-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BSsgiGDm+csL41+Ihc+vC3LCa0IEdwFSfI5uqBNHf4+2/r8I4h3wqXzQHQQFU9+K Bqr1RLoEXQpXRLS3QHhtdQ== 0001018848-97-000003.txt : 19970815 0001018848-97-000003.hdr.sgml : 19970815 ACCESSION NUMBER: 0001018848-97-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970712 FILED AS OF DATE: 19970814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: KEEBLER CORP CENTRAL INDEX KEY: 0001018848 STANDARD INDUSTRIAL CLASSIFICATION: COOKIES & CRACKERS [2052] IRS NUMBER: 363839556 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-08379 FILM NUMBER: 97662747 BUSINESS ADDRESS: STREET 1: 1 HOLLOW TREE LN CITY: ELMHURST STATE: IL ZIP: 60126 BUSINESS PHONE: 7088332900 10-Q 1 ================================================================================ UNITED STATES 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 JULY 12, 1997 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: NO. 333-8379 ------------------------------ KEEBLER CORPORATION (Exact name of Registrant as specified in its charter) DELAWARE 36-1894790 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 677 LARCH AVE., ELMHURST, IL 60126 (Address of principal executive offices) 630-833-2900 (Registrant's telephone number, including area code) NOT APPLICABLE. (Former name, former address and former fiscal year, if changed since last report) ----------------------------- 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 [ ] NUMBER OF SHARES OF COMMON STOCK, $1.00 PAR VALUE, OUTSTANDING AS OF THE CLOSE OF BUSINESS ON AUGUST 14, 1997: 1,000,000. ================================================================================ PART I: FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS KEEBLER CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
JULY 12, December 28, 1997 1996 ----------- ----------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,037 $ 11,404 Trade accounts and notes receivable, net 114,345 137,150 Inventories, net: Raw materials 28,086 25,296 Package materials 10,582 9,842 Finished goods 83,086 76,054 Other 1,928 1,473 ----------- ----------- 123,682 112,665 Deferred income taxes 45,810 55,929 Other 20,014 19,337 ----------- ----------- Total current assets 313,888 336,485 PROPERTY, PLANT, AND EQUIPMENT, NET 473,267 486,080 TRADEMARKS AND TRADENAMES, NET 155,935 158,033 GOODWILL, NET 47,622 48,280 PREPAID PENSION 42,682 43,359 ASSETS HELD FOR SALE 3,178 6,785 OTHER ASSETS 17,399 22,502 ----------- ----------- Total assets $ 1,053,971 $ 1,101,524 =========== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 2
KEEBLER CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (IN THOUSANDS)
JULY 12, December 28, 1997 1996 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 21,270 $ 18,570 Trade accounts payable 78,060 96,754 Other liabilities and accruals 203,900 186,586 Income taxes payable 12,527 - Plant and facility closing costs and severance 8,002 19,860 ----------- ----------- Total current liabilities 323,759 321,770 LONG-TERM DEBT 356,955 412,705 OTHER LIABILITIES: Deferred income taxes 48,742 64,957 Postretirement/postemployment obligations 58,313 56,382 Plant and facility closing costs and severance 16,124 16,124 Deferred compensation 16,601 18,205 Other 23,954 20,708 ----------- ----------- Total other liabilities 163,734 176,376 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock ($1 par value; 1,000,000 shares authorized and issued) 1,000 1,000 Additional paid-in capital 172,568 172,568 Retained earnings 35,955 17,105 ----------- ----------- Total shareholders' equity 209,523 190,673 ----------- ----------- Total liabilities and shareholders' equity $ 1,053,971 $ 1,101,524 =========== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 3
KEEBLER CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS) KEEBLER CORPORATION KEEBLER CORPORATION || UBIUS --------------------------- -------------------------- || ----------- TWELVE Twelve TWENTY-EIGHT Twenty-Four || Four WEEKS ENDED Weeks Ended WEEKS ENDED Weeks Ended || Weeks Ended JULY 12, July 13, JULY 12, July 13, || January 26, 1997 1996 1997 1996 || 1996 ----------- ----------- ----------- ----------- || ----------- || NET SALES $ 459,828 $ 383,765 $1,056,862 $ 719,024 || $ 101,656 || COSTS AND EXPENSES: || Cost of sales 200,082 185,921 460,101 343,370 || 54,870 Selling, marketing, and || administrative expenses 227,124 185,511 535,667 351,113 || 71,427 Other 1,626 1,588 4,546 2,522 || 857 ----------- ----------- ----------- ----------- || ----------- INCOME (LOSS) FROM CONTINUING OPERATIONS 30,996 10,745 56,548 22,019 || (25,498) || Interest (income) from affiliates - - - - || (875) Interest (income) (183) (269) (328) (399) || (3) Interest expense to affiliates - - - - || 664 Interest expense 7,965 9,107 19,735 16,962 || 98 ----------- ----------- ----------- ----------- || ----------- INTEREST EXPENSE (INCOME), NET 7,782 8,838 19,407 16,563 || (116) ----------- ----------- ----------- ----------- || ----------- || INCOME (LOSS) FROM CONTINUING OPERATIONS || BEFORE INCOME TAX EXPENSE 23,214 1,907 37,141 5,456 || (25,382) Income tax expense 9,760 781 15,599 2,747 || - ----------- ----------- ----------- ----------- || ----------- || INCOME (LOSS) FROM CONTINUING OPERATIONS || BEFORE EXTRAORDINARY ITEM 13,454 1,126 21,542 2,709 || (25,382) || DISCONTINUED OPERATIONS: || Gain on disposal of the Frozen Food || businesses, net of tax - - - - || 18,910 ----------- ----------- ----------- ----------- || ----------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 13,454 1,126 21,542 2,709 || (6,472) EXTRAORDINARY ITEM: || Loss on early extinguishment of debt, || net of tax - 1,925 2,692 1,925 || - ----------- ----------- ----------- ----------- || ----------- NET INCOME (LOSS) $ 13,454 $ (799) $ 18,850 $ 784 || $ (6,472) =========== =========== =========== =========== || =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 4
KEEBLER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS) KEEBLER CORPORATION || UBIUS ------------------------------ || ----------- TWENTY-EIGHT Twenty-Four || Four WEEKS ENDED Weeks Ended || Weeks Ended JULY 12, July 13, || January 26, 1997 1996 || 1996 ----------- ----------- || ----------- || CASH FLOWS PROVIDED FROM (USED BY) OPERATING ACTIVITIES || Net income (loss) $ 18,850 $ 784 || $ (6,472) Adjustments to reconcile net income (loss) to cash from || operating activities: || Depreciation and amortization 31,473 21,370 || 1,973 Deferred income taxes (6,096) - || - Gain on the disposal of the Frozen Food businesses, net of tax - - || (18,910) Loss on early extinguishment of debt, net of tax 2,692 1,925 || - (Gain) loss on sale of property, plant, and equipment (605) (46) || 33 Changes in assets and liabilities: || Trade accounts and notes receivable, net 22,805 (1,352) || 22,068 Accounts receivable/payable from affiliates, net - - || (1,941) Inventories, net (11,017) (14,174) || 4,353 Recoverable income taxes and income taxes payable 14,477 1,572 || 25 Other current assets (677) (1,732) || 1,192 Deferred debt issue costs (1,250) (6,123) || - Trade accounts payable and other current liabilities (1,877) 31,737 || 11,550 Restructuring reserves - - || (14,469) Plant and facility closing costs and severance (11,830) (25,511) || - Other, net 5,020 3,292 || 246 ----------- ----------- || ----------- Cash provided from (used by) operating activities 61,965 11,742 || (352) || CASH FLOWS (USED BY) PROVIDED FROM INVESTING ACTIVITIES || Capital expenditures (15,251) (9,085) || (3,228) Proceeds from property disposals 4,969 3,061 || 644 Disposition of the Frozen Food businesses - - || 67,749 Purchase of Sunshine Biscuits, Inc., net of cash acquired - (142,670) || - Working capital adjustment paid by UB Investment (Netherlands)B.V. - 32,609 || - ----------- ----------- || ----------- Cash (used by) provided from investing activities (10,282) (116,085) || 65,165 || CASH FLOWS (USED BY) PROVIDED FROM FINANCING ACTIVITIES || Long-term debt borrowings 109,750 220,000 || - Long-term debt repayments (162,800) (127,925) || (2,377) Revolving Loan facility, net - 13,570 || (63,300) ----------- ----------- || ----------- Cash (used by) provided from financing activities (53,050) 105,645 || (65,677) ----------- ----------- || ----------- (Decrease) increase in cash and cash equivalents (1,367) 1,302 || (864) Cash and cash equivalents at beginning of period 11,404 2,114 || 2,978 ----------- ----------- || ----------- Cash and cash equivalents at end of period $ 10,037 $ 3,416 || $ 2,114 =========== =========== || =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS. 5
KEEBLER CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- THE CONSOLIDATED FINANCIAL STATEMENTS OF KEEBLER CORPORATION ("THE COMPANY") INCLUDE THE FINANCIAL STATEMENTS OF UB INVESTMENTS US, INC. ("UBIUS"), THE PREDECESSOR COMPANY, FOR THE FOUR WEEKS ENDED JANUARY 26, 1996, THE DATE THE COMPANY WAS ACQUIRED BY INFLO HOLDINGS CORPORATION ("INFLO"), AND THE SUCCESSOR COMPANY FOR THE TWENTY-EIGHT WEEKS ENDED JULY 12, 1997 AND THE TWENTY-FOUR WEEKS ENDED JULY 13, 1996. THE DISTINCTION BETWEEN THE PREDECESSOR COMPANY'S AND THE SUCCESSOR COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS HAS BEEN MADE BY INSERTING A DOUBLE LINE BETWEEN SUCH CONSOLIDATED FINANCIAL STATEMENTS. THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FOUR WEEKS ENDED JANUARY 26, 1996 INCLUDE "THE FROZEN FOOD BUSINESSES", DEFINED AS BERNARDI ITALIAN FOODS CO., THE ORIGINAL CHILI BOWL, INC., AND CHINESE FOOD PROCESSING CORPORATION, ALL OF WHICH WERE WHOLLY OWNED SUBSIDIARIES OF UBIUS PRIOR TO THEIR SALE ON DECEMBER 31, 1995. 1. BASIS OF PRESENTATION INTERIM FINANCIAL STATEMENTS The unaudited interim consolidated financial statements included herein were prepared pursuant to the rules and regulations for interim reporting under the Securities Exchange Act of 1934. Accordingly, certain information and footnote disclosures normally accompanying the annual financial statements were omitted. The interim consolidated financial statements and notes should be read in conjunction with the annual audited consolidated financial statements and notes thereto. The accompanying unaudited interim consolidated financial statements contain all adjustments, consisting only of normal adjustments, which in the opinion of management were necessary for a fair statement of the results for the interim periods. Results for the interim periods are not necessarily indicative of results for the full year. FISCAL PERIODS PRESENTED The Company's fiscal year consists of thirteen four-week periods (52 or 53 weeks) and ends on the Saturday nearest December 31. The first quarter consists of four four-week periods. In 1996, the acquisition of Keebler Corporation closed on the last day of the first four-week period. The 1996 year-to-date information can be derived from the sum of the twenty-four weeks ended July 13, 1996 of Keebler Corporation and the four weeks ended January 26, 1996 of UBIUS. RECLASSIFICATIONS Certain reclassifications of prior period data have been made to conform with the current period reporting. 2. ASSETS HELD FOR SALE Subsequent to the acquisition of Sunshine Biscuits, Inc. ("Sunshine"), management decided to close and sell the production plant in Santa Fe Springs, California. The land and buildings, which were valued at a fair market value of $3.6 million as of the date of acquisition, were sold on March 27, 1997. No gain or loss was recognized from the sale of the idle facility. 6 KEEBLER CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 3. DEBT COMMITMENTS Long-term debt consisted of the following at July 12, 1997:
Interest Final JULY 12, Rate Maturity 1997 ----------- ----------------- ------------ (IN THOUSANDS) Revolving Loans Floating December 28, 2002 $ - Term Note 6.938% December 28, 2002 235,000 Senior Subordinated Notes 10.750% June 15, 2006 125,000 Other Senior Debt various 2001-2005 18,225 ------------ 378,225 Less: Current maturities (21,270) ------------ $ 356,955 ============
On April 8, 1997, the Company amended the primary credit financing facility in order to obtain more favorable terms, fees, and interest rates. The Second Amended and Restated Credit Agreement ("Credit Agreement") specifically provides for available borrowings of $380.0 million consisting of a $140.0 million Revolving Loan facility and a $240.0 million Term Note. Any unused borrowings under the Revolving Loan facility are subject to a commitment fee, which will vary from 0.200% - 0.375% based on the relationship of debt to adjusted earnings. In conjunction with the amendment to the Credit Agreement, Term Notes B and C were extinguished by using $40.0 million of borrowings under the Revolving Loan facility, $109.8 million of increased borrowings against Term Note A, and $3.8 million from cash resources. The Company recorded a before-tax extraordinary charge of $4.6 million related primarily to expensing certain bank fees which were being amortized and which were incurred at the time Term Notes B and C were issued. The related after-tax charge was $2.7 million. 7 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SET FORTH BELOW IS A DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE TWENTY-EIGHT WEEKS ENDED JULY 12, 1997 AND JULY 13, 1996. THE TWENTY-EIGHT WEEKS ENDED JULY 13, 1996 INCLUDE BOTH THE TWENTY-FOUR WEEKS OF KEEBLER CORPORATION UNDER CURRENT MANAGEMENT AND THE FOUR WEEKS ENDED JANUARY 26, 1996 OF UBIUS UNDER FORMER MANAGEMENT. THE FIRST FOUR WEEKS OF 1996 INCLUDE THE FROZEN FOOD BUSINESSES WHICH WERE PRESENTED AS A DISCONTINUED OPERATION. THE FROZEN FOOD BUSINESSES WERE SOLD BY UBIUS PRIOR TO THE ACQUISITION OF UBIUS BY INFLO. SUBSEQUENT TO THE ACQUISITION, UBIUS CHANGED ITS NAME TO KEEBLER CORPORATION. THE FOLLOWING DISCUSSION OF RESULTS OF OPERATIONS AND LIQUIDITY AND CAPITAL RESOURCES SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS OF KEEBLER CORPORATION AND UBIUS AND RELATED NOTES THERETO APPEARING ELSEWHERE. RESULTS OF OPERATIONS MATTERS AFFECTING COMPARABILITY The Company's results of operations for the twelve and twenty-eight weeks ended July 12, 1997 include the operating results of Sunshine whereas the comparable twelve and twenty-eight weeks of the prior year only include the operating results of Sunshine from the acquisition date of June 4, 1996 through June 30, 1996. The Company's results for the twenty-four weeks ended July 13, 1996 have been combined with the operating results of the predecessor company for the first four weeks ended January 26, 1996 to compare the first twenty-eight weeks of 1997 and 1996. Results of operations expressed as a percentage of net sales for the twelve and twenty-eight weeks ended July 12, 1997 and July 13, 1996 are set forth below:
Twenty-Eight Twelve Weeks Ended Weeks Ended ------------------------ ------------------------ July 12, July 13, July 12, July 13, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- NET SALES 100.0% 100.0% 100.0% 100.0% COSTS AND EXPENSES: Cost of sales 43.5 48.5 43.5 48.5 Selling, marketing, and administrative expenses 49.4 48.3 50.7 51.5 Other 0.4 0.4 0.4 0.4 ----------- ----------- ----------- ----------- INCOME (LOSS) FROM CONTINUING OPERATIONS 6.7 2.8 5.4 (0.4) INTEREST EXPENSE, NET 1.7 2.3 1.9 2.0 ----------- ----------- ----------- ----------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAX EXPENSE 5.0 0.5 3.5 (2.4) Income tax expense 2.1 0.2 1.5 0.3 ----------- ----------- ----------- ----------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEM 2.9 0.3 2.0 (2.7) DISCONTINUED OPERATIONS: Gain on disposal of the Frozen Food businesses, net of tax -- -- -- 2.3 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE EXTRAORDINARY ITEM 2.9 0.3 2.0 (0.4) EXTRAORDINARY ITEM: Loss on early extinguishment of debt, net of tax -- 0.5 0.2 0.2 ----------- ----------- ----------- ----------- NET INCOME (LOSS) 2.9% (0.2)% 1.8% (0.6)% =========== =========== =========== ===========
8 NET SALES. Net sales for the second quarter of 1997 were $459.8 million compared to $383.8 million for the comparable quarter a year ago. For the twenty-eight weeks ended July 12, 1997, net sales of $1,056.9 million were 28.8% higher compared to the same period of the prior year. Increased sales for 1997 in both the quarter and on a year-to-date basis were partially due to the inclusion of the Sunshine business, which was acquired on June 4, 1996. After adjusting for the impact of Sunshine revenues, net sales for both the quarter and the first twenty-eight weeks of 1997 were consistent with the comparable periods in 1996. GROSS PROFIT. For both the twelve and twenty-eight weeks ended July 12, 1997, gross profit as a percentage of net sales was 56.5% which was consistent with the first quarter of 1997. The gross profit percentage improved 5.0 percentage points in comparison to the comparable twelve and twenty-eight weeks of 1996. The improvement in gross margin for 1997 resulted from a more profitable sales mix, continued lower commodity and packaging material prices, improved operating efficiencies, and lower overhead spending. SELLING, MARKETING, AND ADMINISTRATIVE EXPENSES. Selling, marketing, and administrative expenses were $41.6 million and $113.1 million higher for the twelve and twenty-eight weeks ended July 12, 1997, respectively, as compared to the same periods a year ago. Overall, increased spending was primarily due to the inclusion of the Sunshine business. As a percentage of net sales, selling, marketing, and administrative expenses for the second quarter of 1997 were 1.1 percentage points higher as compared to the second quarter of 1996 principally due to increased marketing expense. Despite these increases, on a year-to-date basis, selling, marketing, and administrative expenses as a percentage of net sales were 0.8 percentage points below year-to-date 1996. Lower spending as a percentage of net sales was the result of increased volume and a more efficient fixed cost structure in the selling and distribution network. OTHER. Other expense of $1.6 million for the twelve weeks ended July 12, 1997 was flat compared to the twelve weeks ended July 13, 1996. For the first twenty-eight weeks in 1997, other expense of $4.5 million was $1.2 million above the comparable period in 1996 primarily due to increased amortization expense and bank service charges. For the year, the increase in amortization expense related to intangibles capitalized as part of the acquisition of Sunshine which occurred late in the second quarter of 1996. Increased bank service charges were attributed to an overall higher average debt structure due to the Sunshine acquisition. INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing operations was $31.0 million and $56.5 million for the twelve and twenty-eight weeks ended July 12, 1997, respectively, which was $20.3 million and $60.0 million higher than the same periods a year ago. The improvement was due primarily to the growth realized from the Sunshine business, increased gross margins, and a more cost effective selling and distribution system. The total benefits realized more than offset the incremental amortization and other expenses recorded as a result of the Keebler and Sunshine acquisitions. INTEREST EXPENSE. Net interest expense was $7.8 million for the second quarter of 1997 compared to $8.8 million for the comparable period of the prior year. The decrease in interest expense for the quarter was primarily due to a lower average debt balance resulting from the early extinguishment of term notes which occurred in the first quarter and more favorable interest rates. Interest expense for the first twenty-eight weeks of 1997 was $3.0 million higher compared to the same period of the prior year. The increase resulted from a higher average debt balance for the first twenty-eight weeks of 1997. The higher average debt balance in 1997 reflected the additional debt entered into late in the second quarter of 1996 to fund the acquisition of Sunshine. INCOME TAXES. Income taxes, for the quarter and the twenty-eight weeks ended July 12, 1997, were provided at an effective tax rate of 42%. The effective tax rate exceeded the statutory rate due to nondeductible expenses, principally amortization of intangibles, including trademarks, tradenames, and goodwill. DISCONTINUED OPERATIONS. The predecessor company in 1995 adopted plans to discontinue the operations of the Frozen Food businesses, and in the first four weeks of 1996, a gain of $18.9 million, net of income taxes, was recognized on the disposal of the Frozen Food businesses. 9 EXTRAORDINARY ITEM NET OF INCOME TAXES. In the first quarter of 1997 and the second quarter of 1996, the Company recorded extraordinary charges related to the write-off of unamortized bank fees due to the early extinguishment of debt. The after-tax extraordinary charge recorded was $2.7 million in the first quarter of 1997 and $1.9 million in the second quarter of 1996. The tax benefits on the extraordinary charges were $1.9 million and $1.3 million, respectively. NET INCOME (LOSS). Net income for both the quarter and on a year-to-date basis had shown substantial improvement over the prior year. Net income in 1997 of $13.5 million for the quarter and $18.9 million for the year was $14.3 million and $24.5 million higher than the comparable periods for 1996. The improvement was primarily attributed to the inclusion of the Sunshine business, improved gross margins, and a more efficient and cost effective fixed selling and distribution network. LIQUIDITY AND CAPITAL RESOURCES Cash provided from operating activities of $62.0 million during the first twenty-eight weeks of 1997 benefited from net earnings of $18.9 million. Improved collection procedures, which resulted in a lower investment in trade accounts and notes receivable, and reduced funding of income taxes payable also contributed to positive cash flow from operations. Offsetting these favorable factors was an increased investment in inventory and spending on plant and facility closing costs and severance. The increase in inventory from year-end reflected normal seasonal inventory replenishment. Spending on plant and facility closing costs and severance relating to exit costs associated with the acquisition of both Keebler and Sunshine, although down from the prior year, accounted for $11.8 million of cash used by operations during the first half of 1997. For the first twenty-eight weeks of 1997, cash used by investing activities of $10.3 million was used primarily to fund capital expenditures. Capital spending of $15.3 million was made principally to enhance or update the existing production lines, provide distribution and production efficiencies, and achieve near-term cost savings. Offsetting capital expenditures were $5.0 million in proceeds from asset disposals. The sale of the Santa Fe Springs plant accounted for $3.6 million of year-to-date proceeds with the remainder of the proceeds provided mainly from the sale of trucks. Cash flows used by financing activities were $53.1 million for the first twenty-eight weeks of 1997. During the first quarter of 1997, the Company entered into the Second Amended and Restated Credit Agreement under which term notes of $153.6 million were extinguished. The extinguishment was funded primarily by a draw down on the Revolving Loan facility and $109.8 million of additional borrowings against other term notes. During the first half of 1997, the draw down on the Revolving Loan facility was completely repaid and $9.2 million of scheduled principal payments were made on the term notes and other debt. As of July 12, 1997, cash and cash equivalents were $10.0 million, long-term debt was $357.0 million and current maturities were $21.3 million. Available borrowings under the Company's Revolving Loan facility were $140.0 million of which there was no outstanding balance as of July 12, 1997. The Company met all financial covenants contained in the financing agreements. Available cash as well as existing short-term credit facilities are expected to be sufficient to meet the Company's normal operating requirements for the foreseeable future. 10 FORWARD-LOOKING STATEMENTS When used in this discussion, the words "believes" and "expects" and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, over which the Company may have no control, which could cause actual results to differ materially from those projected. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligations to republish revised forward-looking statements to reflect events or circumstances after the date thereof or to reflect the occurrence of unanticipated events. Readers are also urged to carefully review and consider the various disclosures made by the Company, in this report, as well as the Company's periodic reports filed with the Securities and Exchange Commission. 11 PART II: OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description ------- ----------- 27 Financial Data Schedule (b) Reports on Form 8-K None. 12 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. KEEBLER CORPORATION By: /s/ SAM K. REED ------------------------------------------------------------------- Sam K. Reed President and Chief Executive Officer Date: August 14, 1997 By: /s/ E. NICHOL MCCULLY ------------------------------------------------------------------- E. Nichol McCully Sr. Vice President and Chief Financial Officer Date: August 14, 1997 By: /s/ JAMES T. SPEAR ------------------------------------------------------------------- James T. Spear Vice President Finance and Corporate Controller Chief Accounting Officer Date: August 14, 1997 13 EX-27 2
5 This schedule contains summary financial information extracted from the Keebler Corporation Consolidated Balance Sheet at July 12, 1997 and Consolidated Statement of Operations for the twenty-eight weeks ended July 12, 1997 found on pages 2 through 4 of the Company's Form 10-Q, and is qualified in its entirety by reference to such financial statements. 1,000 7-MOS JAN-03-1998 DEC-29-1996 JUL-12-1997 10,037 0 120,273 5,928 123,682 313,888 546,252 72,985 1,053,971 323,759 356,955 0 0 1,000 208,523 1,053,971 1,056,862 1,056,862 460,101 995,768 4,546 8,784 19,407 37,141 15,599 21,542 0 (2,692) 0 18,850 0 0
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