<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
___________ __________
Commission file number 33-24715
AURORA FOODS INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 13-3921934
_______________________________________________________________________________
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
445 Hutchinson Avenue, Suite 960
Columbus, OH 43235
(Address of Principal Executive Office)
(614) 436-8600
(Registrant's Telephone Number, Including Area Code)
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 and Exchange Act of 1934
during the preceeding 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 No X
_____ _____
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date.
Shares Outstanding
September 27, 1997
Common stock, no par value 1,000
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
AURORA FOODS INC.
(Formerly MBW Foods Inc.)
BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
September 27, December 31,
1997 1996
---------- ---------
ASSETS (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,341 $ 8,666
Accounts receivable,
net of allowance of $89 12,091 -
Accounts receivable - other (Note 3) 8,324 480
Inventories (Note 4) 4,442 1,182
Prepaid expenses 85 9
Current deferred tax asset 729 -
--------- ---------
Total current assets 30,012 10,337
Property, plant and equipment, net 14,828 5,206
Goodwill and other intangible assets, net 316,040 111,358
Other assets 13,829 3,995
--------- ---------
Total assets $ 374,709 $ 130,896
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of term debt $ 3,250 $ 95,000
Senior secured revolving debt facility 47,000 -
Accounts payable 6,030 -
Accrued liabilities 12,183 2,736
---------- ---------
Total current liabilities 68,463 97,736
Senior secured term debt 36,750 -
Senior subordinated notes, gross of premium 202,460 -
Other liabilities 1,082 -
Deferred tax liability - non-current 2,046 -
---------- ---------
Total liabilities 310,801 97,736
---------- ---------
Stockholder's equity:
Common stock, no par value - -
Paid in capital 61,640 33,160
Retained earnings 2,268 -
---------- ---------
Total stockholder's equity 63,908 33,160
---------- ---------
Total liabilities and stockholder's equity $ 374,709 $ 130,896
========== =========
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
AURORA FOODS INC.
(Fomerly MBW Foods Inc.)
STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Company | Predecessor
-----------------------------------------------
Three Months Ended
-----------------------------------------------
September 27, 1997 | September 30, 1996
-------------------- | -----------------------
<S> <C> | <C>
Net sales $ 49,125 | $ 23,033
Cost of goods sold 15,229 | 7,552
--------- | ---------
Gross profit 33,896 | 15,481
--------- | ---------
Brokerage, distribution and marketing expenses: |
Brokerage and distribution 5,701 | 2,601
Trade promotions 8,734 | 4,380
Consumer marketing 4,889 | 2,662
--------- | ---------
Total brokerage, distribution and marketing expenses 19,324 | 9,643
--------- | ---------
|
Amortization of goodwill and other intangibles 2,170 | -
Selling, general and administrative expenses 1,250 | 1,493
Other expenses 17 | -
Transition related costs (Note 5) 989 | -
--------- | ---------
Total operating expenses 23,750 | 11,136
--------- | ---------
Operating income 10,146 | 4,345
|
Interest income (5) | -
Interest expense 6,624 | -
Amortization of deferred financing expense 293 | -
Other bank and financing expenses 29 | -
--------- | ---------
Income before income taxes 3,205 | 4,345
|
Income tax expense 1,282 | 1,673
--------- | ---------
Net income $ 1,923 | $ 2,672
========= | ========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
AURORA FOODS INC.
(Formerly MBW Foods Inc.)
STATEMENTS OF OPERATIONS
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Company | Predecessor
--------------------------------------
Nine Months Ended
--------------------------------------
September 27, 1997 September 30, 1996
----------------- -------------------
<S> <C> | <C>
Net sales $ 92,016 | $ 67,540
Cost of goods sold 29,500 | 21,346
------ | ------
Gross profit 62,516 | 46,194
------ | ------
Brokerage, distribution and marketing |
expenses: |
Brokerage and distribution 10,400 | 7,377
Trade promotions 15,807 | 13,076
Consumer marketing 9,256 | 8,802
------ | ------
Total brokerage, distribution and |
marketing expenses 35,463 | 29,255
------ | ------
|
Amortization of goodwill and other |
intangibles 3,828 | -
Selling, general and administrative |
expenses 3,577 | 4,869
Other expenses 17 | -
Transition related costs (Note 5) 1,313 | -
------ | ------
Total operating expenses 44,198 | 34,124
------ | ------
|
Operating income 18,318 | 12,070
|
Interest income (86) | -
Interest expense 11,800 | -
Amortization of deferred financing |
expense 2,771 | -
Other bank and financing expenses 53 | -
------ | ------
Income before income taxes 3,780 | 12,070
|
|
Income tax expense 1,512 | 4,647
------ | ------
|
Net income $ 2,268 | $ 7,423
====== | ======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
AURORA FOODS INC.
(Formerly MBW Foods Inc.)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
OPERATING PERIOD JANUARY 1, 1997 THROUGH SEPTEMBER 27, 1997
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Common Paid in Retained
Shares Capital Earnings Total
------ ------- -------- -----
<S> <C> <C> <C> <C>
Balance at December 31, 1996 1,000 $33,160 $ - $33,160
Capital contribution - 28,605 - 28,605
Officer promissory notes - (125) - (125)
Net income - - 2,268 2,268
----- ------- ------ -------
Balance at September 27, 1997 1,000 $61,640 $2,268 $63,908
===== ======= ====== =======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
AURORA FOODS INC.
(Formerly MBW Foods Inc.)
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 27, 1997
(dollars in thousands)
(unaudited)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 2,268
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 7,180
Deferred income taxes 1,317
Change in assets and liabilities, net of effects of businesses acquired:
(Increase) in accounts receivable (19,935)
Decrease in inventories 5,435
(Increase) in prepaid expenses (76)
Increase in accounts payable 6,030
Increase in accrued liabilities 9,447
---------
Net cash provided by operating activities 11,666
---------
Cash flows from investing activities:
Additions to property, plant and equipment (2,793)
Changes to other assets and other liabilities 441
Payment for acquisition of business (224,655)
---------
Net cash used in investing activities (227,007)
---------
Cash flows from financing activities:
Proceeds from long term borrowings 90,000
Proceeds from senior subordinated notes 202,500
Payment of borrowings (98,000)
Capital contributions from Holdings, net of officer promissory notes 28,480
Debt issuance and equity offering costs (11,964)
---------
Net cash provided by financing 211,016
activities ---------
(Decrease) in cash and cash equivalents (4,325)
Cash and cash equivalents, beginning of period 8,666
---------
Cash and cash equivalents, end of period $ 4,341
=========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
AURORA FOODS INC.
(Formerly MBW Foods Inc.)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
Basis of Presentation
The interim financial statements of Aurora Foods Inc. (the "Company," formerly
MBW Foods Inc.), included herein, have not been audited by independent
accountants. The statements include all adjustments, such as normal recurring
accruals, which management considers necessary for a fair presentation of the
financial position and operating results of the Company for the periods
presented. Operating results during the prior year periods of Conopco, Inc., a
subsidiary of Unilever United States, Inc. (together, the "Predecessor"),
include certain reclassifications to conform with the Company's presentation.
The statements have been prepared by the Company pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosure normally included in financial statements
prepared in conformity with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. The operating
results for interim periods are not necessarily indicative of results to be
expected for an entire year.
The prior owners did not operate the Company's Predecessor as a separate
division, and, accordingly, it is not practicable to present a statement of
cash flows during the Predecessor period. The Company was granted a waiver by
the Securities and Exchange Commission with respect to the presentation of these
cash flows.
For further information, reference should be made to the financial statements
for the fiscal year ended December 31, 1996 and the notes thereto included in
the Company's Registration Statement on the Form S-4 on file at the Securities
and Exchange Commission.
NOTE 2 - ACQUISITIONS
On December 31, 1996, Aurora Foods Inc. acquired substantially all of the assets
of the Mrs. Butterworth's(R) syrup and pancake business (the "Business") from
the Predecessor. The Company acquired the inventories, manufacturing equipment,
and certain intangible assets of the Business for a purchase price of $114.1
million. The acquisition was financed by (i) an equity capital contribution
from Aurora Foods Holdings, Inc. ("Holdings") of approximately $33.7 million,
(ii) term loans of $15.0 million and revolving loans of $30.0 million borrowed
under a $60.0 million senior secured credit facility, and (iii) loans of $50.0
million borrowed under a senior subordinated credit facility. On February 10,
1997, the senior subordinated credit facility of $50.0 million and the senior
secured facilities of $15.0 million of term loans and $30.0 million of revolving
loans were repaid with proceeds from a $100.0 million senior subordinated note
offering.
6
<PAGE>
On July 1, 1997, the Company acquired substantially all of the assets of the Log
Cabin(R) syrup business from Kraft Foods, Inc. ("Kraft") for $222.0 million.
The assets acquired include inventories, certain manufacturing equipment and
certain intangible assets. The acquisition was financed by (i) an equity capital
contribution from Holdings of approximately $28.5 million, (ii) term loans of
$40.0 million and revolving loans of $47.0 million borrowed under the senior
secured credit facility, and (iii) proceeds of $102.5 million received in an
additional senior subordinated note offering.
The acquisitions have been accounted for using the purchase method and,
accordingly, the results of operations are included in the Statements of
Operations from the dates of acquisition. Assets acquired and liabilities
assumed were recorded at their estimated fair market value and the excess costs
over net tangible assets are being amortized over the estimated useful lives of
the related intangible assets.
Had the two acquisitions taken place January 1, 1996, the results for the
quarter ended September 27, 1997 would not have been significantly different
from those reflected in the Statements of Operations as the Log Cabin(R) syrup
business was acquired at the beginning of the September quarter. The unaudited
pro forma net sales and income before income taxes for the quarter ended
September 30, 1996 would have been $51,061,000 and $2,784,000, respectively. The
unaudited pro forma net sales and income before income taxes for the nine months
ended September 27, 1997 would have been $143,238,000 and $9,138,000,
respectively, and for the nine months ended September 30, 1996 would have been
$147,076,000 and $2,540,000, respectively.
NOTE 3 - ACCOUNTS RECEIVABLE - OTHER
Accounts Receivable - Other consist of the following (in thousands):
<TABLE>
<CAPTION>
September 28, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Conopco $ 275 $ 480
Kraft 7,981 -
Other 68 -
----- ---
$ 8,324 $ 480
===== ===
</TABLE>
The balances due from Conopco and Kraft are comprised of accounts receivable
collected by them on behalf of the Company.
7
<PAGE>
NOTE 4 - INVENTORIES
Inventories are stated at the lower of cost (determined by the first-in, first-
out method) or market. Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
September 27, 1997 December 31, 1996
------------------ -----------------
<S> <C> <C>
Raw materials $ 291 $ -
Packaging 677 250
Finished goods 3,474 932
----- -----
$ 4,442 $ 1,182
===== =====
</TABLE>
NOTE 5 - TRANSITION RELATED COSTS
Transition related costs consist of what management believes are one-time costs
incurred to establish operations and integrate the businesses acquired,
including relocation expenses, recruiting fees, broker conversions and
orientations, sales training, systems conversion, and other unique transitional
expenses.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Reference is made to Notes to Financial Statements and Management's Discussion
and Analysis of Financial Condition and Results of Operations presented in the
Registrant's Registration Statement on the Form S-4 for the period ended
December 31, 1996.
A. The following tables set forth, for the periods indicated, the percentage
which the items in the Statement of Operations bear to net sales and the
percentage change of such items compared to the indicated prior period. The
Statement of Operations columns for the three months ended and nine months
ended September 30, 1996 show results of the Predecessor's operation without
any pro forma adjustments.
9
<PAGE>
COMPARATIVE RESULTS: THREE MONTHS ENDED SEPTEMBER 27, 1997 (unaudited)
<TABLE>
<CAPTION>
Company Predecessor
------------------------------------------ Period to
Three Months Ended Period
------------------------------------------ Increase
September 27, 1997 September 30, 1996 (Decrease)
------------------ ------------------ ----------
($000) ($000)
<S> <C> <C> <C> <C> <C>
Net sales $ 49,125 100.0 % $ 23,033 100.0 % 113.3 %
Cost of goods sold 15,229 31.0 7,552 32.8 101.7
-------- ----- -------- -----
Gross profit 33,896 69.0 15,481 67.2 119.0
-------- ----- -------- -----
Brokerage, distribution and
marketing expenses:
Brokerage and distribution 5,701 11.6 2,601 11.3 119.2
Trade promotions 8,734 17.8 4,380 19.0 99.4
Consumer marketing 4,889 9.9 2,662 11.6 83.7
-------- ----- -------- -----
Total brokerage, distribution
marketing expenses 19,324 39.3 9,643 41.9 100.4
-------- ----- -------- -----
Amortization of goodwill
and other intangibles 2,170 4.4 - 0.0 0.0
Selling, general and
administrative expenses 1,250 2.6 1,493 6.4 (16.3)
Other expenses 17 0.0 - 0.0 0.0
Transition related costs 989 2.0 - 0.0 0.0
-------- ----- -------- -----
Total operating expenses 23,750 48.3 11,136 48.3 113.3
-------- ----- -------- -----
Operating income 10,146 20.7 4,345 18.9 133.5
Interest income (5) 0.0 - 0.0 0.0
Interest expense 6,624 13.5 - 0.0 0.0
Amortization of deferred
financing expense 293 0.6 - 0.0 0.0
Other bank and financing
expenses 29 0.1 - 0.0 0.0
-------- ----- -------- -----
Income before income
taxes 3,205 6.5 4,345 18.9 (26.2)
Income tax expense 1,282 2.6 1,673 7.3 (23.4)
-------- ----- -------- -----
Net income $ 1,923 3.9 % $ 2,672 11.6 % (28.0) %
======== ===== ======== =====
</TABLE>
10
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 27, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996.
Net Sales. Net sales for the quarter increased $26.1 million versus the prior
year to $49.1 million. The increase was due to the acquisition of Log Cabin,
which provided $26.1 million in net sales. Net dollar sales for Mrs.
Butterworth's were flat for the quarter at $23.0 million. However, case volume
for Mrs. Butterworth's increased 3.2% for the quarter to 1.04 million standard
cases as a result of stronger execution of off-season promotions in July and
August.
Syrup sales increased $26.5 million to $46.7 million in the quarter from $20.2
million in the 1996 period. The Log Cabin acquisition accounted for $26.1
million of the increase and Mrs. Butterworth's grew by $0.4 million, or 2.2%.
Syrup case volume for Mrs. Butterworth's increased 7.0% to 884,000 standard
cases in the quarter from 826,000 in the 1996 period. The increase in syrup
volume was attributable to increases in the Company's Original brand, gallon
sized products and foodservice business.
Pancake mix sales of $2.4 million decreased 14.4% in the quarter as compared to
the 1996 period and pancake mix volume was down 14.7% to 152,000 standard cases.
This decrease was primarily the result of an inventory build up at the retail
shelf that occured in the first half of 1997.
Gross Profit. Gross profit was 69.0% of net sales for the 1997 period as
compared to 67.2% in 1996. The increase in gross margin was primarily due to
lower raw material costs for corn syrup, which is a principal ingredient in
syrup products.
Brokerage, Distribution and Marketing Expenses. Brokerage, distribution and
marketing expenses for the 1997 period were 39.3% of net sales, which were
comparable to the 1996 level of 41.9%.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $1.3 million were $0.2 million lower than the same
period in 1996. The favorable variance was due to lower overhead spending
associated with the Company's stand-alone structure as compared to amounts
allocated to the business during the Predecessor period.
Transition Related Costs. Transition related costs consist of what management
believes to be one-time costs incurred to establish operations of the businesses
acquired, including recruiting fees, relocation expenses, broker conversions and
orientations, sales training, systems conversion, and other unique transitional
expenses.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill and
other intangibles of $2.2 million was attributable to the acquisitions of Mrs.
Butterworth's on December 31, 1996 and Log Cabin on July 1, 1997.
11
<PAGE>
Operating Income. Operating income of 20.7% of net sales increased from the
prior year level of 18.9%. The higher operating income margin profit was due
primarily to lower brokerage and distribution costs and lower selling, general
and administrative expenses.
Interest Expense and Amortization of Deferred Financing Expense. The aggregate
of interest expense and amortization of deferred financing expense was $6.9
million. The expenses were related to the financing of the acquisitions as
described in Note 2 to the financial statements. The Predecessor did not
separately allocate these respective costs to the Business.
Provision for Income Taxes. The Company anticipates a combined federal and state
tax rate of approximately 40%.
12
<PAGE>
COMPARATIVE RESULTS: NINE MONTHS ENDED SEPTEMBER 27, 1997 (unaudited)
<TABLE>
<CAPTION>
Company Predecessor
---------------------------------------------------------------
Nine Months Ended Period to
--------------------------------------------------------------- Period
Increase
September 27, 1997 September 30, 1996 (Decrease)
------------------------------- ------------------------- -----------
($000) ($000)
<S> <C> <C> <C> <C> <C>
Net sales $ 92,016 100.0 % $ 67,540 100.0 % 36.2 %
Cost of goods sold 29,500 32.1 21,346 31.6 38.2
-------- ----- -------- -----
Gross profit 62,516 67.9 46,194 68.4 35.3
-------- ----- -------- -----
Brokerage, distribution and
marketing expenses:
Brokerage and distribution 10,400 11.3 7,377 10.9 41.0
Trade promotions 15,807 17.2 13,076 19.4 20.9
Consumer marketing 9,256 10.1 8,802 13.0 5.2
-------- ----- -------- -----
Total brokerage, distribution
and marketing expenses 35,463 38.6 29,255 43.3 21.2
-------- ----- -------- -----
Amortization of goodwill
and other intangibles 3,828 4.1 - 0.0 0.0
Selling, general and
administrative expenses 3,577 3.9 4,869 7.2 (26.5)
Other expenses 17 0.0 - 0.0 0.0
Transition related costs 1,313 1.4 - 0.0 0.0
-------- ----- -------- -----
Total operating expenses 44,198 48.0 34,124 50.5 29.5
-------- ----- -------- -----
Operating income 18,318 19.9 12,070 17.9 51.8
Interest income (86) 0.0 - 0.0 0.0
Interest expense 11,800 12.8 - 0.0 0.0
Amortization of deferred
financing expense 2,771 3.0 - 0.0 0.0
Other bank and financing
expenses 53 0.0 - 0.0 0.0
-------- ----- -------- -----
Income before income
taxes 3,780 4.1 12,070 17.9 (68.7)
Income tax expense 1,512 1.6 4,647 6.9 (67.5)
-------- ----- -------- -----
Net income $ 2,268 2.5 % $ 7,423 11.0 % (69.5) %
======== ===== ======== =====
</TABLE>
13
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 27, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996.
Net Sales. Net sales for the period increased $24.5 million versus the prior
year to $92.0 million. The increase was due primarily to the acquisition of Log
Cabin(R), which provided $26.1 million in net sales. Net dollar sales for Mrs.
Butterworth's decreased 2.4% to $65.9 million for the nine months ended
September 27, 1997 from $67.5 million for the nine months ended September 30,
1996, while case volume was up 3.4% at 2.97 million standard cases. Net dollar
sales declined on Mrs. Butterworth's due to the everyday low cost or value
pricing strategy adopted by the Predecessor in May 1996. The value pricing
strategy has benefited the brand through higher volumes and lower trade
promotion expenses.
Syrup sales increased $24.7 million to $84.7 million in the 1997 period from
$60.0 million in the 1996 period. This increase was due to the Log Cabin(R)
acquisition, which contributed sales of $26.1 million during the period. Mrs.
Butterworth's syrup dollar sales decreased $1.4 million to $58.6 million in the
period. However, Mrs. Butterworth's syrup case volume increased 4.7% to 2.51
million standard cases in the 1997 period from 2.40 million standard cases in
the 1996 period. The increase in syrup volume was attributable to increases in
the Company's Original brand and foodservice products, which were partially
offset by decreases in sales of the Country Best Recipe and Lite brands.
Pancake mix sales of $7.3 million in the 1997 period decreased by 3.1% as
compared to the 1996 period.
Gross Profit. Gross profit was 67.9% of net sales for the 1997 period as
compared to 68.4% for the 1996 period. The decrease in gross margin was
primarily due to the value pricing strategy deployed in 1996. Increased sales
of lower gross margin foodservice and gallon sized syrup also contributed to the
decline.
Brokerage, Distribution and Marketing Expenses. Brokerage, distribution, and
marketing expenses for the 1997 period were 38.6% of net sales, which were 4.7
margin points below the 1996 level of 43.3%. The favorable variance was due
primarily to lower trade promotions in the 1997 period as a result of the value
pricing strategy as well as a reduction in high value in-ad coupons used in
the 1996 period.
14
<PAGE>
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $3.6 million for the 1997 period were $1.3 million
less than the $4.9 million of expense incurred in the 1996 period. The
favorable variance was due to lower overhead spending associated with the
Company's stand-alone structure as compared to amounts allocated to the business
during the Predecessor period.
Transition Related Costs. Transition related costs consist of what management
believes to be one-time costs incurred to establish operations of the businesses
acquired, including recruiting fees, relocation expenses, broker conversions and
orientations, sales training, systems conversion, and other unique transitional
expenses.
Amortization of Goodwill and Other Intangibles. Amortization of goodwill and
other intangibles of $3.8 million was attributable to the acquisitions of Mrs.
Butterworth's(R) on December 31, 1996 and Log Cabin(R) on July 1, 1997.
Operating Income. Operating income improved to 19.9% of net sales in the 1997
period as compared to 17.9% in the 1996 period. The improvement in the
operating income margin was primarily due to lower marketing expenses and lower
selling, general, and administrative expenses.
Interest Expense and Amortization of Deferred Financing Expense. The aggregate
of interest expense and amortization of deferred financing expense was $14.6
million. The expenses were related to the financing of the acquisitions as
described in Note 2. The Predecessor did not separately allocate these
respective costs to the Business.
Provision for Income Taxes. The Company anticipates a combined federal and
state tax rate of approximately 40%.
15
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 27, 1997, cash provided by operations was
$11.7 million. Net income before non-cash charges provided $10.8 million of cash
and the net change in working capital provided $0.9 million of cash. During the
nine month period, the Company spent $660,000 on computer equipment and
furniture and fixtures related to establishing a corporate headquarters and
infrastructure required to support the Company, and $2.1 million in capital
expenditures related to relocating and installing the acquired manufacturing
equipment at the co-packer's production facility. At September 27, 1997, the
Company had $4.3 million of cash and cash equivalents.
The Company's primary sources of liquidity are cash from operations and
borrowings under a $60.0 million revolving debt facility. The available
borrowing capacity under the revolving debt facility of $13.0 million, combined
with cash provided by operations, will provide the Company with sufficient cash
to fund operations as well as to meet existing obligations.
16
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Exhibit
------ -------
2.1 Asset purchase agreement dated as of December 18, 1996, by and
between MBW Foods Inc. (as successor-in-interest to MBW
Acquisition Corp.) and Conopco, Inc., as amended (incorporated by
reference to Exhibit 2.1 to the Company's Form S-4 filed on August
21, 1997 (the "S-4")).
2.2 Asset purchase agreement dated as of May 7, 1997 by and between
the Company and Kraft Foods, Inc. (incorporated by reference to
Exhibit 2.2 to the S-4).
3.1 Certificate of Incorporation of the Company, with amendments
thereto (incorporated by reference to Exhibit 3.1 to the S-4).
3.2 Amended and Restated By-laws of the Company (incorporated by
reference to Exhibit 3.2 to the S-4).
4.1 Indenture dated as of February 10, 1997, by and between the
Company and Wilmington Trust Company (the "Indenture")
(incorporated by reference to Exhibit 4.1 to the S-4 .
4.2 Specimen Certificate of 9-7/8% Series A Senior Subordinated Note
due 2007 (included in Exhibit 4.1 hereto).
4.3 Specimen Certificate of 9-7/8% Series B Senior Subordinated Note
due 2007 (included in Exhibit 4.1 hereto).
4.4 Form of Note Guarantee to be issued by future subsidiaries of the
Company pursuant to the Series A Indenture (incorporated by
reference to Exhibit 4.4 to the S-4).
4.6 Indenture dated as of July 1, 1997 by and between the Company and
Wilmington Trust Company (the "Series C Indenture") (incorporated
by reference to Exhibit 4.6 to the S-4).
4.7 Specimen Certificate of 9-7/8% Series D Senior Subordinated Note
due 2007 (included in Exhibit 4.6 hereto).
4.8 Form of Note Guarantee to be issued by future subsidiaries of the
Company pursuant to the Series C Indenture (incorporated by
reference to Exhibit 4.8 to the S-4).
4.9 Certificate of Incorporation of the Company, with amendments
thereto (see Exhibit 3.1).
5.0 Amended and Restated By-laws of the Company (see Exhibit 3.2).
10.1 Management Services Agreement, dated as of December 31, 1996, by
and between the Company and Dartford Partnership L.L.C.
(incorporated by reference to Exhibit 10.1 to the S-4).
10.2 Advisory Services Agreement, dated as of December 31, 1996, by and
between the Company and MDC Management Company III, L.P.
(incorporated by reference to Exhibit 10.2 to the S-4).
10.3 Agreement dated as of December 31, 1996, by and between MBW Foods
Inc. and Fenway Partners, Inc. (incorporated by reference to
Exhibit 10.3 to the S-4).
17
<PAGE>
10.4 Amended and Restated Credit Agreement, dated as of July 1, 1997,
by and among the Company, Aurora Holdings Inc., as Guarantor, the
Lenders listed therein, The Chase Manhattan Bank, as
Administrative Agent, Chase Securities Inc., as Arranging
Agent, and Exhibits thereto (incorporated by reference to Exhibit
10.4 to the S-4).
10.5 Employment Agreement, dated as of December 31, 1996, by and
between the Company and Thomas J. Ferraro (incorporated by
reference to Exhibit 10.5 to the S-4).
10.6 Employment Agreement, dated as of December 31, 1996, by and
between the Company and C. Gary Willett (incorporated by reference
to Exhibit 10.6 to the S-4).
10.7 Co-Pack Agreement, dated as of December 31, 1996, by and between
the Company and Van den Bergh Foods Company (incorporated by
reference to Exhibit 10.7 to the S-4).
10.8 Flavor Supply Agreement, dated as of December 31, 1996, by and
between the Company and Quest International Flavors & Food
Ingredients Company (incorporated by reference to Exhibit 10.8 to
the S-4).
10.9 Transition Services Agreement, dated as of December 31, 1996, by
and between the Company and Conopco, Inc. (incorporated by
reference to Exhibit 10.9 to the S-4).
10.10 Shared Technology Licensing Agreement, dated as of December 31,
1996, by and between the Company and Conopco, Inc. (incorporated
by reference to Exhibit 10.10 to the S-4).
10.11 Amended & Restated Limited Liability Company Agreement of MBW
Investors LLC, dated as of December 31, 1996 (incorporated by
reference to Exhibit 10.11 to the S-4).
10.12 Employment Agreement, dated as of January 20, 1997, by and between
the Company and Alan Mintz (incorporated by reference to Exhibit
10.12 to the S-4).
10.13 Transitional Co-Pack Agreement, dated as of July 1, 1997, by and
between the Company and Kraft Foods, Inc. (incorporated by
reference to Exhibit 10.13 to the S-4).
10.14 Transition Services Agreement, dated as of July 1, 1997, by and
between the Company and Kraft Foods, Inc. (incorporated by
reference to Exhibit 10.14 to the S-4).
18
<PAGE>
10.15 Excluded Business Co-Pack Agreement, dated as of July 1, 1997, by
and between the Company and Kraft Foods, Inc. (incorporated by
reference to Exhibit 10.15 to the S-4).
10.16 Red Wing Co-Pack Agreement, dated as of June 9, 1997 by and
between the Company and The Red Wing Company, Inc. (incorporated
by reference to Exhibit 10.16 to the S-4).
27.1 Financial Data Schedule for the period ended September 27, 1997,
submitted to the Securities and Exchange Commission in electronic
format.
(b) Reports on Form 8-K
None.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AURORA FOODS INC.
DATED November 11, 1997 BY: /s/ Dirk Grizzle
---------------------- ----------------------------
Dirk Grizzle
Chief Financial Officer and
Vice President, Administration
and duly authorized officer
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AURORA FOODS INC. AS OF AND FOR THE PERIOD ENDED
SEPTEMBER 27, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-27-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-27-1997
<CASH> 4,341
<SECURITIES> 0
<RECEIVABLES> 12,180
<ALLOWANCES> 89
<INVENTORY> 4,442
<CURRENT-ASSETS> 30,012
<PP&E> 15,468
<DEPRECIATION> 640
<TOTAL-ASSETS> 374,709
<CURRENT-LIABILITIES> 68,463
<BONDS> 239,210
0
0
<COMMON> 0
<OTHER-SE> 63,908
<TOTAL-LIABILITY-AND-EQUITY> 374,709
<SALES> 92,016
<TOTAL-REVENUES> 92,016
<CGS> 29,500
<TOTAL-COSTS> 64,963
<OTHER-EXPENSES> 11,473
<LOSS-PROVISION> 89
<INTEREST-EXPENSE> 11,800
<INCOME-PRETAX> 3,780
<INCOME-TAX> 1,512
<INCOME-CONTINUING> 2,268
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,268
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
