UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 2, 1994
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 0-7803
D O S K O C I L C O M P A N I E S I N C O R P O R A T E D
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-2535513
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2601 NW Expressway, Suite 1000W, Oklahoma City, Oklahoma 73112
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405)879-5500
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13, or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
YES X NO
On August 5, 1994, the number of shares outstanding of the
registrant's common stock, $.01 par value, was 7,940,168.
<PAGE>
DOSKOCIL COMPANIES INCORPORATED
_________________________
TABLE OF CONTENTS
FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet at
July 2, 1994 (Unaudited) and
January 1, 1994 . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statement of
Operations - Unaudited, Three Months and Six
Months Ended July 2, 1994 and
July 3, 1993 . . . . . . . . . . . . . . . . . . 4-5
Condensed Consolidated Statement of Cash
Flows - Unaudited, Six Months Ended
July 2, 1994 and July 3, 1993 . . . . . . . . . . 6
Notes to the Condensed Consolidated
Financial Statements - Unaudited . . . . . . . . 7-10
Report of Independent Accountants . . . . . . . . 11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . 12-17
PART II. OTHER INFORMATION
Item 5. Other Information. . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 18
Signatures . . . . . . . . . . . . . . . . . . . 19
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands, except par value)
<CAPTION>
July 2, January 1,
ASSETS 1994 1994
________ __________
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 6,842 $ 6,203
Receivables 38,448 36,283
Inventories 69,194 39,984
Other current assets 5,703 2,101
________ ________
Total current assets 120,187 84,571
Property, plant and equipment, net of
accumulated depreciation and amortization
of $25,462 and $20,046 124,948 77,678
Intangible assets, net of accumulated
amortization of $3,614 and $2,837 94,795 22,163
Deferred charges and other assets 45,813 44,907
Reorganization value in excess of amounts
allocable to identifiable assets, net of
accumulated amortization of $13,557 and
and $11,090 85,095 87,562
________ ________
$470,838 $316,881
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 20,104 $ 2,330
Accounts payable 17,223 10,357
Accrued liabilities 37,526 40,732
________ ________
Total current liabilities 74,853 53,419
Long-term debt 262,062 127,906
Other long-term liabilities 80,208 79,987
Stockholders' equity:
Common stock, $.01 par value, 20,000,000
shares authorized, 7,940,168 shares
issued and outstanding (7,918,342
shares at January 1, 1994) 79 79
Capital in excess of par value 112,465 112,315
Retained earnings (deficit) (57,155) (54,910)
Minimum pension liability adjustment (1,575) (1,575)
________ ________
53,814 55,909
Unearned compensation (99) (340)
________ ________
Total stockholders' equity 53,715 55,569
________ ________
$470,838 $316,881
======== ========
<FN>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
(Dollar amounts in thousands, except per share figures)
<CAPTION>
Three Months Ended Six Months Ended
___________________ __________________
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Net sales $166,702 $158,066 $322,925 $302,621
Cost of sales 136,036 132,214 265,518 252,686
________ ________ ________ ________
Gross profit 30,666 25,852 57,407 49,935
Operating expenses:
Selling 18,717 14,108 34,831 28,429
General and administrative 6,776 6,712 13,381 13,268
Amortization of intangible
assets 1,698 1,546 3,244 3,092
________ ________ ________ ________
Total 27,191 22,366 51,456 44,789
________ ________ ________ ________
Operating income 3,475 3,486 5,951 5,146
Other income (expense):
Interest and financing
costs (4,483) (3,270) (8,062) (6,287)
Other, net (155) 324 (312) 189
________ ________ ________ ________
Total (4,638) (2,946) (8,374) (6,098)
________ ________ ________ ________
Income (loss) before
income taxes (1,163) 540 (2,423) (952)
Income tax benefit 382 507 1,164 469
________ ________ ________ ________
Income (loss) before extra-
ordinary item and cumulative
effect of a change in
accounting principle (781) 1,047 (1,259) (483)
Extraordinary loss on early
extinguishment of debt, net
of income tax benefit of
$1,495 (986) - (986) -
Cumulative effect of a change
in accounting for post-
retirement benefits other
than pensions - - - (34,426)
________ ________ ________ ________
Net income (loss) $ (1,767) $ 1,047 $ (2,245) $(34,909)
======== ======== ======== ========
Continued
</TABLE>
<PAGE>
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
(Dollar amounts in thousands, except per share figures)
<CAPTION>
Three Months Ended Six Months Ended
___________________ __________________
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Earnings (loss) per share-
primary and fully diluted:
Income (loss) before extra-
ordinary item and
cumulative effect of a
change in accounting
principle $(0.10) $0.13 $(0.16) $(0.07)
Extraordinary loss on
early extinguishment of
debt, net of tax benefit (0.12) - (0.12) -
Cumulative effect of a
change in accounting for
postretirement benefits
other than pensions - - - (4.93)
______ _____ ______ ______
Net income (loss) $(0.22) $0.13 $(0.28) $(5.00)
====== ===== ====== ======
Weighted average number
of common and common
equivalent shares
outstanding -
primary 7,921 8,007 7,921 6,977
fully diluted 7,921 8,016 7,921 6,977
<FN>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Six Months Ended
____________________
July 2, July 3,
1994 1993
_______ _______
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,245) $(34,909)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating
activities:
Depreciation and amortization 9,327 7,783
Income taxes (1,475) (544)
Postretirement medical benefits 27 667
Deferred compensation 493 530
Loss on early extinguishment of debt, net
of income taxes 986 -
Cumulative effect of a change in accounting
for postretirement benefits other
than pensions - 34,426
Changes in:
Receivables 6,936 (1,281)
Inventories (7,452) (8,103)
Other current assets (262) 389
Deferred charges and other assets (377) (300)
Accounts payable and accrued liabilities (7,233) (888)
Noncurrent liabilities (36) 16
Other 6 68
________ ________
Net cash provided (used) by operating
activities (1,305) (2,146)
________ ________
Cash flows from investing activities:
Purchase of property, plant and equipment (5,911) (7,710)
Acquisition of International Multifoods
Foodservice Corp., net of cash acquired (137,442) -
Payments received on notes receivable 205 353
Proceeds from sale of facilities 361 500
Net cash used by assets held for sale - (6,548)
________ ________
Net cash provided (used) by investing
activities (142,787) (13,405)
________ ________
Cash flows from financing activities:
Proceeds from debt obligations, net of
issuance costs 141,280 106,343
Borrowings under revolving working capital
facility 118,500 48,599
Payments on revolving working capital
facility (115,000) (98,011)
Proceeds from other debt obligations 2,155 -
Payments on capital lease and debt
obligations (1,116) (74,355)
Issuance of common stock - 26,883
Payment on early extinguishment of debt (1,088) -
________ ________
Net cash provided (used) by financing
activities 144,731 9,459
________ ________
Increase (decrease) in cash and cash
equivalents 639 (6,092)
Cash and cash equivalents at beginning of
period 6,203 9,312
________ ________
Cash and cash equivalents at end of period $ 6,842 $ 3,220
======== ========
<FN>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE 1 GENERAL
The accompanying condensed consolidated financial
statements include the accounts of Doskocil Companies
Incorporated ("Doskocil") and all majority-owned subsidiaries
(collectively, the "Company") and have been prepared without
audit. The Balance Sheet at January 1, 1994, has been derived
from financial statements which have been audited by Coopers &
Lybrand L.L.P., independent accountants.
In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (adjustments are of a normal, recurring nature except
for entries to record the cumulative effect on years prior to
January 3, 1993 of a change in accounting for postretirement
benefits other than pensions) necessary for a fair presentation
of the financial position as of July 2, 1994 and January 1, 1994,
and the results of operations for the three months and six months
ended July 2, 1994 and July 3, 1993 and cash flows for the six
months ended July 2, 1994 and July 3, 1993. Results for the
three months and six months ended July 2, 1994 are not
necessarily indicative of the results which will be realized for
the year ending December 31, 1994. The financial statements
should be read in conjunction with the Company's Annual Report on
Form 10-K, as amended, for the year ended January 1, 1994.
NOTE 2 RECEIVABLES
Included in receivables of $38.4 million is a note
receivable from an officer due within one year without interest
in the approximate amount of $0.2 million.
NOTE 3 INVENTORIES
Inventories at July 2, 1994 and January 1, 1994 are
summarized as follows (in thousands):
July 2, January 1,
1994 1994
_______ __________
Raw materials and supplies $22,658 $ 8,176
Work in process 4,953 6,254
Finished goods 41,583 25,554
_______ _______
$69,194 $39,984
======= =======
NOTE 4 ACQUISITION
On June 1, 1994, the Company purchased all of the
outstanding stock of International Multifoods Foodservice Corp.,
a division of International Multifoods Corporation, for
approximately $135.8 million. The business, which has been
renamed Doskocil Specialty Brands Company ("Specialty Brands"),
operates as the fourth operating division of Doskocil. Specialty
Brands manufactures frozen food products, including ethnic foods
in the Mexican and Italian segments, as well as appetizers,
entrees and portioned meats. The acquisition has been accounted
for by the purchase method of accounting. The excess of the
aggregate purchase price over fair value of net assets acquired
of approximately $63.7 million was recognized as an intangible
asset and is being amortized over 40 years.
The operating results of Specialty Brands are included in
the Company's consolidated results of operations from the date of
acquisition. The following pro forma financial information
assumes the acquisition occurred at the beginning of 1993. These
results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the
acquisition been made at the beginning of 1993, or of the results
which may occur in the future.
Six Months Ended
____________________
July 2, July 3,
1994 1993
________ ________
Net sales $398,615 $388,509
Operating income $ 9,280 $ 10,755
Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle $ (1,069) $ 152
Net income (loss) $ (2,055) $(34,274)
Earnings per share
Primary and fully diluted $ (.26) $ (4.91)
NOTE 5 LONG-TERM DEBT
On May 25, 1994, the Company consummated a $146.0 million
term loan (the "1994 Term Loan") and a $40.0 million revolving
credit loan (the "1994 Revolving Credit Loan") provided by a bank
group. The proceeds of these transactions were net of $4.7
million of debt issuance costs. The 1994 Term Loan was used to
finance the purchase of Specialty Brands including all fees and
expenses associated with the acquisition, to repay amounts
outstanding under the credit agreement dated April 28, 1993 (the
"1993 Credit Agreement") and to terminate the related interest
rate swap agreement. The proceeds of the 1994 Revolving Credit
Loan were used to repay additional amounts outstanding under the
1993 Credit Agreement. The 1994 Revolving Credit Loan includes a
$5.0 million subfacility for standby and commercial letters of
credit. The 1994 Term Loan and the 1994 Revolving Credit Loan
rank senior to all existing indebtedness and are secured by
essentially all the assets of the Company including accounts
receivable, inventory, general intangibles and mortgaged
properties.
Borrowings under the 1994 Term Loan and the 1994 Revolving
Credit Loan bear interest at an annual rate equal to, at the
Company's option, either (i) Chemical Bank's Base Rate (as
defined in the agreement) plus 1 1/2% or (ii) the LIBOR Option
Rate (as defined in the agreement) plus 2 1/2%. On July 2, 1994,
the weighted average interest rate on the borrowings was 7.19%.
Interest on the borrowings is payable periodically in arrears.
Repayment of the 1994 Term Loan begins December 1994 with
payments at six-month intervals through December 1999. The 1994
Revolving Credit Loan is due January 15, 2000. On July 2, 1994,
the balance outstanding on the 1994 Revolving Credit Loan was
$11.5 million.
In connection with the repayment of the 1993 Credit
Agreement and termination of the above mentioned interest rate
swap agreement, the Company incurred an extraordinary loss in the
amount of $2.5 million before income tax benefit of $1.4 million.
NOTE 6 INCOME TAXES
The provision (benefit) for income taxes consists of the
following components (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
__________________ __________________
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
_____ _____ ______ _____
<S> <C> <C> <C> <C>
Current:
Federal $ (6) $(544) $ 11 $(544)
State 150 37 300 75
_____ _____ _______ _____
$ 144 $ 507 $ 311 $(469)
===== ===== ======= =====
Deferred:
Federal $(295) $ - $(1,244) $ -
State (231) - (231) -
_____ _____ _______ _____
$(526) $ - $(1,475) $ -
===== ===== ======= =====
</TABLE>
The deferred benefit has been recognized in the first half of
1994 based on the Company's projected realization of the benefit
in the current year. The effective tax rate differs from the
statutory rate due primarily to amortization of certain
intangible assets which are not deductible for tax purposes. The
effective tax rate was calculated based on the projected taxable
income for the full fiscal year and the anticipated changes for
fiscal 1994 in the deferred tax assets and related valuation
allowance and the deferred tax liabilities.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Doskocil Companies Incorporated
We have reviewed the condensed consolidated balance sheet
of Doskocil Companies Incorporated and subsidiaries as of July 2,
1994, and the related condensed consolidated statements of
operations for the three month and six month periods ended July
2, 1994, and July 3, 1993, and the condensed consolidated
statementS of cash flows for the six month periods ended July 2,
1994 and July 3, 1993. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as of
January 1, 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for the period
ended January 1, 1994 (not presented herein), and in our report
dated March 1, 1994, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated
balance sheet as of January 1, 1994, is fairly stated in all
material respects in relation to the consolidated balance sheet
from which it has been derived.
COOPERS & LYBRAND L.L.P.
Tulsa, Oklahoma
August 5, 1994
<PAGE>
DOSKOCIL COMPANIES INCORPORATED
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Comparability of Periods. Due to the recent acquisition of
Doskocil Specialty Brands Company ("Specialty Brands"), the
financial statements for the three months and six months ended
July 2, 1994, include approximately 4 weeks of operating results
of the Specialty Brands division. Net sales, gross profit and
operating income of the Company attributable to Specialty Brands
for this 4 week period were $12.1 million, $3.1 million and $0.1
million, respectively.
Three Months ended July 2, 1994 compared with Three Months Ended
July 3, 1993. The Company's net sales for the second quarter of
1994 increased $8.6 million, or 5.5%, over sales of $158.1
million for the same quarter of 1993. Net sales of $166.7
million for the second quarter of 1994 included improved
performance in the Company's Foodservice and Deli divisions over
the same period in 1993 and the addition of the Specialty Brands
division. These overall increases were partially offset by
decreased sales in the Retail division primarily due to a volume
reduction of commodity type products.
In the second quarter of 1994, gross profit increased $4.8
million, or 18.6%, to $30.7 million from $25.9 million for the
second quarter of 1993. Of this total increase, $3.1 million
relates to the addition of Specialty Brands and the remaining
$1.7 million relates to improved product mix and production
efficiencies in the Foodservice and Deli divisions, partially
offset by higher than expected start up costs at the Company's
new Forrest City, Arkansas facility.
During the second quarter of 1994, the Company's selling
expenses increased $4.6 million, or 32.7%, over the 1993 period's
amount of $14.1 million as a result of the marketing costs
associated with Specialty Brands of $2.4 million and increases in
marketing, brokerage costs and sales incentives in the other
divisions. During the 1994 period, general and administrative
expenses increased $0.1 million from the 1993 amount of $6.7
million. Included in general and administrative expense in the
second quarter of 1994 was a one time charge of $0.3 million for
severance relating to the Company's cost reduction efforts.
Amortization of intangible assets, which is a noncash element of
operating expenses, increased approximately $0.2 million in the
second quarter of 1994 over 1993 due to the Specialty Brands
acquisition.
Interest and financing costs for the second quarter of 1994
increased $1.2 million, or 37.1%, over the 1993 period's amount
of $3.3 million. The increase is due primarily to increased
interest costs of $0.8 million and increased amortization of debt
issue costs of $0.1 million on additional bank debt. Long-term
debt at July 2, 1994, was approximately $146.5 million higher
than long-term debt at July 3, 1993. Amortization included in
interest expense for the quarters ended July 2, 1994, and July 3,
1993, was $0.3 million and $0.1 million, respectfully.
For the second quarter of 1994, the Company recorded an
income tax benefit of $0.4 million as a result of a pretax loss
of $1.2 million for the quarter. The Company expects that, due
to the seasonal nature of its operations, income during the
remainder of 1994 will be more than sufficient to realize the
income tax benefit recorded as of the end of the second quarter.
During the second quarter of 1994, the Company incurred an
extraordinary loss on the early extinguishment of debt of $2.5
million. This extraordinary loss has been reported net of income
tax benefit of $1.5 million. This loss related to the write off
of remaining unamortized deferred loan costs and the termination
of the related interest rate swap agreement.
Six Months ended July 2, 1994 compared with Six Months ended July
3, 1993. Net sales for the first half of 1994 increased 6.7% to
$322.9 million compared to $302.6 million for the same period in
the prior year. Sales volume and dollars increased in both the
Foodservice and Deli divisions. These increases plus the
addition of Specialty Brands sales were partially offset by
decreases in sales volume and sales dollars in the Retail
division during the same period.
In the first half of 1994, gross profit increased $7.5
million, or 15.0%, to $57.4 million from $49.9 million in the
first half of 1993. Of this total increase, $3.1 million relates
to the addition of Specialty Brands and the remaining $4.4
million relates to improved product mix and production
efficiencies in the Foodservice and Deli divisions, partially
offset by higher than expected start up costs at the Company's
new Forrest City, Arkansas facility.
During the first half of 1994, the Company's selling
expenses increased $6.4 million, or 22.5%, over the 1993 period's
amount of $28.4 million. This increase is primarily a result of
the selling expenses associated with Specialty Brands of $2.4
million and increases in marketing, brokerage costs and sales
incentives in the other divisions. During the 1994 period,
general and administrative expenses increased $0.1 million.
Included in general and administrative expense in the first half
of 1994 was a one time charge of $0.3 million for severance
relating to the Company's cost reduction efforts. Amortization
of intangible assets, which is a noncash element of operating
expenses, was approximately $3.2 million in 1994 and $3.1 million
in 1993. The $0.1 million increase is due to amortization
relating to the Specialty Brands acquisition.
Liquidity and Capital Resources
On May 25, 1994, the Company consummated a $146.0 million
term loan (the "1994 Term Loan") and a $40.0 million revolving
credit loan (the "1994 Revolving Credit Loan"). The proceeds of
these transactions were net of $4.7 million of debt issuance
costs. The 1994 Term Loan was used to finance the purchase of
Specialty Brands including all fees and expenses associated with
the acquisition, to repay amounts outstanding under the credit
agreement dated April 28, 1993 (the "1993 Credit Agreement") and
to terminate the related interest rate swap agreement. The
proceeds of the 1994 Revolving Credit Loan were used to repay
additional amounts outstanding under the 1993 Credit Agreement.
The 1994 Revolving Credit Loan includes a $5.0 million
subfacility for standby and commercial letters of credit.
The 1994 Term Loan and the 1994 Revolving Credit Loan rank senior
to all existing indebtedness and are secured by essentially all
the assets of the Company including accounts receivable,
inventory, general intangibles and mortgaged properties.
Borrowings under the 1994 Term Loan and the 1994 Revolving
Credit Loan bear interest at an annual rate equal to, at the
Company's option, either (i) Chemical Bank's Base Rate (as
defined in the agreement) plus 1 1/2% or (ii) the LIBOR Option
Rate (as defined in the agreement) plus 2 1/2%. On July 2, 1994,
the weighted average interest rate on the borrowings was 7.19%.
Interest on the borrowings is payable periodically in arrears.
Repayment of the 1994 Term Loan begins December 1994 with
payments at six-month intervals through December 1999. The 1994
Revolving Credit Loan is due January 15, 2000. At July 2, 1994,
the balance outstanding on the 1994 Revolving Credit Loan was
$11.5 million and $28.5 million was available for borrowing at
that date.
Management believes that cash flow from operations combined
with the borrowing capacity available under the Company's 1994
Revolving Credit Loan will be sufficient to meet the Company's
operating and debt service cash requirements for the foreseeable
future.
On June 14, 1994, the Company filed with the Securities and
Exchange Commission a registration statement on Form S-3 covering
5.6 million shares of common stock to be sold through a rights
offering. Pursuant to the terms of the rights offering, the
Company intends to issue rights to purchase additional shares of
common stock to stockholders and warrantholders. The proceeds of
the rights offering are expected to be used to repay indebtedness
under the 1994 Revolving Credit Loan and the 1994 Term Loan. The
proceeds of the rights offering may also be used for general
corporate purposes.
Joseph Littlejohn & Levy Fund, L.P. ("JLL"), which holds
approximately 27% of the currently outstanding shares of common
stock of the Company, has agreed that one of its affiliates will
exercise JLL's pro rata share of rights and its oversubscription
privilege to the extent necessary to assure that the Company
receives gross proceeds of at least $30 million.
Based upon a preliminary assessment, the Company believes
that the integration of the newly acquired Specialty Brands
operations may result in certain realignment and/or restructuring
of its existing operations. In connection with such integration
and realignment and/or restructuring of existing operations, the
Company may incur certain restructuring charges that may result
in an impairment of the "Reorganization value in excess of
amounts allocable to identifiable assets" and/or the goodwill
related to the acquired operations. Because the Company is in
the early stage of developing the plan of integration, it is not
possible to quantify a restructuring or impairment provision, if
any, which may ultimately be required.
Cash Flows and Capital Expenditures
The following table summarizes selected cash flow and
capital expenditure data and has been prepared based on the
historical financial statements of the Company.
<TABLE>
<CAPTION>
Six Months Ended
_________________
July 2, July 3,
1994 1993
_______ _______
<S> <C> <C>
Cash Flow and Capital Expenditures Data (in thousands):
Depreciation $5,492 $4,547
Amortization of intangibles 3,244 3,092
Amortization included in interest expense 591 144
Capital expenditures 5,911 7,710
Net cash provided (used) by operating
activities (1,305) (2,146)
</TABLE>
First half of 1994. On June 1, 1994, the Company purchased
all of the outstanding stock of International Multifoods
Foodservice Corp., a division of International Multifoods
Corporation. The business, which has been renamed Doskocil
Specialty Brands Company, operates as the fourth operating
division of Doskocil. Acquisition costs of $137.4 million
included net accounts receivable of $9.2 million, inventory of
$21.7 million, other current assets of $0.4 million, intangible
assets of $73.4 million and plant, property and equipment of
$43.2 million. The Company also assumed liabilities of $10.5
million.
For the first half of 1994, net cash used by operating
activities was approximately $1.3 million. Decreases in cash
resulted primarily from an increase during the period in
inventory and decreases in accounts payable and accrued
liabilities offset partially by a decrease in accounts
receivable. The cash provided by the results of operations (net
income) during the period, after adding back noncash items of
depreciation and amortization, income taxes, post retirement
medical benefits, deferred compensation and the loss on early
extinguishment of debt, was $7.1 million. The remaining decrease
in cash was due to an increase in other assets of $0.6 million.
Cash expenditures for additions to property, plant and
equipment were approximately $5.9 million during the first half
of 1994. Of this total, approximately $2.6 million of these
expenditures were primarily attributable to construction of
additional capacity and the remainder for replacements and
modifications to existing facilities. The source of the funds
for these expenditures was from the receipt of escrowed funds
related to construction in progress and increased borrowings
first under the 1993 Credit Agreement and later the 1994
Revolving Credit Loan.
First half of 1993. For the first half of 1993, net cash
used by operating activities was approximately $2.1 million.
Decreases in cash resulted primarily from increases during the
period in net working capital employed, including increases both
in receivables of $1.3 million and in inventories of $8.1
million. These decreases in cash were reduced by a decrease in
other current assets of $0.4 million. The cash provided by the
results of operations (net income) during the period, after
adding back noncash items of depreciation and amortization,
income taxes, postretirement medical benefits, deferred
compensation and cumulative effect of a change in accounting, was
$8.0 million.
Cash expenditures for additions to property, plant and
equipment were approximately $7.7 million during the first half
of 1993. These expenditures were primarily attributable to (i)
the construction of additional drying rooms at the Company's
South Hutchinson, Kansas production facility to support growth of
the Foodservice division, and (ii) the construction of a new
production facility in Forrest City, Arkansas. In addition, the
Company had expenditures of approximately $4.3 million for
replacement of and modifications to existing systems and
production lines.
In March of 1993, the Company issued two million shares of
common stock to JLL at $15 per share. In April of 1993, the
Company issued the 9 3/4% Senior Subordinated Redeemable Notes
due 2000 (the "Notes") and executed the 1993 Credit Agreement.
The proceeds from these transactions (net of associated equity
offering and debt issuance costs) were used to repay all amounts
outstanding under the Amended and Restated Credit and Security
Agreement dated as of October 31, 1991. The Company also made
repayments during the first half of 1993 of $1.2 million on other
long-term debt, including capital lease obligations. The Company
increased net borrowings under its long-term financing facilities
and the Notes by $10.7 million, net of debt issuance costs of
$4.7 million, during the first half of 1993. The resulting net
increase in cash from these financing activities totaled $9.5
million.
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
On August 1, 1994, the Company announced that R. Randolph
Devening will join the Company as Chairman of the Board,
President and Chief Executive Officer. On August 15, 1994, Mr.
Devening will succeed John T. Hanes, who announced his retirement
on October 29, 1993, but remained in office until the appointment
of his successor.
On June 14, 1994, the Company filed with the Securities and
Exchange Commission a registration statement on Form S-3 covering
5.6 million shares of common stock to be sold through a rights
offering.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (the following exhibits are listed and numbered
in accordance with Item 601 of Regulation S-K as of the
date of this filing)
Exhibit Number Description
11.1 Calculation of Earnings
per Share
15.1 Letter re: Unaudited
Interim Financial
Information
(b) Reports on Form 8-K
Current Report on Form 8-K, dated May 25, 1994, of
Doskocil Companies Incorporated was filed with the SEC
on June 14, 1994, with respect to the Company
consummating the acquisition of the stock of
International Multifoods Foodservice Corp. under Item 2
(acquisition and disposition of assets), Item 5 (other
events) and Item 7 (financial statements, pro forma
financial information and exhibits).
<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 thereunto duly authorized.
DOSKOCIL COMPANIES INCORPORATED
Dated: August 12, 1994 By:/s/ William L. Brady
________________________
William L. Brady
Vice President and
Controller
EXHIBIT 11.1
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE - UNAUDITED
(Dollar amounts in thousands, except per share figures)
<CAPTION>
Three Months Ended Six Months Ended
__________________ ________________
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Income (loss) before cumulative
effect of a change in accounting
principal $ (781) $1,047 $(1,259) $ (483)
Extraordinary loss on early
extinguishment of debt, net of tax (986) - (986) -
Cumulative effect of a change in
accounting for postretirement
benefits other than pensions - - - (34,426)
_______ ______ _______ ________
Net income (loss) $(1,767) $1,047 $(2,245) $(34,909)
======= ====== ======= =======
Primary earnings per share:
Weighted average number of
common shares outstanding 7,921 7,839 7,921 6,977
Common stock equivalents:
Dilutive options and warrants - 168 - -
______ ______ ______ ______
Weighted average number of
common and common equivalent
shares outstanding 7,921 8,007 7,921 6,977
====== ====== ====== ======
Income (loss) before cumulative
effect of a change in
accounting principal $(0.10) $0.13 $(0.16) $(0.07)
Extraordinary loss on early
extinguishment of debt, net of
tax (0.12) - (0.12) -
Cumulative effect of a change in
accounting for postretirement
benefits other than pensions - - - (4.93)
______ _____ ______ ______
Net income (loss) per share $(0.22) $0.13 $(0.28) $(5.00)
====== ===== ====== ======
Fully diluted earnings per share:
Weighted average number of
common shares outstanding 7,921 7,839 7,921 6,977
Common stock equivalents:
Dilutive options and warrants - 177 - -
______ ______ ______ ______
Weighted average number of
common and common equivalent
shares outstanding 7,921 8,016 7,921 6,977
====== ====== ====== ======
Income (loss) before cumulative
effect of a change in
accounting principal $(0.10) $0.13 $(0.16) $(0.07)
Extraordinary loss on early
extinguishment of debt, net of
tax (0.12) - (0.12) -
Cumulative effect of a change in
accounting for postretirement
benefits other than pensions - - - (4.93)
______ _____ ______ ______
Net income (loss) per share $(0.22) $0.13 $(0.28) $(5.00)
====== ===== ====== ======
</TABLE>
EXHIBIT 15.1
August 11, 1994
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Doskocil Companies Incorporated
Registration on Form S-8
We are aware that our report dated August 5, 1994 on our review
of interim financial information of Doskocil Companies
Incorporated for the periods ended July 2, 1994, and July 3,
1993, and included in the Company's quarterly report on Form 10-Q
for the quarter ended July 2, 1994, is incorporated by reference
in the Registration Statement on Form S-8 (File No. 33-45974) of
Doskocil Companies Incorporated. Pursuant to Rule 436(c) under
the Securities Act of 1933, this report should not be considered
a part of the Registration Statement prepared or certified by us
within the meaning of Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
