SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarter Ended September 30, 2000
[ ] Transition report pursuant to Section 13 or 15(d) Of The Securities
Exchange Act of 1934
For the transition period from ______ to _____
Commission File Number: 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
Carteret, New Jersey 07008
(Address of principal executive offices) (Zip Code)
(732) 541-5555
(Registrant's Telephone Number, Including Area Code)
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 November 9, 2000, there were outstanding 78.1158 shares of Class A
Common Stock and 76.8690 shares of Class B Common Stock.
<PAGE>
DI GIORGIO CORPORATION AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
January 1, 2000 and September 30, 2000 (Unaudited)......................1
Consolidated Condensed Income Statements
Thirty-Nine Weeks and Thirteen Weeks Ended
October 2, 1999 and September 30, 2000 (Unaudited)......................2
Consolidated Condensed Statement of Stockholders' Equity,
Thirty-Nine Weeks Ended September 30, 2000 (Unaudited)..................3
Consolidated Condensed Statements of Cash Flows,
Thirty-Nine Weeks Ended October 2, 1999 and
September 30, 2000 (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 5. Other Information..............................................11
Item 6. Exhibits and Reports on Form 8-K ..............................11
Signatures...................................................................12
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
January 1, September 30,
2000 2000
(Unaudited)
ASSETS
Current Assets:
Cash............................................ $988 $1,354
Accounts and notes receivable-net............... 88,845 92,309
Inventories..................................... 61,546 66,837
Deferred taxes.................................. 7,655 2,882
Prepaid expenses................................ 2,633 4,224
----- -----
Total current assets....................... 161,667 167,606
------- -------
Property, Plant & Equipment
Cost............................................ 21,595 23,566
Accumulated depreciation........................ (11,357) (12,812)
------ ------
Net............................................. 10,238 10,754
------ ------
Long-term notes receivable......................... 11,386 16,909
Other assets....................................... 11,719 15,579
Deferred financing costs........................... 4,652 4,038
Excess of costs over net assets acquired........... 73,744 71,925
------ ------
Total assets.............................. $273,406 $286,811
======== ========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable-revolver.......................... $6,782 $1,138
Accounts payable ............................... 72,410 81,504
Accrued expenses ............................... 25,911 33,776
Notes and leases payable within one year........ 167 90
--- --
Total current liabilities..................... 105,270 116,508
------- -------
Long-term debt .................................... 155,000 155,000
Capital lease liability............................ 2,120 2,072
Other long-term liabilities........................ 5,048 3,210
Minority interest.................................. -- 312
Stockholders' Equity:
Common stock.................................... -- --
Additional paid-in-capital...................... 8,002 8,002
Retained earnings (accumulated deficit)......... (2,034) 1,707
----- -----
Total stockholders' equity.................... 5,968 9,709
----- -----
Total liabilities & stockholders' equity.. $273,406 $286,811
======== ========
See Notes to Consolidated Condensed Financial Statements
-1-
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(in thousands)
(unaudited)
Thirteen weeks ended Thirty-Nine weeks ended
--------------------- ----------------------
Oct. 2, Sept. 30, Oct. 2, Sept. 30,
1999 2000 1999 2000
Revenue:
Net sales....................... $337,306 $362,674 $1,038,359 $1,093,177
Other revenue................... 1,838 1,641 5,918 5,244
----- ----- ----- -----
Total revenue............. 339,144 364,315 1,044,277 1,098,421
Cost of products sold............. 305,232 329,165 942,237 992,213
------- ------- ------- -------
Gross profit-exclusive of
warehouse expense shown below.... 33,912 35,150 102,040 106,208
Warehouse expense............... 12,457 13,026 38,997 39,039
Transportation expense.......... 6,580 7,229 19,956 21,109
Selling, general and
administrative expense.......... 6,540 7,608 19,654 22,439
Amortization-excess of cost
over net assets acquired........ 606 606 1,819 1,819
----- ----- ----- -----
Operating income.................. 7,729 6,681 21,614 21,802
Interest expense................ 4,120 3,989 12,656 12,068
Amortization-deferred financing
costs.......................... 180 210 540 614
Minority interest............... -- 7 -- 18
Other (income)-net.............. (671) (953) (1,980) (2,391)
--- --- ----- -----
Income before income taxes........ 4,100 3,428 10,398 11,493
Income tax expense ............... 1,858 1,589 4,814 5,252
----- ----- ----- -----
Net income ....................... $2,242 $1,839 $5,584 $6,241
====== ====== ====== ======
See Notes to Consolidated Condensed Financial Statements
-2-
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(unaudited)
Additional (Accumulated
Class A Class B Paid-In Deficit)/Retained
Common Stock Common Stock Capital Earnings Total
------------ ------------ ------- -------- -----
Shares Amount Shares Amount
Balance at
January 1,
2000 78.1158 $ -- 76.8690 $ -- $ 8,002 ($2,034) $5,968
Net income -- -- -- -- -- 6,241 6,241
Dividend -- -- -- -- -- (2,500) (2,500)
------- ---- ------- ---- ------- ----- -----
Balance at
Sept. 30,
2000 78.1158 $ -- 76.8690 $ -- $ 8,002 $1,707 $9,709
======= ==== ======= ==== ======= ====== ======
See Notes to Consolidated Condensed Financial Statements
-3-
<PAGE>
DI GIORGIO CORPORATION and SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Thirty-nine weeks ended
-----------------------
Oct. 2, Sept. 30,
1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $5,584 $6,241
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization................. 1,107 1,599
Amortization.................................. 3,966 3,870
Provision for doubtful accounts............... 900 750
Non cash pension income....................... (200) (300)
Deferred taxes................................ 4,814 4,773
Changes in assets and liabilities:
(Increase) decrease in:
Accounts & notes receivable................... (8,149) (4,214)
Inventory..................................... 700 (5,291)
Prepaid expenses.............................. (564) (1,591)
Long-term receivables......................... (1,610) (5,523)
Others assets................................. (20) (4,997)
Increase in:
Accounts payable.............................. 7,387 9,094
Accrued expenses and other liabilities........ 7,537 6,027
----- -----
Net cash provided by operating activities........ 21,452 10,438
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant, & equipment........ (1,586) (2,115)
----- -----
Net cash used in investing activities............ (1,586) (2,115)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings under revolving line-of-credit.... (10,629) (5,644)
Financing fees paid.............................. (450) 0
Capital lease payments........................... (157) (125)
Dividends paid................................... 0 (2,500)
Net effect of minority interest.................. 0 312
- ---
Net cash used in financing activities............ (11,236) (7,957)
------ -----
Increase in cash................................. 8,630 366
Cash at beginning of period...................... 459 988
--- ---
Cash at end of period............................ $9,089 $1,354
====== ======
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest.................................... $8,828 $8,205
====== ======
Income Taxes................................ $157 $648
==== ====
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 September 30, 2000, the
consolidated condensed statements of operations for the thirty-nine weeks ended
October 2, 1999 and September 30, 2000, the consolidated condensed statements of
cash flows for the thirty-nine weeks ended October 2, 1999 and September 30,
2000, and the consolidated condensed statement of stockholders' equity for the
thirty-nine weeks ended September 30, 2000, 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 January 1, 2000 and Form 10-Qs for the quarters
ended April 1, 2000 and July 1, 2000 as filed with the Securities and Exchange
Commission. The information furnished herein 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 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 September 30, 2000 and October 2, 1999
Net sales for the thirteen weeks ended September 30, 2000 rose 7.5% to $362.7
million as compared to $337.3 million for the thirteen weeks ended October 2,
1999 primarily as a result of increased sales to existing customers. Other
revenue, consisting of recurring customer related services, decreased to $1.6
million for the thirteen weeks ended September 30, 2000 as compared to $1.8
million in the prior period.
Gross margin (excluding warehouse expense) decreased as a percentage of net
sales to 9.7% or $35.2 million for the thirteen weeks ended September 30, 2000
as compared to 10.1% of net sales or $33.9 million for the prior period, as a
result of a change in mix of products sold. The Company has, and will continue
to, take steps to maintain and improve its margins. Despite the Company's
efforts, the mix of product sought by customers and competitive pricing
pressures may continue to have an adverse effect on gross margin.
Warehouse expense decreased as a percentage of net sales to 3.6% of net sales or
$13.0 million for the thirteen weeks ended September 30, 2000 as compared to
3.7% of net sales or $12.5 million in the prior period due to the inclusion of
expenses related to the now closed Kearny warehouse in the that period.
Excluding all expenses relating to this facility, warehouse expense would have
been 3.6% of net sales in both periods.
Transportation expense remained at 2.0% of net sales or $7.2 million for the
thirteen weeks ended September 30, 2000 as compared to 2.0% of net sales or $6.6
million in the prior period.
-6-
<PAGE>
Selling, general and administrative expense increased to 2.1% of net sales or
$7.6 million for the thirteen weeks ended September 30, 2000 as compared to 1.9%
of net sales or $6.5 million for the prior period due primarily to costs
associated with (i) EasyGrocer.com, (ii) increased professional fees, (iii)
employee benefits, and (iv) the relocation of and related ongoing expenses
associated with the Company's data processing center.
Interest expense decreased to $4.0 million for the thirteen weeks ended
September 30, 2000 from $4.1 million for the prior period due to lower average
outstanding levels of the Company's debt.
The Company recorded an income tax provision of $1.6 million, resulting in an
effective income tax rate of 46% for the thirteen weeks ended September 30, 2000
as compared to a provision of $1.9 million resulting in an effective rate of 45%
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, due to net operating loss carryforwards for tax purposes, the Company
does not expect to pay federal income tax for the current year until the fourth
quarter of 2000.
The Company recorded net income for the thirteen weeks ended September 30, 2000
of $1.8 million as compared to a net income of $2.2 million in the prior period.
Thirty-nine weeks ended September 30, 2000 and October 2, 1999
Net sales for the thirty-nine weeks ended September 30, 2000 rose 5.3% to
$1,093.2 million as compared to $1,038.4 million for the thirty-nine weeks ended
October 2, 1999 primarily as a result of increased sales to existing customers.
Other revenue, consisting of recurring customer related services, decreased to
$5.2 million for the thirty-nine ended September 30, 2000 as compared to $5.9
million in the prior period. This decrease was a result of $1.0 million of
storage income in the prior period at the Garden City and Kearny facilities
which ceased operations in the second and third quarters of 1999.
Gross margin (excluding warehouse expense) decreased to 9.7% of net sales or
$106.2 million for the thirty-nine weeks ended September 30, 2000 as compared to
9.8% of net sales or $102.0 million in the prior period. The Company has, and
will continue to, take steps to maintain and improve its margins. Despite the
Company's efforts, the mix of product sought by customers and competitive
pricing pressures may continue to have an adverse effect on gross margin.
Warehouse expense decreased as a percentage of net sales to 3.6% of net sales or
$39.0 million for the thirty-nine weeks ended September 30, 2000 as compared to
3.8% of net sales or $39.0 million due to the inclusion of expenses related to
the now closed Garden City and Kearny warehouses in the prior period. Excluding
all expenses relating to these facilities in both periods, warehouse expense
would have been 3.5% of net sales for both periods.
Transportation expense remained at 1.9% of net sales or $21.1 million for the
thirty-nine weeks ended September 30, 2000 as compared to 1.9% of net sales or
$20.0 million in the prior period.
Selling, general and administrative expense increased to 2.1% of net sales or
$22.4 million for the thirty-nine weeks ended September 30, 2000 as compared to
1.9% of net sales or $19.7 million for the prior period due primarily to costs
-7-
<PAGE>
associated with (i) EasyGrocer.com, (ii) increased professional fees (iii)
employee benefits, and (iv) the relocation of and related ongoing expenses
associated with the Company's data processing center.
Interest expense decreased to $12.1 million for the thirty-nine weeks ended
September 30, 2000 from $12.7 million for the prior period due to lower average
outstanding levels of the Company's debt.
The Company recorded an income tax provision of $5.3 million, resulting in an
effective income tax rate of 46% for the thirty-nine weeks ended September 30,
2000 as compared to a provision of $4.8 million resulting in an effective rate
of 46% 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, due to net operating loss carryforwards for tax purposes, the Company
does not expect to pay federal income tax for the current year until the fourth
quarter of 2000.
The Company recorded net income for the thirty-nine weeks ended September 30,
2000 of $6.2 million as compared to a net income of $5.6 million in the prior
period, an increase of approximately 12%.
Liquidity and Capital Resources
Cash flows from operations and amounts available under the Company's $90 million
bank credit facility are the Company's principal sources of liquidity. The
Company believes that these sources will be adequate to meet its anticipated
working capital needs, capital expenditures, dividend payments, if any, debt
service, and other cash requirements during the next twelve months.
The Company's bank credit facility is scheduled to mature on June 30, 2004 and
bears interest at a rate per annum equal to (at the Company's option): (i) the
Euro dollar offering rate plus 1.625% or (ii) the bank's prime rate. Borrowings
under the Company's revolving bank credit facility were $1.1 million (excluding
$5.2 million of outstanding letters of credit) at September 30, 2000. The
Company had additional borrowing capacity of $79.6 million available at that
time under the Company's then current borrowing base availability certificate.
During the thirty-nine weeks ended September 30, 2000, cash flows provided by
operating activities were $10.4 million, consisting primarily of (a) cash
generated from income before non-cash expenses and (b) an increase in accounts
payable, accrued expenses and other liabilities of $15.1 million, offset by an
increase in (i) accounts and notes receivable of $9.7 million, (ii) inventory of
$5.3 million and (iii) prepaid expenses and other assets of $6.6 million.
Cash flows used in investing activities during the thirty-nine weeks ended
September 30, 2000 were approximately $2.1 million, which were used exclusively
for capital expenditures. Net cash used in financing activities of approximately
$ 8.0 million consisted primarily of repayments under the bank credit facility
of $5.6 million and a dividend payment of $2.5 million.
EBITDA, defined as earnings before interest expense, income taxes, depreciation
and amortization, was $29.0 million during the thirty-nine weeks ended September
30, 2000 as compared to $28.1 million in the same period of the prior year. The
-8-
<PAGE>
Company has presented EBITDA supplementally because management believes this
information is useful given the significance of the Company's depreciation and
amortization and because of its highly leveraged financial position. This data
should not be considered as an alternative to any measure of performance or
liquidity as promulgated under generally accepted accounting principles (such as
net income/loss or cash provided by/used in operating, investing and financing
activities), nor should it be considered as an indicator of the Company's
overall financial performance. Also, the EBITDA definition used herein may not
be comparable to similarly titled measures reported by other companies.
The consolidated indebtedness of the Company decreased to $158.3 million at
September 30, 2000 as compared to $164.1 million at January 1, 2000. As of
October 2, 1999 consolidated indebtedness was $167.3 million.
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. As of September 30, 2000, the Company was in compliance with its
covenants.
On October 25, 2000 the Company announced plans for a 100,000-square-foot
expansion of the White Rose Frozen Food distribution facility in Carteret, New
Jersey. The expansion plans were precipitated by the need to expand capacity to
accommodate product requirements of customers without compromising service. The
expansion will bring the total square footage of the facility to approximately
279,000 square feet, with completion expected by late 2001. Although the cost
has not been finalized, the additional expense should not be material to the
Company's liquidity, in part because of expected increased warehouse
efficiencies and productivity.
On November 6, 2000, the Company agreed to a five year contract with its
refrigerated warehouse employees. Although the Company incurred a brief work
stoppage , it does not expect the temporary loss of business to be material to
its liquidity. The Company is currently negotiating a long-term contract with
its refrigerated drivers.
From time to time when the Company considered market conditions attractive, the
Company has purchased on the open market a portion of its public debt and may in
the future purchase and retire a portion of its outstanding public debt.
As a way of enhancing shareholder value and providing the Company's employees
with the benefit of ownership in the Company, the Board of Directors has
authorized management to evaluate a leveraged Employee Stock Ownership Plan
("ESOP").
-9-
<PAGE>
EasyGrocer.com
The Company has developed a proprietary electronic commerce system,
EasyGrocer.com, with the specific needs of its supermarket customers and their
retail consumers in mind. It allows consumers to do their grocery shopping
online 24 hours a day from the convenience of their home or office. Unlike many
other services, EasyGrocer.com is a network of local grocery merchants familiar
with the specific needs, including ethnic products, of their respective
communities. Consumers are able to shop the full inventory of specific stores
they have frequented in the past. All products offered by the supermarket are
available, including groceries, meat, produce, dairy, frozen food and health and
beauty aids.
Once on-line, the consumer is presented with a list of participating stores and
the entire selection of products offered by the store selected. Just as in a
supermarket, weekly specials can be offered to internet customers. Employees of
the store will select the order and will either deliver to or have it available
for pickup by the consumer. The website gives the consumer the same selection
and flexibility as in the supermarket, but with added convenience.
At the present time, EasyGrocer.com's service area is concentrated in New York
City, Long Island, and Westchester County in New York and parts of New Jersey
and Pennsylvania. The Company is continuing to broaden this trading area.
Through September 2000, the number of shopping members has increased in excess
of 700% from the beginning of the year, including orders filled form non-White
Rose customers. The average order size was $107.30 in September 2000, a
significant increase over the participating stores' average in-store order size,
and up from $79.87 in June 2000. The Company expects to spend less than $500,000
during the remainder of 2000 in support of EasyGrocer.com's marketing strategies
and is evaluating its 2001 strategy.
-10-
<PAGE>
II-OTHER INFORMATION
Item 5. Other Information
On October 19, 2000 Arthur M. Goldberg, the Company's Chairman of the Board,
President and Chief Executive Officer, passed away. At a meeting held on October
23, 2000, the Company's Board of Directors appointed Richard B. Neff as
Co-Chairman of the Board, and Chief Executive Officer and Stephen R. Bokser as
Co-Chairman of the Board, President and Chief Operating Officer. In addition,
Earle I. Mack was elected to the Board of Directors.
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/ Richard B. Neff
------------------------------------------
Richard B. Neff
Co-Chairman of the Board of Directors,
Chief Executive Officer
(Principal Financial and
Accounting Officer)
By: /s/ Stephen R. Bokser
------------------------------------------
Stephen R. Bokser
Co-Chairman of the Board of Directors,
President and Chief Operating Officer
Date: November 9, 2000
-12-
<PAGE>
