<PAGE>
- - ----------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 29, 1996 Commission File No. 1-1790
----------
DI GIORGIO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0431833
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
380 Middlesex Avenue 07008
Carteret, New Jersey (Zip Code)
(Address of principal executive offices)
Registrant's telephone number including area code: (908) 541-5555
----------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---------- ----------
As of July 24, 1996, there were 101.62 shares of Class A Common Stock and
100 shares of Class B Common Stock, par value of each class $.01,
outstanding.
- - ----------------------------------------------------------------------------
<PAGE>
DI GIORGIO CORPORATION AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
December 30, 1995 and June 29, 1996 (Unaudited)............. 1
Consolidated Condensed Statements of Operations,
Twenty-Six Weeks and Thirteen Weeks Ended
July 1, 1995 and June 29, 1996 (Unaudited).................. 2
Consolidated Condensed Statement of Stockholder's Equity,
Twenty-Six Weeks Ended June 29, 1996 (Unaudited)............ 3
Consolidated Condensed Statements of Cash Flows,
Twenty-Six Weeks Ended July 1, 1995 and June 29, 1996
(Unaudited)................................................. 4
Notes to Consolidated Condensed Financial Statements......... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 10
Item 6. Exhibits and Reports on Form 8-K...................... 10
Signatures........................................................ 11
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
December 30, June 29,
1995 1996
(Unaudited)
ASSETS
Current Assets:
Cash.......................................... $302 $571
Accounts and notes receivable................. 70,864 64,322
Inventories................................... 52,331 50,120
Prepaid expenses.............................. 3,479 3,702
----- -----
Total current assets.................... 126,976 118,715
------- -------
Property, Plant & Equipment
Cost.......................................... 71,043 71,324
Accumulated depreciation...................... (10,985) (13,541)
------ ------
Net........................................... 60,058 57,783
------ ------
Long-term notes receivable...................... 7,195 8,954
Other assets.................................... 12,680 12,569
Deferred financing costs........................ 4,828 4,331
Excess of costs over net assets acquired........ 95,510 94,064
------ ------
$307,247 $296,416
======== ========
LIABILITIES & STOCKHOLDER'S EQUITY
Current Liabilities:
Notes payable................................. $32,303 $35,987
Accounts payable.............................. 58,414 47,732
Accrued expenses.............................. 25,307 26,954
Current installment long-term obligations..... 3,771 3,869
----- -----
Total current liabilities............... 119,795 114,542
------- -------
Long-term debt.................................. 108,809 103,396
Capital lease liability......................... 33,902 32,731
Other long-term liabilities..................... 9,131 8,089
Stockholder's Equity:
Common stock.................................. - -
Additional paid-in-capital.................... 45,944 45,944
Accumulated deficit........................... (10,334) (8,286)
------ -----
Total stockholder's equity.............. 35,610 37,658
------ ------
$307,247 $296,416
======== ========
See Notes to Consolidated Condensed Financial Statements
-1-
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands)
(unaudited)
Thirteen weeks ended Twenty-six weeks ended
-------------------- ----------------------
July 1, June 29, July 1, June 29,
1995 1996 1995 1996
Revenue:
Net Sales.....................$254,125 $258,322 $509,003 $522,183
Storage revenue............... 377 389 751 748
--- --- --- ---
Total Revenue........... 254,502 258,711 509,754 522,931
Cost of Products Sold........... 228,769 230,491 458,997 467,214
------- ------- ------- -------
Gross Profit-exclusive of
warehouse expense shown below.. 25,733 28,220 50,757 55,717
Warehouse expense............. 9,482 9,999 19,925 20,248
Transportation expense........ 5,859 5,330 11,638 10,955
Selling, general and
administrative expense........ 5,696 6,066 11,457 12,142
Amortization-excess of cost
over net assets acquired...... 723 723 1,446 1,446
--- --- ----- -----
Operating Income................ 3,973 6,102 6,291 10,926
Interest expense-net.......... 4,959 4,433 9,592 9,174
Amortization-deferred financing
costs......................... 366 249 721 497
Other <income>-net............ (1,572) (1,544) (3,224) (2,741)
----- ----- ----- -----
Income from continuing operations
before income taxes........... 220 2,964 (798) 3,996
Income taxes.................... 378 1,452 259 2,167
--- ----- --- -----
<Loss> income before
extraordinary item............. (158) 1,512 (1,057) 1,829
Extraordinary item-gain on
extinguishment of debt-net
of tax......................... 0 219 0 219
--- --- --- ---
Net <loss> income............... ($158) $1,731 ($1,057) $2,048
==== ===== ===== =====
See Notes to Consolidated Condensed Financial Statements
-2-
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDER'S EQUITY
(in thousands, except share data)
(unaudited)
Additional
Class A Class B Paid-In
Common Stock Common Stock Capital (Deficit) Total
------------ ------------ ------- ------- ------
Shares Total Shares Total
Balance at
December 30, 1995 101.62 $ -- 100.00 $ -- $45,944 ($10,334) $35,610
Net income:
twenty-six weeks
ended June 29, 1996 -- -- -- -- -- 2,048 2,048
------ ---- ------ ---- ------- ------- ------
Balance at
June 29, 1996 101.62 $ -- 100.00 $ -- $45,944 ($8,286) $37,658
====== ==== ====== ==== ======= ====== =======
See Notes to Consolidated Condensed Financial Statements
-3-
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Twenty-six weeks ended
July 1, June 29,
1995 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<Loss> income from operations....................... ($1,057) $2,048
Adjustments to reconcile net income to net cash
used in operating activities
Extraordinary gain on the extinguishment of
debt-net of tax.................................. 0 (219)
Depreciation and amortization.................... 1,845 2,315
Amortization..................................... 2,410 2,206
Provision for bad debts.......................... 1,050 1,300
Increase in prepaid pension cost................. (210) (210)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.............................. 5,837 5,242
Inventory........................................ 2,491 2,211
Prepaid expenses & other current assets.......... (1,114) (204)
Long-term receivables............................ 347 (1,759)
Others assets.................................... (321) 322
Increase (decrease) in:
Accounts payable, accrued expenses and
other liabilities............................... (17,217) (10,204)
------ ------
Net cash <used in> provided by operating
activities......................................... (5,939) 3,048
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, & equipment........... (1,263) (342)
----- ---
Net cash used in investing activities............... (1,263) (342)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving line-of-credit....... 3,819 3,684
Refinancing of Farmingdale, NY property............. 6,600 0
Capital lease payments.............................. (2,885) (1,101)
Long-term debt payments............................. (381) (5,020)
Deferred financing fees paid........................ (209) 0
--- ---
Net cash provided by <used in> financing activities. 6,944 (2,437)
----- -----
<Decrease> increase in cash......................... (258) 269
Cash at beginning of period......................... 695 302
--- ---
Cash at end of period............................... $437 $571
=== ===
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest........................................ $9,628 $9,604
===== =====
Income Taxes.................................... $112 $71
=== ==
See Notes to Consolidated Condensed Financial Statements
-4-
<PAGE>
DI GIORGIO CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed balance sheet as of June 29, 1996, the consolidated
condensed statements of operations for the twenty-six weeks and the thirteen
weeks ended July 1, 1995 and June 29, 1996, the consolidated condensed
statement of stockholder's equity for the twenty-six weeks ended June 29, 1996,
and the consolidated condensed statements of cash flows for the twenty-six
weeks ended July 1, 1995 and June 29, 1996 and related notes are unaudited and
have been prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted
pursuant to such rules and regulations. The accompanying unaudited interim
consolidated condensed financial statements and related notes should be read
in conjunction with the financial statements and related notes included in the
Form 10-K for the fiscal year ended December 30, 1995 and Form 10Q for the
quarter ended March 30, 1996, filed with the Securities and Exchange
Commission. The information furnished reflects, in the opinion of the
management of the Company, all adjustments, consisting of normal recurring
accruals, which are necessary to present a fair statement of the results for
the interim periods presented.
The interim figures are not necessarily indicative of the results to be
expected for the full fiscal year.
-5-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Results of operations for the thirteen weeks ended June 29, 1996 and July 1,
1995
Net sales for the thirteen weeks ended June 29, 1996 increased $4.2 million or
1.7% to $258.3 million as compared to $254.1 million in the thirteen weeks
ended July 1, 1995. The increase primarily reflects higher same customer
sales.
Gross margin (excluding warehouse expense) increased to 10.9% of net sales in
the thirteen weeks ended June 29, 1996 from 10.1% of net sales in the prior
period as a result of a more favorable mix of product sold as well as improved
purchasing efficiencies at the Company's dairy division.
Warehouse expense increased to 3.9% of net sales or $10.0 million in the
thirteen weeks ended June 29, 1996 as compared to 3.7% of net sales or $9.5
million in the prior period as improvements in the grocery and frozen
divisions were offset by higher temporary costs in the dairy division as it
undergoes a change in its receiving and warehousing systems. In addition,
beginning with the second quarter of 1996, the entire cost of the Kearny
facility is included in current operations whereas in the past it had been
included as part of a facility integration expense reserve stemming from the
acquisition of the Royal dairy division in 1994.
Transportation expense decreased to 2.1% of net sales or $5.3 million in the
thirteen weeks ended June 29, 1996 from 2.3% of net sales or $5.9 million in
the prior period as a result of better utilization of its transportation fleet.
This was accomplished through the use of larger trailers and more structured
delivery schedules thereby reducing the number of deliveries. These savings
were partly offset by higher wages.
Selling, general and administrative expense increased to 2.3% of net sales or
$6.1 million in the thirteen weeks ended June 29, 1996 from 2.2% of net sales
or $5.7 million in the prior period.
Other income remained relatively flat at approximately $1.5 million.
Interest expense decreased to $4.4 million in the thirteen weeks ended June
29, 1996 from $5.0 million in the prior period. The comparative decrease in
the 1996 period represents a decline in the average outstanding level of the
Company's funded debt, which reduction resulted from the retirement of $4.8
million of the Company's 12% senior notes.
The Company recorded an income tax provision of $1.5 million resulting in an
effective income tax rate of 49%. The Company's estimated effective tax rate
is higher than its statutory tax rate primarily as a result of the
nondeductibility of certain of the Company's amortization of the excess of
cost over net assets acquired; however, due to net operating losses for tax
purposes, the Company does not expect to pay federal income tax for the
current year.
-6-
<PAGE>
The Company recorded net income for the thirteen weeks ended June 29, 1996 of
$1.7 million, which included a $219,000 net gain on the extinguishment of $4.8
million of its 12% senior notes. The $1.7 million net profit for the quarter
compares to a net loss $158,000 in the comparable prior year period.
Results of operations for the twenty-six weeks ended June 29, 1996 and July 1,
1995
Net sales for the twenty-six weeks ended June 29, 1996 increased $13.2 million
or 2.6% to $522.2 million as compared to $509.0 million in the twenty-six weeks
ended July 1, 1995. The increase sales primarily reflects higher same
customer sales.
Gross margin (excluding warehouse expense) increased to 10.7% of net sales in
the twenty-six weeks ended June 29, 1996 from 10.0% of net sales in the prior
period as a result of a more favorable mix of product sold as well as improved
purchasing efficiencies at the Company's dairy division.
Warehouse expense remained constant at 3.9% of net sales as improvements in
the grocery and frozen divisions were offset by higher temporary costs in the
dairy division as it undergoes a change in its receiving and warehousing
systems. In addition, beginning with the second quarter of 1996, the entire
cost of the Kearny facility is included in current operations whereas in the
past it had been included as part of a facility integration expense reserve
stemming from the acquisition of the Royal dairy division in 1994.
Transportation expense decreased to 2.1% of net sales or $11.0 million in the
twenty-six weeks ended June 29, 1996 from 2.3% of net sales or $11.6 million
in the prior period as a result of better utilization of its transportation
fleet. This was accomplished through the use of larger trailers and more
structured delivery schedules thereby reducing the number of deliveries. These
savings were partly offset by higher wages.
Selling, general and administrative expense remained flat at 2.3% of net
sales.
Other income declined to $2.7 million from $3.2 million in the prior period
reflecting the inclusion in the prior period of a one-time settlement of a
lawsuit for approximately $500,000.
Interest expense decreased to $9.2 million in the twenty-six weeks ended
June 29, 1996 from $9.6 million in the prior period. The comparative
decrease in the 1996 period represents a decline in the average outstanding
level of the Company's funded debt, which reduction resulted from the
retirement of $4.8 million of the Company's 12% senior notes partially
offset in 1996 by the inclusion of the $28 million Carteret facility
capital lease for the full period.
The Company recorded an income tax provision of $2.2 million resulting in an
effective income tax rate of 54%. The Company's estimated effective tax rate
is higher than its statutory tax rate primarily because of the
nondeductibility of certain of the Company's amortization of the excess of
cost over net assets acquired; however, due to net operating losses for tax
purposes, the Company does not expect to pay federal income tax for the
current year.
-7-
<PAGE>
The Company recorded net income for the twenty-six weeks ended June 29, 1996
of $2.0 million, which included a $219,000 gain on the extinguishment of debt
net of tax, as compared to a net loss $1.1 million in the prior period.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations and amounts available under the Company's bank
credit facility are the Company's principal sources of liquidity. The Company
believes that these sources will be adequate to meet its anticipated debt
service requirements, working capital needs, and capital expenditures during
fiscal 1996.
During the twenty-six weeks ended June 29, 1996, cash flow provided by
operating activities was $3.4 million consisting primarily of cash generated
from net income, non-cash expenses and declines of $2.2 million in inventory
and $5.2 million in net receivable levels being partially offset by a $10.1
million decrease in accounts payable, accrued expense and other liabilities.
Cash flow used in investing activities during the twenty-six weeks ended June
29, 1996 was approximately $342,000, all of which was used for capital
expenditures. Net cash used in financing activities was approximately $2.4
million, primarily used to retire long-term debt.
Borrowings under the Company's revolving bank credit facility were $36.0
million at June 29, 1996. Additional borrowing capacity of $27.7 million was
available at that time under the Company's borrowing base formula.
Earnings before interest, taxes and depreciation ("EBITDA") was $17.7 million
during the twenty-six weeks ended June 29, 1996 as compared to $13.1 million
in the comparable prior year period and $9.6 million during the thirteen weeks
ended June 29, 1996 as compared to $7.3 million in the comparable prior year
period.
The consolidated indebtedness and stockholder's equity of the Company on
June 29, 1996 were $176.0 million and $37.7 million, respectively compared
to $193.6 million and $34.2 million at July 1, 1995.
Under the terms of the Company's revolving bank credit facility, the Company
is required to meet certain financial tests, including minimum interest
coverage ratios and minimum net worth. As of June 29, 1996, the Company was
in compliance with its covenants.
-8-
<PAGE>
The indenture governing the Company's 12% senior notes, as well as the
Company's bank agreement, impose various restrictions upon the Company,
including among other things, limitations on the occurrence of additional
debt and the making of certain payments and investments.
From time to time when the Company considers market conditions attractive, the
Company has purchased and may continue to purchase and retire a portion of the
Company's outstanding 12% senior notes.
-9-
<PAGE>
Part II-OTHER INFORMATION
Item 1. Legal Proceedings
- - ------ -----------------
On or about May 31, 1996, Di Giorgio entered into a Settlement
Agreement to resolve litigation regarding its occupancy of its former
corporate headquarters in Somerset, New Jersey. The Settlement Agreement
required Di Giorgio make a down-payment of $175,000 and 24 equal monthly
payments of $15,500 beginning June 3, 1996. The Company is fully reserved
for all such payments.
Item 6. Exhibits and Reports on From 8-K
- - ------ --------------------------------
(b) Reports on Form 8-K. None
-10-
<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 hereunto duly authorized.
DI GIORGIO CORPORATION
By: /s/ Arthur M. Goldberg
------------------------------
Arthur M. Goldberg
Chairman, President and Chief
Executive Officer
By: /s/ Richard B. Neff
------------------------------
Richard B. Neff
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: July 31, 1996
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEETS, STATEMENTS OF OPERATIONS, STATEMENT
OF STOCKHOLDER'S EQUITY AND STATEMENT OF CASH FLOWS FROM FORM 10Q FOR THE
PERIOD ENDED JUNE 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> JUN-29-1996
<CASH> 571
<SECURITIES> 0
<RECEIVABLES> 68,711
<ALLOWANCES> 4,389
<INVENTORY> 50,120
<CURRENT-ASSETS> 118,715
<PP&E> 71,324
<DEPRECIATION> 13,541
<TOTAL-ASSETS> 296,416
<CURRENT-LIABILITIES> 114,542
<BONDS> 92,890
0
0
<COMMON> 0
<OTHER-SE> 37,658
<TOTAL-LIABILITY-AND-EQUITY> 296,416
<SALES> 522,183
<TOTAL-REVENUES> 522,931
<CGS> 467,214
<TOTAL-COSTS> 512,005
<OTHER-EXPENSES> (2,244)
<LOSS-PROVISION> 1,300
<INTEREST-EXPENSE> 9,174
<INCOME-PRETAX> 3,996
<INCOME-TAX> 2,167
<INCOME-CONTINUING> 1,829
<DISCONTINUED> 0
<EXTRAORDINARY> 219
<CHANGES> 0
<NET-INCOME> 2,048
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
