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 APRIL 25, 1998
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. 001-13705
--------------------
KEEBLER FOODS COMPANY
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3839556
(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, $0.01 PAR VALUE, OUTSTANDING AS OF THE CLOSE
OF BUSINESS ON MAY 22, 1998: 83,934,077.
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
<TABLE>
KEEBLER FOODS COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<CAPTION>
APRIL 25, January 3,
1998 1998
----------------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 27,333 $ 27,188
Trade accounts and notes receivable, net 104,576 98,963
Inventories, net:
Raw materials 28,365 25,543
Package materials 9,042 7,306
Finished goods 79,050 78,131
Other 1,254 1,482
----------------- -----------------
117,711 112,462
Deferred income taxes 44,333 42,730
Other 20,854 20,303
----------------- -----------------
Total current assets 314,807 301,646
PROPERTY, PLANT, AND EQUIPMENT, NET 474,123 478,121
TRADEMARKS AND TRADE NAMES, NET 152,936 154,146
GOODWILL, NET 46,683 47,059
PREPAID PENSION 42,166 43,060
ASSETS HELD FOR SALE 3,742 3,742
OTHER ASSETS 14,188 15,077
----------------- -----------------
Total assets $ 1,048,645 $ 1,042,851
================= =================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
2
</TABLE>
<PAGE>
<TABLE>
KEEBLER FOODS COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<CAPTION>
APRIL 25, January 3,
1998 1998
----------------- -----------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 29,315 $ 26,365
Trade accounts payable 97,412 126,213
Other liabilities and accruals 214,929 194,923
Income taxes payable 6,426 13,784
Plant and facility closing costs and severance 6,112 6,900
----------------- -----------------
Total current liabilities 354,194 368,185
LONG-TERM DEBT 264,140 272,390
OTHER LIABILITIES:
Deferred income taxes 68,258 69,417
Postretirement/postemployment obligations 62,756 60,605
Plant and facility closing costs and severance 13,800 15,578
Deferred compensation 16,867 18,669
Other 15,717 15,956
----------------- -----------------
Total other liabilities 177,398 180,225
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock ($.01 par value; 100,000,000 shares authorized and - -
none issued)
Common stock ($.01 par value; 500,000,000 shares authorized and
83,934,077 and 77,595,213 shares issued, respectively) 839 776
Additional paid-in capital 168,707 148,613
Retained earnings 86,777 72,737
Treasury stock (3,410) (75)
----------------- -----------------
Total shareholders' equity 252,913 222,051
----------------- -----------------
Total liabilities and shareholders' equity $ 1,048,645 $ 1,042,851
================= =================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
3
</TABLE>
<PAGE>
<TABLE>
KEEBLER FOODS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<CAPTION>
SIXTEEN Sixteen
WEEKS ENDED Weeks Ended
APRIL 25, 1998 April 19, 1997
---------------- ----------------
<S> <C> <C>
NET SALES $ 636,746 $ 597,034
COSTS AND EXPENSES:
Cost of sales 264,087 260,019
Selling, marketing, and administrative expenses 338,175 308,543
Other 2,808 2,920
---------------- ----------------
INCOME FROM OPERATIONS 31,676 25,552
Interest (income) (389) (145)
Interest expense 7,830 12,559
---------------- ----------------
INTEREST EXPENSE, NET 7,441 12,414
---------------- ----------------
INCOME BEFORE INCOME TAX EXPENSE 24,235 13,138
Income tax expense 10,195 5,525
---------------- ----------------
INCOME BEFORE EXTRAORDINARY ITEM 14,040 7,613
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of tax - 2,692
---------------- ----------------
NET INCOME $ 14,040 $ 4,921
================ ================
BASIC NET INCOME PER SHARE:
Income before extraordinary item $ 0.17 $ 0.10
Extraordinary item - 0.04
---------------- ----------------
Net income $ 0.17 $ 0.06
================ ================
WEIGHTED AVERAGE SHARES OUTSTANDING 82,339 77,626
================ ================
DILUTED NET INCOME PER SHARE:
Income before extraordinary item $ 0.16 $ 0.10
Extraordinary item - 0.04
---------------- ----------------
Net income $ 0.16 $ 0.06
================ ================
WEIGHTED AVERAGE SHARES OUTSTANDING 87,138 79,246
================ ================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
4
</TABLE>
<PAGE>
<TABLE>
KEEBLER FOODS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<CAPTION>
SIXTEEN Sixteen
WEEKS ENDED Weeks Ended
APRIL 25, 1998 April 19, 1997
------------------ -------------------
<S> <C> <C>
CASH FLOWS (USED BY) PROVIDED FROM OPERATING ACTIVITIES
Net income $ 14,040 $ 4,921
Adjustments to reconcile net income to cash from
operating activities:
Depreciation and amortization 16,236 17,154
Deferred income taxes (2,762) 889
Accretion on Seller Note - 793
Loss on early extinguishment of debt, net of tax - 2,692
Loss (gain) on sale of property, plant, and equipment 133 (95)
Changes in assets and liabilities:
Trade accounts and notes receivable, net (5,613) 8,124
Inventories, net (5,249) (15,894)
Income taxes payable (7,358) (1,564)
Other current assets (551) 1,103
Deferred debt issue costs - (1,250)
Trade accounts payable and other current liabilities (8,793) 2,290
Plant and facility closing costs and severance (2,564) (9,904)
Other, net 1,351 (534)
------------------ -------------------
Cash (used by) provided from operating activities (1,130) 8,725
CASH FLOWS (USED BY) PROVIDED FROM INVESTING ACTIVITIES
Capital expenditures (10,415) (8,261)
Proceeds from property disposals 168 3,925
------------------ -------------------
Cash (used by) provided from investing activities (10,247) (4,336)
CASH FLOWS PROVIDED FROM (USED BY) FINANCING ACTIVITIES
Purchase of treasury stock (3,335) (75)
Exercise of options and warrant 20,157 -
Long-term debt borrowings - 109,750
Long-term debt repayments (5,300) (157,800)
Revolving Loan facility, net - 32,816
------------------ -------------------
Cash provided from (used by) financing activities 11,522 (15,309)
------------------ -------------------
Increase (decrease) in cash and cash equivalents 145 (10,920)
Cash and cash equivalents at beginning of period 27,188 11,954
------------------ -------------------
Cash and cash equivalents at end of period $ 27,333 $ 1,034
================== ===================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
5
</TABLE>
<PAGE>
KEEBLER FOODS COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
- --------------------------------------------------------------------------------
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.
BUSINESS AND OWNERSHIP
Keebler Foods Company (the "Company") was acquired by INFLO Holdings Corporation
("INFLO") on January 26, 1996. INFLO was owned by Artal Luxembourg S. A.
("Artal"), a private investment company, Flowers Industries, Inc. ("Flowers"), a
New York Stock Exchange-listed company, Bermore, Limited ("Bermore"), a
privately held corporation and the parent of G.F. Industries, Inc., and certain
members of the Company's current management. On November 20, 1997, INFLO was
merged into Keebler Corporation, and subsequently changed its name to Keebler
Foods Company. The Company made an initial public offering (the "Offering") of
13,386,661 shares of common stock on January 29, 1998. As part of the
transaction, Flowers acquired additional shares of common stock from Artal and
Bermore which increased its ownership from approximately 45% to 55%. Artal,
having sold shares to both Flowers and the public, retained ownership of
approximately 21%. Bermore exercised a warrant in exchange for 6,135,781 shares
of common stock, sold shares to both Flowers and the public, and retained
ownership of approximately 6%. Management's ownership remained at approximately
2%, with the balance of the outstanding common stock being sold to
non-affiliates.
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.
RECLASSIFICATIONS
Certain reclassifications of prior period data have been made to conform with
the current period reporting.
2. SHAREHOLDERS' EQUITY
COMMON STOCK
The consolidated financial statements reflect the Company's declaration of a
57.325-for-1 stock split of common stock (the "Stock Split") effective January
22, 1998. The Stock Split was effected in the form of a stock dividend.
Accordingly, all references in the consolidated financial statements to number
of shares, options, warrants, and the related prices, as well as per share
amounts and the average number of shares outstanding, have been restated to
reflect these changes.
6
<PAGE>
KEEBLER FOODS COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On January 29, 1998, the Company made a public offering of 13,386,661 shares of
common stock. Concurrent with the Offering, Bermore exercised a warrant to
purchase 6,135,781 shares of common stock. The exercise of the warrant resulted
in the Company receiving $19.8 million of cash proceeds. All of the shares in
the Offering were sold by Artal and Bermore, with no proceeds from the Offering
going to the Company.
TREASURY STOCK
In March 1998, the Company's Board of Directors authorized the repurchase, at
management's discretion, of up to $30.0 million in shares of the Company's
common stock. The buyback program was primarily instituted to offset dilution
which may result from the exercise and sale of shares related to employee stock
options. The Company's repurchases of shares of common stock are recorded as
treasury stock and result in a reduction of shareholders' equity. The Company
utilizes the cost method for recording treasury stock transactions. Should the
treasury shares be reissued, the Company intends to use a first-in, first-out
method with the excess of repurchase cost over reissuance price treated as a
reduction in retained earnings. Total treasury shares held were 157,894 and
42,994 at April 25, 1998 and January 3, 1998, respectively. The total cost of
treasury stock held by the Company was approximately $3.4 million and $0.1
million at April 25, 1998 and January 3, 1998, respectively.
3. NET INCOME PER SHARE
Basic net income per share is calculated using the weighted average number of
common shares outstanding during each period. Diluted net income per share is
calculated using the weighted average number of common and common equivalent
shares outstanding during each period.
The following table sets forth the computation of basic and diluted net income
per share:
<TABLE>
<CAPTION>
SIXTEEN Sixteen
WEEKS ENDED Weeks Ended
APRIL 25, 1998 April 19, 1997
------------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
NUMERATOR:
Income before extraordinary item............................................. $ 14,040 $ 7,613
Extraordinary item, net of tax............................................... - 2,692
------------------- ------------------
Net income................................................................... $ 14,040 $ 4,921
=================== ==================
DENOMINATOR:
Denominator for Basic Net Income Per Share
Weighted average shares................................................. 82,339 77,626
Effect of Dilutive Securities:
Stock options........................................................... 4,021 1,620
Warrants................................................................ 778 -
------------------- ------------------
Diluted potential common shares......................................... 4,799 1,620
------------------- ------------------
Denominator for Diluted Net Income Per Share................................. 87,138 79,246
=================== ==================
</TABLE>
7
<PAGE>
KEEBLER FOODS COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
At April 25, 1998, there were options to purchase 13,974 shares of common stock
at $29.38 per share and 13,750 shares of common stock at $29.78 per share which
were excluded from the computation of diluted net income per share as the
exercise price of the options exceeded the average market price of common
shares; and therefore, the effect would have been antidilutive. There were no
antidilutive securities at April 19, 1997.
8
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Results of operations expressed as a percentage of net sales for the sixteen
weeks ended April 25, 1998 and April 19, 1997 are set forth below:
<TABLE>
<CAPTION>
Sixteen Weeks Ended
-----------------------------------------
April 25, 1998 April 19, 1997
------------------ ------------------
<S> <C> <C>
NET SALES 100.0% 100.0%
COSTS AND EXPENSES:
Cost of sales 41.5 43.5
Selling, marketing, and administrative expenses 53.1 51.7
Other 0.4 0.5
------------------ ------------------
INCOME FROM OPERATIONS 5.0 4.3
INTEREST EXPENSE, NET 1.2 2.1
------------------ ------------------
INCOME BEFORE INCOME TAX EXPENSE 3.8 2.2
Income tax expense 1.6 0.9
------------------ ------------------
INCOME BEFORE EXTRAORDINARY ITEM 2.2 1.3
EXTRAORDINARY ITEM:
Loss on early extinguishment of debt, net of tax 0.0 0.5
------------------ ------------------
NET INCOME 2.2% 0.8%
================== ==================
</TABLE>
NET SALES. Net sales for the first quarter of 1998 were $636.7 million, up 6.7%
compared to net sales of $597.0 million for the comparable quarter in 1997. The
net sales growth was driven primarily from selected price increases as well as
an increase in sales volume. The majority of the price increases were initiated
in the first quarter of 1998 coupled with some price increases which were
instituted late in 1997. Volume gains, quarter-on-quarter, were achieved almost
entirely from sales of new products and line extensions of existing products.
Additionally, the sales mix in the first quarter of 1998 as compared to the
first quarter of 1997, was more favorable which, to a lesser extent than price
increases and volume gains, also contributed to the net sales growth.
GROSS PROFIT. Gross profit of $372.7 million for the first quarter of 1998 was
$35.6 million higher or 2.0 percentage points better than the comparable period
of 1997. The improvement achieved in gross profit was attributed to increased
sales achieved through both increased prices and volume gains, a more profitable
sales mix, and lower production costs. Raw material costs were down 2.5% in 1998
due to lower flour, sugar, and chocolate prices when compared to the prior year.
Despite an increase in labor wage rates due to inflation, labor costs per unit
improved quarter-on-quarter reflecting productivity gains from increased
automation in the bakeries.
SELLING, MARKETING, AND ADMINISTRATIVE EXPENSES. Selling, marketing, and
administrative expenses were $29.6 million higher for the sixteen weeks ended
April 25, 1998, as compared to the sixteen weeks ended April 19, 1997. Increased
spending was attributed primarily to higher marketing, sales force, and
administrative expenses offset partially by lower distribution costs. The
overall increase in selling, marketing, and administrative expenses was
attributed to increased sales volume. The majority of the increase was related
to higher marketing expense which was in part due to more advertising activity
and campaigns than the year-earlier quarter. Lower distribution expenses were
attributed to improved inventory handling and deployment as well as higher
volume passing through a more efficient fixed cost structure.
INCOME FROM OPERATIONS. Income from operations of $31.7 million for the sixteen
weeks ended April 25, 1998 was $6.1 million higher than the comparable period in
1997. The improvement primarily resulted from improved gross margin attributed
to increased net sales due to volume gains and increased prices, along with
lower product costs, offset partially by higher selling, marketing, and
administrative expenses.
9
<PAGE>
INTEREST EXPENSE. Net interest expense was $7.4 million for the first quarter of
1998 compared to $12.4 million for the same period in 1997. The $5.0 million
decrease in interest expense quarter-on-quarter was primarily due to a lower
average debt balance and lower interest rates in 1998. The refinancing of the
Credit Agreement, late in the first quarter of 1997, provided more favorable
terms, fees, and interest rates and resulted in the early extinguishment of
$53.2 million of debt. Additionally, in the fourth quarter of 1997, there was
$70.0 million of principal pre-payments on the term note and a $29.0 million
early extinguishment of the Seller Note. The weighted average interest rate for
the first quarter of 1998 was 0.7 percentage points lower than the comparable
period of 1997.
INCOME TAXES. Income tax expense for the first quarter of 1998 was $4.7 million
higher than the first quarter of 1997 due to an $11.1 million increase in pretax
income for the sixteen weeks ended April 25, 1998 compared to the sixteen weeks
ended April 19, 1997. The Company provided for income taxes at an effective tax
rate of 42% for both the first quarter of 1998 and 1997. The effective tax rate
exceeded the statutory rate due to nondeductible expenses, principally
amortization of intangibles, including trademarks, trade names, and goodwill.
EXTRAORDINARY ITEM NET OF INCOME TAXES. An after-tax extraordinary charge of
$2.7 million on the early extinguishment of debt was recorded in the first
quarter of 1997. The charge consisted of the write-off of unamortized bank fees
associated with the extinguishment of certain term notes used to finance the
acquisition of the Company and to complete the acquisition of Sunshine. The tax
benefit on the extraordinary charge was $1.9 million. There was no extraordinary
charge recorded in the first quarter of 1998.
NET INCOME. Net income of $14.0 million for the sixteen weeks ended April 25,
1998 was $9.1 million higher than the comparable period of 1997. The significant
growth in net earnings quarter-on-quarter was primarily attributed to net sales
growth due to increased volume, along with price increases coupled with lower
product costs and interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used by operating activities during the first quarter of 1998 were
$1.1 million. Positive cash flow of $14.0 million provided from net earnings for
the quarter was offset by increased funding of current liabilities and income
taxes, spending on plant and facility closing costs and severance, and an
increased investment in inventory and trade accounts receivable. The increased
funding of current liabilities was attributed primarily to the timing of
payments. The decrease in income taxes payable resulted from $20.3 million in
first quarter tax payments, partially offset by the incremental provision for
the quarter. Spending for plant and facility closing costs and severance of $2.6
million, although down from the same quarter of 1997, was related to exit costs
associated with the Keebler and Sunshine acquisitions. The increased investment
in inventories reflected the replenishment of on-hand inventory after a high
fourth quarter selling period.
For the first sixteen weeks of 1998, cash used by investing activities of $10.3
million was primarily used to fund capital expenditures. Capital spending was
made principally to introduce new products, update and enhance production
facilities, and achieve near-term cost savings and efficiencies in the
manufacturing, sales, and distribution process.
Cash provided by financing activities in the first quarter of 1998 was $11.5
million. Concurrent with the Company's initial public offering, Bermore, Limited
exercised a warrant in exchange for 6,135,781 shares of common stock. The
exercise of the warrant resulted in the Company receiving $19.8 million of cash
proceeds on February 3, 1998. Furthermore, during the first sixteen weeks of
1998, employee stock options were also exercised resulting in an additional $0.4
million of cash proceeds. In order to offset any dilution which may result from
the exercise of employee stock options or the sale of common stock, the Company
used $3.3 million to repurchase common stock. Long-term debt repayments of $5.3
million, primarily for scheduled principal payments on the term note and other
debt, also offset cash provided from the exercise of the warrant and employee
stock options.
As of April 25, 1998, cash and cash equivalents were $27.3 million, long-term
debt was $264.1 million, and current maturities were $29.3 million. Available
borrowings under the Company's Revolving Loan facility were $140.0 million for
which there was no outstanding balance on April 25, 1998. 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.
PART II: OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company shareholders conducted an annual meeting by the written consent of
the majority of shareholders on January 21, 1998. By written consent, the
majority of shareholders, on January 21, 1998, approved the Amended and Restated
Certificate of Incorporation; the Amendment and Restatement of By-Laws; a stock
split of 57.325 shares of common stock for every common share outstanding; the
1998 Omnibus Stock Incentive Plan; the Keebler Foods Company Nonemployee
Director Stock Plan; Amendments to the Non-Qualified Stock Option Agreements;
and, the uncontested re-election of the members of the Board of Directors
(pursuant to vacancy) for which there was no solicitation of proxies and no
change in directors.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
NUMBER DESCRIPTION
------ -----------
10.22 (a) First Amendment to the Stock Purchase
Agreement dated March 31, 1998 among Artal
Luxembourg S.A., Flowers Industries, Inc.,
and Keebler Foods Company
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<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 FOODS COMPANY
(Registrant)
/s/ SAM K. REED
----------------------------------------------------
Sam K. Reed
President and Chief Executive Officer
Date: May 26, 1998
/s/ E. NICHOL MCCULLY
----------------------------------------------------
E. Nichol McCully
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: May 26, 1998
/s/ JAMES T. SPEAR
----------------------------------------------------
James T. Spear
Vice President Finance and Corporate Controller
(Principal Accounting Officer)
Date: May 26, 1998
12
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT, made this 31st day of
March, 1998, by and among FLOWERS INDUSTRIES, INC., a Georgia corporation
(hereinafter referred to as "Purchaser"), ARTAL LUXEMBOURG S.A., a Luxembourg
corporation (hereinafter referred to as "Seller") and KEEBLER FOODS COMPANY, a
Delaware corporation (hereinafter referred to as "Keebler").
WITNESSETH:
WHEREAS, Purchaser, Seller and Keebler entered into a Stock Purchase
Agreement, dated January 28, 1998 (the "Stock Purchase Agreement"); and
WHEREAS, Purchaser, Seller and Keebler desire to amend the Stock
Purchase Agreement as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, agreements, representations, warranties and covenants hereinafter set
forth, and the sum of ten dollars and other good and valuable consideration, the
receipt and sufficiency of which is hereby specifically agreed to and
acknowledged, the Stock Purchase Agreement is hereby amended as follows:
1. Section 13.2 of the Stock Purchase Agreement is hereby amended by
deleting said Section in its entirety and substituting in lieu thereof a new
Section 13.2 reading as follows:
13.2 PURCHASES OF KEEBLER STOCK.
--------------------------
13.2.1 From the Closing Date until the earlier of (i) the date on
which Seller (together with its Affiliates) beneficially owns less
than 4,586,000 shares of Keebler Stock or (ii) twenty-four (24)
months after the termination of the Lockup Period (such period, the
"INITIAL STOCK REPURCHASE CONSENT PERIOD"), any purchase of shares of
Keebler Stock by Purchaser or Keebler (other than purchases (A) by
Purchaser or Keebler pursuant to put rights contained in agreements
in effect on the Closing Date, (B) by Purchaser or Keebler from Artal
or Management so long as such shares of Keebler Stock are not part of
the Public Float at the time of purchase, (C) by Keebler from Bermore
of Bermore's Shares which are permitted to be transferred by Bermore
as a "Monthly Transfer" pursuant to Section 4.2(e) of the Bermore
Agreement or by Purchaser or Keebler, as the case may be, pursuant to
the tag-along and drag-along
<PAGE>
rights contained in Sections 4.3 and 4.4 of the Bermore Agreement and
(D) by Purchaser and Keebler which together, in the aggregate with
any prior such purchases, do not exceed (x) fifteen percent (15%) of
the Public Float in Keebler Stock immediately after the Closing,
(PROVIDED that the shares described in clause (y) hereof shall not in
any event be included in calculating the Public Float) plus (y) the
number of shares of Keebler Stock (i) either (A) issued to Management
prior to February 3, 1998 or (B) issued to Management by the Company
subsequent to February 3, 1998 pursuant to a stock option or any
similar plan and (ii) subsequently sold by Management in transactions
resulting in such shares trading in the public market, shall not be
consummated without the prior written consent of Seller, and Keebler
and Purchaser shall not take or permit to be taken any such action
without such prior written consent; PROVIDED, HOWEVER, that the
Extension Period shall be added to the twenty-four (24) month period
set forth in (ii) above; and PROVIDED, FURTHER, that Purchaser will
have the right at any time to purchase the number of shares of
Keebler Stock required to maintain beneficial ownership of at least
fifty-one percent (51%) of Keebler Stock on a fully diluted basis.
13.2.2. After the expiration of the Initial Stock Repurchase Consent
Period (including any Extension Period added thereto) and until the
earlier of (i) the date on which Seller (together with its
Affiliates) beneficially owns less than 4,586,000 shares of Keebler
Stock or (ii) thirty-six (36) months after the termination of the
Lockup Period (the "SECOND STOCK REPURCHASE CONSENT Period"), any
purchase of shares of Keebler Stock by Purchaser or Keebler (other
than purchases (A) by Purchaser or Keebler pursuant to put rights
contained in agreements in effect on the Closing Date, (B) by
Purchaser or Keebler from Artal, Bermore or Management so long as
such shares of Keebler Stock are not part of the Public Float at the
time of purchase, (C) by Keebler from Bermore of Bermore's Shares
which are permitted to be transferred by Bermore as a "Monthly
Transfer" pursuant to Section 4.2(e) of the Bermore Agreement or by
Purchaser or Keebler, as the case may be, pursuant to the tag-along
and drag-along rights contained in Sections 4.3 and 4.4 of the
Bermore Agreement and (D) by Purchaser and Keebler which together, in
the aggregate with any prior such purchases during the Second Stock
Repurchase Consent Period and purchases made during the Initial Stock
Repurchase Consent Period, do not exceed (x) fifteen percent (15%) of
the Public Float in Keebler Stock on the date immediately preceding
any such purchase, (PROVIDED that the shares described in clause (y)
hereof shall not in any event be included in calculating the Public
Float) plus (y) the number of shares of Keebler Stock (i) either (A)
issued to Management prior to February 3, 1998 or (B) issued to
Management by the Company subsequent to February 3, 1998 pursuant to
a stock option or any similar plan and (ii) subsequently sold by
Management in transactions resulting in such shares trading in the
public market, shall not be consummated without the prior written
consent of Seller, and Keebler and Purchaser shall not take or permit
to be taken any such action without such prior written consent;
PROVIDED, HOWEVER, that the Extension Period
2
<PAGE>
shall be added to the thirty-six (36) month period set forth in (ii)
above, and PROVIDED, FURTHER, that Purchaser will have the right at
any time to purchase the number of shares of Keebler Stock required
to maintain beneficial ownership of at least fifty-one percent (51%)
of Keebler Stock on a fully diluted basis."
2. Each party hereby represents and warrants to the others that: (a)
it has all necessary power and authority (corporate or other) to enter into this
First Amendment to Stock Purchase Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby; (b) the
execution, delivery and performance of this First Amendment to Stock Purchase
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action (corporate or other); and (c) this First
Amendment to Stock Purchase Agreement has been duly executed and delivered by
such party and assuming due authorization, execution and delivery by the other
parties hereto, constitutes a valid and legally binding obligation of such
party, enforceable against such party in accordance with its terms.
3. This First Amendment to Stock Purchase Agreement shall be governed
by and construed in accordance with the laws of the State of New York without
regard to principles thereof regarding conflict of laws, except for matters
directly within the purview of the General Corporation Law of the State of
Delaware.
4. Except to the extent expressly amended herein, all terms and
conditions of the Stock Purchase Agreement are hereby affirmed and shall remain
in full force and effect.
5. This First Amendment to Stock Purchase Agreement may be executed
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed or caused
this First Amendment to Stock Purchase Agreement to be executed on its behalf,
all on the day and year first above written.
FLOWERS INDUSTRIES, INC.
"Purchaser"
By: /s/ G. ANTHONY CAMPBELL
-----------------------
Name: G. Anthony Campbell
Title: Secretary and General Counsel
ARTAL LUXEMBOURG S.A.
"Seller"
By: /s/ CARL R. KOHLER
------------------
Name: Carl R. Kohler
Title: Managing Director
KEEBLER FOODS COMPANY
"Keebler"
By: /s/ THOMAS E. O'NEILL
---------------------
Name: Thomas E. O'Neill
Title: Vice President, Secretary
and General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Keebler
Foods Company Consolidated Balance Sheet at April 25, 1998 and the Consolidated
Statement of Operations for the sixteen weeks ended April 25, 1998 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> 4-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> APR-25-1998
<CASH> 27,333
<SECURITIES> 0
<RECEIVABLES> 109,949
<ALLOWANCES> 5,373
<INVENTORY> 117,711
<CURRENT-ASSETS> 314,807
<PP&E> 590,500
<DEPRECIATION> 116,377
<TOTAL-ASSETS> 1,048,645
<CURRENT-LIABILITIES> 354,194
<BONDS> 264,140
0
0
<COMMON> 839
<OTHER-SE> 252,074
<TOTAL-LIABILITY-AND-EQUITY> 1,048,645
<SALES> 636,746
<TOTAL-REVENUES> 636,746
<CGS> 264,087
<TOTAL-COSTS> 602,262
<OTHER-EXPENSES> 2,808
<LOSS-PROVISION> 5,811
<INTEREST-EXPENSE> 7,441
<INCOME-PRETAX> 24,235
<INCOME-TAX> 10,195
<INCOME-CONTINUING> 14,040
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,040
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.16
</TABLE>
