<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
April 13, 1994
THE MORNINGSTAR GROUP INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19075 75-2217488
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
5956 Sherry Lane, Suite 1800
Dallas, Texas 75225-6522
(Address of principal executive offices including zip code)
Registrant's telephone number,
including area code: (214) 360-4777
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INFORMATION TO BE INCLUDED IN REPORT
Item 2. Acquisition or Disposition of Assets.
On April 13, 1994, the registrant, The Morningstar Group Inc.
("Morningstar" or "Company"), completed the previously announced divestiture of
Velda Farms Inc. ("Velda") to Engles Dairy Acquisition L.P. ("Purchaser") at a
selling price of approximately $48.0 million consisting of $45.0 million and
$3.0 million of 9% Series A Preferred Stock of OC, Holdings, Inc., an affiliate
of the Purchaser. Morningstar recorded a gain of approximately $.4 million
after expenses and taxes related to the sale. The Company has not assigned any
value to the preferred stock. As such, the preferred stock has not been
included in determining the gain on the sale. Also, as part of this
transaction Morningstar entered into a Dairy Products Supply Agreement with the
Purchaser.
On January 24, 1994, the Company completed the sale of its plastic packaging
operation ("Packaging") to CKS Rigal Plastics at a selling price of
approximately $1.2 million in cash. The Company recorded an immaterial loss on
the sale after considering expenses and taxes related to the sale.
The foregoing summary is subject to the full text of the Amended and Restated
Agreement and Plan of Merger and the Dairy Products Supply Agreement, both of
which relate to the Velda sale and which were previously included in the
Company's Form 8-K filed April 28, 1994.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(b) Pro Forma Financial Information.
The following financial information is presented to
illustrate the effects of the divestitures of Velda and
Packaging as if such divestitures had occurred on December
31, 1993 (balance sheet) and January 1, 1993 (statement of
operations).
(1) Balance Sheet as of December 31, 1993 (unaudited).
(2) Statement of Operations for the year ended December 31,
1993 (unaudited).
(c) Exhibits.
None.
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<PAGE> 3
THE MORNINGSTAR GROUP
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1993
DOLLARS IN THOUSANDS
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical Divested -------------------------- Pro Forma
ASSETS Balances Operations Debit Credit Balances
- ------ ---------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash $ 3,343 $ (3) $ 46,530(a) $ 4,062(b) $ 4,908
40,900(c)
Receivables 36,621 (10,568) 709(d) - 26,762
Inventories 15,127 (3,600) - - 11,527
Prepaids & deposits 9,966 (447) - - 9,519
----------- ----------- ----------- ----------- ----------
Total current assets 65,057 (14,618) 47,239 44,962 52,716
INVESTMENT IN EQUITY SECURITIES - - 3,000(e) 3,000(e) -
PROPERTY, PLANT & EQUIPMENT:
Land 9,765 (3,704) - - 6,061
Buildings 22,557 (6,093) - - 16,464
Machinery & equipment 37,807 (8,473) - - 29,334
----------- ----------- ----------- ----------- ----------
Gross property, plant & equipment 70,129 (18,270) - - 51,859
Less: Accumulated depreciation (13,882) 4,133 - - (9,749)
----------- ----------- ----------- ----------- -----------
Net property, plant & equipment 56,247 (14,137) - - 42,110
INTANGIBLE AND OTHER ASSETS:
Identifiable intangible assets 3,177 - - - 3,177
Goodwill 90,114 (18,285) - - 71,829
Deferred financing costs 3,099 (394) - 688(b) 2,017
Other assets 2,778 (1,006) - - 1,772
----------- ----------- ----------- ----------- ----------
Total intangible and other assets 99,168 (19,685) - 688 78,795
----------- ----------- ----------- ----------- ----------
TOTAL ASSETS $ 220,472 $ (48,440) $ 50,239 $ 48,650 $ 173,621
=========== =========== =========== =========== ==========
</TABLE>
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<PAGE> 4
THE MORNINGSTAR GROUP
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1993
DOLLARS IN THOUSANDS
(unaudited)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical Divested -------------------------- Pro Forma
Balances Operations Debit Credit Balances
LIABILITIES AND ---------- ----------- ----------- ----------- ----------
SHAREHOLDERS' EQUITY
- --------------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 24,417 $ (6,416) $ - $ - $ 18,001
Intercompany accounts payable - (709) - 709(d) -
Accrued liabilities 19,434 (1,608) - 880(b) 18,706
Current portion of long-term debt 14,750 - 3,775(c) - 10,975
----------- ----------- ----------- ----------- ----------
Total current liabilities 58,601 (8,733) 3,775 1,589 47,682
LONG-TERM DEBT:
Senior term loan 85,750 - 20,450(c) - 65,300
Revolving credit facility 16,675 - 16,675(c) - -
Industrial revenue bonds 3,000 - - - 3,000
----------- ----------- ----------- ----------- ----------
Total long-term debt 105,425 - 37,125 - 68,300
OTHER LONG-TERM LIABILITIES 1,913 - 250(a) - 1,663
----------- ----------- ----------- ----------- ----------
STOCKHOLDERS' EQUITY:
Common stock 143 - - - 143
Additional paid-in capital 69,541 - - - 69,541
Retained deficit (15,151) - - 1,443(f) (13,708)
Payables to parent - (39,707) - 39,707(g) -
----------- ----------- ----------- ----------- ----------
Total stockholders' equity 54,533 (39,707) - 41,150 55,976
----------- ----------- ----------- ----------- ----------
TOTAL LIABILITIES AND
EQUITY $ 220,472 $ (48,440) $ 41,150 $ 42,739 $ 173,621
=========== =========== =========== =========== ==========
</TABLE>
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THE MORNINGSTAR GROUP
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1993
(Unaudited)
The unaudited pro forma consolidated balance sheet combines the following:
(1) The historical consolidated balance sheet of The Morningstar Group
Inc. and Subsidiaries as of December 31, 1993.
(2) The effect of the disposition of The Morningstar Group's wholly-owned
subsidiaries, Velda and Packaging (collectively, the "Divested
Operations"), based on their historical balances as of December 31,
1993.
(3) Pro Forma Adjustments as follows:
<TABLE>
<S> <C>
Sources of Funds
Net Sales Proceeds $ 46,530
===========
Uses of Funds
Term Loan reduction $ 24,225
Revolving Credit Facility reduction 16,675
Expenses and write-offs 5,630
-----------
Total Uses $ 46,530
===========
</TABLE>
(a) The pro forma proceeds from the sale of the Divested Operations
based upon their historical working capital balances as of
December 31, 1993.
(b) The recognition of expenses and write-offs incurred as a result of
the dispositions, including legal fees, accounting fees, insurance
costs, the write-off of a prorata share of Morningstar's deferred
financing costs, and federal and state income taxes relating to
the gain on the dispositions.
(c) The principal reductions in Morningstar's outstanding bank debt
with the net proceeds of the dispositions.
(d) The recognition of a receivable that was formerly eliminated as an
intercompany receivable between continuing Morningstar
subsidiaries and the Divested Operations.
(e) The recognition of preferred stock received as part of the
proceeds during the dispositions, and the creation of a valuation
reserve to defer recognition of the gain until dividends on the
preferred stock commence.
<TABLE>
<S> <C>
9% Series A Preferred Stock $ 3,000
Reserve for Preferred Stock (3,000)
-----------
Net gain on Preferred Stock $ -
===========
</TABLE>
(f) The recognition of the net gain on the dispositions.
(g) The write-off of Morningstar's net investment in the Divested
Operations.
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THE MORNINGSTAR GROUP
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
DOLLARS IN THOUSANDS
(unaudited)
<TABLE>
<CAPTION>
Pro Forma
Year Ended
Morningstar Divested Pro Forma December 31,
Historical Operations Adjustments 1993
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
NET SALES $ 396,668 $ (122,719) $ - $ 273,949
COST OF GOODS SOLD 302,987 (91,390) - 211,597
----------- ----------- ---------- ----------
Gross Profit 93,681 (31,329) - 62,352
OPERATING COSTS AND EXPENSES:
Distribution 35,576 (17,915) - 17,661
Selling 21,660 (2,652) - 19,008
General and administrative 18,679 (4,182) (300) (a) 13,576
(621) (b)
Restructuring and other charges 9,000 (1,900) - 7,100
----------- ----------- ---------- ----------
Total operating costs and expenses 84,915 (26,649) (921) 57,345
----------- ----------- ---------- ----------
OPERATING INCOME 8,766 (4,680) 921 5,007
INTEREST EXPENSE 6,429 - (2,179) (c) 4,250
AMORTIZATION OF DEFERRED
FINANCING COSTS 747 - (261) (d) 486
OTHER INCOME, NET (1,279) 374 - (905)
----------- ----------- ---------- ----------
INCOME/(LOSS) BEFORE INCOME TAXES 2,869 (5,054) 3,361 1,176
PROVISION FOR INCOME TAXES 1,885 - (1,438) (e) 447
----------- ----------- ---------- -----------
NET INCOME/(LOSS) $ 984 $ (5,054) $ 4,799 $ 729
=========== =========== ========== ==========
EARNINGS PER SHARE:
Net earnings $ .06 $ .05
AVERAGE COMMON SHARES OUTSTANDING 15,011,607 15,011,607
</TABLE>
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THE MORNINGSTAR GROUP INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(Unaudited)
The unaudited pro forma consolidated statement of operations combines the
following:
(1) The historical consolidated statement of operations of The Morningstar
Group Inc. and Subsidiaries for the twelve months ended December 31,
1993.
(2) Pro forma adjustments to eliminate the historical results of the
Company's wholly-owned subsidiaries, Velda and Packaging
(collectively, the "Divested Operations") for the twelve months ended
December 31, 1993.
(3) Pro forma adjustments to reflect the effect of the dispositions on the
following (in thousands):
(a) The reduction of certain general and administrative expenses
resulting from reductions of corporate level services and
personnel.
(b) The reduction in amortization of intangibles due to amounts
written off as a result of the dispositions.
<TABLE>
<S> <C>
Identifiable intangibles $ (127)
Goodwill (494)
-----------
$ (621)
===========
</TABLE>
(c) The recognition of the reduction in interest expense resulting
from the payoff of Morningstar's bank loans with the net cash
proceeds from the dispositions.
<TABLE>
<CAPTION>
$ in 000's Avg. rate Interest
---------- --------- --------
<S> <C> <C> <C>
Term loan (24,225) 5.261% $ (1,275)
Revolver (16,675) 5.422% (904)
-----------
Annual reduction $ (2,179)
===========
</TABLE>
(d) The reduction in deferred finance amortization due to amounts
written off as a result of the disposition.
<TABLE>
<CAPTION>
1993 Amortization
-----------------
<S> <C>
Revolver $ 150
Term loan 597
-----------
747
Payoff per balance sheet 34.91%
-----------
Divested amount $ 261
===========
</TABLE>
(e) The recognition of federal and state income taxes based on an
estimated effective tax rate of 38%.
<TABLE>
<S> <C>
Total pro forma profits $ 1,176
Tax rate 38%
-----------
Estimated taxes 447
Less taxes previously recorded (1,885)
-----------
Pro forma tax $ (1,438)
===========
</TABLE>
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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.
(Registrant)
By: /s/Michael J. Cramer
-------------------------------
Michael J. Cramer
Vice President and Secretary
Date: March 27, 1995
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