___________________________________________________________________________
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
____________________________
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): November 30, 1996
____________________________
THE EARTHGRAINS COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
(State or Other Jurisdiction of Incorporation)
1-7554 36-3201045
(Commission file Number) (I.R.S. Employer Identification No.)
8400 Maryland Avenue, St. Louis, Missouri 63105
(Address of Principal Executive Offices) (Zip Code)
(314) 259-7000
(Registrant's Telephone Number, Including Area Code)
___________________________________________________________________________
___________________________________________________________________________
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The Earthgrains Company entered into an agreement on October 6, 1996
to acquire substantially all of the assets of Heiner's Bakery, Inc., of
Huntington, West Virginia. The transaction closed on November 30, 1996
pursuant to the Asset Purchase Agreement dated as of October 6, 1996 (the
"Agreement"), and the First Amendment to Asset Purchase Agreement dated as
of November 30, 1996 (the "First Amendment"), which were filed as exhibits
2.1 and 2.2 to the Company's Current Report filed on December 16, 1996.
It was not practicable at that time to file the financial statements
of Heiner's and the accountant's report thereon required by Item 7(a), or
the pro forma financial information required by Item 7(b); such materials
now are filed herewith.
(a) Financial Statements of Business Acquired
The following financial statements of Heiner's Bakery, Inc. are
submitted herewith as Exhibit 99(a):
1. Report of Independent Accountants
2. Consolidated Balance Sheet as of December 30, 1995, December 31,
1994 and September 7, 1996
3. Consolidated Statement of Earnings for the Fiscal Years Ended
December 30, 1995, December 31, 1994 and December 25, 1993 and the
Thirty-Six Weeks Ended September 7, 1996 and September 9, 1995
4. Consolidated Statement of Stockholders' Equity for the Fiscal
Years Ended December 30, 1995, December 31, 1994, and December 25,
1993
5. Consolidated Statement of Cash Flows for the Fiscal Years Ended
December 30, 1995, December 31, 1994 and December 25, 1993 and the
Thirty-Six Weeks Ended September 7, 1996 and September 9, 1995
6. Notes to Consolidated Financial Statements
(b) Pro Forma Financial Information
The following unaudited pro forma financial statements are submitted
herewith as Exhibit 99(b):
1. Pro Forma Condensed Combined Statement of Earnings for the
Thirty-Six Week Period Ended September 10, 1996
2. Pro Forma Combined Statement of Earnings for Fiscal Year 1995
3. Pro Forma Condensed Combined Balance Sheet as of
September 10, 1996
(c) Exhibits
The following exhibits are included with this Report:
Exhibit 99(a) Certain Financial Statements of Heiner's Bakery, Inc.
and Report of Independent Accountants
Exhibit 99(b) Certain Pro Forma Financial Data
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
THE EARTHGRAINS COMPANY
(Registrant)
Date: February 12, 1997 By: MARK H. KRIEGER
Mark H. Krieger
Vice President and
Chief Financial Officer
3
HEINER'S BAKERY, INC.
Consolidated Financial Statements
December 30, 1995 and December 31, 1994
<PAGE>
HEINER'S BAKERY, INC.
Consolidated Financial Statements
December 30, 1995 and December 31, 1994
Index
- ----------------------------------------------------------------------
Page
Consolidated Financial Statements:
Report of Independent Accountants 1
Consolidated Balance Sheet as of December 30, 1995,
December 31, 1994 and September 7, 1996 2
Consolidated Statement of Earnings for the Fiscal Years
Ended December 30, 1995, December 31, 1994 and
December 25, 1993 and the 36 Weeks Ended
September 7, 1996 and September 9, 1995 3
Consolidated Statement of Stockholders' Equity
for the Fiscal Years Ended December 30, 1995,
December 31, 1994 and December 25, 1993 4
Consolidated Statement of Cash Flows for the Fiscal Years
Ended December 30, 1995, December 31, 1994 and
December 25, 1993 and the 36 Weeks Ended
September 7, 1996 and September 9, 1995 5
Notes to Consolidated Financial Statements 6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Heiner's Bakery, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related statements of earnings and of cash flows present fairly, in all
material respects, the financial position of Heiner's Bakery, Inc. at
December 30, 1995 and December 31, 1994, and the results of their
operations and their cash flows for each of the three fiscal years in the
period ended December 30, 1995 in conformity with generally accepted
accounting principles. These financial statements are the responsibility
of Heiner's Bakery, Inc.'s management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
St. Louis, Missouri
January 10, 1997
<PAGE>
HEINER'S BAKERY, INC.
Consolidated Balance Sheet
As of December 30, 1995, December 31, 1994
and September 7, 1996
Page 2
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
December 30, December 31, September 7,
1995 1994 1996
(Unaudited)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 8,286,584 $ 10,814,548 $ 8,277,553
Investments 10,944,958 4,184,778 11,897,526
Accounts receivable, net 2,440,340 2,288,806 3,034,552
Inventories 505,211 490,100 475,655
Prepaid and other current assets 484,837 365,123 774,295
----------- ------------ -----------
Total current assets 22,661,930 18,143,355 24,459,581
Plant and equipment, net 11,969,304 13,245,016 10,917,954
Total assets $ 34,631,234 $ 31,388,371 $ 35,377,535
=========== ============ ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 289,878 $ 344,517 $ 807,518
Accrued salaries, wages and
benefits 459,458 484,351 495,596
Other current liabilities 198,505 171,114 121,785
----------- ------------ -----------
Total current liabilities 947,841 999,982 1,424,899
Other noncurrent liabilities 1,143,066 1,120,248 1,123,151
Stockholders' Equity:
Retained earnings 28,345,985 25,073,799 28,635,143
Common stock 5,820,378 5,820,378 5,820,378
Treasury stock (1,626,036) (1,626,036) (1,626,036)
----------- ------------ -----------
Total equity 32,540,327 29,268,141 32,829,485
----------- ------------ -----------
Total liabilities and
stockholders' equity $ 34,631,234 $ 31,388,371 $ 35,377,535
=========== ============ ===========
</TABLE>
The accompanying notes are an
integral part of these financial statements.
<PAGE>
HEINER'S BAKERY, INC.
Consolidated Statement of Earnings
Fiscal Years Ended December 30, 1995,
December 31, 1994 and December 25, 1993,
and the 36 Weeks Ended September 7, 1996
and September 9, 1995
Page 3
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended 36 Weeks Ended
December 30, December 31, December 25, September 7, September 9,
1995 1994* 1993 1996 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $ 36,079,293 $ 34,574,294 $ 31,910,220 $ 27,941,007 $ 24,856,591
Cost of products sold 19,450,431 19,559,113 17,660,351 14,770,162 14,250,840
------------ ------------ ------------ ------------ ------------
Gross profit 16,628,86 215,015,181 14,249,869 13,170,845 10,605,751
Marketing, distribution
and administrative
expense 12,873,589 11,837,974 11,160,342 9,889,801 8,604,973
------------ ------------ ------------ ------------ ------------
Operating income 3,755,273 3,177,207 3,089,527 3,281,044 2,000,778
Other income and
expense
Interest income 1,682,559 385,957 555,991 749,100 $ 1,030,928
Other income
(expense), net 29,354 (2,184) 25,279 66,016 8,612
------------ ------------ ------------ ------------ ------------
Net income $ 5,467,186 $ 3,560,980 $ 3,670,797 $ 4,096,160 $ 3,040,318
============ ============ ============ ============ ============
Unaudited pro forma
data (Note 5)
Income before income
taxes $ 5,467,186 $ 3,560,980 $ 3,670,797 $ 4,096,160 $ 3,040,318
Pro forma provision for
income taxes 2,180,176 1,410,428 1,462,442 1,637,757 1,216,599
------------ ------------ ------------ ------------ ------------
Pro forma net income $ 3,287,010 $ 2,150,552 $ 2,208,355 $ 2,458,403 $ 1,823,719
============ ============ ============ ============ ============
<FN>
*Fiscal year 1994 contains 53 weeks.
<FN>
</TABLE>
The accompanying notes are an
integral part of these financial statements.
<PAGE>
HEINER'S BAKERY, INC.
Consolidated Statement of Stockholders' Equity
For the Fiscal Years Ended December 30, 1995,
December 31, 1994 and December 25, 1993
Page 4
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Treasury Retained
stock stock earnings Total
<S> <C> <C> <C> <C>
Balance at December 26, 1992 $ 5,820,378 $ (1,626,036) $ 24,889,503 $ 29,083,845
Distributions to stockholders (5,197,281) (5,197,281)
Net income - - 3,670,797 3,670,797
----------- ------------ ------------ ------------
Balance at December 25, 1993 5,820,378 (1,626,036) 23,363,019 27,557,361
Distributions to stockholders (1,850,200) (1,850,200)
Net income - - 3,560,980 3,560,980
----------- ------------ ------------ ------------
Balance at December 31, 1994 5,820,378 (1,626,036) 25,073,799 29,268,141
Distributions to stockholders (2,195,000) (2,195,000)
Net income - - 5,467,186 5,467,186
----------- ------------ ------------ ------------
Balance at December 30, 1995 $ 5,820,378 $ (1,626,036) $ 28,345,985 $ 32,540,327
=========== ============ ============ ============
</TABLE>
The accompanying notes are an
integral part of these financial statements.
<PAGE>
HEINER'S BAKERY, INC.
Consolidated Statement of Cash Flows
Fiscal Years Ended December 30, 1995,
December 31, 1994 and December 25, 1993,
and the 36 Weeks Ended September 7, 1996
and September 9, 1995
Page 5
- ----------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal Year Ended 36 Weeks Ended
December 30, December 31, December 25, September 7, September 9,
1995 1994 1993 1996 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 5,467,186 $ 3,560,980 $ 3,670,797 $ 4,096,160 $ 3,040,318
Adjustments to reconcile
earnings to net cash flow
provided by operations:
Unrealized (gain)/loss on
trading securities (808,634) 242,857 (31,298) (452,568) (519,092)
Depreciation 1,977,272 2,019,011 1,941,941 1,390,543 1,476,329
(Gain)/loss on disposal of assets (12,091) 21,331 5,377 (55,266) 3,159
Changes in operating assets
and liabilities:
Accounts receivable (149,452) (102,687) (162,624) (589,567) (321,197)
Inventories (15,180) (1,699) (51,980) 53,984 22,556
Prepaid and other current
assets (121,730) 80,927 (251,367) (318,531) (147,103)
Accounts payable (54,639) (353,917) 171,973 517,640 438,116
Other current liabilities 27,391 33,851 52,495 (76,720) (47,474)
Accrued salaries, wages and
benefits (24,893) 41,641 4,822 36,138 234,874
Other 22,818 (6,648) (7,360) (19,915) 26,216
--------- ---------- ---------- ---------- ----------
Net cash flow from
operations 6,308,048 5,535,647 5,342,776 4,581,898 4,206,702
--------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
(Purchase)/sale of investments (5,951,543) 3,734,898 (208,732) (500,000) (5,709,889)
Capital expenditures (689,469) (2,055,539) (1,850,318) (409,700) (375,409)
Proceeds from sale of fixed assets - 3,500 - 125,773 -
--------- ---------- ---------- ---------- ----------
Net cash (used for) provided
by investing activities (6,641,012) 1,682,859 (2,059,050) (783,927) (6,085,298)
--------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Distributions to stockholders (2,195,000) (2,440,200) (5,257,281) (3,807,002) (1,537,000)
Repayment of loan - - 1,203,126 - -
--------- ---------- ---------- ---------- ----------
Net cash used for financing
activities (2,195,000) (2,440,200) (4,054,155) (3,807,002) (1,537,000)
--------- ---------- ---------- ---------- ----------
Net (decrease) increase in cash
and cash equivalents (2,527,964) 4,778,306 (770,429) (9,031) (3,415,596)
Cash and cash equivalents,
beginning of year 10,814,548 6,036,242 6,806,671 8,286,584 10,814,548
--------- ---------- ---------- ---------- ----------
Cash and cash equivalents,
end of year $ 8,286,584 $10,814,548 $ 6,036,242 $ 8,277,553 $ 7,398,952
========== ========== ========== ========== ==========
<FN>
*Fiscal year 1994 contains 53 weeks.
<FN>
</TABLE>
The accompanying notes are an
integral part of these financial statements.
<PAGE>
HEINER'S BAKERY, INC.
December 30, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
Page 6
- ----------------------------------------------------------------------
1. Basis of Presentation
Description of the business
Heiner's Bakery, Inc., along with its real estate holding affiliate,
EEE Realty, Inc. (collectively, the Company), is a producer and distributor
of packaged bakery products for sale to retail grocers and restaurants in
West Virginia, Ohio and Kentucky. The Company, founded in 1905 has been
family owned and operated for its entire existence. Its product lines
include sandwich breads and buns which share common ingredients (flour or
grain-based components) and similarities in the manufacturing process. All
of the Company's products are sold under the Heiner's brand name.
Manufacturing is located in a single, modern, 117,000 square feet
facility in Huntington, West Virginia. Adjacent properties include a truck
wash, a fleet maintenance garage, a surplus store, an employee parking lot,
a storage facility and over-the-road transport parking facilities. In
addition, the Company has distribution facilities in Charleston and
Beckley, West Virginia and Gallipolis and Athens, Ohio. The Company's
fresh baked goods are sold through approximately 100 active delivery
routes.
Heiner's Bakery, Inc. and EEE Realty Inc. are "S" corporations owned
by the same stockholders. EEE Realty, Inc. owns all of the real estate
used in the Company's operations and is the landlord of Heiner's Bakery,
Inc. On November 30, 1996, the Company signed a definitive asset purchase
agreement whereby certain assets would be acquired by The Earthgrains
Company. The accompanying consolidated financial statements have been
prepared on a historical basis and do not reflect the effects of the
acquisition.
2. Summary of Significant Accounting Principles and Policies
The policies utilized by the Company in the preparation of the
financial statements conform to generally accepted accounting principles
and require management to make estimates and assumptions that affect the
reported amount 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 amounts could differ from these estimates and assumptions.
Principles of consolidation
The consolidated financial statements of the Company include the
accounts of Heiner's Bakery, Inc. and EEE Realty, Inc. All significant
intercompany accounts and transactions have been eliminated.
Revenue recognition
Sales revenue and cost of products sold are recorded by the Company
when products are shipped to customers.
Fiscal year end
The Company has a 52-53 week year that ends on the Saturday of or
prior to December 31. The following table summarizes the periods covered
in each of the 3 fiscal years.
Fiscal year Period covered
1995 52-week period ended December 30, 1995
1994 53-week period ended December 31, 1994
1993 52-week period ended December 25, 1993
Cash and cash equivalents
Cash and cash equivalents include cash on hand and temporary
investments with a maturity of 3 months or less.
Inventories and production costs
Inventories are valued at the lower of cost or market. Cost is
determined under the first-in, first-out method. Obsolete or unsalable
inventories are reflected at their estimated realizable values.
Plant and equipment
Plant and equipment is carried at cost and includes expenditures for
new facilities and those which substantially increase the useful lives of
existing facilities. Maintenance, repairs and minor renewals are expensed
as incurred. When plant and equipment is retired or otherwise disposed,
the related cost and accumulated depreciation are eliminated and any gain
or loss on disposition is reflected in income or expense.
Depreciation is provided principally on the straight-line method over
the estimated useful lives of the assets which range from 12 1/2 to 50 years
for buildings and from 4 to 20 years for machinery and equipment.
Income taxes
The Company is a subchapter S corporation. Therefore, the Company's
income is included in the stockholders' income for federal income tax
purposes. While the Company is not subject to federal income tax, it is
subject to certain state and local taxes. See Note 5 for unaudited pro
forma income tax information.
Research and development, advertising and promotional costs
Research and development and advertising and promotional costs are
expensed in the year in which such costs are incurred.
Impairment of long-lived assets
<PAGE>
HEINER'S BAKERY, INC.
December 30, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
Page 7
- ----------------------------------------------------------------------
The Company reviews long-lived assets for impairment whenever events
or changes in business circumstances indicate the carrying amount of the
assets may not be fully recoverable.
Earnings per share information
Given the ownership and capital structure of the Company, earnings per
share information is not considered meaningful or relevant and has not been
presented in the accompanying consolidated financial statements or notes
thereto.
Investments
The Company accounts for its investments, primarily fixed income and
equity securities, in accordance with Statement of Financial Accounting
Standard No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" (SFAS 115) which requires securities to be classified as held-
to-maturity, available-for-sale or trading. The Company adopted SFAS 115
as of December 31, 1992, at which time all investments were classified as
trading securities, based upon management's intention to generate short-
and long-term profits from such investments. As required by SFAS 115, all
such securities have been marked to fair market value at each balance sheet
date, December 30, 1995, December 31, 1994 and December 25, 1993, and
unrealized gains and losses have been included in the determination of net
income for the years then ended.
Unaudited interim financial statements
In the opinion of management, the Company has made all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation of the financial position and results of operations and cash
flows for the 36 weeks ended September 7, 1996 and September 9, 1995, as
presented in the accompanying unaudited interim financial statements.
3. Related-party transactions
During fiscal 1993, the Company had a $1,203,126 note receivable
outstanding from two of its stockholders. Interest was accrued at a rate
equal to the applicable federal interest rate as defined in Section 1274 of
the Internal Revenue Code of 1986. Interest paid totaled $163,126 for the
fiscal year ended December 25, 1993. The note was repaid in full during
fiscal 1993.
The Company uses the rail car unloading services of Miller's Flour, an
entity which is controlled by a principal stockholder of the Company. Such
expenses, included in cost of goods sold, totaled $60,651, $59,279 and
$54,472 for the fiscal years ended December 30, 1995, December 31, 1994 and
December 25, 1993, respectively.
4. Employee Benefit Plans
Pension
The Company sponsors two defined benefit pension plans, one plan for
the benefit of all employees covered by a collective bargaining
arrangement, and a second plan for all other employees. Each pension plan
was fully funded as of December 30, 1995, December 31, 1994 and December
25, 1993.
The components of net periodic pension cost for the fiscal years ended
December 30, 1995, December 31, 1994 and December 25, 1993 and the
reconciliation of the funded status of the Company's plans for the years
then ended, in aggregate, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Components of net periodic pension cost:
Service cost $ 175,441 $ 127,349 $ 147,218
Interest cost 292,499 250,603 233,351
Actual return on assets (300,123) (298,299) (266,790)
Net amortization and deferral (12,913) (22,532) (20,564)
---------- ---------- ----------
Net periodic pension cost $ 154,904 $ 57,121 $ 93,215
========== ========== ==========
Reconciliation of funded status:
Actuarial present value of benefit
obligations:
Vested benefit obligation $3,789,744 $3,006,801
Nonvested benefit obligation 60,483 26,481
---------- ----------
Accumulated benefit obligation $3,850,227 $3,033,282
========== ==========
Projected benefit obligation $4,233,278 $3,732,482
Actual plan assets at fair value 5,175,725 4,245,780
---------- ----------
Plan assets greater than projected
benefit obligation 942,447 513,298
Unrecognized net (loss) gain (162,640) 185,054
Unrecognized transition liability (448,682) (469,245)
---------- ----------
Prepaid pension cost recognized
in the balance sheet $ 331,125 $ 229,107
========== ==========
1995 1994 1993
Major assumptions:
Discount rate 7 1/4% 8% 7 1/2%
<PAGE>
HEINER'S BAKERY, INC.
December 30, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
Page 8
Rate of return on plan assets 6 3/4% - 7 1/4% 6 3/4% - 8% 6 3/4% - 7 1/2%
</TABLE>
Deferred compensation
The Company has deferred compensation agreements with certain key
employees to provide monthly payments for a period up to 10 years, upon the
employee both reaching 65 years of age and retiring from the Company. The
liability associated with such agreements, included in noncurrent
liabilities, was $1,127,066 and $1,104,248 at December 30, 1995 and
December 31, 1994, respectively. The present value of the obligation was
discounted at rates of 7 1/4%, 8% and 7 1/2% at December 30, 1995, December
31, 1994 and December 25, 1993, respectively.
5. Unaudited Pro Forma Information
Income taxes
The Company has calculated the fiscal year ended December 30, 1995,
December 31, 1994 and December 25, 1993, and the 36 weeks ended September
7, 1996 and September 9, 1995 pro forma provisions for income taxes under
Statement of Financial Accounting Standards No. 109 (SFAS 109), "Accounting
for Income Taxes."
The pro forma income tax provisions are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended 36 Weeks Ended
December 30, December 31, December 25, September 7, September 9,
1995 1994 1993 1996 1995
<S> <C> <C> <C> <C> <C>
Current tax provision:
Federal $ 1,337,057 $ 957,327 $ 907,714 $ 1,098,984 $ 729,745
State 388,931 278,473 264,040 319,679 212,272
----------- ----------- ----------- ----------- -----------
1,725,988 1,235,800 1,171,754 1,418,663 942,017
Deferred tax provision:
Federal 351,842 135,277 225,184 169,724 212,708
State 102,346 39,351 65,504 49,370 61,874
----------- ----------- ----------- ----------- -----------
Total provision $ 2,180,176 $ 1,410,428 $ 1,462,442 $ 1,637,757 $ 1,216,599
</TABLE>
The difference in pro forma income taxes provided and the amounts
determined by applying the federal statutory tax rate to income before
income taxes result from the following:
<TABLE>
<CAPTION>
Fiscal Year Ended 36 Weeks Ended
December 30, December 31, December 25, September 7, September 9,
1995 1994 1993 1996 1995
<S> <C> <C> <C> <C> <C>
Tax at federal
statutory rate $ 1,851,669 $ 1,197,844 $ 1,241,123 $ 1,392,694 $ 1,033,708
State income taxes, net
of federal income tax
benefit 324,243 209,764 217,499 243,572 180,937
Other 4,264 2,820 3,820 1,491 1,954
----------- ----------- ----------- ----------- -----------
$ 2,180,176 $ 1,410,428 $ 1,462,442 $ 1,637,757 $ 1,216,599
=========== =========== =========== =========== ===========
</TABLE>
6. Leases
The Company has commitments under operating leases for vehicles used
in its operations. Rental expense in fiscal 1995, 1994 and 1993 was
$9,245, $0 and $0, respectively.
Minimum Future Lease Payments
1996 $ 30,336
1997 30,336
1998 30,336
1999 30,336
2000 30,336
7. Sales to Major Customers and Concentration of Credit Risk
During the fiscal years ended December 30, 1995, December 31, 1994 and
December 25, 1993, sales to one customer amounted to 17%, 17% and 16%,
respectively, of total sales revenue. Although the Company is affected by
the creditworthiness of its customers, management does not believe
significant credit risk exists at December 30, 1995.
8. Investments
The Company's investments are comprised of fixed income and equity
securities, all classified as trading securities (see Note 1), which are
carried at their fair value based upon the quoted market prices of those
investments at December 30, 1995, December 31, 1994, and December 25, 1993.
Accordingly, net realized and unrealized gains and losses on trading
securities are included in net income. The Company recorded an unrealized
gain of $808,634 for the fiscal year ended December 30, 1995, an unrealized
loss of $242,857 for the fiscal year ended December 31, 1994 and an
unrealized gain of $31,298 for the fiscal year ended December 25, 1993.
9. Stockholder Distributions
The Company makes quarterly distributions to provide the stockholders
with funds for estimated quarterly tax deposits.
10. Litigation
The Company is, from time to time, a party to litigation arising in
the normal course of its business. Management believes that such actions
will not have a material adverse impact on its operations.
<PAGE>
HEINER'S BAKERY, INC.
December 30, 1995 and December 31, 1994
Notes to Consolidated Financial Statements
Page 9
- ----------------------------------------------------------------------
11. Supplemental Balance Sheet Information
<TABLE>
<CAPTION>
December 30, December 31, September 7,
1995 1994 1996
(Unaudited)
<S> <C> <C> <C>
Receivables:
Trade $ 2,486,790 $ 2,318,323 $ 3,105,285
Allowance for doubtful accounts (23,827) (6,825) (23,682)
Allowance for returns (22,623) (22,692) (47,051)
------------ ------------ ------------
$ 2,440,340 $ 2,288,806 $ 3,034,552
============ ============ ============
Other assets:
Prepaid pension asset $ 331,125 $ 229,107 $ 447,991
Workers' compensation 106,595 82,422 114,283
Other receivables 3,186 9,663 51,515
Prepaid health insurance 116,575
Receivable from pension plan 43,931 43,931 43,931
------------ ------------ ------------
$ 484,837 $ 365,123 $ 774,295
============ ============ ============
Plant and equipment:
Land $ 1,243,742 $ 1,212,242 $ 1,243,742
Buildings 5,394,933 5,301,331 5,396,229
Machinery and equipment 15,420,497 15,744,131 15,547,674
Transportation equipment 3,128,268 3,092,941 3,237,667
------------ ------------ ------------
25,187,440 25,350,645 25,425,312
Less - Accumulated depreciation (13,218,136) (12,105,629) (14,507,358)
------------ ------------ ------------
$ 11,969,304 $ 13,245,016 $ 10,917,954
============ ============ ============
Accrued salaries, wages and benefits:
Accrued payroll $ 198,098 $ 235,464 $ 238,206
Accrued vacation 261,360 248,887 257,390
------------ ------------ ------------
$ 459,458 $ 484,351 $ 495,596
============ ============ ============
Other current liabilities:
Accrued workers' compensation $ 198,505 $ 171,114 $ 121,785
------------ ------------ ------------
$ 198,505 $ 171,114 $ 121,785
============ ============ ============
</TABLE>
12. Subsequent event
On November 30, 1996, the Company signed a definitive asset purchase
agreement whereby certain assets would be acquired by The Earthgrains
Company.
<PAGE>
THE EARTHGRAINS COMPANY
AND
HEINER'S BAKERY, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
THIRTY-SIX WEEK PERIOD ENDED SEPTEMBER 10, 1996
(Unaudited)
($ In millions)
The following pro forma condensed combined statement of earnings
combines The Earthgrains Company (Earthgrains or The Company) for
the thirty-six week period ended September 10, 1996 and Heiner's
Bakery, Inc. (Heiner's) for the thirty-six week period ended
September 7, 1996. This statement has been prepared under the
assumptions set forth in the accompanying notes. This statement
should be read in conjunction with the separate financial
statements and notes thereto of Earthgrains, included in the
Company's most recent filing on Form 10-Q, and Heiner's interim
financial statements included in this report. The pro forma
condensed combined statement of earnings is not necessarily
indicative of the future results of operations of the combined
companies or the results as they might have been had the
acquisition been effective on the first day of the period
presented.
<TABLE>
<CAPTION>
Earthgrains Pro Forma
Pro Adjustments
Forma Pro Heiner's Note Pro Forma
Historical Adj.(f) Forma Historical Amount Ref. Combined
---------- ------- ----- ---------- ------ ---- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $1,120.0 $ -- $1,120.0 $ 27.9 $ $1,147.9
Cost of products sold 679.3 0.8 680.1 14.7 694.8
-------- -------- -------- -------- --------
Gross profit 440.7 (0.8) 439.9 13.2 453.1
Marketing, distribution and
administrative expenses 434.5 3.7 438.2 9.9 (0.2) (a) 447.9
Provision for restructuring
and consolidation, net 1.0 -- 1.0 -- -- 1.0
-------- -------- -------- -------- -------- --------
Operating Income 5.2 (4.5) 0.7 3.3 0.2 4.2
Other income and expenses:
Interest expense (2.9) (1.2) (4.1) -- (1.9) (b) (6.0)
Interest income 0.7 -- (0.7) (0.7) (a) --
Other income, net 0.7 -- 0.7 0.1 -- 0.8
-------- -------- -------- -------- -------- --------
Income (loss)
before income taxes 3.0 (5.7) (2.7) 4.1 (2.4) (1.0)
-------- -------- -------- -------- -------- --------
Provision (benefit) for 1.6 (g)
income taxes 2.9 (2.0) 0.9 -- (0.9) (c) 1.6
-------- -------- -------- -------- --------- --------
Net income (loss) $ 0.1 $ (3.7) $ (3.6) $ 4.1 (3.1) $ (2.6)
======== ======== ======== ======== ======== ========
Earnings (loss) per share $ 0.01 $ (0.36) $ (0.26)
(d) ======== ======== ========
Weighted average shares
outstanding (pro forma
for Earthgrains prior
to 3/27/96) (d) (e) 10.1 10.1 10.1
======== ======== ========
</TABLE>
<PAGE>
THE EARTHGRAINS COMPANY
AND
HEINER'S BAKERY, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
FISCAL YEAR 1995
(Unaudited)
($ In millions)
The following pro forma condensed combined statement of earnings
combines The Earthgrains Company (Earthgrains or The Company) for
the fifty-two week period ended January 2, 1996 and Heiner's
Bakery, Inc. (Heiner's) for the fifty-two week period ended
December 30, 1995. This statement has been prepared under the
assumptions set forth in the accompanying notes. This statement
should be read in conjunction with the separate financial
statements and notes thereto of Earthgrains, included in the
Company's registration statement on Form 10, and Heiner's for the
fifty-two week period ended December 30, 1995 included in this
report. The pro forma condensed combined statement of earnings is
not necessarily indicative of the future results of operations of
the combined companies or the results as they might have been had
the acquisition been effective on the first day of fiscal 1995.
<TABLE>
<CAPTION>
Earthgrains Pro Forma
Pro Adjustments
Forma Pro Heiner's Note Pro Forma
Historical Adj.(f) Forma Historical Amount Ref. Combined
---------- ------- ----- ---------- ------ ---- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $1,664.6 $ -- $1,664.6 $ 36.1 $ $1,700.7
Cost of products sold 1,023.1 3.5 1,026.6 19.5 1,046.1
-------- -------- -------- -------- --------
Gross profit 641.5 (3.5) 638.0 16.6 654.6
Marketing, distribution and
administrative expenses 639.1 21.0 660.1 12.9 (0.3) (a) 672.7
Provision for restructuring
and consolidation, net 9.1 -- 9.1 -- -- 9.1
-------- -------- -------- -------- -------- --------
Operating Income (6.7) (24.5) (31.2) 3.7 0.3 (27.2)
Other income and expenses:
Interest expense (1.9) (5.4) (7.3) -- (2.7) (b) (10.0)
Interest income -- -- -- 1.7 (1.7) (a) --
Other income, net 4.7 -- 4.7 0.1 -- 4.8
-------- -------- -------- -------- -------- --------
Income (loss)
before income taxes (3.9) (29.9) (33.8) 5.5 (4.1) (32.4)
-------- -------- -------- -------- -------- --------
Provision (benefit) for 2.2 (g)
income taxes 2.7 (10.8) 8.1 -- (1.6) (c) (7.5)
-------- -------- -------- -------- --------- --------
Net income (loss) $ (6.6) $ (19.1) $ (25.7) $ 5.5 (4.7) $ (24.9)
======== ======== ======== ======== ======== ========
Earnings (loss) per share $ (0.65) $ (2.52) $ (2.44)
(d) ======== ======== ========
Weighted average shares
outstanding (pro forma
for Earthgrains) (d) 10.2 10.2 10.2
======== ======== ========
</TABLE>
<PAGE>
THE EARTHGRAINS COMPANY
AND
HEINER'S BAKERY, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF EARNINGS
THIRTY-SIX WEEK PERIOD ENDED SEPTEMBER 10, 1996 AND FISCAL YEAR
1995
(Unaudited)
Notes to Condensed Combined Statements of Earnings
(a) To eliminate interest income and expenses associated with
investments, certain assets and liabilities not acquired by the
Company; and reflect incremental depreciation and amortization
associated with the preliminary purchase price allocation as a
result of the acquisition.
(b) To reflect interest expense on incremental debt and working
capital requirements.
(c) To reflect tax effect of the proforma adjustments.
(d) The number of shares used to compute earnings (loss) per share
is based on the weighted average number of company shares
outstanding subsequent to 3/26/96 and the number of shares of
Anheuser-Busch common stock outstanding for the period ended March
26, 1996, adjusted for an assumed distribution ratio of one share
of Common Stock for every 25 shares of Anheuser-Busch common stock
held on the Record Date.
(e) Earthgrains historical figures presented represent the amounts
included in quarterly filings on Form 10-Q for the twelve week
transition period ended March 26, 1996 plus the twenty-four week
period ended September 10, 1996. Effective March 26, 1996, the
Company changed its year end from the Tuesday closest to December
31 to the last Tuesday in March.
(f) Pro forma adjustments for Earthgrains have been shown for the
periods prior to 3/26/96 to present combined results assuming the
Company had been operating as an independent, public company from
the beginning of Fiscal 1995. Such pro forma combined results for
Earthgrains have been presented in the Form 10 for fiscal 1995 and
in the Form 10-Q for the twelve week transition period ended March
26, 1996.
(g) Heiner's pro forma tax provision calculated in accordance with
SFAS 109 "Accounting for Income Taxes", as if Heiner's had been a
"C" Corporation rather than an "S" Corporation as historically
presented.
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
THE EARTHGRAINS COMPANY
AND
HEINER'S BAKERY, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 10, 1996
(Unaudited)
($ In millions)
The following pro forma condensed combined balance sheet combines
The Earthgrains Company (Earthgrains or The Company) at September
10, 1996 and Heiner's Bakery, Inc. (Heiner's) at September 7, 1996,
under the assumptions set forth in the accompanying notes. The pro
forma condensed combined balance sheet should be read in
conjunction with the separate financial statements and notes
thereto of Earthgrains, included in the Company's most recent
filing on Form 10-Q and Heiner's interim financial statements
included in this report. The pro forma condensed combined balance
sheet is not necessarily indicative of the future financial
position of the combined companies or of the financial position at
September 10, 1996 had the acquisition occurred on that date.
<TABLE>
<CAPTION>
Historical Pro Forma Adjustments
------------------------- -----------------------------
Note Pro Forma
Earthgrains Heiner's Amount Reference Combined
----------- -------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 41.9 $ 8.2 $ (8.2) (1) $ 41.9
Investments -- 11.9 (11.9) (1) --
Accounts receivable, net 148.4 3.0 -- 151.4
Inventories 71.0 .5 -- 71.5
Deferred income taxes and other 28.7 .9 0.5 (2) 30.1
-------- -------- -------- --------
Total current assets 290.0 24.5 (19.6) 294.9
Other assets 29.7 29.7
Goodwill, net 128.1 -- 12.6 (2) 140.7
Plant and equipment, net 715.9 10.9 12.8 (2) 739.6
-------- -------- -------- --------
Total assets $1,163.7 $ 35.4 $ 5.8 $1,204.9
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 117.7 $ .8 -- $ 118.5
Accrued salaries, wages & benefits 48.5 .5 -- 49.0
Accrued taxes, other than
income taxes 13.9 -- -- 13.9
Accrual for restructuring
& consolidation 8.1 -- -- 8.1
Other current liabilities 26.4 .1 1.3 (2) 27.8
-------- -------- -------- --------
Total current liabilities 214.6 1.4 1.3 217.3
-------- -------- -------- --------
Postretirement benefits 122.5 -- -- 122.5
Long-term debt 96.1 -- 38.5 (2) 134.6
Deferred income taxes 87.7 -- -- 87.7
Other noncurrent liabilities 60.2 1.1 (1.1) (1) 60.2
Commitments and contingencies -- -- -- --
Shareholders' equity 582.6 32.9 (32.9) (2) 582.6
-------- -------- -------- --------
Total liabilities and equity $1,163.7 $ 35.4 $ 5.8 $1,204.9
======== ======== ======== ========
_______________________
</TABLE
<PAGE>
PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
THE EARTHGRAINS COMPANY
AND
HEINER'S BAKERY, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 10, 1996
(Unaudited)
Notes to Condensed Combined Balance Sheet:
(1) To eliminate certain assets and liabilities of Heiner's not
acquired by the Company.
(2) To record the preliminary purchase price allocation and
eliminate the stockholder's equity of Heiner's.
<PAGE>
</TABLE>
