<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
UNITED STATES
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 JUNE 30, 1998
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 333-50681
AURORA FOODS INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 94-3303521
-------- ----------
(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
456 Montgomery Street, Suite 2200
San Francisco, CA 94104
(Address of Principal Executive Office, Including Zip Code)
(415) 982-3019
(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 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 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
August 3, 1998
Common stock, $0.01 par value 67,000,000
________________________________________________________________________________
_______________________________________________________________________________
<PAGE>
PART I
------
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
- - -----------------------------
See pages 2 through 13.
1
<PAGE>
AURORA FOODS INC.
BALANCE SHEETS
(dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
June 30, December 27,
1998 1997
------------ ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,118 $ 4,717
Accounts receivable (net of $759 and $140 allowance, respectively) 69,377 12,362
Accounts receivable - other (Note 3) 11,022 1,474
Inventories (Note 4) 69,916 6,902
Prepaid expenses and other assets 8,258 1,955
Asset held for sale (Note 8) 3,000 -
Current deferred tax assets 12,459 2,966
---------- --------
Total current assets 177,150 30,376
Property, plant and equipment 126,510 14,075
Non-current deferred tax assets 9,548 -
Goodwill and other intangible assets 1,085,775 315,241
Other assets 26,451 13,047
---------- --------
Total assets $1,425,434 $372,739
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt $ 28,674 $ 4,375
Senior secured revolving debt facility 31,000 -
Accounts payable 45,259 6,443
Accrued liabilities 65,685 17,409
---------- --------
Total current liabilities 170,618 28,227
Non-current deferred tax liabilities - 3,745
Other liabilities 26,919 -
Senior secured revolving debt facility - 37,500
Senior secured term debt 588,085 35,625
Senior subordinated notes 302,333 202,419
---------- --------
Total liabilities 1,087,955 307,516
---------- --------
Stockholders' equity:
Common stock, $0.01 par value; 87,159,000 shares
authorized; 54,090,628 and 29,053,000
shares issued and outstanding, respectively 541 291
Paid-in capital 397,977 63,912
Promissory notes (672) (215)
(Accumulated deficit) retained earnings (Note 5) (60,367) 1,235
---------- --------
Total stockholders' equity 337,479 65,223
---------- --------
Total liabilities and stockholders' equity $1,425,434 $372,739
========== ========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
AURORA FOODS INC.
STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
June 30, December 27,
1998 1997
----------- -----------
<S> <C> <C>
Net sales $199,813 $21,639
Cost of goods sold 81,743 7,104
-------- -------
Gross profit 118,070 14,535
-------- -------
Brokerage, distribution and marketing expenses:
Brokerage and distribution 18,857 2,420
Trade promotions 45,302 3,431
Consumer marketing 13,497 3,036
-------- -------
Total brokerage, distribution and marketing expenses 77,656 8,887
Amortization of goodwill and other intangibles 8,189 829
Selling, general and administrative expenses 7,558 1,291
Incentive plan (credit) expense (Note 5) (3,417) -
Transition expenses (Note 6) 2,522 182
-------- -------
Total operating expenses 92,508 11,189
-------- -------
Operating income 25,562 3,346
Interest income (198) (49)
Interest expense 21,561 2,522
Amortization of deferred financing expense 587 165
Other bank and financing expenses 89 16
-------- -------
Income before income taxes 3,523 692
Income tax expense 293 277
-------- -------
Net income $ 3,230 $ 415
======== =======
Basic and diluted earnings per share $ 0.06 $ 0.01
======== =======
Weighted average number of shares outstanding 51,981 29,053
======== =======
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
AURORA FOODS INC.
STATEMENTS OF OPERATIONS
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
June 30, December 27,
1998 1997
------------- -------------
<S> <C> <C>
Net sales $289,198 $42,891
Cost of goods sold 119,477 14,271
-------- -------
Gross profit 169,721 28,620
-------- -------
Brokerage, distribution and marketing expenses:
Brokerage and distribution 28,213 4,699
Trade promotions 60,870 7,074
Consumer marketing 21,495 4,367
-------- -------
Total brokerage, distribution and marketing expenses 110,578 16,140
Amortization of goodwill and other intangibles 12,786 1,658
Selling, general and administrative expenses 9,904 2,328
Incentive plan expense (Note 5) 56,583 -
Transition expenses (Note 6) 4,447 324
-------- -------
Total operating expenses 194,298 20,450
-------- -------
Operating (loss) income (24,577) 8,170
Interest income (421) (83)
Interest expense 34,398 5,176
Amortization of deferred financing expense 1,099 2,478
Other bank and financing expenses 140 24
-------- -------
(Loss) income before income taxes and
extraordinary item (59,793) 575
Income tax (benefit) expense (67) 230
-------- -------
Net (loss) income before extraordinary item (59,726) 345
Extraordinary loss on early extinguishment of debt,
net of tax of $1,184 1,876 -
-------- -------
Net (loss) income $(61,602) $ 345
======== =======
Basic and diluted (loss) earnings per share
before extraordinary item $ (1.47) $ 0.01
Extraordinary item per share 0.05 -
-------- -------
Basic and diluted (loss) earnings per share $ (1.52) $ 0.01
======== =======
Weighted average number of shares outstanding 40,580 29,053
======== =======
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
AURORA FOODS INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Retained
Common Stock Additional Earnings
----------------------- Paid-in Promissory (Accumulated
Shares Amount Capital Notes Deficit) Total
--------- --------- ------------ ------------ --------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 27, 1997 29,053 $291 $ 63,912 $(215) $ 1,235 $ 65,223
Capital contribution (Note 1) - - 94,263 (473) - 93,790
Shares issued for acquisition
of business (Note 2) 25,038 250 183,219 - - 183,469
Payments on officer promissory
notes - - - 16 - 16
Incentive plan expense (Note 5) - - 56,583 - - 56,583
Net loss - - - - (61,602) (61,602)
--------- -------- -------- -------- -------- --------
Balance at June 30, 1998 54,091 $541 $397,977 $(672) $(60,367) $337,479
========= ======== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
AURORA FOODS INC.
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
------------------------------------------
June 30, June 28,
1998 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (61,602) $ 345
Early extinguishment of debt, net of tax 1,876 -
Adjustments to reconcile net (loss) income to cash provided by operating
activities:
Depreciation and amortization 17,742 4,419
Deferred income taxes (67) 35
Incentive plan expense 56,583 -
Change in assets and liabilities, net of effects of businesses
acquired:
Increase in accounts receivable (28,651) (6,959)
Decrease in accounts receivable - other 473 -
Increase in inventories (29,817) (516)
Increase in prepaid expenses and other assets (5,020) (133)
Increase in accounts payable 29,464 -
Increase in accrued liabilities 21,723 7,787
--------- -------
Net cash provided by operating activities 2,704 4,978
--------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (7,391) (524)
Changes to other non-current assets and liabilities (1,467) (527)
Proceeds from sale of assets (Note 8) 28,012 -
Payment for acquisition of businesses (Note 2) (463,762) -
--------- -------
Net cash used in investing activities (444,608) (1,051)
--------- -------
Cash flows from financing activities:
Proceeds from senior secured revolving and term debt 473,000 -
Proceeds from senior subordinated notes - 100,000
Repayment of borrowings (114,000) (95,000)
Capital contributions, net of officer promissory notes 93,806 -
Debt issuance costs (12,501) (4,951)
--------- -------
Net cash provided by financing activities 440,305 49
--------- -------
(Decrease) increase in cash and cash equivalents (1,599) 3,976
Cash and cash equivalents, beginning of period 4,717 8,666
--------- -------
Cash and cash equivalents, end of period $ 3,118 $ 12,642
========= ========
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
AURORA FOODS INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
- - -----------------------------
INTERIM FINANCIAL STATEMENTS
The interim financial statements of Aurora Foods Inc. (the "Company"), 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. 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 disclosures 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. Certain prior period amounts have been reclassified to conform to
the current period's presentation.
For further information, reference should be made to the Registration Statement
on Form S-1, as amended, of Aurora Foods Inc. relating to the Company's initial
public offering of equity securities (defined in Note 9), which was completed on
June 25, 1998.
THE COMPANY, ITS BUSINESS AND OWNERSHIP
The Company was incorporated in Delaware on June 19, 1998, as the successor to
Aurora Foods Holdings Inc. ("Holdings") and its subsidiary, AurFoods Operating
Co., Inc. (formerly known as Aurora Foods Inc.) ("AurFoods"), both of which were
incorporated in December 1996. AurFoods is wholly owned by Holdings, which in
turn is wholly owned by MBW Investors LLC ("MBW LLC"). AurFoods was formed for
the purpose of acquiring the Mrs. Butterworth's(R) syrup business from Conopco,
Inc., a subsidiary of Unilever United States, Inc. ("Conopco"). AurFoods
subsequently acquired the Log Cabin(R) syrup business ("LC") from Kraft Foods,
Inc. ("Kraft") in July 1997 and the Duncan Hines(R) baking mix business ("DH")
from The Procter & Gamble Company ("P&G") in January 1998.
Van de Kamp's, Inc. ("VDK"), a wholly-owned subsidiary of VDK Holdings, Inc., a
Delaware corporation, ("VDK Holdings"), was incorporated in Delaware in July
1995 for the purpose of acquiring the Van de Kamp's(R) frozen seafood and frozen
dessert businesses from The Pillsbury Company in September 1995. VDK then
acquired the Mrs. Paul's(R) frozen seafood business from the Campbell Soup
Company in May 1996 and the Aunt Jemima(R) frozen breakfast and Celeste(R)
frozen pizza businesses from The Quaker Oats Company in July 1996. VDK Holdings
was wholly owned by VDK Foods LLC ("VDK LLC").
The Company groups its brands into two general divisions: dry grocery division
and frozen food division. The dry grocery division includes Duncan Hines(R)
brand baking mix products and Mrs. Butterworth's(R) and Log Cabin(R) brand syrup
products. The frozen food division includes the frozen food brands acquired as
part of the VDK Holdings acquisition (see Note 2 - Acquisitons).
7
<PAGE>
On April 8, 1998, MBW LLC and VDK LLC formed Aurora/VDK LLC ("New LLC"). MBW
LLC contributed all of the capital stock of Holdings and VDK LLC contributed all
of the capital stock of VDK Holdings to New LLC (the "Contribution"). In return
for those contributions, MBW LLC was issued 55.5% of the interests in New LLC
plus a right to receive a special $8.5 million priority distribution from New
LLC, and VDK LLC was issued 44.5% of the interests in New LLC plus a right to
receive a special $42.4 million priority distribution from New LLC. The amount
and source of consideration used by MBW LLC and VDK LLC for their acquisition of
interests in New LLC was their equity in Holdings and VDK Holdings,
respectively.
New LLC is a majority-owned subsidiary of MBW LLC. New LLC accounted for the
contribution of the ownership of Holdings at MBW LLC's historical cost and the
contribution of the ownership of VDK Holdings was accounted for as an
acquisition using the purchase method of accounting at New LLC's cost. After
giving effect to the Contribution, New LLC directly held 100% of Holdings'
capital stock and Holdings continued to hold directly 100% of AurFoods capital
stock, and New LLC directly held 100% of VDK Holdings' capital stock and VDK
Holdings continued to hold directly 100% of VDK's capital stock. On June 25,
1998, New LLC contributed to the Company all the issued and outstanding stock of
Holdings and VDK Holdings. Therefore, the Company's financial statements, as it
is the successor to Holdings, includes the historical financial information of
Holdings from its inception.
NOTE 2 - ACQUISITIONS
- - ---------------------
DUNCAN HINES
On January 16, 1998, the Company acquired all the assets of DH from P&G. The
assets acquired by the Company include (i) the Duncan Hines(R) brand and
associated trademarks, (ii) substantially all of the equipment for the
manufacture of Duncan Hines products currently located in P&G's Jackson,
Tennessee facility, (iii) proprietary formulations for Duncan Hines products,
(iv) other product specifications and customer lists and (v) rights under
certain contracts, licenses, purchase orders and other arrangements and permits.
The Company intends to use the acquired assets in its operations of DH. The
purchase price of approximately $445.0 million was based on arms length
negotiations between the Company and P&G. The acquisition was accounted for by
using the purchase method of accounting. The allocation of purchase price has
not been finalized; however, any changes are not expected to be material.
To finance the acquisition of DH and related costs, the Company refinanced its
existing senior bank facilities with $450.0 million of senior secured term debt
under the Second Amended and Restated Credit Agreement, dated as of January 16,
1998 by and among Holdings, the Company, the lenders listed therein, The Chase
Manhattan Bank, The National Westminster Bank PLC, and Swiss Bank Corporation
(the "Aurora Senior Bank Facilities"), and received a capital contribution from
Holdings of $93.8 million. As a result of the new bank borrowings under the
Aurora Senior Bank Facilities, the Company incurred an early extinguishment of
its pre-DH senior secured bank debt and recorded an extraordinary charge of $1.9
million, net of income taxes of $1.2 million, for the six months ended June 30,
1998.
8
<PAGE>
The cost to acquire DH has been allocated to tangible and intangible assets
acquired as follows (in thousands):
<TABLE>
<S> <C>
Cash paid to acquire assets $445,000
Other acquisition costs 6,393
--------
451,393
Cost assigned to tangible assets (40,903)
--------
Cost attributable to intangible assets $ 410,490
=========
</TABLE>
VDK HOLDINGS, INC.
On April 8, 1998, New LLC completed a stock purchase of VDK Holdings (See Note
1 - The Company, Its Business and Ownership). The Company acquired all the
capital stock of VDK Holdings in exchange for $183.5 million of the Company's
equity. The acquisition was accounted for using the purchase method of
accounting. The allocation of purchase price has not been finalized; however,
any changes are not expected to be material.
The cost to acquire VDK Holdings has been allocated to tangible and intangible
assets acquired as follows (in thousands):
<TABLE>
<S> <C>
Value of stock used to acquire VDK Holdings $ 183,469
Liabilities assumed 376,733
Other acquisition costs 12,176
---------
572,378
Cost assigned to tangible assets (201,238)
---------
Cost attributable to intangible assets $ 371,140
=========
</TABLE>
Had the VDK Holdings acquisition taken place April 1, 1998 and the VDK Holdings,
LC and DH acquisitions taken place April 1, 1997, and had the VDK Holdings and
DH acquisitions taken place January 1, 1998 and the VDK Holdings, LC and DH
acquisitions taken place January 1, 1997, the unaudited pro forma results of
operations for the three and six month periods ended June 30, 1998 and June 28,
1997, respectively, would have been as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
----------------------------------- --------------------------------
June 30, June 28, June 30, June 28,
1998 1997 1998 1997
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Net sales $206,652 $187,342 $446,989 $433,926
======== ======== ======== ========
Gross profit $122,064 $105,376 $267,290 $249,662
======== ======== ======== ========
Operating income (loss) $ 25,346 $ 20,236 $(70,457) $ 54,613
======== ======== ======== ========
</TABLE>
9
<PAGE>
NOTE 3 - ACCOUNTS RECEIVABLE - OTHER
- - ------------------------------------
Accounts receivable - other consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 27,
1998 1997
----------- ------------
<S> <C> <C>
Conopco $ - $ 111
Kraft 538 1,057
P&G 10,000 -
Other 484 306
------ ------
$11,022 $1,474
======= ======
</TABLE>
The balances due as of June 30, 1998 and December 27, 1997 from Conopco and
Kraft were comprised of accounts receivable collected by them on behalf of the
Company. The balance due as of June 30, 1998 from P&G was the amount
reimbursable from the relocation of acquired equipment to the Company's contract
manufacturers' facilities.
NOTE 4 - INVENTORIES
- - --------------------
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 27,
1998 1997
------------ --------------
<S> <C> <C>
Raw materials $10,589 $ 270
Work in process 19 -
Finished goods 56,139 6,632
Packaging and other supplies 3,169 -
------- ------
$69,916 $6,902
======= ======
</TABLE>
NOTE 5 - INCENTIVE PLAN EXPENSE
- - ------------------------------
For the six months ended June 30, 1998, the Company recorded non-cash incentive
plan expense of $56.6 million based on the estimated current valuation of the
Company and in accordance with the Company's compensation agreement (the "Aurora
Plan") contained in the Amended and Restated Limited Liability Company Agreement
of MBW Investors LLC (the "Agreement"). The estimated valuation of the Company
as of December 27, 1997 resulted in recording $2.3 million of incentive plan
expense. The valuation of the Company has increased significantly since
December 27, 1997 and has resulted in significant incentive plan expense in the
current year. In addition, most rights under the Aurora Plan are fully vested.
The expense has been recorded as a liability of MBW LLC as the sponsor of the
Aurora Plan. However, because the Aurora Plan is for the benefit of employees
of the Company, expense recognized under the Aurora Plan has been pushed down to
the Company, and has been recorded by the Company as incentive plan expense and
as additional paid-in capital from its parent (See Note 9 - Subsequent Events).
10
<PAGE>
NOTE 6 - TRANSITION EXPENSES
- - ----------------------------
Transition expenses consist of one-time costs incurred to establish the
Company's operations and integrate the acquired businesses, including relocation
expenses, recruiting fees, sales support and other unique transitional expenses.
NOTE 7 - EARNINGS (LOSS) PER SHARE
- - ----------------------------------
Basic earnings (loss) per share is calculated using the weighted number of
common shares outstanding during each period. Diluted earnings (loss) per share
is the same as basic earnings (loss) per share as no common equivalent shares
were outstanding.
The following table sets forth the computation of basic and diluted earnings
(loss) per share (in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------------------ -----------------------------
June 30, June 28, June 30, June 28,
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NUMERATOR:
Earnings (loss) before extraordinary item $ 3,230 $ 415 $(59,726) $ 345
Extraordinary item, net of tax - - 1,876 -
---------- ---------- ---------- -----------
Earnings (loss) $ 3,230 $ 415 $(61,602) $ 345
========== ========== =========== ===========
DENOMINATOR:
Weighted average number of basic shares 51,981 29,053 40,580 29,053
Effect of diluted securities - - - -
---------- ---------- ---------- -----------
Weighted average number of diluted shares 51,981 29,053 40,580 29,053
========== ========== ========== ===========
Basic and diluted earnings (loss) per share
before extraordinary item $ 0.06 $ 0.01 $ (1.47) $ 0.01
Extraordinary item per share - - 0.05 -
---------- ---------- ---------- -----------
Basic and diluted earnings (loss) per share $ 0.06 $ 0.01 $ (1.52) $ 0.01
========== ========== =========== ===========
</TABLE>
NOTE 8 SALE OF ASSETS
- - ----------------------
On May 1, 1998, VDK Holdings completed the sale of its frozen desserts product
line ("Desserts Sale") to Mrs. Smith's Bakeries, Inc., a subsidiary of Flowers,
Inc. VDK Holdings received approximately $28.0 million from the sale of certain
assets of the frozen desserts product line. The net proceeds from the Desserts
Sale were used to repay $25.0 million in indebtedness under the Second Amended
and Restated Credit and Guarantee Agreement, dated as of July 9, 1996, among VDK
Holdings, VDK, the banks and other financial institutions parties thereto and
The Chase Manhattan Bank, as agent as amended (the "VDK Senior Bank
Facilities"). Because VDK Holdings was acquired by the Company shortly before
the desserts sale, the Company will not recognize any gain or loss as a result
of the sale.
11
<PAGE>
The Company plans to close the Chambersburg, Pennsylvania facility where the
frozen desserts product line was manufactured and has taken steps to eliminate
certain corporate and administrative positions related to the desserts business.
Machinery and equipment related to the production of certain frozen seafood and
vegetable products, which is currently located at the Chambersburg facility,
will be relocated to the Company's Erie, Pennsylvania and Jackson, Tennessee
manufacturing facilities. The Company has recorded to the balance sheet as an
asset held for sale the expected proceeds from the future sale of the
Chambersburg manufacturing facility. Currently, there is no contractual
agreement to sell the facility.
NOTE 9 - SUBSEQUENT EVENTS
- - --------------------------
On July 1, 1998, the initial public offering (the "IPO") of 12,909,372 shares of
Common Stock of the Company and 1,590,628 shares of the Company's Common Stock
sold by New LLC was consummated at an initial public offering price of $21.00
per share. Also, concurrently with the IPO, the Company issued $200.0 million
aggregate principal amount of 8 3/4% senior subordinated notes due 2008 (the
"Notes Offering" or "New Notes") and borrowed $225.0 million of senior secured
term debt and $81.8 million out of the total available of $175.0 million of
senior secured revolving debt under the Third Amended and Restated Credit
Agreement, dated as of July 1, 1998, among the Company, as borrower, the lenders
listed therein, The Chase Manhattan Bank, as Administrative Agent, National
Westminster Bank PLC, as Syndication Agent and Swiss Bank Corporation, as
Documentation Agent (the "New Senior Bank Facilities").
The Company used the net proceeds from the IPO, the Notes Offering and the New
Senior Bank Facilities (i) to repay $184.8 million of senior secured bank debt
under the VDK Senior Bank Facilities, (ii) to repay $467.0 million under the
Aurora Senior Bank Facilities (iii) to redeem the 12% Senior Subordinated Notes
due 2005 issued under an Indenture dated as of September 15, 1995, between VDK
and Harris Trust and Savings Bank, as Trustee (the "VDK Notes") (redemption
completed on July 31, 1998) and (iv) to pay the $14.5 million redemption premium
associated with the VDK Notes. As a result of the early extinguishment of the
Aurora Senior Bank Facilities, the Company will record an extraordinary charge
of $7.4 million, net of income taxes of $4.5 million, for the write off of
deferred loan acquisition costs in the quarter ended September 30, 1998.
As a consequence of the IPO, no additional incentive plan expense will be
recorded under the Aurora Plan (Note 5 - Incentive Plan Expense). MBW LLC will
satisfy its liability under the Aurora Plan by distributing shares of the
Company's common stock upon the dissolution of MBW LLC.
12
<PAGE>
The following summary pro forma capitalization table gives effect to (i) the net
proceeds, after fees and expenses, from the IPO ($254.8 million) and the Notes
Offering ($195.0 million) and (ii) the senior debt refinancings, as discussed
above (in thousands):
<TABLE>
<CAPTION>
June 30, 1998
-----------------------------------------
Actual Pro forma
------------- ----------
Long-term debt (including current maturities):
<S> <C> <C>
Senior secured bank facilities $ 647,759 $ 306,800
Senior subordinated notes 302,333 402,333
---------- ----------
Total long term debt 950,092 709,133
Stockholders' equity:
Common stock 541 670
Paid-in capital 397,977 647,951
Promissory notes (672) (672)
Accumulated deficit (60,367) (67,766)
---------- ----------
Total stockholders' equity 337,479 580,183
---------- ----------
Total capitalization $1,287,571 $1,289,316
========== ==========
</TABLE>
13
<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-1, as amended, of Aurora Foods
Inc. relating to the Company's initial public offering of equity securities,
which was completed on June 25, 1998.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the historical
financial information included in the Financial Statements and notes to the
financial statements. Unless otherwise noted, years (1998 and 1997) in this
discussion refer to the Company's June-ending quarters.
Certain statements contained in this report, including, without limitation,
statements containing the words "believes", "anticipates", "intends", "expects",
"estimates" and words of similar import, constitute "forward-looking statements"
and involve known and unknown risk, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: the actions of the Company's competitors; general
economic and business conditions; industry trends; demographics; raw material
costs; the continued success of management's strategy; integration of acquired
businesses into the Company; terms and development of capital; and changes in,
or the failure or inability to comply with, governmental rules and regulations,
including, without limitation, FDA and environmental rules and regulations.
Given these uncertainties undue reliance should not be placed on such forward
looking statements. The Company disclaims an obligation to update any such
factors or to publicly announce the results of any revisions to any other
forward-looking statements contained herein to reflect future events or
developments.
The following tables set forth, for the periods indicated, the percentage, which
the items in the Statement of Operations bear to net sales. A summary of the
period to period increases (decreases) in the components of operations is shown
on the pages that follow.
14
<PAGE>
COMPARATIVE RESULTS: THREE MONTHS ENDED JUNE 30, 1998
AND JUNE 28, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Period to
------------------------------------------------------------ Period
(in thousands except per June 30, 1998 June 28, 1997 Increase
share amounts) -------------------------- -------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Net sales $199,813 100.0% $21,639 100.0% 823.4%
Cost of goods sold 81,743 40.9 7,104 32.8 1,050.7
-------- --------- --------- ---------
Gross profit 118,070 59.1 14,535 67.2 712.3
-------- --------- --------- ---------
Brokerage, distribution and
marketing expenses:
Brokerage and distribution 18,857 9.4 2,420 11.2 679.2
Trade promotions 45,302 22.7 3,431 15.9 1,220.4
Consumer marketing 13,497 6.8 3,036 14.0 344.6
Total brokerage, distribution -------- --------- --------- ---------
and marketing expenses 77,656 38.9 8,887 41.1 773.8
Amortization of goodwill
and other intangibles 8,189 4.1 829 3.8 887.9
Selling, general and
administrative expenses 7,558 3.8 1,291 6.0 493.3
Incentive plan (credit) expense (3,417) (1.7) - 0.0 0.0
Transition expenses 2,522 1.3 182 0.8 1,286.0
-------- --------- --------- ---------
Total operating expenses 92,508 46.4 11,189 51.7 726.8
-------- --------- --------- ---------
Operating income 25,562 12.7 3,346 15.5 663.9
Interest income (198) (0.1) (49) (0.2) 303.7
Interest expense 21,561 10.8 2,522 11.7 754.9
Amortization of deferred
financing expense 587 0.3 165 0.8 255.8
Other bank and financing
expenses 89 0.0 16 0.0 456.2
-------- --------- --------- ---------
Income before income taxes 3,523 1.7 692 3.2 409.1
Income tax expense 293 0.1 277 1.3 5.8
-------- --------- --------- ---------
Net income $ 3,230 1.6% $ 415 1.9% 678.3%
======== ========= ========= =========
Basic and diluted earnings per share $0.06 $ 0.01
======== =========
Weighted average number of
shares outstanding 51,981 29,053
======== =========
</TABLE>
15
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 28, 1997
Net Sales. Net sales for the quarter were $199.8 million, which was an increase
of $178.2 million as compared to net sales in the prior year quarter of $21.6
million. The prior year quarter included sales of only the Mrs. Butterworth's(R)
brand, which was the sole business owned by the Company at the time. Results for
the quarter include the results of the Mrs. Butterworth's(R) brand (acquired
December 31, 1996), the Log Cabin(R) brand (acquired July 1, 1997), the Duncan
Hines(R) brand (acquired January 16, 1998) and the brands that comprise the Van
de Kamp's, Inc. business from April 9, 1998. Results of Van de Kamp's, Inc. for
the period April 1, 1998 to April 8, 1998 are not included in the current
quarter.
Pro Forma Net Sales. Pro forma net sales (which reflect all the acquisitions
noted as if they had occurred on April 1 for both the 1998 and 1997 periods)
for the quarter ended June 30, 1998 were $206.7 million, which was a 10.4%
increase over net sales in the 1997 quarter of $187.3 million. Sales growth in
the quarter was driven by unit volume growth in both dry grocery and frozen
food products, as well as higher prices for the Company's Duncan Hines(R)
baking mix products. Unit volumes increased 6.5% to 11.4 million cases from
10.7 million cases in the prior year.
Growth in case volume as compared to the prior year quarter was led by a 13.3%
increase in Celeste(R) frozen pizza, a 7.1% increase in Aunt Jemima(R) frozen
breakfast products, a 3.6% increase in the Company's syrup brands (Mrs.
Butterworth's(R) and Log Cabin(R)) and a 1.1% increase in Duncan Hines(R)
baking mix products. Unit volumes of the Company's frozen seafood brands
declined by 9.4%, which was primarily due to the timing of the Company's
marketing programs for frozen seafood. The Company shifted four consumer
promotions from the seasonally slower post-Lent period in the second quarter
to the second half of calendar 1998. The Company expects performance of its
frozen seafood to improve in the second half of the year as a result of the
increased consumer marketing activity planned for that period. Unit volume
growth for Duncan Hines(R) exceeded the Company's expectations, which called
for lower volumes in the second quarter as a result of the trade accelerating
purchases in the first quarter in anticipation of the Company's new marketing
and pricing strategy for Duncan Hines(R).
The Company's net sales increase included 3.9% related to pricing, which was
attributable to the competitive price equalization program initiated on the
Duncan Hines(R) brand in March 1998, whereby the Company increased the list
price on cake and frosting products to parity with the competition. The price
equalization program generated approximately $9.5 million in net sales during
the current quarter.
Gross Profit. Gross profit, as a percentage of net sales, was 59.1% for the
quarter, which was lower than the gross profit in the prior year quarter of
67.2%. The decline was due to the inclusion of Duncan Hines(R) baking mix
products, which have a lower gross profit margin than syrup products, as well as
the inclusion of the Van de Kamp's, Inc. business, which had a gross profit
margin of 58.0% for the period April 9, 1998 through June 30, 1998. In addition,
the cost of corn syrup increased over the prior year period. To offset the raw
material cost increase, the Company has implemented a price increase on its
syrup products effective July 1, 1998.
16
<PAGE>
Pro Forma Gross Profit. On a pro forma basis, the quarter gross profit was
59.1%, as a percentage of net sales, as compared to the prior year quarter of
56.2%. The increase was the result of the pricing action initiated on the
Duncan Hines(R) business, which elevated the gross margin on baking mix
products.
Brokerage, Distribution and Marketing Expenses. Brokerage, distribution and
marketing expenses for the quarter increased $68.8 million as compared to the
prior year quarter due to the inclusion of the acquired businesses. As a
percentage of net sales, brokerage, distribution and marketing expenses were
38.9% for the current quarter, which was 2.2 percentage points lower than the
prior year quarter of 41.1%.
Pro Forma Brokerage, Distribution and Marketing Expenses. On a pro forma
basis, brokerage, distribution and marketing expenses increased $14.4 million
to 39.2%, as a percentage of net sales, which was above the prior year quarter
of 35.6%. Brokerage and distribution expenses increased $1.4 million, but
declined as a percentage of net sales to 9.5% as compared to 9.7% for the
prior year period. Marketing expenses increased $13.0 million and were 29.7%
in the quarter, as a percentage of net sales, which was 3.8 percentage points
higher than the prior year quarter of 25.9%. The increase was primarily
attributable to trade and consumer programs executed on the Duncan Hines(R)
business. Additional trade monies and consumer support were required to
compensate for the higher list pricing on cake and frosting products. The
prior owners, P&G, followed an every-day-low-price ("EDLP") strategy and
consequently, the prior year period included comparatively little marketing
support. In addition, the Company has developed and executed consumer programs
and media support for the Log Cabin(R) brand where none existed in the prior
year. The current quarter also includes consumer promotions and slotting
expenses related to the ongoing launch of the Company's new pizza product,
Mama Celeste Fresh-Baked Rising Crust(TM).
Amortization of Goodwill and Intangibles. Amortization of goodwill and
intangibles increased to $8.2 million in the quarter from $.8 million in the
prior year quarter. The increase of $7.4 million was due to the additional
amortization expense generated by the goodwill recorded in connection with the
brands acquired by the Company over the past year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $7.6 million in the quarter were $6.3 million
higher than the prior period expense of $1.3 million. The increase was due to
the inclusion of the Van de Kamp's, Inc. business and additional infrastructure
and staffing required by the dry grocery division to operate the Log Cabin(R)
and Duncan Hines(R) businesses. Selling, general and administrative expenses
were 3.8%, as a percentage of net sales, in the quarter, which was 2.2
percentage points lower than the 6.0% experienced in the prior year quarter.
The decrease as a percentage of net sales reflects the efficiency gained as the
scale of the Company has grown dramatically over the prior year.
Incentive Plan (Credit) Expense. For the three months ended June 30, 1998, the
Company recorded a non-cash credit to incentive plan expense of $3.4 million
based on the current valuation of the Company and in accordance with the Aurora
Plan contained in the Amended and Restated Limited Liability Company Agreement
of MBW Investors LLC (the "MBW LLC Agreement") (see Note 5).
17
<PAGE>
Transition Expenses. Transition expenses were $2.5 million in the quarter as
compared to $0.2 million recorded in the prior year quarter and represent one-
time costs incurred to establish the Company's operations and integrate the
acquired businesses. The increase was due to the acquisitions of the Log
Cabin(R) and Duncan Hines(R) brands.
Operating Income. Operating income of $25.6 million in the quarter was
$22.3 million higher than the operating income last year of $3.3 million. The
significant increase versus the prior year quarter was due to the inclusion of
operating income generated by the acquired businesses.
Pro Forma Operating Income. On a pro forma basis, operating income in the
quarter was $25.3 million as compared to the prior year quarter of $20.2
million. Operating income, as a percentage of net sales, was 12.3% for the
quarter and 10.8% for the prior year quarter. The increase as a percentage of
net sales was due to higher sales and higher gross profit margins. Excluding
the effects of the incentive plan (credit) expense and transition expenses,
operating income for the quarter would have been $24.5 million as compared to
operating income in the prior year quarter of $21.3 million. The 15.0%
increase was the result of growth in both sales and gross profit, which more
than offset the increase in marketing expenses to support the future growth of
the brands and new products.
Interest Expense and Amortization of Deferred Financing Expense. The aggregate
of net interest expense and amortization of deferred financing expense in the
quarter of $22.0 million was higher than the prior year quarter amount of $2.7
million. The increase was due to the additional debt associated with the
acquisitions over the past year.
Income Tax Expense. Income tax expense for both the current and prior year
quarters was $0.3 million, which represents an effective tax rate of 8.3% in
1998 and 40.0% in 1997. The current quarter effective tax rate was less than the
anticipated rate of 39.5% due to the effect of the non-taxable incentive plan
credit of $3.4 million recorded in the current quarter.
Net Income. Net income for the quarter of $3.2 million was $2.8 million higher
than the net income for the prior year quarter of $0.4 million. Net income, as a
percentage of net sales, was 1.6% as compared to 1.9% in the prior year quarter.
18
<PAGE>
COMPARATIVE RESULTS: SIX MONTHS ENDED JUNE 30, 1998
AND JUNE 28, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Period to
Six Months Ended Period
-------------------------------------------------------------- Increase
(in thousands except per share amounts) June 30, 1998 June 28, 1997 (Decrease)
--------------------------- ------------------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales $289,198 100.0% $42,891 100.0% 574.3 %
Cost of goods sold 119,477 41.3 14,271 33.3 737.2
--------- -------- --------- --------
Gross profit 169,721 58.7 28,620 66.7 493.0
--------- -------- --------- --------
Brokerage, distribution and
marketing expenses:
Brokerage and distribution 28,213 9.8 4,699 11.0 500.4
Trade promotions 60,870 21.0 7,074 16.5 760.5
Consumer marketing 21,495 7.4 4,367 10.1 392.2
--------- -------- --------- --------
Total brokerage, distribution
and marketing expenses 110,578 38.2 16,140 37.6 585.1
Amortization of goodwill
and other intangibles 12,786 4.4 1,658 3.9 671.2
Selling, general and
administrative expenses 9,904 3.4 2,328 5.4 325.4
Incentive plan expense 56,583 19.6 - 0.0 0.0
Transition expenses 4,447 1.5 324 0.8 1,272.5
--------- ------- -------- -------
Total operating expenses 194,298 67.1 20,450 47.7 850.1
--------- ------- -------- -------
Operating (loss) income (24,577) (8.4) 8,170 19.0 (400.8)
Interest income (421) (0.1) (83) (0.2) 407.2
Interest expense 34,398 12.0 5,176 12.1 564.6
Amortization of deferred
financing expense 1,099 0.4 2,478 5.8 (55.7)
Other bank and financing
expenses 140 0.0 24 0.0 483.3
--------- ------- -------- -------
(Loss) income before income
taxes and extraordinary item (59,793) (20.7) 575 1.3 (10,498.8)
Income tax (benefit) expense (67) 0.0 230 0.5 (129.1)
--------- ------- -------- -------
Net (loss) income before
extraordinary item (59,726) (20.7) 345 0.8 (17,411.9)
Extraordinary loss on early extinguishment
of debt, net of tax $1,184 1,876 0.6 - 0.0 0.0
--------- ------- -------- -------
Net (loss) income $(61,602) (21.3)% $ 345 0.8% (17,955.7)%
========= ======= ======== =======
Basic and diluted (loss) earnings per
share before extraordinary item $(1.47) $0.01
Extraordinary item per share 0.05 -
--------- --------
Basic and diluted (loss) earnings per share $(1.52) $0.01
========= ========
Weighted average number of shares outstanding 40,580 29,053
========= ========
</TABLE>
19
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 28, 1997
Net Sales. Net sales for the six month period were $289.2 million, which was an
increase of $246.3 million as compared to net sales in the comparable 1997
period of $42.9 million. The prior year included sales of only the Mrs.
Butterworth's(R) brand, which was the sole business owned by the Company at the
time. Results for the six month period include the results of the Mrs.
Butterworth's(R) brand, the Log Cabin(R) brand, the Duncan Hines(R) brand from
January 16, 1998 and the Van de Kamp's, Inc. business from April 9, 1998.
Pro Forma Net Sales. Pro forma net sales (which reflect all the acquisitions
noted previously as if they had occurred on January 1 for both the 1998 and
1997 periods) for the six months ended June 30, 1998 were $447.0 million,
which was a 3.0% increase over net sales in the comparable 1997 period of
$433.9 million. Sales growth in the six month period was due to unit volume
growth in the frozen food division and higher prices for the Company's
Duncan Hines(R) baking mix products. Unit volumes increased 2.2% to 23.3
million cases from 22.8 million cases in the prior year period.
The frozen food division unit volumes increased 4.4% versus last year, with a
6.8% increase in Aunt Jemima(R) frozen breakfast products and a 4.2% increase
in Celeste(R) frozen pizza. Unit volumes for frozen seafood declined by 4.8%,
reflecting the decrease in unit volumes during the June quarter, as previously
discussed. Unit volumes for the dry grocery division declined by 0.2% versus
the prior year period. Unit volumes of the Company's syrup brands increased
0.6% while volumes of Duncan Hines(R) baking mix products declined 0.6%. Unit
volumes for Duncan Hines(R) were negatively impacted in the first quarter of
1998 by a case load into retail channels initiated by P&G in the latter part
of 1997 prior to P&G's divestiture of the business.
The Company's net sales increase included 1.0% related to pricing, which was
attributable to the competitive price equalization program initiated on the
Duncan Hines(R) brand in March 1998, as previously discussed, whereby the
Company increased the list price on cake and frosting products to parity with
the competition. The price equalization program generated approximately $9.7
million in net sales during the six month period.
Gross Profit. Gross profit, as a percentage of net sales, was 58.7% for the
six month period, which was lower than the gross profit in the comparable 1997
period of 66.7%. The decline was due to the inclusion of Duncan Hines(R) baking
mix products and the Van de Kamp's, Inc. business, which have a lower gross
profit margin than syrup products. Also, the cost of corn syrup increased over
the 1997 period, which the Company has addressed with a price increase on its
syrup products effective July 1, 1998.
Pro Forma Gross Profit. On a pro forma basis, the current six month period's
gross profit was 59.8%, as a percentage of net sales, as compared to the prior
year gross profit of 57.5%. The increase was the result of the pricing
action initiated on the Duncan Hines(R) business, which elevated the gross
margin on baking mix products.
20
<PAGE>
Brokerage, Distribution and Marketing Expenses. Brokerage, distribution and
marketing expenses for the six month period increased $94.4 million as compared
to the prior year period due to the inclusion of the acquired businesses. As a
percentage of net sales, brokerage, distribution and marketing expenses were
38.2% in the current six month period, which was 0.6 percentage points higher
than the prior year period of 37.6%.
Pro Forma Brokerage, Distribution and Marketing Expenses. On a pro forma
basis, brokerage, distribution and marketing expenses for the six month period
increased $25.1 million to 41.0%, as a percentage of net sales, which was
above the comparable 1997 period of 36.4%. Brokerage and distribution expenses
increased $1.4 million over last year and remained constant as a percentage of
net sales at 9.6%. Marketing expenses increased $23.7 million and were 31.4%,
as a percentage of net sales, in the six month period, which was 4.6
percentage points higher than the prior year period of 26.8%. The increase was
primarily attributable to trade and consumer programs executed on the Duncan
Hines(R) business, as previously described to compensate for the higher list
pricing strategy initiated on cake and frosting products. The balance of the
increase was due to consumer promotions and media support for the Log Cabin(R)
brand where none existed in the prior year, and consumer promotions and
slotting expenses related to new product initiatives of the Company's new
pizza product, Mama Celeste Fresh-Baked Rising Crust(TM), and new premium
grilled frozen seafood products.
Amortization of Goodwill and Intangibles. Amortization of goodwill and
intangibles increased to $12.8 million in the six month period from $1.7
million in the comparable prior year period. The increase of $11.1 million was
due to the additional amortization expense generated by the goodwill recorded in
connection with the brands acquired by the Company over the past year.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses of $9.9 million in the six month period were $7.6
million higher than the prior year period expense of $2.3 million. The increase
was due to the inclusion of Van de Kamp's, Inc. and the additional
infrastructure and staffing required by the dry grocery division to operate the
Log Cabin(R) and Duncan Hines(R) businesses. Selling, general and
administrative expenses were 3.4% in the six month period, as a percentage of
net sales, which was 2.0 percentage points lower than the 5.4% experienced in
the prior year period. The decrease as a percentage of net sales reflects the
efficiency gained as the scale of the Company has grown dramatically over the
prior year.
Incentive Plan Expense. For the six months ended June 30, 1998, the Company
recorded non-cash incentive plan expense of $56.6 million based on the current
valuation of the Company and in accordance with the Aurora Plan contained in the
MBW LLC Agreement (see Note 5).
Transition Expenses. Transition expenses were $4.4 million in the six month
period as compared to $0.3 million recorded in the prior year period and
represent one-time costs incurred to establish the Company's operations and
integrate the acquired businesses. The increase was due to the acquisitions of
the Log Cabin(R) and Duncan Hines(R) brands.
Operating (Loss) Income. The Company incurred an operating loss of $24.6
million in the six month period as compared to operating income in the prior
year period of $8.2 million. Excluding the effects of the incentive plan
expense and transition expenses, the Company would have achieved operating
income of $36.5 million in the six month period versus the prior year period
operating income of $8.5 million. The significant increase versus the prior
21
<PAGE>
year period was due to the inclusion of operating income generated by the
acquired businesses.
Pro Forma Operating (Loss) Income. On a pro forma basis, the Company incurred
an operating loss of $70.5 million in the six month period as compared to
operating income in the prior year period of $54.6 million. Excluding the
effects of the incentive plan expense and transition expenses, the Company
would have achieved operating income of $51.9 million in the six month
period versus the prior year period operating income of $56.2 million. The
increase in gross profit of 7.1% over the prior year period was offset by
higher marketing expenses. Marketing expenses were increased to drive the
Company's growth objectives. Specifically, marketing spending was initiated
to establish media programs where none existed in the past, support the change
to a high-low pricing strategy for Duncan Hines(R) so the brand would have
parity with its competition, and support the introduction of new products in
the frozen food division through slotting expenditures to gain shelf space and
consumer promotion events.
Interest Expense and Amortization of Deferred Financing Expense. The aggregate
of net interest expense and amortization of deferred financing expense in the
six month period of $35.2 million was higher than the prior year amount of $7.6
million. The increase was due to the additional debt associated with the
acquisitions over the past year.
Income Tax (Benefit) Expense. The income tax benefit recorded for the six month
period was $0.1 million and the prior period income tax expense was $0.2
million. The effective tax rate for the current six month period was less than
the anticipated rate of 39.5% due to the effect of the non-deductible incentive
plan expense.
Net (Loss) Income. The Company incurred a net loss for the six month period of
$61.6 million as compared to net income recorded for the prior year period of
$0.3 million. In addition to the incentive plan expense recorded in the current
six month period, the Company also incurred an extraordinary charge, net of tax,
in the amount of $1.9 million as a result of the write-off of deferred financing
charges associated with the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
For the six months ended June 30, 1998, cash provided by operations was $2.7
million. Net loss plus non-cash charges provided $14.5 million of operating
cash flow. An increase in net working capital used $11.8 million of cash during
the six month period. At June 30, 1998, current assets, excluding cash and
current deferred tax assets, increased $138.9 million as compared to December
27, 1997 and current liabilities, excluding current maturities of senior secured
debt, increased $87.1 million as compared to December 27, 1997. The increase in
both current assets and current liabilities was the result of four factors: (1)
inclusion of all items of working capital related to the Log Cabin(R) and Duncan
Hines(R) businesses, which had previously been recorded in the prior owner's
books in accordance with the respective transition services agreements, (2)
receivable balance of $10.0 million due from P&G to cover reimbursable costs
incurred in connection with the relocation of manufacturing equipment from P&G
to the Company's contract manufacturers' production facilities, (3) inclusion of
all items of working capital related to the Van de Kamp's, Inc. business
acquired on April 8, 1998, and (4) increased inventory levels of certain Duncan
Hines(R) products produced by P&G in advance of relocating certain production
equipment to the Company's contract manufacturers' production
22
<PAGE>
facilities. The increase in current assets, primarily additional receivable
balances and higher inventory levels, was greater than the inclusion of current
liability balances from the respective acquisitions, which caused the use of
cash for working capital needs to be $11.8 million. Inventory balances are
expected to remain at approximately current levels as production is increased to
accommodate higher sales in the fall baking season and as more baking production
equipment is decommissioned and relocated to the Company's contract
manufacturers' production facilities over the next twelve months.
Net cash used in investing activities was $444.6 million for the six months
ended June 30, 1998. The acquisitions of Duncan Hines(R) and Van de Kamp's,
Inc. used cash of $451.4 million and $12.2 million, respectively, during the six
month period. The Desserts Sale (Note 8) generated net proceeds of $28.0
million. The Company spent $7.4 million on capital expenditures during the six
months ended June 30, 1998. The Company spent $2.6 million to relocate and
install acquired manufacturing equipment at the Company's contract
manufacturers' production facilities and $4.8 million primarily to expand
capacity for its frozen breakfast products and establish internal production of
its new rising crust pizza product. The Company expects to spend approximately
$20.0 million on capital expenditures in 1998 and anticipates that these
expenditures will be funded from internal cash flow.
During the six months ended June 30, 1998, financing activities provided cash of
$440.3 million. To finance the acquisition of Duncan Hines(R) and related
expenses, the Company borrowed $450.0 million of senior secured term debt under
the Aurora Senior Bank Facilities and received a $93.8 million capital
contribution from Holdings. The Company repaid the senior secured term debt and
senior secured revolving debt facility that existed prior to the Aurora Senior
Bank Facilities in the amount of $76.5 million and incurred an extraordinary
charge in connection with the early extinguishment of debt in the net of tax
amount of $1.9 million. The remaining balance of proceeds and repayments made
during the six month period were periodic draws and repayments under the
Company's senior secured revolving debt facilities.
At June 30, 1998, the Company had $3.1 million of cash and cash equivalents and
an unused commitment of $44.0 million on its senior secured revolving debt
facilities under the Company's Aurora Senior Bank Facilities and VDK Senior Bank
Facilities. The Company's primary sources of liquidity are cash flows from
operations and available borrowings under the $75.0 million revolving debt
facilities. Management believes the available borrowing capacity under the
revolving debt facilities combined with cash provided by operations will provide
the Company with sufficient cash to fund operations as well as to meet existing
obligations.
YEAR 2000
The Company is aware of the risks associated with the Year 2000 issue relative
to computerized information systems of the Company and others. In connection
with the Company's recent formation and subsequent acquisitions, it has modified
and/or replaced all of its key computer information systems. Accordingly,
management believes that the Company's key computerized information systems are
Year 2000 compliant. Therefore, the Company, prospectively, does not expect to
incur material remediation costs for Year 2000 solutions of its existing
information systems. The Company continues to assess the Year 2000 issue
relative to its key vendors and other third parties having significant
relationships with the Company. Although no assurance can be given with respect
to vendors' and other third parties' computerized information systems being Year
2000 compliant, the Company believes other independent providers of similar
goods
23
<PAGE>
and services can be secured without material adverse effects on the future
operating results and cash flows of the Company.
OTHER INFORMATION
On July 1, 1998, the Company issued 14,500,000 of common equity securities at an
initial public offering price of $21.00 per share for net proceeds of $254.8
million. Concurrent with the IPO, the Company issued $200.0 million of senior
subordinated notes and borrowed $225.0 million of senior secured term debt
pursuant to the New Senior Bank Facilities. The Company used the net proceeds
in the aggregate amount of $679.8 million generated from the IPO, the Notes
Offering and the New Senior Bank Facilities to repay $651.8 million of senior
bank debt outstanding under the VDK Senior Bank Facilities and the Aurora Senior
Bank Facilities, pay fees and expenses, and redeem the VDK Notes in the
principal amount of $35.0 million plus the associated $3.5 million prepayment
premium. On July 31, 1998, the balance of the VDK Notes of $65.0 million of
principal plus the associated redemption premium of $11.0 million was repaid.
To effect the repayment and provide for current working capital needs, the
Company borrowed $99.0 million out of the total available of $175.0 million of
senior secured revolving debt under the New Senior Bank Facilities. Therefore,
after the complete repayment of the VDK Notes, the Company's debt balance was
$724.0 million, which was comprised of $400.0 million of senior subordinated
notes, $225.0 million of senior secured term debt and $99.0 million of senior
secured revolving debt.
IMPACT OF ACCOUNTING PRONOUNCEMENTS
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities (FAS 133). FAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999 (January 1,
2000 for the Company). FAS 133 requires that all derivatives be recorded on the
balance sheet at fair value. Changes in the fair value of derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments, the adoption
of FAS 133 will not have a significant effect on the Company's results of
operations or its financial position.
The Company currently does not use derivative financial instruments for trading
or speculative purposes. In accordance with the New Senior Bank Facilities (as
defined), the Company is required to enter into interest rate protection
agreements to the extent necessary to provide that, when combined with the
Company's senior subordinated notes, at least 50% of the Company's aggregate
indebtedness is subject to either a fixed interest rate or interest rate
protection agreements. Accordingly, the Company's interest rate agreements are
as follows:
Interest Rate Collar Agreements. At June 30, 1998, the Company was party to two
interest rate collar agreements. On August 22, 1996 the company entered into a
three year interest rate collar agreement with a notional principal amount of
$70.0 million, a cap rate of 7.5% (plus the applicable margin) and a floor rate
of 5.5% (plus the applicable margin). On November 26, 1997, the Company entered
into a three year interest rate collar agreement with a notional principal
amount of $50.0 million, a cap rate of 6.5% (plus the applicable margin) and a
floor rate of 5.75% (plus the applicable margin).
Interest Rate Swap Agreement. The Company entered into an interest rate swap
agreement on March 17, 1998. The notional principal amount covered under the
interest rate swap agreement is $150.0 million and the term is three years. The
effective current swap rate is 5.81%.
Risks associated with the interest rate swap and collar agreements include those
associated with changes in the market value and interest rates. Management
considers the potential loss in future earnings and cash flows attributable to
the interest rate swap and collar agreements to not be material.
24
<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 Aurora Foods Inc.'s Form S-4 filed on August 21, 1997
("Aurora S-4")).
2.2 Asset Purchase Agreement, dated as of March 7, 1997, by and between
Aurora Foods Inc. and Kraft Foods, Inc. (Incorporated by reference to
Exhibit 2.2 to the Aurora S-4).
2.3 Asset Purchase Agreement, dated as of November 26, 1997, by and
between Aurora Foods Inc. and The Procter & Gamble Company.
(Incorporated by reference to Exhibit 2.1 to the Aurora Foods Inc.'s
Form 8-K filed on January 30, 1998 (the "Form 8-K")).
2.4 Merger Agreement, dated as of June 22, 1998, between the Aurora Foods
Inc. and A Foods Inc. (Incorporated by reference to Exhibit 2.1 to the
Aurora Foods Inc.'s Form S-1 filed on April 22, 1998 (the "S-1")).
2.5 Merger Agreement, dated as of June 25, 1998, among Aurora Foods
Holdings Inc., AurFoods Operating Co. Inc., VDK Holdings, Inc., Van de
Kamp's, Inc. and A Foods Inc. (Incorporated by reference to Exhibit
2.2 to the S-1).
2.6 Certificate of Merger, dated June 23, 1998, of Aurora Foods Inc. with
and into A Foods Inc. (Incorporated by reference to Exhibit 2.14 to
the S-1).
2.7 Amendment to Asset Purchase Agreement, dated as of February 13, 1997,
between Van de Kamp's, Inc. and Morningstar Foods, Inc. (Incorporated
by reference to Exhibit 2.2 to Van de Kamp's, Inc.'s Form 10-Q for the
quarter ended March 31, 1997).
2.8 Asset Purchase Agreement, dated as of February 3, 1997, between Van de
Kamp's, Inc. and Morningstar Foods, Inc. (Incorporated by reference to
Exhibit 2.1 to Van de Kamp's, Inc.'s Form 10-Q for the quarter ended
March 31, 1997).
25
<PAGE>
2.10 Supplement No. 1 to Asset Purchase and Sales Agreement, dated as of
July 9, 1996, between Van de Kamp's, Inc. and the Quaker Oats Company
("Quaker Oats"). (Incorporated by reference to Exhibit 2.2 to Van de
Kamp's, Inc.'s Form 8-K dated July 9, 1996).
2.11 Asset Purchase and Sales Agreement, dated as of May 15, 1996 between
Van de Kamp's, Inc. and Quaker Oats. (Incorporated by reference to
Exhibit 2.1 to Van de Kamp's, Inc.'s Form 8-K dated July 9, 1996).
2.12 Asset Purchase and Sale Agreement, dated as of January 17, 1996,
between Shellfish Acquisition Company, LLC ("Shellfish") and Campbell
Soup Company ("Campbell"). (Incorporated by reference to the text of
which and Exhibits to which are incorporated by reference to Exhibit
2.1 to Van de Kamp's, Inc.'s Form 10-Q for the quarter ended March 30,
1996 and a list of the contents of the schedule of which is
incorporated by reference to Exhibit 2.1 to Van de Kamp's, Inc.'s Form
8-K dated May 6, 1996 ).
2.13 Asset Purchase Agreement, dated as of January 17, 1996, between Van de
Kamp's, Inc. and Shellfish. (Incorporated by reference to Exhibit 2.2
to the Van de Kamp's, Inc.'s Form 10-Q for the quarter ended March 20,
1996).
2.14 Agreement and Amendment No. 1, dated September 19, 1995, to the Asset
Purchase Agreement among Van de Kamp's, Inc., the Pillsbury Company
and PET Incorporated. (Incorporated by reference to Exhibit to Van de
Kamp's, Inc.'s Form S-4 filed on October 4, 1995 (the "Van de Kamp's
S-4")).
2.15 Asset Purchase Agreement, dated as of July 7, 1995 among Van de
Kamp's, Inc., the Pillsbury Company and PET Incorporated.
(Incorporated by reference to Exhibit 2.1 to the Van de Kamp's S-4).
3.1 Certificate of Incorporation of A Foods Inc., filed with the Secretary
of State of the State of Delaware on June 19, 1998. (Incorporated by
reference to Exhibit 3.1 to the S-1).
3.2 Amended and Restated By-laws of Aurora Foods Inc. (Incorporated by
reference to exhibit 3.2 to the S-1).
4.1 Indenture dated as of February 10, 1997, by and between Aurora Foods
Inc. and Wilmington Trust Company. (Incorporated by reference to
Exhibit 4.1 to the Aurora S-4).
4.2 Specimen Certificate of 9 7/8% Series B Senior Subordinated Note due
2007 (included in Exhibit 4.1 hereto). (Incorporated by reference to
Exhibit 4.2 to the Aurora S-4).
4.3 Form of Note Guarantee to be issued by future subsidiaries of Aurora
Foods Inc. pursuant to the Indenture (included in Exhibit 4.1 hereto).
(Incorporated by reference to Exhibit 4.4 to the Aurora S-4).
26
<PAGE>
4.4 Indenture dated as of July 1, 1997 by and between Aurora Foods Inc.
and Wilmington Trust Company (the "Series D Indenture"). (Incorporated
by reference to Exhibit 4.6 to the Aurora S-4).
4.5 Specimen Certificate of 9 7/8% Series D Senior Subordinated Note due
2007 (included in Exhibit 4.4 hereto). (Incorporated by reference to
Exhibit 4.3 to the Aurora S-4).
4.6 Form of Note Guarantee to be issued by future subsidiaries of Aurora
Foods Inc. pursuant to the Series D Indenture (included in Exhibit 4.4
hereto). (Incorporated by reference to Exhibit 4.8 to the Aurora S-4).
4.7 Securityholders Agreement, dated as of April 8, 1998, by and among
Aurora/VDK LLC, MBW Investors LLC, VDK Foods LLC and the other parties
signatory thereto. (Incorporated by reference to Exhibit 4.2 to the S-
1).
4.8 Indenture dated as of July 1, 1998 by and between Aurora Foods Inc.
and Wilmington Trust Company (Incorporated by reference to Exhibit
4.13 to the S-1).
4.9 Specimen Certificate of 8 3/4% Senior Subordinated Notes due 2008.
(Included in Exhibit 4.8 hereto).
4.10 Specimen Certificate of the Common Stock. (Incorporated by reference
to Exhibit 4.1 to the S-1).
4.11 Registration Rights Agreement, dated July 1, 1998, between Aurora
Foods Inc. and Chase Securities Inc., Goldman, Sachs & Co. and Natwest
Capital Markets Limited (Incorporated by reference to Exhibit 4.15 to
the S-1).
4.12 Indenture, dated as of September 15, 1995, between Van de Kamp's, Inc.
and Harris Trust and Savings Bank. (Incorporated by reference to
Exhibit 4.1 to the Van de Kamp's S-4).
4.13 Global Note, dated September 19, 1995, issued by Van de Kamp's, Inc.
to the Depository Trust Company and registered in the name of Cede &
Co. in the principal amount of $100,000,000. (Incorporated by
reference to Exhibit 4.2 to the Van de Kamp's S-4).
10.1 VDK Holdings, Inc. Incentive Compensation Plan. (Incorporated by
reference to Exhibit 10.1 to S-1).
10.2 Purchase Agreement, dated June 25, 1998, between Aurora Foods Inc. and
Chase Securities Inc., Goldman, Sachs & Co. and NatWest Capital
Markets Limited. (Incorporated by reference to Exhibit 10.3 to S-1).
10.3 Purchase Agreement, dated June 18, 1997, by and among Aurora Foods
Inc., Chase Securities, Inc. and Credit Suisse First Boston
Corporation. (Incorporated by reference to Exhibit 1.2 to the Aurora
S-4).
27
<PAGE>
10.4 Purchase Agreement, dated February 5, 1997, by and between Aurora
Foods Inc. and Chase Securities, Inc. (Incorporated by reference to
Exhibit 1.1 to the Aurora S-4).
10.5 Employment Agreement, dated as of December 31, 1996, by and between
Aurora Foods Inc. and Thomas J. Ferraro (Incorporated by reference to
Exhibit 10.5 to the Aurora S-4).
10.6 Employment Agreement, dated as of December 31, 1996, by and between
Aurora Foods Inc. and C. Gary Willett. (Incorporated by reference to
Exhibit 10.6 to the Aurora S-4).
10.7 Purchase Agreement, dated September 14, 1995, between Van de Kamp's,
Inc. and Chemical Securities, Inc. (Incorporated by reference to
Exhibit 10.6 to S-1).
10.8 Flavor Supply Agreement, dated as of December 31, 1996, by and Aurora
Foods Inc. and Quest International Flavors & Food Ingredients Company.
(Incorporated by reference to Exhibit 10.8 to the Aurora S-4).
10.9 License Agreement, dated as of February 21, 1979, between General Host
Corporation and VDK Acquisition Corporation. (Incorporated by
reference to Exhibit 10.27 to the Van de Kamp's S-4).
10.10 License Agreement, dated as of October 14, 1978, between General Host
Corporation and Van de Kamp's Dutch Bakeries. (Incorporated by
reference to Exhibit 10.28 to the Van de Kamp's S-4).
10.11 Trademark License Agreement, dated July 9, 1996 among Quaker Oats, The
Quaker Oats Company of Canada Limited and Van de Kamp's, Inc.
(Incorporated by reference to Exhibit H to Exhibit 2.1 to Van de
Kamp's, Inc.'s Form 8-K dated July 9, 1996).
10.13 Amended Transitional Co-Pack Agreement, dated as of July 1, 1997, by
and between Aurora Foods Inc. and Kraft Foods, Inc. (Incorporated by
reference to Exhibit 10.13 to the Aurora S-4).
10.16 First Amended and Restated Red Wing Co-Pack Agreement, dated as of
November 19, 1997, by and between Aurora Foods Inc. and The Red Wing
Company, Inc. (Confidential treatment for a portion of this document
has been requested by the Company). (Incorporated by reference to
Exhibit 10.16 to Aurora Foods Inc.'s Form 10-K, filed on March 27,
1998 (the "Aurora 10-K")).
10.18 Production Agreement, dated November 19, 1997, by and between Aurora
Foods Inc. and The Red Wing Company, Inc. (Confidential treatment for
a portion of this document has been requested by the Company).
(Incorporated by reference to Exhibit 10.18 to the Aurora 10-K).
28
<PAGE>
10.19 Transitional Supply Agreement, dated January 16, 1998, by and between
Aurora Foods Inc. and The Procter & Gamble Manufacturing Company.
(Confidential treatment for a portion of this document has been
requested by the Company). (Incorporated by reference to Exhibit 10.20
to the Aurora 10-K).
10.20 Amendment No. 1 to Ferraro Employment Agreement, dated as of January
1, 1998, between Aurora Foods Inc. and Thomas J. Ferraro.
(Incorporated by reference to Exhibit 10.10 to the S-1).
10.21 Amendment No. 1 to Willett Employment Agreement, dated as of January
1, 1998, between C. Gary Willett and Aurora Foods Inc. (Incorporated
by reference to Exhibit 10.13 to the S-1).
10.22 Third Amended and Restated Credit Agreement, dated as of July 1, 1998,
among Aurora Foods Inc., as borrower, the Lenders listed therein, The
Chase Manhattan Bank, as Administrative Agent, National Westminster
Bank PLC, as Syndication Agent and Swiss Bank Corporation, as
Documentation Agent. (Incorporated by reference to Exhibit 10.20 to
the S-1).
10.24 1998 Incentive Plan. (Incorporated by reference to Exhibit 10.2 to the
S-1).
10.26 Employment Agreement between Ian R. Wilson and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.7 to the S-1).
10.27 Employment Agreement between James B. Ardrey and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.8 to the S-1).
10.28 Employment Agreement between Ray Chung and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.9 to the S-1).
10.29 Employment Agreement between M. Laurie Cummings and Aurora Foods Inc.
(Incorporated by reference to Exhibit 10.10 to the S-1).
10.30 Amendment No. 1 to Ellinwood Amended and Restated Employment
Agreement, dated as of January 1, 1998, between Thomas 0. Ellinwood
and Van de Kamp's, Inc. (Incorporated by reference to Exhibit 10.15 to
the S-1).
10.31 Amended and Restated Employment Agreement, dated as of March 11, 1997,
by and between Thomas 0. Ellinwood and Van de Kamp's, Inc.
(Incorporated by reference to Exhibit 10.16 to the S-1).
10.32 Employment Agreement, dated as of February 16, 1998, by and between
Van de Kamp's, Inc. and Anthony A. Bevilacqua. (Incorporated by
reference to Exhibit 10.17 to the S-1).
10.33 Expense Agreement, made as of July 1, 1998, between Aurora Foods Inc.
and Dartford Partnership L.L.C. (Incorporated by reference to Exhibit
10.32 to the S-1).
29
<PAGE>
10.34 Advisory Agreement, made as of April 8, 1998, among Aurora/VDK LLC,
Van de Kamp's, Inc., VDK Holdings, Inc., Aurora Foods Inc. and Aurora
Foods Holdings Inc. and Dartford Partnership L.L.C. (Incorporated by
reference to Exhibit 10.33 to the S-1).
10.35 Advisory Agreement, made as of April 8, 1998, among Aurora/VDK LLC,
Van de Kamp's, Inc., VDK Holdings, Inc., Aurora Foods Inc. and Aurora
Foods Holdings Inc. and MDC Management Company III, L.P. (Incorporated
by reference to Exhibit 10.34 to the S-1).
10.36 Advisory Agreement, made as of April 8, 1998, between Fenway Partners,
Inc. and Aurora/VDK LLC, Van de Kamp's, Inc., VDK Holdings, Inc.,
Aurora Foods Inc. and Aurora Foods Holdings Inc. (Incorporated by
reference to Exhibit 10.35 to the S-1).
10.37 Indemnity Agreement, dated as of July 1, 1998, between Ian R. Wilson
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.46 to
the S-1).
10.38 Indemnity Agreement, dated as of July 1, 1998, between James B.
Ardrey and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.49 to the S-1).
10.39 Indemnity Agreement, dated as of July 1, 1998, between Clive A. Apsey
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.50 to
the S-1).
10.40 Indemnity Agreement, dated as of July 1, 1998, between Charles Ayres
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.51 to
the S-1).
10.41 Indemnity Agreement, dated as of July 1, 1998, between David E. De
Leeuw and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.52 to the S-1).
10.42 Indemnity Agreement, dated as of July 1, 1998, between Charles J.
Delaney and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.53 to the S-1).
10.43 Indemnity Agreement, dated as of July 1, 1998, between Richard C.
Dresdale and Aurora Foods Inc. (Incorporated by reference to Exhibit
10.54 to the S-1).
10.44 Indemnity Agreement, dated as of July 1, 1998, between Andrea Geisser
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.55 to
the S-1).
10.45 Indemnity Agreement, dated as of July 1, 1998, between Peter Lamm and
Aurora Foods Inc. (Incorporated by reference to Exhibit 10.56 to the
S-1).
10.46 Indemnity Agreement, dated as of July 1, 1998, between Tyler T. Zachem
and Aurora Foods Inc. (Incorporated by reference to Exhibit 10.57 to
the S-1).
10.48 1998 Employee Stock Purchase Plan. (Incorporated by reference to
Exhibit 10.47 to the S-1).
30
<PAGE>
10.49 Production Agreement, dated as of June 4, 1998, by and Aurora Foods
Inc. and Gilster-Mary Lee Corporation. (Incorporated by reference to
Exhibit 10.48 to the S-1).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
1. A report on Form 8-K (Aurora Foods Inc.), dated April 8, 1998, was
filed on April 21, 1998 on which Items 5 and 7 were reported. No
financial statements were filed with this filing.
2. A report on Form 8-K (Van de Kamp's, Inc.), dated April 8, 1998, was
filed on April 21, 1998 on which Items 5 and 7 were reported. No
financial statements were filed with this filing.
3. A report on Form 8-K (Aurora Foods Inc.), dated April 22, 1998, as
amended, was filed on May 1, 1998 on which Item 5 was reported. No
financial statements were filed with this filing.
4. A report on Form 8-K (Van de Kamp's, Inc.), dated April 22, 1998, as
amended, was filed on May 6, 1998 on which Item 5 was reported. No
financial statements were filed with this filing.
5. A report on Form 8-K (Van de Kamp's, Inc.), dated May 1, 1998, was
filed on May 15, 1998 on which Item 5 was reported. No financial
statements were filed with this filing.
6. A report on Form 8-K (Van de Kamp's, Inc.), dated June 10, 1998, was
filed on June 10, 1998 on which Item 5 was reported. No financial
statements were filed with this filing.
31
<PAGE>
SIGNATURES
- - ----------
Pursuant to the requirements of Section 13 or 15(d) 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.
AURORA FOODS INC.
Dated: August 12, 1998 By: /s/ M. Laurie Cummings
--------------- --------------------------
M. Laurie Cummings
Chief Financial Officer
(Duly Authorized Officer,
Principal Financial Officer and
Principal Accounting Officer)
32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND A STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-27-1997
<PERIOD-START> DEC-28-1997 JAN-01-1997
<PERIOD-END> JUN-30-1998 JUN-28-1997
<CASH> 3,118 12,642
<SECURITIES> 0 0
<RECEIVABLES> 81,158 7,480
<ALLOWANCES> 759 42
<INVENTORY> 69,916 1,698
<CURRENT-ASSETS> 177,150 22,684
<PP&E> 131,353 5,731
<DEPRECIATION> 4,843 283
<TOTAL-ASSETS> 1,425,434 144,826
<CURRENT-LIABILITIES> 170,618 10,523
<BONDS> 302,333 100,000
397,305 32,619
0 0
<COMMON> 541 541
<OTHER-SE> (60,367) 345
<TOTAL-LIABILITY-AND-EQUITY> 1,425,434 144,826
<SALES> 289,198 42,891
<TOTAL-REVENUES> 289,198 42,891
<CGS> 119,477 14,271
<TOTAL-COSTS> 230,055 30,411
<OTHER-EXPENSES> 83,779 6,687
<LOSS-PROVISION> 759 42
<INTEREST-EXPENSE> 34,398 5,176
<INCOME-PRETAX> (59,793) 575
<INCOME-TAX> (67) 230
<INCOME-CONTINUING> (59,726) 345
<DISCONTINUED> 0 0
<EXTRAORDINARY> 1,876 0
<CHANGES> 0 0
<NET-INCOME> (61,602) 345
<EPS-PRIMARY> (1.52) 0.01
<EPS-DILUTED> (1.52) 0.01
</TABLE>
