Читать книгу Entrepreneurial Finance - Robert D. Hisrich - Страница 33

Little did the founders of the Continental Baking Company know in the 1920s that the company would go through two bankruptcy proceedings by 2013. Through a series of mergers, the company at one time was the largest commercial bakery in the United States, with its Wonder Bread and Hostess cake products becoming Hostess Brands LLC in 1930.

Despite having multiple owners, including International Telephone and Telegraph, Interstate Bakeries Corporation, Ralston Purina, Ripplewood Holdings, Silver Point Capital, Monarch Alternative Capital, and today Apollo Global Management LLC and Metropoulos & Co., the famous Twinkies brand has not had any significant change since invented by James Alexander Dewar in the Depression era of the United States.

Over the years, even though millions of Hostess products were being sold, the company was not keeping a close watch on the numbers, and the income statement of the company was in bad shape due mostly to the company's high fixed-cost structure. The labor unions had negotiated generous pensions and health care benefits not in line with the market. When sales declined in the 1980s and 1990s with people consuming fewer carbohydrates and no successful new product introductions, Hostess Brands LLC had $450 million in debt in 2004 when it filed for its first bankruptcy in September of that year.

During the years in bankruptcy, Hostess Brands LLC attempted to restructure its debt and its unfunded pension funds and had several purchase offers, including one for $580 million in 2007 from its biggest competitor, a part of the giant Mexican bakery firm Bimbo Bakeries USA, Grupo Bimbo. The company stayed intact and emerged from bankruptcy in 2009 by (1) obtaining a $130 million equity infusion for controlling interest by Ripplewood Holdings, a private equity firm; (2) debt providers, including Silver Point Capital and Monarch Alternative Capital, two hedge funds having about 30% of the debt, keeping their loans; and (3) the labor unions agreeing to reduce the number of jobs and salaries by $110 million.

Again, the numbers were not watched carefully; the company had 12 different unions with 15,000 members, 40 different pension plans, and $2 billion in pension liability, and again it was forced to file for bankruptcy in January 2012. As a result of not being able to reach an agreement with the unions and creditors, mismanagement, and not watching the numbers, the company stopped producing its brands of Twinkies, CupCakes, Ding Dongs, and Ho Hos in November 2012. The company sold its Wonder Bread brand to Flowers Foods and Hostess Brands LLC to Apollo Global Management LLC and Metropoulos & Co. Twinkies and Hostess CupCakes were back on the shelves for purchase on July 15, 2013. It is hoped that the numbers will be carefully watched this time to avoid a third bankruptcy.

Financial statements are extremely important for any business, regardless of size or industry, as they provide information on the operating, financing, and investment activities of the venture and help keep a company from filing for bankruptcy protection as occurred twice in the case of Hostess Brands LLC. They are a fundamental tool for raising capital and assessing the financial health of the venture. They allow projections, comparisons, and the evaluation of past performance and future cash flow. In a nutshell, financial statements are a necessary tool for assessing a venture's current and future earnings and associated cash flow. In this chapter, we will cover three basic financial documents: the balance sheet, the income statement, and the statement of cash flow. Chart 3.1 presents a schematic representation of the material covered in this chapter.

Chart 3.1 Schematic of Chapter 3