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Previous: DATALINK SYSTEMS CORP /CA/, NT 10-Q, 1997-02-18 |
Next: PACIFIC SELECT EXEC SEPARATE ACCT PACIFIC MUTUAL LIFE INS, N-30D, 1997-02-18 |
<PAGE> 1
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): DECEMBER 3, 1996
THE MORNINGSTAR GROUP INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-19075 75-2217488
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Incorporation) Identification No.)
5956 SHERRY LANE, SUITE 1500 75225-6522
(FORMERLY SUITE 1800) (Zip Code)
DALLAS, TEXAS
(Address of principal executive offices)
Registrant's telephone number, including area code: (214) 360-4777
______________________________
<PAGE> 2
INDEX TO FINANCIAL STATEMENTS
ITEM 7.(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Page
<TABLE>
<S> <C>
Report of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Presto Food Products, Inc. Combined Balance Sheets . . . . . . . . . . . . . . . . . 3
Presto Food Products, Inc. Combined Statements of Income . . . . . . . . . . . . . . 4
Presto Food Products, Inc. Combined Statements of Changes in Shareholders' Equity . . . . . . 5
Presto Food Products, Inc. Combined Statements of Cash Flow . . . . . . . . . . . . . 6
Notes to Presto Food Products, Inc. Combined Financial Statements . . . . . . . . . . . . . . 7
ITEM 7.(b) PRO FORMA FINANCIAL INFORMATION.
Pro Forma Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Pro Forma Statement of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
1
<PAGE> 3
REPORT OF INDEPENDENT ACCOUNTANTS
February 8, 1996
To the Board of Directors and
Shareholders of
Presto Food Products, Inc. and Affiliate
In our opinion, the accompanying combined balance sheets and the related
combined statements of income, of changes in shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of
Presto Food Products, Inc. and Affiliate at December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
2
<PAGE> 4
PRESTO FOOD PRODUCTS, INC. AND AFFILIATE
COMBINED BALANCE SHEETS
($000's)
<TABLE>
<CAPTION>
September 30
(Unaudited) December 31,
---------------- ---------------------
1996 1995 1994
------ ---- ----
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 287 $ 6,313 $ 1,543
Accounts receivable (Note 7) 14,379 14,701 14,693
Inventories (Note 7) 13,765 7,487 10,694
Other current assets 25 664 608
------- ------- -------
Total current assets 28,456 29,165 27,538
Property, plant and equipment, net (Note 7) 24,206 22,802 24,292
Other assets 968 386 534
------- ------- -------
$53,630 $52,353 $52,364
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable - current portion (Note 3) $ 4,407 $ 1,989 $ 1,967
Accounts payable 8,091 4,002 6,349
Accrued liabilities 4,508 4,909 3,328
------- ------- -------
Total current liabilities 17,006 10,900 11,644
Notes payable - noncurrent portion (Note 3) 9,178 11,017 12,974
Deferred compensation (Note 5) 2,746 2,746 2,258
------- ------- -------
Total liabilities 28,930 24,663 26,876
------- ------- -------
Shareholders' equity:
Common stock (Note 2) 13 13 13
Additional paid-in capital 150 150 150
Retained earnings 24,537 27,527 25,325
------- ------- -------
Total shareholders' equity 24,700 27,690 25,488
------- -------
$53,630 $52,353 $52,364
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
PRESTO FOOD PRODUCTS, INC. AND AFFILIATE
COMBINED STATEMENTS OF INCOME
($000's)
<TABLE>
<CAPTION>
For the nine months ended For the years ended
September 30, December 31,
(Unaudited)
-------------------------- ----------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $101,206 $97,651 $139,472 $135,272 $126,612
Cost of goods sold 62,399 62,746 89,206 83,901 76,984
-------- -------- -------- -------- --------
Gross profit 38,807 34,905 50,266 51,371 49,628
-------- -------- -------- -------- --------
Selling expenses 23,159 22,693 30,928 33,845 30,602
General and administrative expenses 8,558 7,260 10,055 9,342 10,146
-------- -------- -------- -------- --------
Total expenses 31,717 29,953 40,983 43,187 40,748
-------- -------- -------- -------- --------
Operating income 7,090 4,952 9,283 8,184 8,880
-------- -------- -------- -------- --------
Interest expense 1,025 1,141 1,479 1,750 1,847
Other income and expense, net (Note 7) (108) (538) (106) 376 399
-------- -------- -------- -------- --------
917 603 1,373 2,126 2,246
-------- -------- -------- -------- --------
Income before income taxes 6,173 4,349 7,910 6,058 6,634
Provision for income taxes (Note 4) 113 93 209 151 235
-------- -------- -------- -------- --------
Net income $ 6,060 $ 4,256 $ 7,701 $ 5,907 $ 6,399
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
PRESTO FOOD PRODUCTS, INC. AND AFFILIATE
COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($000's)
<TABLE>
<CAPTION>
Total
Common Stock Additional share-
-------------------- paid-in Retained holders'
Series A Series B capital earnings equity
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $ 1 $ 12 $150 $22,228 $22,391
Net income 6,399 6,399
Dividends paid (3,303) (3,303)
----- ----- ------ ------- -------
Balance, December 31, 1993 1 12 150 25,324 25,487
Net income 5,907 5,907
Dividends paid (5,906) (5,906)
----- ----- ------ ------- -------
Balance, December 31, 1994 1 12 150 25,325 25,488
Net income 7,701 7,701
Dividends paid (5,499) (5,499)
----- ----- ------ ------- -------
Balance, December 31, 1995 $ 1 $ 12 $ 150 $27,527 $27,690
Net income (unaudited) 6,060 6,060
Dividends paid (unaudited) (9,050) (9,050)
----- ----- ------ ------- -------
Balance, September 30, 1996 (unaudited) $ 1 $ 12 $ 150 $24,537 $24,700
===== ===== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
PRESTO FOOD PRODUCTS, INC. AND AFFILIATE
COMBINED STATEMENTS OF CASH FLOW
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
($000's)
<TABLE>
<CAPTION> Nine months ended
September 30, Years ended December 31,
(Unaudited)
------------------- -------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 6,060 $4,256 $ 7,701 $ 5,907 $ 6,399
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation 2,299 2,005 3,173 2,850 2,596
Amortization - 9 11 477 626
Changes in assets and liabilities (Note 8) (2,211) (823) 3,002 (3,949) (189)
------ ------- ------- ------- -------
Cash provided by operating activities 6,148 5,447 13,887 5,285 9,432
------- ------ ------- ------- -------
Cash flows from investing activities:
Decrease (increase) in short-term investments - - - 3,177 (145)
Additions to property, plant and equipment (3,703) (934) (1,683) (3,404) (4,955)
------ ------- ------- ------- -------
Cash used in investing activities (3,703) (934) (1,683) (227) (5,100)
------ ------ ------- ------- -------
Cash flows from financing activities:
Proceeds from borrowings 2,418 - - 2,000 2,000
Payments on notes payable (1,839) (1,736) (1,935) (3,706) (1,772)
Dividends paid (9,050) (3,663) (5,499) (5,906) (3,303)
------ ------ ------- ------- -------
Cash used in financing activities (8,471) (5,399) (7,434) (7,612) (3,075)
------ ------ ------- ------- -------
Net increase (decrease) in cash and cash
equivalents (6,026) (886) 4,770 (2,554) 1,257
Cash and cash equivalents at beginning of year 6,313 1,543 1,543 4,097 2,840
------- ------- ------- ------- -------
Cash and cash equivalents at end of year $ 287 $ 657 $ 6,313 $ 1,543 $ 4,097
======= ======= ======= ======= =======
Cash paid for interest $ 1,087 $ 1,203
Cash paid for income taxes $ 92 $ 127
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
PRESTO FOOD PRODUCTS, INC. AND AFFILIATE
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND ITS
SIGNIFICANT ACCOUNTING POLICIES:
Presto Food Products, Inc. and its affiliate (collectively, the Company)
produce non-dairy and other specialty food products which it markets and
distributes to institutional and retail customers throughout the United States.
Established in 1937, the Company is a corporation which operates production
facilities in California and Tennessee and maintains sales offices and
distribution centers in several states.
Principles of combination
The combined financial statements of the Company include the accounts of Presto
Food Products, Inc. (Presto) and its affiliate, Presto Transportation, Inc.
(PTI), formerly RGB Laboratories, Inc. (RGB). Presto owns 70% of the
outstanding shares of common stock of PTI. The remaining shares of PTI are
owned by Presto shareholders in approximately the same proportion as their
ownership in Presto. All significant intercompany accounts and transactions
have been eliminated from the combined accounts.
Unaudited Interim Financial Information
The unaudited financial information furnished herein reflects all adjustments,
consisting only of normal recurring adjustments, which in the opinion of
management, are necessary to fairly state Presto's financial position, the
results of its operations and its cash flows for the periods presented.
The results of operations for the nine months ended September 30, 1996 are not
necessarily indicative of results for the entire fiscal year ending December
31, 1996.
Cash and cash equivalents
For the purposes of the statement of cash flows, the Company considers all
highly liquid investments with a maturity of three months or less to be cash
equivalents.
Concentration of credit risk
The Company sells its products to wholesale and retail customers throughout the
United States. In addition, the Company performs ongoing credit evaluations of
its customers and maintains allowances for potential credit losses which, when
realized, have generally been within the range of management's expectations.
The Company has no significant concentration of credit risk.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
7
<PAGE> 9
NOTE 1 - THE COMPANY AND ITS
SIGNIFICANT ACCOUNTING POLICIES, (Continued):
Property, plant and equipment
Property, plant and equipment are stated at cost. Depreciation is provided
using the straight-line method over the following estimated useful lives of the
assets:
<TABLE>
<S> <C>
Buildings and improvements 12 - 30 years
Equipment 3 - 10 years
</TABLE>
Expenditures for maintenance, repairs and improvements which do not materially
extend the useful lives of assets are charged to operations when incurred.
Major additions and improvements are capitalized at cost and depreciated over
their estimated useful lives.
Income taxes
For federal and state income tax purposes, the Company made an election to
obtain S-Corporation status effective for years subsequent to 1986. In certain
states in which S-corporation status is unavailable, the Company files as a C
corporation.
NOTE 2 - COMMON STOCK:
<TABLE>
<S> <C>
Common stock consists of the following:
Series A Common, voting, no par value, $.01 stated
value, 100,000 shares authorized, 16,623 shares
issued and outstanding $ 1,000
Series B Common, non-voting, no par value, $.01 stated
value, 1,500,000 shares authorized, 1,289,938 shares
issued and outstanding 12,000
-------
$13,000
=======
</TABLE>
8
<PAGE> 10
NOTE 3 - NOTES PAYABLE:
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1995 1994
---- ----
($000's)
<S> <C> <C>
9-3/4% unsecured senior notes, quarterly
payments of interest through 2001,
and annual installments of principal
of $1,000,000 beginning in 1992
through 2001 $ 6,000 $ 7,000
15% unsecured subordinated note,
quarterly payments of interest through
2002, principal balance due in 2002 2,296 2,296
7.97% unsecured senior note, monthly
payments of principal and interest of
approximately $33,000 through 1999 1,500 1,867
6.1% unsecured senior note, monthly
payments of principal and interest of
approximately $33,000 through 1998 1,109 1,505
15% unsecured subordinated notes,
annual installments of principal and
interest of $317,000 through 2002 1,317 1,420
7.5% unsecured subordinated notes,
quarterly payments of interest through
1994 followed by forty quarterly
installments of $36,000 784 853
------- -------
Total notes payable 13,006 14,941
Current portion of notes payable 1,989 1,967
------- -------
Notes payable - noncurrent portion $11,017 $12,974
======= =======
</TABLE>
The terms of the 9-3/4% senior notes require maintenance of various financial
and other covenants which limit certain transactions with respect to capital
stock, tangible assets, borrowings, leases and distributions. At December 31,
1995, the Company was in compliance with all such covenants.
9
<PAGE> 11
NOTE 3 - NOTES PAYABLE, (Continued):
The Company maintains a credit arrangement with a bank which provides revolving
short-term unsecured loans and letters of credit of up to $5,000,000 in the
aggregate. Such loans are made at the bank's prime lending rate. This
agreement requires the Company to comply with certain financial and other
covenants; the Company was in compliance at December 31, 1995 and 1994. There
are no outstanding borrowings at December 31, 1995 under this agreement.
Aggregate future maturities of notes payable at December 31, 1995 are as
follows ($000's):
<TABLE>
<CAPTION>
Year End December 31,
---------------------
<S> <C>
1996 $ 1,989
1997 2,013
1998 1,961
1999 1,574
2000 1,308
Thereafter 4,161
-------
$13,006
=======
</TABLE>
NOTE 4 - PROVISION FOR INCOME TAXES:
The provision for income taxes principally reflects the 1.5% surtax on
California earnings of the Company. Because the Company has elected
S-Corporation status for federal and state tax purposes, substantially all of
the income tax obligations related to the Company's taxable income are passed
through to its shareholders. It is the Company's policy to distribute
dividends to its shareholders in amounts which at a minimum are sufficient for
them to meet their individual tax obligations arising from the Company's
current year taxable earnings.
NOTE 5 - EMPLOYMENT BENEFIT PLANS:
Deferred compensation
The Company maintains a deferred compensation plan for certain executives.
Under the plan, participants may receive annual grants of units which vest
based upon total years of employment and years of employment following each
grant. The unit values are based upon a formula related to the change in total
shareholders' equity from the time of the grant to the time the units are
surrendered for redemption. The (decrease) increase in the value of all
outstanding units was $488,000, ($107,000) and $479,000 during the years ended
1995, 1994 and 1993, respectively.
10
<PAGE> 12
NOTE 5 - EMPLOYMENT BENEFIT PLANS, (Continued):
Retirement and Employee Savings Plan
In 1986, the Company established the Presto Food Products, Inc. Retirement and
Employee Savings Plan (the Plan). Employees who have attained the age of 21
and completed at least six months of service are eligible to participate in the
Plan. Participants may elect to defer 2% to 15% of their annual compensation.
The Company matches, depending on the length of service, 50% to 100% of the
participant's deferred contributions up to 6% of the participant's annual
compensation. Matching payments by the Company amounted to $256,000, $202,000
and $194,000 in 1995, 1994 and 1993, respectively. In addition, the Company
recorded a discretionary contribution of $252,000, $220,000 and $245,000 in
1995, 1994 and 1993, respectively.
Multi-employer Pension Plans
Approximately 60% of the Company's full-time employees are covered by
union-sponsored, multi-employer pension plans. During 1995, 1994 and 1993, the
Company recorded $542,000, $689,000 and $513,000 relating to these plans.
Contributions are determined in accordance with provisions of negotiated labor
contracts and are generally based upon the number of hours worked. The Company
has been advised that there are no withdrawal liabilities under these plans as
of December 31, 1995.
NOTE 6 - COMMITMENTS:
The Company occupies facilities and rents equipment under lease agreements
which expire at various dates through 2002. At December 31, 1995, the future
minimum rentals under leases are $587,000, $387,000, $146,000, $65,000, $50,000
and $38,000 for each of the next five years and thereafter. Certain of these
leases also provide for payments of taxes and insurance. Total rental expense,
including month-to-month rental of machinery and equipment, was approximately
$2,216,000, $2,248,000 and $1,936,000 in 1995, 1994 and 1993, respectively.
11
<PAGE> 13
NOTE 7 - DETAIL OF SELECTED BALANCE SHEET
AND INCOME STATEMENT CAPTIONS:
<TABLE>
<CAPTION>
December 31,
-----------------
1995 1994
($000's)
<S> <C> <C>
Accounts Receivable
Trade $14,954 $14,713
Allowance for doubtful accounts (438) (422)
------- -------
14,516 14,291
Other 185 402
------- -------
$14,701 $14,693
Inventories
Raw materials and packaging $ 3,945 $ 4,147
Finished goods 3,542 6,547
------- -------
$ 7,487 $10,694
Property, plant and equipment, net
Land $ 894 $ 894
Buildings and improvements 12,349 11,739
Equipment 30,204 29,358
Total property, plant and ------- ------
equipment, at cost $43,447 41,991
Accumulated depreciation (20,645) (17,699)
------- -------
$22,802 $24,292
</TABLE>
12
<PAGE> 14
NOTE 7 - DETAIL OF SELECTED BALANCE SHEET
AND INCOME STATEMENT CAPTIONS, (Continued):
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1995 1994 1993
---- ---- ----
($000's)
<S> <C> <C> <C>
Other expense (income)
Interest income $ (58) $ (51) $(216)
Amortization and other (48) 427 615
--- --- ----
$(106) $ 376 $ 399
===== ===== =====
</TABLE>
NOTE 8 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Details of changes in assets and liabilities which increased (decreased) cash
are presented below:
<TABLE>
<CAPTION>
For the years ended December 31,
-----------------------------------
1995 1994 1993
---- ---- ----
($000's)
<S> <C> <C> <C>
Increase (decrease) in cash:
Accounts receivable $ (8) $(1,361) $ (719)
Inventories 3,207 (3,628) (368)
Other current assets (56) 67 69
Intangible and other assets 137 7 18
Accounts payable (2,347) 1,800 132
Accrued liabilities 1,581 (727) 200
Deferred compensation 488 (107) 479
------- ------- -------
$ 3,002 $(3,949) $ (189)
======= ======= =======
</TABLE>
Cash paid for interest amounted to $1,486,000, $1,783,000 and $1,863,000 in
1995, 1994 and 1993, respectively. Cash paid for income taxes amounted to
$235,000, $221,000 and $209,000 in 1995, 1994 and 1993, respectively.
13
<PAGE> 15
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information set forth below is
presented to illustrate the estimated effects of the acquisition of Presto Food
Products, Inc. ("Presto"). The Pro Forma Balance Sheet has been prepared
assuming this transaction occurred on Septeber 30, 1996. The Pro Forma
Statement of Operations has been prepared assuming the transaction occurred on
January 1, 1995. The unaudited pro forma financial information is not
necessarily indicative of what the Company's financial position or results of
operations would have been if the acquisition and the renegotiated senior
credit facility had been consummated at the assumed dates, nor is it indicative
of future results of operations.
14
<PAGE> 16
THE MORNINGSTAR GROUP INC.
PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Morningstar Presto Purchase of Presto
Historical Historical ------------------ Pro Forma
ASSETS Balances Balances Debit Credit Balances
- ------ -------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash . . . . . . . . . . . . . . . . . . . . . . $ 3,724 $ 287 $ -- $ -- $ 4,011
Accounts receivable, net . . . . . . . . . . . 36,344 14,379 954(a) -- 51,677
Inventories . . . . . . . . . . . . . . . . . . 15,992 13,765 -- -- 29,757
Prepaids and deposits . . . . . . . . . . . . . 2,042 25 -- -- 2,067
Deferred tax assets . . . . . . . . . . . . . . 3,089 -- -- -- 3,089
Net assets held for sale . . . . . . . . . . . . 804 -- -- -- 804
---------- -------- --------- ----- --------
Total current assets . . . . . . . . . . . . . 61,995 28,456 954 -- 91,405
Net property, plant and
equipment . . . . . . . . . . . . . . . . 57,354 24,206 -- -- 81,560
INTANGIBLE AND OTHER
ASSETS:
Identifiable intangible assets . . . . . . . . . 3,278 -- 70,000 (b) -- 73,278
Goodwill, net . . . . . . . . . . . . . . . . . 65,452 -- 29,847 (c) -- 95,299
Deferred financing costs . . . . . . . . . . . . 980 -- 1,846 (d) -- 2,826
Other assets . . . . . . . . . . . . . . . . . . 236 968 -- -- 1,204
---------- -------- --------- ----- --------
69,946 968 101,693 -- 172,607
Total intangible and other assets . . . . . . ---------- -------- --------- ----- --------
TOTAL ASSETS . . . . . . . . . . . . . . . . . $ 189,295 $ 53,630 $ 102,647 $ -- $345,572
========== ======== ========= ===== ========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
15
<PAGE> 17
THE MORNINGSTAR GROUP INC.
PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Morningstar Presto Purchase of Presto
Historical Historical ------------------ Pro Forma
LIABILITIES & SHAREHOLDERS' EQUITY Balances Balances Debit Credit Balances
- ---------------------------------- --------- -------- ----- ------ --------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 28,462 $ 8,091 $ -- $ -- $ 36,553
Accrued liabilities 22,541 4,508 -- 6,840 (a) 33,889
Current portion of long-term debt 12,836 4,407 -- (9,243)(e) 8,000
-------- ------- ----- -------- --------
Total current liabilities 63,839 17,006 -- (2,403) 78,442
LONG TERM DEBT 37,164 9,178 -- 119,158 (e) 165,500
OTHER LONG-TERM LIABILITIES 5,339 2,746 -- 10,592 (a) 18,677
STOCKHOLDERS' EQUITY:
Common stock 153 13 -- (13)(f) 153
Additional paid-in capital 72,599 150 -- (150)(f) 72,599
Treasury stock, at cost (6,140) -- -- (6,140)
Retained earnings 16,341 24,537 -- (24,537)(f) 16,341
-------- ------- ----- -------- --------
Total stockholders' equity 82,953 24,700 -- (24,700) 82,953
-------- ------- ----- -------- --------
TOTAL LIABILITIES AND EQUITY $189,295 $53,630 $ -- $102,647 $345,572
======== ======= ===== ======== ========
</TABLE>
16
<PAGE> 18
The Morningstar Group
Notes to Pro Forma Consolidated Balance Sheet
As of September 30, 1996
(Unaudited)
The pro forma adjustments to the accompanying Consolidated Balance Sheet are
summarized below:
[a] To record the working capital assets and liabilities created in
connection with the Presto acquisition.
[b] To record identifiable intangible assets as a result of the Presto
acquisition.
[c] To record goodwill resulting from the acquisition.
[d] To record additional deferred financing costs related to the additional
financing for the acquisition.
[e] To record additional funds borrowed under the term loan to complete the
acquisition and to classify debt to the appropriate amount of current
portion outstanding.
[f] To eliminate Presto's stockholders' equity.
17
<PAGE> 19
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical Historical
Morningstar Presto Pro Forma
Nine Months Nine Months Nine Months
Ended Ended Presto Ended
September 30, 1996 September 30, 1996 Adjustments September 30, 1996
------------------ ------------------ ----------- ------------------
<S> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . $ 267,286 $ 101,206 $ -- $ 368,492
COST OF GOODS SOLD . . . . . . . . 207,317 62,399 -- 269,716
----------- ---------- ----------- -----------
Gross Profit . . . . . . . . . 59,969 38,807 -- 98,776
OPERATING COSTS AND
EXPENSES:
Distribution, Selling,
General and administrative . . . 43,884 31,717 1,931 (a) 72,282
(5,250)(b)
----------- ---------- ----------- -----------
OPERATING INCOME . . . . . . . . . 16,085 7,090 3,319 26,494
INTEREST EXPENSE . . . . . . . . . 2,033 1,025 6,199 (c) 9,257
AMORTIZATION OF DEFERRED
FINANCING COSTS . . . . . . . . . 284 -- 231 (d) 515
OTHER INCOME, NET . . . . . . . . . (350) (108) -- (458)
----------- ---------- ----------- -----------
INCOME/(LOSS) BEFORE
INCOME TAXES . . . . . . . . . . 14,118 6,173 (3,111) 17,180
PROVISION FOR
INCOME TAXES . . . . . . . . . . 4,797 113 1,173 (e) 6,083
----------- ---------- ----------- -----------
NET INCOME/(LOSS) . . . . . . . . . $ 9,321 $ 6,060 $ (4,284) $ 11,097
=========== ========== =========== ============
EARNINGS (LOSS) PER
SHARE . . . . . . . . . . . . . . $ 0.63 $ 0.75
AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . 14,802,981 14,802,981
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
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<PAGE> 20
THE MORNINGSTAR GROUP INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(Dollars in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Historical Historical
Morningstar Presto Pro Forma
Year Ended Year Ended Year
December 31, December 31, Presto Ended
1995 1995 Adjustments December 31, 1995
------------ ---------- ----------- ------------------
<S> <C> <C> <C> <C>
NET SALES . . . . . . . . . . . . . $ 304,730 $ 139,472 $ -- $ 444,202
COST OF GOODS SOLD . . . . . . . . 232,948 89,206 -- 322,154
--------- --------- --------- ---------------
Gross Profit . . . . . . . . . 71,782 50,266 -- 122,048
OPERATING COSTS AND
EXPENSES:
Distribution, Selling,
General and Administrative. . . 51,354 40,983 2,574 (a) 88,911
(6,000)(b)
---------- ---------- ---------- ---------------
OPERATING INCOME . . . . . . . . . 20,428 9,283 3,426 33,137
INTEREST EXPENSE . . . . . . . . . 3,921 1,479 6,789 (c) 12,189
AMORTIZATION OF DEFERRED
FINANCING COSTS . . . . . . . . . 381 -- 308 (d) 689
OTHER INCOME, NET . . . . . . . . . (1,276) (106) -- (1,382)
---------- ---------- ---------- ---------------
INCOME/(LOSS) BEFORE
INCOME TAXES . . . . . . . . . . 17,402 7,910 (3,671) 21,641
PROVISION FOR
INCOME TAXES . . . . . . . . . . 6,062 209 1,571 (e) 7,842
---------- ---------- ---------- ---------------
NET INCOME/(LOSS) . . . . . . . . . $ 11,340 $ 7,701 $ (5,242) $ 13,799
========== ========== ========= ===============
EARNINGS (LOSS) PER
SHARE . . . . . . . . . . . . . . $ 0.74 $ 0.91
AVERAGE COMMON SHARES
OUTSTANDING . . . . . . . . . . . 15,245,562 15,245,562
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
19
<PAGE> 21
THE MORNINGSTAR GROUP
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 1996 and
the Twelve Months Ended December 31, 1995
(Unaudited)
The pro forma adjustments to the accompanying Consolidated Statement of
Operations are summarized as follows:
[a] To record amortization expense for goodwill and intangibles:
[b] Reduction in personnel costs for selling, marketing and general
administration.
[c] To restate interest expense due to the increased term loan, less the
reduction in the revolver and the cash provided by Presto operations.
[d] To recognize additional amortization of deferred financing costs.
[e] The recognition of incremental federal and state income taxes such that
the Presto pro forma effective tax rate equals 42%.
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, 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/ Darron K. Ash
-----------------------------------
Darron K. Ash
Vice President and Chief Financial
Officer
Date: February 18, 1997
21
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