NAME
Assignment 4 Interstate Bakeries Corp (IBC) Analysis Worksheet. Is worth 35 points. Limit the Assignment to 2 pages. Make sure you refer to the exhibits at the end of the Assignment. Draw from you Managerial Accounting and Finance course work. If you don’t remember the ratios please see the module in Canvas or go to Investopedia.com
This is an individual assignment. You need to read the IBC case which is the last case and answer the below questions and do the financial analysis. The write up for the IBC case will be as a group.
A. List 2 Corporate Strategies that Interstate Bakeries had enacted and evidence from the case that suggest that strategy. (MAX3 lines) 3 points
B. Examine Interstate Bakeries Corporation Balance Sheet. Discuss what you see happening in the 10 years. What trends are occurring? What firm’s actions might have shifted the balance sheet? Is there anything to be concerned about. Use numbers as evidence. Remember you can always look at IBC’s ratios for some clarity and support. (8 points)
C. Examine Interstate Bakeries Corporation Income Statement. Discuss what you see happening in the 10 years. What trends are occurring? What actions of the firm’s might have shifted numbers in the income statement? Is there anything to be concerned about? Use numbers as evidence. Remember you can always look at IBC’s ratios for some clarity and support. (8 points)
D. Analyze Interstate Bakeries Corporation ratios. Discuss what you see happening in the last 3 years. What trends are occurring? How do these ratios compare to the competitors? Is there anything to be concerned about? (8 Points)
E. How has the firm used the stock price and what is the stock price in 2004? (Answer is in the case) 5 points.
F. Name IBC’s Generic Business level strategy in the 1990s ____________________________________________ . In general, where should firms allocate their resources when implement this Generic business strategy? (MAX 3 lines) (3 points)

EXHIBIT 1 Interstate Bakeries Ratios
2004 2003 2002 2001 2000 1999
Advertising % TR – 1.21 – – – –
Current Ratio 0.41 0.82 0.89 0.97 1.03 0.98
Gross Margin % 50.01 50.81 52.57 52.74 52.53 52.73
Interest Coverage – 2.07 3.95 3.12 6.13 9.71
Inventories % TA 4.30 4.84 5 4.69 4.77 3.92
Inventory Turnover 45.86 44.23 45.31 45.23 47.91 52.44
LT Debt to Equity 0.04 1.62 1.93 1.42 0.65 0.61
Net Profit Margin % (0.96) 0.78 1.98 1.75 2.54 3.65
Operating Margin % (0.36) 2.36 4.17 4.21 4.84 6.49
Quick Ratio 0.23 0.41 0.49 0.55 0.60 0.59
ROA % (Net) (2.02) 1.69 4.34 3.74 5.28 7.83
ROE % (Net) (11.39) 8.78 20.17 12.45 14.71 21.64
Selling Gen & Admin % TR 47.40 45.36 44.95 45.36 44.53 43.06
Total Asset Turnover 2.09 2.18 2.20 2.14 2.08 2.15
Total Debt to Equity 2.11 1.80 2.06 1.49 0.70 0.65
Source: Mergent Online.

EXHIBIT 2 Balance Sheet Interstate Bakeries 2004 – 1994
As Reported Annual Balance Sheet
Report Date 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
Cash 39728 – – – – – – – – 3726 5046
Accounts receivable, gross 185760 186738 201283 201901 209298 221224 202750 – – – –
Allowance for doubtful accounts 3700 4000 4200 4069 4638 4240 4106 – – – –
Accounts receivable, net 182060 182738 197083 197832 204660 216984 198644 190747 179538 75184 71734
Ingredients & packaging 48936 51827 51444 46846 48697 44222 43534 43195 42591 15274 13384
Finished goods 22965 22854 23595 23002 23845 15936 16996 14420 14806 7122 5907
Other inventories – 5047 5100 6360 6298 5703 5897 6347 9857 1811 1729
Inventories 71901 79728 80139 76208 78840 65861 66427 63962 67254 24207 21020
Other current assets 109029 87429 67610 62885 57647 65905 69387 70453 71481 17232 17106
Total current assets 402718 349895 344832 336925 341147 348750 334458 325162 318273 120349 114906
Land & buildings 462668 451999 426322 418928 397923 385495 343339 291526 279863 99609 91540
Machinery & equipment 1088985 1103524 1051861 1038323 989704 942748 849671 784910 741705 246800 224922
Gross property & equipment 1551653 1555523 1478183 1457251 1387627 1328243 1193010 1076436 1021568 346409 316462
Less accumulated depreciation 738728 702050 633178 582941 501549 425327 344130 269153 204173 123440 101022
Property & equipment, net 812925 853473 845005 874310 886078 902916 848880 807283 817395 222969 215440
Excess of purch cost over net assets acquired – – – – – – – – – – 240249
Goodwill 215346 215346 215346 – – – – – – – –
Intangible assets 190416 191995 189059 – – – – – – – –
Intangibles, net – – – 412261 424700 429109 366648 360642 350792 255123 –
Other assets 52392 34982 8700 – – – – – – – 4196
Total assets 1673797 1645691 1602942 1623496 1651925 1680775 1549986 1493087 1486460 598441 574791
Long-term debt 542701 56259 39500 29063 29000 25000 25000 – 21554 1030 1263
Accounts payable 158754 117701 126348 123872 123461 134681 146852 146638 135447 48979 47848
Accrued expenses 275354 251621 220541 194473 177996 195515 193236 201878 200221 59145 58182
Total current liabilities 976809 425581 386389 347408 330457 355196 365088 348516 357222 109154 107293
Secured term loans 477626 531438 570938 – – – – – – – –
Capital leases 15437 9592 – – – – – – – – –
Notes payable – – – 565000 229000 254000 79000 – – – –
Revolving credit line 60000 44000 50000 20000 185000 140000 207000 – – – –
Total long-term debt 553063 585030 620938 585000 414000 394000 286000 – – – –
Amounts payable within one year 542701 56259 39500 29063 29000 25000 25000 – – – –
Long-term debt 10362 528771 581438 555937 385000 369000 261000 251000 303651 212205 201235
Other liabilities 311183 225103 186746 184854 212981 225030 236506 230967 254962 45461 43409
Deferred income taxes 113735 140479 147139 142492 131810 127746 122237 123882 110378 33584 35413
Total long-term liabilities 435280 894353 915323 883283 729791 721776 619743 605849 668991 291250 280057
Common stock 816 816 807 799 798 796 791 785 387 211 211
Additional paid-in capital 586616 588950 568315 551963 551819 549080 539359 528735 515497 261065 261064
Retained earnings (accumulated deficit) 364886 443345 428434 373087 327151 256807 150718 43228 -34092 -42213 -53091
Treasury stock, at cost 679016 680913 691369 533044 288091 202880 125713 34026 21545 21026 20743
Treasury stock held in rabbi trust, at cost – 8946 – – – – – – – – –
Unearned restricted stock compensation 6982 – 8997 – – – – – – – –
Minimum pension liability adjustment -4612 – -13934 – – – – – – – –
Accumulated other comprehensive income (loss) -4612 -17495 -4957 – – – – – – – –
Total stockholders’ equity (deficit) 261708 325757 301230 392805 591677 603803 565155 538722 460247 198037 187441
Reported in thousands, Source: Mergent Online.

Exhibit 3 Income Statement (1994-2004)
Report Date 2004 2003 2002 2001 2000 1999 1998 1997 1996 1995 1994
Net sales 3467562 3525780 3532423 3496482 3522929 3459377 3265842 3212431 2878180 1222779 1142684
Cost of products sold 1733303 1734494 1675504 1652518 1672168 1635383 1541920 1566265 1453191 630884 581226
Selling, delivery & administrative expenses 1643757 1599340 1587719 1585962 1568759 1489472 1389627 1352026 1236586 501008 473607
Restructuring (credits) charges 12066 – – – – – – – – – –
Other charges – 13501 25700 – – – – – 9500 – 9400
Depreciation & amortization 91024 95177 96143 110899 111604 110045 102703 102997 100145 33594 31568
Gain (loss) on sale or abandonment of assets -5738 – – – – – – – – – –
Total cost & expenses 3485888 3442512 3385066 3349379 3352531 3234900 3034250 3021288 2799422 1165486 1095801
Operating income (loss) -18326 83268 147357 147103 170398 224477 231592 191143 78758 57293 46883
Interest expense 37543 40262 37266 47086 27809 23113 18624 22592 29310 17745 14745
Reorganization charges, net – – – – – – – – – – –
Other income (loss) 331 87 335 518 431 484 594 747 887 104 144
Total other income (expense) -37212 -40175 -36931 -46568 -27378 -22629 -18030 -21845 -28423 -17641 -14601
Income (loss) before income taxes & cumulative effect of accounting change -55538 43093 110426 100535 143020 201848 213562 169298 50335 39652 32282
Current federal income taxes -14023 20954 32956 31242 41283 62227 64449 – – – –
Current state income taxes -2809 2220 3761 2609 3814 5829 13811 – – – –
Total current income taxes -16832 23174 36717 33851 45097 68056 78260 – – – –
Deferred federal income taxes -4785 -6588 3146 4527 5963 6702 5176 – – – –
Deferred state income taxes -551 -943 774 1032 2572 935 2202 – – – –
Total deferred income taxes -5336 -7531 3920 5559 8535 7637 7378 – – – –
Provision (benefit) for income taxes -22168 15643 40637 39410 53632 75693 85638 72121 25872 18955 16528
Income (loss) bef extraord item & accounting change – – – – – – – – – – 15754
Net income (loss) -33370 27450 69789 61125 89388 126155 127924 97177 24463 20697 15754
Weighted average shares outstanding-basic 44868 44599 50091 54110 68156 71662 73512 76200 69202 39414 40612
Weighted average shares outstanding-diluted 44868 45185 51299 54296 68356 72483 74845 – – – –
Year end shares outstanding 45381 44804 43826 50356 65889 70218 72744 75114 74572 39270 39300
Income (loss) per share-continuing operations-basic – – – – – – – – – – 0.39
Net earnings (loss) per share-basic -0.74 0.62 1.39 1.13 1.31 1.76 1.74 1.275 0.35 0.525 0.39
Net earnings (loss) per share-diluted -0.74 0.61 1.36 1.13 1.31 1.74 1.71 – – – –
Dividends per common share 0.21 0.28 – 0.28 – – – – – – –
Total number of employees 35000 34000 35000 34000 34000 34000 34000 32000 30000 – –
Number of common stockholders 2846 2335 2154 6500 6400 6000 5600 4700 4900 – –
Depreciation & amortization – – – 110899 111604 110045 102703 102997 100145 33594 31568
Reported in thousands, Source: Mergent Online.

Exhibit 4 2004 Ratios of competitors.
Company Name Grupo Bimbo S.A. de C.V. (Mexico)

Advertising % TR –
Current Ratio 1.51
Gross Margin % 52.96
Interest Coverage 5.87
Inventories % TA 3.59
Inventory Turnover 21.81

LT Debt to Equity 0.49
Net Profit Margin % 4.98
Operating Margin % 0.72
Quick Ratio 1.27
R&D % TR –
ROA % (Net) 7.95
ROE % (Net) 15.86
Selling Gen & Admin % TR 44.94
Total Asset Turnover 1.60
Total Debt to Equity 0.05

Company Name Campbell Soup Co.

Advertising % TR –
Current Ratio 0.63
Gross Margin % 41.10
Interest Coverage 6.58
Inventories % TA 11.91
Inventory Turnover 5.57

LT Debt to Equity 2.91
Net Profit Margin % 9.10
Operating Margin % 15.54
Quick Ratio 0.22
R&D % TR 1.31
ROA % (Net) 10.07
ROE % (Net) 102.90
Selling Gen & Admin % TR 23.84
Total Asset Turnover 1.11
Total Debt to Equity 3.84

Company Name Morrison (Wm.) Supermarkets Plc

Advertising % TR –
Current Ratio 0.60
Gross Margin % –
Interest Coverage –
Inventories % TA 6.74
Inventory Turnover 34.69

Net Profit Margin % 3.99
Operating Margin % 11.23
Quick Ratio 0.41
R&D % TR –
ROA % (Net) 9.39
ROE % (Net) 15.42
Selling Gen & Admin % TR 11.51
Total Asset Turnover 2.35
Total Debt to Equity –

Company Name Weston (George) Limited

Advertising % TR –
Current Ratio 1.02
Gross Margin % –
Interest Coverage 4.07
Inventories % TA 11.05
Inventory Turnover 14.76

Net Profit Margin % 1.44
Operating Margin % 4.98
Quick Ratio 0.52
R&D % TR –
ROA % (Net) 2.42
ROE % (Net) 9.65
Selling Gen & Admin % TR 91.48
Total Asset Turnover 1.69
Total Debt to Equity 1.21