costs associated with the sale to Schwan recorded in the first quarter of fiscal 2003 and increased operating losses at Mrs. Smith’s Bakeries.

Cumulative Effect of a Change in Accounting Principle. The company adopted Statement of Financial Accounting Standards No. 142, (“SFAS 142”), “Goodwill and Other Intangible Assets” on December 30, 2001 (the first day of fiscal 2002). A transitional impairment that resulted from the company’s adoption of this statement was recorded as of December 30, 2001 at Mrs. Smith’s Bakeries for $23.1 million, net of tax of $1.8 million.

LIQUIDITY AND CAPITAL RESOURCES:

Liquidity represents our ability to generate sufficient cash flows from operating activities to meet our obligations and commitments as well as our ability to obtain appropriate financing and convert into cash those assets that are no longer required to meet existing strategic and financing objectives. Therefore, liquidity cannot be considered separately from capital resources that consist primarily of current and potentially available funds for use in achieving long range business objectives. Currently, the company’s liquidity needs arise primarily from working capital requirements and capital expenditures.

Flowers Foods’ cash and cash equivalents decreased to $27.0 million at April 19, 2003 from $69.8 million at December 28, 2002. The decrease resulted from $6.9 million, $25.1 million and $10.8 million disbursed for operating activities, investing activities and financing activities, respectively.

Net cash of $6.9 million disbursed for operating activities consisted primarily of $5.7 million in net loss, adjusted for certain non-cash items of $34.4 million. These positive items were partially offset by cash disbursed for working capital and other activities of $35.6 million. Net cash disbursed for working capital and other activities resulted primarily from an increase in accounts and notes receivable of $15.7 million and a decrease in accounts payable of $11.5 million.

Net cash disbursed for investing activities during the sixteen weeks ended April 19, 2003 of $25.1 million included capital expenditures of $11.0 million. Capital expenditures at Flowers Bakeries and Flowers Specialty were $7.8 million and $2.5 million, respectively. In addition, cash disbursed for investing activities included $14.5 million for the purchase of Bishop Baking in Cleveland, Tennessee.

Net cash disbursed for financing activities of $10.8 million consisted of payments on debt and capital lease obligations of $9.2 million and dividends paid of $1.5 million.

Interest expense related to the debt required to be repaid of $5.5 million and $5.9 million in the first quarter of fiscal 2003 and fiscal 2002, respectively, was included in discontinued operations.

The company’s credit rating by Standard and Poor’s as of April 19, 2003 was BBB-. The company’s credit rating by Fitch as of April 19, 2003 was BB+. The company’s credit rating by Moody’s as of April 19, 2003 was Ba2. Changes in the company’s credit ratings do not trigger a change in the company’s available borrowings or costs under the credit agreement discussed above, but could effect future credit availability.

NEW ACCOUNTING PRONOUNCEMENTS:

authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. This statement was effective for the company beginning in fiscal 2003. The application of this statement will result in the company reclassifying in its consolidated financial statements, the $6.4 million ($4.0 million, net of tax) fiscal 2001 extraordinary gain on the early extinguishment of debt to continuing operations in its January 3, 2004, Consolidated Financial Statements. This statement did not affect net income.

FORWARD-LOOKING STATEMENTS:

Statements contained in this filing and certain other written or oral statements made from time to time by the company and its representatives that are not historical facts are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to current expectations regarding our future financial condition and results of operations and are often identified by the use of words and phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” “would,” “is likely to,” “is expected to” or “will continue,” or the negative of these terms or other comparable terminology.

Forward-looking statements are based on current information, and are subject to risks and uncertainties that could cause our actual results to differ materially from those projected. Certain factors that may cause actual results to differ materially from those projected are discussed in this report and may include, but are not limited to:

• unexpected changes in any of the following: (i) general economic and business conditions; (ii) the competitive setting in which we operate, including changes in pricing, advertising or promotional strategies by us or our competitors, as well as changes in consumer demand; (iii) interest rates and other terms available to us on our borrowings; (iv) energy and raw materials costs and availability; (v) relationships with our employees and independent distributors; and (vi) laws and regulations (including health-related issues), accounting standards or tax rates in the markets in which we operate;

• our ability to execute our business strategy, which may involve integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values;

• our ability to operate existing, and any new, manufacturing lines according to schedule;

• the level of success we achieve in developing and introducing new products and entering new markets;

• the credit and business risks associated with our customers which operate in the highly competitive retail food industry, including the amount of consolidation in that industry; and

• any business disruptions due to political instability, armed hostilities, incidents of terrorism or the responses to or repercussions from any of these or similar events or conditions.

The foregoing list of important factors does not include all such factors nor necessarily present them in order of importance. In addition, you should consult other disclosures made by the company (such as in our other filings with the Securities and Exchange Commission or in company press releases) for other factors that may cause actual results to differ materially from those projected by the company.

We caution you not to place undue reliance on forward-looking statements, as they speak only as of the date made and are inherently uncertain. The company undertakes no obligation to publicly revise or update such statements, except as required by law. You are advised, however, to consult any further public disclosures by the company (such as in our filings with the Securities and Exchange Commission or in company press releases) on related subjects.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The company uses derivative financial instruments as part of an overall strategy to manage market risk. The company uses forward, futures, swap and option contracts to hedge existing or future exposure to changes in interest rates and commodity prices. The company does not enter into these derivative financial instruments for trading or speculative purposes. If actual market conditions are less favorable than those anticipated, raw material prices could increase significantly, adversely affecting the margins from the sale of our products.

COMMODITY PRICE RISK

The company enters into commodity forward, futures and option contracts and swap agreements for wheat and, to a lesser extent, other commodities in an effort to provide a predictable and consistent commodity price and thereby reduce the impact of volatility in its raw material and packaging prices. At April 19, 2003, the fair market value of the company’s commodity derivative portfolio was $(3.2) million. Of this fair value, $(1.3) million is based on quoted market prices and $(1.9) million is based on models and other valuation methods. Additionally, of this fair value, $(2.6) million and $(0.6) million relate to instruments that will be utilized in fiscal 2003 and 2004, respectively. A sensitivity analysis has been prepared to estimate the company’s exposure to commodity price risk. Based on the company’s derivative portfolio as of April 19, 2003, a hypothetical ten percent increase in commodity prices under normal market conditions could potentially have a $3.1 million effect on the fair value of the derivative portfolio. The analysis disregards changes in the exposures inherent in the underlying hedged item; however, the company expects that any loss in fair value of the portfolio would be substantially offset by reductions in raw material and packaging prices.

INTEREST RATE RISK

The company enters into interest rate swap agreements in order to reduce its overall interest rate risk. At April 19, 2003, the fair market value of the company’s interest rate swaps was a liability of $4.9 million. The fair value of the swap is based on a valuation model using quoted market prices. Of this fair value, $5.0 million and $(0.1) million expire in 2003 and 2004, respectively. A sensitivity analysis has been prepared to estimate the company’s exposure to interest rate risk. Assuming a 10% increase in interest rates, the fair value of the company’s interest rate swap agreement at April 19, 2003, with a total notional amount of $152.8 million, would increase by $0.1 million. A 10% decrease in interest rates would reduce the fair value by $0.1 million.

Based on the company’s floating rate debt at April 19, 2003, including the effect of the interest rate swap agreement, assuming a 10% increase in interest rates, the company’s interest expense would increase by $0.2 million, while the impact of a 10% decrease in interest rates would reduce interest expense by $0.2 million.

ITEM 4. CONTROLS AND PROCEDURES

The company maintains a set of disclosure controls and procedures designed to ensure that information required to be disclosed by the company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. Within the 90-day period prior to the filing of this quarterly report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of the company’s management, including the Chairman and Chief Executive Officer and Senior Vice President and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the company’s disclosure controls and procedures are effective.

Subsequent to the date of their evaluation, there have been no significant changes in the company’s internal controls or in other factors that could significantly affect these controls.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In addition to the proceeding described above, we are engaged in various legal proceedings that arise in the ordinary course of our business. We believe it is remote that the amount of any ultimate liability with respect to those proceedings will be material to our financial position, results of operations, or cash flow. However, the company can not give any assurances regarding the ultimate outcome of these lawsuits and any resolution could be material to the company’s operating results for any particular period.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits filed as part of this report are listed in the Exhibit Index attached hereto.

(b) The company did not file any reports on Form 8-K during the quarter ended April 19, 2003.

SIGNATURES

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

FLOWERS FOODS, INC

By: /s/ Amos R. McMullian

Name: Amos R. McMullian

Title: Chairman of the Board and

Chief Executive Officer

By: /s/ Jimmy M. Woodward

Name: Jimmy M. Woodward

Title: Senior Vice President,

Chief Financial Officer and Chief Accounting Officer

Date: June 3, 2003

CERTIFICATIONS

I, Amos R. McMullian, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Flowers Foods, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: June 3, 2003		/s/ Amos R. McMullian

		Amos R. McMullian
		Chairman of the Board and Chief Executive Officer

CERTIFICATIONS

I, Jimmy M. Woodward, certify that:


Date: June 3, 2003		/s/ Jimmy M. Woodward

		Jimmy M. Woodward
		Senior Vice President, Chief Financial Officer and
		Chief Accounting Officer

EXHIBIT INDEX


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 (Incorporated by reference to Flowers Foods’ Registration Statement on Form 10, dated February 9, 2001, File No. 1-16247).

	2.2	- -	Amendment No. 1 to Distribution Agreement, dated as of March 12, 2001, between Flowers Industries, Inc. and Flowers Foods, Inc. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).

	2.3	- -	Asset Purchase Agreement dated January 29, 2003 by and among The Schwan Food Company, Flowers Foods, Inc. and Mrs. Smith’s Bakeries, LLC (Incorporated by reference to Flowers Foods’ Current Report on Form 8-K dated May 9, 2003).

	2.4	- -	First Amendment to Asset Purchase Agreement dated April 24, 2003 by and among The Schwan Food Company, Flowers Foods, Inc. and Mrs. Smith’s Bakeries, LLC (Incorporated by reference to Flowers Foods’ Current Report on Form 8-K dated May 9, 2003).

	3.1	- -	Restated Articles of Incorporation of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).

	*3.2	- -	Amended and Restated Bylaws of Flowers Foods, Inc.

	4.1	- -	Share Certificate of Common Stock of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).

	4.2	- -	Rights Agreement between Flowers Foods, Inc. and First Union National Bank, as Rights Agent, dated March 23, 2001 (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).

	4.3	- -	Amendment No. 1, dated November 15, 2002, to Rights Agreement between Flowers Foods, Inc. and Wachovia Bank, N.A. (as successor in interest to First Union National Bank), as rights agent, dated March 23, 2001. (Incorporated by reference to Flowers Foods’ Registration Statement on Form 8-A, dated November 18, 2002, File No. 1-16247).

	10.1	- -	Employee Benefits Agreement by and between Flowers Industries, Inc. and Flowers Foods, Inc., dated as of October 26, 2000 (Incorporated by reference to Flowers Foods’ Registration Statement on Form 10, dated February 9, 2001, File No. 1-16247).

	10.2	- -	First Amendment to Employee Benefits Agreement by and between Flowers Industries, Inc. and Flowers Foods, Inc., dated as of February 6, 2001 (Incorporated by reference to Flowers Foods’ Registration Statement on Form 10, dated February 9, 2001, File No. 1-16247).

	10.3	- -	Flowers Foods, Inc. Retirement Plan No. 1 (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).


Exhibit
No.			Name of Exhibit

	10.4	- -	Flowers Foods, Inc. 2001 Equity and Performance Incentive Plan (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).

	10.5	- -	Credit Agreement, dated as of March 26, 2001, among Flowers Foods, Inc., the Lenders party thereto from time to time, SunTrust Bank, as Syndication Agent and Bankers Trust Company, as Administrative Agent (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).

	10.6	- -	Debenture Tender Agreement, dated as of March 12, 2001, by and among Flowers Industries, Inc., Flowers Foods, Inc. and the Holders (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 30, 2001, File No. 1-16247).

	10.7	- -	Employment Agreement, effective as of December 31, 2001, by and between Flowers Foods, Inc. and G. Anthony Campbell. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 27, 2002, File No. 1-6247).

	10.8	- -	Flowers Foods, Inc. Stock Appreciation Rights Plan. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 27, 2002, File No. 1-6247).

	10.9	- -	Flowers Foods, Inc. Annual Executive Bonus Plan. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 27, 2002, File No. 1-6247).

	10.10	- -	Flowers Foods, Inc. Supplemental Executive Retirement Plan. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 27, 2002, File No. 1-6247).

	10.11		First Amendment, dated as of May 10, 2001, among Flowers Foods, Inc., the Lenders party to the Credit Agreement, dated as of March 26, 2001, SunTrust Bank, as syndication agent, and Bankers Trust Company, as administrative agent (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 28, 2003).

	10.12		Second Amendment, dated as of May 10, 2001, among Flowers Foods, Inc., the Lenders party to the Credit Agreement, dated as of March 26, 2001, SunTrust Bank, as syndication agent, and Bankers Trust Company, as administrative agent (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 28, 2003).

	10.13		Third Amendment, Waiver and Consent, dated as of February 21, 2003, among Flowers Foods, Inc., the Lenders party to the Credit Agreement, dated as of March 26, 2001, SunTrust Bank, as syndication agent, and Deutsche Bank Trust Company Americas (f/n/a Bankers Trust Company), as administrative agent (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 28, 2003).

	10.14		Form of Indemnification Agreement, by and between Flowers Foods, Inc., certain executive officer and the directors of Flowers Foods, Inc. (Incorporated by reference to Flowers Foods’ Annual Report on Form 10-K, dated March 28, 2003).

	*21	- -	Subsidiaries of Flowers Foods, Inc.

	*99	- -	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Amos R. McMullian, Chief Executive Officer, and Jimmy M. Woodward, Chief Financial Officer, for the Fiscal Period Ended April 19, 2003.

Filed herewith

27 EX-3.2 3 g83148exv3w2.txt EX-3.2 AMENDED AND RESTATED BYLAWS EXHIBIT 3.2 AMENDED AND RESTATED BYLAWS OF FLOWERS FOODS, INC. ARTICLE 1. OFFICES Flowers Foods, Inc. (the "Corporation") shall maintain at all times a registered office in the State of Georgia and a registered agent at that address, but may have other offices located within or without the State of Georgia as the Board of Directors may determine. ARTICLE 2. MEETINGS OF SHAREHOLDERS 2.1 Place and Time of Meetings. All meetings of the shareholders shall be held at such time and at such place, within or without the State of Georgia, as may be designated by the Board of Directors or, in the absence of a designation by the Board of Directors, by the Chairman of the Board of Directors, the President or the Secretary, and stated in the notice of the meeting. The Chairman of the Board of Directors may postpone and reschedule any previously scheduled annual or special meeting of the shareholders of the Corporation. 2.2 Annual Meeting. An annual meeting of the shareholders shall be held at such date, time and place as shall be designated from time to time by the Board of Directors, at which meeting the shareholders shall elect by a plurality vote the Directors to succeed those whose terms expire and shall transact such other business as may be properly brought before the meeting in accordance with Section 2.10 of these Bylaws. 2.3 Special Meetings. Special meetings of the shareholders may be called only as provided in this Section 2.3. Special meetings may be called by the Chairman of the Board of Directors, and shall be called by the Chairman of the Board of Directors or the Secretary within 10 days after receipt of the written request of a majority of the total number of Directors which the Corporation would have if there were no vacancies (the "Whole Board") or upon receipt of the written request of the holders of at least 75% of the voting power of the then outstanding shares of Common Stock. Any such request by a majority of the Whole Board or the holders of at least 75% of the voting power of the then outstanding shares of Common Stock shall be sent to the Chairman of the Board of Directors and the Secretary and shall state the purpose or purposes of the proposed meeting. At a special meeting of shareholders, only such business shall be conducted or considered as shall have been stated in the notice of the meeting given by or at the direction of the Board of Directors. 2.4 Notice of Meeting. Written notice of every meeting of the shareholders, stating the place, day, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not fewer than ten (10) nor more than sixty (60) days before the date of the meeting to each shareholder of record entitled to vote at such meeting. Written notice shall be given personally, by mail, by private courier, by facsimile transmission, or by telegraph, teletype or other form of wire or wireless communication. If mailed, notice shall be deemed to be delivered when deposited in the United States mail with first-class postage thereon prepaid, addressed to the shareholder at his address as it appears on the stock transfer books of the Corporation. When a meeting of the shareholders is adjourned to another place, date or time, by the holders of a majority of the voting power of the voting shares represented at a meeting, whether or not a quorum is present, notice need not be given of the 2 adjourned meeting if the date, time, and place to which the meeting is adjourned are announced at the meeting at which the adjournment is taken; provided, however, if the Board is required to fix a new record date pursuant to Section 7.5(a) of these Bylaws, notice must be given to persons who are shareholders as of the new record date entitled to vote as such meeting. At an adjourned meeting at which a quorum is present or represented, any business that could have been transacted at the meeting originally called may be transacted. 2.5 Waiver of Notice. Notice of a meeting need not be given to any shareholder who signs a waiver of notice, in person or by proxy, either before or after the date and time stated in the notice. Waiver must be in writing and delivered to the Corporation for inclusion in the minutes or for filing with the corporate records. Attendance of a shareholder at a meeting, either in person or by proxy, shall of itself constitute waiver of notice and waiver of any and all objections to: (1) lack of notice or defective notice of a meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and (2) consideration at the meeting of a particular matter that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. Neither the business transacted nor the purpose of the meeting need be specified in the waiver, except that any waiver by a shareholder of the notice of a meeting of shareholders with respect to an amendment of the Articles of Incorporation, a plan of merger or share exchange, a sale of assets, or any other action which would entitle the shareholder to dissent and obtain payment for his shares shall not be effective unless: (a) prior to execution of the waiver, the shareholder is furnished with the same material required to be sent to the shareholder in a notice of the meeting, including notice of any applicable dissenters' rights; or (b) the waiver expressly waives the right to receive the materials required to be furnished. 3 2.6 Inspectors. The Board of Directors shall appoint one or more inspectors of election to act as judges of the voting and to determine those entitled to vote at any meeting of the shareholders, or any adjournment thereof, in advance of such meeting, but if the Board of Directors fails to make such appointment(s) or if an appointee fails to serve, the presiding officer of the meeting of the shareholders may appoint one or more inspectors (or substitute inspectors) to act at the meeting. 2.7 Quorum. Except as may be provided in the Articles of Incorporation, a majority of the votes entitled to be cast on a matter by the voting group, represented in person or by proxy, shall constitute a quorum of that voting group for action on that matter. Once a share is represented at a meeting for any purpose, other than solely to object to holding the meeting or transacting business at the meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. 2.8 Voting. Except as provided in the Articles of Incorporation or as otherwise provided by law, each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of the shareholders. The vote upon any question brought before a meeting of the shareholders may be by voice vote, unless otherwise required by the Articles of Incorporation or these Bylaws or unless the presiding officer or the holders of a majority of the voting power of the then outstanding shares of all classes of stock entitled to vote thereon present in person or by proxy at such meeting shall determine otherwise. Every vote taken by written ballot shall be counted by the inspector(s) of election. Except as provided in these Bylaws, the Articles of Incorporation or by law, if a quorum exists, action on a matter (other than the election of Directors) by a voting group is approved if the votes cast within the voting group favoring the 4 action exceed the votes cast opposing the action. Directors shall be elected at the annual meeting by a plurality of the votes cast by shares entitled to vote in the election. 2.9 Proxies. A shareholder may vote his shares in person or by proxy. A shareholder may appoint a proxy by executing a writing which authorizes another person or persons to vote or otherwise act on the shareholder's behalf. Execution may be accomplished by any reasonable means, including facsimile transmission. A proxy is effective when received by the inspector of elections and is valid for eleven (11) months from the date of its execution, unless a longer period is expressly provided in the appointment form. An appointment of proxy is revocable by a shareholder unless the appointment form conspicuously states that it is irrevocable and the appointment is coupled with an interest. 2.10 Order of Business. (a) The Chairman of the Board of Directors, or such officer of the Corporation designated by a majority of the Whole Board (as such term is defined in Section 2.3 of these Bylaws), shall call meetings of the shareholders of the Corporation to order and shall act as presiding officer thereof. Unless otherwise determined by the Board of Directors prior to the meeting, the presiding officer of the meeting of the shareholders shall determine the order of business and shall have the authority in his discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than shareholders of the Corporation or their duly appointed proxies) who may attend any such shareholders' meeting; by excluding any shareholder or his proxy from any such meeting based upon the determination by the presiding officer, in his sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat; and by determining the circumstances in which any person may make a statement or ask questions at any such meeting. 5 (b) At an annual meeting of the shareholders, only such business shall be conducted or considered as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the meeting by or at the direction of a majority of the Whole Board, or (iii) otherwise properly requested to be brought before the meeting by a shareholder of the Corporation. (c) For business to be properly requested to be brought before an annual meeting by a shareholder of the Corporation, the shareholder (i) must be a shareholder of record at the time of the giving of the notice for such annual meeting provided for in the Bylaws of this Corporation, (ii) must be entitled to vote at such meeting, and (iii) must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation not fewer than 45 days prior to the date on which the notice of the immediately preceding year's annual meeting of shareholders was first sent to the shareholders of the Corporation; provided, however, that in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which public announcement is first made of the changed date of the meeting. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made, (iii) the class and number of 6 shares of the Corporation that are owned beneficially and of record by the shareholder proposing such business and by the beneficial owner, if any, on whose behalf the proposal is made, and (iv) any material interest of such shareholder proposing such business and the beneficial owner, if any, on whose behalf the proposal is made, in such business. Notwithstanding anything in this Section 2.10 to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 2.10. The presiding officer of the annual meeting shall, if the facts warrant, determine that business was not properly brought before the meeting in accordance with the procedures prescribed in this Section 2.10 and, if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.10, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 2.10. For purposes of this Section 2.10 and Section 3.5 of these Bylaws, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service, in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended, or in shareholder correspondence or a shareholder report. Nothing in this Bylaw shall be deemed to affect any rights of shareholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended, including, but not limited to, the time periods specified to exercise such rights. 7 ARTICLE 3. DIRECTORS 3.1 Powers. The business and affairs of the Corporation shall be managed under the direction of its Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Articles of Incorporation directed or required to be exercised or done by the shareholders. 3.2 Number, Qualification and Term of Office. The authorized number of Directors may be determined from time to time only by a vote of a majority of the Whole Board (as defined in Section 2.3 of these Bylaws) or by the affirmative vote of the holders of at least 66-2/3% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, but in no case shall the number of Directors be fewer than 3 or more than 16. The Directors shall be natural persons of the age of eighteen (18) years or older, but need not be residents of the State of Georgia or hold shares of stock in the Corporation. The Directors shall be classified with respect to the time for which they severally hold office into three classes, as nearly equal in number as possible, designated Class I, Class II and Class III. The Directors first appointed to Class I shall hold office for a term expiring at the annual meeting of shareholders to be held in 2002; the Directors first appointed to Class II shall hold office for a term expiring at the annual meeting of shareholders to be held in 2003; and the Directors first appointed to Class III shall hold office for a term expiring at the annual meeting of shareholders to be held in 2004, with the members of each class to hold office until their successors are elected and qualified. At each succeeding annual meeting of the shareholders of the Corporation, the successors of the class of Directors whose term expires at that meeting shall be elected by plurality vote of all votes cast at such 8 meeting to hold office for a term expiring at the annual meeting of shareholders held in the third year following the year of their election. 3.3 Vacancies and Newly Created Directorships. Newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining Director. Any Director elected to fill a vacancy shall be elected for the unexpired term of the class of Directors in which the vacancy occurred. Any Director elected by reason of an increase in the number of directors shall be elected only for a term of office continuing until the next election of directors by the shareholders and until the election and qualification of such Director's successor. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of an incumbent Director. A vacancy that will occur at a specific date (including but not limited to a resignation that specifies a later date) may be filled before the vacancy occurs, but the new Director may not take office until the vacancy occurs. 3.4 Removal of Directors. Any or all of the Directors of the Corporation may be removed with cause by the affirmative vote of the holders of at least 66-2/3% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors, voting together as a single class. A Director may be removed by the shareholders only at a meeting called for the purpose of removing him, and the meeting notice must state that the purpose, or one of the purposes, of the meeting is removal of the Director. 3.5 Nominations of Directors; Election. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Directors of the Corporation. Nominations of persons for election as Directors of the Corporation may be made 9 by (i) the Board of Directors or a committee appointed by the Board of Directors, or (ii) any person who is a shareholder of record at the time of giving of notice for the meeting provided for in these Bylaws, who is entitled to vote for the election of Directors and who complies with the procedures set forth in this Section 3.5. All nominations by shareholders shall be made pursuant to timely notice in proper written form to the Secretary of the Corporation. To be timely, a shareholder's notice shall be delivered to or mailed and received at the principal executive offices of the Corporation: (i) in the case of an annual meeting, not fewer than 60 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting; provided, however, that in the event that the date of the annual meeting is changed by more than 30 days from such anniversary date, notice by the shareholder to be timely must be so received not later than the close of business on the 10th day following the day on which public announcement is first made of the changed date of the meeting; and (ii) in the case of a special meeting at which Directors are to be elected, not later than the close of business on the 10th day following the day on which public announcement is first made of the changed date of the meeting. To be in proper written form, such shareholder's notice shall set forth or include (i) the name and address, as they appear on the Corporation's books, of the shareholder giving the notice and of the beneficial owner, if any, on whose behalf the nomination is made; (ii) a representation that the shareholder giving the notice is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (iii) the class and number of shares of stock of the Corporation owned beneficially and of record by the shareholder giving the notice and by the beneficial owner, if any, on whose behalf the nomination is made; (iv) a description of all arrangements or understandings between or among any of (A) the shareholder giving the notice, (B) the beneficial 10 owner on whose behalf the notice is given, (C) each nominee, and (D) any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder giving the notice; (v) such other information regarding each nominee proposed by the shareholder giving the notice as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the nominee been nominated, or intended to be nominated, by the Board of Directors; and (vi) the signed consent of each nominee to serve as a Director of the Corporation if so elected. At the request of the Board of Directors, any person nominated by the Board of Directors for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in a shareholder's notice of nomination which pertains to the nominee. The presiding officer of the meeting for election of Directors shall, if the facts warrant, determine that a nomination was not made in accordance with the procedures prescribed by this Section 3.5, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. Notwithstanding the foregoing provisions of this Section 3.5, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 3.5. 3.6 Resignation. Any Director may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board of Directors or the Corporation. 3.7 Compensation. The Board of Directors may establish the compensation for, and reimbursement of the expenses of, Directors for membership on the Board of Directors and on committees of the Board of Directors, attendance at meetings of the Board of Directors or committees of the Board of Directors, and for other services by Directors to the Corporation. 11 3.8 Interested Director Transactions. An interested Director is one who is a party to a contract or transaction with the Corporation or who is an officer or Director of, or has a financial interest in, another corporation, partnership, association, or other entity which is a party to a contract or transaction with the Corporation. Transactions involving such a Director shall be governed by Section 14-2-860, et seq., of the Georgia Business Corporation Code, as the same may hereinafter be amended. 3.9 Qualification of Directors. Each person who shall attain the age of 75 shall not thereafter be eligible for nomination or renomination as a member of the Board of Directors. ARTICLE 4. MEETINGS OF THE BOARD 4.1 Regular Meetings. Regular meetings of the Board of Directors may be held without notice immediately after the annual meeting of the shareholders and at such other time and place either within or without the State of Georgia as shall from time to time be determined by the Board of Directors. 4.2 Special Meetings. Special meetings of the Board of Directors may be called by the Chairman of the Board of Directors or the President, on one day's written notice to each Director by whom such notice is not waived. Notice shall be given personally, by mail, by private courier, by facsimile transmission, or by telegraph, teletype or other form of wire or wireless communication, and need not describe the business to be transacted at, or the purpose of, the special meeting. Special meetings of the Board of Directors may be held at such time and place either within or without the State of Georgia as is determined by the Board of Directors or specified in the notice of any such meeting. 4.3 Waiver of Notice. A Director may waive any notice either before or after the date and time stated in the notice. Such a waiver must be in writing, signed by the Director and delivered to the Corporation for inclusion in the minutes or filing with the corporate records. 12 Attendance of a Director at a meeting shall constitute a waiver of notice of that meeting unless the Director at the beginning of the meeting (or promptly upon arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. 4.4 Quorum. A quorum of the Board of Directors consists of a majority of the number of Directors then in office. If a quorum is present, the acts of a majority of the Directors in attendance shall be the acts of the Board of Directors. A Director who is present at a meeting of the Board of Directors when corporate action is taken is deemed to have assented to the action taken unless: (a) that Director objects at the beginning of the meeting (or promptly upon arrival) to holding the meeting or to transacting business at the meeting; (b) the dissent or abstention of that Director from the action taken is entered into the minutes of the meeting; or (c) that Director delivers written notice of dissent or abstention to the presiding officer of the meeting before, or to the Corporation immediately after, adjournment of the meeting. The right of dissent is not available to a Director who votes in favor of an action taken. 4.5 Adjournment. A meeting of the Board of Directors may be adjourned by a majority of the Directors present, whether or not a quorum exists. Notice of the time and the place of the adjourned meeting and of the business to be transacted thereat, other than by announcement at the meeting at which the adjournment is taken, shall not be necessary. At an adjourned meeting at which a quorum is present, any business may be transacted which could have been transacted at the meeting originally called. 4.6 Participation in Meetings Other Than in Person. Members of the Board of Directors may participate in a meeting of the Board by any means of communication by which 13 all persons participating in the meeting can hear each other. Participation in a meeting in such manner shall constitute presence in person at such meeting. 4.7 Rules. The Board of Directors may adopt rules and regulations that are not inconsistent with law or these Bylaws for the conduct of their meetings and the management of the affairs of the Corporation. ARTICLE 5. COMMITTEES 5.1 Formation and Powers. The Board of Directors, by resolution passed by a majority of the Whole Board (as defined in Section 2.3 of these Bylaws), may create one or more committees and appoint members of the Board of Directors to serve thereon. Each committee shall have such lawfully delegable powers and duties as the Board of Directors may confer. However, a committee shall not have the power to: (i) approve or propose to shareholders action that the Georgia Business Corporation Code requires to be approved by shareholders; (ii) fill vacancies on the Board of Directors or on any of its committees; (iii) amend the Articles of Incorporation pursuant to Section 14-2-1002 of the Georgia Business Corporation Code, as it may hereafter be amended; (iv) adopt, amend or repeal these Bylaws; or (v) approve a plan of merger not requiring shareholder approval. Any committee or committees so designated by the Board of Directors shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Unless otherwise prescribed by the Board of Directors, a majority of the members of the committee shall constitute a quorum for the transaction of business, and the act of a majority of the members present at a meeting at which there is a quorum shall be the act of such committee. Each committee shall prescribe its own rules for calling and holding meetings and its method of procedure, subject to any rules 14 prescribed by the Board of Directors or by applicable law, and shall keep a written record of all actions taken by it. 5.2 Removal. The Board of Directors shall have power at any time to remove any member of any committee, with or without cause, to fill vacancies on any committee, and to dissolve any committee. ARTICLE 6. OFFICERS 6.1 Generally. The officers of the Company shall be elected by the Board of Directors and shall consist of a Chief Executive Officer, a President, a Secretary, and a Treasurer. The Board of Directors may also choose any or all of the following: a Controller, one or more Vice Presidents (who may be given particular designations with respect to authority, function, or seniority), and such other officers as the Board of Directors may from time to time determine. Notwithstanding the foregoing, by specific action the Board of Directors may authorize the Chairman of the Board of Directors to appoint any person to any office other than Chief Executive Officer, President, Secretary, or Treasurer. Any number of offices may be held by the same person. Any of the offices may be left vacant from time to time as the Board of Directors may determine. In the case of the absence or disability of any officer of the Company or for any other reason deemed sufficient by a majority of the Board of Directors, the Board of Directors may delegate the absent or disabled officer's powers or duties to any other officer or to any Director. 6.2 Compensation. The compensation of all officers and agents of the Company who are also Directors of the Company shall be fixed by the Board of Directors or by a committee of the Board of Directors. The Board of Directors may fix the compensation of other officers and 15 agents of the Company or delegate the power to fix such compensation to an officer of the Company. 6.3 Succession. The officers of the Company will hold office until their successors are elected and qualified. Any officer may be removed at any time by the affirmative vote of a majority of the Whole Board. Any vacancy occurring in any office of the Company may be filled by the Board of Directors or by the Chairman of the Board of Directors as provided in Section 6.1 of these Bylaws. 6.4 Authority and Duties. Each of the officers of the Corporation shall have such authority and shall perform such duties as are customarily incident to their respective offices, or as may be specified from time to time by the Board of Directors. 6.5 Interested Officer Transactions. An interested officer is one who is a party to a contract or transaction with the Corporation or who is an officer or Director of, or has a financial interest in, another corporation, partnership, association, or other entity which is a party to a contract or transaction with the Corporation. Transactions involving such an officer shall be governed by Section 14-2-864 of the Georgia Business Corporation Code, as the same may hereinafter be amended. ARTICLE 7. CAPITAL STOCK 7.1 Certificates. The interest of each shareholder may be evidenced by a certificate or certificates representing shares of stock of the Corporation, which shall be in such form as the Board of Directors may from time to time adopt, shall be numbered and shall be entered in the books of the Corporation as they are issued. Each share certificate shall state, on its face, the name of the Corporation and that it is organized under the laws of Georgia, the name of the 16 person to whom it is issued, and the number and class of shares and the designation of the series, if any, that the certificate represents. Also, each certificate may bear the seal of the Corporation or a facsimile thereof and shall be signed, either manually or in facsimile, by any one of the following: the President, the Secretary or an Assistant Secretary, or other officer designated by the Board of Directors for such purpose. If the certificate is signed in facsimile, it must be countersigned by a transfer agent or registered by a registrar other than the Corporation itself or an employee of the Corporation. The transfer agent or registrar may sign either manually or by facsimile. 7.2 Transfers. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue, or to cause its transfer agent to issue, a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. 7.3 Lost, Stolen or Destroyed Certificates. The Secretary may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact, satisfactory to the Secretary, by the person claiming the certificate of stock to be lost, stolen or destroyed. As a condition precedent to the issuance of a new certificate or certificates, the Secretary may require the owners of such lost, stolen or destroyed certificate or certificates to give the Corporation a bond in such sum and with such surety or sureties as the Secretary may direct as indemnity against any claims that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed or the issuance of the new certificate. 17 7.4 Certificateless Shares. The Board of Directors of the Corporation may authorize the issuance of some or all of the shares of stock, of any or all of its classes or series, without certificates. Within a reasonable time after the issue or transfer of the shares without certificates, the Corporation shall send the shareholder to whom a share is to be issued a written statement specifying the name of the Corporation, that the Corporation is organized under the laws of Georgia, the name of the person to whom the shares are issued or transferred, the number and class of shares and the designation of the series, if any, that the certificate represents, and any applicable restriction on the transfer of such shares. 7.5 Record Dates. (a) In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or to take any other action, the Board of Directors shall in advance fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall not be more than 70 days before the date of such meeting. If no record date is fixed, the record date for determining shareholders entitled to notice of or to vote at any meeting of shareholders shall be the close of business on the day before the first notice is delivered to shareholders. A determination of shareholders of record entitled to notice of or to vote at a meeting of the shareholders shall apply to any adjournment of the meeting; provided, however, if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting, the Board of Directors shall fix a new record date for the adjourned meeting. (b) In order that the Corporation may determine the shareholders entitled to receive payment of any dividend or other distribution, the Board of Directors may fix a record 18 date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than 70 days prior to such payment. If no record date is fixed, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the Board of Directors authorizes the distribution. (c) The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes, and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law. ARTICLE 8. MISCELLANEOUS 8.1 Amendments. Notwithstanding anything contained in the Corporation's Articles of Incorporation to the contrary, unless otherwise required by applicable law, Sections 2.3 (Special Meetings), 2.10 (Order of Business), 3.2 (Number, Qualification and Term of Office), 3.3 (Vacancies and Newly Created Directorships), 3.4 (Removal of Directors), 3.5 (Nominations of Directors; Election), 8.8 (Fair Price Requirements) and 8.9 (Business Combinations with Interested Shareholders) of these Bylaws shall not be amended or repealed by the shareholders, and no provision inconsistent therewith shall be adopted by the shareholders, without the affirmative vote of the holders of at least 66 2/3% of the voting power of the then outstanding shares of Common Stock and outstanding shares of preferred stock voting together, to the extent the outstanding shares of preferred stock are afforded voting rights and powers generally equal to the voting rights and powers of shares of Common Stock. 19 8.2 Inspection of Books. (a) A shareholder may inspect and copy, during regular business hours at the Corporation's principal office, the following if he gives the Corporation written notice of his demand at least five (5) business days prior to the requested date of inspection: (1) the Corporation's Articles of Incorporation and all amendments to them currently in effect; (2) the Corporation's Bylaws and all amendments to them currently in effect; (3) resolutions adopted by either the shareholders or Board of Directors increasing or decreasing the number of Directors, the classification of Directors, if any, and the names and residence addresses of all members of the Board of Directors; (4) resolutions adopted by the Board of Directors creating one or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding, and any resolutions adopted by the Board of Directors that affect the size of the board of Directors; (5) the minutes of all shareholders' meetings, executed waivers of notice of meetings, and executed written consents evidencing all action taken by shareholders without a meeting, for the previous three years; (6) all written communications to shareholders generally within the previous three years and the financial statements required to be made available to the shareholders for the previous three years under Section 14-2-1620 of the Georgia Business Corporation Code as it may hereinafter be amended; (7) a list of the names and business addresses of its current Directors and officers; and (8) the Corporation's most recent annual registration delivered to the Secretary of State under Section 14-2-1622 of the Georgia Business Corporation Code. (b) A shareholder may inspect and copy, during regular business hours at a reasonable location specified by the Corporation (1) excerpts from minutes of any meeting of the Board of Directors, records of any action of a committee of the Board of Directors while acting in place of the Board of Directors on behalf of the Corporation, minutes of any meeting of the 20 shareholders, and records of action taken by the shareholders or Board of Directors without a meeting, to the extent not subject to inspection under Section 8.1(a); (2) accounting records of the Corporation; and (3) the record of shareholders. A shareholder may inspect these records of the Corporation only if: (i) his demand is made in good faith and for a proper purpose that is reasonably relevant to his legitimate interest as a shareholder; (ii) he describes with reasonable particularity his purpose and the records he desires to inspect; (iii) the records are directly connected with his purpose; (iv) the records are to be used only for the stated purpose; and (v) the shareholder owns more than two percent (2%) of the outstanding shares of the Corporation at the date of his request. 8.3 Seal. The corporate seal shall be in such form as the Board of Directors may from time to time determine. In the event that it is inconvenient at any time to use the corporate seal of the Corporation, the words "Seal" or "Corporate Seal" enclosed in parentheses or scroll shall be deemed the corporate seal of the Corporation. 8.4 Checks, Notes, Drafts, Etc. Checks, notes, drafts, acceptances, bills of exchange, and other orders or obligations for the payment of money shall be signed by such officer or officers or person or persons as the Board of Directors by resolution shall from time to time designate. 8.5 Fiscal Year. The fiscal year of the Corporation shall be fixed from time to time by the Board of Directors. 8.6 Reliance upon Books, Reports and Records. Each Director, each member of a committee designated by the Board of Directors, and each officer of the Corporation shall, in the performance of his or her duties, be fully protected in relying in good faith upon such information, opinions, reports or statements, including financial statements and other financial 21 data, prepared or presented to the Corporation by: (i) any of the Corporation's officers or employees who the Director reasonably believes to be reliable and competent in the matters presented; (ii) legal counsel, public accountants, investment bankers or other persons engaged by the Corporation as to matters the Director reasonably believes are within the person's professional or expert competence; or (iii) committees of the Board of Directors of which he is not a member if the Director reasonably believes the committee merits confidence. 8.7 Time Periods. In applying any provision of these Bylaws that requires that an act be done or not be done a specified number of days prior to an event, or that an act be done during a period of a specified number of days prior to an event, calendar days shall be used, the day of the doing of the act shall be excluded, and the day of the event shall be included. 8.8 Fair Price Requirements. The Corporation shall be governed by all of the requirements of Part 2 of Article 11 of the Georgia Business Corporation Code, as amended. 8.9 Business Combinations with Interested Shareholders. The Corporation shall be governed by all of the requirements of Part 3 of Article 11 of the Georgia Business Corporation Code, as amended. 8.10 Indemnification. Each person who is or was or had agreed to become a Director or officer of the Corporation, 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 of the Corporation as an employee or agent of the Corporation or as a Director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including the heirs, executors, administrators or estate of such person), shall be indemnified by the Corporation to the fullest extent permitted by the Georgia Business Corporation Code or any other applicable laws as presently or hereafter in effect. The right to indemnification granted by this Section 8.10 shall include the right to be 22 paid in advance expenses incurred in defending a proceeding. The Corporation may, by action of the Board of Directors, provide indemnification to other employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of Directors and officers. The right of indemnification provided in this Section 8.10 shall not be exclusive of any other rights to which any person seeking indemnification may otherwise be entitled, and shall be applicable to matters otherwise within its scope irrespective of whether such matters arose or arise before or after the adoption of this Section 8.10. Without limiting the generality or the effect of the foregoing, the Corporation may enter into one or more agreements with any person, which provide for indemnification greater or different than that provided in this Section 8.10. No amendment, modification or repeal of this Article shall adversely affect any right or protection of a Director, officer, employee or agent that exists at the time of such amendment, modification or repeal. 23 EX-21 4 g83148exv21.txt EX-21 SUBSIDIARIES OF FLOWERS FOODS, INC . . . EXHIBIT 21 SUBSIDIARIES OF FLOWERS FOODS, INC.
NAME OF SUBSIDIARY JURISDICTION OF INCORPORATION OR ORGANIZATION - ------------------ --------------------------------------------- Flowers Finance, LLC Delaware Flowers Bakeries Brands, Inc. Delaware Flowers Foods Bakeries Group, LLC Georgia Flowers Baking Co. of Opelika, LLC Alabama Hardins's Bakery, LLC Alabama Bailey Street Bakery, LLC Alabama Home Baking Company, LLC Alabama Flowers Baking Co. of Texarkana, LLC Arkansas Holsum Baking Company, LLC Arkansas Shipley Baking Company, LLC Arkansas Ideal Baking Company, Inc. Arkansas Flowers Baking Co. of Florida, LLC Florida Flowers Baking Co. of Miami, LLC Florida Flowers Baking Co. of Jacksonville, LLC Florida Flowers Baking Co. of Bradenton, LLC Florida Flowers Baking Co. of Thomasville, LLC Georgia Flowers Baking Co. of Villa Rica, LLC Georgia Flowers Bakery of Tucker, LLC Georgia Table Pride, LLC Georgia Huval Bakery, LLC Louisiana Bunny Bread, LLC Louisiana Flowers Baking Co. of Baton Rouge, LLC Louisiana Flowers Baking Co. of Jamestown, LLC North Carolina Franklin Baking Company, LLC North Carolina Flowers Baking Co. of Memphis, LLC Tennessee Flowers Baking Co. of Morristown, LLC Tennessee East Tennessee Baking Co., LLC Tennessee West Tennessee Baking Co., LLC Tennessee Schott's Bakery, LLC Texas Flowers Baking Co. of Texas, LLC Texas Flowers Baking Co. of Tyler, LLC Texas ButterKrust Bakery, LLC Texas El Paso Baking Co., LLC Texas El Paso Baking Company de Mexico, S.A. de C. V. Mexico San Antonio Baking Co., LLC Texas Austin Baking Co., LLC Texas Corpus Christi Baking Co., LLC Texas Hampton Roads Baking Company, LLC Virginia Flowers Baking Co. of Lynchburg, LLC Virginia Flowers Baking Co. of West Virginia, LLC West Virginia The Donut House, LLC West Virginia Storck Baking Company, LLC West Virginia
Flowers Foods Specialty Group, LLC Georgia Flowers Bakery of Atlanta, LLC Georgia Flowers Bakery of Suwanee, LLC Georgia Flowers Frozen Desserts, LLC Georgia Flowers Frozen Desserts Sales Group, LLC Georgia Flowers Foil Company, LLC Georgia Dan-co Bakery, LLC Georgia Flowers Frozen Distributors, LLC Georgia Flowers Frozen Desserts of Pennsylvania, LLC Georgia Flowers Bakery of Crossville, LLC Tennessee Flowers Bakery Distributors, Inc. Tennessee Flowers Bakery of Cleveland, LLC Tennessee Flowers Bakery of London, LLC Kentucky Flowers Bakery of Montgomery, LLC Alabama Flowers Frozen Desserts of Pembroke, LLC North Carolina Flowers Frozen Desserts of Spartanburg, LLC South Carolina Flowers Baking Co. of Fountain Inn, LLC South Carolina Flowers Frozen Dessert Brands, Inc. South Carolina Flowers Frozen Desserts of Stillwell, LLC Oklahoma

EX-99 5 g83148exv99.txt EX-99 906 CERTIFICATION OF THE CEO AND CFO EXHIBIT 99 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Flowers Foods, Inc. (the "company") on Form 10-Q for the period ended April 19, 2003, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the company certifies, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that, to such officer's knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the company as of the dates and for the periods expressed in the Report. Date: June 3, 2003 /s/ Amos R. McMullian - ------------------------------------------------- Amos R. McMullian Chairman of the Board and Chief Executive Officer /s/ Jimmy M. Woodward - ------------------------------------------------- Jimmy M. Woodward Senior Vice President and Chief Financial Officer The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----

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	•		unexpected changes in any of the following: (i) general economic and business conditions; (ii) the competitive setting in which we operate, including changes in pricing, advertising or promotional strategies by us or our competitors, as well as changes in consumer demand; (iii) interest rates and other terms available to us on our borrowings; (iv) energy and raw materials costs and availability; (v) relationships with our employees and independent distributors; and (vi) laws and regulations (including health-related issues), accounting standards or tax rates in the markets in which we operate;

	•		our ability to execute our business strategy, which may involve integration of recent acquisitions or the acquisition or disposition of assets at presently targeted values;

	•		our ability to operate existing, and any new, manufacturing lines according to schedule;

	•		the level of success we achieve in developing and introducing new products and entering new markets;

	•		the credit and business risks associated with our customers which operate in the highly competitive retail food industry, including the amount of consolidation in that industry; and

	•		any business disruptions due to political instability, armed hostilities, incidents of terrorism or the responses to or repercussions from any of these or similar events or conditions.

1.		I have reviewed this quarterly report on Form 10-Q of Flowers Foods, Inc.;

2.		Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.		Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.		The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and