UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
Amendment No. 2
___X__ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994.
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-7803
D O S K O C I L C O M P A N I E S I N C O R P O R A T E D
________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 13-2535513
______________________________ ___________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2601 Northwest Expressway, Oklahoma City, Oklahoma 73112
__________________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (405)879-5500
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Name of Each Exchange
Title of Each Class on Which Registered
___________________ _____________________
Common Stock, par value $.01 Nasdaq National Market
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 ____
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (Section 229.405 of
this chapter) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
As of March 2, 1995, the aggregate market value of
the voting stock held by non-affiliates of the registrant was
$49,746,210.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate
by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.
YES__X__ NO____
On March 2, 1995, the number of shares outstanding
of the registrant's common stock, $.01 par value, was 12,433,724
shares.
DOCUMENTS INCORPORATED BY REFERENCE: The Proxy
Statement for the Annual Meeting of Stockholders is incorporated
herein by reference into Part III of this Form 10-K.
<PAGE>
DOSKOCIL COMPANIES INCORPORATED
_________________________
TABLE OF CONTENTS
FORM 10-K
Page
PART I
Item 1. Business .......................................... 1
Item 2. Properties ........................................ 8
Item 3. Legal Proceedings ................................. 10
Item 4. Submission of Matters to a Vote of Security Holders 11
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................. 11
Item 6. Selected Financial Data ........................... 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............... 14
Item 8. Financial Statements and Supplementary Data ....... 23
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............... 24
PART III
Item 10. Directors and Executive Officers of the
Registrant ........................................ 24
Item 11. Executive Compensation ............................ 24
Item 12. Security Ownership of Certain Beneficial Owners
and Management .................................... 24
Item 13. Certain Relationships and Related Transactions .... 24
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ............................... 25
- i -
<PAGE>
PART I
Item 1. BUSINESS
General Development of Business
The registrant, Doskocil Companies Incorporated, is a
Delaware corporation incorporated in 1964. Subject to approval
at its 1995 Annual Meeting of Stockholders, the registrant will
change its corporate name to Foodbrands America, Inc. The
registrant is referred to herein as "Foodbrands America" and,
collectively with its direct and indirect subsidiaries, as the
"Company".
The Company is a major producer and marketer of
competitively differentiated perishable food products. The
Company's branded and processed food products include pepperoni
and precooked pizza toppings, appetizers, Mexican and Italian
foods, boneless hams, frankfurters, sausage, bacon and other
branded and processed products which are marketed principally in
the United States under proprietary brand names that include
Wilson Foods, Wilson, Corn King, Wilson's Continental Deli,
Wilson Foodservice, Doskocil, Doskocil Foods, Jefferson Meats,
Fred's, Rotanelli's, Posada and Butcher Boy. The Company
sells its products to foodservice distributors, warehouse clubs,
restaurant chains, grocery chains and their delicatessens, food
processors and other institutional customers.
On June 1, 1994, the Company purchased all of the
outstanding stock of International Multifoods Foodservice Corp.,
a division of International Multifoods Corporation, for
approximately $137.7 million, including other costs of the
acquisition. The business has been renamed Doskocil Specialty
Brands Company (the "Specialty Brands Division").
Narrative Description of Business
Business Strategy. Foodbrands America's objective is
to increase revenue and earnings through internal means and
appropriate acquisitions so as to continue to improve the level
and consistency of profitability in a manner that enhances
shareholder value. The key elements of the Company's strategy
include: (i) manage product quality and consistency to meet
customer expectations and needs; (ii) expand market share in the
growing foodservice and deli markets capitalizing on niche
marketing opportunities; (iii) provide industry superior customer
service; and (iv) introduce new products and make appropriate
acquisitions that promote continued growth. Implementation of
these strategies will focus the Company's business on higher
growth and higher margin food segments, thereby transforming the
Company from a meat processor to a broad-based food company.
This strategic change is evidenced by, among other
things, the acquisition by the Company of the Specialty Brands
Division in June 1994.
Operational Divisions. The Company's operations are
separated into four divisions which operate in two industry
segments. The Food Service Product Segment is comprised of the
following three divisions: (i) the Food Service Division,
which produces and markets processed meat products and pizza
toppings to restaurant chains, hospitals, school systems,
warehouse clubs and others; (ii) the Specialty Brands Division,
which produces and markets frozen food products, including ethnic
foods in the Mexican and Italian segments, as well as appetizers,
entrees and portioned meats primarily to the foodservice
industry; and (iii) the Deli Division, which produces and markets
processed products to grocery store service delicatessens. The
Retail Segment is comprised of the Retail Division, which
produces and markets processed meat products principally to
grocery stores for sale in their refrigerated meat cases.
Food Service Division. The Food Service Division
markets products through a broker network and direct sales force
to customers who remarket the Company's products for
"away-from-home" food preparation. The Company's brokered sales
force markets to traditional restaurants and regional restaurant
chains, and other foodservice customers, such as hospitals,
hotels, school systems and similar establishments. It also sells
directly to foodservice chain distributors (such as Kraft, Inc.
and Sysco Corporation), buying group associations (such as
ComSource) and smaller customers. The direct sales force markets
to customers with centralized purchasing that buy in large
quantities for a number of locations. These include large
national and regional restaurant operators (such as Domino's
Pizza, Inc.), warehouse clubs (such as Sam's Club) and large food
processors (such as Tombstone Pizza Corporation and Tony's
Pizza).
Specialty Brands Division. The Specialty Brands
Division markets products through four market segments.
Specialty Brands' brokered sales force sells to major foodservice
distributors (such as Kraft, Inc. and Sysco Corporation), to
buying group associations (such as Emco) and to smaller
distributors. These distributors resell products to such
foodservice customers as traditional restaurants, hospitals,
hotels and school systems. Consumer products are sold primarily
through food brokers to grocery stores, warehouse clubs and
military stores. Products are sold through an inhouse sales
force to such vending operators and convenience store customers
as VSA, McLane's and NCS. Major national and regional restaurant
chains (such as Denny's and Shoney's) and foodservice management
firms (such as ARA, Daka and Marriott) purchase products through
the division's direct sales force and brokers.
Deli Division. The Deli Division markets products
primarily to the in-store service delicatessens located in many
supermarkets. The Deli Division primarily utilizes a food broker
network to market the Company's products directly to its deli
customers. Although many customers of the Company's retail and
deli products are similar, the buying processes differ
significantly. The Deli Division's customer base consists of
national grocery chains (such as Albertson's, Inc.), national and
regional wholesale warehouse groups (such as Super Valu Stores,
Inc., Fleming Companies, Inc. and Associated Wholesale Inc.),
regional grocery chains (such as Hy-Vee Food Stores, Inc.) and
independent distributors to grocery stores (such as CCS
Distributors, Inc.).
Retail Division. The Retail Division markets products
to grocery stores for sale in their refrigerated meat cases
through food broker networks or direct sales personnel, depending
upon the characteristics of each geographic marketing area. The
Retail Division distributes the Company's products to a wide
range of retail customers that includes grocery wholesalers (such
as Fleming Companies, Inc., and Super Valu Stores, Inc.),
regional grocery store chains (such as Safeway Stores, Inc.,
Von's Grocery Co. and Hy-Vee Food Stores, Inc.), national grocery
store chains (such as Kroger Co. and Albertson's, Inc.),
distributors (such as Interstate Meats, Inc. and CCS
Distributors, Inc.), and warehouse clubs (such as Sam's Club).
Products. The Company's principal products are
processed food products. Processing techniques utilized by the
Company to add value to its products include formulation,
fabrication, breading and battering, blending, frying, smoking,
curing, cooking and packaging.
The Company markets and distributes much of its product
as an integrated line, offering products at several price points
as well as providing "one-stop-shopping" for its customers. Many
of the Company's large competitors own a portfolio of separate
brands but market and distribute each brand as an independent
product line.
The Company's products are developed for sale to niche
markets in which the Company sees growth opportunities. The
percentage of net sales for each of the Company's major product
lines for the years 1994, 1993 and 1992, respectively, are (i)
pizza toppings and crust - 18.3%, 21.2%, and 16.6%; (ii)
processed meat - 34.2%, 38.4%, and 30.2%; (iii) retail commodity
meat case - 31.7%, 39.3%, and 52.5%; and (iv) for the year 1994
only, frozen entrees and vegetables of 15.0%. Management
believes the Company is one of the market leaders in sales to
the foodservice industry of frozen pasta, appetizers and pizza
toppings, as well as sales to convenience stores of burritos.
For several years, the Company also has been a market leader in
sales of retail boneless hams.
The Company is innovative in the development and
production of its major product lines. The Company was the first
commercial producer of precooked pizza toppings and introduced
one of the first boneless hams. The Company's dedication to
quality, consistency and value, as well as its desire to work
directly with its customers to meet their unique needs, has led
the industry to recognize this commitment.
Marketing. The Company utilizes a broad range of
techniques to market its products to customers and the ultimate
consumer depending upon the market and the position of products
within that market. For the Retail Segment, the Company uses
four major types of marketing programs to create consumer
awareness, stimulate trial purchases and build brand loyalty.
These programs include: (i) trade promotions, such as retailer
advertising tie-ins, merchandising contests and in-store
displays; (ii) trade advertising, such as advertising and
publicity in trade magazines and attendance at food shows and
conventions; (iii) consumer promotions, such as gift premiums and
cents-off coupons; and (iv) consumer advertising through magazine
and newspaper ads and television commercials. For the Food
Service Product Segment, the Company's primary marketing effort
includes trade advertising, such as advertising and publicity in
trade magazines and attendance at food shows and conventions.
Distribution System. The Company operates a
centralized distribution system that services all four divisions.
The majority of the Company's products are handled through its
distribution/customer service center, which is located in
Edwardsville, Kansas. From the distribution center, orders can
be filled and delivered in a single shipment regardless of the
variety of products ordered or the location of the manufacturing
facility at which they are produced. The Company also can
combine the orders of many smaller customers in the same
geographic region. Management believes this distribution system
allows the Company to provide superior service to its customers
by reducing the time between the placement of customer orders and
their delivery and by lowering customer shipping costs through
eliminating higher-cost fragmented deliveries and allowing for
"one stop shopping" of the Company's broad product mix.
Government Regulation. The Company is subject to
various laws and regulations relating to the construction and
maintenance of facilities, production standards and pollution
control administered by federal, state and other government
entities, including the Environmental Protection Agency and
corresponding state agencies, the United States Department of
Agriculture ("USDA"), the Food and Drug Administration ("FDA")
and the Occupational Safety and Health Administration ("OSHA").
All of the Company's food processing plants are inspected by the
USDA or the FDA. The USDA-inspected plants are required to have
inspectors present during some or all of their operations. The
Company's trucking operations also are subject to regulation by
the Interstate Commerce Commission and are subject to various
laws and regulations relating to intrastate and interstate
trucking. Management believes that the Company is currently in
compliance in all material respects with all applicable health,
environmental and other laws and regulations and management does
not believe that the costs of continued compliance with existing
laws and regulations or of any other environmental liabilities,
will have a material adverse effect on the Company's financial
condition.
Seasonality. Historically, the Company's retail and
deli business has been seasonal. Sales of deli products
generally are at their lowest during the first quarter of the
year. Sales of deli products increase during the second and
third quarters. Sales of hams generally peak during the
Thanksgiving, Christmas and Easter holidays, while sales of
sausage products are highest during the summer months. Sales of
Food Service and Specialty Brands Divisions' products do not
fluctuate significantly due to seasonality. Net sales of Company
products historically have been higher in the fourth quarter than
in any other quarter of the year.
Employees. At December 31, 1994 the Company employed
approximately 3,538 persons, approximately 50% of whom are
covered by collective bargaining agreements. The Company reached
agreement on three labor agreements in 1994 covering
approximately one-half of the employees covered by collective
bargaining agreements. Other contracts extend through various
dates in 1995 and 1996 for the remaining employees covered by
collective bargaining agreements. Substantially all of the
Company's employees covered by collective bargaining agreements
are members of the United Food and Commercial Workers Union (the
"UFCW"). New union contracts were approved in Cherokee, Iowa,
Concordia, Missouri and Shreveport, Louisiana.
Intellectual Property. The Company owns or has the
right to use more than 130 trademarks and 5 patents. Management
believes that the Company's trademarks are a significant market
advantage to the Company because of their name recognition in the
markets the Company serves. Most of the Company's trademarks are
registered. The Company produces a number of products which are
marketed under numerous Company-owned registered and unregistered
trademarks, symbols, emblems, logos and designs, including the
following trademarks for the Food Service Product Segment:
"Butcher Boy," "Continental Deli Lite," "Doskocil," "Fred's,"
"Jefferson Meats," "Little Juan," "Marquez," "Mr. Nuccio,"
"Pizza Topper," "Pizzano," "Poco Posada," "Posada,"
"Rotanelli's," "Wilson's Continental Deli," and "Wilson
Foodservice". The trademarks for the Retail Segment include:
"Corn King," "Just for Us," "Masterpiece," "Wilson," "Wilson's
Certified," and "Wilson Foods". All of the foregoing are of
material importance to the Company's business. In addition,
certain products are prepared according to customer
specifications and packaged under customer trademarks and labels.
Raw Materials. The Company's primary raw materials are
meat, cheese and vegetables. These raw materials are obtained
from external sources. Other processing materials, such as
seasonings, smoking and curing agents, sausage casings and
packaging materials, are purchased from a number of
readily-available sources. Severe price swings in such raw
materials, and the resultant impact on the prices the Company
charges for its products and the margins it receives, at times
have had, and may in the future have, material adverse effects on
the demand for the Company's products and its profits. The
Company utilizes several techniques for reducing the risk of
future raw materials price increases. These techniques include
purchasing and freezing raw materials during seasonally low
periods of the year, negotiating minimum purchase commitments at
set prices and entering into futures contracts.
Customers. The Company has a diverse customer base
located principally in the United States. Customers include
foodservice distributors, quick service restaurants, grocery
wholesalers, warehouse clubs, buying cooperatives, retail grocery
chains, convenience stores and institutions. No single customer
represented 10% or more of the Company's net sales in fiscal
1994.
Competition. The processed foods industry is highly
competitive with numerous companies of varying sizes.
Competition is encountered both in the procurement of raw
materials and in the sale of products. The Company's products
also compete with a large number of other food sources.
Management believes that the principal competitive factors in the
industry are price, product quality, service and brand loyalty.
Some of the Company's competitors are considerably larger, more
diversified and have correspondingly greater financial and other
resources.
Financial Information About Industry Segments
See disclosure regarding industry segment financial
information in the Consolidated Financial Statements, Note 12
Segment Reporting.
Item 2. PROPERTIES
The following table sets forth the location,
approximate size and description, and ownership status of each of
the Company's facilities.
Owned/
Location Approximate Size and Description Leased
________ ________________________________ _______
Arkansas:
Forrest City 65,000 square feet production Owned *
facility on 11.32 acres
California:
Rialto 80,400 square feet distribution Owned
and warehouse facility on 6.0
acres
Riverside 134,300 square feet production Owned
and office facility on 7.3 acres
Indiana:
Noblesville (1) 93,000 square feet production Owned/
facility on 5.2 acres Leased
Iowa:
Cherokee 237,900 square feet production Leased
facility
Clarinda 51,700 square feet production Owned
facility (closed, held for sale)
Kansas:
Edwardsville 114,800 square feet distribution Leased
and warehouse facility
South Hutchinson 303,700 square feet production, Owned
storage and office facilities on
68 acres
Louisiana:
Shreveport 30,100 square feet production Owned *
facility on 3.6 acres
Missouri:
Carthage 72,100 square feet production Owned
facility on 15.0 acres
Concordia 61,100 square feet production Owned *
facility on 17.2 acres
Piedmont 87,100 square feet production Owned
facility on 6.3 acres
New Mexico:
Albuquerque 32,900 square feet production Owned
facility on 5.8 acres
New York:
New Rochelle 29,900 square feet production Owned
facility on 1.2 acres
Oklahoma:
Oklahoma City 36,300 square feet office Leased
facility
Wisconsin:
Jefferson 306,400 square feet production Owned
facility on 11.4 acres
_________________________________
(1) The Company has formally announced the closing of this
facility in 1995.
* Properties of the Retail Segment
Properties not identified with a '*' are in the Food Service
Product Segment or related to the Corporate Office.
The Company's production facility at Forrest City,
Arkansas is mortgaged under industrial revenue bonds and a note
payable. The outstanding balances at December 31, 1994 are $3.3
million and $1.7 million, respectively. A portion of the
Company's production facility at South Hutchinson, Kansas, serves
as security for industrial revenue bonds. The aggregate
principal amount of those bonds outstanding as of December 31,
1994, is $0.3 million, and the bonds mature in August 1995, at
which time the property may be purchased by the Company for a
nominal amount. The production facility located at Cherokee,
Iowa, is subject to a long-term capital lease in the amount of
$1.1 million. The remaining leased facilities are held under
agreements which provide for fixed annual rental payments. The
Company believes its facilities are in good repair and adequate
to meet the Company's current needs.
Item 3. LEGAL PROCEEDINGS
In September 1992, United Refrigerated Services, Inc.
("URS") filed suit against Wilson Foods Company, a subsidiary of
the Company ("Wilson"), and unaffiliated parties Normac Foods,
Inc. ("Normac") and Thompson Builders of Marshall, Inc.
("Thompson") in the Circuit Court of Saline County, Missouri.
The URS lawsuit involves claims for property damage as a result
of a fire in a warehouse owned by URS in Marshall, Missouri, in
which Wilson was leasing space. The URS lawsuit is in discovery
stages. URS claims real and personal property damage of
approximately $15.0 million or, alternatively, for trebling of
the real property damage (currently estimated by the Company at
approximately $6.0 million, or $18.0 million in the aggregate).
In its answer, Wilson filed a counterclaim against URS
and a cross-claim against other codefendants for indemnity and/or
contribution. The fire occurred in a part of the URS warehouse
being leased by Wilson in which Wilson had produced sausage
patties under contract for Normac until the contract terminated
in September 1991. Normac's contractor, Thompson, was removing
Normac's equipment with a torch when fire broke out and destroyed
a large section of the URS warehouse and its contents.
In 1993, ConAgra, Inc. ("ConAgra") also filed suit
against Wilson, Normac and Thompson in Saline County, Missouri.
ConAgra seeks damages in the amount of $9.4 million from the
named defendants for frozen food that was stored in another part
of the Marshall warehouse at the time of the fire and allegedly
damaged. The ConAgra case also is in discovery.
The Company's insurer has retained counsel to defend
the Company in these matters. Wilson has substantial defenses to
these pending and threatened claims and the Company believes it
is not likely that Wilson will ultimately incur a loss in excess
of its insurance coverage.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by
this report, the Company has not solicited by proxy or otherwise
any vote of security holders on any matter.
Part II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock is traded in the over-the-counter
market under the Nasdaq National Market under the symbol "DOSK."
Following approval of the name change to "Foodbrands America,
Inc." by the Company's stockholders, the Nasdaq National Market
trading symbol will be "FBAI." Approximately 12,433,724 shares
of the Common Stock were outstanding as of March 2, 1995. The
number of holders of record of Common Stock at March 2, 1995 was
approximately 3,180.
The following table sets forth the range of high and
low closing bid prices for the Common Stock for each full
quarterly period in fiscal 1994 and fiscal 1993, respectively, as
quoted by the Nasdaq National Market.
High Bid Low Bid
________ _______
Fiscal 1994
First Quarter $15 1/4 $10 3/8
Second Quarter $13 1/2 $ 8 1/4
Third Quarter $ 9 7/8 $ 7 7/8
Fourth Quarter $ 9 1/8 $ 6
High Bid Low Bid
________ _______
Fiscal 1993
First Quarter $16 1/2 $13 1/2
Second Quarter $17 $14 3/4
Third Quarter $15 5/8 $10
Fourth Quarter $12 $ 9 5/8
The Company has not paid any cash dividends on the
Common Stock since its issuance. The Company does not expect to
pay any dividends in the foreseeable future and intends to
continue to retain any such earnings for the Company's
operations. Additionally, payment of such dividends is limited
by the terms of the Company's 1994 term loan agreement and the
indenture for the Company's 9 % Senior Subordinated Redeemable
Notes due 2000.
Item 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial
information and should be read in conjunction with the Financial
Statements and the Notes thereto and the related Management's
Discussion and Analysis of Financial Condition and Results of
Operations contained elsewhere herein. As a result of the
adoption of Fresh Start Reporting, historical financial data for
periods ended prior to September 29, 1991 is that of a different
reporting entity and is not prepared on a basis comparable to
financial data for periods ending after that date.
<TABLE>
<CAPTION>
Post-Confirmation Pre-Confirmation
_________________________________________________________________ ________________________________
Fiscal Year Fiscal Year Fiscal Year Three Months Nine Months Fiscal Year
Ended Ended Ended Ended Ended Ended
December 31, January 1, January 2, December 28, September 28, December 29,
1994 <F1> 1994 1993 1991 1991 1990
____________ ____________ ___________ ____________ _____________ ____________
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data |
|
Net sales $750,660 $648,207 $770,687 <F13> $208,691<F13>| $611,529 <F13> $877,568<F13>
======== ======== ======== ======== | ======== ========
|
Gross profit $146,409 $110,677 $109,338 $ 32,744 | $ 77,986 $ 97,070
Total operating expenses 138,672 <F2> 94,180 124,442 <F6> 23,891 | 68,926 87,909
________ ________ ________ ________ | ________ ________
|
Operating income (loss) $ 7,737 $ 16,497 $(15,104)<F13> $ 8,853<F13>| $ 9,060 <F13> $ 9,161<F13>
======== ======== ======== ======== | ======== ========
|
Income (loss) from |
continuing operations $(13,717) $ 2,407 $(26,834) $ 3,943 | $(48,424) <F7> $(32,562)<F7>
======== ======== ======== ======== | ======== ========
|
Net income (loss) $(16,198)<F3> $(32,019) <F4> $(26,834) $ 3,943 | $ 65,370 <F8> $(25,290)
======== ======== ======== ======== | ======== ========
|
Earnings (loss) per |
share: <F9> |
Income (loss) |
from continuing |
operations $ (1.57) $ 0.32 $ (4.63) $ 0.68 | $ (9.46) $ (6.37)
======= ====== ======== ======== | ======== ========
Net income (loss) $ (1.85) $(4.32) $ (4.63) $ 0.68 | $ 12.78 $ (4.94)
======= ====== ======== ======== | ======== ========
|
Balance Sheet Data |
|
Working capital <F10> $ 50,657 $ 34,682 $ 14,428 $ 15,852 | $ 16,938 $ 2,632
Total assets 457,704 316,881 290,978 311,912 | 321,200 438,534
Long-term debt <F10> 230,886 127,906 137,305 140,455 | 149,402 301,299
Other long-term |
obligations <F10> 80,331 83,517 <F5> 19,731 6,271 | 6,704 -
Stockholders' equity 78,487 55,569 61,639 88,075 | 84,132 31,034
|
Cash Flow Data |
|
Depreciation $ 12,611 <F12> $ 9,166 $ 11,479 $ 3,047 | $ 10,504 $ 10,135
Amortization <F11> 7,365 <F12> 6,183 6,307 1,436 | 3,963 4,676
Capital expenditures 14,621 19,690 6,604 1,193 | 5,816 1,606
Net cash provided (used) by |
operating activities 27,381 18,138 1,088 14,599 | (3) (32)
____________________
<FN>
<F1> Includes the results of operations of the Specialty Brands Division acquired on June 1, 1994. (See Item 7.)
<F2> Includes a $12.5 million provision for restructuring and integration. (See Note 3 to the Financial Statements.)
<F3> Includes an extraordinary loss of $2.5 million associated with the early extinguishment of debt. (See Note 7 to the Financial
Statements.)
<F4> Includes the cumulative effect on years prior to fiscal year ended January 1, 1994 for a change in accounting for
postretirement benefits other than pensions of a noncash charge against earnings of $34.4 million. (See Note 10 to the
Financial Statements.)
<F5> Includes the recognition of a long-term liability of $65.4 million for Postemployment Medical Benefits. (See Note 10 to the
Financial Statements.)
<F6> Includes a $32.0 million provision for plant closings. (See Note 5 to the Financial Statements.)
<F7> Includes reorganization expenses of $41.0 million and $12.7 million for the nine months ended September 28, 1991 and the year
ended December 29, 1990, respectively.
<F8> Includes an extraordinary gain of $113.8 million for the forgiveness of debt as part of the Chapter 11 reorganization of the
Company which became effective on October 31, 1991.
<F9> The per share amounts for fiscal year 1990 and the period ended September 28, 1991 do not provide meaningful comparisons due to
the Company's Chapter 11 reorganization.
<F10> Certain long-term obligations which were classified as current liabilities in fiscal 1990, due to bankruptcy proceedings, have
been reclassified as long-term obligations for consistent presentation.
<F11> Amortization of intangible assets only. Does not include amortization of certain other items included in interest expense of
$1.6 million and $0.7 million in the fiscal years ended December 31, 1994 and January 1, 1994, respectively, $4.1 million in
the nine months ended September 28, 1991 and $4.9 million in the fiscal year ended December 29, 1990.
<F12> Includes depreciation of $1.9 million and amortization of intangible assets of $1.2 million attributable to the Specialty
Brands Division acquired June 1, 1994.
<F13> Included in the selected financial data for the fiscal year 1992, the three months ended December 28, 1991, the nine months
ended September 20, 1991 and the fiscal year 1990 are the sales and operating income (loss) of the Company's slaughtering and
fresh pork business sold in 1993 of $138.8 million and $(3.7) million, $37.8 million and $0.2 million, $118.4 million and
$(5.2) million and $205.7 million and $(4.0) million, respectively.
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The financial results of the Company's operations in
recent years have been significantly affected by certain events
and accounting changes. In addition to the items noted in Item
6, Selected Financial Data, the following is a general discussion
of the impact of certain factors on the Company's financial
statements.
Acquisition. On June 1, 1994, the Company purchased
all Of the outstanding stock of International Multifoods
Foodservice Corp., a division of International Multifoods
Corporation, for approximately $137.7 million, including
transaction related costs of the acquisition. The business,
which has been renamed Doskocil Specialty Brands Company,
operates as the fourth operating division of the Company. The
Specialty Brands Division manufactures frozen food products,
including ethnic foods in the Mexican and Italian segments, as
well as appetizers, entrees and portioned meats. The acquisition
has been accounted for by the purchase method of accounting. The
excess of the aggregate purchase price over fair value of net
assets acquired of approximately $67.6 million and trademarks at
a fair value of $9.7 million were recognized as intangible assets
and are being amortized over 40 and 25 years, respectively.
Restructuring and Integration. Subsequent to the
acquisition of the Specialty Brands Division, the Company
performed an evaluation of the integration of that division into
its overall operations. As disclosed in its fiscal 1994
quarterly reports, the Company was, at that time, unable to
quantify a restructuring or impairment provision, if any. In
December 1994, the Company announced that the restructuring
program had been finalized and would result in a $12.5 million
charge against operating income in 1994. The restructuring
program is part of a broader multi-faceted plan providing for
realignment, consolidation and improvement of a number of the
Company's activities. The purpose of the restructuring is to
strengthen the Company's competitive position in the processed
food business. The restructuring program identifies specific
manufacturing facilities and operations that relate to excess
capacity, as well as duplication of activities after the
acquisition of the Specialty Brands Division. The charge also
includes costs, incurred prior to year-end, associated with the
corporate legal restructuring to preserve the Company's income
tax net operating loss carryforwards ("NOLs"), as described in
the "Income Taxes" section below, and to change the Company's
name to Foodbrands America, Inc., which management of the Company
believes better reflects the Company's operations and products
after the restructuring and integration program is completed.
In 1995 the Company will reduce administrative
functions and close certain production and distribution
facilities and dispose of these facilities, equipment and
fixtures as soon as feasible. The production capacity and
related sales will be absorbed by the Company's other operations.
The transfer of such production will more fully utilize idle
manufacturing capacity at other plants and streamline the
distribution, transportation and administrative support systems.
Operations absorbing the activities of closed facilities will
expand their workforce as necessary. The Company will also rely
on third party suppliers to provide some products affected by the
closure of certain production facilities. Under the
restructuring program, the Company has identified approximately
570 employees, both production and management, at six locations,
whose employment will be terminated at various dates throughout
1995. The termination benefits required by Company policy and/or
union contracts to be provided to these employees, of
approximately $4.0 million, have been accrued at December 31,
1994. Normal salaries and benefits paid prior to termination
have not been included in this accrual. The write-down of
facilities and certain production operations and equipment
associated with the restructuring and integration program, net of
estimated market value, less cost of disposal, totals
approximately $7.0 million. Costs of $1.5 million were incurred
prior to December 31, 1994, in connection with this program and
were included in the $12.5 million provision. The Company has
also identified additional costs totaling approximately $2.0
million that will be incurred primarily during the second and
third quarters of 1995, but are not presently accruable under
generally accepted accounting principles.
Income Taxes. After considering utilization
restrictions, the Company believes it has approximately $133.4
million of NOLs which will be available as follows: $87.9
million in 1995, $13.3 million in each of the years 1996 through
1998, $5.0 million in 1999 and $0.6 million in 2000. NOLs not
utilized in the first year that they are available may be carried
over and utilized in subsequent years, subject to their
expiration provisions. These carryforwards expire as follows:
$43.6 million in 1996, $17.5 million in 1998, $6.0 million in
1999, $.8 million in 2000 and $65.5 million during the years 2001
through 2009. As a result, management anticipates that the
Company's cash income tax liability for the next four to five
years will not be material.
The amount of the Company's NOLs and the limitation of
their availability are subject to significant uncertainties. In
addition, a future change in stock ownership could result in the
Company's NOLs being substantially reduced or eliminated. The
Company has proposed to its stockholders implementation of
certain stock transfer restrictions which will reduce this risk
of loss. In accordance with Fresh Start Reporting, the Company
will not reflect the realized income tax benefit of
pre-reorganization NOLs in its statement of operations. Instead,
such benefit is reflected as a reduction in the "Reorganization
Value in Excess of Amounts Allocable to Identifiable Assets"
("Reorganization Value"), thus reducing future intangible
amortization expense.
In 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". Implementing the standard resulted in the
Company recording a deferred tax benefit of approximately $31.0
million for deductible temporary differences consisting primarily
of future retiree medical benefit obligations and pension
obligations. The Company provided a valuation allowance for the
remaining net deductible temporary differences and NOLs. In
determining the valuation allowance, the Company considers
projected taxable income during the next four years. The
projected taxable income before NOLs is expected to be
significantly higher than the financial pre-tax income due to the
non-deductible amortization of the intangible assets related to
Reorganization Value and other non-deductible intangible assets
and the fact that the tax basis of the assets was not increased
as a result of the reorganization in September 1991.
Accordingly, the Company expects to realize the net deferred tax
asset from future operations, which contemplates annual increases
in sales consistent with industry projections, and historical
operating margins but does not anticipate any material asset
sales or other unusual transactions. Due to the
non-deductibility of amortization of certain intangible assets,
the annual effective tax rate in future years is expected to be
significantly in excess of the statutory income tax rate.
Results of Operations
Comparability of Periods. Because of the acquisition
of the Specialty Brands Division on June 1, 1994, the financial
statements for the year ended December 31, 1994, include
approximately 31 weeks of operating results of the Specialty
Brands Division. Net sales, gross profit and operating income,
before restructuring and integration costs, attributable to the
Specialty Brands Division for this 31 week period are $112.8
million, $34.2 million and $8.7 million, respectively.
The Fiscal Year Ended December 31, 1994 ("Fiscal 1994")
Compared to the Fiscal Year Ended January 1, 1994 ("Fiscal
1993"). The Company's net sales for Fiscal 1994 increased $102.5
million or 15.8% over Fiscal 1993 sales of $648.2 million. Net
sales for Fiscal 1994 of $750.7 million includes sales volume
increases in the Food Service and Deli Divisions along with the
addition of the sales of the Specialty Brands Division of $112.8
million. These increases were partially offset by volume
decreases in the Retail Division and decreases in raw material
costs which resulted in decreases in sales dollars per pound.
Retail Division volume declined due to the elimination of certain
commodity type products.
Gross profit for Fiscal 1994 increased 32.3%, or $35.7
million over Fiscal 1993 gross profit of $110.7 million. Fiscal
1994 gross profit of $146.4 million includes the Specialty Brands
Division gross profit contribution of $34.2 million. Increases
also were provided by increased sales volumes and improved
product mix and production efficiencies in the Food Service and
Deli Divisions. These increases were offset by the negative
impact of lower sales prices and volumes and higher production
costs in the Retail Division. The Retail Division's operations
also were negatively affected by production inefficiencies at the
Company's new Forrest City, Arkansas facility.
Selling expenses of $91.3 million in Fiscal 1994
increased 49.9% or $30.4 million, over Fiscal 1993 selling
expenses of $60.9 million. The primary component of the increase
is the addition of the Specialty Brands Division with $21.6
million of selling expenses. The remainder of the increase is
due to increased marketing and brokerage costs in the other
divisions, primarily the Retail Division. The increases in the
Food Service and Deli Divisions is due to improved sales volume.
The Retail Division marketing efforts were intensified in an
effort to mitigate sales volume decreases.
General and administrative expenses in Fiscal 1994
increased $0.9 million over Fiscal 1993 expenses of $26.6
million, an increase of 3.5%. Included in the Fiscal 1994 total
of $27.5 million are general and administrative expenses relating
to the Specialty Brands Division of $2.6 million. The reduction
in general and administrative expenses in other divisions is due
primarily to the effect of cost reduction programs instituted in
1993 and 1994.
Amortization of intangible assets, a noncash element of
operating expense, increased approximately $1.2 million in Fiscal
1994 over Fiscal 1993 due to the Specialty Brands acquisition.
Interest and financing costs for Fiscal 1994 increased
$6.3 million or 45.7% over Fiscal 1993 costs of $13.8 million.
The increase is due to increased interest costs of $5.3 million
as a result of increased borrowings, generally higher interest
rates and increased amortization of debt issue costs of $1.0
million. Long-term debt at December 31, 1994 was approximately
$103.0 million higher than long-term debt at January 1, 1994.
Amortization included in interest expense for Fiscal 1994 and
Fiscal 1993 was $1.6 million and $0.7 million, respectively.
During 1994, the Company incurred an extraordinary loss
on the early extinguishment of debt of $2.5 million. This loss
related to the write off of remaining unamortized deferred loan
costs and the termination of the related interest rate swap
agreement.
Fiscal 1993 Compared to The Fiscal Year Ended January
2, 1993 ("Fiscal 1992"). Net sales of processed product for
Fiscal 1993 totaled $648.2 million compared to $631.9 million for
Fiscal 1992, an increase of $16.3 million, or 2.6%. This
increase is due primarily to increased volumes partially offset
by a temporary decrease in sales price per pound in certain
product lines. Total sales for Fiscal 1992 of $770.7 million
included $138.8 million of sales from fresh pork operations.
Gross profit for Fiscal 1993 was $110.7 million, an
increase of $1.4 million, or 1.3%, from gross profit of $109.3
million for Fiscal 1992. This increase resulted primarily from
cost savings programs and improvements in product mix partially
offset by decreases in margin per pound due to competitive
pricing pressure in certain product lines and increased noncash
expense resulting from the previously described adoption of the
accounting standard relating to Postemployment Medical Benefits.
Selling, general and administrative expense for Fiscal
1993 of $87.5 million was greater than Fiscal 1992 of $86.1
million by $1.4 million, or 1.6%. Selling expense increased
approximately $2.0 million as a result of additional promotion
expense and hiring and training cost incurred for additional
staff to support growth in the Company's Food Service and Deli
Divisions. The increase in selling expense was partially offset
by a $0.6 million net decrease in general and administrative
expense. A $2.0 million decrease in general and administrative
expense, which resulted from cost reduction programs and
decreased incentive cost, was partially offset by approximately
$1.5 million of additional cost for the settlement of certain
employment agreements.
In December 1993 the Company entered into a contract
for the sale of its processed food equipment manufacturing
division and recorded a provision for closing of $0.5 million.
Fiscal 1992 included a charge to operations of $32.0 million for
the closing of the Logansport facility as previously described.
Interest and financing costs for Fiscal 1993 increased
$2.4 million, or 20.6%, over Fiscal 1992 even though the average
debt outstanding decreased. Fixed interest rates on the
Company's new long term financing are higher than the variable
rates paid in Fiscal 1992. The financing, however, is less
restrictive and better supports the Company's growth objectives.
Cash Flows and Capital Expenditures
Fiscal 1994. Operating activities provided net cash of
$27.4 million in Fiscal 1994 compared to $18.1 million in Fiscal
1993. The Specialty Brands Division provided $10.6 million of
the total for Fiscal 1994. The cash provided by the results of
operations (net income) after adding back noncash items of
depreciation and amortization, post retirement medical benefits,
provisions for restructuring, integration and plant closings and
extraordinary loss on early extinguishment of debt was $21.0
million in Fiscal 1994, of which $11.8 million was provided by
the Specialty Brands Division, and $20.0 million in Fiscal 1993.
Additional increases in cash from operating activities resulted
primarily from decreases in accounts receivable, inventories and
deferred charges and other assets offset partially by decreases
in accounts payable and increases in other current assets.
The Company's Specialty Brands Division acquisition
costs of $137.7 million included net accounts receivable of $9.2
million, inventory of $21.8 million, other current assets of $0.4
million, intangible assets of $77.3 million and plant, property
and equipment of $39.5 million. The Company also assumed
liabilities of $10.5 million.
Cash expenditures for additions to property, plant and
equipment were approximately $14.6 million during Fiscal 1994.
Of this total, approximately $5.3 million of these expenditures
were primarily attributable to construction of additional
capacity in ham and sausage production and the remainder for
replacements and modifications to existing facilities. The
source of the funds for these expenditures was from cash
generated from operations, the receipt of escrowed funds related
to construction in progress and borrowings under existing credit
facilities.
In October 1994, the Company announced the completion
of a stock rights offering. The rights offering provided current
stockholders the ability to purchase 0.68 shares for each share
currently owned. The offering also provided an over-subscription
privilege for those who exercised more rights. As a result of
the offering, 4,511,867 rights were exercised at $9.00 per share
for gross proceeds of $40.6 million. Net proceeds, after
expenses, were $38.6 million. The Company used $35.0 million of
the proceeds to reduce bank debt. As a result of the offering,
JLL Associates, L.P. ("JLL") increased its ownership in the
Company to approximately 44.3% from 27.4% at January 1, 1994.
Fiscal 1993. Operating activities provided net cash of
$18.1 million in Fiscal 1993 compared to $1.1 million in Fiscal
1992. Investments in property, plant and equipment totaled $19.7
million during Fiscal 1993 compared to $6.6 million for fiscal
1992. These expenditures included construction of the new
facility at Forrest City, Arkansas, construction of additional
drying room at the Company's South Hutchinson, Kansas production
facility to support growth in the Food Service Division and $7.0
million of modifications and replacements at existing facilities.
The Company sold certain assets which had been classified as
Assets Held for Sale resulting in net proceeds of $14.9 million
offset by $16.9 million of net cash used by Assets Held for Sale.
The Company reduced its net borrowings by $26.8 million
during Fiscal 1993. The Company issued $110.0 million in 9 3/4%
Senior Subordinated Redeemable Notes due in the year 2000 (the
"Senior Subordinated Notes") and entered into a new revolving
working capital facility (the "1993 Credit Agreement"). Proceeds
were used to retire the previous bank credit agreement.
On March 22, 1993, JLL purchased from the Company two
million newly-issued shares of Common Stock at $15.00 per share
pursuant to a stock purchase agreement. The Company used the net
proceeds from the sale, $26.7 million, to repay indebtedness. As
a result of this purchase, JLL owned approximately 25% of the
Common Stock. As of January 1, 1994, through subsequent open
market purchases, JLL increased its ownership by approximately
2.4%. JLL holds the Common Stock subject to certain restrictions
including, among other things, the ability of JLL to resell or
otherwise transfer securities of the Company or to purchase
additional securities of the Company. This agreement also grants
certain demand and piggyback registration rights to JLL.
Fiscal 1992. Operating activities provided net cash of
approximately $1.1 million in Fiscal 1992. Significant uses of
cash in Fiscal 1992 resulted from decreases in accounts payable
and accrued liabilities of approximately $20.0 million primarily
as a result of payments of Chapter 11 related obligations, which
were established upon confirmation of the Plan of Reorganization
during the fourth quarter of 1991. These uses of cash were offset
by noncash items of $17.8 million resulting from depreciation and
amortization and $32.0 million resulting from the provision for
plant closing discussed above.
Investments in property, plant and equipment totaled
approximately $6.6 million during Fiscal 1992. These purchases
were primarily for modifications to existing facilities and
replacement of existing equipment. During Fiscal 1992, the
Company sold certain assets which had been classified as Assets
Held for Sale upon confirmation of the Plan of Reorganization.
Such sales resulted in net proceeds of $10.3 million.
Net borrowings during Fiscal 1992 under the Company's
various credit facilities decreased approximately $4.5 million.
Payments under the Amended and Restated Credit and Security
Agreement entered into in 1991 (the "1991 Credit Agreement")
reduced the balance outstanding under the 1991 Credit Agreement
term loan facility to $73.1 million at January 2, 1993, while net
borrowings increased the balance of the 1991 Credit Agreement
revolving credit facility to $64.0 million at January 2, 1993.
Payments on other mortgage debt and capitalized lease obligations
totaled approximately $7.0 million during Fiscal 1992.
Financial Condition and Liquidity
On May 25, 1994, the Company consummated a $146.0
million term loan (the "1994 Term Loan") and a $40.0 million
(subsequently amended to $59.4 million) revolving credit loan
(the "1994 Revolving Credit Loan"). The proceeds of these
transactions were net of $4.8 million of debt issuance costs.
The 1994 Term Loan was used to finance the purchase of the
Specialty Brands Division including all fees and expenses
associated with the acquisition, to repay amounts outstanding
under the 1993 Credit Agreement and to terminate the related
interest rate swap agreement. The proceeds of the 1994 Revolving
Credit Loan were used to repay additional amounts outstanding
under the 1993 Credit Agreement. The 1994 Revolving Credit Loan
includes a $5.0 million subfacility for standby and commercial
letters of credit. As a result of the bank debt reduction
discussed under "Cash Flow and Capital Expenditures", no payments
will be required under the 1994 Term Loan prior to June 1996.
The 1994 Revolving Credit Loan is due January 15, 2000. At
December 31, 1994, there were no borrowings under the 1994
Revolving Credit Loan and $59.4 million was available for
borrowing at that date.
Management believes that cash flow from operations
combined with the borrowing capacity available under the
Company's 1994 Revolving Credit Loan will be sufficient to meet
the Company's operating, capital expenditure and debt service
cash requirements for the foreseeable future.
Historically, the Company's business has been seasonal.
Such seasonality results in significantly different operating
capital needs during the year to finance varying levels of
inventory and accounts receivable. Such requirements are largest
when sales are highest which usually occurs around certain
holiday periods. Additional requirements also occur prior to
such seasonal sales peaks to finance a build up of inventory and
for inventory hedging programs more fully described below.
The Company's primary raw materials are fresh and
frozen meat, cheese and vegetables. Severe price swings in such
raw materials, and the resultant impact on the price the Company
charges for its products, at times have had, and may in the
future have, material adverse effects on the demand for the
Company's products and its profits. The Company utilizes several
techniques for reducing the risk of future raw materials price
increases. These techniques include purchasing and freezing raw
materials during seasonally low cost periods of the year,
negotiating certain minimum purchase commitments at set prices
and periodically entering into futures contracts. Such
techniques are generally employed prior to an expected seasonal
price increase to hedge the cost of raw materials for both firm
and forecasted sales commitments that will occur during a
seasonal sales peak.
Such futures contracts described above are accounted
for as hedges. Accordingly, resulting gains or losses are
deferred and recognized as part of the product cost. The
Company's fiscal year end is typically a seasonal low point in
hedging activities and deferred losses as of the end of Fiscal
1994, 1993 and 1992 were each less than $0.1 million.
Impact of Changing Prices and Inflation
As previously discussed, the impact of changing prices
on the Company's operations is primarily a function of the
Company's raw material commodity prices. These prices are
subject to many forces including those of the marketplace and
inflation. The Company does not believe that inflation played a
major role in either the cost of raw materials or labor, or the
selling price of its products during Fiscal 1994, Fiscal 1993 or
Fiscal 1992. Like many food processors, the Company periodically
adjusts selling prices of its products, subject to competitive
constraints and costs of raw materials.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's consolidated financial statements and
supplementary information are listed in Item 14 of this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections titled "Proposal I. Election of
Directors," "Directors," "Directors Whose Terms Expire in 1995,"
"Continuing Directors," "Meetings of Board of Directors and
Committees," "Executive Officers" and "Principal Stockholders" of
the Proxy Statement for the Annual Meeting of Stockholders are
incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The sections titled "Compensation of Directors and
Executive Officers," "Report of the Compensation Committee of the
Board of Directors," "Stock Price Performance Graph" and
"Proposal II. Amendment to Stock Incentive Plan" of the Proxy
Statement for the Annual Meeting of Stockholders are incorporated
herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The section titled "Principal Stockholders" of the
Proxy Statement for the Annual Meeting of Stockholders are
incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section titled "Certain Relationships and Related
Transactions" of the Proxy Statement for the Annual Meeting of
Stockholders is incorporated herein by reference.
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) List of Documents filed as part of this Report:
1. Financial Statements:
Page
Consolidated Balance Sheet at
December 31, 1994 and January 1, 1994 . . . F-1
Consolidated Statement of Operations
For the Years Ended December 31, 1994,
January 1, 1994, and January 2, 1993. . . . F-2
Consolidated Statement of Stockholders' Equity
For the Years Ended December 31, 1994,
January 1, 1994, and January 2, 1993. . . . F-4
Consolidated Statement of Cash Flows
For the Years Ended December 31, 1994,
January 1, 1994, and January 2, 1993. . . . F-5
Notes to Consolidated Financial Statements . . . F-7
Report of Independent Accountants. . . . . . . .F-24
Quarterly Results of Operations (Unaudited). . .F-25
2. Exhibits (numbered in accordance with Item 601
of Regulation S-K):
Exhibit Number Description
______________ ___________
3.1 Amended and Restated Certificate of
Incorporation of Doskocil Companies
Incorporated ("Doskocil")
3.2 Amended and Restated Bylaws of Doskocil
4.1 Specimen certificate for Doskocil Common
Stock, par value $.01 per share
4.2 Credit Agreement among Doskocil, the Several
Lenders from Time to Time Parties Thereto and
Chemical Bank, as Agent dated as of May 25,
1994
4.3 First Amendment to Credit Agreement dated
November 2, 1994
4.4 Second Amendment to Credit Agreement dated
February 10, 1995
4.5 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000
4.6 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee
4.7 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National
Association, New York, as Trustee dated as of
June 1, 1994
4.8 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory
banks thereto
4.9 Amended and Restated Certificate of
Incorporation of Doskocil (see Exhibit 3.1
above)
4.10 Amended and Restated Bylaws of Doskocil (see
Exhibit 3.2 above)
4.11 Doskocil Companies Incorporated Retirement
and Profit Sharing Plan
4.12* Doskocil Companies Incorporated 1992 Stock
Incentive Plan, as amended
4.13 Lease by and between the City of South
Hutchinson, Kansas and Doskocil dated
August 1, 1985
4.14 Guaranty Agreement between Doskocil and The
Fourth National Bank and Trust Company,
Wichita, dated August 1, 1985
4.15 Agreement for Waste Water Treatment Service
between Stoppenbach, Inc. and The City of
Jefferson, Wisconsin dated November 1985
10.1 Credit Agreement among Doskocil, the Several
Lenders from Time to Time Parties Thereto and
Chemical Bank, as Agent dated as of May 25,
1994 (see Exhibit 4.2 above)
10.2 First Amendment to Credit Agreement dated
November 2, 1994 (see Exhibit 4.3 above)
10.3 Second Amendment to Credit Agreement dated
February 10, 1995 (see Exhibit 4.4 above)
10.4 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (see Exhibit 4.5
above)
10.5 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (see Exhibit 4.6 above)
10.6 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National
Association, New York, as Trustee dated as of
June 1, 1994 (see Exhibit 4.7 above)
10.7 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory
banks thereto (see Exhibit 4.8 above)
10.8 Doskocil Companies Incorporated Retirement
and Profit Sharing Plan (see Exhibit 4.11
above)
10.9* Doskocil Companies Incorporated Annual
Incentive Plan
10.10* Doskocil Companies Incorporated 1992 Stock
Incentive Plan, as amended (see Exhibit 4.12
above)
10.11 Wilson Foods Corporation Retirement and
Profit Sharing Plan for Salaried Employees of
Wilson Foods Corporation effective January 1,
1985, restated December 31, 1987
10.12* Employment Agreement dated November 1, 1991,
between Doskocil and John Hanes
10.13* Separation Agreement and Release dated
December 31, 1993 between Doskocil and John
Hanes
10.14* Employment Agreement dated November 1, 1991,
between Doskocil and Theodore A. Myers
10.15* Settlement Agreement dated July 6, 1993
between Doskocil and Theodore A. Myers
10.16* Employment Agreement dated August 2, 1994,
between Doskocil and R. Randolph Devening
10.17* Employment Agreement dated May 3, 1994,
between Doskocil and Robert S. Wright,
amended August 17, 1994 and further amended
January 6, 1995
10.18* Employment Agreement dated January 30, 1995,
between Doskocil and Larry P. Swafford
10.19* Settlement Agreement dated December 2, 1994,
between Doskocil and Charles I. Merrick
10.20* Form of Transition Employment Agreement dated
on or after December 17, 1991, between
Doskocil and Thomas G. McCarley, William L.
Brady, David J. Clapp, Raymond J. Haefele,
Darian B. Andersen, Bryant P. Bynum, Lee C.
Harrison, T.D. Traver, Charles M. Sweeney,
Horst O. Sieben, Howard C. Madsen, Robert S.
Riddle, Charles E. Smith, Larry P. Swafford
and Gregory P. Ibsen
10.21* Non-Qualified Stock Option Agreement dated
September 29, 1994 between Doskocil and R.
Randolph Devening
10.22* Form of Non-Qualified Stock Option Agreement
dated on or after September 29, 1994 between
Doskocil and William L. Brady, Bryant P.
Bynum, David J. Clapp, Horst O. Sieben,
Thomas G. McCarley, Robert S. Wright, Raymond
J. Haefele and Howard C. Madsen
10.23* Separation Pay Plan, dated March 31, 1993
10.24 Form of Indemnification Agreement between
Doskocil and its non-employee Directors
10.25 Lease by and between the City of South
Hutchinson, Kansas and Doskocil dated
August 1, 1985 (see Exhibit 4.13 above)
10.26 Lease dated November 4, 1991, between
Doskocil and American General Life and
Accident Insurance Company
10.27 Lease Agreement dated April 4, 1992, between
Doskocil and Millard Refrigerated Services-
Atlanta, as amended
10.28 Agreement between Wilson Foods Corporation
and the City of Cherokee, Iowa, dated
February 28, 1964, and First Amendment
thereto dated October 24, 1978; Second
Amendment thereto dated February 24, 1981;
and Third Amendment thereto dated August 18,
1983, covering water and sewage services
10.29 Agreement dated December 26, 1989, by and
between the City of Cherokee, Iowa and Wilson
Foods Corporation, covering water rates
10.30 Equipment Lease Agreement between Wilson
Foods and MDFC Equipment Leasing Corporation,
dated May 20, 1992, and related unconditional
Guaranty executed by Doskocil dated June 11,
1992, and Equipment Lease Addendum to date
10.31 Stock Purchase Agreement by and between
Doskocil and JLL dated February 16, 1993
10.32 Agreement dated as of March 22, 1993, by and
between Joseph Littlejohn and Levy Fund,
L.P., The Airlie Group, L.P. and Doskocil
10.33 Stockholders Agreement dated as of March 22,
1993, by and between the Airlie Group, L.P.
and Doskocil
10.34 Master Equipment Lease between Doskocil and
Cargill Leasing Corporation dated September
1, 1993
10.35 Stock Purchase Agreement between
International Multifoods Corporation and
Doskocil Companies Incorporated dated as of
March 17, 1994
11.1 Calculation of Earnings Per Share
20.1** Annual Report on Form 11-K with Respect to
Doskocil Employee Investment Plan
21.1 Subsidiaries of Doskocil
22.1 Proxy Statement for Annual Meeting of
Stockholders
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
* Management contracts and compensatory plans or arrangements
** To be filed by amendment.
(b) Reports on Form 8-K.
[None]
<PAGE>
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands, except par value)
<CAPTION>
December 31, January 1,
1994 1994
____________ __________
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 1) $ 17,376 $ 6,203
Receivables 41,743 36,283
Inventories (Note 4) 56,192 39,984
Other current assets 3,346 2,101
________ ________
Total current assets 118,657 84,571
Property, plant and equipment - net of
accumulated depreciation and amortization
of $36,434 in 1994 and $20,046 in 1993
(Note 5) 115,724 77,678
Intangible assets, net of accumulated
amortization of $5,269 in 1994 and
$2,837 in 1993 97,072 22,163
Reorganization value in excess of amounts
allocable to identifiable assets, net
of accumulated amortization of $16,023 in
1994 and $11,090 in 1993 (Note 1) 82,629 87,562
Deferred charges and other assets (Note 9) 43,622 44,907
________ ________
$457,704 $316,881
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 3,066 $ 2,330
Accounts payable 16,175 10,357
Accrued liabilities (Note 6) 48,759 37,202
________ ________
Total current liabilities 68,000 49,889
Long-term debt (Note 7) 230,886 127,906
Other long-term liabilities (Note 10) 80,331 83,517
Commitments and contingencies (Note 11)
Stockholders' equity (Note 8):
Preferred stock, 4,000,0000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 20,000,000
shares authorized, 12,447,914 and
7,918,343 shares issued and
outstanding, respectively 124 79
Capital in excess of par value 151,046 112,315
Retained earnings (deficit) (71,108) (54,910)
Minimum pension liability adjustment (1,575) (1,575)
________ ________
78,487 55,909
Unearned compensation - (340)
________ ________
Total stockholders' equity 78,487 55,569
________ ________
$457,704 $316,881
======== ========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
________ ________ ________
<S> <C> <C> <C>
Net sales $750,660 $648,207 $770,687
Cost of sales 604,251 537,530 661,349
________ ________ ________
Gross profit 146,409 110,677 109,338
Operating expenses:
Selling 91,308 60,930 58,920
General and administrative 27,499 26,567 27,215
Amortization of intangible assets 7,365 6,183 6,307
Provision for restructuring and
integration (Note 3) 12,500 - -
Provision for plant closings (Note 5) - 500 32,000
________ ________ ________
Total 138,672 94,180 124,442
________ ________ ________
Operating income (loss) 7,737 16,497 (15,104)
Other income (expense):
Interest and financing costs (20,173) (13,849) (11,485)
Other, net (681) 178 112
________ ________ ________
Total (20,854) (13,671) (11,373)
Income (loss) before income taxes,
extraordinary item and cumulative
effect of a change in accounting
principle (13,117) 2,826 (26,477)
Provision for income taxes (Note 9) (600) (419) (357)
________ ________ ________
Income (loss) before extraordinary item
and cumulative effect of a change in
accounting principle (13,717) 2,407 (26,834)
Extraordinary loss on early extinguishment
of debt (Note 7) (2,481) - -
Cumulative effect on prior years (to
January 2, 1993) of change in
accounting for postretirement benefits
other than pensions (Note 10) - (34,426) -
________ ________ ________
Net income (loss) $(16,198) $(32,019) $(26,834)
======== ======== ========
</TABLE>
(continued)
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
________ _______ _______
<S> <C> <C> <C>
Earnings (loss) per share -
primary and fully diluted:
Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle $ (1.57) $ 0.32 $(4.63)
Extraordinary loss on early
extinguishment of debt (0.28) - -
Cumulative effect of change
in accounting for post-
retirement benefits other
than pensions (Note 10) - (4.64) -
_______ _______ ______
Net income (loss) $ (1.85) $ (4.32) $(4.63)
======= ======= ======
Weighted average number of
common and common equivalent
shares outstanding - primary
and fully diluted 8,727 7,419 5,790
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(In thousands)
<CAPTION>
Minimum
Capital in Retained Pension Unearned
_Common Stock_ Excess of Earnings Liability Compen-
Shares Amount Par Value (Deficit) Adjustment sation
______ ______ __________ ________ __________ _________
<S> <C> <C> <C> <C> <C> <C>
Balance, December 28, 1991 5,790 $ 58 $ 84,074 $ 3,943 $ - $ -
Net Loss - - - (26,834) - -
Issuance of shares under
Stock Incentive Plan (Note 10) 98 1 1,193 - - (1,193)
Amortization - - - - - 397
______ ____ ________ ________ _______ _______
Balance, January 2, 1993 5,888 59 85,267 (22,891) - (796)
Net Loss - - - (32,019) - -
Issuance of new shares 2,000 20 26,702 - - -
Minimum pension liability
adjustment - - - - (1,575) -
Net activity under Stock
Incentive Plan 30 - 346 - - 456
______ ____ ________ ________ _______ _______
Balance, January 1, 1994 7,918 79 112,315 (54,910) (1,575) (340)
Net Loss - - - (16,198) - -
Issuance of new shares (Note 8) 4,512 45 38,581 - - -
Net activity under Stock
Incentive Plan 18 - 150 - - 340
______ ____ ________ ________ _______ _______
Balance, December 31, 1994 12,448 $124 $151,046 $(71,108) $(1,575) $ -
====== ==== ======== ======== ======= =======
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
Doskocil Companies Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
_______________________________
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
________ ________ ________
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(16,198) $(32,019) $(26,834)
Adjustments to reconcile income (loss)
to net cash provided (used) by
operating activities:
Depreciation 12,611 9,166 11,479
Amortization of intangible assets 7,365 6,183 6,307
Amortization included in interest
expense 1,602 666 -
Provision for restructuring and
integration 12,500 - -
Postretirement medical benefits 670 1,090 -
Provision for plant closing
and sale - 500 32,000
Extraordinary loss on early
extinguishment of debt 2,481 - -
Cumulative effect of accounting
change - 34,426 -
Changes in:
Receivables 3,774 (1,761) (860)
Inventories 5,209 (1,054) (257)
Other current assets (875) 1,625 (109)
Deferred charges and other assets 357 (609) -
Accounts payable and accrued
liabilities (2,138) (8) (20,661)
Noncurrent liabilities - (159) -
Other 23 92 23
________ _______ _______
Net cash provided by operating
activities 27,381 18,138 1,088
________ _______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of International Multifoods
Foodservice Corp., net of cash
acquired (137,684) - -
Purchase of property, plant
and equipment (14,621) (19,690) (6,604)
Proceeds from sale of
property, plant and equipment 437 14,900 10,271
Net cash used by Assets Held
for Sale - (16,914) (1,554)
Payments received on notes receivable 672 517 -
________ _______ _______
Net cash provided (used) by
investing activities (151,196) (21,187) 2,113
________ _______ _______
(Continued)
</TABLE>
<PAGE>
<TABLE>
Doskocil Companies Incorporated and Subsidiaries
Consolidated Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Fiscal Year Ended
______________________________
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
________ ________ _______
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations, net
of issuance costs 141,154 109,255 -
Borrowings under revolving working
capital facility 195,500 99,233 94,282
Payments on revolving working capital
facility (203,500) (157,011) (85,282)
Payments on capital lease and
debt obligations (37,859) (78,259) (13,534)
Proceeds from other debt obligations 2,155 - -
Issuance of common stock, net 38,626 26,722 -
Payment on early extinguishment of debt (1,088) - -
________ _______ _______
Net cash provided (used) by
financing activities 134,988 (60) (4,534)
________ _______ _______
Increase (decrease) in cash
and cash equivalents 11,173 (3,109) (1,333)
Cash and cash equivalents,
beginning of period 6,203 9,312 10,645
________ _______ _______
Cash and cash equivalents,
end of period $ 17,376 $ 6,203 $ 9,312
======== ======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the year for:
Interest $ 19,441 $ 8,406 $ 13,826
Income taxes 442 815 175
Reorganization professional and
financing fees - 319 6,173
Supplemental disclosure of noncash
investing activities:
Capital lease obligations assumed 3,403 1,616 2,872
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
DOSKOCIL COMPANIES INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Description of Business and Summary of Significant
Accounting Policies
a. Description of Business:
The Company specializes in formulating, processing,
marketing and distributing specialty food products
to the foodservice, delicatessen and retail
markets.
The Company's annual reporting period ends on the
Saturday nearest December 31. Accordingly, the
annual reporting periods ended December 31, 1994
and January 1, 1994 contained 52 weeks and the
annual reporting period ended January 2, 1993
contained 53 weeks.
b. Principles of Consolidation:
The consolidated financial statements include the
accounts of Doskocil Companies Incorporated
("Doskocil") and all of its subsidiaries. Certain
prior year balances have been reclassified to
conform to the current year's presentation.
c. Cash and Cash Equivalents:
The Company considers cash equivalents to include
all investments with a maturity at date of purchase
of 90 days or less. Cash equivalents of $18.8
million and $6.0 million at December 31, 1994 and
January 1, 1994 represent investments primarily in
Commercial Paper and U.S. Government Securities,
carried at cost, which approximates market.
d. Concentrations of Credit Risk
The concentrations of credit risk with respect to
trade receivables are, in management's opinion,
considered minimal due to the Company's diverse
customer base. The Company sells to customers
located throughout the United States and in certain
foreign countries. Credit evaluations of its
customers' financial conditions are performed
periodically, and the Company generally does
not require collateral from its customers. As of
December 31, 1994, the Company had concentrations
of cash in bank balances totaling approximately
$4.7 million located at 9 banks which exposes the
Company to concentrations of credit risk.
e. Inventories:
Inventories are valued at the lower of cost
(first-in, first-out) or market. The Company
periodically enters into livestock futures
contracts as deemed appropriate to reduce the risk
of future price increases. These futures contracts
are accounted for as hedges. Accordingly,
resulting gains or losses are deferred and
recognized as part of the product cost and included
in cash flows from operating activities in the
Consolidated Statement of Cash Flows.
f. Property, Plant and Equipment:
Property, plant and equipment are stated at cost if
acquired after September 28, 1991, the date the
Company implemented Fresh Start Reporting as set
forth in Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"), issued by the
American Institute of Certified Public Accountants.
When assets are sold or retired, the costs of the
assets and the related accumulated depreciation are
removed from the accounts and the resulting gains
or losses are recognized.
Depreciation and amortization are provided using
the straight-line method over either the estimated
useful lives of the related assets (3 to 40 years)
or, for capital leases, the terms of the related
leases.
g. Intangible Assets and Reorganization Value:
The excess of the aggregate purchase price over
fair value of net assets acquired ("Goodwill") is
being amortized over 40 years. Trademarks and
tradenames are amortized on the straight-line
method over 20 to 25 years.
Based on the allocation of reorganization value in
conformity with the procedures specified by SOP
90-7, the portion of the reorganization value which
cannot be attributed to specific tangible or
identifiable intangible assets of the reorganized
Company has been reported as "Reorganization Value
in Excess of Amounts Allocable to Identifiable
Assets" ("Reorganization Value") and is amortized
using the straight-line method over 20 years.
The Company continually reevaluates the propriety
of the carrying amount of the Reorganization Value
and other intangibles as well as the amortization
period to determine whether current events and
circumstances warrant adjustments to the carrying
value and/or revised estimates of useful lives.
The specific methodology of future pre-interest
cash flows (with assets grouped by division which
is the lowest level for which there are
identifiable cash flows) is used for this
evaluation. At this time, the Company believes
that no impairment of the Reorganization Value and
other intangibles has occurred and that no
reduction of the estimated useful lives is
warranted.
h. Deferred Charges and Other Assets:
Deferred loan costs associated with various debt
instruments issued in 1994 and 1993 are being
amortized over the terms of the related debt using
the interest method. At December 31, 1994 and
January 1, 1994, $7.0 million and $5.1 million,
respectively, remained to be amortized over future
periods. Amortization expense for these loans
included in interest expense for fiscal 1994
and 1993 was approximately $1.5 million and $0.6
million, respectively.
i. Income Taxes:
The Company utilizes the asset and liability
approach for financial accounting and reporting for
income taxes as set forth in Statement of Financial
Accounting Standards No. 109 ("SFAS 109"),
"Accounting for Income Taxes." SFAS 109 utilizes
the liability method and deferred income taxes are
recorded to reflect the expected tax consequences
in future years of differences between the tax
basis of assets and liabilities and their financial
reporting amounts and net operating loss
carryforwards ("NOLs") at each year-end.
j. Earnings (Loss) Per Common Share:
Primary and fully diluted earnings (loss) per share
are computed by dividing net income (loss) by the
weighted average number of common and common
equivalent shares outstanding during each period.
Options and warrants which have a dilutive effect
are considered in the per share computations.
Note 2 Acquisition
On June 1, 1994, the Company purchased all of the
outstanding stock of International Multifoods Foodservice Corp.,
a division of International Multifoods Corporation, for
approximately $137.7 million, including other costs of the
acquisition. The business, which has been renamed Doskocil
Specialty Brands Company (the "Specialty Brands Division"),
operates as the fourth operating division of the Company. The
Specialty Brands Division manufactures frozen food products,
including ethnic foods in the Mexican and Italian segments, as
well as appetizers, entrees and portioned meats. The acquisition
has been accounted for by the purchase method of accounting. The
excess of the aggregate purchase price over fair value of net
assets acquired of approximately $67.6 million and trademarks at
a fair value of $9.7 million were recognized as intangible assets
and are being amortized over 40 and 25 years, respectively.
The operating results of the Specialty Brands Division are
included in the Company's consolidated results of operations from
the date of acquisition. The following unaudited pro forma
consolidated financial information assumes the acquisition
occurred at the beginning of 1993. These results have been
prepared for comparative purposes only and do not purport to be
indicative of what would have occurred had the acquisition been
made at the beginning of 1993, or of the results which may occur
in the future.
Year Ended
__________________
Dec. 31, Jan. 1,
1994 1994
________ ________
(in thousands,
except per share)
Net sales $829,574 $831,537
Operating income 11,988 30,257
Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle (13,421) 6,078
Net income (loss) (15,902) (28,348)
Earnings (loss) per share -
primary and fully diluted:
Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle (1.54) 0.82
Net income (loss) (1.82) (3.82)
Note 3 Restructuring and Integration
In December 1994, the Company announced a restructuring
program that resulted in a $12.5 million charge against operating
income in 1994. The restructuring program identifies specific
manufacturing facilities and operations. The charge also
included costs incurred prior to year-end associated with the
corporate legal restructuring to preserve the Company's income
tax NOLs and to change the Company's name to Foodbrands America,
Inc.
In 1995 the Company plans to close certain production and
distribution facilities and dispose of these facilities,
equipment and fixtures as soon as feasible. Under the
restructuring program, the Company has identified approximately
570 employees, both production and management, at six locations,
whose employment will be terminated at various dates throughout
1995. The termination benefits required by Company policy and/or
union contracts to be provided to these employees, of
approximately $4.0 million, have been accrued at December 31,
1994. Normal salaries and benefits paid prior to termination
have not been included in this accrual. The write-down of
facilities and certain production operations and equipment
associated with the restructuring and integration program, net of
estimated market value, less cost of disposal, totals
approximately $7.0 million. Costs of $1.5 million were incurred
prior to December 31, 1994, in connection with this program and
were included in the $12.5 million provision.
Note 4 Inventories
Inventories at December 31, 1994 and January 1, 1994 are
summarized as follows (in thousands):
1994 1993
_______ _______
Raw materials and supplies $19,311 $ 8,176
Work in process 4,490 6,254
Finished goods 32,391 25,554
_______ _______
$56,192 $39,984
======= =======
Note 5 Property, Plant and Equipment
Property, plant and equipment at December 31, 1994 and
January 1, 1994 is summarized as follows (in thousands):
1994 1993
________ ________
Land $ 2,644 $ 630
Buildings and improvements 58,479 33,172
Machinery and equipment 82,429 49,134
Construction in progress 5,283 11,924
________ ________
148,835 94,860
Less accumulated depreciation and
amortization 36,434 20,046
________ ________
112,401 74,814
Assets to be disposed of, net 3,323 2,864
________ ________
$115,724 $ 77,678
======== ========
Assets to be disposed of represents facilities and equipment
that have been determined to be excess property and have or will
be closed and sold. In December 1993 the Company sold its
Logansport, Indiana facility. In December 1992, the Company
announced the closing of this facility and recorded a $32.0
million provision as its estimate of the related loss on sale of
assets, costs of employee severance compensation and benefits and
results of operations during the holding period. No gain or loss
resulted in 1993 in connection with this sale.
In January 1994, the Company sold all the assets of its
processed food equipment manufacturing division at South
Hutchinson, Kansas. A provision for loss was recorded in 1993
for $0.5 million in connection with the decision to sell the
unit.
Note 6 Accrued Liabilities
Accrued liabilities at December 31, 1994 and January 1, 1994
are summarized as follows (in thousands):
1994 1993
_______ _______
Interest $ 6,375 $ 5,634
Salaries, wages and payroll taxes 9,008 5,549
Employee medical benefits 8,899 7,299
Workers' compensation benefits 1,692 719
Pension and retirement benefits 1,797 2,209
Marketing expenses 7,955 2,588
Provision for facility restructuring
and integration 5,047 6,552
Other 7,986 6,652
_______ _______
$48,759 $37,202
======= =======
Reserves for prior shut-down and holding costs of closed
facilities totaling $6.6 million at January 1, 1994 were reduced
to $0.5 million at December 31, 1994 primarily as a result of
cash payments. Additionally, $3.8 million of related pension
benefits are recorded as long-term liabilities.
Note 7 Long-term Debt
Long-term debt, more fully described below, at December 31,
1994 and January 1, 1994 consisted of the following (in
thousands):
1994 1993
________ ________
Notes payable to banks $111,000 $ 8,000
Industrial revenue bonds and mortgage notes 5,275 6,077
9 3/4% Senior Subordinated Redeemable Notes
due 2000, net of discount 109,684 109,627
Capital lease obligations 7,993 6,532
________ ________
233,952 130,236
Less current maturities 3,066 2,330
________ ________
$230,886 $127,906
======== ========
Based on the borrowing rates currently available to the
Company for bank borrowings, industrial revenue bonds and
mortgage notes, with similar terms and average maturities, the
Company believes that the carrying amount of these long term
debts approximates face value. The fair value of the $110.0
million of 9 3/4% Senior Subordinated Redeemable Notes due 2000
(the "Senior Subordinated Notes") based on the quoted market
price is approximately $101.2 million.
The aggregate amounts of all long-term obligations which
become due during each of the next five fiscal years, excluding
obligations under capitalized leases, are as follows (in
millions): $1.1 in 1995, $15.8 in 1996, $30.9 in 1997, $31.9 in
1998 and $36.0 in 1999.
Notes Payable to Banks
On May 25, 1994, the Company consummated a $146.0 million
term loan (the "1994 Term Loan") and a $40.0 million revolving
credit loan (subsequently amended to $59.4 million) (the "1994
Revolving Credit Loan") provided by a bank group. The proceeds
of these transactions were net of $4.8 million of debt issuance
costs. The 1994 Term Loan was used to finance the purchase of
Specialty Brands including all fees and expenses associated with
the acquisition, to repay amounts outstanding under the credit
agreement dated April 28, 1993 (the "1993 Credit Agreement") and
to terminate the related interest rate swap agreement. The
proceeds of the 1994 Revolving Credit Loan were used to repay
additional amounts outstanding under the 1993 Credit Agreement.
The 1994 Revolving Credit Loan includes a $5.0 million
subfacility for standby and commercial letters of credit. The
1994 Term Loan and the 1994 Revolving Credit Loan rank senior to
all existing indebtedness and are collateralized by essentially
all the assets of the Company including accounts receivable,
inventory, general intangibles and mortgaged properties.
Borrowings under the 1994 Term Loan and the 1994 Revolving
Credit Loan bear interest at an annual rate equal to, at the
Company's option, either (i) Chemical Bank's Base Rate (as
defined in the agreement) plus 1 1/2% or (ii) the LIBOR Option
Rate (as defined in the agreement) plus 2 1/2%. On December 31,
1994, the weighted average interest rate on the borrowings was
8.17%. Interest on the borrowings is payable periodically in
arrears. Repayment of the 1994 Term Loan was scheduled to begin
December 1994 with payments at six-month intervals through
December 1999. As discussed in Note 8, the Company used $35.0
million of the proceeds from the sale of common stock to reduce
its outstanding borrowings under its 1994 Term Loan. As a
result of this prepayment, no payments will be required under the
1994 Term Loan prior to June 1996. The 1994 Revolving Credit
Loan is due January 15, 2000. On December 31, 1994, there were
no borrowings outstanding under the 1994 Revolving Credit Loan.
In connection with the extinguishment of the 1993 Credit
Agreement and termination of the above mentioned interest rate
swap agreement, the Company incurred an extraordinary loss in the
amount of $2.5 million.
The 1994 Term Loan and the Senior Subordinated Notes contain
certain restrictive covenants and conditions among which are
limitations on further indebtedness, restrictions on dispositions
and acquisitions of assets, limitations on dividends and
compliance with certain financial covenants, including but not
limited to minimum net worth and interest expense coverage.
Senior Subordinated Notes
The Senior Subordinated Notes mature on July 15, 2000.
Interest is payable on January 15 and July 15 of each year. The
Senior Subordinated Notes are redeemable at the option of the
Company, in whole or in part, at any time on or after July 15,
1998. If the Senior Subordinated Notes are redeemed during the
12-month period beginning July 15, 1998, the redemption price
(expressed as a percentage of principal amount) will be 103.0%,
and if they are redeemed during the 12-month period beginning
July 15, 1999, the redemption price will be 101.5%. The Senior
Subordinated Notes are unsecured and subordinated to all existing
and future senior indebtedness of the Company, including
borrowings under the 1994 Term and Revolving Credit Loans.
Industrial Revenue Bonds and Mortgage Notes
In July 1993, the Company entered into an agreement with the
Arkansas Development Finance Authority to borrow $4.0 million
using industrial revenue bonds. The interest rate is 6%.
Payments of approximately $58,000, principal and interest, are
due monthly through July 2000. In addition, the Company entered
into a note payable of approximately $1.8 million collateralized
by a mortgage with the City of Forrest City, Arkansas. The
interest rate on the note is 7%. Interest only for the first
year was due in July 1994 and quarterly payments of principal and
interest began in September 1994 and are due through September
2000.
Other industrial revenue bonds require a final annual
principal payment of approximately $0.3 million on August 1,
1995. Interest at the rate of 7.31% is due semi-annually on
February 1 and August 1.
Leases
The Company leases certain facilities, equipment and
vehicles under agreements which are classified as capital leases.
The building leases have original terms ranging from 20 to 25
years and have renewal options for varying periods ranging from
three years to 60 years. Most equipment leases have purchase
options at the end of the original lease term. Leased capital
assets included in property, plant and equipment at December 31,
1994 and January 1, 1994 are as follows (in thousands):
1994 1993
_______ _______
Buildings $ 2,666 $ 2,666
Machinery and equipment 10,441 6,669
_______ _______
13,107 9,335
Accumulated amortization 4,452 2,385
_______ _______
$ 8,655 $ 6,950
======= =======
Future minimum payments, by year and in the aggregate, under
noncancellable capital leases and operating leases with
initial or remaining terms of one year or more consist of the
following at December 31, 1994 (in thousands):
Capital Operating
Leases Leases
_______ _________
1995 $2,704 $ 3,867
1996 2,582 3,555
1997 1,811 2,855
1998 1,046 2,529
1999 863 2,593
Future years 779 2,905
______ _______
Total minimum lease payments 9,785 $18,304
Amounts representing interest 1,792 =======
______
Present value of net minimum
payments 7,993
Current portion 2,016
______
$5,977
======
The Company's rental expense for operating leases was (in
millions) $4.5, $4.0 and $3.0 for the fiscal years ended December
31, 1994, January 1, 1994 and January 2, 1993.
Note 8 Stockholders' Equity
In October 1994, the Company completed a stock rights
offering. The rights offering provided stockholders the ability
to purchase 0.68 shares for each share owned. As a result of the
offering, 4,511,867 rights were exercised at $9.00 per share for
gross proceeds of $40.6 million. Net proceeds, after expenses,
were $38.6 million. The Company used $35.0 million of the
proceeds to reduce bank debt.
At December 31, 1994, the Company has warrants outstanding
to purchase 282,036 shares. The warrant agreement provides the
holders an irrevocable put option, which obligates the Company to
repurchase the warrants at a price per warrant equal to the
excess of (i) the then-current market price per share of Common
Stock, over (ii) $17.53, which may be exercised by each of the
holders of the warrants only upon a Change of Control, as defined
in the current warrant agreement. The warrants may be exercised
through December 31, 1998.
Note 9 Income Taxes
Deferred tax assets primarily result from net operating loss
carryforwards and certain accrued liabilities not currently
deductible, and deferred tax liabilities result from the
recognition of depreciation and amortization in different periods
for financial reporting and income tax purposes. Valuation
allowances are established where necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense
results from the income tax payable for the year, the benefit
realized for pre-reorganization net operating losses and the
change during the year in deferred tax assets and liabilities.
This new standard was required to be implemented in 1993 and
resulted in the Company recording a net deferred tax benefit of
approximately $31.0 million for deductible temporary differences
consisting primarily of future retiree medical benefit
obligations and pension obligations. In determining the
valuation allowance, the Company considered projected taxable
income during the next four years. The $31.0 million deferred
tax benefit is included in Deferred Charges and Other Assets.
The provision for income taxes consists of the following
components (in thousands):
Fiscal Year Ended
________________________________
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
________ _______ _________
(Deferred
(Liability Method) Method)
____________________ _________
Current provision:
Federal $ - $ 44 $ 118
State 600 375 239
______ ______ ______
Total income tax expense $ 600 $ 419 $ 357
====== ====== ======
The effective tax rate on income before extraordinary item and
cumulative effect of a change in accounting principle differs
from the statutory rate as follows:
Fiscal Year Ended
________________________________
Dec. 31, Jan. 1, Jan. 2,
1994 1994 1993
________ _______ _________
(Deferred
(Liability Method) Method)
___________________ _________
Statutory rate (34.0)% 34.0% (34.0)%
Tax effect of:
Items relating to
Fresh Start Reporting - - (15.7)
Amortization of
intangible assets 16.0 74.4 8.1
State taxes, net of
federal benefit 3.0 8.7 .9
Alternative minimum tax - 1.6 .4
Limitation on recognition
of tax benefit 19.6 - 41.6
Benefit of net deductible
temporary differences - (103.9) -
_____ _____ _____
4.6% 14.8% 1.3%
===== ===== =====
At December 31, 1994 and January 1, 1994, the deferred tax
assets and deferred tax liabilities were as follows (in
thousands):
1994 1993
________ _______
Deferred tax assets:
Retiree medical benefit plan
accruals $ 26,805 $26,521
Pension plan accruals 5,373 6,524
Plant closing accruals 2,524 2,621
Employee compensation and benefits
accruals 7,111 3,552
Other accrued expenses 1,227 5,286
Net operating loss carryforwards 53,360 54,880
________ _______
Total deferred tax assets 96,400 99,384
________ _______
Deferred tax liabilities:
Capitalized leases (265) (167)
Accumulated depreciation (1,496) (7,613)
Intangible assets (9,059) (8,865)
Other (78) (78)
________ _______
Total deferred tax liabilities (10,898) (16,723)
________ _______
Net deferred tax assets 85,502 82,661
Valuation allowance (54,564) (51,723)
________ _______
Net deferred tax assets $ 30,938 $30,938
======== =======
At December 31, 1994, after considering utilization
restrictions, the Company's tax loss carryforwards approximated
$133.4 million. In accordance with the provisions of SOP 90-7,
benefits realized from preconfirmation net operating loss
carryforwards are used to reduce Reorganization Value in Excess
of Amounts Allocable to Identifiable Assets until such net
operating loss carryforwards are exhausted. The net operating
loss carryforwards are subject to utilization limitations due to
ownership changes. The net operating loss carryforwards may be
utilized to offset future taxable income as follows: $87.9
million in 1995, $13.3 million in each of years 1996 through
1998, $5.0 million in 1999 and $0.6 million in 2000. Loss
carryforwards not utilized in the first year that they are
available may be carried over and utilized in subsequent years,
subject to their expiration provisions. These carryforwards
expire as follows: $43.6 million in 1996, $17.5 million in 1998,
$6.0 million in 1999, $.8 million in 2000 and $65.5 million
during the years 2001 through 2009.
Note 10 Employee Benefit Plans
The Company and certain subsidiaries maintain employee
benefit plans covering most employees. All full-time employees
of the Company and its subsidiaries who have obtained the age of
21, have completed one year of employment and are not subject to
a collective bargaining agreement are permitted to contribute up
to 15% of their salary, not to exceed the limit set by the
Internal Revenue Service, to a 401(k) plan. The Company makes
contributions on behalf of each participant of a matching amount
not to exceed the employee's contribution or 3% of such
employee's salary.
Substantially all of the hourly employees at both Wilson
Foods Corporation ("Wilson Foods") and Stoppenbach, Inc.
("Stoppenbach"), subsidiaries of the Company, participate in
defined benefit pension plans. Information presented below
includes benefits and Company obligations associated with
participants of closed and sold operations. The funded status of
the defined benefit plans at December 31, 1994 and January 1,
1994 is as follows (in thousands):
1994 1993
_______ _______
Actuarial present value of benefit
obligations:
Vested benefit obligation $59,992 $66,137
======= =======
Accumulated benefit obligation $61,516 $67,760
======= =======
Projected benefit obligation $61,516 $67,838
Plan assets at fair value 48,722 51,910
_______ _______
Projected benefit obligation
in excess of plan assets 12,794 15,928
Unrecognized net actuarial loss -
difference in assumptions and actual
experience (1,637) (1,653)
Adjustment required to recognize
additional minimum liability 1,575 1,575
_______ _______
Accrued pension cost $12,732 $15,850
======= =======
Plan assets are comprised of cash and cash equivalents and
mutual funds investing primarily in interest bearing and equity
securities. The funding policy for the Wilson Foods plan is to
contribute amounts sufficient to meet the minimum funding
requirements of the Employee Retirement Income Security Act of
1974 (ERISA), and the Stoppenbach plan is funded based upon a
recommendation from the Company's actuary. Such contributions
have, in prior years, exceeded the minimum funding requirements.
Pension costs of the defined benefit plans for fiscal 1994,
1993 and 1992 are composed of the following components, based on
expected long-term rates of return of 8.5%, 9.0% and 9.0% and
discount rates of 8.75%, 7.5% and 6.5% for the Stoppenbach plan
and expected long-term rates of return of 8.5%, 8.5% and 8.5% and
discount rates of 8.75%, 7.5% and 8.5% for the Wilson Foods plan
(in thousands):
December 31, January 1, January 2,
1994 1994 1993
____________ __________ __________
Service cost for benefits
earned during the year $ 370 $ 304 $ 620
Interest cost on projected
benefit obligation 4,991 5,104 4,796
Return on plan assets (4,330) (3,667) (3,476)
Amortization of transition
obligation and unrecognized
prior service cost - 41 52
______ ______ ______
Total pension cost $1,031 $1,782 $1,992
====== ====== ======
Expenses for all of the Company's retirement plans for
fiscal years 1994, 1993 and 1992 were (in millions) $2.1, $3.0
and $3.4, respectively.
Wilson Foods provides life insurance and medical benefits
("Postretirement Medical Benefits") for substantially all retired
hourly and salaried employees under various defined benefit
plans, which prior to fiscal 1993 had been accounted for on the
pay-as-you-go method. Contributions are made by certain retired
participants toward their Postretirement Medical Benefits.
In 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" ("FAS 106"). Upon
adoption of the new standard, the Company recorded, in the first
quarter of 1993, a one-time, noncash charge for the cumulative
effect of the change in accounting principle of $34.4 million, a
deferred tax benefit of approximately $31.0 million and a
liability of $65.4 million for Postretirement Medical Benefits.
The obligation as of the beginning of fiscal 1993 represents the
discounted present value of accumulated retiree benefits, other
than pensions, attributed to employees' service rendered prior to
that date. The effect of adopting FAS 106 for the year ended
January 1, 1994 was to increase net periodic postretirement
benefit cost and decrease earnings before cumulative effect of
accounting change by $1.1 million ($0.15 per share) and increase
net loss by $35.5 million ($4.79 per share). Postretirement
benefit cost was $4.4 million for the year ended January 2, 1993
which was recorded on the pay-as-you-go basis.
The components of net periodic postretirement benefit cost
for the years ended December 31, 1994 and January 1, 1994 were as
follows (in thousands):
1994 1993
______ ______
Service cost $ 241 $ 343
Interest on accumulated benefit obligation 5,372 5,719
Other (21) -
______ ______
Net periodic postretirement benefit cost $5,592 $6,062
====== ======
The actuarial and recorded liabilities for these
Postretirement Medical Benefits at December 31, 1994 and January
1, 1994 were as follows (in thousands):
1994 1993
_______ _______
Accumulated postretirement benefit obligation:
Retirees and dependents $58,421 $66,417
Actives not fully eligible 341 3,948
Actives fully eligible 5,535 3,469
_______ _______
64,297 73,834
Assets at fair value (641) (307)
_______ _______
Accumulated postretirement benefit obligation
in excess of plan assets 63,656 73,527
Unrecognized net gain (loss) 2,965 (7,477)
Unrecognized prior service cost 391 403
_______ _______
Liability recognized on the balance sheet 67,012 66,453
Less current portion 5,076 4,759
_______ _______
Noncurrent liability for postretirement
medical benefits $61,936 $61,694
======= =======
For measuring the accumulated postretirement medical benefit
obligation, a 9.6% annual rate of increase in the per capita
claims cost was assumed for 1995. This rate was assumed to
decrease gradually to 8.4% by 2000, 7.4% by 2005, and 6.5% by
2010 and remain at that level thereafter. The weighted average
discount rate used in determining the accumulated obligation was
8.75% and 7.5% for fiscal 1994 and 1993, respectively. The
expected long-term rate of return on plan assets was 6.0% for
both fiscal years 1994 and 1993.
If the health care cost trend rate were increased 1.0%, the
accumulated benefit obligation as of December 31, 1994 would have
increased by $1.2 million. The effect of this change on the
aggregate of service and interest cost for the year ended
December 31, 1994 would be an increase of $0.1 million.
The 1992 Stock Incentive Plan (the "Plan") authorizes the
Company to grant stock options and/or Common Stock aggregating
810,000 shares to directors, officers and other key employees.
In February 1992, the Company granted 105,000 restricted shares
(11,666 shares subsequently lapsed), one-third of which vested
annually, beginning January 1, 1993. On January 1, 1995, the
remaining restricted shares vested. The Company also granted
105,000 performance shares (53,330 shares subsequently lapsed)
which vested annually over three years based upon the attainment
of targeted earnings. The number of performance shares that were
issued and vest by February 2, 1995, is 51,670 (which includes
35,416 shares issued under employee separation agreements). As
of December 31, 1994, the Company has also granted 1,198,190
Common Stock options (869,694 of which are subject to approval of
stockholders at the next annual meeting of stockholders)(67,334
of which subsequently lapsed) at option prices ranging from $9.00
to $16.00 per share. The options are exercisable over a three to
five year period.
Statement of Financial Accounting Standards No. 112
"Employer's Accounting for Postemployment Benefits" became
effective for fiscal year 1994. The Company generally does not
provide postemployment benefits, other than workers compensation
and long-term disability, the costs of which are estimated and
accrued as the events occur, accordingly, implementation of this
statement has not had a material effect on the Company's
financial condition or results of operations.
Note 11 Commitments and Contingencies
The Company has committed to minimum purchases of raw
materials and supplies for delivery at various times in 1995.
The total of such commitments at December 31, 1994, is
approximately $21.1 million.
In September 1992, United Refrigerated Services, Inc.
("URS") filed suit against Wilson Foods and unaffiliated parties
Normac Foods, Inc. ("Normac") and Thompson Builders of Marshall,
Inc. ("Thompson") in the Circuit Court of Saline County,
Missouri. The URS lawsuit involves claims for property damage as
a result of a fire in a warehouse owned by URS in Marshall,
Missouri, in which Wilson Foods was leasing space. The URS
lawsuit is in discovery stages. URS claims real and personal
property damage of approximately $15.0 million or, alternatively,
for trebling of the real property damage (currently estimated by
the Company at approximately $6.0 million, or $18.0 million in
the aggregate).
In its answer, Wilson Foods filed a counterclaim against URS
and a cross-claim against other codefendants for indemnity and/or
contribution. The fire occurred in a part of the URS warehouse
being leased by Wilson Foods in which Wilson Foods had produced
sausage patties under contract for Normac until the contract
terminated in September 1991. Normac's contractor, Thompson, was
removing Normac's equipment with a torch when fire broke out and
destroyed a large section of the URS warehouse and its contents.
In 1993, ConAgra, Inc. ("ConAgra") also filed suit against
Wilson Foods, Normac and Thompson in Saline County, Missouri.
ConAgra seeks damages in the amount of $9.4 million from the
named defendants for frozen food that was stored in another part
of the Marshall warehouse at the time of the fire and allegedly
damaged. The ConAgra case also is in discovery.
The Company's insurer has retained counsel to defend the
Company in these matters. Wilson Foods has substantial defenses
to these pending and threatened claims and the Company believes
it is not likely that Wilson Foods will ultimately incur a loss
in excess of its insurance coverage.
In the opinion of management, the Company's exposure to
loss, if any, under various claims and legal actions that have
arisen in the normal course of business, that are not covered by
insurance, will not be material.
Note 12 Segment Reporting
The Company produces, markets and distributes products
directed at two major groups within the food industry. The first
group is the food service product industry. The food service
industry encompasses all aspects of away-from-home food
preparation. The second group is the retail commodity meat case
business ("Retail"). The Retail industry is representative of
the meats and packaged meats department of a retail grocery
store.
Net sales, operating income, identifiable assets, capital
expenditures, and depreciation and amortization pertaining to the
industries in which the Company operates are presented below (in
thousands):
1994 1993 1992
Net Sales
Food Service Product $506,559 $386,245 $360,595
Retail 238,308 254,937 404,737
Other 5,793 7,025 5,355
________ ________ ________
$750,660 $648,207 $770,687
======== ======== ========
1994 1993 1992
Operating Income
Food Service Product $ 30,543 $ 22,558 $ 26,708
Retail (3,472) 13,069 (24,120)
Other (118) 308 483
________ ________ ________
26,953 35,935 3,071
General Corporate Expenses (19,216) (19,438) (18,175)
________ ________ ________
$ 7,737 $ 16,497 $(15,104)
======== ======== ========
Identifiable Assets
Food Service Product $359,732 $207,114 $162,891
Retail 97,460 108,885 122,254
Other 512 882 816
________ ________ ________
$457,704 $316,881 $285,961
======== ======== ========
Capital Expenditures
Food Service Product $ 10,063 $ 8,934 $ 3,421
Retail 4,558 10,756 3,183
Other - - -
________ ________ ________
$ 14,621 $ 19,690 $ 6,604
======== ======== ========
Depreciation and Amortization
Food Service Product $ 14,631 $ 10,649 $ 10,493
Retail 5,345 4,700 7,293
Other - - -
________ ________ ________
$ 19,976 $ 15,349 $ 17,786
======== ======== ========
Net sales by industry represents sales to unaffiliated
customers. There are no intersegment sales.
Operating income is net sales less operating expenses and
excludes interest expense and income taxes.
Identifiable assets are those used by or allocated to each
segment of the Company's operations. The Company is a holding
company and has no assets except its investment in its
subsidiaries which is eliminated in consolidation.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Doskocil Companies Incorporated
We have audited the consolidated financial statements of Doskocil
Companies Incorporated and subsidiaries as listed in Item 14(a)
of this Form 10-K, as amended. 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 in accordance with generally accepted
auditing standards. Those standards 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. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Doskocil Companies Incorporated and
subsidiaries as of December 31, 1994 and January 1, 1994, and the
consolidated results of their operations and their cash flows for
the years ended December 31, 1994, January 1, 1994, and January
2, 1993 in conformity with generally accepted accounting
principles.
As discussed in Note 11 to the consolidated financial statements,
effective January 3, 1993, the Company changed its method of
accounting for income taxes and its method of accounting for
postretirement benefits other than pensions.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
March 3, 1995
<PAGE>
<TABLE>
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED):
The following is a summary of the unaudited quarterly
results of operations for the years ended December 31, 1994 and
January 1, 1994.
(Amounts are in thousands except per share data.)
<CAPTION>
Quarter
_______________________________________
Year ended December 31, 1994<F1> First Second<F2> Third<F3> Fourth <F4>
________ ________ ________ ________
<S> <C> <C> <C> <C>
Net sales $156,223 $166,702 $205,355 $222,380
Gross profit 26,741 30,666 41,938 47,064
Net income (loss) (478) (1,767) (3,526) (10,427)
Earnings (loss) per share,
primary and fully diluted $(0.06) $(0.22) $(0.44) $(0.94)
</TABLE>
<TABLE>
<CAPTION>
Quarter
________________________________________
Year ended January 1, 1994 First<F5> Second Third Fourth <F6>
________ ________ ________ ________
<S> <C> <C> <C> <C>
Net sales $144,555 $158,066 $168,701 $176,885
Gross profit 24,083 25,852 28,060 32,682
Net income (loss) (35,956) 1,047 813 2,077
Earnings (loss) per share,
primary and fully diluted $(5.88) $0.13 $0.10 $0.26
__________
<F1> Includes the results of operations of the Specialty Brands
Division acquired June 1, 1994.
<F2> The second quarter of the year ended December 31, 1994 included
an extraordinary loss on early extinguishment of debt, net of
income tax benefit, of $1.0 million.
<F3> The third quarter of the year ended December 31, 1994 included a
charge to the extraordinary loss of $1.4 million for the reversal
of an income tax benefit.
<F4> The fourth quarter of the year ended December 31, 1994 included a
charge of $12.5 million for restructuring and integration.
<F5> The first quarter of the year ended January 1, 1994 included a
noncash charge of $34.4 million for the cumulative effect on
prior years of change in accounting for postretirement benefits
other than pensions.
<F6> The fourth quarter of the year ended January 1, 1994 included a
charge of $1.0 million under an employment agreement and a $0.5
million provision for plant closing.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
DOSKOCIL COMPANIES INCORPORATED
By:( William L. Brady)
William L. Brady
Vice President, Controller
and Assistant Corporate
Secretary
Dated: May 9, 1996
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
_______ ___________
3.1 Amended and Restated Certificate of
Incorporation of Doskocil Companies
Incorporated ("Doskocil") (incorporated herein
by reference to Exhibit 3.1 to Annual Report
on Form 10-K filed on March 31, 1994)
3.2 Amended and Restated Bylaws of Doskocil
(incorporated herein by reference to Exhibit
3.2 to Annual Report on Form 10-K filed on
March 31, 1994)
4.1 Specimen certificate for Doskocil Common
Stock, par value $.01 per share (incorporated
herein by reference to Exhibit 4.2 to
Registration Statement on Form S-8, dated
March 3, 1992, and filed on March 4, 1992)
4.2 Credit Agreement among Doskocil, the Several
Lenders from Time to Time Parties Thereto and
Chemical Bank, as Agent dated as of May 25,
1994 (incorporated herein by reference to
Exhibit 1 to Current Report on Form 8-K filed
on June 14, 1994)
4.3 First Amendment to Credit Agreement dated
November 2, 1994
4.4 Second Amendment to Credit Agreement dated
February 10, 1995
4.5 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (incorporated herein
by reference to Exhibit 4.22 to Amendment No.
2 to Registration Statement on Form S-1 filed
April 13, 1993)
4.6 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (incorporated herein by reference to
Exhibit 3 to Current Report on Form 8-K, dated
April 28, 1993, and filed April 30, 1993)
4.7 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National Association,
New York, as Trustee dated as of June 1, 1994
4.8 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory banks
thereto (incorporated herein by reference to
Exhibit 4.2 to Annual Report on Form 10-K,
dated March 12, 1992, and filed on March 13,
1992)
4.9 Amended and Restated Certificate of
Incorporation of Doskocil (see Exhibit 3.1
above)
4.10 Amended and Restated Bylaws of Doskocil (see
Exhibit 3.2 above)
4.11 Doskocil Companies Incorporated Retirement and
Profit Sharing Plan (incorporated herein by
reference to Exhibit 4.8 to Annual Report on
Form 10-K filed on March 31, 1994)
4.12* Doskocil Companies Incorporated 1992 Stock
Incentive Plan, as amended (incorporated
herein by reference to Exhibit 4.9 to Annual
Report on Form 10-K filed on March 31, 1994)
4.13 Lease by and between the City of South
Hutchinson, Kansas and Doskocil dated August
1, 1985 (incorporated herein by reference to
Exhibit 10.14 to Annual Report on Form 10-K,
dated April 12, 1991, and filed on April 15,
1991)
4.14 Guaranty Agreement between Doskocil and The
Fourth National Bank and Trust Company,
Wichita, dated August 1, 1985 (incorporated
herein by reference to Exhibit 4.12 to Annual
Report on Form 10-K, dated March 12, 1992, and
filed on March 13, 1992)
4.15 Agreement for Waste Water Treatment Service
between Stoppenbach, Inc. and the City of
Jefferson, Wisconsin, dated November 1985
(incorporated herein by reference to
Exhibit 4.13 to Annual Report on Form 10-K,
dated March 12, 1992, and filed on March 13,
1992)
10.1 Credit Agreement among Doskocil, the Several
Lenders from Time to Time Parties Thereto and
Chemical Bank, as Agent dated as of May 25,
1994 (see Exhibit 4.2 above)
10.2 First Amendment to Credit Agreement dated
November 2, 1994 (see Exhibit 4.3 above)
10.3 Second Amendment to Credit Agreement dated
February 10, 1995 (see Exhibit 4.4 above)
10.4 Form of Doskocil 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (see Exhibit 4.5
above)
10.5 Indenture between Doskocil and First Fidelity
Bank, National Association, New York, as
Trustee (see Exhibit 4.6 above)
10.6 First Supplemental Indenture between Doskocil
and First Fidelity Bank, National Association,
New York, as Trustee dated as of June 1, 1994
(see Exhibit 4.7 above)
10.7 Warrant Agreement dated as of October 31,
1991, between Doskocil and the signatory banks
thereto (see Exhibit 4.8 above)
10.8 Doskocil Companies Incorporated Retirement and
Profit Sharing Plan (see Exhibit 4.11 above)
10.9* Doskocil Companies Incorporated Annual
Incentive Plan (incorporated herein by
reference to Exhibit 10.4 to Annual Report on
Form 10-K, dated March 12, 1992 and filed
March 13, 1992)
10.10* Doskocil Companies Incorporated 1992 Stock
Incentive Plan, as amended (see Exhibit 4.12
above)
10.11 Wilson Foods Corporation Retirement and Profit
Sharing Plan for Salaried Employees of Wilson
Foods Corporation effective January 1, 1985,
restated December 31, 1987 (incorporated
herein by reference to Exhibit 10.15 to Annual
Report on Form 10-K, dated March 12, 1992, and
filed on March 13, 1992)
10.12* Employment Agreement dated November 1, 1991,
between Doskocil and John Hanes (incorporated
herein by reference to Exhibit 9 to Current
Report on Form 8-K, dated November 14, 1991,
and filed on November 15, 1991)
10.13* Separation Agreement and Release dated
December 31, 1993 between Doskocil and John
Hanes (incorporated herein by reference to
Exhibit 10.18 to Annual Report on Form 10-K
filed on March 31, 1994)
10.14* Employment Agreement dated November 1, 1991,
between Doskocil and Theodore A. Myers
(incorporated herein by reference to Exhibit
10 to Current Report on Form 8-K, dated
November 14, 1991, and filed on November 15,
1991)
10.15* Settlement Agreement dated July 6, 1993
between Doskocil and Theodore A. Myers
(incorporated herein by reference to Exhibit
10.20 to Annual Report on Form 10-K filed on
March 31, 1994)
10.16* Employment Agreement dated August 2, 1994,
between Doskocil and R. Randolph Devening
(incorporated herein by reference to the
exhibit filed with the Current Report on Form
8-K, dated August 15, 1994 and filed on August
17, 1994)
10.17* Employment Agreement dated May 3, 1994,
between Doskocil and Robert S. Wright, amended
August 17, 1994 and further amended January 6,
1995
10.18* Employment Agreement dated January 30, 1995
between Doskocil and Larry P. Swafford
10.19* Settlement Agreement dated December 2, 1994,
between Doskocil and Charles I. Merrick
10.20* Form of Transition Employment Agreement dated
on or after December 17, 1991, between
Doskocil and Thomas G. McCarley, William L.
Brady, David J. Clapp, Raymond J. Haefele,
Darian B. Andersen, Bryant P. Bynum, Lee C.
Harrison, T.D. Traver, Charles M. Sweeney,
Horst O. Sieben, Howard C. Madsen, Robert S.
Riddle, Charles E. Smith, Larry P. Swafford
and Gregory P. Ibsen (incorporated herein by
reference to Exhibit 10.18 to Amendment No. 3
to Registration Statement on Form S-1,
Registration Statement No. 33-59484, filed on
April 20, 1993)
10.21* Non-Qualified Stock Option Agreement dated
September 29, 1994 between Doskocil and R.
Randolph Devening
10.22* Form of Non-Qualified Stock Option Agreement
dated on or after September 29, 1994 between
Doskocil and William L. Brady, Bryant P.
Bynum, David J. Clapp, Horst O. Sieben, Thomas
G. McCarley, Robert S. Wright, Raymond J.
Haefele and Howard C. Madsen
10.23* Separation Pay Plan, dated March 31, 1993
(incorporated herein by reference to Exhibit 2
to Current Report on Form 8-K, dated June 10,
1993, and filed on July 13, 1993)
10.24 Form of Indemnification Agreement between
Doskocil and its non-employee Directors
(incorporated herein by reference to Exhibit
10.42 to Amendment No. 1 to Registration
Statement on Form S-1 dated March 24, 1993)
10.25 Lease by and between the City of South
Hutchinson, Kansas and Doskocil dated August
1, 1985 (see Exhibit 4.13 above)
10.26 Lease dated November 4, 1991, between Doskocil
and American General Life and Accident
Insurance Company (incorporated herein by
reference to Exhibit 10.35 to Annual Report on
Form 10-K, dated March 12, 1992 and filed on
March 13, 1992)
10.27 Lease Agreement dated April 4, 1992, between
Doskocil and Millard Refrigerated Services-
Atlanta, as amended (incorporated herein by
reference to Exhibit 10.27 to Registration
Statement on Form S-1 dated August 28, 1992)
10.28 Agreement between Wilson Foods Corporation and
the City of Cherokee, Iowa, dated February 28,
1964, and First Amendment thereto dated
October 24, 1978; Second Amendment thereto
dated February 24, 1981; and Third Amendment
thereto dated August 18, 1983, covering water
and sewage services (incorporated herein by
reference to Exhibit 10.34 to Registration
Statement on Form S-1 dated March 12, 1993)
10.29 Agreement dated December 26, 1989, by and
between the City of Cherokee, Iowa and Wilson
Foods Corporation, covering water rates
(incorporated herein by reference to Exhibit
10.35 to Registration Statement on Form S-1
dated March 12, 1993)
10.30 Equipment Lease Agreement between Wilson Foods
and MDFC Equipment Leasing Corporation, dated
May 20, 1992, and related unconditional
Guaranty executed by Doskocil dated June 11,
1992, and Equipment Lease Addendum to date
(incorporated herein by reference to Exhibit
10.38 to Amendment No. 1 to Registration
Statement on Form S-1 dated March 24, 1993)
10.31 Stock Purchase Agreement by and between
Doskocil and JLL dated February 16, 1993
(incorporated herein by reference to Exhibit 1
to Current Report on Form 8-K dated February
18, 1993 and Filed on February 19, 1993)
10.32 Agreement dated as of March 22, 1993, by and
between Joseph Littlejohn and Levy Fund, L.P.,
The Airlie Group, L.P. and Doskocil
(incorporated herein by reference to Exhibit
10.43 to Amendment No. 1 to Registration
Statement on Form S-1 dated March 24, 1993)
10.33 Stockholders Agreement dated as of March 22,
1993, by and between the Airlie Group, L.P.
and Doskocil (incorporated herein by reference
to Exhibit 10.44 to Amendment No. 1 to
Registration Statement on Form S-1 dated
March 24, 1993)
10.34 Master Equipment Lease between Doskocil and
Cargill Leasing Corporation dated September 1,
1993 (incorporated herein by reference to
Exhibit 10.35 to Annual Report on Form 10-K
filed on March 31, 1994)
10.35 Stock Purchase Agreement between International
Multifoods Corporation and Doskocil Companies
Incorporated dated as of March 17, 1994
(incorporated herein by reference to Exhibit
10.36 to Annual Report on Form 10-K filed on
March 31, 1994)
11.1 Calculation of Earnings Per Share
20.1** Annual Report on Form 11-K with Respect to
Doskocil Employee Investment Plan
21.1 Subsidiaries of Doskocil
22.1 Proxy Statement for Annual Meeting of
Stockholders (incorporated herein by reference
to Form S-4 Registration Statement filed on
February 17, 1995)
23.1 Consent of Independent Accountants
27.1 Financial Data Schedule
* Management contracts and compensatory plans or arrangements
** To be filed by amendment.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Foodbrands America, Inc. on Form S-8 (File no. 33-
45974) of our report, which includes an explanatory paragraph
relating to the Company's adoption of new methods of accounting
for income taxes and postretirement benefits other than pensions,
dated March 3, 1995, on our audits of the consolidated financial
statements of Foodbrands America, Inc. as of December 31, 1994
and January 1, 1994, and for the years ended December 31, 1994,
January 1, 1994, and January 2, 1993, which report is included in
this Annual Report on Form 10-K, as amended.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
May 9, 1996
