<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED COMMISSION FILE NUMBER
APRIL 30, 2000 1-13933
[VLASIC FOODS INTERNATIONAL, INC. LOGO]
NEW JERSEY 52-2067518
STATE OF INCORPORATION I.R.S. EMPLOYER IDENTIFICATION NO.
VLASIC PLAZA
SIX EXECUTIVE CAMPUS
CHERRY HILL, NEW JERSEY 08002-4112
PRINCIPAL EXECUTIVE OFFICES
TELEPHONE NUMBER: 856-969-7100
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
THERE WERE 45,502,234 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 1, 2000.
<PAGE> 2
VLASIC FOODS INTERNATIONAL
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements
Consolidated Statements of Earnings (unaudited) for the three and 2
nine months ended April 30, 2000 and May 2, 1999
Consolidated Balance Sheets as of April 30, 2000 (unaudited) and 3
August 1, 1999 (audited)
Consolidated Statements of Cash Flows (unaudited) for the nine 4
months ended April 30, 2000 and May 2, 1999
Consolidated Statements of Shareowners' Equity (Deficit) (unaudited) 5
for the nine months ended April 30, 2000 and May 2, 1999
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Results of Operations 14
and Financial Condition
Item 3. Market Risk 24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
SIGNATURE PAGE 26
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VLASIC FOODS INTERNATIONAL
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
April 30, May 2, April 30, May 2,
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 221,750 $ 293,261 $ 695,333 $ 913,147
--------- --------- --------- ---------
Costs and expenses
Cost of products sold 147,000 196,297 463,872 622,966
Marketing and selling expenses 58,586 61,100 178,207 173,875
Administrative expenses 11,964 9,583 36,730 44,514
Research and development expenses 2,158 2,345 6,058 5,515
Other expense, net 426 167 2,296 753
Special items -- 136,785 345 133,585
--------- --------- --------- ---------
Total costs and expenses 220,134 406,277 687,508 981,208
--------- --------- --------- ---------
Earnings (loss) before interest and taxes 1,616 (113,016) 7,825 (68,061)
Interest expense 12,831 11,016 36,706 32,756
Interest income 523 124 688 554
--------- --------- --------- ---------
Earnings (loss) before taxes (10,692) (123,908) (28,193) (100,263)
Taxes on earnings (3,850) 13,599 (10,495) 21,101
--------- --------- --------- ---------
Earnings (loss) from continuing operations (6,842) (137,507) (17,698) (121,364)
Discontinued operations
Earnings (loss) from discontinued
operations, net of tax -- (2,621) (6,699) (2,295)
Gain on sale of discontinued operations, net of tax 4,571 -- 4,571 --
--------- --------- --------- ---------
Net earnings (loss) $ (2,271) $(140,128) $ (19,826) $(123,659)
========= ========= ========= =========
Earnings (loss) per share - basic
Earnings (loss) from continuing operations $ (0.15) $ (3.02) $ (0.39) $ (2.67)
Earnings (loss) from discontinued operations $ 0.10 $ (0.06) $ (0.05) $ (0.05)
--------- --------- --------- ---------
Net earnings (loss) $ (0.05) $ (3.08) $ (0.44) $ (2.72)
========= ========= ========= =========
Weighted average shares outstanding - basic 45,502 45,500 45,502 45,497
Earnings (loss) per share - assuming dilution
Earnings (loss) from continuing operations $ (0.15) $ (3.02) $ (0.39) $ (2.67)
Earnings (loss) from discontinued operations $ 0.10 $ (0.06) $ (0.05) $ (0.05)
--------- --------- --------- ---------
Net earnings (loss) $ (0.05) $ (3.08) $ (0.44) $ (2.72)
========= ========= ========= =========
Weighted average shares outstanding
- assuming dilution 45,502 * 45,500 * 45,502 * 45,497 *
</TABLE>
* Excludes potentially dilutive shares as the result would be antidilutive.
See accompanying Notes to Consolidated Financial Statements.
2
<PAGE> 4
VLASIC FOODS INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
April 30, August 1,
2000 1999 *
--------- ---------
(unaudited) (audited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 23,413 $ 11,316
Restricted cash 9,100 --
Accounts receivable 69,789 79,746
Inventories 120,782 141,933
Other current assets 4,530 16,246
--------- ---------
Total current assets 227,614 249,241
--------- ---------
Plant assets, net 269,709 281,677
Net assets of discontinued operations -- 45,429
Other assets, principally intangible assets, net 87,395 79,582
--------- ---------
Total assets $ 584,718 $ 655,929
========= =========
Current liabilities
Notes payable $ 285,252 $ 146
Payable to suppliers and others 41,655 95,207
Accrued liabilities 59,257 49,280
--------- ---------
Total current liabilities 386,164 144,633
--------- ---------
Long-term debt 197,252 469,054
Deferred income taxes -- 13,429
Other liabilities 46,844 49,214
--------- ---------
Total liabilities 630,260 676,330
--------- ---------
Shareowners' equity (deficit)
Preferred stock, no par value; authorized 4,000 shares;
none issued -- --
Common stock, no par value; authorized 56,000 shares;
issued 45,502 shares at April 30, 2000 and August 1, 1999 137,758 137,758
Accumulated deficit (171,272) (151,446)
Accumulated other comprehensive earnings (loss) (12,028) (6,713)
--------- ---------
Total shareowners' equity (deficit) (45,542) (20,401)
--------- ---------
Total liabilities and shareowners' equity (deficit) $ 584,718 $ 655,929
========= =========
</TABLE>
* Prior year amounts have been reclassified as a result of discontinued
operations.
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE> 5
VLASIC FOODS INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
----------------------
April 30, May 2,
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Earnings (loss) from continuing operations $ (17,698) $(121,364)
Non-cash charges (credits) to earnings (loss) from continuing operations
Special items 345 133,585
Depreciation and amortization 23,722 31,021
Deferred income taxes (9,235) 13,557
Postretirement healthcare benefits 2,900 3,333
Other, net 1,967 (1,075)
Changes in working capital
Accounts receivable 9,299 (58,535)
Inventories 19,719 10,574
Payable to suppliers and other (52,837) (12,325)
Other current assets and liabilities (3,534) 5,624
--------- ---------
Net cash provided by (used in) operating activities (25,352) 4,395
--------- ---------
Cash flows from investing activities
Purchases of plant assets (13,572) (32,659)
Sales of plant assets 329 5,490
Proceeds from businesses sold 42,900 20,675
Other, net (63) 175
--------- ---------
Net cash provided by (used in) investing activities 29,594 (6,319)
--------- ---------
Cash flows from financing activities
Borrowings of senior credit facility 121,100 169,085
Repayment of senior credit facility (107,800) (145,800)
Repayment of short-term debt and capital lease obligations (132) (4,736)
Deferred financing fees (1,221) --
Issuance of common stock -- 285
--------- ---------
Net cash provided by (used in) financing activities 11,947 18,834
--------- ---------
Net cash used in discontinued operations (3,769) (5,979)
Effect of exchange rate changes on cash (323) (109)
--------- ---------
Net change in cash and cash equivalents 12,097 10,822
Cash and cash equivalents - beginning of period 11,316 16,064
--------- ---------
Cash and cash equivalents - end of period $ 23,413 $ 26,886
========= =========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE> 6
VLASIC FOODS INTERNATIONAL
CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY (DEFICIT) (UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Accumulated Total
Common Stock Other Shareowners'
---------------------- Accumulated Comprehensive Equity
Shares Amount Deficit Earnings (Loss) (1) (Deficit)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at August 2, 1998 45,488 $ 137,473 $ (25,115) $ (5,754) $ 106,604
Net loss (123,659) (123,659)
Other comprehensive earnings (loss)
Foreign currency translation adjustments (453) (453)
Reclassification adjustment for business sold (677) (677)
---------
Comprehensive earnings (loss) (124,789)
Issuance of shares of common stock
as a result of stock options exercised 14 285 285
--------- --------- --------- --------- ---------
Balance at May 2, 1999 45,502 $ 137,758 $(148,774) $ (6,884) $ (17,900)
========= ========= ========= ========= =========
Balance at August 1, 1999 45,502 $ 137,758 $(151,446) $ (6,713) $ (20,401)
Net loss (19,826) (19,826)
Other comprehensive earnings (loss)
Foreign currency translation adjustments (5,315) (5,315)
---------
Comprehensive earnings (loss) (25,141)
--------- --------- --------- --------- ---------
Balance at April 30, 2000 45,502 $ 137,758 $(171,272) $ (12,028) $ (45,542)
========= ========= ========= ========= =========
</TABLE>
(1) Accumulated other comprehensive earnings (loss) consists of foreign currency
translation adjustments.
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE> 7
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
1. INTERIM FINANCIAL INFORMATION
The accompanying unaudited consolidated financial statements for the three
and nine months ended April 30, 2000 and May 2, 1999 have been prepared in
accordance with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In our opinion, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation of the
consolidated financial statements have been included. The results of the interim
periods are not necessarily indicative of the results to be expected for the
full fiscal year. The consolidated financial statements and footnotes should be
read in conjunction with Management's Discussion and Analysis of Results of
Operations and Financial Condition beginning on page 14 and our Annual Report,
Form 10-K and Form 10-K/A for the fiscal year ended August 1, 1999.
2. GOING CONCERN MATTERS
The accompanying interim financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As discussed in Note 8, we have
significant borrowings which require, among other things, compliance with
certain financial ratios, specifically a debt/EBITDA ratio and a fixed charge
coverage ratio, on a quarterly basis. As a result of operating losses incurred
during the second quarter ended January 30, 2000 and the third quarter ended
April 30, 2000, we were not in compliance with the financial ratio covenants
under our senior credit facility; however, we requested and received a waiver
through June 20, 2000 in consideration for the payment of a fee and an increase
in interest rates. The waiver required delivery of and compliance with a cash
budget and established a minimum EBITDA test to be met as of April 30, 2000.
Additionally, if the cash budget is not met, we will be unable to borrow under
the senior credit facility. The waiver also required that the senior credit
facility be secured by liens on substantially all of our real property in the
United States on or before April 30, 2000. We were in compliance with the
minimum EBITDA test and the terms and conditions set forth in the waiver as of
the third quarter fiscal 2000 and do not anticipate needing any additional
borrowings through June 20, 2000.
As previously disclosed in our second quarter Form 10-Q for the six months
ended January 30, 2000, we are exploring strategic opportunities for the
Company. The investment banking firm of Lazard Freres & Co. has been hired to
assist with this strategic review and to formulate proposed plans and actions
for the consideration of our Board of Directors. Because this strategic review
is still in process, no assessment can be made of the likelihood that any
proposed plans and actions can be effectively implemented. Regardless of the
outcome of the strategic review, an extension of the existing waiver, a new
waiver covering certain terms and conditions of the senior credit facility, an
amendment of the senior credit facility, a de novo senior credit facility or
some combination of the above will be required. Without such an action, we will
be in default on June 20, 2000.
We have been negotiating with the managers of the senior credit facility
bank syndicate for a further extension of our present waiver, which is set to
expire on June 20, 2000. While we can provide no assurances that the further
extension from a new waiver will be approved as required by the full syndicate,
we expect that the plans and actions proposed by the strategic review and to be
acted upon by our Board of Directors will enable us to successfully negotiate a
new waiver so as to preclude any default on the facility. Our continuation as a
going concern is dependent upon our ability to successfully establish the
necessary financing arrangements and to comply with the terms thereof.
A breach of any of the terms and conditions of the waiver, or subsequent
breaches of the financial covenants under the senior credit facility could
result in acceleration of our indebtedness, in which case the debt would become
immediately due and payable. Based upon our current projections, we do not
believe we will comply with the existing financial covenants unless they are
modified, as they have been in the waiver. If there is no modification of the
existing financial covenants, we may not be able to repay our debt or borrow
sufficient funds to refinance it. Even if new financing is available, it may not
be on terms that are acceptable to us. We have,
6
<PAGE> 8
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
2. GOING CONCERN MATTERS (CONTINUED)
however, received such modifications in the past in the form of waivers and an
amendment to our senior credit facility.
As noted in our Form 10-K/A filed with the Securities and Exchange
Commission on April 28, 2000, our ability to operate as a going concern is
dependent on our ability to successfully negotiate with our senior credit bank
syndicate to preclude default on our facility after June 20, 2000. However,
although no assurances can be given, we remain confident that we will be able to
continue operating as a going concern.
3. SIGNIFICANT ESTIMATES
Generally accepted accounting principles require management to make
estimates and assumptions that affect assets and liabilities, contingent assets
and liabilities, and revenues and expenses. The fiscal 2000 results were
impacted by charges incurred in the second quarter from changes in estimates of
trade marketing and customer deductions primarily for fiscal 1999 and earlier of
approximately $14.5 million pre-tax, or $0.20 per share. These charges resulted
primarily from revised estimates based on new information that provided better
estimates and insight following our conversion to new billing and trade
marketing systems and processes after the conclusion of Vlasic's transition
service agreement with Campbell Soup Company. We have been reviewing these
systems and are continuing to implement processes and procedures to properly
capture and analyze trade marketing spending and customer deductions. These
estimates are based on the expected impact of customer marketing programs as
well as historical experience trends. We continue to believe our estimates are
reasonable, but because there is an inherent uncertainty in the use of
estimates, actual results could differ from those estimates.
4. DISCONTINUED OPERATIONS
In an effort to focus on our core "Vlasic" and "Swanson" businesses and to
pay down debt, we sold Vlasic Farms, Inc., our fresh mushroom business to
Money's Mushrooms Ltd. on January 31, 2000 - in our third quarter fiscal 2000.
The sale price was $50 million, subject to certain post-closing purchase price
adjustments. The proceeds, net of transaction closing costs and amounts held on
deposit to cover certain future costs related to the transaction, were used to
repay a portion of the indebtedness outstanding under our senior credit
facility. Funds held on deposit of $7.1 million are for anticipated purchase
price adjustments, severance payments and certain other indemnified costs and
are included in the Restricted cash amounts on the Consolidated Balance Sheet at
April 30, 2000. Any funds held on deposit remaining after payment of these
specified items will be used to repay a portion of the indebtedness outstanding
under our senior credit facility.
In accordance with Accounting Principles Board Opinion No. 30 (APB 30),
"Reporting the Results of Operations - Reporting the Effect of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions", the results of Vlasic Farms, Inc. have been reported
separately as a discontinued operation for all periods presented. The loss from
discontinued operations for the three and nine months ended April 30, 2000
included the results of our mushroom business through December 17, 1999, the
measurement date. The loss from discontinued operations subsequent to the
measurement date through January 30, 2000 (the phase-out period) of $0.8 million
was deferred and recorded as a reduction to the net gain on disposal in the
third quarter fiscal 2000. Net sales, earnings (loss) before taxes and net
earnings (loss) applicable to discontinued operations were as follows:
7
<PAGE> 9
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
4. DISCONTINUED OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- --------------------
April 30, May 2, April 30, May 2,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ -- $ 27,372 $ 60,717 $ 91,161
Earnings (loss) before taxes $ -- $ (4,220) $(10,973) $ (3,696)
Taxes on earnings -- 1,599 4,274 1,401
-------- -------- -------- --------
Earnings (loss) from discontinued
operations, net of tax $ -- $ (2,621) $ (6,699) $ (2,295)
======== ======== ======== ========
Gain on sale of discontinued operations $ 6,472 $ -- $ 6,472 $ --
Taxes on gain (1,901) -- (1,901) --
-------- -------- -------- --------
Gain on sale of discontinued operations, net of tax $ 4,571 $ -- $ 4,571 $ --
======== ======== ======== ========
</TABLE>
The components of net assets of discontinued operations included in the
Consolidated Balance Sheet were:
<TABLE>
<CAPTION>
August 1,
1999
--------
<S> <C>
Accounts receivable $ 11,947
Inventories 6,698
Plant assets, net 35,974
Payable to suppliers and other current liabilities (9,190)
--------
Net assets of discontinued operations $ 45,429
========
</TABLE>
Liabilities retained by us included certain indemnified costs, property
taxes and medical claims, as well as pensions and other postretirement benefits.
Such amounts were recorded in Accrued liabilities and Other liabilities on the
Consolidated Balance Sheet at April 30, 2000.
5. RESTRUCTURING CHARGES
<TABLE>
<CAPTION>
Severance
and Benefits Other Total
------------ ------- -------
<S> <C> <C> <C>
Balance at August 1, 1999 $ 1,149 $ 200 $ 1,349
Restructuring accrual 1,500 -- 1,500
Fiscal 2000 spending (1,208) (22) (1,230)
Unutilized restructuring charge (171) (178) (349)
------- ------- -------
Balance at April 30, 2000 $ 1,270 $ -- $ 1,270
======= ======= =======
</TABLE>
A special charge of $1.5 million was recorded in the second quarter of
fiscal 2000 associated with reductions in the United States workforce. This
restructuring program was designed to streamline the organization and reflects
the need for a smaller infrastructure. Approximately 35 positions will be
eliminated as part of this program. The $1.5 million charge represents severance
and employee benefit costs that will be paid in cash. As of April 30, 2000, 21
individuals had been severed. This restructuring program is expected to be
completed by the second quarter of fiscal 2001.
8
<PAGE> 10
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
5. RESTRUCTURING CHARGES (CONTINUED)
A special charge of $1 million was recorded in the fourth quarter of fiscal
1999 associated with administrative staff reductions in the United Kingdom. This
restructuring program was designed to align fixed employee costs with the needs
of the SonA and Freshbake businesses. There were 40 individuals severed as of
April 30, 2000 and the $1 million charge represented severance and employee
benefit costs that were paid in cash. This restructuring program was completed
in the third quarter of fiscal 2000.
In conjunction with the sale of Vlasic Farms, Inc., we reversed a portion
of the original reserve recorded for the closure of the Dublin, Georgia mushroom
farm that was not utilized.
The restructuring accruals were included in Accrued liabilities on the
Consolidated Balance Sheets.
6. SEGMENT AND GEOGRAPHIC AREA INFORMATION
Beginning with our financial statements issued for the six months ended
January 30, 2000, we restated our segment reporting structure as a result of the
divestiture of three businesses and to align with changes to our internal
structure. We have four segments that are organized based upon similar economic
characteristics, manufacturing processes, marketing strategies and distribution
channels. The FROZEN FOODS segment consists of Swanson frozen foods in the
United States and Canada and contract manufacturing of primarily frozen
foodservice products in the United States. The GROCERY PRODUCTS segment includes
Vlasic retail and foodservice pickles and condiments and Open Pit barbecue sauce
in the United States. The UNITED KINGDOM OPERATIONS segment includes Freshbake
frozen foods and SonA and Rowats pickles, canned beans and vegetables in the
United Kingdom. Results for the Freshbake frozen foods and SonA and Rowats
businesses had previously been in the Frozen Foods and Grocery Products
segments. The DIVESTED BUSINESSES segment includes the aggregated results from
the Kattus gourmet foods distribution business in Germany (which was sold in
January 1999) and the Swift-Armour Argentine beef business (which was sold in
July 1999), which were previously in the Grocery Products and Agricultural
Products segments. With the divestitures of Swift-Armour and Vlasic Farms, we
eliminated the Agricultural Products segment and reclassified contract
manufacturing of frozen foodservice products into the Frozen Foods segment. The
Vlasic Farms mushroom business has been classified as a discontinued operation
and excluded from segment information. General corporate expenses and assets had
previously been allocated to the segments. We evaluate segment performance based
on earnings before interest and taxes. The corresponding items of segment
information for all periods presented have been restated.
9
<PAGE> 11
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
6. SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
April 30, May 2, April 30, May 2,
SEGMENT INFORMATION 2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales
Frozen Foods $ 124,144 $ 138,174 $ 395,089 $ 406,403
Grocery Products 67,111 81,083 194,047 205,421
United Kingdom Operations 30,495 33,635 106,197 119,853
Divested Businesses -- 40,369 -- 181,470
--------- --------- --------- ---------
Total $ 221,750 $ 293,261 $ 695,333 $ 913,147
========= ========= ========= =========
Earnings (Loss) Before Interest and Taxes
from Continuing Operations
Frozen Foods $ 4,811 $ 13,031 $ 14,018 $ 38,933
Grocery Products 815 11,480 2,010 28,609
United Kingdom Operations (1,632) 3,120 (2,568) 6,334
Divested Businesses -- (138,177) 1,155 (134,642)
Unallocated Corporate Expenses (2,378) (2,470) (6,790) (7,295)
--------- --------- --------- ---------
Total $ 1,616 $(113,016) $ 7,825 $ (68,061)
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
April 30, August 1,
2000 1999
-------- --------
<S> <C> <C>
Total Assets
Frozen Foods $256,819 $251,180
Grocery Products 188,418 203,636
United Kingdom Operations 139,481 155,684
Divested Businesses -- --
Discontinued Operations -- 45,429
-------- --------
Total $584,718 $655,929
======== ========
</TABLE>
10
<PAGE> 12
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
6. SEGMENT AND GEOGRAPHIC AREA INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ---------------------
April 30, May 2, April 30, May 2,
GEOGRAPHIC INFORMATION 2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales
United States $ 184,024 $ 210,737 $ 569,125 $ 586,443
Europe and Canada 37,726 40,731 126,208 183,973
South America -- 41,793 -- 142,731
--------- --------- --------- ---------
Total $ 221,750 $ 293,261 $ 695,333 $ 913,147
========= ========= ========= =========
Earnings (Loss) Before Interest and Taxes
from Continuing Operations
United States $ 2,059 $ 21,068 $ 6,364 $ 57,569
Europe and Canada (443) 4,093 1,461 12,212
South America -- (138,177) -- (137,842)
--------- --------- --------- ---------
Total $ 1,616 $(113,016) $ 7,825 $ (68,061)
========= ========= ========= =========
</TABLE>
7. INVENTORIES
<TABLE>
<CAPTION>
April 30, August 1,
2000 1999
--------- ---------
<S> <C> <C>
Raw materials, containers and supplies $ 33,300 $ 36,427
Finished product 99,044 118,848
--------- ---------
132,344 155,275
Less: Adjustment to LIFO basis (11,562) (13,342)
--------- ---------
Total $ 120,782 $ 141,933
========= =========
</TABLE>
Inventories for which the last in, first out (LIFO) method of determining
cost is used represented approximately 70% and 75% of inventories at April 30,
2000 and August 1, 1999, respectively.
11
<PAGE> 13
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
8. DEBT
<TABLE>
<CAPTION>
April 30, August 1,
2000 1999
-------- --------
<S> <C> <C>
Notes payable
Senior credit facility $285,200 $ --
Other 52 146
-------- --------
Total notes payable $285,252 $ 146
======== ========
Long-term debt
Senior credit facility $ -- $271,900
$200 million 10 1/4% Senior subordinated notes due 2009,
less unamortized discount 197,252 196,962
Capital lease obligations and other -- 192
-------- --------
Total long-term debt $197,252 $469,054
======== ========
</TABLE>
The senior credit facility consists of (1) a senior secured term loan in a
principal amount of $100 million and (2) senior secured revolving credit
commitments providing for revolving loans, initially in the aggregate amount of
up to $550 million. We are required to make mandatory prepayments on the senior
credit facility and permanently reduce revolving credit commitments under
certain circumstances, including upon certain asset sales, issuance of debt
securities, issuance of equity securities and receipt of casualty proceeds which
include property insurance proceeds and condemnation awards. At our option,
subject to certain requirements, loans may be prepaid in whole or in part. As a
result of the application of the net proceeds from the sale of our senior
subordinated notes in fiscal 1999 and the divestiture of our Swift-Armour
Argentine beef business in fiscal 1999, the amount available to be borrowed
under the revolving credit commitments was permanently reduced to $279 million.
Loans under the revolving credit commitments will be available at any time
through the final maturity date on February 20, 2003 and the term loan matures
on February 20, 2003. Borrowings under the senior credit facility bear interest
at rates that, at our option, vary with the prime rate, CD rate, LIBOR or money
market rates plus applicable credit margins. The average interest rate at April
30, 2000 was 8.7%. We are obligated to pay a facility fee ranging from 0.15% to
0.5% on the credit exposure of the banks.
In conjunction with the sale of our Vlasic Farms mushroom business in the
third quarter fiscal 2000 (see Note 4), a portion of the net proceeds received
was used to reduce amounts outstanding under our revolving credit facility and
the revolving credit commitment was permanently reduced by $37.8 million. In
February 2000, we also made an additional voluntary reduction to the revolving
credit commitment of $16.2 million, as we do not anticipate requiring the
additional liquidity. As a result, the amount available to be borrowed under the
revolving credit commitments was permanently reduced to $225 million. Under the
revolving credit facility, the maximum amount of borrowings available is equal
to the revolving credit commitment less any outstanding revolving loans. We have
not increased our borrowings under the senior credit facility since January
2000. At April 30, 2000 (balance sheet date), had we been in compliance with the
specified financial ratio covenants of the senior credit facility and subject to
the discussion below regarding the waiver, the maximum amount potentially
available under the revolving credit commitment was $39.8 million.
The senior credit facility and our senior subordinated debt described
below, contain a number of significant covenants that, among other things,
restrict our ability to engage in mergers and sales of assets, create liens on
our assets, incur additional indebtedness, make investments and acquisitions, or
engage in transactions with our subsidiaries and affiliates. In addition, under
the senior credit facility, we are required to comply with specified ratios and
tests, including maximum debt/EBITDA ratio, minimum fixed charge coverage ratio
and a limitation on capital expenditures. A breach of any of these covenants
could result in a default under our debt agreements.
12
<PAGE> 14
VLASIC FOODS INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS)
8. DEBT (CONTINUED)
As a result of operating losses incurred during the second quarter ended
January 30, 2000 and the third quarter ended April 30, 2000, we were not in
compliance with the financial ratio covenants under our senior credit facility;
however, we requested and received a waiver covering the debt/EBITDA ratio and
the fixed charge coverage ratio of the facility through June 20, 2000. This
waiver required the payment of a fee, an increase in interest rates, delivery
and compliance with a cash budget, and also established a minimum EBITDA test.
If the minimum EBITDA test was not met as of the end of the third quarter fiscal
2000, the waiver period would have ended on May 31, 2000. Additionally, if we
deviate from the cash budget by more than a specified amount, we will be unable
to borrow from the senior credit facility. We have not failed to comply with the
cash budget requirements set forth in the waiver and we do not anticipate
needing any additional borrowings during the existing waiver period. The waiver
also required that the senior credit facility be secured by liens on
substantially all U.S. owned real property on or before April 30, 2000. We were
in compliance with the minimum EBITDA test and the terms and conditions set
forth in the waiver as of the end of the third quarter fiscal 2000.
As previously disclosed in our second quarter Form 10-Q for the six months
ended January 30, 2000, we are exploring strategic opportunities for the
Company. The investment banking firm of Lazard Freres & Co. has been hired to
assist with this strategic review and to formulate proposed plans and actions
for the consideration of our Board of Directors. Because this strategic review
is still in process, no assessment can be made of the likelihood that any
proposed plans and actions can be effectively implemented. Regardless of the
outcome of the strategic review, an extension of the existing waiver, a new
waiver covering certain terms and conditions of the senior credit facility, an
amendment of the senior credit facility, a de novo senior credit facility or
some combination of the above will be required. Without such an action, we will
be in default on June 20, 2000.
We have been negotiating with the managers of the senior credit facility
bank syndicate for a further extension of our present waiver, which is set to
expire on June 20, 2000. While we can provide no assurances that the further
extension from a new waiver will be approved as required by the full syndicate,
we expect that the plans and actions proposed by the strategic review and to be
acted upon by our Board of Directors will enable us to successfully negotiate a
new waiver so as to preclude any default on the facility. Since the present
waiver to the senior credit facility expires on June 20, 2000, the indebtedness
under the senior credit facility has been classified as a current liability in
the Consolidated Balance Sheet at April 30, 2000.
A breach of any of the terms and conditions of the waiver, or subsequent
breaches of the financial covenants under the senior credit facility could
result in acceleration of our indebtedness, in which case the debt would become
immediately due and payable. Based upon our current projections, we do not
believe we will comply with the existing financial covenants unless they are
modified, as they have been in the present waiver. If there is no modification
of the existing financial covenants, we may not be able to repay our debt or
borrow sufficient funds to refinance it. Even if new financing is available, it
may not be on terms that are acceptable to us. We have, however, received such
modifications in the past in the form of waivers and an amendment to our senior
credit facility.
In fiscal 1999, we issued senior subordinated notes with an aggregate
principle amount of $200 million at an issue price of 98.472%. The notes mature
on July 1, 2009. Interest on the notes accrues at the rate of 10 1/4% per annum
and is payable semi-annually in arrears on January 1 and July 1 of each year,
commencing on January 1, 2000. On or after July 1, 2004, the notes may be
redeemed in whole or in part at a stated price.
13
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
INTRODUCTION
On March 30, 1998, Campbell Soup Company distributed one share of Vlasic
common stock to shareowners of Campbell for every ten shares of Campbell capital
stock held at the record date in a tax-free distribution (the "spin-off"). At
the time of the spin-off, we began operations as a separate independent
publicly-owned company. In connection with the spin-off, Campbell contributed
the following businesses: Swanson frozen foods in the United States and Canada,
Vlasic retail and foodservice pickles and condiments in the United States, Open
Pit barbecue sauce, Campbell's mushrooms in the United States, Freshbake and
non-branded frozen foods and SonA and Rowats pickles and beans in the United
Kingdom, Swift and non-branded processed beef in Argentina and Kattus gourmet
foods distribution in Germany. We sold the Kattus business in January 1999 and
sold our Argentine beef business, Swift-Armour, in July 1999. The mushroom
business was sold during the third quarter of fiscal 2000 and has been treated
as a discontinued operation. Prior to the spin-off, the businesses contributed
by Campbell had been separately managed within multiple Campbell business
divisions.
The discussion below summarizes the significant factors affecting our
consolidated operating results, financial condition and liquidity for the three
and nine months ended April 30, 2000 and May 2, 1999. The results for the nine
months ended April 30, 2000 are not necessarily indicative of the results of
operations to be expected for the full year. The following discussion of results
of operations and liquidity and capital resources should be read in conjunction
with our historical consolidated financial statements and the related
accompanying notes.
GOING CONCERN MATTERS
The accompanying interim financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As discussed in Note 8, we have
significant borrowings which require, among other things, compliance with
certain financial ratios, specifically a debt/EBITDA ratio and a fixed charge
coverage ratio, on a quarterly basis. As a result of operating losses incurred
during the second quarter ended January 30, 2000 and the third quarter ended
April 30, 2000, we were not in compliance with the financial ratio covenants
under our senior credit facility; however, we requested and received a waiver
through June 20, 2000 in consideration for the payment of a fee and an increase
in interest rates. The waiver required delivery of and compliance with a cash
budget and established a minimum EBITDA test to be met as of April 30, 2000.
Additionally, if the cash budget is not met, we will be unable to borrow under
the senior credit facility. The waiver also required that the senior credit
facility be secured by liens on substantially all of our real property in the
United States on or before April 30, 2000. We were in compliance with the
minimum EBITDA test and the terms and conditions set forth in the waiver as of
the third quarter fiscal 2000 and do not anticipate needing any additional
borrowings through June 20, 2000.
As previously disclosed in our second quarter Form 10-Q for the six months
ended January 30, 2000, we are exploring strategic opportunities for the
Company. The investment banking firm of Lazard Freres & Co. has been hired to
assist with this strategic review and to formulate proposed plans and actions
for the consideration of our Board of Directors. Because this strategic review
is still in process, no assessment can be made of the likelihood that any
proposed plans and actions can be effectively implemented. Regardless of the
outcome of the strategic review, an extension of the existing waiver, a new
waiver covering certain terms and conditions of the senior credit facility, an
amendment of the senior credit facility, a de novo senior credit facility or
some combination of the above will be required. Without such an action, we will
be in default on June 20, 2000.
We have been negotiating with the managers of the senior credit facility
bank syndicate for a further extension of our present waiver, which is set to
expire on June 20, 2000. While we can provide no assurances that the further
extension from a new waiver will be approved as required by the full syndicate,
we expect that the plans and actions proposed by the strategic review and to be
acted upon by our Board of Directors will enable us to successfully negotiate a
new waiver so as to preclude any default on the facility. Our continuation as a
going concern is dependent upon our ability to successfully establish the
necessary financing arrangements and to comply with the terms thereof.
14
<PAGE> 16
A breach of any of the terms and conditions of the waiver, or subsequent
breaches of the financial covenants under the senior credit facility could
result in acceleration of our indebtedness, in which case the debt would become
immediately due and payable. Based upon our current projections, we do not
believe we will comply with the existing financial covenants unless they are
modified, as they have been in the waiver. If there is no modification of the
existing financial covenants, we may not be able to repay our debt or borrow
sufficient funds to refinance it. Even if new financing is available, it may not
be on terms that are acceptable to us. We have, however, received such
modifications in the past in the form of waivers and an amendment to our senior
credit facility.
As noted in our Form 10-K/A filed with the Securities and Exchange
Commission on April 28, 2000, our ability to operate as a going concern is
dependent on our ability to successfully negotiate with our senior credit bank
syndicate to preclude default on our facility after June 20, 2000. However,
although no assurances can be given, we remain confident that we will be able to
continue operating as a going concern.
RESULTS OF OPERATIONS
OVERVIEW
Net sales for the first nine months of fiscal 2000 were $695.3 million
compared to net sales of $913.1 million for the first nine months of fiscal
1999, or a decrease of 23.9%. However, excluding net sales from the Kattus and
Swift-Armour businesses (which were divested in January 1999 and July 1999,
respectively), net sales decreased 5.0% from the prior year.
For the nine months ended April 30, 2000, we incurred a net loss from
continuing operations of $17.7 million, or ($0.39) per share, compared to a net
loss from continuing operations for the nine months ended May 2, 1999 of $121.4
million, or ($2.67) per share. The fiscal 2000 results were adversely impacted
by charges related to changes in estimates of trade marketing and customer
deductions primarily from fiscal 1999 and earlier of approximately $14.5 million
pre-tax, or ($0.20) per share, and charges relating to product manufacturing and
inventory costs of approximately $11.0 million pre-tax, or ($0.15) per share.
The net loss from continuing operations for the nine months ended May 2, 1999
included net special charges of $140.6 million pre-tax, or ($3.09) per share and
one-time costs of $7.0 million pre-tax, or ($0.10) per share, for duplicative
administrative transition costs and costs related to the development of our
information technology infrastructure. The net loss from discontinued operations
for the nine months ended April 30, 2000 was $6.7 million, or ($0.15) per share
partially offset by a gain of $4.6 million, or $0.10 per share, on the sale of
the discontinued business that was completed in the third quarter of fiscal
2000. The net loss from discontinued operations for the nine months ended May 2,
1999 was $2.3 million, or ($0.05) per share.
15
<PAGE> 17
CONSOLIDATED STATEMENTS OF EARNINGS
The following table sets forth certain items in our consolidated statements
of earnings as percentages of our net sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ ------------------
April 30, May 2, April 30, May 2,
2000 1999 2000 1999
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
Cost of products sold 66.3% 67.0% 66.7% 68.3%
Marketing and selling expenses 26.4% 20.8% 25.6% 19.0%
Administrative expenses 5.4% 3.3% 5.4% 4.9%
Research and development expenses 1.0% 0.8% 0.9% 0.6%
Other expense 0.2% -- 0.3% --
Special items -- 46.6% -- 14.6%
------ ------ ------ ------
Total costs and expenses 99.3% 138.5% 98.9% 107.4%
------ ------ ------ ------
Earnings (loss) before interest and taxes
from continuing operations 0.7% (38.5)% 1.1% (7.4)%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED APRIL 30, 2000 COMPARED TO THREE MONTHS ENDED MAY 2, 1999
NET SALES. Net sales of $221.8 million for the three months ended April 30,
2000 decreased 24.4% from net sales of $293.3 million for the three months ended
May 2, 1999. However, included in the net sales for the three months ended May
2, 1999 was $40.4 million from the divested Kattus and Swift-Armour businesses.
Excluding net sales from these divested businesses, net sales decreased
approximately 12.3% in the third quarter of fiscal 2000 compared to the same
period of last year. This decrease was primarily due to volume declines in our
Vlasic and Swanson businesses. Unit product sales were down in both businesses
in the third quarter of fiscal 2000 compared to the third quarter of fiscal 1999
as a result of reduced inventories held by our customers. The United Kingdom
frozen foods business also had a decline in sales resulting from reduced volumes
during the period.
COST OF PRODUCTS SOLD. Cost of products sold as a percentage of net sales
for the three months ended April 30, 2000 was 66.3% compared to 67.0% for three
months ended May 2, 1999. Excluding the divested Kattus and Swift-Armour
businesses, cost of products sold as a percentage of net sales would have been
64.3% for the three months ended May 2, 1999. The increase in cost of products
sold as a percentage of net sales was primarily attributable to sales volume
declines in our Vlasic and Swanson businesses resulting in higher absorption of
fixed manufacturing costs in the third quarter of fiscal 2000. Intense
competitive pressures at our United Kingdom businesses also impacted both
selling price and volume resulting in higher cost of products sold margins.
MARKETING AND SELLING EXPENSES. Marketing and selling expenses as a
percentage of net sales increased to 26.4% for the three months ended April 30,
2000 compared to 20.8% for the three months ended May 2, 1999. Excluding the
divested Kattus and Swift-Armour businesses, marketing and selling expenses as a
percentage of net sales would have been 22.6% for the three months ended May 2,
1999. Marketing and selling expenses as a percentage of net sales increased in
the third quarter of fiscal 2000 compared to the same period of the prior year
as a result of lower sales volume despite a decrease in the total actual dollars
from the same period a year ago. Trade marketing approximated a year ago.
Advertising was down in the third quarter of fiscal 2000 compared to the third
quarter of fiscal 1999 due to intense advertising campaigns run in the prior
year. Selling expenses were down because of lower commissions associated with
lower volumes.
ADMINISTRATIVE EXPENSES. Administrative expenses as a percentage of net
sales increased for the three months ended April 30, 2000 to 5.4% from 3.3% for
the three months ended May 2, 1999. However, excluding
16
<PAGE> 18
the divested Kattus and Swift-Armour businesses, administrative expenses as a
percentage of net sales was 3.6% in 1999. The increase in the third quarter of
fiscal 2000 when compared to 1999 was attributable to a credit recognized in the
third quarter of fiscal 1999 due to the elimination of certain accruals for
incentive-based programs.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses as a
percentage of net sales increased to 1.0% for the three months ended April 30,
2000 compared to 0.8% for the three months ended May 2, 1999, or 0.9% excluding
the divested Kattus and Swift-Armour businesses.
OTHER EXPENSE, NET. Other expense is principally goodwill amortization of
approximately $0.6 million on a quarterly basis. Also included in other expense
(income) is the appreciation(depreciation) on the market value of assets held in
certain employee's deferred compensation plans. Such assets depreciated greater
in the third quarter of fiscal 1999 on a relative basis.
SPECIAL ITEMS. During the third quarter fiscal 1999, special items of
$136.8 million, net, were recorded including a $140.0 million non-cash
impairment loss associated with the divestiture of the Swift-Armour Argentine
beef businesses that was partially offset by a $3.2 million benefit resulting
from the completion of a fiscal 1998 restructuring program at amounts less than
originally planned.
EARNINGS (LOSS) BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS.
Earnings before interest and taxes from continuing operations for the three
months ended April 30, 2000 were $1.6 million compared to a loss from continuing
operations of $113.0 million for the three months ended May 2, 1999. On a
comparable basis, excluding the $136.8 million of special items discussed above
in the third quarter of fiscal 1999 and excluding the divested Kattus and
Swift-Armour businesses, earnings before interest and taxes for the three months
ended May 2, 1999 were $21.9 million. This decrease in the third quarter of
fiscal 2000 was principally driven by significant volume declines in our Vlasic
and Swanson businesses.
INTEREST EXPENSE, NET. Interest expense, net, for the three months ended
April 30, 2000 was $12.3 million compared to $10.9 million for the three months
ended May 2, 1999. We incurred higher interest expense in the third quarter of
fiscal 2000 primarily as a result of higher interest rates on our bank
borrowings and the public bond debt that was issued in June 1999.
TAXES ON EARNINGS. The effective tax rate was 36.0% for the three months
ended April 30, 2000. Excluding the impact of our special items in the third
quarter of fiscal 1999 and excluding a $7.0 million charge related to the
repatriation of foreign dividends recorded in the third quarter of fiscal 1999,
the effective tax rate was 51.2% for the three months ended May 2, 1999. The
fiscal 2000 rate was lower than the fiscal 1999 rate predominately due to higher
Swift-Armour taxes in the prior year.
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS. The divested Vlasic Farms
mushroom business has been classified as a discontinued operation in accordance
with Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations Reporting the Effect of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions."
During the three months ended April 30, 2000, the sale closed and we recorded a
net gain on sale of the discontinued business of $4.6 million.
NINE MONTHS ENDED APRIL 30, 2000 COMPARED TO NINE MONTHS ENDED MAY 2, 1999
NET SALES. Net sales of $695.3 million for the nine months ended April 30,
2000 decreased 23.9% from net sales of $913.1 million for the nine months ended
May 2, 1999. However, excluding net sales from the divested Kattus and
Swift-Armour businesses, net sales decreased 5.0% year on year. This decrease
was primarily due to volume declines in our Vlasic and Swanson businesses.
The United Kingdom frozen foods business suffered an overall decline in net
sales as well.
COST OF PRODUCTS SOLD. Cost of products sold as a percentage of net sales
decreased to 66.7% for the nine months ended April 30, 2000 compared to 68.3%
for the nine months ended May 2, 1999. Excluding the divested Kattus and
Swift-Armour businesses, cost of products sold as a percentage of net sales
would have been 64.9% for the nine months ended May 2, 1999. On a comparable
basis, the increase in cost of products sold as a percentage of net sales was
attributable to product manufacturing and inventory costs incurred in the second
17
<PAGE> 19
quarter of fiscal 2000 relating to higher absorption and obsolescence charges,
higher third quarter fiscal 2000 absorption rates related to lower volumes and
operational difficulties in our United Kingdom frozen foods business.
MARKETING AND SELLING EXPENSES. Marketing and selling expenses as a
percentage of net sales increased to 25.6% for the nine months ended April 30,
2000 compared to 19.0% for the nine months ended May 2, 1999. Excluding the
divested Kattus and Swift-Armour businesses, marketing and selling expenses as a
percentage of net sales would have been 20.2% for the nine months ended May 2,
1999. The increase in fiscal 2000 was predominately caused by additional charges
recorded in the second quarter of fiscal 2000 for trade marketing and customer
deductions resulting from revised estimates principally for fiscal 1999 and
earlier, based on new information following our conversion to new billing and
trade marketing systems and processes. Marketing and selling expenses as a
percentage of net sales excluding the impact of these charges in the first nine
months of fiscal 2000 would have been approximately 23.3%. However excluding
these charges, marketing and selling expenses as a percentage of net sales would
have still increased in the first nine months of fiscal 2000 due to greater
trade marketing costs incurred related to new product introductions at Swanson,
lower sales volumes and higher coupon redemptions from consumers. Partially
offsetting these increases were lower selling expenses that were volume driven.
ADMINISTRATIVE EXPENSES. Administrative expenses as a percentage of net
sales increased for the nine months ended April 30, 2000 to 5.4% from 4.9% for
the nine months ended May 2, 1999, or 5.2% excluding the divested Kattus and
Swift-Armour businesses. The increase in the nine months ended April 30, 2000
was principally due to higher medical benefit costs.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses as a
percentage of net sales increased to 0.9% for the nine months ended April 30,
2000 compared to 0.6% for the nine months ended May 2, 1999, or 0.8% excluding
the divested Kattus and Swift-Armour businesses.
OTHER EXPENSE, NET. Other expense is principally goodwill amortization of
approximately $0.6 million on a quarterly basis. Included in the first nine
months of fiscal 2000 were costs associated with a boiler explosion that damaged
a frozen foods manufacturing facility. Costs associated with this explosion are
expected to be covered by our insurance policy and will have a negligible impact
for the year. For the first nine months of fiscal 1999, goodwill amortization
was largely offset by a gain on the sale of certain assets.
SPECIAL ITEMS. During the first nine months of fiscal 2000, special items
of $0.3 million, net, were recorded including a $1.5 million United States
restructuring charge that was partially offset by a $1.2 million benefit
resulting from the resolution of certain contingencies related to the divested
Kattus business. During the first nine months of fiscal 1999, special items of
$133.6 million were recorded which included a $140.0 million non-cash impairment
loss associated with the divestiture of the Swift-Armour Argentine beef business
partially offset by a $3.2 million benefit resulting from completion of a fiscal
1998 restructuring program at amounts less than originally planned as well as a
$3.2 million benefit relating to the sale of the Kattus business.
EARNINGS (LOSS) BEFORE INTEREST AND TAXES FROM CONTINUING OPERATIONS.
Earnings before interest and taxes from continuing operations for the nine
months ended April 30, 2000 were $7.8 million (or $8.2 million excluding special
items) compared to a loss of $68.1 million for the nine months ended May 2,
1999. On a comparable basis, excluding the divested Kattus and Swift-Armour
businesses and excluding our special items and costs related to the development
of our information technology infrastructure incurred in the first nine months
of fiscal 1999, earnings before interest and taxes for the nine months ended May
2, 1999 were $70.4 million. The decrease of $62.2 million in the first nine
months of fiscal 2000 was driven by:
- charges of approximately $14.5 million incurred in the second quarter of
fiscal 2000 for trade marketing and customer deductions resulting from
revised estimates principally for fiscal 1999 and earlier, based on new
information following our conversion to new billing and trade marketing
systems and processes;
- charges of approximately $11 million incurred in the second quarter of
fiscal 2000 related to product manufacturing and inventory costs;
- significant sales volume declines;
- increased marketing and advertising costs in our core Vlasic and Swanson
U.S. businesses in fiscal 2000 compared to last year; and
- operational difficulties encountered in the United Kingdom frozen foods
business.
18
<PAGE> 20
INTEREST EXPENSE, NET. Interest expense, net, for the nine months ended
April 30, 2000 was $36.0 million compared to $32.2 million for the nine months
ended May 2, 1999. We incurred higher interest expense in the first nine months
of fiscal 2000 primarily as a result of higher interest rates on our bank
borrowings and the public bond debt that was issued in June 1999.
TAXES ON EARNINGS. The effective tax rate was 35.8% for the nine months
ended April 30, 2000. Excluding the impact of our special items in the nine
months ended May 2, 1999 and excluding a $7.0 million charge related to the
repatriation of foreign dividends, the effective tax rate was 42.3% for the nine
months ended May 2, 1999. The fiscal 2000 rate was lower than the fiscal 1999
rate predominately due to higher Swift-Armour taxes in the prior year.
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS. The divested Vlasic Farms
mushroom business has been classified as a discontinued operation in accordance
with Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations Reporting the Effect of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The
loss from operations of the discontinued business for the nine months ended
April 30, 2000 was $6.7 million compared to a loss of $2.3 million for the same
period of the prior year. The decline in earnings was attributable to poor
yields, higher costs and reduced contract sales at our mushroom farms in fiscal
2000. During the third quarter of fiscal 2000, the sale of the business closed
and we recorded a net gain on sale of the discontinued business of $4.6 million.
RESULTS BY SEGMENT
The following table sets forth certain segment information for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
April 30, May 2, April 30, May 2,
SEGMENT INFORMATION 2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net Sales
Frozen Foods $ 124,144 $ 138,174 $ 395,089 $ 406,403
Grocery Products 67,111 81,083 194,047 205,421
United Kingdom Operations 30,495 33,635 106,197 119,853
Divested Businesses -- 40,369 -- 181,470
--------- --------- --------- ---------
Total $ 221,750 $ 293,261 $ 695,333 $ 913,147
========= ========= ========= =========
Earnings (Loss) Before Interest and Taxes
from Continuing Operations
Frozen Foods $ 4,811 $ 13,031 $ 14,018 $ 38,933
Grocery Products 815 11,480 2,010 28,609
United Kingdom Operations (1,632) 3,120 (2,568) 6,334
Divested Businesses -- (138,177) 1,155 (134,642)
Unallocated Corporate Expenses (2,378) (2,470) (6,790) (7,295)
--------- --------- --------- ---------
Total $ 1,616 $(113,016) $ 7,825 $ (68,061)
========= ========= ========= =========
</TABLE>
THREE MONTHS ENDED APRIL 30, 2000 COMPARED TO THREE MONTHS ENDED MAY 2, 1999
Net sales of the frozen foods segment decreased 10.2% to $124.1 million for
the three months ended April 30, 2000 compared to the same period of the prior
year. Overall volume declines in our Swanson business as a result of reduced
inventories held by our customers contributed to the significant decrease in net
sales. Consumption levels were flat as compared to the same period a year ago.
The segment's earnings before interest and taxes were $4.8 million for the three
months ended April 30, 2000 compared to 13.0 million for the
19
<PAGE> 21
three months ended May 2, 1999. This significant decline was primarily
attributable to the impact of the sales volume declines and greater marketing
and trade spending costs incurred in the third quarter of fiscal 2000 compared
to the prior year.
Net sales of the grocery products segment decreased 17.2% to $67.1 million
for the three months ended April 30, 2000 compared to fiscal 1999. This decrease
was primarily due to volume declines in our core Vlasic pickles and Open Pit
barbecue sauce businesses as a result of reduced inventories held by our
customers. Consumption was up approximately 1% in the period compared to last
year. The segment's earnings before interest and taxes were $0.8 million for the
three months ended April 30, 2000 compared to $11.5 million for the three months
ended May 2, 1999, or $10.4 million excluding the impact of certain special
items in the third quarter of fiscal 1999. This significant decline was
primarily a result of sales volume declines and higher marketing costs.
Advertising costs decreased from the same period of the prior year.
Net sales of the United Kingdom operations segment decreased 9.3% to $30.5
million for the three months ended April 30, 2000 compared to the same period of
the prior year. The decline in net sales was attributable to increased
competition that impacted both selling price and volume. The segment's loss
before interest and taxes was $1.6 million for the three months ended April 30,
2000 compared to earnings of $3.1 million for the three months ended May 2,
1999. Excluding a $2.1 million credit in special items related to this segment
in the third quarter of fiscal 1999, the segment's earning before income and
taxes was $1.0 million. The decline in earnings in the third quarter of fiscal
2000 as compared to the prior year was primarily due to lower sales and pricing
pressures as a result of intense competition, as well as manufacturing
inefficiencies.
The divested businesses segment included net sales in fiscal 1999 from the
Kattus and Argentine beef businesses which were sold in January 1999 and July
1999, respectively.
NINE MONTHS ENDED APRIL 30, 2000 COMPARED TO NINE MONTHS ENDED MAY 2, 1999
Net sales of the frozen foods segment decreased 2.8% to $395.1 million for
the nine months ended April 30, 2000 compared to the same period of the prior
year. Volume declines at our Swanson U.S. business were partially offset by
improved mix reflecting new product introductions at higher price points.
Overall consumption was down approximately 1% for the nine months. The segment's
earnings before interest and taxes were $14.0 million for the nine months ended
April 30, 2000 compared to $38.9 million for the nine months ended May 2, 1999
largely due to the impact of sales volume declines on earnings. The decline was
also a result of charges totaling approximately $13.4 million pertaining to
prior year trade marketing and customer deductions, as well as product
manufacturing and inventory costs. Additionally, current year trade marketing
costs increased due to new product introductions in fiscal 2000.
Net sales of the grocery products segment decreased 5.5% to $194.0 million
for the nine months ended April 30, 2000 compared to fiscal 1999. This decrease
was primarily driven by declining volumes resulting from reduced inventory held
by our customers. Overall pickle consumption was up approximately 2% for the
nine months. The segment's earnings before interest and taxes were $2.0 million
for the nine months ended April 30, 2000 compared to $28.6 million for the nine
months ended May 2, 1999 largely due to the impact of sales volume declines on
earnings. The decline was also a result of charges totaling approximately $13.0
million pertaining to prior year trade marketing and customer deductions, as
well as product manufacturing and inventory costs. Advertising costs in our
Vlasic business also increased from the same period of the prior year.
Net sales of the United Kingdom operations segment decreased 11.4% to
$106.2 million for the nine months ended April 30, 2000 compared to the same
period of the prior year. The segment's loss before interest and taxes was $2.6
million for the three months ended April 30, 2000 compared to earnings of $6.3
million for the three months ended May 2, 1999. This decline was attributable to
lower sales and charges pertaining to inventory write-offs and operating
inefficiencies incurred in the first nine months of fiscal 2000.
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LIQUIDITY AND CAPITAL RESOURCES
The senior credit facility consists of (1) a senior secured term loan in a
principal amount of $100 million and (2) senior secured revolving credit
commitments providing for revolving loans, initially in the aggregate amount of
up to $550 million. We are required to make mandatory prepayments on the senior
credit facility and permanently reduce revolving credit commitments under
certain circumstances, including upon certain asset sales, issuance of debt
securities, issuance of equity securities and receipt of casualty proceeds which
include property insurance proceeds and condemnation awards. At our option,
subject to certain requirements, loans may be prepaid in whole or in part. As a
result of the application of the net proceeds from the sale of our senior
subordinated notes in fiscal 1999 and the divestiture of our Swift-Armour
Argentine beef business in fiscal 1999, the amount available to be borrowed
under the revolving credit commitments was permanently reduced to $279 million.
Loans under the revolving credit commitments will be available at any time
through the final maturity date on February 20, 2003 and the term loan matures
on February 20, 2003. Borrowings under the senior credit facility bear interest
at rates that, at our option, vary with the prime rate, CD rate, LIBOR or money
market rates plus applicable credit margins. The average interest rate at April
30, 2000 was 8.7%. We are obligated to pay a facility fee ranging from 0.15% to
0.5% on the credit exposure of the banks.
In conjunction with the sale of our Vlasic Farms mushroom business in the
third quarter fiscal 2000 (see Note 4), a portion of the net proceeds received
was used to reduce amounts outstanding under our revolving credit facility and
the revolving credit commitment was permanently reduced by $37.8 million. In
February 2000, we also made an additional voluntary reduction to the revolving
credit commitment of $16.2 million, as we do not anticipate requiring the
additional liquidity. As a result, the amount available to be borrowed under the
revolving credit commitments was permanently reduced to $225 million. Under the
revolving credit facility, the maximum amount of borrowings available is equal
to the revolving credit commitment less any outstanding revolving loans. We have
not increased our borrowings under the senior credit facility since January
2000. At April 30, 2000 (balance sheet date), had we been in compliance with the
specified financial ratio covenants of the senior credit facility and subject to
the discussion below regarding the waiver, the maximum amount potentially
available under the revolving credit commitment was $39.8 million.
The senior credit facility and our senior subordinated debt described
below, contain a number of significant covenants that, among other things,
restrict our ability to engage in mergers and sales of assets, create liens on
our assets, incur additional indebtedness, make investments and acquisitions, or
engage in transactions with our subsidiaries and affiliates. In addition, under
the senior credit facility, we are required to comply with specified ratios and
tests, including maximum debt/EBITDA ratio, minimum fixed charge coverage ratio
and a limitation on capital expenditures. A breach of any of these covenants
could result in a default under our debt agreements.
As a result of operating losses incurred during the second quarter ended
January 30, 2000 and the third quarter ended April 30, 2000, we were not in
compliance with the financial ratio covenants under our senior credit facility;
however, we requested and received a waiver covering the debt/EBITDA ratio and
the fixed charge coverage ratio of the facility through June 20, 2000. This
waiver required the payment of a fee, an increase in interest rates, delivery
and compliance with a cash budget, and also established a minimum EBITDA test.
If the minimum EBITDA test was not met as of the end of the third quarter fiscal
2000, the waiver period would have ended on May 31, 2000. Additionally, if we
deviate from the cash budget by more than a specified amount, we will be unable
to borrow from the senior credit facility. We have not failed to comply with the
cash budget requirements set forth in the waiver and we do not anticipate
needing any additional borrowings during the existing waiver period. The waiver
also required that the senior credit facility be secured by liens on
substantially all U.S. owned real property on or before April 30, 2000. We were
in compliance with the minimum EBITDA test and the terms and conditions set
forth in the waiver as of the end of the third quarter fiscal 2000.
As previously disclosed in our second quarter Form 10-Q for the six months
ended January 30, 2000, we are exploring strategic opportunities for the
Company. The investment banking firm of Lazard Freres & Co. has been hired to
assist with this strategic review and to formulate proposed plans and actions
for the consideration of our Board of Directors. Because this strategic review
is still in process, no assessment can be made of the likelihood that any
proposed plans and actions can be effectively implemented. Regardless of the
outcome of the strategic review, an extension of the existing waiver, a new
waiver covering certain terms and conditions of the senior credit facility, an
amendment of the senior credit facility, a de novo senior credit facility or
some combination of the above will be required. Without such an action, we will
be in default on June 20, 2000.
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We have been negotiating with the managers of the senior credit facility
bank syndicate for a further extension of our present waiver, which is set to
expire on June 20, 2000. While we can provide no assurances that the further
extension from a new waiver will be approved as required by the full syndicate,
we expect that the plans and actions proposed by the strategic review and to be
acted upon by our Board of Directors will enable us to successfully negotiate a
new waiver so as to preclude any default on the facility. Since the present
waiver to the senior credit facility expires on June 20, 2000, the indebtedness
under the senior credit facility has been classified as a current liability in
the Consolidated Balance Sheet at April 30, 2000.
A breach of any of the terms and conditions of the waiver, or subsequent
breaches of the financial covenants under the senior credit facility could
result in acceleration of our indebtedness, in which case the debt would become
immediately due and payable. Based upon our current projections, we do not
believe we will comply with the existing financial covenants unless they are
modified, as they have been in the present waiver. If there is no modification
of the existing financial covenants, we may not be able to repay our debt or
borrow sufficient funds to refinance it. Even if new financing is available, it
may not be on terms that are acceptable to us. We have, however, received such
modifications in the past in the form of waivers and an amendment to our senior
credit facility.
In fiscal 1999, we issued senior subordinated notes with an aggregate
principle amount of $200 million at an issue price of 98.472%. The notes mature
on July 1, 2009. Interest on the notes accrues at the rate of 10 1/4% per annum
and is payable semi-annually in arrears on January 1 and July 1 of each year,
commencing on January 1, 2000. On or after July 1, 2004, the notes may be
redeemed in whole or in part at a stated price.
Our liquidity needs will be primarily for capital expenditures, working
capital and interest service requirements on our debt obligations. Capital
expenditures for fiscal year 2000 will not exceed $25 million. We believe that
our capital expenditures for the foreseeable future will be focused on
preventive maintenance and equipment replacement, projects intended to result in
cost savings and projects related to new product introductions.
We anticipate that our operating cash flows will be sufficient to meet our
working capital requirements, capital expenditure requirements and interest
service requirements on our debt obligations for the remainder of fiscal 2000,
although borrowings to fund seasonal working capital requirements will be
required early in the next fiscal year. However, if we are unable to obtain a
new waiver or extend the existing waiver by June 20, 2000, we will be in default
of our senior credit facility which could result in acceleration of the bank
debt, in which case the debt would become immediately due and payable.
Interest and principal payments on the indebtedness outstanding under our
senior credit facility and senior subordinated debt represent significant cash
requirements. Our ability to raise funds to service our debt may be restricted
by our debt agreements and our ability to effect equity financing is dependent
on our results of operations and market conditions. In the event that we are
unable to refinance such indebtedness or raise funds through asset sales, sales
of equity or otherwise, our ability to pay principal of, and interest on, our
debt would be adversely affected.
CASH FLOWS FOR THE NINE MONTHS ENDED APRIL 30, 2000 COMPARED TO NINE MONTHS
ENDED MAY 2, 1999
Net cash used in operating activities was $25.4 million for the nine months
ended April 30, 2000 compared to net cash provided of $4.4 million for the nine
months ended May 2, 1999. The change in cash flows from operations was
principally driven by significantly lower earnings excluding special items in
the first nine months of fiscal 2000. Working capital increased $27.4 million
for the nine months of fiscal 2000 compared to an increase of $54.7 million for
the first nine months of fiscal 1999. The increase in working capital for the
first nine months of fiscal 2000 was primarily attributable to lower accounts
payable balances partially offset by a reduction of our accounts receivables
resulting from improved collections.
Net cash provided by investing activities was $29.6 million for the nine
months ended April 30, 2000 compared to net cash used of $6.3 million for the
nine months ended May 2, 1999. Capital expenditures were $13.6 million for the
nine months ended April 30, 2000 compared to $32.7 million for the nine months
ended May 2, 1999. Capital expenditures were greater in the first nine months of
the prior year as we built our information technology infrastructure, and also
due to the inclusion of Kattus and Swift-Armour. The prior year investing
activity also included the disposition of the Peterlee frozen food facility in
the United Kingdom in September 1998
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and the proceeds from the sale of our Kattus business in January 1999 of $20.7
million. Cash proceeds from the sale of Vlasic Farms of $42.9 million ($50.0
million contract price net of $7.1 million funds held on deposit - see Note 4)
were included in the nine months ended April 30, 2000. Capital expenditures for
fiscal year 2000 are not expected to exceed $25 million.
Net cash provided by financing activities was $12.0 million for the nine
months ended April 30, 2000 compared to $18.8 million for the nine months ended
May 2, 1999 principally due to a decrease in borrowings under the senior credit
facility.
SEASONALITY
Our sales and cash flows are affected by seasonal cyclicality during
certain parts of the year. Sales of frozen foods tend to be marginally higher
during the winter months. Sales of pickles, relishes and barbecue sauce tend to
be higher in the summer months. The majority of pickles are packed during a
season extending from May through September. As a result, our inventory levels
tend to be higher in the first quarter of the fiscal year which makes our
working capital requirements significantly higher in the first quarter,
requiring us to draw more heavily on the revolving credit commitments under our
senior credit facility.
YEAR 2000
The Year 2000 issue was the result of date-sensitive computer programs
using two digits rather than four to define the applicable year. If not
corrected, this could have resulted in system failures or miscalculations
leading to significant disruptions in a company's operations. Prior to our
spin-off from Campbell, a worldwide information technology project was initiated
to identify areas impacted by Year 2000 issues. The purpose of this
high-priority project was to identify and remediate non-ready systems and
devices before business processes were affected. We completed a global business
impact assessment and formulated plans for timely correction, retirement,
replacement or updating of non-ready systems. We completed the work on our
identified critical systems and our other systems and partnered with experienced
systems integration and Year 2000 vendors in the execution of our Year 2000
master plan.
We did not experience any significant problems or issues with the Year 2000
rollover and began the year with fully operational systems and infrastructure.
Our systems remained available throughout the course of the Year 2000 rollover
and, to date, continue to be available within historical operating parameters.
We believe that any future Year 2000 related problems are unlikely and would not
be significant to our business, financial condition and results of operations.
Our Year 2000 costs remained in-line with our projections and no incremental
funding was required to successfully complete the effort.
RECENT DEVELOPMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement established accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. The
statement requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FAS Statement 133," which postponed the adoption date of SFAS No. 133. We
must adopt the statement beginning fiscal 2001. We are currently evaluating the
effect that implementation of the new standard will have to our financial
statements.
In May 2000, the Emerging Issues Task Force (EITF) issued EITF No. 2000-10,
"Accounting for Shipping and Handling Revenues and Costs" and EITF No. 2000-14,
"Accounting for Coupons, Rebates and Discounts". In reference to EITF No.
2000-10, the Task Force tentatively concluded that amounts billed to customers
related to shipping and handling should be classified as revenue and costs
incurred for shipping and handling should be classified as cost of products
sold. Implementation of this standard will likely result in a reclassification
of outbound freight costs from a reduction of net sales to cost of products sold
on our Consolidated Statements of Earnings. We do not anticipate a material
adjustment. We will implement the standard when required in accordance with the
EITF's final consensus.
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EITF No. 2000-14 addressed accounting for sales incentives. The Task Force
concluded that in accounting for cash sales incentives offered by a manufacturer
(for example, coupons to be used at the point of retail sale or mailed in after
the retail sale), the manufacturer should recognize the incentive as a reduction
of revenue on the later date of the manufacturer's sale to the retailer or the
date the offer is made to the public. The reduction of revenues should be
measured based on the estimated amount of incentives to be claimed by the
ultimate customers. We are currently evaluating the effect that implementation
of this pronouncement will have to our financial statements. We must adopt the
pronouncement beginning in our first quarter of fiscal 2001.
FORWARD-LOOKING INFORMATION
This report and our filings with the Securities and Exchange Commission
contain certain forward-looking statements within the meaning of the Securities
Act of 1933 and the Securities Exchange Act of 1934. We caution readers that any
such forward-looking statements made by us or on our behalf are based on our
current expectations and beliefs but are not guarantees of future performance.
Actual results could differ materially from those expressed or implied in the
forward-looking statements. Important factors that could cause such differences
include, but are not limited to:
- our ability to successfully establish necessary financing arrangements;
- our ability to continue to comply with covenants and the terms of the
senior credit facility (and any waivers thereto), and the senior
subordinated notes;
- changes in accounting estimates developed in connection with the
application of generally accepted accounting principles,
- changes in accounting policies and practices;
- our ability to successfully implement corrective measures and processes
and procedures to properly capture and analyze trade marketing spending
and customer deductions;
- our ability to maintain capital expenditures within the forecast limits,
which are based on assumptions about infrastructure requirements;
- issues associated with our business and information systems and embedded
technology;
- Campbell Soup Company's future requirements for frozen foodservice
products;
- the impact of strong competitive response to our efforts to leverage our
brand power with product innovation and new advertising;
- the inherent risks in the marketplace associated with our products,
including uncertainties about trade and consumer acceptance;
- changes in prices of raw materials and other inputs;
- the impact of unforeseen economic and political changes in international
markets where we compete;
- the market risks associated with financial instruments which may be
subject to unforeseen economic changes, such as currency exchange rates,
interest rates, inflation rates and recessionary trends;
- our ability to achieve the gains anticipated from our cost productivity
programs; and
- our ability to achieve the forecasted savings related to restructuring
programs.
ITEM 3. MARKET RISK
We use or are permitted to use financial instruments, including fixed and
variable rate debt, as well as swap, forward and option contracts, to finance
our operations and to hedge interest rate and currency exposures. The swap,
forward and option contracts are entered into for periods consistent with
related underlying exposures and do not constitute positions independent of
those exposures. We do not enter into contracts for speculative purposes, nor
are we a party to any leveraged instrument.
As disclosed in our Annual Report, we entered into an interest rate swap
contract with a notional value of $50 million to hedge a portion of our U.S.
variable interest rate bank borrowings. As of April 30, 2000, the interest rate
swap contract provided that we pay an average interest rate of 5.9% and receive
an average interest rate of 6.3%. We would have received approximately $1.7
million to settle the interest rate swap contract as of April 30, 2000.
There have been no other material changes in our market risk during the
three months or nine months ended April 30, 2000. For additional information,
refer to page 20 of our Annual Report for the fiscal year ended August 1, 1999.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in our Form 10-K, dated October 15, 1999, we are not
aware of any pending claims or litigation the outcome of which would have a
material adverse effect on our business, financial position or results of
operations.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
A. Cautionary Statement on Forward-Looking statements
This report contains certain forward-looking statements within the
meaning of the Securities Act of 1933 and the Securities Exchange Act
of 1934. This information is based upon our current views and
assumptions regarding future events and financial performance and is
subject to risks and uncertainties that could cause actual results to
differ materially from those expressed in this report. Additional
information concerning factors that could cause actual results to vary
materially from the results anticipated can be found on page 24 in
Management's Discussion and Analysis of Results of Operations and
Financial Condition of this Quarterly Report on Form 10-Q and in our
Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended
August 1, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
(27) Financial Data Schedule
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PART II. OTHER INFORMATION
B. Reports on Form 8-K
We filed a Current Report on Form 8-K, dated January 31, 2000 with the
Securities and Exchange Commission, on February 14, 2000, regarding
completion of the sale of our Vlasic Farms mushroom business and the Second
Quarter Fiscal 2000 outlook with an announcement of a corporate
reorganization.
We also filed a Current Report on Form 8-K, dated March 24, 2000 with the
Securities and Exchange Commission, on April 4, 2000, regarding an
amendment of the terms and conditions of our Foodservice Supply Agreement
with Campbell Soup Company.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VLASIC FOODS INTERNATIONAL INC.
Dated: June 14, 2000 By: /s/ Joseph Adler
--------------------------------------------
Joseph Adler
Vice President and Controller
(Principal Financial and Accounting Officer)
26
