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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 April 1, 1995
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
1-9050
HUDSON FOODS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 71-0427616
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1225 Hudson Road, Rogers, Arkansas 72756
(Address of principal executive offices) (Zip Code)
(501) 636-1100
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
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 (2) has been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of April 3, 1995 Hudson Foods, Inc. had 20,068,758 shares of $0.01
par value Class A Common Stock outstanding and 9,602,822 shares of $0.01 par
value Class B Common Stock outstanding.
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PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
HUDSON FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
April 1, October 1,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,281 $ 1,899
Receivables, net 68,071 65,508
Inventory:
Field inventory 41,876 39,680
Feed, eggs and other 24,374 21,581
Finished products 86,262 74,240
Other 21,697 12,073
_________ _________
Total current assets 243,561 214,981
_________ _________
Property, plant and equipment, net
of accumulated depreciation of
$131,016 and $120,536 254,520 229,050
Excess cost of investment, net 14,963 15,244
Other assets 38,540 13,905
_________ _________
Total assets $551,584 $473,180
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements
</TABLE>
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<PAGE>
PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS
HUDSON FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
April 1, October 1,
1995 1994
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 11,100 16,800
Current portion of long-term obligations 5,158 5,109
Accounts payable 38,521 41,188
Accrued liabilities 41,002 40,581
Deferred income taxes 11,207 11,207
_________ _________
Total current liabilities 106,988 114,885
_________ _________
Long-term obligations 88,598 75,169
_________ _________
Deferred income taxes and deferred gain 71,888 73,937
_________ _________
Stockholders' equity:
Common stock:
Class A, $.01 par value; 40,000,000
shares authorized; issued
20,917,868 and 9,233,893 shares 209 92
Class B, $.01 par value; 40,000,000
shares authorized; issued and
outstanding 9,602,822 and
8,501,882 shares 96 85
Additional capital 155,230 97,505
Retained earnings 139,809 122,923
Treasury stock, at cost (915,438 and
933,854 Class A shares) (11,234) (11,416)
_________ _________
Total stockholders' equity 284,110 209,189
_________ _________
Total liabilities and stockholders' equity $551,584 $473,180
========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements
</TABLE>
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HUDSON FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $271,814 $256,327 $551,769 $506,619
Cost of sales 227,520 222,284 465,722 434,930
_________ _________ _________ _________
Gross profit 44,294 34,043 86,047 71,689
Selling 19,150 18,839 38,198 38,096
General and administrative 7,402 6,122 14,654 12,596
_________ _________ _________ _________
Operating income 17,742 9,082 33,195 20,997
_________ _________ _________ _________
Other expense (income):
Interest expense, net 19 1,717 476 3,546
Interest on tax settlement 4,500 -- 4,500 --
Other (801) -- (2,190) --
_________ _________ _________ _________
Total other expense 3,718 1,717 2,786 3,546
_________ _________ _________ _________
Income before income taxes 14,024 7,365 30,409 17,451
Income tax expense 5,856 2,993 12,406 6,984
_________ _________ _________ _________
Net income $ 8,168 $ 4,372 $ 18,003 $ 10,467
========= ========= ========= =========
Earnings per share:
Primary $0.27 $0.18 $0.62 $0.42
Fully diluted $0.27 $0.18 $0.62 $0.42
========= ========= ========= =========
Dividends per share:
Class A $.0200 $.0200 $.0400 $.0400
Class B $.0166 $.0166 $.0332 $.0332
========= ========= ========= =========
Weighted average number of
common and common equivalent
shares outstanding:
Primary 30,114 24,923 28,952 24,835
Fully diluted 30,123 26,188 28,980 26,146
========= ========= ========= =========
The accompanying notes are an integral part of the condensed consolidated
financial statements
</TABLE>
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<PAGE>
HUDSON FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
April 1, April 2,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $18,003 $10,467
Items included in net income
not requiring cash:
Depreciation 11,334 10,535
Amortization 426 547
Deferred gain (1,388) (1,388)
Deferred income taxes (143) (385)
Other 72 (44)
Changes in operating assets and liabilities (31,547) (26,339)
_________ ________
Cash flows used for operations (3,243) (6,607)
_________ ________
Cash flows from investing activities:
Purchase of property, plant and equipment (37,117) (16,483)
Disposition of property, plant and
equipment, net 313 3,707
Funds held by trustee for capital project (23,786) --
Other (1,331) (624)
_________ ________
Cash flows used for investments (61,921) (13,400)
_________ ________
Cash flows from financing activities:
Addition (reduction) to notes payable (5,700) 22,300
Addition to long-term obligations 25,000 --
Reduction to long-term obligations (5,981) (2,578)
Sale of Class A common stock 51,264 --
Dividends (1,116) (888)
Exercise of stock options and other 1,079 634
_________ ________
Cash flows provided by financing 64,546 19,468
_________ ________
Decrease in cash and cash equivalents (618) (539)
Cash and cash equivalents at beg. of period 1,899 3,891
_________ ________
Cash and cash equivalents at end of period $ 1,281 $ 3,352
========= ========
Supplemental disclosure of cash flow information:
Interest paid $ 1,090 $ 3,701
Income taxes paid $15,764 $ 9,476
The accompanying notes are an integral part of the condensed consolidated
financial statements
</TABLE>
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HUDSON FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The condensed consolidated financial statements for the periods ended
April 1, 1995 and April 2, 1994 include, in the opinion of management, all
adjustments (none of which were other than normal recurring accruals) necessary
to present fairly the results of operations and cash flows for such periods.
Results for the six month period ended April 1, 1995 are not necessarily
indicative of the results which will be realized for the year ending
September 30, 1995. The annual report for the year ended October 1, 1994
contains additional information which should be read in conjunction with these
financial statements.
Note 2. On February 10, 1995 the Company's Board of Directors approved a
three-for-two split of the Company's issued and outstanding Class A and Class B
common stock in the form of a stock dividend for the shareholders of record
as of February 28, 1995. As a result, 6,653,539 shares of Class A common stock
and 3,200,940 shares of Class B common stock were issued. The stated par value
of each share was not changed from $.01. A total of $98,545 was reclassified
from the Company's additional capital account to the Class A and Class B common
stock accounts. Earnings and dividends per share amounts have been restated to
retroactively give effect to the stock split.
Note 3. On March 2, 1995, the county of Henderson, Kentucky issued solid waste
disposal tax-exempt revenue bonds and loaned the $25 million proceeds to the
Company. The proceeds are to be used to finance the construction of solid
waste disposal and sewage facilities at the Company's chicken facility, protein
plant, chicken feed mill and hatchery in Henderson, Kentucky. The bond
proceeds are being held by a trustee until construction funds have been
expended by the Company, at which time the trustee will reimburse the Company.
Under the loan agreement, the Company agrees to make payments sufficient to pay
the principal and interest on the bonds and the purchase price of bonds
tendered for purchase. The bonds as initially issued accrue interest at weekly
rates. The rate at issue was 3.80% and is currently 4.80%. The rate of
interest may be changed from time to time to flexible daily or term rates upon
notice. The interest rate on the bonds is determined by the Company's
remarketing agent.
The bonds mature on March 1, 2015 but are subject to optional redemption at the
direction of the Company and also mandatory redemption after the occurrence of
an event that would cause the bonds to become taxable.
Note 4. In February 1995, the Company reached an agreement with the Internal
Revenue Service regarding the examination of the 1989 and 1990 Federal income
tax returns.
Based on management's best estimate of the final outcome of the examination,
the Company, during the second quarter of fiscal 1995, recorded $0.5 million of
tax expense and $4.5 million of interest expense attributable to taxes due for
the years under audit and the effect of the audit on all subsequent tax years.
<PAGE>
<PAGE>
HUDSON FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Taxes due under the settlement have not been finalized, but management believes
the liability will be substantially less than the assessment previously
disclosed. Also, management believes that any remaining taxes due will not
impact earnings and will only result in the acceleration of previously recorded
deferred income taxes. Management anticipates that the final calculation of
the liability will be completed in fiscal 1995.
Note 5. During the first quarter of fiscal 1995, $5.5 million of the
outstanding 8% Convertible Subordinated Debentures due 2006 were converted into
263,837 shares of common stock at a conversion price of $21.00 per share. The
conversions increased common stock and additional capital by $5.3 million. Also
during the first quarter of fiscal 1995, $3.8 million of the outstanding 8%
Convertible Subordinated Debentures were redeemed for cash plus a 1.6% premium.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Hudson Foods, Inc.
We have reviewed the condensed consolidated balance sheet of Hudson Foods, Inc.
and subsidiaries as of April 1, 1995 and the related condensed consolidated
statements of operations for the three and six month periods ended April 1,
1995 and April 2, 1994, and the condensed consolidated statements of cash flows
for the six month periods ended April 1, 1995 and April 2, 1994. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of October 1, 1994, and the
related consolidated statements of operations and cash flows for the year then
ended (not presented herein); and in our report dated October 26, 1994, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of October 1, 1994 is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
April 25, 1995
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Historically, the Company's operating results have been heavily influenced by
two external factors: the cost to the Company of feed grains and the price
received by the Company for its commodity-based finished products. These two
factors have fluctuated significantly and independently. Inflation has not
materially affected results of operations.
In recent years the Company has undertaken a business strategy focused largely
on the following: increased production and sale of further-processed poultry
and other processed food products, and increased sales to larger customers such
as club store and food-service chains. This strategy decreased the proportion
of feed grain costs in relation to total cost of sales, which reduced the
impact of commodity cost fluctuations. In addition, the sales prices of
further-processed products are less sensitive to commodity poultry price
fluctuations. Another result of this strategy has been increased sales to
large customers under firm-price or cost-plus contracts utilizing dedicated
plant arrangements. Although an increase in feed costs or a decrease in
finished product prices could have an adverse effect on the Company, management
believes that the implementation of this strategy has reduced the Company's
vulnerability to such price fluctuations.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SECOND QUARTER OF FISCAL 1995 COMPARED WITH
SECOND QUARTER OF FISCAL 1994
Sales from the Company's operations were $271.8 million for the second quarter
of fiscal 1995, an increase of $15.5 million, or 6.0% over the second quarter
of fiscal 1994. The sales increase primarily resulted from the following:
Chicken sales increased 12.7% to $146.2 million in the second quarter of
fiscal 1995 from $129.8 million in the second quarter of fiscal 1994
primarily due to a 22.6% increase in volume. The volume increase was
essentially due to increased sales in international markets, especially
Russia.
Portioned entree sales decreased 6.3% to $44.8 million in the second
quarter of fiscal 1995 from $47.8 million in the second quarter of fiscal
1994 primarily due to lower selling prices resulting from changes in the
product mix and a slight decrease in volume.
Luncheon meat sales decreased 13.0% to $36.7 million in the second quarter
of fiscal 1995 from $42.2 million in the second quarter of fiscal 1994
primarily due to lower selling prices as a result of changes in the
product mix and customer base and a slight decrease in volume.
Turkey sales increased 31.2% to $29.3 million in the second quarter of
fiscal 1995 from $22.4 million in the second quarter of fiscal 1994
primarily due to an 18.8% increase in volume and higher selling prices due
to increased sales of further-processed products.
During the second quarter of fiscal 1995, the Company moved into a new area of
food processing when its new hamburger plant in Columbus, Nebraska began
production. The plant produces beef patties for the Burger King restaurant
chain as well as for club stores and other customers. Total beef sales,
including the Columbus production, were $4.5 million in the second quarter of
fiscal 1995.
Cost of sales was $227.5 million in the second quarter of fiscal 1995, an
increase of $5.2 million, or 2.4%, over the second quarter of fiscal 1994. As
a percentage of sales, cost of sales decreased to 83.7% for the second quarter
of fiscal 1995 from 86.7% in the second quarter of fiscal 1994 primarily due to
a 14.8% decrease in feed costs per ton.
Gross profit was $44.3 million in the second quarter of fiscal 1995, an
increase of $10.3 million, or 30.1%, over the second quarter of fiscal 1994.
As a percentage of sales, gross profit increased to 16.3% in the second quarter
of fiscal 1995 from 13.3% in the second quarter of fiscal 1994 due to the
factors discussed above.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SECOND QUARTER OF FISCAL 1995 COMPARED WITH
SECOND QUARTER OF FISCAL 1994 (CONTINUED)
Selling and general and administrative expenses were $26.6 million in the
second quarter of fiscal 1995, an increase of $1.6 million, or 6.4%, over the
second quarter of fiscal 1994. General and administrative expenses rose
primarily as a result of increased incentive compensation accruals. As a
percentage of sales, selling and general and administrative expenses remained
relatively constant at 9.8% in the second quarter of fiscal 1995 compared with
9.7% in the second quarter of fiscal 1994.
Operating income was $17.7 million in the second quarter of fiscal 1995, an
increase of $8.7 million, or 95.4%, over the second quarter of fiscal 1994.
This increase was primarily due to the improvements in the Company's operations
described previously.
Interest expense decreased primarily due to the conversion and redemption of
the 8% Convertible Subordinated Debentures coupled with increased capitalized
interest on construction in progress.
During the second quarter of fiscal 1995, based on management's best estimate
of the final tax and interest due resulting from an Internal Revenue Service
examination settlement, the Company recorded $0.5 million of tax expense and
$4.5 million of interest expense (see Note 4.).
Other income for the second quarter of fiscal 1995 was composed of gains on
assets destroyed by fire.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FIRST SIX MONTHS OF FISCAL 1995 COMPARED WITH
FIRST SIX MONTHS OF FISCAL 1994
Sales from the Company's operations were $551.8 million for the first
six months of fiscal 1995, an increase of $45.2 million, or 8.9% over the first
six months of fiscal 1994. The sales increase primarily resulted from the
following:
Chicken sales increased 13.2% to $282.6 million in the first six months of
fiscal 1995 from $249.6 million in the first six months of fiscal 1994
primarily due to a 22.5% increase in volume. The volume increase was
essentially due to increased sales in international markets, especially
Russia, and increased domestic consumer demand for chicken products.
Portioned entree sales decreased slightly to $88.7 million in the first six
months of fiscal 1995 from $89.0 million in the first six months of fiscal
1994 primarily resulting from lower selling prices resulting from changes
in the product mix. The lower selling prices were partially offset by a
3.1% increase in volume.
Luncheon meat sales decreased 4.6% to $81.7 million in the first six months
of fiscal 1995 from $85.7 million in the first six months of fiscal 1994
primarily due to lower selling prices as a result of changes in the product
mix and customer base. The lower selling prices were partially offset by a
3.2% increase in volume.
Turkey sales increased 32.8% to $72.6 million in the first six months of
fiscal 1995 from $54.7 million in the first six months of fiscal 1994
primarily due to a 20.3% increase in volume and higher selling prices due
to increased sales of further-processed products.
During the first six months of fiscal 1995, the Company moved into a new area
of food processing when its new hamburger plant in Columbus, Nebraska began
production. The plant produces beef patties for the Burger King restaurant
chain as well as for club stores and other customers. Total beef sales,
including the Columbus production, were $6.7 million in the first six months of
fiscal 1995.
Cost of sales was $465.7 million in the first six months of fiscal 1995, an
increase of $30.8 million, or 7.1%, over the first six months of fiscal 1994.
As a percentage of sales, cost of sales decreased to 84.4% in the first six
months of fiscal 1995 compared with 85.8% in the first six months of fiscal
1994 primarily due to a 11.6% decrease in feed costs per ton.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FIRST SIX MONTHS OF FISCAL 1995 COMPARED WITH
FIRST SIX MONTHS OF FISCAL 1994 (CONTINUED)
Gross profit was $86.1 million in the first six months of fiscal 1995, an
increase of $14.4 million, or 20.0%, over the first six months of fiscal 1994.
As a percentage of sales, gross profit increased to 15.6% in the first six
months of fiscal 1995 compared with 14.2% in the first six months of fiscal
1994 due to the factors discussed above.
Selling and general and administrative expenses were $52.9 million in the first
six months of fiscal 1995, an increase of $2.2 million, or 4.3%, over the first
six months of fiscal 1994. General and administrative expenses rose primarily
as a result of increased incentive compensation accruals. As a percentage of
sales, selling and general and administrative expenses decreased to 9.6% in the
first six months of fiscal 1995 from 10.0% in the first six months of fiscal
1994.
Operating income was $33.2 million in the first six months of fiscal 1995, an
increase of $12.2 million, or 58.1%, over the first six months of fiscal 1994.
This increase was primarily due to the improvements in the Company's operations
described previously.
Interest expense decreased primarily due to the conversion and redemption of
the 8% Convertible Subordinated Debentures coupled with increased capitalized
interest on construction in progress.
During the second quarter of fiscal 1995, based on management's best estimate
of the final tax and interest due resulting from an Internal Revenue Service
examination settlement, the Company recorded $0.5 million of tax expense and
$4.5 million of interest expense (see Note 4.).
Other income for the first six months of fiscal 1995 was primarily composed of
gains on assets destroyed by fire.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Working capital at April 1, 1995 was $136.6 million compared with $100.1
million at October 1, 1994 and the current ratio was 2.28 to 1 and 1.87 to 1
at April 1, 1995 and October 1, 1994, respectively. Other current assets
increased primarily due to the recording of a sale-leaseback receivable that
will be collected in the third quarter of fiscal 1995. Other assets increased
primarily due to loan proceeds received from the county of Henderson, Kentucky
(see Note 3). The Company's total capitalization, as represented by long-term
obligations plus stockholders' equity, was $372.7 million on April 1, 1995,
compared with $284.4 million on October 1, 1994. Long-term obligations
represented 23.8% and 26.4% of total capitalization on April 1, 1995 and
October 1, 1994, respectively.
Notes payable due under the Company's unsecured credit agreements at April 1,
1995 were $11.1 million compared with $16.8 million on October 1, 1994. Total
long-term obligations and current portion of long-term obligations increased
$13.5 million due to the net effect of the following: 1) proceeds received on a
$25 million loan from the county of Henderson, Kentucky; 2) $3.8 million of 8%
Convertible Subordinated Debentures that were redeemed and $5.5 million of 8%
Convertible Subordinated Debentures that were converted into Class A common
stock; and 3) normal debt payments.
Common stock and additional capital increased $57.9 million to $155.5
million at April 1, 1995 from $97.6 million at October 1, 1994. The increase
primarily resulted from the following: 1) the issuance of 2.5 million new
shares of Class A common stock sold in a public stock offering on November 21,
1994 and 2) the conversion of $5.5 million of 8% Convertible Subordinated
Debentures into common stock (see Note 5). Additionally, during the second
quarter of fiscal 1995, the Company issued 6.7 million shares of Class A common
stock and 3.2 million shares of Class B common stock in a three-for-two stock
split, effected as a stock dividend.
The Company's cash flow used for operating activities was $3.2 million in the
first six months of fiscal 1995 compared with $6.6 million in the first six
months of fiscal 1994. The improvement was primarily due to higher net income
and changes in operating assets and liabilities.
For the first six months of fiscal 1995 and 1994, the Company had capital
expenditures of $37.1 million and $16.5 million, respectively. Capital
expenditures, in the first six months of fiscal 1995, were for the construction
of a beef processing plant in Columbus, Nebraska, the beginning of construction
of a chicken complex near Henderson, Kentucky and the expansion and/or
upgrading of existing production facilities and related equipment. The beef
processing plant began production in January 1995 and the Kentucky chicken
complex is expected to begin production in 1996. The capital expenditures have
been and will continue to be financed by operations, borrowings, lease
arrangements and the issuance of common stock.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The $25 million loan proceeds received from the county of Henderson, Kentucky
(see Note 3) are being held by a trustee until the Company expends construction
funds, at which time the trustee will reimburse the Company. At April 1, 1995,
the Company had been reimbursed for $1.2 million of construction expenditures.
The Company's capital budget for fiscal 1995 contemplates aggregate capital
expenditures of approximately $94.0 million for the building of the new beef
processing plant and chicken complex and upgrading and/or expanding current
production facilities and related equipment. To achieve this level of capital
expenditures, the Company will be required to obtain waivers from certain
lenders. Management believes that such waivers will be obtained. However,
there can be no assurance that such waivers will be granted.
Historically, the Company's operations have been financed through internally
generated funds, borrowings, lease arrangements and the issuance of common
stock. On April 26, 1994, the Company entered into a $100 million unsecured
credit agreement that expires June 30, 1997. At April 1, 1995, the Company had
$91.8 million available under this agreement. The Company did not have any
notes payable outstanding under the agreement but had $8.2 million in
outstanding letters of credit. The credit agreement, among other things,
limits the payment of dividends to approximately $2.8 million in any fiscal
year and limits annual capital expenditures and lease obligations. It requires
the maintenance of minimum levels of working capital and tangible net worth and
that the current ratio, leverage ratio and cash flow coverage ratio be
maintained at certain levels. It also limits the creation of new secured debt
to $25.0 million and new unsecured short-term debt with parties outside the
credit agreement to $20.0 million. Additionally, an event of default will
occur if the aggregate outstanding voting power of James T. Hudson and his
immediate family in the Company is reduced below 51%.
On May 18, 1994, the Company entered into an unsecured term loan agreement with
a financial institution giving the Company the right to borrow up to $50.0
million of senior notes fixed at a rate to be determined at drawdown. The
Company had not borrowed under the agreement at April 1, 1995. The agreement
expires February 24, 1996.
The Company has entered into four separate unsecured short-term credit
agreements with financial institutions (outside the $100 million revolving
credit agreement) giving the Company the right to borrow up to $10.0 million
each from three institutions and $15.0 million from one institution. At
April 1, 1995, the Company had $11.1 million outstanding under these
agreements.
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
TAX MATTERS
In February 1995, the Company reached an agreement with the Internal Revenue
Service regarding the examination of the 1989 and 1990 Federal income tax
returns.
Based on management's best estimate of the final outcome of the examination,
the Company, during the second quarter of fiscal 1995, recorded $0.5 million of
tax expense and $4.5 million of interest expense attributable to taxes due for
the years under audit and the effect of the audit on all subsequent tax years.
Taxes due under the settlement have not been finalized, but management believes
the liability will be substantially less than the assessment previously
disclosed. Also, management believes that any remaining taxes due will not
impact earnings and will only result in the acceleration of previously recorded
deferred income taxes. Management anticipates that the final calculation of the
liability will be completed in fiscal 1995.
<PAGE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
At the February 10, 1995 Annual Meeting of Stockholders, the
Company announced a three-for-two stock split, effected as a
stock dividend, on the Company's Class A and Class B common
stock, effective March 28, 1995 for stockholders of record as of
February 28, 1995. As a result, the Company issued 6,653,539 shares
of Class A common stock and 3,200,940 shares of Class B common
stock.
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
At the February 10, 1995 Annual Meeting of Stockholders of
Hudson Foods, Inc., the stockholders elected the following
persons to the Company's Board of Directors by the votes
indicated below:
Authority
Name For Withheld
-------------------------------------------------------------------
James T. Hudson 74,992,566 430,032
Michael T. Hudson 74,991,211 431,387
Charles B. Jurgensmeyer 74,993,544 429,054
Elmer W. Shannon 74,555,321 867,277
Jerry L. Hitt 74,994,725 427,873
Kenneth N. May 74,564,904 857,694
James R. Hudson 74,989,607 432,991
Jane M. Helmich 74,990,530 432,068
By 73,243,722 votes for, 1,594,224 votes against, 584,652 votes
abstaining and no broker non-votes, the stockholders granted
discretionary authority to the proxies to vote for other matters
properly brought before the Annual Meeting. However, no votes
were cast pursuant to that authority.
Item 5. Other Information
Not applicable
<PAGE>
<PAGE>
PART II - OTHER INFORMATION (CONTINUED)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Description of Exhibit Sequentially
Number Numbered Page
----------------------------------------------------------------
4a Restated Certificate of Incorporated by
Incorporation of Hudson reference from
Foods, Inc., Section 4 Registration
Statement No.
33-15274
11 Calculation of earnings
per share Page 19
15 Letter regarding unaudited
interim financial information Page 20
(b) Reports on Form 8-K
Not applicable
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Hudson Foods, Inc.
Date May 8, 1995 Michael T. Hudson
President
Date May 8, 1995 Charles B. Jurgensmeyer
Chief Financial Officer
<PAGE>
<PAGE>
<PAGE>
Exhibit 11 - HUDSON FOODS INC. AND SUBSIDIARIES
EARNINGS PER SHARE CALCULATION
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 1, April 2, April 1, April 2,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net income $8,168 $4,372 $18,003 $10,467
Interest on convertible
subordinated debentures
net of income taxes -- 212 -- 429
__________ __________ __________ __________
Adjusted net income $8,168 $4,584 $18,003 $10,896
========== ========== ========== ==========
Primary earnings per share:
- ---------------------------
Weighted average number of
common shares outstanding 29,531,096 24,334,001 28,387,933 24,292,428
Common stock equivalents:
Dilutive options 582,473 589,170 564,083 542,901
__________ __________ __________ __________
Weighted average number of
common and common equivalent
shares 30,113,569 24,923,171 28,952,016 24,835,329
========== ========== ========== ==========
Primary earnings per share $0.27 $0.18 $0.62 $0.42
========== ========== ========== ==========
Fully diluted earnings
per share:
- ---------------------------
Weighted average number of
common shares outstanding 29,531,096 24,334,001 28,387,933 24,292,429
Common stock equivalents:
Dilutive options 592,315 608,080 592,316 608,080
Convertible subordinated
debentures -- 1,245,429 -- 1,245,429
__________ __________ __________ __________
Weighted average number of
common and common equivalent
shares 30,123,411 26,187,510 28,980,249 26,145,938
========== ========== ========== ==========
Fully diluted earnings per
share $0.27 $0.18 $0.62 $0.42
========== ========== ========== ==========
</TABLE>
<PAGE>
<PAGE>
<PAGE>
EXHIBIT 15
HUDSON FOODS, INC. AND SUBSIDIARIES
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Hudson Foods, Inc.
Registration on Forms S-8
We are aware that our report dated April 25, 1995 on our review of the interim
financial information of Hudson Foods, Inc. for the periods ended April 1, 1995
and April 2, 1994, and included in this Form 10-Q is incorporated by reference
in the Company's registration statement on Form S-8 (File nos. 33-36690 and
33-41839). Pursuant to Rule 436(c) under the Securities Act of 1933, this
report should not be considered a part of the registration statement prepared
or certified by us within the meaning of Sections 7 and 11 of that Act.
Coopers & Lybrand L.L.P.
Tulsa, Oklahoma
May 5, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> APR-01-1995
<CASH> 1,281
<SECURITIES> 0
<RECEIVABLES> 69,566
<ALLOWANCES> 1,495
<INVENTORY> 152,512
<CURRENT-ASSETS> 243,561
<PP&E> 385,536
<DEPRECIATION> 131,016
<TOTAL-ASSETS> 551,584
<CURRENT-LIABILITIES> 106,988
<BONDS> 0
<COMMON> 305
0
0
<OTHER-SE> 283,805
<TOTAL-LIABILITY-AND-EQUITY> 551,584
<SALES> 551,769
<TOTAL-REVENUES> 551,769
<CGS> 465,722
<TOTAL-COSTS> 518,574
<OTHER-EXPENSES> 2,310
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 476
<INCOME-PRETAX> 30,409
<INCOME-TAX> 12,406
<INCOME-CONTINUING> 18,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 18,003
<EPS-PRIMARY> .62
<EPS-DILUTED> .62
</TABLE>
