UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 5, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from to
------------- -----------------
COMMISSION FILE NUMBER: 0-7277
FRESH FOODS, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA
(State or other jurisdiction of incorporation or organization)
56-0945643
(I.R.S. Employer Identification No.)
3437 EAST MAIN STREET
CLAREMONT, NORTH CAROLINA 28610
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (828) 459-7626
WSMP, INC.
1 WSMP DRIVE, CLAREMONT, NORTH CAROLINA 28610
-----------------------------------------------------------
(Former name or former address, if changed since last report)
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 (3) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at January 19, 1999
----- --------------------------------
<S> <C>
COMMON STOCK, $1.00 PAR VALUE 5,914,809
</TABLE>
FRESH FOODS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I. Financial Information:
-------------------------------------------------------------
Item 1. Financial Statements
Consolidated Condensed Balance Sheets -
December 5, 1998 and February 27, 1998................................................... 1-2
Consolidated Condensed Statements of
Operations and Retained Earnings -
Thirteen Weeks Ended December 5, 1998
and Twelve Weeks Ended November 7, 1997................................................. 3
Consolidated Condensed Statements of
Operations and Retained Earnings -
Forty Weeks Ended December 5, 1998
and Thirty-Six Weeks Ended November 7, 1997............................................. 4
Consolidated Condensed Statements of Cash
Flows - Forty Weeks Ended December 5, 1998 and
Thirty-Six Weeks Ended November 7, 1997................................................. 5
Notes to Consolidated Condensed Financial
Statements.............................................................................. 6-9
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations........................................ 10-15
Part II. Other Information:
-------------------------------------------------------------
Item 6. Exhibits and Reports on Form 8-K............................................... 16
Signatures.............................................................................. 17
Index to Exhibits....................................................................... 18
Exhibit 11 - Computation of Earnings per
Common and Common Equivalent Share.................................................. 19
</TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FRESH FOODS, INC. AND SUBSIDIARIES
---------------------------------------------
Consolidated Condensed Balance Sheets
<TABLE>
<CAPTION>
(Unaudited)
December 5, February 27,
ASSETS 1998 1998
- ------ ------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,033,147 $ 2,818,071
Marketable equity securities 211,328 206,706
Accounts receivable, net (includes related party
receivables of $218,647 and $181,367 at December 5,
1998 and February 27, 1998, respectively) 18,135,307 5,204,700
Notes receivable - current, net (includes related party
notes receivable of $972,838 and $526,592 at December
5, 1998 and February 27, 1998, respectively) 1,650,865 1,150,906
Inventories 27,489,042 7,361,347
Income taxes refundable 1,087,717 872,157
Deferred income taxes 942,262 424,786
Prepaid expenses and other current assets 680,828 269,222
------------ -----------
Total current assets 54,230,496 18,307,895
------------ -----------
Property, plant and equipment, net 73,286,429 45,023,793
------------ -----------
Other assets:
Properties held for sale 2,086,847 1,680,993
Excess of cost over fair value of net assets of
businesses acquired 35,704,955 2,906,366
Other intangible assets, net 47,194,239 829,500
Notes receivable (includes related party notes receivable
of $832,906 and $1,550,638 at December 5, 1998 and
February 27, 1998, respectively) 944,543 1,886,249
Deferred income taxes -- 685,458
Deferred loan origination fees 4,496,390 262,828
Other 107,594 72,717
------------ -----------
Total other assets 90,534,568 8,324,111
------------ -----------
Total assets $218,051,493 $71,655,799
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
1
FRESH FOODS, INC. AND SUBSIDIARIES
---------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
December 5, February 27,
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1998
- ------------------------------------ ------------ -----------
<S> <C> <C>
Current liabilities:
Notes payable -- $ 5,105,144
Current installments of long-term debt $ 658,375 2,189,401
Trade accounts payable 6,820,012 6,605,893
Income taxes payable 245,965 --
Accrued insurance 1,592,548 614,846
Accrued interest 557,720 87,426
Accrued payroll and payroll taxes 3,753,882 1,960,534
Accrued promotions 2,864,338 12,000
Accrued taxes (other than income and payroll) 1,829,984 379,269
Other accrued liabilities 3,167,312 1,850,766
------------ -----------
Total current liabilities 21,490,136 18,805,279
Deferred income 75,010 --
Deferred income taxes 217,062 --
Long-term debt, excluding current installments 155,695,901 13,623,532
------------ -----------
Total liabilities 177,478,109 32,428,811
------------ -----------
Commitments and Contingencies (Note 9)
Shareholders' equity:
Preferred stock - par value $.10, authorized 2,500,000
shares; no shares issued -- --
Common stock - par value $1, authorized 100,000,000
shares; issued 5,914,174 shares at December 5, 1998
and 5,898,449 shares at February 27, 1998 5,914,174 5,898,449
Capital in excess of par value 23,762,596 23,647,020
Other comprehensive income - unrealized gain on
securities available for sale 16,905 19,261
Retained earnings 10,879,709 9,662,258
------------ -----------
Total shareholders' equity 40,573,384 39,226,988
------------ -----------
Total liabilities and shareholders' equity $218,051,493 $71,655,799
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
2
FRESH FOODS, INC. AND SUBSIDIARIES
---------------------------------------------
Consolidated Condensed Statements of Operations and Retained Earnings
Thirteen Weeks Ended December 5, 1998 and Twelve Weeks Ended November 7, 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
Operating revenues:
Food processing $ 48,352,396 $14,571,313
Restaurant operations and franchising (includes related party
transactions totaling $11,555 in 1998 and $51,410 in 1997) 25,766,144 21,396,708
------------ -----------
Total operating revenues 74,118,540 35,968,021
------------ -----------
Costs and expenses:
Cost of goods sold (includes related party transactions totaling
$52,978 in 1998 and $109,827 in 1997) 39,952,148 20,593,143
Restaurant operating expenses (includes related party transactions
totaling $1,135,028 in 1998 and $1,063,013 in 1997) 12,032,354 9,329,829
Selling, general and administrative expenses (includes related
party transactions totaling $579,029 in 1998 and $396,491 in 13,086,321 3,195,340
Depreciation and amortization 2,646,139 1,081,284
------------ -----------
Total costs and expenses 67,716,962 34,199,596
------------ -----------
Operating income 6,401,578 1,768,425
------------ -----------
Other income (expense):
Other income (including interest) (includes related party
transactions totaling $30,235 in 1998 and $38,258 in 1997) 108,524 146,953
Net gain (loss) on dispositions and sales of assets (includes
related party transactions totaling $878 in 1998 and $365,781 in 1997 (14,970) 533,079
Interest expense (includes related party transactions totaling
$25,125 in 1997) (4,037,142) (415,624)
Other expense (includes related party transactions totaling $7,339
in 1998 and $48,595 in 1997) (321,482) (158,601)
------------ -----------
Net other income (expense) (4,265,070) 105,807
------------ -----------
Earnings before income taxes 2,136,508 1,874,232
Income tax provision 899,309 705,021
------------ -----------
Net earnings 1,237,199 $ 1,169,211
============ ===========
Retained earnings:
Balance at beginning of period $ 9,642,510 $ 9,499,564
Net earnings 1,237,199 1,169,211
------------ -----------
Balance at end of period $ 10,879,709 $10,668,775
============ ===========
Net earnings per common share - basic $ .21 $ .21
============ ===========
Net earnings per common share - diluted $ .21 $ .19
============ ===========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
3
FRESH FOODS, INC. AND SUBSIDIARIES
---------------------------------------------
Consolidated Condensed Statements of Operations and Retained Earnings
Forty Weeks Ended December 5, 1998 and Thirty-Six Weeks Ended November 7, 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------- -------------
<S> <C> <C>
Operating revenues:
Food processing $ 109,634,458 $ 47,218,488
Restaurant operations and franchising (includes related party
transactions totaling $77,367 in 1998 and $212,945 in 1997) 77,521,877 64,953,934
------------- -------------
Total operating revenues 187,156,335 112,172,422
------------- -------------
Costs and expenses:
Cost of goods sold (includes related party transactions totaling
$278,757 in 1998 and $318,945 in 1997) 102,483,579 65,763,835
Restaurant operating expenses (includes related party transactions
totaling $2,768,820 in 1998 and $2,796,455 in 1997) 35,492,818 27,784,021
Selling, general and administrative expenses (includes related party
transactions totaling $2,127,537 in 1998 and $1,249,947 in 1997) 30,886,766 9,279,763
Depreciation and amortization 6,348,111 3,110,891
------------- -------------
Total costs and expenses 175,211,274 105,938,510
------------- -------------
Operating income 11,945,061 6,233,912
------------- -------------
Other income (expense):
Other income (including interest) (includes related party
transactions totaling $117,075 in 1998 and $100,975 in 1997) 485,980 496,697
Net gain (loss) on dispositions and sales of assets (includes
related party transactions totaling $878 in 1998 and $477,299 in
1997) (994,988) 553,565
Interest expense (includes related party transactions totaling
$29,709 in 1998 and $79,454 in 1997) (8,454,239) (1,246,150)
Other expense (includes related party transactions totaling
$50,818 in 1998 and $109,159 in 1997) (769,188) (363,561)
------------- -------------
Net other expense (9,732,435) (559,449)
------------- -------------
Earnings before income taxes and extraordinary item 2,212,626 5,674,463
Income tax provision 932,401 2,148,778
------------- -------------
Earnings before extraordinary item 1,280,225 3,525,685
Extraordinary loss from early extinguishment of debt (net of
income tax benefit of $45,719) (62,774) --
------------- -------------
Net earnings $ 1,217,451 $ 3,525,685
============= =============
Retained earnings:
Balance at beginning of period $ 9,662,258 $ 7,143,090
Net earnings 1,217,451 3,525,685
------------- -------------
Balance at end of period $ 10,879,709 $ 10,668,775
============= =============
Earnings before extraordinary item - basic $ 0.22 $ 0.63
Extraordinary loss from early extinguishment of debt (.01) --
------------- -------------
Net earnings per common share - basic $ 0.21 $ 0.63
============= =============
Earnings before extraordinary item - diluted $ 0.21 $ 0.58
Extraordinary loss from early extinguishment of debt (.01) --
------------- -------------
Net earnings per common share - diluted $ 0.20 $ 0.58
============= =============
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
4
FRESH FOODS, INC. AND SUBSIDIARIES
--------------------------------------------
Consolidated Condensed Statements of Cash Flows
Forty Weeks Ended December 5, 1998 and Thirty-Six Weeks Ended November 7, 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,217,451 $ 3,525,685
------------- -----------
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Extraordinary loss from extinguishment of debt (before tax benefit of
$45,719) 108,493 -
Depreciation and amortization 6,348,111 3,110,891
Depreciation on properties leased to others 212,166 154,841
Increase in deferred income taxes 420,048 3,499
Provision for losses on receivables 126,753 19,244
Net (gain) loss on disposition and write-down of assets 994,988 (553,565)
Other non-cash adjustments to earnings 410,471 619,481
Changes in operating assets and liabilities (net of effect from purchase
of restaurant companies and Pierre) providing (using) cash:
Marketable equity securities (6,978) (4,908)
Receivables (3,087,978) (2,469,842)
Inventories 1,140,208 (1,581,200)
Income taxes refundable, prepaid expenses and other (581,411) (5,646)
Trade accounts payable and other accrued liabilities (1,386,227) 1,103,236
------------- -----------
Total adjustments 4,698,644 396,031
------------- -----------
Net cash provided by operating activities 5,916,095 3,921,716
------------- -----------
Cash flows from investing activities:
Purchase of net assets of Pierre Foods (123,460,948)
Proceeds from sales of assets to others 74,144 2,164,064
Proceeds from sales of assets to related parties 13,746 950,000
Decrease in related party notes receivables 250,000 179,452
Decrease in other notes receivable 214,577 396,953
Deposits, net of refunds (41,016) 4,868
Capital expenditures to related parties (1,802,185) (1,017,851)
Capital expenditures - others (10,678,199) (6,974,432)
------------- -----------
Net cash used in investing activities (135,429,881) (4,296,946)
------------- -----------
Cash flows from financing activities:
Proceeds from issuance of senior notes 115,000,000 --
Net borrowing under revolving credit agreement 38,102,085 --
Proceeds from issuance of long-term debt 1,700,000
Principal payments on long-term debt (12,560,741) (3,165,928)
Net proceeds (repayments) under short-term borrowing agreements (5,105,144) 1,267,136
Loan origination fees (4,782,088) --
Repurchase of common stock (1,983,750)
Proceeds from exercise of stock options 74,750 496,200
------------- -----------
Net cash provided by (used in) financing activities 130,728,862 (1,686,342)
------------- -----------
Net increase (decrease) in cash and cash equivalents 1,215,076 (2,061,572)
Cash and cash equivalents at beginning of period 2,818,071 4,275,031
------------- -----------
Cash and cash equivalents at end of period $ 4,033,147 $ 2,213,459
============= ===========
</TABLE>
See accompanying notes to unaudited consolidated condensed financial statements.
5
FRESH FOODS, INC. AND SUBSIDIARIES
---------------------------------------------
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments necessary to
present fairly the financial position as of December 5, 1998 and February
27, 1998, the results of operations for the fiscal quarters ended December
5, 1998 and November 7, 1997 and the cash flows for the forty weeks ended
December 5, 1998 and the thirty-six weeks ended November 7, 1997. As a
result of the change in the number of weeks in the fiscal quarter ended
December 5, 1998 as compared to the prior year quarter ended November 7,
1997 (described in Note 5) and the acquisition of Pierre (described in
Note 9), the two quarters are not comparable. The audited financial
statements for the fiscal year ended February 27, 1998 should be read in
conjunction with these unaudited quarterly financial statements.
2. The results of operations for the forty weeks ended December 5, 1998 are
not necessarily indicative of the results to be expected for the full
year.
3. Financial statements for fiscal 1998 have been reclassified, where
applicable, to conform to financial statement presentation used in fiscal
1999. Amounts for the fiscal quarter and year to date ended November 7,
1997 have been restated to reflect the merger with Sagebrush, Inc. which
was completed on January 30, 1998 and accounted for as a pooling of
interests under Accounting Principles Board Opinion No. 16. In addition,
amounts for the fiscal quarter and year to date ended December 5, 1998
include the results of operations for Pierre from the acquisition date of
June 9, 1998 through December 5, 1998.
4. In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share", which was required to be adopted for both
interim and year-end financial statement periods ending December 15, 1997.
The Company adopted this new method of computing earnings per share and
restated earnings per share for all prior periods. The following is a
reconciliation between basic and diluted earnings (loss) per share before
extraordinary item:
<TABLE>
<CAPTION>
Earnings
(Loss) before
Extraordinary Per Share
Item Shares Amount
-------------- -------------- ----------
<S> <C> <C> <C>
Quarter Ended December 5, 1998
Earnings per common share - basic $ 1,237,199 5,914,174 $ 0.21
Stock-based compensation awards -- 92,021 --
-------------- -------------- ----------
Earnings per common share - diluted $ 1,237,199 6,006,195 $ 0.21
============== ============== ==========
Quarter Ended November 7, 1997
Earnings per common share - basic $ 1,169,211 5,575,510 $ 0.21
Stock-based compensation awards -- 509,407 (0.02)
-------------- -------------- -----------
Earnings per common share - diluted $ 1,169,211 6,084,917 $ 0.19
============== ============== ===========
Year to Date Ended December 5, 1998
Earnings per common share - basic $ 1,280,225 5,908,018 $ 0.22
Stock-based compensation awards -- 194,908 (0.01)
-------------- -------------- -----------
Earnings per common share - diluted $ 1,280,225 6,102,926 $ 0.21
============== ============== ===========
Year to Date Ended November 7, 1997
Earnings per common share - basic $ 3,525,685 5,578,420 $ 0.63
Stock-based compensation awards -- 486,063 (0.05)
-------------- ------------- -----------
Earnings per common share - diluted $ 3,525,685 6,064,483 $ 0.58
============== ============= ===========
</TABLE>
6
5. The Company reports the results of its operations using a 52-53 week
basis. As a result of the Pierre acquisition, described in Note 9, the
Company changed its interim fiscal periods to conform with standard food
processing industry interim periods. In line with this, each quarter of
the 52 week fiscal year will contain 13 weeks except for the infrequent
fiscal years with 53 weeks. In order to adopt this interim calendar, the
Company's existing operations contain forty weeks this fiscal year to
date, as compared to thirty-six weeks in the previous fiscal year to date,
and thirteen weeks in the quarter ended December 5, 1998, as compared to
twelve weeks in the quarter ended November 7, 1997. The effect of the
additional weeks in 1998 increased revenue by $24,372,479, increased
operating income by $2,466,818, increased net income by $684,946 and
increased earnings per basic and diluted share by $.12 and $.11,
respectively, for the year to date ended December 5, 1998. The effect
of the additional week in the quarter ended December 5, 1998 increased
revenue by $4,185,923, increased operating income by $535,423, increased
net income by $98,863 and increased earnings per basic and diluted share
by $.02 and $.02, respectively, for the year to date ended December 5,
1998.
6. A summary of inventories, by major classifications, follows:
<TABLE>
<CAPTION>
December 5, February 27,
1998 1998
--------------- -------------
<S> <C> <C>
Restaurants $ 809,270 $ 876,863
Food processing
Raw materials 6,741,834 2,786,546
Work in process 1,034,218 1,574,767
Finished goods 18,903,720 2,123,171
--------------- -------------
Totals $ 27,489,042 $ 7,361,347
=============== =============
</TABLE>
7. Supplemental cash flow disclosures - cash paid during the period ended:
<TABLE>
<CAPTION>
December 5, 1998 November 7, 1997
----------------- ----------------
<S> <C> <C>
Interest $ 7,706,595 $ 1,105,499
================= ================
Income taxes $ 362,110 $ 1,620,824
================= ================
</TABLE>
During the first quarter of fiscal 1998, the Company purchased fixed
assets and inventories of certain commonly controlled franchised
units in exchange for cash, the assumption of current and long-term
liabilities, the issuance of long-term notes, and the forgiveness of a
note receivable. Also, as part of the same transaction, the Company issued
98,750 shares of common stock in exchange for a non-competition agreement.
Specific amounts relating to items purchased and consideration given are
set forth in Note 8.
8. On March 1, 1997, the Company acquired fourteen franchised restaurants
from various corporations predominantly owned by a former executive
officer of the Company for a total purchase price of $3,767,500 payable as
follows: $500 in cash; $352,780 in assumed current liabilities; $476,720
in assumed long-term liabilities; $125,000 in forgiveness of a note
receivable from seller; $2,012,500 in common stock of the Company; and a
two year 5% promissory note in the amount of $800,000. As part of this
transaction, 223,611 shares of common stock were issued to the selling
corporations. In addition, costs associated with the acquisition totaling
$64,707 were capitalized as part of the transaction. The acquisition price
is allocated as follows: $1,203,413 to fixed assets, $2,477,481 to excess
of cost over fair value of net assets of businesses acquired and $151,313
to restaurant inventories.
In addition, existing lease agreements for eleven of the restaurant
properties were assigned to the Company. Also the Company signed new lease
agreements on the remaining three properties. The new leases are
classified as operating leases.
Also as part of this transaction, the former executive officer, who was
also the single largest franchisee of the Company, entered into a
fifteen-year non-competition agreement with the Company in exchange for
98,750 shares of common stock valued at $888,750 on the date of the
agreement. These shares are restricted securities and their resale is
subject to certain conditions.
7
These shares are restricted securities and their resale is subject to
certain conditions.
9. On June 9, 1998, the Company purchased certain of the net operating assets
of the Pierre Foods Division ("Pierre") of Hudson Foods, Inc. ("Hudson"),
a wholly owned subsidiary of Tyson Foods, for $122 million and assumed
certain of Hudson's liabilities, consisting principally of trade payables
and other accrued short-term liabilities. The acquisition was accounted
for using the purchase method of accounting. The purchase price, which
totaled $123.3 million including the capitalized costs of the acquisition,
has been allocated to the net underlying assets based on preliminary
estimates of fair values. The Company does not believe that the final
purchase price allocation will differ significantly from the preliminary
purchase price allocation recorded at December 5, 1998. Excess purchase
price over fair market value of the underlying assets of $80,581,219 was
allocated to goodwill and other intangible assets, including tradenames
and assembled workforce, and is being amortized on a straight-line basis
over lives ranging from fifteen to thirty years.
The purchase was financed by the proceeds of an offering of $115.0 million
aggregate principal amount of the Company's 10 3/4% Senior Notes Due 2006
(the "Senior Notes") and an initial borrowing under a new five-year, $75.0
million, revolving bank credit facility (the "Bank Facility"), with
availability subject to a borrowing base formula. In addition, borrowings
under the Bank Facility were used to extinguish all existing indebtedness
of the Company for borrowed money, with the exception of outstanding
industrial revenue bonds and certain capital lease obligations.
The Senior Notes are unsecured obligations of the Company, unconditionally
guaranteed on a senior unsecured basis by all existing subsidiaries of the
Company. Interest on the Senior Notes is payable on June 1 and December 1
of each year, commencing December 1, 1998. The Senior Notes mature on June
1, 2006, unless previously redeemed, and are not subject to any sinking
fund requirement.
The Bank Facility provides for a revolving line of credit under which the
Company may borrow up to an amount equal to the lesser of $75.0 million or
a borrowing base (comprised of eligible accounts receivable, inventory,
machinery and equipment and real property). Borrowings under the Bank
Facility will bear interest at floating rates based upon the interest rate
option selected from time to time by the Company. The borrowings are
secured by a first priority security interest in substantially all of the
personal property of the Company and its subsidiaries, together with all
real property included in the borrowing base.
On September 5, 1998, the Company completed a reorganization, consisting
of a series of stock and asset transfers, mergers and liquidations among
and involving the parent corporation and its subsidiaries, designed to
simplify the corporate structure. As a result of this reorganization,
Fresh Foods, Inc. is a holding company with no assets or operations other
than investments in its subsidiaries. All subsidiaries of Fresh Foods,
Inc. are wholly owned, directly or indirectly, by Fresh Foods, Inc., and
serve as subsidiary guarantors of the Bank Facility and Senior Notes and
as such have unconditionally guaranteed the notes on a joint and several
basis. In addition, all guarantors of the Bank Facility and Senior Notes
are subsidiaries of Fresh Foods, Inc.
As a result of the September 5, 1998 reorganization, separate financial
statements of the subsidiary guarantors are not presented because (a) the
subsidiary guarantors have jointly and severally guaranteed the Senior
Notes on a full and unconditional basis, (b) the aggregate assets,
liabilities, earnings and equity of the subsidiary guarantors are
substantially equivalent to the assets, liabilities, earnings and equity
of the parent on a consolidated basis and (c) management has determined
that such information is not material to investors.
The following unaudited pro forma consolidated results of operations
assume the Pierre acquisition occurred as of the beginning of each year:
8
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Forty Thirty-Six
Weeks Ended Weeks Ended
December 5, 1998 November 7, 1997
---------------- -----------------
<S> <C> <C>
Total operating revenues $ 216,034 $ 186,765
Operating income 12,075 9,680
Loss before extraordinary item (864) 2,017
Extraordinary loss (net of tax) (73) (117)
Net earnings (loss) $ (937) $ 1,900
Net loss per common share - basic:
Loss before extraordinary item $ (0.15) $ 0.36
Extraordinary loss (0.01) (0.02)
---------------- -----------------
Net loss $ (0.16) $ 0.34
================ =================
Net loss per common share - diluted:
Loss before extraordinary item $ (0.15) $ 0.33
Extraordinary loss (0.01) (0.02)
---------------- -----------------
Net loss $ (0.16) $ (0.31)
================ =================
</TABLE>
10. Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income", was issued in June 1997 and became effective for
the Company in the current fiscal year. SFAS No. 130 requires disclosure
of comprehensive income (which is defined as "the change in equity during
a period excluding changes resulting from investments by shareholders and
distributions to shareholders") and its components. Total comprehensive
income, comprised of net earnings and unrealized holding gains (losses) on
available-for-sale securities, was $1,224,634 and $1,178,260 for the
quarters ended December 5, 1998 and November 7, 1997, and was $1,215,095
and $3,534,925 for the year to date periods ended December 5, 1998 and
November 7, 1998, respectively.
In June 1997, Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosures About Segments of an Enterprise and Related
Information," was issued. SFAS No. 131 redefines how operating segments
are determined and requires disclosure of certain financial and
descriptive information about a company's operating segments. The Company
will be required to adopt this new standard for fiscal 1999. The Company
has not yet completed its analysis of the effect of this new standard on
its financial statement disclosures.
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants (the "AICPA") issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidance on the types of internal costs, including payroll and interest
costs, which should be capitalized relative to development of software
applications. The Company will be required to adopt this new statement for
fiscal 1999. The Company has evaluated this statement and does not expect
any material effect on the Company's financial statements.
In April 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the financial
reporting of start-up costs and organization costs. It requires costs of
start-up activities and organization costs to be expensed as incurred. The
Company will be required to adopt this new statement for fiscal 2000. The
Company is in the process of evaluating this statement and based on
preliminary review, expects the cumulative effect of this statement to
require a write-off of approximately $94,000 before any tax benefit.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The Company's operations are classified into two business segments:
food processing operations, principally fully cooked meat and sandwich
production; and restaurant operations, comprised of the Sagebrush, Western
Steer, Prime Sirloin and Bennett's concepts. On June 9, 1998, the Company
completed its acquisition of Pierre Foods. The inclusion of Pierre's operations
and the additional three weeks of operations in the existing operations (see
Note 5) results in increases in every revenue and expense category compared with
prior year results for the comparable periods. Results for the fiscal quarters
and year to date ended December 5, 1998 and November 7, 1997, are shown below:
<TABLE>
<CAPTION>
Fiscal Quarter Ended Year to Date Ended
----------------------------- ----------------------------
(In millions) December 5, November 7, December 5, November 7,
1998 1997 1998 1997
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Revenues:
Food processing operations $ 48.3 $ 14.6 $ 109.6 $ 47.2
Restaurant operations 25.8 21.4 77.6 65.0
----------- ------------ ------------- -----------
Total 74.1 36.0 187.2 112.2
----------- ------------ ------------- -----------
Cost of goods sold:
Food processing operations 30.1 12.6 73.5 41.9
Restaurant operations 9.9 8.0 29.0 23.9
----------- ------------ ------------- -----------
Total 40.0 20.6 102.5 65.8
----------- ------------ ------------- -----------
Restaurant operating expenses 12.0 9.3 35.5 27.8
Selling, general and administrative 13.1 3.2 30.9 9.3
Depreciation and amortization 2.6 1.1 6.4 3.1
----------- ------------ ------------- -----------
Operating income 6.4 1.8 11.9 6.2
----------- ------------ ------------- -----------
Other expense (4.3) 0.1 (9.7) (0.5)
----------- ------------ ------------- -----------
Earnings (loss) before income taxes
and extraordinary item 2.1 1.9 2.2 5.7
Income tax provision (benefit) 0.9 0.7 0.9 2.2
----------- ------------ ------------- -----------
Earnings (loss) before extraordinary item 1.2 1.2 1.3 3.5
Extraordinary loss (net of tax) -- -- (0.1) --
----------- ------------ ------------- -----------
Net earnings (loss) $ 1.2 $ 1.2 $ 1.2 $ 3.5
=========== ============ ============= ===========
</TABLE>
Fiscal Quarter Ended December 5, 1998 Compared to Fiscal Quarter Ended
November 7, 1997
Revenues. Revenues increased by $38.1 million, or 105.8%. The net
effect of the Pierre acquisition accounted for $33.7 million of the sales
increase. The remaining increase of $4.4 million was the result of increases in
restaurant revenues. This increase in restaurant revenues was due to the
additional one week of sales and the opening, following the fiscal quarter
ended November 7, 1997, of fifteen Sagebrush restaurants, consisting of
six new restaurants (including two former franchises) and nine conversions.
The revenue effect of these new restaurants was offset somewhat by the
closing of six non-Sagebrush restaurants.
Cost of goods sold. Cost of goods sold increased by $19.4, or 94.2%.
The Pierre acquisition accounted for $17.5 million of the increase. Cost of
goods sold in the restaurant segment increased by $1.9 million, or 23.8%, due to
the additional one week of sales, the operation of fifteen new restaurants in
the quarter ended December 5, 1998, and an increase in the costs of beef,
chicken and dairy products. Cost of goods sold in the food processing
10
segment decreased as a percentage of operating revenues of that segment from
86.3% to 62.3% due to the Company's acquisition of Pierre, which historically
had a higher gross margin percentage than existing Company food processing
operations.
Restaurant operating expenses. Such expenses increased by $2.7 million,
or 29.0%, as a result of the operation of additional restaurants and the
additional week in the fiscal quarter ending December 5, 1998. As a percentage
of restaurant revenues, restaurant operating expenses increased from 43.5% to
46.5%, due to the incurrence of costs associated with opening or converting
a greater number of stores this fiscal quarter compared to the number of stores
opened or converted in the prior fiscal quarter.
Selling, general and administrative. Such expenses increased by $9.9
million, or 309.4%, as a result of the Company's acquisition of Pierre, which
historically had a higher level of selling, general and administrative
expenses than existing Company operations, and the additional week of
operations. As a percentage of revenues, selling, general and administrative
expenses increased from 8.9% to 17.7% due to the higher level of selling,
general and administrative expenses relating to Pierre.
Depreciation and amortization. Depreciation and amortization increased
by $1.5 million, or 136.4%, due to the Pierre acquisition and the higher number
of restaurants in operation.
Operating income. Operating income increased by $4.6 million, or
255.6%, and increased as a percentage of revenues from 5.0% to 8.6%, for the
reasons stated above.
Other income (expense). Net other expense increased by $4.4 million
from net other income of $106,000. This increase was due primarily to interest
expense ($4.0 million) resulting from the borrowings used to finance the Pierre
acquisition and, to a lesser extent, the nonrecurrence in the fiscal 1999
quarter of a net gain in the fiscal 1998 quarter on disposition and sale of
excess real property.
Earnings before income taxes and extraordinary items. Such earnings
increased by $200,000 million, or 10.5%, for the reasons stated above.
Income tax provision. The effective tax rate for the fiscal quarter
ended December 5, 1998 was 42.1%, as compared to 37.6% for the prior year
comparable quarter.
Net earnings. Net earnings were flat for the reasons stated above.
Year to Date Ended December 5, 1998 Compared to Year to Date Ended November 7,
1997
Revenues. Revenues increased by $75.0 million, or 66.8%. The net effect
of the Pierre acquisition accounted for $62.4 million of the sales increase. The
remaining increase of $12.6 was the result of an increase of in restaurant
revenues. This increase in restaurant revenues was due to the additional four
weeks of sales of $24,372,479 and the opening, since the beginning of fiscal
1998, of nineteen Sagebrush restaurants, consisting of nine new restaurants
(including two former franchises) and ten conversions. The revenue effect of
these nine new Sagebrush restaurants was offset somewhat by the closing of six
non-Sagebrush restaurants.
Cost of goods sold. Cost of goods sold increased by $36.7 million, or
55.8%. The Pierre acquisition accounted for $31.6 million of the increase.
Cost of goods sold in the restaurant segment increased by $5.1 million, or
21.3%, due to the operation of additional restaurants and the additional four
weeks in the fiscal period ended December 5, 1998, and increases in the costs
of beef, chicken and dairy products. Cost of goods sold in the food processing
segment decreased as a percentage of operating revenues of that segment from
88.8% to 67.1% due to the Company's acquisition of Pierre, which historically
had a higher gross margin percentage than existing Company food processing
operations.
Restaurant operating expenses. Such expenses increased by $7.7 million,
or 27.7%, as a result of the additional four weeks and the operation of
additional restaurants in the latter period. As a percentage of restaurant
revenues, restaurant operating expenses increased from 42.8% to 45.7% due to the
11
incurrence of costs associated with opening or converting a greater number of
stores this fiscal quarter compared to the number of stores opened or converted
in the prior fiscal quarter.
Selling, general and administrative. Such expenses increased by $21.6
million, or 232.3%, as a result of the Company's acquisition of Pierre, which
historically had a higher level of selling, general and administrative expenses
than existing Company operations, and the additional four weeks of operations.
As a percentage of revenues, selling, general and administrative expenses
increased from 8.0% to 15.7% due to the higher level of selling, general and
administrative expenses relating to Pierre.
Depreciation and amortization. Depreciation and amortization increased
by $3.3 million, or 106.5%, due to the Pierre acquisition and the higher number
of restaurants in operation.
Operating income. Operating income increased by $5.7 million, or 91.9%,
and increased as a percentage of revenues from 5.5% to 6.4% for the reasons
stated above.
Other income (expense). Net other expense increased by $9.2 million
from $500,000 due to (1) interest expense ($7.2 million) resulting from the
borrowings used to finance the Pierre acquisition, (2) dispositions of certain
fixtures and equipment deemed worthless as a result of the acquisition and
integration of the Sagebrush operations, (3) dispositions of certain fixtures
and equipment deemed worthless as a result of conversions of restaurants to the
Sagebrush concept and (4) a disposition of computer software that management had
determined not to utilize in the future due to the integration of Pierre into
Fresh Foods.
Earnings before income taxes and extraordinary item. Such earnings
decreased by $3.3 million, or 57.8%, for the reasons stated above.
Income tax provision. The effective tax rate for the fiscal year to
date ended December 5, 1998 was 42.1%, as compared to 37.9% for the prior year
comparable period. Such increase was due to the non-deductibility of certain
costs incurred during fiscal 1998.
Earnings before extraordinary item. Earnings before extraordinary item
decreased by $2.3 million, or 65.7%, for the reasons stated above.
Extraordinary loss. Extraordinary loss, net of tax, is the result of a
$66,000 loss on write-off of loan fees due to early extinguishment of debt in
fiscal 1998.
Net earnings. Net earnings decreased by $2.3 million, or 65.7%, for the
reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $33.6 million at December 5, 1998,
as compared to a deficit of $497,000 at February 27, 1998. Most of the increase
in working capital was attributable to borrowings under the revolving line of
credit used to finance part of the Pierre acquisition, restaurant conversions
and construction, and operations. These borrowings are classified as long term
debt on the balance sheet.
The Company has traditionally financed its working capital needs
through a combination of cash flow from operations and bank borrowings and, from
time to time, sales of underutilized assets. During fiscal 1997, the Company
entered into an agreement with a bank to provide a $6.0 million revolving credit
facility, secured by a lien on inventory and receivables. The Company also
obtained construction loans from a bank in amounts of up to $1.0 million per
restaurant to finance the construction of new restaurants. Borrowings under
these facilities were paid off with proceeds from the revolving bank facility as
part of the Pierre acquisition.
12
On June 9, 1998, the Company completed the acquisition of Pierre Foods.
The $122.0 million cash purchase price was financed by the proceeds of an
offering of $115.0 million aggregate principal amount of the Company's 10 3/4%
Senior Notes Due 2006 (the "Notes") and an initial borrowing under a new
five-year, $75.0 million revolving Bank Facility, with availability subject to a
borrowing base formula. In addition, borrowings under the Bank Facility were
used to extinguish all existing debt of the Company, with the exception of
outstanding industrial revenue bonds and certain capital lease obligations (see
Note 11 to the unaudited consolidated condensed financial statements).
The Bank Facility provides for a five-year revolving line of credit
under which the Company may borrow up to an amount (including standby letters of
credit up to $2.5 million) equal to the lessor of $75.0 million or a borrowing
base (comprised of eligible accounts receivable, inventory, machinery and real
property). The portion of the Bank Facility not used in connection with
consummation of the Pierre acquisition may be used for working capital
requirements, permitted acquisitions and general corporate purposes. Borrowings
under the Bank Facility will bear interest at floating rates based upon the
interest rate option selected from time to time by the Company.
As of December 5, 1998, after giving effect to the Pierre acquisition
and related financial transactions, the Company had approximately 38.8 million
in outstanding borrowings under the revolving line of credit and approximately
$15.4 million of additional availability under the Bank Facility.
The Company anticipates that its cash requirements, including working
capital, capital expenditures and required principal and interest payments due
under the Bank Facility and interest payments due under the Notes, which
represent significant liquidity requirements, will be met though a combination
of funds provided by operations, borrowings under the Bank Facility and,
depending upon stock market conditions and other factors, the net proceeds of a
possible offering of its common stock. In addition, from time to time the
Company expects to continue its practice of acquiring equipment with the
proceeds of secured bank loans or capital or operating leases.
Funding for capital expenditures has been obtained primarily through
current earnings and term loans. Capital expenditures were $12.5 million for
the fiscal year to date ended December 5, 1998, as compared to $8.0 million for
the comparable period of fiscal 1998. The reason for the $4.5 million increase
was the construction of six new Sagebrush restaurants and the conversion of
nine restaurants to the Sagebrush concept during fiscal 1998 to date.
The Company has budgeted approximately $16.1 million for capital
expenditures in fiscal 1999, including expenditures for Pierre subsequent to the
Pierre acquisition. These expenditures are being devoted to (i) restaurant
conversions (nine) and the construction of seven new (including three
former franchises) Sagebrush restaurants (approximately $10.0 million) and (ii)
routine equipment upgrading and maintenance (approximately $1.0 million), (iii)
the food processing segment (approximately $4.5 million), and (iv) other
miscallaneous (approximately $.5 million).
The Company's major market risk exposure is potential loss arising from
changing interest rates and its impact on long-term debt. The Company's policy
is to manage interest rate risk by maintaining a combination of fixed and
variable rate financial instruments in amounts and with maturities that
management considers appropriate. Of long-debt debt outstanding at December 5,
1998, $38.8 principal amount was accruing interest at a variable rate. A rise in
prevailing interest rates could have adverse effects on the Company's financial
condition and results of operations.
SEASONALITY
The Company considers its restaurant operations to be somewhat seasonal
in nature, with stronger sales during the Christmas season and spring, weaker
sales during the mid-summer and late winter. Except for sales to school
districts, which decline significantly during the summer and early January,
there is no seasonal variation in the Company's sales of food products. The
Company's food production is steady throughout the year.
13
INFLATION
The Company believes that inflation has not had a material impact on
its results of operations for any of the periods reported herein.
"YEAR 2000" ISSUES
The "Year 2000" problem arose because many existing computer programs
use only the last two digits to refer to a year. If not addressed, computer
programs that are date sensitive may not have the ability to properly recognize
dates in year 2000 and beyond. The result could be a temporary disruption of
operations and the processing of transactions. The Company has developed a four
phase approach to addressing this problem. Phase 1 was an analysis to identify
the impact and costs relating to Year 2000, both in computer information systems
and other equipment. Phase 2 was to create a comprehensive plan to address and
fix any problems identified. Phase 3 is the actual implementation of the
comprehensive plan and Phase 4 is addressing any unforeseen complications or
issues not previously addressed. The Company has completed Phase 1 and Phase 2.
Phase 3, relating to the Company's systems,both IT and non-IT were substantially
complete at the end of 1998, with most of the systems complete. Testing of
compliance is continuing. Additionally, as part of Phase 3, the Company has sent
"Year 2000" questionnaires to vendors and other entities with which the Company
conducts business in order to assess whether they are year 2000 compliant or
have adequately addressed their system conversion requirements. More than half
of all vendors and other entities and substantially all major vendors and other
entities receiving questionnaires from the Company have responded. The vast
majority of vendors and other entities responding have done so by offering
assurances that they are either currently Year 2000 compliant or have a plan in
place to be Year 2000 compliant in a timely manner. The Company plans to follow
up on those vendors and other entities not responding as of yet by sending a
second inquiry. The Company cannot predict how many, if any, of the responses it
receives may prove later to be inaccurate or overly optimistic. As a result, the
Company has begun developing, as part of Phase 3, contingency plans to address
unanticipated interruptions or down time in both the Company's and third
parties' systems and services. The costs to implement the Company's plan through
December 5, 1998 were $228,275 and are being expensed as incurred. The estimated
cost to complete Phase 3 is $142,000. These costs exclude the costs of
purchasing Year 2000 compliant computer programs that would have been purchased
in the ordinary course of business regardless of "Year 2000" concerns. As of
December 5, 1998 the Company is on schedule to complete Phase 3 as planned. The
Company is continuing to closely monitor adherence to the implementation plan
and is currently satisfied that it will be adequately completed in the scheduled
time frame. If the Company encounters unforeseen complications or issues not
previously addressed in the comprehensive plan (Phase 4), additional resources
from internal and external sources would be committed to complete the necessary
conversions in the required time frame. Since the Company has no reason to
believe that it will need to utilize these additional resources, no estimates as
to their cost has been made at this time.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, Statement of Financial Accounting Standards ("SFAS") No.
131, "Disclosures About Segments of an Enterprise and Related Information," was
issued. SFAS No. 131 redefines how operating segments are determined and
requires disclosure of certain financial and descriptive information about a
company's operating segments. The Company will be required to adopt this new
standard for fiscal 1999. The Company has not yet completed its analysis of the
effect of this new standard on its financial statement disclosures.
In March 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants (the "AICPA") issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides guidance
on the types of internal costs, including payroll and interest costs, which
should be capitalized relative to development of software applications. The
Company will be required to adopt this new statement for fiscal 2000. The
Company has evaluated this statement and does not expect any material effect on
the Company's financial statements.
14
In April 1998, the Accounting Standards Executive Committee of the
AICPA issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the financial reporting
of start-up costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. The Company will
be required to adopt this new statement for fiscal 1999. The Company is in the
process of evaluating this statement and based on preliminary review, expects
the cumulative effect of this statement to require a write-off of approximately
$94,000 before any tax benefit.
CAUTIONARY STATEMENT AS TO FORWARD LOOKING INFORMATION
Statements contained in this report as to the Company's outlook for
sales, operations, capital expenditures and other amounts, including budgeted
amounts and projections of future financial or economic performance of the
Company, and statements of the Company's plans and objectives for future
operations, are "forward looking" statements provided in reliance upon the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results or events to differ materially
from those projected, estimated, assumed or anticipated in any such forward
looking statements include, among others, the substantial leverage of the
Company, restrictions to be imposed on the Company by the terms of its Bank
Facility and Senior Notes, risks relating to the Company's ability to execute
its business strategy following the Pierre acquisition, competitive
considerations, government regulation and general risks of the food industry,
the possibility of adverse changes in food costs, the availability of supplies,
the Company's dependence on key personnel, potential labor disruptions and "Year
2000" issues.
15
PART II. OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
----------- ----------- --------
<S> <C> <C>
11 Computation of Per Share Earnings 19
</TABLE>
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on September 11, 1998,
announcing the change in the Company's fiscal year.
16
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 thereunto duly authorized.
FRESH FOODS, INC.
Date January 19, 1999 By: /s/ James C. Richardson,
---------------- -------------------------------------
James C. Richardson, Jr.
(Chief Executive Officer)
Date January 19, 1999 By: /s/ James E. Harris
---------------- ------------------------------------
James E. Harris
(Principal Financial Officer)
17
INDEX TO EXHIBITS
For inclusion in Quarterly Report on Form 10-Q Quarter Ended December 5, 1998
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ----------- --------
<S> <C> <C>
11 Computation of Per Share Earnings 19
</TABLE>
18
EXHIBIT 11
FRESH FOODS, INC. AND SUBSIDIARIES
-------------------------------------------
Computation of Per Share Earnings
<TABLE>
<CAPTION>
Quarters Ended Year to Date Ended
----------------------- --------------------------
December 5, November 7, December 5, November 7,
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Computation of Earnings Per Common Share - Basic:
Earnings (loss) before extraordinary item $1,237,199 1,169,211 1,280,225 3,525,685
Extraordinary loss from early extinguishment of debt (net
of income tax benefit of $45,719) -- -- (62,774) --
---------- ---------- ----------- -----------
Net earnings (loss) $1,237,199 $1,169,211 $ 1,217,451 $ 3,525,685
========== ========== =========== ===========
Actual outstanding shares at beginning of period 5,914,174 5,525,324 5,898,449 5,326,948
Add (deduct) weighted average shares applicable to:
Common stock purchased -- -- -- (101,806)
Common stock issued 50,186 9,569 353,278
---------- ---------- ----------- -----------
Weighted average shares as adjusted 5,914,174 5,575,510 5,908,018 5,578,420
========== ========== =========== ===========
Earnings (loss) before extraordinary item - basic $ 0.21 $ 0.21 $ 0.22 $ 0.63
Extraordinary loss from early extinguishment of debt -- -- (0.01) --
---------- ---------- ----------- -----------
Earnings (loss) per common share - basic $ 0.21 $ 0.21 $ 0.21 $ 0.63
========== ========== =========== ===========
Computation of Earnings Per Common Share - Diluted:
Earnings (loss) before extraordinary item $1,237,199 $1,169,211 $ 1,280,225 $ 3,525,685
Extraordinary loss from early extinguishment of debt (net
of income tax benefit of $45,719) -- -- (62,774) --
---------- ---------- ----------- -----------
Net earnings (loss) $1,237,199 $1,169,211 $ 1,217,451 $ 3,525,685
========== ========== =========== ===========
Actual outstanding shares at beginning of period 5,914,174 5,525,324 5,898,449 5,326,948
Add (deduct) weighted average shares applicable to:
Common stock purchased -- -- -- (101,806)
Common stock issued -- 50,186 9,569 353,278
Common stock options exercised -- 49,685 3,963 71,291
Common stock options forfeited 884 -- 47,297 --
Common stock options outstanding 91,137 459,722 143,648 414,772
---------- ---------- ----------- -----------
Weighted average shares as adjusted 6,006,195 6,084,917 6,102,926 6,064,483
========== ========== =========== ===========
Earnings (loss) before extraordinary item - diluted $ 0.21 $ 0.19 $ 0.21 $ 0.58
Extraordinary loss from early extinguishment of debt -- -- (0.01) --
---------- ---------- ----------- -----------
Earnings (loss) per common share - diluted $ 0.21 $ 0.19 $ 0.20 $ 0.58
========== ========== =========== ===========
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the 1999
third quarter 10-Q for Fresh Foods, Inc. and is qualified in its entirety by
reference to such 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-06-1999
<PERIOD-END> DEC-05-1998
<CASH> 4,033,147
<SECURITIES> 211,328
<RECEIVABLES> 16,888,614
<ALLOWANCES> 525,175
<INVENTORY> 27,489,042
<CURRENT-ASSETS> 54,230,496
<PP&E> 102,965,933
<DEPRECIATION> 29,679,505
<TOTAL-ASSETS> 218,051,493
<CURRENT-LIABILITIES> 21,490,136
<BONDS> 155,660,781
0
0
<COMMON> 5,194,174
<OTHER-SE> 34,659,210
<TOTAL-LIABILITY-AND-EQUITY> 218,051,493
<SALES> 187,156,335
<TOTAL-REVENUES> 187,156,335
<CGS> 102,483,579
<TOTAL-COSTS> 137,976,397
<OTHER-EXPENSES> 6,348,111
<LOSS-PROVISION> 126,753
<INTEREST-EXPENSE> 8,454,239
<INCOME-PRETAX> 21,212,626
<INCOME-TAX> 932,401
<INCOME-CONTINUING> 1,280,225
<DISCONTINUED> 0
<EXTRAORDINARY> (62,774)
<CHANGES> 0
<NET-INCOME> 1,217,451
<EPS-PRIMARY> .21
<EPS-DILUTED> .20
</TABLE>
