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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 8, 2000
or
[_] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ___ to ___
Commission file number: 333-76569
Luigino's, Inc.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Minnesota 2038 59-3015985
(State of other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code)
</TABLE>
525 Lake Avenue South
Duluth, MN 55802
(218) 723-5555
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices.)
Check whether the registrant: (1) 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 ___
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common 1,000
---------------------------- -----------------------------------
(Class) (Outstanding at November 20, 2000)
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LUIGINO'S, INC.
INDEX
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<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
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Item 1. Financial Statements
Balance Sheets as of October 8, 2000 (Unaudited) and January 2, 2000............ 3
Statements of Operations for the third fiscal quarter ended and 40 weeks
ended October 8, 2000 and October 10, 1999 (Unaudited)......................... 4
Statements of Cash Flows for 40 weeks ended October 8, 2000 and
October 10, 1999 (Unaudited)................................................... 5
Notes to Financial Statements (Unaudited)....................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk...................... 12
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders............................. 13
Item 5. Other Information............................................................... 13
Item 6. Exhibits and Reports on Form 8-K................................................ 14
</TABLE>
2
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Part 1 - Financial Information
Item 1. Financial Statements
LUIGINO'S, INC.
Balance Sheets
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
October 8, January 2,
2000 2000
------------ -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................... $ 153 $ 105
Receivables, net of allowance for doubtful accounts
of $146 and $145, respectively.................................... 20,462 22,059
Inventories......................................................... 20,571 22,420
Notes receivable from principal stockholder......................... 5,472 250
Prepaid expenses and other.......................................... 1,946 1,547
----------- ----------
Total current assets............................................ 48,604 46,381
Property, Plant and Equipment:
Land................................................................ 22 22
Buildings and improvements.......................................... 16,818 16,783
Machinery and equipment............................................. 110,424 98,159
Office equipment and leasehold improvements......................... 5,566 5,022
Construction in progress............................................ 1,509 8,835
Less - - Accumulated depreciation................................... (43,208) (34,211)
----------- ----------
Net property, plant and equipment............................... 91,131 94,610
Other Assets:
Restricted cash..................................................... 709 747
Notes receivable from principal stockholder......................... -- 5,472
Other............................................................... 4,943 5,398
----------- ----------
Total other assets.............................................. 5,652 11,617
----------- ----------
Total Assets............................................................. $ 145,387 $ 152,608
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of long-term debt................................ $ 2,330 $ 2,729
Accounts payable.................................................... 13,301 25,422
Accrued expenses - -
Accrued payroll and benefits.................................... 2,637 4,817
Accrued interest and other...................................... 1,983 4,430
Accrued promotions.............................................. 4,418 4,915
----------- ----------
Total current liabilities....................................... 24,669 42,313
Long-Term Debt, less current maturities.................................. 125,834 117,698
----------- ----------
Total liabilities............................................... 150,503 160,011
----------- ----------
Commitments and Contingencies
Stockholders' Deficit:
Common stocks - -
Voting, $1 stated par value, 600 shares authorized;
100 shares issued and outstanding............................. -- --
Nonvoting, $1 stated par value, 900 shares authorized;
900 shares issued and outstanding............................. 1 1
Additional paid-in capital.......................................... 655 655
Accumulated deficit................................................. (5,772) (8,059)
----------- ----------
Total stockholders' deficit..................................... (5,116) (7,403)
----------- ----------
Total Liabilities and Stockholders' Deficit.............................. $ 145,387 $ 152,608
=========== ==========
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The accompanying notes are an integral part of these financial statements.
3
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LUIGINO'S, INC.
Statements of Operations
(In Thousands)
(Unaudited)
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<CAPTION>
Third Fiscal Quarter Ended 40 Weeks Ended
---------------------------------------- ----------------------------------------
October 8, 2000 October 10, 1999 October 8, 2000 October 10, 1999
------------------ -------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Net Sales........................... $ 63,308 $ 59,741 $ 203,670 $ 194,624
Cost of Goods Sold.................. 36,391 35,352 118,976 113,322
------------------ -------------------- ------------------ -------------------
Gross profit................... 26,917 24,389 84,694 81,302
------------------ -------------------- ------------------ -------------------
Operating (Income) Expenses:
Selling and promotional........ 16,107 15,105 54,339 61,109
General and administrative..... 5,489 5,344 18,089 17,837
Hibbing Settlement (Note 6).... -- -- -- (776)
------------------ -------------------- ------------------ -------------------
Total operating expenses....... 21,596 20,449 72,428 78,170
------------------ -------------------- ------------------ -------------------
Operating income............... 5,321 3,940 12,266 3,132
Other Income (Expense):
Interest expense............... (3,062) (3,104) (10,410) (9,532)
Interest Income................ 84 72 288 303
Other, net..................... 15 46 143 205
------------------ -------------------- ------------------ -------------------
Total other expense............ (2,963) (2,986) (9,979) (9,024)
------------------ -------------------- ------------------ -------------------
Net Income (Loss)................... $ 2,358 $ 954 $ 2,287 $ (5,892)
================== ==================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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LUIGINO'S, INC.
Statements of Cash Flows
(In Thousands)
(Unaudited)
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<CAPTION>
40 Weeks Ended
-------------------------------------
October 8, 2000 October 10, 1999
------------------ -----------------
<S> <C> <C>
Operating Activities:
Net income (loss).............................................. $ 2,287 $ (5,892)
Adjustments to net income (loss) provided
by (used in) operating activities -
Depreciation and amortization................................. 9,782 8,600
Changes in operating assets and liabilities:
Receivables.................................................. 1,597 (1,764)
Inventories.................................................. 1,849 (4,748)
Prepaid expenses and other................................... (399) (587)
Accounts payable and accrued expenses........................ (17,245) (5,330)
------------------ -----------------
Net cash used in operating activities....................... (2,129) (9,721)
------------------ -----------------
Investing Activities:
Purchases of property, plant and equipment..................... (5,518) (19,127)
Purchases of other assets...................................... (829) (630)
------------------ -----------------
Net cash used in investing activities....................... (6,347) (19,757)
------------------ -----------------
Financing Activities:
Borrowings on revolving credit agreement....................... 57,300 60,600
Payments on revolving credit agreement......................... (47,300) (61,600)
Proceeds from debt............................................. -- 100,000
Repayments of debt............................................. (2,263) (54,805)
Decrease (Increase) in deferred financing costs................ 499 (3,658)
Decrease in restricted cash.................................... 38 28
Decrease of notes receivable................................... 250 3,337
Distributions to stockholders.................................. -- (15,000)
------------------ -----------------
Net cash provided by financing activities................... 8,524 28,902
------------------ -----------------
Increase (Decrease) in cash and cash equivalents................ 48 (576)
Cash and cash equivalents, beginning of period.................. 105 1,193
------------------ -----------------
Cash and cash equivalents, end of period........................ $ 153 $ 617
================== =================
Supplemental Information:
Interest paid................................................ $ 11,536 $ 7,137
================== =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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LUIGINO'S, INC.
Notes to Financial Statements
(Unaudited)
(Dollars in Thousands)
1. Operations:
Luigino's, Inc. (the "Company" or "Luigino's"), a Minnesota corporation,
manufactures food products primarily under the Michelina's label at production
facilities located in Minnesota and Ohio. Its products, distributed
predominately in the North American market, are sold through independent and
chain store retail grocery outlets.
2. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the U.S. for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 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. In the opinion of management, all adjustments consisting solely of
normal recurring items considered necessary for a fair presentation have been
included.
Operating results for the year to date period ended October 8, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 2000. Certain amounts in the financial statements for prior
quarters have been reclassified to conform with the current period's
presentation. Those reclassifications had no effect on stockholders' equity or
net income.
For further information, refer to the audited financial statements and footnotes
thereto included in the Company's Form 10-K for the fiscal year ended January 2,
2000, filed on March 28, 2000 with the Securities and Exchange Commission.
3. Recent Accounting Pronoucements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". SFAS 133, as
amended by SFAS No. 137, is effective for fiscal years beginning after June 15,
2000. SFAS 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. The Company utilizes an interest rate
swap intended to hedge its interest rate risk associated with long-term debt.
The Company has not completed its analysis of the effect of SFAS 133, but
management does not expect adoption of the new standard on January 1, 2001 to
materially affects its financial statements.
4. Fiscal Year:
The Company has elected a 52/53 week fiscal year which ends on the Sunday
closest to December 31 and a 16-week first fiscal quarter, 12-week second and
third fiscal quarters, and a 12 or 13 week fourth fiscal quarter.
5. Inventories:
Inventories are stated at the lower of first-in, first-out cost or market and
consisted of the following:
October 8, 2000 January 2, 2000
--------------- ---------------
Finished Goods..................... $ 9,178 $ 9,226
Raw Materials...................... 8,666 9,804
Packaging Supplies................. 2,727 3,390
------- -------
$20,571 $22,420
======= =======
6
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6. Hibbing Settlement
During 1996, the Company entered into an agreement with the Office of the
Commissioner of the Iron Range Resources Rehabilitation Board (IRRRB) for the
construction of a manufacturing facility in Hibbing, Minnesota. In the third
quarter of 1998, the Company recorded a $5.2 million charge for the impairment
of assets incurred in connection with the potential plant facility. The total
reserve of $5.2 million represented a non-cash charge of $4.7 million for asset
impairment and $0.5 million for potential future liquidated damages and other
costs. On April 27, 1999 the IRRRB and Luigino's entered into a settlement
agreement under which Luigino's agreed to convey the property to the IRRRB, and
the IRRRB agreed to pay Luigino's $0.5 million and release the claims against
Luigino's for payment of liquidated damages of $0.4 million. This income was
partially offset by additional expenses of $0.1 million required to settle the
claim.
7
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion of the financial condition and results of
operations of Luigino's, Inc. (the "Company" or "Luigino's") should be read in
conjunction with the Company's Financial Statements and Notes thereto.
Results of Operations
The following table sets forth, for the periods indicated, the major
components of Luigino's statements of operations expressed as a percentage of
net sales:
<TABLE>
<CAPTION>
Third Fiscal Quarter Ended 40 Weeks Ended
-------------------------- --------------------------
October 8, October 10, October 8, October 10,
2000 1999 2000 1999
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net Sales.................................... 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold........................... 57.5 59.2 58.4 58.2
-------- ----------- ---------- -----------
Gross profit........................... 42.5 40.8 41.6 41.8
Operating (Income) Expenses:
Selling and promotional................ 25.4 25.3 26.7 31.4
General and administrative............. 8.7 8.9 8.9 9.2
Hibbing Settlement..................... 0.0 0.0 0.0 (0.4)
-------- ----------- ---------- -----------
Total operating expenses............... 34.1 34.2 35.6 40.2
Operating income....................... 8.4 6.6 6.0 1.6
Other Income (Expense):
Interest expense....................... (4.8) (5.2) (5.1) (4.9)
Interest income........................ 0.1 0.1 0.1 0.2
Other, net............................. 0.1 0.1 0.1 0.1
-------- ----------- ---------- -----------
Total other expense................ (4.6) (5.0) (4.9) (4.6)
-------- ----------- ---------- -----------
Net Income (Loss)............................ 3.8% 1.6% 1.1% (3.0)%
======== =========== ========== ===========
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Third Fiscal Quarter 2000 compared to Third Fiscal Quarter 1999
Net Sales. The following table sets forth Luigino's net sales by
product line and the percentage change from the prior period:
<TABLE>
<CAPTION>
Third Fiscal Quarter Ended Percentage
--------------------------------------
October 8, 2000 October 10, 1999 Change
--------------- ---------------- -----------
(Dollars in thousands)
<S> <C> <C> <C>
Green Label............ $35,227 $31,981 10.1%
Signature.............. 6,788 8,474 (19.9)
Red Label.............. 7,320 9,186 (20.3)
Black Label............ 7,239 6,453 12.2
Snacks................. 3,409 3,647 (6.5)
Kids................... 3,325 - 100.0
------- ------- -----
$63,308 $59,741 6.0%
======= ======= =====
</TABLE>
8
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Total net sales for the third quarter of 2000 increased 6.0% or $3.6
million, to $63.3 million from $59.7 million in the third quarter of 1999. The
Kids product line was launched in the first quarter of 2000 resulting in an
increase in sales of $3.3 million in the third quarter of fiscal 2000. Green
Label net sales increased $3.2 million and Black Label net sales increased $0.8
million due to the increased market share. Signature net sales decreased $1.7
million, Red Label net sales decreased $1.9 million and Snacks net sales
decreased $0.2 million due to lower distribution.
Canadian sales contributed 9.5%, or $6.0 million, to net sales for the
third quarter of 2000 compared to 11.2%, or $6.7 million, for the third quarter
of 1999. Canadian sales are represented by shipments to Canada rather than
Canadian consumption. Sales decreased due to a change in the Canadian
distributor's inventory strategy to reduce total inventories in the supply
chain.
Volume increases were recorded for Green Label, Black Label and the
introduction of Kids, partially offset by a decrease in Red Label, Signature and
Snacks.
Gross Profit. Gross profit in the third quarter of 2000 increased 10.4%,
or $2.5 million, from $24.4 million in the third quarter of 1999. The increase
in gross profit is a result of the increase in overall sales levels. The gross
margin in the third quarter of 2000 increased to 42.5% of net sales from 40.8%
in the third quarter of 1999. The increase in gross margin is primarily due to
increased efficiency in our Jackson manufacturing facility.
Selling and Promotional Expenses. Selling and promotional expenses for the
third quarter of 2000 increased 6.6%, or $1.0 million, to $16.1 million from
$15.1 million in the third quarter of 1999. The increase resulted primarily
from a $2.5 million increase in sales promotions and advertising expenses
partially offset by a decrease in slotting costs of $1.7 million.
General and Administrative Expenses. General and administrative expenses
for the third quarter of 2000 increased 2.7%, or $0.2 million, to $5.5 million
from $5.3 million in the third quarter of 1999 due to higher amortization
expense.
Operating Income. Operating income for the third quarter of 2000 increased
35.1%, or $1.4 million, to $5.3 million from $3.9 million in the third quarter
of 1999. As a percentage of net sales, operating income increased to 8.4% of
net sales in the third quarter of 2000 from 6.6% in the third quarter of 1999.
The increase resulted from the $2.5 million increase in gross profit, offset by
the $1.0 million increase in selling and promotional expenses, and the $0.1
million increase in general and administrative expenses.
Interest Expense. Interest expense was $3.1 million for the third quarter
of 2000 and for the third quarter of 1999.
Interest Income. Interest income was $0.1 million for the third quarter of
2000 and the third quarter of 1999.
Net Income. For the reasons stated above, net income for the third quarter
of 2000 increased 149.7%, or $1.4 million, to $2.4 million from $1.0 million in
the third quarter of 1999. As a percentage of net sales, net income increased
to 3.7% of net sales in the third quarter of 2000 from 1.6% in the third quarter
of 1999.
9
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Forty weeks ended October 8, 2000 compared to the forty weeks ended October 10,
1999
Net Sales. The following table sets forth Luigino's net sales by
product line and the percentage change from the prior period:
40 Weeks Ended Percentage
---------------------------------
October 8, 2000 October 10, 1999 Change
--------------- ---------------- ---------
(Dollars in thousands)
Green Label.................... $113,123 $106,912 5.8%
Signature...................... 25,107 26,066 (3.7)
Red Label...................... 24,510 28,356 (13.6)
Black Label.................... 23,494 21,947 7.0
Snacks......................... 11,627 11,343 2.5
Kids........................... 5,809 - 100.0
-------- -------- -----
$203,670 $194,624 4.6%
======== ======== =====
Total net sales for the forty weeks ended October 8, 2000 increased
4.6%, or $9.0 million, to $203.7 million from $194.6 million for the forty weeks
ended October 10, 1999. The Kids product line was launched in the first quarter
of 2000 resulting in an increase in net sales of $5.8 million. Green Label net
sales increased $6.2 million and Black Label net sales increased $1.5 million
due to continued growth in both Canada and the U.S. Red Label net sales
decreased $3.9 million and Signature decreased $1.0 million due to lower
distribution.
Canadian net sales contributed 12.6%, or $25.6 million, to net sales
for the forty weeks ended October 8, 2000 compared to 11.1%, or $21.7 million,
for the forty weeks ended October 10, 1999. Canadian sales have benefited from
overall growth in the frozen entree market, new product introduction and stock
required for the new Canadian warehouse.
Volume/Price. Total volume for the forty weeks ended October 8, 2000
increased 4.7% or 938,000 cases. Green Label increased .9% and Black Label
increased 2.2%. Volume increase was also driven by the introduction of Kids
entrees in fiscal year 2000. Red Label volume decreased 12.8% due to increased
competitive activities in the economy end of the frozen entree category. Volume
of Signature and Snacks also declined due to some distribution loss. More
effective use of sales promotions resulted in overall higher pricing.
Gross Profit. Gross profit for the forty weeks ended October 8, 2000
increased 4.2%, or $3.4 million, from $81.3 million for the forty weeks ended
October 10, 1999. The increase in gross profit is a result of the increase in
overall sales levels. The gross margin in the forty weeks ended October 8, 2000
decreased to 41.6% of net sales from 41.8% for the forty weeks ended October 10,
1999. The decrease was primarily due to a slight change of product mix.
Selling and Promotional Expenses. Selling and promotional expenses for
the forty weeks ended October 8, 2000 decreased 11.1%, or $6.8 million, to $54.3
million from $61.1 million for the forty weeks ended October 10, 1999. The
decrease resulted primarily from an $8.8 million decrease in slotting expense, a
$2.4 million decrease in advertising expense, partially offset by a $1.0 million
increase in other selling expenses primarily related to management fees from the
vending business and a $2.1 million increase in trade promotion.
General and Administrative Expenses. General and administrative
expenses for the forty weeks ended October 8, 2000 increased 1.4%, or $0.3
million, to $18.1 million from $17.8 million for the forty weeks ended October
10, 1999. The increase was primarily due to higher amortization expenses.
Hibbing Settlement. During the second quarter of 1999, the Company
reversed charges of $0.8 million recorded in fiscal year 1998 related to the
November 1998 claim made by the Iron Range
10
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Resources and Rehabilitation Board (IRRRB). On April 27, 1999 the IRRRB and
Luigino's entered into a settlement agreement under which Luigino's agreed to
convey the property to the IRRRB and the IRRRB agreed to pay Luigino's $0.5
million and release the claims against Luigino's for payment of liquidated
damages of $0.4 million. This was partially offset by additional expenses of
$0.1 million required to settle the claim.
Operating Income. Operating income for the forty weeks ended October 8,
2000 increased 291.6%, or $9.1 million, to $12.3 million from $3.1 million for
the forty weeks ended October 10, 1999. As a percentage of net sales, operating
income increased to 6.0% of net sales for the forty weeks ended October 8, 2000
compared to 1.6% for the forty weeks ended October 10, 1999. The increase
resulted from the $3.4 million increase in gross profit, the $6.8 million
decrease in selling and promotional expenses, partially offset by the $0.3
million increase in general and administrative expenses, and the impact of the
Hibbing Settlement.
Interest Expense. Interest expense for the forty weeks ended October 8,
2000 increased 9.2%, or $0.9 million, to $10.4 million from $9.5 million for the
forty weeks ended October 10, 1999. The increase resulted primarily from an
increase in the interest on outstanding senior subordinated notes.
Interest Income. Interest income was $0.3 million for the forty weeks
ended October 8, 2000 and for the forty weeks ended October 10, 1999.
Other Income. Other income was $0.1 million for the forty weeks ended
October 8, 2000 and $0.2 million for the forty weeks ended October 10, 1999.
Net Income (Loss). For the reasons stated above, net income for the forty
weeks ended October 8, 2000 increased 138.8%, or $8.2 million, to $2.3 million
as compared to net loss of $(5.9) million for the forty weeks ended October 10,
1999. As a percentage of net sales, net income increased to 1.1% of net sales
for the forty weeks ended October 8, 2000 compared to a net loss of (3.0)% for
the forty weeks ended October 10, 1999.
Liquidity and Capital Resources
Operating activities used $2.1 million of cash for the forty weeks ended
October 8, 2000 and $9.7 million for the forty weeks ended October 10, 1999.
The decrease in cash used resulted from increased net earnings due to increased
gross profit and to decreased selling and promotional expense, partially offset
by higher interest expense and increased working capital requirements for 2000.
Investing activities used $6.3 million of cash for the forty weeks ended
October 8, 2000 and $19.8 million for the forty weeks ended October 10, 1999.
The forty weeks ended October 8, 2000 included the purchase of $5.5 million in
machinery and equipment compared to $5.9 million of purchases of equipment
previously under operating leases and $13.2 million in machinery and equipment
purchases for the forty weeks ended October 10, 1999.
Financing activities generated $8.5 million of cash for the forty weeks
ended October 8, 2000 compared to $28.9 million for the forty weeks ended
October 10, 1999. The forty weeks ended October 8, 2000 includes a $7.7 million
increase in debt, a $0.5 million increase in deferred financing costs and a $0.3
million shareholder notes receivable collection.
2000 Planned Expenditures. As a part of the Company's strategic growth
plan, the Company incurred approximately $8.9 million for slotting expenses for
the forty weeks ended October 8, 2000. The Company plans to incur approximately
$1.1 million in additional slotting expenses in 2000 to introduce new products
and increase product penetration. The Company intends to finance these
expenditures through internally generated funds and borrowings under the
revolving credit agreement.
The Company anticipates continuing to elect Subchapter S treatment under
the U.S. Internal Revenue Code. Consequently, the Company will continue to make
quarterly distributions to the shareholders based upon their estimated tax
liabilities.
11
<PAGE>
Luigino's ability to make scheduled payments of principal, or to pay any
interest or premiums, or to refinance its indebtedness or to fund planned
capital expenditures will depend on future performance, which, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond the Company's control. Based upon
the current level of operations, the Company believes that cash flow from
operations and available cash, together with available borrowings under the
credit agreement, will be adequate to meet the future liquidity needs for at
least the next several years. The Company may, however, need to refinance all
or a portion of the principal of the senior subordinated notes on or before
maturity. There can be no assurance that the business will generate sufficient
cash flow from operations, or that future borrowings will be available under the
credit agreement in an amount sufficient to enable the Company to service
indebtedness or to fund other liquidity needs. In addition, there can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all.
Cautionary Statement
This Form 10-Q contains forward-looking statements within the meaning of
federal securities laws. These statements include statements regarding intent,
belief or current expectations of the Company and its management. These
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties that may cause the Company's actual results
to differ materially from the results discussed in these statements. The
Company's forward-looking statements are subject to risks, uncertainties and
assumptions including, among other things: general economic and business
conditions; the Company's expectations and estimates concerning future financial
performance, financing plans and the impact of competition; anticipated trends
in the Company's industry; and other risks and uncertainties detailed from time
to time in the Company's filings with the Securities and Exchange Commission,
including Exhibit 99 to this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Inflation
The Company believes that the relatively moderate rate of inflation over
the past few years has not had a significant impact on sales or profitability.
Market Risk Considerations
Credit Risk. Financial instruments which potentially subject Luigino's to
significant concentrations of credit risk consist primarily of cash and trade
accounts receivable. The Company maintains cash and cash equivalents and other
financial instruments with various financial institutions. The Company's policy
is to limit exposure to any one institution. When the Company formulates the
investment strategy the Company considers periodic evaluations of the relative
credit standing of these financial institutions. The Company's concentrations
of credit risk for trade accounts receivable are limited due to the large number
of entities comprising the customer base. The Company has an exclusive
distribution agreement with J.M. Schneider Corporation in Canada, which
accounted for 12.6% of net sales for the forty weeks ended October 8, 2000. The
Company does not currently foresee a credit risk with this distributor.
Interest Rate Swap. Interest rate swaps are entered into as a hedge of
underlying debt instruments to effectively change the characteristics of the
interest rate without actually changing the debt instrument. The Company's
exposure to market risk for change in interest rates relates primarily to long-
term debt obligations. At October 8, 2000, there were no interest rate swap
agreements.
12
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PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
In connection with the "safe harbor" provisions of the Private Securities
Litigation and Reform Act of 1995, the Company is hereby filing cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in forward-looking statements of the
Company made by, or on behalf of the Company. See Exhibit 99 to this report.
13
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Description
------ -----------
10.1 Amendment No. 6 and Waiver to Amended and Restated
Credit Agreement
27.1 Financial Data Schedule
99.1 Cautionary Statements for Purposes of the "Safe
Harbor" provisions of the Private Securities
Litigation Reform Act of 1995
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the forty weeks ended October
8, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LUIGINO'S, INC.
Date: 11/21/00 By: /s/ Ronald O. Bubar
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Chief Executive Officer
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