<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTERLY PERIOD ENDED JULY 4, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-18339
SYLVAN INC.
(Exact name of registrant as specified in its charter)
NEVADA 25-1603408
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
333 MAIN STREET, P.O. BOX 249, SAXONBURG, PA 16056-0249
(Address of principal executive offices) (Zip Code)
(724) 352-7520
(Registrant's telephone number, including area code)
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
--- ---
Number of shares of common stock outstanding as of July 23, 1999 ... 6,156,136
<PAGE> 2
SYLVAN INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets
July 4, 1999 and January 3, 1999 ...........................................3
Condensed Consolidated Statements of Income, Three Months
Ended July 4, 1999 and June 28, 1998 .......................................5
Condensed Consolidated Statements of Income, Six Months
Ended July 4, 1999 and June 28, 1998 .......................................6
Condensed Consolidated Statements of Cash Flows, Six Months
Ended July 4, 1999 and June 28, 1998 .......................................7
Notes to Condensed Consolidated Financial Statements
July 4, 1999 ...............................................................8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk ...............19
Part II - OTHER INFORMATION
Item 1. Legal Proceedings ........................................................20
Item 6. Exhibits and Reports on Form 8-K .........................................20
</TABLE>
<PAGE> 3
Part I - Financial Information
Item 1.
CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In Thousands)
<TABLE>
<CAPTION>
July 4, 1999 January 3, 1999
------------ ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,955 $ 6,497
Trade accounts receivable, net of allowance
for doubtful accounts of $819 and $710, respectively 10,462 12,630
Inventories 9,629 9,820
Prepaid income taxes and other expenses 1,681 1,459
Other current assets 3,694 1,505
Deferred income tax benefit 687 856
- ----------------------------------------------------------------------------------------------------------
Total current assets 33,108 32,767
Property, plant and equipment, net 51,864 53,439
Intangible assets, net of accumulated amortization
of $3,578 and $3,249, respectively 11,102 12,218
Other assets, net of accumulated amortization
of $309 and $272, respectively 1,387 4,126
- ----------------------------------------------------------------------------------------------------------
TOTAL ASSETS $97,461 $102,550
==========================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In Thousands Except Share Data)
<TABLE>
<CAPTION>
July 4, 1999 January 3, 1999
------------ ---------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 2,992 $ 825
Accounts payable - trade 4,246 5,341
Accrued salaries, wages and other employee benefits 2,709 2,504
Other accrued liabilities 1,464 2,150
Income taxes payable 3,420 3,041
- ------------------------------------------------------------------------------------------------------------
Total current liabilities 14,831 13,861
- ------------------------------------------------------------------------------------------------------------
Long-term and revolving-term debt 32,189 34,586
- ------------------------------------------------------------------------------------------------------------
Other long-term liabilities:
Other employee benefits 1,061 1,054
Other 1,096 1,437
- ------------------------------------------------------------------------------------------------------------
Total other long-term liabilities 2,157 2,491
- ------------------------------------------------------------------------------------------------------------
Minority interest 1,349 1,348
SHAREHOLDERS' EQUITY:
Common stock, voting, par value $.001, 10,000,000 shares
authorized, 6,671,601 and 6,637,201 shares issued and
6,206,136 and 6,387,336 shares outstanding
at July 4, 1999 and January 3, 1999, respectively 7 7
Common capital contributed in excess of par 16,736 16,443
Retained earnings 44,248 41,657
Less: Treasury stock, at cost, 465,465 and 249,865 shares
at July 4, 1999 and January 3, 1999, respectively (4,858) (2,318)
------- --------
56,133 55,789
Cumulative translation adjustment (5,795) (2,122)
Pension adjustment (3,403) (3,403)
- ------------------------------------------------------------------------------------------------------------
Accumulated other comprehensive deficit (9,198) (5,525)
- ------------------------------------------------------------------------------------------------------------
Total shareholders' equity 46,935 50,264
- ------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $97,461 $102,550
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands Except Share Data)
<TABLE>
<CAPTION>
-------- Three Months Ended --------
July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
NET SALES $21,305 $20,971
- ---------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 12,565 12,206
Selling, administration, research and development 5,057 4,839
Depreciation 1,353 1,262
- ---------------------------------------------------------------------------------------------------------------------
18,975 18,307
- ---------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 2,330 2,664
INTEREST EXPENSE, NET, INCLUDING
AMORTIZATION OF DEBT ISSUANCE COST 525 534
OTHER INCOME (EXPENSE) (13) (38)
- ---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,792 2,092
PROVISION FOR INCOME TAXES 490 535
- ---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARIES 1,302 1,557
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES (18) 77
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME $ 1,320 $ 1,480
=====================================================================================================================
NET INCOME PER SHARE - BASIC $ 0.21 $ 0.23
=====================================================================================================================
NET INCOME PER SHARE - DILUTED $ 0.21 $ 0.23
=====================================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 6,269,388 6,460,989
=====================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 6,290,613 6,575,834
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands Except Share Data)
<TABLE>
<CAPTION>
---------- Six Months Ended --------
July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
NET SALES $43,420 $42,959
- ---------------------------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 25,513 24,665
Selling, administration, research and development 10,643 9,755
Depreciation 2,717 2,490
- ---------------------------------------------------------------------------------------------------------------------
38,873 36,910
- ---------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 4,547 6,049
INTEREST EXPENSE, NET, INCLUDING
AMORTIZATION OF DEBT ISSUANCE COST 1,060 1,062
OTHER INCOME (EXPENSE) 66 (39)
- ---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 3,553 4,948
PROVISION FOR INCOME TAXES 961 1,435
- ---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARIES 2,592 3,513
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES 1 99
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME $ 2,591 $ 3,414
=====================================================================================================================
NET INCOME PER SHARE - BASIC $ 0.41 $ 0.53
=====================================================================================================================
NET INCOME PER SHARE - DILUTED $ 0.41 $ 0.52
=====================================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 6,314,836 6,455,880
=====================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 6,340,155 6,557,142
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sylvan Inc. and Subsidiaries
(Unaudited, In Thousands)
<TABLE>
<CAPTION>
-------- Six Months Ended -----
July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,591 $3,414
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 3,081 2,831
Employee benefits 415 (817)
Trade accounts receivable 1,488 3,027
Inventories (253) (1,155)
Prepaid expenses and other assets 244 (754)
Accounts payable and accrued liabilities (1,433) (2,000)
Other 882 678
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 7,015 5,224
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for acquisition, net of cash acquired 0 (1,619)
Net expenditures for property, plant and equipment (4,012) (2,808)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (4,012) (4,427)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (366) (242)
Net borrowings (repayments) under revolving credit line 719 (1,026)
Proceeds from exercise of stock options 293 234
Purchase of treasury shares (2,540) (218)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (1,894) (1,252)
- ----------------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES ON CASH (651) (249)
- ----------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 458 (704)
CASH AND CASH EQUIVALENTS, beginning of period 6,497 5,567
- ----------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $6,955 $4,863
============================================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
Interest paid $1,185 $1,150
Income taxes paid 330 1,332
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES:
In May 1998, the company purchased 90% of the capital stock of International
Mushrooms Ltd. (an Irish corporation) for $1.6 million. In conjunction with this
acquisition, liabilities were assumed as follows:
Fair value of assets acquired $4,492
Cash paid for the capital stock (1,619)
================
Liabilities assumed $2,873
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Sylvan Inc. and Subsidiaries
July 4, 1999
(Unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General
-------
These condensed consolidated financial statements of Sylvan Inc. are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim period. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the company's Annual Report to
Shareholders and its Form 10-K for the year ended January 3, 1999.
Cash
----
The company maintains a French-franc denominated cash balance of
approximately FF15.0 million with a U.S. bank in support of a loan
advanced by a European bank. This balance is reported under "Other Current
Assets" as of July 4, 1999.
Inventories
-----------
Inventories at July 4, 1999 and January 3, 1999 consisted of the
following:
<TABLE>
<CAPTION>
(in thousands) July 4, 1999 January 3, 1999
------------ ---------------
<S> <C> <C>
Growing crops and compost material $4,883 $4,882
Stores and other supplies 1,602 1,632
Mushrooms and spawn on hand 3,144 3,306
------ ------
$9,629 $9,820
====== ======
</TABLE>
Labor Agreement
---------------
On July 20, 1999, the company's Quincy subsidiary signed a collective
bargaining agreement with the United Farm Workers of America. The contract
covers various harvesting and packaging employees at the Quincy operation.
Earnings Per Common Share
-------------------------
Earnings per share were calculated using the weighted average number of
shares outstanding during the period and including the effect of stock
options outstanding. Pursuant to the company's 1990 and 1993 stock option
plans, options for a total of 1,300,083 shares of the company's common
stock have been granted and options for a total of 526,808 of these shares
have been exercised as of July 4, 1999.
8
<PAGE> 9
The following tables reconcile the number of shares utilized in the
earnings per share calculations for the three and six months ended July 4,
1999 and June 28, 1998.
<TABLE>
<CAPTION>
Three Months Ended
July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
Net income (in thousands) $1,320 $1,480
====== ======
Earnings per common share - basic $ .21 $ .23
====== ======
Earnings per common share - diluted $ .21 $ .23
====== ======
Common shares - basic 6,269,388 6,460,989
Effect of dilutive securities: stock options 21,225 114,845
--------- ---------
Common shares - diluted 6,290,613 6,575,834
========= =========
<CAPTION>
Six Months Ended
July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
Net income (in thousands) $2,591 $3,414
====== ======
Earnings per common share - basic $ .41 $ .53
====== ======
Earnings per common share - diluted $ .41 $ .52
====== ======
Common shares - basic 6,314,836 6,455,880
Effect of dilutive securities: stock options 25,319 101,262
--------- ---------
Common shares - diluted 6,340,155 6,557,142
========= =========
</TABLE>
For the quarter ended July 4, 1999, and for the six-month periods ended
July 4, 1999 and June 28, 1998, options to purchase approximately 406,000,
391,000 and 88,000 shares of common stock, respectively, were outstanding,
but were not included in the computation of diluted earnings per share
because the options' exercise prices were greater than the average market
price of the company's common shares for the periods. There were no shares
excluded for the quarter ended June 28, 1998.
Reclassifications
-----------------
Certain reclassifications have been made to the prior-year condensed
consolidated financial statements to conform to the current-year
presentation.
2. LONG-TERM DEBT AND BORROWING ARRANGEMENTS:
The company has a Revolving Credit Agreement with two commercial banks,
dated August 6, 1998. It provides for revolving credit loans on which the
aggregate outstanding balance available to the company may not initially
exceed $55.0 million. This aggregate outstanding balance will decline over
the life of the agreement as follows:
Maximum Aggregate
Period Beginning Outstanding Balance
---------------- -------------------
August 6, 2003 $50.0 million
August 6, 2004 45.0 million
9
<PAGE> 10
Outstanding borrowings under the agreement bear interest at either the
Prime Rate or LIBOR (plus an applicable margin) at the company's option.
On July 4, 1999, the company had outstanding borrowings under the
agreement of $30.3 million. The revolving credit loans mature on August 5,
2005.
The agreement provides for the maintenance of various financial covenants
and includes limitations as to incurring additional indebtedness and the
granting of security interests to third parties. Obligations under the
agreement are guaranteed by certain wholly owned subsidiaries of the
company.
The company has a French-franc denominated loan of FF15.0 million.
Interest is payable based on a formula that utilizes a Paris Interbank
Offered Rate plus an applicable margin. Repayment is due in January 2000.
This loan is supported by a compensating cash balance maintained in a U.S.
bank.
The company's majority-owned Dutch subsidiary has a long-term plant and
equipment and overdraft facility with a Dutch bank. At July 4, 1999, term
loans amounting to 3.0 million Dutch guilders were outstanding under this
agreement.
3. COMPREHENSIVE INCOME:
Comprehensive income consists of the following:
<TABLE>
<CAPTION>
Three Months Ended
(in thousands) July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
Net income $ 1,320 $1,480
Other comprehensive income (loss):
Foreign currency translation adjustment (1,368) 58
------- ------
Comprehensive income (loss) $ (48) $1,538
======= ======
<CAPTION>
Six Months Ended
(in thousands) July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
Net income $ 2,591 $3,414
Other comprehensive income (loss):
Foreign currency translation adjustment (3,673) (560)
------- ------
Comprehensive income (loss) $(1,082) $2,854
======= ======
</TABLE>
4. BUSINESS SEGMENT INFORMATION:
Sylvan is a worldwide producer and distributor of mushroom products,
specializing in spawn (the equivalent of seed for mushrooms) and
spawn-related products and services, and is a major grower and marketer of
fresh mushrooms in the United States. The company has two reportable
business segments: spawn products, which include spawn-related products and
services, and fresh mushrooms. Spawn-related products include casing
inoculum, nutritional supplements and disease-control agents. During the
quarter and six months ended July 4, 1999, the company made no changes in
the basis of segmentation or in the basis of measurement of segment profit
or loss from that reported in the January 3, 1999 financial statements.
10
<PAGE> 11
<TABLE>
<CAPTION>
Three Spawn Fresh
Months Products Mushrooms
(in thousands) Ended Segment Segment Total
-------------- ----- ------- ------- -----
<S> <C> <C> <C> <C>
Total revenues 1999 $14,253 $7,362 $21,615
1998 13,689 7,583 21,272
Intersegment revenues 1999 310 -- 310
1998 301 -- 301
Segment operating income 1999 2,673 547 3,220
1998 2,964 476 3,440
</TABLE>
<TABLE>
<CAPTION>
Reconciliation to Consolidated Financial Data
---------------------------------------------
Three Months Ended
(in thousands) July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
Total revenues for reportable segments $21,615 $21,272
Elimination of intersegment revenues (310) (301)
------- -------
Total consolidated revenues $21,305 $20,971
======= =======
Segment operating income $ 3,220 $ 3,440
Unallocated corporate expenses (890) (776)
Interest expense, net (525) (534)
Other income (expense) (13) (38)
------- -------
Consolidated income before income taxes $ 1,792 $ 2,092
======= =======
</TABLE>
<TABLE>
<CAPTION>
Six Spawn Fresh
Months Products Mushrooms
(in thousands) Ended Segment Segment Total
-------------- ----- ------- ------- -----
<S> <C> <C> <C> <C>
Total revenues 1999 $29,345 $14,688 $44,033
1998 27,708 15,801 43,509
Intersegment revenues 1999 613 -- 613
1998 550 -- 550
Segment operating income 1999 5,586 850 6,436
1998 6,188 1,495 7,683
</TABLE>
11
<PAGE> 12
Reconciliation to Consolidated Financial Data
---------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
(in thousands) July 4, 1999 June 28, 1998
------------ -------------
<S> <C> <C>
Total revenues for reportable segments $44,033 $43,509
Elimination of intersegment revenues (613) (550)
------- -------
Total consolidated revenues $43,420 $42,959
======= =======
Segment operating income $ 6,436 $ 7,683
Unallocated corporate expenses (1,889) (1,634)
Interest expense, net (1,060) (1,062)
Other income (expense) 66 (39)
------- -------
Consolidated income before income taxes $ 3,553 $ 4,948
======= =======
</TABLE>
12
<PAGE> 13
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sylvan Inc. and Subsidiaries
RESULTS OF OPERATIONS (Three Months Ended July 4, 1999 and June 28, 1998)
CONSOLIDATED REVIEW
Net Sales
- ---------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Net sales $21,305 $20,971 2
</TABLE>
Net sales for the three months ended July 4, 1999 were $21.3 million, 2% higher
than the $21.0 million reported for the corresponding 1998 quarter.
International sales for the quarter were 47%, equal to the 1998 second quarter.
Although international sales continue to increase on a volume and local currency
basis, the effect of the continued strengthening of the U.S. dollar offset this
increase for the second quarter of 1999. The U.S. dollar was approximately 5%
stronger at the end of the current quarter, in terms of the company's applicable
foreign currencies, than at the end of the second quarter of 1998. The
strengthening of the U.S. dollar had the effect of decreasing sales for the
current quarter by approximately $.7 million.
Operating Costs and Expenses
- ----------------------------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C>
Cost of sales $12,565 $12,206 3
Selling, administration,
research and development 5,057 4,839 5
Depreciation 1,353 1,262 7
</TABLE>
The company's cost of sales, expressed as a percentage of sales, was 59.0% for
the second quarter of 1999, versus 58.2% for the second quarter of 1998. The
company expensed approximately $220,000 during the current quarter in connection
with the replacement of a blender that was removed from service at the
Australian facility. Excluding this charge, the cost of sales percentage for the
current quarter was 57.9%. Selling, administration, research and development
expenses were $5.1 million, or 23.7% of sales, comparable to the $4.8 million,
or 23.1% of sales, for the corresponding 1998 period. Depreciation expense for
the second quarter of 1999 was $1.4 million, $91,000 higher than for the second
quarter of 1998.
Interest Expense
- ----------------
The company's net interest expense for the second quarter of 1999 was $525,000,
2% lower than for the corresponding 1998 quarter. The effective borrowing rate
for the current quarter was 6.5%, as compared with 6.8% for the second quarter
of 1998.
Income Tax Expense
- ------------------
The effective income tax rate was 27% for the second quarter of 1999, which was
slightly higher than the 26% effective income tax rate for the second quarter of
1998. The increase in fresh mushroom earnings for the quarter had the effect of
increasing the consolidated income tax rate.
13
<PAGE> 14
BUSINESS SEGMENTS
Spawn Products Segment
- ----------------------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Sales, including intersegment $14,253 $13,689 4
Operating expenses 11,580 10,725 8
Operating income 2,673 2,964 (10)
</TABLE>
Net sales of spawn and spawn-related products were $14.3 million for the quarter
ended July 4, 1999, a 4% improvement over the corresponding period in 1998.
Spawn product sales volume increased 6%, with a 7% increase in the Americas and
a 4% increase in overseas markets. Strong volume increases were achieved during
the quarter in France, Canada and the Netherlands. The overseas U.S. dollar
equivalent selling price was 6% lower during the current quarter primarily due
to the strengthening of the U.S. dollar. The average selling price in the
Americas was equivalent to that of the corresponding 1998 quarter. Sales of
disease-control agents and nutritional supplements, which accounted for 13% of
consolidated net sales for the second quarter of 1999, were 2% higher than the
same period of 1998.
Operating expenses were $11.6 million during the second quarter of 1999. Within
operating expenses, cost of sales increased by 11% to $7.6 million, or 53% of
sales. This increase was primarily due to the $220,000 nonrecurring charge taken
in connection with the replacement of the blender that was removed from service
at the Australian facility. The remaining operating expenses increased by 2% to
$4.0 million for the current quarter.
Operating income declined to 19% of sales during the second quarter of 1999
versus 22% for the corresponding period of 1998, due to the nonrecurring charge
for replacement of the blender in Australia, and a 5% strengthening of the U.S.
dollar against applicable foreign currencies.
Fresh Mushrooms Segment
- -----------------------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Sales $7,362 $7,583 (3)
Operating expenses 6,815 7,107 (4)
Operating income 547 476 15
</TABLE>
Fresh mushroom sales decreased during the current quarter to $7.4 million, as
compared with $7.6 million for the same period in 1998. This decrease was due to
2% fewer pounds sold and a 1% decrease in the average selling price per pound.
The percentage of mushrooms sold through the fresh channel was 85% for the
second quarter of 1999 and 89% for the corresponding quarter of 1998. Highly
competitive market conditions exist in the southeastern United States and are
expected to continue throughout the remainder of 1999.
The fresh mushroom cost of sales was $5.3 million, or 72% of sales, for the
second quarter of 1999, versus $5.7 million, or 75% of sales, for the
corresponding period of 1998. Beginning in the second quarter of 1998 and
continuing into the first quarter of 1999, Quincy experienced production
inefficiencies that contributed to production yield reductions, spreading a cost
structure that is primarily fixed in nature over fewer pounds. Production
efficiencies substantially improved in March 1999.
The fresh mushroom operating income of 7%, as a percentage of sales, was 15%
higher than the 6% for the corresponding 1998 quarter.
14
<PAGE> 15
RESULTS OF OPERATIONS (Six Months Ended July 4, 1999 and June 28, 1998)
CONSOLIDATED REVIEW
Net Sales
- ---------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Net sales $43,420 $42,959 1
</TABLE>
Net sales for the six months ended July 4, 1999 were $43.4 million, a 1%
increase over the $43.0 million reported for the corresponding 1998 period.
International sales for the current six-month period were 49%, up from 47% for
the six months ended June 28, 1998. The U.S. dollar was approximately 5%
stronger at the end of the current period, when measured in terms of the
company's applicable foreign currencies, than at the end of the first six months
of 1998.
Operating Costs and Expenses
- ----------------------------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Cost of sales $25,513 $24,665 3
Selling, administration,
research and development 10,643 9,755 9
Depreciation 2,717 2,490 9
</TABLE>
The company's cost of sales, expressed as a percentage of sales, was 58.8% for
the first six months of 1999, versus 57.4% for the corresponding 1998 period.
The company expensed approximately $220,000 during the current period in
connection with the replacement of the blender that was removed from service at
the Australian facility. Excluding this charge, the cost of sales percentage for
the current period was 58.3%. Selling, administration, research and development
expenses increased to $10.6 million, or 24.5% of sales, as compared with $9.8
million, or 22.7% of sales, for the corresponding 1998 period. Much of this
increase relates to increased professional fees, additional bad debt reserves,
the May 1998 acquisition of International Mushrooms Ltd. and increased employee
medical insurance amounts recorded during the first quarter of 1999.
Depreciation expense for the current six-month period was $2.7 million, $227,000
higher than the $2.5 million for the corresponding period of 1998.
Interest Expense
- ----------------
The company's net interest expense for the six months ended July 4, 1999 was
$1.1 million, essentially equal to that of the corresponding six-month period of
1998. The effective borrowing rate for the current period was 6.5%, as compared
with 6.9% for the first six months of 1998.
Income Tax Expense
- ------------------
The effective income tax rate was 27% for the current period, lower than the 29%
effective income tax rate for the corresponding 1998 period. The proportion of
fresh mushroom earnings, compared with total earnings, has the effect of
increasing or decreasing the consolidated income tax rate.
15
<PAGE> 16
BUSINESS SEGMENTS
Spawn Products Segment
- ----------------------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Sales, including intersegment $29,345 $27,708 6
Operating expenses 23,759 21,520 10
Operating income 5,586 6,188 (10)
</TABLE>
Net sales of spawn and spawn-related products were $29.3 million for the six
months ended July 4, 1999, a 6% improvement over the corresponding period in
1998. Spawn product sales volume increased 6%, with a 5% increase in the
Americas and a 7% increase in overseas markets. Strong volume increases were
achieved during the six-month period in France, Canada, the Netherlands and
South Africa. The overseas U.S. dollar equivalent selling price was 2% lower as
local currency selling price increases were more than offset by the effect of
the continued strengthening of the U.S. dollar. The average selling price in the
Americas was equivalent to that of the corresponding 1998 period. Sales of
disease-control agents and nutritional supplements accounted for 12% of
consolidated net sales, which was consistent with the same period of 1998.
Operating expenses were $23.8 million during the first six months of 1999.
Within operating expenses, cost of sales increased by 12% to $15.4 million, or
52% of sales, versus $13.8 million, or 50% of sales, for the corresponding 1998
period. This increase was primarily due to the $220,000 nonrecurring charge
taken during the second quarter in connection with the replacement of the
blender that was removed from service at the Australian facility, and a
decreased margin on nutritional supplements. The increased administrative
charges mentioned in the six-month consolidated review accounted for most of the
increase in the remaining operating expenses, which totaled $8.4 million for the
current period.
Operating income declined to 19% of sales during the first six months of 1999
versus, 22% for the corresponding period of 1998.
Fresh Mushrooms Segment
- -----------------------
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 % Change
---- ---- --------
<S> <C> <C> <C>
Sales $14,688 $15,801 (7)
Operating expenses 13,838 14,306 (3)
Operating income 850 1,495 (43)
</TABLE>
Fresh mushroom sales decreased 7% to $14.7 million for the first six months of
1999, as compared with $15.8 million for the same period in 1998. This decrease
was due to 6% fewer pounds sold and a 1% decrease in average selling price per
pound. The percentage of mushrooms sold through the fresh channel was 88% for
the current period of 1999 and 92% for the corresponding period of 1998. Highly
competitive market conditions exist in the southeastern United States and are
expected to continue throughout the remainder of 1999.
The fresh mushroom cost of sales for the first six months of 1999 was $10.8
million, or 73% of sales, versus $11.5 million, or 73% of sales, for the
corresponding period of 1998. Beginning in the second quarter of 1998 and
continuing into the first quarter of 1999, Quincy experienced production
inefficiencies that contributed to production yield reductions, spreading a cost
structure that is primarily fixed in nature over fewer pounds. Production
efficiencies substantially improved in March 1999.
Fresh mushroom operating income was 6% as a percentage of sales, or $.9 million,
for the current six-month period, as compared with 9%, or $1.5 million, for the
corresponding six months of 1998.
16
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended July 4, 1999
was $7.0 million, an increase of $1.8 million over the $5.2 million net cash
provided for the six months ended June 28, 1998. Employee benefit accruals
increased by $.4 million for the six months ended July 4, 1999, as compared with
the $.8 million decrease during the same 1998 period due to a change in the
timing of funding certain employee benefits. Trade accounts receivable
contributed $1.5 million to operating cash flow for the 1999 six-month period,
as compared with $3.0 million for the six months ended June 28, 1998. During
1999, the spawn products segment experienced a reduction in its trade accounts
receivable balance through management's efforts to reduce overall receivable
exposures. For the 1998 period, the majority of the change related to the
collection of accounts receivable of a French subsidiary acquired in December
1997.
Inventories increased by $.3 million during the six months ended July 4, 1999,
as compared with an increase of $1.2 million during the 1998 corresponding
period. Relatively minor variations occurred within the inventories during 1999;
whereas, during the six months ended June 28, 1998, the company significantly
increased inventory levels within its North American spawn business. Prepaid
expenses and other assets decreased by $.2 million during the period ended July
4, 1999, primarily due to the reduction of employee-related prepaids in France
and the reduction of advances paid to suppliers by Quincy. The corresponding
1998 increase of prepaid expenses and other assets was $.8 million. Accounts
payable and accrued liabilities decreased by $1.4 million during the first six
months of 1999 due to payments made to contractors, which had been held back
pending the satisfactory completion of equipment start-up tests at the French
inoculum laboratory, and due to litigation settlements. The majority of the net
decrease during the six months ended June 28, 1998 resulted from the settlement
of trade payables of a French subsidiary acquired in December 1997.
Cash used by investing activities was $4.0 million for the six months ended July
4, 1999, versus the $4.4 million used during the same period of 1998.
Significant capital projects during 1999 included the continued construction and
completion of a spawn production facility in South Africa, a replacement blender
in Australia, upgrading chilling equipment at Quincy, additional cold store
capacity in the Netherlands and additional equipment for the company's
biological products operation. In May 1998, the company acquired 90% of the
capital stock of International Mushrooms Ltd. for $1.6 million. Capital
expenditures in 1999 are expected to total between $6 million and $10 million
for existing operations, with additional expenditures for any expansions,
whether through acquisition or new initiatives. The company believes that it has
sufficient cash resources from current cash balances, internally generated funds
and available bank credit facilities to meet its ongoing capital needs.
Available credit under the company's revolving credit arrangement was $24.7
million as of July 4, 1999. Term debt and revolving credit increased $.4 million
during the six months ended July 4, 1999, as compared with a decrease of $1.3
million during the corresponding period of 1998. During the first six months of
1999, the company repurchased 215,600 shares of its common stock at an average
price of $11.78 per share. By comparison, 19,525 shares were repurchased during
the first six months of 1998 at an average price of $14.38 per share.
YEAR 2000 ISSUES
State of Readiness: Sylvan is currently executing an overall Year 2000
compliance strategy through an evaluation conducted by its business systems
department. The program consists essentially of addressing issues related to
four identified primary risk areas. These are:
o business information systems;
o company products and customers;
o third-party product and service providers; and
o facilities.
Business Information Systems: The business information systems program involves
an ongoing assessment of the potential exposures of general computer systems
utilized by each of Sylvan's sales, production and administrative subsidiaries.
The company believes that, as a result of software upgrades and computer system
purchases, Sylvan's computer systems will either not have a Year 2000 problem or
will be warranted to be Year 2000 compliant by third-party vendors by the end of
1999.
17
<PAGE> 18
Company Products and Customers: Exposures in production process areas relate
almost entirely to the presence of imbedded operating systems for spawn
production blenders and mushroom compost processing operations. A Year 2000
review has been conducted and the company believes that its mushroom compost
processing systems and other imbedded systems in the United States are Year 2000
compliant. Software modifications are being implemented for several blender
systems and for some European imbedded systems.
Because the company is in a narrowly structured industry, a substantial portion
of its revenues is derived from a small number of customers worldwide and, to
some extent, Sylvan's business is dependent upon the efforts of those entities
to address their own Year 2000 issues. However, the company believes that, due
to the fungible nature of the raw materials, supplies and services utilized by
Sylvan's customers and the relative ease of access to their customers and
markets, the risks of Year 2000 related disruptions for such third parties are
small and are not likely to have a material adverse effect on the company's
business, results of operations, equity or financial condition. The company will
continue to monitor this and other issues raised herein and respond accordingly.
Third-Party Product and Service Providers: The company believes that Year 2000
risk exposures relating to most of the raw materials and operating supplies used
in the production of the company's products are low due to their fungible
nature. Issues could exist with respect to the company's ability to obtain
certain limited use items from third parties such as packaging for spawn
products. In addition, the company's production facilities are dependent upon
third-party suppliers of electricity, water and other utilities. The company
believes that brief interruptions of these services will have little effect on
its operations and that the risk of prolonged interruptions to all nine of its
geographically dispersed spawn plants is low. The necessity for contingency
plans will be evaluated from time to time and, if such plans appear warranted,
the company believes that they can be implemented expeditiously.
Facilities: A review of issues related to the Year 2000 compliance of Sylvan's
facilities infrastructure has been completed and no major problems or
significant risks are currently anticipated.
Year 2000 Cost: The total cost for the company's Year 2000 compliance efforts is
currently estimated to be approximately $70,000. Most of the expenditures relate
to computer system installations and software upgrades and have been, or will
be, capitalized and charged to expense over the estimated useful life of the
associated software and hardware. Additional costs could be incurred if
significant remediation activities are required, particularly with respect to
third-party suppliers, but the company does not anticipate that such costs will
be material.
Risks and Contingency Plans: Based on the Year 2000 compliance work conducted to
date and described above, the company's most significant risk in its most likely
worst case scenario appears to be that, upon completion of its review of its
third-party product and service providers, certain of these suppliers may not be
compliant. Future operating results could be adversely affected, if such product
and service providers in fact do not become compliant in a timely manner and
cannot provide Sylvan with the products and services that it requires in a
timely and cost-effective manner and if the company is not able to obtain an
inventory of such items as spawn product packaging to deal with the compliance
problems of bag vendors. However, the company believes that its vendor
management process will identify these potential risks.
At this time, a formal contingency plan for dealing with third-party product and
service providers who are not Year 2000 compliant has not been developed because
Sylvan does not believe that these issues are sufficiently material to warrant
it and the company anticipates that potential supply interruptions can be
avoided as described below. Nevertheless, the company will review this matter
during the course of its continued evaluation of potential risks and exposures.
The company believes that the raw materials, operating supplies and packaging
supplies that it requires are readily available from a number of suppliers and
that its service needs are not significantly different from those of other
companies. The company also believes that, for most if not all of its suppliers
who may be identified as being noncompliant, various remediation strategies can
be employed with particular suppliers as an alternative to switching suppliers.
These remediation strategies include, but are not limited to, increasing
purchases from suppliers in question prior to January 1, 2000 to provide a
safety stock. Remediation strategies also include the development of plans to
implement production increases at plants that are not affected by utility
interruptions to make up most, if not all, of the production shortfalls at
plants that are affected by prolonged interruptions.
18
<PAGE> 19
EURO CURRENCY
Sylvan does not believe that the conversion to the Euro has a material impact on
its business or financial condition.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
From time to time in this report and in other written reports and oral
statements, references are made to expectations regarding future performance of
the company. These "forward-looking statements" are based on currently available
competitive, financial and economic data and the company's operating plans, but
they are inherently uncertain. Events could turn out to be significantly
different from what is expected, depending upon such factors as mushroom raw
material production and growing process inconsistencies, specific pricing or
product initiatives of the company's competitors and competitive conditions in
the U.S. mushroom market in general, changes in currency and exchange risks, or
changes in a specific country's or region's political or economic conditions.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
The information presented under this item in the company's Form 10-K for the
fiscal year ended January 3, 1999 has not changed materially. Information
relating to the sensitivity to foreign currency exchange rate changes of the
company's firmly committed sales transactions, in addition to what is presented
in Item 2 of this filing, is omitted because it is an immaterial portion of
total sales.
19
<PAGE> 20
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
-----------------
In March 1998, the company's Quincy subsidiary was served with a complaint filed
in the Circuit Court of the Second Judicial Circuit of Florida for Gadsden
County. The complaint sought compensation, including loss of earnings, for a
group of approximately 60 former Quincy employees who alleged that they were
illegally terminated in March 1996 as a result of their participation in
collective bargaining activities. The company believes that the complaint and
its claims were without merit, but in May 1999, Quincy executed a settlement
agreement with the claimants that provides for Quincy's payment of $420,000 to
them and their attorneys and for the implementation of procedures to reinstate
the claimants' employment. The settlement is subject to court approval and the
company anticipates that such approval will be forthcoming.
There are no other material pending legal proceedings to which Sylvan or any of
its subsidiaries is a party, or of which any of their property is subject, other
than ordinary, routine litigation incidental to their respective businesses.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits required by Item 601 of Regulation S-K
10 Collective Bargaining Agreement, dated July 20, 1999, between
Quincy Corporation and the United Farm Workers of America,
AFL-CIO.
11 Statement re computation of per share earnings is not required
because the relevant computation can be clearly determined
from the material contained in the financial statements
included herein.
27 Financial Data Schedule
(b) Reports on Form 8-K
None
20
<PAGE> 21
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.
Date: August 9, 1999 SYLVAN INC.
By: /s/ DONALD A. SMITH
-----------------------
Donald A. Smith
Chief Financial Officer
By: /s/ FRED Y. BENNITT
-----------------------
Fred Y. Bennitt
Secretary/Treasurer
21
<PAGE> 22
Index to Exhibits
10 Collective Bargaining Agreement, dated July 20, 1999, between
Quincy Corporation and the United Farm Workers of America,
AFL-CIO.
11 Statement re computation of per share earnings is not required
because the relevant computation can be clearly determined
from the material contained in the financial statements
included herein.
27 Financial Data Schedule
<PAGE> 1
Exhibit 10
COLLECTIVE BARGAINING AGREEMENT
BETWEEN
QUINCY CORPORATION, INC.
AND
UNITED FARM WORKERS OF AMERICA, AFL-CIO
REVISED MAY 19, 1999
PREAMBLE
The Employer, the Union and employees recognize the obligations of its
members to work towards efficient operation of the Employer and the
demands of the Employer's customers. Therefore, it is the purpose of
this Agreement to obtain a maximum efficiency in the operations of the
Employer; to eliminate all interruptions of work and interference in
operations; to secure a prompt and fair disposition of grievances; and
to set forth other conditions of employment during the life of this
Agreement.
I. PARTIES
THIS AGREEMENT is between QUINCY CORPORATION, INC. (hereinafter
referred to as the "Employer") and its successors, provided that such
successor is at least fifty one percent (51%) owned by existing
shareholders of the Employer as of the date of this agreement, and
UNITED FARM WORKERS OF AMERICA, AFL-CIO, (hereinafter referred to as
the "Union").
II. RECOGNITION/UNION RIGHTS AND OBLIGATIONSCOMPANY/UNION
COOPERATIONCOMPANY/UNION COOPERATION
A. The Employer does hereby recognize the Union as the sole labor
organization representing the rights of its employees described in
Attachment A, hereafter collectively called "workers".
B. The Employer further recognizes the rights and obligations of the
Union to negotiate wages, hours and other terms and conditions of
employment and to administer this Agreement on behalf of the covered
employees. The Employer will inform all employees immediately upon
their employment of its policies and commitments as set forth above.
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05/18/99
<PAGE> 2
C. Neither the Employer nor its representatives will interfere with the
right of any worker to join and assist the Union. The Employer agrees
that employees will secure no advantage, no more favorable
consideration nor any form of special privilege because of
non-participation in Union activities. Further, the Employer agrees
with and recognizes the right of workers to support and participate in
collective bargaining and contract administration functions.
D. The Union agrees with the objective of achieving the highest level of
employee performance and production consistent with safety and good
health, and to use its best efforts to effectuate the same with
employees.
III. HOURS OF WORK, OVERTIME, WAGES AND BENEFITS
A. Wage rates for specific job classifications are set forth in Article
XXVI.
B. Overtime: Hourly employees shall receive time and one-half (1 1/2)
their regular rate of pay for all hours worked over forty (40) in a
given seven (7) day calendar week, except for employees covered by the
harvesting incentive pay system, in this case the employee should be
paid the normal incentive pay amount plus 1/2 their base hourly rate.
C. Meal time breaks shall be one-half (1/2) hour.
D. Pay Periods and Pay Days: Employees will be paid on a weekly basis and
will receive their paycheck every Thursday.
E. Employees shall have paid rest periods of fifteen (15) minutes each,
which insofar as practical, shall be in the middle of each continuous
four (4) hour work period.
IV. UNION SECURITY
A. The Employer agrees, upon written authorization from the employee, to
deduct union dues and assessments from the employee's paycheck each
week and remit to the Union's designee. The deductions will commence
the first paycheck ten (10) working days after the Employer receives
the employee's written dues authorization. Any change in union dues
shall become effective the next paycheck ten (10) working days after
the Employer has received a certification of the change signed by the
Union's President. Employees may revoke their union dues authorization
at any time. The Employer will cease making such deductions from the
next paycheck ten (10) working days after notice of said revocation is
received in writing by the employee. The Employer shall provide a
monthly summary report containing the names of the
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05/18/99
<PAGE> 3
members, Social Security numbers, payroll periods covered, gross
wages, total hours worked per worker and amount of dues and
assessments deducted during such pay periods from each member.
B. Dues and assessments shall be deducted on a weekly basis and remitted
to UFW, Membership Department, P.O. Box 62, Keene, CA 93531.
V. HIRING
A. The Union will provide a list of applicants to the Employer for
consideration when new or additional employees are needed in the areas
referred to in Attachment A.
B. Promotion and Job Bidding. In the event a permanent vacancy in a job
classification in the bargaining unit arises, which the Employer
decides to fill, the following procedures shall apply.
1.) The Employer will post the job for five (5) working days on
bulletin boards and otherwise announce the vacancy consistent
with the Employer past practice, including allowing
non-bargaining unit employees to bid bargaining unit jobs and
vice versa.
2.) Employees who wish to be considered for the posted vacancy must
apply in writing during the posting period to the Employer's
designee.
3.) If the designee decides to fill the position while the permanent
assignment is being made, he may do so with any qualified
employee, provided experience gained during such temporary
assignment shall not be determinative in filling the vacancy
permanently.
4.) The Employer's designee will consider all timely applications
from qualified employees and fill the vacancy based on:
a. Qualifications and ability to perform the work.
b. Past disciplinary records.
c. Job Classification seniority.
When factors a and b are relatively equal, Job Classification
seniority shall be given primary consideration.
VI. SENIORITY
A. Probationary Period. A newly hired employee in the bargaining unit
will be considered a probationary employee for the first ninety (90)
calendar days of employment. During the probationary period, the
Employer retains the right to layoff, terminate, transfer, or
discipline such employee subject only to the law and the employee
shall have no recourse to the grievance or arbitration procedure
provided herein. After successful completion of the probationary
period, the employee shall be placed on the seniority list as of his
date of hire. Annual leave shall accrue during
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05/18/99
<PAGE> 4
probation and may be taken as earned under the same conditions
applicable to non-probationary employees. No accrual of benefits will
be paid to employees who do not complete probation.
B. Farm Seniority. Farm seniority shall be the time of cumulative service
as an employee of the Employer.
C. Job Classification Seniority. Job Classification seniority shall be
the time of cumulative service on the active payroll of the Employer
working within a designated job classification. An approved leave of
absence will qualify as part of cumulative service.
D. Priority. Where two or more employees have the same seniority date or
dates, under sections B and C of this article, the seniority dates
shall be determined by the employee's birthday.
E. Regaining Seniority. If a former employee is rehired, he will
establish a new Job Classification seniority. Credit for Medical
Insurance, Pension and Section 401(K) Plan participation shall not be
restored unless allowed by the particular Plan.
F. Promotions Within the Unit. When an employee is promoted to a
different position within the bargaining unit, he shall be on a trial
period for thirty (30) days during which time he may elect to return
to the position from which promoted. However, if the prior position
has been filled, the returning employee will be placed in another
position but with no reductions in the rate of pay he was receiving
initially prior to the promotion. Upon successful completion of the
trial period, job classification seniority shall accumulate from the
date of promotion. If prior to the end of the 30-day period the
employee is removed and returned to his former or similar open
position, he shall be given Job Classification seniority credit for
the time spent in the job to which he was promoted.
G. Transfer Out of the Unit. At the option of the Employer, employees
outside the bargaining unit may enter or re-enter the bargaining unit
in their former or another position as long as it does not displace
any current bargaining unit employee. If they are returned to their
former or another position, Job Classification seniority for the
period they worked outside the bargaining unit shall not be counted in
calculating job seniority, but Job Classification seniority
accumulated before the transfer shall be retained. If any employee
decides to transfer out of the bargaining unit, he must return within
thirty (30) days to keep his seniority.
H. Seniority List. Upon the execution of this Agreement, the Employer
shall prepare a seniority list for bargaining unit employees which
shall show Farm and Job
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<PAGE> 5
Classification seniority. The Employer will provide the Union with a
copy within a reasonable time period. After the initial list a
seniority list will be provided to the Union within five (5) working
days of a written request but no more than once during a calendar
quarter.
I. Layoff. In the event of a layoff, employees will be selected for
layoff on the basis of the following factors:
1.) Job Classification seniority.
J. Employees will be recalled in inverse order of layoff by Job
Classification.
VII. GRIEVANCE AND ARBITRATION
A. A grievance is defined as any difference between the Employer and any
employee or the Union involving the interpretation or application of
the provisions of this Agreement, or a claim of a violation of this
Agreement. Whenever a grievance arises between the Employer and the
employees or the Union, the matter will be handled in accordance with
the following procedure:
B. Informal. Except in cases involving disciplinary action which shall
proceed immediately to Step 1, the employee shall meet to discuss the
grievance informally with his immediate supervisor and attempt to
resolve the grievance before it may be filed in Step 1. The employee
must request this meeting not more than ten (10) working days after
the occurrence which gives rise to the grievance. Failure of the
employee to request a meeting within the time set shall be deemed a
waiver of the grievance and it shall not be subject to further
processing under this Article or otherwise. A Union steward may be
present if the Employee requests; however, the employee shall have the
right to adjust his grievance with or without the assistance of the
Union.
C. Step 1: Within ten (10) working days after the meeting in the informal
step, the grievance shall be reduced to writing and signed by the
employee and presented to his or her immediate supervisor. The written
grievance must include:
a. A statement of the grievance and a summary of the facts on which
the grievance is based.
b. The remedy requested.
c. The Article and Section of the Agreement which the grievant
claims has been violated.
D. Step 2: Within ten (10) working days of presentation of the written,
signed grievance, the employee's manager, or the next level of
management above the grievant's immediate supervisor, whichever
applies, and one local representative of the Union
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05/18/99
<PAGE> 6
shall meet and/or discuss the grievance. The management representative
will respond in writing within ten (10) working days of the meeting
and/or discussion.
E. Step 3: If the grievance is not settled in Step 2 above, within ten
(10) working days of receipt of the Employer's response in Step 2, the
Union shall notify the Employer in writing of its appeal of the
grievance to Step 3. Within ten (10) working days of delivery of the
written notice of appeal to Step 3, the Union and the Employer's
designee shall meet and/or discuss the grievance. The designee shall
respond in writing within ten (10) working days after the meeting or
discussion. Failure of the parties to meet to discuss the grievance
within the time provided in Steps 1, 2 and 3 of the grievance
procedure or failure of the Employer to respond at any step shall be
deemed a denial of the grievance. The Union must then proceed to the
next step within the time limits, just as if the Employer had denied
the grievance in writing on the last day for a response. Failure of
the Employer to respond at any step shall not in any way restrict the
Employer's or the Union's right to raise any issue or present any
evidence it deems appropriate in support of its position in any
subsequent arbitration or other administrative or judicial
proceedings.
F. Arbitration. Any signed, written grievance which is not settled
pursuant to sections B, C, D and E of this article, shall be submitted
to binding arbitration upon the request of either party. Arbitration
proceedings must be initiated by serving a written request for
arbitration by the Union or the Employer within forty-five (45)
working days of the response of the Employer under Step 3 above or the
last day on which the Employer could have responded to Step 3,
whichever occurs first.
G. Selection of Arbitrator. As soon after the request for arbitration is
served as is conveniently possible, the parties shall meet or confer
by telephone in order to select an arbitrator to hear and decide the
grievance. If the parties are unable to agree on an arbitrator, the
party requesting arbitration shall request the American Arbitration
Association to supply the parties with a panel of seven (7)
arbitrators. Within five (5) working days after the receipt of such
panel, the parties will meet or confer by telephone or in person to
select an arbitrator. The Union and the Employer shall each have the
right to alternatively strike three (3) names from the list. The name
remaining shall be the arbitrator. Subject to section H of this
article, the arbitrator selected shall decide the dispute and such
decision shall be final and binding on the parties and the employees.
The expenses of the arbitrator shall be paid equally among the
parties. However, each party shall be responsible for its own
attorneys' fees, any court reporting services it wishes to use, and
the wages of employees, whether they be witnesses, potential
witnesses, representatives, or grievant, it utilizes in any
arbitration proceeding.
H. Authority of Arbitrator. The jurisdiction of the arbitrator is limited
and confined to the interpretation and application of the specific
provisions of this Agreement to the
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<PAGE> 7
grievance. The arbitrator shall in no way alter, amend, or modify the
terms of this Agreement. When any employee has been disciplined for
one or more of the rules and regulations of the Employer and said
discipline is subjected to this Article, the arbitrator shall deny the
grievance if he is satisfied by a preponderance of the evidence that
the employee violated such rule or regulation. Under no circumstances
may an arbitrator award back wages or monetary relief to any employee
for a period more than ten (10) working days prior to the submission
of the grievance to Step 1. Monetary awards shall be limited to the
amount of the back wages and benefits the employee would have
otherwise earned less unemployment compensation and other earnings. No
relief may be granted to any employee who has not timely filed a
grievance as required above. The arbitrator may not consider more than
one (1) grievance without the agreement of both parties; provided,
multiple grievances properly raise the same issues which have been
properly appealed. The arbitrator shall have no power to establish
wage scales or fringe benefits or to change the established wage scale
or schedule of fringe benefits.
I. Finality of Decision. The decision of the arbitrator shall be
supported by substantial evidence on the record as a whole and shall
be final and binding on the employees, the Employer and Union.
J. Time Limits. The time limits set forth above are to be considered of
the essence to the grievance and arbitration procedure. The failure of
the employee or the Union to meet any time limit set forth therein
shall be deemed to constitute waiver of the grievance and acceptance
of the Employer's position. The time limits in sections B, C, D and E
of this article may be extended in writing by mutual consent of the
parties.
K. Limitations. The party referring a grievance to arbitration shall have
the burden of proof, except the Employer shall have the burden of
proof in disciplinary grievances unless this Agreement provides
otherwise.
L. Precedent. In order to encourage prompt resolution of grievances,
agreements and compromises of grievances made under this section shall
not be cited by either party as precedent in any subsequent
arbitration proceeding without the consent of the other party.
M. Witnesses. Each party shall be responsible for the pay of the
representatives and witnesses it uses in arbitration or preparation
therefore. Time spent by witnesses called to testify by the Union in
an arbitration proceeding will not be counted as time worked.
Subject to legal review. Page 7 Confidential
05/18/99
<PAGE> 8
VIII. NO STRIKE CLAUSE
For the duration of this Agreement, the Union, its officers,
representatives, members and the Employer's employees covered by this
Agreement, shall not authorize or condone, nor shall they take part in or
participate in any strike, slow down, picketing, stoppages of work,
boycott or other interruption of or interference with the Employer's
business or its operation at any location.
Failure or refusal on the part of any employee to comply with any
provision of this Article shall be cause for disciplinary action, up to
and including discharge.
If there is a dispute as to whether an employee violated this Article, the
only issue that may be grieved shall be whether the employee violated the
Article. Upon proof the arbitrator shall uphold the Employer's
disciplinary decision.
The Employer agrees that it will not lock-out employees for the duration
of this Agreement so long as the Union or the employees do not violate
their obligations as set forth in this Article.
IX. RIGHT OF ACCESS TO COMPANY PROPERTY
A. Duly authorized and designated representatives of the Union shall
have the right of access to Employer property in connection with the
administration of this Agreement or other normal Union affairs. In
the exercise of the foregoing, there shall be no interference with
the productive activities of the employees.
B. The Employer shall recognize the Union stewards for handling
grievances with the Employer, provided Union stewards must be
employees of the Employer on the active payroll. The Employer agrees
that the choice and removal of Union stewards is otherwise a
function of the Union. The Union shall notify the Employer in
writing who the current Union stewards or alternate stewards are and
shall furnish the Employer written notice of any new appointments or
changes in stewards. The selection of an employee as Union steward
shall in no way relieve the employee from carrying out his or her
usual and assigned duties in the same manner as is expected of all
other employees. The number of Union stewards should be limited to
one (1) chief and two (2) stewards. Alternates may be substituted
when a steward is absent for an extended period of time.
C. Stewards shall not leave their jobs while on shift for the purpose
of investigating, presenting, handling or settling grievances with
management except by permission of the Employer's designee. All such
activities handled during the steward's working time will be paid
for by the Employer, however, the stewards will, whenever possible,
handle activities during non-working time. The Employer shall not be
responsible for the wages of any steward while they are involved in
arbitration under this Agreement. Activities of stewards shall in no
way interfere with the operation of the Employer.
Subject to legal review. Page 8 Confidential
05/18/99
<PAGE> 9
D. The Employer will allow no more than five (5) UFW officials to visit
the Employer's property provided the Union receives prior approval
in writing by the Employer for each visit. During any visit the
Employer will have one or more of its representatives present to
accompany the UFW officials. The Union officials will not in any
fashion interfere with the work of the employees.
X. DISCIPLINE AND DISCHARGE
A. Cooperation and Support. The Union agrees to support all the rules
and regulations of the Employer. Those rules will be supplied to the
Union's local President and the UFW.
B. Quincy Farms Rules. For the best interests of the Employer and its
employees, all employees will abide by the rules, regulations and
policies of the Employer. Violation of any of the Employer's rules,
or for just cause, shall be considered cause for disciplinary action
up to and including discharge. The Employee may grieve and arbitrate
any action under this section.
XI. DISCRIMINATION
In accordance with the policies of the Employer and the Union, it is
agreed that there shall be no discrimination against any employee because
of race, age, creed, color, religion, sex, sexual orientation, national
origin, political belief, disability, marital status, language spoken or
activities on behalf of or in opposition to any labor organization.
XII. LEAVES OF ABSENCE
A. General Leaves. Leaves of absence without pay are discouraged;
however, at the Employer's discretion, an employee who has used all
accumulated unused annual leave may be granted a leave of absence
for good reason without pay which in no event shall exceed thirty
(30) days, unless a longer leave is allowed by law. Leaves of
absence for personal reasons will be granted only when the services
of the employee are not immediately required and there are other
employees capable of doing the work.
B. Activities During Leaves. Leaves of absence will not be granted for
the purposes of allowing employees to take another position
temporarily, try out new work, or venture into business for himself.
Engaging in any of these activities during a leave of absence will
result in termination for the employee.
Subject to legal review. Page 9 Confidential
05/18/99
<PAGE> 10
C. Return From Leave of Absence. Upon returning to work from an
authorized leave of absence under this Article, an employee shall be
entitled to the job he left, or a job similar to the one he left. If
such job or jobs have been eliminated or another employee has been
permanently transferred to take over such job or jobs, the Employer
shall have the right to place the returning employee in any job
which it deems him capable of performing.
D. Union Activities. Should an employee wish time off to attend Union
conventions or training sessions, he shall file a written request
just as he would when requesting other leave without pay, but not
less than ten (10) days before the requested leave is to begin. Such
leaves may be no longer than five (5) working days and no one
steward may take more than ten (10) working days off a calendar year
for such leaves. The Employer's designee will review a properly
filed request and grant the leave request if in his discretion he
determines such leave will not be operationally inconvenient. All
such leaves will be without pay.
E. Long Term Leave. An employee may request a leave of up to one year
to conduct Union business, subject to written request procedures
listed above.
XIII. INS
A. Should an INS agent visit the premises, the Employer will
immediately notify the Union by telephone call to the local Union
office.
B. The Employer shall not reveal confidential information concerning
employees to the INS or its agents, except as required by law and in
conjunction with a search warrant.
C. The Employer shall not participate in any computer verification of
immigration or work authorization status, except for the program
that is currently in place or as required by law.
D. When the Employer receives written notice from the INS concerning
the employment authorization status of an employee, the Employer
shall promptly fax said notice to the Union. The Employer shall
provide a minimum of thirty (30) days following written notice to
each such employee to correct his or her records before terminating
the employee.
XIV. SSA LANGUAGE
When the Employer receives written notice from the Social Security
Administration concerning the verification of Social Security numbers, the
Employer shall promptly fax said notice to the Union. The Employer shall
provide a minimum of thirty (30) days following written notice to each
such employee to correct his or her records before terminating the
employee.
Subject to legal review. Page 10 Confidential
05/18/99
<PAGE> 11
XV. MAINTENANCE OF STANDARDS
Employer agrees that all terms and conditions of employment for employees
relating to wages, hours of work and general working conditions shall be
maintained at no less than the highest standards in effect as of the date
of this agreement.
XVI. BARGAINING UNIT WORK
A. Supervisors and other persons not included in the bargaining unit
shall not perform any work covered by this Agreement except for
instruction, training, testing equipment, experimental and
developmental work, emergencies, or other occasional and incidental
types of work which does not deprive bargaining unit workers of work
or avoid the recall of bargaining unit workers for work they would
normally perform.
B. It shall not be a violation of this Agreement for persons other than
bargaining unit employees to perform bargaining unit work consistent
with the Employer's past practice.
XVII. MANAGEMENT RIGHTS
All inherent and common law management functions and prerogatives which
the Employer has not expressly modified or restricted by this Agreement
are retained and vested exclusively in the Employer and are not subject to
arbitration under this Agreement. The Employer specifically reserves the
exclusive right in accordance with its judgment to reprimand, suspend and
otherwise discipline employees; to discharge employees for just cause,
which includes violation of company regulations and policies; to hire,
promote, demote, transfer, layoff and recall employees to work; to
determine the starting and quitting times, and the number of hours and
shifts to be worked; to maintain the efficiency of employees; to close
down the operation or any part thereof, or expand, reduce, alter, combine,
transfer, assign or cease any job, department, operation, or service; to
control and regulate the use of machinery, equipment and other property of
the Employer; including but not limited to transferring or subcontracting
with satellite growers for the cultivation, growing and harvesting of
mushrooms provided that such subcontracting is not conducted on the
company's existing property; to determine the number, location and
operation of stations and divisions and departments thereof; to assign
work and overtime; to determine the size and composition of the work
force; to make or change rules, procedures, policies and practices not in
conflict with the provisions of this Agreement; to assign or reassign
equipment, jobs and work locations; to set schedules, hours and days of
work; to establish standards of conduct and work for employees; to
introduce new or improved production, maintenance, services and packing
methods, materials, machinery and equipment and otherwise generally manage
the business; and to direct the work force.
Subject to legal review. Page 11 Confidential
05/18/99
<PAGE> 12
The Employer's failure to exercise any function hereby reserved to it,
or its exercising any such function in a particular way, shall not be
deemed a waiver of its rights.
XVIII. RECORDS AND PAY PERIODS
A. The Employer shall keep full and accurate records, including total
hours worked, piece rate or incentive rate records, total wages and
total deductions. Employees shall be furnished a copy of the itemized
deductions, hourly rates, hours worked and total wages each payday
which shall include the employee's piece rate production records.
B. The employee may request to examine time sheets, piece rate records
and other records that pertain to the employee's wages. A Union
representative may be present at the employee's request.
XIX. BULLETIN BOARD
The Employer shall provide bulletin boards placed at such locations as
shall be mutually agreed.
XX. MODIFICATION
No provision or term of this Agreement may be amended, modified,
changed, altered or waived except by written document executed by the
parties hereto.
XXI. SAVINGS CLAUSE
If any part of this Agreement is, or is hereafter found to be, in
contravention of the laws or regulations of the United States or of
any state having jurisdiction, such part shall be superseded by the
appropriate provisions of such law or regulation so long as the same
is in effect, but all other provisions of this Agreement shall
continue in full force and effect.
XXII. JDLC PENSION PLAN
Commencing on March 31, 1999 the Employer shall contribute to the Juan
De La Cruz Farm Workers Pension Plan in the amount of five cents
($.05) for each hour worked by all employees covered under this
agreement.
The monthly contributions to the Juan De La Cruz Farm Workers Pension
Plan, together with a monthly summary report, shall be forwarded to
the administrator of the plan no later than the fifteenth (15th) day
of the following month at P.O. Box
Subject to legal review. Page 12 Confidential
05/18/99
<PAGE> 13
92861, Los Angeles, CA 90009, or other such address designated in
writing by the plan administrator.
XXIII. MEDICAL PLAN
The Employer agrees to continue to offer eligible employees the
existing Blue Cross Medical Plan, however the Employer retains the
right to modify the plan and employee copays if the total cost to the
company increases by more than fifty thousand dollars ($50,000) during
a twelve (12) month period. The Employer will keep the Union informed
and discuss other alternatives with the Union, however the Employer
will retain the right to make any changes that it deems necessary.
XXIV. DISCLOSURE
When the Employer eliminates, adds or modifies rules and regulations
or forms that apply to wages, hours and working conditions, it will
make bargaining unit employees aware of same and provide the Union a
copy of the applicable rule, regulation or form.
XV. PROFIT SHARING
All employees of Quincy Corporation who are employed at the end of
each of the two nine-month periods covered by this agreement are
eligible for a profit sharing bonus. The first nine-month period will
be April 1, 1999 through December 31, 1999 and the bonus will be paid
on or before March 15, 2000. The second nine-month period will be
January 1, 2000 through September 30, 2000 and the bonus will be paid
on or before December 31, 2000. The bonus amount will be calculated as
follows:
A. The following percentage of Quincy Corporation's audited before
interest and tax earnings for each of the two nine-month periods
covered by this eighteen-month agreement will be established as a
bonus pool amount:
$0 to $1,500,000 0%
$1,500,001 and above 30% of the amount over $1,500,000
B. The bonus pool amount will be divided by the total wages for the
applicable nine-month period paid to employees of Quincy Corporation
who are employed at the end of each respective nine-month period and
the result is the bonus multiplier.
C. Each employee's total wages paid during the applicable nine-month
period will be multiplied by the bonus multiplier to determine the
employee's bonus.
Subject to legal review. Page 13 Confidential
05/18/99
<PAGE> 14
D. The Employer shall submit every six (6) months operating statements to
the Union within forty-five (45) days of the end of each six (6) month
period. The Employer shall also submit its annual operating statement
for 1999 and 2000 to the Union within sixty (60) days of the end of
the fiscal year. There shall be no inter-company charges initiated
during 1999 and 2000 that have the effect of reducing the bonus pool
amount. The Employer will not change accounting assumptions or
practices, except as required to conform to government regulations or
generally accepted accounting principles; and in no event shall such
assumptions or practices be changed to reduce the bonus pool amount.
The Employer agrees to provide for an independent audit of the
Employer specifically designed to verify the bonus pool amount. This
independent audit will be paid for by the Employer and a copy will be
addressed to the Union.
E. If for any reason the Employer is sold, the eligible employees are
fully vested in the prorated share of the profits for the period the
profit sharing plan is in effect. Such prorated share will be paid to
the eligible employees within thirty (30) days after the completion of
the sale of the Employer.
XXVI. WAGES
Pack house employees will receive a fifty cents ($.50) per hour wage
increase and Luggers will receive a twenty-five cents ($.25) per hour
wage increase from the wage rate in effect on March 31, 1999. This
wage increase will be implemented retroactively to May 1, 1999.
XXVII. HOLIDAYS
Because of the nature of the mushroom business, it will be necessary
to work holidays. The company shall pay one and one-half (1-1/2) times
an employee's regular straight time hourly rate for hours worked on
the following recognized holidays: NEW YEAR'S DAY, MARTIN LUTHER KING,
JR.'S OBSERVED BIRTHDAY, MEMORIAL DAY, FOURTH OF JULY, LABOR DAY,
THANKSGIVING DAY, and CHRISTMAS DAY.
If you are scheduled to work on a Holiday and fail to do so without a
valid excuse you will be subject to disciplinary action on the first
occurrence. A second occurrence within a twelve (12) month period will
result in suspension. Repeat offenders outside of a twelve (12) month
period will be terminated.
Subject to legal review. Page 14 Confidential
05/18/99
<PAGE> 15
XXVIII. VACATIONS/SICK/PERSONAL DAYS
Vacation benefits for regular employees shall be granted on the
following basis:
YEARS OF CONTINUOUS VACATION
SERVICE VACATION DAYS PAY*
------- ------------- ----
1 One week (5) days 2%
3 Two weeks (10) days 4%
10 Three weeks (15) days 6%
* Percent of gross W-2 earnings for the preceding employment year
for the first year of service and for the preceding calendar year
for all subsequent years of service.
A vacation is not earned until an employee reaches his anniversary
date.
Vacation benefits will be granted only after an employee's anniversary
date. Vacations must be scheduled one (1) month in advance and
approved by your supervisor.
Seniority shall govern in the selection of vacations insofar as
practicable to do so under current operating conditions. Certain
departments have a maximum limit on how many people can be gone from
work at any given time.
Vacation benefits shall not be allowed to accumulate from one vacation
period to the next.
Quincy Farms will provide all hourly employees with two (2) paid
personal/sick days per year. The requirements are:
1. Must have been employed at least ninety (90) days.
2. Sick/Personal days will be based on a calendar year.
3. Sick/Personal days cannot be taken prior to, on the day of,
or after a holiday.
4. Sick/Personal days cannot be taken in conjunction with
vacation or any other leave.
5. There will be no accrual of sick/personal days.
6. Employees will be paid eight (8) hours @ five dollars and
fifteen cents ($5.15) per hour for each sick/personal day.
7. Sick/Personal day payment will be made each year in the pay
periods closest to June 15th and December 15th.
8. Call in requirements are necessary for sick days and
personal days (if not scheduled in advance). If employee
does not call in, the day will be treated as an unexcused
absence.
9. Form must be completed for each day you take. Notify your
Supervisor.
Subject to legal review. Page 15 Confidential
05/18/99
<PAGE> 16
XXIX. SAFETY
The Employer and the Union agree that any material change made to the
Employer's existing Safety Manual will be discussed, prior to any change,
with the Safety Committee.
XXX. DURATION
This agreement shall remain in full force and effect for eighteen (18)
months from the date of this agreement.
XXXI. COMMENCEMENT OF NEGOTIATIONS
Beginning at least three months prior to the expiration of this
agreement, Quincy and the UFW will meet and will use their good faith
best efforts to negotiate a new agreement that will promote a
relationship that will benefit everyone concerned.
UNITED FARM WORKERS OF QUINCY CORPORATION d/b/a
AMERICA, AFL-CIO QUINCY FARMS
/s/ ARTURO S. RODRIGUEZ /s/ DENNIS C. ZENSEN
- ------------------------------------ --------------------------------
Arturo S. Rodriguez, President Dennis C. Zensen, Chairman
7/20/99 7/20/99
- ------- -------
Date Date
/s/ DAVID M. VILLARINO /s/ BOBBY J. WEATHERFORD
- ------------------------------------ --------------------------------
David M. Villarino, Membership Fund Bobby J. Weatherford, CFO
Manager
7/20/99 7/20/99
- ------- -------
Date Date
/s/ Frank Curiel
- ------------------------------------
Frank Curiel, State of Florida
Director
- -------
Date
BARGAINING COMMITTEE
Name/Date
/s/ Tomasa Sanchez
- ------------------------------------
/s/ Transito Manzanarez
- ------------------------------------
/s/ Dianne Starke
- ------------------------------------
/s/ Willie B. Dilworth
- ------------------------------------
Subject to legal review. Page 16 Confidential
05/18/99
<PAGE> 17
ATTACHMENT A
DEPARTMENT
----------
HARVESTING
PACKING
SHIPPING
IRRIGATION
NIGHT SHIFT OPERATIONS
GROUNDS KEEPING
JANITORIAL
Subject to legal review. Page 17 Confidential
05/18/99
<PAGE> 18
QUINCY FARMS 190 Mannie Gunn Rd.
Quincy, Florida 32351
Phone 850-875-1600
Fax 850-627-3493
July 19, 1999
ATTACHMENT LETTER No. 1
The Parties (Quincy Farms, and the United farm Workers of America, AFL-CIO),
agree that all terms and conditions under this contract, unless otherwise
specifically provided by contract language, will become effective on the date
the contract is executed by both parties.
/s/ ARTURO S. RODRIGUEZ /s/ DENNIS C. ZENSEN
- --------------------------------------- --------------------------------
Arturo S. Rodriguez, President Dennis C. Zensen, Chairman
United Farm Workers of America, AFL-CIO Quincy Corporation,
d/b/a Quincy Farms
7/20/99 7/20/99
- ------- -------
Date Date
/s/ FRANK CURIEL /s/ BOBBY J. WEATHERFORD
- --------------------------------------- --------------------------------
Frank Curiel, State of Florida Bobby J. Weatherford, CFO
Director, United Farm Workers, AFL-CIO Quincy Corporation,
d/b/a Quincy Farms
7/20/99 7/20/99
- ------- -------
Date Date
/s/ DAVID M. VILLARINO
- ---------------------------------------
7/20/99
Membership Director
<TABLE> <S> <C>
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<CIK> 0000861291
<NAME> SYLVAN INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-02-2000
<PERIOD-START> JAN-04-1999
<PERIOD-END> JUL-04-1999
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<RECEIVABLES> 11,281
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<INVENTORY> 9,629
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<CURRENT-LIABILITIES> 14,831
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0
0
<COMMON> 7
<OTHER-SE> 46,928
<TOTAL-LIABILITY-AND-EQUITY> 97,461
<SALES> 43,420
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<INCOME-PRETAX> 3,553
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