SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 25, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Registration Statement (Form S-4) Number 33-56517
CURTICE-BURNS FOODS, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-0845824
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
90 Linden Place, P.O. Box 681, 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 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 25, 1995:
10,000 shares
Page 1 of 26<PAGE>
<PAGE>
Part I. FINANCIAL INFORMATION
INTRODUCTION
Curtice-Burns Foods, Inc. ("Curtice-Burns" or "the Company") is a producer and
marketer of processed food products. In addition, the Company manufactures
cans which are both utilized by the Company and sold to third parties. The
Company sells products in three principal categories: (i) "branded" products,
which are sold under the Company's trademarks, (ii) "private label" products,
which are sold to grocers that in turn use their own brand names on the
products, and (iii) "food service" products, which are sold to food service
distributors and institutions. In fiscal 1994, approximately one-half of the
Company's net sales were branded, and the remainder were split between private
label and food service. The Company operates throughout the United States and
in Western Canada through six operating divisions.
On November 3, 1994 the Company was acquired by Pro-Fac Cooperative, Inc.
("Pro-Fac"), an agricultural cooperative formed under New York State law to
process and market crops grown by its members.
Pro-Fac and the Company were established together in the early 1960s and,
before Pro-Fac's recent acquisition of the Company, had a long-standing
contractual relationship under the Integrated Agreement and similar
predecessor agreements. The Integrated Agreement, which has been superseded
by the Pro-Fac Marketing Agreement, principally governed four arrangements
between Pro-Fac and the Company: Facilities Financing, Operations Financing,
Marketing, and Management. Pro-Fac continues to market its members' crops and
provide other accommodations to the Company, and the Company continues to
provide management services to Pro-Fac, pursuant to the Pro-Fac Marketing
Agreement.
The Acquisition
The acquisition was accomplished through a tender offer for all outstanding
shares of the Company and a subsequent merger of PF Acquisition Corp.
("PFAC"), a wholly-owned subsidiary of Pro-Fac, into the Company. As a result
of the acquisition, the holders of the Class A and Class B common stock of the
Company became entitled to $19.00 per share in cash, the Company became a
wholly-owned subsidiary of Pro-Fac, and the Company assumed all of the
liabilities of PFAC, including liabilities for acquisition indebtedness.
The acquisition was accounted for using the purchase method of accounting.
In recording the transaction, approximately $121.6 million was added to fixed
asset values to bring the assets up to appraised fair market value, and the
asset lives were adjusted to lives deemed appropriate for assets acquired.
The resulting annual depreciation will approximate $23.3 million on all
existing assets at the appraised values. In addition, approximately $94.8
million of goodwill and other intangible assets were recorded as the excess
of purchase cost over net assets acquired. Included in this amount was
approximately $45.1 million for deferred tax adjustments to properly reflect
the effects of the acquisition in accordance with the Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." The
resulting annual amortization of goodwill and other intangible assets will
approximate $2.7 million for goodwill and other intangible assets using a 35-
year amortization period. For purposes of preparing these financial
statements, a preliminary allocation of the purchase price has been made.
Future adjustments will be made to this allocation based upon the final asset
appraisals and analyses.
In connection with the acquisition, PFAC sold $160.0 million of 12.25 percent
Senior Subordinated Notes (the "Notes") due 2005 and entered into a credit
agreement (the "New Credit Agreement") with CoBank, ACB, formerly The
Springfield Bank for Cooperatives (the "Bank"), which provided for a term
loan, a term-loan facility, a seasonal-loan facility, and a letter-of-credit
facility. All <PAGE>
<PAGE>
obligations of PFAC under the Notes and the New Credit Agreement have become
obligations of the Company. Consequently, the Company is more highly
leveraged and has greater interest expense than prior to the acquisition.
Further information concerning the acquisition, how it was accounted for, and
financed is set forth in Amendment No. 1 to the Company's Registration
Statement on Form S-4 (Registration No. 33-56517) which was filed with the
Securities and Exchange Commission on December 16, 1994.
ITEM I - FINANCIAL STATEMENTS
The interim financial statements contained herein are unaudited but, in the
opinion of the management of the Company, include all adjustments (consisting
of normal recurring adjustments and the effects of the acquisition) necessary
for a fair presentation of the results of operations for these periods. The
results of operations for the interim periods are not necessarily indicative
of the results of operations for the full year. The Company is a wholly-owned
subsidiary of Pro-Fac.
In addition, the interim financial statements contained herein present the
results of the Company during the period prior to its acquisition by Pro-Fac
(the "Predecessor Entity") as well as the period subsequent to its November
3, 1994 acquisition (the "Successor Entity"). The financial statements of the
Predecessor Entity and Successor Entity are not comparable in certain respects
because of differences between the cost bases of the assets held by the
Predecessor Entity compared to that of the Successor Entity as well as the
effect on the Successor Entity's operations for adjustments to depreciation,
amortization, and interest expense.
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Operations
(Dollars in Thousands)
<CAPTION>
Three Months Ended
3/25/95 3/26/94
Successor Predecessor
<S> <C> <C>
Net sales $180,357 $189,455
Cost of sales 126,779 134,166
Gross profit 53,578 55,289
Other selling, administrative, and
general expenses (40,207) (45,357)
Operating income before dividing with Pro-Fac 13,371 9,932
Interest expense (10,509) (4,285)
Pretax earnings before dividing with Pro-Fac 2,862 5,647
Pro-Fac share of earnings (1,436) (2,517)
Income before taxes 1,426 3,130
Provision for taxes (974) (1,479)
Net income $ 452 $ 1,651
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE> Curtice-Burns Foods, Inc.
Consolidated Statement of Operations
(Continued)
(Dollars in Thousands)
<CAPTION>
Fiscal 1995 Fiscal 1994
6/26/94 - 11/3/94 - 6/27/93 -
11/3/94 3/25/94 3/26/94
Predecessor Successor Predecessor
<S> <C> <C> <C>
Net sales $276,621 $296,560 $ 642,791
Cost of sales 195,810 206,949 456,594
Gross profit 80,811 89,611 186,197
Restructuring expenses, including net
(loss)/gain from division disposals (8,415) -- 8,114
Change-in-control expenses (2,150) -- --
Gain on assets resulting from fire claim 6,469 -- --
Other selling, administrative, and
general expenses (60,576) (66,699) (148,724)
Operating income before dividing with Pro-Fac 16,139 22,912 45,587
Interest expense (7,624) (16,358) (14,294)
Pretax earnings before dividing with Pro-Fac 8,515 6,554 31,293
Pro-Fac share of earnings (4,062) (3,282) (14,990)
Income before taxes 4,453 3,272 16,303
Provision for taxes (2,735) (1,916) (6,744)
Net income $ 1,718 $ 1,356 $ 9,559
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Balance Sheet
Dollars in Thousands Except Share Amounts
<CAPTION>
Successor Predecessor Predecessor
3/25/95 6/25/94 3/26/94
<S> <C> <C> <C>
Assets
Current assets:
Cash $ 5,294 $ 2,928 $ 3,836
Accounts receivable trade, net 58,813 57,640 55,972
Accounts receivable, other 6,348 8,460 7,916
Income taxes refundable 722 237 6,229
Current deferred taxes receivable 8,461 10,487 8,825
Inventories -
Finished goods 136,915 108,538 120,432
Raw materials and supplies 54,755 46,721 47,704
Total inventories 191,670 155,259 168,136
Prepaid manufacturing expense 5,062 8,190 3,117
Prepaid expenses and other current assets 4,947 4,305 7,898
Total current assets 281,317 247,506 261,929
Investment in Bank 22,907 -- --
Property, plant, and equipment, net 272,960 167,516 168,342
Goodwill and other intangibles, net 93,793 24,909 25,331
Assets held for resale 5,406 -- --
Other assets 24,547 7,007 8,024
Total Assets $700,930 $446,938 $463,626
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 66,000 $ -- $ 15,500
Accounts payable 44,379 62,335 42,551
Due to Pro-Fac 2,692 9,447 15,469
Accrued employee compensation 9,925 11,482 10,547
Other accrued expenses 24,819 26,947 29,648
Current portion of obligations under
capital leases 785 18,430 22,871
Current portion of long-term debt 8,007 14,816 15,150
Total current liabilities 156,607 143,457 151,736
Long-term debt 165,438 79,061 87,357
Senior subordinated notes 160,000 -- --
Obligations under capital leases 1,296 124,973 120,450
Deferred income taxes 61,501 14,958 19,449
Other non-current liabilities 18,443 3,591 3,380
Total liabilities 563,285 366,040 382,272
Commitments and Contingencies
Shareholders' Equity:
Class A common - $.99 par value; -0-, 10,125,000
and 10,125,000 shares authorized;
- 0 -, 6,628,430, and 6,582,878
outstanding, respectively -- 6,562 6,517
Class B common - $.99 par value; -0-, 4,050,000
and 4,050,000 shares authorized;
- 0 -, 2,056,876, and 2,060,702
outstanding, respectively -- 2,036 2,040
Common stock, par value $.01
10,000 shares outstanding, owned by Pro-Fac -- -- --
Additional paid-in capital 136,289 14,224 13,744
Retained earnings 1,356 58,121 58,953
Minimum pension liability -- (45) --
Total shareholders' equity 137,645 80,898 81,254
Total liabilities and shareholders' equity $700,930 $446,938 $463,626
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows
Dollars in Thousands
<CAPTION>
Fiscal 1995 Fiscal 1994
Predecessor Successor Predecessor
6/26/94 - 11/3/94 - 6/27/93 -
11/3/94 3/25/95 3/26/94
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,718 $ 1,356 $ 9,559
Adjustments to reconcile net income to net cash
provided by operating activities -
Restructuring including net loss/(gain) from
division disposals 8,415 -- (8,114)
Gain on assets resulting from fire claim (6,469) -- --
Amortization of goodwill and other intangibles 753 1,020 1,215
Depreciation 6,228 9,774 16,066
Equity in undistributed earnings of Bank -- (1,288) --
Change in assets and liabilities:
Accounts receivable (12,430) 13,907 8,625
Inventories (70,961) 34,550 (12,627)
Income taxes refundable 1,491 (1,976) (15,275)
Deferred taxes (1,224) 49,793 8,823
Accounts payable and accrued expenses (5,662) (26,533) (18,859)
Due to Pro-Fac 9,650 (16,405) (1,144)
Other assets and liabilities 8,733 7,655 (3,725)
Net cash (used in)/provided by operating activities (59,758) 71,853 (15,456)
Cash Flows From Investing Activities:
Fixed asset write-up to appraised values -- (121,572) --
Goodwill and other intangible assets -- (70,657) --
Purchase of property, plant, and equipment (5,689) (9,433) (13,503)
Proceeds from disposals -- 1,322 42,097
Investment in Bank -- (21,619) --
Net cash (used in)/provided by investing activities (5,689) (221,959) 28,594
Cash Flows From Financing Activities:
Due to Pro-Fac 42,000 (42,000) 7,500
Proceeds from issuance of short-term debt 30,000 66,000 15,500
Proceeds from issuance of long-term debt 10,886 333,445 5,614
Payments on short term debt -- (30,000) --
Payments on long-term debt (350) (104,413) (6,800)
Payments on Pro-Fac capital leases (11,344) (129,978) (33,652)
Stock activity relating to Predecessor's equity 52 (81,278) 167
Capital contribution by Pro-Fac -- 136,289 --
Cash dividends paid (1,390) -- (4,147)
Net cash provided by/(used in) financing activities 69,854 148,065 (15,818)
Net change in cash 4,407 (2,041) (2,680)
Cash at beginning of period 2,928 7,335 6,516
Cash at end of period $ 7,335 $ 5,294 $ 3,836
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for -
Interest (net of amount capitalized) $ 6,967 $ 12,365 $ 14,413
Income taxes, net $ 2,135 $ 5,689 $ 12,437
Supplemental Schedule of Non-Cash Investing and
Financing Activities:
Amounts included in goodwill and other intangible
assets relating to deferred tax and other
liability valuations in connection with
the acquisition of the Company by Pro-Fac $ -- $ 45,141 $ --
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited, consolidated financial statements have been
prepared in accordance with generally accepted accounting principles. The
following summarizes the significant accounting policies applied in the
preparation of the accompanying financial statements. The accounting policies
apply to both the Predecessor Entity and Successor Entity companies unless
otherwise noted.
Fiscal Year
The financial statements of the Predecessor Entity include the period from
June 26, 1994 through November 3, 1994, the acquisition date. The financial
statements of the Successor Entity include the period from November 3, 1994
through March 25, 1995, the fiscal quarter end (see NOTE 3). The fiscal year
of the Successor Entity will correspond with that of its parent, Pro-Fac
Cooperative, Inc. ("Pro-Fac"), and will end on June 24, 1995, the last
Saturday in June.
Consolidation
The consolidated financial statements include the Company and its wholly-owned
subsidiaries after elimination of intercompany transactions and balances.
Inventories
Inventories are stated at the lower of cost or market on the first-in, first-
out ("FIFO") method. Inventory reserves are recorded to reflect the
difference between FIFO cost and the market applicable to canned and frozen
fruit and vegetable inventories.
Investment in CoBank ("The Bank")
The Company's investment in the Bank is required as a condition of borrowing.
These securities are not physically issued by the Bank, but the Company is
notified as to their monetary value. The investment is carried on the
Company's books at cost plus the Company's share of the undistributed earnings
of the Bank (that portion of patronage refunds not distributed currently in
cash). The investment was contributed to the Company by Pro-Fac in
conjunction with the acquisition.
Manufacturing Overhead
Allocation of manufacturing overhead to finished goods produced is on the
basis of a production year; thus at the end of each fiscal year, manufacturing
costs incurred by seasonal plants, subsequent to the previous pack, are
deferred and included in the accompanying balance sheet under the caption
"Accrued/prepaid manufacturing expense."
Property, Plant, and Equipment and Related Lease Arrangements
Property, plant, and equipment are depreciated over the estimated useful lives
of the assets using the straight-line method, half-year convention, over 4 to
40 years.
Assets held for resale are separately classified on the balance sheet and
represent fixed assets not currently used in, nor planned to be used in, the
business operations of the Company.
<PAGE>
<PAGE>
Lease arrangements are capitalized when such leases convey substantially all
of the risks and benefits incidental to ownership. Capital leases are
amortized over either the lease term or the life of the related assets,
depending upon available purchase options and lease renewal features.
Income Taxes
Income taxes are provided on income for financial reporting purposes.
Deferred income taxes resulting from temporary differences between financial
reporting and tax reporting are appropriately classified in the balance sheet
and properly reflect the effects of the acquisition in accordance with the
SFAS No. 109, "Accounting for Income Taxes."
Pension
The Company and its subsidiaries have several pension plans and participate
in various union pension plans which on a combined basis cover substantially
all employees. Charges to income with respect to plans sponsored by the
Company and its subsidiaries are based upon actuarially determined costs.
Pension liabilities are funded by periodic payments to the various pension
plan trusts.
Employers' Accounting for Postemployment Benefits
On June 26, 1994, the Company adopted the SFAS No. 112, "Employers' Accounting
for Postemployment Benefits," with no significant impact. This statement
establishes accounting standards for employers who provide benefits to former
or inactive employees after employment but before retirement. Postemployment
benefits are all types of benefits provided to former or inactive employees,
their beneficiaries, and covered dependents.
Goodwill and Other Intangibles
Goodwill and other intangible assets include the cost in excess of the fair
value of net tangible assets acquired in purchase transactions and acquired
non-competition agreements and trademarks. Goodwill and other intangible
assets, stated at net of accumulated amortization, are amortized on a
straight-line basis over 35 years. The Company periodically assesses whether
there has been a permanent impairment in the value of goodwill. This is
accomplished by determining whether the estimated, undiscounted future cash
flows from operating activities exceed the carrying value of goodwill as of
the assessment date. Should aggregate future cash flows be less than the
carrying value, a writedown would be required, measured by the difference
between the undiscounted future cash flows and the carrying value of goodwill.
Goodwill resulting from the purchase of the Company by Pro-Fac of
approximately $94.8 million is being amortized on a straight-line basis over
35 years. See NOTE 3.
Earnings Per Share Data Omitted
Net income or earnings per share amounts are not presented, as subsequent to
November 3, 1994, the Company is a wholly-owned subsidiary of Pro-Fac.
Environmental Expenditures
Environmental expenditures that pertain to current operations are expensed or
capitalized consistent with the Company's capitalization policy. Expenditures
that result from the remediation of an existing condition caused by past
operations that do not contribute to current or future revenues are expensed.
Liabilities are recorded when remedial activities are probable, and the cost
can be reasonably estimated.<PAGE>
<PAGE>
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of" (SFAS No. 121). SFAS No. 121 establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles and goodwill related to those assets to be held and used, and for
long-lived assets and certain identifiable intangibles to be disposed of.
Management believes current policies in effect, such as that pertaining to
goodwill and intangibles (as stated previously in this NOTE 1), satisfy the
requirements of SFAS No. 121, and no further action on the part of the Company
will be required for compliance.
NOTE 2. AGREEMENTS WITH PRO-FAC
On November 3, 1994, the Company was acquired by Pro-Fac. Pro-Fac and the
Company were established together in the early 1960s and, before Pro-Fac's
recent acquisition of the Company, had a long-standing contractual
relationship under the Integrated Agreement and similar Predecessor Entity
agreements. The Integrated Agreement, which has been superseded by the Pro-
Fac Marketing Agreement, consisted of four principal sections: Operations
Financing, Marketing, Facilities Financing, and Management.
The provisions of the Integrated Agreement included the financing of certain
assets utilized in the business of the Company and provided a sharing of
income and losses between Curtice-Burns and Pro-Fac. Under the Pro-Fac
Marketing Agreement, Pro-Fac and the Company will continue the Marketing and
Management arrangements of the Integrated Agreement as well as the sharing of
income and losses. The capital contribution of Pro-Fac to the Company at
acquisition primarily included the cancellation of indebtedness and capital
lease obligations. Payments by the Company to Pro-Fac for interest,
amortization, and lease financing payments ceased as of November 3, 1994.
Amounts received by Pro-Fac from Curtice-Burns under both Agreements for the
nine months ended March 25, 1995 and March 26, 1994 include: commercial
market value of crops delivered, $56.1 million and $58.4 million,
respectively; interest income, $6.1 million and $12.0 million, respectively;
and additional proceeds from profit sharing provisions, $7.3 million and $15.0
million, respectively. During fiscal 1993 a dispute arose between the Company
and Pro-Fac regarding the sharing of certain losses incurred in the Company's
restructuring program. As part of the merger, such dispute was resolved.
NOTE 3. CHANGE IN CONTROL OF THE COMPANY
In 1993, the Company's management and Board of Directors began exploring
several strategic alternatives for the Company, including a possible sale of
all the equity of the Company. Those activities ultimately resulted in the
Company entering into an Agreement and Plan of Merger with Pro-Fac and PFAC
on September 27, 1994 (the "Merger Agreement"). Pursuant to the Merger
Agreement, on October 4, 1994, Pro-Fac initiated a tender offer for all of the
Company's outstanding stock at $19.00 per share. At the expiration of the
tender offer on November 2, 1994, 6,229,442 shares of Class A and 2,046,997
shares of Class B common stock (or approximately 94 percent and 99 percent,
respectively, of the total number of outstanding shares of Class A and Class
B common stock of the Company) had been validly tendered and not withdrawn.
All such tendered shares were accepted for payment by PFAC. On November 3,
1994, PFAC merged into the Company, making the Company a wholly-owned
subsidiary of Pro-Fac.
Prior to November 3, 1994, the Company expensed $2.2 million of legal,
accounting, investment banking, and other expenses relative to the change of
control issue. In recognizing these expenses, the Company allocated half of
these amounts to Pro-Fac as a deduction to the profit split. Pro-Fac disputed
these charges, but such dispute was resolved with the merger.
The acquisition was accounted for using the purchase method of accounting.
In recording the transaction, approximately $121.6 million was added to fixed
asset values to bring the assets up to appraised fair market value, and the
asset lives were adjusted to lives deemed appropriate for assets acquired.
The resulting annual depreciation will approximate $23.3 million on all
existing assets at the appraised values. In addition, approximately $94.8
million of goodwill and other intangible assets were recorded as the excess
of purchase cost over net assets acquired. Included in this amount was
approximately $45.1 million for deferred tax adjustments to properly reflect
the effects of the acquisition in accordance with the SFAS No. 109,
"Accounting for Income Taxes." The resulting annual amortization of goodwill
and other intangible assets will approximate $2.7 million for goodwill and
other intangible assets using a 35-year amortization period. For purposes of
preparing these financial statements, a preliminary allocation of the purchase
price has been made. Future adjustments will be made to this allocation based
upon the final asset appraisals and analyses.
In connection with the acquisition, PFAC sold $160.0 million of 12.25 percent
Senior Subordinated Notes (the "Notes") due 2005 and entered into a credit
agreement (the "New Credit Agreement") with the Bank, which provided for a
term loan, a term-loan facility, a seasonal-loan facility, and a letter-of-
credit facility. All obligations of PFAC under the Notes and the New Credit
Agreement have become obligations of the Company.
Following, in capsule form, is the consolidated, unaudited results of
operations of Curtice-Burns Foods for the nine months ended March 25, 1995 and
March 26, 1994, assuming the acquisition by Pro-Fac took place at the
beginning of the 1994 fiscal year. The column headed "As Reported" for March
25, 1995 is the total of Successor and Predecessor entities.
<TABLE>
(In Millions)
<CAPTION>
Nine Months Ended
(Unaudited)
March 25, 1995 March 25, 1994
As Reported Pro Forma As Reported Pro Forma
<S> <C> <C> <C> <C>
Net sales $573.2 $573.2 $642.8 $642.8
Income before taxes $ 7.7 $ 5.5 $ 16.3 $ 9.4
Net income $ 3.1 $ 2.2 $ 9.6 $ 3.8
</TABLE>
Included in the March 1995 net sales are $32.4 million relating to businesses
sold or to be sold. The March 1994 net sales include $104.7 million such
sales, resulting in comparable net sales for ongoing businesses of $540.8
million for the nine months ended March 1995 and $538.1 million for the nine
months ended March 1994.
Included in the March 1995 income before taxes are losses of $1.2 million
(after dividing with Pro-Fac), relating to restructuring costs including
division disposals, operating losses for businesses sold or to be sold
(offsetting a gain for an insurance claim); and the March 1994 income before
taxes includes gains of $3.7 million (after dividing with Pro-Fac), relating
to restructuring gain on division disposals (offsetting operating losses for
businesses sold or to be sold) resulting in comparable income before taxes for
ongoing businesses of $6.7 million for the nine months ended March 1995 and
$5.7 million for the nine months ended March 1994 on a pro-forma basis.
<PAGE>
<PAGE>
NOTE 4. DISPOSALS/POTENTIAL DISPOSAL
Disposals
National Oats. On November 19, 1993, the Company sold the oats portion of the
National Oats business for $39.0 million and transferred the popcorn business
to CMF. The sale of the oats business resulted in an approximate $10.9
million gain in fiscal 1994.
Hiland Potato Chips. On November 22, 1993, the Company sold certain assets
of the Hiland potato chips business for approximately $3.0 million. There was
no material gain or loss on this transaction after taking into account the
fiscal 1993 restructuring charge.
Meat Snacks. On February 22, 1994, the Company sold the meat snacks business
for approximately $5.0 million. There was no material gain or loss on this
transaction after taking into account a restructuring charge recorded in
fiscal 1993.
Nalley's U.S. Chips and Snacks. On December 19, 1994, the Company sold the
Nalley's U.S. Chips and Snacks business for approximately $2.0 million. In
the first quarter of fiscal 1995, the Company recognized a charge of
approximately $8.4 million in connection with the elimination of this line of
business. There was no material gain or loss on this transaction after taking
into account a restructuring charge recorded in the first quarter of fiscal
1995.
Potential Disposal
Nalley's Canada Ltd. On March 30, 1995, the Company announced the potential
sale of Nalley's Canada Ltd., located in Vancouver, British Columbia, to a
management group within its Canadian division.
The sale agreements are being negotiated and are subject to Board approval.
For the nine months ended March 25, 1995, net sales were $30.1 millon and
operating income was breakeven. The net assets employed, which have not yet
been classified as being held for resale, are $9.3 million as of March 25,
1995.
Nalley's Canada Ltd. is Western Canada's largest snack food company and also
competes in the salad dressing, canned meat, and pickle categories. The
buyers intend to close the salad dressing plant but would continue to operate
its snack food plant. The Company's Nalley's U.S. division would provide to
Nalley's Canada Ltd., through a supply agreement, those products which would
no longer be manufactured in Canada through. If this sale is finalized, it
would be in late June or early July 1995 with no significant gain or loss to
the Company.
The business divestitures resulted in the following charges to earnings of the
Predecessor Entity company in fiscal 1994 and fiscal 1995:
Fiscal 1994 Restructuring Gain. Included in fiscal 1994 results was a net
gain of $7.8 million comprised of a gain on the sale of the oats business of
$10.9 million, net of a charge of $3.1 million to adjust previous estimates
regarding activities initiated in fiscal 1993.
Fiscal 1995 Restructuring Charge. Included in the first three months of
fiscal 1995 results was a restructuring charge of $8.4 million to reflect the
estimated impact of the sale of certain assets of the Nalley's U.S. Chips and
Snacks operation and other expenses relating to the disposal of this
operation.
<PAGE>
<PAGE>
NOTE 5. DEBT
Historical Funding and Capital Expenditures
The operations of the Company historically have been funded with cash flows
generated by operations, borrowings from Pro-Fac (which in turn borrowed a
portion of these funds from the Bank), and borrowings under the Company's
seasonal facility with a syndicate of commercial lenders led by The Chase
Manhattan Bank, N.A. Pro-Fac and the Company had available seasonal lines of
credit of $100.0 million through September 1993, $86.0 million through
September 1994, and $96.0 million thereafter. The maximum borrowing on those
seasonal lines during fiscal 1994 was $81.0 million, while the average amount
outstanding during such year totaled approximately $51.5 million. The balance
outstanding at November 3, 1994 was $83.5 million. These borrowings were
repaid simultaneously with the consummation of the acquisition of the Company
by Pro-Fac and replaced by the New Credit Agreement.
New Credit Agreement
The Bank has provided the Company, subject to the terms and conditions set out
in the New Credit Agreement, with loans of up to $200 million to finance the
purchase of shares pursuant to the tender offer and the merger, to refinance
certain existing indebtedness of Pro-Fac and the Company, and to pay fees and
expenses related to the purchase of shares.
The Bank also has provided the Company, subject to the terms and conditions
set out in the New Credit Agreement, with seasonal financing of up to $86.0
million and a $10.0 million letter-of-credit facility. The Acquisition
Facility, the Seasonal Facility, and the Letter-of-Credit Facility are
collectively referred to herein as the "Bank Facility."
Guarantees and Security. All obligations under the Bank Facility are
guaranteed by Pro-Fac and the Subsidiary Guarantors. The Company's
obligations under the Bank Facility and Pro-Fac's and the Subsidiary
Guarantor's obligations under their respective guaranties are secured by all
of the assets of the Company and each guarantor, respectively, including (i)
all present and future accounts, contracts rights, chattel paper, instruments
(excluding shares of capital stock), documents, inventory, general
intangibles, and equipment; (ii) all real property; and (iii) all products and
proceeds of the foregoing.
Interest. The Bank Facility provides for interest rates on the Acquisition
Facility, at the Company's option, equal to (i) the relevant London interbank
offered rate plus 2.60 percent, (ii) the relevant prime rate plus 0.50
percent, or (iii) the relevant U.S. Treasury Rate plus 3.00 percent. The
Seasonal Facility provides for interest rates on amounts outstanding
thereunder at the Company's option equal to (x) the relevant London interbank
offered rate plus 1.75 percent, (y) the relevant prime rate minus 0.25
percent, or (z) the relevant U.S. Treasury Rate plus 2.00 percent. The Bank
has extended to a portion of the Acquisition Facility for a limited period of
time certain fixed rates that were in effect with respect to indebtedness
repaid to the Bank on November 3, 1994. The weighted average rate of interest
applicable to that portion of the Acquisition Facility is estimated to equal
approximately 8.3 percent per annum for the period from November 3, 1994
through May 1, 1995.
Maturity. Borrowings of $80.0 million under the Term Loan portion of the
Acquisition Facility are payable in 20 equal, semi-annual installments
beginning in May 1995. These installments are equivalent to $8.0 million per
year. Borrowings of up to an additional $120.0 million under the Term- Loan
Facility portion of the Acquisition Facility are payable during the first five
years of the facility in annual installments on September 1 of each year, in
an amount equal to the "annual cash sweep" for the preceding fiscal year, as
defined in the Acquisition Facility. The Company will be permitted to pay and
reborrow funds <PAGE>
<PAGE>
under the Term-Loan Facility, subject to limitations on the amount reborrowed
and the other terms of the Acquisition Facility. Beginning in the year 2000,
the balance of the Term-Loan Facility will be payable in ten equal,
semi-annual installments.
Borrowings under the Seasonal Facility are payable at the expiration of that
portion of the facility, which is May, 1996; except that for 15 consecutive
calendar days before the end of fiscal 1995, the borrowings under the Seasonal
Facility must be zero. The Letter-of-Credit Facility provides for the
issuance of letters of credit through October 1995.
Certain Covenants. The Pro-Fac Bank Guarantee requires Pro-Fac, on a
consolidated basis: to achieve an adjusted cash-flow-coverage ratio at the
end of fiscal 1995 of at least 1.0 to 1.0 and, at the end of each fiscal year
thereafter, of at least 1.1 to 1.0; to maintain a minimum working capital of
at least $100.0 million for each fiscal year (beginning with the fiscal year
ending June 30, 1995); and to maintain a minimum long-term debt to equity
ratio (measured at each month-end) of 3.1 to 1.0 from the Closing Date through
May 1995, 2.8 to 1.0 from June 30, 1995 through May 1996, and declining over
time to 1.8 to 1.0 at June 30, 2001 and thereafter. In addition, the Pro-Fac
Bank Guarantee requires Pro-Fac on a consolidated basis to maintain a
consolidated total net worth of not less than 15 percent of total assets for
each month-end until July 2000, and 20 percent thereafter, and at least 19
percent of total assets at the fiscal years ending June 1995 and 1996,
increasing over time to at least 25 percent of total assets at the fiscal year
ending June 2001 and each fiscal year thereafter. The Bank Facility and the
Pro-Fac Bank Guarantee contain additional restrictions and obligations on
Pro-Fac and the Company, including (i) restrictions on the ability to declare
or pay dividends or repurchase stock, (ii) limitations on the incurrence of
debt or prepayment of debt, (iii) limitations on debt, investments,
acquisitions, capital expenditures and asset sales, and (iv) requiring
maintenance of properties and insurance and the delivery of information,
financial and otherwise. Management believes the Company is in compliance
with all restrictions and requirements under the terms of the borrowing
agreement.
The Senior Subordinated Notes ("Notes")
The Notes represent general unsecured obligations of the Company, subordinated
in right of payment to certain other debt obligations of the Company
(including the Company's obligations under the New Credit Agreement). The
Notes are unconditionally guaranteed by the Guarantors on a senior-
subordinated basis, with each such guarantee subordinated to the Guarantors'
respective guarantees of the obligations of the Company under the New Credit
Agreement and all other Senior Indebtedness of the Guarantors.
The Notes are limited in aggregate principal amount to $160.0 million and will
mature on February 1, 2005. Interest on the Notes accrues at the rate of
12.25 percent per annum and is payable semi-annually in arrears on February
1 and August 1, commencing on February 1, 1995, to holders of record on the
immediately preceding January 15 and July 15, respectively. Except as
provided above, interest on the Notes accrues from the most recent date to
which interest has been paid or, if no interest has been paid, from the date
of original issuance. Interest is computed on the basis of a 360-day year,
comprised of 12 30-day months.
Each of the Pro-Fac and the Subsidiary Guarantors has unconditionally
guaranteed the payment of Obligations of the Company under the Notes. Rights
of holders, pursuant to such guarantees, are subordinate to the rights of the
holders of the Senior Indebtedness of Pro-Fac and the Subsidiary Guarantors
to payment in full in the same manner as the rights of holders of the Notes
are subordinate to those of the holders of the Senior Indebtedness of the
Company. Senior Indebtedness of the Company includes the short- and long-term
debt due the Bank as well as <PAGE>
<PAGE>
approximately $1.7 million of supplemental executive retirement benefits.
Funds made available by the distribution of investment certificates to
members, in lieu of cash by Pro-Fac, have historically been reinvested by Pro-
Fac in the Company. Under the Indentures related to the Notes, Pro-Fac will
be required to reinvest at least 70 percent of the additional Patronage income
in Curtice-Burns.
NOTE 6. OTHER MATTERS
Contingencies
In conjunction with the sale of the National Oats division by the Company,
Pro-Fac terminated the membership of the Harvest States Cooperative ("Harvest
States") in Pro-Fac. Harvest States was the National Oats division's only
supplier of oats. As a result of this action, Harvest States filed a claim
against Pro-Fac for, among other things, the receipt of payments for future
oats purchases after the sale of National Oats division through fiscal year
1995. In April 1995, a settlement was reached with Harvest States resulting
in no material cost to the Company.
A grower has filed suit against the Company for damages resulting from
defective seed which was purchased from the Southern Frozen Foods division.
The lawsuit alleges that the defective seed resulted in the loss of crops and
acreage use for a growing season, and the grower is seeking approximately $1.0
million in damages. Management believes this claim is without merit and
intends to vigorously defend its position. As the amount of damages is
neither probable nor reasonably estimable, no accrual for loss has been
included in the financial statements. In addition, management anticipates
that all material costs of settlement, if incurred, will be covered under its
insurance policies.
Commitments
The Company's Southern Frozen Foods division has guaranteed an approximate
$1.4 million loan for the City of Montezuma to renovate a sewage treatment
plant operated by Southern Frozen Foods on behalf of the City.
Fire Claim
In July 1994, a plant operated by the Company's Southern Frozen Foods
division, located in Montezuma, Georgia, was damaged by fire. All material
costs associated with the facility repairs and business interruption are
anticipated to be covered under the Company's insurance policies. During the
first quarter of fiscal 1995, a $6.5 million gain (before dividing with Pro-
Fac and before taxes) was recorded, representing the insurance proceeds for
the replacement value in excess of the depreciated book value of the building
and equipment destroyed in this fire. It is expected the facility will be
operational in the fourth quarter of fiscal 1995.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following comparisons to the prior year periods present the results of the
Company during the period prior to its acquisition by Pro-Fac, ("Predecessor
Entity") as well as the period subsequent to its acquisition, ("Successor
Entity"). The financial statements of the Predecessor and Successor entities
are not comparable in certain respects because of differences between the cost
bases of the assets held by the Predecessor Entity compared to that of the
Successor Entity as well as the effect on the Successor Entity's operations
for adjustments to depreciation, amortization, and interest expense.
<PAGE>
<PAGE>
The following tables illustrate the Company's results of operations by
business for the three and nine months of fiscal 1994 compared to the three
and nine months of fiscal 1995.
<TABLE>
Net Sales
(Dollars in Millions)
<CAPTION>
Three Months Ended Nine Months Ended
3/25/95 3/26/94 3/25/95 3/26/94
% of % of % of % of
$ Total $ Total $ Total $ Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit ("CMF") 77.8 43.1 79.5 42.0 253.8 44.3 259.7 40.4
Nalley's Fine Foods 43.3 24.0 40.8 21.5 131.5 22.9 124.7 19.4
Southern Frozen Foods 23.6 13.1 22.7 12.0 73.3 12.8 70.9 11.0
Snack Foods Group 14.1 7.8 14.5 7.7 44.8 7.8 45.3 7.1
Brooks Foods 9.3 5.2 9.3 4.9 26.0 4.5 26.6 4.1
Finger Lakes Packaging 11.2 6.2 10.8 5.7 36.5 6.4 35.5 5.5
Intercompany eliminations1 (7.9) (4.4) (6.9) (3.7) (25.1) (4.4) (24.6) (3.8)
Subtotal ongoing operations 171.4 95.0 170.7 90.1 540.8 94.3 538.1 83.7
Businesses sold and to be sold2 9.0 5.0 18.8 9.9 32.4 5.7 104.7 16.3
Total 180.4 100.0 189.5 100.0 573.2 100.0 642.8 100.0
<FN>
1 Intercompany sales by Finger Lakes
2 The Company has sold the oats portion of the National Oats business, the Hiland potato
chips business, the meat snacks business, and the Nalley's U.S. Chips and Snacks business,
and announced the potential sale of Nalley's Canada Ltd. See NOTE 4 - "Disposals/Potential
Disposal."
</TABLE>
<TABLE>
Cost of Sales
(Dollars in Millions)
<CAPTION>
Three Months Ended Nine Months Ended
3/25/95 3/26/94 3/25/95 3/26/94
% of % of % of % of
$ Total $ Total $ Total $ Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMF 59.1 46.7 59.2 44.1 188.2 46.7 195.1 42.7
Nalley's Fine Foods 26.0 20.5 24.8 18.5 79.3 20.0 76.3 16.7
Southern Frozen Foods 18.4 14.5 17.6 13.1 57.1 14.2 55.6 12.2
Snack Foods Group 9.2 7.3 9.5 7.1 28.8 7.2 28.9 6.3
Brooks Foods 5.9 4.7 6.1 4.6 16.5 4.1 17.3 3.8
Finger Lakes Packaging 10.3 8.1 9.5 7.1 33.2 8.2 32.0 7.0
Intercompany eliminations and
corporate overhead (9.2) (7.4) (6.6) (5.0) (25.4) (6.6) (23.0) (5.0)
Subtotal ongoing operations 119.7 94.4 120.1 89.5 377.7 93.8 382.2 83.7
Businesses sold and to be sold1 7.1 5.6 14.1 10.5 25.1 6.2 74.4 16.3
Total 126.9 100.0 134.2 100.0 402.8 100.0 456.6 100.0
<FN>
1 The Company has sold the oats portion of the National Oats business, the Hiland potato
chips business, the meat snacks business, and the Nalley's U.S. Chips and Snacks business,
and announced the potential sale of Nalley's Canada Ltd. See NOTE 4 -
"Disposals/Potential Disposal."
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Gross Profit
(Dollars in Millions)
<CAPTION>
Three Months Ended Nine Months Ended
3/25/95 3/26/94 3/25/95 3/26/94
% of % of % of % of
$ Total $ Total $ Total $ Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMF 18.7 34.9 20.3 36.7 65.6 38.5 64.6 34.7
Nalley's Fine Foods 17.3 32.3 16.0 28.9 52.2 30.6 48.4 26.0
Southern Frozen Foods 5.2 9.7 5.1 9.2 16.2 9.5 15.3 8.2
Snack Foods Group 4.9 9.1 5.0 9.0 16.0 9.4 16.4 8.8
Brooks Foods 3.4 6.3 3.2 5.8 9.5 5.6 9.3 5.0
Finger Lakes Packaging 0.9 1.7 1.3 2.4 3.3 1.9 3.5 1.9
Intercompany eliminations and
corporate overhead 1.3 2.4 (0.3) (0.5) 0.3 0.2 (1.6) (0.9)
Subtotal ongoing operations 51.7 96.4 50.6 91.5 163.1 95.7 155.9 83.7
Businesses sold and to be sold1 1.9 3.6 4.7 8.5 7.3 4.3 30.3 16.3
Total 53.6 100.0 55.3 100.0 170.4 100.0 186.2 100.0
<FN>
1 The Company has sold the oats portion of the National Oats business, the Hiland potato
chips business, the meat snacks business, and the Nalley's U.S. Chips and Snacks business,
and announced the potential sale of Nalley's Canada Ltd. See NOTE 4 -
"Disposals/Potential Disposal."
</TABLE>
<TABLE>
Operating Income Before Dividing with Pro-Fac1
(Dollars in Millions)
<CAPTION>
Three Months Ended Nine Months Ended
3/25/95 3/26/94 3/25/95 3/26/94
% of % of % of % of
$ Total $ Total $ Total $ Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMF 6.2 46.3 7.4 74.8 24.3 56.3 21.6 57.6
Nalley's Fine Foods 4.0 29.9 3.2 32.3 12.6 29.2 11.5 30.7
Southern Frozen Foods 1.5 11.2 2.7 27.3 7.0 16.2 7.4 19.7
Snack Foods Group 0.3 2.2 0.2 2.0 2.2 5.1 2.2 5.9
Brooks Foods 1.2 9.0 0.9 9.1 3.3 7.6 3.2 8.5
Finger Lakes Packaging 0.7 5.2 0.6 6.1 2.3 5.3 2.5 6.7
Intercompany eliminations and
corporate overhead1 (0.3) (2.3) (2.7) (27.4) (8.1) (18.8) (10.1) (27.0)
Subtotal ongoing operations 13.6 101.5 12.3 124.2 43.6 100.9 38.3 102.1
Businesses sold and to be sold2 (0.2) (1.5) (2.4) (24.2) (0.4) (0.9) (0.8) (2.1)
Total 13.4 100.0 9.9 100.0 43.2 100.0 37.5 100.0
<FN>
1 Table excludes restructuring (loss)/gain from division disposals of fiscal 1995 and 1994,
change-in-control expense, and an insurance gain on assets resulting from a fire claim
recorded in the first nine months of fiscal 1995.
2 The Company has sold the oats portion of the National Oats business, the Hiland potato
chips business, the meat snacks business, and the Nalley's U.S. Chips and Snack business,
and announced the potential sale of Nalley's Canada Ltd. See NOTE 4 -
"Disposals/Potential Disposal."
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Depreciation and Amortization
(Dollars in Millions)
<CAPTION>
Three Months Ended Nine Months Ended
3/25/95 3/26/94 3/25/95 3/26/94
% of % of % of % of
$ Total $ Total $ Total $ Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMF 2.9 43.9 2.6 45.6 7.8 42.9 8.3 44.9
Nalley's Fine Foods 0.8 12.1 0.8 14.0 2.3 12.6 2.3 12.4
Southern Frozen Foods 0.7 10.6 0.6 10.5 1.9 10.4 1.7 9.2
Snack Foods Group 0.6 9.1 0.6 10.5 1.6 8.8 1.6 8.7
Brooks Foods 0.2 3.1 0.1 1.8 0.5 2.8 0.5 2.7
Finger Lakes Packaging 0.3 4.6 0.4 7.0 0.9 5.0 1.0 5.4
Corporate1 0.9 13.6 -- -- 2.2 12.0 0.2 1.0
Subtotal ongoing operations 6.4 97.0 5.1 89.4 17.2 94.5 15.6 84.3
Businesses sold and to be sold2 0.2 3.0 0.6 10.6 1.0 5.5 2.9 15.7
Total 6.6 100.0 5.7 100.0 18.2 100.0 18.5 100.0
<FN>
1 Includes adjustment for amortization of excess of purchase cost over net assets acquired.
2 The Company has sold the oats portion of the National Oats business, the Hiland potato
chips business, the meat snacks business, and the Nalley's U.S. Chips and Snack business,
and announced the potential sale of Nalley's Canada Ltd. See NOTE 4 -
"Disposals/Potential Disposal."
</TABLE>
<TABLE>
Total Assets
(Dollars in Millions)
<CAPTION>
3/25/95 3/26/94
% of % of
$ Total $ Total
<S> <C> <C> <C> <C>
CMF 215.9 30.8 198.7 43.0
Nalley's Fine Foods 87.5 12.5 82.7 17.8
Southern Frozen Foods 62.5 8.9 45.9 9.9
Snack Foods Group 23.4 3.3 23.0 5.0
Brooks Foods 11.5 1.6 11.2 2.4
Finger Lakes Packaging 32.3 4.6 30.8 6.6
Corporate1 256.1 36.6 48.4 10.3
Subtotal ongoing operations 689.2 98.3 440.7 95.0
Businesses sold to be sold2 11.7 1.7 22.9 5.0
Total 700.9 100.0 463.6 100.0
<FN>
1 Includes excess of purchase cost over net assets acquired. These amounts are
allocable to division operations following further analysis which will be
completed in the fourth quarter of fiscal 1995.
2 The Company has sold the oats portion of the National Oats business, the
Hiland potato chips business, the meat snacks business, and the Nalley's U.S.
Chips and Snack business, and announced the potential sale of Nalley's Canada
Ltd. See NOTE 4 - "Disposals/Potential Disposal."
</TABLE>
The following table illustrates the Company's income statement data and the
percentage of net sales represented by these items for the three and nine months
ended March 25, 1995 and March 26, 1994.
<PAGE>
<TABLE>
Consolidated Statement of Operations
(Dollars in Millions)
<CAPTION>
Three Months Ended Nine Months Ended
3/25/95 3/26/94 3/25/95 3/26/94
% of % of % of % of
$ Sales $ Sales $ Sales $ Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 180.4 100.0 189.5 100.0 573.2 100.0 642.8 100.0
Cost of sales 126.8 70.3 134.2 70.8 402.8 70.3 456.6 71.0
Gross profit 53.6 29.7 55.3 29.2 170.4 29.7 186.2 29.0
Restructuring expenses, including
net (loss)/gain from division
disposals -- -- -- -- (8.4) (1.5) 8.1 1.2
Change-in-control expenses -- -- -- -- (2.2) (0.4) -- --
Gain on assets resulting from
fire claim -- -- -- -- 6.5 1.2 -- --
Other selling, administrative
and general expenses (40.2) (22.3) (45.4) (24.0) (127.2) (22.2) (148.7) (23.1)
Operating income before dividing
with Pro-Fac 13.4 7.4 9.9 5.2 39.1 6.8 45.6 7.1
Interest expense (10.5) (5.8) (4.3) (2.3) (24.0) (4.2) (14.3) (2.2)
Pretax earnings before dividing
with Pro-Fac 2.9 1.6 5.6 2.9 15.1 2.6 31.3 4.9
Pro-Fac share of earnings (1.4) (0.8) (2.5) (1.3) (7.3) (1.3) (15.0) (2.3)
Income before taxes 1.5 0.8 3.1 1.6 7.8 1.3 16.3 2.6
Provision for taxes (1.0) (0.5) (1.4) (0.7) (4.7) (0.8) (6.7) (1.1)
Net Income 0.5 0.3 1.7 0.9 3.1 0.5 9.6 1.5
</TABLE>
THREE-MONTH CHANGES FROM THE CORRESPONDING PRIOR YEAR PERIOD
Net Sales
The Company's net sales in the third quarter of fiscal 1995 of $180.4 million
decreased $9.1 million or 4.8 percent from $189.5 million in the third quarter
of fiscal 1994. Net sales attributable to businesses sold or to be sold in
connection with the Company's restructuring program discussed in NOTE 4 in the
third quarter of fiscal 1995 were $9.0 million and $18.8 million in the third
quarter of fiscal 1994. The Company's net sales from ongoing operations,
excluding businesses sold or to be sold, were $540.8 million in the third
quarter of fiscal 1995, an increase of $2.7 million or 0.5 percent from $538.1
million in the third quarter of fiscal 1994.
Cost of Sales
The Company's cost of sales in the third quarter of fiscal 1995 of $126.8
million decreased $7.4 million or 5.5 percent from $134.2 million in the third
quarter of fiscal 1994. Of this decrease, $7.0 million was attributable to
businesses sold or to be sold, and a $0.4 million reduction was attributable
to the Company's ongoing operations. This decrease of $0.4 million was the
result of variations in volume, selling prices, and product mix.
Gross Profit
Gross profit of $53.6 million in the third quarter of fiscal 1995 decreased
$1.7 million or 3.1 percent from $55.3 million in the third quarter of fiscal
1994. Of this net decrease, a $2.8 million reduction was attributable to
businesses sold or to be sold, and an increase of $1.1 million was
attributable to increased gross profit at the Company's ongoing operations.
This increase of $1.1 million was the result of variations in volume, selling
prices, costs, and product mix.
Other Selling, Administrative, and General Expenses
Other selling, administrative, and general expenses in the third quarter of
fiscal 1995 of $40.2 million decreased $5.2 million or 11.5 percent from $45.4
million in the third quarter of fiscal 1994. This decrease of $5.2 million
includes primarily:<PAGE>
<PAGE>
<TABLE>
(In Millions)
<CAPTION>
Businesses
Sold or to be Sold Ongoing Total
<S> <C> <C>
Change in trade promotions $(1.4) $(1.2) $(2.6)
Change in advertising and selling costs (2.1) 1.6 (0.5)
All other (0.6) (1.5) (2.1)
Change in selling, administrative
and general expenses $(4.1) $(1.1) $(5.2)
</TABLE>
The $1.5 million decrease in other administrative cost, attributable to the
Company's ongoing operations, was primarily related to reduced spending at
Corporate Headquarters, with minor variations throughout the division
operations.
Operating Income - Before Dividing With Pro-Fac
The Company's operating income (before dividing with Pro-Fac) for the third
quarter of fiscal 1995 of $13.4 million increased $3.5 million or 35.3 percent
from $9.9 million in the third quarter of fiscal 1994. Included in the fiscal
1995 operating income are operating losses of $0.2 million (attributable to
businesses sold or to be sold); and the fiscal 1994 operating income includes
operating losses of $2.4 million, attributable to businesses sold or to be
sold. The Company's operating income from ongoing operations of $13.6 million
in the third quarter of fiscal 1995 increased $1.3 million or 10.6 percent
from $12.3 million in the third quarter of fiscal 1994.
Interest Expense
Interest expense in the third quarter of fiscal 1995 of $10.5 million
increased $6.2 million or 144.2 percent from $4.3 million in the third quarter
of fiscal 1994. This increase was primarily attributable to the increased
borrowing related to the acquisition of the Company by Pro-Fac.
Pro-Fac Share of Earnings
Pro-Fac's share of the Company's earnings in the third quarter of fiscal 1995
of $1.4 million decreased $1.1 million or 44.0 percent from $2.5 million in
the third quarter of fiscal 1994. The Pro-Fac share of earnings in the third
quarter of fiscal 1995 and fiscal 1994 was 50.0 percent and 44.6 percent,
respectively, of the Company's pretax earnings before dividing with Pro-Fac.
Income Before Taxes
The Company's income before taxes in the third quarter of fiscal 1995 of $1.5
million decreased $1.6 million or 51.6 percent from $3.1 million in the third
quarter of fiscal 1994.
Provision for Taxes
The provision for taxes in the third quarter of fiscal 1995 of $1.0 million
decreased $0.4 million or 28.6 percent from $1.4 million in the third quarter
of fiscal 1994. The effective tax rate for the quarter ended March 25, 1995
was 66.7 percent compared to 45.2 percent for the quarter ended March 26,
1994. The effective tax rate was negatively affected by the non-deductibility
of the amortization of excess of purchase cost over net assets acquired.
Net Income
The Company's net income for the third quarter of fiscal 1995 of $0.5 million
decreased $1.2 million or 70.6 percent from $1.7 million in the third quarter
of fiscal 1994.
NINE MONTH CHANGES FROM THE CORRESPONDING PRIOR YEAR PERIOD
Net Sales
The Company's net sales in the first nine months of fiscal 1995 of $573.2
million decreased $69.6 million or 10.8 percent from $642.8 million in the
first nine <PAGE>
<PAGE>
months of fiscal 1994. The net sales, attributable to businesses sold or to
be sold in connection with the Company's restructuring program discussed in
NOTE 4, were $32.4 million in the first nine months of fiscal 1995 and $104.7
million in the first nine months of fiscal 1994. The Company's net sales from
ongoing operations, excluding businesses sold or to be sold, were $540.8
million in the first nine months of fiscal 1995, an increase of $2.7 million
or 0.5 percent from $538.1 million in the first nine months of fiscal 1994.
This net sales variance of $2.7 million for ongoing operations is comprised
of increases and decreases as follows:
<TABLE>
<CAPTION> Net Sales
Variance
<S> <C>
CMF $(5.9)
Nalley's Fine Foods 6.8
Southern Frozen Foods 2.4
All Other (0.6)
$ 2.7
</TABLE>
The decreased sales at the CMF division were primarily the result of decreased
sales of popcorn ($3.4 million) and fruit fillings and toppings ($2.6
million). The increased sales at the Nalley's Fine Foods division were
primarily the result of increased sales of pickles and relishes ($2.2
million), salad dressings ($1.3 million), and canned entrees and soups ($1.6
million). Southern Frozen Foods' increased sales were primarily the result
of a $3.0 million increase in frozen vegetables, partially offset by a
decrease in frozen fruit sales.
Cost of Sales
The Company's cost of sales in the first nine months of fiscal 1995 of $402.8
million decreased $53.8 million or 11.8 percent from $456.6 million in the
first nine months of fiscal 1994. Of this decrease, $49.3 million was
attributable to businesses sold or to be sold, and a $4.5 million reduction
was attributable to the Company's ongoing operations. This decrease of $4.5
million was the result of variations in volume, selling prices, and product
mix.
Gross Profit
Gross profit of $170.4 million in the first nine months of fiscal 1995
decreased $15.8 million or 8.5 percent from $186.2 million in the first nine
months of fiscal 1994. Of this net decrease, a $23.0 million reduction was
attributable to businesses sold or to be sold, and an increase of $7.2 million
was attributable to increased gross profit at the Company's ongoing
operations. This increase of $7.2 million was the result of variations in
volume, selling prices, costs, and product mix. The $7.2 million increase in
gross profit for ongoing operations is comprised of increases as follows:
<TABLE>
<CAPTION>
Gross
Profit
Variance
<S> <C>
CMF $ 1.0
Nalley's Fine Foods 3.8
Southern Frozen Foods 0.9
Snack Foods Group (0.4)
Intercompany profit elimination 1.5
All Other 0.4
$ 7.2
</TABLE>
The increased gross profit at CMF is primarily comprised of a gross profit
increase in the canned and frozen vegetable category ($3.9 million), partially
offset by decreased gross profit on the fruit filling and topping category
($1.9 million, and the popcorn category ($1.1 million). Nalley's Fine Foods
increased <PAGE>
<PAGE>
gross profit primarily relates to improved margins on canned entrees and soups
($4.0 million) and improved margins on peanut butter ($0.3 million), partially
offset by reduced margins on pickles and relishes ($0.7 million). Southern
Frozen Foods' increased gross profit primarily relates to improved margins on
its increased sales of frozen vegetables.
Restructuring Expenses Including Net (Loss)/Gain
From Division Disposals
Restructuring expenses, including net (loss)/gain from division disposals,
resulted in a charge in the first nine months of fiscal 1995 of $8.4 million
to reflect the impact of the sale of certain assets of the Nalley's U.S. Chips
and Snack business and other expenses relating to the disposal of this
operation. Included in the first nine months of fiscal 1994 was an $8.1
million net gain from restructuring, including division disposals, for a net
increase in this expense from year to year of $16.5 million, all of which was
incurred by the Predecessor Entity. See NOTE 4 - "Disposals/Potential
Disposal."
Change-in-Control Expenses
Change-in-control expenses recorded in the first nine months of fiscal 1995,
amounting to $2.2 million, reflect non-deductible expenses relating to the
sale of the Company covering legal, accounting, investment banking, and other
expenses relative to the change-in-control issue. All of these expenses were
incurred by the Predecessor Entity. In recognizing this expense, the Company
allocated one-half of this amount to Pro-Fac as a deduction to the profit
split. See NOTE 3 -"Change in Control of the Company."
Gain on Assets Resulting From Fire Claim
The gain on assets resulting from the fire claim recorded in the first nine
months of fiscal 1995 amounted to $6.5 million representing the insurance
proceeds for the replacement value in excess of the depreciated book value of
the building and equipment destroyed by fire on July 7, 1994 at the Southern
Frozen Foods division. This gain was recorded by the Predecessor Entity.
Other Selling, Administrative, and General Expenses
Other selling, administrative, and general expenses in the first nine months
of fiscal 1995 of $127.2 million decreased $21.5 million or 14.5 percent from
$148.7 million in the first nine months of fiscal 1994. This net decrease of
$21.5 million includes primarily:
<TABLE>
(In Millions)
<CAPTION>
Businesses
Sold or to be Sold Ongoing Total
<S> <C> <C>
Change in trade promotions $ (6.6) $(1.2) $ (7.8)
Change in advertising and selling costs (11.7) 3.8 (7.9)
All other (2.3) (3.5) (5.8)
Change in selling, administrative,
and general expenses $(20.6) $ 0.9 $(21.5)
</TABLE>
The $1.2 million decrease in trade promotions at the Company's ongoing
operations is primarily comprised of a decrease at CMF of $2.5 million (which
primarily relates to reduced spending on the fruit filling and topping
category of $3.6 million, with minor increases in other categories) and
increased trade promotions at Nalley's Fine Foods of $0.9 million (primarily
related to increased spending on canned entrees and soups of $0.7 million and
salad dressings of $0.6 million, offsetting decreased spending of $0.4 million
on other product lines).<PAGE>
<PAGE>
The $3.8 million increase in advertising and selling costs at the Company's
ongoing operations represents increased costs at CMF ($2.0 million) and
Nalley's Fine Foods ($1.9 million), with minor offsetting variations at other
operations. The increase at CMF primarily relates to fruit fillings and
toppings ($2.2 million), with minor variations in other product lines. The
increase at Nalley's Fine Foods primarily relates to costs associated with
canned entrees and soups ($0.8 million) and salad dressings ($0.7 million),
with minor variations in other product lines.
The $3.5 million decrease in other administrative costs, attributable to the
Company's ongoing operations, primarily relates to CMF and Corporate
Headquarters, with minor variations at other operations. The improved costs
at CMF amount to $0.3 million. Administrative expense reductions at Corporate
Headquarters amount to $1.0 million. There is a $0.3 million reduction in the
Company's management bonus accrual and a $0.4 million reduction in the
currency exchange loss. In addition, dividend income relating to the
Company's investment in the Bank amounted to $0.6 million.
Operating Income
Before Dividing with Pro-Fac
The Company's operating income (before dividing with Pro-Fac) for the nine
months ended March 25, 1995 of $39.1 million decreased $6.5 million or 14.3
percent from $45.6 million in the nine months ended March 26, 1994. Included
in the March 1995 operating income: the restructuring charges, including a
loss from division disposals of $8.4 million; change-in-control expense of
$2.2 million; gain on assets resulting from fire claim of $6.5 million; and
operating losses attributable to businesses sold or to be sold of $0.2
million. Included in the March 1994 operating income: the restructuring gain
from division disposals of $8.1 million and operating losses attributable to
businesses sold or to be sold of $2.4 million. Excluding the restructuring
loss/gain from division disposals, change-in-control expense, and gain on
assets resulting from fire claim, and operating losses attributable to
businesses sold or to be sold, the Company's operating income (before dividing
with Pro-Fac) from ongoing operations for the nine months ended March 25, 1995
of $43.6 million increased $5.3 million or 13.8 percent from $38.3 million in
the nine months ended March 26, 1994.
Interest Expense
Interest expense in the first nine months of fiscal 1995 of $24.0 million
increased $9.7 million or 67.8 percent from $14.3 million in the first nine
months of fiscal 1994. This increase was primarily attributable to the
increased borrowing related to the acquisition of the Company by Pro-Fac.
Pro-Fac Share of Earnings
Pro-Fac's share of the Company's earnings in the first nine months of fiscal
1995 of $7.3 million decreased $7.7 million or 51.3 percent from $15.0 million
in the first nine months of fiscal 1994. The restructuring expenses, change-
in-control expense, and fire claim discussed above accounted for $6.1 million
of this decrease. The Pro-Fac share of earnings in the first nine months of
fiscal 1995 and fiscal 1994 was 48.3 percent and 47.9 percent, respectively,
of the Company's pretax earnings before dividing with Pro-Fac.
Income Before Taxes
The Company's income before taxes in the first nine months of fiscal 1995 of
$7.8 million decreased $8.5 million or 52.1 percent from $16.3 million in the
first nine months of fiscal 1994. The restructuring expenses, change-in-
control expense, and fire claim discussed above accounted for $6.1 million or
71.8 percent of the decrease.<PAGE>
<PAGE>
Provision for Taxes
The provision for taxes in the first nine months of fiscal 1995 of $4.7
million decreased $2.0 million or 29.9 percent from $6.7 million in the first
nine months of fiscal 1994. The effective tax rate in the nine months ended
March 25, 1995 was 60.3 percent compared to 41.1 percent in the nine months
ended March 26, 1994. The non-deductibility of the amortization of excess
purchase cost over net assets acquired was primarily responsible for the
significantly increased rate.
Net Income
The Company's net income for the first nine months of fiscal 1995 of $3.1
million decreased $6.5 million or 67.7 percent from $9.6 million in the first
nine months of fiscal 1994.
The primary reasons for the Company's $6.5 million decrease in net income are
the after-tax effect of the increased expenses relating to restructuring,
change in control, and interest, partially offset by the gains resulting from
the Southern Frozen Foods' fire claim and improvements in divisions' operating
results as well as the change in the Company's effective tax rate -- all
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Historical Funding and Capital Expenditures
The operations of Curtice-Burns historically have been funded with cash flows
generated by operations, borrowings from Pro-Fac (which in turn borrowed a
portion of these funds from the Bank), and borrowings under Curtice-Burns'
Seasonal Facility with a syndicate of commercial lenders led by The Chase
Manhattan Bank, N.A. Pro-Fac and Curtice-Burns had available seasonal lines
of credit of $100.0 million through September 1993, $86.0 million through
September 1994, and $96.0 million thereafter. The maximum borrowing on those
seasonal lines during fiscal 1994 was $81.0 million, while the average amount
outstanding during such year totaled approximately $51.5 million. The balance
outstanding at November 3, 1994 was $83.5 million. These borrowings were
repaid simultaneously with the consummation of the acquisition.
In addition to borrowings by Pro-Fac, which had been loaned to Curtice-Burns,
substantially all cash not distributed by Pro-Fac to its members or security
holders had either been invested in assets leased to Curtice-Burns or loaned
to Curtice-Burns to finance its operations.
In the first nine months of fiscal 1995, the net cash provided by operating
activities of Curtice-Burns of $12.1 million reflects net income of $3.1
million ($1.7 million as Predecessor Entity and $1.4 million as Successor
Entity). Amortization of assets amounted to $18.2 million ($7.5 million
before the acquisition and $10.7 million after the acquisition). Inventories
increased $36.4 million (an increase of $71.0 million before the acquisition
and a decrease of $34.6 million after the acquisition), accounts receivable
decreased $1.5 million (an increase of $12.4 million before the acquisition
and a decrease of $13.9 million after the acquisition), and the deferred taxes
increased $48.6 million (a decrease of $1.2 million before the acquisition and
an increase of $49.8 million after the acquisition). The increase in the
deferred taxes was primarily related to the excess of cost over net assets
acquired in the acquisition of Curtice-Burns by Pro-Fac. Changes in other
assets and liabilities amounted to $22.3 million ($16.2 million cash provided
before the acquisition and $38.5 million use of cash after the acquisition).
Cash flows used in investing activities generally include the acquisition and
disposition of assets held for or used in the production of goods, but due to
the acquisition of Curtice-Burns by Pro-Fac, also include the fixed asset
write-up to appraised values of $121.6 million, the excess cost over the net
book value <PAGE>
<PAGE>
of assets acquired of $70.7 million, and the investment in the Bank as
required in the borrowing arrangements of $21.6 million. Net cash used in
investing activities in the first nine months of fiscal 1995 amounted to
$227.7 million, $213.9 million of which relates to the acquisition items
discussed above. Of the remaining $13.8 million cash used in investing
activities, $15.1 million was spent on capital expenditures ($5.7 million
before the acquisition and $9.3 million after the acquisition). Also in the
nine-month period, $1.3 million was provided by the disposition of fixed
assets.
Net cash provided by financing activities in the first nine months of fiscal
1995 amounted to $217.9 million ($69.9 million before the acquisition and
$148.0 million after the acquisition). The net borrowings of short- and long-
term debt by the Successor Entity include the liquidation of existing debt at
acquisition of $30.0 million for short-term debt and $104.4 million for long-
term debt and new debt of $66.0 million and $333.4 million of short- and long-
term debt, respectively. Net cash provided by financing activities also
include the capital contribution by Pro-Fac of $136.3 million and the
liquidation of the Predecessor Entity's equity of $81.3 million as well as the
termination of the obligation on the Pro-Fac capital leases.
Because of the additional debt as a result of the acquisition of the Company
by Pro-Fac, the cash flow of the Company is the single, most important measure
of performance for the next five years for the purpose of reducing this debt.
New Borrowings; Additional Capital Contribution by Pro-Fac
Under the New Credit Agreement, the Company is able to borrow up to $86.0
million for seasonal working capital purposes under the Seasonal Facility,
subject to a borrowing base limitation, and obtain up to $11.0 million in
aggregate face amount of letters of credit pursuant to a Letter-of-Credit
Facility. The borrowing base is defined as the lesser of (i) $86.0 million
and (ii) the sum of 60 percent of eligible accounts receivable plus 50 percent
of eligible inventory ($96.4 million at March 25, 1995).
As of March 25, 1995, (i) cash borrowings outstanding under the Seasonal
Facility were $66.0 million, and (ii) additional availability under the
Seasonal Facility, after taking into account the amount of the borrowing base,
was $20.0 million. In addition to its seasonal financing, as of March 25,
1995, the Company had $23.8 million available for long-term borrowings under
the Term-Loan Facility. The Company believes that the cash flow generated by
its operations and the amounts available under the Seasonal Facility should
be sufficient to fund its working capital needs, fund its capital
expenditures, and service its debt for the foreseeable future.
Pro-Fac intends to make additional equity contributions to the Company.
Specifically, Pro-Fac has undertaken to contribute not less than $10.0 million
in equity to the Company. Pro-Fac is making progress on this undertaking as:
federal tax refunds for the years 1986 through 1990 are presently being
processed following earlier approval by the U.S. Internal Revenue Service;
management is designing a Preferred Stock Purchase Plan for employees, and is
working to improve the liquidity of the current Pro-Fac preferred stock.
As a result of the acquisition of the Company by Pro-Fac, the Company's total
debt and interest expense have increased because the Notes have a
substantially higher interest rate than the debt that was repaid with the
proceeds from the Note Offering. The New Credit Agreement will require that
both Pro-Fac and the Company meet certain financial tests and ratios and
comply with certain other restrictions and limitations. As of March 25, 1995,
the Company and Pro-Fac are in compliance with all such restrictions and
limitations.
<PAGE>
<PAGE>
Supplemental Information on Inflation
During the last three fiscal years, the changes in costs and prices within the
Company's business due to inflation were not significantly different from
inflation in the United States economy as a whole. Levels of capital
investment, pricing, and inventory investment were not materially affected by
the moderate inflation.
Short- and Long-Term Trends
The vegetable portion 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. Indications for the 1994 crop
year are that national supplies increased over the prior year due to the
intentional increase in planned production by vegetable processors and
increased crop yields thereby returning the current national supplies to ample
levels. Yields in Curtice-Burns' growing areas increased as well. As of
March 25, 1995, the Company's total inventories were $191.7 million, an
increase of $23.5 million or 14.0 percent from $168.1 million in the prior
year. This excess has affected seasonal-loan balances and will be gradually
reduced by the end of the 1996 fiscal year. There are variations among the
specific commodities and the effect on pricing and profitability in fiscal
1995 has depended upon individual company pricing practices and the effect of
recent industry plant closings and production realignments.
In addition to the excess inventory discussed above, another element impeding
the reduction of short-term debt in fiscal 1995 is the timing of reimbursement
for cash expenditures relative to the facility repairs of the Company's
Montezuma, Georgia plant with was destroyed by fire in July 1994. See NOTE
6 - "Other Matters - Fire Claim." While all material costs associated with
the fire are anticipated to be covered under the Company's insurance policies,
as of March 25, 1995, approximately $13.0 million of such expenditures were
receivable from insurance companies.
Capital expenditures are expected to approximate $21.0 million in fiscal 1995.
The largest, single capital project in process is renovation and updates to
the Nalley's salad dressing plant in Tacoma, Washington. This capital project
amounts to approximately $10.0 million and will provide increased production
and efficiencies for the salad dressing line.
Required scheduled payments on long-term debt will approximate $8.0 million
in the current calendar year. Management expects that cash provided from
operations will be sufficient to cover the scheduled payments on long-term
debt and planned capital expenditures.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the fiscal period to which this
report relates.<PAGE>
<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.
CURTICE-BURNS FOODS, INC.
Date: 5/8/95 BY: /s/William D. Rice
WILLIAM D. RICE
CHIEF FINANCIAL OFFICER, SENIOR
VICE PRESIDENT AND TREASURER
(Duly Authorized Officer and
Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-24-1995
<PERIOD-END> MAR-25-1995
<CASH> 5294
<SECURITIES> 0
<RECEIVABLES> 65161
<ALLOWANCES> 0
<INVENTORY> 191670
<CURRENT-ASSETS> 281317
<PP&E> 272960
<DEPRECIATION> 0
<TOTAL-ASSETS> 700930
<CURRENT-LIABILITIES> 156607
<BONDS> 0
<COMMON> 136289
0
0
<OTHER-SE> 1356
<TOTAL-LIABILITY-AND-EQUITY> 700930
<SALES> 573181
<TOTAL-REVENUES> 573181
<CGS> 402759
<TOTAL-COSTS> 402759
<OTHER-EXPENSES> 138715
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23982
<INCOME-PRETAX> 7725
<INCOME-TAX> 4651
<INCOME-CONTINUING> 3074
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3074
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
