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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 quarter (twelve weeks) ended March 27, 1999.
[ ] 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
Tom's Foods Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
58-1516963
(I.R.S. Employer Identification No.)
900 8th Street
Columbus, GA 31902
(Address of principal executive offices, including zip code)
(706) 323-2721
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
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TOM'S FOODS INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE TWELVE WEEKS
ENDED MARCH 27, 1999
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheets as of March 27, 1999 (unaudited) and January 2, 1999..................................3
Statements of Operations (unaudited) for the twelve weeks ended
March 27, 1999 and March 28, 1998...........................................................4
Statements of Cash Flows (unaudited) for the twelve weeks ended
March 27, 1999 and March 28, 1998...........................................................5
Notes to Financial Statements........................................................................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................................6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.....................................................................9
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TOM'S FOODS INC.
BALANCE SHEETS
MARCH 27, 1999 AND JANUARY 2, 1999
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<CAPTION>
March 27, 1999 January 2, 1999
-------------- ---------------
(unaudited)
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ASSETS
Current Assets:
Cash and short-term investments $ 1,498 $ 3,087
Accounts and notes receivable, net 17,204 16,073
Inventories:
Raw Materials 3,067 2,383
Packaging materials 2,340 2,916
Finished goods and work in progress 5,850 5,657
Other current assets 3,297 2,859
--------- ---------
Total current assets 33,256 32,975
--------- ---------
Property, Plant, and Equipment:
Land and land improvements 5,535 5,690
Buildings 14,591 14,358
Machinery, equipment and vehicles 47,641 46,733
Vending and other distribution equipment 10,174 10,121
Furniture and fixtures 9,819 9,834
Construction in progress 4,410 4,497
--------- ---------
Total property, plant and equipment 92,170 91,233
Accumulated depreciation (41,889) (40,449)
--------- ---------
Net property, plant and equipment 50,281 50,784
--------- ---------
Noncurrent accounts and notes receivable, net 113 505
Other assets 1,770 1,770
Deferred debt issue costs 2,769 2,885
Goodwill and intangible assets,net 46,200 46,587
--------- ---------
Total assets $ 134,389 $ 135,506
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Revolving Debt $ 177 --
Accounts payable 10,138 $ 11,473
Accrued liabilities 9,448 8,277
Current portion of capital lease and other debt obligations 152 156
--------- ---------
Total current liabilities 19,915 19,906
--------- ---------
Long-Term Debt:
Senior secured notes 60,000 60,000
Industrial development revenue bonds 10,000 10,000
Capital lease and other debt obligations 553 585
--------- ---------
Total long-term debt 70,553 70,585
--------- ---------
Other long-term obligations 37 37
Accrued pension cost 7,244 7,115
Accrued postretirement benefits other than pensions 1,797 1,797
Exchangable Preferred Stock, $.01 par value, Class A, 7,000 shares authorized,
7,000 shares issued and outstanding at March 27, 1999
and January 2, 1999 8,082 7,911
Shareholders' Equity:
Common stock, $0.01 par value; 10,000 shares authorized, and 5,000
shares issued and outstanding at March 27, 1999, and January 2, 1999 0 0
Preferred Stock, $.01 par value, Class B, 21,737 shares authorized, 21,737 shares
issued and outstanding at March 27, 1999 and January 2, 1999 24,798 24,316
Additional paid-in capital 43,725 43,725
Retained Deficit (41,762) (39,886)
--------- ---------
Total shareholders' equity 26,761 28,155
--------- ---------
Total liabilities and shareholders' equity $ 134,389 $ 135,506
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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TOM'S FOODS INC.
STATEMENTS OF OPERATIONS
FOR THE TWELVE WEEKS ENDED
MARCH 27, 1999 AND MARCH 28, 1998
(in thousands)
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<CAPTION>
TWELVE WEEKS ENDED
---------------------------------
March 27, 1999 March 28, 1998
-------------- --------------
(unaudited) (unaudited)
<S> <C> <C>
Net Sales $ 47,048 45,656
Cost of Goods Sold (29,244) (28,065)
-------- --------
Gross Profit 17,804 17,591
Expenses and Other Income:
Selling and Administrative Expenses (16,994) (17,366)
Amortization of Goodwill, Intangible Assets
and Refinancing Costs (502) (502)
Other Income 159 516
-------- --------
Income from Operations 467 239
Interest Expense (Net of Interest Income) (1,830) (1,814)
-------- --------
Loss before Income Taxes (1,363) (1,575)
Provision for Income Taxes 30 115
-------- --------
Net Loss $ (1,393) $ (1,690)
======== ========
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The accompanying notes are an integral part of these financial statements.
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TOM'S FOODS INC.
STATEMENTS OF CASH FLOWS
FOR THE TWELVE WEEKS ENDED
MARCH 27, 1999 AND MARCH 28, 1998
(in thousands)
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TWELVE WEEKS ENDED
-------------------------------
March 27,1999 March 28, 1998
------------- --------------
(unaudited) (unaudited)
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Cash Flows from Operating Activities:
Net loss $(1,393) $(1,690)
------- -------
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Depreciation and amortization 2,136 2,190
Provision (benefit) for income taxes 30 115
Dividends accrued 171 172
(Gain) loss on disposal of property, plant,
and equipment (34) (147)
Changes in assets and liabilities:
Accounts and notes receivable (687) (2,179)
Inventories (302) (1,808)
Other assets (439) 231
Accounts payable (1,335) (1,990)
Other liabilities 1,140 836
Accrued pension cost 129 123
------- -------
Total adjustments 809 (2,457)
------- -------
Net cash provided by (used in)
operating activities (584) (4,147)
------- -------
Cash Flows from Investing Activities:
Additions to property, plant, equipment (1,223) (1,502)
Proceeds from disposal of property,
plant and equipment 76 385
------- -------
Net cash used in investing activities (1,147) (1,117)
------- -------
Cash Flows from Financing Activities:
Net borrowing on working capital revolver 177 0
Other debt (35) (11)
------- -------
Net cash provided by (used in)
financing activities 142 (11)
------- -------
Increase (decrease) in cash and
short-term investments (1,589) (5,275)
Cash and short-term investments,
beginning of period 3,087 7,487
------- -------
Cash and short-term investments,
end of period 1,498 2,212
======= =======
Interest paid during the period $ 448 $ 262
Income taxes paid during the period 0 $ 57
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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TOM'S FOODS INC.
NOTES TO FINANCIAL STATEMENTS
Item 1. BASIS OF FINANCIAL STATEMENTS AND FORMATION AND ORGANIZATION
The accompanying unaudited financial statements of Tom's Foods Inc. have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. It is suggested that these financial
statements be read in conjunction with the financial statements and the notes
thereto included in the annual report and Form 10-K for the fiscal year ended
January 2, 1999.
The accompanying unaudited financial statements include, in the opinion of
management, all adjustments, which are of a normal recurring nature, necessary
for a fair presentation for the periods presented. Results for the interim
periods presented are not necessarily indicative of results that may be
expected for a full fiscal year.
FISCAL YEAR
The Company's fiscal year is the 52- or 53-week period ending on the Saturday
nearest to December 31. The current year, fiscal 1999, ends January 1, 2000 and
contains 52 weeks. The Company's first three quarters contain twelve weeks of
results while the fourth quarter contains 16 or 17 weeks coinciding with the
Company's fiscal year.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined using
the average cost for raw materials, packaging materials, and work in process.
Finished goods cost is determined using the first-in, first-out method. Cost
elements include the cost of raw materials, direct labor, and overhead incurred
in the manufacturing process.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
TWELVE WEEKS ENDED MARCH 27, 1999
COMPARED TO TWELVE WEEKS ENDED MARCH 28, 1998
Net sales for the first quarter ended March 27, 1999 were $47.0 million, an
increase of 3.0%, or $1.4 million, compared to the corresponding period in
1998.
Gross profit increased to $17.8 million in the first quarter of 1999 from $17.6
million in the first quarter of 1998, an increase of $200,000 or 1.2%,
corresponding with the increase in sales discussed above. The gross profit
margin percentage of 37.8% for the first quarter of 1999 was 0.7 percentage
points lower than the first quarter of 1998 due primarily to a shift in product
mix.
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First quarter 1999, selling, general and administrative expenses decreased to
$17.0 million from $17.4 million in the 1998 period, a decrease of 2.1% or
$400,000.
Other Income was $159,000 for the first quarter of 1999 compared to $516,000
for the corresponding period in 1998 due to lower gains on asset disposals in
the normal course of business and lower commission income.
Interest expense, net of interest income, remained relatively flat between the
first quarter 1999 and 1998, increasing only $16,000 on slightly higher
revolving credit borrowings over the prior year.
The provision for income taxes was $30,000 in 1999 compared to $115,000 for
1998, a decrease of $85,000 due to lower state income and franchise taxes. The
Company estimates that it will have no Federal tax obligation for the fiscal
year due to loss carryforwards from prior years.
As a result of the increase in sales and the favorable expense variances
discussed above, the net loss for the twelve week period ended March 27, 1999
was $1.4 million, a $300,000 improvement over the same period in the prior
year.
Earnings before interest, taxes, depreciation and amortization ("EBITDA")
represents the sum of income (loss) before income taxes plus interest expense,
depreciation and amortization. EBITDA is a widely accepted measure of a
company's ability to incur and service debt, to undertake capital expenditures,
and to meet working capital requirements. EBITDA is not a measure of financial
performance under generally accepted accounting principles ("GAAP") and should
not be considered an alternative either to net income as an indicator of the
Company's operating performance or as an indicator of the Company's liquidity.
EBITDA for the first quarter of 1999 was $2.6 million compared to $2.4 million
for the same period in 1998. The higher EBITDA in 1999 was due to the higher
sales and favorable expense variances versus the first quarter 1998.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow requirements are for working capital, capital
expenditures and debt service. The Company has met its liquidity needs through
internally generated funds and a revolving line of credit established in August
1996 and amended in October 1997. As of March 27, 1999, the Company had
$177,000 of outstanding loans under the revolving line and had letters of
credit outstanding of $ 2.0 million and $9.8 million in borrowing availability
thereunder. The Company's working capital improved to $13.3 million as of March
27, 1999 from $12.0 million for the same period in 1998.
Net cash used in operating activities was $584,000 for the twelve week period
ended March 27, 1999 versus $4.1 million used during the same period in 1998.
The improvement in operating cash flow versus the prior year was due to
favorable working capital changes in accounts and notes receivable of $1.5
million and inventory of $1.5 million.
Capital expenditures were $1.2 million and $1.5 million the first quarter of
1999 and 1998,
7
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respectively.
Net cash provided by financing activities was $142,000 for the first quarter of
1999, largely revolving line of credit borrowings, versus a use of $11,000 in
the first quarter of 1998.
YEAR 2000 ISSUES
The Company has conducted an assessment of its Year 2000 readiness including a
review of its financial information systems, manufacturing systems, and
distribution operations to identify those systems or operations that might be
affected by the arrival of the year 2000. Plans have been developed to correct
those components that were found to be affected by the date change. To date,
corrections have been addressed through limited outside services at a cost of
$120,000 and through the use of internal resources which should be adequate to
complete the Company's Year 2000 preparations. The costs of addressing Year
2000 issues have been expensed in the ordinary course of business.
Substantially all, if not all, of the Company's compliance activities are
anticipated to be complete by the end of the third quarter of 1999. The Company
has begun to develop contingency plans in the event that it does not reach its
compliance objectives on time. These plans are expected to be complete by the
end of the second quarter of 1999.
In addition to the activities discussed above, the Company has and continues to
work with suppliers, customers, and other third parties with whom the Company
conducts business to determine the Year 2000 readiness of these key business
partners. Business partner preparation is anticipated to be adequate.
Additionally, there are alternative suppliers for most key raw materials. The
Company will continue to monitor year 2000 compliance progress of its trading
partners and work with, as appropriate, these business partners as the Company
develops its contingency plans.
CAUTIONARY STATEMENT RELATED TO FORWARD-LOOKING STATEMENTS
The statements contained in the foregoing "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and elsewhere which are not
historical facts are forward-looking statements that involve risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. There can be no assurance that any
forward-looking statement will be realized or that actual results will not be
significantly higher or lower than set forth in such forward-looking statement.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.1 Financial Data Schedule (for SEC use only).
27.2 Restated Financial Data Schedule (for SEC
use only).
8
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(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the
Registrants during the quarter ended March 27, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TOM'S FOODS INC.
By /s/ Rolland G. Divin
- ----------------------------------------------
Rolland G. Divin
President, Chief Executive Officer,
and Director (Principal Executive Officer)
Date: May 3, 1999
By /s/ S. Albert Gaston
- ----------------------------------------------
S. Albert Gaston
Senior Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 3, 1999
9
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TOM'S FOODS INCORPORATED FOR THE THREE MONTHS ENDED
MARCH 27, 1999 AND FOR THE THREE MONTHS ENDED MARCH 28, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-02-1999
<PERIOD-END> MAR-27-1999
<CASH> 1,498
<SECURITIES> 0
<RECEIVABLES> 19,542
<ALLOWANCES> 2,338
<INVENTORY> 11,257
<CURRENT-ASSETS> 33,256
<PP&E> 92,170
<DEPRECIATION> 41,889
<TOTAL-ASSETS> 134,389
<CURRENT-LIABILITIES> 19,915
<BONDS> 70,000
8,082
24,798
<COMMON> 0
<OTHER-SE> 43,725
<TOTAL-LIABILITY-AND-EQUITY> 134,389
<SALES> 47,048
<TOTAL-REVENUES> 47,048
<CGS> 29,244
<TOTAL-COSTS> 17,337
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,830
<INCOME-PRETAX> (1,363)
<INCOME-TAX> 30
<INCOME-CONTINUING> (1,393)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,393)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TOM'S FOODS INCORPORATED FOR THE THREE MONTHS ENDED
MARCH 27, 1999 AND FOR THE THREE MONTHS ENDED MARCH 28, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> MAR-28-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 45,656
<TOTAL-REVENUES> 45,656
<CGS> 28,065
<TOTAL-COSTS> 17,352
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,814
<INCOME-PRETAX> (1,575)
<INCOME-TAX> 115
<INCOME-CONTINUING> (1,690)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,690)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
