FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 20, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to __________
_______________
For the Quarter Ended August 20, 1994 Commission File Number 1-11165
INTERSTATE BAKERIES CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 43-1470322
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12 East Armour Boulevard, Kansas City, Missouri 64111
- ----------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (816) 561-6600
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- -------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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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 / /
There were 19,639,315 shares of common stock, $.01 par value per share,
outstanding on September 16, 1994.
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INTERSTATE BAKERIES CORPORATION
FORM 10-Q
QUARTER ENDED AUGUST 20, 1994
CONTENTS
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Description Page
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PART I - FINANCIAL INFORMATION (UNAUDITED)
- ------------------------------------------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 1-2
Consolidated Balance Sheet 3
Consolidated Statement of Income 4
Consolidated Statement of Cash Flows 5
Notes to Consolidated Financial Statements 6-7
PART II - OTHER INFORMATION
- ---------------------------
Legal Proceedings Not Applicable
Changes in Securities Not Applicable
Defaults Upon Senior Securities Not Applicable
Submission of Matters to a Vote of Security Holders Not Applicable
Other Information Not Applicable
Exhibits and Reports on Form 8-K 8
Signatures 9
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INTERSTATE BAKERIES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net sales for the first quarter of fiscal 1995, the twelve weeks ended August
20, 1994, were $274,099,000, an increase of $4,437,000, or 1.6%, over prior
year net sales of $269,662,000. This increase was primarily attributable to
acquisitions, along with slightly higher selling prices for bread. Cake sales
were down due to lower unit volume primarily reflecting the sale of the Los
Angeles cake operation during fiscal 1994. Selling prices for cake remained
soft reflecting increased promotional activity.
Cost of products sold was 51.4% of net sales for the first quarter of fiscal
1995, up from 50.3% of net sales in the prior year. This margin decline was
attributable to higher commodity costs for certain key ingredients.
Selling, delivery and administrative expenses increased 1.1% to $110,285,000
for the first quarter, representing 40.2% of net sales, compared to
$109,048,000 and 40.4% of net sales in the prior year. This slightly
favorable comparison on a percentage of net sales basis was primarily the
result of cost containment efforts in labor and labor related areas.
As a result of these factors, operating income for the first quarter of 1995
was $15,171,000, down 14.2% from fiscal 1994's operating income of
$17,690,000.
Interest expense for the first quarter was $3,946,000, a $432,000 and 12.3%
increase over the prior year's expense of $3,514,000. This increase was
attributable to higher debt levels during fiscal 1995 resulting from an
acquisition and treasury stock repurchases.
Non-deductible goodwill amortization was responsible for the effective tax
rate of 47.8% in fiscal 1995. This amortization, along with the passage of
the Omnibus Budget Reconciliation Act of 1994, produced an effective tax rate
of 50.8% in fiscal 1994. Fiscal 1994's provision included $808,000 of expense
relating to the cumulative adjustment of the net deferred tax liability at the
prior year end and additional taxes payable for the prior year.
Net income for the first quarter of fiscal 1995 was $5,886,000, or $.30 per
share, compared to $6,989,000, or $.33 per share, for the same period a year
ago.
1
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INTERSTATE BAKERIES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Changes in Financial Condition
- ------------------------------
Cash generated by operating activities for the twelve weeks ended August 20,
1994 was $21,761,000 compared to $18,575,000 a year ago, with this increase
reflecting favorable changes in working capital components. Cash generated by
operations during fiscal 1995, along with net debt increases of $11,698,000,
were used to fund capital expenditures of $18,919,000, purchase intangibles of
$13,878,000 and pay common stock dividends of $2,455,000.
As noted in the Company's Annual Report on Form 10-K for the year ended May
28, 1994, cash flows from operations should be sufficient to meet the ongoing
cash requirements in the current year. Excess cash from operations will be
used to reduce the revolving credit borrowings, fund acquisitions or
repurchase common shares under the Company's share repurchase program.
2
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INTERSTATE BAKERIES CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(000's)
August 20, May 28,
1994 1994
---------- -------
Assets
Current assets:
Cash and cash equivalents $ 3,122 $ 5,046
Accounts receivable, less allowance
for doubtful accounts of $1,938,000
($1,645,000 at May 28) 74,013 71,734
Inventories 22,787 21,020
Other current assets 16,034 17,106
-------- --------
Total current assets 115,956 114,906
-------- --------
Property and equipment:
Land and buildings 99,144 91,540
Machinery and equipment 236,036 224,922
-------- --------
335,180 316,462
Less accumulated depreciation (106,900) (101,022)
-------- --------
Net property and equipment 228,280 215,440
-------- --------
Excess of purchase cost over net assets
acquired 252,408 240,249
Other assets 4,138 4,196
-------- --------
$600,782 $574,791
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Long-term debt payable within one year $ 1,017 $ 1,263
Accounts payable 42,331 47,848
Accrued expenses 73,674 58,182
-------- --------
Total current liabilities 117,022 107,293
-------- --------
Long-term debt:
Related party 79,000 79,000
Other 134,179 122,235
Other liabilities 44,451 43,409
Deferred income taxes 35,413 35,413
-------- --------
Total long-term liabilities 293,043 280,057
-------- --------
Stockholders' equity:
Preferred stock, par value $.01 per share;
authorized - 1,000,000 shares; issued - none - -
Common stock, par value $.01 per share;
authorized - 40,000,000 shares; issued -
21,051,000 shares (21,050,000 at May 28) 211 211
Additional paid-in capital 261,064 261,064
Accumulated deficit (49,660) (53,091)
Treasury stock at cost - 1,412,000 shares
(1,400,000 at May 28) (20,898) (20,743)
-------- --------
Total stockholders' equity 190,717 187,441
-------- --------
$600,782 $574,791
======== ========
See accompanying notes.
3
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INTERSTATE BAKERIES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(000'S EXCEPT PER SHARE DATA)
Twelve Weeks Ended
------------------------
August 20, August 21,
1994 1993
---------- ----------
Net sales $274,099 $269,662
-------- --------
Cost of products sold 140,849 135,638
Selling, delivery and administrative
expenses 110,285 109,048
Depreciation and amortization 7,794 7,286
-------- --------
258,928 251,972
-------- --------
Operating income 15,171 17,690
-------- --------
Other income (51) (24)
Interest expense 3,946 3,514
-------- --------
3,895 3,490
-------- --------
Income before income taxes 11,276 14,200
Provision for income taxes 5,390 7,211
-------- --------
Net income $ 5,886 $ 6,989
======== ========
Earnings per share $ .30 $ .33
======== ========
Weighted average common and common
equivalent shares outstanding 19,687 20,909
======== ========
See accompanying notes.
4
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INTERSTATE BAKERIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(000's)
Twelve Weeks Ended
-----------------------
August 20, August 21,
1994 1993
---------- ----------
Cash flows from operating activities:
Net income $ 5,886 $ 6,989
Depreciation and amortization 7,794 7,286
Other 1,080 3,660
Change in operating assets and liabilities:
Accounts receivable (2,279) 2,108
Inventories (1,767) 42
Other current assets 1,072 420
Accounts payable and accrued expenses 9,975 (1,930)
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Cash from operating activities 21,761 18,575
------- -------
Cash flows from investing activities:
Additions to property and equipment (18,919) (7,843)
Sale of assets 51 62
Other (13,905) (20)
------- -------
Cash from investing activities (32,773) (7,801)
------- -------
Cash flows from financing activities:
Reduction of note payable - (5,000)
Reduction of long-term debt (302) (5,659)
Addition to long-term debt 12,000 8,000
Common stock dividends paid (2,455) (2,497)
Acquisition of treasury stock (155) (5,643)
------- -------
Cash from financing activities 9,088 (10,799)
------- -------
Change in cash and cash equivalents (1,924) (25)
Cash and cash equivalents:
Beginning of period 5,046 4,603
------- -------
End of period $ 3,122 $ 4,578
======= =======
Supplemental disclosures:
Interest paid $ 6,116 $ 6,081
Income taxes paid 745 2,758
See accompanying notes.
5
<PAGE>
INTERSTATE BAKERIES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Accounting Policies and Basis of Presentation
---------------------------------------------
The accompanying unaudited consolidated financial statements include all
adjustments, consisting only of normal recurring accruals, which, in the
opinion of management, are necessary for a fair presentation of financial
position, results of operations and cash flows. Results of operations for
interim periods are not necessarily indicative of results to be expected for a
full year.
2. Inventories
-----------
The components of inventories are as follows:
(000's)
----------------------
August 20, May 28,
1994 1994
---------- -------
Ingredients and packaging $13,858 $13,384
Finished goods 7,204 5,907
Other 1,725 1,729
------- -------
$22,787 $21,020
======= =======
3. Income Taxes
------------
The reconciliation of the provision for income taxes to the statutory federal
rate is as follows:
Twelve Weeks Ended
------------------------
August 20, August 21,
1994 1993
---------- ----------
Statutory federal tax 35.0% 35.0%
State income tax 5.4 5.1
Cumulative impact of tax law changes - 5.7
Goodwill amortization 6.5 4.6
Other .9 .4
---- ----
47.8% 50.8%
==== ====
6
<PAGE>
4. Acquisition
- ---------------
On June 13, 1994, the Company acquired the assets and liabilities of Fuchs
Baking Co. ("Fuchs"), Miami, Florida. Fuchs, which has annual sales of
approximately $50,000,000, produces and distributes bakery products throughout
central and southern Florida. The acquisition, which was financed through
borrowings on the Company's revolving credit agreement, was recorded as a
purchase during the first quarter of fiscal 1995. The effect of the
transaction on results of operations is not material.
7
<PAGE>
PART II
ITEM 6 - Exhibits and Reports on Form 8-K
a) 11 - Schedule regarding computation of per share earnings
b) 27 - Financial data schedule
8
<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.
Interstate Bakeries Corporation
-------------------------------
(Registrant)
DATE September 29, 1994 /s/ Charles A. Sullivan
-------------------------------
Charles A. Sullivan, President
and Chief Executive Officer
DATE September 29, 1994 /s/ John F. McKenny
-------------------------------
John F. McKenny, Vice President/
Corporate Controller and
Principal Accounting Officer
9
EXHIBIT 11
INTERSTATE BAKERIES CORPORATION
SCHEDULE REGARDING COMPUTATION OF PER SHARE EARNINGS
(000's EXCEPT PER SHARE DATA)
Twelve Weeks Ended
-----------------------
August 20, August 21,
1994 1993
---------- ----------
Net income $ 5,886 $ 6,989
======= =======
Weighted average common shares
outstanding 19,642 20,846
Dilutive stock options 45 63
------- -------
Weighted average common and common
equivalent shares outstanding 19,687 20,909
======= =======
Earnings per share $ .30 $ .33
======= =======
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF AUGUST 20, 1994 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE TWELVE WEEKS ENDED AUGUST 20, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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