<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 September 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 September 30, 1995, the number of shares outstanding of each class of
common stock was:
Common Stock, $.01 par value: 15,234,161 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, September 30,
1994 1995
------------ -------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,152 $ 4,541
Receivables, net of allowance for doubtful accounts of $1,495 and $1,610 . 30,469 25,972
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,540 11,456
Prepaids and deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,062 1,954
Net assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . -- 761
------------ -------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 48,223 44,684
PROPERTY, PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,062 5,713
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,938 18,525
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 36,041 42,669
------------ -------------
Gross property, plant and equipment . . . . . . . . . . . . . . . . 60,041 66,907
Less: Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (13,404) (16,771)
------------ -------------
Net property, plant and equipment . . . . . . . . . . . . . . . . . 46,637 50,136
INTANGIBLE AND OTHER ASSETS:
Identifiable intangible assets . . . . . . . . . . . . . . . . . . . . . . 2,512 2,013
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,951 60,427
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . 1,540 1,354
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402 380
------------ -------------
Total intangible and other assets . . . . . . . . . . . . . . . . . 70,405 64,174
------------ -------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 165,265 $ 158,994
============ =============
</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, September 30,
1994 1995
------------ -------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,263 $ 21,059
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,345 14,716
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . 6,000 8,000
------------- -------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . 42,608 43,775
LONG-TERM DEBT (net of current maturities) . . . . . . . . . . . . . . . . . 53,892 38,000
OTHER LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . 1,963 1,987
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 50,000,000 shares authorized;
14,916,747 shares in 1994 and 15,234,161 shares in 1995 issued and outstanding 149 152
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 71,157 71,967
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . (4,504) 3,113
------------ -------------
Total stockholders' equity and retained earnings . . . . . . . . . 66,802 75,232
------------ -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . . . $ 165,265 $ 158,994
============ =============
</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 Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1994 1995 1994 1995
---------- ------------ ----------- ----------
<S> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . $ 70,429 $ 73,167 $ 214,835 $ 219,943
Cost of goods sold . . . . . . . . . . . . . . . . 54,764 56,872 165,633 168,511
Selling, distribution, and general and administrative 11,904 12,125 37,242 37,510
---------- ------------ ----------- -----------
OPERATING INCOME . . . . . . . . . . . . . . . . . . 3,761 4,170 11,960 13,922
OTHER (INCOME) AND EXPENSE:
Interest expense . . . . . . . . . . . . . . . . . 1,068 940 3,445 3,114
Dividend Income . . . . . . . . . . . . . . . . . . -- -- -- (268)
Amortization of net deferred financing costs . . . 90 94 260 286
Other income, net . . . . . . . . . . . . . . . . . (343) (292) (1,013) (683)
---------- ------------ ----------- -----------
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . 2,946 3,428 9,268 11,473
Provision for income taxes . . . . . . . . . . . . 1,089 1,112 3,108 4,040
---------- ------------ ----------- -----------
INCOME FROM CONTINUING OPERATIONS . . . . . . . . . . 1,857 2,316 6,160 7,433
DISCONTINUED OPERATIONS
Income from discontinued operations (a) . . . . . . (252) -- 818 --
Gain on disposal (b) . . . . . . . . . . . . . . . (43) -- 423 184
---------- ------------ ----------- -----------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS . . . . . (295) -- 1,241 184
---------- ------------ ----------- -----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . $ 1,562 $ 2,316 $ 7,401 $ 7,617
========== ============ =========== ===========
EARNINGS PER COMMON SHARE:
Earnings from continuing operations . . . . . . . . $ .12 $ .15 $ .41 $ .49
Earnings from discontinued operations . . . . . . . (.02) -- .08 .01
---------- ------------ ----------- -----------
Earnings per common share . . . . . . . . . . . . . $ .10 $ .15 $ .49 $ .50
========== ============ =========== ===========
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING . . . . . . . . . . . . . . . . 15,078,713 15,390,199 15,010,785 15,284,802
(a) Net of applicable tax provision of . . . . . . $ -- $ -- $ 507 $ --
(b) Net of applicable tax provision of . . . . . . -- -- 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>
Nine Months Ended
September 30,
-------------------------
1994 1995
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers . . . . . . . . . . . . . . . . . . . . . . . . . . $ 216,469 $ 224,440
Interest received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 -
Cash paid to suppliers and employees . . . . . . . . . . . . . . . . . . . . . . (195,756) (197,067)
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,419) (3,622)
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,784) (2,837)
----------- -----------
NET CASH PROVIDED BY CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . 15,636 20,914
NET CASH USED BY DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . . . (3,488) --
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . 12,148 20,914
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,846) (9,052)
Proceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . 30 2
Dividends received from Preferred Stock . . . . . . . . . . . . . . . . . . . . . - 268
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (502) 336
----------- -----------
Net cash used by continuing operations . . . . . . . . . . . . . . . . . . . . (6,318) (8,446)
Discontinued Operations:
Sale of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . 50,237 --
Sale of Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 3,000
Capital and other expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (482) --
----------- -----------
Net cash provided by discontinued operations . . . . . . . . . . . . . . . . . 49,755 3,000
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . 43,437 (5,446)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuing common stock . . . . . . . . . . . . . . . . . . . . . . . 1,622 813
Net payments under revolving credit facility . . . . . . . . . . . . . . . . . (16,675) (1,892)
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,131) (12,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (535) --
----------- -----------
NET CASH USED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . . . (55,719) (13,079)
----------- -----------
NET INCREASE (DECREASE) IN CASH . . . . . . . . . . . . . . . . . . . . . . . . . . (134) 2,389
CASH, BEGINNING OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,340 2,152
----------- -----------
CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,206 $ 4,541
=========== ===========
</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>
Nine Months Ended
September 30,
-------------------------
1994 1995
---------- -----------
<S> <C> <C>
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,401 $ 7,617
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH FLOW FROM OPERATIONS:
Discontinued operations net income . . . . . . . . . . . . . . . . . . . . . . (1,241) (184)
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,092 3,810
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . 2,022 2,025
(Gain) loss on fixed asset retirements . . . . . . . . . . . . . . . . . . . . (243) --
Increase in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814 2,866
Change in assets and liabilities, net of effects
from disposition of subsidiary:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,129 4,497
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,648) (916)
Prepaids & deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,578 2,883
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (239) 3,796
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,076) (5,229)
Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 (251)
---------- -----------
NET CASH PROVIDED BY CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . . . . 15,636 20,914
DISCONTINUED OPERATIONS:
Discontinued operations net income . . . . . . . . . . . . . . . . . . . . . . 1,241 184
Gain on divestiture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (423) (184)
Change in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,095) --
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 789 --
---------- -----------
NET CASH USED BY DISCONTINUED OPERATIONS . . . . . . . . . . . . . . . . . . . . . (3,488) --
---------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . . . $ 12,148 $ 20,914
========== ===========
</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
September 30, 1995
(1) CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements as of September 30, 1995,
and for the nine 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 September 30, 1995 and for the nine 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 December 31, At September 30,
1994 1995
--------------- ----------------
<S> <C> <C>
Raw materials and supplies . . . . . . . . . . . . . . . . . . . $ 6,757 $ 5,828
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . 3,783 5,628
--------------- ----------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,540 $ 11,456
=============== ================
</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 September 30, 1995 were:
<TABLE>
<CAPTION>
Average
Amount of Interest
Debt Rate
------------ --------
(in thousands)
<S> <C> <C>
Senior term loan . . . . . . . . . . . . . . . . . . . . . . $ 43,000 7.250%
Revolving credit facility (a) . . . . . . . . . . . . . . . . -- 8.750%
Industrial development revenue bonds . . . . . . . . . . . . . 3,000 4.600%
------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 46,000
Less: Current maturities . . . . . . . . . . . . . . . . . . 8,000
------------
Long term debt, net of current maturities . . . . . . . . . . $ 38,000
============
</TABLE>
(a) At September 30, 1995, there were no amounts borrowed under
the revolving credit facility and letters of credit
totalling $8,850,000 were issued. At September 30, 1995,
the Company had $16,150,000 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 Ashof September 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 - Third Quarter and Year-to-Date 1995
Compared with Third 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 non-dairy
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 third quarter of 1995 totalled $73.2 million, an
increase of $2.8 million from net sales for the same period in 1994. For the
nine months ended September 30, 1995, net sales were $219.9 million, an
increase of $5.1 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 Nine Months Ended
September 30, September 30,
-------------------------- ---------------------------
Business Category 1994 1995 1994 1995
----------------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Branded specialty products . . . . . . . . . . . $ 24,792 $ 27,322 $ 72,610 $ 82,798
Other specialty products . . . . . . . . . . . . 45,637 45,845 142,225 137,145
----------- ------------ ----------- -----------
Net sales . . . . . . . . . . . . . . . . . . . $ 70,429 $ 73,167 $ 214,835 $ 219,943
=========== ============ =========== ===========
</TABLE>
Net sales of branded specialty products increased by 10.2% and 14.0% for
the third quarter and first nine months of 1995 when compared to similar
periods in 1994. This improvement was accomplished through increased sales of
International Delight and Lactaid. Net sales of other specialty products
remained flat during the third quarter of 1995 versus 1994, as the Company
continues to selectively exit from some of its lower margin business. Net
sales of other specialty products declined 3.6% during the nine month period
ended September 30, 1995 due mainly to declines in the cultured and juice
categories.
Gross margin was 22.3% and 23.4% for the third quarter and first nine
months of 1995 compared to 22.2% and 22.9% for the same periods in 1994. These
comparisons are the result of increasing sales of branded products in the third
quarter, which contribute higher gross margins, but have been slightly offset
by increased competitive pricing in the other specialty products category.
Operating expense ratios were 16.6% and 17.1% for the third quarter and
first nine months of 1995 compared to 16.9% and 17.3% for the same periods in
1994. Distribution expenses, as a percent of net sales, decreased during the
nine months ended September 30, 1995, versus the same period in 1994, despite
the increase in branded sales. This reflects the Company's continuing efforts
to optimize its distribution programs. Selling expenses remained relatively
flat from 1994 to 1995. General and administrative expenses, as a percent of
net sales, increased slightly in 1995 due in part to additional depreciation.
The Company's operating income during the third quarter of 1995 was $4.2
million, an increase of 10.9% from operating income for the third quarter of
1994 of approximately $3.8 million. For the first nine months, 1995 operating
income was $13.9 million, an increase of 16.4% from 1994 operating income of
$12.0 million. The increase in operating income from like periods in 1994 was
the result of higher branded sales and higher gross margins.
For the third quarter, interest expense declined by 12.0% from $1.1
million in 1994 to $.9 million in 1995. For the first nine months, interest
expense declined 9.6%. These reductions resulted primarily from lower average
debt levels offset by higher average interest rates on the Company's debt.
The Company recorded net income from continuing operations of $2.3 million
and $7.4 million in the third quarter and first nine months of 1995 compared
to $1.9 million and $6.2 million for the comparable periods of 1994. The
improved profitability was primarily the result of higher branded sales, lower
interest expense and higher gross margins.
8
<PAGE> 10
Liquidity and Capital Resources
Cash provided by continuing operations was $20.9 million during the first
nine months of 1995 compared to cash provided by continuing operations of $15.6
million during the first nine months of 1994. The sources of cash during the
first nine months of 1995 were the $20.9 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 $.8 million from the exercise
of stock options. These sources of cash were utilized to pay down debt of
$13.9 million, to provide for capital and other expenditures of $8.7 million,
and to provide for an increase in cash balances of $2.4 million.
Capital expenditures during the first nine months of 1995 were spent
primarily on equipment additions for increased operating efficiencies. As of
the end of the third 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 September 30, 1995 the Company had approximately $16.1 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 September 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 September 30, 1995, there were no amounts borrowed under the revolving
credit facility and approximately $8.9 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 paid its scheduled principal payment of $2.0 million during the second
quarter of 1995. During the third quarter of 1995, the Company paid its
scheduled principal payment of $2.0 million as well as an additional prepayment
of $3.0 million. The remaining amortization schedule for the term loan is as
follows:
<TABLE>
<CAPTION>
Approximate
Quarterly payment date(s) Quarterly payment
---------------------------------- -----------------
<S> <C>
December 20, 1995 - December 20, 1996 $ 2,000,000
March 20, 1997 1,798,000
June 20, 1997 - September 20, 1998 4,519,000
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.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
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: November 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,541
<SECURITIES> 0
<RECEIVABLES> 27,582
<ALLOWANCES> 1,610
<INVENTORY> 11,456
<CURRENT-ASSETS> 44,684
<PP&E> 66,907
<DEPRECIATION> (16,771)
<TOTAL-ASSETS> 158,994
<CURRENT-LIABILITIES> 43,775
<BONDS> 0
<COMMON> 72,119
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 158,994
<SALES> 219,943
<TOTAL-REVENUES> 219,943
<CGS> 168,511
<TOTAL-COSTS> 168,511
<OTHER-EXPENSES> 37,510
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 11,473
<INCOME-TAX> 4,040
<INCOME-CONTINUING> 7,433
<DISCONTINUED> 184
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,617
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
</TABLE>
