SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 23, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Registration Statement (Form S-4)Number 33-56517
CURTICE-BURNS FOODS, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-0845824
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
90 Linden Place, P.O. Box 681, Rochester, NY 14603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (716) 383-1850
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of October 13, 1995.
Common Stock: 10,000
Page 1 of 14<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Operations and Retained Earnings
(Dollars in Thousands)
<CAPTION>
Quarter Ended
September 23, September 24,
1995 1994
Successor Predecessor
<S> <C> <C>
Net sales $165,178 $176,847
Cost of sales 122,646 126,844
Gross profit 42,532 50,003
Restructuring expenses, including net loss from
division disposals -- (8,415)
Change in control expenses -- (1,750)
Gain on assets result of the fire claim -- 6,469
Other selling, administrative, and general expenses (36,725) (37,973)
Operating income before dividing with Pro-Fac 5,807 8,334
Interest expense (10,046) (5,071)
Pretax (loss)/earnings before dividing with Pro-Fac (4,239) 3,263
Pro-Fac share of loss/(earnings) 2,120 (1,493)
(Loss)/income before taxes (2,119) 1,770
Tax benefit/(provision) 285 (1,437)
Net (loss)/income (1,834) 333
Retained earnings at beginning of period -- 58,121
Less cash dividends declared -- (1,390)
Retained earnings at end of period $ (1,834) $ 57,064
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Balance Sheet
<CAPTION>
Successor Successor Predecessor
September 23, June 24, September 24,
1995 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash $ 6,068 $ 4,158 $ 7,293
Accounts receivable trade, net 60,913 47,341 65,120
Accounts receivable, other 12,753 19,812 8,055
Income taxes refundable 1,105 1,043 --
Current deferred tax asset 3,954 6,784 12,618
Inventories -
Finished goods 179,559 108,691 179,427
Raw materials and supplies 52,387 51,491 44,488
Total inventories 231,946 160,182 223,915
Receivable from Pro-Fac 5,725 1,001 --
Prepaid manufacturing expense -- 9,903 --
Prepaid expenses and other current assets 4,944 2,306 6,151
Total current assets 327,408 252,530 323,152
Investment in Bank 22,907 22,907 --
Property, plant, and equipment, net 276,461 272,192 160,288
Goodwill and other intangibles, net 79,375 101,494 24,487
Assets held for sale 5,521 13,863 --
Other assets 13,560 9,298 17,914
Total assets $725,232 $672,284 $525,841
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 86,000 $ -- $ 40,000
Accounts payable 59,122 60,112 53,491
Income taxes payable -- -- 1,288
Due to Pro-Fac -- -- 49,304
Accrued interest 4,525 9,171 503
Accrued employee compensation 7,042 11,644 8,597
Accrued manufacturing expense 787 -- 2,249
Other accrued expenses 19,295 15,116 32,906
Current portion of obligations under capital leases 764 764 18,430
Current portion of long-term debt 8,008 11,552 14,641
Total current liabilities 185,543 108,359 221,409
Long-term debt 185,274 183,665 89,848
Senior subordinated notes 160,000 160,000 --
Obligations under capital leases 1,650 1,620 114,379
Deferred income tax liabilities 34,923 59,721 16,338
Other non-current liabilities 18,593 17,836 3,974
Total liabilities 585,983 531,201 445,948
Commitments and Contingencies
Shareholders' Equity:
Class A common - $.99 par value; -0-,
-0-, and 10,125,000 shares
authorized; -0-, -0-, and 6,628,430
outstanding, respectively -- -- 6,567
Class B common - $.99 par value; -0-,
-0-, and 4,050,000 shares
authorized; -0-, -0-, and 2,056,876
outstanding, respectively -- -- 2,036
Common stock, par value $.01
10,000 shares outstanding,
owned by Pro-Fac -- -- --
September 23, June 24, September 24,
1995 1995 1994
Additional paid-in capital:
Shareholder paid-in capital 151,083 151,083 14,271
Less capital contribution
receivable 10,000 10,000 --
141,083 141,083 14,271 141,083 141,083 14,271
Retained earnings (1,834) -- 57,064
Minimum pension liability -- -- (45)
Total shareholders' equity 139,249 141,083 79,893
Total liabilities and shareholders' equity $725,232 $672,284 $525,841
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows
Quarter Ended
(Dollars in Thousands) September 23, September 24,
1995 1994
Successor Predecessor
<CAPTION>
<S> <C> <C>
Cash Flows From Operating Activities:
Net (loss)/income $ (1,834) $ 333
Adjustments to reconcile net income/(loss) to net cash provided
by operating activities -
Restructuring:
Net loss from division disposals -- 5,567
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 1,180 422
Depreciation 6,374 4,671
Change in assets and liabilities:
Accounts receivable (5,138) (7,075)
Inventories (67,486) (67,181)
Income taxes refundable/payable (62) 1,525
Accounts payable and accrued expenses (580) (9,985)
Receivable from/payable to Pro-Fac (4,724) 1,357
Other assets and liabilities (3,895) 6,298
Deferred taxes (122) (751)
Net cash used in operating activities (76,287) (68,440)
Cash Flows From Investing Activities:
Purchase of property, plant, and equipment (5,258) (4,419)
Proceeds from disposals 4,790 44
Cash paid for acquisition (5,400) --
Net cash used in investing activities (5,868) (4,375)
Cash Flows From Financing Activities:
Receivable from/payable to Pro-Fac -- 38,500
Proceeds from issuance of short-term debt 86,000 40,000
Proceeds from issuance of long-term debt 5,400 10,912
Payments on long-term debt (7,335) (300)
Payments on capital leases -- (10,594)
Stock activity relating to Predecessor's equity -- 52
Cash dividends paid -- (1,390)
Net cash provided by financing activities 84,065 77,180
Net change in cash 1,910 4,365
Cash at beginning of period 4,158 2,928
Cash at end of period $ 6,068 $ 7,293
All amounts above exclude the effects of the
acquisition of Packer Foods as detailed in
the Supplemental Disclosure of Cash Flow
Information
Supplemental Disclosure of Cash Flow Information:
Cash paid/(received) during the period for -
Interest (net of amount capitalized) $ 14,694 $ 4,661
Income taxes, net $ (82) $ 557
Capital lease obligations incurred $ -- $ 934
Acquisition of Packer Foods:
Accounts receivable $ 1,375 $ --
Inventories 4,278 --
Prepaid expenses and other current assets 270 --
Property, plant and equipment 5,884 --
Goodwill 128 --
Accounts payable (4,954) --
Accrued expenses (257) --
Deferred income tax (226) --
Other non-current liabilities (1,098) --
Cash paid for acquisition $ 5,400 $ --
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
/TABLE
<PAGE>
<PAGE>
CURTICE-BURNS FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and in
the opinion of management include all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the results of
operations for the periods presented. 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. The acquisition was
accounted for using the purchase method of accounting. In conjunction with
the change in ownership all identifiable assets and liabilities were adjusted
to reflect their fair values at the date of acquisition. Such allocations
continue to be reviewed. These financial statements should be read in
conjunction with the financial statements and accompanying notes contained in
the Company's Form 10-K for the fiscal year ended June 24, 1995. The results
of operations for the interim periods are not necessarily indicative of the
results of operations for the full year.
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 after
November 3, 1994 (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 1995 have been reclassified to
conform with fiscal 1996 presentations.
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 Pro-Fac 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 in the Company and committed to another $10.0 million investment.
The $10 million investment has been reflected as a capital contribution
receivable on the balance sheet as the funds have not yet been transferred by
Pro-Fac.
Funds made available by the distribution of retains to members, in lieu of
cash by Pro-Fac, have historically been reinvested by Pro-Fac in the Company.
Under the Indentures related to the Notes, Pro-Fac will be required to
reinvest at least 70 percent of the additional Patronage income in Curtice-
Burns.
Amounts received by Pro-Fac from Curtice-Burns under both Agreements for the
quarters ended September 23, 1995 and September 24, 1994 include: commercial
market value of crops delivered, $31.8 million and $37.7 million,
respectively; interest income, $4.2 million for the quarter ended September
24, 1994; and additional proceeds from profit/(loss) sharing provisions,
$(2.1) million and $1.5 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, <PAGE>
<PAGE>
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 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." This
amount was adjusted in the first quarter of fiscal 1996 in conjunction with
the change in tax status of Curtice-Burns. See NOTE 5. 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 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 quarters ended September 23, 1995
and September 24, 1994, assuming the acquisition by Pro-Fac took place at the
beginning of the 1995 fiscal year.
<TABLE>
(In Millions)
<CAPTION>
(Pro Forma is Unaudited)
September 23, 1995 September 24, 1994
Actual Actual Pro Forma
<S> <C> <C> <C>
Net sales $165.2 $176.8 $176.8
(Loss)/income before taxes $ (2.1) $ 1.8 $ 4.3
Net (loss)/income $ (1.8) $ 0.3 $ 1.8
</TABLE>
NOTE 4. DISPOSALS
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 June 26, 1995, the Company sold the Nalley's Canada
Ltd. subsidiary, located in Vancouver, British Columbia, to a group led by
management within its Canadian subsidiary. This sale was contemplated by
Pro-Fac in conjunction with the acquisition.
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.
NOTE 5. TAXES ON INCOME
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. In August 1995, Curtice-
Burns and Pro-Fac received a favorable ruling from the Internal Revenue
Service approving the change in tax treatment effective for fiscal 1996.
Pro-Fac's ruling also confirmed that the change in Curtice-Burns <PAGE>
<PAGE>
status would have no affect on Pro-Fac's ongoing treatment as a cooperative
under Subchapter T of the Internal Revenue Code of 1986. Accordingly, during
the quarter ended September 23, 1995, the Company provided taxes on non-
patronage earnings and patronage earnings to be retained by the Company. The
effective tax benefit of approximately 13.4 percent recognized in the first
quarter, is comprised of state income taxes , federal taxes on non-patronage
earnings and patronage earnings retained by the Company. The Company's
effective tax benefit is negatively impacted by the amount of non-deductible
goodwill created in conjunction with the acquisition and merger of Curtice
Burns Foods, Inc. by Pro-Fac Cooperative, Inc. as of November 3, 1994.
As a cooperative, deferred tax accounting is generally not required for
temporary differences associated with patronage earnings allocated to
members. Therefore, in conjunction with this change in tax status, deferred
taxes have been adjusted based upon estimated future levels of patronage
earnings to be allocated to members. As the change in tax status represents
a resolution of an uncertainty related to income taxes outstanding at the
date of the acquisition, the reduction in net deferred taxes of approximately
$22 million has been applied against goodwill.
NOTE 6. OTHER MATTERS
Packer Foods: 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: 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 September 23, 1995,
the Company has received $12.5 million in proceeds from the insurance claims
for the fire with approximately $6.4 million receivable at that date.
ITEM 2. 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 for the first quarter of fiscal
1996 compared to the prior year quarter. The following comparisons to the
prior year periods present the results of the Company during the period prior
to its acquisition by Pro-Fac, ("Predecessor entity") as well as the period
subsequent to its acquisition, ("Successor entity"). The financial
statements of the Predecessor and Successor entities are not comparable in
certain respects because of differences between the cost bases of the assets
held by the Predecessor entity compared to that of the Successor entity as
well as the effect on the Successor entity's operations for adjustments to
depreciation, amortization, and interest expense.
The following tables illustrate the Company's results of operations by
business for the quarters ended September 23, 1995 and September 24, 1994,
and the Company's total assets by business as of September 23, 1995 and
September 24, 1994.
<PAGE>
<TABLE>
Net Sales
(Dollars in Millions)
<CAPTION>
Quarter Ended
September 23, September 24,
1995 1994
% of % of
$ Total $ Total
<S> <C> <C> <C>
Comstock Michigan Fruit ("CMF") $ 68.7 41.6% $ 71.7 40.6%
Nalley's Fine Foods 46.4 28.1 43.9 24.8
Southern Frozen Foods 22.9 13.9 23.1 13.1
Snack Foods Group 15.4 9.3 15.4 8.7
Brooks Foods 6.9 4.2 5.4 3.1
Finger Lakes Packaging 12.3 7.4 14.6 8.3
Intercompany eliminations1 (7.4) (4.5) (9.7) (5.6)
Subtotal ongoing operations 165.2 100.0 164.4 93.0
Businesses sold2 -- -- 12.4 7.0
Total $165.2 100.0% $176.8 100.0%
<FN>
1 Intercompany sales by Finger Lakes
2 The Company sold Nalley's U.S. Chips and Snacks business and Nalley's Canada Ltd. See NOTE 4 -
"Disposals."
</TABLE>
<TABLE>
Operating Income Before Dividing with Pro-Fac1
(Dollars in Millions)
<CAPTION>
Quarter Ended
September 23, September 24,
1995 1994
% of % of
$ Total $ Total
<S> <C> <C> <C> <C>
CMF $ 3.9 67.2% $ 6.7 55.8%
Nalley's Fine Foods 1.0 17.2 4.4 36.7
Southern Frozen Foods 1.0 17.2 2.4 20.0
Snack Foods Group 1.0 17.2 0.8 6.7
Brooks Foods 0.4 6.9 0.1 0.8
Finger Lakes Packaging 0.8 13.8 1.0 8.3
Intercompany eliminations (2.3) (39.5) (3.0) (25.0)
Subtotal ongoing operations 5.8 100.0 12.4 103.3
Businesses sold2 -- -- (0.4) (3.3)
Total $ 5.8 100.0% $12.0 100.0%
<FN>
1 Table excludes restructuring loss from division disposals in fiscal 1995, change in control expense
in fiscal 1995, and gain on assets as a result of a fire claim recorded in fiscal 1995.
2 The Company sold the Nalley's U.S. Chips and Snack business and Nalley's Canada Ltd. See NOTE 4 -
"Disposals."
</TABLE>
<TABLE>
Depreciation and Amortization
(Dollars in Millions)
<CAPTION>
Quarter Ended
September 23, September 24,
1995 1994
% of % of
$ Total $ Total
<S> <C> <C> <C> <C>
CMF $3.5 48.0% $2.7 49.1%
Nalley's Fine Foods 1.3 17.8 0.8 14.5
Southern Frozen Foods 1.3 17.8 0.6 10.9
Snack Foods Group 0.5 6.8 0.5 9.1
Brooks Foods 0.2 2.8 0.2 3.6
Finger Lakes Packaging 0.5 6.8 0.3 5.5
Corporate -- -- 0.1 1.8
Subtotal ongoing operations 7.3 100.0 5.2 94.5
Businesses sold 1 -- -- 0.3 5.5
Total $7.3 100.0% $5.5 100.0%
<FN>
1 The Company sold the Nalley's U.S. Chips and Snack business and Nalley's Canada Ltd. See NOTE 4 -
"Disposals."
/TABLE
<PAGE>
<PAGE>
<TABLE>
Total Assets
(Dollars in Millions)
<CAPTION>
Quarter Ended
September 23, September 24,
1995 1994
% of % of
$ Total $ Total
<S> <C> <C> <C> <C>
CMF $338.2 46.6% $258.9 49.2%
Nalley's Fine Foods 161.5 22.3 84.4 16.1
Southern Frozen Foods 99.2 13.7 47.6 9.1
Snack Foods Group 28.0 3.9 24.1 4.6
Brooks Foods 23.4 3.2 13.0 2.5
Finger Lakes Packaging 37.5 5.2 50.5 9.6
Corporate 37.4 5.1 22.8 4.3
Subtotal ongoing operations 725.2 100.0 501.3 95.4
Businesses sold1 -- -- 24.5 4.6
Total $725.2 100.0% $525.8 100.0%
<FN>
1 The Company sold the Nalley's U.S. Chips and Snack business and Nalley's Canada Ltd. See NOTE 4 -
"Disposals."
</TABLE>
The following table illustrates the Company's income statement data and the
percentage of net sales represented by these items for the quarters ended
September 23, 1995 and September 24, 1994.
<TABLE>
Consolidated Statement of Operations
(Dollars in Millions)
<CAPTION>
Quarter Ended
September 23, September 24,
1995 1994
% of % of
$ Total $ Total
<S> <C> <C> <C> <C>
Net sales $165.2 100.0% $176.8 100.0%
Cost of sales 122.6 74.2 126.8 71.7
Gross profit 42.6 25.8 50.0 28.3
Restructuring expenses, including net loss from
division disposals -- -- (8.4) (4.8)
Change in control expenses -- -- (1.8) (1.0)
Gain on assets incurred as result of a fire claim -- -- 6.5 3.7
Other selling, administrative and general expenses (36.8) (22.3) (38.0) (21.5)
Operating income/(loss) before dividing with Pro-Fac 5.8 3.5 8.3 4.7
Interest expense (10.0) (6.0) (5.1) (2.9)
Pretax (loss)/earnings before dividing with Pro-Fac (4.2) (2.5) 3.2 1.8
Pro-Fac share of loss/(earnings) 2.1 1.3 (1.5) (0.8)
Loss/(income) before taxes (2.1) (1.2) 1.7 1.0
Tax benefit/(provision) 0.3 0.1 (1.4) (0.8)
Net loss/(income) $ (1.8) (1.1)% $ 0.3 0.2%
</TABLE>
CHANGES FROM FIRST QUARTER FISCAL 1995 TO FIRST QUARTER FISCAL 1996
General: First quarter net sales for Curtice-Burns declined from $176.8
million in the previous year to $165.2 million in the current year. After
adjusting for divested businesses, which had net sales of $12.4 million in
the first quarter of the prior year, there was a small net sales increase.
In conjunction with the acquisition, net assets were adjusted to fair market
value and additional debt was incurred. Accordingly, depreciation,
amortization and interest expense have increased, making year-to-year
comparisons difficult to analyze. Nonetheless, earnings before interest,
depreciation and amortization (EBITDA) for ongoing businesses can be
compared.
<PAGE>
<PAGE>
The following table reconciles EBITDA with pretax earnings:
<TABLE>
Curtice Burns Foods Earnings Comparison
(Dollars in Thousands)
<CAPTION>
Quarter Ended
9/23/95 9/24/94 Variance
<S> <C> <C> <C>
Pretax earnings prior to interest, depreciation and
amortization from ongoing businesses (EBITDA) $ 13,174 $17,290 $(4,116)
(Losses)/gains from non-recurring and sold businesses -- (3,374) 3,374
Depreciation and amortization (7,367) (5,582) (1,785)
Operating earnings for ongoing businesses 5,807 8,334 (2,527)
Interest expense (10,046) (5,071) (4,975)
Pretax (loss)/earnings prior to dividing with Pro-Fac $ (4,239) $ 3,263 $(7,502)
</TABLE>
The reduction in EBITDA from the prior year first quarter is $4.1 million or
24 percent. There are two main reasons for this: a $3.0 million decrease
due to a decline in vegetable pricing compared with the prior year, an
industry-wide problem related to the bountiful 1994 national vegetable
harvest; and an increase in promotional expenses, particularly at Nalley's
Fine Foods division, caused in part by "slotting allowances," which are
necessary expenses for new product introductions. Nalley's introduced a new
line of Bernstein's fat-free dressings during the first quarter which
management believes will have a positive effect on earnings later this fiscal
year.
The remaining earnings variances relate to non-recurring charges in the
previous year along with the increased depreciation, amortization and
interest.
Many of these variances were expected, specifically the vegetable pricing
situation and changes related to our acquisition by Pro-Fac. The September
quarter has historically had lower earnings than the other quarters of the
year. Accordingly, interest coverage and other such measures should be made
on a full year basis. Vegetable prices have stabilized, and with harvesting
nearly done for the smaller 1995 vegetable crop, prices may gradually
increase during the 1996 fiscal year. The high promotional expenses related
to new products are not expected to continue through the remainder of the
fiscal year.
Net Sales: The Company's net sales in the quarter ended September 23, 1995
of $165.2 million decreased $11.6 million or 6.6 percent from $176.8 million
in the same quarter last year. The net sales attributable to businesses sold
in connection with the Company's restructuring program discussed in NOTE 4
were $12.4 million in the quarter ended September 24, 1994. The Company's
net sales from ongoing operations, excluding businesses sold, were $164.4 in
the quarter ended September 24, 1994 compared to $165.2 million in the
quarter ended September 23, 1995. This increase in net sales of $0.8 million
for ongoing operations is comprised of increased net sales at Nalley's and
Brooks of $2.5 million and $1.5 million, respectively, partially offset by
decreases of $3.2 million in the other operations, primarily at CMF. CMF net
sales decreased $3.0 million or 4.2 percent from the prior year quarter
primarily due to decreased pricing on canned and frozen vegetables which
offset a 7.0 percent increase in unit sales for the category. It is
anticipated vegetable pricing will improve in the remainder of fiscal 1996.
The increased net sales at Nalley's of $2.5 million or 5.7 percent primarily
relates to increases in the salad dressings, salsa, and pickles product
lines. The net sales increase at Brooks of $1.5 million or 27.8 percent is
primarily attributable to a 37.4 percent increase in unit sales compared to
the prior year quarter.
Gross Profit: Gross profit of $42.6 million for the quarter ended September
23, 1995 decreased $7.4 million or 14.8 percent from $50.0 million for the
quarter ended September 24, 1994. Of this net decrease, a $2.9 million
reduction was attributable to businesses sold, and a decrease of $4.5 million
was attributable to the Company's ongoing operations. The decrease in gross
profit for ongoing operations is comprised of increases and decreases as
follow:
<TABLE>
<CAPTION>
<S> <C>
CMF $(3.6)
Southern Frozen Foods (1.2)
Nalley's Fine Foods (0.8)
Brooks 0.3
All Other 0.8
$(4.5)
</TABLE>
The decreased gross profit at the Company's CMF and Southern Frozen Foods
operations primarily relates to depressed vegetable pricing. The decreased
gross profit at the Company's Nalley's operation primarily relates to higher
costs in the canned meats and salads category. The improvement at Brooks is
due to the increased sales volume.<PAGE>
<PAGE>
Restructuring Expenses Including Net Loss From Division Disposals:
Restructuring expenses, including net loss 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. See NOTE 4 --
"Disposals."
Change in Control Expenses: Change in control expenses recorded in fiscal
1995 amounting to $1.8 million reflect non-deductible expenses relating to
the sale of the Company covering legal, accounting, investment banking, and
other expenses relative to the change in control issue. All of these
expenses were incurred by the Predecessor entity. See NOTE 3 -- "Change in
Control of the Company."
Gain on Assets Incurred as a Result of Fire Claim at Southern Frozen Foods:
The gain on assets incurred as a result of a fire claim recorded in the first
quarter of fiscal 1995 amounted to $6.5 million.
Other Selling, Administrative, and General Expenses: Other selling,
administrative, and general expenses in the quarter ended September 23, 1995
of $36.8 million decreased $1.2 million or 3.2 percent from $38.0 million in
the quarter ended September 24, 1994. This net decrease of $1.2 million
includes primarily:
<TABLE>
(In Millions)
<CAPTION> Businesses
Sold Ongoing Total
<S> <C> <C> <C>
Change in trade promotions $(1.1) $ 1.0 $(0.1)
Change in advertising and selling costs (1.9) (0.2) (2.1)
Change in other selling, administrative, and
general expenses (0.3) 1.3 1.0
$(3.3) $ 2.1 $(1.2)
</TABLE>
The $1.0 million increase in trade promotions at the Company's ongoing
operations is primarily comprised of increased spending at the Nalley's
operation on the dressing category which offset decreased spending on CMF's
filling & topping category.
The $1.3 million increase in other administrative expenses at the Company's
ongoing operations primarily relates to increased costs at the Company's CMF
and Nalley's operations.
Operating Income Before Dividing with Pro-Fac: The Company's operating income
(before dividing with Pro-Fac) for the quarter ended September 23, 1995 of
$5.8 million decreased $2.5 million or 30.1 percent from $8.3 million in the
quarter ended September 24, 1994. Prior year operating income included:
restructuring expenses, including a net loss from division disposals of $8.4
million; change in control expenses of $1.8 million; net gain on assets
resulting from fire claim of $6.5 million; and operating losses attributable
to businesses sold of $0.4 million. Excluding the restructuring expenses,
change in control expenses, gain on assets incurred resulting from the fire
claim, and operating losses attributable to businesses sold, the Company's
operating income (before dividing with Pro-Fac) from ongoing operations for
the quarter ended September 23, 1995 of $5.8 million decreased $6.6 million
or 53.2 percent from $12.4 million in the quarter ended September 24, 1994.
Interest Expense: Interest expense in the quarter ended September 23, 1995
of $10.0 million increased $4.9 million or 96.1 percent from $5.1 million in
the quarter ended September 24, 1994. This increase was primarily
attributable to the increased borrowing and increased interest rates related
to the acquisition of the Company by Pro-Fac.
Provision for Taxes: The benefit for taxes in the quarter ended September 23,
1995 of $0.3 million changed $1.7 million from the provision of $1.4 million
in the quarter ended September 24, 1994. See NOTE 5, "Taxes," relative to
the change in tax status.
Net Income: The Company's net (loss)/income for the quarter ended September
23, 1995 of $(1.8) million decreased $2.1 million from $0.3 million in the
prior year quarter. The primary reasons for the Company's $2.1 million
decrease in net income are decreased gross profit and increased interest
expense.
LIQUIDITY AND CAPITAL RESOURCES
In the quarter ended September 23, 1995, the net cash used in operating
activities of Curtice-Burns of $76.3 million reflects net loss of $1.8
million. Depreciation and amortization of assets amounted to $7.6 million.
Inventories increased $67.5 million, and accounts receivable increased $5.1
million. Changes in other assets and liabilities amounted to $9.5 million.
Cash flows used in investing activities of $5.9 million include net cash used
for capital expenditures in the quarter of $5.3 million, disposals provided
$4.8 million, and the acquisition of Packer used $5.4 million.
<PAGE>
<PAGE>
Net cash provided by financing activities in the quarter amounted to $84.1
million. Proceeds from seasonal borrowings amounted to $86.0 million,
proceeds from long-term debt to finance the Packer acquisition amounted to
$5.4 million, and payments on long-term debt amounted to $7.3 million.
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 in fiscal 1996 is
expected to be sufficient to cover scheduled payments on long-term debt and
planned capital expenditures.
New Borrowings : Under the New Credit Agreement, as amended, Curtice-Burns
is able to borrow up to $99.8 million for seasonal working capital purposes
under the Seasonal Facility, subject to a borrowing base limitation, and
obtain up to $14.2 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) $99.8 million and (ii) the sum of 60 percent of eligible
accounts receivable plus 50 percent of eligible inventory.
As of September 23, 1995, (i) cash borrowings outstanding under the Seasonal
Facility were $86.0 and (ii) availability under the Seasonal Facility, after
taking into account the amount of the borrowing base, was $13.8 million. In
addition to its seasonal financing, as of September 23, 1995, The Company had
$1.0 million available for long-term borrowings under the Term Loan Facility.
The Company believes that the cash flow generated by its operations and the
amounts available under the Seasonal Facility should be sufficient to fund
its working capital needs, fund its capital expenditures and service its debt
for the foreseeable future.
As a result of the acquisition of Curtice-Burns by Pro-Fac, 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 September 23, 1995, the Company is in
compliance with 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
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.
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. With the harvesting nearly done for the smaller 1995
vegetable crop, it is anticipated prices and inventory levels will stabilize
during the 1996 fiscal year.
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. of
approximately $3.8 million were 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 June 26, 1995 Curtice-Burns sold its
Canadian subsidiary, Nalley's Canada Ltd., located in Vancouver, British
Columbia, to a management group within the Canadian subsidiary. This sale
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.
Packer Foods: 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.
<PAGE>
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
Exhibit 27 Financial Data Schedule
(b) No current report on Form 8-K was filed during the fiscal period to
which this report relates.<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CURTICE-BURNS FOODS, INC.
Date: October 25, 1995 BY: /s/ William D. Rice
WILLIAM D. RICE
CHIEF FINANCIAL OFFICER,
SENIOR VICE PRESIDENT
AND TREASURER
(Duly Authorized Officer
and
Principal Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000026285
<NAME> CURTICE BURNS FOODS INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> SEP-23-1995
<CASH> 6068
<SECURITIES> 0
<RECEIVABLES> 73666
<ALLOWANCES> 0
<INVENTORY> 231946
<CURRENT-ASSETS> 327408
<PP&E> 276461
<DEPRECIATION> 0
<TOTAL-ASSETS> 725232
<CURRENT-LIABILITIES> 185543
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 139249
<TOTAL-LIABILITY-AND-EQUITY> 725232
<SALES> 165178
<TOTAL-REVENUES> 165178
<CGS> 122646
<TOTAL-COSTS> 157251
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10046
<INCOME-PRETAX> (2119)
<INCOME-TAX> (285)
<INCOME-CONTINUING> (1834)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
