<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 June 30, 1995
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)
DELAWARE 75-2217488
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
5956 SHERRY LANE, SUITE 1800
DALLAS, TEXAS 75225-6522
(Address of principal executive offices) (Zip Code)
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 June 30, 1995, the number of shares outstanding of each class of
common stock was:
Common Stock, $.01 par value: 14,930,797 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, June 30,
1994 1995
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,152 $ 2,497
Receivables, net of allowance for doubtful accounts of $1,495 and $1,495 . 30,469 26,804
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,540 9,870
Prepaids and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,062 1,887
Net assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . - 763
------------ ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 48,223 41,821
------------ ------------
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,062 5,713
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,938 18,339
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 36,041 38,733
------------ ------------
Gross property, plant and equipment . . . . . . . . . . . . . . . . 60,041 62,785
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (13,404) (15,598)
------------ ------------
Net property, plant and equipment . . . . . . . . . . . . . . . . . 46,637 47,187
------------ ------------
INTANGIBLE AND OTHER ASSETS:
Identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . 2,512 2,180
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,951 61,710
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . 1,540 1,449
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402 349
------------ ------------
Total intangible and other assets . . . . . . . . . . . . . . . . . 70,405 65,688
------------ ------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 165,265 $ 154,696
============ ============
</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, June 30,
1994 1995
--------------- ---------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,263 $ 14,666
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,345 14,718
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 6,000 8,000
------------ -----------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 42,608 37,384
LONG-TERM DEBT (net of current maturities) . . . . . . . . . . . . . . . . . 53,892 43,000
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 1,963 2,017
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 50,000,000 shares authorized;
14,390,262 shares in 1994 and 14,930,797 in 1995 issued
and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 149
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 71,157 71,351
Retained equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . (4,504) 795
------------ -----------
Total stockholders' equity and retained deficit . . . . . . . . . . 66,802 72,295
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . $ 165,265 $ 154,696
============ ===========
</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 Six Months Ended
June 30, June 30,
-------------------------- --------------------------
1994 1995 1994 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . $ 73,667 $ 75,337 $ 144,406 $ 147,355
Cost of goods sold . . . . . . . . . . . . . . . . 56,231 57,138 110,597 111,644
Selling, distribution, and general and
administrative . . . . . . . . . . . . . . . . . . 12,911 12,776 25,437 25,961
---------- ----------- ---------- ----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . 4,525 5,423 8,372 9,750
OTHER (INCOME) AND EXPENSE:
Interest expense . . . . . . . . . . . . . . . . . 1,147 1,038 2,377 2,174
Dividend Income . . . . . . . . . . . . . . . . . . - - - (268)
Amortization of deferred financing costs . . . . . 75 95 170 191
Other income, net . . . . . . . . . . . . . . . . . (366) (241) (497) (390)
---------- ----------- ---------- ----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . 3,669 4,531 6,322 8,043
Provision for income taxes . . . . . . . . . . . . 1,130 1,685 2,019 2,928
---------- ----------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . 2,539 2,846 4,303 5,115
DISCONTINUED OPERATIONS:
Income from discontinued operations (a) . . . . . . 163 - 1,070 -
Gain (loss) on disposal (b) . . . . . . . . . . . . 546 (510) 466 184
---------- ----------- ---------- ----------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS . . . . . 709 (510) 1,536 184
---------- ----------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 3,248 $ 2,336 $ 5,839 $ 5,299
========== =========== ========== ==========
EARNINGS PER COMMON SHARE:
Earnings from continuing operations . . . . . . . . $ 0.17 $ 0.19 $ 0.29 $ 0.34
Earnings from discontinued operations . . . . . . . 0.05 (0.03) 0.10 0.01
---------- ----------- ---------- ----------
Earnings per common share . . . . . . . . . . . . . $ 0.22 $ 0.16 $ 0.39 $ 0.35
========== =========== ========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING . . . . . . . . 15,006,128 15,118,978 14,975,488 15,114,951
(a) Net of applicable tax provision of . . . . . . $ 51 $ - $ 507 $ -
(b) Net of applicable tax provision (benefit) of . . 2,920 (591) 2,879 216
</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>
Six Months Ended
June 30,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . $ 145,929 $ 151,020
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 -
Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . . . . . . (129,548) (135,892)
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,856) (2,672)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (757) (1,788)
----------- ----------
NET CASH PROVIDED BY CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . 12,870 10,668
NET CASH USED BY DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . . . (3,147) -
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . 9,723 10,668
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,315) (4,930)
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . 45 2
Dividends received from preferred stock . . . . . . . . . . . . . . . . . . . . . - 268
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (726) 35
----------- ----------
Net cash used by continuing operations . . . . . . . . . . . . . . . . . . . . (3,996) (4,625)
Discontinued Operations:
Sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . 50,006 -
Sale of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,000
Capital and other expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (482) -
----------- ----------
Net cash provided by discontinued operations . . . . . . . . . . . . . . . . . 49,524 3,000
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . 45,528 (1,625)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing common stock . . . . . . . . . . . . . . . . . . . . . . . 264 194
Net payments under revolving credit facility . . . . . . . . . . . . . . . . . (15,904) (1,892)
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,961) (7,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (535) -
----------- ----------
NET CASH USED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . (56,136) (8,698)
----------- ----------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . (885) 345
CASH, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,340 2,152
----------- ----------
CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,455 $ 2,497
=========== ==========
</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 OPERATING ACTIVITIES
(Unaudited, dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1994 1995
----------- -----------
<S> <C> <C>
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,839 $ 5,299
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH FLOW FROM OPERATING ACTIVITIES:
Discontinued operations net income . . . . . . . . . . . . . . . . . . . . . . (1,536) (184)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,087 2,570
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . 1,336 1,350
(Gain) loss on fixed asset retirements . . . . . . . . . . . . . . . . . . . . (12) -
Increase in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 1,963 2,393
Change in assets and liabilities, net of effects
from disposition of subsidiaries:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 944 3,665
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 670
Prepaids & deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,513 2,950
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382) (2,597)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,531) (5,227)
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (65) (221)
---------- ----------
NET CASH PROVIDED BY CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . 12,870 10,668
DISCONTINUED OPERATIONS:
Discontinued operations net income . . . . . . . . . . . . . . . . . . . . . . 1,536 184
Gain on divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (466) (184)
Change in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,009) -
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 792 -
---------- ----------
NET CASH USED BY DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . . . (3,147) -
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . $ 9,723 $ 10,668
========== ==========
</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
June 30, 1995
(1) CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of June 30, 1995, and for
the six 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 June 30, 1995 and for the six 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 1994 financial
statements contained in its most recent Annual Report on Form 10-K.
Certain prior year balances have been reclassified to conform to the
current year presentation.
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 in cash after working capital adjustments and $3 million of
9% Series A Preferred Stock (the "Preferred Stock"). The Company
deferred the recognition of the gain on the Preferred Stock pending
realization of the gain. The sale of Velda completed the Company's
divestiture of its regional dairies. These regional dairy operations
along with the Company's other divested operations, have been treated as
discontinued operations, and previously published financial statements
have been restated to conform with this presentation.
On March 31, 1995, the Preferred Stock was redeemed by its issuer
at face value plus accrued dividends. The $3.0 million gain on the
stock, less applicable taxes and other reserves of $2.3 million, was
reflected in discontinued operations in the Consolidated Statements of
Operations during the first quarter of 1995. The Company also recognized
$268,000 in dividends, related to the Preferred Stock, during the first
quarter of 1995 which was recorded in continuing operations. The Company
recorded an additional loss from discontinued operations of approximately
$.5 million, net of tax benefits, during the second quarter of 1995,
related to discontinued operations reserves and other liabilities.
(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, June 30,
1994 1995
------------- -------------
<S> <C> <C>
Raw materials and supplies . . . . . . . . . . . . . . . . . . . $ 6,757 $ 5,514
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . 3,783 4,356
------------- ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,540 $ 9,870
============= ============
</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 June 30, 1995 were:
<TABLE>
<CAPTION>
Average
Amount of Interest
Debt Rate
------------- --------
(in thousands)
<S> <C> <C>
Senior term loan . . . . . . . . . . . . . . . . . . . . . . $ 48,000 7.323%
Revolving credit facility (a) . . . . . . . . . . . . . . . . - 9.000%
Industrial development revenue bonds . . . . . . . . . . . . . 3,000 4.850%
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 51,000
Less: Current maturities . . . . . . . . . . . . . . . . . . 8,000
-------------
Long term debt, net of current maturities . . . . . . . . . . $ 43,000
=============
</TABLE>
(a) At June 30, 1995, there were no borrowings under the
revolving credit facility and letters of credit totaling
$8,300,000 were issued. At June 30, 1995, the Company had
$16,700,000 in additional borrowing capacity under the
terms of its revolving credit facility.
(4) EARNINGS PER COMMON SHARE
Net income per share is based upon the weighted average shares of
common stock and common stock equivalents outstanding. Stock options are
included as common stock equivalents under the treasury stock method,
when dilutive.
(5) STOCK REPURCHASE PROGRAM
On June 21, 1995, the Company's Board of Directors announced that
it had approved a plan pursuant to which the Company may repurchase up to
$20 million of its common stock. The purchases will be effected through
open market transactions or negotiated transactions from time to time,
depending on the market price of the stock and other factors. As of June
30, 1995, no shares had been repurchased by the Company.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations - Second Quarter and Year-to-Date 1995
Compared with Second Quarter and Year-to-Date 1994
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) gourmet flavored coffee creamers, Second
Nature(R) egg product, Lactaid(R) reduced lactose and lactose-free milks 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 second quarter of 1995 totaled $75.3 million, an increase
of $1.7 million from net sales for the same period in 1994. For the six months
ended June 30, 1995, net sales were $147.4 million, an increase of $2.9 million
from the same period in 1994. The following table reflects net sales by
business category from year to year:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ---------------------------
Business Category 1994 1995 1994 1995
----------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Branded specialty products . . . . . . . . . . . $ 23,957 $ 27,949 $ 47,818 $ 55,476
Other specialty products . . . . . . . . . . . . 49,710 47,388 96,588 91,879
----------- ------------ ----------- -----------
Net sales . . . . . . . . . . . . . . . . . . . $ 73,667 $ 75,337 $ 144,406 $ 147,355
=========== ============ =========== ===========
</TABLE>
Net sales of branded specialty products increased by 16.7% and 16.0% for
the second quarter and first six months of 1995, respectively, when compared to
similar periods in 1994. This improvement was accomplished through increased
sales of International Delight(R) and Lactaid(R). Net sales of other specialty
products decreased by 4.7% during the second quarter due mainly to declines in
the juice and other category. Net sales of other specialty products declined
4.9% during the six month period ended June 30, 1995 due to declines in the
cultured category as well as the juice and other category. The Company's
selective withdrawal from certain marginally profitable segments of this
business also contributed to the declines.
Gross margin was 24.2% for the second quarter and the first six months of
1995, respectively, compared to 23.7% and 23.4% for like periods of 1994.
These comparisons are the result of increasing sales of branded products in the
second quarter and first six months of 1995, and the Company's selective
withdrawal from certain marginally profitable segments of the specialty
products business. This increase is slightly offset by increased competitive
pricing in the other specialty products category.
Operating expense ratios were 17.0% and 17.6% for the second quarter and
first six months of 1995, respectively, compared to 17.5% and 17.6% for like
periods of 1994. Distribution expenses as a percent of net sales decreased
slightly in 1995 despite the increase in branded sales. This reflects the
Company's continued efforts to optimize its distribution programs. Selling
expenses increased as a percent of net sales primarily as a result of increased
advertising and promotional activities and increased brokerage commissions
related to the increase in branded specialty products. General and
administrative expenses remained relatively flat as compared to 1994.
The Company's operating income during the second quarter of 1995 was $5.4
million, an increase of 19.8% from operating income for the second quarter of
1994 of approximately $4.5 million. For the first six months, 1995 operating
income was $9.8 million, an increase of 16.5% from 1994 operating income of
$8.4 million. The increase in operating income from like periods in 1994 was
the result of increased sales of branded products which contribute higher
operating margins.
For the second quarter, interest expense declined by 9.5% from $1.1
million in 1994 to $1.0 million in 1995. For the first six months, interest
expense declined 8.5%. The decrease in 1995 resulted from lower debt levels
offset by higher average interest rates on the Company's debt.
8
<PAGE> 10
The Company recorded net income from continuing operations of $2.8 million
and $5.1 million in the second quarter and first six months of 1995,
respectively, compared to $2.5 million and $4.3 million for the comparable
periods of 1994. The improved profitability was primarily the result of higher
branded product sales and higher gross margins.
Liquidity and Capital Resources
Cash provided by continuing operations was $10.7 million during the first
six months of 1995 compared to cash provided by continuing operations of $12.9
million during the first six months of 1994. The sources of cash during the
first six months of 1995 were the $10.7 million provided by continuing
operations, $.3 million provided from dividends on the Preferred Stock, $3.0
million from the sale of the Preferred Stock, and $.2 million from the exercise
of stock options. These sources of cash were utilized to pay down debt of $8.9
million, to provide for capital and other expenditures of $5.0 million, and to
provide for an increase in cash balances of $.3 million.
Capital expenditures during the first six months of 1995 were spent
primarily on equipment additions for increased operating efficiencies. As of
the end of the second quarter of 1995, the Company was in compliance with all
covenants and financial ratios contained in its Senior Credit Agreement. Based
upon the Company's projections for the remainder of 1995, management does not
anticipate any violation of the financial covenants contained in its Senior
Credit Agreement.
At June 30, 1995 the Company had approximately $16.7 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, debt service requirements, potential stock repurchases, and capital
expenditures for the foreseeable future.
Financing
As of June 30, 1995, the Company's Senior Credit Agreement consisted of a
$97.0 million term loan and a $25.0 million revolving credit facility. As of
June 30, 1995, there were no borrowings under the revolving credit facility and
approximately $8.3 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 in cash after working capital
adjustments, and $3.0 million of 9% Series A Preferred Stock. 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. The Company made additional term loan principal payments during
the year ended December 31, 1994, and during the three months ended March 31,
1995 of approximately $11.8 million and $5.0 million, respectively. The
Company also paid its scheduled principal payment of $2.0 million during the
second quarter of 1995. The remaining amortization schedule for the term loan
is as follows:
<TABLE>
<CAPTION>
Approximate
Quarterly payment date(s) Quarterly payment
---------------------------------- -----------------
<S> <C>
September 20, 1995 - September 20, 1996 $ 2,000,000
December 20, 1996 3,082,000
March 20, 1997 3,715,000
June 20, 1997 - September 20, 1998 4,518,000
December 20, 1998 4,088,000
</TABLE>
9
<PAGE> 11
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
To the knowledge of the Company, there are no reportable suits or
proceedings pending or threatened against or affecting the Company other than
those encountered in the ordinary course of the Company's business and
described in the Company's most recent Annual Report on Form 10-K.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Pursuant to a Stockholders Meeting held on May 18, 1995, the Company's
stockholders took the following actions:
Election of Directors - The stockholders elected each of C.
Dean Metropoulos, John R. Muse, Charles W. Tate, Jack W.
Evans, and Jim L. Turner to serve as a director of the
Company until his successor is elected and qualified, or if
earlier, until his death, resignation or removal from
office.
Appointment of Auditors - The stockholders ratified the
appointment of Arthur Andersen LLP as independent auditors
of the Company for the ensuing year.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit 27--Financial Data Schedule.
(b) Reports on Form 8-K.
None.
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/ C. DEAN METROPOULOS
C. Dean Metropoulos
President and Chief Executive Officer
(Authorized Officer)
Date: August 14, 1995
11
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,497
<SECURITIES> 0
<RECEIVABLES> 28,299
<ALLOWANCES> 1,495
<INVENTORY> 9,870
<CURRENT-ASSETS> 41,821
<PP&E> 62,785
<DEPRECIATION> 15,598
<TOTAL-ASSETS> 154,696
<CURRENT-LIABILITIES> 37,384
<BONDS> 0
<COMMON> 72,295
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 154,696
<SALES> 147,355
<TOTAL-REVENUES> 147,355
<CGS> 111,644
<TOTAL-COSTS> 111,644
<OTHER-EXPENSES> 25,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,174
<INCOME-PRETAX> 8,043
<INCOME-TAX> 2,928
<INCOME-CONTINUING> 5,115
<DISCONTINUED> 184
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,299
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
