UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q/A
(MARK ONE)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 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
1-9050
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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.)
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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 July 17, 1997 Hudson Foods, Inc. had 20,664,681 shares of $0.01 par
value Class A Common Stock outstanding and 9,602,372 shares of $0.01 par
value Class B Common Stock outstanding.
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HUDSON FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Dollars in thousands)
June 28, September 28,
1997 1996
-------- -------------
ASSETS:
Current assets:
Cash and cash equivalents..................... $ 8,429 $ 6,437
Receivables, net.............................. 117,182 108,792
Inventory:
Field inventory............................. 60,376 61,250
Feed, eggs and other........................ 37,278 32,273
Finished products........................... 194,659 133,349
Other......................................... 35,529 22,373
-------- --------
Total current assets.......................... 453,453 364,474
-------- --------
Property, plant and equipment, net of
accumulated depreciation of $165,947
and $150,745.................................. 401,430 367,600
Excess cost of investment, net.................. 13,697 14,119
Other assets.................................... 35,499 28,549
-------- --------
Total assets.................................... $904,079 $774,742
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................. $ 83,200 $ --
Current portion of long-term obligations...... 25,912 24,714
Accounts payable.............................. 59,328 69,552
Accrued liabilities........................... 52,977 49,578
Deferred income taxes......................... 6,741 6,741
-------- --------
Total current liabilities..................... 228,158 150,585
-------- --------
Long-term obligations........................... 272,755 224,951
-------- --------
Deferred income taxes and deferred gain......... 76,864 73,286
-------- --------
Stockholders' equity:
Common Stock:
Class A, $.01 par value; 40,000,000 shares
authorized; issued 21,503,975 and
21,384,664 shares......................... 215 214
Class B, $.01 par value; 40,000,000 shares
authorized; issued and outstanding
9,602,372 and 9,602,522 shares............ 96 96
Additional capital............................ 160,191 159,314
Retained earnings............................. 176,398 177,153
Treasury stock, at cost (846,644 and
877,196 Class A shares)..................... (10,598) (10,857)
-------- --------
Total stockholders' equity.................... 326,302 325,920
-------- --------
Total liabilities and stockholders' equity...... $904,079 $774,742
======== ========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
HUDSON FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(in thousands except per share data)
Three Months Ended Nine Months Ended
-------------------- ----------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
-------- -------- ----------- ----------
Sales....................... $435,449 $337,234 $1,231,846 $1,008,205
Cost of sales............... 390,572 296,069 1,089,031 883,195
Gross profit................ 44,877 41,165 142,815 125,010
Selling..................... 23,964 23,440 74,883 71,231
General and administrative.. 8,207 8,542 24,222 23,871
International reorganization
(Note 2).................. 33,336 -- 33,336 --
Operating income (loss)..... (20,630) 9,183 10,374 29,908
Other expense:
Interest, net............. 4,204 2,472 8,773 5,282
Other..................... -- 1,306 -- 1,306
-------- -------- ---------- ----------
Total other expense....... 4,204 3,778 8,773 6,588
Income (loss) before income
taxes..................... (24,834) 5,405 1,601 23,320
Income tax expense (benefit) (9,933) 2,096 641 9,130
-------- -------- ----------- ----------
Net income (loss)........... $(14,901) $ 3,309 $ 960 $ 14,190
-------- -------- ----------- ----------
Earnings (loss) per share... $ (0.49) $ 0.11 $ 0.03 $ 0.47
-------- -------- ----------- ----------
Shares used in earnings per
share computations:
Primary and fully diluted. 30,251 30,409 30,471 30,404
-------- -------- ----------- ----------
Dividends per share:
Class A................... $ 0.0200 $ 0.0200 $ 0.0600 $ 0.0600
Class B................... $ 0.0167 $ 0.0167 $ 0.0501 % 0.0501
-------- -------- ----------- ----------
Sales Growth................ 29.1% 10.3% 22.2% 17.6%
Margins (Percent of Sales):
Gross profit.............. 10.3% 12.2% 11.6% 12.4%
Operating income (loss)... (4.7)% 2.7% 0.8% 3.0%
Income (loss) before
income taxes............ (5.7)% 1.6% 0.1% 2.3%
Net income (loss)......... (3.4)% 1.0% 0.1% 1.4%
======== ======== =========== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
HUDSON FOODS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
Nine Months Ended
------------------------
June 28, June 29,
1997 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 960 $ 14,190
Items included in net income not requiring
cash:
Depreciation............................... 22,007 18,731
Amortization............................... 1,028 1,035
Deferred gain.............................. (1,503) (1,696)
Deferred income taxes...................... 3,966 2,882
International reorganization (Note 2)...... 33,336 --
Loss on sale of business................... -- 1,306
Changes in operating assets and liabilities.. (125,359) (59,291)
-------- ---------
Cash flows used for operating activities..... (65,565) (22,843)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment.... (56,256) (115,094)
Disposition of property, plant and
equipment, net............................. 419 987
Funds received from trustee for capital
project.................................... -- 16,926
Sale of business............................. -- 28,885
Other........................................ (7,556) (6,852)
-------- ---------
Cash flows used for investing activities..... (63,393) (75,148)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Addition to (reduction of) notes payable..... 83,200 (12,300)
Addition to long-term obligations............ 55,000 120,000
Reduction of long-term obligations........... (5,998) (5,479)
Dividends.................................... (1,716) (1,707)
Exercise of stock options and other.......... 464 222
-------- ---------
Cash flows provided by financing activities.. 130,950 100,736
-------- ---------
Increase in cash and cash equivalents.......... 1,992 2,745
Cash and cash equivalents at beginning of
period....................................... 6,437 2,159
-------- ---------
Cash and cash equivalents at end of period..... $ 8,429 $ 4,904
======== =========
Supplemental disclosure of cash flow
information:
Interest paid, net of amount capitalized..... $ 10,194 $ 5,744
Income taxes paid............................ $ 11,604 $ 8,523
======== =========
The accompanying notes are an integral part of the condensed consolidated
financial statements.
HUDSON FOODS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The condensed consolidated financial statements for the periods
ended June 28, 1997 and June 29, 1996 include, in the opinion of
management, all adjustments necessary to present fairly the results of
operations and cash flows for such periods. The Annual Report for the year
ended September 28, 1996, and the Company's Form 10-K contain additional
information which should be read in conjunction with these financial
statements.
Note 2. During the third quarter of fiscal 1997, the Company recorded a
charge associated with a reorganization of its International Division, with
particular emphasis placed on structural changes to its business in Russia,
including reorganizing the Company's Russian market distribution system.
Specifically, the Company elected to discontinue utilization of a Russian
distributor to market its products throughout Russia and to begin to
distribute its products directly to customers in Russia. The distributor
previously accounted for the majority of the Company's sales in Russia. As
part of the change, the Company incorporated in Russia and has initiated
the expansion of marketing and other personnel in Russia. Associated with
these changes, the Company recognized that receivables totaling $24.2
million and inventory of $9.1 million would not be recoverable. The charge
associated with receivables has been included as a loss on international
reorganization and the charge associated with inventory has been included
as an increase in cost of sales in the accompanying statement of operations
for the three and nine months ended June 28, 1997.
Note 3. In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share
("FAS 128"). FAS 128 will change the computation, presentation and
disclosure requirements for earnings per share. FAS 128 requires the
presentation of "basic" and "diluted" earnings per share, as defined, for
all entities with complex capital structures. FAS 128 is effective for
financial statements issued for periods ending after December 15, 1997, and
requires restatement of all prior period earnings per share amounts. The
Company has not yet determined the impact that FAS 128 will have on its
earnings per share when adopted.
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 June 28, 1997 and the related condensed
consolidated statements of operations for the three and nine months ended
June 28, 1997 and June 29, 1996, and cash flows for the nine months ended
June 28, 1997 and June 29, 1996. 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 September 28, 1996, and the
related consolidated statements of operations and cash flows for the year
then ended (not presented herein); and in our report dated October 29,
1996, 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 September 28, 1996 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
July 23, 1997
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 factors: the cost of feed grains and commodity-based finished
product prices. These two factors have fluctuated significantly and
independently. In recent years the Company has undertaken a business
strategy to increase the production and sale of further-processed products
and increase sales to large customers such as club store and foodservice
chains. In fiscal 1996, one such customer accounted for approximately
18.7% of total sales. For the first nine months of fiscal 1997, that same
customer accounted for approximately 18.8% of total sales. This strategy
helps decrease the proportion of feed grain costs to total cost of sales,
which reduces the impact of commodity cost fluctuations. In addition, the
sales prices of further-processed products are less sensitive to commodity
price fluctuations. Even so, a material increase in feed costs or a
material decrease in finished product prices could have an adverse effect
on the Company, but management believes that the implementation of this
strategy has reduced the Company's vulnerability to such price
fluctuations.
International sales accounted for 17.5% of the Company's total sales during
fiscal 1996 and 19.1% for the first nine months of fiscal 1997. The
Company's primary international markets are Russia, Eastern Europe, Asia
and Central America. The main products sold are chicken leg quarters,
chicken paws and turkey thigh meat.
The Company believes that its operations are in substantial compliance with
applicable environmental laws and regulations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
THIRD QUARTER OF FISCAL 1997 COMPARED WITH
THIRD QUARTER OF FISCAL 1996
Sales from the Company's operations were $435.4 million for the third
quarter of fiscal 1997, an increase of $98.2 million, or 29.1%, over the
third quarter of fiscal 1996. International sales increased by $28.4
million and were 19.6% and 16.9% of sales for the third quarter of fiscal
1997 and 1996, respectively. The Company's primary international markets
are Russia, Eastern Europe, Asia and Central America. The main products
sold into international markets were chicken leg quarters, chicken paws and
turkey thigh meat. The Company's four main customer groups are:
foodservice, club stores, retail and international. The sales increase
primarily resulted from the following:
Chicken sales increased 28.1% to $264.9 million in the third quarter of
fiscal 1997 from $206.9 million in the third quarter of fiscal 1996
primarily due to an 18.9% increase in volume and a 7.8% increase in
selling prices. Sales in all four customer groups increased due to
continuing consumer demand for chicken products. Selling prices
were strong due to high customer demand.
Portioned entree sales increased 50.2% to $55.3 million in the third
quarter of fiscal 1997 from $36.8 million in the third quarter of
fiscal 1996 due to a 52.7% increase in volume, offset by a 1.6%
decrease in selling prices. The volume increase was primarily due
to expanded sales in all four customer groups, especially
foodservice customers.
Turkey sales increased 11.7% to $46.8 million in the third quarter of
fiscal 1997 from $41.9 million in the third quarter of fiscal 1996
mainly due to a 22.3% increase in volume, offset by an 8.7% decrease
in selling prices. The Company has changed its production emphasis
from whole birds to further-processed products, but the Company does
sell some whole birds on a limited basis. For example, whole birds
were sold in the third quarter of fiscal 1997 but in the second
quarter of fiscal 1996. That timing difference partially explains
the volume increase and selling price decrease. Volume also
increased due to increased international sales.
Beef sales increased 58.7% to $36.0 million in the third quarter of
fiscal 1997 from $22.7 million in the third quarter of fiscal 1996
due to a 42.8% increase in volume and an 11.1% increase in selling
prices. The volume increase was due to increased sales to club
store, international and retail customers. Selling prices increased
due to increased raw material costs.
Luncheon meat sales increased 12.7% to $18.9 million in the third
quarter of fiscal 1997 from $16.7 million in the third quarter of
fiscal 1996 primarily due to an 11.2% increase in volume and a 1.3%
increase in selling prices. The volume increase was primarily due
to increased sales to club store customers.
Cost of sales was $399.7 million for the third quarter of fiscal 1997, an
increase of $103.6 million, or 35.0%, over the third quarter of fiscal
1996. As a percentage of sales, cost of sales was 91.8% and 87.8% in the
third quarter of fiscal 1997 and fiscal 1996, respectively. The increase
was primarily due to an increase in outside purchases, increased processing
costs and the write-off of international inventory.
Feed and ingredient costs, as a percentage of sales, were 24.4% for the
third quarter of fiscal 1997 and 29.3% for the third quarter of fiscal
1996. Feed and ingredient costs per ton for the third quarter of fiscal
1997 were down 6.0% from the same period of fiscal 1996. Also, due to a
lack of birds for processing at the Company's new Kentucky plant,
additional birds were purchased from outside sources which caused costs to
shift from feed and ingredients to outside purchases.
Gross profit was $35.7 million in the third quarter of fiscal 1997, a
decrease of $5.4 million, or 13.2%, from the third quarter of fiscal 1996.
As a percentage of sales, gross profit decreased to 8.2% in the third
quarter of fiscal 1997 from 12.2% in the third quarter of fiscal 1996 due
to the factors discussed above.
Selling and general and administrative expenses were almost unchanged at
$32.2 million in the third quarter of fiscal 1997 and $32.0 million for the
third quarter of fiscal 1996. As a percentage of sales, selling and
general and administrative expenses decreased to 7.4% in the third quarter
of fiscal 1997 from 9.5% in the third quarter of fiscal 1996. During the
third quarter of fiscal 1997, the Company decreased certain selling
expenses such as product handling and advertising.
During the third quarter of fiscal 1997, the Company recorded a charge
associated with a reorganization of its International Division. The
reorganization placed particular emphasis on changes to the Company's
Russian market distribution system. Specifically, the Company elected to
discontinue its utilization of a Russian distributor to market its products
throughout Russia and to begin to distribute its products directly to
customers in Russia. The distributor previously accounted for the majority
of the Company's sales in Russia. As part of the change, the Company
incorporated in Russia and has initiated the expansion of marketing and
other personnel in Russia. The Company believes that the reorganization
will allow it to grow its customer base by distributing its products into
the widespread geographic markets of Russia. The Company also believes
that there are business opportunities in Russia and feels confident, under
existing tariff laws, that the restructuring will allow its International
Division to effectively compete in the Russian marketplace. Associated
with these changes, the Company recognized that receivables of $24.1
million and inventory of $9.1 million would not be recoverable. The charge
associated with receivables has been included as a loss on international
reorganization and the charge associated with inventory has been included
as an increase in cost of sales in the accompanying statement of
operations.
As a result of the charge recorded in the international reorganization, the
Company had an operating loss of $20.6 million for the third quarter of
fiscal 1997 compared to operating income of $9.2 million for the third
quarter of fiscal 1996.
Interest expense increased as a result of increased short and long-term
borrowings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FIRST NINE MONTHS OF FISCAL 1997 COMPARED WITH
FIRST NINE MONTHS OF FISCAL 1996
Sales from the Company's operations were $1,231.8 million for the first
nine months of fiscal 1997, an increase of $223.6 million, or 22.2%, over
the first nine months of fiscal 1996. International sales increased $54.8
million and were 19.1% and 17.9% of sales for the first nine months of
fiscal 1997 and 1996, respectively. The Company's primary international
markets are Russia, Eastern Europe, Asia and Central America. The main
products sold into international markets were chicken leg quarters, chicken
paws and turkey thigh meat. The Company's four main customer groups are:
foodservice, club stores, retail and international. The sales increase
primarily resulted from the following:
Chicken sales increased 29.0% to $738.1 million in the first nine
months of fiscal 1997 from $572.1 million in the first nine months
of fiscal 1996 primarily due to an 18.5% increase in volume and an
8.9% increase in selling prices. Sales in all four customer groups
increased due to continuing consumer demand for chicken products.
Selling prices were strong due to high customer demand.
Portioned entree sales increased 29.1% to $162.0 million in the
first nine months of fiscal 1997 from $125.4 million in the first
nine months of fiscal 1996 due to a 30.6% increase in volume, offset
by a 1.1% decrease in selling prices. The volume increase was
primarily due to expanded sales in all four customer groups,
especially foodservice customers.
Turkey sales increased 7.1% to $143.1 million in the first nine
months of fiscal 1997 from $133.6 million in the first nine months
of fiscal 1996 mainly due to a 7.3% increase in selling prices. The
Company has changed its production emphasis from whole birds to
further-processed products. The change in product mix was the
primary cause of the large increase in selling prices.
Beef sales increased 39.8% to $92.3 million in the first nine months
of fiscal 1997 from $66.0 million in the first nine months of fiscal
1996 due to a 30.3% increase in volume and a 7.3% increase in
selling prices. The volume increase was primarily due to increased
sales to retail and club store customers. Selling prices increased
due to increased raw material costs.
Luncheon meat sales decreased 27.3% to $56.0 million in the first
nine months of fiscal 1997 from $77.0 million in the first nine
months of fiscal 1996 primarily due to a 30.7% decrease in volume
offset by a 4.9% increase in selling prices. The volume decrease
was primarily due to the December 1995 sale of the Company's Topeka,
Kansas luncheon meat plant and its related brand names and the
closing and subsequent sale of its Wichita, Kansas luncheon meat
plant. The increase in selling prices was primarily due to product
mix changes that resulted from the sale.
Cost of sales was $1,098.2 million for the first nine months of fiscal
1997, an increase of $215.0 million, or 24.3%, over the first nine months
of fiscal 1996. As a percentage of sales, cost of sales was 89.1% and
87.6% for the first nine months of fiscal 1997 and fiscal 1996,
respectively. The increase primarily resulted from the net effect of
higher feed and ingredient costs, an increase in outside purchases, higher
processing costs, higher selling prices and the write-off of international
inventory.
Feed and ingredient costs per ton for the first nine months of fiscal 1997
were up approximately 2.3% over the same period of fiscal 1996, but feed
and ingredient costs, as a percentage of sales, were 23.9% and 25.6% for
the first nine months of fiscal 1997 and fiscal 1996, respectively. Due to
a lack of birds for processing at the Company's new Kentucky plant,
additional birds were purchased from outside sources which caused costs to
shift from feed and ingredients to outside purchases.
Gross profit was $133.7 million in the first nine months of fiscal 1997, an
increase of $8.7 million, or 6.9%, from the first nine months of fiscal
1996. As a percentage of sales, gross profit decreased to 10.9% in the
first nine months of fiscal 1997 from 12.4% in the first nine months of
fiscal 1996 due to the factors discussed above.
Selling and general and administrative expenses were $99.1 million in the
first nine months of fiscal 1997, an increase of $4.0 million, or 4.2%,
over the first nine months of fiscal 1996. As a percentage of sales,
selling and general and administrative expenses decreased to 8.0% in the
first nine months of fiscal 1997 from 9.4% in the first nine months of
fiscal 1996. During the first nine months of fiscal 1997, the Company
decreased certain selling expenses such as product handling, demonstrations
and advertising.
During the third quarter of fiscal 1997, the Company recorded a charge
associated with a reorganization of its International Division. The
reorganization placed particular emphasis on changes to the Company's
Russian market distribution system. Specifically, the Company elected to
discontinue its utilization of a Russian distributor to market its products
throughout Russia and to begin to distribute its products directly to
customers in Russia. The distributor previously accounted for the majority
of the Company's sales in Russia. As part of the change, the Company
incorporated in Russia and has initiated the expansion of marketing and
other personnel in Russia. The Company believes that the reorganization
will allow it to grow its customer base by distributing its products into
the widespread geographic markets of Russia. The Company also believes
that there are business opportunities in Russia and feels confident, under
existing tariff laws, that the restructuring will allow its International
Division to effectively compete in the Russian marketplace. Associated
with these changes, the Company recognized that receivables of $24.1
million and inventory of $9.1 million would not be recoverable. The charge
associated with receivables has been included as a loss on international
reorganization and the charge associated with inventory has been included
as an increase in cost of sales in the accompanying statement of
operations.
Operating income was $10.4 million for the first nine months of fiscal
1997, a decrease of $19.5 million, or 65.3%, from the first nine months of
fiscal 1996. The decrease was primarily due to the restructuring charge
described previously.
Interest expense increased as a result of increased short and long-term
borrowings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Working capital at June 28, 1997 was $225.3 million compared with $213.9
million at September 28, 1996. The current ratio was 1.99 to 1 and 2.42 to
1 at June 28, 1997 and September 28, 1996, respectively.
Accounts receivable increased mainly due to expanded sales in both domestic
and international markets. Inventory increased primarily due to increasing
sales, especially in international markets. Other current assets increased
primarily due to the recording of a $10.5 million income tax receivable due
to the overpayment of estimated taxes. Other assets increased primarily
due to miscellaneous investments and capitalized costs.
The Company's total capitalization, as represented by long-term obligations
plus stockholders' equity, was $599.1 million on June 28, 1997, compared
with $550.9 million on September 28, 1996. Long-term obligations
represented 45.5% and 40.8% of total capitalization on June 28, 1997 and
September 28, 1996, respectively.
Cash flows used for operating activities were $65.6 million in the first
nine months of fiscal 1997 compared with $22.8 million in the first nine
months of fiscal 1996. The change was primarily due to increases in
operating assets.
The Company's capital budget for fiscal 1997 contemplates aggregate capital
expenditures of approximately $65 million for the addition of cooking
facilities at the Company's Indiana broiler complex, completion of the
broiler complex near Henderson, Kentucky and upgrading and/or expansion of
current production facilities and related equipment.
For the first nine months of fiscal 1997 and 1996, the Company had capital
expenditures of $56.3 million and $115.1 million, respectively. Capital
expenditures, in the first nine months of fiscal 1997, included the
addition of cooking facilities at the Company's Indiana broiler complex,
the continuing construction of a broiler complex near Henderson, Kentucky,
the expansion and/or upgrading of other production facilities and related
equipment and the expansion and/or upgrading of poultry grow-out
facilities. The expansion of the Indiana facility to a more specialized
plant was completed on April 1, 1997. The plant historically produced
fresh cut-up chicken but is now marinating, breading and cooking chicken.
The plant currently is processing 460,000 birds per week and is scheduled
to produce 620,000 birds per week by November 1997. The Kentucky
processing plant produces individually quick frozen, tray packed, deboned
and marinated chicken products. The Kentucky complex is currently
processing 650,000 birds per week and is scheduled to produce 1.3 million
birds per week by November 1997. The Company experienced delays in the
construction of grow-out houses in Kentucky due to bad weather which
resulted in a lack of birds for processing. With improved weather and site
conditions, construction has started again, and the Company is making
progress in securing contract growers.
Historically, the Company's operations have been financed through
internally generated funds, borrowings, lease arrangements and the issuance
of common stock. On April 30, 1996, the Company entered into a $200.0
million unsecured credit agreement that expires on June 30, 2000. At June
28, 1997, the Company had $63.2 million and $14.2 million outstanding in
notes payable and letters of credit, respectively. 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 requires 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 is reduced below 51%.
The Company has three separate unsecured short-term credit agreements with
financial institutions giving the Company the right to borrow up to $15.0
million each from two institutions and $10.0 million from the other. At
June 28, 1997, the Company had $20.0 million outstanding under these
agreements.
Total long-term obligations and current portion of long-term obligations
increased $49.0 million due to the net effect of the following: 1) proceeds
received on loans from insurance companies totaling $55.0 million and 2)
normal debt payments.
On December 6, 1996, the Company borrowed $50.0 million under an unsecured
term loan agreement from an insurance company at 6.97% due December 6,
2006. On April 11, 1997, $15.0 million in unsecured loans at 6.99% from
insurance companies matured. These loans were rolled into new unsecured
loans totaling $20.0 million from the same insurance companies at 6.99% due
April 11, 2007. For the new loans, interest payments only will be due in
the first three years. Beginning in the fourth year, quarterly principal
and monthly interest payments will be due. Restrictions and covenants are
substantially the same as those included in the $200.0 million unsecured
credit agreement.
FORWARD LOOKING STATEMENT
Certain statements in this document constitute forward looking statements
and involve risks, uncertainties and other factors which may cause the
actual performance of the Company to be materially different from the
performance expressed or implied by such statements. Such factors include,
among others, market conditions and weather patterns that may affect the
cost of grain, consumer demand for poultry products, the completion on
schedule of capital projects planned or under construction, adverse
publicity involving the Company or the poultry industry, the possibility of
tariff law changes or other marketplace changes and restrictions directly
affecting export sales, difficulties in assessing credit risks in sales to
Russian customers and in collecting amounts owed, fluctuations in foreign
exchange rates, and other risks commonly encountered in international
trade.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit Sequentially
Number Description of Exhibit 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 (loss)
per share Page 17
15 Letter regarding unaudited
interim financial information Page 18
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a Form 8-K with the Securities and Exchange
Commission on July 11, 1997. The report included "Item 5. Other
events". The other event was a press release issued by the
Company on July 11, 1997 regarding a restructuring charge
resulting from a reorganization of the Company's international
division.
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 December 3, 1997 Michael T. Hudson
President and Chief Executive Officer
Date December 3, 1997 Charles B. Jurgensmeyer
Chief Financial Officer
EXHIBIT 11
HUDSON FOODS, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS (LOSS) PER SHARE
(in thousands except per share data)
Three Months Ended Nine Months Ended
--------------------- --------------------
June 28, June 29, June 28, June 29,
1997 1996 1997 1996
-------- ------- ------- -------
Net income (loss) $(14,901) $ 3,309 $ 960 $14,190
-------- ------- ------- -------
PRIMARY EARNINGS (LOSS)
PER SHARE:
Weighted average number of
common shares outstanding 30,251 30,099 30,208 30,076
Common stock equivalents:
Dilutive options -- 310 263 328
Weighted average number of
common and common
equivalent shares 30,251 30,409 30,471 30,404
-------- ------- ------- -------
Primary earnings (loss)
per share $ (0.49) $ 0.11 $ 0.03 $ 0.47
-------- ------- ------- -------
FULLY DILUTED EARNINGS (LOSS)
PER SHARE:
Weighted average number of
common shares
outstanding 30,251 30,099 30,208 30,097
Common stock equivalents:
Dilutive options -- 316 263 328
Weighted average number of
common and common
equivalent shares 30,251 30,415 30,471 30,404
-------- ------- ------- -------
Fully diluted earnings
(loss) per share $ (0.49) $ 0.11 $ 0.03 $ 0.47
======== ======= ======= =======
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 July 23, 1997 on our review of the
interim financial information of Hudson Foods, Inc. for the periods ended
June 28, 1997 and June 29, 1996, and included in this Form 10-Q is
incorporated by reference in the Company's registration statements 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
December 2, 1997
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-27-1997
<PERIOD-END> JUN-28-1997
<CASH> 8,429
<SECURITIES> 0
<RECEIVABLES> 122,462
<ALLOWANCES> 5,280
<INVENTORY> 292,313
<CURRENT-ASSETS> 453,453
<PP&E> 567,377
<DEPRECIATION> 165,947
<TOTAL-ASSETS> 904,079
<CURRENT-LIABILITIES> 228,158
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0
0
<COMMON> 311
<OTHER-SE> 325,991
<TOTAL-LIABILITY-AND-EQUITY> 904,079
<SALES> 1,231,846
<TOTAL-REVENUES> 1,231,846
<CGS> 1,098,172
<TOTAL-COSTS> 1,221,472
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 8,773
<INCOME-PRETAX> 1,601
<INCOME-TAX> 641
<INCOME-CONTINUING> 960
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 960
<EPS-PRIMARY> .03
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