<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) May 2, 2000
---------------
ODWALLA, INC.
---------------------------------------------------
(Exact name of registrant as specified in charter)
CALIFORNIA 0-23036 77-0096788
(State or other (Commission File Number) (IRS Employer
jurisdiction Identification No.)
of incorporation)
120 STONE PINE ROAD, HALF MOON BAY, CA 94019
--------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 726-1888
-------------
NONE
-------------
(Former name or former address, if changed since last report.)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 10, 2000, Odwalla, Inc. ("Registrant") filed a Current Report on
Form 8-K to report the Registrant's acquisition of all of the outstanding
capital stock of Fresh Samantha, Inc. ("Fresh Samantha").
This amendment to the Registrant's Current Report on Form 8-K is being
filed to include the Financial Statements and Pro Forma Financial Information
required by Item 7 of Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Business Acquired
See Index to Financial Statements and Pro Forma Financial Information
beginning on page F-1 of this Report.
(b) Pro Forma Financial Information
See Index to Financial Statements and Pro Forma Financial Information
beginning on page F-1 of this Report.
(c) Exhibits.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ODWALLA, INC.
DATE: July 13, 2000 By:
/s/ James R. Steichen
-----------------------------------------
Name: James R. Steichen
Title: Senior Vice President Finance, and
Chief Financial Officer
<PAGE> 3
INDEX TO FINANCIAL STATEMENTS AND PRO FORMA FINANCIAL INFORMATION
FRESH SAMANTHA, INC.
Report of Independent Accountants.....................................F-2
Consolidated Balance Sheets, October 31, 1998, October 30, 1999 and
April 29, 2000....................................................F-3
Consolidated Statements of Operations, three years in the period
ended October 30, 1999 and twenty-four weeks in the period
ended April 17, 1999 and twenty-six weeks ended April 29, 2000. ..F-5
Consolidated Statements of Changes in Shareholders' Equity, three
years in the period ended October 30, 1999 and twenty-six
weeks in the period ended April 29, 2000..........................F-6
Consolidated Statements of Cash Flows, three years in the period
ended October 30, 1999 and twenty-four weeks in the period
ended April 17, 1999 and twenty-six weeks ended April 29, 2000....F-7
Notes to Consolidated Financial Statements............................F-9
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Pro Forma Financial Information Overview.............................F-21
Pro Forma Combined Condensed Balance Sheets..........................F-22
Pro Forma Combined Condensed Statements of Operations for the year
ended August 28, 1999............................................F-24
Pro Forma Combined Condensed Statements of Operations for the
twenty-six weeks ended February 26, 2000.........................F-25
Notes to Combined Condensed Pro Forma Financial Statements...........F-26
F-1
<PAGE> 4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Fresh Samantha, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the consolidated financial
position of Fresh Samantha, Inc. and Subsidiary as of October 30, 1999 and
October 31, 1998, and the consolidated results of their operations and their
cash flows for the years then ended, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Portland, Maine
December 22, 1999
except for Note 6,
as to which the date is
January 10, 2000
F-2
<PAGE> 5
FRESH SAMANTHA, INC.
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
October 31, October 30, April 29,
1998 1999 2000
------------- ------------ --------------
<S> <C> <C> <C>
(unaudited)
Current assets
Cash and cash equivalents $ 2,440 $ 463 $ 219
Trade accounts receivable, net of allowance
of $27, $488 and $266 1,337 3,444 2,709
Inventories 455 1,482 1,414
Prepaid expenses and other current assets 95 4 207
Refundable income taxes 47 - -
Deferred tax asset, current 58 - -
------------- ------------ ------------
Total current assets 4,432 5,393 4,549
Plant, property and equipment, net 2,483 7,130 6,209
Other assets, noncurrent 21 205 213
------------- ------------ ------------
Total assets $ 6,936 $ 12,728 $ 10,971
============= ============ ============
Current liabilities
Accounts payable $ 1,298 $ 3,758 $ 4,044
Accrued payroll and related items 193 502 765
Accrued workers' compensation insurance 93 14 -
Short-term borrowings 102 - -
Other accruals 26 174 724
Current maturities of capital lease obligations 62 228 227
Current maturities of long-term debt 30 3,498 3,714
------------- ------------ ------------
Total current liabilities 1,804 8,174 9,474
Capital lease obligations, less current maturities 189 569 415
Long-term debt, less current maturities 44 31 -
Deferred income taxes 98 - -
Other 25 10 10
------------- ------------ ------------
Total liabilities 2,160 8,784 9,899
-------- --------- ---------
Commitments and contingencies
Shareholders' equity
Preferred stock:
Class N-1, 160,000 shares authorized at $.01 par, 140,702 shares
issued and outstanding; liquidation preference $3,869,305 - 1 1
Class N-2, 80,000 shares authorized at $.01 par, 77,480 share
issued and outstanding; liquidation preference $2,130,700 - 1 1
Common stock:
Class L-1, 50,000 shares authorized at $.01 par, 21,713 shares
issued and outstanding - - -
Class L-2, 50,000 shares authorized at $.01 par, 9,151 shares
issued and outstanding - - -
Class A-1 and A-2, 5,125,000 shares authorized at $.01 par,
no shares issued
Class A-3, 1,125,000 shares authorized at $.01 par, 277,768
shares issued and outstanding 3 3 3
Additional paid-in capital 13,002 19,000 19,000
Accumulated deficit (8,229) (15,061) (17,933)
-------------- ------------- -------------
Total shareholders' equity 4,776 3,944 1,072
------------- ------------ ------------
Total liabilities and shareholders' equity $ 6,936 $ 12,728 $ 10,971
============= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 6
FRESH SAMANTHA, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended October 24 and 26 weeks ended
---------------------------------- ----------------------------
April 17, April 29,
1997 1998 1999 1999 2000
--------- -------- ---------- ------------ -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net sales $ 7,180 $ 15,708 $ 32,158 $ 11,247 $ 21,049
Cost of sales 4,011 8,895 16,888 6,273 10,228
--------- -------- ---------- ----------- ----------
Gross profit 3,169 6,813 15,270 4,974 10,821
--------- -------- ---------- ----------- ----------
Operating expenses
Sales and distribution 1,474 4,149 15,870 5,575 9,597
Marketing, general and administrative 1,379 2,564 5,820 1,763 2,884
--------- -------- ---------- ----------- ----------
Total operating expenses 2,853 6,713 21,690 7,338 12,481
--------- -------- ---------- ----------- ----------
Income (loss) from operations 316 100 (6,420) (2,364) (1,660)
Other (expense) income, net (107) (269) (197) (25) (1,212)
---------- --------- ----------- ------------ -----------
Income (loss) before income taxes 209 (169) (6,617) (2,389) (2,872)
Income tax (expense) benefit (110) 51 40 41 -
---------- -------- ---------- ----------- ----------
Net income (loss) $ 99 $ (118) $ (6,577) $ (2,348) $ (2,872)
========= ========= =========== ============ ===========
Basic net income (loss) per share $ 9.00 $ (2.55) $ (21.31) $ (7.60) $ (9.29)
========= ======== ========== =========== ==========
Shares used in per share amounts 11 46 309 309 309
========= ======== ========== =========== ==========
Diluted net income (loss) per share $ 9.00 $ (2.55) $ (21.31) $ (7.60) $ (9.29)
========= ======== ========== =========== ==========
Shares used in per share amounts 11 46 309 309 309
========= ======== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 7
FRESH SAMANTHA, INC.
Consolidated Statements of Changes in Shareholders' Equity
(in thousands)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------------------------------------- -------------------------------
Class N-1 Class N-2 Series A Class A Class B
-------------- -------------- -------------- -------------- --------------
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 26, 1996 (unaudited) 200 $ 2 1 $ - 10 $ -
Net income (unaudited)
----- ------ ----- ------ ----- -----
Balance, October 25, 1997 200 2 1 - 10 -
Exchange of preferred stock
for Class B shares (200) (2) - -
Exchange of shares (1) - (10) -
Issuance of warrants related to
Class A-3 shares
Issuance of common stock related to
recapitalization, net of issuance costs
Redemption of common stock
Distribution to shareholders
Net loss
----- ------ ----- ------ ----- -----
Balance, October 31, 1998 - - - - - -
Issuance of preferred stock, net
of issuance costs 141 $ 1 77 $ 1 - - - - - -
Net loss - - - - - -
--- ------ ---- ------ ----- ------ ----- ------ ----- -----
Balance, October 30, 1999 141 1 77 1 - - - - - -
Net loss (unaudited)
--- ------ ---- ------ ----- ------ ----- ------ ----- -----
Balance, April 29, 2000
(unaudited) 141 $ 1 77 $ 1 - $ - - $ - - $ -
=== ====== ==== ====== ===== ====== ===== ====== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Common Stock
------------------------------------------------------- Accumulated
Class A-3 Class L-1 Class L-2 Additional Retained
--------------- --------------- ---------------- Paid-in Earnings
Shares Amount Shares Amount Shares Amount Capital (Deficit) Total
------ ------ ------ ------ ------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, October 26, 1996 (unaudited) $ 8 $ 111 $ 121
Net income (unaudited) 99 99
Balance, October 25, 1997 8 210 220
Exchange of preferred stock
for Class B shares 2 - -
Exchange of shares 695 $ 7 (7) - -
Issuance of warrants related to
Class A-3 shares 1 (1) -
Issuance of common stock related to
recapitalization, net of issuance costs 22 $ - 9 $ - 13,000 (816) 12,184
Redemption of common stock (417) (4) (2) (7,494) (7,500)
Distribution to shareholders (10) (10)
Net loss (118) (118)
--- ---- ---- ---- ---- ------ ------- -------- -------
Balance, October 31, 1998 278 3 22 - 9 - 13,002 (8,229) 4,776
Issuance of preferred stock, net
of issuance costs 5,998 (255) 5,745
Net loss - - - - - - - (6,577) (6,577)
--- ---- ---- ---- ---- ------ ------- -------- -------
Balance, October 30, 1999 278 3 22 - 9 - 19,000 (15,061) 3,944
Net loss (unaudited) (2,872) (2,872)
--- ---- ---- ---- ---- ------ ------- -------- -------
Balance, April 29, 2000
(unaudited) 278 $ 3 22 $ - 9 $ - $19,000 $(17,933) $ 1,072
=== ==== ==== ==== ==== ====== ======= ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 8
FRESH SAMANTHA, INC.
Consolidated Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Year ended October 24 and 26 weeks ended
--------------------------------- ------------------------------
April 17, April 29,
1997 1998 1999 1999 2000
---------- --------- ---------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 99 $ (118) $ (6,577) $ (2,348) $ (2,872)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation 165 320 1,222 418 839
Amortization - 39 1 - 6
Deferred taxes 111 (4) (40) (40) -
(Gain) loss on sale of assets 9 82 (3) - 24
Changes in assets and liabilities
Trade accounts receivable (454) (607) (2,107) (1,276) 735
Inventories (186) (172) (1,026) (51) 68
Refundable income taxes - (47) 47 47 -
Prepaid expenses and other current assets (65) (75) 91 (17) (203)
Other noncurrent assets 25 (8) (150) (49) (8)
Accounts payable 513 565 2,459 900 286
Accrued payroll and related items 19 123 310 87 263
Accrued workers' compensation
insurance - 64 (79) (93) (14)
Other accrued liabilities 189 5 148 471 550
Other long-term liabilities - 13 (14) (25) -
Income taxes payable - (48) - - -
---------- ---------- ---------- ----------- -----------
Net cash provided by (used in) operating
activities 425 132 (5,718) (1,976) (326)
---------- --------- ----------- ------------ ------------
Cash flows from investing activities
Capital expenditures (689) (1,489) (5,075) (1,586) (94)
Proceeds from sale of assets 7 - 46 - 146
---------- --------- ---------- ----------- -----------
Net cash used in investing activities (682) (1,489) (5,029) (1,586) 52
----------- ---------- ----------- ------------ -----------
</TABLE>
F-6
<PAGE> 9
FRESH SAMANTHA, INC.
Consolidated Statements of Cash Flows (Continued)
(in thousands)
<TABLE>
<CAPTION>
Year ended October 24 and 26 weeks ended
--------------------------------- ------------------------------
April 17, April 29,
1997 1998 1999 1999 2000
---------- --------- ---------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities
Principal payments under long-term debt (123) (1,664) (166) (74) -
Proceeds from long-term debt 347 722 3,385 - 185
Net borrowings under line of credit 94 - - 2,047 -
Debt issuance costs - - (35) - -
Payments of obligations under capital leases - (35) (159) 34 (155)
Redemption of common stock - (7,500) - - -
Distribution to shareholders - (10) - - -
Transaction expenses - (816) (255) - -
Issuance of preferred stock - - 6,000 - -
Issuance of common stock - 13,000 - - -
---------- --------- ---------- ----------- -----------
Net cash provided by financing activities 318 3,697 8,770 2,007 30
---------- --------- ---------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 61 2,340 (1,977) (1,555) (244)
Cash and cash equivalents, beginning of period 39 100 2,440 2,440 463
---------- --------- ---------- ----------- -----------
Cash and cash equivalents, end of period $ 100 $ 2,440 $ 463 $ 885 $ 219
========== ========= ========== =========== ===========
Cash paid during the year for:
Interest $ 89 $ 179 $ 201
</TABLE>
Noncash investing and financing activities: We entered into capital lease
obligations for vehicle and equipment leases totaling $182 and $705 in 1998 and
1999. In addition, we financed equipment acquisitions of $577, $102 and $133 in
1997, 1998 and 1999.
See accompanying notes to consolidated financial statements.
F-7
<PAGE> 10
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company. Fresh Samantha, Inc. ("Fresh Samantha" or "Company") is a
creator, manufacturer and distributor of all-natural super-premium refrigerated
juices. The Company delivers 19 blends of juices to selected markets along the
Eastern Seaboard from Maine to Florida. The Company's products include classic
juices, such as orange juice and grapefruit juice, smoothies and other
nutritionally fortified juice products.
Principles of Consolidation. The consolidated financial statements include
the accounts of Fresh Samantha, Inc. and its subsidiary, Fresh Samantha Juice
Bars, Inc. Upon consolidation, all significant intercompany accounts and
transactions have been eliminated.
Fiscal Year. The Company's fiscal year is a fifty-two week or fifty-three
week period ending on the last Saturday of October.
Interim Financial Statements. The accompanying consolidated balance sheet of
Fresh Samantha and its subsidiary at April 29, 2000 and the related consolidated
statements of operations and of cash flows for the twenty-four and twenty-six
week periods ended for each of April 17, 1999 and April 29, 2000 have not been
audited by independent accountants. However, in management's opinion, they
include all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the financial position and the results of
operations for the periods presented. The statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosure normally included in
financial statements prepared in conformity with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The operating results for the interim periods are not necessarily
indicative of results to be expected for an entire year.
Cash and Cash Equivalents. The Company invests its excess cash in money
market funds, which are valued at amortized cost, which approximates market
value. These investments are subject to minimal credit and market risk. We
consider all highly liquid investments with a maturity of 90 days or less when
purchased to be cash equivalents.
Inventories. Inventories are stated at the lower of cost or market with cost
determined on a first-in first-out (FIFO) basis.
Plant, Property and Equipment. Plant, property and equipment are stated at
cost, less accumulated depreciation and amortization. The cost of additions and
improvements are capitalized, while maintenance and repairs are charged to
expense when incurred. Depreciation and amortization are provided on the
straight-line basis over the shorter of the estimated useful life of the asset
or the lease term.
Other Assets. Other assets consist principally of deposits and debt issuance
costs. Debt issuance costs are amortized over the term of the debt.
Income Taxes. Fresh Samantha accounts for income taxes under the liability
method in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 109, "Accounting for Income Taxes."
Revenue Recognition. Revenue is recognized when products are delivered to
our customers. The product is distributed directly to customers stores by
Company drivers. We provide our customers the right of return for products under
certain circumstances and record a reserve for products estimated to be
returned. The reserves for estimated product returns at October 31, 1998 and
October 30, 1999 and were approximately $9,800 and $120,000, and are included in
the allowances amounts of $26,900 and $488,200 in the accompanying balance
sheets at October 31, 1998 and October 30, 1999.
Advertising Costs. Advertising costs are expensed as incurred. For the years
ended October 30, 1999 and October 31, 1998, the Company incurred advertising
expenses of approximately $1,145,000 and $629,000.
F-8
<PAGE> 11
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentration of Risk. We are subject to a concentration of credit risk with
respect to trade accounts receivable. However, this concentration is mitigated
by the diversification of our customer base within the areas we distribute our
products and by the number of customers.
We are engaged in the manufacturing and distribution of fresh juice products
and, therefore, are subject to certain risks that could have an unfavorable
impact on operations, including an unfavorable weather impact on raw materials,
changes in government regulations, changes in consumer demands and the emergence
of significant competitors. A significant portion of Fresh Samantha's business
and customers are concentrated in New England and along the Eastern Seaboard.
Our raw materials consist primarily of fruit, fruit juices, purees and
vegetables. The Company makes the majority of our purchases from a select number
of suppliers that management has judged to be of high quality. Although
concentrating purchasing with few suppliers, management believes that other
suppliers could provide the raw materials with similar quality on comparable
terms. However, an extended interruption in the supply of any of the raw
materials used in the Company's products, or reduction in the materials'
quality, would have an adverse effect on the Company's business and results of
operations.
Fair Value of Financial Instruments. The recorded amounts for cash and cash
equivalents, accounts receivable, accounts payable, accrued payroll and related
items and other accrued expenses approximate fair value due to the short-term
nature of these financial instruments. The fair value of amounts outstanding
under our notes payable and capital lease arrangements approximates their
recorded values in all material respects, as determined by discounting future
cash flows at current market interest rates as of October 31, 1998 and October
30, 1999.
Use of Estimates. The financial statements are prepared in conformity with
generally accepted accounting principles and, accordingly, include amounts that
are based on management's best estimates and judgments. Actual results could
differ from these estimates.
Earnings per share. Basic earnings per share is computed using the weighted
average number of common shares outstanding during the period. Diluted earnings
per share is computed using the weighted average number of common and dilutive
common equivalent shares outstanding during the period. Common equivalent shares
consist of the shares issuable upon the exercise of stock options and warrants
under the treasury stock method.
The following table shows the computation of basic and diluted earnings per
share, in thousands except per share data:
<TABLE>
<CAPTION>
24 and 26 weeks ended
---------------------
Year ended October Apr 17, Apr 29,
------------------------- ------- -------
1997 1998 1999 1999 2000
---- ---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Basic:
Weighted average common shares outstanding 11 46 309 309 309
Net income (loss) $ 99 $ (118) $(6,577) $(2,348) $(2,872)
Per share amount, attributable to common
shareholders $ 9.00 $ (2.55) $(21.31) $ (7.60) (9.29)
Diluted:
Weighted average common equivalent
shares outstanding 11 46 340 309 537
Shares used in per share amounts 11 46 309 309 309
Net income (loss) $ 99 $ (118) $(6,577) $(2,348) $(2,872)
Per share amount, attributable to common
shareholders $ 9.00 $ (2.55) $(21.31) $ (7.60) $ (9.29)
</TABLE>
F-9
<PAGE> 12
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We had no dilutive common equivalent shares during fiscal 1998 or 1999 or in
either of the interim periods presented due to the reported net loss.
Reclassifications. To conform with new classifications in the first
twenty-six weeks of fiscal 2000 financial statement presentation, we
reclassified certain prior period expenses. The primary reclassification was
between sales and distribution costs and general and administrative expenses.
2. CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following (in thousands):
<TABLE>
<CAPTION>
October 31, October 30, April 29,
1998 1999 2000
----------- ----------- --------------
(unaudited)
<S> <C> <C> <C>
Cash $ 136 $ 380 $ 219
Cash equivalents 2,304 83 -
----------- ---------- ----------
$ 2,440 $ 463 $ 219
=========== ========== ==========
</TABLE>
Interest earned on cash and cash equivalents was $5,000 and $36,000 in 1998
and 1999.
3. INVENTORIES
Our inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
October 31, October 30, April 29,
1998 1999 2000
----------- ----------- --------------
(unaudited)
<S> <C> <C> <C>
Raw materials, including packaging and other supplies $ 378 $ 890 $ 1,097
Finished product 77 592 317
---------- ----------- ----------
Total $ 455 $ 1,482 $ 1,414
========= =========== ==========
</TABLE>
4. PLANT, PROPERTY AND EQUIPMENT
Estimated useful lives that we use are as follows:
<TABLE>
<CAPTION>
<S> <C>
Leasehold improvements............................. shorter of useful life or lease term
Machinery and equipment............................ 5 to 10 years
Motor vehicles..................................... 5 years
</TABLE>
Plant, property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
October 31, October 30, April 29,
1998 1999 2000
----------- ----------- --------------
(unaudited)
<S> <C> <C> <C>
Leasehold improvements $ 303 $ 1,504 $ 1,556
Machinery and equipment 2,507 6,746 6,727
Motor vehicles 318 669 510
---------- ----------- -------------
3,128 8,919 8,793
Less accumulated depreciation and amortization (645) (1,789) (2,584)
----------- ------------ --------------
Plant, property and equipment, net $ 2,483 $ 7,130 $ 6,209
========== =========== =============
</TABLE>
F-10
<PAGE> 13
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. SHORT-TERM BORROWINGS
The Company obtains financing from certain of our vendors for certain of our
machinery and equipment purchases. Such financing is obtained through
arrangements whereby the amount of the individual payments for the equipment are
determined based on a quantity of raw material purchases from the vendor
multiplied by a specific dollar amount as defined in the agreement. The terms of
the agreements are generally one year in length and require the payment of
interest on the outstanding principal balance at a rate of 15% per annum. At the
end of the term, the remaining principal and any accrued and unpaid interest
thereon is due and payable to the vendor. At October 30, 1999, the Company has
paid the vendors in full.
6. LONG-TERM DEBT
Long-term notes payable balances are as follows:
<TABLE>
<CAPTION>
October 31, October 30,
1998 1999
----------- ----------
(in thousands)
<S> <C> <C>
Variable rate (9% at October 30, 1999) revolving credit agreement (1) $ 3,385
Noninterest-bearing notes, monthly principal payments ranging from $500 to
$10,000, with maturity dates ranging from February 2000
to March 2002. 87
Note payable at a fixed rate of 8.4% per annum, monthly principal and interest
payments of $402 starting in August 1999 through July 2002. The
note is collateralized by the underlying motor vehicle. 12
Note payable at a fixed rate of 10.98% per annum, monthly principal and
interest payments of $695 through February 2001. The note is
collateralized by the underlying motor vehicle. $ 16 10
Note payable at a fixed rate of 11.60% per annum, monthly principal and
interest payments of $554 through July 2001. The note is
collateralized by the underlying motor vehicle. 16 11
Notes payable at fixed rates ranging from 9.49% to 11.10% per annum, monthly
principal and interest payments ranging from $224 to $475, with maturity
dates ranging from August 2000 to November 2001. The notes
are collateralized by the underlying motor vehicles and equipment. 42 24
------------ -----------
74 3,529
Less: current portion (30) (3,498)
------------- ------------
Long-term debt, excluding current portion $ 44 $ 31
============ ===========
</TABLE>
The aggregate long-term maturities of the notes payable are as follows (in
thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
2000 $ 3,498
2001 24
2002 7
--------
$ 3,529
========
</TABLE>
F-11
<PAGE> 14
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) On January 21, 1999, the Company entered into a revolving credit and
loan agreement with a bank (the "Agreement"). This Agreement was
subsequently amended on September 27, 1999. The Company was in violation
of certain covenants under this agreement at October 31, 1999. On
January 10, 2000, the Company amended this agreement in order to remedy
these covenant violations. The Amended Agreement provides for revolving
loan advances ("Revolving Loan Advances") up to the lesser of the
applicable Revolving Commitment, or the sum of 70% of eligible accounts
receivable, as defined in the Agreement, plus 40% of the sum of capital
expenditures financed by Revolving Loan Advances and all other capital
expenditures incurred in fiscal 1999 and 2000 ("Formula Capital
Expenditures"), plus $1,600,000 during the period from the date of the
note to the Reduction Date (the earlier of May 31, 2000 or the date at
which Bain Capital, Inc. makes a capital contribution of at least
$3,000,000). The applicable Revolving Commitment amount is $6,000,000
through and including the Reduction Date and $4,000,000 thereafter.
Revolving Loan Advances will bear interest, payable monthly, at the
bank's prime lending rate, or the prime rate published in the Wall
Street Journal, plus three-quarters of one percent (0.75%). All
outstanding Revolving Loan Advances and accrued and unpaid interest are
payable in full on February 28, 2001. If not paid in full on the due
date, whether stated or by acceleration, interest on unpaid balances
shall thereafter be payable on demand at a rate equal to 4.75% above the
Prime Rate in effect. In the event the Company makes certain
prepayments, as defined in the Agreement, a prepayment premium equal to
one and one-quarter percent (1.25%) of the Revolving Commitment will be
applied. In addition, upon the occurrence of either or both of a
Significant Change in Ownership and/or a Credit Termination, as defined
in the Agreement, the Company shall pay a Termination Fee equal to
one-quarter percent (0.25%) of the Appraised Value of the Company
greater than $33,500,000.
The proceeds of the Note shall be used by the Company solely for working
capital and equipment financing needs. The Company must maintain an
operating account at the Lender's place of business, and the Company
shall deposit all revenues into the operating account. The Lender may in
its discretion debit the operating account for the payments of interest,
principal and other costs from time to time under the terms of the Loan
Documents.
A Letter of Credit was issued in favor of the Lender in the minimum
principal amount of $3,000,000 and bearing an expiration date of no
earlier than June 30, 2000. The Letter of Credit may be drawn by the
Lender (i) if any default shall occur and/or (ii) if, by May 31, 2000,
Bain Capital shall not have made a cash capital contribution to the
Company.
The Agreement contains certain affirmative, negative and financial
covenants which require the Company, among other things, to maintain
minimum quarterly net revenues, tangible net worth, net income, cash
flow to debt service and total liabilities to tangible net worth ratios,
as defined in the Agreement. The Agreement also contains cross-default
provisions and all borrowings under the Agreement are
cross-collateralized.
7. OPERATING AND CAPITAL LEASES
The Company leases certain property consisting of production facilities,
offices, branch distribution facilities, equipment and motor vehicles under
operating leases. These leases expire at various dates through 2009 and many
facility leases contain renewal options. Most property leases require the
Company to pay utilities, property taxes and common maintenance costs. The
Company also leases various machinery and equipment and motor vehicles under
capital leases expiring through 2004.
Following is an analysis of property and equipment under capital leases by
major class as of October 30, 1999 (in thousands):
Machinery and equipment $ 600
Motor vehicles 403
----------
1,003
Less accumulated amortization 177
----------
$ 826
==========
F-12
<PAGE> 15
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Depreciation of assets under capital leases was $40,268 and $118,301 for
the years ended October 31, 1998 and October 30, 1999.
As of October 30, 1999, future net minimum lease payments under capital
leases and future minimum rental payments required under operating leases are as
follows:
<TABLE>
<CAPTION>
Capital Operating
Fiscal Year Ending Leases Leases
------------------ ------- ---------
<S> <C> <C>
2000 $ 289 $ 2,907
2001 270 2,843
2002 202 2,647
2003 135 2,475
2004 32 1,878
Thereafter - 4,095
---------- ----------
928 $ 16,845
==========
Less amount representing interest 131
----------
Present value of net minimum lease payments 797
Less current maturities 228
----------
Long-term portion $ 569
==========
</TABLE>
For the years ended October 31, 1998 and October 30, 1999, rent expense
amounted to $1,189,000 and $3,130,000.
8. SHAREHOLDERS EQUITY:
On September 17, 1998, the Company entered into an agreement (the
"Recapitalization Agreement") with a group of outside investors affiliated with
Bain Capital, Inc. ("Bain") and with its existing stockholders ("Existing
Stockholders"). Pursuant to the terms of the Recapitalization Agreement, a
series of transactions (the "Recapitalization"), which are summarized below,
were completed to effect the recapitalization of the Company.
(i) The Company amended its articles of incorporation to authorize five
new classes of common stock as follows: (1) 4,000,000 shares of
Class A-1 common stock; (2) 1,125,000 shares of Class A-2 common
stock; (3) 1,125,000 shares of Class A-3 common stock; (4) 50,000
shares of Class L-1 common stock and (5) 50,000 shares of Class L-2
common stock.
All new classes of common stock have a par value of $.01 per share.
(ii) Each of the Existing Stockholders' 1,000 shares of outstanding
Class A common stock and 10,200 shares of outstanding Class B
common stock were exchanged for 62 shares of the Class A-3 common
stock and warrants. Subsequent to the exchange, 694,400 shares of
Class A-3 common stock were outstanding;
(iii) The Company issued to Bain 12,527 shares of the Class L-1 common
stock and 5,280 shares of the Class L-2 common stock for an
aggregate purchase price of $7,500,000;
(iv) The proceeds of $7,500,000 were used to redeem the Existing
Stockholders of 416,632 shares of the outstanding Class A-3 common
stock. The redeemed shares were canceled and are no longer
outstanding. Subsequent to the redemption, 277,768 shares of Class
A-3 common stock were outstanding;
(v) The Company issued to Bain an additional 9,186 shares of the Class
L-1 common stock and an additional 3,871 shares of the Class L-2
common stock for an aggregate purchase price of $5,500,000.
Subsequent to this additional purchase, outstanding shares of the
Class L-1 and Class L-2 common stock totaled 21,713 and 9,151;
F-13
<PAGE> 16
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(vi) The proceeds of $5,500,000 were used to (1) repay all outstanding
amounts under the Company's existing line of credit and other note
payable arrangements totaling approximately $1,970,000, (2) pay
Recapitalization related costs of approximately $816,000 and (3)
fund operations. The remaining proceeds from the sale of additional
shares of Class L-1 and L-2 common stock of approximately
$2,304,000 were invested in money market funds as of October 31,
1998.
At October 30, 1999, the Company has three classes of outstanding common
stock, Class L-1, Class L-2 and Class A-3. The significant features of these
classes of common stock as reflected in the Company's Amended and Restated
Articles of Incorporation are as follows:
Voting Rights
Each share of Class A common stock shall be entitled to one vote per
share and each share of Class L common stock is entitled to the number of votes
per share equal to the Class L conversion factor then in effect (23.4005 at
October 30, 1999).
Board of Directors
The holders of outstanding shares of Class A-1 and L-1 common stock are
entitled to elect three directors, the holders of outstanding shares of Class
A-2 and Class L-2 common stock are entitled to elect one director and the
holders of outstanding Class A-3 common stock are entitled to elect three
directors. If the number of directors exceeds seven, the holders of outstanding
shares of Class A-1 and L-1 common stock will be entitled to elect the remaining
directors up to a maximum of 15 directors.
Distributions
The holders of the outstanding shares of Class L common stock are
entitled to all distributions, including distributions in the event of a
complete or partial liquidation of the Company or upon a sale of all or
substantially all of the business assets, until the holders have received an
aggregate amount equal to the outstanding shares of Class L common stock
multiplied by the Class L base amount ($421.20 at October 30, 1999) per share
plus an amount necessary to generate an internal rate of return on the
investment in Class L common stock of 9% per annum, compounded quarterly. All
holders of common stock are entitled to receive remaining distributions ratably
based on the number of shares held once the holders of the Class L common stock
have received their required distributions.
Mandatory Conversion of Class A Common Stock
Upon a vote by the Board of Directors, each outstanding share of Class A
common stock other than Class A-1 common stock will automatically convert into
one share of Class A-1 common stock upon an initial public offering of the
Company's common stock ("IPO"). However, the vote will not be effective prior to
an IPO. Subsequent to the conversion, all classes of Class A common stock other
than Class A-1 will be retired, cancelled and removed from the Company's
authorized capital and the holders of Class A-1 common stock will be entitled to
elect the entire Board of Directors.
Optional Conversion of Class L Common Stock
At any time at the option of the holders of the Class L-1 and Class L-2
common stock, each outstanding share of Class L-1 and Class L-2 common stock may
be converted into a number of shares of Class A-1 and Class A-2, respectively,
based on the Class L conversion factor then in effect (23.4005 at October 31,
1999). However, if there has been an automatic conversion of Class A common
stock to Class A-1 common stock as a result of an IPO, the shares of Class L-2
common stock will convert into shares of Class A-1 common stock. Subsequent to
the optional conversion, the Class L common stock will be retired, cancelled and
removed from the Company's authorized capital.
F-14
<PAGE> 17
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stockholders Agreement
In connection with the Recapitalization, the Existing Stockholders and
Bain entered into a Stockholders Agreement. The Stockholders Agreement
establishes agreements with respect to voting, restrictions on the transfer of
shares of common stock and rights of the stockholders to request registration
under the Securities Act of 1933 in the event of an IPO.
Preferred Stock
On September 10, 1999, the Company amended its Articles of Incorporation
and authorized one hundred sixty thousand (160,000) shares of Class N-1
Preferred Stock and eighty thousand (80,000) shares of Class N-2 Preferred Stock
(Class N Shares, respectively), each having a par value of $0.01 per share. In
the event of distributions, the holders of Class N Shares will receive the same
priority of Class L Common Stock as a single and separate class and, with
respect to the Class N Shares, are entitled to all distributions, including
distributions in the event of a complete or partial liquidation of the Company
or upon a sale of all or substantially all of the business assets, until the
holders have received an aggregate amount equal to the outstanding shares of
Class N preferred stock multiplied by the Class N Base Amount ($27.50 at October
30, 1999) per share. At any time at the option of the holders of the Class N-1
and Class N-2 preferred stock, each outstanding share of Class N-1 and Class N-2
preferred stock may be converted in to an equal number of Class A-1 and Class
A-2 common stock, respectively. However, if there has been an automatic
conversion of Class A common stock to Class A-1 common stock as a result of an
IPO, the shares of Class N-2 preferred stock will convert into shares of Class
A-1 common stock. Subsequent to the optional conversion, the Class N preferred
stock will be retired, cancelled and removed from the Company's authorized
capital.
In addition, the stockholders amended their Stockholders' Agreement. In
connection with this amendment the Company issued $6,000,000 of Class N
Convertible Preferred Stock, par value $.01 per share (the "Class N Stock"). The
Class N preferred stock consisted of 140,702 and 77,480 shares of Class N-1 and
Class N-2, respectively.
Stock Options
On April 1, 1999, the Company adopted its 1999 Stock Option Plan. The
purpose of this Plan is to provide selected employees of the Company with
additional incentives to contribute to the success of the Company and to
attract, reward and retain employees of outstanding ability. The Plan reserves
for issuance a maximum of 200,000 shares of Class A-3 common stock. The Plan
allows the granting of both incentive stock options and non-qualified stock
options. Options vest ratably over a five year period, but generally none are
exercisable until at least one year following the grant and all expire after ten
years in the event they are not exercised.
Stock option activity for the year ended October 30, 1999 is as follows (in
thousands except per share amounts):
<TABLE>
<CAPTION>
Weighted Average
Options Exercise Price
----------- ----------------
<S> <C> <C>
Balance at October 31, 1998 - -
Granted 48 $ 18.00
Forfeited (16) $ 18.00
-----------
Balance at October 30, 1999 32 $ 18.00
==========
Options exercisable at October 30, 1999 10 $ 18.00
==========
</TABLE>
The weighted average remaining contractual life of these options is
approximately 10 years. Exercise price for options outstanding at October 30,
1999 is $18.00.
F-15
<PAGE> 18
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As permitted under SFAS 123, the Company follows APB 25 in accounting for
stock-based awards to employees. Under APB 25, we have not recognized any
compensation expense with respect to such awards, since the exercise price of
the stock options awarded are equal to the fair market value of the underlying
security on the grant date.
Had compensation costs for the stock options issued under the Stock Option
Plan been determined based on the grant date fair values as required by SFAS No.
123, our net loss would have been increased to the pro forma amounts indicated
below (in thousands except per share amounts):
<TABLE>
<CAPTION>
1999 1999
Net loss Basic net loss per share
-------- ------------------------
<S> <C> <C>
As reported $ (6,577) $ 21.31
Pro forma $ (6,656) $ 21.57
</TABLE>
Fair value was estimated using the minimum-value method, a risk-free
interest rate of 6% and an expected life of 10 years.
Warrants
In connection with the Recapitalization and the exchange of the former Class
A and Class B common stock for Class A-3 common stock, the Existing Stockholders
entered into an agreement (the "Warrant Agreement") whereby they obtained
warrants to purchase additional shares of Class A-3 common stock at an initial
exercise price of $.01 per share upon the occurrence of (1) a sale of all or
substantially all of the assets of the Company, (2) any transaction after which
Bain ceases to own a majority of the voting stock of the Company and (3) an IPO.
The additional shares to be purchased are to be determined in accordance with a
formula outlined in the Warrant Agreement, but not to exceed 142,354 shares.
Based on the formula for calculating the additional shares, the benefit to be
derived by the Existing Stockholders from these warrants is substantially
limited. As a result, management has valued these warrants at an aggregate
nominal value of $1,000 and has recorded their value as a charge to accumulated
deficit and a credit to additional paid-in capital.
9. RELATED PARTY TRANSACTIONS
During 1998, the Company entered into various transactions with an
affiliated company, Down East Sunsprouts, Inc. ("Down East Sunsprouts"). Prior
to fiscal 1998, Down East Sunsprouts was wholly-owned by Fresh Samantha but was
subsequently spun off to the Existing Shareholders of the Company. The fiscal
1998 transactions between the related parties included purchases of inventory
from one another as well as Fresh Samantha's incurring payroll and other
operating costs on behalf of Down East Sunsprouts. At October 31, 1998, Fresh
Samantha had a $12,000 net receivable from Down East Sunsprouts relating to the
fiscal 1998 transactions which is included in prepaid expenses and other current
assets in the accompanying balance sheet. The amount was paid in full by Down
East Sunsprouts subsequent to year end. Subsequent to Fresh Samantha's fiscal
1998 year end, Down East Sunsprouts was sold to a third party. Sales to and
purchases from Down East Sunsprouts amounted to approximately $15,900 and
$13,700 for the year ending October 31, 1998.
F-16
<PAGE> 19
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. EMPLOYEE BENEFIT PLAN
The Company sponsors the Fresh Samantha, Inc. 401(k) defined
contribution plan (the "Plan"). The Plan covers all employees who meet the
initial eligibility requirements, as defined in the Plan document, and who
continue to provide at least 1,000 hours of service during the Plan year.
Participants in the Plan may contribute up to 15% of their pre-tax compensation
in any one Plan year subject to the Internal Revenue Service limitation. The
Company may elect to match the participants' contributions based on a matching
contribution formula using a contribution percentage determined at the Company's
discretion. Plan participants vest in Company matching contributions ratably
over a five year period in accordance with a graduated vesting schedule. Under
the Plan, the Company, at its sole discretion, may also elect to make additional
contributions on behalf of the participants. All employer matching contributions
due to the plan for fiscal 1999 had been paid as of October 30, 1999. The
Company charged approximately $35,000 and $46,000 to expense for this Plan for
the years ended October 31, 1998 and October 30, 1999.
11. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax assets and liabilities are as follows
(in thousands):
<TABLE>
<CAPTION>
October 31, October 30,
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets
Net operating loss carryover $ 35 $ 2,298
Expenses not currently deductible 58 278
Alternative minimum tax credit 30 31
-------- --------
123 2,607
-------- --------
Deferred tax liabilities
Tax over book depreciation 163 124
-------- --------
163 124
-------- --------
Net deferred tax assets (liabilities) before valuation allowance (40) 2,483
Less valuation allowance - (2,483)
--------- --------
Net deferred tax asset (liabilities) $ (40) $ -
========= ========
</TABLE>
Due to the uncertainty of future taxable income, the Company fully
reserved for its net deferred tax assets.
The Company will have remaining federal and state net operating loss
carryforwards of approximately $5,660,000 expiring in fiscal years 2000 through
2019. The net operating loss carryforwards are available to offset future
federal and state taxable income.
F-17
<PAGE> 20
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Income tax benefit consists of the following (in thousands):
<TABLE>
<CAPTION>
Year ended October
------------------
1997 1998 1999
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Federal:
Current $ (37) $ 58 $ -
Deferred (46) (2) 32
-------- --------- --------
(83) 56 32
-------- -------- --------
State:
Current (12) 10 -
Deferred (15) (15) 8
-------- --------- --------
(27) (5) 8
-------- --------- --------
Total income tax (expense) benefit $ (110) $ 51 $ 40
======== ======== ========
</TABLE>
The provision for income taxes is different from the amount computed using
the applicable statutory federal income tax rate of 34%, with the differences
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Year ended October
------------------
1997 1998 1999
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Tax benefit at statutory rates $ (34) $ 58 $ 2,250
Adjustment due to:
Change in valuation allowance - - (2,483)
Other (76) (7) 273
-------- --------- --------
Total income tax (expense) benefit $ (110) $ 51 $ 40
======== ======== ========
</TABLE>
12. OTHER (EXPENSE) INCOME, NET
Other (expense) income consisted of the following (in thousands):
<TABLE>
<CAPTION>
Year ended October 24 and 26 weeks ended
--------------------------------- ------------------------------
April 17, April 29,
1997 1998 1999 1999 2000
---------- --------- ---------- ----------- -----------
(unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Interest income $ - $ 5 $ 36 $ 29 $ -
Interest expense (98) (172) (219) (51) (218)
Transaction costs (1) - - - - (1,022)
Other (9) (102) (14) (3) 28
----------- ---------- ----------- ------------ -----------
$ (107) $ (269) $ (197) $ (25) $ (1,212)
=========== ========== =========== ============ ============
</TABLE>
(1) Transaction costs, consisting primarily of professional fees, were incurred
by the Company in connection with the acquisition of all of the Company's
outstanding stock by Odwalla, Inc. on May 2, 2000.
F-18
<PAGE> 21
FRESH SAMANTHA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. ALLOWANCE FOR DOUBTFUL ACCOUNTS AND PRODUCT RETURNS
The following summarizes activity in the allowance for doubtful
accounts and product returns for the years shown (in thousands):
<TABLE>
<CAPTION>
Year ended October
--------------------
1997 1998 1999
------ ------ -----
(unaudited)
<S> <C> <C> <C>
Allowance for doubtful accounts and product returns,
beginning of year $ - $ 23 $ 27
Bad debt expense and change in allowance for product
returns for the year 45 21 483
Accounts receivable written off during the year (22) (17) (22)
------- ------- -------
Allowance for doubtful accounts and product returns,
end of year $ 23 $ 27 $ 488
====== ====== ======
</TABLE>
F-19
<PAGE> 22
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL INFORMATION OVERVIEW
On February 2, 2000, Odwalla announced a definitive agreement to
acquire all of the outstanding shares of Fresh Samantha, Inc. At the annual
shareholders meeting on April 25, 2000, Odwalla's shareholders approved the
acquisition and other matters necessary to complete the transaction. On May 2,
2000, we completed our acquisition of Fresh Samantha. We accounted for the
acquisition of Fresh Samantha as a purchase for accounting purposes and,
accordingly, the purchase price has been allocated to the tangible and
intangible assets acquired and liabilities assumed on the basis of their fair
values on the acquisition date, May 2, 2000.
The total purchase price of approximately $28.8 million consisted of
the issuance of 3,612,122 shares of Odwalla common stock with an estimated fair
value of $27.5 million plus transaction costs of approximately $1.3 million,
consisting principally of professional fees. The fair value of the common stock
issued was determined using the average closing market price of Odwalla's common
stock for several days before and after the merger announcement.
Under a Preferred Stock Conversion Agreement, dated as of February 11,
2000, between Odwalla and Catterton-Simon Partners, we issued 1,333,333 shares
of our common stock to Catterton-Simon Partners in exchange for 1,074,666 shares
of Odwalla's Series A Preferred Stock, representing all of the outstanding
shares of such stock, and cancellation of a warrant to purchase 75,000 shares of
Odwalla's common stock held by Catterton-Simon Partners. The issuance of common
stock to Catterton-Simon Partners as an inducement for early conversion was
approved by Odwalla's shareholders on April 25, 2000.
In addition, we sold 960,769 shares of common stock for $6.0 million
through a private placement to three funds managed by Wasserstein Perella Group,
Inc. and to Catterton-Simon Partners III, L.P. pursuant to a Stock Purchase
Agreement dated as of February 11, 2000, and amended as of April 25, 2000.
The unaudited pro forma combined financial information on the following
pages combines Odwalla's balance sheet as of February 26, 2000, and the
statements of operations for the year ended August 28, 1999, and for the
twenty-six weeks ended February 26, 2000, with the Fresh Samantha balance sheet
as of April 29, 2000, and the Fresh Samantha statements of operations for the
year ended October 30, 1999, and for the twenty-six weeks ended April 29, 2000.
These pro forma financial statements are based on the preliminary estimates and
assumptions set forth in the notes to such statements. The unaudited pro forma
combined condensed financial information set forth below does not purport to
represent what the combined results of operations or financial condition of
Odwalla would actually have been if the Fresh Samantha acquisition and the other
events noted above had in fact occurred on the dates indicated or to project the
future combined results of operations or financial condition of Odwalla.
The unaudited pro forma combined condensed financial statements,
including the notes thereto, are qualified in their entirety by reference to,
and should be read in conjunction with, the historical consolidated financial
statements of Odwalla, contained in our Annual Report on Form 10-K for the year
ended August 28, 1999, and in our Quarterly Report on Form 10-Q for the period
ended February 26, 2000) and of Fresh Samantha (beginning on page F-2 of this
Current Report on Form 8-K/A), including the notes thereto.
F-20
<PAGE> 23
PRO FORMA COMBINED CONDENSED BALANCE SHEETS
(UNAUDITED)
AS OF FEBRUARY 26, 2000
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Fresh Pro Forma
Odwalla Samantha Combined Adjustments Total
<S> <C> <C> <C> <C> <C>
Current assets
Cash, cash equivalents and short-
term investments $ 1,766 $ 219 $ 1,985 $ 6,000 a $ 4,158
(3,827)b
Trade accounts receivable 6,634 2,709 9,343 9,343
Inventories 4,157 1,414 5,571 (26)c 5,545
Prepaid expenses and other current assets 1,519 207 1,726 (121)c 1,605
Deferred tax asset, current 1,622 - 1,622 1,622
--------- --------- --------- --------- ---------
Total current assets 15,698 4,549 20,247 2,026 22,273
Plant, property and equipment, net 14,491 6,209 20,700 (1,541)c 19,159
Goodwill, net 1,063 - 1,063 30,533 c 31,596
Other intangible assets, net 443 - 443 443
Other assets, noncurrent 951 213 1,164 (347)c 817
--------- --------- --------- --------- ----
Total assets $ 32,646 $ 10,971 $ 43,617 $ 30,671 $ 74,288
========= ========= ========= ========= =========
Current liabilities
Accounts payable $ 6,082 $ 4,044 $ 10,126 $ 1,013 c $ 11,026
(113)b
Accrued payroll and related items 1,018 765 1,783 76 c 1,859
Line of credit 1,950 - 1,950 1,950
Other accruals 1,841 724 2,565 1,006 c 3,571
Current maturities of capital lease
obligations 25 227 252 252
Current maturities of long-term debt 181 3,714 3,895 (3,714)b 181
--------- --------- --------- ---------- ----
Total current liabilities 11,097 9,474 20,571 (1,732) 18,839
Capital lease obligations, less current
maturities 4 415 419 419
Long-term debt, less current maturities 581 - 581 581
Other - 10 10 10
--------- --------- --------- --------- ---------
Total liabilities 11,682 9,899 21,581 (1,732) 19,849
--------- --------- --------- ---------- -------
Mandatorily redeemable and convertible
preferred stock 7,931 - 7,931 (7,931)d -
--------- --------- --------- ---------- --
</TABLE>
(continued on next page)
F-21
<PAGE> 24
PRO FORMA COMBINED CONDENSED BALANCE SHEETS (Continued)
(UNAUDITED)
AS OF FEBRUARY 26, 2000
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Fresh Pro Forma
Odwalla Samantha Combined Adjustments Total
--------- --------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
Shareholders' equity
Preferred stock - 2 2 (2)c -
Common stock 29,751 3 29,754 6,000 a 72,806
27,475 c
(3)c
9,580 d
Additional paid-in capital 62 19,000 19,062 (19,000)c -
(62)d
Accumulated deficit (16,780) (17,933) (34,713) 17,933 c (18,367)
(1,587)d
--------- --------- --------- --------- -
Total shareholders' equity 13,033 1,072 14,105 40,334 54,439
--------- --------- --------- --------- ---------
Total liabilities and shareholders' equity $ 32,646 $ 10,971 $ 43,617 $ 30,671 $ 74,288
========= ========= ========= ========= =========
</TABLE>
F-22
<PAGE> 25
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED AUGUST 28, 1999
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Fresh Pro Forma
Odwalla Samantha Combined Adjustments Total
--------- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 68,042 $ 32,158 $ 100,200 $ 100,200
Cost of sales 35,542 16,888 52,430 $ (24)e 52,406
--------- --------- ---------- --------- ----------
Gross profit 32,500 15,270 47,770 24 47,794
--------- --------- ---------- --------- ----------
Operating expenses
Sales and distribution 24,056 15,870 39,926 (142)e 39,784
Marketing, general and administrative 10,555 5,820 16,375 1,456 e 17,831
Recall and related costs 250 - 250 250
--------- --------- ---------- --------- ----------
Total operating expenses 34,861 21,690 56,551 1,314 57,865
--------- --------- ---------- --------- ----------
Loss from operations (2,361) (6,420) (8,781) (1,290) (10,071)
Other (expense) income, net (40) (197) (237) 140 f (97)
---------- ---------- ----------- ---------- -----------
Loss before income taxes (2,401) (6,617) (9,018) (1,150) (10,168)
Income tax benefit 359 40 399 399
--------- --------- ---------- --------- ----------
Net loss (2,042) (6,577) (8,619) (1,150) (9,769)
Preferred stock dividend (267) - (267) 267 d -
---------- --------- ----------- --------- ----------
Net loss applicable to common
shareholders $ (2,309) $ (6,577) $ (8,886) $ (883) $ (9,769)
========== ========== =========== ========== ===========
Net loss per share attributable to common shareholders:
Basic and diluted $ (0.45) $ (21.31) $ (0.89)
=========== =========== ===========
Weighted average shares, basic and diluted 5,098 309 11,004
========== ========= ==========
</TABLE>
F-23
<PAGE> 26
PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE TWENTY-SIX WEEKS ENDED
FEBRUARY 26, 2000 (In thousands,
except per share amounts)
<TABLE>
<CAPTION>
Fresh Pro Forma
Odwalla Samantha Combined Adjustments Total
--------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales $ 34,859 $ 21,049 $ 55,908 $ 55,908
Cost of sales 18,541 10,228 28,769 $ (12)e 28,757
--------- --------- --------- ---------- ---------
Gross profit 16,318 10,821 27,139 12 27,151
--------- --------- --------- --------- ---------
Operating expenses
Sales and distribution 12,498 9,597 22,095 (71)e 22,024
Marketing, general and administrative 4,935 2,884 7,819 728 e 8,547
--------- --------- --------- --------- ---------
Total operating expenses 17,433 12,481 29,914 657 30,571
--------- --------- --------- --------- ---------
Loss from operations (1,115) (1,660) (2,775) (645) (3,420)
Other (expense) income, net (51) (1,212) (1,263) 150 f (1,113)
---------- ---------- ---------- --------- ---------
Loss before income taxes (1,166) (2,872) (4,038) (495) (4,533)
Income tax benefit 175 - 175 175
--------- --------- --------- --------- ---------
Net loss (991) (2,872) (3,863) (495) (4,358)
Preferred stock dividend (426) - (426) 426d -
---------- --------- ---------- --------- ---------
Net loss applicable to common
shareholders $ (1,417) $ (2,872) $ (4,289) $ (69) $ (4,358)
============ ========== ========== ========== =========
Net loss per share attributable to common shareholders:
Basic and diluted $ (0.28) $ (9.30) $ (0.40)
=========== =========== ==========
Weighted average shares, basic and diluted 5,126 309 11,032
=========== ========== =========
</TABLE>
F-24
<PAGE> 27
ODWALLA, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The pro forma combined balance sheet assumes that the merger took place
February 26, 2000 and combines Odwalla's February 26, 2000, consolidated balance
sheet and Fresh Samantha's April 29, 2000, consolidated balance sheet.
The pro forma combined statement of operations assumes the merger took
place as of the beginning of fiscal 1999, August 29, 1998. For the fiscal 1999
statement of operations, Odwalla's statement of operations for the year ended
August 28, 1999, and Fresh Samantha's statement of operations for the year ended
October 30, 1999, are combined. Each of the financial statements consists of 52
week periods. For the fiscal 2000 operations, Odwalla's statement of operations
for the twenty-six weeks ended February 26, 2000, and Fresh Samantha's statement
of operations for the twenty-six weeks ended April 29, 2000, are combined.
On a combined basis, there were no material transactions between
Odwalla and Fresh Samantha during the periods presented. There are no material
differences between the accounting policies of Odwalla and Fresh Samantha. The
pro forma combined provision for income taxes may not represent the amounts that
would have resulted had Odwalla and Fresh Samantha filed consolidated income tax
returns during the periods presented.
2. UNAUDITED PRO FORMA ADJUSTMENTS
The following adjustments were applied to the Odwalla and Fresh
Samantha historical consolidated financial statements to arrive at the unaudited
pro forma combined condensed financial information. These adjustments are based
on management's preliminary estimates of the value of the tangible and
intangible assets acquired.
a. Reflects the private placement of $6.0 million of common stock at the
merger date.
b. Reflects the payment of Fresh Samantha's outstanding bank debt at the
close of the merger, as required under the merger agreement. Odwalla's line of
credit was increased from $5.0 million to $10.0 million at the time of the
merger with Fresh Samantha in accordance with an amendment to Odwalla's existing
credit agreement in April 2000.
c. Reflects the purchase accounting adjustment for the merger as follows
(amounts in thousands):
Total purchase price:
<TABLE>
<CAPTION>
<S> <C>
Issuance of 3,612,122 shares of common stock to Fresh Samantha shareholders valued
at the average closing price for the five days before and after February 2, 2000,
the date of the merger announcement........................................... $ 27,475
Direct transaction costs incurred by Odwalla, primarily professional fees........ 1,320
------------
Total purchase price.......................................................... $ 28,795
============
</TABLE>
F-25
<PAGE> 28
ODWALLA, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Continued)
Adjustment to eliminate Fresh Samantha shareholders equity:
Elimination of Fresh Samantha outstanding common and preferred stock,
additional paid in capital and accumulated deficit. This adjustment
recognizes the cost basis of the Fresh Samantha assets and
liabilities acquired through the following
<TABLE>
<CAPTION>
<S> <C>
Elimination of Fresh Samantha preferred stock................................. $ 2
Elimination of Fresh Samantha common stock.................................... 3
Elimination of Fresh Samantha additional paid-in capital...................... 19,000
Elimination of Fresh Samantha accumulated deficit............................. (17,933)
</TABLE>
Purchase price allocated to:
<TABLE>
<CAPTION>
<S> <C>
Fair value of property and equipment and other assets acquired, based on
management evaluation of the fair value of individual assets at the acquisition
date, and liabilities acquired................................................ $ (1,738)
Goodwill related to the acquisition.............................................. 30,533
------------
Total allocated purchase price................................................... $ 28,795
============
</TABLE>
d. Reflect the elimination of the Series A preferred stock, the cancellation of
the existing Catterton-Simon Partners common stock warrant, and the issuance of
additional shares of common stock as an inducement for early conversion of the
preferred stock to common stock as at February 26, 2000.
<TABLE>
<CAPTION>
<S> <C>
Elimination of Odwalla's mandatorily redeemable convertible preferred stock through
issuance of common stock in exchange.......................................... $ 7,931
Cancellation of the existing Catterton-Simon Partners common stock warrant....... 62
Issuance of 258,667 shares of common stock as an inducement for early conversion to
common stock based on Odwalla's closing stock price on May 2, 2000............ 1,587
------------
Net adjustment to common stock................................................... $ 9,580
============
</TABLE>
No amount related to the issuance of additional shares as an inducement
for early conversion to common stock has been included in the unaudited pro
forma combined condensed statements of operations for the year ended August 28,
1999 and the twenty-six weeks ended February 26, 2000 as it is non-recurring.
The appropriate amount was expensed in the period the acquisition was
consummated.
In addition, the preferred stock dividend for each of the operating
periods presented has been eliminated in the pro forma combined condensed
statements of operations as they would not have been incurred if the preferred
stock had been converted into common stock as of the beginning of the periods
shown.
F-26
<PAGE> 29
ODWALLA, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (Continued)
e. Reflect additional depreciation and amortization resulting from the merger
(amounts in thousands).
<TABLE>
<CAPTION>
Twenty-six
Year ended weeks ended
August 28, February 26,
1999 2000
-------------- --------------
<S> <C> <C>
Odwalla intends to amortize the goodwill related to the merger using
the straight-line method over a twenty year life.
Amortization assumption as if the merger had occurred at the beginning
of the period shown................................................... $ 1,527 $ 763
Odwalla allocated the estimated decrease in fair value of property and equipment acquired
to the individual assets. For this pro forma information, we have assumed that the
average life assigned to the decrease in fair value is 6.5 years. Depreciation was
calculated as if the merger occurred at the beginning of the period shown and reflects
the allocation to cost of sales; sales and distribution; and marketing, general and
administrative costs based on management estimates................. (237) (118)
--------- --------
Total change in amortization and depreciation expense as if the acquisition had taken
place as of the first date of the periods shown.................... $ 1,290 $ 645
========= ========
</TABLE>
f. Reflects reduction in interest expense assuming reduced borrowing due to the
private placement of $6.0 million of common stock at the merger date, a portion
of which was used to pay the outstanding balance of Fresh Samantha's credit
facility of $3.8 million as of April 29, 2000.
F-27
