<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report June 1, 1998
Commission file number 33-30261
WINDY HILL PET FOOD COMPANY, INC.
(Exact Name of Registrant as Specified in Its Charter)
MINNESOTA 41-0323270
--------- ----------
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation or Organization)
Highwoods Plaza II
103 Powell Court, Suite 200
Brentwood, TN 37027
(Address of Principal Executive Office, Including Zip Code)
(615) 373-7774
(Registrant's Telephone Number, Including Area Code)
================================================================================
1
<PAGE>
Item 2. Acquisition of Disposition of Assets
- ------ -----------------------------------
On June 1, 1998, Windy Hill Pet Food company, Inc. a Minnesota
corporation (the "Company"), completed the acquisition of all of the capital
stock of Deep Run Packaging Co., Inc. ("Deep Run"). Deep Run is a manufacturer
of canned pet food for private label retailers. The purchase price of
approximately $16.4 million was based on arm's length negotiations between the
Company and the shareholders of Deep Run.
To finance the acquisition of Deep Run and related costs, the Company
borrowed $17 million under the Company's revolving credit facility under
the Company's credit agreement.
Item 7. Financial Statements, Pro Forma Financial Information
- ------ -----------------------------------------------------
and Exhibits
------------
(a) Financial Statements of Business Acquired. The audited balance sheet
of Deep Run Packing Company, Inc. as of March 31, 1998 and the
related statements of income, retained earnings and cash flows for
the year ended March 31, 1998, together with the report of
independent accountants thereon are included on pages 5 through 19
herein.
(b) Unaudited Pro Forma Financial Information. The unaudited pro forma
statement of operations of Windy Hill Pet Food Company, Inc. for the
year ended December 27, 1997 and the three months ended March 28,
1998 and the unaudited pro forma balance sheet as of March 28, 1998
and related notes, included on pages 20 through 25 herein.
(c) Exhibits. The following exhibits are filed in accordance with
Item 601 of Regulation S-K, per an amendment to this report of Form
8-K/A:
2.1 Stock Purchase Agreement dated April 6, 1998 between Windy
Hill Pet Food Company, Inc. and the shareholders of Deep
Run Packaging Co., Inc., the text of which and exhibits to
which are incorporated by reference to Exhibit 2.1 to the
Company's Form 10-Q filed August 11, 1998.
23.1 Consent of Niessen, Dunlap & Pritchard, P.C.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
WINDY HILL PET FOOD COMPANY, INC.
Date: August 14, 1998 By /s/ Thomas R. Heidenthal
------------------------
Thomas R. Heidenthal
Senior Vice President
and Chief Financial Officer
Date: August 14, 1998 By /s/ Charles W. Dunleavy
-----------------------
Charles W. Dunleavy
Vice President - Finance
and Principal Accounting Officer
3
<PAGE>
Item 7(a): Financial Statements of Business Acquired
The following financial statements of Deep Run Packing Company, Inc. are
included in item 7(a).
Page
----
Report of Independent Accountants.................................... 5
Financial Statements:
-Balance Sheet as of March 31, 1998............................... 6-7
-Statement of Income for the year ended March 31, 1998............ 8
-Statement of Retained Earnings for the year ended
March 31, 1998................................................. 9
-Statement of Cash Flows for the year ended March 31, 1998........ 10
Notes to the Financial Statements.................................... 11-15
Schedule of Cost of Goods Sold for the year ended
March 31, 1998..................................................... 16
Schedule of Transportation Expenses for the year ended
March 31, 1998..................................................... 17
Schedule of Selling Expenses for the year ended March 31, 1998....... 18
Schedule of Administrative Expenses for the year ended
March 31, 1998..................................................... 19
4
<PAGE>
[LETTERHEAD OF NIESSEN, DUNLAP & PRITCHARD]
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
AND SUPPLEMENTARY INFORMATION
To the Board of Directors
Deep Run Packing Co., Inc.
Dublin, Pennsylvania
We have audited the accompanying balance sheet of Deep Run Packing Co., Inc., as
of March 31, 1998, and the related statements of income, retained earnings, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Deep Run Packing Co., Inc., as
of March 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on pages
16-19 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relations to
the basic financial statements taken as a whole.
/s/ NIESSEN, DUNLAP & PRITCHARD, P.C.
NIESSEN, DUNLAP & PRITCHARD, P.C.
Colmar, Pa.
July 16, 1998
5
<PAGE>
DEEP RUN PACKING CO., INC.
BALANCE SHEET
MARCH 31, 1998
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash $ 242,590
Accounts Receivable 2,286,305
Other Receivables and Advances 26,987
Inventory 2,369,427
Prepaid Expenses 247,824
------------
Total Current Assets 5,173,133
------------
Investments
Cash Value of Life Insurance 409,073
------------
Property and Equipment
Land 68,000
Buildings and Improvements 2,556,291
Accumulated Depreciation (1,265,899)
Machinery and Equipment 7,778,437
Accumulated Depreciation (4,338,721)
Transportation Equipment 264,387
Accumulated Depreciation (238,019)
Office Furniture and Equipment 242,143
Accumulated Depreciation (199,560)
------------
Net Property and Equipment 4,867,059
------------
Other Assets
Prepaid Expenses 129,945
Excise Tax Deposit 194,674
------------
Total Other Assets 324,619
------------
TOTAL ASSETS $ 10,773,884
============
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
DEEP RUN PACKING CO., INC.
BALANCE SHEET
MARCH 31, 1998
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current Maturities of Long-Term Note $ 409,953
Accounts Payable 1,935,668
Accrued Expenses 204,999
-----------
Total Current Liabilities 2,550,620
Long-Term Debt
Note Payable, Less Current Maturities 112,307
-----------
Total Liabilities 2,662,927
-----------
Stockholders' Equity
Common Stock 1,000
Additional Paid-In Capital 29,389
Retained Earnings 8,314,488
-----------
8,344,877
Treasury Stock (233,920)
-----------
Total Stockholders' Equity 8,110,957
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $10,773,884
-----------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
DEEP RUN PACKING CO., INC.
STATEMENT OF INCOME
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
%
-----
<S> <C> <C>
Sales
Sales $30,857,977 102.0
Promotions and Allowances (601,100) (2.0)
----------- -----
Net Sales 30,256,877 100.0
Cost of Goods Sold 25,604,331 84.6
----------- -----
Gross Profit 4,652,546 15.4
----------- -----
Operating Expenses
Transportation 775,800 2.6
Selling 390,418 1.3
Administrative 1,224,782 4.0
----------- -----
Total Operating Expenses 2,391,000 7.9
----------- -----
Operating Income 2,261,546 7.5
----------- -----
Other Income (Expense)
Cash Discounts 158,661 0.5
Interest Income 36,717 0.1
Miscellaneous Income 105,076 0.3
Loss on Disposal of Equipment (22,304) (0.1)
Interest Expense (68,387) (0.2)
---------- -----
Total Other Income (Expense) 209,763 0.7
---------- -----
NET INCOME $ 2,471,309 8.2
=========== =====
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
DEEP RUN PACKING CO., INC.
STATEMENT OF RETAINED EARNINGS
YEAR ENDED MARCH 31, 1998
<TABLE>
<S> <C>
Balance, Beginning $ 6,746,179
Net Income 2,471,309
Dividends (903,000)
-----------
Balance, Ending $ 8,314,488
===========
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
DEEP RUN PACKING CO., INC.
STATEMENT OF CASH FLOWS
YEAR ENDED MARCH 31, 1998
<TABLE>
<S> <C>
Cash Flows from Operating Activities
Net Income $ 2,471,309
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 576,977
Loss on Disposal of Equipment 22,304
Change in Assets and Liabilities:
(Increase) Decrease in:
Accounts Receivable (719,496)
Other Receivables and Advances (25,282)
Inventory (571,087)
Prepaid Expenses 38,419
Excise Tax Deposit (132,891)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 552,045
-----------
Net Cash Provided by Operating Activities 2,212,298
-----------
Cash Flows from Investing Activities
Increase in Cash Value of Life Insurance (123,723)
Proceeds from Disposal of Equipment 48,500
Purchase of Property and Equipment (461,034)
-----------
Net Cash Used in Investing Activities (536,257)
-----------
Cash Flows from Financing Activities
Principal Payments on Long-Term Borrowings (760,620)
Dividends (903,000)
-----------
Net Cash Used in Financing Activities (1,663,620)
-----------
Net Increase in Cash 12,421
Cash
Beginning 230,169
-----------
Ending $ 242,590
===========
Supplemental Disclosures of Cash Flow Information
Cash Payments for Interest $ 68,631
===========
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
DEEP RUN PACKING CO., INC.
Notes to Financial Statements
March 31, 1998
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
The Company was incorporated under the laws of the Commonwealth of
Pennsylvania on November 14, 1955. The Company's principal operation is the
processing, packing, and sale of pet food at the wholesale level. The
Company grants credit to supermarkets and other retail customers throughout
the nation and several foreign countries. Consequently, the Company's
ability to collect the amounts due from customers is affected by economic
fluctuations of its customers.
CASH
The Company maintains its cash accounts in two commercial banks. The amount
on deposit often exceeds the federally insured limit. The Company has not
experienced any losses in such accounts. The Company believes it is not
exposed to any significant credit risk on cash.
ACCOUNTS RECEIVABLE
An allowance for bad debts is not provided. The Company uses the direct
write-off method for bad debts whereby amounts considered uncollectible are
recorded directly to bad debt expense. Collections of accounts previously
written off are included in income as received.
Bad debts expense for the year ended March 31, 1998, was $25,313.
INVENTORY
Inventory is valued at the lower of cost or market, on a first-in, first-out
basis. At March 31, 1998, inventory consists of the following:
<TABLE>
<S> <C>
Raw Materials $1,149,044
Work in Process 818,543
Finished Goods 401,840
----------
$2,369,427
==========
</TABLE>
PREPAID EXPENSES
The Company capitalizes all costs associated with the design and production
of labels and packaging materials for new customers. Included in these
costs are items such as artwork, design layout, and production of dies for
printing. The costs are expensed over five years. Included in prepaid
expenses at March 31, 1998, are unamortized costs of $226,957.
11
<PAGE>
DEEP RUN PACKING CO., INC.
Notes to Financial Statements
March 31, 1998
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Major replacements and
betterments are capitalized while maintenance and repairs are expensed as
incurred.
Depreciation is computed for financial statement purposes on a straight-line
basis over the estimated useful lives of the related assets. The estimated
useful lives of depreciable assets are:
<TABLE>
<CAPTION>
Classifications Years
------------------------------ -------
<S> <C>
Buildings and Improvements 25-40
Machinery and Equipment 5-12
Transportation Equipment 5-6
Office Furniture and Equipment 5-10
</TABLE>
Depreciation expense for the year ended March 31, 1998, was $576,977.
INCOME TAX STATUS
The Company's stockholders have elected beginning for the year ended
September 30, 1991, to be taxed under sections of the federal income tax
laws which provide that, in lieu of corporation income taxes, the
stockholders separately account for their pro rata shares of the Company's
items of income, deductions, losses, and credits. Therefore, these
statements do not include any provision for federal corporate income taxes
or refunds. A similar election has been made for Pennsylvania income taxes.
Also, no provision has been made for any amounts which may be paid as
dividends to the stockholders to assist them in paying their personal income
taxes on the income of the corporation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
2. EXCISE TAX DEPOSIT
The Company has an excise tax deposit with the Internal Revenue Service
allowing the Company to maintain its fiscal year end. The deposit will be
returned to the Company upon termination of its S corporation election,
changes in the Company's profitability, or if the Company changes to a
December year end.
12
<PAGE>
DEEP RUN PACKING CO., INC.
Notes to Financial Statements
March 31, 1998
3. LINE OF CREDIT
The Company has a line of credit agreement with Mellon Bank which permits
borrowing up to $1 million. The line is secured by the Company's accounts
receivable, inventory, machinery and equipment, and other collateral.
Interest is charged on the outstanding balance at the lender's prime rate
and is payable monthly. The line of credit was not used during the year
ended March 31, 1998.
4. LONG-TERM NOTE PAYABLE
The Company has a note payable to Mellon Bank. The note is payable in
monthly installments of $36,268, including interest at 7.5% per annum. The
final payment is due June 1999. The note is secured by the Company's
accounts receivable, inventory, machinery and equipment, and other
collateral. This note agreement with the bank contains certain restrictions
and covenants. The Company must also maintain a debt to equity ratio of 1
to 1 and sufficient cash flow to debt service of 1.5 to 1. Total interest
expense on this note for the year ended March 31, 1998, was $55,775.
Aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ending
March 31, Amount
------------ --------
<S> <C>
1999 $409,953
2000 112,307
--------
$522,260
========
</TABLE>
5. COMMON STOCK AND TREASURY STOCK
The Company has authorized 1 million shares of common stock with a par
value of $10 per share. At March 31, 1998, there are 100,000 shares issued,
83,000 shares outstanding, and 17,000 shares of treasury stock. The treasury
stock is reported at cost.
13
<PAGE>
DEEP RUN PACKING CO., INC.
Notes to Financial Statements
March 31, 1998
6. RETIREMENT PLAN
The Company sponsors a 401(k) deferred salary savings plan which is a
qualified defined contribution plan. All employees of the Company who meet
certain eligibility requirements are able to participate in the plan.
Pursuant to this plan, employees can contribute up to the lessor of 15% of
their compensation or $10,000 a year to the plan. The Company matches 100%
of the employee contribution up to 4% of compensation. In addition, the
Company's Board of Directors has the discretion to contribute an additional
amount, up to a maximum of 15% of employee compensation. For the year ended
March 31, 1998, the matching contribution was $63,302 and there were no
discretionary contributions.
7. MAJOR CUSTOMERS
During the year ended March 31, 1998, the Company recognized cumulative
sales of $15,455,637 to four major customers. At March 31, 1998, accounts
receivable included $1,575,850 due from these customers.
8. OPERATING LEASES
The Company is currently leasing seven forklifts and two automobiles under
operating leases. The future minimum commitments under these operating
leases are as follows:
<TABLE>
<CAPTION>
Year Ending
March 31, Amount
----------- ----------
<S> <C>
1999 $ 69,323
2000 68,054
2001 51,341
2002 11,212
--------
$199,930
========
</TABLE>
Total rent expense for this equipment for the year ended March 31, 1998, was
$54,461.
9. RELATED PARTY TRANSACTIONS
Interest expense includes $3,543 which was incurred and paid on demand loans
from three stockholders of the Company. The borrowing and repayment of these
demand loans occurred within the year ended March 31, 1998.
14
<PAGE>
DEEP RUN PACKING CO., INC.
Notes to Financial Statements
March 31, 1998
10. SUBSEQUENT EVENTS
STOCK PURCHASE AGREEMENT
On April 6, 1998, the stockholders of the Company entered into a stock
purchase agreement to sell their entire interest in the Company to another
corporation. This transaction occurred on June 1, 1998.
RELATED PARTY TRANSACTIONS
On April 29, 1998, the Company acquired real estate adjoining its property
for $300,000. This real estate was acquired from two stockholders of the
Company.
15
<PAGE>
DEEP RUN PACKING CO., INC.
SCHEDULE OF COST OF GOODS SOLD
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
%
-----
<S> <C> <C>
Raw Materials $ 6,405,598 21.2
Purchase of Finished Goods 303,462 1.0
Cans and Ends 10,427,280 34.5
Cartons and Trays 744,786 2.5
Grains and Flavors 2,263,575 7.5
Labels and Labeling Supplies 1,093,028 3.6
Wages - Plant 1,822,769 6.0
Salaries - Plant Managers 341,347 1.1
Advertising in Classified 5,344 0.0
Boiler and Water Service 37,738 0.1
Depreciation - Plant 551,947 1.8
Environmental Supplies/Repairs 160,210 0.5
Finishing Costs 10,370 0.0
Gainsharing Expense 85,113 0.3
Insurance - Employee Benefits 208,893 0.7
Insurance - Liability/Accident 112,693 0.4
Medical Reimbursement Plan 18,475 0.1
Outside Services - Other 162,080 0.5
Pension Plan 44,596 0.1
Plant Supplies and Expense 109,613 0.4
Product Analysis 18,940 0.1
Quality Control - Lab 56,254 0.2
Rent - Equipment 64,673 0.2
Repairs/Maintenance - Building 32,456 0.1
Repairs/Maintenance - Equipment 302,250 1.0
Safety Equipment 5,587 0.0
Sanitation Supplies and Expense 96,111 0.3
Tax - Payroll 186,131 0.6
Tax - Real Estate 31,725 0.1
Uniforms 33,712 0.1
Utilities 435,158 1.4
Training 3,504 0.0
------------ -----
26,175,418 86.5
Change in Inventory (571,087) (1.9)
------------ -----
Total $ 25,604,331 84.6
============ ====
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
DEEP RUN PACKING CO., INC.
SCHEDULE OF TRANSPORTATION EXPENSES
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
%
-----
<S> <C> <C>
Wages - Drivers $ 16,320 0.1
Depreciation - Transportation 504 0.0
Freight Out - Common Carrier 733,843 2.4
Insurance - Employee Benefits 1,092 0.0
Insurance - Liability/Accident 2,752 0.0
Miscellaneous 223 0.0
Tax - Payroll 1,368 0.0
Truck Expenses 3,351 0.0
Truck Fuels 4,977 0.0
Truck Maintenance 11,370 0.0
-------- ----
Total $775,800 2.6
======== ====
</TABLE>
See Notes to Financial Statements.
17
<PAGE>
DEEP RUN PACKING CO., INC.
SCHEDULE OF SELLING EXPENSES
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
%
_____
<S> <C> <C>
Salaries - Sales $ 52,536 0.2
Advertising/Public Relations 56,316 0.2
Automobile Maintenance 2,225 0.0
Broker Commissions 168,739 0.6
Customer Development 533 0.0
Depreciation - Automobiles 1,583 0.0
Insurance - Employee Benefits 7,026 0.0
Insurance - Liability/Accident 1,017 0.0
International Expenses 40,369 0.1
Meals and Entertainment 5,570 0.0
Miscellaneous 293 0.0
Pension Plan 3,692 0.0
Sales Expenses 374 0.0
Tax - Payroll 3,463 0.0
Telephone 5,425 0.0
Trade Shows 17,034 0.1
Travel 24,223 0.1
---------------
Total $390,418 1.3
===============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
DEEP RUN PACKING CO., INC.
SCHEDULE OF ADMINISTRATIVE EXPENSES
YEAR ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
%
------
<S> <C> <C>
Salaries - Administrative $ 779,394 2.6
Accounting Fees 50,420 0.2
Administrative Supplies 9,806 0.0
Automobile 14,313 0.0
Bad Debts 25,313 0.1
Bank Charges 2,833 0.0
Depreciation - Office 22,943 0.1
Donations 37,167 0.1
Dues and Subscriptions 13,245 0.0
Engineering Fees 6,209 0.0
Insurance - Employee Benefits 18,984 0.1
Insurance - Liability/Accident 3,095 0.0
Insurance - Life 3,266 0.0
Legal Fees 12,835 0.0
Licenses 23,459 0.1
Medical Reimbursement Plan 4,421 0.0
Miscellaneous 26,683 0.1
Outside Services 12,997 0.0
Pension Plan 15,013 0.1
Personnel Fees 15,235 0.1
Postage 9,826 0.0
Repairs and Maintenance 25,480 0.1
Seminars and Training 22,091 0.1
Tax - Miscellaneous 5,868 0.0
Tax - Payroll 48,577 0.2
Telephone 15,309 0.1
---------- ------
Total $1,224,782 4.0
========== ======
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
ITEM 7(b): UNAUDITED PRO FORMA FINANCIAL INFORMATION
On June 1, 1998, the Company acquired the stock of Deep Run Packing Company,
Inc. The assets acquired include the company's manufacturing facility,
machinery, equipment and land located in Pennsylvania. The Company intends to
use the acquired assets to diversify into the canned pet food market segment.
The purchase price was approximately $16.4 million. The acquisition was
accounted for using the purchase method of accounting. The purchase price was
allocated to the assets and liabilities based on the fair share of these items.
Goodwill of $8.9 million was recorded. The Company financed the acquisition of
Deep Run Packing and related costs with a $17.0 million borrowing under the
terms of its senior secured acquisition debt facility.
The following unaudited condensed pro forma financial statements consist of the
unaudited pro forma statements of operations of the Company for the fiscal year
ended December 27, 1997 and for the three months ended March 28, 1998 and the
unaudited pro forma balance sheet as of March 28, 1998 and the related notes.
The unaudited pro forma statements of operations of the Company give effect to
the Deep Run Acquisition as if such transactions had occurred on January 1,
1997. The unaudited pro forma balance sheet has been prepared assuming that the
transaction had occurred on December 28, 1997.
The historical data of the Company for the fiscal year ended December 27, 1997
have been derived from the Company's audited consolidated financial statements
and the historical data for the three months ended March 28, 1998 have been
derived from the unaudited interim financial statements of the Company. The
historical data of Deep Run for the year ended December 31, 1997 and three
month period ended March 31, 1998 have been derived from the unaudited financial
statements of Deep Run for those periods.
20
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Windy Hill
Windy Hill Deep Run Adjustments for Pro Forma
Historical Historical Acquisition Combined
---------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
Net sales $164,288 $28,667 $ - $192,955
Cost of goods sold 113,288 23,400 (235) (a) 136,453
-------- ------- ------- --------
Gross Profit 51,000 5,267 235 56,502
Operating Expenses:
Promotion and distribution 28,980 1,548 - 30,528
Selling, general and administrative 10,886 1,340 219 (b) 12,445
Non-recurring transition costs 1,571 - - 1,571
-------- ------- ------- --------
Income from operations 9,563 2,379 16 11,958
Interest expense, net 10,608 58 1,615 (c) 12,281
Equity in earnings of joint ventures (377) - - (377)
Other expense, net 93 2 - 95
-------- ------- ------- --------
Income (loss) before taxes (761) 2,319 (1,599) (41)
Income tax expense (benefit) 26 - (36) (d) (10)
-------- ------- ------- --------
Net income (loss) before
extraordinary item $ (787) $ 2,319 $(1,563) $ (31)
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
21
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 28, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Windy Hill
Windy Hill Deep Run Adjustments for Pro Forma
Historical Historical Acquisition Combined
---------- ---------- --------------- ---------
<S> <C> <C> <C> <C>
Net sales $61,769 $8,551 $ - $70,320
Cost of goods sold 44,737 7,293 (64) (a) 51,966
------- ------ ----- -------
Gross Profit 17,032 1,258 64 18,354
Operating expenses:
Promotion and distribution 8,018 390 - 8,408
Selling, general and administrative 3,993 303 55 (b) 4,351
Non-recurring transition costs 160 - - 160
------- ------ ----- -------
Income from operations 4,861 565 9 5,435
Interest expense, net 3,698 - 404 (c) 4,102
Equity in earnings of joint ventures (266) - - (266)
Other expense, net 29 (92) - (63)
------- ------ ----- -------
Income (loss) before taxes 1,400 657 (395) 1,662
Income tax expense (benefit) 643 - 75 (d) 718
------- ------ ----- -------
Net income (loss) before
extraordinary item $ 757 $ 657 $(470) $ 944
======= ====== ===== =======
</TABLE>
See accompanying notes to unaudited pro forma financial statements.
22
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
(a) Adjustment to cost of goods sold to reflect $235,000 for the year ended
December 27, 1997 and $64,000 for the three months ended March 28, 1998
of reductions in depreciation expense based on the Company's estimated
useful lives of the assets acquired.
(b) Adjustment to selling, general and administrative expense to reflect
$219,000 for the year ended December 27, 1997 and $55,000 for the three
months ended March 28, 1998 of additional amortization of goodwill
resulting from the acquisition.
(c) Adjustment to interest expense, net to reflect interest on $17,000,000 debt
incurred to acquire Deep Run:
Three Months
Year Ended Ended
December 27, March 28,
1997 1998
------------ ------------
Additional financing at 9.5% $1,615 $404
====== ====
(d) Reflects an adjustment to income tax benefit (expense) at the effective
rate of 23.9% for the year ended December 27, 1997 and 43.2% for the
three months ended March 28, 1998 based on the Company's effective rate
for such periods.
23
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
PRO FORMA BALANCE SHEET
AS OF MARCH 28, 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Pro Forma Windy Hill
Windy Hill Deep Run Adjustments Pro Forma
Historical Historical for Acquisition Combined
---------- ---------- ---------------- ---------
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,702 $ 243 $ - $ 1,945
Trade accounts receivable, net of allowances 18,388 2,313 - 20,701
Inventories 15,484 2,369 - 17,853
Deferred income tax benefits 2,360 - - 2,360
Prepaid expenses and other assets 1,324 248 195 (a) 1,767
-------- ------- ------- --------
Total Current Assets 39,258 5,173 - 44,626
Property, plant, and equipment, net 72,097 4,867 - 76,964
Goodwill, net 97,846 - 8,889 (b) 106,735
Other assets 16,594 734 (195) (a) 17,133
-------- ------- ------- --------
Total Assets $225,795 $10,774 $ 8,889 $245,458
======== ======= ======= ========
CURRENT LIABILITIES:
Current installments of long-term debt $ 1,500 $ 410 $ - $ 1,910
Accounts payable 15,091 1,936 - 17,027
Accrued liabilities 11,164 205 - 11,369
-------- ------- ------- --------
Total current liabilities 27,755 2,551 - 30,306
Long-term debt, excluding current installments 145,812 112 17,000 (c) 162,924
Post-retirement benefit liability 2,641 - - 2,641
Other long term liabilities 3,043 - - 3,043
Deferred income tax liability 13,059 - - 13,059
-------- ------- ------- --------
Total liabilities 192,310 2,663 17,000 211,973
Stockholders' equity:
Common stock - 1 (1) (d) -
Preferred stock - - - -
Additional paid-in capital 35,458 29 (29) (d) 35,458
Treasury stock - (234) 234 (d) -
Retained earnings (deficit) (1,973) 8,315 (8,315) (d) (1,973)
-------- ------- ------- --------
Total stockholders' equity 33,485 8,111 (8,111) 33,485
-------- ------- ------- --------
Total liabilities and stockholders' equity $225,795 $10,774 $ 8,889 $245,458
======== ======= ======= ========
</TABLE>
See accompanying notes to unaudited pro forma financial statements
24
<PAGE>
WINDY HILL PET FOOD COMPANY, INC.
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 28, 1998
(a) Adjustment to reclass certain assets from long term to current as a result
of the acquisition.
(b) Adjustment to reflect the excess of cost over the fair value of net assets
purchased. Goodwill is being amortized on a straight-line basis over a
40-year period.
(c) Represents debt incurred to acquire Deep Run.
(d) Represents the equity adjustments associated with the acquisition.
25
<PAGE>
Index to Exhibits
Exhibit No Exhibit Description
- ---------- -------------------
2.1 Stock purchase agreement dated April 16, 1998 between
Windy Hill Pet Food Company, Inc. and the shareholders of
Deep Run Packaging Co, Inc. (the text of which and
exhibits which are incorporated by Reference to Exhibit
2.1 in the Company's Form 10-Q filed August 11, 1998).
23.1 Consent of Niessen, Dunlap & Pritchard, P.C.
26
<PAGE>
EXHIBIT 23.1
[LETTERHEAD OF NIESSEN, DUNLAP & PRITCHARD, P.C.]
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
Windy Hill Pet Food Company, Inc.
Brentwood, Tennessee
We consent to the inclusion of our report dated July 16, 1998, with respect to
the balance sheet of Deep Run Packing Co., Inc., as of March 31, 1998, and
the related statements of income, retained earnings, and cash flows for the
year then ended, and supplementary schedules, which report appears in the Form
8-K/A of Windy Hill Pet Food Company, Inc., dated August 14, 1998.
/s/ Niessen, Dunlap & Pritchard, P.C.
NIESSEN, DUNLAP & PRITCHARD, P.C.
Colmar, Pa.
August 14, 1998
