Page 1 of 18
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Form 10-Q
Quarterly Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 23, 1996
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, PO 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 April 19, 1996.
Common Stock: 10,000
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
ITEM I. FINANCIAL STATEMENTS
Curtice-Burns Foods, Inc.
Consolidated Statement of Operations
<CAPTION>
(Dollars in Thousands)
Quarter Ended
3/23/96 3/25/95
<S> <C> <C>
Net sales $177,849 $180,357
Cost of sales 133,619 126,779
--------- ---------
Gross profit 44,230 53,578
Selling, administrative, and general expenses (34,633) (40,207)
--------- ---------
Operating income before dividing with Pro-Fac 9,597 13,371
Interest expense (10,484) (10,509)
--------- ---------
Pretax (loss)/earnings before dividing with Pro-Fac (887) 2,862
Pro-Fac share of loss/(earnings) 125 (1,436)
------------ ---------
(Loss)/income before taxes (762) 1,426
Tax provision (7) (974)
------------- ----------
Net (loss)/income $ (769) $ 452
</TABLE>
<TABLE>
<CAPTION>
========== =========
Nine Months Ended
Fiscal 1996 Fiscal 1995
----------- -------------------------------
6/25/95 - 11/4/94 - 6/26/94 -
3/23/96 3/25/95 11/3/94
Successor Successor Predecessor
<S> <C> <C> <C>
Net sales $ 551,213 $296,560 $276,621
Cost of sales 412,760 206,949 195,810
----------- --------- ---------
Gross profit 138,453 89,611 80,811
Restructuring expenses, including net
(loss)/gain from division disposals 0 0 (8,415)
Change in control expenses 0 0 (2,150)
Gain on assets resulting from fire claim 0 0 6,469
Other selling, administrative and general expenses (117,674) (66,699) (60,576)
---------- --------- ---------
Operating income before dividing with Pro-Fac 20,779 22,912 16,139
Interest expense (31,489) (16,358) (7,624)
----------- ---------- ----------
Pretax(loss)/earnings before dividing with Pro-Fac (10,710) 6,554 8,515
Pro-Fac share of loss/(earnings) 5,037 (3,282) (4,062)
------------- ----------- ----------
(Loss)/income before taxes (5,673) 3,272 4,453
Tax benefit/(provision) 1,193 (1,916) (2,735)
------------- ----------- ----------
Net (loss)/income $ (4,480) $ 1,356 $ 1,718
============ =========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
3
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Balance Sheet
<CAPTION>
(Dollars in Thousands)
March 23, June 24, March 25,
1996 1995 1995
<S> <C> <C> <C>
Assets
Current assets:
Cash $ 6,073 $ 4,158 $ 5,294
Accounts receivable trade, net 54,184 47,341 58,813
Accounts receivable, other 8,546 19,812 6,348
Income taxes refundable 1,552 1,043 722
Current deferred tax asset 3,954 6,784 8,461
Inventories -
Finished goods 130,708 108,691 136,915
Raw materials and supplies 39,157 51,491 54,755
---------- -------- --------
Total inventories 169,865 160,182 191,670
--------- -------- --------
Receivable from Pro-Fac 12,881 1,001 0
Prepaid manufacturing expense 4,344 9,903 5,062
Prepaid expenses and other current assets 3,394 2,306 4,947
----------- -------- --------
Total current assets 264,793 252,530 281,317
Investment in Bank 24,439 22,907 22,907
Property, plant, and equipment, net 270,435 272,192 272,960
Assets held for sale 5,935 13,863 5,406
Goodwill and other intangibles, net 82,891 101,494 93,793
Other assets 15,550 9,298 24,547
---------- ----------- ----------
Total assets $664,043 $672,284 $700,930
======== ======== ========
Liabilities and shareholder's equity
Current liabilities:
Notes payable $ 41,000 $ 0 $ 66,000
Accounts payable 38,566 60,112 44,379
Due to Pro-Fac 0 0 2,692
Accrued interest 4,440 9,171 4,743
Accrued employee compensation 6,733 11,644 9,925
Other accrued expenses 21,534 15,116 20,076
Current portion of obligations under capital leases 764 764 785
Current portion of long-term debt 8,056 11,552 8,007
----------- -------- --------
Total current liabilities 121,093 108,359 156,607
Long-term debt 181,418 183,665 165,438
Senior subordinated notes 160,000 160,000 160,000
Obligations under capital leases 1,620 1,620 1,296
Deferred income tax liabilities 33,710 59,721 61,501
Other non-current liabilities 19,599 17,836 18,443
---------- -------- --------
Total liabilities 517,440 531,201 563,285
Commitments and Contingencies
Shareholder's Equity:
Common stock, par value $.01 - 10,000 shares
outstanding, owned by Pro-Fac 0 0 0
March 23, June 24, March 25,
1996 1995 1995
----------- ---------- --------
<C> <C> <C>
Additional paid-in capital:
Shareholder paid-in capital $151,083 $151,083 $136,289
Less capital contribution receivable 0 10,000 0
-------- -------- ---------
$151,083 $141,083 $136,289 151,083 141,083 136,289
======== ======== ========
Retained earnings (4,480) 0 1,356
---------- -------------- -----------
Total shareholder's equity 146,603 141,083 137,645
--------- --------- ---------
Total liabilities and shareholder's equity $664,043 $672,284 $700,930
======== ======== ========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
18
4
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows
<CAPTION>
(Dollars in Thousands)
Fiscal 1996 Fiscal 1995
6/25/95 - 11/4/94 - 6/26/94 -
3/23/96 3/25/95 11/3/94
Successor Successor Predecessor
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net (loss)/income $ (4,480) $ 1,356 $ 1,718
Adjustments to reconcile net (loss)/income to net cash provided by
operating activities:
Restructuring:
Net loss from division disposals 0 0 5,567
Net operating losses subsequent to decision to dispose 0 0 2,848
Gain on assets resulting from fire claim 0 0 (6,469)
Amortization of goodwill, other intangibles, and financing fees 3,114 1,020 753
Depreciation 19,740 9,774 6,228
Equity in undistributed earnings of Bank (1,532) (1,288) 0
Change in assets and liabilities:
Accounts receivable 5,339 13,623 (12,430)
Inventories (5,433) 34,216 (70,961)
Income taxes refundable/payable (509) (722) 1,491
Accounts payable and accrued expenses (29,854) (30,802) (5,662)
Receivable from/payable to Pro-Fac (12,342) (16,405) 9,650
Other assets and liabilities (3,733) (502) 8,733
Deferred taxes 0 4,825 (1,224)
-------------- ----------- ----------
Net cash (used in)/provided by operating activities (29,690) 15,095 (59,758)
---------- ---------- ---------
Cash Flows From Investing Activities:
Purchase of property, plant, and equipment (12,574) (3,861) (5,689)
Disposals 4,322 1,322 0
Cash paid for acquisition (5,400) 0 0
----------- -------------- -------------
Net cash used in investing activities (13,652) (2,539) (5,689)
---------- ----------- ----------
Cash Flows From Financing Activities:
Receivable from/payable to Pro-Fac 10,000 (42,000) 42,000
Proceeds from issuance of short-term debt 41,000 66,000 30,000
Payments on short-term debt 0 (30,000) 0
Proceeds from issuance of long-term debt 5,400 359,000 10,886
Payments on long-term debt and capital leases (11,143) (199,787) (11,694)
Amounts paid to stockholders for acquisition 0 (167,810) 0
Stock activity relating to Predecessor's equity 0 0 52
Cash dividends paid 0 0 (1,390)
-------------- --------------- -----------
Net cash provided by/(used in) financing activities 45,257 (14,597) 69,854
---------- ---------- ----------
Net change in cash 1,915 (2,041) 4,407
Cash at beginning of period 4,158 7,335 2,928
----------- ------------ -----------
Cash at end of period $ 6,073 $ 5,294 $ 7,335
========== =========== ==========
<FN>
Consolidated Statement of Cash Flows continued on following page.
</FN>
</TABLE>
<PAGE>
<TABLE>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows (Continued)
<CAPTION>
(Dollars in Thousands)
Fiscal 1996 Fiscal 1995
6/25/95 - 11/4/94 - 6/26/94 -
3/23/96 3/25/95 11/3/94
Successor Successor Predecessor
<S> <C> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash paid/(received) during the period for -
Interest (net of amount capitalized) $ 36,147 $ 12,365 $ 6,967
========= ========= ==========
Income taxes, net $ (681) $ 5,689 $ 2,135
========= ========== ==========
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
==========
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 4,094
-----------
$136,289
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<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 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 Cooperative, Inc.
("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 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.
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 2). 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 presentation. ----------------
NOTE 2. CHANGE OF CONTROL AND AGREEMENTS WITH PRO-FAC
On November 3, 1994, Curtice-Burns Foods, Inc. ("Curtice Burns" or the
"Company") was acquired by Pro-Fac. Pro-Fac and the Company were established
together in the early 1960s and, before Pro-Fac's recent acquisition of the
Company, had a long-standing contractual relationship under the Integrated
Agreement and similar Predecessor entity agreements. The Integrated Agreement,
which has been superseded by the Pro-Fac Marketing 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 continue the Marketing and
Management arrangements of the Integrated Agreement as well as the sharing of
income and losses. Under the Pro-Fac Marketing and Facilitation Agreement, the
Company pays Pro-Fac the commercial market value ("CMV") for all crops supplied
by Pro-Fac. In addition, in any year in which the Company has earnings on
products which were processed from crops supplied by Pro-Fac ("Pro-Fac
Products"), the Company pays to Pro-Fac up to 90 percent of such earnings, but
in no case more than 50 percent of all pretax earnings (before dividing with
Pro-Fac) of the Company. In years in which the Company has losses on Pro-Fac
Products, the Company reduces the CMV it would otherwise pay to Pro-Fac by up to
90 percent of such losses, but in no case by more than 50 percent of all pretax
losses (before dividing with Pro-Fac) of the Company. Earnings and losses are
determined at the end of the fiscal year, but are accrued on an estimated basis
during the year.
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 $13.9 million
in the Company (including reinvested Additional Patronage Income as described
below).
<PAGE>
Funds made available by the distribution of patronage income over CMV
("Additional Patronage Income") to members in the form of retains, in lieu of
cash by Pro-Fac, have historically been reinvested by Pro-Fac in the Company.
Under the Indenture related to the Notes, Pro-Fac is required to reinvest at
least 70 percent of the Additional Patronage Income in Curtice Burns, and
Pro-Fac has reinvested $3.9 million of such patronage in the Company since the
acquisition.
The receivable from Pro-Fac at March 23, 1996 is $12.9 million, comprised of
$7.9 million for working capital and the accrual for estimated losses on Pro-Fac
Products under the Marketing and Facilitation Agreement of $5.0 million.
Amounts received by or paid to Pro-Fac from Curtice Burns under both Agreements
for the nine months ended March 23, 1996 and March 25, 1995 include: CMV of
crops delivered, $45.3 million and $56.1 million, respectively; and interest
income, $6.1 million for the nine months ended March 25, 1995. Payments by the
Company to Pro-Fac for interest, amortization, and lease financing payments
ceased as of November 3, 1994.
Following, in capsule form, are the consolidated, unaudited results of
operations of Curtice Burns Foods for the nine months ended March 25, 1995,
assuming the acquisition by Pro-Fac took place at the beginning of the 1995
fiscal year.
<TABLE>
<CAPTION>
(In Millions)
Nine Months Ended
(Pro Forma is Unaudited)
March 25, 1995
Actual Pro Forma
<S> <C> <C>
Net sales $573.2 $573.2
Income before taxes $ 7.7 $ 5.5
Net income $ 3.1 $ 2.2
</TABLE>
NOTE 3. DISPOSALS AND POTENTIAL DISPOSAL
Nalley's US Chips and Snacks: On December 19, 1994, the Company sold the
Nalley's US 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.
Through a supply agreement, the Company's Nalley's US division will provide to
the new owner those products previously provided as well as certain products for
which manufacturing has been discontinued by the new owners.
Finger Lakes Packaging: On April 9, 1996, the Company announced its intent to
sell its Finger Lakes Packaging Company subsidiary ("Finger Lakes"), a
can-making operation based in Lyons, New York. Finger Lakes also has an
operation in Benton Harbor, Michigan. Approximately 60 percent of the cans
manufactured by Finger Lakes are used by divisions of the Company. The Company
plans to enter into a long-term supply agreement with Finger Lakes Packaging in
conjunction with the sale.
NOTE 4. TAXES ON INCOME
In January 1995, the Boards of Directors of Curtice Burns and Pro-Fac approved
appropriate amendments to the Bylaws of Curtice Burns 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
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
nine months ended March 23, 1996, the Company provided taxes on non-patronage
earnings and patronage earnings to be 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
by Pro-Fac as of November 3, 1994.
<PAGE>
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 5. 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 the
acquisition was approximately $5.4 million in notes bearing interest at 10
percent to be paid until the notes mature in the year 2000. The transaction was
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 has been merged into the
Company's Comstock Michigan Fruit operations.
Commitments: The Company's Southern Frozen Foods division has guaranteed an
approximate $2.0 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. A
gain on assets destroyed in the fire was recognized by Curtice Burns prior to
the acquisition. Final negotiations are currently in progress with the insurance
carriers. As of March 23, 1996, the Company has received $18.5 million in
proceeds from the insurance claims for the fire with approximately $3.0 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 three- and nine-month
periods of fiscal 1996 compared to the comparable prior year periods. 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 as well as the effect on the Successor entity's operations for
adjustments to depreciation, amortization, and interest expense.
General: Third quarter net sales for Curtice Burns declined from $180.4 million
in the previous year to $177.8 million in the current year. After adjusting for
businesses sold or to be sold, which had net sales of $4.3 million in the third
quarter of this year and $12.4 million the prior year, there was a net sales
increase of $5.5 million. The nine months net sales for Curtice Burns declined
from $573.2 million in the previous year to $551.2 million in the current year.
After adjusting for businesses sold or to be sold, which had net sales of $12.8
million in the current year and $43.8 million in the prior year period, net
sales increased $9.0 million.
In conjunction with the acquisition of the Company by Pro-Fac, 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. EBITDA does not represent information prepared in accordance with
generally accepted accounting principles, nor is such information considered
superior to information presented in accordance with generally accepted
accounting principles.
<PAGE>
The following table reconciles EBITDA with pretax earnings for the three and
nine month periods:
<TABLE>
Curtice Burns Foods Earnings Comparison
<CAPTION>
(Dollars in Thousands)
Quarter Ended Nine Months Ended
3/23/96 3/25/95 Variance 3/23/96 3/25/95 Variance
<S> <C> <C> <C> <C> <C> <C>
Pretax earnings prior to interest,
depreciation, and amortization from
ongoing businesses (EBITDA) $ 15,906 $ 17,229 $(1,323) $ 38,794 $ 54,992 $(16,198)
Non-recurring gains and losses and
businesses sold or to be sold 1,520 1,399 121 4,239 449 3,790
Depreciation and amortization (7,829) (5,257) (2,572) (22,254) (16,390) (5,864)
--------- -------- ------- --------- -------- ----------
Operating earnings 9,597 13,371 (3,774) 20,779 39,051 (18,272)
Interest expense (10,484) (10,509) 25 (31,489) (23,982) (7,507)
-------- -------- ------- --------- -------- ----------
Pretax (loss)/earnings prior to dividing
with Pro-Fac $ (887) $ 2,862 $(3,749) $(10,710) $ 15,069 $(25,779)
========= ======== ======= ======== ======== ========
</TABLE>
EBITDA from ongoing businesses declined $1.3 million for the quarter, from $17.2
million in the same period the previous year to $15.9 million in fiscal 1996.
Year-to-date EBITDA from ongoing businesses declined $16.2 million, from $55.0
million in the prior year to $38.8 million.
Depressed vegetable pricing has significantly impacted the Company's financial
results as well as much of the rest of the industry. The industry as a whole
fully expected a slight upturn in pricing which has not happened. The Company's
vegetable category, which includes significant segments of both the Comstock
Michigan Fruit and Southern Frozen Foods divisions, experienced a 56 percent
reduction in EBITDA for nine months. Improvements in earnings of other product
lines at the Comstock Michigan Fruit division have offset part of the vegetable
category earnings reduction.
Other issues impacting year-to-date results include the costly start up of the
Nalley's dressing plant, other manufacturing variances and increased promotion
expenses at Nalley's. In total, Nalley's EBITDA is $14 million lower for the
nine-months period ended March 23, 1996 versus the prior year. Several steps
have been taken to address these problems, including senior management changes
at the division. Third quarter results for this division have improved from the
first six months results.
A major inventory reduction program across all divisions has been implemented.
Short-term debt was reduced an additional $25 million in the third quarter of
this year than during the same period last year due to significant cash flow
generated from these programs and from an additional investment in the Company
by Pro-Fac. (See NOTE 2.)
<PAGE>
The following tables illustrate the Company's results of operations by business
for the three and nine months ended March 23, 1996 and March 25, 1995, and the
Company's total assets by business as of March 23, 1996 and March 25, 1995.
<TABLE>
Net Sales
<CAPTION>
(Dollars in Millions)
Three Months Ended Nine Months Ended
3/23/96 3/25/95 3/23/96 3/24/95
% of % of % of % of
$ Total $ Total $ Total $ Total
------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Comstock Michigan Fruit ("CMF") 82.2 46.2 77.7 43.1 255.1 46.3 253.8 44.3
Nalley's Fine Foods 44.4 25.0 43.3 24.0 137.2 24.9 131.5 22.9
Southern Frozen Foods 23.2 13.1 23.6 13.1 72.6 13.2 73.3 12.8
Snack Foods Group 14.4 8.1 14.1 7.8 44.9 8.1 44.8 7.8
Brooks Foods 9.3 5.2 9.3 5.1 28.6 5.2 26.0 4.5
------- ------- ------- ------- ------ ------- ------ -------
Subtotal ongoing operations 173.5 97.6 168.0 93.1 538.4 97.7 529.4 92.3
Businesses sold or to be sold1 4.3 2.4 12.4 6.9 12.8 2.3 43.8 7.7
------- ------- ------- ------- ------ ------- ------ -------
Total 177.8 100.0 180.4 100.0 551.2 100.0 573.2 100.0
===== ===== ===== ===== ===== ===== ===== =====
<FN>
1 The Company sold Nalley's US Chips and Snacks business and Nalley's Canada
Ltd. and announced the intent to sell Finger Lakes Packaging. See NOTE 3 -
"Disposals and Potential Disposal."
</FN>
</TABLE>
<TABLE>
Operating Income Before Dividing with Pro-Fac
<CAPTION>
(Dollars in Millions)
Three Months Ended Nine Months Ended
3/23/96 3/25/95 3/23/96 3/24/95
% of % of % of % of
$ Total $ Total $ Total $ Total
------- ----- ----- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMF 4.7 49.0 6.2 46.2 16.8 80.8 24.3 62.1
Nalley's Fine Foods 1.6 16.7 4.0 29.8 (3.1) (14.9) 12.6 32.2
Southern Frozen Foods 1.6 16.7 2.3 17.2 4.8 23.1 7.8 19.9
Snack Foods Group 0.8 8.3 0.3 2.2 2.8 13.5 2.2 5.6
Brooks Foods 1.1 11.5 1.2 9.0 3.3 15.9 3.3 8.4
Corporate eliminations (1.3) (13.7) (1.8) (13.4) (6.4) (31.9) (9.3) (23.6)
---- ----- ---- ----- ---- ----- ----- ------
Subtotal ongoing operations 8.5 88.5 12.2 91.0 18.0 86.5 40.9 104.6
Non-recurring gains and losses and
businesses sold or to be sold1 1.1 11.5 1.2 9.0 2.8 13.5 (1.8) (4.6)
--- ------ ----- ------- ----- ------ ----- -------
Total 9.6 100.0 13.4 100.0 20.8 100.0 39.1 100.0
=== ===== ==== ===== ==== ===== ==== =====
<FN>
1 The Company sold the Nalley's US Chips and Snack business and Nalley's
Canada Ltd. and announced the intent to sell Finger Lakes Packaging. See
NOTE 3 - "Disposals and Potential Disposal." Fiscal 1995 includes
restructuring loss from division disposals, change in control expense, and
gain on assets as a result of a fire claim recorded in fiscal 1995.
</FN>
</TABLE>
<PAGE>
<TABLE>
EBITDA
<CAPTION>
(Dollars in Millions)
Three Months Ended Nine Months Ended
3/23/96 3/25/95 3/23/96 3/24/95
% of % of % of % of
$ Total $ Total $ Total $ Total
------- ----- ----- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMF 8.5 48.8 9.1 48.9 27.7 64.4 32.2 58.1
Nalley's Fine Foods 3.1 17.8 4.7 25.3 1.0 2.3 14.9 26.9
Southern Frozen Foods 2.9 16.7 3.0 16.1 8.7 20.2 9.7 17.5
Snack Foods Group 1.3 7.5 0.8 4.3 4.2 9.8 3.8 6.8
Brooks Foods 1.3 7.5 1.4 7.5 3.9 9.1 3.8 6.8
Corporate and eliminations (1.2) (6.9) (1.8) (9.6) (6.7) (15.6) (9.4) (16.8)
---- ---- ----- ------- ----- ------ ----- ------
Subtotal ongoing operations 15.9 91.4 17.2 92.5 38.8 90.2 55.0 99.3
Non-recurring gains and losses and
businesses sold or to be sold1 1.5 8.6 1.4 7.5 4.2 9.8 0.4 0.7
----- ------- ----- ------- ----- ------- ----- -------
Total 17.4 100.0 18.6 100.0 43.0 100.0 55.4 100.0
==== ===== ==== ===== ==== ===== ==== =====
<FN>
1 The Company sold the Nalley's US Chips and Snacks business and Nalley's
Canada Ltd. and announced the intent to sell Finger Lakes Packaging. See
NOTE 3 - "Disposals and Potential Disposal." Fiscal 1995 includes
restructuring loss from division disposals, change in control expense and
gain on assets as a result of a fire claim.
</FN>
</TABLE>
<TABLE>
Total Assets
<CAPTION>
(Dollars in Millions)
March 23, 1996 March 25, 1995
% of % of
$ Total $ Total
------- ----- ------- -----
<S> <C> <C> <C> <C>
CMF 285.9 43.1 215.9 30.8
Nalley's Fine Foods 145.4 21.9 87.5 12.5
Southern Frozen Foods 95.1 14.3 62.5 8.9
Snack Foods Group 26.9 4.1 23.4 3.3
Brooks Foods 21.3 3.2 11.5 1.6
Corporate1 58.0 8.7 256.1 36.6
------ ------- ----- ------
Subtotal ongoing operations 632.6 95.3 656.9 93.7
Businesses sold or to be sold2 31.4 4.7 44.0 6.3
------ ------- ------ -------
Total 664.0 100.0 700.9 100.0
===== ===== ===== =====
<FN>
1 The March 25, 1995 figure includes the adjustment required to reflect
property, plant, and equipment at fair market values and excess of cost
over market value of assets acquired. Such amounts were subsequently
allocated by division.
2 The Company sold the Nalley's US Chips and Snack business and Nalley's
Canada Ltd. and announced the intent to sell Finger Lakes Packaging. See
NOTE 3 - "Disposals and Potential Disposal."
</FN>
</TABLE>
<PAGE>
The following table illustrates the Company's income statement data and the
percentage of net sales represented by these items for the quarters and nine
months ended March 23, 1996 and March 25, 1995.
<TABLE>
Consolidated Statement of Operations
<CAPTION>
(Dollars in Millions)
Three Months Ended Nine Months Ended
3/23/96 3/25/95 3/23/96 3/25/95
% of % of % of % of
$ Sales $ Sales $ Sales $ Sales
------- ----- ------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales 177.8 100.0 180.4 100.0 551.2 100.0 573.2 100.0
Cost of sales 133.6 75.1 126.8 70.3 412.7 74.9 402.8 70.3
----- ----- ----- ----- ------ ----- ------ -----
Gross profit 44.2 24.9 53.6 29.7 138.5 25.1 170.4 29.7
Restructuring expenses, including
net loss from division disposals 0.0 0.0 0.0 0.0 0.0 0.0 (8.4) (1.5)
Change in control expenses 0.0 0.0 0.0 0.0 0.0 0.0 (2.2) (0.4)
Gain on assets incurred as result
of a fire claim 0.0 0.0 0.0 0.0 0.0 0.0 6.5 1.2
Other selling, administrative
and general expenses (34.6) (19.5) (40.2) (22.3) (117.7) (21.3) (127.2) (22.2)
----- ----- ----- ----- ------ ----- ------ -----
Operating income before dividing
with Pro-Fac 9.6 5.4 13.4 7.4 20.8 3.8 39.1 6.8
Interest expense (10.5) (5.9) (10.5) (5.8) (31.5) (5.7) (24.0) (4.2)
----- ---- ----- ----- ------ ----- ------ -----
Pretax (loss)/earnings before
dividing with Pro-Fac (0.9) (0.5) 2.9 1.6 (10.7) (1.9) 15.1 2.6
Pro-Fac share of loss/(earnings) 0.1 0.1 (1.4) (0.8) 5.0 0.9 (7.3) (1.3)
----- ----- ----- ----- ------ ----- ------ -----
Loss/(income) before taxes (0.8) (0.4) 1.5 0.8 (5.7) (1.0) 7.8 1.3
Tax (provision)/benefit 0.0 0.0 (1.0) (0.5) 1.2 0.2 (4.7) (0.8)
----- ----- ----- ----- ------ ----- ----- -----
Net loss/(income) (0.8) (0.4) 0.5 0.3 (4.5) (0.8) 3.1 0.5
===== ===== ===== ===== ====== ===== ===== =====
</TABLE>
CHANGES FROM THE THIRD QUARTER OF FISCAL 1995 TO
THE THIRD QUARTER OF FISCAL 1996
Net Sales: The Company's net sales in the quarter ended March 23, 1996 of $177.8
million decreased $2.6 million or 1.4 percent from $180.4 million in the same
quarter last year. The net sales attributable to businesses sold or to be sold
discussed in NOTE 3 were $4.3 million in the quarter ended March 23, 1996 and
$12.4 million in the quarter ended March 25, 1995. The Company's net sales from
ongoing operations, excluding businesses sold or to be sold, were $168.0 in the
quarter ended March 25, 1995 compared to $173.5 million in the quarter ended
March 23, 1996. This increase in net sales of $5.5 million for ongoing
operations is primarily comprised of increased net sales at CMF and Nalley's of
$4.4 million and $1.1 million, respectively, with minor variations at other
operations. The increased net sales at Nalley's of $1.1 million or 2.5 percent
primarily relates to increases in the salad dressings, salsa, and pickles
product lines. The net sales increase at CMF of $4.4 million or 5.7 percent is
primarily attributable to an increase in canned and frozen vegetables compared
to the prior year quarter.
Gross Profit: Gross profit of $44.2 million for the quarter ended March 23, 1996
decreased $9.4 million or 17.5 percent from $53.6 million for the quarter ended
March 25, 1995. Of this net decrease, a $1.8 million reduction was attributable
to businesses sold or to
<PAGE>
be sold, and a decrease of $7.6 million was attributable to the Company's
ongoing operations. The decrease in gross profit for ongoing operations is
comprised of increases and decreases as follows:
<TABLE>
<CAPTION>
(In Millions)
<S> <C>
CMF $(3.4)
Southern Frozen Foods (1.7)
Nalley's Fine Foods (2.1)
All Other (0.4)
-----
$(7.6)
</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 was caused by increased manufacturing
costs primarily related to the new dressing plant.
Selling, Administrative and General Expenses: Selling, administrative and
general expenses in the quarter ended March 23, 1996 of $34.6 million decreased
$5.6 million or 13.9 percent from $40.2 million in the quarter ended March 25,
1995. This net decrease of $5.6 million includes:
<TABLE>
<CAPTION>
(In Millions)
Businesses
Sold or
to be Sold Ongoing Total
<S> <C> <C> <C>
Change in trade promotions $(0.6) $(1.5) $(2.1)
Change in advertising and selling costs (1.3) (0.5) (1.8)
Change in other administrative expenses (0.1) (1.6) (1.7)
----- ----- -----
$(2.0) $(3.6) $(5.6)
===== ===== =====
</TABLE>
The $2.0 million decrease in trade promotions and advertising and selling costs
at the Company's ongoing operations is primarily comprised of decreased spending
at CMF's and Nalley's operations.
The $1.6 million decrease in other administrative expenses at the Company's
ongoing operations primarily relates to reduced expenditures relating to the
Company's management incentive plan.
NINE MONTH CHANGES FROM THE CORRESPONDING PRIOR YEAR PERIOD
Net Sales: The Company's net sales in the first nine months of fiscal 1996 of
$551.2 million decreased $22.0 million or 3.8 percent from $573.2 million in the
first nine months of fiscal 1995. The net sales attributable to businesses sold
or to be sold discussed in NOTE 3 were $12.4 million in the first nine months of
fiscal 1996 compared to $43.8 million in the first nine months of fiscal 1995.
The Company's net sales from ongoing operations excluding businesses sold or to
be sold were $538.3 million in the first nine months of fiscal 1996, an increase
of $9.0 million or 1.7 percent from $529.4 million in the first nine months of
fiscal 1995. This increase in net sales of $8.9 million for ongoing operations
primarily relates to Nalley's and Brooks, with increases of $5.7 million and
$2.6 million, respectively.
Gross Profit: Gross profit of $138.5 million in the first nine months of fiscal
1996 decreased $31.9 million or 18.7 percent from $170.4 million in the first
nine months of fiscal 1995. Of this net decrease, a $7.3 million reduction was
attributable to businesses sold or to be sold, and a decrease of $24.6 million
was attributable to decreased gross profit at the Company's ongoing operations.
<PAGE>
This decrease of $24.6 million was the result of variations in volume, selling
prices, costs and product mix. The gross profit variations are comprised of
increases and decreases as follows:
<TABLE>
<CAPTION>
(In Millions)
<S> <C>
CMF $(14.0)
Southern Frozen Foods (3.6)
Nalley (8.7)
All others 1.7
------
$(24.6)
</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 relates to higher
costs on all the product lines, but particularly in salad dressings due to plant
start-up activities.
Restructuring Expenses Including Net (Loss)/Gain From Division Disposals:
Restructuring expenses, including net (loss)/gain from division disposals
resulted in a charge in the first nine months of fiscal 1995 of $8.4 million to
reflect the impact of the sale of certain assets of the Nalley's US Chips and
Snacks business and other expenses relating to the disposal of this operation.
Change in Control Expenses: Change in control expenses recorded in the first
nine months of fiscal 1995, amounting to $2.2 million, reflect non-deductible
expenses relating to the sale of the Company which include legal, accounting,
investment banking and other expenses.
Gain on Assets Resulting From Fire Claim: The gain on assets resulting from fire
claim recorded in the first nine months of fiscal 1995 amounted to $6.5 million
representing the replacement value in excess of the depreciated book value of
the building and equipment destroyed by fire on July 7, 1994 at the Southern
Frozen Foods division.
Other Selling, Administrative and General Expenses: Other selling,
administrative and general expenses in the first nine months of fiscal 1996 of
$117.7 million decreased $9.5 million or 7.5 percent from $127.2 million in the
first nine months of fiscal 1995. This net decrease of $9.5 million includes:
<TABLE>
<CAPTION>
(In Millions)
Businesses
Sold or
to be Sold Ongoing Total
<S> <C> <C> <C>
Change in trade promotions $(2.5) $(2.0) $(4.5)
Change in advertising and selling costs (4.6) (1.1) (5.7)
Change in other administrative expenses (0.5) 1.2 0.7
------ ------ ------
$(7.6) $(1.9) $(9.5)
===== ===== =====
</TABLE>
The $3.1 million decrease in trade promotions, advertising and selling costs at
the Company's ongoing operations resulted from increased costs at Nalley's of
$3.0 million primarily in the canned and dressing product lines offset by
decreases at Comstock Michigan Fruit of $6.6 million primarily in the filling
and topping product lines. Minor variations occurred in the Company's other
operations.
The $1.2 million increase in other administrative costs attributable to the
Company's ongoing operations was primarily related to increased expense at
Nalley's of $4.0 million and a decrease in the Company's management incentive
expense. The increased expense at Nalley's included administrative expenses
which had been allocated to Nalley's Chips and Snacks and Nalley's Canada Ltd.
which had been sold. The disposal of these businesses did not eliminate
centralized functions leaving costs which must be reduced over a period of time.
Interest Expense: Interest expense in the first nine months of fiscal 1996 of
$31.5 million increased $7.5 million or 31.3 percent from $24.0 million in the
first nine months of fiscal 1995. This increase was primarily attributable to
the increased borrowing and rates related to the acquisition of the Company by
Pro-Fac.
Provision for Taxes: The benefit for taxes in the first nine months of fiscal
1996 of $1.2 million decreased $5.9 million from the provision of $4.7 million
in the first nine months of fiscal 1995. The non-deductibility of the
amortization of goodwill negatively impacts the Company's effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
In the nine months ended March 23, 1996, the net cash used in operating
activities of Curtice Burns of $29.7 million reflects a net loss of $4.5
million. Depreciation and amortization of assets amounted to $22.8 million.
Inventories increased $5.4 million, and accounts receivable decreased $5.3
million. Accounts payable and accrued expenses decreased $29.9 million. Changes
in other assets and liabilities amounted to $4.1 million.
Cash flows used in investing activities of $13.7 million include net cash used
for capital expenditures in the nine-month period of $12.6 million, disposals
provided $4.3 million, and the acquisition of Packer used $5.4 million.
Net cash provided by financing activities in the nine months ended March 23,
1996 amounted to $45.3 million. Proceeds from seasonal borrowings amounted to
$41.0 million, proceeds from long-term debt to finance the Packer acquisition
amounted to $5.4 million, and payments on long-term debt amounted to $11.1
million. Pro-Fac invested an additional $10.0 million in the Company.
Borrowings: Under the New Credit Agreement, as amended, Curtice Burns is able to
borrow up to $84.0 million for seasonal working capital purposes under the
Seasonal Facility, subject to a borrowing base limitation, and obtain up to
$14.0 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) $84.0
million and (ii) the sum of 60 percent of eligible accounts receivable plus 50
percent of eligible inventory.
As of March 23, 1996, (i) cash borrowings outstanding under the Seasonal
Facility were $41.0 million and (ii) additional availability under the Seasonal
Facility, after taking into account the amount of the borrowing base, was $43.0
million. In addition to its seasonal financing, as of March 23, 1996, the
Company had $1.0 million available for long-term borrowings under the Term Loan
Facility. 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. 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 Subordinated 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 March 23, 1996, 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 their own
inventories to normal. Favorable weather conditions in the 1994 growing season
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 a higher carryover inventory at the end of fiscal
1995 than at the end of fiscal 1994 for the Company. With the harvesting
completed for the smaller 1995 vegetable
<PAGE>
crop, it had been anticipated that prices would gradually increase during the
1996 fiscal year. This has not occurred to the degree expected.
Required scheduled payments on long-term debt will approximate $8.0 million in
the next 12 months. 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, as will any proceeds from the proposed sale
of Finger Lakes Packaging, as discussed below.
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.
Finger Lakes Packaging: On April 9, 1996, the Company announced its intent to
sell its Finger Lakes Packaging Company subsidiary ("Finger Lakes"), a
can-making operation based in Lyons, New York. Finger Lakes also has an
operation in Benton Harbor, Michigan. Approximately 60 percent of the cans
manufactured by Finger Lakes are used by divisions of the Company. The Company
plans to enter into a long-term supply agreement with Finger Lakes Packaging in
conjunction with the sale.
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER MATTERS
Pursuant to previously disclosed succession plans, the Board of Directors, with
the aid of a professional executive recruiting firm, has been conducting a
search, both inside and outside of the Company, for a Chief Operating Officer to
provide continuity for the future.
It is contemplated that the Chief Operating Officer will be a potential
successor when retirement plans are determined for the Chief Executive Officer.
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>
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: April 25, 1996 BY: /s/ William D. Rice
WILLIAM D. RICE
CHIEF FINANCIAL OFFICER,
SENIOR VICE PRESIDENT
(Duly Authorized Officer and Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000026285
<NAME> CURTICE-BURNS FOODS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> MAR-23-1996
<CASH> 6073
<SECURITIES> 0
<RECEIVABLES> 62730
<ALLOWANCES> 0
<INVENTORY> 169865
<CURRENT-ASSETS> 264793
<PP&E> 270435
<DEPRECIATION> 0
<TOTAL-ASSETS> 664043
<CURRENT-LIABILITIES> 121093
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 146603
<TOTAL-LIABILITY-AND-EQUITY> 664043
<SALES> 551213
<TOTAL-REVENUES> 551213
<CGS> 412760
<TOTAL-COSTS> 412760
<OTHER-EXPENSES> 112711
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31489
<INCOME-PRETAX> (5673)
<INCOME-TAX> (1193)
<INCOME-CONTINUING> (4480)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4480)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
