<PAGE> 1
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 March 31, 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 0-19075
THE MORNINGSTAR GROUP INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 75-2217488
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
5956 SHERRY LANE, SUITE 1100
DALLAS, TEXAS 75225-6522
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (214) 360-4777
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 .
--- ---
As of April 30, 1994, the number of shares outstanding of each class
of common stock was:
Common Stock, $.01 par value: 14,378,112 shares
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1993 1994
------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,340 $ 3,429
Receivables, net of allowance for doubtful accounts of $974 and $1,102 . . 26,762 27,226
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,527 11,549
Prepaids and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,519 5,991
Net assets of discontinued operations - current . . . . . . . . . . . . . . 5,571 5,927
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 56,719 54,122
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,062 6,062
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,463 17,710
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 29,334 30,252
------------ ------------
Gross property, plant and equipment . . . . . . . . . . . . . . . . 51,859 54,024
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (9,749) (10,758)
------------ ------------
Net property, plant and equipment . . . . . . . . . . . . . . . . . 42,110 43,266
INTANGIBLE AND OTHER ASSETS:
Identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . 3,177 3,011
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71,829 71,021
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . 2,705 2,587
Net assets of discontinued operations - noncurrent . . . . . . . . . . . . 33,822 32,579
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,772 2,228
------------ ------------
Total intangible and other assets . . . . . . . . . . . . . . . . . 113,305 111,426
------------ ------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 212,134 $ 208,814
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
1
<PAGE> 3
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31, March 31,
1993 1994
------------- -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,850 $ 19,006
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,663 18,108
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 14,750 15,000
------------ ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 50,263 52,114
LONG-TERM DEBT (net of current maturities) . . . . . . . . . . . . . . . . . 105,425 97,608
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 1,913 1,744
STOCKHOLDERS' EQUITY AND RETAINED DEFICIT:
Common stock, $.01 par value, 50,000,000 shares authorized;
14,287,212 in 1993 and 14,376,312 in 1994 issued and outstanding . . . . . 143 144
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 69,541 69,764
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,151) (12,560)
------------ ------------
Total stockholders' equity and retained deficit . . . . . . . . . . 54,533 57,348
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . $ 212,134 $ 208,814
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
2
<PAGE> 4
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1993 1994
----------- -----------
<S> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,576 $ 70,739
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,899 54,480
Selling, distribution, and general and administrative . . . . . . . . . . . . . . 11,931 12,526
---------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,746 3,733
OTHER (INCOME) AND EXPENSE:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,148 1,230
Amortization of deferred financing cost . . . . . . . . . . . . . . . . . . . . . 106 95
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (174) (245)
---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,666 2,653
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 649 889
---------- ----------
INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1,017 1,764
DISCONTINUED OPERATIONS
Income from discontinued operations,
net of applicable tax provision of $442 and $456 . . . . . . . . . . . . . . . 932 907
Loss on disposal, net of applicable tax benefit of $41 . . . . . . . . . . . . . - (80)
---------- ----------
INCOME FROM DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . 932 827
---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,949 $ 2,591
========== ==========
EARNINGS PER COMMON SHARE:
Earnings from continuing operations . . . . . . . . . . . . . . . . . . . . . . . $ 0.07 $ 0.12
Earnings from discontinued operations . . . . . . . . . . . . . . . . . . . . . . 0.06 0.05
---------- ----------
Earnings per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.13 $ 0.17
========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING . . . . . . . . . . . . . . . . . . . . 15,074,868 14,905,068
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE> 5
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1993 1994
---------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . $ 58,145 $ 71,315
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1
Income tax refund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 -
Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . . . . . . (53,965) (60,412)
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,357) (1,566)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (184)
----------- ----------
NET CASH PROVIDED BY CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . 2,835 9,154
NET CASH PROVIDED (USED) BY DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . 1,806 (182)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale (acquisition) of subsidiaries:
Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,352) 857
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . (12,843) 1,179
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,552) (4)
Liabilities related to acquisition . . . . . . . . . . . . . . . . . . . . . . . 2,956 -
----------- ----------
Net cash provided (used) by sale (acquisition) of subsidiary . . . . . . . . . . (28,791) 2,032
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,037) (2,158)
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . 19 10
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (155) (423)
----------- ----------
Net cash used by continuing operations . . . . . . . . . . . . . . . . . . . . (29,964) (539)
Discontinued operations:
Capital and other expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (340) (468)
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . 95 2
----------- ----------
Net cash used by discontinued operations . . . . . . . . . . . . . . . . . . . (245) (466)
NET CASH USED BY INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . (30,209) (1,005)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing common stock . . . . . . . . . . . . . . . . . . . . . . . - 224
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . . . . . . . 35,000 -
Net payments under revolving credit facility . . . . . . . . . . . . . . . . . . (6,021) (4,067)
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,667) (3,500)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (535) (535)
----------- ----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . 25,777 (7,878)
NET INCREASE IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 89
CASH, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,849 3,340
----------- ----------
CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,058 $ 3,429
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE> 6
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATIONS
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1993 1994
----------- -----------
<S> <C> <C>
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,949 $ 2,591
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH FLOW FROM OPERATIONS:
Discontinued operations net income . . . . . . . . . . . . . . . . . . . . . . . (932) (827)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 1,034
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,126 618
(Gain) loss on fixed asset retirements . . . . . . . . . . . . . . . . . . . . . 11 (240)
Increase in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 924 972
Change in assets and liabilities, net of effects from
acquisition and disposition of subsidiaries:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,241 (464)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (269) (22)
Prepaids and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,293) 3,528
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (921) 1,156
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 976
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (216) (168)
---------- ----------
NET CASH PROVIDED BY CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . $ 2,835 $ 9,154
========== ==========
DISCONTINUED OPERATIONS:
Discontinued operations net income . . . . . . . . . . . . . . . . . . . . . . . $ 932 $ 827
Increase in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (1,800)
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 892 791
---------- ----------
NET CASH PROVIDED (USED) BY DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . $ 1,806 $ (182)
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 7
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
(1) CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of March 31, 1994, and
for the three months then ended have been prepared by The Morningstar
Group Inc. (the "Company" or "Morningstar") without audit. In the
opinion of management, all necessary adjustments (which include only
normal recurring adjustments) to present fairly, in all material
respects, the consolidated financial position, results of operations and
changes in cash flows at March 31, 1994 and for the three months then
ended, have been made. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted. These
financial statements should be read in conjunction with the Company's
1993 financial statements contained in its most recent Annual Report on
Form 10-K.
On April 13, 1994, Morningstar completed the divestiture of its
Florida-based fluid milk operation Velda Farms Inc. ("Velda") to Engles
Dairy Acquisition L.P. ("Purchaser") at an approximate selling price of
$48 million consisting of $45 million of cash and $3 million of 9% Series
A Preferred Stock. The sale of Velda completes the Company's divestiture
of its regional dairies. These operations have been treated as
discontinued operations, and previously published financial statements
have been restated to conform with this presentation.
On March 31, 1993, the Company acquired Favorite Foods Inc.,
("Favorite") a subsidiary of Nestle USA, Inc., for approximately $28
million plus expenses. Favorite, headquartered in Fullerton, California,
is a processor of cultured and ultrapasteurized products. The Company
amended its senior credit agreement to increase the term loan and
borrowed funds thereunder to complete this purchase.
(2) INVENTORIES
Inventories are valued at the lower of cost or market. Cost is
determined using the first-in, first-out method. Inventories are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
At At
December 31, March 31,
1993 1994
-------------- -------------
<S> <C> <C>
Raw materials and supplies . . . . . . . . . . . . . . . . . . . $ 7,871 $ 6,886
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . 3,656 4,663
-------------- -------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 11,527 $ 11,549
============== =============
</TABLE>
Finished goods inventories include the costs of materials, labor
and plant overhead.
6
<PAGE> 8
(3) DEBT
The Company's outstanding long-term debt and average interest
rates in effect on March 31, 1994 were:
<TABLE>
<CAPTION>
Average
Amount of Interest
Debt Rate
-------------- --------------
(in thousands)
<S> <C> <C>
Senior term loan . . . . . . . . . . . . . . . . . . . . . . . $ 97,000 5.667%
Revolving credit facility (a) . . . . . . . . . . . . . . . . 12,608 5.684%
Industrial development revenue bonds . . . . . . . . . . . . . 3,000 2.950%
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 112,608
Less: Current maturities . . . . . . . . . . . . . . . . . . 15,000
-------------
Long-term debt, net of current maturities . . . . . . . . . . $ 97,608
=============
</TABLE>
_________________
(a) As of March 31, 1994, $12,608,000 was borrowed under the
revolving credit facility and letters of credit totalling
$5,216,090 were issued. At March 31, 1994, the Company had
$12,175,910 in additional borrowing capacity under the terms
of its revolving credit facility.
(4) PRO FORMA RESULTS
The following unaudited pro forma information is presented to
illustrate the estimated effects of: (i) the acquisition of Favorite and
(ii) the divestiture of Velda as if both transactions had occurred on
January 1, 1993 (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1993 1994
----------- ----------
<S> <C> <C>
Pro forma net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 67,763 $ 70,739
Pro forma income from continuing operations . . . . . . . . . . . . . . . . . $ 1,075 $ 1,764
========== ==========
Pro forma shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . 15,074,868 14,905,068
Pro forma earnings per share from continuing operations . . . . . . . . . . . $ 0.07 $ 0.12
========== ==========
</TABLE>
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION.
Results of Operations - First Quarter 1994
Compared with First Quarter 1993
Net sales are classified into two categories: (i) branded specialty
products, which include historical sales of the Company's four national branded
products -- International Delight(R) non-dairy coffee creamer, Second Nature(R)
egg product, Lactaid(R) reduced lactose milk and Naturally Yours(R) no fat sour
cream; and (ii) other specialty products, which includes all sales of the
Company's specialty foods business other than branded specialty products.
Net sales for the first quarter of 1994 totalled $70.7 million, an
increase of $14.2 million from net sales for the same period in 1993. The
following table reflects net sales by business category from year to year
(dollars in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
Business Category 1993 1994
----------------- ----------- -----------
<S> <C> <C>
Branded specialty products . . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,251 $ 23,861
Other specialty products . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,325 46,878
----------- -----------
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 56,576 $ 70,739
=========== ===========
</TABLE>
Net sales of branded specialty products increased by 24.0% for the first
quarter of 1994 when compared to the same period of 1993. This improvement was
accomplished through increased sales volume for all four branded products. Net
sales of other specialty products increased by 25.6% during the first quarter
when compared to 1993 primarily due to the acquisition of Favorite on March 31,
1993.
Gross margin was 23.0% for the first quarter of 1994 compared to 25.9% for
the like period of 1993, due to a shift in branded products sales mix,
increased branded trade promotions and competitive pricing activity in the
other specialty products category.
Operating expenses as a percentage of net sales were 17.7% for the first
quarter of 1994 compared to 21.1% for the same period of 1993. Distribution
expenses as a percentage of sales increased slightly during the quarter due to
a higher proportion of branded product sales in 1994 than 1993, which carry a
slightly higher distribution expense related to a wider distribution area
served. Selling expenses declined as a percentage of sales during the quarter
primarily due to reduced introductory expenses for branded products. A slight
increase in sales expense was incurred to absorb the increased specialty
products sales provided by the Favorite acquisition. General and
administrative expenses declined as a percentage of sales during the quarter as
the result of reduced personnel costs and reduced amortization of intangibles.
The Company's operating income during the first quarter of 1994 was $3.7
million, an increase of 35.9% from operating income for the first quarter of
1993 of approximately $2.7 million. The increase in operating income was
primarily due to the combination of increasing sales of branded products, which
contribute higher operating margins and improved operating expenses and ratios.
For the first quarter, interest expense increased by 7.1% from $1.1
million during 1993 to $1.2 million during 1994. The increase resulted from
higher debt levels and slightly higher average interest rates in 1994 on the
Company's floating rate senior debt as compared with the first quarter of 1993.
The Company recorded income from continuing operations of $1.8 million in
the first quarter of 1994 compared to income from continuing operations of $1.0
million in the same period last year. The improved profitability was primarily
the result of higher sales and lower operating expense margins.
8
<PAGE> 10
During the fourth quarter of 1993, the Company recorded a charge of $9.0
million which included provisions for reductions in workforce, relocation of
the manufacturing of certain product lines to gain operating efficiencies, and
the abandonment of other product lines. The charge also included $1.9 million
representing the excess of the book value of operating assets sold in 1991 and
1992 over their estimated realizable value. Cash expenditures during the first
quarter of 1994 related to this charge were approximately $1.0 million, with an
additional $3.6 million expected in the remainder of 1994.
Liquidity and Capital Resources
Cash provided by continuing operations was $9.2 million during the first
three months of 1994 compared to cash provided by continuing operations of $2.8
million during the first three months of 1993. The sources of cash during the
first quarter of 1994 were the $9.2 million provided by continuing operations,
$2.0 million from the sale of Morningstar's packaging operation, and $.2
million from the exercise of stock options. These sources of cash were
utilized to pay down debt of $7.6 million, to provide for capital and other
expenditures of $3.0 million, to pay dividends of $.5 million, to provide $.2
million used by discontinued operations, and to provide for an increase in cash
balances of $.1 million.
Capital expenditures during the first quarter of 1994 were spent primarily
on equipment additions for increased operating efficiencies. As of the end of
the quarter of 1994, the Company was not in compliance with its fixed charge
coverage ratio and has obtained a waiver of this covenant from its senior
lenders. The Company was in compliance with all other covenants and financial
ratios contained in its senior credit agreement.
At March 31, 1994 the Company had approximately $12.2 million in unused
borrowing capacity under its revolving credit facility. The Company expects
that operating cash flows, together with borrowings under its revolving credit
facility, will be sufficient to fund the Company's requirements for working
capital and capital expenditures for the foreseeable future.
Financing
As of March 31, 1994, the Company's senior credit agreement consisted of a
$97.0 million term loan and a $30.0 million revolving credit facility. As of
March 31, 1994, approximately $12.6 million was borrowed under the revolving
credit facility and approximately $5.2 million in letters of credit were
outstanding.
On April 13, 1994, Morningstar completed the divestiture of Velda, its
Florida-based fluid milk operation, to Engles Dairy Acquisition L.P. at an
approximate selling price of $48 million including $3.0 million of 9% Series A
Preferred Stock. After adjusting the selling price for increases in working
capital, approximately $46 million was received in cash. Following the
application of the cash proceeds on April 13, 1994, the Company had no revolver
balance outstanding and had a remaining term loan balance of approximately
$64.2 million. No further quarterly payments are required on the term loan
until June 20, 1995. The remaining amortization schedule for the term loan is
as follows:
<TABLE>
<CAPTION>
Approximate
Quarterly payment date(s) Quarterly payment
------------------------------------- -----------------
<S> <C>
June 20, 1995 $ 3,306,000
September 20, 1995 - March 20, 1997 3,890,000
June 20, 1997 - December 20, 1998 4,731,000
March 20, 1999 505,000
</TABLE>
On June 20, 1994, the borrowing capacity available under the revolving credit
facility will be reduced from a total of $30 million to $25 million.
9
<PAGE> 11
PART II
OTHER INFORMATION
10
<PAGE> 12
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.
THE MORNINGSTAR GROUP INC.
/s/ TRACY L. NOLL
Tracy L. Noll
Vice President and Chief Financial Officer
(Authorized Officer and Principal Financial Officer)
Date: May 13, 1994
11
