<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JULY 12, 1997
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: NO. 333-8379
------------------------------
KEEBLER CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 36-1894790
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
677 LARCH AVE., ELMHURST, IL 60126
(Address of principal executive offices)
630-833-2900
(Registrant's telephone number, including area code)
NOT APPLICABLE.
(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 [ ]
NUMBER OF SHARES OF COMMON STOCK, $1.00 PAR VALUE, OUTSTANDING AS OF THE CLOSE
OF BUSINESS ON AUGUST 14, 1997: 1,000,000.
================================================================================
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
KEEBLER CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 12, December 28,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 10,037 $ 11,404
Trade accounts and notes receivable, net 114,345 137,150
Inventories, net:
Raw materials 28,086 25,296
Package materials 10,582 9,842
Finished goods 83,086 76,054
Other 1,928 1,473
----------- -----------
123,682 112,665
Deferred income taxes 45,810 55,929
Other 20,014 19,337
----------- -----------
Total current assets 313,888 336,485
PROPERTY, PLANT, AND EQUIPMENT, NET 473,267 486,080
TRADEMARKS AND TRADENAMES, NET 155,935 158,033
GOODWILL, NET 47,622 48,280
PREPAID PENSION 42,682 43,359
ASSETS HELD FOR SALE 3,178 6,785
OTHER ASSETS 17,399 22,502
----------- -----------
Total assets $ 1,053,971 $ 1,101,524
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
2
</TABLE>
<PAGE>
KEEBLER CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 12, December 28,
1997 1996
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 21,270 $ 18,570
Trade accounts payable 78,060 96,754
Other liabilities and accruals 203,900 186,586
Income taxes payable 12,527 -
Plant and facility closing costs and severance 8,002 19,860
----------- -----------
Total current liabilities 323,759 321,770
LONG-TERM DEBT 356,955 412,705
OTHER LIABILITIES:
Deferred income taxes 48,742 64,957
Postretirement/postemployment obligations 58,313 56,382
Plant and facility closing costs and severance 16,124 16,124
Deferred compensation 16,601 18,205
Other 23,954 20,708
----------- -----------
Total other liabilities 163,734 176,376
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock ($1 par value; 1,000,000 shares authorized and issued) 1,000 1,000
Additional paid-in capital 172,568 172,568
Retained earnings 35,955 17,105
----------- -----------
Total shareholders' equity 209,523 190,673
----------- -----------
Total liabilities and shareholders' equity $ 1,053,971 $ 1,101,524
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KEEBLER CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS)
KEEBLER CORPORATION KEEBLER CORPORATION || UBIUS
--------------------------- -------------------------- || -----------
TWELVE Twelve TWENTY-EIGHT Twenty-Four || Four
WEEKS ENDED Weeks Ended WEEKS ENDED Weeks Ended || Weeks Ended
JULY 12, July 13, JULY 12, July 13, || January 26,
1997 1996 1997 1996 || 1996
----------- ----------- ----------- ----------- || -----------
<S> <C> <C> <C> <C> || <C>
NET SALES $ 459,828 $ 383,765 $1,056,862 $ 719,024 || $ 101,656
||
COSTS AND EXPENSES: ||
Cost of sales 200,082 185,921 460,101 343,370 || 54,870
Selling, marketing, and ||
administrative expenses 227,124 185,511 535,667 351,113 || 71,427
Other 1,626 1,588 4,546 2,522 || 857
----------- ----------- ----------- ----------- || -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 30,996 10,745 56,548 22,019 || (25,498)
||
Interest (income) from affiliates - - - - || (875)
Interest (income) (183) (269) (328) (399) || (3)
Interest expense to affiliates - - - - || 664
Interest expense 7,965 9,107 19,735 16,962 || 98
----------- ----------- ----------- ----------- || -----------
INTEREST EXPENSE (INCOME), NET 7,782 8,838 19,407 16,563 || (116)
----------- ----------- ----------- ----------- || -----------
||
INCOME (LOSS) FROM CONTINUING OPERATIONS ||
BEFORE INCOME TAX EXPENSE 23,214 1,907 37,141 5,456 || (25,382)
Income tax expense 9,760 781 15,599 2,747 || -
----------- ----------- ----------- ----------- || -----------
||
INCOME (LOSS) FROM CONTINUING OPERATIONS ||
BEFORE EXTRAORDINARY ITEM 13,454 1,126 21,542 2,709 || (25,382)
||
DISCONTINUED OPERATIONS: ||
Gain on disposal of the Frozen Food ||
businesses, net of tax - - - - || 18,910
----------- ----------- ----------- ----------- || -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 13,454 1,126 21,542 2,709 || (6,472)
EXTRAORDINARY ITEM: ||
Loss on early extinguishment of debt, ||
net of tax - 1,925 2,692 1,925 || -
----------- ----------- ----------- ----------- || -----------
NET INCOME (LOSS) $ 13,454 $ (799) $ 18,850 $ 784 || $ (6,472)
=========== =========== =========== =========== || ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
KEEBLER CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
KEEBLER CORPORATION || UBIUS
------------------------------ || -----------
TWENTY-EIGHT Twenty-Four || Four
WEEKS ENDED Weeks Ended || Weeks Ended
JULY 12, July 13, || January 26,
1997 1996 || 1996
----------- ----------- || -----------
<S> <C> <C> || <C>
CASH FLOWS PROVIDED FROM (USED BY) OPERATING ACTIVITIES ||
Net income (loss) $ 18,850 $ 784 || $ (6,472)
Adjustments to reconcile net income (loss) to cash from ||
operating activities: ||
Depreciation and amortization 31,473 21,370 || 1,973
Deferred income taxes (6,096) - || -
Gain on the disposal of the Frozen Food businesses, net of tax - - || (18,910)
Loss on early extinguishment of debt, net of tax 2,692 1,925 || -
(Gain) loss on sale of property, plant, and equipment (605) (46) || 33
Changes in assets and liabilities: ||
Trade accounts and notes receivable, net 22,805 (1,352) || 22,068
Accounts receivable/payable from affiliates, net - - || (1,941)
Inventories, net (11,017) (14,174) || 4,353
Recoverable income taxes and income taxes payable 14,477 1,572 || 25
Other current assets (677) (1,732) || 1,192
Deferred debt issue costs (1,250) (6,123) || -
Trade accounts payable and other current liabilities (1,877) 31,737 || 11,550
Restructuring reserves - - || (14,469)
Plant and facility closing costs and severance (11,830) (25,511) || -
Other, net 5,020 3,292 || 246
----------- ----------- || -----------
Cash provided from (used by) operating activities 61,965 11,742 || (352)
||
CASH FLOWS (USED BY) PROVIDED FROM INVESTING ACTIVITIES ||
Capital expenditures (15,251) (9,085) || (3,228)
Proceeds from property disposals 4,969 3,061 || 644
Disposition of the Frozen Food businesses - - || 67,749
Purchase of Sunshine Biscuits, Inc., net of cash acquired - (142,670) || -
Working capital adjustment paid by UB Investment (Netherlands)B.V. - 32,609 || -
----------- ----------- || -----------
Cash (used by) provided from investing activities (10,282) (116,085) || 65,165
||
CASH FLOWS (USED BY) PROVIDED FROM FINANCING ACTIVITIES ||
Long-term debt borrowings 109,750 220,000 || -
Long-term debt repayments (162,800) (127,925) || (2,377)
Revolving Loan facility, net - 13,570 || (63,300)
----------- ----------- || -----------
Cash (used by) provided from financing activities (53,050) 105,645 || (65,677)
----------- ----------- || -----------
(Decrease) increase in cash and cash equivalents (1,367) 1,302 || (864)
Cash and cash equivalents at beginning of period 11,404 2,114 || 2,978
----------- ----------- || -----------
Cash and cash equivalents at end of period $ 10,037 $ 3,416 || $ 2,114
=========== =========== || ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
</TABLE>
<PAGE>
KEEBLER CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
THE CONSOLIDATED FINANCIAL STATEMENTS OF KEEBLER CORPORATION ("THE COMPANY")
INCLUDE THE FINANCIAL STATEMENTS OF UB INVESTMENTS US, INC. ("UBIUS"), THE
PREDECESSOR COMPANY, FOR THE FOUR WEEKS ENDED JANUARY 26, 1996, THE DATE THE
COMPANY WAS ACQUIRED BY INFLO HOLDINGS CORPORATION ("INFLO"), AND THE SUCCESSOR
COMPANY FOR THE TWENTY-EIGHT WEEKS ENDED JULY 12, 1997 AND THE TWENTY-FOUR WEEKS
ENDED JULY 13, 1996. THE DISTINCTION BETWEEN THE PREDECESSOR COMPANY'S AND THE
SUCCESSOR COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS HAS BEEN MADE BY INSERTING
A DOUBLE LINE BETWEEN SUCH CONSOLIDATED FINANCIAL STATEMENTS. THE CONSOLIDATED
FINANCIAL STATEMENTS FOR THE FOUR WEEKS ENDED JANUARY 26, 1996 INCLUDE "THE
FROZEN FOOD BUSINESSES", DEFINED AS BERNARDI ITALIAN FOODS CO., THE ORIGINAL
CHILI BOWL, INC., AND CHINESE FOOD PROCESSING CORPORATION, ALL OF WHICH WERE
WHOLLY OWNED SUBSIDIARIES OF UBIUS PRIOR TO THEIR SALE ON DECEMBER 31, 1995.
1. BASIS OF PRESENTATION
INTERIM FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements included herein were
prepared pursuant to the rules and regulations for interim reporting under the
Securities Exchange Act of 1934. Accordingly, certain information and footnote
disclosures normally accompanying the annual financial statements were omitted.
The interim consolidated financial statements and notes should be read in
conjunction with the annual audited consolidated financial statements and notes
thereto. The accompanying unaudited interim consolidated financial statements
contain all adjustments, consisting only of normal adjustments, which in the
opinion of management were necessary for a fair statement of the results for the
interim periods. Results for the interim periods are not necessarily indicative
of results for the full year.
FISCAL PERIODS PRESENTED
The Company's fiscal year consists of thirteen four-week periods (52 or 53
weeks) and ends on the Saturday nearest December 31. The first quarter consists
of four four-week periods. In 1996, the acquisition of Keebler Corporation
closed on the last day of the first four-week period. The 1996 year-to-date
information can be derived from the sum of the twenty-four weeks ended July 13,
1996 of Keebler Corporation and the four weeks ended January 26, 1996 of UBIUS.
RECLASSIFICATIONS
Certain reclassifications of prior period data have been made to conform with
the current period reporting.
2. ASSETS HELD FOR SALE
Subsequent to the acquisition of Sunshine Biscuits, Inc. ("Sunshine"),
management decided to close and sell the production plant in Santa Fe Springs,
California. The land and buildings, which were valued at a fair market value of
$3.6 million as of the date of acquisition, were sold on March 27, 1997. No gain
or loss was recognized from the sale of the idle facility.
6
<PAGE>
KEEBLER CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
3. DEBT COMMITMENTS
Long-term debt consisted of the following at July 12, 1997:
<TABLE>
<CAPTION>
Interest Final JULY 12,
Rate Maturity 1997
----------- ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C>
Revolving Loans Floating December 28, 2002 $ -
Term Note 6.938% December 28, 2002 235,000
Senior Subordinated Notes 10.750% June 15, 2006 125,000
Other Senior Debt various 2001-2005 18,225
------------
378,225
Less: Current maturities (21,270)
------------
$ 356,955
============
</TABLE>
On April 8, 1997, the Company amended the primary credit financing facility in
order to obtain more favorable terms, fees, and interest rates. The Second
Amended and Restated Credit Agreement ("Credit Agreement") specifically provides
for available borrowings of $380.0 million consisting of a $140.0 million
Revolving Loan facility and a $240.0 million Term Note. Any unused borrowings
under the Revolving Loan facility are subject to a commitment fee, which will
vary from 0.200% - 0.375% based on the relationship of debt to adjusted
earnings.
In conjunction with the amendment to the Credit Agreement, Term Notes B and C
were extinguished by using $40.0 million of borrowings under the Revolving Loan
facility, $109.8 million of increased borrowings against Term Note A, and $3.8
million from cash resources. The Company recorded a before-tax extraordinary
charge of $4.6 million related primarily to expensing certain bank fees which
were being amortized and which were incurred at the time Term Notes B and C were
issued. The related after-tax charge was $2.7 million.
7
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SET FORTH BELOW IS A DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE TWENTY-EIGHT WEEKS ENDED JULY 12, 1997 AND JULY 13, 1996. THE
TWENTY-EIGHT WEEKS ENDED JULY 13, 1996 INCLUDE BOTH THE TWENTY-FOUR WEEKS OF
KEEBLER CORPORATION UNDER CURRENT MANAGEMENT AND THE FOUR WEEKS ENDED JANUARY
26, 1996 OF UBIUS UNDER FORMER MANAGEMENT. THE FIRST FOUR WEEKS OF 1996 INCLUDE
THE FROZEN FOOD BUSINESSES WHICH WERE PRESENTED AS A DISCONTINUED OPERATION. THE
FROZEN FOOD BUSINESSES WERE SOLD BY UBIUS PRIOR TO THE ACQUISITION OF UBIUS BY
INFLO. SUBSEQUENT TO THE ACQUISITION, UBIUS CHANGED ITS NAME TO KEEBLER
CORPORATION. THE FOLLOWING DISCUSSION OF RESULTS OF OPERATIONS AND LIQUIDITY AND
CAPITAL RESOURCES SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS OF KEEBLER CORPORATION AND UBIUS AND RELATED NOTES THERETO APPEARING
ELSEWHERE.
RESULTS OF OPERATIONS
MATTERS AFFECTING COMPARABILITY
The Company's results of operations for the twelve and twenty-eight weeks ended
July 12, 1997 include the operating results of Sunshine whereas the comparable
twelve and twenty-eight weeks of the prior year only include the operating
results of Sunshine from the acquisition date of June 4, 1996 through June 30,
1996. The Company's results for the twenty-four weeks ended July 13, 1996 have
been combined with the operating results of the predecessor company for the
first four weeks ended January 26, 1996 to compare the first twenty-eight weeks
of 1997 and 1996. Results of operations expressed as a percentage of net sales
for the twelve and twenty-eight weeks ended July 12, 1997 and July 13, 1996 are
set forth below:
<TABLE>
<CAPTION>
Twenty-Eight
Twelve Weeks Ended Weeks Ended
------------------------ ------------------------
July 12, July 13, July 12, July 13,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES 100.0% 100.0% 100.0% 100.0%
COSTS AND EXPENSES:
Cost of sales 43.5 48.5 43.5 48.5
Selling, marketing, and administrative
expenses 49.4 48.3 50.7 51.5
Other 0.4 0.4 0.4 0.4
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS 6.7 2.8 5.4 (0.4)
INTEREST EXPENSE, NET 1.7 2.3 1.9 2.0
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAX EXPENSE 5.0 0.5 3.5 (2.4)
Income tax expense 2.1 0.2 1.5 0.3
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE EXTRAORDINARY ITEM 2.9 0.3 2.0 (2.7)
DISCONTINUED OPERATIONS:
Gain on disposal of the Frozen Food
businesses, net of tax -- -- -- 2.3
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 2.9 0.3 2.0 (0.4)
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt,
net of tax -- 0.5 0.2 0.2
----------- ----------- ----------- -----------
NET INCOME (LOSS) 2.9% (0.2)% 1.8% (0.6)%
=========== =========== =========== ===========
</TABLE>
8
<PAGE>
NET SALES. Net sales for the second quarter of 1997 were $459.8 million compared
to $383.8 million for the comparable quarter a year ago. For the twenty-eight
weeks ended July 12, 1997, net sales of $1,056.9 million were 28.8% higher
compared to the same period of the prior year. Increased sales for 1997 in both
the quarter and on a year-to-date basis were partially due to the inclusion of
the Sunshine business, which was acquired on June 4, 1996. After adjusting for
the impact of Sunshine revenues, net sales for both the quarter and the first
twenty-eight weeks of 1997 were consistent with the comparable periods in 1996.
GROSS PROFIT. For both the twelve and twenty-eight weeks ended July 12, 1997,
gross profit as a percentage of net sales was 56.5% which was consistent with
the first quarter of 1997. The gross profit percentage improved 5.0 percentage
points in comparison to the comparable twelve and twenty-eight weeks of 1996.
The improvement in gross margin for 1997 resulted from a more profitable sales
mix, continued lower commodity and packaging material prices, improved operating
efficiencies, and lower overhead spending.
SELLING, MARKETING, AND ADMINISTRATIVE EXPENSES. Selling, marketing, and
administrative expenses were $41.6 million and $113.1 million higher for the
twelve and twenty-eight weeks ended July 12, 1997, respectively, as compared to
the same periods a year ago. Overall, increased spending was primarily due to
the inclusion of the Sunshine business. As a percentage of net sales, selling,
marketing, and administrative expenses for the second quarter of 1997 were 1.1
percentage points higher as compared to the second quarter of 1996 principally
due to increased marketing expense. Despite these increases, on a year-to-date
basis, selling, marketing, and administrative expenses as a percentage of net
sales were 0.8 percentage points below year-to-date 1996. Lower spending as a
percentage of net sales was the result of increased volume and a more efficient
fixed cost structure in the selling and distribution network.
OTHER. Other expense of $1.6 million for the twelve weeks ended July 12, 1997
was flat compared to the twelve weeks ended July 13, 1996. For the first
twenty-eight weeks in 1997, other expense of $4.5 million was $1.2 million above
the comparable period in 1996 primarily due to increased amortization expense
and bank service charges. For the year, the increase in amortization expense
related to intangibles capitalized as part of the acquisition of Sunshine which
occurred late in the second quarter of 1996. Increased bank service charges were
attributed to an overall higher average debt structure due to the Sunshine
acquisition.
INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing operations was
$31.0 million and $56.5 million for the twelve and twenty-eight weeks ended July
12, 1997, respectively, which was $20.3 million and $60.0 million higher than
the same periods a year ago. The improvement was due primarily to the growth
realized from the Sunshine business, increased gross margins, and a more cost
effective selling and distribution system. The total benefits realized more than
offset the incremental amortization and other expenses recorded as a result of
the Keebler and Sunshine acquisitions.
INTEREST EXPENSE. Net interest expense was $7.8 million for the second quarter
of 1997 compared to $8.8 million for the comparable period of the prior year.
The decrease in interest expense for the quarter was primarily due to a lower
average debt balance resulting from the early extinguishment of term notes which
occurred in the first quarter and more favorable interest rates. Interest
expense for the first twenty-eight weeks of 1997 was $3.0 million higher
compared to the same period of the prior year. The increase resulted from a
higher average debt balance for the first twenty-eight weeks of 1997. The higher
average debt balance in 1997 reflected the additional debt entered into late in
the second quarter of 1996 to fund the acquisition of Sunshine.
INCOME TAXES. Income taxes, for the quarter and the twenty-eight weeks ended
July 12, 1997, were provided at an effective tax rate of 42%. The effective tax
rate exceeded the statutory rate due to nondeductible expenses, principally
amortization of intangibles, including trademarks, tradenames, and goodwill.
DISCONTINUED OPERATIONS. The predecessor company in 1995 adopted plans to
discontinue the operations of the Frozen Food businesses, and in the first four
weeks of 1996, a gain of $18.9 million, net of income taxes, was recognized on
the disposal of the Frozen Food businesses.
9
<PAGE>
EXTRAORDINARY ITEM NET OF INCOME TAXES. In the first quarter of 1997 and the
second quarter of 1996, the Company recorded extraordinary charges related to
the write-off of unamortized bank fees due to the early extinguishment of debt.
The after-tax extraordinary charge recorded was $2.7 million in the first
quarter of 1997 and $1.9 million in the second quarter of 1996. The tax benefits
on the extraordinary charges were $1.9 million and $1.3 million, respectively.
NET INCOME (LOSS). Net income for both the quarter and on a year-to-date basis
had shown substantial improvement over the prior year. Net income in 1997 of
$13.5 million for the quarter and $18.9 million for the year was $14.3 million
and $24.5 million higher than the comparable periods for 1996. The improvement
was primarily attributed to the inclusion of the Sunshine business, improved
gross margins, and a more efficient and cost effective fixed selling and
distribution network.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from operating activities of $62.0 million during the first
twenty-eight weeks of 1997 benefited from net earnings of $18.9 million.
Improved collection procedures, which resulted in a lower investment in trade
accounts and notes receivable, and reduced funding of income taxes payable also
contributed to positive cash flow from operations. Offsetting these favorable
factors was an increased investment in inventory and spending on plant and
facility closing costs and severance. The increase in inventory from year-end
reflected normal seasonal inventory replenishment. Spending on plant and
facility closing costs and severance relating to exit costs associated with the
acquisition of both Keebler and Sunshine, although down from the prior year,
accounted for $11.8 million of cash used by operations during the first half of
1997.
For the first twenty-eight weeks of 1997, cash used by investing activities of
$10.3 million was used primarily to fund capital expenditures. Capital spending
of $15.3 million was made principally to enhance or update the existing
production lines, provide distribution and production efficiencies, and achieve
near-term cost savings. Offsetting capital expenditures were $5.0 million in
proceeds from asset disposals. The sale of the Santa Fe Springs plant accounted
for $3.6 million of year-to-date proceeds with the remainder of the proceeds
provided mainly from the sale of trucks.
Cash flows used by financing activities were $53.1 million for the first
twenty-eight weeks of 1997. During the first quarter of 1997, the Company
entered into the Second Amended and Restated Credit Agreement under which term
notes of $153.6 million were extinguished. The extinguishment was funded
primarily by a draw down on the Revolving Loan facility and $109.8 million of
additional borrowings against other term notes. During the first half of 1997,
the draw down on the Revolving Loan facility was completely repaid and $9.2
million of scheduled principal payments were made on the term notes and other
debt.
As of July 12, 1997, cash and cash equivalents were $10.0 million, long-term
debt was $357.0 million and current maturities were $21.3 million. Available
borrowings under the Company's Revolving Loan facility were $140.0 million of
which there was no outstanding balance as of July 12, 1997. The Company met all
financial covenants contained in the financing agreements. Available cash as
well as existing short-term credit facilities are expected to be sufficient to
meet the Company's normal operating requirements for the foreseeable future.
10
<PAGE>
FORWARD-LOOKING STATEMENTS
When used in this discussion, the words "believes" and "expects" and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to certain risks and uncertainties, over which the Company may have
no control, which could cause actual results to differ materially from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof. The Company
undertakes no obligations to republish revised forward-looking statements to
reflect events or circumstances after the date thereof or to reflect the
occurrence of unanticipated events. Readers are also urged to carefully review
and consider the various disclosures made by the Company, in this report, as
well as the Company's periodic reports filed with the Securities and Exchange
Commission.
11
<PAGE>
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
KEEBLER CORPORATION
By: /s/ SAM K. REED
-------------------------------------------------------------------
Sam K. Reed
President and Chief Executive Officer
Date: August 14, 1997
By: /s/ E. NICHOL MCCULLY
-------------------------------------------------------------------
E. Nichol McCully
Sr. Vice President and Chief Financial Officer
Date: August 14, 1997
By: /s/ JAMES T. SPEAR
-------------------------------------------------------------------
James T. Spear
Vice President Finance and Corporate Controller
Chief Accounting Officer
Date: August 14, 1997
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Keebler
Corporation Consolidated Balance Sheet at July 12, 1997 and Consolidated
Statement of Operations for the twenty-eight weeks ended July 12, 1997 found on
pages 2 through 4 of the Company's Form 10-Q, and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-29-1996
<PERIOD-END> JUL-12-1997
<CASH> 10,037
<SECURITIES> 0
<RECEIVABLES> 120,273
<ALLOWANCES> 5,928
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0
0
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<INCOME-TAX> 15,599
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<EXTRAORDINARY> (2,692)
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</TABLE>
