22 April, 2024
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You need to read the IBC case which is the last case and answer the below questions. You will need to construct a Value Chain and do a financial analysis for IBC. The case takes place in 2004.
- Identify 2 Corporate Strategies that Interstate Bakeries had enacted and evidence from the case that suggest that strategy.
1.
2.
- List 4 External Environment issues in Sweetcakes and Bread industry.
1,
2.
3.
- Examine Interstate Bakeries Corporation Income Statement and Balance Sheet below. A)Discuss what has happened in the last 10 years. B)What trends are occurring? C) What IBC actions might have shifted the balance sheet? D) Is there anything to be concerned about? Use numbers as evidence.
- Analyze Interstate Bakeries Corporation ratios against the competitors below. A) Discuss what has happened over the last 3 years. B) What trends are occurring? C) How do these ratios compare to the competitors? D) Is there anything to be concerned about?
- Identify two ways the firm used its stock to develop the firm over the last 10 years
- Place Data from the case into the Value chain for IBC.
- Name IBC’s Generic Business level strategy in the 1990s ____________________________________________ .
VALUE CHAIN
| Secondary Support Activities | Infrastructure | ||||
| Human Resources | |||||
| Technology | |||||
| Procurement | |||||
| Primary Activities | Inbound Logistics | Operations | Outbound Logistics | Marketing | Service |
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 in 000s | |||||||||||
| 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 in 000s | 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 |
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