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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
(Amendment No. 1)
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended May 26, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-6566
THORN APPLE VALLEY, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MICHIGAN 38-1964066
(State or other (I.R.S. Employer Identification No.)
jurisdiction of
incorporation or
organization)
</TABLE>
26999 CENTRAL PARK BOULEVARD, SUITE 300,
SOUTHFIELD, MICHIGAN 48076
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 213-1000
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which
NONE registered
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.10 PAR VALUE PER SHARE
(Title of class)
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 such shorter period that registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this 10-K or any amendment to this Form
10-K. [ ]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK OF THE REGISTRANT HELD BY
NON-AFFILIATES OF THE REGISTRANT AS OF AUGUST 18, 1995, COMPUTED BY REFERENCE TO
THE NASDAQ CLOSING PRICE ON SUCH DATE, WAS $108,261,000.
THE NUMBER OF OUTSTANDING SHARES OF REGISTRANT'S COMMON STOCK AS OF AUGUST
18, 1995 WAS 5,773,920.
The following document (or portion thereof) has been incorporated by
reference in this Annual Report on Form 10-K: the definitive Proxy Statement for
the 1995 Annual Meeting of Shareholders to be held on October 26, 1995 (Part
III).
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Year Ended
Form 10-K/A THORN APPLE VALLEY, INC. May 26, 1995
PART I
ITEM 1. BUSINESS
Thorn Apple Valley, Inc. (sometimes referred to hereinafter
collectively with its predecessors and subsidiaries as the "Company") is a
major producer of manufactured meat and poultry products and is one of the
largest slaughterers of hogs in the United States. The Company was originally
incorporated in 1959 as a Michigan corporation. It reincorporated in Delaware
in 1971 and reincorporated in Michigan in 1977. The Company is engaged in the
manufacture and sale of bacon, hot dogs and lunchmeats, hams, smoked sausages
and turkey products, as well as the slaughtering of hogs and the related sale
of fresh pork products. The Company markets its products under premium and
other proprietary brand labels including "Thorn Apple Valley," "Wilson
Certified," "Corn King," "Colonial," "Triple M," "Herrud," "Royal Crown," "Bar
H," "Olde Virginie" and "Cavanaugh Lakeview Farms" and under customer-owned
private labels. The Company sells its products principally to wholesalers,
supermarkets and other manufacturers throughout the United States and in
selected international markets.
Due to market conditions, profit margins on sales of manufactured meat
and poultry products are usually more consistent than profit margins on sales
of fresh meats and by-products. Consumer packaged meat and poultry
manufacturers generally receive higher profit margins on premium labeled items.
On May 30, 1995, the Company purchased certain assets from Foodbrands
America, Inc. and its subsidiaries ("Foodbrands"). The Company acquired
substantially all of Foodbrands' Retail Division ("Wilson") assets used by
Wilson in its business of producing and marketing retail meat products.
The acquired assets include three manufacturing facilities, machinery and
equipment, certain trademarks and trade names, certain other assets and
goodwill. The aggregate purchase price for the assets acquired and the
assumption of certain liabilities was approximately $65.8 million. During the
next five years, Foodbrands has the right to receive from the Company up to an
additional $10 million in accordance with what is being referred to as an
Earnout Agreement (see Note 12 to the Notes to the Consolidated Financial
Statements for further discussion related to the acquisition). Because the
Wilson acquisition occurred during the first week of fiscal 1996 and was
accounted for as a purchase, the Wilson acquisition had no effect (other than
the description set forth in Note 12 to the Notes to Consolidated Financial
Statements) on the Company's financial statements for fiscal 1995 or for
earlier periods.
PRODUCTS, OPERATIONS AND MARKETING
The Company is engaged in a single segment business with two principal
product categories: manufactured meat and poultry products and fresh pork. The
following table shows for the fiscal periods indicated the net sales and
approximate pounds of products shipped for the Company's manufactured products
operations and fresh pork operations.
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Fiscal % of Fiscal % of Fiscal % of Fiscal % of Fiscal % of
1991 Sales 1992 Sales 1993 Sales 1994 Sales 1995 Sales
---- ----- ---- ----- ---- ----- ---- ----- ---- -----
(in millions)
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Net sales (in dollars)
----------------------
Manufactured products $368.8 46% $368.4 50% $386.7 53% $416.3 54% $415.4 56%
Fresh pork products 443.2 54% 365.7 49% 336.6 46% 349.1 45% $321.8 43%
Products shipped (in lbs.)
--------------------------
Manufactured products 292.2 - 320.3 - 337.8 - 351.7 - 378.2 -
Fresh pork products 483.9 - 458.8 - 415.6 - 419.6 - 422.2 -
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Year Ended
Form 10-K/A THORN APPLE VALLEY, INC. May 26, 1995
MANUFACTURED PRODUCTS
The manufactured products operations of the Company's business involve
the production and sale of consumer brand labeled, packaged meat and poultry
products, such as bacon, hot dogs, lunchmeats, hams, smoked sausages and turkey
products. Shipments by category of these products for the five most recent
fiscal years were as follows:
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<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
Product Category 1991 1992 1993 1994 1995
---------------- ---- ---- ---- ---- ----
(in millions of pounds)
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Bacon . . . . . . . . . . . . . . . . 88.9 99.7 100.6 100.7 111.3
Hot dogs and lunchmeats . . . . . . . 74.4 75.7 78.1 72.2 71.1
Hams . . . . . . . . . . . . . . . . 57.8 62.7 67.2 74.1 85.4
Smoked sausages . . . . . . . . . . . 35.9 45.1 51.6 61.3 64.3
Turkey products . . . . . . . . . . . 13.9 17.4 23.9 24.3 25.2
Other . . . . . . . . . . . . . . . . 21.3 19.7 16.4 19.1 20.9
----- ----- ----- ----- ----
Total . . . . . . . . . . . . . . . . 292.2 320.3 337.8 351.7 378.2
</TABLE>
The Company's manufactured products sales division, which has regional
offices, markets the Company's consumer packaged meat and poultry products
using a national sales force which calls on the Company's various customers.
Price lists, product availability, marketing programs and payment terms,
however, are determined by the corporate office. Customers are generally
wholesalers or large supermarket chains.
The Thorn Apple Valley-Grand Rapids division of the Company ("Grand
Rapids"), which is located in Grand Rapids, Michigan, is engaged in the
production and sale of approximately 50 varieties of packaged, table-ready meat
products such as hot dogs, lunchmeats, corned beef and smoked sausage, under
brand names which include "Thorn Apple Valley," "Herrud," "Triple M," and
"Colonial" and other controlled and private label brands.
The Thorn Apple Valley-Deli & Smoked Meats division of the Company
("Smoked Meats"), which is located in Detroit, Michigan, is primarily engaged
in the production and sale of smoked hams, cooked hams, smoked loins, turkey
breasts, deli products and related items. These products are sold to
supermarket chains under various brand names, including "Thorn Apple Valley,"
"Herrud," "Royal Crown," "Bar H," "Colonial," "Olde Virginie" and "Cavanaugh
Lakeview Farms" and other controlled and private label brands.
The Thorn Apple Valley-Carolina division of the Company ("Carolina"),
which is located in Holly Ridge, North Carolina, produces bacon and related
by-products. These items are sold principally to supermarket chains under
brand names which include "Thorn Apple Valley," "Herrud," "Holly Ridge Farm,"
"Colonial" and "Olde Virginie" and other controlled and private label brands.
During the fourth quarter of fiscal 1995, the Company closed its Thorn
Apple Valley-Utah division ("Utah") (which was operated through the Company's
wholly-owned subsidiary, Tri-Miller Packing Co.) as was previously publicly
announced. (See Note 11 to the Notes to the Consolidated Financial
Statements.) The Utah division had produced a wide variety of manufactured
meat products,
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Year Ended
Form 10-K/A THORN APPLE VALLEY, INC. May 26, 1995
that included hot dogs, hams, bacon and fresh and smoked sausage, and sold such
products primarily under the brand names "Thorn Apple Valley" and "Triple M";
such products are now produced by the Company's Grand Rapids division.
The Company has acquired the following additional manufacturing
divisions resulting from its acquisition of certain assets of the retail
division of Foodbrands (see Note 12 to the Notes to the Consolidated Financial
Statements):
The Thorn Apple Valley-Concordia division of the Company ("Concordia"),
which is located in Concordia, Missouri, and is primarily engaged in the
production of boneless hams and other related smoked meats products.
The Thorn Apple Valley-Dixie division of the Company ("Dixie"), which
is located in Forrest City, Arkansas, and is primarily engaged in the
production of hot dogs and smoked sausage.
The Thorn Apple Valley-Shreveport division of the Company
("Shreveport"), which is located in Shreveport, Louisiana, and is primarily
engaged in the production of specialty products such as natural casing hot
dogs.
FRESH PORK
The Thorn Apple Valley-Frederick division of the Company
("Frederick"), which is located in Detroit, Michigan, is engaged in the
slaughtering and cutting of hogs and the sale of primal cuts of fresh pork
products, including hams, shoulders, loins, ribs, butts and pork bellies, and
of related by-products, such as edible renderings and meat trimmings.
Approximately 3,146,000, 2,891,000 and 2,820,000 hogs were slaughtered by
Frederick in fiscal years 1995, 1994 and 1993, respectively. The Utah division
slaughtered approximately 274,000, 339,000 and 330,000 hogs during fiscal years
1995, 1994 and 1993, respectively. (See Note 11 to the Notes to the
Consolidated Financial Statements for further discussion of Utah).
Sales of products by the Frederick division are ordinarily initiated
and completed by telephone between buyers and Frederick sales personnel. Sales
are also made through brokers located throughout the United States and abroad.
Customers for primal cuts and trimmings are generally wholesalers, supermarket
chains and outside processors. Most edible offal items are cleaned, boxed and
frozen for storage until delivery to the customer. Fat trimmings and some
inedible items are sold to renderers. The Company also further processes some
of its primal cuts into higher margin boneless products.
TRADEMARKS AND LICENSES
The Company owns or has the right to use over 80 various trademarks,
including those described above and certain trademarks purchased from
Foodbrands. The trademarks are valuable to the Company because of the
significant market advantage that name recognition provides in the retail
market served by the Company. Most of the trademarks used by the Company are
registered with the appropriate administrative offices, and the Company intends
to renew each such registration as long as the related trademark is used with
respect to a current line of products.
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Year Ended
Form 10-K/A THORN APPLE VALLEY, INC. May 26, 1995
DISTRIBUTION AND CUSTOMERS
During fiscal 1995 approximately 19% of the Company's products were
marketed in Michigan. This percentage was approximately 20% for fiscal 1994 and
1993 respectively. The balance of the products were marketed in each of these
years primarily in 46 other states, Washington, D.C., Canada and to Pacific Rim
countries. Sales to customers in foreign countries during fiscal 1995 totaled
approximately $9,300,000. This total was approximately $11,200,000 for fiscal
1994 and approximately $13,300,000 for fiscal 1993.
On a regular basis, the Company sells its fresh pork and manufactured
products to more than 900 customers. These customers consist primarily of
wholesalers, supermarket chains and, in the case of the Company's fresh pork
operations, other manufacturers of meat and poultry products. For fiscal 1995,
approximately 34% of the Company's sales were made to its 10 largest customers,
none of whom accounted for as much as 10% of the Company's sales. The Company
does not have any significant long-term sales commitments except for the sale
of its inedible rendering materials. See "Business-Long Term Royalty
Agreement".
The Company owns and operates a fleet of refrigerated tractor-trailers
and additional trailers which are used for transporting a portion of its
products to customers and to the Company's manufacturing facilities. The
Company also engages the services of contract carriers, including Coast
Refrigerated Trucking Co., Inc., National Food Express, Inc. and Millers
Transport Inc., all wholly-owned subsidiaries of the Company. Products are
shipped to supermarket chains, wholesalers and other meat processors. In
addition to its own delivery equipment, the Company utilizes non-affiliated
carriers or has customers make their own arrangements for delivery.
RAW MATERIALS
The Company's primary raw material is live hogs. The purchase of hogs
accounted for approximately 73% of the total purchases of raw materials made by
the Company during fiscal 1995. Purchases of live hogs are through a network
of buying stations, selected brokers and direct from hog producers mainly in
the states of Michigan, Ohio, Indiana, Illinois and Ontario, Canada. In
November 1994 the Company entered into a 10 year agreement with Michigan
Livestock Exchange ("MLE"), whereby MLE supplies hogs for the Company's
slaughter facility in Detroit, Michigan. This agreement gives the Company the
purchasing power of 43 buying stations throughout the Company's buying area.
Under the terms of the 10 year agreement, in addition to supplying hogs, MLE
manages the Company's hog buying stations. Under this agreement, MLE is
currently supplying approximately 70% of the total hogs being purchased by the
Company. The transportation of hogs to the Frederick facility is primarily in
tractor-trailers owned and operated by independent contractors.
During fiscal 1995, Grand Rapids obtained from Frederick 50% of all of
the pork required in its operations, which constituted approximately 9% of the
cost of the total meat requirements of Grand Rapids. Approximately 56% of the
pork processed during fiscal 1995 at Smoked Meats was obtained from Frederick,
which constituted approximately 41% of its total meat requirements.
Approximately 93% of the pork processed during fiscal 1995 at the Company's
Cavanaugh Lakeview Farms, Ltd. ("Cavanaugh Lakeview Farms") subsidiary was
obtained from either Frederick or Smoked Meats, which constituted substantially
all of its meat requirements. Approximately 41% of the pork bellies processed
by Carolina were obtained from Frederick.
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Year Ended
Form 10-K/A THORN APPLE VALLEY, INC. May 26, 1995
The Company purchases poultry, beef and other meats required for its
manufactured meat products and other materials such as seasonings, smoking and
curing agents, sausage casings and packaging materials from a number of
readily-available sources.
COMPETITION
The meat packing and manufacturing industry is highly competitive.
The Company competes with large national, regional and local companies, some of
which have substantially greater sales volume, brand name recognition and
financial resources than the Company. Competition is encountered both in the
procurement of raw materials and in the sale of products. The Company's
products also compete with other meat, fish and poultry products. Competition
exists mainly with respect to product quality, name recognition, price and
service.
EMPLOYEES
The Company has approximately 3,800 employees (of which approximately
600 are former employees of Foodbrands who were hired by the Company),
approximately 860 of whom are engaged in slaughtering and cutting hogs,
approximately 2,140 of whom are engaged in the production of the manufactured
meat and poultry products, and approximately 800 of whom are employed in
administration, sales or transportation.
The majority of the Company's production workers are employed under
four union contracts. These contracts are generally for a period of two to four
years and have various expiration dates through the third quarter of fiscal
2000. Although the Company experienced a strike in 1990 at its Grand Rapids
facility, it has historically maintained good labor relations. The unexpired
portions of the existing agreements contain no significant labor cost
increases.
REGULATION
Like other participants in the meat and poultry manufacturing
industry, the Company is subject to various laws and regulations relating to
the construction and maintenance of facilities, production standards and
pollution control administered by federal, state and other government entities,
including the Environmental Protection Agency and corresponding state agencies
such as the Michigan Department of Natural Resources, the United States
Department of Agriculture, and the Occupational Safety and Health
Administration. All of the Company's existing fresh pork and manufactured meat
and poultry products plants are federally inspected by the United States
Department of Agriculture under the Federal Meat Inspection Act. The Company
believes that it is in compliance with all health, environmental and other laws
and regulations in all material respects and that continued compliance with
existing standards will not have a material effect on the Company's results of
operations or financial condition.
LONG-TERM ROYALTY AGREEMENT
In December 1988, the Company sold substantially all of the assets of
its wholly owned subsidiary, Wayne By-Products Company, to an unrelated third
party. In connection with the sale of these assets, the Company entered into
an agreement requiring the Company to sell all its inedible rendering materials
to such third party through 1998. The Company believes that the terms and
conditions of the agreement are at least as favorable as are available from
others.
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Year Ended
Form 10-K/A THORN APPLE VALLEY, INC. May 26, 1995
PURCHASE AND MANAGEMENT AGREEMENT
In November 1994, the Company entered into a 10 year agreement with
MLE. Under the terms of the agreement, MLE manages the Company's hog buying
stations and provides the Company with hogs in accordance with the Company's
quantity and quality specifications at MLE's hog costs plus certain expenses.
In consideration, the Company pays MLE $83,333 per month as a facilities and
use management fee. In accordance with the agreement, the Company has
purchased $2.0 million of preferred stock of MLE that pays a 6% dividend. The
Company has classified the investment in MLE in other long-term assets on its
consolidated balance sheet.
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Year Ended
Form 10-K/A THORN APPLE VALLEY, INC. May 26, 1995
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on September 21, 1995.
THORN APPLE VALLEY, INC.
(Registrant)
By: /s/ LOUIS GLAZIER
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Louis Glazier
Executive Vice President
Finance and Administration
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