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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 27, 1998 Commission File No. 1-1790
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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: (732) 541-5555
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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 August 10, 1998, there were 78.1158 shares of Class A Common Stock and
76.8690 shares of Class B Common Stock, par value of each class $.01,
outstanding.
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<PAGE>
DI GIORGIO CORPORATION AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
December 27, 1997 and June 27, 1998 (Unaudited).................... 1
Consolidated Condensed Statements of Operations,
Twenty-Six Weeks and Thirteen Weeks Ended
June 28, 1997 and June 27, 1998 (Unaudited) ...................... 2
Consolidated Condensed Statement of Stockholders' Deficiency
Twenty-Six Weeks Ended June 27, 1998 (Unaudited) .................. 3
Consolidated Condensed Statements of Cash Flows,
Twenty-Six Weeks Ended June 28, 1997 and
June 27, 1998 (Unaudited) ........................................ 4
Notes to Consolidated Condensed Financial Statements (Unaudited)...... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................... 6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................... 11
Signatures ............................................................. 12
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
December 27, June 27,
1997 1998
(Unaudited)
ASSETS
Current Assets:
Cash...................................... $2,426 $2,091
Accounts and notes receivable-net......... 71,715 69,621
Inventories............................... 56,121 61,792
Prepaid expenses.......................... 8,234 9,002
----- -----
Total current assets................ 138,496 142,506
------- -------
Property, Plant & Equipment
Cost...................................... 35,837 24,957
Accumulated depreciation.................. (13,693) (14,892)
------ ------
Net....................................... 22,144 10,065
------ ------
Long-term notes receivable.................. 7,428 8,063
Deferred taxes.............................. 12,266 12,266
Other assets................................ 15,341 14,115
Deferred financing costs.................... 5,657 5,297
Excess of costs over net assets acquired.... 78,629 77,399
------ ------
Total assets $279,961 $269,711
======== ========
LIABILITIES & STOCKHOLDERS' DEFICIENCY Current Liabilities:
Notes payable - revolver.................. $19,669 $31,082
Accounts payable.......................... 58,899 58,247
Accrued expenses.......................... 21,098 20,708
Notes and leases payable within one year.. 15,465 4,842
------ -----
Total current liabilities........... 115,131 114,879
------- -------
Long-term debt.............................. 159,333 155,000
Capital lease liability..................... 2,499 2,396
Other long-term liabilities................. 6,079 5,715
Stockholders' Deficiency:
Common stock.............................. - -
Additional paid-in-capital................ 13,002 8,002
Accumulated deficit....................... (16,083) (16,281)
------ ------
Total stockholders' deficiency....... (3,081) (8,279)
------ -----
Total liabilities & stockholders'
deficiency......................... $279,961 $269,711
======== ========
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
-------------------- ----------------------
June 28, June 27, June 28, June 27,
1997 1998 1997 1998
Revenue:
Net sales....................... $252,188 $284,531 $516,566 $564,251
Other revenue................... 1,691 1,674 3,286 3,510
----- ----- ----- -----
Total revenue............. 253,879 286,205 519,852 567,761
Cost of products sold............. 225,882 256,731 463,062 509,535
------- ------- ------- -------
Gross profit-exclusive of
warehouse expense shown below.... 27,997 29,474 56,790 58,226
Warehouse expense............... 10,641 12,604 21,250 24,025
Transportation expense.......... 5,252 5,989 10,674 12,150
Selling, general and
administrative expense.......... 5,781 5,821 11,305 11,709
Amortization-excess of cost
over net assets acquired........ 669 615 1,338 1,230
----- ----- ----- -----
Operating Income.................. 5,654 4,445 12,223 9,112
Interest expense................ 5,984 4,320 11,693 9,096
Amortization-deferred financing
costs.......................... 363 180 651 360
Other (income)-net.............. (1,158) (558) (2,201) (1,077)
----- ----- ----- -----
Income before income taxes and
extraordinary items.............. 465 503 2,080 733
Income taxes...................... 426 420 1,312 730
--- --- --- -----
Income before
extraordinary items.............. 39 83 768 3
Extraordinary (loss) on
extinguishment of debt-net of tax. (8,467) 0 (8,467) (201)
----- ----- ----- -----
Net income (loss)................. ($8,428) $83 ($7,699) ($198)
====== === ====== ====
See Notes to Consolidated Condensed Financial Statements
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<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' DEFICIENCY
(in thousands, except share data)
(unaudited)
Additional
Class A Class B Paid-In (Accumulated
Common Stock Common Stock Capital Deficit) Total
------------ ------------ ------- ------- ------
Shares Amount Shares Amount
Balance at
December 27,
1997 101.622 $ -- 100.00 $ -- $13,002 ($16,083) ($3,081)
Stock repurchase (23.506) $ -- (23.131) $ -- (5,000) ($5,000)
Net loss -- -- -- -- -- (198) (198)
------ ---- ------ ---- ------- --- ---
Balance at
June 27, 1998 78.116 $ -- 76.869 $ -- $8,002 ($16,281) ($8,279)
====== === ====== ==== ======= ======= ======
See Notes to Consolidated Condensed Financial Statements
-3-
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Twenty-six weeks ended
----------------------
June 28, June 27,
1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... ($7,699) ($198)
Adjustments to reconcile net loss to net cash
used in operating activities
Extraordinary loss on extinguishment
of debt-net of tax............................ 8,467 201
Depreciation and amortization................. 2,436 1,356
Amortization.................................. 2,320 2,700
Provision for bad debts....................... 750 750
Increase in prepaid pension cost.............. (150) (150)
Noncash interest expense...................... 3,010 0
Impairment loss on leasehold improvements..... 0 3,000
Gain on sale of Garden City facility.......... 0 (3,400)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts & notes receivable................... (5,089) 1,344
Inventory..................................... (1,540) (5,671)
Prepaid expenses.............................. (901) (768)
Long-term receivables......................... (572) (635)
Other assets.................................. (10,972) (143)
(Decrease) increase in:
Accounts payable, accrued expenses and
other liabilities............................ 2,435 (1,063)
------ -----
Net cash used in operating activities............ (7,505) (2,677)
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, & equipment........ (1,702) (2,543)
Net proceeds from Garden City facility sale...... 0 13,867
----- -----
Net cash (used in) provided by
investing activities............................ (1,702) 11,324
----- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving line-of-credit.... 3,451 11,413
Capital lease payments........................... (2,065) (97)
Premiums paid in connection with debt redemption. (10,829) (335)
Repayment of Rose Partner note receivable........ 8,917 0
Capital stock repurchase......................... 0 (5,000)
Dividend paid.................................... (61) 0
Finance fees paid................................ (5,230) 0
New note offering................................ 155,000 0
Long-term debt payments.......................... (139,736) (14,963)
------- -------
Net cash provided by (used in)financing
activities..................................... 9,447 (8,982)
----- -----
Increase (decrease) in cash...................... 240 (335)
Cash at beginning of period...................... 1,749 2,426
----- -----
Cash at end of period............................ $1,989 $2,091
===== =====
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest..................................... $15,085 $9,409
====== =====
Income Taxes (Refunds)....................... $185 ($5)
=== ====
Non-cash dividend of notes receivable and
land held for sale.............................. $4,162 $0
===== ==
See Notes to Consolidated Condensed Financial Statements
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<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 27, 1998, the consolidated
condensed statements of operations for the thirteen weeks and twenty-six weeks
ended June 28, 1997 and June 28, 1998, the consolidated condensed statements of
cash flows for the twenty-six weeks ended June 28, 1997 and June 27, 1998, and
stockholders' deficiency for the twenty-six weeks ended June 27, 1998, 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 27,
1997 and the Form 10-Q for the quarter ended March 28, 1998, 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.
2. GARDEN CITY FACILITY
On April 1, 1998 the Company sold its Garden City, New York frozen facility and
underlying land for approximately $14.5 million. The terms of the agreement
require the Company to lease back the facility for a period of two years with
one five year option, at an annual rent of approximately $1.5 million. The
Company will use the facility for its public cold storage business. The net
proceeds of the sale were applied as follows: $7.2 million was used to repay a
note on the building and leasehold interest, $1.7 million was used to acquire
the land and $5 million was used to repay a portion of the Company's bank credit
facility. The transaction resulted in a gain of approximately $3.4 million
offset by an asset write down of certain related leasehold improvements of
approximately $3 million. The remaining gain will be deferred over the remaining
term of the lease.
3. STOCK REPURCHASE
During the thirteen weeks ended June 27, 1998, the Company repurchased 23.5062
shares of Class A and 23.131 shares of Class B common stock for $5 million.
-5-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Forward- Looking Statements
Forward-looking statements in this Form 10-Q include, without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or achievement
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. These
factors include, among others, the following: general economic and business
conditions and those in particular in the New York City metropolitan area;
restrictions imposed by the documents governing the Company's indebtedness;
competition; the Company's reliance on several significant customers; potential
losses from loans to its retailers; potential environmental liabilities which
the Company may have; the Company's labor relations; dependence on key
personnel; changes in business regulation; business abilities and judgment of
personnel; and changes in, or failure to comply with, government regulations.
Results of Operations
Thirteen weeks ended June 27, 1998 and June 28, 1997
Net sales for the thirteen weeks ended June 27, 1998 were $284.5 million as
compared to $252.2 million for the thirteen weeks ended June 28, 1997. This
12.8% increase in net sales primarily reflects increased sales of frozen food
products to an additional division of an existing customer which began in August
1997.
Other revenue, consisting of recurring customer related services, remained
constant at $1.7 million for the thirteen weeks ended June 27, 1998 as well as
the prior period.
Gross margin (excluding warehouse expense) decreased to 10.4% of net sales or
$29.5 million for the thirteen weeks ended June 27, 1998 as compared to 11.1% of
net sales or $28.0 million for the prior period, reflecting the combined impact
of a change in mix of products sold and an increase in sales to higher volume,
lower margin chain customers. The Company has, and will continue to, take steps
to maintain and improve its margins; however, factors such as decreases in
promotional activities, changes in product mix, additions of high volume, low
margin customers, or competitive pricing pressures may , together or separately
have an effect on gross margin. As compared to the thirteen weeks ended March
28, 1998, gross margin increased from 10.3%.
Warehouse expense increased as a percentage of net sales to 4.4% of net sales or
$12.6 million for the thirteen weeks ended June 27, 1998 as compared to 4.2% of
net sales or $10.6 million for the thirteen weeks ended June 28, 1997 primarily
as a result of operating two frozen food facilities. The current period included
approximately $400,000 of direct start-up costs and
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<PAGE>
$75,000 of temporary labor inefficiencies related to the new frozen food
facility. Another cause for the increase was the amended grocery facility lease.
In November 1997, the Company amended its grocery facility lease, adding
additional leased property, extending the term, and increasing the annual rental
obligations. The changes in the provisions of the lease resulted in the amended
lease being treated as a new lease and accounted for as an operating lease. Had
the terms of the lease not changed, warehouse expense as a percentage of sales
would have decreased by .1% of sales in the current period.
Transportation expense remained constant at 2.1% of net sales or $6.0 million
for the thirteen weeks ended June 27, 1998 as compared to 2.1% of net sales or
$5.3 million in the thirteen weeks ended June 28, 1997.
Selling, general and administrative expense decreased to 2.0% of net sales or
$5.8 million for the thirteen weeks ended June 27, 1998 as compared to 2.3% of
net sales or $5.8 million for the thirteen weeks ended June 28, 1997.
Other income, net of other expenses, decreased to $558,000 for the thirteen
weeks ended June 27, 1998 as compared to $1.2 million for the thirteen weeks
ended June 28, 1997. The decline reflects (i) approximately $278,000 of rental
income relating to the Farmingdale facility in the thirteen weeks ended June 28,
1997 and (ii) a lower level of interest income as a result of the repayment of
the Rose Partner note receivable (repaid in June 1997) which accounted for
$243,000 of interest income in the thirteen weeks ended June 28, 1997 . The
Farmingdale facility was sold in August 1997 with the proceeds used to reduce
outstanding indebtedness.
Interest expense decreased to $4.3 million for the thirteen weeks ended June 27,
1998 from $6.0 million for the thirteen weeks ended June 28, 1997. The
comparative decrease is a result of lower average outstanding levels of the
Company's funded debt and lower average interest rates as a result of the
Company's refinancing in June 1997.
The Company recorded an income tax provision of $420,000, resulting in an
effective income tax rate of 83% for the thirteen weeks ended June 27, 1998 as
compared to a provision of $426,000 resulting in an effective rate of 92% in the
thirteen weeks ended June 28, 1997. The Company's estimated effective tax rate
is higher than the 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 carryforwards for tax purposes,
the Company does not expect to pay federal income tax for the current year with
the exception of an alternative minimum tax.
The Company recorded net income for the thirteen weeks ended June 27, 1998 of
$83,000 as compared to a net loss of $8.4 million for the thirteen weeks ended
June 28, 1997, which included an $8.5 million extraordinary loss, net of tax, on
the extinguishment of debt .
Twenty-six weeks ended June 27, 1998 and June 28, 1997
Net sales for the twenty-six weeks ended June 27, 1998 were $564.3 million as
compared to $516.6 million for the twenty-six weeks ended June 28, 1997. This
9.2% increase in net sales primarily reflects increased sales of frozen food
products to an additional division of an existing customer which began in August
1997.
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<PAGE>
Other revenue, consisting of recurring customer related services, increased
slightly to $3.5 million for the twenty-six weeks ended June 27, 1998 as
compared to $3.3 million in the prior period.
Gross margin (excluding warehouse expense) decreased to 10.3% of net sales or
$58.2 million for the twenty-six weeks ended June 27, 1998 as compared to 11.0%
of net sales or $56.8 million for the prior period, reflecting the combined
impact of a change in mix of products sold and an increase in sales to higher
volume, lower margin chain customers. The Company has, and will continue to,
take steps to maintain and improve its margins; however, factors such as
decreases in promotional activities, changes in product mix, additions of high
volume, low margin customers, or competitive pricing pressures may , together or
separately have an effect on gross margin.
Warehouse expense increased as a percentage of net sales to 4.3% of net sales or
$24.0 million for the twenty-six weeks ended June 27, 1998 as compared to 4.1%
of net sales or $21.3 million for the prior period primarily as a result of
operating two frozen food facilities beginning in April 1998. Another cause for
the increase was the amended grocery facility lease. In November 1997, the
Company amended its grocery facility lease, adding additional leased property,
extending the term, and increasing the annual obligations. The changes in the
provisions of the lease resulted in the amended lease being treated as a new
lease and accounted for as an operating lease. Had the terms of the lease not
changed, warehouse expense as a percentage of sales would have decreased by .1%
of sales in the current period.
Transportation expense remained increased to 2.2% of net sales or $12.2 million
for the twenty-six weeks ended June 27, 1998 as compared to 2.1% of net sales or
$10.7 million in the prior period.
Selling, general and administrative expense decreased to 2.1% of net sales or
$11.7 million for the twenty-six weeks ended June 27, 1998 as compared to 2.2%
of net sales or $11.3 million for the prior period.
Other income, net of other expenses, decreased to $1.1 million for the
twenty-six weeks ended June 27, 1998 as compared to $2.2 million for the prior
period. The decline reflects (i) approximately $513,000 of rental income
relating to the Farmingdale facility in the prior period and (ii) a lower level
of interest income as a result of the repayment of the Rose Partner note
receivable (repaid in June 1997) which accounted for $502,000 of interest income
in the prior period. The Farmingdale facility was sold in August 1997 with the
proceeds used to reduce outstanding indebtedness.
Interest expense decreased to $9.1 million for the twenty-six weeks ended June
27, 1998 from $11.7 million for the prior period. The comparative decrease is a
result of lower average outstanding levels of the Company's funded debt and
lower average interest rates as a result of the Company's refinancing in June
1997.
The Company recorded an income tax provision of $730,000, resulting in an
effective income tax rate of 100% for the twenty-six weeks ended June 27, 1998
as compared to a provision of $1.3 million resulting in an effective rate of 63%
in the prior period. The Company's estimated effective tax rate is higher than
the 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,
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<PAGE>
due to net operating losses carryforwards for tax purposes, the Company does not
expect to pay federal income tax for the current year with the exception of an
alternative minimum tax.
The Company recorded a net loss for the twenty-six weeks ended June 27, 1998 of
$198,000, including an extraordinary loss, net of tax, on the extinguishment of
debt, of $201,000 as compared to a net loss of $7.7 million for the prior
period, which included an $8.5 million extraordinary loss , net of tax, on the
extinguishment of debt.
Liquidity and Capital Resources
Cash flows from operations and amounts available under the Company's bank credit
facility are the Company's principal sources of liquidity. The Company's bank
credit facility will mature on June 30, 2000 and bears interest at a rate per
annum equal to (at the Company's option): (i) the Euro Dollar Offering Rate plus
2.25% or (ii) Bankers Trust Company's prime rate plus 0.75%. Borrowings under
the Company's revolving bank credit facility were $31.1 million at June 27,
1998. Additional borrowing capacity of $48.4 million was available at that time
under the Company's borrowing base formula. The Company believes that these
sources will be adequate to meet its anticipated working capital needs, capital
expenditures, and debt service requirements during the next twelve months.
During the twenty-six weeks ended June 27, 1998, cash flows used in operating
activities were $2.7 million, consisting primarily of (i) cash generated from
income before extraordinary items and non-cash expenses and (ii) a decrease in
accounts payable, accrued expenses and other liabilities of $1.1 million, a
decrease in accounts receivable of $1.3 million offset by an increase in
inventory of $5.7 million related primarily to the transition of the Company's
frozen food distribution business form Garden City, NY to Carteret, NJ. The
Company expects to eliminate any duplicate frozen food inventory by completing
the transfer of its distribution inventory from its Garden City, NY facility to
its Carteret, NJ facility in the third quarter while continuing to operate
Garden City as a storage facility.
Cash flows provided by investing activities during the twenty-six weeks ended
June 27, 1998 were approximately $11.3 million; which consisted of $13.9 million
of proceeds from the sale of the Garden City facility offset by $2.5 million of
capital expenditures, which included the Garden City land purchase of $1.7
million. Net cash used in financing activities was $9.0 million consisting
primarily of $15.0 million of debt payments and a $5.0 million capital stock
buyback offset by increased borrowings under the Company's bank credit facility
of $11.4 million during the period. The $15.0 million in debt payments included
approximately $7.5 million which was utilized to redeem the balance of the
Company's 12% senior notes on March 26, 1998. The redemption included a
mandatory 4.5% premium ($335,000) which resulted in a $201,000 extraordinary
loss net of tax. As a result of this redemption, the Company expects to save
approximately $250,000 in interest expense annually given the current difference
in interest rates between the notes redeemed and the Company's bank credit
facility. The balance of debt payments reflects the repayment of notes related
to the sale of the Garden City facility (see below).
Earnings before interest expense, income taxes, depreciation and amortization,
and non-recurring charges such as extraordinary gains or losses ("EBITDA"), was
$13.9 million during the twenty- six weeks ended June 27, 1998 as compared to
$18.5 million in the prior period. This decrease in EBITDA reflected a
combination of lower gross margins, the treatment of the grocery facility lease
which contributed $1.4 million of the difference and the sale of the Farmingdale
property in August 1997 which contributed approximately $861,000 to the prior
period's EBITDA.
-9-
<PAGE>
The consolidated indebtedness of the Company decreased to $193.3 million at June
27, 1998 as compared to $197.0 million at December 27, 1997. Stockholders'
deficiency was $8.3 million on June 27, 1998 as compared to a deficiency of $3.1
million on December 27, 1997 primarily as a result of the $5 million stock
repurchase in May 1998.
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. The Company and its banks amended the interest
coverage ratio test for the remaining term of the bank credit facility in March
1998. As of June 27, 1998, the Company was in compliance with its covenants.
From time to time when the Company considers market conditions attractive, the
Company has and may in the future, purchase a portion of its public debt on the
open market.
On April 1, 1998, the Company sold its Garden City facility for $14.5 million.
The net proceeds of the sale were applied as follows: $7.2 million was used to
repay a note on the building and leasehold interest, $1.7 million was used to
acquire the land and $5 million was used to repay a portion of the Company's
bank credit facility. As part of the transaction, the Company will lease the
Garden City facility for a minimum of two years. The Company will continue to
use the facility for its public cold storage business and may from time to time
utilize it for storage or as a secondary frozen food distribution center. In
April 1998, the Company began shipping frozen food product from its new frozen
food facility in Carteret, NJ.
In May 1998, the Company repurchased and retired into treasury $5 million of its
outstanding common stock on a prorata basis.
As situations present themselves, the Company, has in the past, and will in the
future actively pursue complementary acquisitions, distribution agreements, and
similar arrangements which would allow it to leverage its facilities and market
position and increase profitability.
Year 2000 Computer issues
The Company has implemented a Year 2000 compliance program designed to insure
that the Company's computer systems and applications will function properly
beyond 1999. The program is led by the Company's vice president of information
systems and consists of employees from across division lines. The Company has
identified all of the systems which need testing, including but not limited to
its traditional computer systems, heating, refrigeration and air conditioning,
security systems and telephones. The majority of testing to see if a system is
Year 2000 compliant or not is complete and the remediation phase is scheduled to
be completed in the first quarter of fiscal 1999.
The expected cost should be less than $1 million and the majority of that
consists of internal salaries. The Company does expect to use, on a limited
basis, some outside programmers in this effort.
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<PAGE>
II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K. None
-11-
<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: August 10, 1998
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED BALANCE SHEETS, STATEMENTS OF OPERATIONS, STATEMENT OF
STOCKHOLDERS' DEFICIENCY AND STATEMENT OF CASH FLOWS FROM FORM 10Q FOR THE
PERIOD ENDED JUNE 27, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-2-1999
<PERIOD-START> DEC-28-1997
<PERIOD-END> JUN-27-1998
<CASH> 2,091
<SECURITIES> 0
<RECEIVABLES> 74,207
<ALLOWANCES> 4,586
<INVENTORY> 61,792
<CURRENT-ASSETS> 142,506
<PP&E> 24,957
<DEPRECIATION> 14,892
<TOTAL-ASSETS> 269,711
<CURRENT-LIABILITIES> 114,879
<BONDS> 155,000
0
0
<COMMON> 0
<OTHER-SE> (8,279)
<TOTAL-LIABILITY-AND-EQUITY> 269,711
<SALES> 564,251
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<CGS> 509,535
<TOTAL-COSTS> 557,419
<OTHER-EXPENSES> 513
<LOSS-PROVISION> 750
<INTEREST-EXPENSE> 9,096
<INCOME-PRETAX> 733
<INCOME-TAX> 730
<INCOME-CONTINUING> 3
<DISCONTINUED> 0
<EXTRAORDINARY> (201)
<CHANGES> 0
<NET-INCOME> (198)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
