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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (Fee Required)
For the Fiscal Year Ended June 24, 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 of incorporation) (I.R.S. Employer Identification No.)
90 Linden Place, P.O. Box 681, Rochester, New York 14603
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (716) 383-1850
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates of the registrant:
NONE
Number of common shares outstanding at September 22, 1995:
Common Stock: 10,000
The exhibit page begins on page 67
Page 1 of 70 pages
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FORM 10-K ANNUAL REPORT - 1995
CURTICE-BURNS FOODS, INC.
TABLE OF CONTENTS
PART I
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PAGE
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ITEM 1.
Description of Business
General Development of Business...................................................... 3
Relationship with Pro-Fac............................................................ 3
Narrative Description of Business ................................................... 5
Financial Information About Industry Segments........................................ 9
Packaging and Distribution........................................................... 10
Trademarks........................................................................... 10
Raw Material Sources................................................................. 11
Environmental Matters................................................................ 12
Seasonality of Business.............................................................. 13
Practices Concerning Working Capital................................................. 13
Significant Customers................................................................ 13
Backlog of Orders.................................................................... 14
Business Subject to Government Contracts............................................. 14
Competitive Conditions............................................................... 14
New Products and Research and Development............................................ 15
Employees............................................................................ 15
ITEM 2. Description of Properties............................................................ 15
ITEM 3. Legal Proceedings.................................................................... 18
ITEM 4. Submission of Matters to a Vote of Security Holders.................................. 18
PART II
ITEM 5. Market for Registrant's Common Stock and
Related Stockholder Matters....................................................... 18
ITEM 6. Selected Financial Data.............................................................. 19
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................... 19
ITEM 8. Financial Statements and Supplementary Data.......................................... 30
ITEM 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................................ 52
PART III
ITEM 10. Directors and Executive Officers of the
Registrant........................................................................ 52
ITEM 11. Executive Compensation............................................................... 56
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management.................................................................... 61
ITEM 13. Certain Relationships and Related Transactions....................................... 61
PART IV
ITEM 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K............................................................... 65
Signatures........................................................................... 69
</TABLE>
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ITEM 1. DESCRIPTION OF BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
Curtice-Burns is a producer and marketer of processed food products, including
canned and frozen fruits and vegetables, canned desserts and condiments, fruit
fillings and toppings, canned chilies and stews, salad dressings, pickles,
peanut butter and snack foods. In addition, CurticeBurns manufactures cans,
which are both utilized by the Company and sold to third parties. Pro-Fac
Cooperative, Inc. ('Pro-Fac') and Curtice-Burns were established together in the
early 1960s and have had a long-standing contractual relationship under an
Integrated Agreement pursuant to which Pro-Fac provided crops and financing to
Curtice-Burns, Curtice-Burns provided a market and management to Pro-Fac, and
Pro-Fac shared in the profits of Curtice-Burns. Pro-Fac is an agricultural
cooperative corporation formed in 1960 under New York law to process and market
crops grown by its members. Only growers of crops marketed through Pro-Fac (or
associations of such growers) can become members of Pro-Fac.
On November 3, 1994, Pro-Fac acquired Curtice-Burns (the 'Acquisition'), and
Curtice-Burns became a wholly-owned subsidiary of Pro-Fac. In connection with
the Acquisition, Agway Inc. and the other shareholders of Curtice-Burns received
$19.00 per share in cash for their shares of common stock of Curtice-Burns. The
purchase price and fees and expenses related to the Acquisition were financed
with borrowings under a new credit agreement (the 'New Credit Agreement') with
Springfield Bank for Cooperatives, predecessor to CoBank ACB (the 'Bank'), and
the proceeds of the Company's 12.25 percent Senior Subordinated Notes due 2005
(the 'Notes'). Pro-Fac has guaranteed the obligations of the Company under the
New Credit Agreement and the Notes.
As a result of the indebtedness incurred in connection with the Acquisition,
Curtice-Burns is a much more highly leveraged company, with higher interest
expenses, than prior to the Acquisition. The New Credit Agreement and the Notes
restrict the ability of Pro-Fac to amend the Pro-Fac Marketing and Facilitation
Agreement. The New Credit Agreement and the Notes also restrict the amount of
dividends and other payments that may be made by the Company to Pro-Fac.
RELATIONSHIP WITH PRO-FAC
Upon consummation of the Acquisition, certain disputed matters which were the
subject of pending arbitration were resolved. The Integrated Agreement was
terminated, and Pro-Fac and Curtice-Burns entered into the Pro-Fac Marketing and
Facilitation Agreement as of November 3, 1994 (the 'Pro-Fac Marketing
Agreement'). The Pro-Fac Marketing Agreement reflects that much of the financing
previously provided by Pro-Fac to Curtice-Burns has been restructured. Financing
previously provided by the Bank to Pro-Fac, then re-lent by Pro-Fac to
Curtice-Burns, is now provided directly by the Bank to Curtice-Burns under the
New Credit Agreement. Pro-Fac's interest in the facilities and equipment of
Curtice-Burns and Pro-Fac's investment in the Bank were transferred to
Curtice-Burns at the time of the Acquisition. The Pro-Fac equity that was
previously lent to Curtice-Burns was also transferred to Curtice-Burns.
The Pro-Fac Marketing Agreement resembles the Integrated Agreement in that it
continues to provide for Pro-Fac to supply crops and additional financing to
Curtice-Burns, for Curtice-Burns to provide a market and management services to
Pro-Fac, and for Pro-Fac to share in the profits of CurticeBurns. To preserve
the independence of Curtice-Burns, the Pro-Fac Marketing Agreement also requires
that certain of the directors of Curtice-Burns be individuals who are not
employees or shareholders of, or otherwise
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affiliated with, Pro-Fac or the Company ('Disinterested Directors') and requires
that certain decisions be approved by the Disinterested Directors.
Purchase of Crops From Pro-Fac: Under the Pro-Fac Marketing Agreement,
Curtice-Burns purchases crops from Pro-Fac at the commercial market value
('CMV') of those crops. 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. Under both the Pro-Fac
Marketing Agreement and the predecessor agreement to the Pro-Fac Marketing
Agreement, Curtice-Burns paid Pro-Fac $55.9 million, $59.2 million, and $59.8
million as CMV for crops purchased from Pro-Fac in fiscal years 1995, 1994, and
1993, respectively. The crops purchased by Curtice-Burns from Pro-Fac
represented approximately 73 percent, 65 percent and 60 percent of all raw
agricultural crops purchased by Curtice-Burns in fiscal 1995, 1994, and 1993,
respectively.
CMV will be determined, similar to the process that existed prior to the
Acquisition, by a joint committee of the Boards of Directors of Pro-Fac and
Curtice-Burns, which is currently comprised of the Chief Executive Officer of
Curtice-Burns and an equal number of Pro-Fac directors and Disinterested
Directors. The Pro-Fac Marketing Agreement requires a majority of the
Disinterested Directors to approve the recommendation of the joint committee.
Although CMV is intended to be no more than the fair market value of the crops
purchased by Curtice-Burns, it may be more or less than the price Curtice-Burns
would pay in the open market in the absence of the Pro-Fac Marketing Agreement.
The volume and type of crops to be purchased by Curtice-Burns 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.
Patronage Income of Pro-Fac: In addition to CMV, under the Pro-Fac Marketing
Agreement, Curtice-Burns will pay to Pro-Fac as additional patronage income up
to 90 percent of Curtice-Burns' pretax income on Pro-Fac related products (the
'Pro-Fac Products'), or reduce CMV by up to 90 percent of Curtice-Burns' losses
on Pro-Fac Products. The Pro-Fac Marketing Agreement provides that additional
patronage income may not exceed 50 percent of Curtice-Burns' entire pretax
income and that no more than 50 percent of Curtice-Burns' entire pretax loss
will be charged to Pro-Fac, through a reduction of CMV, during the term of the
Notes. Additional patronage income is paid to Pro-Fac for services provided to
Curtice-Burns, including the provision of a long term, stable crop supply,
favorable payment terms for crops and access to cooperative bank financing and
the sharing of risks in losses of operations of the business.
Curtice-Burns has historically paid Pro-Fac additional patronage income based on
a portion of Curtice-Burns' pretax income. Under the predecessor agreements to
the Pro-Fac Marketing Agreement, additional patronage income has generally been
equal to 50 percent of the pretax income of CurticeBurns, or in loss years
amounts due to Pro-Fac for interest on its loans to Curtice-Burns have been
reduced by 50 percent of Curtice-Burns' pretax losses. Curtice-Burns paid
additional patronage income to Pro-Fac of $9.6 million and $16.9 million in
fiscal 1995 and 1994 on account of CurticeBurns' earnings for those years. In
fiscal 1993, Curtice-Burns reduced the amount of interest due to Pro-Fac by
$21.8 million based on a 50 percent allocation of a loss at Curtice-Burns.
Historically, Curtice-Burns has deducted additional patronage income for income
tax purposes as an ordinary and necessary business expense for accommodations
provided to Curtice-Burns by Pro-Fac. Under the Pro-Fac Marketing Agreement,
Pro-Fac will continue to provide many of the same services as it has in the
past. Although Curtice-Burns is a wholly-owned subsidiary of Pro-Fac, the
payment of additional patronage income will be
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subject to a similar methodology to that established at arm's length in the past
and will be approved by a majority of the Disinterested Directors.
In January of 1995, the Boards of Directors of Curtice-Burns Foods, Inc. and
Pro-Fac Cooperative, Inc. approved appropriate amendments to the Bylaws of
Curtice-Burns Foods, Inc. to allow the Company to qualify as a cooperative under
Subchapter T of the Internal Revenue Code. A private letter ruling agreeing to
this change was received from the Internal Revenue Service in August 1995. The
effective date of the change is June 25, 1995. As a cooperative, patronage
income will be deductible to the extent distributed to its members. Accordingly,
taxation on patronage income is only imposed at the patron level.
Additional patronage income received by Pro-Fac is deductible to Pro-Fac for
federal tax purposes only to the extent distributed to its members. Pro-Fac may
make this distribution to its members through a combination of cash and retains
as long as a minimum of 20 percent of the amount is paid in cash as required by
federal tax law. Pro-Fac has historically paid its members between 20 percent
and 30 percent of additional patronage income in cash and the remaining portion
in retains. Funds made available by the distribution of retains to members in
lieu of cash have historically been reinvested by Pro-Fac in Curtice-Burns.
Pro-Fac will be required to reinvest at least 70 percent of the additional
patronage income in Curtice-Burns.
Under the Pro-Fac Marketing Agreement, Curtice-Burns will continue to manage the
business and affairs of Pro-Fac and provide all personnel and systems required
for its management, and Pro-Fac will pay Curtice-Burns a quarterly fee of
$25,000 for these services. See 'Certain Transactions.'
NARRATIVE DESCRIPTION OF BUSINESS
General: The Company is a producer and marketer of processed food products
including canned and frozen fruits and vegetables, canned desserts and
condiments, fruit fillings and toppings, canned chilies and stews, salad
dressings, pickles, peanut butter and snack foods. 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
institutions such as restaurants, caterers and bakeries and to schools. In
fiscal 1995, approximately one-half of the Company's net sales were branded and
the remainder were split between private label and food service. The Company's
branded products include 'Comstock,' 'Thank You' and 'Wilderness' fruit fillings
and toppings, 'Nalley' chilies and stews, 'Bernstein's' salad dressings and
'Adams' peanut butter. The Company's private label products include salad
dressings, salsa, fruit fillings and toppings, canned puddings and canned and
frozen vegetables, which are sold to customers such as A&P, Kroger, Safeway,
Topco, Wegman's and Winn-Dixie. The Company's food service products include
salad dressings, pickles, fruit fillings and toppings, canned and frozen
vegetables, canned puddings, cheese sauces and canned and frozen fruit, which
are sold to customers such as Carvel, Disney, Foodservice of America, KFC,
McDonald's and Sysco.
Comstock Michigan Fruit: CMF, the Company's largest division, headquartered in
Rochester, New York, produces products in three principal categories: (i) fruit
fillings and toppings, (ii) aseptically produced products and (iii) canned and
frozen fruits and vegetables. In fiscal 1995, approximately one-third of CMF's
net sales represented branded products,
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approximately one-third represented private label products and approximately
one-third represented food service products. CMF markets its branded products
under the 'Thank You,' 'Comstock,' 'Wilderness,' 'Greenwood,' 'Silver Floss,'
'Blue Boy,' 'Super Pop,' 'Pop-Eye,' and 'Pops-Rite' labels. The following table
sets forth the net sales and division operating income for CMF for the periods
shown:
<TABLE>
<CAPTION>
(Dollars in Millions)
Fiscal Year Ended
-----------------------------------------
June 24, June 25, June 26,
1995 1994 1993
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<S> <C> <C> <C>
Net sales $332.1 $333.4 $317.8
Operating income 31.9 29.6 23.0
</TABLE>
CMF estimates the national fruit fillings and toppings market to be
approximately $225.0 million. CMF's fruit fillings and toppings are marketed
under the 'Comstock', 'Thank You' and 'Wilderness' brands, which held a national
market share of approximately 52 percent in the fruit filling segment in fiscal
1995. CMF's fruit fillings and toppings are sold both through grocers to the
public and to food service institutions such as restaurants, caterers and
bakeries and to schools. In fiscal 1994, the Company introduced the 'More
Fruit/More Flavor' program at CMF, which involved the production of fruit
fillings and toppings with more fruit content, which CMF sells at a premium
price. The Company believes this program has increased CMF's market share in the
fruit fillings and toppings category.
CMF's aseptic operations produce puddings, cheese sauces and dips for sale by
CMF and diet drinks for sale by a third party under a co-packing arrangement.
The aseptic production process involves preparation of the product in a sterile
environment beginning with batch formulation and continuing through packaging.
As a result, once packaged, the product requires no further cooking. The Company
believes its aseptic production facility is state-of-the-art. In 1994, CMF's
aseptically processed puddings accounted for approximately 66 percent of the
national food service market and aseptically processed cheese sauces accounted
for approximately one-quarter of the national food service market.
CMF's fruit and vegetable processing business includes both branded and private
label production. It also includes value added products such as canned specialty
fruits and frozen vegetable mixes. Success in the fruit and vegetable processing
business is driven by, among other things, an ability to control costs. The
Company has aggressively sought to reduce costs in the fruit and vegetable
processing business by closing plants, making capital investments in the
modernization of processing equipment, changing its product mix and refining
advertising strategies. For example, in fiscal 1993, the Company initiated
production consolidation efforts involving the closing of CMF plants located in
Michigan and New York. Programs aimed at further reducing costs include
continued capital investment in cost savings projects and further vegetable
plant production efficiencies. Subsequent to the end of fiscal 1995, on July 21,
1995, the Company acquired Packer Foods, Inc. (see further discussion in Note 9
of the financial statements). Packer's operation is in the process of being
merged into the CMF operations.
Nalley's Fine Foods: Nalley's is headquartered in Tacoma, Washington. It markets
canned meat products such as chilies and stews, pickles, salad dressings, peanut
butter and syrup, which are sold throughout the Northwest and Western United
States under the 'Nalley' brand and other premium brand names, such as
'Bernstein's' salad dressing and 'Adams' natural peanut butter. Approximately
three-quarters of Nalley's products are branded;
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however, private label accounts for a growing percentage of Nalley's business.
The following table sets forth the net sales and division operating income for
Nalley's for the periods shown:
<TABLE>
<CAPTION>
(Dollars in Millions)
Fiscal Year Ended
-----------------------------------------
June 24, June 25, June 26,
1995 1994 1993
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<S> <C> <C> <C>
Net sales $181.2 $171.8 $164.5
Operating income 18.7 16.5 19.1
</TABLE>
The Nalley's products have been a vehicle for growth through both geographic
expansion and line extension. Several of Nalley's products have leading market
shares in the Pacific Northwest, such as Nalley's chili, which had a market
share of approximately 55 percent, and 'Nalley' and 'Farman's' pickles, which
together had a market share of approximately 48 percent, for the 52-week period
ended June 1995. In the Pacific Northwest, the Company's 'Nalley' and
'Bernstein's' brands of salad dressings had a combined market share of
approximately 18 percent for the same period. Nalley's has taken an aggressive
position in growing its market share in the salad dressing category. It is
believed by management that over the last three years, Nalley's has been the
only major salad dressing company on the West Coast to grow its share
consistently. It has done this by pursuing unique line extensions (e.g.,
Bernstein's 'Wine Country Italian'), entering fast-growing market segments with
superior-quality products (e.g., Bernstein's fat-free dressings), and by
entering new markets, such as refrigerated dressings (e.g., Bernstein's
refrigerated dressings).
In line with the growing trend toward private label, Nalley's has been
aggressively pursuing this profitable business segment. Specifically, Nalley's
has been executing its three-tiered store label strategy on specialty Mexican
products, such as chili and salsa, salad dressings and canned soups. The
three-tiered strategy allows the Company to offer to its private label customers
products in a 'good,' 'better,' 'best' format. For example, if the grocer seeks
a premium salsa brand, Nalley's can offer its top-tier brand of salsa. By using
the three-tiered approach, the Company has successfully extended the reach of
its available products. The private label customer base continues to expand on a
national basis and includes Winn-Dixie in the Southeast, Wegman's in Upstate New
York, Topco in the Midwest, and Ralph's and Western Family on the West Coast.
Southern Frozen Foods: Southern Frozen Foods, headquartered in Montezuma,
Georgia, freezes and sells a full line of southern vegetables such as black-eyed
peas, okra and leafy greens as well as a line of traditional vegetables such as
corn, peas, squash and green beans. Southern also produces specialty side
dishes, breaded vegetables and onion rings, and a small amount of frozen fruit.
The following table sets forth the net sales and division operating income for
Southern for the periods shown:
<TABLE>
<CAPTION>
(Dollars in Millions)
Fiscal Year Ended
-----------------------------------------
June 24, June 25, June 26,
1995 1994 1993
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Net sales $96.6 $94.3 $93.4
Operating income 9.2 10.2 7.6
</TABLE>
Southern's products are marketed under the following brand names: 'McKenzie's',
'Southern Farms', 'Gold King', 'Chill-Ripe' and 'Tropic Isle.' Approximately
one-half of Southern's products are sold under brand labels,
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with 'McKenzie's' and 'Southern Farms' accounting for approximately 27 percent
of the southern vegetable market in the Southeastern United States for the
52-week period ended February 5, 1995. Approximately 15 percent of Southern's
products are sold to private label customers with major accounts including
Winn-Dixie, Federated Foods, SuperValu and Marketing Management. Distribution is
primarily in the Southeast and South Central portions of the United States.
On July 7, 1994, a fire destroyed Southern's breading and packaging operations.
In the interim the Division outsourced these functions. On July 7, 1995, the new
plant and all production lines were back in operation. The new facility is 35
percent larger and houses state of the art packaging, breading and fryer
equipment.
Snack Foods Group: The Snack Foods Group consists of three separate
divisions: (i) Snyder, (ii) Tim's and (iii) Husman. The following table
sets forth the net sales and division operating income for the Snack Foods
Group for the periods shown:
<TABLE>
<CAPTION>
(Dollars in Millions)
Fiscal Year Ended
-----------------------------------------
June 24, June 25, June 26,
1995 1994 1993
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<S> <C> <C> <C>
Net sales $60.5 $61.2 $65.4
Operating income 3.6 2.7 4.1
</TABLE>
Snyder of Berlin: Snyder of Berlin headquartered in Berlin, Pennsylvania,
produces and markets several varieties of potato chips in distinctive
silver-colored bags, as well as several varieties of cornbased snack
products in conventional packaging, primarily under the 'Snyder of Berlin'
brand. Snyder products are recognized for their unique taste and freshness
among users in Western Pennsylvania, Ohio and West Virginia, some of the
country's highest per capita snack consumption markets.
Tim's Cascade Chips: Tim's Cascade Chips located in Auburn, Washington,
produces kettle-fried potato chips for distribution in the Washington,
Northern Idaho, and Western Oregon area. Kettle frying produces a potato
chip that is thicker and crisper than other potato chips.
Husman's Snack Foods: Husman's Snack Foods located in Cincinnati, Ohio,
manufactures and markets potato chips, popcorn, and cheese curls and
distributes other snack items in Cincinnati and Dayton, Ohio and areas of
northern Kentucky. Husman's targets unique products and packaging to
maintain a strong potato chip market share. Multi-packs and licensing
agreements with local restaurants are two ways Husman's creates their
value added proposition.
Brooks Foods: Brooks Foods located in Mt. Summit, Indiana markets canned beans
and tomato products under their 'Brooks' brand and private label or store
brands. The majority of sales, over 75 percent, are sold under the Brooks brand
and consist of value added items such as Chili Hot Beans and stewed tomatoes.
The following table sets forth the net sales and division operating income for
Brooks for the periods shown:
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<TABLE>
<CAPTION>
(Dollars in Millions)
Fiscal Year Ended
-----------------------------------------
June 24, June 25, June 26,
1995 1994 1993
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<S> <C> <C> <C>
Net sales $30.2 $30.0 $30.7
Operating income 2.8 3.1 2.7
</TABLE>
Brooks chili beans are the dominant leader with an average category share of
more than 65 percent. Brooks value-added canned tomatoes with chili seasonings
continue to grow share under the 'Just for Chili' brand name after only a few
short years from introduction. Brooks brand 'Rich & Tangy Ketchup' continues to
hold a very visible position in all stores in Brooks markets; in fact, has been
experiencing some unit growth in recent months.
Brooks growth in store-brand canned bean sales has continued, attributable in
large part to efficiency improvements and cost controls. Brooks has made great
strides in becoming a low-cost producer for these items and should see further
strides in this direction over the next two years. In the large-volume category,
opportunity continues to further decrease costs.
Brooks also co-packs for other companies and further opportunities are being
explored in this area.
Finger Lakes Packaging Company: Finger Lakes, headquartered in Lyons, New York,
manufactures various sizes of three-piece sanitary food cans for sale to the
Company and third parties. In fiscal 1994, approximately two-thirds of Finger
Lakes sales were to other divisions of the Company and one-third were to other
customers. The following table sets forth the net sales and division operating
income (before elimination of intercompany sales) for Finger Lakes for the
periods shown:
<TABLE>
<CAPTION>
(Dollars in Millions)
Fiscal Year Ended
-----------------------------------------
June 24, June 25, June 26,
1995 1994 1993
-------- -------- ------
<S> <C> <C> <C>
Net sales $49.7 $49.9 $47.1
Operating income 3.5 3.9 2.9
</TABLE>
Finger Lakes' three-part, metal sanitary cans are used in the retail, food
service and institutional markets. These cans are recyclable and provide
economical containers for the Company's products based on volume run and
customer base.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The business of the Company is principally conducted in one industry segment,
the processing and sale of various food products. The table set forth below
shows certain financial information relating to that industry segment for each
of the Company's last five fiscal years. The financial statements for the fiscal
years ended June 24, 1995, June 25, 1994, and June 26, 1993, which are included
in this report, reflect the information set forth in the table. The fiscal 1995
amounts are the total of Predecessor and Successor entities.
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<TABLE>
<CAPTION>
Fiscal Years
-------------------------------------------------------------------
Dollars in Millions June 24, June 25, June 26, June 26, June 28,
1995** 1994** 1993** 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $748.5 $829.1 $878.6 $896.9 $933.1
Sales to unaffiliated
customers* $748.5 $829.1 $878.3 $896.6 $932.6
Net income/(loss) $ 4.0 $ 10.1 $(23.8) $ 6.1 $ 3.7
Total assets $672.3 $446.9 $493.7 $529.7 $557.9
</TABLE>
* The only sales by the Company to affiliated customers were made to Agway
by the Predecessor entity. Such sales consist principally of frozen foods
and are made at competitive prices. There are no intersegment sales or
transfers since the business of the Company is principally conducted in
one industry segment.
** Including restructuring charges, net gain/(loss) from division disposals
of $(4.2) million, $3.9 million, and $(29.9) million (after split with
Pro-Fac) for fiscal 1995, 1994, 1993, respectively and change of control
costs of $1.1 million and $1.7 million (after split with Pro-Fac) in
fiscal 1995 and 1994, respectively. See Notes 3 and 4 to 'Notes to
Consolidated Financial Statements.'
PACKAGING AND DISTRIBUTION
The food products produced by the Company are distributed to various consumer
markets in all 50 states as well as in Canada. Branded lines of CMF, Southern
and Brooks divisions are sold through food brokers which sell primarily to
supermarket chains and various institutional feeders. Nalley's as its own sales
personnel responsible for sales within the Pacific Northwest and uses food
brokers for sales in other marketing areas. Snyder's, Tim's and Husman's
products are marketed through distributors, some of which are owned and operated
by the Company, who sell directly to retail outlets in Kentucky, Maryland, Ohio,
Pennsylvania, Virginia, West Virginia, Washington, Northern Idaho and Western
Oregon.
Customer brand operations encompass the sale of products under private labels to
chain stores and under the controlled labels of buying groups. For example,
private label customers of CMF include such major food distributors as A&P,
Kroger, Safeway, Topco, Wegman's and Winn-Dixie. The Company has developed
central storage and distribution facilities that permit multi-item single
shipment to customers in key marketing areas.
Curtice-Burns Express ('CBX'), a subsidiary of the Company, is a licensed common
carrier with authority in 48 states. It is used by the Company to obtain
backhaul volume on shipments via the Company's trucks or contract haulers. The
other divisions of the Company lease their equipment to CBX for these backhauls.
TRADEMARKS
The major brand names under which the Company markets its products are
trademarks of the Company. Such brand names are considered to be of material
importance to the business of the Company since they have the effect of
developing brand identification and maintaining consumer loyalty. All of the
Company's trademarks are of perpetual duration so long as periodically renewed,
and it is currently intended that the Company will maintain them in force. The
major brand names utilized by the Company are as follows:
10
<PAGE>
<TABLE>
<CAPTION>
Product Brand Name
------------------------ -----------------------------------------------
<S> <C>
Chilies, stews and soups Brooks, Mariners Cove, Nalley
Fruits and vegetables Blue Boy, Brooks, Chill-Ripe, Gold King,
Gracias, Greenwood, Hoosier Sweets, Just for
Chili, McKenzie's, Naturally Good, Ritter,
Southern Farms, Southland, Thank You, Tropic
Isle
Fruit fillings and toppings Comstock, Globe, Gracias, Thank You,
Wilderness
Peanut butter Adams
Pickles Farman's, Nalley
Popcorn Pop-Eye, Pops-Rite, Super Pop
Puddings Gracias, Thank You
Salad dressings Bernstein's, Bernstein's Light Fantastic,
Nalley
Sauerkraut Silver Floss
Snack food Cheese Pleezers, Husman, La Restaurante,
Snyder of Berlin, Thunder Crunch, Tim's
Cascade Chips
Syrup Lumberjack
</TABLE>
RAW MATERIAL SOURCES
It is currently anticipated that the Company will continue to acquire a
substantial part of its raw agricultural products from Pro-Fac. In fiscal 1995,
approximately 73 percent of the crops processed by the Company were supplied by
Pro-Fac. The Company also will purchase on the open market some crops of the
same type and condition as those purchased from Pro-Fac. Such open market
purchases may occur at prices higher or lower than those paid to Pro-Fac for
similar products.
The canned and frozen vegetable portion of the Company's 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 in a given year. This oversupply
typically will result in depressed selling prices and reduced profitability to
the Company on the inventory produced from that year's crops. Excessive rain or
drought conditions can produce low crop yields and a shortage situation. This
shortage typically will result in higher selling prices and increased
profitability to the Company. While the national supply situation controls the
pricing, the supply can differ regionally because of variations in weather. For
example, the 1993 floods in the Midwest and the drought in the South produced
lower crop yields in those areas and increased prices, even though the crops in
the Company's growing areas were at normal levels. Favorable weather conditions
in the 1994 growing season produced high crop yields resulting in somewhat
depressed selling prices, increased inventory levels throughout the year, and a
higher carryover inventory at the end of the year. The impact of the 1993
growing season principally affected the Company's operating results in fiscal
1994, and the impact of the 1994 growing season principally affected the
Company's operating results in fiscal 1995. The impact of the 1995 growing
season on
11
<PAGE>
the Company's operating results for fiscal 1996 cannot be determined until late
fall of 1995 when national supplies are known.
Except for cans manufactured by Finger Lakes, the Company purchases all of its
requirements for nonagricultural products, including containers, on the open
market. Although the Company has not experienced any difficulty in obtaining
adequate supplies of such items, occasional periods of short supply of certain
raw materials may occur.
ENVIRONMENTAL MATTERS
The disposal of solid and liquid waste material resulting from the preparation
and processing of foods and the emission of wastes and odors inherent in the
heating of foods during preparation are subject to various federal, state, and
local environmental laws and regulations. Such laws and regulations have had an
important effect on the food processing industry as a whole, requiring
substantially all firms in the industry to incur material expenditures for
modification of existing processing facilities and for construction of new waste
treatment facilities. The Company is also subject to standards imposed by
regulatory agencies pertaining to the occupational health and safety of its
employees. Management believes that continued measures to comply with such laws
and regulations will not have a material adverse effect upon its competitive
position.
Among the various programs for the protection of the environment which have been
adopted to date, the most important for the operations of the Company are the
waste water discharge permit programs administered by the environmental
protection agencies in those states in which the Company does business and by
the federal Environmental Protection Agency. Under these programs, permits are
required for processing facilities which discharge certain wastes into streams
and other bodies of water, and the Company is required to meet certain discharge
standards in accordance with compliance schedules established by such agencies.
The Company has to date received permits for all facilities for which permits
are required, and each year submits applications for renewal permits for some of
the facilities. Such renewal permits are currently being processed, and the
Company expects that they will be issued by the agencies in due course.
While the Company cannot predict with certainty the effect of any proposed or
future environmental legislation or regulations on its processing operations,
management of the Company believes that the waste disposal systems which are now
in operation or which are being constructed or designed are sufficient to comply
with all currently applicable laws and regulations.
A facility owned by the Company in Brockport, New York, known as the Former
3M/Dynacolor Plant Site (DEC Site No. 828066) and used by prior owners as a
manufacturing facility, was in May 1995 classified as a hazardous waste site
presenting a significant threat to the environment. DEC is currently assessing
any impact on groundwater from soil contamination. Until the results of DEC's
assessment are available, it is not possible to determine what, if any, response
actions will be required at the facility.
The Company has been identified as a potentially responsible party ('PRP') under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, ('CERCLA') along with over 100 other entities, at the Ellis
Road Site in Jacksonville, Florida. To date, the Company has paid approximately
$45,000 toward the completion of various removal actions and soil clean up. EPA
is evaluating the need for groundwater remediation which, if required, the
Company does not believe will have a material impact on its earnings given its
relatively small contribution of material to the site and the availability of
other viable PRPs.
12
<PAGE>
The Company has been identified by EPA as a PRP under CERCLA at the Spectron
Inc. Site located in Elkton, Maryland. The investigation of the site is still in
the preliminary stages, and it is not yet possible to estimate the scope or cost
of whatever remedial action may be required. However, based upon its very small
contribution of material to the site and the large number of other viable PRPs,
the Company does not believe this matter will have a material impact on its
earnings.
The Company is cooperating with environmental authorities in remedying various
leaks and spills at several of its plants, primarily associated with underground
storage tanks. Such actions are being conducted pursuant to procedures approved
by the appropriate environmental authorities at a cost that is not significant,
except for one project at the Company's Nalley's plant in Tacoma, Washington,
where the cost of remediation is expected to be approximately $1,250,000, which
amount has been properly accrued in the financial statements.
Expenditures related to environmental programs and facilities have not had, and
are not expected to have, a material effect on the earnings of the Company.
In fiscal 1995, total capital expenditures of Pro-Fac and the Company were $32.6
million (including $12.8 million relating to a fire claim reimbursed by
insurance proceeds), of which approximately $1.6 million was devoted to the
construction of environmental facilities. The Company estimates that the capital
expenditures for environmental control facilities, principally waste water
treatment facilities, for the 1996 fiscal year will be approximately $3.3
million. However, there can be no assurance that expenditures will not be
higher.
SEASONALITY OF BUSINESS
From the point of view of sales, the business of the Company is not highly
seasonal, since the demand for its products is fairly constant throughout the
year. Exceptions to this general rule include some products that have higher
sales volume in the cool weather months (such as canned fruits and vegetables,
chili, and fruit fillings and toppings), and others that have higher sales
volume in the warm weather months (such as potato chips, and condiments). Since
many of the raw materials processed by the Company are agricultural crops,
production of these products is predominantly seasonal, occurring during and
immediately following the harvest seasons of such crops.
PRACTICES CONCERNING WORKING CAPITAL
The Company must maintain substantial inventories throughout the year of those
finished products produced from seasonal raw materials; these inventories are
generally financed through seasonal borrowings.
A short-term line of credit is extended to the Company under agreements with
CoBank, ACB. This line of credit is used primarily for seasonal borrowing, the
amount of which fluctuates during the year. The line of credit is subject to
annual renewal.
Both the maintenance of substantial inventories and the practice of seasonal
borrowing are common to the food processing industry.
SIGNIFICANT CUSTOMERS
The Company's one principal industry segment is not dependent upon the business
of a single customer or a few customers. The Company does not have any customers
to which sales are made in an amount which equals 10 percent
13
<PAGE>
or more of the Company's net sales. The loss of even its biggest customer would
not have a materially adverse effect on the Company.
BACKLOG OF ORDERS
Backlog of orders has not historically been significant in the business of the
Company. Orders are filled shortly after receipt from inventories of packaged
and processed foods.
BUSINESS SUBJECT TO GOVERNMENTAL CONTRACTS
No material portion of the business of the Company is subject to renegotiation
of profits with, or termination by, any governmental agency.
COMPETITIVE CONDITIONS
All products of the Company, particularly branded products, compete with those
of national and major regional food processors under highly competitive
conditions. Many of the national manufacturers have substantially greater
resources than the Company. The principal methods of competition in the food
industry are ready availability of a broad line of products, product quality,
price, and advertising and sales promotion.
In recent years, and particularly when various food items are in short supply,
the constant availability of a full line of food items and the ability to
deliver the required items rapidly and economically have been among the most
important competitive factors in the markets in which the Company operates. The
Company believes that it is competitive with national brands in this area since
distribution of many of its regional brands and custom-pack food items are
limited to areas which can easily be served from its production and distribution
facilities. In this way, the problems inherent in attempting to supply markets
remote from its principal areas of operation are minimized, and the marketing
area is commensurate with the production and storage facilities.
The expansion of the operations of the Company over the years has also allowed
it to offer more complete and diverse lines of products. In the early years of
its existence, the Company marketed principally commodity canned vegetables. The
Company now also markets a broad range of snack foods, desserts, condiments and
other specialty food items, canned and other frozen entrees, salad dressings and
branded frozen vegetables. While all of these products are not offered in every
marketing area, in many areas the Company can offer a diverse line of products,
and the original commodity vegetable items now account for only 18.0 percent of
Company sales.
Quality of product and uniformity of quality are also important methods of
competition. The Company's relationship with Pro-Fac gives the Company local
sources of supply, thus allowing the Company to exercise control over the
quality and uniformity of much of the raw product which it purchases. The
members of Pro-Fac generally operate relatively large production units with
emphasis on mechanical growing and harvesting techniques. This factor is also an
advantage in producing uniform, high-quality food products.
The Company's pricing is generally competitive with that of other food
processors for products of comparable quality. The branded products of the
Company are marketed under regional brands and its marketing programs are
focused on local tastes and preferences as a means of developing consumer brand
loyalty. The Company's advertising program utilizes local media, and strong
emphasis is placed on in-store promotions.
Although the relative importance of the above factors may vary as between
particular products or customers, the above description is generally
14
<PAGE>
applicable to all of the products of the Company in the various markets in
which they are distributed.
Profit margins for canned and frozen fruits and vegetables are subject to
industry supply and demand fluctuations, attributable to changes in growing
conditions, acreage planted, inventory carryover, and other factors. The Company
has endeavored to protect against changing growing conditions through
geographical expansion of its sources of supply. The Company has also taken
steps to lessen the impact of such cycles on its earnings by diversifying into
food product lines which are not affected as severely by fluctuation in profit
margins. The Company has emphasized the merchandising of its own brands and
expanded service and product development for its high volume private label and
food service customers. The percentage of sales under brand names owned and
promoted by the Company (including franchise brands) increased from 35 percent
in fiscal 1972 to a current level of approximately 52.2 percent; sales to the
food service industry (restaurants and institutional customers), which were
insignificant in 1972, now represent approximately 23.5 percent; private label
sales, which were more than half the Company's sales in 1972, currently
represent approximately 20.6 percent; and sales to other manufacturers are
approximately 3.7 percent of total sales.
An estimate of the number of competitors in the markets served by the Company is
very difficult. Nearly all products sold by the Company compete with the
nationally advertised brands of the leading food processors, including Borden,
DelMonte, Green Giant, Heinz, Frito-Lay, Kraft, Vlasic, Birdseye, and similar
major brands, as well as with the branded and private label products of a number
of regional processors, many of which operate only in portions of the marketing
area served by the Company. While the major brands are dominant in branded
products on a national level, the Company believes that it is a significant
factor in many of the marketing areas served by one or more of its regional
brands.
NEW PRODUCTS AND RESEARCH AND DEVELOPMENT
The amount expensed during the last three fiscal years on Company-sponsored and
customer-sponsored research activities relating to the development of new
products or the improvement of existing products was not material, and the
number of employees engaged full-time in such research activities is also not
material. While several divisions of the Company operate test kitchens and pilot
plants for the development of new products, the emphasis generally has been on
the development of related products or modifications of existing products for
the Company's brands and customized products for the Company's private label and
food service businesses. No new products which required the investment of a
material amount of assets have been publicly announced.
EMPLOYEES
As of June 24, 1995, the Company had 3,802 full-time employees, of whom 2,720
were engaged in production and the balance in management, sales and
administration. As of that date, the Company also employed approximately 950
seasonal and other part-time employees, almost all of whom were engaged in
production. Most of the production employees are members of various labor
unions. The Company believes its relationship with its employees is good.
ITEM 2. DESCRIPTION OF PROPERTIES
Historically, Pro-Fac has held title to, and leased to the Company, most of the
processing facilities, warehouses and other plants and equipment
15
<PAGE>
(including equipment located in properties not owned by Pro-Fac) utilized
in the Company's business.
In connection with the Acquisition, Pro-Fac transferred to Curtice-Burns all of
the plants, other real property, and equipment previously owned by ProFac and
leased to Curtice-Burns. As a result, all plants, warehouses, office space and
other facilities used by Curtice-Burns in its business are now either owned by
Curtice-Burns or one of its subsidiaries or leased from third parties. Most of
the properties owned by Curtice-Burns are subject to mortgages in favor of the
Bank. In general, each division occupies a large facility in which its executive
offices, a processing plant and warehouse space are located. Some divisions have
additional processing plants located in rural areas that are convenient for the
delivery of crops from Pro-Fac members and/or additional warehouse locations
dispersed to facilitate the distribution of finished products. Curtice-Burns
believes that its facilities are in good condition and suitable for the
operations of the Company.
Eight of the properties are held for sale. These properties are located in
Denver, Colorado; Wall Lake, Iowa; Clifton, New Jersey; Alton, New York; South
Dayton, New York; Rushville, New York; Albany, Oregon; and Vancouver, British
Columbia, Canada.
In July 1994, a plant operated by Southern, located in Montezuma, Georgia, was
damaged by fire. All material costs associated with repairs to the facility have
been covered under the Company's insurance policies. Costs associated with
business interruption are currently under negotiation with the insurance
carriers.
16
<PAGE>
The following table describes all facilities leased or owned by the Company
(other than the eight properties held for sale and certain public warehouses
leased by the Company from third parties from time to time). Except as otherwise
noted, each facility set forth below is owned by the Company.
FACILITIES UTILIZED BY THE COMPANY
<TABLE>
<CAPTION>
Type of Property Square
(By Division) Location Feet
----------------------------------------------------------- ------------------ ---------
<S> <C> <C>
COMSTOCK MICHIGAN FRUIT:
Office building, manufacturing plant and warehouse* Benton Harbor, MI 239,252
Distribution center Coloma, MI 400,000
Manufacturing plant and warehouse Fennville, MI 370,600
Warehouse Sodus, MI 243,138
Warehouse and office; public storage facility (1) Vineland, NJ 198,000
Warehouse Alton, NY 60,060
Freezing plant; warehouse; office and dry storage Barker, NY 150,100
Freezing plant Bergen, NY 122,009
Cold storage and repack facility and public storage warehouse Brockport, NY 429,052
Cutting, curing and packaging plant Gorham, NY 55,534
Canning plant and warehouse; freezing plant Leicester, NY 205,599
Distribution center and warehouse LeRoy, NY 137,300
Canning plant and warehouse; freezing plant Oakfield, NY 203,403
Canning plant and warehouse Red Creek, NY 137,264
Cutting, curing and canning plant Shortsville, NY 103,686
Cutting and curing plant Waterport, NY 21,626
Manufacturing plant Ridgway, IL 50,000
Distribution and warehouse North Bend, NE 50,000
NALLEY'S FINE FOODS:
Office building, warehouse and tank farm Enumclaw, WA 87,313
Office building, manufacturing plant and warehouse Tacoma, WA 438,000
Parking lot and yards (1) Tacoma, WA 162,570
Warehouses (1) Tacoma, WA 254,000
Receiving and grading station (1) Cornelius, OR 11,700
Receiving and grading station (1) Mount Vernon, WA 30,206
SOUTHERN FROZEN FOODS:
Office, freezing plant, cold storage and repackaging facility Montezuma, GA 563,442
Office, freezing plant and cold storage Alamo, TX 110,000
SNACK FOODS GROUP:
Office, plant and warehouse Berlin, PA 190,225
Administrative, plant, warehouse and distribution center (1) Auburn, WA 37,600
Office, plant and warehouse Cincinnati, OH 113,576
Distribution Center Elwood City, PA 8,000
Distribution Center Monessen, PA 10,000
BROOKS FOODS:
Office building, canning plant and warehouse Mt. Summit, IN 200,000
FINGER LAKES PACKAGING:
Can manufacturing plant Lyons, NY 147,376
CORPORATE HEADQUARTERS:
Headquarters office (1) (Includes office space for CMF
as well as Corporate Conference Center) Rochester, NY 62,500
</TABLE>
(1) Leased from third parties, although certain related equipment is owned by
the Company.
* Also includes can manufacturing equipment operated by Finger Lakes Packaging.
17
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings other than routine litigation
incidental to the business to which either the Company or Pro-Fac is a party or
to which any of their property is subject. Further, no such proceedings are
known to be contemplated by governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
All of the capital stock of the Company is owned by Pro-Fac Cooperative, Inc.
18
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Curtice-Burns Foods, Inc.
FIVE YEAR SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended June
----------------------------------------------------------------
(Dollars in Thousands) 1995 1994 1993 1992 1991
--------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Summary of Operations*
Net sales $748,525 $ 829,116 $ 878,627 $ 896,931 $933,084
-------- --------- --------- --------- ---------
Costs and expenses:
Cost of sales 530,139 592,621 632,663 652,347 673,258
Gain on assets net of additional costs incurred
as a result of the fire (4,154) -- -- -- --
Restructuring including net (gain)/loss from
division disposals 8,415 (7,768) 61,037 -- --
Change in control expenses 2,150 3,500 -- -- --
Selling, administrative and general expenses 159,937 186,934 207,119 201,327 220,943
Interest expense 32,414 18,205 19,550 22,835 26,135
-------- --------- --------- --------- ---------
728,901 793,492 920,369 876,509 920,336
-------- --------- --------- --------- ---------
Pretax earnings/(loss) before dividing with Pro-Fac 19,624 35,624 (41,742) 20,422 12,748
Pro-Fac share of earnings/(loss) 9,616 16,849 (21,800) 9,505 5,907
-------- --------- --------- --------- ---------
Income/(loss) before taxes 10,008 18,775 (19,942) 10,917 6,841
Provision for taxes 6,026 8,665 3,895 4,769 3,184
-------- --------- --------- --------- ---------
Net income/(loss) $ 3,982 $ 10,110 $ (23,837) $ 6,148 $ 3,657
======== ========= ========= ========= =========
Balance Sheet Data:
Working capital $144,171 $ 104,049 $ 100,422 $ 101,706 $ 106,849
Ratio of current assets to current liabilities 2.3-1 1.7-1 1.6-1 1.6-1 1.6-1
Total assets $672,284 $ 446,938 $ 493,729 $ 529,739 $ 557,860
Long-term debt and senior-subordinated notes $343,665 $ 79,061 $ 85,037 $ 70,345 $ 72,691
Long-term obligations under capital leases $ 1,620 $ 124,973 $ 154,102 $ 167,291 $ 174,113
Other Statistics:
Average number of employees:
Regular 3,838 5,169 5,325 5,573 5,779
Seasonal 1,540 1,596 1,347 1,808 1,982
</TABLE>
* Represents the results of operations for both the Predecessor and Successor
entities for fiscal 1995.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion is to outline the most significant reasons for
changes in net sales, expenses and earnings from fiscal 1993 through 1995. The
following comparisons to the prior year periods present the results of the
Company during the period prior to its acquisition by ProFac, ('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.
The following tables illustrate the Company's results of operations by business
for the fiscal years ended June 24, 1995, June 25, 1994, and June 26, 1993, and
the Company's total assets by business as at June 24, 1995 and June 25, 1994.
19
<PAGE>
<TABLE>
<CAPTION>
Net Sales
(Dollars in Millions)
Fiscal Years Ended
---------------------------------------------------------
6/24/95 6/25/94 6/26/93
---------------- --------------- ----------------
% of % of % of
$ Total $ Total $ Total
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit ('CMF') 332.1 44.4 333.4 40.2 317.8 36.1
Nalley's Fine Foods 181.2 24.2 171.8 20.7 164.5 18.7
Southern Frozen Foods 96.6 12.9 94.3 11.4 93.4 10.7
Snack Foods Group 60.5 8.1 61.2 7.4 65.4 7.4
Brooks Foods 30.2 4.0 30.0 3.6 30.7 3.5
Finger Lakes Packaging 49.7 6.6 49.9 6.0 47.1 5.4
Intercompany eliminations 1 (34.3) (4.5) (34.4) (4.1) (32.9) (3.7)
----- ----- ----- ----- ----- -----
Subtotal ongoing operations 716.0 95.7 706.2 85.2 686.0 78.1
Businesses sold or to be sold 2 32.5 4.3 122.9 14.8 192.6 21.9
----- ----- ----- ----- ----- -----
Total 748.5 100.0 829.1 100.0 878.6 100.0
===== ===== ===== ===== ===== =====
</TABLE>
1 Intercompany sales by Finger Lakes
2 The Company 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 subsequent to 1995 fiscal year end, sold
Nalley's Canada Ltd. See NOTE 4 - 'Disposals.'
<TABLE>
<CAPTION>
Operating Income Before Dividing with Pro-Fac 1
(Dollars in Millions)
Fiscal Years Ended
----------------------------------------------------------
6/24/95 6/25/94 6/26/93
% of % of % of
$ Total $ Total $ Total
------ ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
CMF 31.9 54.5 29.6 59.7 23.0 59.1
Nalley's Fine Foods 18.7 32.0 16.5 33.3 19.1 49.1
Southern Frozen Foods 9.2 15.7 10.2 20.5 7.6 19.5
Snack Foods Group 3.6 6.1 2.7 5.4 4.1 10.6
Brooks Foods 2.8 4.8 3.1 6.3 2.7 6.9
Finger Lakes Packaging 3.5 6.0 3.9 7.9 2.9 7.5
Intercompany eliminations and
corporate overhead 1 (10.0) (17.1) (15.1) (30.5) (14.4) (37.0)
----- ----- ----- ----- ----- -----
Subtotal ongoing operations 59.7 102.0 50.9 102.6 45.0 115.7
Businesses sold or to be sold 2 (1.2) (2.0) (1.3) (2.6) (6.1) (15.7)
----- ----- ----- ----- ----- -----
Total 58.5 100.0 49.6 100.0 38.9 100.0
===== ===== ===== ===== ===== =====
</TABLE>
1 Table excludes restructuring (loss)/gain from division disposals of fiscal
1995, 1994, and 1993 change in control expense in fiscal 1995 and 1994, and
gain on assets net of additional costs incurred as a result of a fire claim
recorded in fiscal 1995.
2 The Company 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, subsequent to 1995 fiscal year end, sold Nalley's
Canada Ltd. See NOTE 4 - 'Disposals.'
20
<PAGE>
<TABLE>
<CAPTION>
Depreciation and Amortization
(Dollars in Millions)
Fiscal Years Ended
----------------------------------------------------------
6/24/95 6/25/94 6/26/93
--------------- ----------------- ---------------
% of % of % of
$ Total $ Total $ Total
----- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
CMF 10.3 43.3 11.5 44.8 11.6 38.0
Nalley's Fine Foods 4.2 17.6 3.0 11.7 3.0 9.8
Southern Frozen Foods 3.9 16.4 2.5 9.7 2.1 6.9
Snack Foods Group 1.8 7.6 2.0 7.8 2.0 6.5
Brooks Foods 0.7 2.9 0.6 2.3 0.6 2.0
Finger Lakes Packaging 1.6 6.7 1.2 4.7 1.4 4.6
Corporate 0.5 2.1 1.7 6.5 2.7 8.9
---- ----- ----- ----- ----- -----
Subtotal ongoing operations 23.0 96.6 22.5 87.5 23.4 76.7
Businesses sold or to be sold 1 0.8 3.4 3.2 12.5 7.1 23.3
---- ----- ----- ----- ----- -----
Total 23.8 100.0 25.7 100.0 30.5 100.0
==== ===== ===== ===== ===== =====
</TABLE>
1 The Company 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, subsequent to 1995 fiscal year end, sold Nalley's
Canada Ltd. See NOTE 4 - 'Disposals.'
<TABLE>
<CAPTION>
Total Assets
(Dollars in Millions)
6/24/95 6/25/94
------------------------- ------------------------
% of % of
$ Total $ Total
----- ----- ----- -----
<S> <C> <C> <C> <C>
CMF 267.9 39.9 218.5 48.9
Nalley's Fine Foods 158.9 23.6 73.8 16.5
Southern Frozen Foods 97.9 14.6 48.2 10.8
Snack Foods Group 28.4 4.2 24.5 5.4
Brooks Foods 20.9 3.1 11.0 2.5
Finger Lakes Packaging 46.1 6.9 39.3 8.8
Corporate 38.4 5.7 5.8 1.3
----- ----- ----- -----
Subtotal ongoing operations 658.5 98.0 421.1 94.2
Businesses sold or to be sold 1 13.8 2.0 25.8 5.8
----- ----- ----- -----
Total 672.3 100.0 446.9 100.0
===== ===== ===== =====
</TABLE>
1 The Company 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, subsequent to 1995 fiscal year end, sold Nalley's
Canada Ltd. See NOTE 4 - 'Disposals.'
The following table illustrates the Company's income statement data and the
percentage of net sales represented by these items for the fiscal years ended
June 24, 1995, June 25, 1994, and June 26, 1993.
21
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations
(Dollars in Millions)
Fiscal Years Ended
--------------------------------------------------------------
6/24/95 6/25/94 6/26/93
------------------- ---------------- ----------------
% of % of % of
$ Sales $ Sales $ Sales
------- ----- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net sales 748.5 100.0 829.1 100.0 878.6 100.0
Cost of sales 530.1 70.8 592.6 71.5 632.6 72.0
------ ----- ------ ----- ------ -----
Gross profit 218.4 29.2 236.5 28.5 246.0 28.0
Restructuring expenses, including
net (loss)/gain from division
disposals (8.4) (1.1) 7.8 0.9 (61.0) (6.9)
Change in control expenses (2.2) (0.3) (3.5) (0.4) -- --
Gain on assets net of additional costs
incurred as result of a fire claim 4.1 0.5 -- -- -- --
Other selling, administrative and
general expenses (159.9) (21.3) (186.9) (22.5) (207.1) (23.6)
------ ----- ------ ----- ------ -----
Operating income/(loss) before
dividing with Pro-Fac 52.0 6.9 53.9 6.5 (22.1) (2.5)
Interest expense (32.4) (4.3) (18.2) (2.2) (19.6) (2.2)
------ ----- ------ ----- ------ -----
Pretax earnings/(loss) before dividing
with Pro-Fac 19.6 2.6 35.7 4.3 (41.7) (4.7)
Pro-Fac share of (earnings)/loss (9.6) (1.3) (16.9) (2.0) 21.8 2.5
------ ----- ------ ----- ------ -----
Income/(loss) before taxes 10.0 1.3 18.8 2.3 (19.9) (2.2)
Provision for taxes (6.0) (0.8) (8.7) (1.1) (3.9) (0.5)
------ ----- ------ ----- ------ -----
Net income/(loss) 4.0 0.5 10.1 1.2 (23.8) (2.7)
====== ===== ====== ===== ====== =====
</TABLE>
CHANGES FROM FISCAL 1994 TO FISCAL 1995
General: Net sales declined 9.7 percent in the year, to $748.5 million from
$829.1 million the previous year due primarily to divested businesses. Operating
earnings for fiscal 1995 reflect changes in many product lines. The chips and
snacks segment posted gains, while the popcorn earnings at CMF declined.
Vegetable prices decreased during the year because there was an ample national
supply in the fall of 1994, but vegetable earnings for the year were still ahead
of fiscal 1994. Net income of $4.0 million for fiscal 1995 compared to $10.1
million a year ago. The decrease in net income is primarily due to increased
interest expense caused by the revised capital structure of the Company and the
gain on the sale of National Oats included in the fiscal 1994 results.
Net Sales: The Company's net sales in fiscal 1995 of $748.5 million decreased
$80.6 million or 9.7 percent from $829.1 million in 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 $32.5 million in fiscal 1995 and
$122.9 million in fiscal 1994. The Company's net sales from ongoing operations,
excluding businesses sold or to be sold, were $716.0 million in fiscal 1995, an
increase of $9.8 million or 1.4 percent from $706.2 million in fiscal 1994. This
net sales variance of $9.8 million for ongoing operations is primarily comprised
of a $9.4 million increase at Nalley's with minor variations at other divisions.
An increase of $5.4 million in sales of pickles and relishes and an increase of
$2.7 million in dressing sales were the primary reasons for Nalley's increase.
Gross Profit: Gross profit of $218.4 million in fiscal 1995 decreased $18.1
million or 7.7 percent from $236.5 million in fiscal 1994. Of this net decrease,
a $23.9 million reduction was attributable to businesses sold or to be sold, and
an increase of $5.8 million was attributable to increased gross profit at the
Company's ongoing operations. This increase of $5.8
22
<PAGE>
million was the result of variations in volume, selling prices, costs, and
product mix. The increase in gross profit for ongoing operations is comprised of
increases and decreases as follow:
<TABLE>
<CAPTION>
Gross
Profit
Variance
<S> <C>
CMF $(0.8)
Nalley's Fine Foods 5.1
Southern Frozen Foods (0.9)
Snack Foods Group 0.5
All Other 1.9
-----
$ 5.8
=====
</TABLE>
Nalley's Fine Foods increased gross profit primarily relates to improved margins
on canned entrees and soups ($3.4 million) and improved margins on dressings
($1.2 million).
Restructuring Expenses Including Net (Loss)/Gain From Division Disposals:
Restructuring expenses, including net (loss)/gain from division disposals,
resulted in a charge in 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 fiscal 1994 was
an $7.8 million net gain from restructuring, including division disposals, for a
net increase in this expense from year to year of $16.2 million, all of which
was incurred by the Predecessor entity. See NOTE 4 -- 'Disposals.'
Change in Control Expenses: Change in control expenses recorded in fiscal 1995
and fiscal 1994, amounting to $2.2 million and $3.5 million, respectively,
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.
See NOTE 3 -- 'Change in Control of the Company.'
Gain on Assets Net of Additional Costs Incurred as a Result of Fire Claim at
Southern Frozen Foods: The gain on assets net of additional costs incurred as a
result of a fire claim recorded in fiscal 1995 amounted to $4.2 million.
Other Selling, Administrative, and General Expenses: Other selling,
administrative, and general expenses in fiscal 1995 of $159.9 million decreased
$27.0 million or 14.4 percent from $186.9 million in fiscal 1994. This net
decrease of $27.0 million includes primarily:
<TABLE>
<CAPTION>
(In Millions)
Businesses
------------------------------
Sold or to be Sold Ongoing Total
------------------ ------- -----
<S> <C> <C> <C>
Change in trade promotions $ (8.1) $(2.8) $(10.9)
Change in advertising and selling costs (13.8) 2.0 (11.8)
All other (5.6) 1.3 (4.3)
------ ----- ------
Change in selling, administrative,
and general expenses $(27.5) $ 0.5 $(27.0)
====== ===== ======
</TABLE>
The $2.8 million decrease in trade promotions at the Company's ongoing
operations is primarily comprised of a decrease at CMF of $4.0 million (which
primarily relates to reduced spending on the fruit filling and topping category,
with minor increases in other categories) and increased trade promotions at
Nalley's Fine Foods of $0.8 million (primarily related
23
<PAGE>
to increased spending on canned entrees and soups and salad dressings,
offsetting decreased spending on other product lines).
The $2.0 million increase in advertising and selling costs at the Company's
ongoing operations represents increased costs at CMF ($1.5 million) and Nalley's
Fine Foods ($1.6 million), with minor offsetting variations at other operations.
The increase at CMF primarily relates to fruit fillings and toppings, with minor
variations in other product lines. The increase at Nalley's Fine Foods primarily
relates to costs associated with canned entrees and soups and salad dressings,
with minor variations in other product lines.
The $1.3 million increase in other administrative expenses primarily relates to
increased amortization of intangibles resulting from the acquisition and other
minor offsetting variances.
Operating Income Before Dividing with Pro-Fac: The Company's operating income
(before dividing with Pro-Fac) for fiscal 1995 of $52.0 million decreased $1.8
million or 3.3 percent from $53.8 million in fiscal 1994. Included in the 1995
operating income: the restructuring charges, including a loss from division
disposals of $8.4 million; change in control expenses of $2.2 million; net gain
on assets resulting from fire claim of $4.2 million; and operating losses
attributable to businesses sold or to be sold of $1.2 million. Included in the
1994 operating income: the restructuring gain from division disposals of $7.8
million; change in control expenses of $3.5 million; and operating losses
attributable to businesses sold or to be sold of $4.8 million. Excluding the
restructuring loss/gain from division disposals, change in control expense, gain
on assets net of additional costs incurred resulting from the 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
fiscal 1995 of $59.7 million increased $5.3 million or 9.7 percent from $54.4
million in fiscal 1994.
Interest Expense: Interest expense in fiscal 1995 of $32.4 million increased
$14.2 million or 78.0 percent from $18.2 million in fiscal 1994. This increase
was primarily attributable to the increased borrowing and increased interest
rates related to the acquisition of the Company by ProFac.
Pro-Fac Share of Earnings: Pro-Fac's share of the Company's earnings in fiscal
1995 of $9.6 million decreased $7.3 million or 43.1 percent from $16.9 million
in fiscal 1994. The restructuring expenses, change in control expense, and fire
claim discussed above accounted for $5.4 million of this decrease. The Pro-Fac
share of earnings in fiscal 1995 and fiscal 1994 was 49.0 percent and 47.3
percent, respectively, of the Company's pretax earnings before dividing with
Pro-Fac.
Income Before Taxes: The Company's income before taxes in fiscal 1995 of $10.0
million decreased $8.8 million or 46.8 percent from $18.8 million in fiscal
1994. The restructuring expenses, change in control expense, and fire claim
discussed above accounted for $5.4 million or 61.4 percent of the decrease.
Provision for Taxes: The provision for taxes in fiscal 1995 of $6.0 million
decreased $2.7 million or 31.0 percent from $8.7 million in fiscal 1994. The
effective tax rate in fiscal 1995 was 60.0 percent compared to 46.2 percent in
fiscal 1994. The non-deductibility of the amortization of excess purchase cost
over net assets acquired was primarily responsible for the significantly
increased rate.
24
<PAGE>
Net Income: The Company's net income for fiscal 1995 of $4.0 million decreased
$6.1 million or 60.4 percent from $10.1 million in fiscal 1994.
The primary reasons for the Company's $6.1 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 net 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.
CHANGES FROM FISCAL 1993 TO FISCAL 1994
Net Sales: The Company's net sales in fiscal 1994 of $829.1 million decreased
$49.5 million, or 5.6 percent, from $878.6 million in fiscal 1993. The net sales
attributable to businesses sold or to be sold in connection with the Company's
restructuring program were $122.9 million in fiscal 1994 and $192.6 million in
fiscal 1993. The Company's net sales from ongoing operations excluding
businesses sold or to be sold in fiscal 1994 were $706.2 million, an increase of
$20.2 million, or 2.9 percent, from $686.0 million in fiscal 1993. The increase
in net sales from ongoing operations is attributable in part to CMF. Net sales
at CMF in fiscal 1994 of $333.4 million increased $15.6 million, or 4.9 percent,
from $317.8 million in fiscal 1993. The increase in net sales at CMF was due to
an increase in net sales at CMF's New York vegetables business resulting from
increased prices and volumes associated with a national shortage in supply in
the vegetable market attributable to floods in the Midwest and a drought in the
South in the 1993 growing season. This increase in sales at CMF was offset in
part by reduced raw material costs at the Company, that were reflected in
reduced selling prices of the Company's products. Net sales at Nalley's in
fiscal 1994 of $171.8 million increased $7.3 million, or 4.4 percent, from
$164.5 million in fiscal 1993. The increase in net sales at Nalley's was
primarily attributable to an $8.5 million increase in salad dressing and a $1.0
million decrease in pickles and relishes related to reduced volume. Net sales at
Southern in fiscal 1994 of $94.3 million remained essentially flat compared to
$93.4 million in fiscal 1993. Net sales at the Snack Foods Group in fiscal 1994
of $61.2 million decreased $4.2 million, or 6.4 percent, from $65.4 million in
fiscal 1993. The decrease was caused by reduced volume related principally to
the competitive pressures of the salty snacks business and the decline in
consumption for the potato chip category. Net sales at Brooks in fiscal 1994 of
$30.0 million decreased $0.7 million, or 2.3 percent, from $30.7 million in
fiscal 1993. This net decrease is comprised of a decrease of $2.8 million of
tomato products almost completely offset by increased sales of bean products.
The decrease in tomato products sold was the result of the decision to exit the
private label ketchup business. The increase in bean products was due to a 21.0
percent increase in units sold. Net sales at Finger Lakes in fiscal 1994 of
$49.9 million increased $2.8 million, or 5.9 percent, from $47.1 million (before
elimination of intercompany sales) in fiscal 1993. This was primarily the result
of a 10.2 percent increase in volume.
Gross Profit: Gross profit of $236.5 million in fiscal 1994 decreased $9.5
million, or 3.9 percent, from $246.0 million in fiscal 1993. Of this net
decrease, a $23.6 million reduction was attributable to businesses sold or to be
sold and an increase of $14.1 million was attributable to increased gross profit
at the Company's ongoing operations. Gross profit for CMF increased $8.5
million, Nalley's increased $4.8 million, Southern increased $2.5 million, and
the Snack Foods Group decreased $2.8 million. These changes were the result of
variations in volume, selling prices, costs and product mix.
25
<PAGE>
Restructuring Including Net (Gain)/Loss From Division Disposals: Included in the
fiscal 1994 results was a net gain of $7.8 million comprised of a gain on the
sale of the oats operations of National Oats of $10.9 million, net of a charge
of $3.1 million to adjust previous estimates regarding activities initiated in
fiscal 1993. Consummation of the sale of Nalley's U.S. Chips and Snacks
completed the Company's dispositions pursuant to the restructuring program
initiated in 1993. The Company incurred restructuring charges in fiscal 1993 of
$61.0 million, which included the loss incurred on the sale of the Lucca frozen
entree business, anticipated losses on the sale of the meat snacks and Hiland
potato chips businesses, and other costs anticipated in conjunction with the
restructuring program.
Change in Control Expenses: During fiscal 1994, the Company expensed $3.5
million of legal, accounting, investment banking and other expenses relative to
the change in control issue. In recognizing this expense, the Company allocated
half of this amount to Pro-Fac as a deduction to the profit split.
Selling, Administrative and General Expenses: Selling, administrative and
general expenses of $186.9 million in fiscal 1994 decreased $20.2 million, or
9.8 percent, from $207.1 million in fiscal 1993. Cost reductions include (i) a
$0.7 million decrease in trade promotions, (ii) a $13.1 million decrease in
advertising and selling costs and (iii) a $5.1 million decrease in
administrative costs. Of the net decrease in trade promotions, an $8.8 million
decrease was attributable to businesses sold or to be sold and an increase of
$8.1 million was attributable to increased trade promotions at the Company's
ongoing operations. Of this increase, $2.6 million was due to increased
promotions on a reformulated fruit filling and topping product of CMF and to the
expansion of the pumpkin pie filling category and $4.3 million was primarily due
to new product promotions for Nalley's salad dressings and canned meats and
entrees introduced in fiscal 1993 and 1994. Of the net decrease in advertising
and selling costs, $13.2 million was attributable to businesses sold or to be
sold. The remaining increase of $0.1 million was primarily attributable to a
$2.1 million decrease in advertising and selling costs net of an increase in
such costs of $1.8 million at Nalley's. The increase at Nalley's was primarily
related to canned meats and entrees and salad dressings.
Operating Income Before Dividing Profits With Pro-Fac: The Company's operating
income in fiscal 1994 of $53.8 million increased $76.0 million from an operating
loss of $22.2 million in fiscal 1993. Excluding restructuring charges and change
in control expenses, the Company's operating income in fiscal 1994 was $49.6
million, a $10.7 million increase, or 27.5 percent, from an operating income of
$38.9 million in fiscal 1993. Operating losses attributable to businesses sold
or to be sold in connection with the Company's restructuring program were $4.8
million in fiscal 1994 and $6.1 million in fiscal 1993. Excluding operating
losses from businesses sold or to be sold, the Company's operating income from
continuing operations in fiscal 1994 was $54.4 million, an increase of $9.4
million, or 20.9 percent, from $45.0 million in fiscal 1993. Of this increase,
CMF contributed $6.6 million, Southern contributed $2.6 million and Finger Lakes
contributed $1.0 million. These increases were offset in part by decreased
operating income at Nalley's of $2.6 million and $1.4 million for the Snack
Foods Group. The increases for CMF's New York vegetables business and Southern
were attributable to increased selling prices as a result of the short crop of
vegetables nationally due to poor weather conditions in the Midwest during the
1993 growing season. Finger Lakes benefitted from improved production
efficiencies and procedures as a result of capital improvements. The decrease at
Nalley's pertained to both a sales volume decline and an increase in costs for
the peanut butter and pickles and relishes categories, and trade promotions and
selling costs on the canned meat and entree category. In addition, CMF's fruit
fillings and toppings business experienced increased trade promotions and
advertising
26
<PAGE>
costs related to reformulated fruit fillings and toppings and expansion of the
pumpkin pie filling markets. The decrease in the Snack Foods Group is the result
of the sales decline as previously mentioned. An increase of $1.2 million
related to the management incentive plan also reduced operating income.
Interest Expense: Interest expense in fiscal 1994 of $18.2 million decreased
$1.4 million, or 7.1 percent, from $19.6 million in fiscal 1993. The reduction
in interest expense is due to lower interest rates off-set in part by an
increase in loan volume.
Pro-Fac Share of Earnings/(Loss): Pro-Fac share of earnings in 1994 of $16.9
million increased $38.7 million from a share of loss of $21.8 million in fiscal
1993. The increase is attributable to the factors described above. The Pro-Fac
share of earnings/(loss) in fiscal 1994 and fiscal 1993 was 47.3 percent and
52.2 percent, respectively, of the Company's pretax earnings/(loss) before
dividing with Pro-Fac. The change in percentage is the result of changes in the
dividend paid by the Bank that Pro-Fac shares with the Company.
Income/(Loss) Before Taxes: Income/(loss) before taxes in fiscal 1994 of $18.8
million increased $38.7 million from a loss of $19.9 million in fiscal 1993.
Excluding restructuring charges and change in control expenses, the Company's
income before taxes in fiscal 1994 was $16.6 million, a $6.0 million increase,
or 56.6 percent, from income before taxes of $10.6 million in fiscal 1993. The
increase is attributable to the factors described above.
Provision for Taxes: Provision for taxes in fiscal 1994 of $8.7 million
increased $4.8 million from a provision of $3.9 million in fiscal 1993. Included
in the fiscal 1994 results was a charge against earnings of $0.5 million to
adjust deferred taxes to the higher rate as legislated by Congress and as
required under Financial Accounting and Standards Board No. 109. The Company's
effective tax rate was significantly impacted during fiscal 1994 by
non-deductible legal and advisory expenses incurred in conjunction with the
change in control, the increase in the federal statutory income tax rate enacted
on August 10, 1993 and the adjustment of a valuation allowance previously
recorded.
Net Income/(Loss): The Company's fiscal 1994 net earnings were $10.1 million
compared to a loss of $23.8 million in fiscal 1993. Also included in the fiscal
1994 results was a net gain of $7.8 million comprised of a gain on the sale of
the oats operations of National Oats of $10.9 million, net of a charge of $3.1
million to adjust previous estimates regarding activities initiated in 1993, and
a charge of $3.5 million of legal, accounting and investment banking and other
expenses relating to the potential change of control of the Company. Included in
fiscal 1993 results were restructuring charges of $61.0 million. Net earnings,
excluding these items, were approximately $9.1 million in fiscal 1994 and $5.8
million in fiscal 1993, an increase of 56.9 percent.
LIQUIDITY AND CAPITAL RESOURCES
In fiscal 1995, the net cash provided by operating activities of CurticeBurns of
$22.4 million reflects net income of $4.0 million ($1.7 million as Predecessor
Entity and $2.3 million as Successor Entity). Depreciation and amortization of
assets amounted to $24.1 million ($7.0 million before the acquisition and $17.1
million after the acquisition). Inventories increased $4.0 million (an increase
of $71.0 million before the acquisition and a decrease of $67.0 million after
the acquisition), accounts receivable increased $1.2 million (an increase of
$12.7 million before the acquisition and a decrease of $11.5 million after the
acquisition), and the deferred
27
<PAGE>
taxes, including the provision for deferred taxes, increased $3.5 million (a
decrease of $1.2 million before the acquisition and an increase of $4.7 million
after the acquisition). Changes in other assets and liabilities amounted to
$23.7 million ($8.7 million cash provided before the acquisition and $15.0
million cash provided after the acquisition).
Cash flows used in investing include the acquisition of assets held for or used
in the production of goods. Net cash used for capital expenditures in fiscal
1995 amounted to $32.6 million ($5.7 million before the acquisition and $26.9
million after the acquisition). Included in the capital expenditures is $12.6
million relating to the Southern Frozen Foods fire which were reimbursed by
insurance proceeds.
Net cash provided by financing activities in fiscal 1995 amounted to $11.4
million ($69.9 million provided before the acquisition and $58.5 million used
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 $178.0 million for long-term debt
(including payments of financing fees) and new debt of $359.0 million of
long-term debt. Net cash provided by financing activities also include the
capital contribution by Pro-Fac of $3.9 million and the payment to the former
shareholders of the Company of $167.8 million. Dividends of $3.7 million were
paid in fiscal 1995 ($1.4 million before the acquisition and $2.3 million to its
parent after the acquisition).
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. Net cash provided from operations is expected to be sufficient to
cover scheduled payments on long-term debt and planned capital expenditures.
New Borrowings : Under the New Credit Agreement, Curtice-Burns 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.
As of June 24, 1995, (i) cash borrowings outstanding under the Seasonal Facility
were zero and (ii) 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 June 24, 1995, Pro-Fac had $1.0 million available for
long-term borrowings under the Term Loan Facility. Pro-Fac 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.
As a result of the acquisition of Curtice-Burns by Pro-Fac, Pro-Fac'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 requires that Pro-Fac and Curtice-Burns
meet certain financial tests and ratios and comply with certain other
restrictions and limitations. As of June 24, 1995, ProFac is in compliance with
or has obtained waivers for all such restrictions and limitations.
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
28
<PAGE>
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. For
example, the 1993 floods in the Midwest and the drought in the South produced
lower crop yields in those areas and increased prices nationally even though the
crops in the Company's growing areas were at normal levels.
As a result of the shortage situation of the national supply due to the low
yields from the 1993 crop year, many vegetable producers intentionally increased
planned production for the 1994 crop year attempting to return the supplies to
ample levels. Favorable weather conditions in the 1994 growing season, however,
produced high crop yields in addition to the increased planned production. This
resulted in somewhat depressed selling prices, increased inventory levels
throughout fiscal 1995, and left a higher carryover inventory at the end of
fiscal 1995 than at the end of fiscal 1994 for the Company. As of June 24, 1995,
the Company's total inventories were $160.2 million, an increase of $4.9 million
or 3.2 percent from $155.3 million in the prior year. This excess will be
gradually reduced by the end of the 1996 fiscal year due to a decrease in the
planned production for the 1995 crop 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.
The impact of the 1993 growing season principally affected the Company's
operating results in fiscal 1994, and the impact of the 1994 growing season
principally affected the Company's operating results in fiscal 1995. The impact
of the 1995 growing season on the Company's operating results for fiscal 1996
cannot be determined until late fall of 1995 when national supplies can be
determined. Decreased vegetable prices are expected to depress earnings for the
first quarter of fiscal 1996 as are increased slotting allowances for certain
new items.
In addition to the excess inventory discussed above, another element affecting
cash flow in fiscal 1995 was the timing of reimbursement for cash expenditures
relative to the facility repairs and other activities of the Company's
Montezuma, Georgia plant which was destroyed by fire in July 1994. See 'Fire
Claim' in Note 6. As of June 24, 1995, approximately $10.0 million of such
expenditures were receivable from insurance companies. Final settlements with
the insurance carriers regarding claims for business interruption are currently
being negotiated.
Primarily due to higher inventory levels and the timing of the insurance
proceeds of the fire claim, the average seasonal loan balance in fiscal 1995 was
$66.5 million, an increase of $15.0 million or 29.1 percent over the fiscal 1994
average of $51.5 million.
Capital expenditures (excluding the expenditures relating to the fire for which
reimbursement was received) amounted to $19.8 million in fiscal 1995. The
largest, single capital project in process during fiscal 1995 was 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 coming year. Cash proceeds from the sale of Nalley's Canada Ltd., sold
subsequent to fiscal year end of approximately $3.8 million, were
29
<PAGE>
applied to long-term debt in accordance with the terms of the New Credit
Agreement.
Supplemental Information on Inflation: 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.
Sale of Nalley's Canada Ltd.: On March 20, 1995 Curtice-Burns announced its
intention to sell its Canadian subsidiary, Nalley's Canada Ltd., located in
Vancouver, British Columbia, to a management group within the Canadian
subsidiary. This sale was finalized subsequent to year end (as of June 26, 1995)
and was contemplated by Pro-Fac in conjunction with the acquisition. Nalley's
U.S. will have an ongoing supply agreement with Nalley's Canada Ltd. as a result
of the sale. See further discussion at 'Certain Transactions.'
Subsequent Event: On July 21, 1995, the Company completed the acquisition of
Packer Foods, a privately owned, Michigan-based food processor. The total cost
of acquisition was approximately $5.4 million in notes plus interest at 10
percent to be paid until the notes mature in the year 2000. The transaction will
be accounted for as a purchase. For its latest fiscal year ended December 31,
1994, Packer had net sales of $13 million, operating income of $300,000, and
income before extraordinary items of $100,000. Packer Foods is in the process of
being merged into the Company's CMF operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ITEM Page
<S> <C>
Curtice-Burns Foods, Inc. and Consolidated Subsidiaries:
Report of Independent Accountants......................................................... 31
Management's Responsibility for Financial Statements...................................... 33
Consolidated Financial Statements for the years ended June 24, 1995, June 25,
1994, and June 26, 1993:
Consolidated Statement of Operations and
Retained Earnings................................................................. 34
Consolidated Balance Sheet........................................................ 35
Consolidated Statement of Cash Flows.............................................. 36
Notes to Consolidated Financial Statements........................................ 37
</TABLE>
30
<PAGE>
Report of Independent Accountants
August 16, 1995
To the Shareholder and
Board of Directors of
Curtice-Burns Foods, Inc.
In our opinion, the consolidated balance sheet and the related consolidated
statements of operations and retained earnings and of cash flows listed under
Item 8 of this Form 10-K present fairly, in all material respects, the financial
position of Curtice-Burns Foods, Inc. and its subsidiaries ('Successor Company')
at June 24, 1995, and the results of their operations and their cash flows for
the period November 4, 1994 to June 24, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Successor Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
As discussed in Notes 2 and 3 to the financial statements, as of November 3,
1994, the Successor Company became a wholly owned subsidiary of Pro-Fac
Cooperative, Inc. In conjunction with this change in ownership, identifiable
assets and liabilities were adjusted to reflect their fair values at the date of
acquisition.
Our audits of the consolidated financial statements also included an audit of
the financial statement schedule listed in the accompanying index and appearing
under Item 14 of the Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein for the period November 4, 1994 to June 24, 1995 when read in
conjunction with the consolidated financial statements.
/s/Price Waterhouse, LLP
Price Waterhouse, LLP
Rochester, New York
August 16, 1995
31
<PAGE>
Report of Independent Accountants
August 16, 1995
To the Shareholder and
Board of Directors of
Curtice-Burns Foods, Inc.
In our opinion, the consolidated balance sheet and related consolidated
statements of operations and retained earnings and of cash flows listed under
Item 8 of this Form 10-K present fairly, in all material respects, the financial
position of Curtice-Burns Foods, Inc. and its subsidiaries ('Predecessor
Company') at June 25, 1994 and the results of their operations and their cash
flows for the period from June 26, 1994 to November 3, 1994 and for each of the
two fiscal years in the period ended June 25, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Predecessor Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits of the consolidated financial statements also included an audit of
the financial statement schedule listed in the accompanying index and appearing
under Item 14 of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the information set forth
therein for the period from June 26, 1994 to November 3, 1994 and for each of
the two fiscal years in the period ended June 25, 1994 when read in conjunction
with the related consolidated financial statements.
/s/Price Waterhouse, LLP
Price Waterhouse, LLP
Rochester, New York
August 16, 1995
32
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
Management is responsible for the preparation and integrity of the financial
statements and related notes which begins on the next page. These statements
have been prepared in accordance with generally accepted accounting principles.
The Company's accounting systems include internal controls designed to provide
reasonable assurance of the reliability of its financial records and the proper
safeguarding and use of its assets. Such controls are monitored through the
internal and external audit programs.
The financial statements have been audited by Price Waterhouse LLP, independent
accountants, who were responsible for conducting their examination in accordance
with generally accepted auditing standards. Their resulting reports are on the
preceding pages.
The Board of Directors exercises its responsibility for these financial
statements. The independent accountants and internal auditors of the Company
have full and free access to the Board. The Board periodically meets with the
independent accountants and the internal auditors, without management present,
to discuss accounting, auditing and financial reporting matters.
/s/ Roy A. Myers /s/ William D. Rice
Roy A. Myers William D. Rice
President and Senior Vice President
Chief Executive Officer Chief Financial Officer
September 15, 1995
33
<PAGE>
FINANCIAL STATEMENTS
The Company is a wholly-owned subsidiary of Pro-Fac. The 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>
<CAPTION>
Curtice-Burns Foods, Inc.
Consolidated Statement of Operations and Retained Earnings
(Dollars in Thousands)
Fiscal 1995
--------------------------
11/4/94 - 6/26/94 -
6/24/95 11/3/94 Fiscal 1994 Fiscal 1993
Successor Predecessor Predecessor Predecessor
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 471,904 $276,621 $ 829,116 $ 878,627
Cost of sales 334,329 195,810 592,621 632,663
--------- -------- --------- ---------
Gross profit 137,575 80,811 236,495 245,964
Restructuring expenses, including net
(loss)/gain from division disposals -- (8,415) 7,768 (61,037)
Change in control expenses -- (2,150) (3,500) --
Gain on assets net of additional costs
incurred as a result of the fire (2,315) 6,469 -- --
Other selling, administrative, and
general expenses (99,361) (60,576) (186,934) (207,119)
--------- -------- --------- ---------
Operating income/(loss) before dividing
with Pro-Fac 35,899 16,139 53,829 (22,192)
Interest expense (24,790) (7,624) (18,205) (19,550)
--------- -------- --------- ---------
Pretax earnings/(loss) before dividing
with Pro-Fac 11,109 8,515 35,624 (41,742)
Pro-Fac share of (earnings)/loss (5,554) (4,062) (16,849) 21,800
--------- -------- --------- ---------
Income/(loss) before taxes 5,555 4,453 18,775 (19,942)
Provision for taxes (3,291) (2,735) (8,665) (3,895)
--------- -------- --------- ---------
Net income/(loss) 2,264 1,718 10,110 (23,837)
Retained earnings at beginning of period -- 58,121 53,541 82,882
Less cash dividends declared (2,264) (1,390) (5,530) (5,504)
--------- -------- --------- ---------
Retained earnings at end of period $ -- $ 58,449 $ 58,121 $ 53,541
========= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
34
<PAGE>
Curtice-Burns Foods, Inc.
Consolidated Balance Sheet
<TABLE>
<CAPTION>
(Dollars in Thousands) Successor Predecessor
6/24/95 6/25/94
--------- -----------
<S> <C> <C>
Assets
Current assets:
Cash $ 4,158 $ 2,928
Accounts receivable trade, less allowances for
bad debts of $673 and $1,066, respectively 47,341 57,640
Accounts receivable, other 19,812 8,460
Income taxes refundable 1,043 237
Current deferred tax asset 6,784 10,487
Inventories -
Finished goods 108,691 108,538
Raw materials and supplies 51,491 46,721
-------- --------
Total inventories 160,182 155,259
-------- --------
Receivable from Pro-Fac 1,001 --
Prepaid manufacturing expense 9,903 8,190
Prepaid expenses and other current assets 2,306 4,305
-------- --------
Total current assets 252,530 247,506
Investment in Bank 22,907 --
Property, plant, and equipment, net 272,192 167,516
Goodwill and other intangibles, less accumulated
amortization of $2,539 and $10,335, respectively 101,494 24,909
Assets held for sale 13,863 --
Other assets 9,298 7,007
-------- --------
Total Assets $672,284 $446,938
======== ========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 60,112 $ 62,335
Due to Pro-Fac -- 9,447
Accrued interest 9,171 93
Accrued employee compensation 11,644 11,482
Other accrued expenses 15,116 26,854
Current portion of obligations under
capital leases 764 18,430
Current portion of long-term debt 11,552 14,816
-------- --------
Total current liabilities 108,359 143,457
Long-term debt 183,665 79,061
Senior subordinated notes 160,000 --
Obligations under capital leases 1,620 124,973
Deferred income tax liabilities 59,721 14,958
Other non-current liabilities 17,836 3,591
-------- --------
Total liabilities 531,201 366,040
-------- --------
Commitments and Contingencies
Shareholders' Equity:
Class A common - $.99 par value;
-0- and 10,125,000 shares
authorized; -0- and 6,628,430
outstanding, respectively -- 6,562
Class B common - $.99 par value;
-0- and 4,050,000 shares
authorized; -0- and 2,056,876
outstanding, respectively -- 2,036
Common stock, par value $.01
10,000 shares outstanding,
owned by Pro-Fac -- --
Additional paid-in capital: 6/24/95 6/25/94
Shareholder paid-in capital 151,083 14,224 -- --
Less capital contribution receivable (10,000) -- -- --
-------- --------
141,083 14,224 141,083 14,224
======== ========
Retained earnings -- 58,121
Minimum pension liability -- (45)
-------- --------
Total shareholders' equity 141,083 80,898
-------- --------
Total liabilities and shareholders' equity $672,284 $446,938
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
35
<PAGE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
(Dollars in Thousands)
Fiscal 1995
11/4/94 - 6/26/94 -
6/24/95 11/3/94 Fiscal 1994 Fiscal 1993
Successor Predecessor Predecessor Predecessor
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income/(loss) ........................................................... $ 2,264 $ 1,718 $ 10,110 $ (23,837)
Adjustments to reconcile net income/(loss) to net cash provided by
operating activities -
Restructuring:
Net loss/(gain) from division disposals .............................. -- 5,567 (7,768) 61,037
Including net operating losses subsequent to decision to dispose ..... -- 2,848 -- --
Gain on assets resulting from fire claim ................................. -- (6,469) -- --
Amortization of goodwill, other intangibles, and financing fees .......... 3,218 753 1,685 2,538
Depreciation ............................................................. 13,864 6,228 22,322 25,432
Provision for deferred taxes ............................................. 4,205 (4,705) 2,670 (10,642)
Provision for losses on accounts receivable .............................. 91 292 709 346
Equity in undistributed earnings of Bank ................................. (1,288) -- -- --
Change in assets and liabilities:
Accounts receivable .................................................. 11,540 (12,722) 5,704 (8,043)
Inventories .......................................................... 67,022 (70,961) 250 4,738
Income taxes refundable/payable ...................................... (1,043) 1,491 (9,283) 11,617
Deferred taxes ....................................................... 517 3,481 -- --
Accounts payable and accrued expenses ................................ (13,140) (5,662) (7,313) 2,497
Receivable from/payable to Pro-Fac ................................... (20,098) 9,650 834 (1,654)
Other assets and liabilities ......................................... 15,012 8,733 2,055 (3,345)
---------- ---------- ---------- ----------
Net cash provided by/(used in) operating activities ............................ 82,164 (59,758) 21,975 60,684
---------- ---------- ---------- ----------
Cash Flows From Investing Activities:
Goodwill and other intangible assets ........................................ -- -- (1,637) (26,898)
Purchase of property, plant, and equipment .................................. (26,891) (5,689) (9,543) (8,360)
Proceeds from disposals ..................................................... -- -- 45,068 8,834
---------- ---------- ---------- ----------
Net cash (used in)/provided by investing activities ............................ (26,891) (5,689) 33,888 (26,424)
---------- ---------- ---------- ----------
Cash Flows From Financing Activities:
Receivable from/payable to Pro-Fac .......................................... (42,000) 42,000 (500) (16,000)
Proceeds from issuance of short-term debt ................................... -- 30,000 -- --
Proceeds from issuance of long-term debt .................................... 359,000 10,886 40,378 33,348
Payments on short term debt ................................................. (30,000) -- -- --
Payments on long-term debt including acquisition-related financing fees ..... (178,015) (350) (50,194) (16,644)
Payments on capital leases .................................................. (1,259) (11,344) (44,293) (29,570)
Stock activity relating to Predecessor's equity ............................. -- 52 688 500
Amounts paid to shareholders for acquisition ................................ (167,800) -- -- --
Capital contribution by Pro-Fac ............................................. 3,888 -- -- --
Cash dividends paid ......................................................... (2,264) (1,390) (5,530) (5,504)
---------- ---------- ---------- ----------
Net cash (used in)/provided by financing activities ............................ (58,450) 69,854 (59,451) (33,870)
---------- ---------- ---------- ----------
Net change in cash ............................................................. (3,177) 4,407 (3,588) 390
Cash at beginning of period .................................................... 7,335 2,928 6,516 6,126
---------- ---------- ---------- ----------
Cash at end of period .......................................................... $ 4,158 $ 7,335 $ 2,928 $ 6,516
========== ========== ========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for -
Interest (net of amount capitalized) ..................................... $ 17,531 $ 6,967 $ 18,623 $ 19,757
========== ========== ========== ==========
Income taxes, net ........................................................ $ 5,567 $ 1,417 $ 15,077 $ 1,909
========== ========== ========== ==========
Supplemental Schedule of Non-Cash Investing and Financing Activities:
In conjunction with the purchase of Curtice-Burns by Pro-Fac during fiscal
1995, the following non-cash transactions occurred:
Transfer of Investment in CoBank from Pro-Fac ........................ $ 21,619 -- -- --
Debt forgiven by Pro-Fac ............................................. 110,576 -- -- --
Other assets contributed by Pro-Fac .................................. 5,000 -- -- --
---------- ---------- ---------- ----------
$ 137,195 -- -- --
========== ========== ========== ==========
Capital lease obligations incurred ....................................... $ 1,562 -- $ 10,723 $ 16,065
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
36
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying 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. On November 3, 1994, CurticeBurns was
acquired by Pro-Fac Cooperative, Inc. ('Pro-Fac') at which time the Company
became a wholly-owned subsidiary of Pro-Fac. 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 June 24, 1995, the fiscal year end (see NOTE 3). The fiscal year of
the Successor entity corresponds with that of its parent, Pro-Fac, and ends on
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.
Reclassification: Certain items for fiscal 1994 and 1993 have been
reclassified to conform with fiscal 1995 presentations.
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. These reserves amounted to $.1 million, $.4
million, $1.2 million for fiscal 1995, 1994, and 1993, respectively.
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 at cost plus the Company's share of the undistributed
earnings of the Bank (that portion of patronage refunds not distributed
currently in cash) which approximates market. 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 '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.
37
<PAGE>
Assets held for sale are separately classified on the balance sheet. The
recorded value represents an estimate of net realizable value.
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 Statement of Financial Accounting Standards ('SFAS') No. 109,
'Accounting for Income Taxes.' See NOTE 7 - 'Taxes on Income.'
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 net of accumulated amortization, are
amortized on a straight-line basis over 5 to 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 discounted future cash flows and the carrying value of goodwill.
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.
Commodities Options Contracts: In connection with the purchase of certain
commodities for anticipated manufacturing requirements, the Company
38
<PAGE>
occasionally enters into options contracts as deemed appropriate to reduce the
effect of price fluctuations. These options contracts are accounted for as
hedges and, accordingly, gains and losses are deferred and recognized in cost of
sales as part of the product cost.
Casualty Insurance: The Company is insured for workers compensation and
automobile liability through a self-insurance program. The Company accrues for
the estimated losses from both asserted and unasserted claims. The estimate of
the liability for unasserted claims arising from unreported incidents is based
on an analysis of historical claims data.
Earnings Per Share Data Omitted: 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.
Advertising: Production costs of commercials and programming are charged to
operations in the year first aired. The costs of other advertising promotion and
marketing programs are charged in the year incurred. Advertising expense
incurred in fiscal year 1995, 1994, and 1993 amounted to $13,150,000,
$13,318,000, and $16,499,000, respectively.
NOTE 2. AGREEMENTS WITH PRO-FAC
On November 3, 1994, Curtice-Burns was acquired by Pro-Fac. See NOTE 3 - 'Change
in Control of the Company.' 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 and Facilitation 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 and
Facilitation 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 ProFac to the Company at
acquisition primarily included the cancellation of indebtedness and capital
lease obligations.
Subsequent to the acquisition date, Pro-Fac invested an additional $3.9 million
and committed to another $10.0 million investment which is reflected as a
capital contribution on the balance sheet.
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
39
<PAGE>
will be required to reinvest at least 70 percent of the additional Patronage
income in Curtice-Burns.
Amounts received by Pro-Fac from Curtice-Burns under both Agreements for the
fiscal years ended June 24, 1995, June 25, 1994, and June 26, 1993 include:
commercial market value of crops delivered, $55.9 million, $59.2 million and
$59.8 million, respectively; interest income, $6.1 million, $15.6 million, and
$17.1 million, respectively; and additional proceeds from profit/(loss) sharing
provisions, $9.6 million, $16.8 million and $(21.8) million, respectively.
Payments by the Company to Pro-Fac for interest, amortization, and lease
financing payments ceased as of November 3, 1994.
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 its subsidiary
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
conjunction with the change in ownership all other identifiable assets and
liabilities were adjusted to reflect their fair values at the date of
acquisition. In recording the transaction, approximately $121.5 million was
recorded to adjust property, plant, and equipment to fair market value, and the
asset lives were adjusted for assets acquired. The resulting annual depreciation
will approximate $23.3 million on all existing assets at the appraised values.
In addition, approximately $104.0 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 $43.8 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 $3.0
million for goodwill and other intangible assets using lives ranging from 5 to
35-years.
There were no other significant changes to accounting policies as a result of
the acquisition.
In connection with the acquisition, PFAC sold $160.0 million of 12.25 percent
Senior Subordinated Notes (the 'Notes') due 2005 and entered into
40
<PAGE>
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 fiscal years ended June 24, 1995 and June 25,
1994, assuming the acquisition by Pro-Fac took place at the beginning of the
1994 fiscal year. The column headed 'Actual' for June 24, 1995 is the total of
Successor and Predecessor entities.
<TABLE>
<CAPTION>
(In Millions)
Fiscal Year Ended
(Pro Forma is Unaudited)
June 24, 1995 June 25, 1994
---------------------- -----------------------
Actual Pro Forma Actual Pro Forma
------ --------- ------ ----------
<S> <C> <C> <C> <C>
Net sales $748.5 $748.5 $829.1 $829.1
Income before taxes $ 10.0 $ 7.0 $ 18.8 $ 9.1
Net income $ 4.0 $ 2.9 $ 10.1 $ 3.1
</TABLE>
NOTE 4. 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
pretax 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. This
sale was contemplated by Pro-Fac in conjunction with the acquisition.
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 group
led by management within its Canadian subsidiary. This sale was finalized,
subsequent to fiscal year end (as of June 26, 1995) and was contemplated by
Pro-Fac in conjunction with the acquisition. The assets of Nalley's Canada Ltd.
are classified as held for sale as of June 24, 1995.
The Company's Nalley's U.S. division will provide to Nalley's Canada Ltd.,
through a supply agreement, those products which would no longer be manufactured
in Canada.
41
<PAGE>
The business divestitures resulted in the following charges to earnings of the
Predecessor company in fiscal 1993, 1994 and fiscal 1995:
Fiscal 1993 Restructuring Charge: To reflect completed and anticipated effects
of the restructuring program, the Company incurred restructuring charges in
fiscal 1993 of $61.0 million. This charge included the loss incurred on the sale
of the Lucca Frozen Foods business, anticipated losses on the sale of the Hiland
potato chips and meat snacks businesses, and other costs anticipated in
conjunction with the restructuring program.
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 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.
NOTE 5. DEBT
New Credit Agreement: The Bank has provided the Company, subject to the terms
and conditions set out in the New Credit Agreement, as amended, 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
outstanding borrowings under the New Credit Agreement were $195.0 million at
June 24, 1995.
The Bank also has provided the Company, subject to the terms and conditions set
out in the New Credit Agreement, as amended, with seasonal financing of up to
$86.0 million and a $11.0 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 certain subsidiaries of Curtice-Burns (the
'Subsidiary Guarantors'). The Company's obligations under the Bank
Facility and Pro-Fac's and the Subsidiary Guarantors' 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 (i) the
42
<PAGE>
relevant London interbank offered rate plus 1.75 percent, (ii) the
relevant prime rate minus 0.25 percent, or (iii) 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 the
Acquisition Facility was 8.7 percent per annum for the period from
November 3, 1994 through June 24, 1995.
Based on an estimated borrowing rate at fiscal year end 1995 of 9.0
percent for long-term debt with similar terms and maturities, the fair
value of the Company's long-term debt outstanding is approximately $193.8
million at June 24, 1995.
Based on an estimated borrowing rate at fiscal year end 1994 of 8.0
percent for long-term debt with similar terms and maturities, the fair
value of the Company's long-term debt outstanding was approximately $88.7
million for Pro-Fac related debt and $1.8 million for other debt at June
25, 1994.
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 during each fiscal year, the borrowings under
the Seasonal Facility must be zero. The average borrowing under the
Seasonal Facility was $65.1 million during fiscal 1995, and the
weighted-average interest rate on such borrowing was 7.2 percent. There
were no borrowings under this Seasonal Facility at June 24, 1995. The
Letter of Credit Facility provides for the issuance of letters of credit
through May 1996.
Certain Covenants: The Pro-Fac Bank Guarantee requires Pro-Fac, on a
consolidated basis, to maintain specified levels with regard to working
capital, tangible net worth, fixed charges, the incurrence of additional
debt, and limitations on dividends, investments, acquisitions, and asset
sales. The Company is in compliance with, or has obtained waivers for, all
restrictions and requirements under the terms of the borrowing agreement.
Other Debt: Other debt of $.2 million carries rates up to 11.0
percent at June 24, 1995.
Maturities: Total long-term debt maturities during each of the next five
fiscal years are as follows: 1996, $11.5 million; 1997 through 1999, $8.0
million each; and 2000, $31.1 million. Provisions of the Term Loan
Facility require annual payments in the years 1996 through 2000 on October
1 of each year in an amount equal to the 'annual cash sweep' (equivalent
to approximately 80 percent of net income adjusted for certain cash and
non-cash items) for the preceding fiscal year as defined in the
Acquisition Facility. The annual sweep to be paid on October 1, 1995
(included in the fiscal 1996 amount above) relating to fiscal 1995
amounted to $3.5 million. Provisions of the Term Loan Facility also
require that cash proceeds from the sale of businesses be applied to the
Term Loan Facility. The sale of Nalley's Canada Ltd. subsequent to
43
<PAGE>
1995 fiscal year end resulted in $3.8 million cash proceeds that were
applied to this debt.
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 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.
Based on an estimated borrowing rate at fiscal year end of 11.6 percent for
borrowings with similar terms and maturities, the fair value of the Notes was
$149.8 million at June 24, 1995.
Short-Term Borrowings: Short-term borrowings for the three years ended June
24, 1995 were as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Fiscal Fiscal Fiscal
1995 1994 1993
------- ------- --------
<S> <C> <C> <C>
Balance at end of period $ -- $11,500 $12,000
Rate at fiscal year end --% 5.5% 4.3%
Maximum outstanding during the period $94,000 $81,000 $96,000
Average amount outstanding during the period $66,541 $51,516 $70,949
Weighted average interest rate during the period 7.3% 4.6% 4.6%
</TABLE>
The above amounts include borrowings from commercial banks and from Pro-Fac
under existing and pre-existing loan agreements.
44
<PAGE>
NOTE 6. PROPERTY, PLANT AND EQUIPMENT AND RELATED OBLIGATIONS
The following is a summary of property, plant and equipment and related
obligations at June 24, 1995 and June 25, 1994.
<TABLE>
<CAPTION>
(Dollars in Thousands)
June 24, 1995 June 25, 1994
---------------------------- -----------------------------------------------------------------
Leased From
Owned Leased Owned ---------------------
Assets Assets Total Assets Pro-Fac Others Total
-------- -------- -------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Land $ 5,467 $ -- $ 5,467 $ 6 $ 8,635 $ -- $ 8,641
Land improvements 1,540 -- 1,540 85 3,467 -- 3,552
Buildings 92,215 795 93,010 1,150 86,903 720 88,773
Machinery and
equipment 168,477 3,520 171,997 8,953 219,971 4,609 233,533
Construction in
progress 18,719 -- 18,719 21,085 -- -- 21,085
Valuation allowance -- -- -- -- (3,970) -- (3,970)
-------- ------ -------- -------- -------- ------ --------
286,418 4,315 290,733 31,279 315,006 5,329 351,614
Less accumulated
depreciation 16,695 1,846 18,541 7,142 173,684 3,272 184,098
-------- ------ -------- -------- -------- ------ --------
Net $269,723 $2,469 $272,192 $ 24,137 $141,322 $2,057 $167,516
======== ====== ======== ======== ======== ====== ========
Obligations under
capital leases 1 $2,384 $ 2,384 $141,322 $2,081 $143,403
Less current portion 764 764 17,645 785 18,430
------ -------- -------- ------ --------
Long-term portion $1,620 $ 1,620 $123,677 $1,296 $124,973
====== ======== ======== ====== ========
</TABLE>
1 Represents the present value of net minimum lease payments calculated at
the Company's incremental borrowing rate at the inception of the leases,
which ranged from 6 to 9 percent.
Interest capitalized in conjunction with construction amounted to $1,841,000 and
$79,000 in fiscal 1995 and 1994, respectively.
The following is a schedule of future minimum lease payments together with the
present value of the minimum lease payments related to capitalized leases, both
as of June 24, 1995.
<TABLE>
<CAPTION>
(Dollars in Thousands)
Fiscal Year Ending Last Capital Operating Total Future
Saturday In June Leases Leases Commitment
----------------------- ------- -------- ------------
<S> <C> <C> <C>
1996 $1,225 $ 4,868 $ 6,093
1997 842 2,804 3,646
1998 637 2,028 2,665
1999 395 1,422 1,817
2000 75 366 441
Later years 320 597 917
------ ------- -------
Net minimum lease payments 3,494 12,085 $15,579
======= =======
Less amount representing interest 1,110
------
Present value of minimum lease payments $2,384
======
</TABLE>
Total rent expense related to operating leases (including lease arrangements of
less than one year which are not included in the previous table) amounted
45
<PAGE>
to $10,297,000, $11,721,000, and $13,713,000 for fiscal years 1995, 1994, and
1993, respectively. The fiscal 1995 amount is comprised of $4,280,000 for the
Predecessor entity and $6,017,000 for the Successor entity.
NOTE 7. TAXES ON INCOME
Taxes on income include the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Fiscal 1995
-----------------------------
11/4/94 - 6/26/94 -
6/24/95 11/3/94 Fiscal 1994 Fiscal 1993
Successor Predecessor Predecessor Predecessor
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Federal -
Current $(1,368) $ 5,834 $4,047 $10,132
Deferred 3,810 (3,529) 1,831 (7,407)
------- ------- ------ -------
2,442 2,305 5,878 2,725
------- ------- ------ -------
State and foreign -
Current (46) 1,106 1,948 4,405
Deferred 895 (676) 839 (3,235)
------- ------- ------ -------
849 430 2,787 1,170
------- ------- ------ -------
$ 3,291 $ 2,735 $8,665 $ 3,895
======= ======= ====== =======
</TABLE>
The deferred tax liabilities/assets consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ------
<S> <C> <C> <C>
Liabilities
Depreciation $ 66,736 $22,147 $19,854
Non-compete agreements 1,120 513 620
Long-term receivables 626 1,416 885
Prepaid manufacturing 3,827 -- --
Other 45 486 592
-------- ------- -------
72,354 24,562 21,951
-------- ------- -------
Assets
Inventory reserves 3,416 319 796
Allowance for doubtful accounts 382 514 364
Reserve for restructuring -- 3,526 6,459
Capital loss carryforward 3,738 3,979 3,979
Accrued employee benefits 3,711 2,180 1,817
Insurance accruals 1,659 2,022 1,249
Pension/OPEB accruals 6,237 2,971 2,179
Plant consolidation and closing expenses 2,572 3,639 2,321
Alternative minimum income tax -- -- 376
Tax credits 3,628 -- --
Other 1,440 941 1,460
-------- ------- -------
26,783 20,091 21,000
-------- ------- -------
Net deferred liabilities (45,571) (4,471) (951)
Valuation allowance (7,366) -- (850)
-------- ------- -------
$(52,937) $(4,471) $(1,801)
======== ======= =======
</TABLE>
In conjunction with the acquisition, a valuation allowance was established in
fiscal 1995 for that portion of the capital loss carryforward and tax
46
<PAGE>
credits where it was more likely than not that a tax benefit would not be
realized.
A reconciliation of the Company's effective tax rate to the amount computed by
applying the federal income tax rates of 35 and 34 percent to income before
taxes, is as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Fiscal 1995
-------------------------
11/4/94 - 6/26/94 -
6/24/95 11/3/94 Fiscal 1994 Fiscal 1993
Successor Predecessor Predecessor Predecessor
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income tax provision (benefit),
at 35% in 1995 and 1994 and 34% in
the previous year $1,942 $1,558 $6,571 $(6,797)
State income taxes, net of
federal income tax effect 552 294 900 189
Goodwill amortization 637 167 480 9,248
Valuation allowance -- -- (850) 850
Statutory rate change -- -- 480 --
Non-deductible legal and
advisory expenses -- 753 1,058 --
Other, net 160 (37) 26 405
------ ------ ------ -------
$3,291 $2,735 $8,665 $ 3,895
====== ====== ====== =======
Effective Tax Rate 59.3% 61.4% 46.2% N/M*
====== ====== ====== =======
</TABLE>
* The effective tax rate calculation for 1993 is not meaningful.
In January 1995, the Boards of Directors of Curtice-Burns Foods, Inc. and
Pro-Fac Cooperative, Inc. approved appropriate amendments to the Bylaws of
Curtice-Burns Foods, Inc. to allow the Company to qualify as a cooperative under
Subchapter T of the Internal Revenue Code. A private letter ruling agreeing to
this change was received from the Internal Revenue Service in August 1995. The
effective date of the change is June 25, 1995. As a cooperative, patronage
income will be deductible to the extent distributed to its members. Accordingly,
taxation on patronage income is only imposed at the patron level.
On August 10, 1993, President Clinton signed into law a new income tax bill
which increased corporate income tax rates from 34 percent to 35 percent. Under
the provisions of SFAS 109 the Company recorded the impact of this rate increase
during the first quarter of fiscal 1994. The impact of this rate increase on the
Company's deferred tax assets and liabilities resulted in an increase to income
tax expense of approximately $480,000.
Although the Company reported a pretax loss for fiscal 1993, a tax provision of
$3,895,000 was recorded, primarily due to the non-deductible writedown of
goodwill recorded in conjunction with the Company's overall restructuring plan.
47
<PAGE>
NOTE 8. PENSIONS, PROFIT SHARING, AND OTHER EMPLOYEE BENEFITS
Pensions : The Company has primarily noncontributory defined benefit plans
covering most employees. The benefits for these plans are based primarily on
years of service and employees' pay near retirement. The Company's funding
policy is consistent with the funding requirements of Federal law and
regulations. Plan assets consist principally of common stocks, corporate bonds
and U.S. Government obligations.
The Company also participates in several union sponsored pension plans; however,
it is not possible to determine the Company's relative share of the accumulated
benefit obligations or net assets for these plans.
Pension cost for fiscal years ended 1995, 1994, and 1993 includes the following
components:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Fiscal 1995
----------------------------
11/4/94 - 6/26/94 -
6/24/95 11/3/94 Fiscal 1994 Fiscal 1993
Successor Predecessor Predecessor Predecessor
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Service cost -- benefits earned
during the period $ 2,427 $ 1,270 $ 3,958 $ 3,927
Interest cost on projected benefit
obligation 4,365 2,225 6,815 6,259
Return on assets
Actual gain -- (1,717) (2,044) (6,311)
Deferred gain (4,789) (678) (5,213) (842)
------- ------- ------- -------
Total gain (4,789) (2,395) (7,257) (7,153)
Amortization of transition amount
at June 29, 1985 -- (265) (1,001) (1,001)
Amortization of prior service cost -- 61 426 130
Recognition of curtailment gain -- -- (874) --
Amortization of gain -- 57 6 --
------- ------- ------- -------
2,003 953 2,073 2,162
Union and other pension costs 147 1,182 593 555
------- ------- ------- -------
Net pension cost $ 2,150 $ 2,153 $ 2,666 $ 2,717
======= ======= ======= =======
</TABLE>
As a result of the change of control of the Company, the Plan assets and
obligations were remeasured on November 3, 1994, and the entire balance of the
transition obligation, unrecognized prior service costs, and outstanding gains
and losses totaling $5,167,266 were adjusted at the time of the acquisition.
As a result of restructuring activities, the Plan assets and obligations were
remeasured as of November 22, 1993. The restructuring and the resulting
curtailment caused the projected benefit obligation to decrease by approximately
$874,000 and caused approximately $311,000 of previously unrecognized prior
service cost to be recognized immediately. This resulted in a net decrease in
annual pension cost of $563,000.
48
<PAGE>
The pension plans' funded status was as follows:
<TABLE>
<CAPTION>
(Dollars in Thousands) June 24, 1995 June 25, 1994 June 26, 1993
------------- ------------- -------------
Assets Accumulated Assets
Exceed Benefits Exceed
Accumulated Exceed Accumulated
Benefits Assets Benefits
----------- ---------- -----------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(65,350) $(71,302) $(66,927)
======== ======== ========
Accumulated benefit obligation $(69,449) $(76,649) $(70,522)
======== ======== ========
Projected benefit obligation $(78,809) $(87,744) $(85,277)
Plan assets at fair value 74,897 71,875 74,147
-------- -------- --------
Projected benefit obligation in excess of
Plan assets (3,912) (15,869) (11,130)
Unrecognized net (gain)/loss (8,787) 11,075 8,305
Unrecognized prior service cost -- 1,088 1,693
Unrecognized net asset at year end -- (4,408) (5,410)
Liability for unfunded accumulated
benefit obligation -- (1,401) --
-------- -------- --------
(12,699) (9,515) (6,542)
Union and other pension plans (281) (958) (711)
-------- -------- --------
Pension liability at year end $(12,980) $(10,473) $ (7,253)
======== ======== ========
</TABLE>
In 1995 the assumed discount rate, assumed long-term of rate return on Plan
assets, and the assumed long-term rate of compensation increase were 8.50
percent, 10.0 percent, and 4.50 percent, respectively.
In 1994 the assumed discount rate, assumed long-term rate of return on Plan
assets and the assumed long-term rate of compensation increase were 7.75
percent, 10.0 percent and 4.50 percent, respectively. In 1993 the assumed
discount rate, assumed long-term rate of return on Plan assets, and the assumed
long-term rate of compensation increase were 8.25 percent, 10.0 percent and 6.0
percent, respectively.
Provisions of the Financial Accounting Standards Board SFAS No. 87, 'Employers
Accounting for Pensions,' require the Company to record a minimum pension
liability relating to certain unfunded pension obligations, establish an
intangible asset thereto and reduce stockholders equity. At June 25, 1994, a
minimum pension liability of $1,401,000 was recorded as required by SFAS 87. A
related intangible asset was recorded for $1,356,000 and stockholders equity was
reduced by $45,000. The adjustment in the minimum pension liability at June 25,
1994 resulted mainly from a decrease in the discount rate and the general
performance of investment markets.
Profit Sharing: Under the Deferred Profit Sharing Plan and the Non- Qualified
Profit Sharing Plan, the Company allocated to all salaried exempt employees a
percentage of its earnings in excess of 7.0 percent in 1994 and 5.0 percent in
1995 of the combined long-term debt and equity (as defined) of Pro-Fac and the
Company. In fiscal 1995 and 1994, $1,400,000 and $1,171,000, respectively, was
allocated to the Plans while no awards were allocated in fiscal 1993.
49
<PAGE>
Postretirement Benefits Other Than Pensions: Generally, other than pensions, the
Company does not pay retirees' benefit costs. Isolated exceptions exist, which
have evolved from union negotiations, early retirement incentives and existing
retiree commitments from acquired companies.
In December 1990, the Financial Accounting Standards Board issued SFAS No. 106,
'Employers' Accounting for Postretirement Benefits Other Than Pensions.' SFAS
106, effective for fiscal years beginning after December 15, 1992, requires
employers to accrue the cost of retiree health and other postretirement benefits
during the working careers of active employees and allows the transition
obligation to be recognized in net income either immediately or over 20 years.
The Company adopted SFAS 106 during the first quarter of fiscal 1994. The
Company has elected to amortize the unrecognized transition obligation over 20
years. The adoption of SFAS 106 is not considered material to the financial
statements as a whole.
The Company has not prefunded any of its retiree medical or life insurance
liabilities. Consequently there are no Plan assets held in a trust, and there is
no expected long-term rate of return assumption for purposes of determining the
annual expense.
The Plan's funded status was as follows:
<TABLE>
<CAPTION>
(Dollars In Thousands)
June 24, 1995 June 25, 1994
------------- -------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Fully eligible active participants $ 113 $ 202
Other active participants 244 288
Retirees 2,386 2,474
------- -------
Total 2,743 2,964
Less Plan assets at fair value -- --
------- -------
Accumulated postretirement benefit obligation in excess of
fair value of assets (2,743) (2,964)
Unrecognized transition obligation -- 2,622
Unrecognized prior service cost -- --
Unrecognized losses/(gains) (274) 6
------- -------
Accrued postretirement benefit cost $(3,017) $ (336)
======= =======
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Fiscal 1995
-------------------------
11/4/94 - 6/26/94 -
6/24/95 11/3/94 Fiscal 1994
Successor Predecessor Predecessor
--------- ----------- -----------
<S> <C> <C> <C>
Service cost $ 15 $ 8 $ 38
Interest cost 154 74 248
Actual return on assets -- -- --
Net amortization and deferral -- 46 155
---- ---- -----
Net periodic postretirement benefit cost $169 $128 $ 441
==== ==== =====
</TABLE>
50
<PAGE>
As a result of the change in control, the entire balance of the transition
obligation and the outstanding gains and losses totaling $2,538,000 were charged
to goodwill at the time of the sale.
Restructuring activities during fiscal 1994 resulted in a curtailment which
caused the Accumulated Postretirement Obligation to decrease by approximately
$878,000 and the Unrecognized Transition Obligation to decrease by approximately
$817,000. This resulted in a net decrease in the Net Postretirement Benefit Cost
of $92,000.
The weighted-average, assumed-discount rate used to measure the benefit
obligations was 7.75 percent at the beginning and 8.50 percent at the end of the
fiscal year.
The annual rate of increase in the per capita cost of health care benefits was
assumed to be 14 percent for 1994 and 12 percent for 1995. The rate was assumed
to decrease gradually to 6.0 percent by the year 2005 and remain at that level
thereafter.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
postretirement benefit obligation (APBO) and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost as
follows:
<TABLE>
<CAPTION>
(Dollars in Thousands)
Successor Predecessor Predecessor
11/4/94 - 6/24/95 6/26/94 - 11/3/94 Fiscal 1994
------------------ ------------------ --------------
Current 1% Higher Current 1% Higher Current 1% Higher
Trend Trend Trend Trend Trend Trend
<S> <C> <C> <C> <C> <C> <C>
APBO $2,743 $2,874 $2,948 $3,118 $2,964 $3,149
Service cost+interest cost $ 170 $ 178 $ 82 $ 86 286 301
</TABLE>
EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112, 'Employers' Accounting for Postemployment Benefits.'
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.
The Company adopted the provisions of FAS No. 112 effective June 26, 1994. The
adoption did not have a significant impact on the operations or cash flow of the
Company.
NOTE 9. OTHER MATTERS
Sale of Nalley's Canada Ltd.: On March 20, 1995 Curtice-Burns announced its
intention to sell its Canadian subsidiary, Nalley's Canada Ltd., located in
Vancouver, British Columbia, to a management group within the Canadian
51
<PAGE>
subsidiary. This sale was finalized subsequent to year end (as of June 26, 1995)
and was contemplated by Pro-Fac in conjunction with the acquisition. Nalley's
U.S. will have an ongoing supply agreement with Nalley's Canada Ltd. as a result
of the sale.
Subsequent Event: On July 21, 1995, the Company completed the acquisition of
Packer Foods, a privately owned, Michigan-based food processor. The total cost
of acquisition was approximately $5.4 million in notes plus interest at 10
percent to be paid until the notes mature in the year 2000. The transaction will
be accounted for as a purchase. For its latest fiscal year ended December 31,
1994, Packer had net sales of $13 million, operating income of $300,000, and
income before extraordinary items of $100,000. Packer Foods is in the process of
being merged into the Company's Comstock Michigan Fruit operations.
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.
Southern Frozen Foods Fire: 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. A gain on assets destroyed in the fire was recognized by Curtice-Burns
prior to the acquisition. Subsequent to the acquisition, additional costs in the
amount of $2.3 million were incurred for which negotiations are currently in
progress with the insurance carriers. As of June 24, 1995, the Company has
received $10.0 million in proceeds from the insurance claims for the fire.
Subsequent to fiscal year end, $2.5 million was received for a total of $12.5
million with $10.0 million receivable at August 30, 1995.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Management and Directors: Effective upon consummation of the Acquisition,
Pro-Fac established a management structure for the Company, providing for a
Board of Directors consisting of one management director, Pro-Fac Directors and
Disinterested Directors. The number of Pro-Fac Directors is equal to the number
of Disinterested Directors. The Chairman of the Board is a Pro-Fac Director. The
initial management and directors are listed below. The Company may in the future
expand the Board of Directors, but Pro-Fac has undertaken to cause the Company
to maintain a Board on which the number of Pro-Fac Directors does not exceed the
number of Disinterested Directors. Both the New Credit Agreement and the
Indenture provide that there will be a Change of Control if, for a period of 120
consecutive days, the number of Disinterested Directors on the Board of
Directors of the Company is less than the greater of (i) two and (ii) the number
of directors of the Company who are Pro-Fac Directors.
52
<PAGE>
Set forth below is certain information concerning the individuals who serve as
directors and executive officers of the Company as well as other corporate
officers and the individuals who serve as presidents and chief executive
officers of certain of the Company's divisions.
<TABLE>
<CAPTION>
Year of
Name Birth Positions
------------------------ ------- ---------------------------------------------------------
<S> <C> <C>
Roy A. Myers(1) 1931 President and Chief Executive Officer and Director
William D. Rice 1934 Senior Vice President, Chief Financial Officer, Secretary
and Treasurer
Stephen R. Wright 1947 Senior Vice President -- Procurement
Patrick D. Lindenbach 1955 Executive Vice President of the Company and President
and Chief Executive Officer of Nalley's
Diana T. Bartalo 1946 Assistant Treasurer and Director of Financial Reporting
Robert E. McMahon 1941 Vice President Information Systems
Blaine B. Petersen 1928 Vice President Operations
Earl L. Powers 1944 Vice President and Controller
Beatrice B. Slizewski 1943 Vice President Corporate Communications
Lois J. Warlick-Jarvie 1958 Vice President Human Resources
Dennis M. Mullen 1953 President and Chief Executive Officer of CMF
Thomas A. Collins 1938 President and Chief Executive Officer of Southern
Eugene W. Hermenet 1936 President and Chief Executive Officer of Brooks
Ronald R. Fithen 1946 President and Chief Executive Officer of Finger Lakes
Robert V. Call, Jr.(2) 1926 Director and Chairman of the Board
Bruce R. Fox(2) 1947 Director
Cornelius D. Harrington, Jr.(3) 1927 Director
Steven D. Koinzan(2) 1948 Director
William B. McKnight, Jr.(3) 1945 Director
Frank M. Stotz(3) 1930 Director
</TABLE>
(1) Management Director.
(2) Pro-Fac Director.
(3) Disinterested Director.
Roy A. Myers has been the Chief Executive Officer and a Director of the
Company since the completion of the Acquisition. Mr. Myers served as a
Director and Executive Vice President of the Company from 1987 to the
completion of the Acquisition (at which time he was appointed the Chief
Executive Officer). He served as Vice President-Operations of the Company
53
<PAGE>
from 1985 to 1987 and as Vice President of the Company from 1983 to 1985. He has
been an employee of the Company or a predecessor to the Company since 1955 in
various other capacities including Industrial Relations Manager, Operations
Manager and President of the Corporate Services Division. He was General Manager
of Pro-Fac from 1987 until the completion of the Acquisition, having served as
Assistant General Manager from 1983 to 1987.
William D. Rice has been Senior Vice President Finance and Administration of the
Company since 1991, Secretary of the Company since 1989 and Treasurer of the
Company since 1975. He was Vice President-Finance of the Company from 1969 to
1991. He has been Assistant Treasurer of Pro-Fac since 1970.
Stephen R. Wright has been Senior Vice President -- Procurement of the Company
since the completion of the Acquisition. He was Vice President -- Procurement
for the Company from 1990 to November, 1994, having served as Director of
Commodities and Administration Services for the Company from 1988 to 1990. He
became General Manager of Pro-Fac in March 1995.
Patrick D. Lindenbach has been an Executive Vice President of the Company since
March 1993 and Division President and Chief Executive Officer of Nalley's since
June 1990. He was Division President and Chief Executive Officer of Nalley's
Canada Ltd. from 1988 to 1990. Prior to working at the Company, he held various
positions at Kellogg Salada Canada Inc., Warner Lambert Canada, Inc. and
Standard Brands Canada Ltd.
Diana T. Bartalo has been Director of Financial Reporting since 1992; Assistant
Treasurer since 1988; Corporate Accounting Manager 1976-1992; and held several
administrative staff positions 1970-1976.
Robert E. McMahon has been Vice President Information Systems since November
1993; prior to that he was Vice President, Information Systems for the Comstock
Michigan Fruit Division 1992-1993 and Director of Corporate Information Systems
since December 1991. He joined the Comstock Michigan Fruit Division as Systems
Integration Manager in 1989 and became Director of Information Systems for that
Division in 1990. Prior to employment with Curtice-Burns, he held management,
executive and technical positions with such organizations as Abbott Labs, BASF,
IBM, MTech, and Price Waterhouse.
Blaine B. Petersen has been Vice President Operations since 1991; prior to that
he was Director of Operations since 1990. Before joining Curtice- Burns, he was
Vice President Plant Operations, Grace Culinary Systems Division of W.R. Grace &
Co. 1988-1990, Vice President Operations, Fishery Products, Inc. 1983-1988.
Various executive management positions 1969-1983.
Earl L. Powers has been Vice President and Controller since March 1993, and Vice
President Finance and Management Information Systems, Comstock Michigan Fruit
Division of the Company 1991 to March 1993. Prior to joining the Company, he was
Controller of various Pillsbury Company divisions 1987-1990 and various other
executive management positions at the Pillsbury Company 1976-1987.
Beatrice B. Slizewski has been Vice President of Corporate Communications for
Curtice-Burns and Pro-Fac since March 1995. She joined the Company as Director
of Corporate Communications in 1991. Prior to joining Curtice- Burns
(1988-1991), she worked as a marketing and public relations consultant for J.P.
Associates, a small business consulting agency in Rochester, New
54
<PAGE>
York. Previous food industry experience includes 14 years with the R.T. French
Company (1974 - 1988) -- eight years in public relations and seven years in
various accounting functions.
Lois J. Warlick-Jarvie has been Vice President Human Resources since January
1993; Corporate Director Human Resources July 1991 to January 1993; Manager
Compensation, Benefits and Risk Management January 1989 to July 1991; various
administrative staff positions within the Company 1982 to 1989.
Dennis M. Mullen has been President and Chief Executive Officer of CMF since
March 1993. He was Senior Vice President and Business Unit Manager Food Service
of CMF from 1991 to 1993, and Senior Vice President-Custom Pack Sales for
Nalley's from 1990 to 1991. Prior to employment with the Company, he was
President and Chief Executive Officer of Globe Products Company.
Thomas A. Collins has been President and Chief Executive Officer of Southern
since 1990. He was Executive Vice President of Southern from 1989 to 1990, Vice
President-Sales and Marketing of Southern from 1985 to 1989, Vice President,
Marketing for Retail and Foodservice of Southern from 1981 to 1985 and Vice
President, Foodservice Sales of Southern from 1975 to 1981.
Ronald R. Fithen has been President and Chief Executive Officer of Finger Lakes
since 1991. Prior to joining the Company in 1991, he was Plant Manager for
Continental Can's largest manufacturing operation in St. Louis.
Eugene W. Hermenet has been President and Chief Executive Officer of Brooks
since 1978. He was Executive Vice President of Brooks from 1975 to 1978. He was
President of Silver Floss from 1972 to 1975, Vice President of Silver Floss from
1971 to 1972 and Assistant to the President of Silver Floss from 1969 to 1971.
Robert V. Call, Jr. has been a Director of the Company since the completion of
the Acquisition. Mr. Call had been a Director of the Company since 1986 until
completion of the Acquisition (at which time he resigned and was reappointed).
He has been a Director of Pro-Fac since 1962. He was President of Pro-Fac from
1986 to March 27, 1995, having served as Treasurer from 1973 to 1984. He has
been a member of Pro-Fac since 1961. He is a vegetable, fruit and grain farmer
(My-T Acres, Inc., Batavia, NY).
Bruce R. Fox has been a Director of the Company since the completion of the
Acquisition. He has been a Director of Pro-Fac since 1974. He was Treasurer of
Pro-Fac from 1984 until March 27, 1995, when he was elected President. He has
been a member of Pro-Fac since 1974. Mr. Fox is a fruit and vegetable grower
(N.J. Fox & Sons, Inc., Shelby, MI).
Cornelius D. Harrington, prior to his retirement, was President of the Bank of
New England-West in Springfield, MA or a predecessor to the Bank of New
England-West from 1978 to December 1990. He was Chief Executive Officer of the
Bank of New England-West from 1984 to December 1990. Until 1987, he served as
Chairman of the Board of Directors of BayState Medical Center in Springfield,
MA. He has been a Director of the Farm Credit Bank of Springfield since January
1994.
Steven D. Koinzan has been a Director of the Company since the completion of the
Acquisition. He has been a Director of Pro-Fac since 1983. He was Secretary of
Pro-Fac from March 1993 until March 27, 1995, when he was
55
<PAGE>
elected Treasurer. He has been a member of Pro-Fac since 1979. Mr. Koinzan is a
popcorn, field corn and soybean farmer (Koinzan Farms; Norden, Nebraska).
William B. McKnight, Jr. has been a Director of the Company since the completion
of the Acquisition. Mr. McKnight is President and Chief Executive Officer of
Wise Snack Foods. He was Executive Vice President of the Nabisco Foods Group of
RJR Nabisco, Inc. until 1993. He was President and Chief Executive Officer of
the Nabisco Foods Company from 1988 to 1992 and President of the Biscuit
Division of the Nabisco Foods Group from 1986 to 1988. Mr. McKnight was
President of the Grocery Division of the Nabisco Foods Group from 1984 to 1986,
President of the Grocery Products Division from 1982 to 1984 and Vice President,
Marketing of the Special Products Division from 1981 to 1982. From 1968 to 1981,
he held various management positions at General Mills, Inc. Mr. McKnight has
been a Director of VideOcart, Inc. since 1989 and a Director of Ghirardelli
Chocolate Company since 1991. He is a member of the Executive Committee of the
Kenyon College Fund and St. Clare's Riverside Hospital.
Frank M. Stotz has been a Director of the Company since the completion of the
Acquisition. Mr. Stotz retired in 1994 from his position as Senior Vice
President -- Finance of Bausch & Lomb Incorporated. Before joining Bausch & Lomb
in that capacity in 1991, Mr. Stotz was a partner with Price Waterhouse. He
joined Price Waterhouse in Chicago in 1954, was admitted to partnership in 1966
and retired from the firm in 1991 to join Bausch & Lomb. From 1980 to 1991, he
was partner in charge of the Rochester office of Price Waterhouse. Mr. Stotz
serves on the Boards of Trustees of St. John Fisher College, The Genesee
Hospital, The Rochester Center for Governmental Research and The Automobile Club
of Rochester. He is also a member of the Bishop's Council of the Catholic
Diocese of Rochester.
Term of Office: All directors of the Company will hold office from the date of
election until the next annual meeting of shareholders or until their successors
are duly elected and qualified. Each executive officer of the Company will hold
office from the date of election until his successor is elected or appointed.
There are no family relationships between any Director, executive officer, or
any person nominated or chosen by the Company to become a Director or executive
officer. Officers of the Company serve for a term of office from the date of
election to the next organization meeting of the Board of Directors and until
their respective successors are elected and qualified, except in the case of
death, resignation, or removal.
ITEM 11. EXECUTIVE COMPENSATION
The following tables show the cash compensation and certain other components of
the compensation of the chief executive officer and certain other most highly
compensated Executive Officers of the Company earned during fiscal years ended
June 24, 1995, June 25, 1994, and June 26, 1993.
56
<PAGE>
Executive Compensation
Summary Compensation Table - Successor Entity
November 4, 1994 to June 24, 1995
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Deferred
Compensation 1 Awards Profit
Name and Principal Position Year Salary Bonus 2 Options Sharing
---------------------------- ---- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Roy A. Myers - 1995 $258,375 $200,539 $ 0 $10,609
President, CEO
and Director
William D. Rice - 1995 $159,081 $116,143 $ 0 $ 9,791
Senior Vice President, CFO,
Secretary and Treasurer
Patrick D. Lindenbach - 1995 $128,927 $ 71,504 $ 0 $ 8,134
Executive Vice President
Dennis M. Mullen - 1995 $112,772 $ 71,207 $ 0 $ 7,265
President, Comstock
Michigan Fruit Division
Stephen R. Wright 1995 $ 98,373 $ 51,628 $ 0 $ 4,520
General Manager,Pro-Fac
Cooperative, Inc.
Thomas A. Collins 1995 $ 97,867 $ 65,941 $ 0 $ 5,947
President, Southern
Frozen Foods
</TABLE>
1 No named Executive Officer has received personal benefits during the period
in excess of the lesser of $50,000 or 10 percent of annual salary.
2 Pursuant to the Management Incentive Plan of the Company (the 'Incentive
Plan'), additional compensation is paid if justified by the activities of
the officers and employees eligible under the Incentive Plan and by the
earnings of the Company and of Pro-Fac Cooperative, Inc. ('Pro-Fac').
57
<PAGE>
Executive Compensation
Summary Compensation Table - Predecessor Entity
Prior to November 3, 1994
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Deferred
Compensation 1 Awards Profit All Other(3)
Name and Principal Position Year Salary Bonus 2 Options Sharing Compensation
---------------------------- ---- ------- -------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C>
J. William Petty 1995 $153,292 $ 90,442 $ 0 $14,999 $424,000
President and Chief 1994 406,369 219,440 0 13,323 0
Executive Officer 1993 322,498 148,739 66,800 0 0
Roy A. Myers - 1995 $ 81,552 $ 0 $ 0 $ 0 $ 0
Executive Vice President 1994 228,615 101,231 0 7,886 0
and Director 1993 219,969 35,943 18,200 0 0
William D. Rice - 1995 $ 80,984 $ 0 $ 0 $ 0 $ 0
Senior Vice President, 1994 230,912 102,248 0 7,933 0
Secretary and Treasurer 1993 222,700 36,389 19,500 0 0
Patrick D. Lindenbach - 1995 $ 69,031 $ 0 $ 0 $ 0 $ 0
Executive Vice President 1994 189,083 66,438 0 6,403 0
1993 166,779 102,152 12,700 0 0
Dennis M. Mullen - 1995 $ 66,786 $ 0 $ 0 $ 0 $ 0
President, Comstock 1994 170,128 101,643 0 5,761 0
Michigan Fruit Division 1993 151,880 98,531 10,200 0 0
</TABLE>
1 No named Executive Officer has received personal benefits during the listed
years in excess of the lesser of $50,000 or 10 percent of annual salary.
2 Pursuant to the Management Incentive Plan of the Company (the 'Incentive
Plan'), additional compensation is paid if justified by the activities of the
officers and employees eligible under the Incentive Plan and by the earnings
of the Company and of Pro-Fac Cooperative, Inc. ('Pro-Fac').
3 Salary continuation pursuant to the Key Executive Severance Plan.
Retirement Plans: The Company's Master Salaried Retirement Plan (the 'Pension
Plan') provides defined retirement benefits for its officers and all salaried
and clerical personnel. The compensation upon which the pension benefits are
determined is included in the salary columns of the 'summary compensation
tables.'
For retirement before age 65, the annual benefits are reduced by an amount for
each year prior to age 65 at which such retirement occurs so that if retirement
occurs at age 55, the benefits are 70 percent of those payable at age 65.
The approximate number of years of Plan participation under the Company's
Pension Plan as of June 24, 1995, of the Executive Officers listed in the
compensation tables are as follows: J. William Petty-10, Patrick D.
Lindenbach-6, Dennis M. Mullen-5, Roy A. Myers-33, William D. Rice-23,
Thomas A. Collins-14, and Stephen R. Wright-22.
58
<PAGE>
On January 28, 1992, the Company adopted an Excess Benefit Retirement Plan which
serves to provide employees with the same retirement benefit they would have
received from the Company's Master Salaried Retirement Plan under the career
average base pay formula, but for changes required under the 1986 Tax Reform Act
and the compensation limitation under Section 401(a)(17) of the Internal Revenue
Code, which was $150,000 on January 1, 1994, having been revised in the 1992
Omnibus Budget Reform Act.
The following table shows the estimated pension benefits payable to a covered
participant, at age 65, at the specified final average pay, and years of
credited service levels under the Company's Master Salaried Retirement Plan and
the Excess Benefit Retirement Plan.
<TABLE>
<CAPTION>
Pension Plan Table
Years of Plan Participation
Final -----------------------------------------------------------------------------------
Average Pay 15 20 25 30 35
----------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$125,000 $22,586 $ 29,522 $ 36,435 $ 43,397 $ 50,540
150,000 27,836 36,522 45,185 53,897 62,790
175,000 33,086 43,522 53,935 64,397 75,040
200,000 38,336 50,522 62,685 74,897 87,290
225,000 43,586 57,522 71,435 85,397 99,540
250,000 48,836 64,522 80,185 95,897 111,790
275,000 54,086 71,522 88,935 106,397 124,040
300,000 59,336 78,522 97,685 116,897 136,290
325,000 64,586 85,522 106,435 127,397 148,540
350,000 69,836 92,522 115,185 137,897 160,790
375,000 75,086 99,522 123,935 148,397 173,040
400,000 80,336 106,522 132,685 158,897 185,290
</TABLE>
The benefits listed on the Pension Plan Table are not subject to any deduction
for Social Security.
The Company also maintains a Supplemental Executive Retirement Plan ('SERP') to
ensure that certain key executives affected by joining the Company at mid-career
will receive levels of retirement income reasonably related to their service and
compensation, and reflecting their contribution to the success of the Company.
Presently the SERP includes Mr. Petty as a participant. The Plan ensures that
participants will receive, from all past and current employment sources, a
minimum aggregate benefit of 50 percent of Final Average Base Salary upon
retirement at age 65 with decreasing amounts as early as age 62, but no SERP
benefit if retirement occurs prior to age 62. Final Average Base Salary is
defined as the average of the highest three consecutive calendar years'
compensation, including base salary and cash incentive bonuses. Retirement
benefits for SERP participants will be paid from a combination of five sources:
The Master Salaried Retirement Plan of the Company, the interest income
available from the accumulations in the Company's Deferred Profit Sharing Plan,
primary benefits under Social Security, any pension plans from previous
employment, and finally, an increment paid by the SERP from the Company's
general funds to bring the aggregate benefits to the prescribed level. The SERP
is not tax qualified and is not subject to the various maximum benefit
limitations prescribed in
59
<PAGE>
ERISA and the 1986 Tax Reform Act. The total projected annual benefit payable
under this supplemental plan to Mr. Petty is $113,136.
Change of Control Provisions of Severance and Other Benefit Plans: The Company
has adopted a Change of Control Severance Plan concerning certain key employees
and Executive Officers (the 'Plan'). The Plan provides salary and benefit
continuation to designated executives (including the named executives listed in
the compensation table) in the event their employment is terminated within a
specified period after a change of control of the Company, as such term is
defined in the Plan.
The Plan will remain in existence until November 3, 1996. The Plan provides for
salary and benefit continuation upon termination other than for cause within the
two-year period following a Change of Control as follows: one year of salary and
benefit continuation for Messrs. Petty, Myers and Rice; two years of salary and
benefit continuation for the other designated executives including Messrs.
Lindenbach, Mullen, and Collins, or until the executive obtains other employment
at an annual salary not less than 75 percent of his annual salary at
termination, whichever occurs first.
Under the terms of the Agreement, Mr. Petty is entitled to a minimum
supplemental retirement benefit equal to 50 percent of his current salary, less
all other sources of retirement income including his supplemental retirement
benefit under the Curtice-Burns Foods Supplemental Executive Retirement Plan.
The total projected annual benefit payable under this provision of the Plan to
Mr. Petty is $46,508. Messrs. Myers and Rice would e entitled to a supplemental
retirement benefit equal to the benefit they would receive from the
Curtice-Burns Foods Master Salaried Retirement Plan if they continue working
until age 65 at their current salary level, less their actual retirement benefit
from this Plan. In all cases, the supplemental retirement benefits begin at the
end of the salary and benefit continuation period. Also, upon a Change of
Control all stock options granted prior to February 18, 1994 became exercisable.
If any excise tax is imposed on Mr. Petty in respect to payments under these
agreements and the accelerated vesting of stock options, the Company will pay to
Mr. Petty an amount that will net him the same sum as he would have retained if
the excise tax did not apply.
The Profit Sharing Plan and the Incentive Plan also contain a change of control
provision pursuant to which, in the event of a change of control of the Company,
participants in such plan who are terminated within two years following a change
in control are entitled to an allocation of benefits under such plan for the
fiscal year of their termination on a pro rata basis for the part of the year
they were employed.
Directors Compensation: In fiscal 1995, non-employee directors who were
designated by Pro-Fac received an annual stipend of $6,000 per year, plus $200
per day for attending Board or Committee meetings. In fiscal 1995, all other
outside directors, Messrs. Harrington, McKnight, and Stotz received $18,000 in
addition to $600 per day. The Chairman of the Board receives a fixed amount in
lieu of the standard attendance fees and annual stipend. The Company accrued an
annual stipend of $24,700 for Mr. Call as Chairman of the Board. Mr. Myers was
not paid directors' fees.
60
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding capital stock of he Company is owned by Pro-Fac
Cooperative, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
PRO-FAC MARKETING AND FACILITATION AGREEMENT
The Company has a contractual relationship with Pro-Fac Cooperative, Inc. (its
parent Company), an agricultural cooperative which, since its organization, has
supplied a substantial portion of the raw food products processed by the Company
from crops grown by its approximately 650 members.
General: Upon consummation of the Transactions, the Integrated Agreement was
terminated, and Pro-Fac and the Company entered into the Pro-Fac Marketing and
Facilitation Agreement. Under the Pro-Fac Marketing and Facilitation Agreement,
Pro-Fac and the Company will continue the marketing and management arrangements
of the Integrated Agreement. The Pro-Fac Marketing and Facilitation Agreement is
the successor to similar marketing agreements between the Company and Pro-Fac
that have been continuously in effect since these companies' formations in the
early 1960s.
Purchase of Crops From Pro-Fac: Under the Pro-Fac Marketing and Facilitation
Agreement, the Company purchases crops from Pro-Fac at the Commercial Market
Value of those crops, which is defined generally as the weighted average of the
prices paid by other commercial processors for similar crops used for similar or
related purposes sold under preseason contracts and in the open market in the
same or similar market areas. Under the predecessor agreements to the Pro-Fac
Marketing and Facilitation Agreement, the Company paid Pro-Fac $59.8 million and
$59.2 million as Commercial Market Value for crops purchased from Pro-Fac in
fiscal years 1994 and 1993, respectively. In fiscal 1995 the Company paid
Pro-Fac $55.9 million as commercial market value for crops. The crops purchased
by the Company from Pro-Fac represented approximately 73 percent, 65 percent,
and 60 percent of all raw agricultural crops purchased by the Company in fiscal
1995, 1994, and 1993, respectively.
Commercial Market Value will be determined, similar to the process that existed
prior to the Acquisition, by a joint committee of the Boards of Directors of
Pro-Fac and the Company, which is currently comprised of the Chief Executive
Officer of the Company and an equal number of Pro-Fac directors and
Disinterested Directors. The Pro-Fac Marketing and Facilitation Agreement
requires a majority of the Disinterested Directors to approve the recommendation
of the joint committee. Although Commercial Market Value is intended to be no
more than the fair market value of the crops purchased by the Company, it may be
more or less than the price the Company would pay in the open market in the
absence of the Pro-Fac Marketing and Facilitation Agreement. The volume and type
of crops to be purchased by the Company under the Pro-Fac Marketing and
Facilitation Agreement are determined pursuant to its annual profit plan, which
requires the approval of a majority of the Disinterested Directors.
61
<PAGE>
Patronage Income of Pro-Fac: In addition to Commercial Market Value, under the
Pro-Fac Marketing and Facilitation Agreement, the Company will pay to Pro-Fac as
additional patronage income (the 'additional patronage income') up to 90 percent
of the Company's pretax income on Pro-Fac related products (the 'Pro-Fac
Products'), or reduce Commercial Market Value by up to 90 percent of the
Company's losses on Pro-Fac Products. The Pro-Fac Marketing and Facilitation
Agreement provides that additional patronage income may not exceed 50 percent of
the Company's entire pretax income and that no more than 50 percent of the
Company's entire pretax loss will be charged to Pro-Fac, through a reduction of
Commercial Market Value, during the term of the Notes. Additional patronage
income is paid to Pro-Fac for services provided to the Company, including the
provision of a long term, stable crop supply, favorable payment terms for crops
and access to cooperative bank financing and the sharing of risks in losses of
operations of the business.
In fiscal 1995 the Company paid Pro-Fac additional patronage income of $9.6
million.
The Company has historically paid Pro-Fac additional patronage income based on a
portion of the Company's pretax income. Under the predecessor agreements to the
Pro-Fac Marketing and Facilitation Agreement, additional patronage income has
generally been equal to 50 percent of the pretax income of the Company, or in
loss years amounts due to Pro-Fac for interest on its loans to the Company have
been reduced by 50 percent of the Company's pretax losses. The Company paid
additional patronage income to Pro-Fac of $16.9 million in fiscal 1994 on
account of the Company's earnings for that year. In fiscal 1993, the Company
reduced the amount of interest due to Pro-Fac by $21.8 million based on a 50
percent allocation of a loss at the Company.
Historically, the Company has deducted additional patronage income for income
tax purposes as an ordinary and necessary business expense for accommodations
provided to the Company by Pro-Fac. Under the Pro-Fac Marketing and Facilitation
Agreement, Pro-Fac will continue to provide many of the same services as it has
in the past. Although the Company is a wholly-owned subsidiary of Pro-Fac, the
payment of additional patronage income will be subject to a similar methodology
to that established at arm's length in the past and will be approved by a
majority of the Disinterested Directors. The Indenture provides that there will
be a Change of Control if, for a period of 120 consecutive days, the number of
Disinterested Directors on the Board of Directors of the Company is less than
the greater of (i) two and (ii) the number of directors of the Company who are
Pro-Fac Directors. The Company's management believes that it will continue to be
able to pay additional patronage income to Pro-Fac and deduct such payments for
federal income tax purposes as ordinary and necessary business expenses.
There can be no assurance that all of such payments will be able to be deducted
in the future.
Additional patronage income received by Pro-Fac is deductible to Pro-Fac for
federal tax purposes only to the extent distributed to its members. Pro-Fac may
make this distribution to its members through a combination of cash and
securities as long as a minimum of 20 percent of the amount is paid in cash as
required by federal tax law. Pro-Fac has historically paid its members between
20 percent and 30 percent of additional patronage income in cash and the
remaining portion in securities. Funds made available by the distribution of
investment certificates to members in lieu of cash have
62
<PAGE>
historically been reinvested by Pro-Fac in the Company. Under the Indenture,
Pro-Fac will be required to reinvest at least 70 percent of the additional
patronage income in the Company.
Under the Pro-Fac Marketing and Facilitation Agreement, the Company will
continue to manage the business and affairs of Pro-Fac and provide all personnel
and systems required for its management, and Pro-Fac will pay the Company a
quarterly fee of $25,000 for these services.
Borrowings by Pro-Fac: The Indenture governing the Notes permits the Company to
make demand loans to Pro-Fac for working capital purposes in amounts not
exceeding $10.0 million at any time outstanding, each such loan to bear interest
at a rate equal to the rate in effect on the date of such loan under the
Seasonal Facility. The loan balance must be reduced to zero for a period of not
less than 15 consecutive days in each fiscal year. Except for the foregoing
provision and except for Pro-Fac's guarantee of the Notes and the New Credit
Agreement, as long as Pro-Fac has the right to borrow under the Pro-Fac
Marketing and Facilitation Agreement, the Indenture does not permit Pro-Fac to
incur any other Indebtedness.
Equity Ownership in CoBank: As part of its historical lending arrangements with
the Bank, which is a cooperative, Pro-Fac made investments in the Bank. Pro-Fac
made these investments through (i) a capital purchase obligation equal to a
percentage, set annually based on the Bank's capital needs, of its interest paid
to the Bank and (ii) a patronage rebate on interest paid by Pro-Fac to the Bank
based on the Bank's earnings, which is paid in cash and capital certificates.
The investments in the Bank are capital certificates that are redeemed by the
Bank, currently beginning six years after issuance in four quarterly
installments. As of June 24, 1995, the amount of Pro-Fac's investment in the
Bank was approximately $22.9 million. Pursuant to its capital purchase
obligation, Pro-Fac increased its investment in the Bank by $1.3 million and
$2.6 million in fiscal 1995 and 1994, respectively. Amounts paid to Pro-Fac on
account of dividends and the redemption of capital certificates in connection
with such investment were $2.3 and $3.1 million in fiscal 1995 and 1994,
respectively. In connection with the Transactions, Pro-Fac contributed its
investment in the Bank to the capital of the Company.
Purchase of Crops From Pro-Fac: Each of the members of Pro-Fac sells crops to
Pro-Fac pursuant to a general marketing agreement between such member and
Pro-Fac, which crops in turn are sold to the Company pursuant to the Pro-Fac
Marketing and Facilitation Agreement. Prior to the Acquisition, these crops were
sold to the Company pursuant to the Integrated Agreement. During fiscal 1995,
the following directors and executive officers of Pro-Fac directly or through
sole proprietorships or corporations, sold crops to Pro-Fac and provided
harvesting, trucking and waste removal services to Curtice-Burns for the
following aggregate amounts:
<TABLE>
<CAPTION>
RELATIONSHIP AGGREGATE AMOUNT PAID
NAME TO PRO-FAC IN FISCAL 1994
-------------------- ------------ ---------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Dale E. Burmeister................................ Director $ 0.1
Robert V. Call, Jr................................ Director 2.1
Glen Lee Chase.................................... Director 0.1
Tommy R. Croner................................... Director and Secretary 0.3
Albert P. Fazio................................... Director and Vice President 0.2
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
RELATIONSHIP AGGREGATE AMOUNT PAID
NAME TO PRO-FAC IN FISCAL 1994
--------------------- ------------ ---------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Bruce R. Fox...................................... Director and President 1.1
Steven D. Koinzan................................. Director and Treasurer 0.2
Kenneth A. Mattingly.............................. Director 0.7
Paul E. Roe....................................... Director 0.5
Allan Mitchell.................................... Director 0.2
</TABLE>
STOCK OPTION PAYMENTS TO MANAGEMENT
In conjunction with the acquisition of the Company, $1.7 million representing
the aggregate payments that were made in connection with the cancellation of
certain outstanding options to purchase shares of Curtice- Burns stock which
were exercisable at a price less than $19.00 per share.
Of the total stock option payments made in conjunction with the acquisition,
following were the payments to those listed in the summary compensation tables:
<TABLE>
<CAPTION>
Name Amount
--------------------- --------
<S> <C>
J. William Petty $340,856
Roy A. Myers $148,348
William D. Rice $154,231
Patrick D. Lindenbach $ 85,545
Dennis M. Mullen $ 17,850
Stephen R. Wright $ 27,746
Thomas A. Collins $ 46,296
</TABLE>
SALE OF NALLEY'S CANADA LTD.
Subsequent to the end of the fiscal year, the Company sold its Nalley's Canada
Ltd. subsidiary to a group of investors led by Mr. Patrick Lindenbach, who is
Chief Executive Officer for the Company's Nalley's Fine Foods Division. The sale
price was approximately $8 million, one-half in cash and one-half in notes. The
effect on ongoing earnings is negligible and appropriate incentives, reporting
relationships, and management reports have been instituted to avoid any problems
or appearance of problems with conflict of interest.
DIRECTORS AND OFFICERS LIABILITY INSURANCE
As authorized by New York law and in accordance with the policy of that state,
the Company has obtained insurance from Chubb Group Insurance insuring the
Company against any obligation it incurs as a result of its indemnification of
its officers and directors, and insuring such officers and directors for
liability against which they may not be indemnified by the Company. This
insurance has a term expiring on August 15, 1996, at an annual cost of
approximately $25,000. As of this date, no sums have been paid to any officers
or directors of the Company under this indemnification insurance contract.
64
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
The Following Appear in ITEM 8 of This Report
<TABLE>
<CAPTION>
ITEM Page
---- ----
<S> <C>
Curtice-Burns Foods, Inc. and Consolidated Subsidiaries:
Report of Independent Accountants....................................................... 31
Management's Responsibility for Financial Statements.................................... 33
Consolidated Financial Statements for the years ended June 24, 1995, June 25,
1994, and June 26, 1993:
Consolidated Statement of Operations and
Retained Earnings.............................................................. 34
Consolidated Balance Sheet........................................................ 35
Consolidated Statement of Cash Flows.............................................. 36
Notes to Consolidated Financial Statements........................................ 37
</TABLE>
(2) The following additional financial data are set forth herein:
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
65
<PAGE>
SCHEDULE VIII
Curtice-Burns Foods, Inc.
Valuation and Qualifying Accounts
For the Three Fiscal Years Ended June 24, 1995
<TABLE>
<CAPTION>
Fiscal 1995
-----------------------------------
Successor* Predecessor Predecessor Predecessor
11/4/94-6/24/95 6/26/94-11/3/94 Fiscal 1994 Fiscal 1993
--------------- --------------- ----------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Balance at beginning of period $683,000 $1,066,000 $ 801,000 $ 1,353,000
Additions charged to expense $ 91,000 $ 292,000 $ 702,000 $ 346,000
Deductions $101,000 $ 427,000 $ 437,000 $ 898,000
Balance at end of period $673,000 $ 931,000 $1,066,000 $ 801,000
Inventory reserve
Balance at beginning of period $ -- $ 379,000 $1,189,000 $ 2,520,000
Net change $144,000 $ 635,000 $ (810,000) $(1,331,000)
Balance at end of period** $144,000 $1,014,000 $ 379,000 $ 1,189,000
</TABLE>
*Valuation accounts were revalued by the acquiring company.
**Difference between FIFO cost and market applicable to canned and frozen fruit
and vegetable inventories.
66
<PAGE>
Schedules other than those listed above are omitted because they are either not
applicable or not required, or the required information is shown in the
financial statements or the notes thereto.
(3)The following exhibits are filed herein or have been previously
filed with the Securities and Exchange Commission:
(b) EXHIBITS:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ---------------------------------------------------------
<S> <C>
3.3** Certificate of Incorporation of Curtice-Burns.
3.4 Bylaws of Curtice-Burns.
10.1** Indenture, dated as of November 3, 1994 (the 'Inden-
ture'), among PFAC, Pro-Fac and IBJ Schroder Bank & Trust
Company ('IBJ'), as Trustee, as amended by First
Supplemental Indenture, dated as of November 3, 1994,
each with respect to Curtice-Burns' 12.25 percent Senior
Subordinated Notes due 2005 (the 'Notes').
10.2** Term Loan, Term Loan Facility and Seasonal Loan
Agreement, dated as of November 3, 1994, among
Springfield Bank for Cooperatives (the 'Bank'),
Curtice-Burns and PFAC.
10.3** Parent Guaranty, dated as of November 3, 1994, by Pro-Fac
in favor of the Bank.
10.4** Parent Security Agreement, dated as of November 3, 1994
between Pro-Fac and the Bank.
10.5** Mortgage, Open End Mortgage, Deed of Trust, Trust Deed,
Deed to Secure Debt, Purchase Money Mortgage, Assignment,
Security Agreement and Financing Statement dated November
3, 1994 among PFAC, Curtice-Burns and the Bank.
10.6** Marketing and Facilitation Agreement, dated as of No-
vember 3, 1994, between Pro-Fac and Curtice-Burns.
10.7** Management Incentive Plan, as amended.
10.8** Supplemental Executive Retirement Plan, as amended.
10.9** Key Executive Severance Plan, as amended.
10.10** Master Salaried Retirement Plan, as amended.
10.11** Non-Qualified Profit Sharing Plan, as amended.
10.12** Excess Benefit Retirement Plan.
10.13* Modification A of Term Loan, Term Loan Facility, and
Seasonal Loan Agreement, dated as of January 26, 1995,
between Curtice-Burns and the Bank.
</TABLE>
67
<PAGE>
(b) EXHIBITS (Continued):
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ---------------------------------------------------------
<S> <C>
10.14* Second Amendment to Non-Qualified Profit Sharing Plan.
10.15 Modifications B-D of Term Loan, Term Loan Facility, and
Seasonal Loan Agreement Between Curtice-Burns and the
Bank.
21.1 List of Subsidiaries.
27 Financial Data Schedule.
</TABLE>
* Incorporated by reference from Registration Statement No. 33-60273.
** Incorporated by reference from Registration Statement No. 33-56517, as
amended.
68
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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. Dated: August 16, 1995
CURTICE-BURNS FOODS, INC.
By /s/ William D. Rice
------------------------------
William D. Rice, Senior Vice
President, Secretary and
Treasurer
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints ROY A. MYERS and WILLIAM D. RICE, and each of them, his
true and lawful attorneys-in-fact and agents, with full power of substitution
and re-substitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments to this Annual Report on Form 10-K and
to file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneysin-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
69
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Roy A. Myers President and 8/16/95
----------------------------- Chief Executive
(ROY A. MYERS) (Principal Executive
Officer)
/s/ William D. Rice Senior Vice President, 8/16/95
----------------------------- Secretary and Treasurer
(WILLIAM D. RICE) (Principal Financial
Officer)
/s/ Robert V. Call, Jr. Chairman of the Board; 8/16/95
----------------------------- Director
(ROBERT V. CALL, JR.)
/s/ Bruce R. Fox Treasurer and Director 8/16/95
-----------------------------
(BRUCE R. FOX)
/s/ Cornelius D. Harrington Director 8/16/95
-----------------------------
(CORNELIUS D. HARRINGTON)
/s/ Steven D. Koinzan Director 8/16/95
-----------------------------
(STEVEN D. KOINZAN)
/s/ William B. McKnight, Jr. Director 8/16/95
-----------------------------
(WILLIAM B. MCKNIGHT, JR.)
/s/ Frank M. Stotz Director 8/16/95
-----------------------------
(FRANK M. STOTZ)
</TABLE>
70
BYLAWS
OF
CURTICE BURNS FOODS, INC.
ARTICLE I
Shareholders
Section 1.1. Annual Meetings. A meeting of shareholders shall be held annually
for the election of directors and the transaction of other business on such date
as may be designated by the Board of Directors from time to time.
Section 1.2. Special Meetings. Special meetings of shareholders may be called at
any time by the Board of Directors, the Chairman of the Board, if any, or the
President.
Section 1.3. Place of Meetings. Meetings of shareholders shall be held at such
place, within or without the State of New York, as may be fixed by the Board of
Directors. If no place is fixed, such meetings shall be held at the principal
office of the Corporation in the State of New York.
Section 1.4 Notice of Meetings. Written notice of each meeting of shareholders
shall be given stating the place, date and hour of the meeting. Notice of a
special meeting of shareholders shall state the purpose or purposes for which
the meeting is called and shall indicate that it is being issued by or at the
direction of the person or persons calling the meeting.
If, at any meeting of shareholders, action is proposed to be taken which would,
if taken, entitle shareholders fulfilling the requirements of Section 623 of the
New York Business Corporation Law to receive payment for their shares, the
notice of such meeting shall include a statement of that purpose and to that
effect and shall be accompanied by a copy of Section 623 or an outline of its
material terms.
A copy of the notice of each meeting of shareholders shall be given, personally
or by first class mail, not fewer than ten nor more than fifty days before the
date of the meeting, provided, however, that a copy of such notice may be given
by third class mail not fewer than twenty-four nor more than fifty days before
the date of the meeting, to each shareholder entitled to vote at such meeting.
If mailed, such notice shall be deemed given when deposited in the United States
mail, with postage thereon prepaid, directed to the shareholder at his address
as it appears on the record of shareholders, or, if he shall have filed with the
Secretary of the Corporation a written request that notices to him
<PAGE>
be mailed to some other address, then directed to him at such other address.
When a meeting of shareholders is adjourned to another time or place, it shall
not be necessary to give any notice of the adjourned meeting if the time and
place to which the meeting is adjourned are announced at the meeting at which
the adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
However, if after the adjournment the Board of Directors fixes a new record date
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each shareholder of record on the new record date entitled to notice under the
preceding paragraphs of this Section 1.4.
Section 1.5. Waiver of Notice. Notice of meeting need not be given to any
shareholder who submits a signed waiver of notice, in person or by proxy,
whether before or after the meeting. The attendance of any shareholder at a
meeting, in person or by proxy, without protesting prior to the conclusion of
the meeting the lack of notice of such meeting, shall constitute a waiver of
notice by him.
Section 1.6. Inspectors. Voting at meetings of shareholders need not be
conducted by inspectors unless a shareholder present in person or by proxy and
entitled to vote at such meeting so requests. The Board of Directors, in advance
of any shareholders' meeting, may appoint one or more inspectors to act at the
meeting or any adjournment thereof. If inspectors are not so appointed, the
person presiding at a shareholders' meeting may, and on the request of any
shareholder entitled to vote thereat shall, appoint one or more inspectors. In
case any person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by the
person presiding thereat. Each inspector, before entering upon the discharge of
his duties, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best of
his ability.
The inspectors shall determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all shareholders. On request of the person presiding at
the meeting or any shareholder entitled to vote thereat, the inspectors shall
make a report in writing of any challenge, question or matter determined by them
and execute a certificate of any fact found by them.
2
<PAGE>
Section 1.7. List of Shareholders at Meetings. A list of shareholders as of the
record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders upon the
request thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors of election, or person presiding thereat,
shall require such list of shareholders to be produced as evidence of the right
of the persons challenged to vote at such meeting, and all persons who appear
from such list to be shareholders entitled to vote thereat may vote at such
meeting.
Section 1.8. Qualification of Voters. Every shareholder of record shall be
entitled at every meeting of shareholders to one vote for every share standing
in his name on the record of shareholders, unless otherwise provided in the
certificate of incorporation or by law. If the certificate of incorporation or
law provides for more or less than one vote for any share on any matter, every
reference in these by-laws to a majority or other proportion of shares shall be
construed to refer to such majority or other proportion of the votes of such
shares.
Treasury shares as of the record date and shares held as of the record date by
another domestic or foreign corporation of any type or kind, if a majority of
the shares entitled to vote in the election of directors of such other
corporation is held as of the record date by the Corporation, shall not be
shares entitled to vote or to be counted in determining the total number of
outstanding shares.
Shares held by an administrator, executor, guardian, conservator, committee or
other fiduciary, except a trustee, may be voted by him, either in person or by
proxy, without transfer of such shares into his name. Shares held by a trustee
may be voted by him, either in person or by proxy, only after the shares have
been transferred into his name as trustee or into the name of his nominee.
Shares held by or under the control of a receiver may be voted by him without
the transfer thereof into his name if authority so to do is contained in an
order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
until the shares have been transferred into the name of the pledgee, or a
nominee of the pledgee.
Redeemable shares which have been called for redemption shall not be deemed to
be outstanding shares for the purpose of voting or determining the total number
of shares entitled to vote on any matter on and after the date on which written
notice of redemption has been sent to holders thereof and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
3
<PAGE>
irrevocable instruction and authority to pay the redemption price to the holders
of the shares upon surrender of certificates therefor.
Shares standing in the name of another domestic or foreign corporation of any
type or kind may be voted by such officer, agent or proxy as the by-laws of such
corporation may provide, or, in the absence of such provision, as the board of
directors of such corporation may determine.
If shares are registered on the record of shareholders of the Corporation in the
name of two or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety or otherwise, or if
two or more persons have the same fiduciary relationship respecting the same
shares, unless the Secretary of the Corporation is given written notice to the
contrary and is furnished with a copy of the instrument or order appointment
them or creating the relationship wherein it is so provided, their acts with
respect to voting shall have the following effect:
(1) If only one votes, the vote shall be accepted by the Corporation as the vote
of all;
(2) If more than one vote, the act of the majority so voting shall be accepted
by the Corporation as the vote of all;
(3) If more than one vote, but the vote is equally on any particular matter, the
vote shall be accepted by the Corporation as a proportionate vote of the shares;
unless the Corporation has evidence, on the record of shareholders or otherwise,
that the shares are held in a fiduciary capacity. Noting in this paragraph shall
alter any requirement that the exercise of fiduciary powers be by act of a
majority, contained in any law applicable to such exercise of powers (including
section 10-10.7 of the Estates, Powers and Trusts Law of the State of New York);
(4) When shares as to which the vote is equally divided are registered on the
record of shareholders of the Corporation in the name of, or have passed by
operation of law or by virtue of any deed or trust or other instrument to two or
more fiduciaries, any court having jurisdiction of their accounts, upon petition
by any of such fiduciaries or by any party in interest, may direct the voting of
such shares for the best interest of the beneficiaries. This subparagraph shall
not apply in any case where the instrument or order of the court appointing
fiduciaries shall otherwise direct how such shares shall be voted; and
(5) If the instrument or order furnished to the Secretary of the Corporation
shows that a tenancy is held in unequal interests, a majority or equal division
for the purposes of this paragraph shall be a majority or equal division in
interest.
4
<PAGE>
Section 1.9. Quorum of Shareholders. The holders of a majority of the shares
entitled to vote thereat shall constitute a quorum at a meeting of shareholders
for the transaction of any business, provided that when a specified item of
business is required to be voted on by a class or series, voting as a class, the
holders of a majority of the shares of such class or series shall constitute a
quorum for the transaction of such specified item of business. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any shareholders.
The shareholders present may adjourn the meeting despite the absence of a
quorum.
Section 1.10 Proxies. Every shareholder entitled to vote at a meeting of
shareholders or to express consent or dissent without a meeting may authorize
another person or persons to act for him by proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact. No proxy
shall be valid after the expiration of eleven months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided by law.
The authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless, before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or any Assistant
Secretary.
A shareholder shall not sell his vote or issue a proxy to vote to any person for
any sum of money or anything of value except as permitted by law.
Section 1.11. Vote or Consent of Shareholders. Directors shall, except as
otherwise required by law or by the certificate of incorporation, be elected by
a plurality of the votes cast at a meeting of shareholders by the holders of
shares entitled to vote in the election.
Whenever any corporate action, other than the election of directors, is to be
taken by vote of the shareholders, it shall, except as otherwise required by law
or by the certificate of incorporation, be authorized by a majority of the votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
Section 1.12. Fixing Record Date. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any
5
<PAGE>
dividend or the allotment of any rights, or for the purpose of any other action,
the Board of Directors may fix, in advance, a date as the record date for any
such determination of shareholders. Such date shall not be more than fifty nor
less than ten days before the date of such meeting, nor more than fifty days
prior to any other action.
If no record date is fixed: (1) the record date for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if no notice is given, the day on which the meeting is held; and (2)
the record date for determining shareholders for any other purpose shall be at
the close of business on the day on which the resolution of the Board of
Directors relating thereto is adopted. When a determination of shareholders of
record entitled to notice of or to vote at any meeting of shareholders has been
made as provided in this Section 1.12, such determination shall apply to any
adjournment thereof, unless the Board of Directors fixes a new record date for
the adjourned meeting.
ARTICLE II
Board of Directors
Section 2.1. Power of Board and Qualification of Directors. The business of the
Corporation shall be managed under the direction of the Board of Directors. Each
director shall be at least eighteen years of age.
Section 2.2. Number of Directors. The Board of Directors shall consist of such
number of members, not less than three, as may be fixed from time to time by
vote of a majority of the entire Board; provided, however, that if all the
shares of the Corporation are owned beneficially and of record by less than
three shareholders, the number of directors may be fixed by such a vote at less
than three, but not less than the number of shareholders.
Section 2.3. Election and Term of Directors. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting except as otherwise permitted by law and until their successors have
been elected and qualified.
Section 2.4. Quorum of Directors. Unless a greater proportion is required by the
certificate of incorporation, a majority of the entire Board of Directors shall
constitute a quorum for the transaction of business or of any specified item of
business. Except where otherwise provided by law or in the certificate of
incorporation or these by-laws, the vote of a majority of the directors present
at a meeting at the time of such vote, if a quorum is then present, shall be the
act of the Board.
6
<PAGE>
Section 2.5. Board or Committee Action. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action required or permitted
to be taken by the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents thereto by the members of the Board or the committee
shall be filed with the minutes of the proceedings of the Board or the
committee.
Any one or more members of the Board of Directors or committee thereof may
participate in a meeting of the Board or such committee by means of a conference
telephone or similar communications equipment allowing all persons participating
in the meeting to hear each other at the same time, and participation by such
means shall constitute presence in person at such meeting.
Section 2.6. Regular Meetings. Regular meetings of the Board of Directors may be
held at such places, within or without the State of New York, and at such times
as the Board may from time to time determine, and if so determined notice
thereof need not be given.
Section 2.7. Special Meetings. Special meetings of the Board of Directors may be
held at any time or place, within or without the State of New York, whenever
called by the Chairman of the Board, if any, by the Vice Chairman of the Board,
if any, by the President or by any two directors. Reasonable notice thereof
shall be given by the person or persons calling the meeting.
Section 2.8. Resignation. Any director of the Corporation may resign at any time
by giving written notice to the Board of Directors or to the Chairman of the
Board or the Vice-Chairman of the Board, if any, or the President or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective.
Section 2.9. Removal of Directors. Any one or more of the directors may be
removed for cause by action of the Board of Directors. Any or all of the
directors may be removed with or without cause by vote of the shareholders.
Section 2.10. Newly Created Directorships and Vacancies. Newly created
directorships resulting from an increase in the number of directors and
vacancies occurring in the Board of Directors for any reason except the removal
of directors without cause may be filled by vote of the Board. If the number of
directors then in office is less than a quorum, such newly created directorships
and vacancies may be filled by vote of a majority of the directors then in
office. Vacancies occurring by reason of the removal of directors without cause
by the shareholders shall be filled by vote of the
7
<PAGE>
shareholders. A director elected to fill a vacancy, unless elected by the
shareholders, shall hold office until the next meeting of shareholders at which
the election of directors is in the regular order of business, and until his
successor has been elected and qualified.
Section 2.11. Organization. Meetings of the Board of Directors shall be presided
over by the Chairman of the Board, if any, or in the absence of the Chairman of
the Board by the Vice Chairman of the Board, if any, or in the absence of the
Vice Chairman of the Board by the President, or in their absence by a chairman
chosen at the meeting. The Secretary, or in the absence of the Secretary an
Assistant Secretary, shall act as secretary of the meeting, but in the absence
of the Secretary and any Assistant Secretary the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.12. Compensation of Directors. The Board of Directors shall have
authority to fix the compensation of directors for services in any capacity.
ARTICLE III
Executive and Other Committees
Section 3.1. Executive and Other Committees of Directors. The Board of
Directors, by resolution adopted by a majority of the entire Board, may
designate from among its members an executive committee and other committees,
each consisting of three or more directors, and each of which, to the extent
provided in the resolution, shall have all the authority of the Board, except
that no such committee shall have authority as to the following matters:
(1) The submission to shareholders of any action that needs shareholders'
approval;
(2) The appointment of any person to a vacancy in the Board or in any committee
thereof;
(3) The fixing of compensation of the directors for serving on the Board or on
any committee thereof;
(4) The amendment or repeal of the by-laws, or the adoption of new by-laws;
(5) The amendment or repeal of any resolution of the Board which, by its terms,
shall not be so amendable or repealable; or
(6) The removal or indemnification of directors.
8
<PAGE>
The Board of Directors may designate one or more directors as alternate members
of any such committee, who may replace any absent member or members at any
meeting of such committee.
Unless the Board of Directors otherwise provides, each committee designated by
the Board may adopt, amend and repeal rules for the conduct of its business. In
the absence of a provision by the Board of Directors or a provision in the rules
of such committee to the contrary, a majority of the entire authorized number of
members of such committee shall constitute a quorum for the transaction of
business, the vote of a majority of the members present at a meeting at the time
of such vote if a quorum is then present or the unanimous written consent of all
members thereof shall be the act of such committee, and in other respects each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article II of these by-laws. Each
committee shall keep regular minutes of its proceedings and report the same to
the Board.
Each such committee shall serve at the pleasure of the Board of Directors. Any
member of a committee may be removed at any time, with or without cause, by the
affirmative vote of a majority of the entire Board.
ARTICLE IV
Officers
Section 4.1. Officers. The officers of the Corporation shall be chosen by the
Board. As soon as practicable after the annual meeting of shareholders in each
year, the Board of Directors shall elect or appoint a President, a Secretary and
a Treasurer, and it may, if it so determines, elect or appoint from among its
members a Chairman of the Board and one or more Vice-Chairmen of the Board. The
Board may also elect or appoint one or more Vice-Presidents, Assistant
Vice-Presidents, Assistant Secretaries and Assistant Treasurers and may give any
of them such further designations or alternate titles as it considers desirable.
Any two or more offices may be held by the same person, except the offices of
President and Secretary.
Section 4.2. Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided in the resolution of the Board of Directors electing or
appointing any officer, each officer shall hold office until the meeting of the
Board of Directors following the next succeeding annual meeting of shareholders
and until his successor is elected and qualified or until his earlier
resignation or removal. Any officer may resign at any time upon written notice
to the Board or to the Chairman of the Board, if any, or the President or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless
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<PAGE>
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. The Board may remove any officer with or without cause at
any time. Any such removal shall be without prejudice to the contractual rights
of the officer, if any, with the Corporation, but the election or appointment of
an officer shall not of itself create contract rights. Any vacancy occurring in
any office of the Corporation by death, resignation, removal or otherwise may be
filled for the unexpired portion of the term by the Board at any regular or
special meeting.
Section 4.3. Powers and Duties. The officers of the Corporation shall have such
powers and perform such duties in the management of the Corporation as shall be
stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board.
Section 4.4. Chairman of the Board. The Chairman of the Board, if any, shall
preside at all meetings of the Board of Directors and of the shareholders at
which he shall be present. He shall have and may exercise such powers and
perform such other duties as are assigned to him by the Board from time to time
or as may be provided by law.
Section 4.5. Vice-Chairman of the Board. In the absence of the Chairman of the
Board, the Vice-Chairman of the Board or Vice- Chairmen of the Board, if any,
shall preside at all meetings of the Board of Directors and of the shareholders
at which he or they shall be present. If there be more than one Vice-Chairman of
the Board, the Board may determine the order in which the Vice-Chairmen of the
Board shall so preside. The Vice-Chairman of the Board or Vice-Chairmen of the
Board shall have and may exercise such powers and perform such other duties as
are assigned to him or them by the Board from time to time or as may be provided
by law.
Section 4.6. President. In the absence of the Chairman of the Board and all
Vice-Chairmen of the Board, if any, the President shall preside at all meetings
of the Board of Directors and of the shareholders at which he shall be present;
he shall be the chief executive officer and shall have general charge and
supervision of the business of the Corporation; and, in general, he shall
perform all duties incident to the office of president of a corporation, and in
addition shall have and may exercise such other powers and perform such other
duties as are assigned to him by the Board from time to time or as may be
provided by law.
Section 4.7. Vice-Presidents. The Vice-President or Vice- Presidents, at the
request of the President or in his absence or during his inability to act, shall
perform the duties of the President, and when so acting shall have the powers of
the President. If there be more than one Vice-President, the Board of
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Directors may determine which one or more of the Vice-Presidents shall perform
any of such duties; or if such determination is not made by the Board, the
President may make such determination; otherwise any of the Vice-Presidents may
perform any of such duties. The Vice-President or Vice-Presidents shall have and
may exercise such other powers and perform such other duties as are assigned to
him or them by the Board or the President from time to time or as may be
provided by law.
Section 4.8. Secretary. The Secretary shall have the duty to record all the
proceedings of the meetings of the shareholders, Board of Directors and any
committee in a book to be kept for that purpose; he shall see that all notices
are duly given in accordance with the provision of these by-laws or as required
by law; he shall be custodian of the records of the Corporation; he may affix
the corporate seal to any document the execution of which, on behalf of the
Corporation, is duly authorized, and when so affixed may attest the same; and,
in general, he shall perform all duties incident to the office of secretary of a
corporation, and shall have and may exercise such other powers and shall perform
such other duties as are assigned to him by the Board or the President from time
to time or as may be provided by law.
Section 4.9. Treasurer. The Treasurer shall have charge of and be responsible
for all funds, securities, receipts and disbursements of the Corporation, and
shall deposit or cause to be deposited, in the name of the Corporation, all
moneys or other valuable effects in such banks, trust companies or other
depositories as shall, from time to time, be selected by or under authority of
the Board of Directors; if required by the Board, he shall give a bond for the
faithful discharge of his duties, with such surety or sureties as the Board may
determine; he shall keep or cause to be kept full and accurate records of all
receipts and disbursements in books of the Corporation and shall render to the
President and to the Board, whenever requested, an account of the financial
condition of the Corporation; and, in general, he shall perform all the duties
incident to the office of treasurer of a corporation, and shall have any may
exercise such other powers and shall perform such other duties as are assigned
to him by the Board or the President from time to time or as may be provided by
law.
Section 4.10. Other Officers. The other officers of the Corporation, if any,
shall have such authority and perform such duties in the management of the
Corporation as shall be stated in a resolution of the Board of Directors and
which are not inconsistent with these by-laws, and, to the extent not so stated,
as generally pertain to their respective offices, subject to the control of the
Board.
Section 4.11. Fidelity Bonds. If required by the Board, any officer shall give
the Corporation a bond in a sum and with one or more sureties satisfactory to
the Board, for the faithful
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performance of the duties of his office, and for the restoration to the
Corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the Corporation.
ARTICLE V
Indemnification
Section 5.1. Indemnification. The Corporation shall indemnify any person made,
or threatened to be made, a party to any action or proceeding, whether civil or
criminal, by reason of the fact that he, his testator or intestate is or was a
director, officer or employee of the Corporation or serves or served any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise in any capacity at the request of the Corporation against judgments,
fines, amounts paid in settlement and reasonable expenses, including attorneys'
fees actually and necessarily incurred as a result of such action or proceeding
or any appeal thereon to the full extent permitted by the New York Business
Corporation Law. Expenses incurred in defending a civil or criminal action or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action or proceeding to the extent, if any, authorized by the Board in
accordance with the provisions of said Business Corporation Law, upon receipt of
an undertaking by or on behalf of the director, officer or employee to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Corporation as authorized in these by-laws or to repay such
amount to the extent the expenses so advanced by the Corporation or allowed by a
court exceed the indemnification to which he is entitled. The Corporation shall
provide such other indemnification to the directors and officers of the
Corporation as may, from time to time, be provided pursuant to resolutions duly
adopted by the Board of Directors of the Corporation.
ARTICLE VI
Forms of Certificates and Loss and Transfer of Shares
Section 6.1. Forms of Share Certificates. The shares of the Corporation shall be
represented by certificates or shall be uncertified shares. Certificates shall
be signed by the Chairman or a Vice-Chairman of the Board or the President or a
Vice- President and the Secretary or an Assistant Secretary or the Treasurer or
an Assistant Treasurer, and may be sealed with the seal of the Corporation or a
facsimile thereof. The signatures of the officers upon a certificate may be
facsimiles if the certificate is countersigned by a transfer agent or registered
by
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a registrar other than the Corporation itself or its employee or if the shares
are listed on a registered national security exchange. In case any officer who
has signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if he were such officer at the
date of issue.
Each certificate representing shares issued by the Corporation which is
authorized to issue shares of more than one class shall set forth upon the face
or back of the certificate, or shall state that the Corporation will furnish to
any shareholder upon request and without charge, a full statement of the
designation, relative rights, preferences and limitations of the shares of each
class authorized to be issued and the designation, relative rights, preferences
and limitations of each series of any class of preferred shares authorized to be
issued in series so far as the same have been fixed and the authority of the
Board of Directors to designate and fix the relative rights, preferences and
limitations of other series.
Each certificate representing shares shall state upon the fact thereof:
(1) That the Corporation is formed under the laws of the State of New York;
(2) The name of the person or persons to whom issued; and
(3) The number and class of shares, and the designation of the series, if any,
which such certificate represents.
Unless otherwise provided by the articles of incorporation or these by-laws, the
Board of Directors of the Corporation may provide by resolution that some or all
of any or all classes and series of its shares shall be uncertificated shares,
provided that such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation. Within a
reasonable time after the issuance or transfer of uncertificated shares, the
Corporation shall send to the registered owner thereof a written notice
containing the information required to be set forth or stated on certificates
pursuant to the two immediately preceding paragraphs of this section. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of uncertificated shares and the rights and obligations of the holders of
certificates representing shares of the same class and series shall be
identical.
Section 6.2. Lost, Stolen or Destroyed Share Certificate. Any person claiming a
certificate for shares to be lost, stolen or destroyed shall furnish proof of
that fact satisfactory to an officer of the Corporation, and shall give the
Corporation a bond
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of indemnity in form and amount and with one or more sureties satisfactory to
such officer, whereupon a new certificate may be issued of the same tenor and
for the same number of shares as the one alleged to be lost, stolen or
destroyed. The Board may at any time authorize the issuance of a new certificate
to replace a certificate alleged to be lost, stolen or destroyed upon such other
lawful terms and conditions as the Board shall prescribe.
Section 6.3. Transfers of Shares. Transfer of shares shall be made on the books
of the Corporation only by the person named in the certificate or by his
attorney, lawfully constituted in writing, and upon surrender of the certificate
therefor, together with such evidence of the payment of transfer taxes and
compliance with other provisions of law as the Corporation or its transfer agent
may require.
Section 6.4. Registered Shareholders. The Corporation shall be entitled to treat
the holder of record of any share or shares of stock as the holder in fact
thereof, and accordingly shall not be bound to recognize any equitable or other
claim to or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, save as expressly provided by
the laws of New York.
ARTICLE VII
Other Matters
Section 7.1. Fiscal Year. The fiscal year of the Corporation shall be fixed by
the Board of Directors.
Section 7.2. Corporate Seal. The Board of Directors may adopt a corporate seal,
alter such seal at pleasure, and authorize it to be used by causing it or a
facsimile to be affixed or impressed or reproduced in any other manner.
Section 7.3. When Notice or Lapse of Time Unnecessary. Whenever for any reason
the Corporation or the Board of Directors or any committee thereof is authorized
to take any action after notice to any person or persons or after the lapse of a
prescribed period of time, such action may be taken without notice and without
the lapse of such period of time if at any time before or after such action is
completed the person or persons entitled to such notice or entitled to
participate in the action to be taken or, in the case of a shareholder, his
attorney-in-fact, submit a signed waiver of notice of such requirements.
Section 7.4. Books to be Kept. The Corporation shall keep (a) correct and
complete books and records of account, (b) minutes of the proceedings of the
shareholders, Board of Directors and committees thereof, if any, and (c) a
current list of the directors
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and officers and their residence addresses; and the Corporation shall also keep
at its principal office in the State of New York or at the office of its
transfer agent or registrar in the State of New York, if any, a record
containing the names and addresses of all shareholders, the number and class of
shares held by each and the dates when they respectively became the owners of
record thereof. Any of the foregoing books, minutes or records may be in written
form or in any other form capable of being converted into written form within a
reasonable time.
Section 7.5. Interest of Directors and Officers in Transactions. In the absence
of fraud, no contract or other transaction between the Corporation and one or
more of its directors, or between the Corporation and any other corporation,
firm, association or other entity in which one or more of its directors are
directors or officers, or have a substantial financial interest, shall be either
void or voidable, for this reason alone or by reason alone that such director or
directors are present at the meeting of the Board, or of a committee thereof,
which approves such contract or transaction, or that their votes are counted for
such purpose:
(1) If the material facts as to such director's interest in such contract or
transaction and as to any such common directorship, officership or financial
interest are disclosed in good faith or known to the Board of Directors or a
committee thereof, and the Board or committee approves such contract or
transaction by a vote sufficient for such purpose without counting the vote of
such interested director or, if the votes of the disinterested directors are
insufficient to constitute an act of the Board under Section 2.4 of these
by-laws, by unanimous vote of the disinterested directors; or
(2) If the material facts as to such director's interest in such contract or
transaction and as to any such common directorship, officership or financial
interest are disclosed in good faith or known to the shareholders entitled to
vote thereon, and such contract or transaction is approved by vote of such
shareholders.
If such good faith disclosure of material facts as to the director's interest in
the contract or transaction and as to such common directorship, officership or
financial interest is made to the directors or shareholders, or known to the
Board of Directors or the committee or shareholders approving such contract or
transaction, as provided above, the contract or transaction may not be avoided
by the Corporation for the reasons set forth above.
If there was no such disclosure or knowledge, or if the vote of such interested
director was necessary for the approval of such contract or transaction at a
meeting of the Board or committee at which it was approved, the Corporation may
avoid the contract or transaction unless the party or parties thereto shall
establish affirmatively that the contract or transaction was fair and
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<PAGE>
reasonable as to the Corporation at the time it was approved by the Board, a
committee thereof or the shareholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board or of a committee which approves such contract
or transaction.
Notwithstanding the foregoing, no loan, except advances in connection with
indemnification, shall be made by the Corporation to any director unless it is
authorized by vote of the shareholders. For this purpose, shares of the director
who would be the borrower shall not be shares entitled to vote.
Section 7.6. Powers of Execution.
(a) All checks and other demands for money and notes and other instruments for
the payment of money shall be signed on behalf of the Corporation by such
officer or officers or by such other person or persons as the Board may
designate from time to time.
(b) All contracts, deeds and other instruments to which the seal of the
Corporation is affixed shall be signed on behalf of the Corporation by the
Chairman of the Board, by the Vice Chairman of the Board, by the President, by
any Vice President, or by such other person or persons as the Board may
designate from time to time, and shall be attested by the Secretary or an
Assistant Secretary.
(c) All other contracts, deeds and instruments shall be signed on behalf of the
Corporation by the Chairman of the Board, by the Vice Chairman of the Board, by
the President, by any Vice President, or by such other person or persons as the
Board or the President may designate from time to time.
(d) All shares of stock owned by the Corporation in other corporations shall be
voted on behalf of the Corporation by the President or by such other person or
persons as the Board may designate from time to time.
Section 7.7. Notices. Whenever, under the provisions of these by-laws, notice is
required to be given to any director or shareholder, such notice may be given in
writing (a) in person, (b) by mail, by depositing the same in the United States
mail, postage prepaid, addressed to such director or shareholder at such address
as appears on the records of the Corporation (or, in the case of any
shareholder, at such other address as he may have specified in a written request
filed with the Secretary), and such notice shall be deemed to be given on the
day it is so mailed.
Section 7.8. Amendment of Bylaws. Bylaws of the Corporation may be adopted,
amended or repealed by vote of the holders of the shares at any time entitled to
vote in the election of any
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directors. Bylaws may also be adopted, amended or repealed by the Board of
Directors by the vote of a majority of the directors present at a meeting of the
Board at which a quorum is present, but any by-law adopted by the Board may be
amended or repealed by the shareholders entitled to vote thereon as hereinabove
provided.
If any by-law regulating an impending election of directors is adopted, amended
or repealed by the Board of Directors, there shall be set forth in the notice of
the next meeting of shareholders for the election of directors the by-law so
adopted, amended or repealed, together with a concise statement of the changes
made.
ARTICLE VIII
Operation as a Cooperative
Section 8.1. Effective Date. Effective June 25, 1995, the Corporation shall, for
federal tax purposes, operate on a cooperative basis in accordance with
Subchapter T of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as
amended.
Section 8.2. Members. There shall be one class of members of this cooperative
Corporation, consisting of the holders of its voting common stock. Those
eligible for membership shall consist of producers of agricultural products
marketed by this cooperative Corporation and other cooperatives having such
producers as their members. All members of this cooperative Corporation shall
constitute patrons for purposes of its cooperative operations.
Section 8.3. Voting Rights. Each member of this cooperative Corporation shall be
entitled to cast one vote on any corporate action which is taken by membership
vote, regardless of the number of shares of the stock of the Corporation held by
such member.
Section 8.4. Membership Nontransferable. The voting common stock of this
cooperative Corporation shall not be transferable or salable to any person other
than the Corporation on such terms and conditions as its Board of Directors
imposes.
Section 8.5. Business with Non-Members.
(a) The value of business which this cooperative Corporation does with
non-members in any fiscal year shall not be as great as the value of business it
does with members during that year.
(b) This cooperative Corporation may extend the benefits of its programs to
non-members which are producers of the agricultural products which it markets by
granting such producers the status of non-member patrons. Such status can be
conferred by a vote of a majority of the entire Board of Directors at either a
regular or special meeting and can be revoked in the same manner when the best
17
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interests of this cooperative Corporation will be served thereby. Non-member
patrons may be required to pay assessments and must observe such other terms and
conditions as may be determined by the Board. In the event of termination or
withdrawal of a non-member patron, the Board shall cause this cooperative
Corporation to pay any obligations due such non-member patron in accordance with
policies established by the Board. Termination or withdrawal shall not, however,
relieve such non-member patron from its accrued financial obligations to this
cooperative Corporation, except as otherwise determined by the Board.
(c) This cooperative Corporation may conduct business with non- members without
conferring the status of patron upon them. The Board of Directors shall
establish the terms and conditions of such activity. Such business may be
authorized if it is deemed that such activity can be construed to be in the best
interest of the members and is consistent with the Certificate of Incorporation,
these Bylaws, any rules and policies of the Board, and all applicable laws.
Section 8.6. Operation at Cost and Capital Contributions of Patrons. The
operations of this cooperative Corporation shall be conducted so that its
patrons will through their patronage furnish capital for the Corporation. To
assure that this cooperative Corporation operates on a service-at-cost basis,
this Corporation is obligated annually to account on a patronage basis to its
patrons for all amounts received from the furnishing of services in excess of
operating expenses properly chargeable against the services furnished.
Section 8.7. Patronage Proceeds. The patronage proceeds of this cooperative
Corporation will be determined by the Board of Directors in accordance with
Subchapter T of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as
amended, and consistently applied generally accepted accounting principles.
Section 8.8. Payment, Allocation and Retention of Patronage Proceeds.
(a) Without any further action on the part of any officer or the Board of
Directors, this cooperative Corporation shall be absolutely liable for the
payment or allocation to each patron of its pro rata share of the patronage
proceeds of the Corporation. Such payment or allocation shall be accomplished
annually within 8 1/2 months after the close of each fiscal year of this
cooperative Corporation. Such payment or allocation shall be in cash, in
qualified written notices of allocation or in nonqualified written notices of
allocation (as defined in Subchapter T of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended), as the Board of Directors shall
determine each year. If payment is made by qualified written notices of
allocation, at least 20% of the total patronage dividend shall be paid in cash.
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(b) Upon such terms and conditions and in such amounts as are deemed advisable
in the discretion of the Board of Directors, a portion of the patronage proceeds
may be retained in this cooperative Corporation for use as working capital or
for such other purposes as may be determined by the Board. Such portion of the
patronage proceeds so retained shall be allocated among the patrons entitled
thereto; the balance of the patronage proceeds not so retained shall be paid in
cash.
Section 8.9. Taxable Income of Patrons. Each producer which hereafter applies
for and is accepted for patron status in this cooperative Corporation and each
patron of this cooperative Corporation on the effective date set forth in
Section 8.1 above which continues as a patron after such date shall, by such act
alone, consent that any distributions with respect to its patronage occurring
after said date which are made in qualified written notices of allocation will
be taken into account by it at their stated dollar amounts in the manner
provided in Subchapter T of Chapter 1 of Subtitle A of the Internal Revenue Code
of 1986, as amended, in the taxable year(s) in which such qualified written
notices of allocation are received by it from the Corporation.
Section 8.10. Non-Patronage Earnings. Income derived from investments and from
business activity with non-patrons shall be utilized in the operation of this
cooperative Corporation in such manner as may be determined from time to time by
the Board of Directors. Subject to the provisions of the Certificate of
Incorporation, these Bylaws, and applicable law, non-patronage dividends may be
declared and paid on the stock of this Corporation in such amounts and at such
times as the Board may determine.
Section 8.11. Handling of Losses. Any losses which may be incurred by this
cooperative Corporation shall be treated in such manner as may be determined by
the Board of Directors in its discretion, taking into account the tax
consequences of such losses.
Section 8.12. Dissolution. The procedure for dissolution of this cooperative
Corporation shall be to convert all assets into cash and then allocate the cash
in the following order or priority:
(a) To pay the necessary costs of dissolution.
(b) To pay any remaining debts and obligations of this cooperative Corporation.
(c) To pay all outstanding written notices of allocation on a pro rata basis,
without priority.
(d) To redeem any outstanding capital stock of the Corporation which has a par
value at its par value.
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(e) To distribute any remaining funds to the current and former patrons of this
cooperative Corporation in proportion to their respective total cumulative
patronage business with it on and after the effective date specified in Section
8.1 above.
Section 8.13. Conflicts. In the event that any provision of this Article VIII is
inconsistent with any other provision of these Bylaws, the terms and conditions
of this Article shall control the operations of this cooperative Corporation on
and after the effective date specified in Section 8.1 above.
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EXHIBIT 10.15
Modification B
CoBANK, ACB
LOAN AGREEMENT NO. T-6184-B,
T-6186-B, S-6183-B, and S-6181-B
July 19, 1995
CURTICE-BURNS FOODS, INC.
--------------------------------------------------------------------
MODIFICATION OF
TERM LOAN, TERM LOAN FACILITY AND SEASONAL LOAN AGREEMENT
IT IS AGREED, That the Term Loan, Term Loan Facility and Seasonal Loan Agreement
dated as of November 3, 1994, entered into between Curtice-Burns Foods, Inc.
(successor to merger between PF Acquisition Corp. and Curtice-Burns Foods, Inc.)
('Borrower') and Springfield Bank for Cooperatives, now known as CoBank, ACB
('Bank'),as amended January 26,1995 is hereby further amended as follows:
(1) Section 2.4 entitled Term Loan Facility is modified by decreasing the Term
Loan Facility to an aggregate principal amount of up to One Hundred Sixteen
Million Two Hundred Ten Thousand Dollars ($116,210,000).
(2) Section 2.7 entitled Seasonal Loan Facility is modified by decreasing the
Seasonal Loans to an aggregate principal amount not to exceed at any time
outstanding the lesser of (a) Eighty-Three Million Three Hundred Thousand
Dollars ($83,300,000) or (b) the Borrowing Base (the 'Seasonal Loan
Commitment').
(3) Section 3.7 entitled L/C Limit is modified by increasing the L/C Limit
outstanding at any time to Thirteen Million Seven Hundred Thousand Dollars
($13,700,000).
The Borrower agrees to execute such additional documents and to take such other
action as may be reasonably requested by the Bank to give effect to this
Modification.
<PAGE>
EXHIBIT 10.15
Modification B
(Continued)
The Term Loan, Term Loan Facility and Seasonal Loan Agreement is hereby amended
accordingly but otherwise shall remain in full force and effect.
CoBANK, ACB (formerly known as Springfield
Bank for Cooperatives)
By /s/ Ralph T. Lawrence
--------------------------
Its VP
ACCEPTED AND AGREED TO: 7/20/95
---------------
(Date)
CURTICE-BURNS FOODS, INC. (successor to merger between PF
Acquisition Corp. and Curtice-Burns Foods, Inc.)
By /s/ Roy A. Myers
--------------------------
Its President
ACKNOWLEDGED AND AGREED TO: 7/20/95
---------------
(Date)
PRO-FAC COOPERATIVE, INC.
By /s/ William D. Rice
--------------------------
Its Asst. Treasurer
ACKNOWLEDGED AND AGREED TO: 7/20/95
---------------
(Date)
CURTICE-BURNS EXPRESS, INC.
CURTICE-BURNS MEAT SNACKS, INC.
FINGER LAKES PACKAGING COMPANY, INC.
HUSMAN SNACK FOODS COMPANY, INC.
KENNEDY ENDEAVORS, INCORPORATED
NALLEY'S CANADA LIMITED
QUALITY SNAX OF MARYLAND, INC.
SEASONAL EMPLOYERS, INC.
PRO-FAC HOLDING COMPANY OF IOWA, INC.
By___________________________________________________
Its
<PAGE>
EXHIBIT 10.15
Modification C
CoBANK, ACB
LOAN AGREEMENT NO. T-6184-C,
T-6186-C, S-6183-C, and S-6181-C
August 30, 1995
CURTICE-BURNS FOODS, INC.
--------------------------------------------------------------------
MODIFICATION OF
TERM LOAN, TERM LOAN FACILITY AND SEASONAL LOAN AGREEMENT
IT IS AGREED, That the Term Loan, Term Loan Facility and Seasonal Loan Agreement
dated as of November 3, 1994, entered into between Curtice-Burns Foods, Inc.
(successor to merger between PF Acquisition Corp. and Curtice-Burns Foods, Inc.)
('Borrower') and Springfield Bank for Cooperatives, now known as CoBank, ACB
('Bank'),as amended January 26,1995 and July 19, 1995 is hereby further amended
as follows:
(1) Section 2.7 entitled Seasonal Loan Facility is modified by decreasing the
Seasonal Loans to an aggregate principal amount not to exceed at any time
outstanding the lesser of (a) Eighty-Two Million Eight Hundred Thousand Dollars
($82,800,000) or (b) the Borrowing Base (the 'Seasonal Loan Commitment').
(2) Section 3.7 entitled L/C Limit is modified by increasing the L/C Limit
outstanding at any time to Fourteen Million Two Hundred Thousand Dollars
($14,200,000).
The Borrower agrees to execute such additional documents and to take such other
action as may be reasonably requested by the Bank to give effect to this
Modification.
<PAGE>
EXHIBIT 10.15
Modification C
(Continued)
The Term Loan, Term Loan Facility and Seasonal Loan Agreement is hereby amended
accordingly but otherwise shall remain in full force and effect.
CoBANK, ACB (formerly known as
Springfield
Bank for Cooperatives)
By /s/ Ralph Lawrence
------------------------
Its V.P.
ACCEPTED AND AGREED TO: 8/25/95
--------------------
(Date)
CURTICE-BURNS FOODS, INC. (successor to merger between PF
Acquisition Corp. and Curtice-Burns Foods, Inc.)
By /s/ Roy A. Myers
---------------------
Its President
ACKNOWLEDGED AND AGREED TO: 8/25/95
----------------------
(Date)
PRO-FAC COOPERATIVE, INC.
By /s/ William D. Rice
---------------------
Its Asst. Treas.
ACKNOWLEDGED AND AGREED TO: 8/25/95
----------------------
(Date)
CURTICE-BURNS EXPRESS, INC.
CURTICE-BURNS MEAT SNACKS, INC.
FINGER LAKES PACKAGING COMPANY, INC.
HUSMAN SNACK FOODS COMPANY, INC.
KENNEDY ENDEAVORS, INCORPORATED
NALLEY'S CANADA LIMITED
QUALITY SNAX OF MARYLAND, INC.
SEASONAL EMPLOYERS, INC.
PRO-FAC HOLDING COMPANY OF IOWA, INC.
By /s/ William D. Rice
---------------------
Its Vice President
<PAGE>
EXHIBIT 10.15
Modification D
CoBANK, ACB
LOAN AGREEMENT NO. T-6184-D,
T-6186-D, S-6183-D, and S-6181-D
As of September 1, 1995
CURTICE-BURNS FOODS, INC.
--------------------------------------------------------------------
MODIFICATION OF
TERM LOAN, TERM LOAN FACILITY AND SEASONAL LOAN AGREEMENT
IT IS AGREED, That the Term Loan, Term Loan Facility and Seasonal Loan Agreement
dated as of November 3, 1994, entered into between Curtice-Burns Foods, Inc.
(successor to merger between PF Acquisition Corp. and Curtice-Burns Foods, Inc.)
('Borrower') and Springfield Bank for Cooperatives, now known as CoBank, ACB
('Bank'),as amended January 26, 1995, July 19, 1995 and August 30, 1995 is
hereby further amended as follows:
(1) Section 2.6 entitled Amortization of Term Loan Facility Loans is modified by
changing the dates of the first five annual installments from September 1 of
each year, beginning September 1, 1995, to October 1 of each of the first five
years beginning October 1, 1995.
(2) Section 2.7 entitled Seasonal Loan Facility is modified by increasing the
Seasonal Loans to an aggregate principal amount not to exceed at any time
outstanding the lesser of (a) Ninety-nine Million Eight Hundred Thousand Dollars
($99,800,000) for the period beginning September 15, 1995 and ending at the
close of business on December 15, 1995 at which time the aggregate principal
amount shall be decreased to Eighty-two Million Eight Hundred Thousand Dollars
($82,800,000)or (b) the Borrowing Base (the 'Seasonal Loan Commitment')
(3) Section 2.14 entitled Fees is modified by adding a paragraph reading as
follows:
(c) The Borrower agrees to pay an origination fee of 2/10 of 1 percent
(.20%) on the Seventeen Million Dollar ($17,000,000) increase on the Seasonal
Loan Facility to be billed by the Bank.
The Borrower agrees to execute such additional documents, including amendments
and modifications of the Seasonal Note, and to take such other action as may be
reasonably requested by the Bank to give effect to this Modification.
<PAGE>
Curtice-Burns Foods, Inc.
Term Loan, Term Loan Facility and Seasonal Loan Agreement
EXHIBIT 10.15
Modification D
(Continued)
The Term Loan, Term Loan Facility and Seasonal Loan Agreement is hereby amended
accordingly but otherwise shall remain in full force and effect.
All terms of the Term Loan, Term Loan Facility and Seasonal Loan Agreement and
any other related loan and collateral documents (collectively 'Loan Documents')
remain in full force and effect and are hereby ratified and confirmed, except to
the extent modified by this Agreement, by Borrower.
All Financial Statements and disclosures submitted to the Bank under the Loan
Documents are true and accurate in all material respects. Except as previously
disclosed to the Bank, there has been no material adverse change in the
financial condition or operations of Borrower.
The Loan Documents are not subject to any offset, claim, or defense by Borrower.
All liens granted by Borrower to the Bank (i) remain in full force and effect,
(ii) are not subject to any claim or defense, and (iii) retain a first priority
lien position.
To the best of Borrower's knowledge, there are no liens, other than liens
granted under the Loan Documents, on any real or personal property of Borrower.
CoBANK, ACB (formerly known as Springfield
Bank for Cooperatives)
By /s/ Ralph T. Lawrence
----------------------------
Its V.P.
ACCEPTED AND AGREED TO: 9/14/95
--------------------------
(Date)
CURTICE-BURNS FOODS, INC. (successor to merger between PF
Acquisition Corp. and Curtice-Burns Foods, Inc.)
By /s/ William D. Rice
---------------------
Its Sr. Vice Pres.
ACKNOWLEDGED AND AGREED TO: 9/14/95
----------------------
(Date)
PRO-FAC COOPERATIVE, INC.
By /s/ Thomas R. Kalchik
---------------------
Its Assisant Secretary
<PAGE>
Curtice-Burns Foods, Inc.
Term Loan, Term Loan Facility and Seasonal Loan Agreement
EXHIBIT 10.15
Modification D
(Continued)
ACKNOWLEDGED AND AGREED TO: 9/14/95
----------------------
(Date)
CURTICE-BURNS EXPRESS, INC.
CURTICE-BURNS MEAT SNACKS, INC.
FINGER LAKES PACKAGING COMPANY, INC.
HUSMAN SNACK FOODS COMPANY, INC.
KENNEDY ENDEAVORS, INCORPORATED
NALLEY'S CANADA LIMITED
QUALITY SNAX OF MARYLAND, INC.
SEASONAL EMPLOYERS, INC.
PRO-FAC HOLDING COMPANY OF IOWA, INC.
By /s/ William D. Rice
---------------------
Its Vice Pres.
<PAGE>
Curtice-Burns Foods, Inc.
Term Loan, Term Loan Facility and Seasonal Loan Agreement
EXHIBIT 10.15
Modification D
(Continued)
AMENDMENT TO SEASONAL LOAN NOTE
September 15, 1995 Rochester, New York
CURTICE-BURNS FOODS, INC., a New York corporation ('Borrower'), and CoBank, ACB
('CoBank'), a corporation established and existing under the law of the United
States of America, with regional office located at 67 Hunt Street, Agawam,
Massachusetts, hereby agree to amend the Seasonal Loan Note dated November 3,
1994 in the amount of $86,000,000 made by Borrower and PF Acquisition Corp
(whereby borrower is the successor to merger between PF Acquisition Corp. and
Borrower) to the Springfield Bank for Cooperatives, now known as CoBank
('Note').
The Borrower and CoBank hereby agree as follows:
1. The stated principal amount of the Note is amended from Eighty-Six Million
Dollars ($86,000,000) to Ninety-Nine Million Eight Hundred Thousand Dollars
($99,800,000).
The Note is hereby amended accordingly but otherwise shall remain in full force
and effect.
CURTICE-BURNS FOODS, INC.
By /s/ William D. Rice
------------------------
Title Sr. Vice Pres.
--------------------
CoBank, ACB
By /s/ Ralph T. Lawrence
------------------------
Title Vice Pres.
--------------------
<PAGE>
EXHIBIT 21.1
CURTICE-BURNS FOODS, INC.
SUBSIDIARIES OF THE REGISTRANT
Curtice Burns Export Corporation
Curtice Burns Express, Inc.
Finger Lakes Packaging Co., Inc.
Kennedy Endeavors, Inc.
Curtice Burns Meat Snacks, Inc.*
La Restaurante, Inc.*
Quality Snax, Inc.*
Snyder's Potato Chips, Inc.*
Seasonal Employers, Inc.
Husman Potato Chips, Inc.
Comstock Michigan Fruit Company of Canada Limited
*Inactive Corporations
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<FISCAL-YEAR-END> JUN-24-1995
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