UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ____.
COMMISSION FILE NUMBER:
333-12929
WEIDER NUTRITION INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 87-0563574
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2002 SOUTH 5070 WEST 84104-4726
SALT LAKE CITY, UTAH (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code:
(801) 975-5000
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 [ ]
The number of shares outstanding of the Registrant's common stock is 25,042,073
(as of February 29, 2000).
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
FEBRUARY 29, MAY 31,
ASSETS 2000 1999
----------- ---------
(unaudited)
Current assets:
Cash and cash equivalents .......................... $ 2,708 $ 1,926
Receivables ........................................ 45,708 60,524
Inventories ........................................ 52,483 63,658
Prepaid expenses and other ......................... 3,953 4,712
Deferred taxes ..................................... 7,071 7,387
--------- ---------
Total current assets ........................... 111,923 138,207
--------- ---------
Property and equipment, net .......................... 48,060 48,872
--------- ---------
Other assets:
Intangible assets, net ............................. 49,632 51,980
Deposits and other assets .......................... 6,415 10,114
Securities available for sale ...................... 1,859 2,692
Notes receivable related to
stock performance units .......................... 4,147 4,164
--------- ---------
Total other assets ............................. 62,053 68,950
--------- ---------
Total assets ............................. $ 222,036 $ 256,029
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................... $ 26,391 $ 25,492
Accrued expenses ................................... 20,016 18,406
Earnout amounts payable ............................ 903 3,246
Current portion of long-term debt(Note 2) .......... 81,025 110,716
--------- ---------
Total current liabilities ...................... 128,335 157,860
--------- ---------
Long-term debt ....................................... 3,581 4,723
--------- ---------
Deferred taxes ....................................... 190 1,666
--------- ---------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01 per share; shares
authorized-10,000,000; no shares issued
and outstanding .................................. -- --
Class A common stock, par value $.01 per share;
shares authorized-50,000,000; shares issued
and outstanding-9,354,641 and 9,334,036 .......... 93 93
Class B common stock, par value $.01 per share;
shares Authorized-25,000,000; shares issued and
outstanding-15,687,432 ........................... 157 157
Additional paid-in capital ......................... 83,198 82,985
Other accumulated comprehensive loss ............... (3,717) (2,331)
Retained earnings .................................. 10,199 10,876
--------- ---------
Total stockholders' equity ....................... 89,930 91,780
--------- ---------
Total liabilities and stockholders' equity ..... $ 222,036 $ 256,029
========= =========
See notes to condensed consolidated financial statements.
2
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WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED
-----------------------------
FEB. 29, FEB. 28,
2000 1999
------------ ------------
Net sales .................................... $ 90,449 $ 89,030
Cost of goods sold ........................... 56,650 55,680
------------ ------------
Gross profit ................................. 33,799 33,350
------------ ------------
Operating expenses:
Selling and marketing ...................... 20,208 17,953
General and administrative ................. 6,628 6,568
Research and development ................... 1,188 1,426
Amortization of intangible assets .......... 815 955
Severance, recruiting and reorganization
costs .................................... 822 --
Plant consolidation and transition ......... -- 1,079
Other inventory related charges ............ -- 1,863
------------ ------------
Total operating expenses ............... 29,661 29,844
------------ ------------
Income from operations ....................... 4,138 3,506
------------ ------------
Other income (expense):
Interest income ............................ 286 139
Interest expense ........................... (2,774) (2,884)
Other ...................................... (63) (47)
------------ ------------
Total other expense, net ............... (2,551) (2,792)
------------ ------------
Income before income taxes ................... 1,587 714
Provision for income taxes ................... 733 307
------------ ------------
Net income ................................... $ 854 $ 407
============ ============
Weighted average shares outstanding:
Basic ...................................... 25,042,073 24,948,381
============ ============
Diluted .................................... 25,049,726 25,075,267
============ ============
Net income per share:
Basic ...................................... $ 0.03 $ 0.02
============ ============
Diluted .................................... $ 0.03 $ 0.02
============ ============
Comprehensive loss ........................... $ (668) $ (618)
============ ============
See notes to condensed consolidated financial statements.
3
<PAGE>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
NINE MONTHS ENDED
-------------------------------
FEB. 29, FEB. 28,
2000 1999
-------------- -------------
Net sales .................................... $ 267,792 $ 240,250
Cost of goods sold ........................... 167,597 154,869
------------ ------------
Gross profit ................................. 100,195 85,381
------------ ------------
Operating expenses:
Selling and marketing ...................... 57,653 49,571
General and administrative ................. 21,697 18,705
Research and development ................... 3,294 3,692
Amortization of intangible assets .......... 2,536 2,388
Severance, recruiting and reorganization
costs .................................... 3,523 2,500
Plant consolidation and transition ......... -- 5,113
Other inventory related charges ............ -- 1,863
------------ ------------
Total operating expenses ............... 88,703 83,832
------------ ------------
Income from operations ....................... 11,492 1,549
------------ ------------
Other income (expense):
Interest income ............................ 570 441
Interest expense ........................... (8,412) (7,197)
Other ...................................... (131) (436)
------------ ------------
Total other expense, net ............... (7,973) (7,192)
------------ ------------
Income (loss) before income taxes ............ 3,519 (5,643)
Provision for income taxes (benefit) ......... 1,376 (2,317)
------------ ------------
Net income (loss) ............................ $ 2,143 $ (3,326)
============ ============
Weighted average shares outstanding:
Basic ...................................... 25,039,028 24,903,934
============ ============
Diluted .................................... 25,047,072 24,903,934
============ ============
Net income (loss) per share:
Basic ...................................... $ 0.09 $ (0.13)
============ ============
Diluted .................................... $ 0.09 $ (0.13)
============ ============
Comprehensive income (loss) .................. $ 757 $ (3,888)
============ ============
See notes to condensed consolidated financial statements.
4
<PAGE>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
--------------------
FEB. 29, FEB. 28,
2000 1999
--------- --------
Cash flows from operating activities:
Net income (loss) .................................... $ 2,143 $ (3,326)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Provision for bad debts .......................... 1,732 919
Deferred taxes ................................... (1,160) 1,189
Depreciation, amortization and
asset impairment ................................ 8,240 10,568
Management and employee stock compensation
charges ......................................... 201 --
Loss on disposition of equipment ................. 17 65
Changes in operating assets and liabilities- net
of assets acquired:
Receivables ...................................... 14,668 3,761
Inventories ...................................... 12,313 (4,199)
Prepaid expenses and other ....................... 775 (278)
Deposits and other assets ........................ 5,270 3,010
Accounts payable ................................. (2,934) 1,475
Accrued expenses ................................. (1,133) (4,388)
-------- --------
Net cash provided by operating activities ...... 40,132 8,796
-------- --------
Cash flows from investing activities:
Acquisitions, net of cash acquired ................... (1,164) (24,668)
Purchase of property and equipment ................... (4,090) (9,159)
Purchase of intangibles .............................. (216) --
Proceeds from disposition of equipment ............... 85 1,083
Change in notes receivable ........................... 17 10
Investment in securities available for sale .......... -- (4,998)
-------- --------
Net cash used in investing activities .......... (5,368) (37,732)
-------- --------
Cash flows from financing activities:
Issuance of common stock ............................. 12 139
Dividends paid ....................................... (2,820) (2,794)
Proceeds from debt ................................... 5,543 35,630
Payments on debt ..................................... (35,523) (1,350)
-------- --------
Net cash provided by (used in) financing
activities .................................... (32,788) 31,625
-------- --------
Effect of exchange rate changes on cash ................ (1,194) (1,095)
-------- --------
Increase in cash and cash equivalents .................. 782 1,594
Cash and cash equivalents, beginning of period ......... 1,926 684
-------- --------
Cash and cash equivalents, end of period ............... $ 2,708 $ 2,278
======== ========
See notes to condensed consolidated financial statements.
5
<PAGE>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION AND OTHER MATTERS
The accompanying unaudited interim consolidated financial statements
("interim financial statements") do not include all disclosures provided in the
annual consolidated financial statements. These interim financial statements
should be read in conjunction with the consolidated financial statements and the
footnotes thereto contained in the Weider Nutrition International, Inc. (the
"Company") Annual Report on Form 10-K for the year ended May 31, 1999 as filed
with the Securities and Exchange Commission. The May 31, 1999 consolidated
balance sheet was derived from audited financial statements, but all disclosures
required by generally accepted accounting principles are not provided in the
accompanying footnotes. The Company is a majority-owned subsidiary of Weider
Health and Fitness ("WHF").
In the opinion of the Company, the accompanying interim financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the Company's financial position and
results of operations. Certain prior period amounts have been reclassified to
conform with the current interim period presentation.
2. CREDIT FACILITY
The Company's credit facility with certain lending institutions led by
General Electric Capital Corporation ("GECC") was amended and extended to mature
at June 30, 2000. Amounts outstanding under the credit facility at February 29,
2000 ($64.0 million), are included in current portion of long-term debt.
The Company expects to finalize a new credit facility with GECC prior to
the filing of the Company's Form 10-K for the year ending May 31, 2000. However,
there can be no assurance that the new facility will be obtained by such date or
on terms favorable to the Company. Management expects that amounts outstanding
under a new credit facility to be subsequently reclassified as a long-term
obligation.
3. RECEIVABLES
Receivables consist of the following:
FEBRUARY 29, MAY 31,
2000 1999
------- ------
Trade accounts $46,201 $59,389
Income taxes 1,396 2,195
Other 1,147 1,168
------- -------
48,744 62,752
Less allowance for doubtful accounts (3,036) (2,228)
------- -------
TOTAL $45,708 $60,524
======= =======
6
<PAGE>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
4. INVENTORIES
Inventories consist of the following:
FEBRUARY 29, MAY 31,
2000 1999
------- ------
Raw materials $15,020 $24,364
Work in process 2,558 3,364
Finished goods 34,905 35,930
------- -------
Total $52,483 $63,658
======= =======
Inventory totaling approximately $2.6 million and $4.0 million,
respectively, primarily consisting of two raw materials, is included as a
long-term asset in deposits and other assets in the accompanying balance sheets.
5. INTANGIBLE ASSETS
Intangible assets consist of the following:
FEBRUARY 29, MAY 31,
2000 1999
-------- -----
Cost in excess of fair value
of net assets acquired (goodwill) $53,372 $53,706
Patents and trademarks 10,879 10,452
Noncompete agreements 197 209
------- -------
64,448 64,367
Less accumulated amortization (14,816) (12,387)
------- -------
Total $49,632 $51,980
======= =======
6. OPERATING SEGMENTS
In fiscal 1999, the Company adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information", which changes the way the
Company reports information about its operating segments.
The Company has two primary reportable segments. These segments include
the Company's U.S. based or domestic operations and the Company's interna-
tional operations. The Company has three primary areas within its domestic
operations: mass market; health food stores; and health clubs and gyms. The
Company manufactures and markets nutritional products, including a broad line of
vitamins, joint-related and other nutraceuticals, and sports nutrition
supplements in the mass market; a broad line of vitamins, nutraceuticals and
sports nutrition products primarily through independent distributors and a
significant retailer in health food stores; and a broad line of sports nutrition
products primarily through distributors in health clubs and gyms. The Company
also manufactures and markets nutritional and other products, including a broad
line of sports nutrition supplements and sportswear, together with certain other
nutraceuticals in its international operations.
7
<PAGE>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
The accounting policies of these segments are the same as those described
in Note 1 to the consolidated financial statements (See the Company's Annual
Report on Form 10-K). The Company evaluates the performance of its operating
segments based on actual and expected operating results of the respective
segments. Certain noncash and other expenses, and domestic assets, are not
allocated to the areas within the domestic operating segment.
Segment information for the nine months ended February 29, 2000 and
February 28, 1999, respectively, are summarized as follows:
INCOME
(LOSS)
NET FROM INTEREST
2000: SALES OPERATIONS EXPENSE
-------- ---------- --------
Domestic Operations:
Mass market $133,945 $ 15,730 $ 2,537
Health food stores 28,485 (2,224) 1,421
Health clubs and gyms 15,695 (518) 914
Other 3,225 (1,348) 203
Unallocated -- (3,523) --
-------- -------- ------
181,350 8,117 5,075
International Operations 86,442 3,375 3,337
-------- -------- --------
$267,792 $ 11,492 $ 8,412
======== ======== ========
INCOME
(LOSS)
NET FROM INTEREST
1999: SALES OPERATIONS EXPENSE
-------- ---------- --------
Domestic Operations:
Mass market $111,401 $ 12,156 $ 2,487
Health food stores 42,106 (1,216) 1,196
Health clubs and gyms 18,162 558 610
Other 11,194 (2,211) 235
Unallocated -- (9,476) --
-------- -------- -----
182,863 (189) 4,528
International Operations 57,387 1,738 2,669
-------- -------- --------
$240,250 $ 1,549 $ 7,197
======== ======== ========
Reconciliation of total assets for the reportable segments is as follows
at February 29, 2000:
Total domestic assets $ 194,397
Total international assets 81,965
Eliminations (54,326)
---------
Total $ 222,036
=========
8
<PAGE>
WEIDER NUTRITION INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(UNAUDITED)
7. SALES TO MAJOR CUSTOMERS
The Company's three largest customers accounted for approximately 45% and
43%, respectively, of net sales for the nine months ended February 29, 2000 and
February 28, 1999. At February 29, 2000 and May 31, 1999, amounts due from these
customers represented approximately 37% and 42%, respectively, of total trade
accounts receivable.
8. CONTINGENCIES
In March 1999, the plaintiff's attorney involved in a previously settled
California matter regarding certain of the Company's bar products filed a
lawsuit on behalf of Michael Morelli and an alleged class in the unfair
competition and false claims under New York (New York County) alleging similar
unfair competition and false claims under New York law. In May 1999, the
plaintiffs' attorney also filed a lawsuit on behalf of Lisa Fasig and an alleged
class in the Circuit Court of Lee County, Florida alleging similar claims under
Florida law. The Company disputes the allegations and is vigorously opposing the
lawsuits.
After discussions and negotiations between the Company and the FTC, the
Company accepted, without admitting liability, a proposed consent decree in June
1999 which provided, among other things, that the Company will not make certain
diet and weight loss claims for its products without adequate scientific
substantiation. In November 1999, the FTC Commissioners did not approve the
final consent decree. Accordingly, the Company and the FTC are continuing
discussions regarding this matter. The Company is unable to predict whether it
will be able to reach a negotiated settlement of this matter. No assurance can
be given that any imposition of injunctive relief and/or penalties in resolving
this matter would not have a material adverse effect on the Company.
The Company is involved in other claims, legal actions and governmental
proceedings that arise from the Company business operations. Although ultimate
liability cannot be determined at the present time, the Company believes that
any liability resulting from these matters, if any, after taking into
consideration the Company's insurance coverage, will not have a material adverse
effect on the Company's financial position or cash flows.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-Q. EXCEPT FOR THE HISTORICAL
INFORMATION CONTAINED HEREIN, THE MATTERS DISCUSSED IN THIS QUARTERLY REPORT
CONTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE
ACT OF 1934, AS AMENDED, THAT ARE BASED ON MANAGEMENT'S BELIEFS AND ASSUMPTIONS,
CURRENT EXPECTATIONS, ESTIMATES, AND PROJECTIONS. STATEMENTS THAT ARE NOT
HISTORICAL FACTS, INCLUDING WITHOUT LIMITATION STATEMENTS WHICH ARE PRECEDED BY,
FOLLOWED BY OR INCLUDE THE WORDS "BELIEVES," "ANTICIPATES," "PLANS," "EXPECTS,"
"MAY," "SHOULD" OR SIMILAR EXPRESSIONS ARE FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE SUBJECT TO RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND
THE COMPANY'S ABILITY TO PREDICT OR CONTROL, AND, THEREFORE, ACTUAL RESULTS MAY
DIFFER MATERIALLY. THE COMPANY DISCLAIMS ANY OBLIGATION TO UPDATE ANY
FORWARD-LOOKING STATEMENTS WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS
OR OTHERWISE.
IMPORTANT FACTORS THAT MAY EFFECT FUTURE RESULTS INCLUDE, BUT ARE NOT
LIMITED TO: COMPLETION OF THE SKU REDUCTION PROGRAM AS ANTICIPATED BY THE
COMPANY, THE COMPANY'S ABILITY TO IMPLEMENT MORE SOPHISTICATED OPERATING SYSTEMS
AND INVENTORY MANAGEMENT PROGRAMS, THE IMPACT OF COMPETITIVE PRODUCTS AND
PRICING, THE IMPACT OF NEW FDA DIETARY SUPPLEMENT REGULATIONS PUBLISHED IN
JANUARY 2000 ON THE COMPANY'S PRODUCTS AND MARKETING PLANS, INCLUDING, WITHOUT
LIMITATION, PRODUCT LABELING, PRODUCT NAMES AND PRODUCT STRUCTURE/FUNCTION
CLAIMS, DEPENDENCE ON INDIVIDUAL PRODUCTS, THE REALIZABLE VALUE OF DISCONTINUED
SKUS, MARKET CONDITIONS INCLUDING PRICING, DEMAND FOR PRODUCTS, AND THE LEVEL OF
TRADE INVENTORIES, THE SUCCESS OF PRODUCT DEVELOPMENT AND NEW PRODUCT
INTRODUCTIONS INTO THE MARKETPLACE, CHANGES IN LAWS AND REGULATIONS, THE
COMPANY'S ABILITY TO IDENTIFY, RECRUIT AND INTEGRATE KEY MANAGEMENT PERSONNEL,
INCLUDING THE COST AND TIMING THEREOF, LITIGATION AND GOVERNMENT REGULATORY
ACTION, AVAILABILITY OF FUTURE FINANCING, UNCERTAINTY OF MARKET ACCEPTANCE OF
NEW PRODUCTS, RESULTS OF MANAGEMENT'S EVALUATION OF ITS BUSINESS OPERATIONS AND
STRATEGIES, AND OTHER RISKS INDICATED FROM TIME TO TIME IN THE COMPANY'S SEC
REPORTS, COPIES OF WHICH ARE AVAILABLE UPON REQUEST FROM THE COMPANY'S INVESTOR
RELATIONS DEPARTMENT.
GENERAL
Weider Nutrition International, Inc. (the "Company") develops,
manufactures, markets, distributes and sells branded and private label vitamins,
nutritional supplements and sports nutrition products in the United States and
throughout the world. The Company offers a broad range of capsules and tablets,
powdered drink mixes, bottled beverages and nutrition bars, consisting of
approximately 850 nutritional supplement stock keeping units ("SKUs")
domestically and internationally. The Company has a portfolio of recognized
brands, including Schiff(R), Weider Sports Nutrition, MetaForm(R), American Body
Building(TM), Multipower(R), Multaben(R) and Venice Beach(R) that are primarily
marketed through mass market, health food store and/or health club and gym
distribution channels. The Company markets its branded nutritional supplement
products in four principal categories: sports nutrition; vitamins, minerals and
herbs; weight management; and healthy snacks. As a result of the Company's July
1998 acquisition of Haleko Hanseatisches Lebensmittel Kontor GmbH ("Haleko"),
the Company has significantly expanded its operations
10
<PAGE>
outside the United States. The Company's international operations include sports
nutrition supplements, other nutraceuticals and sportswear products.
In January 2000, the FDA published new regulations governing labeling and
structure/function claims for dietary supplements. The Company is evaluating the
new regulations to determine the impact of the new regulations on the Company's
products and results of operations. As a result of these new regulations, the
Company anticipates transitioning its Schiff(R) Pain Free(TM) product to
Schiff(R) Move Free(TM). No assurance can be given that compliance with the new
regulations will not have a material adverse effect on the Company's results of
operations and financial condition.
The Company's principal executive offices are located at 2002 South 5070
West, Salt Lake City, Utah 84104 and its telephone number is (801) 975-5000. As
used herein, the "Company" means Weider Nutrition International, Inc. and its
subsidiaries, except where indicated otherwise.
RESULTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO THREE MONTHS ENDED
FEBRUARY 28, 1999
The following table shows selected items expressed on an actual basis and
as a percentage of net sales for the respective interim periods:
THREE MONTHS ENDED
--------------------------------------
FEB. 29, 2000 FEB. 28, 1999
---------------- -----------------
(dollars in thousands)
Net sales ............................ $90,449 100.0% $89,030 100.0%
Cost of goods sold ................... 56,650 62.6 55,680 62.5
------- ----- ------- -----
Gross profit ......................... 33,799 37.4 33,350 37.5
------- ----- ------- -----
Operating expenses ................... 28,839 31.9 26,902 30.3
Severance, recruiting and
reorganization costs ............... 822 0.9 -- --
Plant consolidation
and transition ..................... -- -- 1,079 1.2
Other inventory related costs -- -- 1,863 2.1
------- ----- ------- -----
Total operating expenses ............. 29,661 32.8 29,844 33.6
------- ----- ------- -----
Income from operations ............... 4,138 4.6 3,506 3.9
Other expense, net ................... 2,551 2.8 2,792 3.1
Income taxes ......................... 733 0.8 307 0.3
------- ----- ------- -----
Net income ........................... $ 854 1.0% $ 407 0.5%
======= ===== ======= =====
NET SALES. Net sales for the three months ended February 29, 2000
increased $1.4 million, or 1.6%, to $90.4 million from $89.0 million for the
three months ended February 28, 1999. Sales to mass market retailers (including
food, drug, mass, club and convenience stores) and international markets
increased during the three months ended February 29, 2000 compared to the three
months ended February 28, 1999. Sales to health food distributors and retailers,
health club and gym distributors and contract manufacturing sales decreased
during the third quarter of fiscal 2000 compared to the third quarter of fiscal
1999.
Third quarter fiscal 2000 sales to mass market retailers increased
approximately 12.1% to $48.1 million from third quarter fiscal 1999 sales of
$42.9 million. The increase in sales to mass market retailers was primarily the
result of increased sales of Schiff(R) Pain Free(TM) products to existing
accounts offset by reduced volumes of certain other branded products primarily
due to
11
<PAGE>
the Company's SKU reduction program and a temporary delay in the introduction of
new products. Sales of Schiff's Pain Free(TM) amounted to $30.6 million for the
third quarter of fiscal 2000 compared to $21.8 million for the third quarter of
fiscal 1999. Sales to health food distributors and retailers decreased
approximately 42.8% to $7.3 million for the fiscal 2000 third quarter from $12.8
million for the fiscal 1999 second quarter. Sales to health club and gym
distributors decreased approximately 20.6% to $5.2 million for the third quarter
of fiscal 2000 from $6.5 million for the third quarter of fiscal 1999. The
decrease in sales resulted primarily from the Company's increased focus on the
mass market distribution channel, as well as a temporary delay in the
introduction of new products into the health food, and health club and gym
distribution channels. The Company intends to launch new products, including
line extensions, into its primary distribution channels selectively during the
Company's fiscal 2000 fourth quarter.
Sales to international markets increased 20.7% to $29.1 million for the
three months ended February 29, 2000 from $24.1 million for the three months
ended February 28, 1999. The increased sales volume is due primarily to
sportswear sales growth in the Company's European operations.
The Company had no sales from contract manufacturing (private label)
during the third quarter of fiscal 2000 compared to $1.3 million for the third
quarter of fiscal 1999. The elimination of contract manufacturing sales is
consistent with the Company's decision to limit contract manufacturing business
to only those customers who have, or may in the future have, other business
relationships with the Company. Private label business for customers with whom
other business relationships exist are included in the net sales amounts for the
distribution channel applicable to the customer.
GROSS PROFIT. Gross profit increased approximately 1.3% to $33.8 million
for the quarter ended February 29, 2000 compared to $33.4 million for the
quarter ended February 28, 1999 primarily as a result of the increase in net
sales. Gross profit, as a percentage of net sales, remained relatively constant
at 37.4% for the quarter ended February 29, 2000 compared to 37.5% for the
quarter ended February 28, 1999.
OPERATING EXPENSES. Operating expenses, including certain severance,
recruiting and reorganization costs, decreased approximately 0.1% to $29.7
million for the fiscal 2000 third quarter from $29.8 million for the fiscal 1999
third quarter. During the fiscal 2000 third quarter the Company continued its
organizational changes and upgrading of management systems (including senior
management changes) that resulted in approximately $0.8 million of costs during
the three month period. During the fiscal 1999 third quarter the Company
recognized, in aggregate, approximately $2.9 million in charges relating to the
consolidation of capsule and tablet manufacturing to its Utah facility as well
as inventory impairment costs resulting from excess labels, packaging and
discontinuation of certain SKUs to comply with the Dietary Supplements Health
and Education Act ("DSHEA") product labeling requirements effective in March
1999. Excluding these charges for the respective periods, operating expenses
increased $1.9 million, or 7.2% during the third quarter of fiscal 2000 in
comparison to the third quarter of fiscal 1999. The increase was primarily
attributable to incremental selling and marketing costs.
12
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Selling and marketing expenses, including sales, marketing, adver- tising,
freight and other costs, increased approximately 12.6% to $20.2 million for the
fiscal 2000 third quarter from $18.0 million for the fiscal 1999 third quarter.
The increase in selling and marketing expenses resulted primarily from an
increase in advertising and certain promotional costs. The Company expects its
selling and marketing expenses, as a percentage of sales, to increase during the
fourth quarter of fiscal 2000 and in future periods.
General and administrative expenses remained relatively constant for the
quarter ended February 29, 2000 compared to the quarter ended February 28, 1999.
OTHER EXPENSE. Other expense, net, remained relatively constant at $2.6
million and $2.8 million, respectively, for the quarters ended February 29, 2000
and February 28, 1999.
PROVISION FOR INCOME TAXES. Provision for income taxes amounted to $0.7
million for the quarter ended February 29, 2000 compared to $0.3 million for the
quarter ended February 28, 1999. The increase resulted primarily from an
increase in pre-tax earnings for the fiscal 2000 third quarter in comparison to
the fiscal 1999 third quarter. Effective tax rate changes result primarily from
tax rate differences for the Company's domestic and international operations.
NINE MONTHS ENDED FEBRUARY 29, 2000 COMPARED TO NINE MONTHS ENDED
FEBRUARY 28, 1999
NET SALES. Net sales for the nine months ended February 29, 2000 increased
$27.5 million, or 11.5%, to $267.8 million from $240.3 million for the nine
months ended February 28, 1999. Sales to mass market retailers and international
markets increased during the nine months ended February 29, 2000 compared to the
nine months ended February 28, 1999. Sales to health food distributors and
retailers, health club and gym distributors, and contract manufacturing sales
decreased during the first nine months of fiscal 2000 compared to the first nine
months of fiscal 1999.
Sales to mass volume retailers increased approximately 20.2% to $133.9
million for the nine months ended February 29, 2000 from $111.4 million for the
nine months ended February 28, 1999. The increase in sales to mass market
retailers was primarily the result of increased sales to existing accounts of
certain leading branded products, offset by reduced volumes of certain other
branded products primarily due to the Company's SKU reduction program and a
temporary delay in the introduction of new products. Sales of the Company's
Schiff(R) Pain Free(TM) products amounted to $78.6 million for the first nine
months of fiscal 2000 compared to $50.1 million for the first nine months of
fiscal 1999. Sales to health food distributors and retailers decreased
approximately 32.3% to $28.5 million for the first nine months of fiscal 2000
from $42.1 million for fiscal 1999. Sales to health club and gym distributors
decreased approximately 13.6% to $15.7 million from $18.2 million for the nine
months ended February 28, 1999. The decrease in sales resulted primarily from
the Company's increased focus on the mass market distribution channel as well as
a temporary delay in the introduction of new products into the health food, and
health club and gym distribution channels. The Company intends to launch new
products, including line extensions, into its primary distribution channels
selectively during the Company's fiscal 2000 fourth quarter.
13
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Sales to international markets increased 50.6% to $86.4 million for the
nine months ended February 29, 2000 from $57.4 million for the nine months ended
February 28, 1999. The increase in sales to international markets resulted
primarily from the Company's acquisition of Haleko in July 1998. Haleko's net
sales amounted to $73.6 million and $45.0 million, respectively, for the nine
months ended February 29, 2000 and February 28, 1999. The Company's financial
results for the first nine months of fiscal 2000 included Haleko's operating
results for nine months (compared to seven months included in the first nine
months of fiscal 1999).
Contract manufacturing (private label) sales volume decreased
approximately 95.1% to $0.4 million for the first nine months of fiscal 2000
from $7.7 million for the first nine months of fiscal 1999. The decrease in
contract manufacturing sales is consistent with the Company's decision to limit
contract manufacturing business to only those customers who have, or may in the
future have, other business relationships with the Company. Private label
business for customers with whom other business relationships exist are included
in the net sales amounts for the distribution channel applicable to the
customer.
GROSS PROFIT. Gross profit increased approximately 17.4% to $100.2 million
for the nine months ended February 29, 2000 from $85.4 million for the nine
months ended February 28, 1999. Gross profit, as a percentage of net sales, was
37.4% for the nine months ended February 29, 2000 compared to 35.5% for the nine
months ended February 28, 1999. The increase in the gross profit percentage
resulted primarily from consolidation of the Company's capsule and tablet
manufacturing facilities, increased higher margin international sales, change in
sales mix and reduced credits for returned products and decreased inventory
related costs.
OPERATING EXPENSES. Operating expenses, including certain severance,
recruiting and reorganization costs, increased approximately 5.8% to $88.7
million for the first nine months of fiscal 2000 from $83.8 million for the
first nine months of fiscal 1999. During the first nine months of fiscal 2000
the Company continued its initiative for organizational changes and upgrading of
management systems (including senior management changes) that resulted in
approximately $3.5 million of costs during the nine month period. During the
first nine months of fiscal 1999 the Company recognized, in aggregate,
approximately $9.5 million in charges relating to the consolidation of capsule
and tablet manufacturing to its Utah facility, severance costs related to the
departure of a former CEO and the termination of approximately twenty employees
and inventory impairment costs resulting from excess labels, packaging and
discontinuation of certain SKUs to comply with DSHEA product labeling
requirements effective March 1999. Excluding these charges for the respective
periods, operating expenses increased $15.6 million, or 20.4% during the first
nine months of fiscal 2000 in comparison to the first nine months of fiscal
1999.
Selling and marketing expenses, including sales, marketing, adver- tising,
freight and other costs, increased approximately 16.3% to $57.7 million for the
first nine months of fiscal 2000 from $49.6 million for the first nine months of
fiscal 1999. The increase in selling and marketing expenses resulted primarily
from the acquisition of Haleko, increased advertising and promotion costs
associated with the Company's brand building initiatives and personnel costs
required to handle higher sales volumes. The Company expects its selling and
marketing expenses, as a percentage of sales, to increase during the fourth
quarter of fiscal 2000 and in future periods.
14
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General and administrative expenses increased approximately 16.0% to
$21.7 million for the nine months ended February 29, 2000 compared to $18.7
million for the nine months ended February 28, 1999. The increase in general and
administrative expenses for the first nine months of fiscal 2000 resulted
primarily from the acquisition of Haleko and increased employee compensation and
other personnel costs, partially offset by a reduction in legal costs.
OTHER EXPENSE. Other expense, net, amounted to $8.0 million for the nine
months ended February 29, 2000 compared to $7.2 million for the nine months
ended February 28, 1999. The net increase of approximately $0.8 million resulted
primarily from increased interest costs associated with additional indebtedness
incurred in connection with the acquisition of Haleko, together with an overall
higher effective borrowing rate.
PROVISION FOR INCOME TAXES. Provision for income taxes amounted to $1.4
million for the nine months ended February 29, 2000 compared to a tax benefit of
$2.3 million for the nine months ended February 28, 1999. The increase resulted
primarily from realization of pre-tax earnings for the first nine months of
fiscal 2000 in comparison to a pre-tax loss for the first nine months of fiscal
1999. Effective tax rate changes result primarily from tax rate differences for
the Company's domestic and international operations.
LIQUIDITY AND CAPITAL RESOURCES. Concurrent with the Company's IPO,
effective May 1, 1997, the Company entered into an amended credit agreement (the
"Credit Agreement") with certain lending institutions led by GECC. As currently
amended, the Credit Agreement is a $90.0 million senior secured credit facility
that contains standard terms and conditions, including, subject to permitted
amounts, a limitation on the ability of the Company to pay dividends on the
common stock and minimum net worth requirements. The obligations of the Company
under the Credit Agreement are secured by a first priority lien on all owned or
acquired tangible and intangible assets of the Company and a pledge to GECC of
the capital stock of the U.S. subsidiaries of the Company, including the
subsidiary that owns the Company's foreign subsidiaries. Borrowings available
under the Credit Agreement are used for general working capital, to support
capital expenditures and for other investment considerations. Borrowings under
the Credit Agreement bear interest at floating rates and mature in June 2000
(See Note 2 to the Condensed Consolidated Financial Statements). Accordingly,
amounts outstanding under the Credit Agreement at February 29, 2000 are included
in current portion of long-term debt. At February 29, 2000, the Company had
approximately $26.0 million of available credit under the Credit Agreement.
Excluding amounts outstanding under the Credit Agreement($64.0 million),
the Company had working capital of approximately $47.6 million at February 29,
2000 compared to $79.0 million at May 31, 1999. The decrease in working capital
resulted primarily from reduced receivables and inventories. Current receivables
and inventories decreased $14.8 million and $11.2 million, respectively, during
the nine months ended February 29, 2000. The decrease in receivables was
primarily attributable to a change in customer sales mix. The decrease in
inventories was primarily attributable to improved inventory management,
including the Company's SKU reduction program.
During the first nine months of fiscal 2000, the Company's aggregate
current and long-term debt decreased approximately $30.8 million to $84.6
million at February 29, 2000, primarily as a result of the decrease in
receivables and inventories.
15
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The Company expects to fund its long-term capital requirements for the
next twelve months through the use of operating cash flow supplemented as
necessary by borrowings under the Credit (see Note 2 to the Condensed
Consolidated Financial Statements) and, if necessary, through debt financing or
the issuance of additional equity. The Company also from time to time may
evaluate strategic acquisitions as the nutritional supplements industry
continues to consolidate. The funding of any future acquisitions, if any, may
also require borrowings under the Credit Agreement, as amended, and/or other
debt financing or the issuance of additional equity.
The Company paid a quarterly dividend of $0.0375 per share subsequent to
February 29, 2000. The dividend was declared to be payable on March 20, 2000 to
holders of all classes of common stock of record at the close of business on
March 10, 2000. The Company's Board of Directors will determine dividend policy
in the future based upon, among other things, the Company's results of
operations, financial condition, contractual restrictions and other factors
deemed relevant at the time. In addition, the Credit Agreement contains certain
customary financial covenants that may limit the Company's ability to pay
dividends on its common stock. Accordingly, there can be no assurance that the
Company will be able to sustain the payment of dividends in the future.
IMPACT OF INFLATION. The Company has historically been able to pass
inflationary increases for raw materials and other costs through to its
customers and anticipates that it will be able to continue to do so in the
future.
SEASONALITY. The Company's business has historically been seasonal, with
lower sales typically realized during the first and second fiscal quarters and
higher sales typically realized during the third and fourth fiscal quarters. The
Company believes such fluctuations in sales are the result of greater marketing
and promotional activities toward the end of each fiscal year, customer buying
patterns, and consumer spending patterns related primarily to the consumers'
interest in achieving personal health and fitness goals after the beginning of
each new calendar year and before the summer fashion season.
Furthermore, as a result of changes in product sales mix and other
factors, as discussed above, the Company experiences fluctuations in gross
profit and operating margins on a quarter-to-quarter basis.
YEAR 2000. As of April 14, 2000, the Company is not aware of any material
year 2000 problems in any of its critical systems and services. In addition, the
Company has not received any notification from any supplier of critical systems
or services of any material year 2000 related problems in their businesses. In
the event that any year 2000 related problems arise in the future, the Company
formulated a year 2000 plan to address such issues. However, although the
Company has a year 2000 plan, no assurance can be given that such plan will be
able to solve all year 2000 issues that might still arise or that the failure to
solve any such year 2000 issue will not have a material adverse effect on the
Company.
16
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The information set forth in Note 8 to Condensed Consolidated
Financial Statements in Item 1 of this Quarterly Report on Form 10-Q is
incorporated herein by reference.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
17
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
5.1 Stock Purchase Agreement, dated July 9, 1998, by and among Weider
Nutrition Group, Inc. and Wolfgang Brandt and Eberhardt Schluter. (2)
5.2 Amendment Deed to Stock Purchase Agreement, dated July 24, 1998. (2)
5.3 Share Transfer Deed, dated July 24, 1998. (2)
3.1 Amended and Restated Certificate of Incorporation of Weider Nutrition
International, Inc. (1)
3.2 Amended and Restated Bylaws of Weider Nutrition International, Inc. (1)
4.1 Amended and Restated Credit Agreement dated as of May 6, 1997 among
Weider Nutrition International, Inc., certain subsidiaries, certain
lenders and General Electric Capital Corporation. (3)
4.2 First Amendment to Amended and Restated Credit Agreement dated as of
August 27, 1997 among Weider Nutrition International, Inc. and certain
of its affiliates and General Electric Capital Corporation and certain
other lenders. (3)
4.3 Second Amendment to Amended and Restated Credit Agreement dated as of
February 1998 among Weider Nutrition International, Inc. and certain of
its affiliates and General Electric Capital Corporation and certain
other lenders. (3)
4.4 Third Amendment to Amended and Restated Credit Agreement dated as of
July 28, 1998 among Weider Nutrition International, Inc. and certain of
its affiliates and General Electric Capital Corporation and certain
other lenders. (4)
4.5 Fourth Amendment to Amended and Restated Credit Agreement dated as of
December 2, 1998 among Weider Nutrition International, Inc. and certain
of its affiliates and General Electric Capital Corporation and certain
other lenders. (4)
4.6 Fifth Amendment to Amended and Restated Credit Agreement dated as of
December 15, 1998 among Weider Nutrition International, Inc. and
certain of its affiliates and General Electric Capital Corporation and
certain other lenders. (4)
4.7 Sixth Amendment to Amended and Restated Credit Agreement dated as of
March 4, 1999 among Weider Nutrition International, Inc. and certain of
its affiliates and General Electric Capital Corporation and certain
other lenders. (5)
4.8 Seventh Amendment to Amended and Restated Credit Agreement dated as of
June 24, 1999 among Weider Nutrition International, Inc. and certain of
its affiliates and General Electric Capital Corporation and certain
other lenders. (6)
4.9 Haleko Credit Agreement dated as of July 22, 1999, among Haleko and
certain other lenders. (7)
4.10 Eighth Amendment to Amended and Restated Credit Agreement dated as of
February 24, 2000 among Weider Nutrition International, Inc. and
certain of its affiliates and General Electric Capital Corporation and
certain other lenders. (8)
10.1 Build-To-Suit Lease Agreement, dated March 20, 1996, between SCI
Development Services Incorporated and Weider Nutrition Group, Inc. (1)
10.2 Agreement by and between Joseph Weider and Weider Health and Fitness. (1)
10.3 1997 Equity Participation Plan of Weider Nutrition International, Inc. (1)
10.4 Form of Tax Sharing Agreement by and among Weider Nutrition
International, Inc. and its subsidiaries and Weider Health and Fitness
and its subsidiaries. (1)
10.5 Form of employment Agreement between Weider Nutrition International,
Inc. and Richard B. Bizzaro. (1)
10.6 Form of Employment Agreement between Weider Nutrition International,
Inc. and Robert K. Reynolds, as amended. (5)
10.7 Form of Senior Executive Employment Agreement between Weider Nutrition
International, Inc. and certain senior executives of the Company. (1)
10.8 Advertising Agreement between Weider Nutrition International, Inc. and
Weider Publications, Inc. (1)
10.9 Amended and Restated Shareholders Agreement between Weider Health and
Fitness and Hornchurch Investments Limited (1)
10.10 Amended and Restated Shareholders Agreement between Weider Health and
Fitness, Bayonne Settlement and Ronald Corey. (1)
10.11 Indemnification Agreement between Weider Nutrition Group, Inc. and
Showa Denko America. (1)
18
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10.12 License Agreement between Mariz Gestao E Investmentos Limitada and Weider
Nutrition Group Limited. (1)
10.13 Form of Employment Agreement between Weider Nutrition International,
Inc. and David J. Gustin. (5)
10.14 Form of Employment Agreement between Weider Nutrition International,
Inc. and Bruce J. Wood. (6)
10.15 Separation Agreement between Weider Nutrition International, Inc. and
Robert K. Reynolds. (7)
21 Subsidiaries of Weider Nutrition International, Inc. (1)
27.1 Financial Data Schedule Summary (8)
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(1) Filed as an Exhibit to the Company's Registration Statement on From S-1
(File No. 333-12929) and incorporated herein by reference.
(2) Previously filed in the Company's Current Report on Form 8-K dated as of
July 24, 1998 and incorporated herein by reference.
(3) Previously filed in the Company's Current Report on Form 10-Q dated as of
October 14, 1998 and incorporated herein by reference.
(4) Previously filed in the Company's Current Report on Form 10-Q dated as of
January 14, 1999 and incorporated herein by reference.
(5) Previously filed in the Company's Current Report on Form 10-Q dated as of
April 6, 1999 and incorporated herein by reference.
(6) Previously filed in the Company's Current Report on Form 10-K dated as of
August 30, 1999 and incorporated herein by reference.
(7) Previously filed in the Company's Current Report on Form 10-Q dated as of
October 15, 1999.
(8) Filed herewith
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(b) Reports on Form 8-K
None
19
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SIGNATURES
Pursuant to the requirements 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.
WEIDER NUTRITION INTERNATIONAL, INC.
Date: April 14, 2000 BY: /s/ BRUCE J. WOOD
Bruce J. Wood
President, Chief Executive Officer
and Director
Date: April 14, 2000 BY: /s/ JOSEPH W. BATY
Joseph W. Baty, Executive
Vice President and Chief
Financial Officer
20
EXHIBIT 4.10
EIGHTH AMENDMENT AND CONSENT TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
This EIGHTH AMENDMENT AND CONSENT TO THIRD AMENDED AND RESTATED CREDIT
AGREEMENT (this "AMENDMENT") dated as of February 16, 2000 and effective as of
February 29, 2000 (the "EFFECTIVE DATE") is made among WEIDER NUTRITION
INTERNATIONAL, INC., a Delaware corporation ("HOLDINGS"), WEIDER NUTRITION
GROUP, INC., a Utah corporation ("NUTRITION"), WNG HOLDINGS (INTERNATIONAL)
LTD., a Nevada corporation ("INTERNATIONAL"; Holdings, Nutrition and
International, individually, each an "OBLIGOR" and, collectively, "OBLIGORS"),
GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation, for itself, as
Lender, and as Agent for Lenders (in such capacity, "AGENT"), and the other
Lenders signatory to the hereinafter defined Credit Agreement.
RECITALS
A. Agent, Lenders and Obligors are party to that certain Third Amended and
Restated Credit Agreement dated as of May 6, 1997 (as previously amended,
restated, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT").
B. On and subject to the terms and conditions hereof, Obligors have
requested, and Agent and Lenders are willing to grant, certain amendments and
consents under the Credit Agreement.
C. This Amendment shall constitute a Loan Document and these Recitals
shall be construed as part of this Amendment; capitalized terms used herein
without definition are so used as defined in Annex A to the Credit Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. AMENDMENT. Subject to the conditions precedent set forth in Section 5
hereof, the Credit Agreement is hereby amended as follows:
(a) The text of Section 1.5(a) of the Credit Agreement is replaced
with the following text:
"(a) Borrowers shall pay interest to Agent, for the ratable benefit
of Lenders, in arrears on (i) the first day of each month with
respect to Index Rate Loans and (ii) on the last day of each
applicable LIBOR Period with respect to LIBOR Loans, at a per annum
rate equal to (A) with respect to
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Index Rate Loans, the Index Rate plus a margin of 4.00% and (B) with
respect to LIBOR Loans, the LIBOR Rate plus a margin of 5.50%."
(b) The definition of "REVOLVING COMMITMENT TERMINATION DATE" in
Annex A to the Credit Agreement is amended by deleting the reference to
"February 29, 2000" and replacing such reference with a reference to "June
30, 2000."
(c) The definition of "REVOLVING CREDIT LOAN COMMITMENT" in Annex A
to the Credit Agreement is amended by deleting the reference to "One
Hundred Fifteen Million Dollars ($115,000,000)" and replacing such
reference with a reference to "Ninety Million Dollars ($90,000,000)."
(d) Annex E to the Credit Agreement is amended by deleting
paragraphs (a) and (b) in their entirety and replacing them with the
following paragraphs:
"(a) To Agent and Lenders, within thirty (30) days after the end of
each Fiscal Month (i) for Holdings and its Subsidiaries on a
consolidated and consolidating basis, unaudited balance sheets as of
the close of such Fiscal Month and the related statements of income
and cash flow for that portion of the Fiscal Year ending as of the
close of such Fiscal Month, in each case setting forth in
comparative form the figures for the corresponding period in the
prior year and the figures contained in the budget, all prepared in
accordance with GAAP (subject to normal year-end adjustments), (ii)
a certificate of the Chief Financial Officer of Holdings (on behalf
of itself and each Borrower) attached to the foregoing financial
information to the effect that (A) the attached Financial Statements
present fairly in all material respects and in accordance with GAAP
(subject to normal year-end adjustments and the absence of
footnotes) the financial position and results of operations of
Holdings and its Subsidiaries, on a consolidated and consolidating
basis, in each case as at the end of, and for, such Fiscal Month,
(B) all other attached financial information is true, correct and
complete in all material respects and (C) there was no Default or
Event of Default in existence as of such time or, if a Default or
Event of Default shall have occurred and be continuing, describing
the nature thereof and all efforts undertaken to cure such Default
or Event of Default, and (iii) a statement setting forth the
calculations used in determining compliance with each financial
covenant set forth on ANNEX G;
(b) To Agent and Lenders, within forty-five (45) days after the end
of each Fiscal Quarter, a management discussion and analysis which
includes a comparison to budget for that Fiscal Quarter and a
comparison of performance for that Fiscal Quarter to the
corresponding period in the prior year;"
(e) Annexes G and J to the Credit Agreement are respectively
replaced with Annexes G and J respectively attached as ANNEXES A and B
hereto.
2. CONSENT. Subject to the conditions precedent set forth in Section 5
hereof, notwithstanding any provision of the Credit Agreement to the contrary,
Agent and Lenders
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<PAGE>
hereby consent to the transfer (in the form of a loan, advance or investment) on
or before the earlier of the Revolving Commitment Termination Date and June 30,
2000 of an aggregate amount of up to $1.5 million by Obligors to its
Subsidiaries not domiciled in the United States.
3. AGREEMENTS BY OBLIGORS.
(a) Each Obligor hereby agrees that it will use its best efforts to
(i) obtain, on or before February 18, 2000, a signed proposal letter with
respect to refinancing of the Revolving Credit Loan Commitment and (ii)
hold, on or before April 21, 2000, a syndication bank meeting with respect
to such refinancing.
(b) In addition to the fee referenced in Section 5(e), the Obligors
jointly and severally agree to pay to Agent (at Agent's option, by payment
or as a charge against the Revolving Loan) for the ratable benefit of each
Lender, a fee of $450,000 on May 31, 2000, if the Revolving Credit Loan
Commitment has not been refinanced and terminated on or before such date.
4. REPRESENTATIONS AND WARRANTIES. As of the date hereof, Obligors
hereby jointly and severally represent and warrant to Agent and Lenders as
follows:
(a) After giving effect to this Amendment and the transactions
contemplated hereby (i) no Default or Event of Default shall have occurred
or be continuing and (ii) the representations and warranties of Obligors
contained in the Loan Documents shall be true, accurate and complete in
all respects on and as of the date hereof to the same extent as though
made on and as of such date, except to the extent such representations and
warranties specifically relate to an earlier date.
(b) The execution, delivery and performance, as the case may be, by
each Obligor of this Amendment and the other documents and transactions
contemplated hereby are within each Obligor's corporate powers, have been
duly authorized by all necessary corporate action (including, without
limitation, all necessary shareholder approval) of each Obligor, have
received all necessary governmental approvals, and do not and will not
contravene or conflict with any provision of law applicable to any
Obligor, the certificate or articles of incorporation or bylaws of any
Obligor, or any order, judgment or decree of any court or other agency of
government or any contractual obligation binding upon any Obligor.
(c) This Amendment, the Credit Agreement and each other Loan
Document is the legal, valid and binding obligation of each Obligor
enforceable against each Obligor in accordance with its respective terms,
except to the extent enforceability is limited by bankruptcy, insolvency
or similar laws affecting the rights of creditors generally or by
application of general principles of equity.
5. CONDITIONS PRECEDENT. This Amendment shall become effective as of the
Effective Date, PROVIDED that as of the Effective Date each of the following
items shall have been received by Agent or satisfied, as the case may be, all in
form and substance satisfactory to Agent:
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(a) AMENDMENT. This Amendment, duly executed by each Obligor,
Agent and each Lender.
(b) REVOLVING CREDIT NOTES. Revolving Credit Notes reflecting each
Revolving Credit Loan Commitment set forth on ANNEX A attached hereto,
duly executed by each Borrower.
(c) NO DEFAULT. After giving effect to this Amendment and the
transactions contemplated hereby, no Default or Event of Default shall
have occurred and be continuing.
(d) WARRANTIES AND REPRESENTATIONS. After giving effect to this
Amendment and the transactions contemplated hereby, the warranties and
representations of each Obligor contained in this Amendment shall be true
and correct in all respects.
(e) FEES, COSTS AND EXPENSES. Agent shall have received (at
Agent's option, by payment or as a charge against the Revolving Loan) (i)
for the ratable benefit of each Lender, an amendment fee of $450,000,
which fee shall be fully earned as of the date hereof and shall be
non-refundable when paid, and (ii) all other fees, costs and expenses,
including reasonable attorneys' fees, due pursuant to the Loan Documents,
including as incurred by Agent in connection herewith.
6. EFFECT ON LOAN DOCUMENTS. This Amendment is limited to the specific
purpose for which it is granted and, except as specifically set forth above (a)
shall not be construed as a consent, waiver, amendment or other modification
with respect to any term, condition or other provision of any Loan Document and
(b) each of the Loan Documents shall remain in full force and effect and are
each hereby ratified and confirmed.
7. SUCCESSORS AND ASSIGNS. This Amendment shall be binding on and shall
inure to the benefit of Obligors, Agent, Lenders and their respective successors
and assigns; PROVIDED that no Obligor may assign its rights, obligations, duties
or other interests hereunder without the prior written consent of Agent and
Lenders. The terms and provisions of this Amendment are for the purpose of
defining the relative rights and obligations of Obligors, Agent and Lenders with
respect to the transactions contemplated hereby and there shall be no third
party beneficiaries of any of the terms and provisions of this Amendment.
8. ENTIRE AGREEMENT. This Amendment, including all documents attached
hereto, incorporated by reference herein or delivered in connection herewith,
constitutes the entire agreement of the parties with respect to the subject
matter hereof and supersedes all other understandings, oral or written, with
respect to the subject matter hereof.
9. FEES AND EXPENSES. Obligors shall pay to Agent on demand all fees,
costs and expenses owing by Obligors pursuant to Section 11.3 of the Credit
Agreement, including those incurred by Agent or otherwise payable in connection
with the preparation, execution and delivery of this Amendment.
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<PAGE>
10. INCORPORATION OF CREDIT AGREEMENT. The provisions contained in
Sections 11.9 and 11.14 of the Credit Agreement are incorporated herein by
reference to the same extent as if reproduced herein in their entirety with
respect to this Amendment.
11. ACKNOWLEDGMENT. Each Obligor hereby represents and warrants that there
are no liabilities, claims, suits, debts, liens, losses, causes of action,
demands, rights, damages or costs, or expenses of any kind, character or nature
whatsoever, known or unknown, fixed or contingent (collectively, the "CLAIMS"),
which any Obligor may have or claim to have against Agent or any Lender, or any
of their respective affiliates, agents, employees, officers, directors,
representatives, attorneys, successors and assigns (collectively, the "LENDER
RELEASED PARTIES"), which might arise out of or be connected with any act of
commission or omission of the Lender Released Parties existing or occurring on
or prior to the date of this Amendment, including, without limitation, any
Claims arising with respect to the Obligations or any Loan Documents. In
furtherance of the foregoing, each Obligor hereby releases, acquits and forever
discharges the Lender Released Parties from any and all Claims that any Obligor
may have or claim to have, relating to or arising out of or in connection with
the Obligations or any Loan Documents or any other agreement or transaction
contemplated thereby or any action taken in connection therewith from the
beginning of time up to and including the date of the execution and delivery of
this Amendment. Each Obligor further agrees forever to refrain from commencing,
instituting or prosecuting any lawsuit, action or other proceeding against any
Lender Released Parties with respect to any and all Claims which might arise out
of or be connected with any act of commission or omission of the Lender Released
Parties existing or occurring on or prior to the date of this Amendment,
including, without limitation, any Claims arising with respect to the
Obligations or any Loan Documents.
12. CAPTIONS. Section captions used in this Amendment are for
convenience only, and shall not affect the construction of this Amendment.
13. SEVERABILITY. Whenever possible each provision of this Amendment shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Amendment shall be prohibited by or invalid under
such law, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Amendment.
14. COUNTERPARTS. This Amendment may be executed in any number of
counterparts and by the different parties on separate counterparts, and each
such counterpart shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument. Delivery of an
executed counterpart of a signature page to this Amendment by telecopy shall be
effective as delivery of a manually executed counterpart of this Amendment.
[signature pages follow]
-5-
<PAGE>
IN WITNESS WHEREOF, this Eighth Amendment and Consent to Third Amended and
Restated Credit Agreement has been duly executed and delivered as of the day and
year first above written.
WEIDER NUTRITION INTERNATIONAL, INC.
WEIDER NUTRITION GROUP, INC.
WNG HOLDINGS (INTERNATIONAL) LTD.
For each of the foregoing:
By: _______________________________
Title: ______________________________
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
By: _______________________________
Title: Duly Authorized Signatory
FIRST UNION NATIONAL BANK, successor by merger to
Corestates Bank, N.A.
By: _______________________________
Title:______________________________
LASALLE BANK NATIONAL ASSOCIATION,
successor to LaSalle National Bank
By: _______________________________
Title:______________________________
-6-
<PAGE>
THE BANK OF NOVA SCOTIA
By: _______________________________
Title:______________________________
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.
By: _______________________________
Title:______________________________
By: _______________________________
Title:______________________________
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: _______________________________
Title:______________________________
By: _______________________________
Title:______________________________
ZIONS FIRST NATIONAL BANK
By: _______________________________
Title:______________________________
-7-
<PAGE>
Annex A
ANNEX G (SECTION 6.20)
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
FINANCIAL COVENANTS
Nutrition shall not breach or fail to comply with the following
financial covenant, which shall be calculated in the same manner as in the most
recently delivered and approved Projections and in accordance with GAAP,
consistently applied:
MINIMUM EBITDA. Nutrition shall have, at the end of the period described below,
EBITDA equal to or greater than the amount set forth opposite such period:
PERIOD AMOUNT
------ -----------
Nine Fiscal Months ending February 29, 2000 $12,050,000
Ten Fiscal Months ending March 31, 2000 $12,525,000
Eleven Fiscal Months ending April 30, 2000 $13,325,000
Twelve Fiscal Months ending May 31, 2000 $14,400,000
Twelve Fiscal Months ending June 30, 2000 $13,225,000
-8-
<PAGE>
Annex B
ANNEX J
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
COMMITMENTS
REVOLVING CREDIT
LENDER LOAN COMMITMENT PERCENTAGE
- ----- --------------- ----------
General Electric Capital Corporation $ 30,150,000.00 33.50%
First Union National Bank $ 15,525,000.00 17.25%
LaSalle Bank National Association $ 15,525,000.00 17.25%
The Bank of Nova Scotia $ 7,200,000.00 8.00%
Bank Austria Creditanstalt $ 7,200,000.00 8.00%
Corporate Finance, Inc.
Dresdner Bank AG, New York and $ 7,200,000.00 8.00%
Grand Cayman Branches
Zions First National Bank $ 7,200,000.00 8.00%
----------
Total: $ 90,000,000.00 100.00%
=============== ==========
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF WEIDER NUTRITION INTERNATIONAL, INC. AS OF,
AND FOR THE NINE MONTHS ENDING FEBRUARY 29, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 2,708
<SECURITIES> 1,859
<RECEIVABLES> 48,744
<ALLOWANCES> 3,036
<INVENTORY> 52,483
<CURRENT-ASSETS> 111,923
<PP&E> 70,369
<DEPRECIATION> 22,309
<TOTAL-ASSETS> 222,036
<CURRENT-LIABILITIES> 128,335
<BONDS> 3,581
0
0
<COMMON> 250
<OTHER-SE> 89,680
<TOTAL-LIABILITY-AND-EQUITY> 222,036
<SALES> 267,792
<TOTAL-REVENUES> 267,792
<CGS> 167,597
<TOTAL-COSTS> 167,597
<OTHER-EXPENSES> 88,703
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,412
<INCOME-PRETAX> 3,519
<INCOME-TAX> 1,376
<INCOME-CONTINUING> 2,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,143
<EPS-BASIC> 0.09
<EPS-DILUTED> 0.09
</TABLE>
