<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) SEPTEMBER 3, 1996
[CAMPBELL SOUP COMPANY -- LOGO]
(Exact name of Registrant as specified in its charter)
New Jersey
State of Incorporation
1-3822
(Commission File Number)
21-0419870
I.R.S. Employer Identification No.
Campbell Place
Camden, New Jersey 08103-1799
Principal Executive Offices
Telephone Number: (609) 342-4800
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<PAGE> 2
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired: See pages F-1
through F-23 of this Report.
Pace Foods, Ltd.
Financial Statements
Years Ended December 31, 1994 and 1993
with Report of Independent Auditors
F-1
<PAGE> 3
Pace Foods, Ltd.
Financial Statements
Years Ended December 31, 1994 and 1993
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . 1
Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Income . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Shareholder's and Partners' Equity . . . . . . . . . . . 5
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
F-2
<PAGE> 4
Report of Independent Auditors
General Partner of
Pace Foods, Ltd.
We have audited the accompanying balance sheets of Pace Foods, Ltd. as of
December 31, 1994 and 1993, and the related statements of income, shareholder's
and partners' equity, and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pace Foods, Ltd. at
December 31, 1994 and 1993 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
Ernst & Young LLP
San Antonio, Texas
June 30, 1995
1
F-3
<PAGE> 5
Pace Foods, Ltd.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
----------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $16,977,918 $945,597
Investments 2,630,097 -
Trade accounts receivable 18,066,761 12,944,862
Inventories 7,612,526 6,067,873
Prepaid expenses 360,111 298,732
Current portion of note receivable from shareholder
32,727,000 4,091,000
Advances to growers 1,636,724 1,910,286
Other receivables 614,353 39,565
----------------------------------------
Total current assets 80,625,490 26,297,915
Intangible assets, net 3,331,537 3,396,708
Property, plant, and equipment, net 25,111,521 26,230,905
Other assets:
Long-term investments 983,072 1,033,072
Notes receivable from shareholder - 32,727,000
Notes receivable principally from officers and employees
1,070,243 1,271,305
Notes receivable growers 941,252 -
Other 139,300 367,245
----------------------------------------
3,133,867 35,398,622
----------------------------------------
Total assets $112,202,415 $91,324,150
========================================
</TABLE>
2
F-4
<PAGE> 6
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
----------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDER'S AND PARTNERS' EQUITY
Current liabilities:
Accounts payable $ 11,438,142 $ 8,141,586
Accrued expenses 4,689,795 5,681,372
Revolving line of credit 20,000,000 -
----------------------------------------
Total current liabilities 36,127,937 13,822,958
Other accrued liabilities 8,678,254 5,821,318
Shareholder's and partners' equity:
Common stock, par value, $.01 per share; authorized
1,000 shares; issued and outstanding 100 shares
- 1
Retained earnings - 71,679,873
Unrealized holding loss on investments (111,283) -
General partner's capital 3,064,467 -
Limited partner's capital 64,443,040 -
----------------------------------------
Total shareholder's and partners' equity 67,396,224 71,679,874
----------------------------------------
Total liabilities and shareholder's and partners' equity
$112,202,415 $91,324,150
========================================
</TABLE>
See accompanying notes.
3
F-5
<PAGE> 7
Pace Foods, Ltd.
Statements of Income
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
------------------------------------------------
<S> <C> <C> <C>
Net sales $239,697,067 $211,977,203 $195,621,023
Cost of sales 120,927,833 108,557,940 99,384,109
------------------------------------------------
Gross profit 118,769,234 103,419,263 96,236,914
Operating expenses:
Selling 59,728,310 51,284,854 43,246,896
General and administrative 11,940,841 17,946,332 14,918,290
-----------------------------------------------
Operating profit 47,100,083 34,188,077 38,071,728
Other income (expense):
Amortization expense (173,277) (206,135) (206,135)
Interest expense (1,160,807) (3,697,764) (4,310,008)
Interest income - note receivable 3,395,018 3,817,209 4,285,894
Investment income 552,060 1,183,686 715,105
Unrealized loss on short accounts (2,507) (24,259) (2,525)
Equity in income of long-term investments (41,113) - 5,185
Gain (loss) on sale of investments (169,873) 89,425 350
Miscellaneous (expense) income (1,069,699) 38,488 103,634
-----------------------------------------------
Income before taxes and extraordinary item 48,429,885 35,388,727 38,663,228
State income taxes 16,342 1,020,045 1,298,487
-----------------------------------------------
Income before extraordinary item 48,413,543 34,368,682 37,364,741
Extraordinary item:
Loss on early extinguishment of debt (less applicable
state income taxes of $105,935)
- 2,248,170 -
-----------------------------------------------
Net income $48,413,543 $32,120,512 $37,364,741
===============================================
</TABLE>
See accompanying notes.
4
F-6
<PAGE> 8
Pace Foods, Ltd.
Statements of Shareholder's and Partners' Equity
<TABLE>
<CAPTION>
C.A.G. C.A.G.
MANAGEMENT, HOLDING, TOTAL
UNREALIZED INC. INC. SHAREHOLDER'S
HOLDING GENERAL LIMITED AND
COMMON STOCK RETAINED LOSS ON PARTNER PARTNER PARTNERS'
SHARES AMOUNT EARNINGS INVESTMENTS CAPITAL CAPITAL EQUITY
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
January 1, 1992 100 $1 $ 49,060,736 $ - $ - $ - $ 49,060,737
Cash distributions paid - - (26,652,786) - - - (26,652,786)
Net income - - 37,364,741 - - - 37,364,741
-----------------------------------------------------------------------------------------------
Balance at
December 31, 1992 100 1 59,772,691 - - - 59,772,692
Cash distributions paid - - (20,173,374) - - - (20,173,374)
Noncash distribution - - (39,956) - - - (39,956)
Net income - - 32,120,512 - - - 32,120,512
-----------------------------------------------------------------------------------------------
Balance at
December 31, 1993 100 1 71,679,873 - - - 71,679,874
Reorganization and
capital restructuring
on January 1, 1994 (100) (1) (71,679,873) - 3,030,300 71,679,874 3,030,300
Unrealized holding gain
on investments - - - (111,283) - - (111,283)
Cash distributions paid - - - - (449,968) (55,166,242) (55,616,210)
Net income - - - - 484,135 47,929,408 48,413,543
-----------------------------------------------------------------------------------------------
Balance at
December 31, 1994 - $- $ - $(111,283) $3,064,467 $ 64,443,040 $ 67,396,224
===============================================================================================
</TABLE>
See accompanying notes.
5
F-7
<PAGE> 9
Pace Foods, Ltd.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
--------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $48,413,543 $ 32,120,512 $ 37,364,741
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 4,776,217 4,255,374 2,794,356
Loss on sale of property, plant, and equipment 135,977 12,056 4,030
Equity in income of long-term investments 50,000 - (5,185)
Loss (gain) on sale of investments 169,873 (89,425) (350)
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivables (5,121,899) 411,051 (980,097)
(Increase) decrease in inventories (1,544,653) 959,808 (1,137,649)
(Increase) decrease in prepaid expenses (61,379) 60,048 52,210
(Decrease) increase in advances to growers (667,690) (514,595) (1,395,691)
(Increase) decrease in other receivables and
other assets (346,843) 2,186,432 (431,014)
Increase in accounts payable and accrued expenses 5,161,915 1,539,241 1,041,755
(Decrease) increase in state income taxes payable - (1,501,398) 1,501,398
--------------------------------------------
Net cash provided by operating activities 50,965,061 39,439,104 38,808,504
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (3,610,196) (8,186,475) (6,616,138)
Proceeds from sale of property, plant, and equipment 14,880 41,280 13,445
Decrease (increase) in notes receivable principally from
officers and employees 201,062 (314,058) (149,028)
Decrease in long-term receivables - - 45,813
(Decrease) increase in payable to broker - (519,918) 519,918
Principal payments on note receivable from shareholder 4,091,000 4,091,000 8,182,000
Purchases of investments (38,073,920) (70,666,738) (51,806,985)
Proceeds from sale of investments 35,162,667 97,899,781 41,815,718
Purchase of intangible (132,323) (51,550) -
--------------------------------------------
Net cash provided by (used in) investing activities (2,346,830) 22,293,322 (7,995,257)
</TABLE>
6
F-8
<PAGE> 10
Pace Foods, Ltd.
Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Principal payments on long-term debt $ - $ (40,909,000) $ (9,091,000)
Proceeds from draw on revolving line of credit 30,000,000 - -
Payments on revolving line of credit (10,000,000) - -
Capital contribution by general partner 3,030,300 - -
Cash distributions paid (55,616,210) (20,173,374) (26,652,786)
------------------------------------------------------
Net cash used in financing activities (32,585,910) (61,082,374) (35,743,786)
------------------------------------------------------
Increase (decrease) in cash and cash equivalents 16,032,321 650,052 (4,930,539)
Cash and cash equivalents
at beginning of year 945,597 295,545 5,226,084
------------------------------------------------------
Cash and cash equivalents
at end of period $ 16,977,918 $ 945,597 $ 295,545
=====================================================
SUPPLEMENTAL DISCLOSURES
Interest paid $ 809,992 $ 4,577,308 $ 4,443,876
State income taxes paid 2,342 2,521,443 -
NONCASH TRANSACTIONS
Investing activities:
Unrealized holding loss on investments $ 111,283 $ - $ -
Distribution of long-term investment - 39,956 -
Transfer of farmer advances to long-term notes
receivable 941,252 - -
</TABLE>
See accompanying notes.
7
F-9
<PAGE> 11
Pace Foods, Ltd.
Notes to Financial Statements
December 31, 1994 and 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND CAPITAL RESTRUCTURING
Pace Foods, Inc., a Delaware corporation (the Company), was incorporated on
November 13, 1991. Effective January 1, 1994, the Company changed its name to
C.A.G. Holding, Inc., a Delaware corporation, and simultaneously transferred
all of its assets and liabilities to Pace Foods, Ltd., a Texas limited
partnership (the Company, Ltd.), in consideration for a 99% limited partnership
interest in the Company, Ltd. Additionally, C.A.G. Management, Inc., a
Delaware corporation, purchased a 1% general partnership interest in the
Company, Ltd. for cash consideration of $3,030,300. Pursuant to the General
Conveyance, Transfer and Assignment dated January 1, 1994, the audited balance
sheet of the Company as of December 31, 1993 became the beginning balance sheet
of the Company, Ltd. C.A.G. Holding, Inc. and C.A.G. Management, Inc. are
owned 100% by the same sole shareholder who was the previous sole shareholder
of the Company prior to the reorganization. The reorganization has not been
retroactively reported in the financial statements as the assets, liabilities,
and operations after the reorganization and capital restructuring are still
owned 100% by the previous sole shareholder of the Company.
The year ended December 31, 1994 represents 100% of the operations of the
Company, Ltd. from January 1, 1994 to December 31, 1994 and the assets and
liabilities of the Company, Ltd. at December 31, 1994.
All references to the "Company" for 1992 and 1993 and "Company, Ltd." for 1994
relate to the same operating assets, liabilities, and operations of Pace Foods.
The capital restructuring had no effect on the ultimate ownership by the sole
shareholder other than legal structure and taxing entities.
DESCRIPTION OF BUSINESS
The Company is a food products manufacturer specializing in tomato-based
products with jalapenos. The Company currently has two primary products: Pace
Picante Sauce, the original product, and Pace Thick & Chunky Salsa.
8
F-10
<PAGE> 12
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include currency on hand, money market accounts,
demand deposits with financial institutions, and all highly liquid financial
instruments purchased with an original maturity of three months or less.
INVESTMENTS
Management determines the appropriate classification of marketable equity and
debt securities at the time of purchase and reevaluates such designation as of
each balance sheet date. At December 31, 1994, all of the Company's marketable
equity and debt securities are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported in a separate component of shareholders'
equity. The cost of securities sold is based on the specific identification
method. Dividends on securities classified as available-for-sale are included
in "investment income."
TRADE ACCOUNTS RECEIVABLE
Accounts receivable are recorded on an accrual basis in the period in which the
product is shipped. Trade accounts receivable is shown, less allowance for
doubtful accounts of $81,290, $82,439, and $81,290 for the years ended
December 31, 1994, 1993, and 1992, respectively. Management has estimated and
recorded an allowance for sales discounts on an accrual basis to recognize
unearned discounts. The Company performs periodic credit evaluations of its
customers' financial condition and generally does not require collateral.
INVENTORIES
The Company's inventories are stated at the lower of cost or market. Costs are
determined using a standard cost method based on a first-in, first-out (FIFO)
basis.
9
F-11
<PAGE> 13
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVANCES TO GROWERS
Advances to growers represent cash advances to third-party growers to be
utilized by such growers in farming operations for the Company. These growers,
located in the U.S. (55% based on pounds to be provided) and in Mexico (45%
based on pounds to be provided) at December 31, 1994 and 1993, grow and harvest
field and row crops for the Company under a contract. Terms of the contract
include a specific price per pound that the Company will pay upon harvest and
delivery of these crops to the Company. There were no reserves for
uncollectible advances for the fiscal years ended December 31, 1993 and 1992.
Advances to growers is shown less reserves for uncollectible advances of
$172,271 as of December 31, 1994.
Advances to growers are recovered when delivery of these crops are made to the
Company. The recovery is based on a contractual agreement with the individual
growers (see Note 12 for purchase commitments). The Company performs periodic
reviews of its growers and determines whether any advances to growers may not
be collectible, and at the time of this determination an allowance is
established with a corresponding charge to expense. The advances to growers
are uncollateralized.
INTANGIBLES
Intangibles consist of the excess of purchase price over the fair value of net
assets acquired, formula and process costs, and trademark and trade name costs.
All trademark and trade name costs relate to Territorial House. Amortization
is computed on a straight-line basis over the useful lives of the assets.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment is stated at cost. The Company provides for
depreciation of property, plant, and equipment using primarily accelerated cost
recovery and modified accelerated cost recovery methods that approximate a
double declining method acceptable under generally accepted accounting
principles. Major renewals and betterments are charged to the property
accounts while replacements, maintenance, and repairs which do not improve or
extend the lives of the respective assets are expensed currently.
10
F-12
<PAGE> 14
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-TERM INVESTMENTS
Long-term investments consist primarily of investments in limited partnerships
and other long-term investments for which no active secondary market exists.
The Company's investments in limited partnerships are accounted for on the
equity basis of accounting.
INCOME TAXES
Federal
For federal income tax purposes, the Company's shareholder elected to be taxed
under the provisions of Subchapter S of the Internal Revenue Code.
Accordingly, the Company did not pay federal income taxes; rather, its income
was passed directly through to its shareholder for the years ended December 31,
1993 and 1992.
As a result of the reorganization and capital restructuring discussed above,
the Company, Ltd., a Texas limited partnership, does not pay federal income
taxes; rather, its income is passed directly through to its general and limited
partners for the period of January 1, 1994 to December 31, 1994.
The Company's federal income tax returns are subject to examination by taxing
authorities. Because the application of tax laws and regulations to many types
of transactions is susceptible to varying interpretations, amounts reported in
the financial statements could be changed at a later date as a result of
examination by taxing authorities.
State
The state of Texas has a provision in its franchise tax statute to include a
tax based on income. Under the law, the amount of franchise tax owed by a
corporation is the greater of .25% of total capital or 4.5% of the net taxable
earned surplus apportioned to Texas sales. Net taxable earned surplus is a
term defined by the tax statute and is based on federal taxable income. As a
result of the law, the Company has recorded the earned surplus portion of the
tax in its financial statements as state income taxes for the years ended
December 31, 1994, 1993, and 1992.
11
F-13
<PAGE> 15
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
As a result of the reorganization discussed above, the Company, Ltd., a Texas
limited partnership, does not pay state income taxes; rather, its income is
passed directly through to its general and limited partners for state income
tax purposes for the period of January 1, 1994 to December 31, 1994.
REVENUE RECOGNITION
Product revenue is recognized when the product is shipped. Sales are solicited
throughout the year, with a concentration in the fall and continuing through
early winter. Sales carry cash, volume, and promotional discounts in
conjunction with volumes purchased and payment terms. Revenue from these sales
are recorded net of a provision for cash discounts that are anticipated to be
earned and deducted at the time of payment by the customer. Additionally,
volume and promotional discounts that are anticipated to be earned and deducted
at the time of payment by the customer are estimated and reserved for as an
accrued liability with a corresponding charge to selling expense. The
estimated discounts represent an average of historical amounts taken and are
adjusted as program terms are changed.
ADVERTISING
Advertising costs of the Company include costs related to broadcast and print
media advertising expenses. Total advertising expense amounted to
approximately $29,520,000, $24,920,000, and $19,169,000 for the years ended
December 31, 1994, 1993, and 1992, respectively. For all periods presented,
advertising costs are expensed as incurred.
EARNINGS AND DISTRIBUTIONS PER SHARE
Earnings and distributions per share have not been calculated in the
accompanying financial statements. For the years ended December 31, 1993 and
1992, all outstanding shares were owned by a sole shareholder. For the year
ended December 31, 1994, the sole shareholder owned 100% interest in both the
general partner and limited partner of the Company, Ltd.
12
F-14
<PAGE> 16
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
2. INVESTMENTS
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective for fiscal years beginning after
December 15, 1993. Under the new rules, debt securities that the Company, Ltd.
has both the positive intent and ability to hold to maturity are carried at
amortized cost. Debt securities that the Company, Ltd. does not have the
positive intent and ability to hold to maturity and all marketable equity
securities are classified as available-for-sale or trading and are carried at
fair value. Unrealized holding gains and losses on securities classified as
available-for-sale are carried as a separate component of shareholders' equity.
Unrealized holding gains and losses on securities classified as trading are
reported in earnings.
The Company, Ltd. adopted the provisions of the new standard for investments
held as of January 1, 1994. In accordance with the Statement, prior period
financial statements have not been restated to reflect the change in accounting
principle. There was no cumulative effect upon adoption in accordance with the
new rules.
The following is a summary of available-for-sale securities held by the Company
at December 31, 1994:
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE SECURITIES
-------------------------------------------------------------
GROSS GROSS
UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Marketable equity securities $ 909,003 $- $ 87,753 $ 821,250
Obligations of states and
governmental subdivisions 1,832,377 - 23,530 1,808,847
-------------------------------------------------------------
$2,741,380 $- $111,283 $2,630,097
=============================================================
</TABLE>
The gross realized loss on the sales of available-for-sale securities totaled
$169,873 for the year ended December 31, 1994. The net adjustment to
unrealized holding losses on available-for-sale securities included as a
separate component of partners' equity totaled $111,283.
13
F-15
<PAGE> 17
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
2. INVESTMENTS (CONTINUED)
The amortized cost of estimated fair value of debt securities at December 31,
1994, by contracting maturity, are shown below:
<TABLE>
<CAPTION>
ESTIMATED
COST FAIR VALUE
-------------------------------
<S> <C> <C>
AVAILABLE-FOR-SALE
Due in one year or less $1,558,526 $1,543,878
Due after one year through five years 273,851 264,969
-------------------------------
$1,832,377 $1,808,847
===============================
</TABLE>
At December 31, 1992, the current portfolio of marketable securities was
carried at the lower of aggregate cost or market. Marketable securities
included in current assets had a cost of $27,143,618 at December 31, 1992. All
investments held at December 31, 1992 were sold in 1993 and a net realized gain
of $89,425 on the sale of all marketable securities was included in the
determination of net income for 1993.
No valuation allowance was recorded in 1992 since the marketable securities
portfolio had an aggregate market value equal to or in excess of aggregate
cost.
A net realized gain of $350 on the sale of marketable securities was included
in the determination of net income for 1992.
The cost of marketable securities sold was based on the first-in, first-out
basis of the shares of each security held at the time of the sale.
3. INVENTORIES
Inventories consist of:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
------------------------------
<S> <C> <C>
Raw materials $2,340,646 $1,796,371
Packaging materials 784,068 706,800
Finished goods 4,487,812 3,564,702
------------------------------
$7,612,526 $6,067,873
==============================
</TABLE>
14
F-16
<PAGE> 18
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
4. NOTE RECEIVABLE FROM SHAREHOLDER
Subsequent to December 31, 1993, the Company transferred its note receivable in
the original amount of $55,000,000 to the Company, Ltd. as a part of the
reorganization discussed in Note 1. The Company, Ltd. renewed the note
receivable to the shareholder for advances of up to an aggregate of $45,000,000.
Terms of the new note include interest at 10.32% on the outstanding balance,
payable quarterly on the 15th day of April, July, October, and January, and a
principal payment of $4,091,000 due on January 15, 1994. The remaining unpaid
principal and interest is due on January 15, 1995. There are certain options of
extension to the shareholder to repay the unpaid principal balance beyond 1995.
Interest income in the amount of approximately $3,395,018, $3,817,209, and
$4,285,894 for the years ended December 31, 1994, 1993, and 1992, respectively,
has been recognized on the note receivable from shareholder.
5. INTANGIBLES
Intangible assets consist of:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993 USEFUL LIVES
-------------------------------------------------
<S> <C> <C> <C>
GOODWILL $ 4,575,249 $ 4,575,249 40 years
Accumulated amortization (1,408,913) (1,294,531)
-----------------------------
Book value 3,166,336 3,280,718
LICENSING AGREEMENT 1,060,000 1,060,000 12 years
Accumulated amortization (1,060,000) (1,001,105)
-----------------------------
Book value - 58,895
PACKAGING 196,687 64,364 5 years
Accumulated amortization (31,486) (7,269)
-----------------------------
Book value 165,201 57,095
-----------------------------
Total net book value $ 3,331,537 $ 3,396,708
=============================
</TABLE>
15
F-17
<PAGE> 19
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993 USEFUL LIVES
--------------------------------------------------------
<S> <C> <C> <C>
Land $5,312,826 $5,312,826 -
Building and plant 7,705,858 7,262,408 31.5 years
Furniture and fixtures 1,518,752 1,522,492 7 years
Leasehold improvements 1,085,887 926,833 31.5 years
Machinery and equipment 24,951,963 22,352,848 5 - 7 years
Automobiles 153,003 130,315 5 years
Projects in process 2,097,719 2,029,273 -
----------------------------------
42,826,008 39,536,995
Less accumulated
depreciation 17,714,487 13,306,090
-----------------------------------
$25,111,521 $26,230,905
===================================
</TABLE>
7. ACCRUED EXPENSES
Accrued expenses shown in the current liabilities section of the financial
statements consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
------------------------------
<S> <C> <C>
Accrued salaries, benefits, and
related expenses $1,927,931 $2,385,835
Accrued selling expenses 2,027,889 2,756,719
Accrued interest payable 281,111 -
Other 452,864 538,818
------------------------------
$4,689,795 $5,681,372
==============================
</TABLE>
16
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<PAGE> 20
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
8. OTHER ACCRUED LIABILITIES
Other accrued liabilities represents an executive incentive bonus program. The
incentive bonus is calculated on an annual basis as a multiple of adjusted
company earnings. The incentive bonus is expensed as earned although payout of
earned incentive bonus amounts does not occur until a future period and is in
accordance with the plan's payout provisions.
9. REVOLVING LINE OF CREDIT AND LONG-TERM DEBT
At December 31, 1993, the Company had a $10,000,000 revolving line of credit at
prime or LIBOR plus .75%, expiring on January 15, 1994. As of December 31,
1993, the Company had $10,000,000 available. In addition, the Company had
$2,000,000 available for standby letters of credit, of which $1,193,000 was
outstanding as of December 31, 1993. Available amounts expired in June of the
following year.
In January 1994, the Company, Ltd. refinanced the Company's original
$10,000,000 revolving line of credit to $12,000,000, at prime or LIBOR plus
.75%, of which $5,000,000 could be used for standby letters of credit. In
March of 1994, the Company entered into a new $40,000,000 credit agreement
which expires on May 1, 1997. Under the new credit agreement, the Company must
maintain a $20,000,000 promissory note with the financial institution to have
an additional $20,000,000 committed by the financial institution. The credit
agreement provides an interest rate of prime or LIBOR plus .75%. Loans drawn
on the additional $20,000,000 commitment are subject to bid from other
financial institutions thereby causing these interim bid loans to charge
interest at or below prime or LIBOR plus .50%. Interim bid loans accepted from
other financial institutions reduce the additional $20,000,000 committed by the
financial institution. Amounts outstanding with the primary financial
institution cannot exceed $30,000,000. At December 31, 1994, the Company, Ltd.
had available $20,000,000 under the $40,000,000 credit agreement. Commitment
fees are paid by the Company, Ltd. for unused committed funds available at the
financial institution at a rate of .25%. The credit agreement has restrictive
loan covenants. Loan covenants restrict the Company's indebtedness to the
general and limited partners, defines acceptable investments, and limits
capital expenditures as well as distributions. Covenants also include certain
covenant calculations based on financial results. As of December 31, 1994, the
17
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<PAGE> 21
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
9. REVOLVING LINE OF CREDIT AND LONG-TERM DEBT (CONTINUED)
Company, Ltd. has $20,000,000 outstanding under its credit agreement. The
outstanding principal balance is due on May 1, 1997, with interest payable
quarterly and all unpaid interest due at maturity.
Additionally, with the new credit agreement, the Company, Ltd. replaced the
$12,000,000 line of credit with a new $8,000,000 line of credit, which expires
on March 22, 1995, at prime or LIBOR plus .75%, of which $2,000,000 can be used
for standby letters of credit. The outstanding principal balance is due on
March 22, 1995, with interest payable quarterly and all unpaid interest due at
maturity. As of December 31, 1994, the Company, Ltd. had not utilized the
$8,000,000 line of credit other than for approximately $1,000,000 in
outstanding letters of credit.
The Company had long-term debt agreements with financial institutions amounting
to $36,818,000, as well as a current portion of $4,091,000 as of December 31,
1992, which were subsequently paid in full during 1993. The early
extinguishment of debt resulted in prepayment penalty interest of $2,248,170,
net of state income taxes of $105,935. The note agreements contained
restrictive covenants which the Company met or had waived by the lender. In
addition, the shareholder was restricted to cash withdrawals based on certain
financial ratios and a percentage of net earnings as defined by the note
agreements.
10. EMPLOYEE BENEFIT PLANS
PENSION PLAN
The Company has a defined benefit pension plan (Pension Plan) covering
substantially all of its associates. The benefits are based upon a formula
utilizing years of service and a percentage of monthly income in relationship
to projected Social Security Compensation at age 65. The Company's funding
policy is to contribute amounts to the plan sufficient to meet the minimum
funding requirements set forth in the Employee Retirement Income Security Act
of 1974, plus such additional amount as the Company may determine to be
appropriate from time to time.
Contributions provide for benefits attributed to service to date and also for
those expected to be earned in the future.
18
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<PAGE> 22
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the Pension Plan's funded status and amounts
recognized in the Company's balance sheet at 1994, 1993, and 1992:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993 1992
-------------------------------------------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $1,368,734, $1,462,194,
and $229,571 at December 31, 1994, 1993,
and 1992, respectively $1,724,145 $1,758,909 $1,139,361
=================================================
Projected benefit obligation for service rendered
to date $3,223,911 $3,521,347 $2,483,864
Plan assets at fair value, primarily cash
equivalents, marketable securities, and bonds 2,091,427 1,425,954 1,367,455
-------------------------------------------------
Plan assets deficient of projected benefit
obligations 1,132,484 2,095,393 1,116,409
Unrecognized net gain from past experience
different from that assumed and effects of
changes in assumptions 1,069,710 1,560,273 964,393
-------------------------------------------------
Current pension obligation accrued $ 62,774 $ 535,120 $ 152,016
=================================================
Net pension cost included the following
components:
Service cost - benefits earned during the
period $ 408,508 $ 405,441 $ 303,300
Interest cost on projected benefit
obligations 190,051 196,487 143,056
(Gain)/loss on plan assets 186,169 (56,982) (42,390)
Net amortization and deferral (306,582) (35,188) (75,220)
-------------------------------------------------
Net periodic pension cost $ 478,146 $ 509,758 $ 328,746
=================================================
</TABLE>
19
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<PAGE> 23
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
The discount rate was 7.5%, 7.25%, and 8.0% at December 31, 1994, 1993, and
1992, respectively. The expected long-term rate of return on plan assets was
8.5% in 1994, 1993, and 1992.
ASSOCIATE SAVINGS PLAN
The Company has an Associate Savings Plan covering all eligible associates of
the Company who have completed one year of service. The Company matches up to
75% of the associates' contributions with a ceiling on the matching of 4% of
the participant's compensation. The Company contributed approximately $80,405,
$71,085, and $116,000 for the years ended 1994, 1993, and 1992, respectively.
The associate contribution limitations are determined by formulas which limit
the upper one-third of the plan members from contributing amounts that would
cause the Plan to be top-heavy. The overall contribution is limited to 14% of
the associate's compensation.
11. RELATED PARTY TRANSACTIONS
The Company had loans to officers amounting to approximately $1,070,000 and
$951,000 for the years ended December 31, 1994 and 1993, respectively.
Additionally, the Company has a receivable due from its shareholder
(see Note 4).
12. COMMITMENTS
As of December 31, 1993, the Company had outstanding purchase commitments of
$35,012,243 and $265,241, respectively, for raw materials and machinery and
equipment expiring at various dates through 1994. At December 31, 1994,
purchase commitments were $37,337,392 and $250,000, respectively, for raw
materials and machinery and equipment expiring at various dates through 1994
and 1995.
In addition, at December 31, 1993, the Company had outstanding purchase
commitments expiring at various dates in 1994 of $12,510,005 to growers for the
purchase of field and row crops to be harvested and delivered to the Company
after December 31, 1993. Outstanding purchase commitments to growers at
December 31, 1994 amounted to $22,076,230 and expire at various dates in 1995.
20
F-22
<PAGE> 24
Pace Foods, Ltd.
Notes to Financial Statements (continued)
December 31, 1994 and 1993
12. COMMITMENTS (CONTINUED)
The Company leases certain of its inventory warehouses and office space under
operating leases expiring at various dates through 1994. Terms of these
agreements generally range from 1 - 5 years and may include renewal options for
various terms of up to 10 years. Total rental expense for operating leases
amounted to $1,195,387, $651,278, and $860,238 for the years ended December 31,
1994, 1993, and 1992, respectively.
The minimum rental commitments under all operating leases with initial or
remaining terms of more than one year are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1994 1993
------------------------------
<S> <C> <C>
1994 $ - $1,026,531
1995 1,028,228 968,283
1996 856,382 803,806
1997 668,154 664,430
1998 529,196 527,198
1999 and thereafter - -
------------------------------
$3,081,960 $3,990,248
==============================
</TABLE>
13. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to administrative expenses amounted to
$1,444,742, $1,386,204, and $2,281,580 for the years ended December 31, 1994,
1993, and 1992, respectively.
14. CONTINGENCIES
At December 31, 1994, 1993, and 1992, the Company was involved in certain
claims. Management believes that the ultimate outcome of these claims is not
determinable at December 31, 1994 and 1993, if settled, would not have a
materially adverse effect on the Company's financial statements.
15. SUBSEQUENT EVENT
On January 30, 1995, certain assets and liabilities of Pace Foods, Ltd. were
acquired by Campbells Soup Company in a transaction accounted for as a purchase.
Subsequent to the sale of Pace Foods, Ltd. the shareholder paid discretionary
bonuses to employees and executives of the Company amounting to approximately
$35 million.
21
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<PAGE> 25
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, CAMPBELL SOUP COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED HEREUNTO DULY AUTHORIZED.
CAMPBELL SOUP COMPANY
BY: /s/ JOHN J. FUREY
--------------------------------
JOHN J. FUREY
CORPORATE SECRETARY
DATE: SEPTEMBER 3, 1996
22
