Regarding the quarterly results, IBC Chairman and Chief Executive Officer Charles A. Sullivan commented: ``We reported in December that in the absence of any positive growth in top-line sales to offset higher operating costs, our financial performance in this quarter would be similar to the prior quarter. We have moved quickly to implement action plans for driving future earnings growth amidst these challenging circumstances.''
Summarizing the Company's financial performance for the 16-week quarter ended March 10, 2001:
- Net sales of $1,038,969,000, an increase of 0.3 percent over the prior year's $1,035,609,000.
- Operating income of $28,989,000, or 2.8 percent of net sales, compared to last year's $41,336,000, or 4.0 percent of net sales.
- Net income of $7,747,000, or 0.7 percent of net sales, compared to the previous year's $20,417,000, or 2.0 percent of net sales.
- Diluted earnings per share of $0.15 compared to the prior year's $0.30.
For the first 40 weeks of the fiscal year, the Company reported:
- Net sales of $2,676,476,000, an increase of 0.8 percent over the prior year's $2,655,682,000.
- Operating income of $111,771,000, or 4.2 percent of net sales, compared to the prior year's $150,278,000, or 5.7 percent of net sales.
- Net income of $46,018,000, or 1.7 percent of net sales, compared to the previous year's $81,581,000, or 3.1 percent of net sales.
- Diluted earnings per share of $0.83 compared to the prior year's $1.18.
In reviewing costs, Mr. Sullivan noted that over 80% of the reduction in operating income for the quarter resulted from higher energy and fuel costs. Excluding the impact of energy cost increases, our gross profit as a percent of net sales was approximately 53.2% for the quarter, compared to 52.2% in the prior year. This margin improvement primarily reflects higher selling prices.
"With essentially flat top-line sales, even minor inflationary increases in costs squeeze margins," Mr. Sullivan said. "Therefore our primary focus has been, and continues to be, top-line sales growth. We have increased pricing but, due to the competitive nature of the market, this strategy has impacted volume. We are currently working to increase volume through the expansion of new bakery products, particularly in the Northeast and Northwest regions, and the design of more effective promotional programs."
Mr. Sullivan also noted the Company continues its drive toward improved longer-term profitability through improved efficiency and productivity at its 65 bakeries.
"We have invested, and will continue to invest, in projects that drive costs out of the system and enhance product quality and manufacturing efficiency. During the year, we have had a seamless transfer of production into our new Knoxville, Tennessee, bakery and should be moving production into our new Kansas City bakery by early summer. Both of these new facilities replace older, less efficient bakeries. We have also announced the closing of our Richmond, Virginia, bakery with production shifted to our recently modernized Rocky Mount, North Carolina, plant. We have also taken action toward more efficient realignment of our distribution routes, particularly in the Southeast, Midwest and New England areas. Better overall route productivity ensures higher routes averages and reduced selling expense, and is essential to improved profitability," he said.
Looking to the future, Mr. Sullivan said the fourth quarter would be no less challenging than the third.
"Our strategies are in place and being implemented to drive sales volume and earnings growth," he said. "Ingredient costs should remain reasonable in light of current commodity purchase contracts in place through the balance of the fiscal year. We intend to continue maintaining a tight discipline on operational costs. In response to the expected higher energy costs, we will continue to review pricing, and protect margins as appropriate."
Interstate Bakeries Corporation is the nation's largest wholesale baking company with 65 bread and cake bakeries located in strategic markets from coast-to-coast. The Company is headquartered in Kansas City, Missouri.
INTERSTATE BAKERIES CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(000'S EXCEPT PER-SHARE DATA)
Sixteen Weeks Ended Forty Weeks Ended
---------------------- ---------------------
March 10, March 4, March 10, March 4,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Net sales $1,038,969 $1,035,609 $2,676,476 $2,655,682
---------- ---------- ---------- ----------
Cost of products
sold 492,207 494,886 1,268,286 1,254,563
Selling, delivery
and administrative
expenses 483,470 464,534 1,211,021 1,164,653
Depreciation and
amortization 34,303 34,853 85,398 86,188
---------- ---------- ---------- ----------
1,009,980 994,273 2,564,705 2,505,404
---------- ---------- ---------- ----------
Operating income 28,989 41,336 111,771 150,278
Interest expense
-- net 16,246 8,669 36,083 19,748
---------- ---------- ---------- ----------
Income before
income taxes 12,743 32,667 75,688 130,530
Income taxes 4,996 12,250 29,670 48,949
---------- ---------- ---------- ----------
Net income $ 7,747 $ 20,417 $ 46,018 $ 81,581
========== ========== ========== ==========
Earnings per
share:
Basic $ 0.15 $ 0.30 $ 0.83 $ 1.19
========== ========== ========== ==========
Diluted $ 0.15 $ 0.30 $ 0.83 $ 1.18
========== ========== ========== ==========
Average shares
outstanding:
Basic 50,561 67,239 55,176 68,831
========== ========== ========== ==========
Diluted 50,708 67,382 55,369 69,129
========== ========== ========== ==========
CONSOLIDATED CONDENSED BALANCE SHEET
(000'S)
March 10, June 3,
2001 2000
Assets: ---------- ----------
Current assets $ 327,320 $ 341,147
Property and equipment -- net 879,500 886,078
Other assets 417,021 424,700
---------- ----------
$1,623,841 $1,651,925
========== ==========
Liabilities and Stockholders' Equity:
Current liabilities $ 909,075 $ 330,457
Long-term debt 0 385,000
Other long-term liabilities 333,583 344,791
Stockholders' equity 381,183 591,677
---------- ----------
$1,623,841 $1,651,925
========== ==========
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