<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- ----------------------------------------------------------
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 MARCH 31, 1996
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 33-68992
------------------------
TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C>
DELAWARE 13-3438814
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
9 WEST 57TH STREET, NEW YORK, NEW YORK 10019
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 212-756-8900
Indicate by check mark whether the registrant (1) has filed all reports 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 _______
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. As of July 10, 1996 the
registrant had 9,138,465 shares of common stock outstanding.
________________________________________________________________________________
<PAGE>
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Part I -- Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- March 31, 1996 (unaudited) and December 31, 1995....................... 3
Consolidated Statements of Income for the three-month periods ended March 31, 1996 and 1995
(unaudited).......................................................................................... 4
Consolidated Statements of Cash Flows for the three-month periods ended March 31, 1996 and 1995
(unaudited).......................................................................................... 5
Notes to Consolidated Financial Statements............................................................ 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 8
Part II -- Other Information
Item 1. Legal Proceedings.................................................................................. 14
Item 4. Submission of Matters to a Vote of Security Holders................................................ 14
Item 6. Exhibits and Reports on Form 8-K................................................................... 14
Signatures................................................................................................. 15
</TABLE>
2
<PAGE>
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................................... $ 82,555 $120,279
Receivables, net................................................................ 182,186 165,989
Inventories, net................................................................ 126,216 129,848
Other current assets............................................................ 15,025 13,356
----------- ------------
Total current assets....................................................... 405,982 429,472
Property, plant and equipment, net................................................... 244,012 237,174
Goodwill, net of accumulated amortization of $21,917 and $21,519 at March 31, 1996
and December 31, 1995, respectively................................................ 93,396 95,887
Other noncurrent assets.............................................................. 48,545 53,042
----------- ------------
Total assets............................................................... $ 791,935 $815,575
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt........................... $ 67,404 $ 64,647
Accounts payable................................................................ 235,340 256,466
Taxes currently payable......................................................... 12,124 8,996
Accrued expenses................................................................ 56,913 57,080
----------- ------------
Total current liabilities.................................................. 371,781 387,189
Long-term debt....................................................................... 223,419 223,308
Deferred income taxes................................................................ 16,546 18,180
Minority interests................................................................... 60,366 58,065
Other noncurrent liabilities......................................................... 23,987 31,786
----------- ------------
Total liabilities.......................................................... 696,099 718,528
----------- ------------
Commitments and contingencies........................................................ -- --
Stockholders' equity:
Preferred stock, $.01 par value; authorized 2,500,000 shares; none
outstanding.................................................................... -- --
Common stock, $.01 par value; authorized 11,000,000 shares; issued 9,750,000
shares......................................................................... 97 97
Additional paid-in capital...................................................... 9,653 9,653
Treasury stock (611,535 shares)................................................. (23,200) (23,200)
Retained earnings............................................................... 138,787 138,552
Cumulative foreign currency translation adjustment.............................. (29,501) (28,055)
----------- ------------
Total stockholders' equity................................................. 95,836 97,047
----------- ------------
Total liabilities and stockholders' equity................................. $ 791,935 $815,575
----------- ------------
----------- ------------
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
<PAGE>
TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Net sales........................................................................... $ 530,390 $ 451,507
----------- -----------
Operating expenses:
Cost of sales.................................................................. 442,204 374,449
Selling, general and administrative expenses................................... 73,440 64,816
Amortization of intangible assets.............................................. 731 706
----------- -----------
Total operating expenses.................................................. 516,375 439,971
----------- -----------
Operating income.................................................................... 14,015 11,536
----------- -----------
Other income (expense):
Interest income................................................................ 1,992 1,994
Interest expense............................................................... (8,733) (5,827)
Other income................................................................... 157 --
----------- -----------
Total other income (expense).............................................. (6,584) (3,833)
----------- -----------
Income from operations before income taxes and minority interests in earnings....... 7,431 7,703
Income taxes........................................................................ (2,071) (4,063)
Minority interests in earnings...................................................... (4,120) (2,599)
----------- -----------
Net income.......................................................................... $ 1,240 $ 1,041
----------- -----------
----------- -----------
Net income per common share......................................................... $.14 $.11
----------- -----------
----------- -----------
Weighted average number of common shares outstanding................................ 9,138 9,181
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
<PAGE>
TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................................... $ 1,240 $ 1,041
Items not affecting cash:
Depreciation and amortization of intangible assets................................ 8,930 7,853
Minority interests in earnings, net............................................... 4,120 2,099
Deferred income taxes and other items, net........................................ (5,914) (146)
Changes in working capital:
Receivables....................................................................... (20,227) 16,041
Inventories....................................................................... 656 (14,250)
Accounts payable and accrued expenses............................................. (14,353) (15,998)
Taxes payable..................................................................... 3,322 (6,895)
Other current assets.............................................................. (2,192) (4,399)
----------- -----------
Net cash used in operating activities........................................ (24,418) (14,654)
----------- -----------
Cash flows from investing activities:
Expenditures for property, plant and equipment.................................... (17,918) (13,183)
Proceeds from disposal of assets.................................................. 1,147 1,040
Other investments................................................................. (468) (2,976)
----------- -----------
Net cash used in investing activities........................................ (17,239) (15,119)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of long-term debt.......................................... 3,931 2,189
Repayment of long-term bank borrowings............................................ (3,190) (6,215)
Net proceeds from short-term debt................................................. 3,983 28,666
Common stock dividends............................................................ (1,005) --
----------- -----------
Net cash provided by financing activities.................................... 3,719 24,640
----------- -----------
Foreign exchange effects on cash and cash equivalents.................................. 214 3,771
----------- -----------
Net decrease in cash and cash equivalents.............................................. (37,724) (1,362)
Cash and cash equivalents at beginning of the period................................... 120,279 74,786
----------- -----------
Cash and cash equivalents at end of the period......................................... $ 82,555 $ 73,424
----------- -----------
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest.......................................................................... $ 3,126 $ 5,302
----------- -----------
----------- -----------
Income taxes...................................................................... $ 3,625 $ 10,060
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
<PAGE>
TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
1. BUSINESS DESCRIPTION
As of March 31, 1996, TLC Beatrice International Holdings, Inc. ('TLC
Beatrice' and together with its subsidiaries, the 'Company') and its
subsidiaries was comprised of 11 operating entities and their subsidiaries
located principally in western Europe. The Company's operating entities are
engaged in the wholesale and retail distribution of food, groceries, household
products and beverages, and the manufacture and marketing of ice cream and
desserts, snacks, and beverages. Sales of these products are made to customers
principally in western Europe.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying interim financial statements as of March 31, 1996 and for
the three-month periods ended March 31, 1996 and 1995 have not been audited;
however, in the opinion of management, all adjustments, which consist of normal
recurring accruals, necessary for a fair presentation of the financial position
and results of operations for such interim periods, are included. The results of
operations for an interim period are not necessarily indicative of results for
an entire year. The Company's Food Distribution segment shows relatively even
sales and operating income throughout the year. The Grocery Products segment
shows greater seasonality, with the majority of sales and operating income
earned during the second and third quarters of the year. For further information
refer to the consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the year ended December 31, 1995.
Net income per common share is computed by dividing the net income
applicable to common stockholders by the weighted average number of common
shares outstanding during the period. The weighted average number of shares
outstanding was 9,138,465 and 9,180,965 for the three-month periods ended March
31, 1996 and 1995, respectively.
3. INVENTORIES
Inventories consisted of the following components:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Raw materials and supplies................................................. $ 13,173 $ 10,860
Work in process............................................................ 120 76
Finished goods............................................................. 113,889 120,189
----------- ------------
127,182 131,125
Less inventory reserves.................................................... (966) (1,277)
----------- ------------
Total................................................................. $ 126,216 $129,848
----------- ------------
----------- ------------
</TABLE>
4. ACCUMULATED DEPRECIATION
At March 31, 1996 and December 31, 1995, accumulated depreciation on
property, plant and equipment amounted to $172,996,000 and $164,797,000,
respectively.
5. INCOME TAXES
Income tax expense is comprised primarily of foreign taxes on income. The
effective tax rate therefore differs from the U.S. Federal statutory rate as a
result of differences among U.S. and foreign rates, losses of certain companies
having no current tax benefits, credits allowable against foreign taxes and
nondeductible expenses such as goodwill amortization.
6. LITIGATION
On May 20, 1994, Carlton Investments ('Carlton') filed a complaint against
TLC Beatrice and the executrices of the Lewis Estate in the Supreme Court of the
State of New York, County of New York, titled Carlton Investments v. TLC
Beatrice International Holdings Inc., et al. Carlton alleges that TLC
6
<PAGE>
<PAGE>
TLC BEATRICE INTERNATIONAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED)
Beatrice breached the Stockholders' Agreement by paying a $22.1 million
compensation package to Mr. Reginald F. Lewis, former Chairman of the Board and
Chief Executive Officer of TLC Beatrice, and that Mr. Lewis tortiously
interfered with the Stockholders' Agreement by procuring that breach for his
personal enrichment. The tortious interference claim was subsequently dismissed
by the court and is now pending appeal. TLC Beatrice is vigorously defending
this action. Carlton is seeking $11.5 million plus interest in damages and
attorneys' fees and costs.
On January 4, 1995, Carlton filed a stockholder derivative suit in the
Court of Chancery of the State of Delaware, New Castle County, entitled Carlton
Investments v. TLC Beatrice International Holdings, Inc., et al., C.A. No.
13950. This suit, as amended, alleges that from 1987 to 1993, Reginald Lewis and
certain entities and individuals allegedly controlled by Mr. Lewis wasted and
converted TLC Beatrice's assets and that the director defendants breached their
fiduciary duties by authorizing or acquiescing in this waste of assets. Among
other things, the derivative complaint, as amended, alleges (i) the alleged
conversion of more than $2.1 million of TLC Beatrice's assets by Mr. Lewis as
living expenses, (ii) Mr. Lewis' alleged procurement of board approval of at
least $2.5 million paid by TLC Beatrice to reimburse Mr. Lewis for legal fees
paid by Mr. Lewis to defend himself and certain of the director defendants
against litigation unrelated to TLC Beatrice, (iii) the diversion of millions of
dollars of TLC Beatrice assets at the direction of Mr. Lewis to TLC Group, L.P.,
an entity owned and controlled by Mr. Lewis, to or for the benefit of Mr. Lewis
and entities owned or affiliated with him without any benefit to TLC Beatrice,
(iv) the wrongful payment to Mr. Lewis of a $22.1 million compensation package
weeks before his death and that his family failed to disclose to the Board that
Mr. Lewis was allegedly terminally ill before the payment of the compensation
package, and (v) the payment of extravagant compensation and severance packages
to certain of Mr. Lewis' friends and family members. The derivative complaint
also asserts that beginning in 1988, Mr. Lewis (i) caused TLC Beatrice to lease
(and later purchase) an extravagantly large and costly jet airplane for his and
his family's nearly exclusive use, both business and personal, (ii) caused TLC
Beatrice to subsidize the rent for space that several Lewis-owned entities
shared with TLC Beatrice at prime locations in New York, (iii) failed to
disclose to the Board that he was receiving funds from Lewis & Clarkson after he
withdrew from the firm, (iv) failed to disclose the retention by him of voting
rights associated with common stock issued to management and (v) used the assets
and corporate opportunities of French subsidiaries for his own personal
purposes. Carlton also alleges as a basis for these claims that many of the
transactions challenged were in breach of the Stockholders' Agreement. Named as
defendants are the executrices of Mr. Lewis' estate, several entities allegedly
controlled by the late Mr. Lewis, together with a number of current and former
directors and a former officer of TLC Beatrice. TLC Beatrice and four direct or
indirect subsidiaries are also named as nominal defendants. Carlton seeks
damages for TLC Beatrice in the amount of payments it alleges were improperly
paid by TLC Beatrice, an accounting and Carlton's cost of suit and reasonable
attorneys' fees. TLC Beatrice and the other defendants have filed answers and
affirmative defenses to the derivative complaint. Discovery is proceeding. TLC
Beatrice intends to vigorously defend against this suit and believes the
allegations to be without merit. TLC Beatrice's outside litigation counsel has
advised TLC Beatrice that at this time the extent of TLC Beatrice's liability,
if any, is not determinable. Under certain circumstances the Registrant is
obligated to reimburse the directors for their share of any judgment or
settlement.
The ultimate outcome that may result from these matters may have a material
adverse effect on the Company's consolidated financial condition or results of
operations. No provision for any liability that may result from these matters
has been made in the consolidated financial statements.
TLC Beatrice and its subsidiaries are also involved in certain other legal
actions and claims arising in the ordinary course of business. Management
believes that the outcome of such other litigation will not have a material
adverse effect on the financial position or results of operations of the
Company. See 'Part II, Item 1. Legal Proceedings.'
7
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is qualified by reference to and
should be read in conjunction with the Company's Unaudited Consolidated
Financial Statements, including the Notes thereto, included elsewhere in this
Report. The Company's net sales and results of operations during the periods
presented have not been significantly affected by inflation. Operating results
for the three months ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1996 or any other
period.
The Company's net sales, costs, assets and liabilities are for the most
part denominated in local currencies. Therefore, results of operations, as
stated in local currencies, and the Company's business practices and plans with
respect to a particular country, are not significantly affected by exchange rate
fluctuations. However, such results of operations as reported in U.S. dollars
may be significantly affected by fluctuations in the value of the local
currencies in which the Company transacts business in relation to the U.S.
dollar. Results of operations of the Company's subsidiaries are translated into
U.S. dollars on the basis of average exchange rates throughout the period.
Assets and liabilities are translated into U.S. dollars on the basis of rates of
exchange as of the balance sheet dates. Notwithstanding the fact that
substantially all of the Company's cash flow is denominated in foreign
currencies, such currencies have in the past generally fluctuated within a
relatively well-defined range in relation to the U.S. dollar. Accordingly,
although the Company has closely monitored its currency exposure in the past and
will continue to do so, the Company believes that it is not necessary to hedge
its overall foreign currency position at this time.
Operations of the Company's Food Distribution segment are concentrated in
France, and net sales, costs, assets and liabilities of these operations are
therefore denominated almost exclusively in French francs. Operations of the
Company's Grocery Products segment, however, are located in several European
countries, including Spain, Ireland, Germany, Belgium, the Netherlands and
France. Unless otherwise indicated, all percentage changes in segment operating
results set forth below have been calculated based on local currency amounts.
During the year ended December 31, 1995 the Company sold three
subsidiaries: Artigel GmbH & Co. Kg ('Artigel'), a 70% owned ice cream
manufacturer in Germany, and two wholly-owned ice cream distributors, Artic S.A.
('Artic') in Belgium and Artic France S.A.R.L. ('Artic France') in France.
Artigel, Artic and Artic France had combined net sales in 1995 of $66.3 million.
Artigel, Artic and Artic France are sometimes referred to collectively herein as
the 'Northern Ice Cream Subsidiaries.'
RESULTS OF OPERATIONS
The following table provides information concerning the Company's net sales
and operating income, by segment, for the three months ended March 31, 1996 and
1995. The approximate percentage changes in net sales and operating income
attributable to operations on a local currency basis and to changes in exchange
rates for such periods are shown in the table on page 10 below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net Sales:
Food Distribution.................................................................... $458,645 $376,953
Grocery Products..................................................................... 71,745 74,554
-------- --------
Total Net Sales................................................................. $530,390 $451,507
-------- --------
-------- --------
Operating Income:
Food Distribution.................................................................... $ 13,953 $ 12,668
Grocery Products..................................................................... 3,634 1,967
-------- --------
Segment Operating Income............................................................. 17,587 14,635
Corporate Expenses................................................................... (2,841) (2,393)
Amortization of Intangibles.......................................................... (731) (706)
-------- --------
Total Operating Income.......................................................... $ 14,015 $ 11,536
-------- --------
-------- --------
</TABLE>
8
<PAGE>
<PAGE>
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995
Net sales were approximately $530 million for the three-month period ended
March 31, 1996, an increase of 17% compared to the corresponding period in 1995,
or a 14% increase on a local currency basis. Excluding the net sales of the
Northern Ice Cream Subsidiaries for the three-month period ended March 31, 1995,
net sales would have increased 21%, or 17% on a local currency basis, in the
first three months of 1996 versus the same period in 1995.
The Food Distribution segment had net sales for the three-month period
ended March 31, 1996 of $459 million, an increase of 22%, or a 18% increase on a
local currency basis, over the comparable period in 1995. Wholesale sales
relating to the Franprix network declined by 4% primarily reflecting lower
volume due to a reduction in the number of franchisees in the network from 434
at March 31, 1995 to 401 at March 31, 1996. Also affecting wholesale sales was a
4% decline in sales to comparative Franprix stores from the first quarter 1996
versus the first quarter 1995. Net sales relating to the Leader Price network
increased by 54% in the first quarter of 1996 versus the first quarter of 1995,
relecting the additional volume created by the opening of 50 stores between
March 31, 1995 and March 31, 1996.
The Grocery Products segment had net sales in the first three months of
1996 of $72 million, a decrease of 4%, or 6% on a local currency basis, over the
comparable period in 1995. Excluding the net sales of the Northern Ice Cream
Subsidiaries for the three-month period ended March 31, 1995, net sales would
have increased 15%, or 12% on a local currency basis, in the first quarter of
1996 versus the first quarter of 1995. The increase was due to higher sales
experienced in all grocery product operations. Beverage operation sales
increased 19% due to strong sales to customers in France. Snack operation sales
increased 7% due to the introduction of price increases in the second quarter of
1995. The Company's Spanish ice cream operations, consisting of Interglas S.A.
('Interglas') and Helados La Menorquina S.A. ('La Menorquina'), also experienced
sales growth in the first quarter of 1996 versus the comparable period in 1995.
Net sales of Interglas increased by 5% due to increased yogurt sales and price
increases in ice cream products. Net sales of La Menorquina increased by 10%
primarily due to stronger sales to hotels and restaurants.
Total combined segment operating income (operating income before corporate
expenses and amortization of intangibles) for the three month period ended March
31, 1996 increased by 20%, or 17% on a local currency basis, over the comparable
period in the prior year. Excluding the segment operating income of the Northern
Ice Cream Subsidiaries in the first quarter of 1995, segment operating income
would have increased by 12%, or 10% on a local currency basis, in the first
three months of 1996 versus the comparable period in 1995.
Operating income of the Food Distribution segment increased by 10%, or 7%
on a local currency basis, in the first three months of 1996 compared to the
first three months of 1995. The 48% increase in Leader Price operating income,
primarily reflecting the increase in the number of Leader Price stores from 165
in March 1995 to 215 in March 1996, was partially offset by a 27% decline in
Franprix's operating income for the first quarter of 1996 versus the first
quarter of 1995. The shortfall in Franprix's operating income was due on the
wholesale level to a decline in sales of 7% and to a decline in gross margin due
to continuing competitive pressures in the Paris food distribution business. On
the retail level, the drop in operating income was due to increased business
taxes, higher repairs and maintenance expenditures, poor performance of a newly
opened Franprix store and one-time expenses associated with the closing of an
underperforming store owned by the Company.
Operating income of the Grocery Products segment increased by approximately
$1.6 million to $3.6 million in the first quarter of 1996 compared to $2.0
million for the comparable period in 1995. Excluding the Northern Ice Cream
Subsidiaries from 1995 results, operating income would have increased 22%, or
19% on a local currency basis, for the first quarter of 1996 versus the
comparable period in 1995. Improved performance at Interglas, Tayto Ltd.
('Tayto') and the Company's beverage operations were slightly offset by lower
operating income performance at La Menorquina. The increase in operating income
of 13% at Interglas was attributed to increased sales and higher ice cream
prices. Beverage operations posted an 11% increase in operating income due
primarily to a 15% increase experienced at Frisdranken Industrie Winters B.V.
('Winters') reflecting a 15% increase in net sales and greater production
efficiencies. Tayto, a manufacturer of potato chips and snacks in Ireland,
9
<PAGE>
<PAGE>
recorded a 6% increase in operating income due to a 7% increase in net sales. La
Menorquina experienced a small decline in operating income due to increased
selling expenses.
The following table details the approximate percentage changes in net sales
and operating income attributable to operations on a local currency basis and to
changes in exchange rates for the three month period ended March 31, 1996 as
compared to the three month period ended March 31, 1995.
<TABLE>
<CAPTION>
NET SALES OPERATING INCOME
--------------------------------- ---------------------------------
PERCENT CHANGE PERCENT CHANGE
ATTRIBUTABLE TO ATTRIBUTABLE TO
---------------------- TOTAL ---------------------- TOTAL
EXCHANGE PERCENT EXCHANGE PERCENT
OPERATIONS RATES CHANGES OPERATIONS RATES CHANGES
---------- -------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Segment
Food distribution....................... 18% 4% 22% 7% 3% 10%
Grocery products........................ (6) 2 (4) 77 8 85
Grocery products, excluding Northern Ice
Cream Subsidiaries.................... 12 3 15 19 3 22
Total.............................. 14 3 17 17 3 20
Total, excluding Northern Ice Cream
Subsidiaries..................... 17 4 21 10 2 12
</TABLE>
Net income for the first quarter of 1996 increased by approximately
$200,000 to $1.2 million, compared to $1.0 million in the first quarter of 1995.
The increase was primarily due to higher operating income of $2.5 million and
lower tax expense of $2.0 million offset by higher interest expense of $2.9
million and higher reported minority interest in earnings of $1.5 million. The
decrease in tax expense was primarily attributable to deferred tax adjustments
recorded in the first quarter of 1996. The increase in interest expense was
primarily due to higher interest rates and increased indebtedness of the Company
at March 31, 1996 versus March 31, 1995. Total indebtedness, short-term debt,
current portion of long-term debt and long-term debt, was $290.8 million at
March 31, 1996 versus $279.4 million at March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company incurred significant indebtedness in connection with the
acquisition of the international operations of the Beatrice Companies, Inc. in
1987 (the 'Acquisition'). All of the Company's original Acquisition-related
indebtedness has been repaid. Management believes that the Company's current
level of indebtedness, amounting to approximately $290.8 million at March 31,
1996, of which $223.4 million represents long-term debt and $67.4 million
represents short-term debt and current portion of long-term debt, is such that
no significant restrictions on future earnings or liquidity exist and that the
Company's existing level of indebtedness will not have any adverse impact on its
operating flexibility. The Company, however, continues to monitor its level of
indebtedness.
Working capital financing is generally available to each operating
subsidiary of the Company through short-term lines of credit and overdraft
facilities from local banks. At March 31, 1996, TLC Beatrice's subsidiaries had
lines of credit denominated in local currencies totalling $162.2 million, of
which $108.5 million remained unused. The Company believes that cash flow from
operations combined with local credit facilities are sufficient, in the
aggregate, to meet anticipated working capital and capital spending
requirements, as well as the Company's debt service requirements for the
foreseeable future, including interest payments.
At March 31, 1996, the Company had working capital of $34.2 million,
compared to working capital of $42.3 million at December 31, 1995.
On October 2, 1995, TLC Beatrice sold $175 million aggregate principal
amount of 11.5% Senior Secured Notes due October 1, 2005 (the 'Notes'). Interest
on the Notes is payable on April 1 and October 1 of each year, commencing April
1, 1996. The Notes rank pari passu in right of payment with all unsubordinated
borrowings of TLC Beatrice and are secured by a security interest in a portion
of the capital stock of certain of TLC Beatrice's subsidiaries and certain
intercompany indebtedness. The
10
<PAGE>
<PAGE>
Indenture relating to the Notes (the 'Indenture') permits TLC Beatrice's
subsidiaries to incur additional indebtedness under certain circumstances,
including up to $25 million for general corporate purposes under a Facility
Agreement (the 'Credit Agreement'), described below, among Banque Paribas,
Smurfit Paribas Bank Limited and TLC Beatrice International (Irish) Holdings
Limited ('Irish Holdings') which is guaranteed by TLC Beatrice.
The Notes are redeemable, at the option of TLC Beatrice, in whole or in
part, at any time on or after October 1, 2000, at the redemption prices set
forth in the Indenture plus accrued interest to the redemption date. In
addition, upon one or more Public Equity Offerings (as defined in the Indenture)
consummated prior to October 1, 1998, TLC Beatrice may at its option redeem up
to $52.5 million aggregate principal amount of Notes from the proceeds thereof
at 110% of the principal amount thereof plus accrued interest to the date of
redemption.
TLC Beatrice is required to offer to repurchase all outstanding Notes at
101% of principal amount plus accrued interest promptly after the occurrence of
a Change of Control (as defined in the Indenture) with respect to TLC Beatrice.
A Change of Control will generally be deemed to occur if (i) the Permitted
Holders (as defined in the Indenture) shall beneficially own in the aggregate
less than 20% of the aggregate voting power of all classes of Voting Stock (as
defined in the Indenture) of TLC Beatrice; or (ii) any person or entity (other
than a Permitted Holder) shall beneficially own either more than 50% of the
aggregate voting power of all classes of Voting Stock of TLC Beatrice or shares
of Voting Stock of TLC Beatrice representing aggregate voting power greater than
that represented by the aggregate shares of Voting Stock then beneficially owned
by the Permitted Holders; or (iii) any such person or entity shall elect a
majority of the Board of Directors of TLC Beatrice. There can be no assurance
that TLC Beatrice will have sufficient funds to repay the Notes should a Change
of Control occur.
The Indenture restricts, among other things, the ability of TLC Beatrice
and its Restricted Subsidiaries (as defined in the Indenture) to incur
indebtedness, incur liens, enter into sale and leaseback transactions, make
restricted payments, enter into asset dispositions and engage in transactions
with affiliates. The Indenture also limits the ability of TLC Beatrice and its
Restricted Subsidiaries to enter into agreements that restrict the payment of
dividends and other payments by any Restricted Subsidiary to the Company. In
addition, the Indenture restricts the ability of TLC Beatrice to merge or
consolidate with or transfer all or substantially all of its assets to another
entity.
Proceeds from the issuance of the Notes were used to repay: (i) a 485
million French franc (approximately $98.6 million at the September 30, 1995
foreign exchange rate) term loan (the 'Term Loan') due September 2001 of TLC
Beatrice International Holdings France S.A. ('TLC France'), bearing interest at
the Paris Interbank Offering Rate ('PIBOR') plus 1.75%; (ii) a 100 million
French franc (approximately $20.3 million at the September 30, 1995 foreign
exchange rate) subordinated term loan (the 'Subordinated Loan') due March 2002
of TLC France, bearing interest at PIBOR plus 3.5%, and a redemption fee of
approximately $2 million which was due when the Subordinated Loan was repaid;
(iii) 46 million French francs (approximately $9.3 million at the September 30,
1995 foreign exchange rate) and $16.3 million outstanding under a 137 million
French franc revolving loan of Irish Holdings due October 31, 1995, bearing
interest at LIBOR plus 1.30% and (iv) $15 million outstanding under a term loan
due January 1996 of TLC Beatrice, bearing interest at 7.69%, which loan was
guaranteed by certain subsidiaries of TLC Beatrice. The remaining proceeds were
used for general corporate purposes. The Company recorded charges of $4.6
million in the quarter ended December 31, 1995 relating to the repayment of
these facilities which is included in other income.
On October 6, 1995, Irish Holdings entered into the Credit Agreement
pursuant to which Irish Holdings can initially borrow up to the lower of (a) 16
million Irish Punts (approximately $25.9 million at the then-prevailing foreign
exchange rate) and (b) an amount calculated as follows: 28 million Irish Punts
plus any share capital contributed in cash to Tayto, Irish Holdings' principal
operating subsidiary, less the cumulative amount of cash dividends paid and
management fees and intercompany loans made by Tayto to Irish Holdings from the
date of the Credit Agreement. The amount available for borrowing under the
Credit Agreement is reduced to (i) 9.6 million Irish Punts (approximately $15.4
million at the December 31, 1995 foreign exchange rate) from February 1, 1999
through January 31, 2000 and (ii) 3.2 million Irish Punts (approximately $5.1
million at the December 31, 1995 foreign exchange rate) from February 1, 2000
through January 31, 2001, at which time all amounts outstanding must be repaid.
11
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Interest on borrowings in Irish Punts is payable at the rate of the Dublin
Interbank Offering Rate ('DIBOR') plus 1.65%. The Credit Agreement also provides
for an alternative currency option pursuant to which Irish Holdings can borrow
in certain other currencies at an interest rate equal to LIBOR plus 1.65%. The
Credit Agreement contains restrictions on certain activities of Irish Holdings
and Tayto, including, among other things, the incurrence of indebtedness or
encumbrances, entering into agreements other than in the ordinary course of
business, the making of certain capital expenditures and the acquisition or sale
of assets outside the ordinary course of business. In addition, Irish Holdings
and Tayto are required to maintain certain financial ratios. The Credit
Agreement is guaranteed by TLC Beatrice and secured by a pledge of the common
stock of Tayto owned by Irish Holdings. As of March 31, 1996, approximately $5.5
million (at the then-prevailing foreign exchange rate), was borrowed under the
Credit Agreement.
In the three months ended March 31, 1996, cash used in operating activities
was $24.4 million.
In the three months ended March 31, 1996, cash provided by financing
activities was $3.7 million, primarily reflecting approximately $4.0 million in
net proceeds from the issuance of short-term debt.
In the three months ended March 31, 1996, cash used in investing activities
was $17.2 million, primarily reflecting capital expenditures. The Company
estimates its 1996 net capital expenditures will be approximately $57 million,
primarily related to (i) the construction of a beverage manufacturing facility
in France, (ii) the construction of a warehouse in Ireland in order to
consolidate Tayto's warehouse operations and (iii) anticipated Leader Price
store openings. During the first quarter of 1996, new French regulations were
enacted which place certain restrictions on the opening of new food stores over
3,000 square feet in size. The Company can give no assurances as to how the
regulations will be enforced. As many of the Company's planned new store
openings for 1996 are already in progress, the Company does not anticipate that
1996 planned store openings will be significantly affected. However, future
store openings could be adversely affected by the new regulations.
The Company, including in certain circumstances TLC Beatrice, is a party to
separate stockholder agreements with minority stockholders. Certain of these
minority stockholders have the option to require the Company to purchase their
interests in certain of the Company's subsidiaries in whole or in part at any
time, and certain of these minority stockholders have the option to require the
Company to purchase their interests in certain of the Company's subsidiaries in
whole or in part on or after January 1, 1997 or upon cessation of such
stockholder's employment with the Company for any reason. Solely for purposes of
illustration, if all of such options were exercised in full, using the formula
that would be in effect on January 1, 1997, the Company's aggregate purchase
obligation in respect of the interests in such subsidiaries is estimated to be
approximately $35 million as of December 31, 1995. Such amount would be likely
to increase or decrease depending on when such options were exercised. The
Company believes cash flows from operations together with its potential
borrowing capacity will be sufficient to meet any purchase obligation that may
result if any or all of such minority stockholders require the Company to
purchase their interests in such subsidiaries. In addition, certain other
minority stockholders have the right to require the Company to repurchase their
shares in Distribution Leader Price and Retail Leader Price, and the Company has
the right to acquire such shares, on or after July 1, 1997. If the put option is
exercised after July 1, 1997, as long as the Notes remain outstanding, the
purchase price for such shares is payable 25% on the closing of the purchase of
such shares, 45% on the first anniversary of such closing and 30% on the second
anniversary of such closing, together with interest thereon at PIBOR. After
repayment of the Notes, the purchase price for such shares is payable 50% on the
closing of the purchase of such shares and 50% on the first anniversary of such
closing, without interest. Solely for purposes of illustration, if such other
minority stockholders were to have exercised their options to require the
Company to purchase all their shares in such subsidiaries on December 31, 1995,
using the formula that would be in effect on July 1, 1997, the total purchase
price for such shares would have been approximately $91 million. Distribution
Leader Price and Retail Leader Price have shown substantial earnings growth
during the past three years. If such companies' earnings were to continue to
increase prior to the exercise of such option, as to which no assurance can be
given, the purchase price would increase materially. Due to the manner in which
such purchase price would be calculated, the Company is not currently able to
quantify what the purchase obligation would be. However, the Company believes
that such purchase obligation would be material.
12
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As a consequence of the termination of certain long-standing income tax
incentives in the Canary Islands as of December 31, 1991, transition rules were
promulgated by the Spanish and Canary Island provincial governments. To preserve
the tax advantages granted under these prior incentives, the transition rules
required investments by TLC Beatrice's Canary Islands subsidiary, Interglas, in
certain approved Canary Islands' investments. The unfulfilled investment
requirement aggregated approximately $10.7 million at December 31, 1995 and must
be made in 1996. A variety of investments are eligible, including productive
machinery and equipment and/or local government interest-bearing bonds. To the
extent the investment requirement is met by investment in productive machinery
and equipment, Interglas is not entitled to claim the 25% investment tax credit
normally allowable on such machinery or equipment. To the extent the requirement
is satisfied by an investment in local government bonds, they must be held for a
minimum of five years. For 1995, Interglas satisfied its investment requirement
under the transition rules of approximately $10.4 million entirely from internal
cash flow. If the Company cannot meet its investment requirements, then it would
be required to pay taxes in an amount equal to 35% of its outstanding investment
obligation. The Company has provided for deferred income taxes of approximately
$3.7 million on its outstanding investment obligation under the transition
rules.
In addition, the Canary Islands instituted new tax incentives beginning in
1994. Interglas has taken advantage of these incentives and is required to make
qualifying investments of $17.8 million by 1997 and an additional $17.5 million
by 1998. The Company has provided for deferred income taxes on these
requirements equal to the 35% tax rate on $35.3 million, or approximately $12.4
million, in the event that the required investment obligations are not
fulfilled. The Company can give no assurances that changes in existing Canary
Islands tax rules and requirements will not occur or that the Company will be
able to make qualifying investments in the future. By reason of these
uncertainties, the Company has recorded the potential full deferred tax
liability. If the Company can fulfill these investment requirements, the
deferred tax liability may be reversed depending upon relevant facts and
circumstances existing at the time.
TLC Beatrice is a defendant in lawsuits with Carlton Investments alleging,
among other things, a breach of the Stockholders' Agreement, waste of corporate
assets and breaches of fiduciary duties. TLC Beatrice intends to vigorously
defend against these actions and believes these allegations to be without merit.
TLC Beatrice's outside litigation counsel has advised TLC Beatrice that at this
time the extent of TLC Beatrice's liability, if any, is not determinable. The
ultimate outcome that may result from these matters may have a material effect
on TLC Beatrice's consolidated financial condition and/or results of operations.
See Note 6 of Notes to Consolidated Financial Statements included herein under
Part I.
13
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<PAGE>
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As previously reported in the Company's Form 10-K and Form 10-K/A for the
year ended December 31, 1995, the Company is a defendant in certain legal
proceedings in Delaware and New York, brought by Carlton Investments. See Item 3
to the Company's Annual Report on Form 10-K and Form 10-K/A for its fiscal year
ended December 31, 1995 and Note 6 to the Consolidated Financial Statements
included herein under Part I.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On January 19, 1996, the holders of 4,678,260 shares of common stock of
the Registrant (being a majority of the outstanding shares of common stock of
the Registrant) entered into a written consent.
(b) By such consent, the said stockholders consented to the adoption of a
Restated Certificate of Incorporation of the Registrant, which Restated
Certificate of Incorporation (i) restated the Registrant's Certificate of
Incorporation and various amendments thereto and (ii) increased the number of
authorized shares of common stock from 11 million to 15 million.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
27. Financial Data Schedule.
b. Reports on Form 8-K
No reports on Form 8-K were filed during the three months ended March
31, 1996.
14
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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.
TLC BEATRICE INTERNATIONAL
HOLDINGS, INC.
<TABLE>
<S> <C>
Date: July 10, 1996 By /s/ Loida N. Lewis
........................................................
LOIDA N. LEWIS
CHAIRMAN
Date: July 10, 1996 By /s/ Peter Offermann
........................................................
PETER OFFERMANN
EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
</TABLE>
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
MONTHS ENDED MARCH 31, 1996 AND CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR
ENDED DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 82,555 120,279
<SECURITIES> 0 0
<RECEIVABLES> 182,186 165,989
<ALLOWANCES> (5,878) (7,655)
<INVENTORY> 126,216 129,848
<CURRENT-ASSETS> 15,025 13,356
<PP&E> 244,012 237,174
<DEPRECIATION> (172,996) (164,797)
<TOTAL-ASSETS> 791,935 815,575
<CURRENT-LIABILITIES> 371,781 387,189
<BONDS> 223,419 223,308
<COMMON> 97 97
0 0
0 0
<OTHER-SE> 95,739 96,950
<TOTAL-LIABILITY-AND-EQUITY> 791,935 815,575
<SALES> 530,390 2,072,613
<TOTAL-REVENUES> 530,390 2,072,613
<CGS> 442,204 1,693,288
<TOTAL-COSTS> 516,375 1,993,301
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,733 32,974
<INCOME-PRETAX> 7,431 62,892
<INCOME-TAX> 2,071 20,470
<INCOME-CONTINUING> 1,240 18,456
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 3,092
<CHANGES> 0 0
<NET-INCOME> 1,240 15,364
<EPS-PRIMARY> .14 1.68
<EPS-DILUTED> 0 0
</TABLE>
