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 November 12, 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 November 12, 1994 Commission File Number 1-11165
INTERSTATE BAKERIES CORPORATION
-----------------------------------------------------
(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
--------------
- -------------------------------------------------------------------------
(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 / /
There were 19,639,305 shares of common stock, $.01 par value per share,
outstanding on December 9, 1994.
<PAGE>
INTERSTATE BAKERIES CORPORATION
FORM 10-Q
QUARTER ENDED NOVEMBER 12, 1994
CONTENTS
--------
Description Page
----------- ----
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
<PAGE>
INTERSTATE BAKERIES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net sales for the second quarter of fiscal 1995, the twelve weeks ended
November 12, 1994, were $280,726,000, a 4.4% and $11,792,000 increase over
prior year net sales of $268,934,000. Year-to-date net sales for fiscal 1995
were $554,825,000, an increase of $16,229,000 and 3.0% over net sales of
$538,596,000 in fiscal 1994. These increases were primarily attributable to
acquisitions and slightly higher selling prices for bread. For the quarter,
bread unit volume excluding acquisitions was up from the prior year, while
cake volume and pricing remained soft.
Cost of products sold was 51.2% of net sales for the second quarter of fiscal
1995 compared to 50.1% for fiscal 1994, while year-to-date cost of products
sold was 51.3% compared to 50.2% in the prior year. These margin declines
were attributable to somewhat higher commodity costs for certain key
ingredients, as well as higher labor and overhead costs associated with recent
acquisitions.
Selling, delivery and administrative expenses for the second quarter of fiscal
1995 increased 3.1% to $113,629,000, representing 40.5% of net sales, compared
to $110,207,000 and 41.0% of net sales in fiscal 1994. These favorable
comparisons on a percentage of net sales basis were primarily the result of
lower labor and labor related costs.
Depreciation and amortization was up $558,000 for the second quarter and
$1,066,000 year-to-date due to the completion of our new Jacksonville, Florida
bakery and acquisitions.
As a result of these factors, operating income for the second quarter of
fiscal 1995 was $15,544,000, down $1,256,000 from the prior year's
$16,800,000. Year-to-date operating income was $30,715,000, a decrease of
$3,775,000 from $34,490,000 in fiscal 1994.
Interest expense for the second quarter was up $687,000, or 21.0%, to
$3,964,000, while year-to-date interest expense increased $1,119,000, or
16.5%, to $7,910,000. These increases were attributable to higher interest
rates during fiscal 1995, as well as higher debt levels resulting from an
acquisition in the first quarter of fiscal 1995 and treasury stock repurchases
during the latter half of the prior fiscal year.
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 year-to-
date tax rate of 48.6% 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 second quarter was $6,063,000, or $.31 per share, compared
to $7,289,000, or $.36 per share, for the same period a year ago. Year-to-
date net income in fiscal 1995 was $11,949,000, or $.61 per share, down from
$14,278,000, or $.69 per share, in fiscal 1994.
1
<PAGE>
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 twenty-four weeks ended
November 12, 1994 was $30,047,000 compared to $33,663,000 a year ago, with
this decrease reflecting somewhat lower earnings. Cash generated by
operations during fiscal 1995, along with net debt increases of $10,646,000
and cash on hand, was used to fund capital expenditures of $25,088,000,
purchase intangibles of $13,878,000 and pay common stock dividends of
$4,910,000.
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
<PAGE>
INTERSTATE BAKERIES CORPORATION
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(000's)
November 12, May 28,
1994 1994
------------ -------
Assets
Current assets:
Cash and cash equivalents $ 1,575 $ 5,046
Accounts receivable, less allowance
for doubtful accounts of $2,104,000
($1,645,000 at May 28) 80,355 71,734
Inventories 23,263 21,020
Other current assets 16,632 17,106
-------- --------
Total current assets 121,825 114,906
-------- --------
Property and equipment:
Land and buildings 99,725 91,540
Machinery and equipment 239,157 224,922
-------- --------
338,882 316,462
Less accumulated depreciation (110,546) (101,022)
-------- --------
Net property and equipment 228,336 215,440
-------- --------
Excess of purchase cost over net assets
acquired 250,676 240,249
Other assets 4,205 4,196
-------- --------
$605,042 $574,791
======== ========
<PAGE>
Liabilities and Stockholders' Equity
Current liabilities:
Long-term debt payable within one year $ 1,021 $ 1,263
Accounts payable 42,772 47,848
Accrued expenses 75,358 58,182
-------- --------
Total current liabilities 119,151 107,293
-------- --------
Long-term debt:
Related party 79,000 79,000
Other 133,123 122,235
Other liabilities 45,795 43,409
Deferred income taxes 33,713 35,413
-------- --------
Total long-term liabilities 291,631 280,057
-------- --------
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 -
21,056,000 shares (21,050,000 at May 28) 211 211
Additional paid-in capital 261,065 261,064
Accumulated deficit (46,052) (53,091)
Treasury stock at cost - 1,417,000 shares
(1,400,000 at May 28) (20,964) (20,743)
-------- --------
Total stockholders' equity 194,260 187,441
-------- --------
$605,042 $574,791
======== ========
See accompanying notes.
3
<PAGE>
INTERSTATE BAKERIES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(000'S EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
-------------------------- ---------------------------
November 12, November 13, November 12, November 13,
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $280,726 $268,934 $554,825 $538,596
-------- -------- -------- --------
Cost of products sold 143,708 134,640 284,557 270,278
Selling, delivery and administrative
expenses 113,629 110,207 223,914 219,255
Depreciation and amortization 7,845 7,287 15,639 14,573
-------- -------- -------- --------
265,182 252,134 524,110 504,106
-------- -------- -------- --------
Operating income 15,544 16,800 30,715 34,490
-------- -------- -------- --------
Other income (34) (58) (85) (82)
Interest expense 3,964 3,277 7,910 6,791
-------- -------- -------- --------
3,930 3,219 7,825 6,709
-------- -------- -------- --------
Income before income taxes 11,614 13,581 22,890 27,781
Provision for income taxes 5,551 6,292 10,941 13,503
-------- -------- -------- --------
Net income $ 6,063 $ 7,289 $ 11,949 $ 14,278
======== ======== ======== ========
Earnings per share $ .31 $ .36 $ .61 $ .69
======== ======== ======== ========
Weighted average common and common
equivalent shares outstanding 19,686 20,414 19,687 20,661
======== ======== ======== ========
See accompanying notes.
</TABLE>
4
<PAGE>
INTERSTATE BAKERIES CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(000's)
Twenty-Four Weeks Ended
--------------------------
November 12, November 13,
1994 1993
------------ ------------
Cash flows from operating activities:
Net income $ 11,949 $ 14,278
Depreciation and amortization 15,639 14,573
Other 749 3,932
Change in operating assets and liabilities:
Accounts receivable (8,621) (3,178)
Inventories (2,243) 613
Other current assets 474 (164)
Accounts payable and accrued expenses 12,100 3,609
-------- --------
Cash from operating activities 30,047 33,663
-------- --------
Cash flows from investing activities:
Additions to property and equipment (25,088) (15,149)
Sale of assets 99 116
Other (14,045) (20)
-------- --------
Cash from investing activities (39,034) (15,053)
-------- --------
Cash flows from financing activities:
Reduction of note payable - (5,000)
Reduction of long-term debt (354) (5,719)
Addition to long-term debt 11,000 9,000
Common stock dividends paid (4,910) (5,027)
Acquisition of treasury stock (221) (13,894)
Issuance of common stock 1 -
-------- --------
Cash from financing activities 5,516 (20,640)
-------- --------
Change in cash and cash equivalents (3,471) (2,030)
Cash and cash equivalents:
Beginning of period 5,046 4,603
-------- --------
End of period $ 1,575 $ 2,573
======== ========
Supplemental disclosures:
Interest paid $ 8,679 $ 7,548
Income taxes paid 12,092 6,928
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)
------------------------
November 12, May 28,
1994 1994
------------ -------
Ingredients and packaging $14,742 $13,384
Finished goods 6,714 5,907
Other 1,807 1,729
------- -------
$23,263 $21,020
======= =======
3. Income Taxes
------------
The reconciliation of the provision for income taxes to the statutory federal
rate is as follows:
Twenty-Four Weeks Ended
--------------------------
November 12, November 13,
1994 1993
------------ ------------
Statutory federal tax 35.0% 35.0%
State income tax 5.4 5.1
Cumulative impact of tax law changes - 2.9
Goodwill amortization 6.5 5.1
Other .9 .5
---- ----
47.8% 48.6%
==== ====
The provision for income taxes for the current quarter of both fiscal years
includes any adjustments for revisions in the projected annual effective tax
rate.
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 December 9, 1994 /s/ Charles A. Sullivan
-------------------------------
Charles A. Sullivan, President
and Chief Executive Officer
DATE December 9, 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)
<TABLE>
<CAPTION>
Twelve Weeks Ended Twenty-Four Weeks Ended
-------------------------- --------------------------
November 12, November 13, November 12, November 13,
1994 1993 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net income $ 6,063 $ 7,289 $ 11,949 $ 14,278
========= ========= ========= =========
Weighted average common shares
outstanding 19,639 20,359 19,641 20,602
Dilutive stock options 47 55 46 59
--------- --------- --------- ---------
Weighted average common and common
equivalent shares outstanding 19,686 20,414 19,687 20,661
========= ========= ========= =========
Earnings per share $ .31 $ .36 $ .61 $ .69
========= ========= ========= =========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF NOVEMBER 12, 1994 AND THE CONSOLIDATED
STATEMENT OF INCOME FOR THE TWENTY-FOUR WEEKS ENDED NOVEMBER 12, 1994 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-28-1994
<PERIOD-END> NOV-12-1994
<CASH> 1575
<SECURITIES> 0
<RECEIVABLES> 82459
<ALLOWANCES> 2104
<INVENTORY> 23263
<CURRENT-ASSETS> 121825
<PP&E> 338882
<DEPRECIATION> 110546
<TOTAL-ASSETS> 605042
<CURRENT-LIABILITIES> 119151
<BONDS> 133123
<COMMON> 211
0
0
<OTHER-SE> 194049
<TOTAL-LIABILITY-AND-EQUITY> 605042
<SALES> 554825
<TOTAL-REVENUES> 554825
<CGS> 284557
<TOTAL-COSTS> 284557
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7910
<INCOME-PRETAX> 22890
<INCOME-TAX> 10941
<INCOME-CONTINUING> 11949
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11949
<EPS-PRIMARY> .61
<EPS-DILUTED> 0
</TABLE>
