<PAGE> 1
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UNITED STATES
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 QUARTERLY PERIOD ENDED AUGUST 31, 1997
OR
[ ] 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 1-8574
UNITED FOODS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 74-1264568
(State of Incorporation) (I.R.S. Employer Identification No.)
TEN PICTSWEET DRIVE, BELLS, TN 38006
(Address of principal executive offices) (Zip Code)
Registrants telephone number, including area code: (901) 422-7600
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
----- ------
On October 10, 1997, 2,616,075 shares of Class A Common Stock and
4,193,854 shares of Class B Common Stock of United Foods, Inc. were
outstanding.
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<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part I: Financial Information:
Item 1: Financial Statements:
Balance Sheets 2-3
Statements of Operations 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
Part II: Other Information and Signatures
Item 4: Submission of Matters to a Vote of Security Holders 12
Item 5: Other Information 12
Item 6: Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
1
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
UNITED FOODS, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1997 1997
---------- -----------
Unaudited
---------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 617 $ 3,772
Accounts Receivable 16,121 17,533
Inventories (Note 3) 52,730 36,694
Prepaid Expenses and Miscellaneous 3,223 3,871
Deferred Income Taxes (Note 5) 1,255 1,255
--------- ---------
Total Current Assets 73,946 63,125
--------- ---------
Property and Equipment:
Land and Land Improvements 9,448 8,846
Buildings and Leasehold Improvements 21,060 21,060
Machinery, Equipment and Improvements 93,774 91,942
--------- ---------
124,282 121,848
Less Accumulated Depreciation (70,568) (67,210)
--------- ---------
Net Property and Equipment 53,714 54,638
--------- ---------
Other Assets 1,408 1,345
--------- ---------
Total Assets $ 129,068 $ 119,108
========= =========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 4
UNITED FOODS, INC.
BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 31, FEBRUARY 28,
1997 1997
---------- -----------
Unaudited
---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 25,385 $ 11,982
Accruals 7,337 5,305
Income Taxes Payable (Note 5) 5 328
Current Maturities of Long-term Debt 4,671 4,772
--------- ---------
Total Current Liabilities 37,398 22,387
Long-term Debt, Less Current Maturities 41,871 36,244
Deferred Income Taxes (Note 5) 5,021 5,021
--------- ---------
Total Liabilities 84,290 63,652
--------- ---------
Stockholders' Equity:
Common Stock, Class A (Notes 6 and 7) 5,116 5,116
Common Stock, Class B, Convertible (Notes 6 and 7) 5,694 5,694
Additional Paid-in Capital 2,463 2,463
Retained Earnings 41,634 42,183
--------- ---------
54,907 55,456
Less Cost of Treasury Stock (Notes 6 and 7) (10,129) --
--------- ---------
Total Stockholders' Equity 44,778 55,456
--------- ---------
Total Liabilities and Stockholders' Equity $ 129,068 $ 119,108
========= =========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 5
UNITED FOODS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED AUGUST 31, ENDED AUGUST 31,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Gross Sales and Services Less Discounts, Returns
and Allowances $ 42,579 $ 42,628 $ 89,542 $ 91,336
Costs of Sales and Services (Note 3) 35,706 34,809 73,791 74,650
-------- -------- -------- --------
Gross Profit 6,873 7,819 15,751 16,686
Selling, Administrative and General Expenses 7,490 6,924 14,898 14,971
-------- -------- -------- --------
Operating Income (Loss) (617) 895 853 1,715
-------- -------- -------- --------
Interest Income (Expense) - Net (925) (887) (1,786) (1,951)
Miscellaneous Income (Expense) - Net (Note 4) -- 34 41 437
-------- -------- -------- --------
Total Other Income and (Expense) (925) (853) (1,745) (1,514)
-------- -------- -------- --------
Income (Loss) Before Taxes on Income (Benefit) (1,542) 42 (892) 201
Taxes on Income (Benefit) (Note 5) (593) 16 (343) 77
-------- -------- -------- --------
Net Income (Loss) $ (949) $ 26 $ (549) $ 124
======== ======== ======== ========
Common Share and Common Share Equivalents
(Notes 6 and 7) 8,549 11,107 9,679 11,112
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE AND COMMON
SHARE EQUIVALENT (NOTES 6 AND 7) $ (.11) $ .00 $ (.06) $ .01
======== ======== ======== ========
Cash Dividends Per Common Share:
Class A $-0- $-0- $-0- $-0-
Class B $-0- $-0- $-0- $-0-
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 6
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED AUGUST 31,
-----------------------
1997 1996
-------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (549) $ 124
Adjustments to reconcile net income to net cash
provided by operations:
Depreciation and amortization 3,702 3,947
Provision for losses on accounts receivable 86 83
Gain on disposal of property and equipment (41) (55)
Adjustments to property held for disposal -- (212)
Deferred income taxes -- (483)
Change in assets and liabilities:
Accounts and notes receivable 1,326 (179)
Inventories (16,036) (4,701)
Prepaid expenses and miscellaneous 648 1,478
Other assets (63) 425
Accounts payable and accruals 15,331 7,409
Income taxes (323) (19)
-------- -------
Net cash provided by operations 4,081 7,817
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,716) (669)
Proceeds from sale of other property and equipment 83 552
-------- -------
Net cash used by investing activities (2,633) (117)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 420 --
Payments of long-term debt (2,318) (2,158)
Revolving credit borrowings increase (decrease) 7,424 (6,033)
Purchase of treasury stock (10,129) --
-------- -------
Net cash used by financing activities (4,603) (8,191)
-------- -------
NET DECREASE IN CASH FOR THE PERIOD (3,155) (491)
CASH AND CASH EQUIVALENTS, beginning of period 3,772 1,029
-------- -------
CASH AND CASH EQUIVALENTS, end of period $ 617 $ 538
======== =======
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 7
UNITED FOODS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(CONCLUDED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED AUGUST 31,
-----------------------
1997 1996
------ ------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the six months for:
Interest $1,651 $2,215
Income taxes $ 723 $ 704
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital expenditures of $104, $0, $0 and $160 are included
in accounts payable at August 31, 1997, February 28,
1997, August 31, 1996 and February 29, 1996, respectively
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 8
UNITED FOODS, INC.
NOTES TO FINANCIAL STATEMENTS
1. The interim financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended February 28, 1997.
Significant accounting policies and other disclosures normally provided
have been omitted since such items are disclosed therein.
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly its financial position as of August
31, 1997 and its results of operations for the three and six months ended
August 31, 1997 and 1996 and cash flows for the six months ended August 31,
1997 and 1996.
2. The results of operations for the six months ended August 31, 1997 and
1996 are not necessarily indicative of the results to be expected for
the fiscal year.
3. Inventories are summarized as follows:
<TABLE>
<CAPTION>
AUGUST 31, 1997 FEBRUARY 28, 1997
--------------- -----------------
<S> <C> <C>
Finished products $45,998,000 $30,807,000
Raw materials 2,749,000 2,525,000
Growing crops 3,057,000 2,111,000
Merchandise and supplies 926,000 1,251,000
----------- -----------
$52,730,000 $36,694,000
=========== ===========
</TABLE>
Substantially all of the Company's inventories are valued at the lower of
cost (first-in, first-out) or market at each fiscal year end. However, due
to the seasonality of vegetable processing, the gross profit method, at the
estimated annual rate, is used to determine frozen vegetable cost of goods
sold in interim financial statements.
4. Miscellaneous income in the amount of $437,000 for the six months ended
August 31, 1996 consists of $212,000 to restore the carrying value of
certain property held for disposal to its original cost, based on its fair
market value. Further, miscellaneous income includes the recognition of a
claim in the amount of $167,000 and net gains on the sale of plant,
property and equipment.
5. Taxes on income consist of the current and deferred taxes required to be
recognized for the periods presented in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes".
6. Each share of Class B Common Stock is convertible into one share of Class A
Common Stock at the holder's election. Holders of the Class A Common Stock
are entitled to a preference dividend of $.025 per share for any quarter
and each preceding quarter of the Company's fiscal year before the holders
of the Class B Common Stock are entitled to any regular cash dividend.
Class A stockholders have the right to elect a number of directors that
equal at least 25% of the members of the board of directors. In addition,
on matters requiring the classes to vote together, the Class A holders are
entitled to 1/10 vote per share and holders of Class B Common Stock are
entitled to one vote per share.
On May 19, 1997, the Company initiated a cash tender offer for up to one
million shares of its Class A and Class B Common Stock at a price of $2.50
per share. On June 17, 1997, the Company amended the cash tender offer by
extending the Expiration Date to July 3, 1997 and by increasing the number
of shares it offered to purchase from 1,000,000 shares of its Class A and
Class B Common Stock to up to 2,500,000 shares of its Class A Common Stock
and up to 1,500,000 shares of its Class B Common Stock, each at a price of
$2.50 per share. A total of approximately 2,641,299 shares of Class A
Common Stock and 1,720,932 shares of Class B Common Stock were validly
tendered and not withdrawn in response to the offer, as amended. The
purchase of shares was prorated in accordance with the terms of the offer,
as amended, for each class of common stock. The purchase, which totalled
approximately $10,129,000, including expenses, was funded with borrowings
from the Company's revolving credit facilities and available cash.
7
<PAGE> 9
7. Earnings per share of common stock and common stock equivalents have been
computed based upon the weighted average number of shares outstanding
during the three and six months ended August 31, 1997 and August 31, 1996.
The assumed exercise of common stock options does not materially dilute
earnings per share for the three or six months ended August 31, 1996. As of
February 28, 1997, holders of substantially all of the Company's common
stock options had agreed not to exercise their options in exchange for an
agreed upon amount of deferred compensation and, therefore, the assumed
exercise of the common stock options is not included in the computation of
common stock equivalents for the three and six months ended August 31,
1997.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128").
This statement simplifies the standards for computing earnings per share
("EPS") previously found in APB Opinion No. 15, "Earnings per Share", as
the presentation of primary and fully-diluted EPS is replaced with Basic
and Diluted EPS. Basic EPS excludes dilution and is computed by dividing
income available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or
resulted in the issuance of common stock that then shared in the earnings
of the entity.
SFAS 128 is effective for financial statements issued for periods ending
after December 15, 1997, and applies to entities with publicly-held common
stock or potential common stock. The Company will adopt SFAS 128 in the
financial statements issued for the year ending February 28, 1998. If the
provisions of SFAS 128 had been applied to the three and six months ended
August 31, 1997, estimated Basic EPS and Diluted EPS would have been $(.11)
and $(.06), respectively.
8
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition and earnings
during the periods included in the accompanying balance sheets and statements of
income.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of cash are operations and external committed
credit facilities. At August 31, 1997, the Company's revolving credit facilities
totaled $21,000,000, all of which was available. The Company's sources of
liquidity are expected to meet adequately requirements for the upcoming year and
the foreseeable future; however, new financing alternatives are constantly
evaluated to determine their practicality and availability in order to provide
the Company with sufficient and timely funding at the least possible cost. The
Company's $18,000,000 and $3,000,000 revolving credit facilities currently
mature in fiscal 2001. One-year extensions of maturity dates of the revolving
credit facilities will be considered by the lenders annually. If annual
extensions are not granted, the Company will then investigate revolving credit
facilities with other lenders and believes it can replace any current revolving
credit facility within its remaining 24-month term.
Operations provided net cash of $4,081,000 during the six months ended August
31, 1997 and $7,817,000 during the same period of the prior year. Inventory
increases used cash of $16,036,000 during the six months ended August 31, 1997,
compared with cash used of $4,701,000 during the same period of the prior year.
The change results primarily from the timing of deliveries of frozen finished
product under the reciprocal supply agreements, further described under "Supply
Agreements". The effect on operating cash flow of these deliveries during the
six months ended August 31, 1997 was substantially offset by a related increase
in accounts payable.
Investing activities used cash of $2,633,000 for the six months ended August 31,
1997 compared with cash used of $117,000 during the same period of the prior
year, primarily as the result of increased capital expenditures.
Financing activities used cash of $4,603,000 for the six months ended August 31,
1997 compared with cash used of $8,191,000 during the same period of the prior
year. On May 19, 1997, the Company initiated a cash tender offer for up to 1
million shares of its Class A and Class B Common Stock at a price of $2.50 per
share. On June 17, 1997, the Company amended the cash tender offer by extending
the Expiration Date to July 3, 1997 and by increasing the number of shares it
offered to purchase from 1,000,000 shares of its Class A and Class B Common
Stock to up to 2,500,000 shares of its Class A Common Stock and up to 1,500,000
shares of its Class B Common Stock, each at a price of $2.50 per share. A total
of approximately 2,641,299 shares of Class A Common Stock and approximately
1,720,932 shares of Class B Common Stock were validly tendered and not withdrawn
in response to the offer, as amended. The purchases of shares was prorated in
accordance with the terms of the offer, as amended, for each class of common
stock. The purchase, which totaled approximately $10,129,000, including
expenses, was funded with borrowings from the Company's revolving credit
facilities and available cash. Cash provided by operations was used to reduce
borrowings under the Company's revolving credit agreements for the six months
ended August 31, 1996.
Working capital at August 31, 1997 was $36,548,000, and was $40,738,000 at
February 28, 1997. The reduction results primarily from the decrease in cash
from $3,772,000 at February 28, 1997 to $617,000 at August 31, 1997, primarily
as the result of the stock purchase previously mentioned.
The Company's ratio of debt to equity increased to 1.88 to 1 at August 31, 1997
from 1.15 to 1 at February 28, 1997, primarily as the result of the stock
purchase and the increase in accounts payable previously mentioned.
CAPITAL EXPENDITURES
Capital expenditures for fiscal 1998 are estimated to be approximately
$4,500,000 which is approximately $3,000,000 less than depreciation expense
projected for fiscal 1998. Capital expenditures are expected to be for normal
replacement of older equipment with more efficient and energy saving equipment.
These expenditures are expected to be funded from operations and the Company's
revolving credit facilities.
9
<PAGE> 11
RESULTS OF OPERATIONS
OVERVIEW AND TRENDS
The Company's product line is made up of agricultural products which are subject
to the cyclical conditions and risks inherent in the agricultural industry. The
Company bears part of the growing risks and all of the processing and marketing
risks of these agricultural products. Weather abnormalities and excess
inventories sometimes cause substantial reductions in the annual volume of
product processed in facilities that are owned or leased by the Company. When
this happens, the unit cost of that year's production will increase
substantially, resulting in reduced profit margins for one or more years. On the
other hand, when bumper crops occur unit costs will decrease but selling prices
will, in general, be depressed.
The Company has always been faced with very strong competition in the
marketplace from large brand name competitors, private regional U. S. vegetable
processors, and privately-owned Mexican vegetable processors. These competitive
pressures, coupled with low overall growth, have led to weak market pricing. The
Company anticipates that these conditions will continue.
In addition to general inflation and the growing, processing and marketing risks
described above, the Company faces significant costs associated with increasing
governmental regulation, the loss of land and water available for agriculture in
California and the increasing competition due to world-wide facilitation of
trade. As a result of these factors, the Company's earnings history is cyclical
and will continue to be so in the future.
The effect on the Company's operations and its ability to withstand the costs of
ongoing and developing healthcare, labeling, OSHA, EPA, taxation and other
governmental regulations is unknown.
SUPPLY AGREEMENTS
The Company has entered into two multi-year reciprocal supply agreements with
other food processing companies. Through these agreements the Company procures
frozen vegetables to meet certain production and inventory requirements. Also,
the Company sells frozen vegetables and fresh mushrooms to the other food
processors.
REVENUES
Net sales and service revenue decreased $49,000 (.1%) and $1,794,000 (2.0%) for
the three and six month periods ended August 31, 1997, respectively, as compared
with the same periods of the prior year. Sales volume increased 5.0% and .4% for
the three and six month periods, respectively. The average selling price per
pound decreased 1.7% for the quarter and .6% for the six months ended August 31,
1997, as compared with the same period of the prior year. Sales allowances
increased $1,745,000 (23.9%) for the quarter and $1,793,000 (11.4%) for the six
months, as compared with the same period of the prior year. The increase in
sales allowances for the quarter resulted primarily from increased promotional
allowances resulting from competitive market conditions and the Company's
efforts in obtaining additional distribution.
COST OF SALES AND SERVICES AND GROSS PROFIT
Gross profit decreased $946,000 (12.1%) and $935,000 (5.6%) for the three and
six month periods ended August 31, 1997, respectively, as compared with the same
periods of the prior year. The gross margin decreased from 18.3% to 16.1% and
from 18.3% to 17.6% for the quarter and six months, respectively. The effect of
lower average selling prices and higher promotional allowances, previously
mentioned, on gross profit and on the gross margin were partially mitigated by
lower unit production costs for the quarter and year-to-date periods. The gross
profit method, at the estimated annual gross profit rate, is used to determine
cost of goods sold in interim financial statements (See Note 3 - Notes to
Financial Statements). Cost of sales and services increased $897,000 (2.6%) for
the quarter and decreased $859,000 (1.2%) for the six months as compared with
the same periods of the prior year, primarily as the result of the sales volume
changes previously mentioned, offset by lower average unit production costs for
the quarter and year-to-date periods.
SELLING, ADMINISTRATIVE AND GENERAL EXPENSES
Selling, general administrative expenses increased $566,000 (8.2%) for the
quarter and decreased $73,000 (.5%) for the six months ended August 31, 1997, as
compared with the same periods of the prior year. The increase for the quarter
was due
10
<PAGE> 12
primarily to increased storage expense of $180,000 resulting from higher
average inventories and increased other selling expenses of $355,000 related to
product development.
INTEREST EXPENSE
Interest expense - net increased $38,000 (4.3%) for the quarter and decreased
$165,000 (8.5%) for the six months as compared to the same periods of the prior
year. The increase during the three months ended August 31, 1997 resulted
primarily from higher average borrowings resulting from the stock purchase
previously mentioned.
MISCELLANEOUS INCOME
Miscellaneous income in the amount of $437,000 for the six months ended August
31, 1996 consisted of $212,000 to restore the carrying value of certain property
held for disposal to its original cost, based on its fair market value. Further,
miscellaneous income includes the recognition of a claim in the amount of
$167,000 and net gains on the sale of plant, property and equipment.
TAXES ON INCOME
Taxes on income for the three and six months ended August 31, 1997 and 1996
consisted of current and deferred taxes provided at the estimated effective
federal and state tax rates expected to be recognized for the respective
periods.
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share ("SFAS 128"). This
statement simplifies the standards for computing earnings per share ("EPS")
previously found in APB Opinion No. 15, "Earnings per Share", as the
presentation of primary and fully-diluted EPS is replaced with Basic and Diluted
EPS. Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, and applies to entities with publicly-held common stock or
potential common stock. The Company will adopt SFAS 128 in the financial
statements issued for the year ending February 28, 1998. If the provisions of
SFAS 128 had been applied to the three and six months ended August 31, 1997,
estimated Basic EPS and Diluted EPS would have been $(.11) and $(.06),
respectively.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"), which establishes standards for reporting and display of comprehensive
income, its components and accumulated balances. Comprehensive income is defined
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements.
Also, in June 1997, the Financial Accounting Standards Board issued SFAS 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS
131"), which supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise. SFAS 131 establishes standards for the way that public
companies report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements issued to the public. It also
establishes standards for disclosures regarding products and services,
geographic areas and major customers. SFAS 131 defines operating segments as
components of a company about which separate financial information is available
that is evaluated by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
SFAS 130 and SFAS 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these standards,
management has been unable to evaluate fully the impact, if any, these standards
may have on future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of these
standards.
11
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Annual Meeting of Stockholders held on September 15, 1997, the
following members were elected to the Board of Directors:
--------------------------------------------------------------------
Votes Votes
For Withheld
--------------------------------------------------------------------
Class A Director John S. Wilder 2,072,600 58,998
Class B Director Darla T. Darnall 3,693,042 21,739
Class B Director Kelle T. Northern 3,693,208 21,573
--------------------------------------------------------------------
The following proposals were approved at the Company's Annual Meeting:
<TABLE>
<CAPTION>
Votes Votes Votes
For Against Abstained/
Not Voted
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Approve appointment of BDO Seidman, LLP 3,903,884 22,535 1,522
as independent public accountants for the
Company
2. Approve the Company's Incentive 3,150,028 162,017 20,843
Compensation Plan for the Chairman of the
Board of Directors
-----------------------------------------------------------------------------------------------
</TABLE>
ITEM 5. OTHER INFORMATION
On September 15, 1997, the Board of Directors amended Article III of the
Company's By-Laws to increase the number of Directors from nine to eleven.
On September 15, 1997, Daniel B. Tankersley agreed to resign his position as a
Class A Director in the Class of 1999 and was elected to fill the newly created
Class B directorship in the Class of 1998. James W. Tankersley was elected to
fill the newly created Class B directorship in the Class of 1999 and Thomas A.
Hopper, Jr. was elected to fill the Class A vacancy in the Class of 1999 created
by the resignation of Daniel B. Tankersley.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) - EXHIBITS
See Exhibit Table.
(b) - REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the three months ended August 31,
1997.
12
<PAGE> 14
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.
UNITED FOODS, INC.
Date: October 14, 1997 By /s/ Carl W. Gruenewald, II
-------------------- ---------------------------------
Carl W. Gruenewald, II
Senior Vice President,
Chief Financial Officer & Treasurer
13
<PAGE> 15
UNITED FOODS, INC.
EXHIBITS TABLE
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
NUMBER DESCRIPTION PAGE
- ------- --------------------------------------------------------------------------------------------- ------
<S> <C> <C>
3.1 Amendment dated September 15, 1997 to Article III of By-Laws of United Foods, Inc. 15
10.1 Tenth Amendment, dated August 4, 1997, to that certain Revolving Credit Agreement, dated 16-18
August 20, 1992 between United Foods, Inc. and Cooperatieve Raiffeisen-Boerenleenbank B.A.,
"Rabobank-Nederland".
11 Computation of earnings per share. 19
27 Financial Data Schedule (For SEC use only).
</TABLE>
14
<PAGE> 1
EXHIBIT 3.1
UNITED FOODS, INC.
SEPTEMBER 15, 1997
BY-LAW AMENDMENT
BE IT RESOLVED, That Section 3.2 of ARTICLE III. BOARD OF DIRECTORS of
the By-Laws of the Corporation is hereby amended to read as follows:
Section 3.2 Number and Qualifications. The Board of Directors shall
have eleven (11) members. Directors need not be stockholders.
15
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 10
Dated as of August 4, 1997
This TENTH AMENDMENT between UNITED FOODS, INC., a Delaware corporation
(the "Borrower"), and COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK B.A.,
"RABOBANK NEDERLAND", NEW YORK BRANCH (the "Bank").
PRELIMINARY STATEMENTS. The Borrower and the Bank have entered into a
Revolving Credit Agreement, dated as of August 20, 1992 (as amended prior to the
date hereof and as may be further amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"; the terms defined in the Credit
Agreement being used herein as therein defined). Each of the Borrower and the
Bank wish to amend the Credit Agreement as hereinafter set forth.
NOW, THEREFORE, the Borrower and the Bank hereby agree as follows:
SECTION 1. Amendment to Credit Agreement. Sections 1.01 and 6.09 of the
Credit Agreement are, effective as of the date hereof and subject to the
satisfaction of the conditions precedent set forth in Section 2 hereof, hereby
amended by deleting the date "August 31, 1999" appearing said Sections and
substituting, in lieu thereof, the date "August 31, 2000".
SECTION 2. Conditions of Effectiveness. This Tenth Amendment shall
become effective when, and only when, the Bank shall have received counterparts
of this Tenth Amendment executed by the Borrower.
SECTION 3. Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The representations and warranties contained in Section 3.01 of the
Credit Agreement are true and correct on and as of the date hereof as though
made on and as of the date hereof.
(b) The execution, delivery and performance by the Borrower of this
Tenth Amendment, and the Credit Agreement, as amended hereby, are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action and do not contravene (i) the Borrower's charter or By-Laws, or
(ii) law or any contractual restriction binding on or affecting the Borrower, or
result in, or require, the creation of any lien, security interest or other
charge, encumbrance or upon or with respect to any of its properties.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by the Borrower of this Tenth Amendment
or the Credit Agreement, as amended hereby.
16
<PAGE> 2
(d) This Tenth Amendment and the Credit Agreement, as amended hereby,
constitute, legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms, subject,
however, to the effect on such enforceability of (i) any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and (ii) general principles of equity (regardless whether such
enforceability is considered in a proceeding in equity or at law).
(e) There is no pending or threatened action or proceeding affecting
the Borrower or any of its subsidiaries before any court, governmental agency or
arbitrator, which may materially adversely affect the condition, financial or
otherwise, or operations of the Borrower.
(f) No event has occurred and is continuing which constitutes an Event
of Default or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
SECTION 4. Reference to and Effect on the Credit Agreement. (a) Upon
the effectiveness of Section 1 hereof, on and after the date hereof, each
reference in the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of like import shall mean and be a reference to the Credit
Agreement as amended hereby, and each reference in the Note and the other Loan
Documents to the Credit Agreement shall mean and be a reference to the Credit
Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement and the
Note shall remain in full force and effect and are hereby ratified and confirmed
in all respects.
(c) The execution, delivery and effectiveness of this Tenth Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Bank under the Credit Agreement, nor constitute a
waiver of any provision of the Credit Agreement.
SECTION 5. Costs, Expenses and Taxes. The Borrower agrees to pay on
demand all costs and expenses of the Bank in connection with the preparation,
execution and delivery of this Tenth Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel (who may be in-house
counsel) for the Bank with respect thereto and with respect to advising the Bank
as to its rights and responsibilities hereunder and thereunder. In addition, the
Borrower shall pay any and all stamp and other taxes payable or determined to be
payable in connection with the execution and delivery of this Tenth Amendment
and the other instruments and documents to be delivered hereunder, and agrees to
save the Bank harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes.
SECTION 6. Execution in Counterparts. This Tenth Amendment may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute but one and the same instrument.
SECTION 7. Governing Law. This Tenth Amendment shall be governed by,
and construed in accordance with, the laws (without giving effect to the
conflicts of laws principles thereof) of the State of New York.
17
<PAGE> 3
SECTION 8. Final Agreement. This Tenth Amendment represents the final
agreement between you and us as to the subject matter hereof and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
of the parties. There are no unwritten oral agreements between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Tenth Amendment
to be executed by their respective officers thereunto duly authorized, as of the
date first above written.
UNITED FOODS, INC.
By /s/ Carl W. Gruenewald, II
----------------------------------------------
Title: Sr. Vice President - Finance Treasurer
COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK
B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By /s/ Dana W. Hemenway
------------------------------------
Authorized Officer
Vice President
By /s/ Jan Reece
------------------------------------
Authorized Officer
Senior Credit Officer
18
<PAGE> 1
EXHIBIT 11
UNITED FOODS, INC.
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED AUGUST 31, ENDED AUGUST 31,
-------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
SHARES:
Weighted average number of common shares
outstanding 8,549,059 10,809,929 9,679,494 10,809,929
Effect of shares issuable under option
plan and warrants as determined by the
treasury stock method -- 297,500 -- 301,822
----------- ----------- ----------- -----------
Weighted average number of common shares
outstanding as adjusted 8,549,059 11,107,429 9,679,494 11,111,751
=========== =========== =========== ===========
PER COMMON SHARE COMPUTATIONS:
Net Income (Loss) $ (949,000) $ 26,000 $ (549,000) $ 124,000
=========== =========== =========== ===========
Net Income (Loss) $ (.11) $ .00 $ (.06) $ .01
=========== =========== =========== ===========
</TABLE>
19
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-1998
<PERIOD-END> AUG-31-1997
<CASH> 617
<SECURITIES> 0
<RECEIVABLES> 16,121
<ALLOWANCES> 0
<INVENTORY> 52,730
<CURRENT-ASSETS> 73,946
<PP&E> 124,282
<DEPRECIATION> 70,568
<TOTAL-ASSETS> 129,068
<CURRENT-LIABILITIES> 37,398
<BONDS> 41,871
0
0
<COMMON> 10,810
<OTHER-SE> 33,968
<TOTAL-LIABILITY-AND-EQUITY> 129,068
<SALES> 89,542
<TOTAL-REVENUES> 89,542
<CGS> 73,791
<TOTAL-COSTS> 73,791
<OTHER-EXPENSES> 14,898
<LOSS-PROVISION> 86
<INTEREST-EXPENSE> 1,786
<INCOME-PRETAX> (892)
<INCOME-TAX> (343)
<INCOME-CONTINUING> (549)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (549)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
