UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 25, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
File Number 0-20539
PRO-FAC COOPERATIVE, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-6036816
(State or other jurisdiction of (IRS Employer
incorporation or organization Identification Number)
90 Linden Place, PO Box 682, Rochester, NY 14603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (716) 383-1850
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 twelve months (or 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 October 30, 1999.
Common Stock - 2,040,568
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statement of Operations and Net Proceeds
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Quarter Ended
September 25, September 26,
1999 1998
<S> <C> <C>
Net sales $ 296,248 $ 182,579
Cost of sales (211,454) (135,882)
---------- ----------
Gross profit 84,794 46,697
Selling, administrative, and general expense (63,188) (34,883)
Income from Great Lakes Kraut Company 491 636
Gain on sale of aseptic operations 0 64,202
---------- ----------
Operating income 22,097 76,652
Interest expense (20,649) (8,336)
---------- ----------
Income before taxes, dividends, allocation of net proceeds, and
extraordinary item 1,448 68,316
Tax provision (1,045) (25,007)
---------- ----------
Income before dividends, allocation of net proceeds, and
extraordinary item 403 43,309
Extraordinary item relating to the early extinguishment of debt
(net of income taxes) 0 (18,024)
---------- ----------
Net income $ 403 $ 25,285
========== ==========
Allocation of net proceeds:
Net income $ 403 $ 25,285
Dividends on common and preferred stock (2,103) (1,978)
---------- ----------
Net (deficit)/proceeds (1,700) 23,307
Allocation from/(to) earned surplus 1,700 (21,302)
---------- ----------
Net proceeds available to members $ 0 $ 2,005
========== ==========
Net proceeds available to members:
Estimated cash payment $ 0 $ 501
Qualified retains 0 1,504
---------- ----------
Net proceeds available to members $ 0 $ 2,005
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Balance Sheet(Unaudited)
(Dollars in Thousands) ASSETS
<CAPTION>
September 25, June 26, September 26,
1999 1999 1998
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 10,832 $ 6,540 $ 9,083
Accounts receivable, trade, net 114,017 88,249 105,374
Accounts receivable, other 14,695 9,848 23,038
Income taxes refundable 4,079 11,295 0
Current deferred tax asset 16,160 16,160 13,336
Inventories -
Finished goods 410,091 284,863 349,451
Raw materials and supplies 78,195 50,057 45,829
---------- ---------- ----------
Total inventories 488,286 334,920 395,280
---------- ---------- ----------
Current investment in CoBank 1,602 2,403 1,330
Prepaid manufacturing expense 114 18,217 98
Prepaid expenses and other current assets 22,938 27,883 17,288
---------- ---------- ----------
Total current assets 672,723 515,515 564,827
Investment in CoBank 19,693 19,693 22,377
Investment in Great Lakes Kraut Company 7,170 6,679 7,223
Property, plant, and equipment, net 364,118 367,255 317,025
Assets held for sale, at net realizable value 1,172 890 2,711
Goodwill and other intangible assets, net 262,059 260,733 321,022
Other assets 25,615 25,714 24,477
---------- ---------- ----------
Total assets $1,352,550 $1,196,479 $1,259,662
========== ========== ==========
Liabilities and Shareholders' and Members' Capitalization
Current liabilities:
Notes payable $ 165,600 $ 54,900 $ 94,000
Current portion of obligations under capital leases 208 208 256
Current portion of long-term debt 16,580 8,670 1,023
Accounts payable 124,876 107,159 96,930
Income taxes payable 0 0 13,212
Accrued interest 11,552 5,974 690
Accrued employee compensation 15,194 15,127 14,329
Other accrued expenses 79,214 64,603 96,209
Dividends payable 0 45 0
Amounts due AgriFrozen growers 1,372 1,453 0
Amounts due members 29,032 20,045 29,946
---------- ---------- ----------
Total current liabilities 443,628 278,184 346,595
Obligations under capital leases 568 568 503
Long-term debt 694,761 702,322 687,087
Deferred income tax liabilities 23,072 23,072 34,644
Other non-current liabilities 31,886 32,222 26,623
Minority interest in AgriFrozen 8,000 8,000 0
---------- ---------- ----------
Total liabilities 1,201,915 1,044,368 1,095,452
---------- ---------- ----------
Commitments and contingencies
Class B cumulative redeemable preferred stock liquidation preference $10 per
share, authorized - 500,000 shares; issued and
outstanding 26,061, 26,061, and 27,043 shares, respectively 261 261 270
Common stock, par value $5, authorized - 5,000,000 shares
September 25, June 26, September 26,
1999 1999 1998
---------- --------- -------------
Shares issued 2,040,568 1,995,740 1,834,805
Shares subscribed 346,229 384,649 737,935
--------- --------- ---------
Total subscribed and issued 2,386,797 2,380,389 2,572,740
Less subscriptions receivable in installments (346,229) (384,649) (737,935)
--------- --------- ---------
Total issued and outstanding 2,040,568 1,995,740 1,834,805 10,203 9,979 9,174
Shareholders' and members' capitalization: ========= ========= =========
Retained earnings allocated to members 25,573 25,573 31,264
Non-qualified allocation to members 2,050 2,050 2,660
Non-cumulative preferred stock, par value $25; authorized - 5,000,000 shares;
issued and outstanding - 39,635,
39,635, and 45,001, respectively 991 991 1,125
Class A cumulative preferred stock, liquidation preference
$25 per share; authorized - 10,000,000 shares; issued and
outstanding 3,694,495, 3,694,495 and 3,503,199 shares,
respectively 92,362 92,362 87,580
Earned surplus 19,958 21,658 32,750
Accumulated other comprehensive income:
Minimum pension liability adjustment (763) (763) (608)
Cumulative foreign currency adjustment 0 0 (5)
---------- ---------- -----------
Total shareholders' and members' capitalization 140,171 141,871 154,766
---------- ---------- ----------
Total liabilities and capitalization $1,352,550 $1,196,479 $1,259,662
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
Quarter Ended
September 25, September 26,
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 403 $ 25,285
Amounts payable to members 0 (501)
Adjustments to reconcile net income to net cash used in operating activities:
Extraordinary item relating to the early extinguishment of debt (net of income taxes) 0 18,024
Gain on sale of aseptic operations 0 (64,202)
Depreciation 8,466 4,385
Amortization of goodwill and other intangibles 2,105 926
Amortization of debt issue costs and discount on subordinated promissory note 1,140 200
Equity in undistributed earnings of Great Lakes Kraut Company (491) (636)
Change in assets and liabilities:
Accounts receivable (30,615) (40,670)
Inventories (135,263) (63,732)
Income taxes refundable/(payable) 7,216 19,629
Accounts payable and other accrued expenses 37,587 (12,796)
Amounts due to members 8,987 9,310
Other assets and liabilities 3,984 (3,034)
----------- -----------
Net cash used in operating activities (96,481) (107,812)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (8,672) (4,094)
Proceeds from disposals 273 83,000
Proceeds from investment in CoBank 801 664
Cash paid for acquisitions 0 (442,918)
----------- -----------
Net cash used in investing activities (7,598) (363,348)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of short-term debt 110,700 177,000
Repayment of short-term debt 0 (83,000)
Proceeds from issuance of long-term debt 0 677,100
Payments on long-term debt (450) (276,450)
Cash paid for debt issuance costs 0 (17,523)
Issuances of common stock 224 45
Cash dividends paid (2,103) (1,978)
----------- -----------
Net cash provided by financing activities 108,371 475,194
----------- -----------
Net change in cash and cash equivalents 4,292 4,034
Cash and cash equivalents at beginning of period 6,540 5,049
----------- -----------
Cash and cash equivalents at end of period $ 10,832 $ 9,083
=========== ===========
<FN>
(Table continued on next page)
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Table continued from previous page)
<CAPTION>
Quarter Ended
September 25, September 26,
1999 1998
------------------ -------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Acquisition of Dean Foods Vegetable Company -
Accounts receivable $ 24,201
Current deferred tax asset 30,645
Inventories 195,674
Prepaid expenses and other current assets 6,374
Property, plant and equipment 154,527
Assets held for sale at net realizable value 49
Goodwill and other intangible assets 182,010
Accounts payable (40,865)
Accrued employee compensation (8,437)
Other accrued expenses (75,778)
Long-term debt (2,752)
Subordinated promissory note (22,590)
Other assets and liabilities, net (2,453)
----------
$ 440,605
==========
Acquisition of J.A. Hopay Distributing Co., Inc. -
Accounts receivable $ 420
Inventories 153
Property, plant and equipment 51
Goodwill and other intangible assets 3,303
Other accrued expenses (251)
Obligation for covenant not to compete (1,363)
----------
$ 2,313
==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
Pro-Fac Cooperative, Inc. ("Pro-Fac" or the "Cooperative") is an agricultural
cooperative which processes and markets crops grown by its members through its
wholly-owned subsidiary Agrilink Foods, Inc. ("Agrilink") and through its
subsidiary PF Acquisition II, Inc. in which it has a controlling interest. PF
Acquisition II, Inc. conducts business under the name AgriFrozen Foods
("AgriFrozen").
Agrilink has four primary product lines including: vegetables, fruits, snacks,
and canned meals. AgriFrozen has vegetables as its one primary product line. The
majority of each of the product lines' net sales are within the United States.
In addition, all of the Cooperative's operating facilities, excluding one in
Mexico, are within the United States.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and, in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of operations for
these periods. The following summarizes the significant accounting policies
applied in the preparation of the accompanying financial statements. These
financial statements should be read in conjunction with the financial statements
and accompanying notes contained in the Pro-Fac Cooperative, Inc. Form 10-K/A-1
for the fiscal year ended June 26, 1999.
Consolidation: The consolidated financial statements include the Cooperative and
its subsidiaries, Agrilink and AgriFrozen. The financial statements are after
elimination of intercompany transactions and balances. Investments in affiliates
owned more than 20 percent but not in excess of 50 percent are recorded under
the equity method of accounting.
Reclassification: Certain items for fiscal 1999 have been reclassified to
conform with the current presentation.
NOTE 2. ACQUISITIONS
Agripac Frozen Vegetable Business: On February 23, 1999, AgriFrozen acquired the
frozen vegetable business of Agripac, Inc. ("Agripac"), an Oregon cooperative.
AgriFrozen was formed in January 1999 under the corporation laws of New York. On
January 4, 1999 Agripac filed a voluntary petition under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Oregon. On January 22, 1999 Agripac, as debtor-in-possession, filed a motion
with the Bankruptcy Court for authority to sell substantially all of the assets
comprising its frozen food processing business. The bankruptcy court confirmed
the sale of Agripac's frozen food processing assets to AgriFrozen by an order
entered on February 18, 1999.
The net purchase price for the assets was $80.5 million. AgriFrozen paid an
additional $7.8 million in related expenses, including $6.4 million to prior
member-growers of Agripac to obtain crop delivery agreements with AgriFrozen,
and transaction expenses and miscellaneous costs totaling $1.4 million.
AgriFrozen expects to pay an additional $1.2 million in severance costs
associated with the acquisition and the implementation of AgriFrozen's business
plan. In connection with, and as a condition to the consummation of the
acquisition, AgriFrozen entered into a sufficient number of crop delivery
contracts with prior member growers of Agripac acceptable to AgriFrozen.
The acquisition was accounted for under the purchase method of accounting. Under
purchase accounting tangible and identifiable intangible assets acquired are
recorded at their respective fair values.
In order to consummate the acquisition, AgriFrozen (i) entered into a credit
facility with CoBank (the "CoBank Credit Facility") providing for $30 million of
term loan borrowings and up to $60 million of revolving credit borrowings (the
"CoBank Revolving Credit Facility") and (ii) issued a $12 million Subordinated
Promissory Note to CoBank. Neither Pro-Fac nor Agrilink guaranteed the debts of
AgriFrozen or otherwise pledged any of their respective properties as security
for the CoBank financing. In fact, all of AgriFrozen's indebtedness is expressly
without recourse to Pro-Fac and Agrilink.
<PAGE>
Phase I environmental audits were performed on the facilities acquired from
Agripac, including lease properties. A number of environmental conditions
requiring remedial action have been identified, but none of them individually,
or in the aggregate, are expected to exceed the $4.0 million of debt reduction
for environmental remediation to be provided by CoBank.
As part of its business strategy, AgriFrozen has also entered into an
administrative services agreement with Agrilink to provide it with certain
management consulting and administrative services.
The effects of the Agripac acquisition are not material and accordingly, have
been excluded from the pro forma information presented below.
Dean Foods Vegetable Company: On September 24, 1998, Agrilink acquired the Dean
Foods Vegetable Company ("DFVC"), the frozen and canned vegetable business of
Dean Foods Company ("Dean Foods"), by acquiring all the outstanding capital
stock of Dean Foods Vegetable Company and Birds Eye de Mexico SA de CV (the
"DFVC Acquisition"). In connection with the DFVC Acquisition, Agrilink sold its
aseptic business to Dean Foods. Agrilink paid $360 million in cash, net of the
sale of the aseptic business, and issued to Dean Foods a $30 million unsecured
subordinated promissory note due November 22, 2008 (the "Dean Foods Subordinated
Promissory Note"), as consideration for the DFVC Acquisition. Agrilink had the
right, exercisable until July 15, 1999, to require Dean Foods, jointly with
Agrilink, to treat the DFVC Acquisition as an asset sale for tax purposes under
Section 338(h)(10) of the Internal Revenue Code. On April 15, 1999, Agrilink
paid $13.2 million to Dean Foods and exercised the election.
After the DFVC Acquisition, DFVC was merged into Agrilink. DFVC has been one of
the leading processors of vegetables in the United States, selling its products
under well-known brand names, such as Birds Eye, Freshlike and Veg-All, and
various private labels. Agrilink believes that the DFVC Acquisition strengthens
its competitive position by: (i) enhancing its brand recognition and market
position, (ii) providing opportunities for cost savings and operating
efficiencies and (iii) increasing its product and geographic diversification.
The DFVC Acquisition was accounted for under the purchase method of accounting.
Under purchase accounting, tangible and identifiable intangible assets acquired
and liabilities assumed were recorded at their respective fair values. Goodwill
associated with the DFVC Acquisition is being amortized over 30 years.
The following unaudited pro forma financial information presents a summary of
consolidated results of operations of Pro-Fac and DFVC as if the acquisition had
occurred at the beginning of the 1999 fiscal year.
Quarter Ended
September 26, 1998
Net sales $279.7
Income before extraordinary item $ 33.2
Net income $ 16.8
These unaudited pro forma results have been prepared for comparative purposes
only and include adjustments for additional depreciation expense and
amortization and interest expense on acquisition debt. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect at the beginning of the 1999 fiscal year, or of
the future operations of the consolidated entities.
Concurrently with the DFVC Acquisition, Agrilink refinanced its existing
indebtedness (the "Refinancing"), including its 12 1/4 percent Senior
Subordinated Notes due 2005 (the "Old Notes") and its then existing bank debt.
On August 24, 1998, Agrilink commenced a tender offer (the "Tender Offer") for
all the Old Notes and consent solicitation to certain amendments under the
indenture governing the Old Notes to eliminate substantially all the restrictive
covenants and certain events of default therein. Substantially all of the $160
million aggregate principal amount of the Old Notes were tendered and purchased
by Agrilink for aggregate consideration of approximately $184 million, including
accrued interest of $2.9 million. Agrilink also terminated its then existing
bank facility (including seasonal borrowings) and repaid the $176.5 million,
excluding interest owed and breakage fees outstanding thereunder. Agrilink
recognized an extraordinary item of $18.0 million (net of income taxes) in the
first quarter of fiscal 1999 relating to this refinancing.
<PAGE>
In order to consummate the DFVC Acquisition and the Refinancing and to pay the
related fees and expenses, Agrilink: (i) entered into a new credit facility (the
"New Credit Facility") providing for $455 million of term loan borrowings (the
"Term Loan Facility") and up to $200 million of revolving credit borrowings (the
"Revolving Credit Facility"), (ii) entered into and drew upon a $200 million
bridge loan facility (the "Subordinated Bridge Facility") and (iii) issued the
$30 million Subordinated Promissory Note to Dean Foods. The Subordinated Bridge
Facility was repaid during November of 1998 principally with the proceeds from
the issuance of Senior Subordinated Notes (the "New Notes") for $200 million
aggregate principal amount due November 1, 2008. Interest on the New Notes
accrues at the rate of 11-7/8 percent per annum. Debt issue costs of $5.5
million associated with the Subordinated Bridge Facility were expensed during
the quarter ended December 26, 1998.
NOTE 3. AGREEMENTS WITH AGRILINK AND AGRIFROZEN
Agrilink: The contractual relationship between Pro-Fac and Agrilink is defined
in the Pro-Fac Marketing and Facilitation Agreement (the Pro-Fac Marketing
Agreement"). Under the Pro-Fac Marketing Agreement, Agrilink pays Pro-Fac the
commercial market value ("CMV") for all crops supplied by Pro-Fac. CMV is
defined as the weighted average price paid by other commercial processors for
similar crops sold under preseason contracts and in the open market in the same
or competing market area. Although CMV is intended to be no more than the fair
market value of the crops purchased by Agrilink, it may be more or less than the
price Agrilink would pay in the open market in the absence of the Pro-Fac
Marketing Agreement.
Under the Pro-Fac Marketing Agreement, Agrilink is required to have on its board
of directors some persons who are neither members of nor affiliated with Pro-Fac
("Disinterested Directors"). The number of Disinterested Directors must at least
equal the number of directors who are members of Pro-Fac. The volume and type of
crops to be purchased by Agrilink under the Pro-Fac Marketing Agreement are
determined pursuant to its annual profit plan, which requires the approval of a
majority of the Disinterested Directors of Agrilink. In addition, under the
Pro-Fac Marketing Agreement, in any year in which Agrilink has earnings on
products which were processed from crops supplied by Pro-Fac ("Pro-Fac
Products"), Agrilink pays to Pro-Fac, as additional patronage income, up to 90
percent of such earnings, but in no case more than 50 percent of all pretax
earnings (before dividing with Pro-Fac) of Agrilink. In years in which Agrilink
has losses on Pro-Fac Products, Agrilink reduces the CMV it would otherwise pay
to Pro-Fac by up to 90 percent of such losses, but in no case by more than 50
percent of all pretax losses (before dividing with Pro-Fac) of Agrilink.
Additional patronage income is paid to Pro-Fac for services provided to
Agrilink, including the provision of a long term, stable crop supply, favorable
payment terms for crops and the sharing of risks in losses of certain operations
of the business. Earnings and losses are determined at the end of the fiscal
year, but are accrued on an estimated basis during the year. Under the Pro-Fac
Marketing Agreement, Pro-Fac is required to reinvest at least 70 percent of the
additional patronage income in Agrilink.
AgriFrozen: The contractual relationship between Pro-Fac and AgriFrozen is
defined in a Marketing and Facilitation Agreement between Pro-Fac and
AgriFrozen. Under this agreement, AgriFrozen will purchase raw products from
Pro-Fac and will process and market the finished products. AgriFrozen will pay
Pro-Fac CMV for the crops supplied by Pro-Fac. In addition, in any year in which
AgriFrozen has earnings on any products sold which were processed from crops
supplied by Pro-Fac, AgriFrozen will distribute such earnings to members of
Pro-Fac. However, in the event AgriFrozen experiences any losses on Pro-Fac
products, AgriFrozen will deduct the losses from the total CMV payable. The
agreement permits AgriFrozen to pay 20 percent in cash and retain 80 percent of
its earnings on Pro-Fac products as working capital.
Under the Marketing and Facilitation Agreement between AgriFrozen and Pro-Fac,
the board of directors of AgriFrozen is required to consist of: (i) at least
three and as many as five directors who are individuals who currently serve as
directors of Pro-Fac and who are chosen by Pro-Fac's board of directors; (ii)
one director who is nominated by the president of Agrilink from among Agrilink's
management employees; and (iii) any number of disinterested directors who are to
be elected from individuals suggested by the president of Agrilink.
Disinterested directors are persons who are neither employees, shareholders, nor
otherwise affiliated with Pro-Fac or AgriFrozen, but may include a disinterested
director of Agrilink.
<PAGE>
<TABLE>
NOTE 4. DEBT
Summary of Long-Term Debt:
<CAPTION>
September 25, 1999 June 26, September 26,
Agrilink AgriFrozen Total 1999 1998
----------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Term Loan Facility $ 446,400 $ 30,000 $ 476,400 $ 476,600 $ 455,000
Senior Subordinated Notes 200,015 0 200,015 200,015 15
Subordinated Promissory Note (net of discount) 24,056 4,121 28,177 27,378 23,372
Subordinated Bridge Facility 0 0 0 0 200,000
Other 6,749 0 6,749 6,999 9,723
---------- -------- ---------- ---------- ----------
Total debt 677,220 34,121 711,341 710,992 688,110
Less current portion (16,580) 0 (16,580) (8,670) (1,023)
---------- -------- ---------- ---------- ----------
Total long-term debt $ 660,640 $ 34,121 $ 694,761 $ 702,322 $ 687,087
========== ======== ========== ========== ==========
</TABLE>
NOTE 5. OTHER MATTERS
Sale of Canned Vegetable Business: On September 15, 1999, Agrilink and Seneca
Foods Corporation announced they are in negotiation regarding the purchase by
Seneca of Agrilink's Midwest, private label, canned vegetable business. The
transaction will include reciprocal copacking agreements. The parties are
working toward finalizing the agreement by mid November. This transaction does
not include Agrilink's retail branded canned vegetables, Veg-All and Freshlike.
No significant gain or loss is anticipated on this sale.
Restructuring: During the third quarter of fiscal 1999, Agrilink began
implementation of a corporate-wide restructuring program. The overall objectives
of the plan are to reduce expenses, improve productivity, and streamline
operations. The total restructuring charge amounted to $5.0 million and was
primarily comprised of employee termination benefits. Efforts have focused on
the consolidation of operating functions and the elimination of approximately
five percent of the work force. Reductions in personnel include operational and
administrative positions. Through September 25, 1999, $1.9 million of this
charge has been liquidated and the remaining termination benefits will be
liquidated during fiscal 2000.
NOTE 6: OPERATING SEGMENTS
The Cooperative is organized by product line for management reporting with
operating income being the primary measure of segment profitability.
Accordingly, no items below operating earnings are allocated to segments. The
Cooperative's four primary operating segments are as follows: vegetables,
fruits, snacks, and canned meals.
The vegetable product line consists of canned and frozen vegetables, chili
beans, pickles, and various other products. Branded products within the
vegetable category include Birds Eye, Birds Eye Voila!, Freshlike, Veg-All,
McKenzies, Brooks Chili Beans, Farman's and Nalley. The fruit product line
consists of canned and frozen fruits including fruit fillings and toppings.
Branded products within the fruit category include Comstock and Wilderness. The
snack product line consists of potato chips, popcorn and other corn-based snack
items. Branded products within the snacks category include Tim's Cascade Chips,
Snyder of Berlin, Husman, La Restaurante, Erin's, Beehive, Pops-Rite, and Super
Pop. The canned meal product line includes canned meat products such as chilies,
stew, and soups, and various other ready-to-eat prepared meals. Branded products
within the canned meal category include Nalley. Other product lines primarily
represent salad dressings. Branded products within the "other category" include
Bernstein's and Nalley.
<PAGE>
The following table illustrates the Cooperative's operating segment information:
<TABLE>
(Dollars in Millions) Fiscal Years Ended
<CAPTION>
September 25, 1999 September 26, 1998
<S> <C> <C>
Net Sales:
Vegetables $ 200.3 $ 78.8
Fruits 23.3 25.1
Snacks 21.4 21.8
Canned Meals 16.6 14.8
Other 14.7 13.4
--------- --------
Continuing segments 276.3 153.9
Businesses sold or to be sold1 19.9 28.7
--------- --------
Total $ 296.2 $ 182.6
========= ========
Operating income:
Vegetables2 $ 15.0 $ 3.4
Fruits 3.3 2.2
Snacks 1.5 2.0
Canned Meals 1.9 1.4
Other 0.9 0.0
--------- --------
Continuing segments 22.6 9.0
Businesses sold or to be sold1 (0.5) 3.5
--------- --------
Total 22.1 12.5
Gain on sale of aseptic operations 0.0 64.2
--------- --------
Total consolidated operating income 22.1 76.7
Interest expense (20.7) (8.4)
--------- --------
Income before taxes, dividends, allocation of net proceeds
and extraordinary item $ 1.4 $ 68.3
========= ========
<FN>
1 Includes the private label canned vegetable business to be sold in fiscal 2000 and the aseptic and peanut butter businesses sold
in fiscal 1999.
2 The vegetable product line includes earnings derived from Agrilink's investment in Great Lakes Kraut Company of $0.5 million and
$0.6 million in fiscal 2000 and fiscal 1999, respectively.
</FN>
</TABLE>
NOTE 7. SUBSIDIARY GUARANTORS
Kennedy Endeavors, Incorporated and Linden Oaks Corporation wholly-owned
subsidiaries of Agrilink ("Subsidiary Guarantors"), and Pro-Fac, have jointly
and severally, fully and unconditionally guaranteed, on a senior subordinated
basis, the obligations of Agrilink with respect to Agrilink's 11-7/8 percent
Senior Subordinated Notes due 2008 ("New Notes") and the New Credit Facility.
The covenants in the New Notes and the New Credit Facility do not restrict the
ability of the Subsidiary Guarantors to make cash distributions to Agrilink.
Separate financial statements and other disclosures concerning the Subsidiary
Guarantors are not presented because management has determined that such
financial statements and other disclosures are not material. Accordingly, set
forth below is certain summarized financial information derived from unaudited
historical financial information for the Subsidiary Guarantors, on a combined
basis.
<PAGE>
(Dollars in Thousands)
Quarter Ended
September 25, September 26,
1999 1998
------------- --------------
Summarized Statement of Operations:
Net sales $ 18,262 $ 3,331
Gross profit 14,384 1,561
Income from continuing operations 14,132 610
Net income 9,186 396
Summarized Balance Sheet:
Current assets $ 2,511 $ 2,097
Noncurrent assets 215,813 7,080
Current liabilities 5,583 758
On March 2, 1999, Agrilink transferred trademarks valued at $212.6 million to
Linden Oaks Corporation. By consolidating the trademarks into a separate
subsidiary, Agrilink will be able to monitor more closely and efficiently the
benefits associated with its trademarks. The royalty fees that are earned by
Linden Oaks Corporation in connection with the trademarks are insignificant with
respect to the Consolidated Statement of Operations and Net Proceeds.
NOTE 8. OTHER MATTERS
Dividends: Subsequent to quarter end, the Cooperative declared a cash dividend
of $.43 per share on the Class A Cumulative Preferred Stock. These dividends
approximate $1.6 million and were paid on October 29, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The purpose of this discussion is to outline the significant reasons for changes
in the Unaudited Consolidated Statement of Operations and Net Proceeds in the
first quarter of fiscal 2000 versus such periods in fiscal 1999.
Pro-Fac Cooperative, Inc.'s ("Pro-Fac" or the "Cooperative") wholly-owned
subsidiary, Agrilink Foods, Inc. ("Agrilink") has four primary product lines
including: vegetables, fruits, snacks and canned meals. The Cooperative's
subsidiary, AgriFrozen, has vegetables as its one primary product line. The
majority of each of the product lines' net sales are within the United States.
In addition, all of the Cooperative's operating facilities, excluding one in
Mexico, are within the United States.
The vegetable product line consists of canned and frozen vegetables, chili
beans, pickles, and various other products. Branded products within the
vegetable category include Birds Eye, Birds Eye Voila!, Freshlike, Veg-All,
McKenzies, Brooks Chili Beans, Farman's, and Nalley. The fruit product line
consists of canned and frozen fruits including fruit fillings and toppings.
Branded products within the fruit category include Comstock and Wilderness. The
snack product line consists of potato chips, popcorn and other corn-based snack
items. Branded products within the snack category include Tim's Cascade Chips,
Snyder of Berlin, Husman, La Restaurante, Erin's, Beehive, Pops-Rite, and Super
Pop. The canned meal product line includes canned meat products such as chilies,
stews, soups, and various other ready-to-eat prepared meals. Branded products
within the canned meal category include Nalley. The Cooperative's other product
line primarily represents salad dressings. Brand products within this category
include Bernstein's, and Nalley.
The following tables illustrate the results of operations by product line for
the three months ended September 25, 1999 and September 26, 1998.
<PAGE>
EBITDA1,2
(Dollars in Millions)
Quarter Ended
September 25, September 26,
1999 1998
------------------ ------------------
% of % of
$ Total $ Total
----- ------ ------ ------
Vegetables $23.0 70.3% $ 5.9 33.1%
Fruits 3.7 11.4 2.7 15.2
Snacks 2.4 7.3 2.7 15.2
Canned Meals 2.3 7.3 1.9 10.7
Other 1.4 4.0 0.4 2.2
----- ----- ------ -----
Continuing operations 32.8 100.3 13.6 76.4
Businesses sold or to be sold3 (0.1) (0.3) 4.2 23.6
----- ----- ------ -----
Total $32.7 100.0% $ 17.8 100.0%
===== ===== ====== =====
1 Earnings before interest, taxes, depreciation, and amortization ("EBITDA")
is defined as the sum of pretax income, dividends, allocation of net
proceeds, extraordinary item, interest expense, depreciation and
amortization of goodwill and other intangibles.
EBITDA should not be considered as an alternative to net income or cash
flows from operations or any other generally accepted accounting principles
measure of performance or as a measure of liquidity.
EBITDA is included herein because the Cooperative believes EBITDA is a
financial indicator of a Cooperative's ability to service debt. EBITDA as
calculated by the Cooperative may not be comparable to calculations as
presented by other companies.
2 Excludes the gain on sale of aseptic operations. See NOTE 2 to the "Notes
to Consolidated Financial Statements."
3 Represents the operating results of the private label canned vegetable
business to be sold in fiscal 2000 and the operating results of the aseptic
and peanut butter operations sold in fiscal 1999. See NOTES 2 and 5 to the
"Notes to Consolidated Financial Statements."
Net Sales
(Dollars in Millions)
Quarter Ended
September 25, September 26,
1999 1998
------------------- ------------------
% of % of
$ Total $ Total
------ ------ ------ ------
Vegetables $200.3 67.6% $ 78.8 43.2%
Fruits 23.3 7.9 25.1 13.8
Snacks 21.4 7.2 21.8 11.9
Canned Meals 16.6 5.6 14.8 8.1
Other 14.7 5.0 13.4 7.3
------ ----- ------ -----
Continuing segments 276.3 93.3 153.9 84.3
Businesses sold or to be sold1 19.9 6.7 28.7 15.7
------ ----- ------ -----
Total $296.2 100.0% $182.6 100.0%
====== ===== ====== =====
1 Represents net sales of the private label canned vegetable business to be
sold in fiscal 2000 and net sales of the aseptic and peanut butter
operations sold in fiscal 1999. See NOTES 2 and 5 to the "Notes to
Consolidated Financial Statements."
<PAGE>
Operating Income1
(Dollars in Millions)
Quarter Ended
September 25, September 26,
1999 1998
------------------- ------------------
Vegetables $15.0 67.9% $ 3.4 27.2%
Fruits 3.3 14.9 2.2 17.6
Snacks 1.5 6.8 2.0 16.0
Canned Meals 1.9 8.6 1.4 11.2
Other 0.9 4.1 0.0 0.0
----- ----- ----- -----
Continuing operations 22.6 102.3 9.0 72.0
Businesses sold or to be sold2 (0.5) (2.3) 3.5 28.0
----- ----- ----- -----
Total3 $22.1 100.0% $12.5 100.0
===== ===== ===== =====
1 Excludes the gain on sale of aseptic operations. See NOTE 2 to the "Notes
to Consolidated Financial Statements."
2 Represents the operating results of the private label canned vegetable
business to be sold in fiscal 2000 and operating results of the aseptic and
peanut butter operations sold in fiscal 1999. See NOTES 2 and 5 to the
"Notes to Consolidated Financial Statements."
CHANGES FROM FIRST QUARTER FISCAL 2000 TO FIRST QUARTER FISCAL 1999
The net income for the first quarter of fiscal 2000 of $0.4 million represents a
$24.9 million decrease as compared to the first quarter of fiscal 1999 net
income of $25.3 million. Comparability of net income is, however, difficult
because the results of the first quarter of fiscal 1999 were impacted by the
gain on sale of aseptic operations and an extraordinary item relating to the
early extinguishment of debt. In addition, fiscal 2000 results have been
impacted by an increase in interest associated with the acquisition of DFVC on
September 24, 1998 and the acquisition of the frozen vegetable business of
Agripac on February 23, 1999. Accordingly, management believes, to summarize
results, an evaluation of EBITDA from continuing segments, as presented on page
12, is more appropriate as it allows the operations of the business to be
reviewed in a more consistent manner.
EBITDA from continuing segments increased $19.2 million, or 141.2 percent, to
$32.8 million in the first quarter of the current fiscal year from $13.6 million
in the first quarter of the prior fiscal year.
The vegetable product line accounts for $17.1 million of the increase in EBITDA
from continuing segments and is primarily attributable to the DFVC and Agripac
acquisitions. While this operating segment has benefited from the inclusion of
the Birds Eye, Freshlike, and Veg-All brands, the category has been negatively
impacted by market conditions within the frozen private label segment as a
result of lower demand.
The Cooperative's fruit product line showed an improvement of $1.0 million due
to the inclusion in the first quarter of fiscal 1999 of $0.8 million of costs
associated with a new product launch.
The snack segment was negatively impacted by competitive pricing within the
popcorn product line as a result of an increase in production from foreign
countries, such as Argentina.
Canned meals increased $0.4 million primarily due to improvements in volume
within the chili category.
The other product line showed improvements of $1.0 million due to reductions in
various cost components within the dressing category.
Net Sales: Total net sales for the quarter increased $113.6 million, or 62.2
percent, to $296.2 million in the first quarter of fiscal 2000 from $182.6
million in the first quarter of fiscal 1999. Excluding businesses sold or to be
sold, net sales increased by $122.4 million
<PAGE>
to $276.63 million in the first quarter of fiscal 2000 from $153.9 million in
the first quarter of fiscal 1999. This change is attributable to an increase of
$121.5 million within the vegetable product line primarily as a result of the
DFVC and Agripac acquisitions. The Birds Eye, Freshlike, and Veg-All brands
accounted for incremental sales of $86.2 million. In addition, AgriFrozen
accounted for additional sales of $18.0 million. The remaining increase was
attributable to incremental private label and food service sales associated with
the DFVC Acquisition.
Net sales for the fruit product line decreased $1.8 million in the first quarter
of fiscal 2000 to $23.3 million from $25.1 million in the first quarter of
fiscal 1999 primarily as a result of decreased volume within the private label
apple sauce and pie filling categories.
Canned meals increased $1.8 million primarily attributable to improvements in
volume within the chili category and the introduction of Meals for Now, a
ready-to-eat canned meal product, sold under the Nalley label.
The other category, which primarily represents dressings, showed modest
improvements.
Operating Income: Excluding the impact of businesses sold or to be sold and the
gain on sale of aseptic operations, operating income increased from $9.0 million
in the first quarter of fiscal 1999 to $22.6 million in the first quarter of
fiscal 2000. This represents an improvement of $13.6 million or 151.1 percent.
Vegetables showed improvements of $11.6 million or 341.2 percent. The change is
primarily attributable to the DFVC and Agripac acquisitions. Branded products
associated with the DFVC Acquisition accounted for $9.7 million of the increase
while the operations of AgriFrozen contributed $1.3 million.
The Cooperative's fruit category showed an improvement of $1.1 million due to
the inclusion in the first quarter of fiscal 1999 of $0.8 million of costs
associated with a new product launch.
Snacks showed a decline of $0.5 million from $2.0 million in the first quarter
of fiscal 1999 to $1.5 million in the first quarter of fiscal 2000. As
highlighted above, the decline resulted from competitive pressures within the
popcorn category.
Canned meals showed an increase of $0.5 million due primarily to the
improvements in volume within the chili category highlighted above.
The other product category showed improvements due to reductions in various cost
components within the dressing category.
Selling, Administrative, and General Expenses: Selling, administrative, and
general expenses have increased $28.3 million as compared with the first quarter
of the prior fiscal year. The increase is primarily attributable to the DFVC and
Agripac acquisitions and therefore the overall increase of the Cooperative's
size.
Gains on Sale of Aseptic Operations: In conjunction with the DFVC Acquisition,
Agrilink sold its aseptic operation to Dean Foods. The final purchase price of
$80 million was determined in the third quarter of fiscal 1999 based upon a
final appraisal performed by an independent appraiser.
Income from Great Lakes Kraut LLC: This amount represents earnings received from
the investment in Great Lakes Kraut LLC, a joint venture formed between Agrilink
and Flanagan Brothers, Inc. on July 1, 1997. There has been no significant
change in the operations of the joint venture for the first quarter of fiscal
2000 compared with the prior year.
Interest Expense: Interest expense increased $12.3 million to $20.6 million in
the first quarter of fiscal 2000 from $8.3 million in the first quarter of
fiscal 1999. This increase is associated with additional debt to finance the
DFVC and Agripac acquisitions and higher levels of seasonal borrowings to fund
additional working capital requirements due to the increase in the Cooperative's
size.
Tax Provision: The provision for taxes decreased $24.0 million to $1.0 million
in the first quarter of fiscal 2000 from $25.0 million in the first quarter of
fiscal 1999. Of this decrease, $25.0 million is attributable to the provision in
the first quarter of fiscal 1999 associated with the gain on sale of the aseptic
operations. The remaining variance was impacted by the change in earnings before
tax. The Cooperative's effective tax rate is impacted by the net proceeds
distributed to members and the non-deductibility of certain amounts of goodwill.
<PAGE>
Extraordinary Item Relating to the Early Extinguishment of Debt: Concurrently
with the DFVC Acquisition, Agrilink refinanced its existing indebtedness,
including its 12 1/4 percent Senior Subordinated Notes due 2005 and its then
existing bank debt. Premiums and breakage fees associated with early redemptions
and other fees incurred amounted to $18.0 million (net of income taxes of $10.4
million).
LIQUIDITY AND CAPITAL RESOURCES
The following discussion highlights the major variances in the "Unaudited
Consolidated Statement of Cash Flows" for the first quarter of fiscal 2000
compared to the first quarter of fiscal 1999.
Net cash used in operating activities decreased $11.3 million over the first
quarter of the prior fiscal year. This decrease primarily results from variances
within accounts payable and other accruals due to the timing of liquidation of
outstanding balances offset by an increase in inventories due to the harvesting
of crops and related production activities during this time.
Net cash used in investing activities in the first quarter of fiscal 1999 was
impacted by the DFVC Acquisition and the sale of the aseptic operations. The
purchase of property, plant and equipment increased $4.6 million to $8.7 million
for the first quarter of fiscal 2000 from $4.1 million for the first quarter of
fiscal 1999. The increase was primarily utilized to support an additional 19
operating facilities acquired in conjunction with the DFVC and Agripac
acquisitions.
Net cash provided by financing activities in the first quarter of fiscal 1999
was significantly impacted by the DFVC Acquisition and the activities completed
concurrent with the acquisition to refinance existing indebtedness.
AGRILINK DEBT
Borrowings: Under Agrilink's New Credit Facility, Agrilink is able to borrow up
to $200 million for seasonal working capital purposes under the Revolving Credit
Facility. The Revolving Credit Facility may also be utilized in the form of
letters of credit.
As of September 25, 1999, (i) cash borrowings outstanding under the Revolving
Credit Facility were $126.8 million, (ii) there were $14.0 million in letters of
credit outstanding, and (iii) additional availability under the Revolving Credit
Facility, after taking into account the amount of borrowings and letters of
credit outstanding, was $59.2 million. Agrilink believes that the cash flow
generated by operations and the amounts available under the Revolving Credit
Facility provide adequate liquidity to fund working capital needs and capital
expenditures.
Certain financing arrangements require that Pro-Fac and Agrilink meet certain
financial tests and ratios and comply with certain restrictions and limitations.
As of September 25, 1999, Pro-Fac and Agrilink are in compliance with all such
covenants, restrictions, and limitations.
Interest Rate Risk Management: The Cooperative is subject to market risk from
exposure to changes in interest rates based on its financing activities.
Agrilink has entered into certain financial instrument transactions to maintain
the desired level of exposure to the risk of interest rate fluctuations and to
minimize interest expense. More specifically, Agrilink has entered into two
interest rate swap agreements with the Bank of Montreal. The agreements provide
for fixed interest rate payments by Agrilink in exchange for payments received
at the three-month LIBOR rate.
The following is a summary of Agrilink's interest rate swap agreements:
September 25, 1999
Interest Rate Swap:
Variable to Fixed - notional amount $250,000
Average pay rate 4.96 - 5.32%
Average receive rate 5.31%
Maturities through 2001
Agrilink had a two-year option to extend the maturity date on one of the
interest rate swap agreements with a notional amount of $100,000,000. On June 8,
1999, Agrilink sold this option to Bank of Montreal for approximately
$2,050,000. The gain resulting from the sale is being recognized over the
remaining life of the interest rate swap.
<PAGE>
While there is potential that interest rates will fall, and hence minimize the
benefits of Agrilink's hedge position, it is Agrilink's position that on a
long-term basis, the possibility of interest rates increasing exceeds the
likelihood of interest rates decreasing. Agrilink will, however, monitor market
conditions to adjust its position as it considers necessary.
AGRIFROZEN DEBT
Borrowings: Under AgriFrozen's CoBank Credit Facility, AgriFrozen is able to
borrow up to $55.0 million for seasonal working capital purposes under the
CoBank Revolving Credit Facility.
As of September 25, 1999, (i) cash borrowings outstanding under the CoBank
Revolving Credit Facility were $38.8 million, and (ii) additional availability
under the CoBank Revolving Credit Facility, after taking into account the amount
of borrowings, was $16.2 million. AgriFrozen believes that the cash flow
generated by operations and the amounts available under the CoBank Revolving
Credit Facility provide adequate liquidity to fund working capital needs and
capital expenditures.
AgriFrozen's obligations are not guaranteed by Pro-Fac or Agrilink and are
expressly nonrecourse as to Pro-Fac and Agrilink.
Certain financing arrangements require that AgriFrozen meet certain financial
tests and ratios and comply with certain restrictions and limitations. As of
September 25, 1999, AgriFrozen was in compliance with all such covenants,
restrictions, and limitations.
OTHER MATTERS
Restructuring: During the third quarter of fiscal 1999, Agrilink began
implementation of a corporate-wide restructuring program. The overall objectives
of the plan are to reduce expenses, improve productivity, and streamline
operations. The total restructuring charge amounted to $5.0 million and was
primarily comprised of employee termination benefits. Efforts have focused on
the consolidation of operating functions and the elimination of approximately
five percent of the work force. Reductions in personnel include operational and
administrative positions. Through September 25, 1999, $1.9 million of this
charge has been liquidated and the remaining termination benefits will be
liquidated during fiscal 2000.
Short- and Long-Term Trends: The vegetable and fruit portions of the business
can be positively or negatively affected by weather conditions nationally and
the resulting impact on crop yields. Favorable weather conditions can produce
high crop yields and an oversupply situation. This results in depressed selling
prices and reduced profitability on the inventory produced from that year's
crops. Excessive rain or drought conditions can produce low crop yields and a
shortage situation. This typically results in higher selling prices and
increased profitability. While the national supply situation controls the
pricing, the supply can differ regionally because of variations in weather.
The effect of the 1999 growing season on fiscal 2000 financial results cannot be
estimated until late 1999 or early calendar 2000 when harvesting is complete and
when local and national supplies can be determined.
Year 2000 Readiness Disclosure: A full inventory and analysis of business
applications and related software was performed and Agrilink determined that it
will be required to modify or replace certain portions of its software so that
its computer systems will be Year 2000 compliant. These modifications and
replacements have been made for mission critical applications and software and
will continue to be made in conjunction with Agrilink's overall information
systems initiatives.
In addition, Agrilink has contacted non-information technology vendors to ensure
that any of their products that are currently in use can adequately deal with
the change in century. To date, Agrilink has received satisfactory responses
from vendors. Areas being addressed include full reviews of manufacturing
equipment, telephone and voice mail systems, security systems, and other
office/site support systems. Based upon preliminary information, the costs of
addressing potential problems are not expected to have a material adverse impact
on Agrilink's financial position, results of operations, or cash flows in future
periods. Accordingly, the cost of the project is being funded through operating
cash flows.
Agrilink has initiated formal communications with significant suppliers and
customers to determine the extent to which Agrilink is vulnerable to those third
parties' failure to remediate their own Year 2000 issues. However, there can be
no guarantee that the systems of other companies on which Agrilink's systems
rely will be timely converted, or that a failure to convert by another company,
or a conversion that is incompatible with Agrilink's systems, would not have
material adverse effect on Agrilink. Accordingly, Agrilink has devoted the
necessary resources to resolve all significant Year 2000 issues in a timely
manner.
<PAGE>
Based on the progress made to date (which includes compliant systems in place
and in production), Agrilink does not believe any material exposure to
significant business interruption exists. In the event some of the remaining
elements of Agrilink's Year 2000 compliance project are delayed, procedures have
been addressed to ensure alternative workaround initiatives are completed.
Prior to AgriFrozen's acquisition of Agripac's frozen vegetable processing
business, the Cooperative conducted an analysis of Agripac's associated computer
hardware and software systems. Based on this analysis, AgriFrozen has replaced
its computer hardware with year 2000 ready hardware and has entered into a
sublease with Agrilink pursuant to which it will license Agrilink's software
systems. Based on the progress made to date, AgriFrozen does not believe any
material exposure to significant business interruption exists. Also before the
acquisition, Agripac conducted an assessment of its vendors, suppliers and
customers to determine the extent of their year 2000 readiness and Agripac's
potential vulnerability. However, there can be no guarantee that the systems of
other companies on which AgriFrozen's systems rely will be timely converted, or
that a failure to convert by another company, or a conversion that is
incompatible with AgriFrozen's systems, would not have a material adverse effect
on AgriFrozen.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
From time to time, the Cooperative makes oral and written statements that may
constitute "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the Securities and Exchange
Commission ("SEC") in its rules, . regulations, and releases. The Cooperative
desires to take advantage of the "safe harbor" provisions in the Act for
forward-looking statements made from time to time, including, but not limited
to, the forward-looking information contained in the Management's Discussion and
Analysis (pages 11 to 16) and other statements made in this Form 10-Q and in
other filings with the SEC.
The Cooperative cautions readers that any such forward-looking statements made
by or on behalf of the Cooperative are based on management's 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. Among the factors that could impact the
Cooperative's ability to achieve its goals are:
the impact of strong competition in the food industry;
the impact of weather on the volume and quality of raw product;
the inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer acceptance;
the continuation of the Cooperative's success in integrating operations
(including whether the anticipated cost savings in connection with its
acquisitions will be realized and the timing of any such realization), and
the availability of acquisition and alliance opportunities;
the Cooperative's ability to achieve gains in productivity and improvements
in capacity utilization; and
the Cooperative's ability to service debt.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 10-Q
(a) Exhibits
Exhibit Number Description
10.1 First Amendment to Credit Agreement
10.2 Second Amendment to Credit Agreement
10.3 Third Amendment to Credit Agreement
10.4 Fourth Amendment to Credit Agreement
10.5 Fifth Amendment to Credit Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the first quarter of fiscal 2000.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRO-FAC COOPERATIVE, INC.
Date: July 12, 2000 BY: /s/ Stephen R. Wright
---------------- --------------------------------
STEPHEN R. WRIGHT
GENERAL MANAGER
Date: July 12, 2000 BY: /s/ Earl L. Powers
---------------- --------------------------------
EARL L. POWERS
VICE PRESIDENT FINANCE AND
ASSISTANT TREASURER
(Principle Financial Officer and
Principle Accounting Officer)
