<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statement of Operations and Net Proceeds
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Quarter Ended
September 25, September 26,
1999 1998
<S> <C> <C>
Net sales $ 296,248 $ 182,579
Cost of sales (211,454) (135,882)
---------- ----------
Gross profit 84,794 46,697
Selling, administrative, and general expense (63,188) (34,883)
Income from Great Lakes Kraut Company 491 636
Gain on sale of aseptic operations 0 64,202
---------- ----------
Operating income 22,097 76,652
Interest expense (20,649) (8,336)
---------- ----------
Income before taxes, dividends, allocation of net proceeds, and
extraordinary item 1,448 68,316
Tax provision (1,045) (25,007)
---------- ----------
Income before dividends, allocation of net proceeds, and
extraordinary item 403 43,309
Extraordinary item relating to the early extinguishment of debt
(net of income taxes) 0 (18,024)
---------- ----------
Net income $ 403 $ 25,285
========== ==========
Allocation of net proceeds:
Net income $ 403 $ 25,285
Dividends on common and preferred stock (2,103) (1,978)
---------- ----------
Net (deficit)/proceeds (1,700) 23,307
Allocation from/(to) earned surplus 1,700 (21,302)
---------- ----------
Net proceeds available to members $ 0 $ 2,005
========== ==========
Net proceeds available to members:
Estimated cash payment $ 0 $ 501
Qualified retains 0 1,504
---------- ----------
Net proceeds available to members $ 0 $ 2,005
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Balance Sheet(Unaudited)
(Dollars in Thousands) ASSETS
<CAPTION>
September 25, June 26, September 26,
1999 1999 1998
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 10,832 $ 6,540 $ 9,083
Accounts receivable, trade, net 114,017 88,249 105,374
Accounts receivable, other 14,695 9,848 23,038
Income taxes refundable 4,079 11,295 0
Current deferred tax asset 16,160 16,160 13,336
Inventories -
Finished goods 410,091 284,863 349,451
Raw materials and supplies 78,195 50,057 45,829
---------- ---------- ----------
Total inventories 488,286 334,920 395,280
---------- ---------- ----------
Current investment in CoBank 1,602 2,403 1,330
Prepaid manufacturing expense 114 18,217 98
Prepaid expenses and other current assets 22,938 27,883 17,288
---------- ---------- ----------
Total current assets 672,723 515,515 564,827
Investment in CoBank 19,693 19,693 22,377
Investment in Great Lakes Kraut Company 7,170 6,679 7,223
Property, plant, and equipment, net 364,118 367,255 317,025
Assets held for sale, at net realizable value 1,172 890 2,711
Goodwill and other intangible assets, net 262,059 260,733 321,022
Other assets 25,615 25,714 24,477
---------- ---------- ----------
Total assets $1,352,550 $1,196,479 $1,259,662
========== ========== ==========
Liabilities and Shareholders' and Members' Capitalization
Current liabilities:
Notes payable $ 165,600 $ 54,900 $ 94,000
Current portion of obligations under capital leases 208 208 256
Current portion of long-term debt 16,580 8,670 1,023
Accounts payable 124,876 107,159 96,930
Income taxes payable 0 0 13,212
Accrued interest 11,552 5,974 690
Accrued employee compensation 15,194 15,127 14,329
Other accrued expenses 79,214 64,603 96,209
Dividends payable 0 45 0
Amounts due AgriFrozen growers 1,372 1,453 0
Amounts due members 29,032 20,045 29,946
---------- ---------- ----------
Total current liabilities 443,628 278,184 346,595
Obligations under capital leases 568 568 503
Long-term debt 694,761 702,322 687,087
Deferred income tax liabilities 23,072 23,072 34,644
Other non-current liabilities 31,886 32,222 26,623
Minority interest in AgriFrozen 8,000 8,000 0
---------- ---------- ----------
Total liabilities 1,201,915 1,044,368 1,095,452
---------- ---------- ----------
Commitments and contingencies
Class B cumulative redeemable preferred stock liquidation preference $10 per
share, authorized - 500,000 shares; issued and
outstanding 26,061, 26,061, and 27,043 shares, respectively 261 261 270
Common stock, par value $5, authorized - 5,000,000 shares
September 25, June 26, September 26,
1999 1999 1998
---------- --------- -------------
Shares issued 2,040,568 1,995,740 1,834,805
Shares subscribed 346,229 384,649 737,935
--------- --------- ---------
Total subscribed and issued 2,386,797 2,380,389 2,572,740
Less subscriptions receivable in installments (346,229) (384,649) (737,935)
--------- --------- ---------
Total issued and outstanding 2,040,568 1,995,740 1,834,805 10,203 9,979 9,174
Shareholders' and members' capitalization: ========= ========= =========
Retained earnings allocated to members 25,573 25,573 31,264
Non-qualified allocation to members 2,050 2,050 2,660
Non-cumulative preferred stock, par value $25; authorized - 5,000,000 shares;
issued and outstanding - 39,635,
39,635, and 45,001, respectively 991 991 1,125
Class A cumulative preferred stock, liquidation preference
$25 per share; authorized - 10,000,000 shares; issued and
outstanding 3,694,495, 3,694,495 and 3,503,199 shares,
respectively 92,362 92,362 87,580
Earned surplus 19,958 21,658 32,750
Accumulated other comprehensive income:
Minimum pension liability adjustment (763) (763) (608)
Cumulative foreign currency adjustment 0 0 (5)
---------- ---------- -----------
Total shareholders' and members' capitalization 140,171 141,871 154,766
---------- ---------- ----------
Total liabilities and capitalization $1,352,550 $1,196,479 $1,259,662
========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
<CAPTION>
Quarter Ended
September 25, September 26,
1999 1998
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 403 $ 25,285
Amounts payable to members 0 (501)
Adjustments to reconcile net income to net cash used in operating activities:
Extraordinary item relating to the early extinguishment of debt (net of income taxes) 0 18,024
Gain on sale of aseptic operations 0 (64,202)
Depreciation 8,466 4,385
Amortization of goodwill and other intangibles 2,105 926
Amortization of debt issue costs and discount on subordinated promissory note 1,140 200
Equity in undistributed earnings of Great Lakes Kraut Company (491) (636)
Change in assets and liabilities:
Accounts receivable (30,615) (40,670)
Inventories (135,263) (63,732)
Income taxes refundable/(payable) 7,216 19,629
Accounts payable and other accrued expenses 37,587 (12,796)
Amounts due to members 8,987 9,310
Other assets and liabilities 3,984 (3,034)
----------- -----------
Net cash used in operating activities (96,481) (107,812)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (8,672) (4,094)
Proceeds from disposals 273 83,000
Proceeds from investment in CoBank 801 664
Cash paid for acquisitions 0 (442,918)
----------- -----------
Net cash used in investing activities (7,598) (363,348)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of short-term debt 110,700 177,000
Repayment of short-term debt 0 (83,000)
Proceeds from issuance of long-term debt 0 677,100
Payments on long-term debt (450) (276,450)
Cash paid for debt issuance costs 0 (17,523)
Issuances of common stock 224 45
Cash dividends paid (2,103) (1,978)
----------- -----------
Net cash provided by financing activities 108,371 475,194
----------- -----------
Net change in cash and cash equivalents 4,292 4,034
Cash and cash equivalents at beginning of period 6,540 5,049
----------- -----------
Cash and cash equivalents at end of period $ 10,832 $ 9,083
=========== ===========
<FN>
(Table continued on next page)
</FN>
</TABLE>
<PAGE>
<TABLE>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statement of Cash Flows
(Dollars in Thousands)
(Table continued from previous page)
<CAPTION>
Quarter Ended
September 25, September 26,
1999 1998
------------------ -------------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Acquisition of Dean Foods Vegetable Company -
Accounts receivable $ 24,201
Current deferred tax asset 30,645
Inventories 195,674
Prepaid expenses and other current assets 6,374
Property, plant and equipment 154,527
Assets held for sale at net realizable value 49
Goodwill and other intangible assets 182,010
Accounts payable (40,865)
Accrued employee compensation (8,437)
Other accrued expenses (75,778)
Long-term debt (2,752)
Subordinated promissory note (22,590)
Other assets and liabilities, net (2,453)
----------
$ 440,605
==========
Acquisition of J.A. Hopay Distributing Co., Inc. -
Accounts receivable $ 420
Inventories 153
Property, plant and equipment 51
Goodwill and other intangible assets 3,303
Other accrued expenses (251)
Obligation for covenant not to compete (1,363)
----------
$ 2,313
==========
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
PRO-FAC COOPERATIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
Pro-Fac Cooperative, Inc. ("Pro-Fac" or the "Cooperative") is an agricultural
cooperative which processes and markets crops grown by its members through its
wholly-owned subsidiary Agrilink Foods, Inc. ("Agrilink") and through its
subsidiary PF Acquisition II, Inc. in which it has a controlling interest. PF
Acquisition II, Inc. conducts business under the name AgriFrozen Foods
("AgriFrozen").
Agrilink has four primary product lines including: vegetables, fruits, snacks,
and canned meals. AgriFrozen has vegetables as its one primary product line. The
majority of each of the product lines' net sales are within the United States.
In addition, all of the Cooperative's operating facilities, excluding one in
Mexico, are within the United States.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and, in the opinion
of management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of the results of operations for
these periods. The following summarizes the significant accounting policies
applied in the preparation of the accompanying financial statements. These
financial statements should be read in conjunction with the financial statements
and accompanying notes contained in the Pro-Fac Cooperative, Inc. Form 10-K/A-1
for the fiscal year ended June 26, 1999.
Consolidation: The consolidated financial statements include the Cooperative and
its subsidiaries, Agrilink and AgriFrozen. The financial statements are after
elimination of intercompany transactions and balances. Investments in affiliates
owned more than 20 percent but not in excess of 50 percent are recorded under
the equity method of accounting.
Reclassification: Certain items for fiscal 1999 have been reclassified to
conform with the current presentation.
NOTE 2. ACQUISITIONS
Agripac Frozen Vegetable Business: On February 23, 1999, AgriFrozen acquired the
frozen vegetable business of Agripac, Inc. ("Agripac"), an Oregon cooperative.
AgriFrozen was formed in January 1999 under the corporation laws of New York. On
January 4, 1999 Agripac filed a voluntary petition under Chapter 11 of the
Bankruptcy Code in the United States Bankruptcy Court for the District of
Oregon. On January 22, 1999 Agripac, as debtor-in-possession, filed a motion
with the Bankruptcy Court for authority to sell substantially all of the assets
comprising its frozen food processing business. The bankruptcy court confirmed
the sale of Agripac's frozen food processing assets to AgriFrozen by an order
entered on February 18, 1999.
The net purchase price for the assets was $80.5 million. AgriFrozen paid an
additional $7.8 million in related expenses, including $6.4 million to prior
member-growers of Agripac to obtain crop delivery agreements with AgriFrozen,
and transaction expenses and miscellaneous costs totaling $1.4 million.
AgriFrozen expects to pay an additional $1.2 million in severance costs
associated with the acquisition and the implementation of AgriFrozen's business
plan. In connection with, and as a condition to the consummation of the
acquisition, AgriFrozen entered into a sufficient number of crop delivery
contracts with prior member growers of Agripac acceptable to AgriFrozen.
The acquisition was accounted for under the purchase method of accounting. Under
purchase accounting tangible and identifiable intangible assets acquired are
recorded at their respective fair values.
In order to consummate the acquisition, AgriFrozen (i) entered into a credit
facility with CoBank (the "CoBank Credit Facility") providing for $30 million of
term loan borrowings and up to $60 million of revolving credit borrowings (the
"CoBank Revolving Credit Facility") and (ii) issued a $12 million Subordinated
Promissory Note to CoBank. Neither Pro-Fac nor Agrilink guaranteed the debts of
AgriFrozen or otherwise pledged any of their respective properties as security
for the CoBank financing. In fact, all of AgriFrozen's indebtedness is expressly
without recourse to Pro-Fac and Agrilink.
<PAGE>
Phase I environmental audits were performed on the facilities acquired from
Agripac, including lease properties. A number of environmental conditions
requiring remedial action have been identified, but none of them individually,
or in the aggregate, are expected to exceed the $4.0 million of debt reduction
for environmental remediation to be provided by CoBank.
As part of its business strategy, AgriFrozen has also entered into an
administrative services agreement with Agrilink to provide it with certain
management consulting and administrative services.
The effects of the Agripac acquisition are not material and accordingly, have
been excluded from the pro forma information presented below.
Dean Foods Vegetable Company: On September 24, 1998, Agrilink acquired the Dean
Foods Vegetable Company ("DFVC"), the frozen and canned vegetable business of
Dean Foods Company ("Dean Foods"), by acquiring all the outstanding capital
stock of Dean Foods Vegetable Company and Birds Eye de Mexico SA de CV (the
"DFVC Acquisition"). In connection with the DFVC Acquisition, Agrilink sold its
aseptic business to Dean Foods. Agrilink paid $360 million in cash, net of the
sale of the aseptic business, and issued to Dean Foods a $30 million unsecured
subordinated promissory note due November 22, 2008 (the "Dean Foods Subordinated
Promissory Note"), as consideration for the DFVC Acquisition. Agrilink had the
right, exercisable until July 15, 1999, to require Dean Foods, jointly with
Agrilink, to treat the DFVC Acquisition as an asset sale for tax purposes under
Section 338(h)(10) of the Internal Revenue Code. On April 15, 1999, Agrilink
paid $13.2 million to Dean Foods and exercised the election.
After the DFVC Acquisition, DFVC was merged into Agrilink. DFVC has been one of
the leading processors of vegetables in the United States, selling its products
under well-known brand names, such as Birds Eye, Freshlike and Veg-All, and
various private labels. Agrilink believes that the DFVC Acquisition strengthens
its competitive position by: (i) enhancing its brand recognition and market
position, (ii) providing opportunities for cost savings and operating
efficiencies and (iii) increasing its product and geographic diversification.
The DFVC Acquisition was accounted for under the purchase method of accounting.
Under purchase accounting, tangible and identifiable intangible assets acquired
and liabilities assumed were recorded at their respective fair values. Goodwill
associated with the DFVC Acquisition is being amortized over 30 years.
The following unaudited pro forma financial information presents a summary of
consolidated results of operations of Pro-Fac and DFVC as if the acquisition had
occurred at the beginning of the 1999 fiscal year.
Quarter Ended
September 26, 1998
Net sales $279.7
Income before extraordinary item $ 33.2
Net income $ 16.8
These unaudited pro forma results have been prepared for comparative purposes
only and include adjustments for additional depreciation expense and
amortization and interest expense on acquisition debt. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect at the beginning of the 1999 fiscal year, or of
the future operations of the consolidated entities.
Concurrently with the DFVC Acquisition, Agrilink refinanced its existing
indebtedness (the "Refinancing"), including its 12 1/4 percent Senior
Subordinated Notes due 2005 (the "Old Notes") and its then existing bank debt.
On August 24, 1998, Agrilink commenced a tender offer (the "Tender Offer") for
all the Old Notes and consent solicitation to certain amendments under the
indenture governing the Old Notes to eliminate substantially all the restrictive
covenants and certain events of default therein. Substantially all of the $160
million aggregate principal amount of the Old Notes were tendered and purchased
by Agrilink for aggregate consideration of approximately $184 million, including
accrued interest of $2.9 million. Agrilink also terminated its then existing
bank facility (including seasonal borrowings) and repaid the $176.5 million,
excluding interest owed and breakage fees outstanding thereunder. Agrilink
recognized an extraordinary item of $18.0 million (net of income taxes) in the
first quarter of fiscal 1999 relating to this refinancing.
<PAGE>
In order to consummate the DFVC Acquisition and the Refinancing and to pay the
related fees and expenses, Agrilink: (i) entered into a new credit facility (the
"New Credit Facility") providing for $455 million of term loan borrowings (the
"Term Loan Facility") and up to $200 million of revolving credit borrowings (the
"Revolving Credit Facility"), (ii) entered into and drew upon a $200 million
bridge loan facility (the "Subordinated Bridge Facility") and (iii) issued the
$30 million Subordinated Promissory Note to Dean Foods. The Subordinated Bridge
Facility was repaid during November of 1998 principally with the proceeds from
the issuance of Senior Subordinated Notes (the "New Notes") for $200 million
aggregate principal amount due November 1, 2008. Interest on the New Notes
accrues at the rate of 11-7/8 percent per annum. Debt issue costs of $5.5
million associated with the Subordinated Bridge Facility were expensed during
the quarter ended December 26, 1998.
NOTE 3. AGREEMENTS WITH AGRILINK AND AGRIFROZEN
Agrilink: The contractual relationship between Pro-Fac and Agrilink is defined
in the Pro-Fac Marketing and Facilitation Agreement (the Pro-Fac Marketing
Agreement"). Under the Pro-Fac Marketing Agreement, Agrilink pays Pro-Fac the
commercial market value ("CMV") for all crops supplied by Pro-Fac. CMV is
defined as the weighted average price paid by other commercial processors for
similar crops sold under preseason contracts and in the open market in the same
or competing market area. Although CMV is intended to be no more than the fair
market value of the crops purchased by Agrilink, it may be more or less than the
price Agrilink would pay in the open market in the absence of the Pro-Fac
Marketing Agreement.
Under the Pro-Fac Marketing Agreement, Agrilink is required to have on its board
of directors some persons who are neither members of nor affiliated with Pro-Fac
("Disinterested Directors"). The number of Disinterested Directors must at least
equal the number of directors who are members of Pro-Fac. The volume and type of
crops to be purchased by Agrilink under the Pro-Fac Marketing Agreement are
determined pursuant to its annual profit plan, which requires the approval of a
majority of the Disinterested Directors of Agrilink. In addition, under the
Pro-Fac Marketing Agreement, in any year in which Agrilink has earnings on
products which were processed from crops supplied by Pro-Fac ("Pro-Fac
Products"), Agrilink pays to Pro-Fac, as additional patronage income, 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 Agrilink. In years in which Agrilink
has losses on Pro-Fac Products, Agrilink 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 Agrilink.
Additional patronage income is paid to Pro-Fac for services provided to
Agrilink, including the provision of a long term, stable crop supply, favorable
payment terms for crops and the sharing of risks in losses of certain operations
of the business. Earnings and losses are determined at the end of the fiscal
year, but are accrued on an estimated basis during the year. Under the Pro-Fac
Marketing Agreement, Pro-Fac is required to reinvest at least 70 percent of the
additional patronage income in Agrilink.
AgriFrozen: The contractual relationship between Pro-Fac and AgriFrozen is
defined in a Marketing and Facilitation Agreement between Pro-Fac and
AgriFrozen. Under this agreement, AgriFrozen will purchase raw products from
Pro-Fac and will process and market the finished products. AgriFrozen will pay
Pro-Fac CMV for the crops supplied by Pro-Fac. In addition, in any year in which
AgriFrozen has earnings on any products sold which were processed from crops
supplied by Pro-Fac, AgriFrozen will distribute such earnings to members of
Pro-Fac. However, in the event AgriFrozen experiences any losses on Pro-Fac
products, AgriFrozen will deduct the losses from the total CMV payable. The
agreement permits AgriFrozen to pay 20 percent in cash and retain 80 percent of
its earnings on Pro-Fac products as working capital.
Under the Marketing and Facilitation Agreement between AgriFrozen and Pro-Fac,
the board of directors of AgriFrozen is required to consist of: (i) at least
three and as many as five directors who are individuals who currently serve as
directors of Pro-Fac and who are chosen by Pro-Fac's board of directors; (ii)
one director who is nominated by the president of Agrilink from among Agrilink's
management employees; and (iii) any number of disinterested directors who are to
be elected from individuals suggested by the president of Agrilink.
Disinterested directors are persons who are neither employees, shareholders, nor
otherwise affiliated with Pro-Fac or AgriFrozen, but may include a disinterested
director of Agrilink.
<PAGE>
<TABLE>
NOTE 4. DEBT
Summary of Long-Term Debt:
<CAPTION>
September 25, 1999 June 26, September 26,
Agrilink AgriFrozen Total 1999 1998
----------- ----------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Term Loan Facility $ 446,400 $ 30,000 $ 476,400 $ 476,600 $ 455,000
Senior Subordinated Notes 200,015 0 200,015 200,015 15
Subordinated Promissory Note (net of discount) 24,056 4,121 28,177 27,378 23,372
Subordinated Bridge Facility 0 0 0 0 200,000
Other 6,749 0 6,749 6,999 9,723
---------- -------- ---------- ---------- ----------
Total debt 677,220 34,121 711,341 710,992 688,110
Less current portion (16,580) 0 (16,580) (8,670) (1,023)
---------- -------- ---------- ---------- ----------
Total long-term debt $ 660,640 $ 34,121 $ 694,761 $ 702,322 $ 687,087
========== ======== ========== ========== ==========
</TABLE>
NOTE 5. OTHER MATTERS
On September 15, 1999, Agrilink and Seneca Foods Corporation announced they are
in negotiation regarding the purchase by Seneca of Agrilink's Midwest, private
label, canned vegetable business. The transaction will include reciprocal
copacking agreements. The parties are working toward finalizing the agreement by
mid November. This transaction does not include Agrilink's retail branded canned
vegetables, Veg-All and Freshlike. No significant gain or loss is anticipated on
this sale.
Restructuring: During the third quarter of fiscal 1999, Agrilink began
implementation of a corporate-wide restructuring program. The overall objectives
of the plan are to reduce expenses, improve productivity, and streamline
operations. The total restructuring charge amounted to $5.0 million and was
primarily comprised of employee termination benefits. Efforts have focused on
the consolidation of operating functions and the elimination of approximately
five percent of the work force. Reductions in personnel include operational and
administrative positions. Through September 25, 1999, $1.9 million of this
charge has been liquidated and the remaining termination benefits will be
liquidated during fiscal 2000.
NOTE 6: OPERATING SEGMENTS
The Cooperative is organized by product line for management reporting with
operating income being the primary measure of segment profitability.
Accordingly, no items below operating earnings are allocated to segments. The
Cooperative's four primary operating segments are as follows: vegetables,
fruits, snacks, and canned meals.
The vegetable product line consists of canned and frozen vegetables, chili
beans, pickles, and various other products. Branded products within the
vegetable category include Birds Eye, Birds Eye Voila!, Freshlike, Veg-All,
McKenzies, Brooks Chili Beans, Farman's and Nalley. The fruit product line
consists of canned and frozen fruits including fruit fillings and toppings.
Branded products within the fruit category include Comstock and Wilderness. The
snack product line consists of potato chips, popcorn and other corn-based snack
items. Branded products within the snacks category include Tim's Cascade Chips,
Snyder of Berlin, Husman, La Restaurante, Erin's, Beehive, Pops-Rite, and Super
Pop. The canned meal product line includes canned meat products such as chilies,
stew, and soups, and various other ready-to-eat prepared meals. Branded products
within the canned meal category include Nalley. Other product lines primarily
represent salad dressings. Branded products within the "other category" include
Bernstein's and Nalley.
<PAGE>
The following table illustrates the Cooperative's operating segment information:
<TABLE>
(Dollars in Millions) Fiscal Years Ended
<CAPTION>
September 25, 1999 September 26, 1998
<S> <C> <C>
Net Sales:
Vegetables $ 200.3 $ 78.8
Fruits 23.3 25.1
Snacks 21.4 21.8
Canned Meals 16.6 14.8
Other 14.7 13.4
--------- --------
Continuing segments 276.3 153.9
Businesses sold or to be sold1 19.9 28.7
--------- --------
Total $ 296.2 $ 182.6
========= ========
Operating income:
Vegetables2 $ 15.0 $ 3.4
Fruits 3.3 2.2
Snacks 1.5 2.0
Canned Meals 1.9 1.4
Other 0.9 0.0
--------- --------
Continuing segments 22.6 9.0
Businesses sold or to be sold1 (0.5) 3.5
--------- --------
Total 22.1 12.5
Gain on sale of aseptic operations 0.0 64.2
--------- --------
Total consolidated operating income 22.1 76.7
Interest expense (20.7) (8.4)
--------- --------
Income before taxes, dividends, allocation of net proceeds
and extraordinary item $ 1.4 $ 68.3
========= ========
<FN>
1 Includes the private label canned vegetable business to be sold in fiscal 2000 and the aseptic and peanut butter businesses sold
in fiscal 1999.
2 The vegetable product line includes earnings derived from Agrilink's investment in Great Lakes Kraut Company of $0.5 million and
$0.6 million in fiscal 2000 and fiscal 1999, respectively.
</FN>
</TABLE>
NOTE 7. SUBSIDIARY GUARANTORS
Kennedy Endeavors, Incorporated and Linden Oaks Corporation wholly-owned
subsidiaries of Agrilink ("Subsidiary Guarantors"), and Pro-Fac, have jointly
and severally, fully and unconditionally guaranteed, on a senior subordinated
basis, the obligations of Agrilink with respect to Agrilink's 11-7/8 percent
Senior Subordinated Notes due 2008 ("New Notes") and the New Credit Facility.
The covenants in the New Notes and the New Credit Facility do not restrict the
ability of the Subsidiary Guarantors to make cash distributions to Agrilink.
Separate financial statements and other disclosures concerning the Subsidiary
Guarantors are not presented because management has determined that such
financial statements and other disclosures are not material. Accordingly, set
forth below is certain summarized financial information derived from unaudited
historical financial information for the Subsidiary Guarantors, on a combined
basis.
<PAGE>
(Dollars in Thousands)
Quarter Ended
September 25, September 26,
1999 1998
------------- --------------
Summarized Statement of Operations:
Net sales $ 18,262 $ 3,331
Gross profit 14,384 1,561
Income from continuing operations 14,132 610
Net income 9,186 396
Summarized Balance Sheet:
Current assets $ 2,511 $ 2,097
Noncurrent assets 215,813 7,080
Current liabilities 5,583 758
On March 2, 1999, Agrilink transferred trademarks valued at $212.6 million to
Linden Oaks Corporation. By consolidating the trademarks into a separate
subsidiary, Agrilink will be able to monitor more closely and efficiently the
benefits associated with its trademarks. The royalty fees that are earned by
Linden Oaks Corporation in connection with the trademarks are insignificant with
respect to the Consolidated Statement of Operations and Net Proceeds.
NOTE 8. OTHER MATTERS
Dividends: Subsequent to quarter end, the Cooperative declared a cash dividend
of $.43 per share on the Class A Cumulative Preferred Stock. These dividends
approximate $1.6 million and were paid on October 29, 1999.
