<PAGE>
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 December 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, PO Box 681, Rochester, NY 14603
(Address of Principal Executive Offices) (Zip Code)
Registrants 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
issuers classes of common stock as of October 13, 1995.
Common Stock: 10,000
Page 1 of 16
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Curtice-Burns Foods, Inc.
Consolidated Statement of Operations
<S> <C> <C> <C>
Quarter Ended
Fiscal 1996 Fiscal 1995
(Dollars in Thousands)
9/24/95 - 11/4/94 - 9/25/94 -
12/23/95 12/24/94 11/3/94
Successor Successor Predecessor
Net sales $208,186 $116,203 $ 99,774
Cost of sales 156,495 80,170 68,966
Gross profit 51,691 36,033 30,808
Change in control expenses (400)
Other selling, administrative, and general expenses (46,316) (26,492) (22,603)
Operating income before dividing with Pro-Fac 5,375 9,541 7,805
Interest expense (10,959) (5,849) (2,553)
Pretax (loss)/earnings before dividing with Pro-Fac (5,584) 3,692 5,252
Pro-Fac share of loss/(earnings) 2,792 (1,846) (2,569)
(Loss)/income before taxes (2,792) 1,846 2,683
Tax benefit/(provision) 915 (942) (1,298)
Net (loss)/income $ (1,877) $ 904 $ 1,385
Six Months Ended
Fiscal 1996 Fiscal 1995
6/25/95 - 11/4/94 - 6/26/94 -
12/23/95 12/24/94 11/3/94
Successor Successor Predecessor
Net sales $373,364 $116,203 $276,621
Cost of sales 279,141 80,170 195,810
Gross profit 94,223 36,033 80,811
Restructuring expenses, including net
(loss)/gain from division disposals (8,415)
Change in control expenses (2,150)
Gain on assets resulting from fire claim 6,469
Other selling, administrative and general
expenses (83,041) (26,492) (60,576)
Operating income before dividing with Pro-Fac 11,182 9,541 16,139
Interest expense (21,005) (5,849) (7,624)
Pretax(loss)/earnings before dividing with Pro-Fac (9,823) 3,692 8,515
Pro-Fac share of loss/(earnings) 4,912 (1,846) (4,062)
(Loss)/income before taxes (4,911) 1,846 4,453
Tax benefit/(provision) 1,200 (942) (2,735)
Net (loss)/income $ (3,711) $ 904 $ 1,718
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
Curtice-Burns Foods, Inc.
Consolidated Balance Sheet
(Dollars in Thousands)
<S> <C> <C> <C>
December 23, June 24, December 24,
1995 1995 1994
Assets
Current assets:
Cash $ 6,228 $ 4,158 $ 7,765
Accounts receivable trade, net 62,094 47,341 66,203
Accounts receivable, other 9,853 19,812 13,015
Income taxes refundable 1,877 1,043
Current deferred tax asset 3,954 6,784 10,610
Inventories -
Finished goods 165,009 108,691 160,962
Raw materials and supplies 46,581 51,491 54,464
Total inventories 211,590 160,182 215,426
Receivable from Pro-Fac 8,490 1,001
Prepaid manufacturing expense 9,903
Prepaid expenses and other
current assets 4,049 2,306 5,289
Total current assets 308,135 252,530 318,308
Investment in Bank 22,907 22,907 21,619
Property, plant, and equipment, net 273,827 272,192 271,907
Assets held for sale 5,935 13,863 6,138
Goodwill and other intangibles, net 83,706 101,494 93,975
Other assets 12,770 9,298 22,293
Total assets $707,280 $672,284 $734,240
Liabilities and shareholders equity
Current liabilities:
Notes payable $ 70,000 $ $ 70,000
Accounts payable 49,218 60,112 55,078
Income taxes payable 2,975
Due to Pro-Fac 10,601
Accrued interest 9,486 9,171 4,550
Accrued employee compensation 7,945 11,644 9,259
Accrued manufacturing expense 2,269 2,417
Other accrued expenses 27,514 15,116 29,171
Current portion of obligations
under capital leases 764 764 785
Current portion of long-term debt 8,056 11,552 8,182
Total current liabilities 175,252 108,359 193,018
Long-term debt 181,420 183,665 165,390
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 61,521
Other non-current liabilities 17,906 17,836 15,822
Total liabilities 569,908 531,201 597,047
Commitments and Contingencies
Shareholders Equity:
Common stock, par value $.01
10,000 shares outstanding,
owned by Pro-Fac 0 0 0
<C> <C> <C>
December 23, June 24, December 24,
1995 1995 1994
Additional paid-in capital:
Shareholder paid-in capital 151,083 $151,083 $136,289
Less capital contribution
receivable 10,000 10,000 0
$141,083 $141,083 $136,289
141,083 141,083 136,289
Retained earnings (3,711) 904
Total shareholders equity 137,372 141,083 137,193
Total liabilities and
shareholders equity $707,280 $672,284 $734,240
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
<CAPTION>
Curtice-Burns Foods, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
<S> <C> <C> <C>
Fiscal 1996 Fiscal 1995
6/25/95 - 11/4/94 - 6/26/94 -
12/23/95 12/24/94 11/3/94
Successor Successor Predecessor
Cash Flows From Operating Activities:
Net (loss)/income $(3,711) $ 904 $ 1,718
Adjustments to reconcile net (loss)/income 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 2,053 410 753
Depreciation 12,772 3,742 6,228
Change in assets and liabilities:
Accounts receivable (3,878) (434) (12,430)
Inventories (47,158) 10,460 (70,961)
Income taxes refundable/payable (834) 2,975 1,491
Accounts payable and accrued expenses (351) (9,450) (5,662)
Receivable from/payable to Pro-Fac (7,951) (8,496) 9,650
Other assets and liabilities (2,999) 8,373 8,733
Deferred taxes 2,696 (1,224)
Net cash (used in)/provided by operating activities (52,057) 11,180 (59,758)
Cash Flows From Investing Activities:
Purchase of property, plant, and equipment (8,751) (280) 5,689)
Disposals 4,019
Cash Paid for Acquisition (5,400)
Net cash used in investing activities (10,132) (280) (5,689)
Cash Flows From Financing Activities:
Receivable from/payable to Pro-Fac (42,000) 42,000
Proceeds from issuance of short-term debt 70,000 70,000 30,000
Payments on short-term debt (30,000)
Proceeds from issuance of long-term debt 5,400 359,000 10,886
Payments on long-term debt and capital leases (11,141) (199,660) (11,694) Amounts paid to stockholders for acquisition (167,810)
Stock activity relating to Predecessors equity 52
Cash dividends paid (1,390)
Net cash provided by/(used in) financing activities 64,259 (10,470) 69,854
Net change in cash 2,070 430 4,407
Cash at beginning of period 4,158 7,335 2,928
Cash at end of period $ 6,228 $ 7,765 $ 7,335
Supplemental Disclosure of Cash Flow Information:
Cash paid/(received) during the period for -
Interest (net of amount capitalized) $10,721 $ 2,061 $ 6,967
Income taxes, net $ (366) $ 2,508 $ 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
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
<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. 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 entitys 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 have now been finalized. The
finalization of such allocations and adjustments to deferred taxes
(as described in Note 4) account for the majority of the variance
in goodwill.
These financial statements should be read in conjunction with the
financial statements and accompanying notes contained in the
Companys 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. CHANGE OF CONTROL AND AGREEMENTS WITH PRO-FAC
On November 3, 1994, Curtice-Burns was acquired by Pro-Fac. Pro-
Fac and the Company were established together in the early 1960s
and, before Pro-Facs 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 $10.0 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 six months ended December 23, 1995 and December
24, 1994 include: commercial market value of crops delivered,
$45.9 million and $54.2 million, respectively; interest income,
$6.1 million for the six months ended December 24, 1994; and
additional proceeds from (loss)/profit sharing provisions, $(4.9)
million and $5.9 million, respectively. Payments by the Company to
Pro-Fac for interest, amortization, and lease financing payments
ceased as of November 3, 1994.
<PAGE>
Following, in capsule form, is the consolidated, unaudited results
of operations of Curtice-Burns Foods for the six months ended
December 24, 1994, assuming the acquisition by Pro-Fac took place
at the beginning of the 1995 fiscal year.
<TABLE>
<CAPTION>
(In Millions)
Six Months Ended
(Pro Forma is Unaudited)
<S> <C> <C>
December 24, 1994
Actual Pro Forma
Net sales $392.8 $392.8
Income before taxes $ 6.3 $ 4.1
Net income $ 2.6 $ 2.0
</TABLE>
NOTE 3. DISPOSALS
Nalleys US Chips and Snacks: On December 19, 1994, the Company
sold the Nalleys 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.
Nalleys Canada Ltd.: On June 26, 1995, the Company sold the
Nalleys 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 Companys Nalleys US division will provide to Nalleys Canada
Ltd., through a supply agreement, those products which would no
longer be manufactured in Canada.
NOTE 4. 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-Facs
ruling also confirmed that the change in Curtice-Burns status would
have no affect on Pro-Facs ongoing treatment as a cooperative
under Subchapter T of the Internal Revenue Code of 1986.
Accordingly, during the six months ended December 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 24% percent recognized in the six months, is
comprised of state income taxes , federal taxes on non-patronage
earnings and patronage earnings retained by the Company. The
Companys 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 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 plus 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 Companys Comstock Michigan
Fruit operations.
Commitments: The Companys 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
Companys 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 Companys insurance policies. A gain on
assets destroyed in the fire was recognized by Curtice-Burns prior
<PAGE>
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 December 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. MANAGEMENTS 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 six 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 held by the
Predecessor entity compared to that of the Successor entity as well
as the effect on the Successor entitys operations for adjustments
to depreciation, amortization, and interest expense.
General: Second quarter net sales for Curtice-Burns declined from
$216.0 million in the previous year to $208.2 million in the
current year. After adjusting for divested businesses, which had
net sales of $11.0 million in the second quarter of the prior year,
there was a net sales increase of $3.2 million. The six months net
sales for Curtice Burns declined from $392.8 million in the
previous year to $373.4 million in the current year. After
adjusting for divested businesses, which had net sales of $23.4
million in the prior year period, net sales increased $4.0 million.
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.
The following table reconciles EBITDA with pretax earnings for the
three and six month periods:
<PAGE>
<TABLE>
<CAPTION>
Curtice Burns Foods Earnings Comparison
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended Six Months Ended
12/23/95 12/24/94 Variance 12/23/95 12/24/94 Variance
Pretax earnings prior to interest,
depreciation, and amortization from
ongoing businesses (EBITDA) $ 12,433 $23,488 $(11,055) $25,607 $40,778 $(15,171)
(Loss)/gain from non-recurring and
sold businesses -- (168) 168 -- (3,542) 3,542
Depreciation and amortization (7,058) (5,974) (1,084) (14,425) (11,556) (2,869)
Operating earnings 5,375 17,346 (11,971) 11,182 25,680 (14,498)
Interest expense (10,959) (8,402) (2,557) (21,005) (13,473) (7,532)
Pretax (loss)/earnings prior to dividing
with Pro-Fac $ (5,584) $ 8,944 $(14,528) $(9,823) $12,207 $(22,030)
</TABLE>
EBITDA declined $11.1 million for the quarter, from $23.5 million
in the same period the previous year to $12.4 million in fiscal
1996. Year-to-date, EBITDA declined $15.2 million, from $40.8
million the prior year to $25.6 million. This decline relates to
three main factors. The first continues to be the decline in
vegetable pricing versus the prior year, a situation that is
impacting the entire industry. Although it has taken longer than
anticipated, in the past six months there has been a slight upward
trend in pricing. The other two major factors relate to our
Nalleys Fine Foods division. They include start-up costs for a
new dressing plant and increased manufacturing costs associated
with other products. The plant start-up turned out to be more
expensive than expected, due in part to the complexity of producing
Bernsteins unique-flavored dressings, Nalleys flagship product.
Additional promotional expenses were related to the introduction of
new fat-free dressings and to meet the very competitive environment
for other products in Nalleys key North Pacific markets. These
expenses increased without an acceptable increase in sales
performance, and therefore, controls have been installed to improve
the promotion to performance relationship.
On a year-to-date basis, these increased Nalleys expenses are
estimated at $12 million. Approximately three quarters of these,
or $9 million are non-recurring costs, and corrective actions are
being taken to put these problems behind us. These actions include
improvements in dressing plant performance, new hires with specific
needed expertise, and improved trade promotion planning and
control.
<PAGE>
Other activities include a major inventory reduction program and an
aggressive cost cutting initiative corporate-wide.
The following tables illustrate the Companys results of operations
by business for the three and six months ended December 23, 1995
and December 24, 1994, and the Companys total assets by business
as of December 23, 1995 and December 24, 1994.
<TABLE>
<CAPTION>
Net Sales
(Dollars in Millions)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Three Months Ended Six Months Ended
12/23/95 12/24/94 12/23/95 12/23/94
% of % of % of % of
$ Total $ Total $ Total $ Total
Comstock Michigan Fruit ("CMF") 104.2 50.0 104.3 48.3 172.9 46.3 176.0 44.8
Nalleys Fine Foods 46.5 22.3 44.3 20.5 92.9 24.9 88.2 22.5
Southern Frozen Foods 26.5 12.7 26.6 12.3 49.4 13.2 49.7 12.7
Snack Foods Group 15.0 7.2 15.3 7.1 30.4 8.1 30.7 7.8
Brooks Foods 12.4 6.0 11.3 5.2 19.3 5.2 16.7 4.3
Finger Lakes Packaging 10.4 5.0 10.7 5.0 22.7 6.1 25.3 6.4
Intercompany eliminations 1 (6.8) (3.2) (7.5) (3.5) (14.2) (3.8) (17.2) (4.4)
Subtotal ongoing operations 208.2 100.0 205.0 94.9 373.4 100.0 369.4 94.1
Businesses sold 2 -- -- 11.0 5.1 -- -- 23.4 5.9
Total 208.2 100.0 216.0 100.0 373.4 100.0 392.8 100.0
<FN>
1 Intercompany sales by Finger Lakes
2 The Company sold Nalleys US Chips and Snacks business and
Nalleys Canada Ltd. See NOTE 3 - "Disposals."
</TABLE>
<TABLE>
<CAPTION>
Operating Income Before Dividing with Pro-Fac(1)
(Dollars in Millions)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Three Months Ended
Six Months Ended
12/23/95 12/24/94 12/23/95 12/23/94
% of % of % of $ of
$ Total $ Total $ Total $ Total
CMF 8.2 151.9 11.4 64.0 12.1 108.0 18.1 60.7
Nalleys Fine Foods (5.7) (105.6) 4.2 23.6 (4.7) (42.0) 8.6 28.9
Southern Frozen Foods 2.1 38.9 3.1 17.4 3.1 27.7 5.5 18.5
Snack Foods Group 0.9 16.7 1.1 6.2 1.9 17.0 1.9 6.4
Brooks Foods 1.8 33.3 2.0 11.2 2.2 19.6 2.1 7.0
Finger Lakes Packaging 0.7 13.0 0.6 3.4 1.5 14.0 1.6 5.4
Intercompany eliminations (2.6) (48.2) (5.3) (25.8) (4.9) (44.3) (8.3) (26.2)
Subtotal ongoing operations 5.4 100.0 17.1 100.0 11.2 100.0 29.5 100.7
Businesses sold 2 -- -- 0.6 -- -- -- 0.2 (0.7)
Total 5.4 100.0 17.7 100.0 11.2 100.0 29.7 100.0
<FN>
1 Table excludes restructuring loss from division disposals,
change in control expense, and gain on assets as a result of a
fire claim recorded in fiscal 1995.
2 The Company sold the Nalleys US Chips and Snack business and
Nalleys Canada Ltd. See NOTE 3 - "Disposals."
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Depreciation and Amortization
(Dollars in Millions)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Three Months Ended Six Months Ended
12/23/95 12/24/94 12/23/95 12/23/94
% of % of % of % of
$ Total $ Total $ Total $ Total
CMF 3.4 47.9 2.2 36.7 6.9 47.9 4.9 42.2
Nalleys Fine Foods 1.4 19.8 0.7 11.7 2.7 18.8 1.5 12.9
Southern Frozen Foods 1.3 18.3 0.6 10.0 2.6 18.1 1.2 10.3
Snack Foods Group 0.4 5.6 0.5 8.3 0.9 6.2 1.0 8.6
Brooks Foods 0.2 2.8 0.1 1.7 0.4 2.8 0.3 2.6
Finger Lakes Packaging 0.4 5.6 0.3 5.0 0.9 6.2 0.6 5.2
Corporate and eliminations -- -- 1.1 18.3 0.0 0.0 1.3 11.2
Subtotal ongoing operations 7.1 100.0 5.5 91.7 14.4 100.0 10.8 93.0
Businesses sold 1 -- -- 0.5 8.3 -- -- 0.8 7.0
Total 7.1 100.0 6.0 100.0 14.4 100.0 11.6 100.0
<FN>
1 Table excludes restructuring loss from division disposals,
change in control expense, and gain on assets as a result of a
fire claim recorded in fiscal 1995.
2 The Company sold the Nalleys US Chips and Snack business and
Nalleys Canada Ltd. See NOTE 3 - "Disposals."
</TABLE>
<TABLE>
<CAPTION>
Total Assets
(Dollars in Millions)
<S> <C> <C> <C> <C>
December 23, December 24,
1995 1994
% of % of
$ Total $ Total
CMF 383.0 45.6 264.0 36.0
Nalleys Fine Foods 153.9 21.8 89.2 12.1
Southern Frozen Foods 100.2 14.2 64.9 8.8
Snack Foods Group 28.1 4.0 24.3 3.3
Brooks Foods 22.6 3.2 11.1 1.5
Finger Lakes Packaging 31.6 4.4 42.5 5.8
Corporate 47.9 6.8 225.8 30.8
Subtotal ongoing operations 707.3 100.0 721.8 98.3
Businesses sold 1 -- -- 12.4 1.7
Total 707.3 100.0 734.2 100.0
<FN>
1 The Company sold the Nalleys US Chips and Snack business and
Nalleys Canada Ltd. See NOTE 3 "Disposals."
</TABLE>
The following table illustrates the Companys income statement data
and the percentage of net sales represented by these items for the
quarters and six months ended December 23, 1995 and December 24,
1994.
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Operations
(Dollars in Millions)
<S> <C> <C> <C> <C>
<C> <C> <C> <C>
Three Months Ended Six Months Ended
12/23/95 12/24/94 12/23/95 12/23/94
% of % of % of % of
$ Sales $ Sales $ Sales $ Sales
Net sales 208.2 100.0 216.0 100.0 373.4 100.0 392.8 100.0
Cost of sales 156.5 75.2 149.2 69.1 279.2 74.8 276.0 70.3
Gross profit 51.7 24.8 66.8 30.9 94.2 25.2 116.8 29.7
Restructuring expenses,
including net loss from
division disposals (8.4) (2.1)
Change in control expenses (0.4) (0.2) (2.2) (0.6)
Gain on assets incurred as
result of a fire claim 6.5 1.6
Other selling, administrative
and general expenses (46.3) (22.2) (49.0) (22.6) (83.0) (22.2) (87.0) (22.1)
Operating income) before
dividing with Pro-Fac 5.4 2.6 17.4 8.1 11.2 3.0 25.7 6.5
Interest expense (11.0) (5.3) (8.4) (3.9) (21.0) (5.6) (13.5) (3.4)
Pretax (loss)/earnings before
dividing with Pro-Fac (5.6) (2.7) 9.0 4.2 (9.8) (2.6) 12.2 3.1
Pro-Fac share of loss/(earnings) 2.8 1.4 (4.4) (2.0) 4.9 1.3 (5.9) (1.5)
Loss/(income) before taxes (2.8) (1.3) 4.6 2.2 (4.9) (1.3) 6.3 1.6
Tax benefit/(provision) 0.9 0.4 (2.3) (1.1) 1.2 0.3 (3.7) (0.9)
Net loss/(income) $(1.9) (0.9) 2.3 1.1 $(3.7) (1.0) 2.6 0.7
</TABLE>
CHANGES FROM SECOND QUARTER FISCAL 1995 TO SECOND QUARTER FISCAL
1996
Net Sales: The Companys net sales in the quarter ended December
23, 1995 of $208.2 million decreased $7.8 million or 3.6 percent
from $216.0 million in the same quarter last year. The net sales
attributable to businesses sold discussed in NOTE 3 were $11.0
million in the quarter ended December 24, 1994. The Companys net
sales from ongoing operations, excluding businesses sold, were
$205.0 in the quarter ended December 24, 1994 compared to $208.2
million in the quarter ended December 23, 1995. This increase in
net sales of $3.2 million for ongoing operations is primarily
comprised of increased net sales at Nalleys and Brooks of $2.2
million and $1.1 million, respectively, with minor variations at
other operations. The increased net sales at Nalleys of $2.2
million or 5.0 percent primarily relates to increases in the salad
dressings, salsa, and pickles product lines. The net sales increase
at Brooks of $1.1 million or 9.7 percent is primarily attributable
to an increase in unit sales compared to the prior year quarter.
Gross Profit: Gross profit of $51.7 million for the quarter ended
December 23, 1995 decreased $15.1 million or 22.6 percent from
$66.8 million for the quarter ended December 24, 1994. Of this net
decrease, a $2.5 million reduction was attributable to businesses
sold, and a decrease of $12.6 million was attributable to the
Companys ongoing operations. The decrease in gross profit for
ongoing operations is comprised of increases and decreases as
follow:
<TABLE>
<CAPTION>
<S> <C>
CMF $(7.0)
Southern Frozen Foods (0.7)
Nalleys Fine Foods (5.8)
Brooks 0.2
All Other 0.7
$(12.6)
</TABLE>
The decreased gross profit at the Companys CMF and Southern Frozen
Foods operations primarily relates to depressed vegetable pricing.
The decreased gross profit at the Companys Nalleys operation was
caused by increased manufacturing costs primarily related to the
startup of the new dressing plant. The improvement at Brooks is due
to the increased sales volume.
Change in Control Expenses: Change in control expenses recorded in
the second quarter of fiscal 1995 amounting to $0.4 million reflect
non-deductible expenses relating to the sale of the Company
covering legal, accounting, investment banking, and other expenses
relative to the change
<PAGE>
in control issue. All of these expenses were incurred by the
Predecessor entity. See NOTE 2 -- "Change in Control of the
Company and Agreements with Pro-Fac."
Other Selling, Administrative, and General Expenses: Other
selling, administrative, and general expenses in the quarter ended
December 23, 1995 of $46.3 million decreased $2.7 million or 5.5
percent from $49.0 million in the quarter ended December 24, 1994.
This net decrease of $2.7 million includes primarily:
<TABLE>
<CAPTION>
(In Millions)
<S> <C>
<C> <C>
Businesses
Sold
Ongoing Total
Change in trade promotions $(0.8) $(1.5) $(2.3)
Change in advertising and selling costs (1.3) (0.5) (1.8)
Change in other selling, administrative, and
general expenses (0.1) 1.5 1.4
$(2.2) $(0.5) $(2.7)
</TABLE>
The $2.0 million decrease in trade promotions and advertising and
selling costs at the Companys ongoing operations is primarily
comprised of increased spending at the Nalleys operation offset by
decreased spending at CMFs operation.
The $1.5 million increase in other administrative expenses at the
Companys ongoing operations primarily relates to increased costs
at the Companys Nalleys operations.
Interest Expense: Interest expense in the quarter ended December
23, 1995 of $11.0 million increased $2.6 million or 31.0 percent
from $8.4 million in the quarter ended December 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
December 23, 1995 of $0.9 million changed $3.2 million from the
provision of $2.3 million in the quarter ended December 24, 1994.
See NOTE 4, "Taxes," relative to the change in tax status.
SIX MONTH CHANGES FROM THE CORRESPONDING PRIOR YEAR PERIOD
Net Sales: The Companys net sales in the first six months of
fiscal 1996 of $373.4 million decreased $19.4 million or 4.9
percent from $392.8 million in the first six months 1995. The net
sales attributable to businesses sold discussed in Note 3 were
$23.4 million in the first six months of fiscal 1995. The
Companys net sales from ongoing operations excluding businesses
sold were $373.4 million in the first six months of fiscal 1996, an
increase of $4.0 million or 1.1 percent from $369.4 million in the
first six months of fiscal 1995.
Gross Profit: Gross profit of $94.2 million in the first six
months of fiscal 1996 decreased $22.6 million or 19.3 percent from
$116.8 million in the first six months of fiscal 1995. Of this net
decrease, a $5.4 million reduction was attributable to businesses
sold and a decrease of $17.2 million was attributable to decreased
gross profit at the Companys ongoing operations. This decrease of
$17.2 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>
<S> <C>
CMF $(10.6)
Southern Frozen Foods (1.9)
Nalley (6.6)
Brooks 0.5
All others 1.4
$(17.2)
</TABLE>
The decreased gross profit at the Companys CMF and Southern Frozen
Foods operations primarily relates to depressed vegetable pricing.
The decreased gross profit at the Companys Nalleys operation
primarily to higher costs on all of their product lines, but
particularly in salad dressings due to the plant start up process.
The improvement at Brooks is due to higher sales volume.
<PAGE>
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 six months of
fiscal 1995 of $8.4 million to reflect the impact of the sale of
certain assets of the Nalleys US Chips and Snack other expenses
relating to the disposal of this operation.
Change in Control Expenses: Change in control expenses recorded in
the first six months of fiscal 1995, amounting to $2.2 million,
reflect non-deductible expenses relating to the sale of the Company
covering legal, accounting, investment banking and other expenses
relative to the change in control issue. In recognizing this
expense, the Company allocated half of this amount to Pro-Fac as a
deduction to the profit split. See Note 2 - "Change in Control of
the Company and Agreements with Pro-Fac".
Gain on Assets Resulting From Fire Claim: The gain on assets
resulting from fire claim recorded in the first six months of
fiscal 1995 amounted to $6.5 million representing the insurance
proceeds for the replacement value in excess of the depreciated
book value of the building and equipment destroyed by fire on July
7, 1994 at the Southern Frozen Foods Division.
Other Selling, Administrative and General Expenses: Other selling,
administrative and general expenses in the first six months of
fiscal 1996 of $83.0 million decreased $4.0 million or 4.6 percent
from $87.0 million in the first six months of fiscal 1995. This
net decrease of $4.0 million includes primarily:
<TABLE>
<CAPTION>
(In Millions)
<S> <C>
<C> <C>
Businesses
Sold
Ongoing Total
Change in trade promotions $(1.9) $(0.5) $(2.4)
Change in advertising and
selling costs (3.2) (0.7) (3.9)
All other (0.4) 2.7 2.3
Change in selling, administrative
and general expenses $(5.5) $ 1.5 $(4.0)
</TABLE>
The $1.2 million decrease in trade promotions, advertising and
selling costs at the Companys ongoing operations resulted from
increased costs at Nalleys of $3.8 million primarily in the canned
and dressing product lines offset by a decrease at Comstock
Michigan Fruit of $5.3 million primarily in the filling and topping
product lines. Minor variations occurred in the Companys other
operations.
The $2.7 million increase in other administrative costs
attributable to the Companys ongoing operations was primarily
related to increased spending at Nalleys of $2.2 million and
slight variations at other operations.
Interest Expense: Interest expense in the first six months of
fiscal 1996 of $21.0 million increased $7.5 million or 55.6 percent
from $13.5 million in the first six 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 six months
of fiscal 1996 of $1.2 million decreased $4.9 million from the
provision of $3.7 million in the first six months of fiscal 1995.
The non-deductibility of the amortization of goodwill negatively
impacts the Companys effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
In the six months ended December 23, 1995, the net cash used in
operating activities of Curtice-Burns of $52.1 million reflects a
net loss of $3.7 million. Depreciation and amortization of assets
amounted to $14.8 million. Inventories increased $47.2 million,
and accounts receivable increased $3.9 million. Changes in other
assets and liabilities amounted to $12.1 million.
Cash flows used in investing activities of $10.1 million include
net cash used for capital expenditures in the six-month period of
$8.7 million, disposals provided $4.0 million, and the acquisition
of Packer used $5.4 million.
Net cash provided by financing activities in the six months ended
December 23, 1995 amounted to $64.3 million. Proceeds from
seasonal borrowings amounted to $70.0 million, proceeds from long
<PAGE>
term debt to finance the Packer acquisition amounted to $5.4
million, and payments on long-term debt amounted to $11.1 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 $86.0 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) $86.0 million and (ii) the sum of 60 percent of eligible
accounts receivable plus 50 percent of eligible inventory.
As of December 23, 1995, (i) cash borrowings outstanding under the
Seasonal Facility were $70.0 and (ii) availability under the
Seasonal Facility, after taking into account the amount of the
borrowing base, was $16.0 million. In addition to its seasonal
financing, as of December 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 December 23, 1995, the Company is in compliance
with all such restrictions and limitations. The Company
anticipates it will not achieve the fixed charge coverage ratio at
June 29, 1996 outlined in the New Credit Agreement. Management is
currently working with the lending institution to obtain a waiver
for this covenant. Management anticipates such waiver will be
granted.
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 years 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 completed 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
Nalleys 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 Companys 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.
<PAGE>
Management Change: Patrick Lindenbach resigned as president of the
Nalleys Fine Foods division in Tacoma, Washington, effective
December 8, 1995. Lindenbach is a partner in the management group
that purchased the Nalleys Canada division from Curtice Burns last
summer and has now decided to devote his full time and energies to
this new venture. Dennis Mullen, president of Curtice Burns
Comstock Michigan Fruit (CMF) division, assumed the additional
responsibility as president of the Nalleys division. Ben Frega, a
senior vice president at CMF, was promoted to executive vice
president and assumed much of the day-to-day responsibilities for
that division. Mr. Frega has been employed by the Company for
twenty-one years in positions of increasing responsibility.
Director Change: Subsequent to quarter end, on January 26, 1996,
Walter F. Payne was appointed to the Curtice Burns Board. Mr.
Payne replaces William B. McKnight, who has resigned from the
Board. Since joining the Curtice Burns board, Mr. McKnight has
taken on new duties as president and chief executive officer of
Wise Foods. Mr. Payne is president and chief executive officer of
Blue Diamond Growers, a 4,000-member cooperative of almond growers
based in Sacramento, California. Blue Diamond is the worlds
largest tree nut marketer and processor. Mr. Payne joined Blue
Diamond Growers in 1973 as director of marketing and planning and
was promoted to positions of increasing responsibility over the
years, including that of executive vice president and chief
operating officer in 1990, to his present role in 1992.
<PAGE>
PART II. OTHER INFORMATION
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: January 29, 1996 BY: /s/
William D. Rice
WILLIAM D. RICE
CHIEF
FINANCIAL OFFICER, SENIOR
VICE
PRESIDENT AND TREASURER
(Duly
Authorized Officer and
Principal Financial Officer)
</DOCUMENT
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000026285
<NAME> CURTICE BURNS FOODS INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> DEC-23-1995
<CASH> 6228
<SECURITIES> 0
<RECEIVABLES> 71947
<ALLOWANCES> 0
<INVENTORY> 211590
<CURRENT-ASSETS> 308135
<PP&E> 273827
<DEPRECIATION> 0
<TOTAL-ASSETS> 707280
<CURRENT-LIABILITIES> 175252
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 137372
<TOTAL-LIABILITY-AND-EQUITY> 707280
<SALES> 373364
<TOTAL-REVENUES> 373364
<CGS> 279141
<TOTAL-COSTS> 78129
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21005
<INCOME-PRETAX> (4911)
<INCOME-TAX> (1200)
<INCOME-CONTINUING> (3711)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
