<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1996
REGISTRATION NO. 333-01911
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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FOODBRANDS AMERICA, INC.*
(Exact name of registrant as specified in its charter)
DELAWARE 13-2535513
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
1601 NORTHWEST EXPRESSWAY, SUITE 1700
OKLAHOMA CITY, OKLAHOMA 73118-1495
(405) 879-4100
(Address, including zip code and telephone number,
including area code, of registrants'
principal executive offices)
HORST O. SIEBEN
SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
FOODBRANDS AMERICA, INC.
1601 NORTHWEST EXPRESSWAY, SUITE 1700
OKLAHOMA CITY, OKLAHOMA 73118-1495
(405) 879-4100
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
------------------------------
COPIES TO:
John M. Mee, Esq. Jonathan A. Schaffzin, Esq.
Brice E. Tarzwell, Esq. Cahill Gordon & Reindel
McAfee & Taft A Professional 80 Pine Street
Corporation New York, New York 10005
Two Leadership Square, Tenth Floor (212) 701-3000
Oklahoma City, Oklahoma 73102
(405) 235-9621
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THE REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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* Information regarding additional registrants is contained in the table of
Additional Registrants.
<PAGE>
ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
EXACT NAME OF SUBSIDIARY GUARANTOR
REGISTRANTS AS SPECIFIED IN THEIR I.R.S. EMPLOYER
RESPECTIVE CHARTERS AND JURISDICTION IDENTIFICATION
OF INCORPORATION OR ORGANIZATION NO.
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<S> <C>
Brennan Packing Co., Inc., a
Delaware corporation........................................................................... 36-6047048
Continental Deli Foods, Inc.,
a Delaware corporation......................................................................... 73-0955617
Doskocil Food Service Company, L.L.C.,
an Oklahoma limited liability company.......................................................... 48-1175514
Specialty Brands, Inc.,
a Delaware corporation (formerly, Doskocil Specialty Brands Company)........................... 41-1564761
FBAI Investments Corporation, an
Oklahoma corporation........................................................................... 73-1484639
KPR Holdings, L.P., a Delaware
limited partnership............................................................................ 75-2513990
National Service Center, Inc.,
a Delaware corporation......................................................................... 48-1121753
RKR-GP, Inc., a Delaware corporation............................................................ 75-2513987
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MAY 9, 1996
P_R_O_S_P_E_C_T_U_S
$120,000,000
FOODBRANDS AMERICA, INC.
% SENIOR SUBORDINATED NOTES DUE 2006
----------------
Interest on the % Senior Subordinated Notes due 2006 (the "Notes") of
Foodbrands America, Inc. ("Foodbrands America" and, collectively with its
subsidiaries, the "Company") offered hereby (the "Offering") is payable
semi-annually in arrears on and of each year, commencing
, 1996. The Notes may be redeemed by Foodbrands America, in whole or in
part, at any time on or after , 2001 at the redemption prices set forth
herein, together with accrued and unpaid interest to the date of redemption. In
addition, on or prior to , 1999, Foodbrands America may redeem up to 25%
of the originally issued Notes, at a price of % of the principal amount
thereof, together with accrued and unpaid interest to the redemption date, with
the net proceeds of a Public Equity Offering (as defined herein) for gross
proceeds of $50.0 million or more; PROVIDED, not less than $75.0 million in
principal amount of Notes is outstanding thereafter. Upon a Change of Control
(as defined herein), (i) Foodbrands America will have the option to redeem the
Notes, in whole or in part, at a redemption price equal to the principal amount
thereof, together with accrued and unpaid interest to the date of redemption
plus the Applicable Premium (as defined herein) and (ii) subject to certain
conditions, each holder of Notes will have the right to require Foodbrands
America to purchase such holder's Notes at a purchase price equal to 101% of the
principal amount thereof, together with accrued and unpaid interest to the date
of purchase.
The Notes will be unconditionally guaranteed upon issuance, jointly and
severally, by substantially all of the direct and indirect subsidiaries of
Foodbrands America (the "Subsidiary Guarantors"). The Notes and the guarantees
of the Notes by the Subsidiary Guarantors (the "Note Guarantees") will be
unsecured and subordinated in right of payment to all existing and future Senior
Indebtedness (as defined herein) of Foodbrands America and Guarantor Senior
Indebtedness (as defined herein) of each Subsidiary Guarantor, respectively, and
will be senior in right of payment to all existing and future Subordinated
Indebtedness (as defined herein) of Foodbrands America and the Subsidiary
Guarantors. Under certain limited circumstances, the Note Guarantees may be
unconditionally released. As of March 30, 1996, after giving PRO FORMA effect to
the issuance of the Notes and the application of the estimated net proceeds
therefrom to purchase all of Foodbrands America's 9 3/4% Senior Subordinated
Redeemable Notes due 2000 (the "9 3/4% Notes") pursuant to the tender offer
referred to below, total consolidated debt of Foodbrands America and its
subsidiaries would have been $334.4 million, of which $214.4 million would have
been Senior Indebtedness or Guarantor Senior Indebtedness.
On March 29, 1996, Foodbrands America commenced a tender offer to purchase
up to all of its outstanding 9 3/4% Notes and a related consent solicitation to
amend or remove certain covenants of the indenture pursuant to which the 9 3/4%
Notes were issued (the "9 3/4% Indenture"). On April 24, 1996, Foodbrands
America extended the tender offer and increased the purchase price to 105 3/8%
(which includes the related consent fee) of the principal amount thereof,
together with accrued and unpaid interest to the date of purchase. On May 8,
1996, the tender offer was again extended. Such tender offer and related consent
solicitation are collectively referred to herein as the "Tender Offer." The net
proceeds of this Offering will be used to consummate the Tender Offer, and if
any net proceeds remain after consummation of the Tender Offer, to reduce
Foodbrands America's outstanding indebtedness under its bank credit agreement
(the "Credit Agreement"). See "Use of Proceeds." The Tender Offer is conditioned
upon, among other things, Foodbrands America receiving valid tenders and
consents from holders of at least a majority in aggregate principal amount of
the 9 3/4% Notes. As of the close of business on May 3, 1996, the Company had
received tenders and consents from holders of $88 million in aggregate principal
amount of the 9 3/4% Notes. This Offering is conditioned upon consummation of
the Tender Offer.
The Notes have been authorized for listing on the New York Stock Exchange
subject to effective registration of the Notes under the Securites Act of 1933.
SEE "RISK FACTORS" BEGINNING ON PAGE 9 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN EVALUATING AN INVESTMENT
IN THE NOTES.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNT(2) FOODBRANDS AMERICA(3)
<S> <C> <C> <C>
Per Note................................ % % %
Total................................... $ $ $
</TABLE>
(1) Plus accrued interest, if any, from , 1996.
(2) Foodbrands America and the Subsidiary Guarantors have agreed, jointly and
severally, to indemnify the several Underwriters (as defined herein) against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(3) Before deducting expenses payable by Foodbrands America estimated at
$ .
------------------------
The Notes are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of certain legal
matters by counsel for the Underwriters and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Notes
will be made in New York, New York on or about May , 1996.
------------------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
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The date of this Prospectus is May , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices at 7 World Trade Center, 13th Floor, New York, New York 10048 and Suite
1400, Northwestern Atrium Center, 14th Floor, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained by mail from the Public
Reference Section of the Commission at prescribed rates at the principal office
of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. In addition, such reports, proxy statements and information concerning
the Company can be inspected and copied at the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
Foodbrands America and the Subsidiary Guarantors have filed with the
Commission a registration statement on Form S-3 (herein, together with all
amendments and exhibits thereto, referred to as the "Registration Statement")
under the Securities Act of 1933, as amended (the "Securities Act"). This
Prospectus does not contain all the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information, reference is hereby made
to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Foodbrands America's Annual Report on Form 10-K for the fiscal year ended
December 30, 1995, Amendments One and Two thereto on Form 10-K/A (filed February
28 and May 9, 1996, respectively), Quarterly Report on Form 10-Q for the period
ended March 30, 1996, Amendments One, Two and Three on Form 8-K/A (filed on
February 26 and 29, and April 25, 1996, respectively) to Foodbrands America's
Current Report on Form 8-K (which relates to Foodbrands America's acquisitions
of KPR Holdings, L.P. and TNT Crust, Inc.) dated December 11, 1995, and
Foodbrands America's Current Report on Form 8-K dated April 23, 1996, filed
under the Exchange Act (File No. 1-11621) are hereby incorporated in this
Prospectus by reference. Foodbrands America's Quarterly Report on Form 10-Q for
the period ended March 30, 1996, which has been incorporated herein by
reference, contains a report (a "SAS 71 report") on such unaudited information
prepared by Coopers and Lybrand, L.L.P., independent accountants. The SAS 71
report is not a "report" or "part" of this registration statement within the
meaning of Sections 7 and 11 of the Securities Act, nor does such independent
accountant's liability under Section 11 of the Securities Act extend to the SAS
71 report.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of this Offering (except any SAS 71
report included therein) shall be deemed to be incorporated in this Prospectus
and to be a part hereof from the date of the filing of such document. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for all purposes to the extent that a statement contained herein or in any other
subsequently filed document which is also incorporated or deemed to be
incorporated by reference modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of the Registration Statement or this
Prospectus.
Foodbrands America will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy
(without exhibits unless such exhibits are specifically incorporated by
reference into such document) of any or all documents incorporated by reference
in this Prospectus. Written request for such copies should be directed to Bryant
P. Bynum, Foodbrands America, Inc., Vice President -- Finance, Treasurer and
Secretary, at the Company's principal executive offices, 1601 Northwest
Expressway, Suite 1700, Oklahoma City, Oklahoma 73118-1495, or by telephone at
(405) 879-4100.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES OFFERED
HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN, OR INCORPORATED
BY REFERENCE INTO, THIS PROSPECTUS. REFERENCE IS MADE TO "DESCRIPTION OF THE
NOTES -- CERTAIN DEFINITIONS" FOR THE DEFINITIONS OF CERTAIN CAPITALIZED TERMS.
THE COMPANY
The Company is a leading producer, marketer and distributor of frozen and
refrigerated processed food products to the foodservice industry (which
encompasses all aspects of away-from-home food preparation). It targets many of
its products to segments of the foodservice industry which it believes will grow
at rates greater than, and provide profit margins higher than, those of the
foodservice industry in general. The Company believes it is one of the nation's
leading foodservice suppliers of meat-based pizza toppings, partially baked and
self-rising pizza crusts, burritos, frozen stuffed pastas, breaded appetizers,
soups, sauces and side dishes, and processed meat products. The Company's
customers include wholesale foodservice distributors, multi-unit restaurant
chains, food processors, grocery store delicatessens and warehouse clubs, many
of which are market leaders within their industry sectors. The Company's brand
names are well recognized in the foodservice industry and include
DOSKOCIL-Registered Trademark- pizza toppings, WILSON'S CONTINENTAL
DELI-Registered Trademark- and AMERICAN FAVORITE-TM- deli meats,
POSADA-Registered Trademark-, LITTLE JUAN-Registered Trademark-, BUTCHER
BOY-Registered Trademark- and MARQUEZ-Registered Trademark- burritos,
ROTANELLI'S-Registered Trademark- frozen pastas and FRED'S-Registered Trademark-
breaded cheese and vegetable appetizers. The Company differentiates its products
through development, formulation, processing, packaging and distribution.
In response to consumer demand and demographic trends, certain segments of
the foodservice industry, such as "ethnic foods" and convenience foods, have
grown at a faster rate than the foodservice industry in general. The Company has
targeted these segments of the foodservice industry which it believes will be
profitable, under-served and growing. The Company seeks to achieve long-term
growth in revenues and profitability by capitalizing on certain long-standing,
as well as emerging, trends in U.S. eating and dining habits:
- According to industry research, U.S. consumers are increasingly purchasing
food prepared outside the home. The Company has shifted its focus from
fresh meat and other commodity-based products and has become a provider of
a wide variety of specialty processed products to the foodservice
industry.
- Pizza accounted for one in four entrees ordered from foodservice
establishments in 1994. The Company is one of the leading suppliers to the
growing pizza industry with a strong position in the meat topping and
partially-baked and self-rising pizza crust markets. Its customer base
includes many of the largest pizza producers in the U.S.
- "Ethnic foods," such as Mexican style foods and Italian pasta dishes, are
becoming increasingly popular. The Company has a strong market presence
with these products and will seek additional avenues in the ethnic food
market for further growth.
- The Company believes that restaurants and other foodservice providers are
seeking to out-source more of the food preparation process to ensure
product quality and consistency, to reduce preparation costs, and to
increase food safety. The Company, including its recently acquired
subsidiaries, has a strong record of developing innovative products and
product formulations that meet customers' specific needs and reduce
foodservice providers' "back-of-the-house" preparation requirements.
In the past two years, the Company has repositioned itself moving from a
supplier of primarily meat-based products, such as commodity and fresh pork
products, to a leading, high-quality manufacturer and marketer of value-added
frozen and refrigerated food products. As a result, during 1995, on a PRO FORMA
basis after giving effect to the Acquisitions (as defined herein), over
one-third of the Company's sales were of specialty, non-meat products, while
commodity products accounted for only 13% of sales. The Company has achieved
this transformation by successfully completing several initiatives.
In 1994, the Company acquired the frozen specialty foods division of
International Multifoods Corporation (now operated as the Specialty Brands
Division), which broadened the Company's product line to include appetizers and
ethnic foods, and appointed R. Randolph Devening, who has extensive experience
in
3
<PAGE>
food processing, foodservice and distribution, as Chairman, President and Chief
Executive Officer. In 1995, the Company divested itself of its Retail Division
segment, thereby exiting the volatile retail meat-case business. It also
acquired KPR Holdings, L.P. ("KPR"), a producer of pizza toppings, pepperoni,
soups, sauces and side dishes, and TNT Crust, Inc. ("TNT"), a manufacturer of
partially baked and self-rising pizza crusts (collectively, the "Acquisitions").
In pursuit of its overall business strategy in the future the Company will
seek to:
- expand its market penetration in its existing foodservice markets;
- leverage its leadership position in the pizza toppings and partially baked
pizza crust business;
- further emphasize the development and sale of higher-margin processed
specialty products;
- invest in its manufacturing and distribution operations with the objective
of further improving its status as a low-cost producer; and
- exploit growth opportunities through selective acquisitions of well
positioned premium producers of value-added processed food products
serving niche markets in the foodservice industry.
The Company has increased annual sales from continuing operations from $366
million in 1992 to $751 million on a PRO FORMA basis after giving effect to the
Acquisitions in 1995. Income from continuing operations increased from $0.6
million in 1992 to $9.6 million in 1995 on the same PRO FORMA basis. Cash flow
from operating activities increased from $4.6 million in 1992 to $12.8 million
in 1995 on an historical basis. The Company also increased Adjusted EBITDA (as
defined herein) from continuing operations from $20.4 million in 1992 to $73.1
million in 1995 on the same PRO FORMA basis, resulting in an increase in its
Adjusted EBITDA margin from 5.6% of sales in 1992 to 9.7% in 1995.
On April 23, 1996, the Company announced net income for the quarter ended
March 30, 1996 of $2.1 million compared to income from continuing operations in
the first quarter of 1995 of $1.8 million and net loss from the prior year
quarter of $0.6 million. See "Management's Discussion and Analysis -- Recent
Developments."
TENDER OFFER
Foodbrands America issued $110 million of 9 3/4% Notes in April 1993
pursuant to the 9 3/4% Indenture between Foodbrands America and First Fidelity
Bank, N.A., as trustee, all of which was outstanding as of the date hereof. The
Company's obligations under the 9 3/4% Indenture have also been guaranteed by
the Subsidiary Guarantors. On March 29, 1996, Foodbrands America commenced a
Tender Offer (which was extended on April 24, 1996 and May 8, 1996) to purchase
for cash up to all of the outstanding 9 3/4% Notes and to solicit consents from
holders thereof to amend or remove certain covenants contained in the 9 3/4%
Indenture. The purchase price to be paid in respect of validly tendered 9 3/4%
Notes and the related consents is 105 3/8% of their principal amount, plus
accrued interest to the date of purchase. The Tender Offer is conditioned upon,
among other things, Foodbrands America receiving valid tenders and related
consents from holders of at least a majority in aggregate principal amount of
the 9 3/4% Notes. As of the close of business on May 3, 1996 approximately $88
million in aggregate principal amount of the 9 3/4% Notes had been tendered
pursuant to the Tender Offer. This Offering is conditioned upon the consummation
of the Tender Offer. See "Use of Proceeds" and "Description of Other
Indebtedness."
To finance the Acquisitions, refinance certain existing debt and provide
future working capital, Foodbrands America entered into a $320 million credit
facility with a group of financial institutions (the "Lenders") led by Chemical
Bank. To secure the obligations created under the Credit Agreement, Foodbrands
America and its subsidiaries pledged substantially all of their respective
assets and the Subsidiary Guarantors also guaranteed Foodbrands America's
obligations under the Credit Agreement. At May 3, 1996, $211.1 million was
outstanding under the Credit Agreement. Any net proceeds from this Offering
which are not used to purchase 9 3/4% Notes will be applied to reduce Foodbrands
America's term credit facility under the Credit Agreement. See "Use of
Proceeds." A condition of the Tender Offer is an amendment to the Credit
Agreement which, among other things, extends the amortization and maturity of
certain of Foodbrands America's obligations thereunder. By extending the average
life of its indebtedness, the Company expects to achieve greater financial
flexability in pursuing its business strategy. See "Description of Other
Indebtedness -- The Credit Agreement."
4
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THE OFFERING
<TABLE>
<S> <C>
Notes Offered..................... $120,000,000 principal amount of % Senior Subordinated
Notes due 2006.
Maturity Date..................... , 2006.
Interest Payment Dates............ and of each year, commencing ,
1996.
Mandatory Redemption.............. None.
Optional Redemption............... The Notes may be redeemed at the option of Foodbrands
America, in whole or in part, at any time on or after
, 2001, at the redemption prices set forth
herein, together with accrued and unpaid interest to the
date of redemption. In addition, on or prior to
, 1999, Foodbrands America may redeem up to
25% of the originally issued Notes with the net proceeds
of a Public Equity Offering for gross proceeds of $50.0
million or more at a price of % of the principal
amount thereof, together with accrued and unpaid
interest to the redemption date; PROVIDED not less than
$75.0 million in principal amount of Notes is
outstanding thereafter.
Change of Control................. Upon a Change of Control, (i) Foodbrands America will
have the option to redeem the Notes, in whole or in
part, at a redemption price equal to the principal
amount thereof, together with accrued and unpaid
interest to the date of redemption, plus the Applicable
Premium and (ii) subject to certain conditions, each
holder of Notes will have the right to require
Foodbrands America to purchase such holder's Notes at a
purchase price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest to
the date of purchase.
Note Guarantees................... Upon issuance, the Notes will be unconditionally
guaranteed, jointly and severally, on a senior
subordinated basis by the Subsidiary Guarantors. Under
certain limited circumstances, the Note Guarantees may
be unconditionally released.
Ranking of the Notes and Note
Guarantees....................... The Notes and the Note Guarantees represent unsecured
senior subordinated obligations of Foodbrands America
and the Subsidiary Guarantors, respectively. The Notes
and the Note Guarantees will be unsecured and
subordinated in right of payment to all existing and
future Senior Indebtedness of Foodbrands America and
Guarantor Senior Indebtedness of the Subsidiary
Guarantors, respectively, and will be senior in right of
payment to all existing and future Subordinated
Indebtedness of Foodbrands America and the Subsidiary
Guarantors. As of March 30, 1996, after giving PRO FORMA
effect to this Offering and the use of the net proceeds
therefrom to purchase all of Foodbrands America's 9 3/4%
Notes pursuant to the Tender Offer, the total
consolidated indebtedness of Foodbrands America and its
subsidiaries would have been $334.4 million, of which
$214.4 million would have been Senior Indebtedness or
Guarantor Senior Indebtedness. In the event of any
default in the
</TABLE>
5
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<TABLE>
<S> <C>
payment in respect of any Senior Indebtedness, no
payment with respect to the Notes may be made by
Foodbrands America unless and until such default has
been cured or waived. In addition, upon the occurrence
of any default entitling the holders of Designated
Senior Indebtedness to accelerate the maturity thereof
and the receipt by the Trustee under the Indenture of
written notice of such occurrence from such holders, no
payment in respect of the Notes or the Note Guarantees
may be made by Foodbrands America or the Note
Guarantors, as applicable, for a maximum period of 179
days.
Covenants......................... The indenture governing the Notes (the "Indenture") will
contain certain covenants that, among other things,
restrict the incurrence of additional indebtedness by
Foodbrands America and its Restricted Subsidiaries (as
defined herein), restrict the payment of dividends on
and redemptions of capital stock of Foodbrands America,
restrict the making of certain investments, limit
transactions with affiliates, restrict the issuance of
preferred stock by Restricted Subsidiaries, provide for
the application of the proceeds of certain asset sales,
restrict the incurrence of liens, limit guarantees by
Restricted Subsidiaries, require compliance with
Exchange Act reporting requirements, and govern the
ability of the Company to engage in certain mergers or
consolidations or to transfer all or substantially all
of its assets to another person.
Use of Proceeds................... To consummate the Tender Offer and, if any net proceeds
remain after consummation of the Tender Offer, to reduce
the outstanding indebtedness under the term and
acquisition revolving credit facilities under the Credit
Agreement. See "Use of Proceeds."
</TABLE>
The Notes have been authorized for listing on the New York Stock Exchange
subject to effective registration of the Notes under the Securities Act of 1933.
For additional information regarding the Notes, see "Description of the Notes."
RISK FACTORS
Prospective purchasers of the Notes should consider all of the information
contained in this Prospectus before making an investment in the Notes. In
particular, prospective purchasers should consider the factors set forth under
"Risk Factors."
6
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SUMMARY FINANCIAL INFORMATION
Set forth below is summary historical and PRO FORMA consolidated financial
information for the Company. The Company's consolidated financial statements are
prepared on the basis of a 52 or 53 week year, ending on the Saturday nearest
December 31. The Company's 1995 fiscal year was 52 weeks and its fiscal quarters
each contained 13 weeks. The Retail Division was sold in 1995 and has been
reported as a discontinued operation. Accordingly, the historical financial data
has been restated. The unaudited PRO FORMA consolidated financial information
for the Company set forth below has been derived from the unaudited PRO FORMA
consolidated financial information included elsewhere in this Prospectus and
gives effect to (i) the Acquisitions and the financing thereof and (ii) the
Offering and the use of proceeds therefrom to purchase $88 million of the 9 3/4%
Notes tendered as of May 3, 1996, as if each such transaction had occurred on
January 1, 1995. The unaudited PRO FORMA consolidated financial information does
not necessarily represent what the Company's results of operations would have
been if the Acquisitions and the financing thereof and this Offering and the use
of proceeds therefrom had actually been completed on that date, and are not
intended to project the Company's results of operations for any future period.
The table should be read in conjunction with "Pro Forma Consolidated Financial
Information," "Selected Consolidated Financial Information," "Management's
Discussion and Analysis" and the consolidated financial statements of the
Company and related notes thereto, and the financial statements of KPR and TNT
and related notes thereto included in, or incorporated by reference into, this
Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED JAN. ENDED DEC. ENDED DEC. ENDED DEC.
1, 1994 31, 1994 30, 1995 30, 1995
----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales...................................................... $ 393,270 $ 512,352 $ 634,700 $ 751,008
Gross profit................................................... 57,482 102,234 134,715 162,352
Provisions for restructuring and integration and plant
closing....................................................... 500 10,586 -- --
Operating income............................................... 3,428 11,209 35,103 50,418
Income (loss) from continuing operations....................... (4,374) (5,195) 9,601 9,589
Net income (loss).............................................. (32,019)(2) (16,198)(3) (34,095)(4)
Earnings (loss) per share--primary and fully diluted:
Income (loss) from continuing operations..................... $ (0.59) $ (0.59) $ 0.77 $ 0.77
Net income (loss)............................................ (4.32) (1.85) (2.73)
BALANCE SHEET DATA:
Working capital................................................ $ 34,682 $ 50,657 $ 20,430
Total assets................................................... 304,560 453,734 532,572
Long-term debt................................................. 122,377 224,260 305,407
Total debt..................................................... 123,830 225,914 323,748
OTHER DATA:
Net cash provided by operating activities...................... $ 17,590 $ 33,094 $ 12,844
Net cash used by investing activities.......................... (21,187) (151,196) (67,133)
Net cash provided (used) by financing activities............... (60) 134,988 43,653
Adjusted EBITDA (5)............................................ 16,714 36,592 50,861 $ 73,061
Adjusted EBITDA margin (5)..................................... 4.3% 7.1% 8.0% 9.7%
Interest expense (6)........................................... $ 9,078 $ 14,175 $ 16,567 $ 30,937
Capital expenditures........................................... 8,934 10,063 24,255 30,855
Ratio of Adjusted EBITDA to interest expense (5)............... 1.8x 2.6x 3.1x 2.4x
Ratio of total debt to Adjusted EBITDA (5)..................... 7.4x 6.2x 6.4x 4.6x
Ratio of earnings to fixed charges (7)......................... -- -- 1.8x 1.5x
</TABLE>
- ------------------------------
(1) Net income (loss) includes the income (loss), net of applicable income
taxes, from operations of the discontinued Retail Division of $6.8 million,
$(8.5) million and $(4.1) million for each of the fiscal years 1993 through
1995, respectively.
(2) Includes the cumulative effect on years prior to the fiscal year ended
January 1, 1994 for a change in accounting for postretirement benefits other
than pensions of a non-cash charge against earnings of $34.4 million.
(3) Includes an extraordinary loss of $2.5 million associated with the early
extinguishment of debt.
7
<PAGE>
(4) Includes the loss on disposal of the Retail Division of $38.5 million and an
extraordinary loss on early extinguishment of debt of $1.0 million.
(5) Adjusted EBITDA represents income (loss) from continuing operations before
income taxes, interest and financing costs, restructuring/integration and
plant closing provisions, depreciation, amortization and other non-cash
expenses. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage
of net sales. The Company has included information concerning Adjusted
EBITDA as it understands that such information is used by certain investors
as one measure of an issuer's historical ability to service its debt.
Adjusted EBITDA should not be considered as an alternative to, or more
meaningful than, operating income or cash flow determined by generally
accepted accounting principles as an indication of the Company's operating
performance. Adjusted EBITDA is not presented here as an alternative measure
of operating results or cash flow, but rather to provide additional
information related to debt service capability.
(6) Interest expense does not include amortization of financing costs or fees
paid to banks and others which are included in "Interest and Financing
Costs" in the Company's Consolidated Statement of Operations.
(7) For purposes of computing this ratio, earnings consist of income (loss) from
continuing operations before income taxes and fixed charges. Fixed charges
consist of interest on indebtedness, amortization of debt issuance costs and
a portion of operating lease expense which is representative of the interest
factor attributable to interest expense. Such earnings were insufficient to
cover fixed charges by $5.7 million and $4.7 million in the fiscal year
ended January 1, 1994 and the fiscal year ended December 31, 1994,
respectively.
8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should consider carefully the following factors before
purchasing the Notes offered hereby.
LEVERAGE AND DEBT SERVICE
The Company incurred substantial indebtedness in connection with the
financing of the acquisitions of Specialty Brands, KPR and TNT and will remain
highly leveraged following this Offering. As of March 30, 1996, on a PRO FORMA
basis after giving effect to this Offering and the use of proceeds therefrom to
purchase all of the 9 3/4% Notes, the Company would have had total consolidated
indebtedness (including capitalized lease obligations) of approximately $334.4
million and on such date its ratio of consolidated debt to stockholder's equity
would have been 8.3 to 1. In addition, the Company would have had the ability to
borrow additional indebtedness of up to $108.5 million under the Credit
Agreement, of which up to $98.5 million would have been available to finance
acquisitions. The Company expects to pursue acquisitions in the future on a
selective basis in furtherance of its business strategy and may incur additional
indebtedness outside of the Credit Agreement. See "Capitalization" and "Business
- -- Business Strategy."
The degree to which the Company is leveraged could have important
consequences to the holders of the Notes, including: (i) the Company's ability
to obtain additional financing for working capital or other purposes in the
future may be limited; (ii) a substantial portion of the Company's cash flow
from operations will be dedicated to the payment of the principal of and
interest on its indebtedness, thereby reducing funds available for operations;
(iii) certain of the Company's borrowings, including the borrowings under the
Credit Agreement, will be at variable rates of interest which could cause the
Company to be vulnerable to increases in interest rates (as of May 3, 1996,
total indebtedness of the Company subject to floating interest rates was $211.1
million); (iv) the Company may be more vulnerable to economic downturns and be
limited in its ability to withstand competitive pressures; and (v) substantially
all of the Company's indebtedness will become due prior to the maturity of the
Notes (see "Description of Other Indebtedness -- The Credit Agreement" and "--
The 9 3/4% Notes"). The Company's ability to make scheduled payments of the
principal of, or interest on, or to refinance, its indebtedness will depend on
its future operating performance and cash flow, which are subject to prevailing
economic conditions, prevailing interest rate levels, and financial,
competitive, business and other factors, many of which are beyond its control.
If the Company cannot generate sufficient cash flow from operations to meet its
principal and interest service obligations, the Company might be required to
refinance its indebtedness. There can be no assurance that a refinancing could
be effected on satisfactory terms or would be permitted by the terms of its debt
instruments. See "Management's Discussion and Analysis."
SUBORDINATION AND IMPACT OF POTENTIAL RELEASE OF NOTE GUARANTEES
The payment of principal of, and premium, if any, and interest on the Notes
will be expressly subordinated in right of payment to the prior payment in full
of all Senior Indebtedness of Foodbrands America, whether outstanding at the
date of the Indenture or incurred thereafter. Upon any payment or distribution
of Foodbrands America's assets to creditors upon any dissolution, winding-up,
liquidation, reorganization, bankruptcy, insolvency, receivership or other
proceedings relating to Foodbrands America, whether voluntary or involuntary,
holders of the Senior Indebtedness will be entitled first to receive payment in
full of all amounts due thereon before the holders of the Notes will be entitled
to receive any payment with respect to the Notes. In the event of any default in
the payment in respect of any Senior Indebtedness, no payment with respect to
the Notes may be made by Foodbrands America unless and until such default has
been cured or waived. In addition, upon the occurrence of any other default
entitling the holders of Designated Senior Indebtedness to accelerate the
maturity thereof and receipt by the Trustee under the Indenture of written
notice of such occurrence from such holders, no payment in respect of the Notes
may be made by Foodbrands America or the Note Guarantors, as applicable, for a
maximum period of 179 days. The Indenture contains subordination provisions
similar to the foregoing with respect to the Note Guarantees and the Subsidiary
Guarantors. By reason of the subordination of the Notes and the Note Guarantees
to all existing
9
<PAGE>
and future Senior Indebtedness of Foodbrands America and Guarantor Senior
Indebtedness of the Subsidiary Guarantors, holders of the Notes may recover less
ratably than holders of Senior Indebtedness or Guarantor Senior Indebtedness or
may recover nothing.
The Note Guarantees are also subject to release under certain circumstances.
Foodbrands America's operations are conducted through its wholly-owned
subsidiaries, where all of the Company's operating assets are located.
Accordingly, Foodbrands America is dependent upon cash flow from its
subsidiaries to meet its debt obligations, which will depend upon the future
performance of these subsidiaries. The release of the Note Guarantees would
increase the structural subordination of holder's claims and accordingly could
have a material adverse impact on holders, through the trading price of the
Notes or otherwise. If no Default exists or would exist under the Indenture,
concurrently with any sale or disposition (by merger or otherwise) of any
Subsidiary Guarantor (other than a transaction subject to the provisions
described under "Description of the Notes -- Consolidation, Merger, Sale of
Assets, Etc.") by Foodbrands America or a Restricted Subsidiary to any person
that is not an affiliate of Foodbrands America or any of the Restricted
Subsidiaries, such Subsidiary Guarantor will be automatically and
unconditionally released from all obligations under its Note Guarantee. In
addition, if no Default exists or would exist under the Indenture, at the
request of Foodbrands America, a Note Guarantor that is not a Leveraged
Subsidiary (as defined herein) will be released from all obligations under its
Note Guarantee if the Note Guarantor has been unconditionally released from its
obligations under the Credit Agreement and the 9 3/4% Indenture. The Credit
Agreement provides that a Note Guarantor's obligations, as guarantor thereunder,
will terminate when all obligations under the Credit Agreement have been
indefeasibly paid in full in cash and the Lenders have no further commitments
thereunder, obligation to issue letters of credit thereunder or exposure
pursuant to letters of credit issued thereunder. The Note Guarantors'
obligations under the 9 3/4% Indenture will be released, upon the request of
Foodbrands America, in the event that the Note Guarantors are released from
guarantees of indebtedness under the Credit Agreement and the Note Guarantees.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the holders of Notes would be
entitled to require that the Company offer to purchase the Notes at a purchase
price of 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the date of purchase. Events causing a Change of Control would
constitute a Default under the Credit Agreement entitling the Lenders to declare
the Company's obligations thereunder to be immediately due and payable or to
block payments in respect of the Notes for up to 179 days. In addition, the
9 3/4% Indenture contains provisions similar to the Notes applicable upon the
occurrence of a Change of Control. Generally, the acquisition by any person or
group (other than Joseph Littlejohn & Levy Associates, L.P. ("JLL") and its
affiliates or any group comprised of JLL and the Airlie Group L.P. ("Airlie"))
of beneficial ownership of capital stock of the Company having a majority of the
combined voting power of the Company's capital stock or the replacement of a
majority of the board of directors, or a majority of the directors not elected
pursuant to an agreement with JLL and Airlie, over a two year period would
constitute a Change of Control.
As of March 30, 1996, the Company would have had total consolidated
indebtedness of $321.0 subject to mandatory redemption obligations of the
Company or an event of default upon the occurrence of a Change of Control. There
can be no assurance that in the event of a Change of Control the Company would
have the ability to satisfy any or all of its mandatory redemption or payment
obligations in connection therewith and the ability of Foodbrands America or the
Note Guarantors to satisfy such redemption obligations would be subject to the
subordination provisions applicable to the Notes and the Credit Agreement.
RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES
The Credit Agreement and the Indenture contain numerous restrictive
covenants which limit the discretion of the Company's management with respect to
certain business matters. These covenants place significant restrictions on,
among other things, the ability of Foodbrands America and the Restricted
Subsidiaries to incur additional indebtedness, to create liens or other
encumbrances, to make certain payments, investments, loans and guarantees and to
sell or otherwise dispose of a substantial portion of assets to, or merge or
consolidate with, another entity which is not controlled by the Company. The
Credit
10
<PAGE>
Agreement also contains a number of financial covenants which require the
Company to meet certain financial ratios and tests and provide that a "change of
control" will constitute an event of default. See "Description of Other
Indebtedness -- The Credit Agreement" and "Description of the Notes -- Certain
Covenants" and "-- Consolidation, Merger, Sale of Assets, Etc." A failure to
comply with the obligations contained in the Credit Agreement or the Indenture,
if not cured or waived, could permit acceleration of the related indebtedness
and acceleration of indebtedness under other instruments which contain
cross-acceleration or cross-default provisions. In addition, the obligations of
the Company under the Credit Agreement are secured by substantially all of the
Company's assets. In the event of an event of default under the Credit
Agreement, the lenders under the Credit Agreement would be entitled to exercise
the remedies available to a secured lender under applicable law. Therefore, in
addition to being entitled to the benefits of the subordination provisions
contained in the Indenture, the secured lenders will have a prior claim on those
assets of the Company securing their indebtedness. If the Company were obligated
to repay all or a significant portion of its indebtedness, there can be no
assurance that the Company would have sufficient cash to do so or that the
Company could successfully refinance such indebtedness. Other indebtedness of
the Company and its subsidiaries that may be incurred in the future may contain
financial or other covenants more restrictive than those applicable to the
Credit Agreement or the Notes.
ABSENCE OF PROFITABLE OPERATIONS
Since emerging from bankruptcy in 1991 through fiscal year 1995, the Company
reported a series of net losses. The Company reported a $26.8 million net loss
in fiscal 1992 as a result of the $32.0 million provision for plant closings
recognized in that year, a $32.0 million net loss in fiscal 1993 as a result of
a one-time charge to earnings of $34.4 million in connection with certain
retiree medical benefit expenses in accordance with Statement of Financial
Accounting Standards No. 106, a $16.2 million net loss in fiscal 1994 and a
$34.1 million net loss in fiscal 1995 as a result of the loss upon disposition
of approximately $38.5 million recorded in connection with the sale of the
Retail Division which includes a write-off of $64.3 million of intangible
assets. See "Management's Discussion and Analysis." Additionally, the Company's
Tender Offer will result in an extraordinary loss for early debt retirement of
approximately $5.1 million (if all outstanding 9 3/4% Notes are tendered). There
can be no assurance of profitable operations in fiscal 1996 or otherwise.
FRAUDULENT CONVEYANCE CONSIDERATIONS
Each Subsidiary Guarantor's guarantee of the obligations of Foodbrands
America under the Notes may be subject to review under relevant federal and
state fraudulent conveyance statutes (the "fraudulent conveyance statutes") in a
bankruptcy, reorganization or rehabilitation case or similar proceeding or a
lawsuit by or on behalf of unpaid creditors of such Subsidiary Guarantors. If a
court were to find under relevant fraudulent conveyance statutes that, at the
time the Notes were issued, (a) a Subsidiary Guarantor guaranteed the Notes with
the intent of hindering, delaying or defrauding current or future creditors or
(b)(i) a Subsidiary Guarantor received less than reasonably equivalent value or
fair consideration for guaranteeing the Notes and (ii)(A) was insolvent or was
rendered insolvent by reason of such Note Guarantee, (B) was engaged, or about
to engage, in a business or transaction for which its assets constituted
unreasonably small capital, (C) intended to incur, or believed that it would
incur, obligations beyond its ability to pay as such obligations matured (as all
of the foregoing terms are defined in or interpreted under such fraudulent
conveyance statutes) or (D) was a defendant in an action for money damages, or
had a judgment for money damages docketed against it (if, in either case, after
final judgment, the judgment is unsatisfied), such court could avoid or
subordinate such Note Guarantee to presently existing and future indebtedness of
such Subsidiary Guarantor and take other action detrimental to the holders of
the Notes, including, under certain circumstances, invalidating such Note
Guarantee.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the federal or state law that is being applied in any such
proceeding. Generally, however, a Subsidiary Guarantor would be considered
insolvent if, at the time it incurs the obligations constituting a Note
Guarantee, either (i) the fair market value (or fair saleable value) of its
assets is less than the amount required to pay the probable liability on its
total existing indebtedness and liabilities (including contingent liabilities)
as they become absolute and mature or (ii) it is incurring obligations beyond
its ability to pay as such obligations mature or become due.
11
<PAGE>
The Boards of Directors and management of Foodbrands America and each
Subsidiary Guarantor believe that at the time of issuance of the Notes and the
Note Guarantees, each Subsidiary Guarantor (i) will be (a) neither insolvent nor
rendered insolvent thereby, (b) in possession of sufficient capital to meet its
obligations as the same mature or become due and to operate its business
effectively and (c) incurring obligations within its ability to pay as the same
mature or become due and (ii) will have sufficient assets to satisfy any
probable money judgment against it in any pending action. There can be no
assurance, however, that such beliefs will prove to be correct or that a court
passing on such questions would reach the same conclusions.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of varying sizes, including divisions or subsidiaries of larger
companies. A number of these competitors have multiple product lines as well as
substantially greater financial and other resources available to them, and there
can be no assurance that the Company can compete successfully with such other
companies. Competitive pressures or other factors could cause the Company's
products to lose market share or result in significant price erosion, which
would have a material adverse effect on the Company's results of operations.
GENERAL RISKS OF FOOD INDUSTRY
The industry in which the Company competes is subject to the risk of adverse
changes in general economic conditions; adverse changes in local markets, which,
in the case of excess supply in the market, may be further increased by the
limited shelf life of food products; evolving consumer preference and
nutritional and health-related concerns; federal, state and local food
processing controls; consumer product liability claims; risks of product
tampering; and the availability and expense of liability insurance.
GOVERNMENTAL REGULATION
The Company's production facilities and products are subject to numerous
federal, state and local laws and regulations concerning, among other things,
health and safety matters, food manufacture, product labeling, advertising and
the environment. Compliance with existing federal, state and local laws and
regulations is not expected to have a material adverse effect upon the earnings
or competitive position of the Company. However, the Company cannot predict the
effect, if any, of laws and regulations that may be enacted in the future, or of
changes in the enforcement of existing laws and regulations that are subject to
extensive regulatory discretion.
RAW MATERIALS
Fresh and frozen meat, flour, vegetables, cheese and dairy products, sugar,
other agricultural products, vegetable oils and plastic and paper for packaging
materials constitute significant components of the Company's cost of goods sold.
There can be no assurance that the Company will be able to pass the effects of
raw material price increases on to its customers for any extended period of
time, if at all. Commodity raw materials are subject to fluctuations in price
and such fluctuations could have an adverse effect on the financial performance
of the Company. Occasionally and where possible, the Company makes advance
purchases of products significant to its business in order to lock in what is
perceived to be favorable pricing. In some cases, the Company also seeks to
protect itself from basic market price fluctuations of products through hedging
transactions. See "Management Discussion and Analysis -- Financial Condition and
Liquidity."
POTENTIAL LOSS OF NET OPERATING LOSS CARRYFORWARDS
Due to the lack of direct legal authority with respect to the tax rules
governing the limitations on and reductions of net operating loss carryforwards
("NOLs") in post-bankruptcy circumstances, both the amount of the Company's NOLs
as well as the limitations on their availability are subject to significant
uncertainties. Accordingly, there can be no assurance that the estimated $108.5
million of NOLs believed available by the Company as of December 30, 1995 to
significantly reduce its cash income tax liability will not be either
significantly limited or substantially reduced. See "Managements Discussion and
Analysis -- General -- Income Taxes."
12
<PAGE>
Certain restrictions on transferability (the "Transfer Restrictions") of the
Company's Common Stock are contained in the Company's Amended and Restated
Certificate of Incorporation. The Transfer Restrictions are intended to reduce
the risk of loss of the Company's NOLs. However, it is possible that, either in
a transaction consented to by the Board of Directors or, in the event of a sale
or purchase of Common Stock by a holder of five percent or more of the Company's
Common Stock, a sufficient change in stock ownership may occur such that the
NOLs presently available to the Company could be substantially reduced or
eliminated. The reduction or elimination of the NOLs would adversely impact cash
flow but would not materially impact net income.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to Foodbrands America from the sale of the Notes are
estimated to be approximately $116 million, net of the Underwriters' discount
and fees and expenses relating to this Offering. Foodbrands America intends to
apply the net proceeds from the sale of the Notes, together with cash on hand
(if necessary), to purchase any and all 9 3/4% Notes validly tendered to it
pursuant to the Tender Offer; however, no such Notes will be purchased unless at
least a majority in aggregate principal amount of 9 3/4% Notes are validly
tendered and related consents received. As of the close of business on May 3,
1996, the Company had received tenders and consents from holders in excess of
$88 million of aggregate principal amount of the 9 3/4% Notes. The aggregate
cash required to purchase the 9 3/4% Notes (exclusive of fees and expenses)
tendered as of May 3, 1996 would equal approximately $95.6 million. If all
9 3/4% Notes are tendered, the aggregate cash required to purchase the 9 3/4%
Notes (exclusive of related fees and expenses) would equal approximately $119.5
million. Any portion of the net proceeds not so utilized will be used to repay a
portion of Foodbrands America's term facility under the Credit Agreement.
Proceeds received from the term facility were used to refinance existing
indebtedness and to finance the Acquisitions. The 9 3/4% Notes bear interest at
a rate of 9 3/4% per annum and borrowings under the Credit Agreement bear
interest at an average weighted rate of 7.75% per annum (as of March 30, 1996).
This Offering and the Tender Offer are intended to replace the 9 3/4% Notes with
the Notes, which will bear interest at a higher rate than the 9 3/4% Notes and
have a longer maturity. A condition to the Tender Offer is an amendment to the
Credit Agreement which will, among other things, extend the maturity and
amortization of certain of the Company's obligations thereunder. See "Prospectus
Summary -- Tender Offer," "Management's Discussion and Analysis -- Liquidity and
Capital Resources" and "Description of Other Indebtedness."
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
30, 1996 and as adjusted to give PRO FORMA effect to the Offering and the use of
the net proceeds therefrom to purchase the 9 3/4% Notes tendered as of the close
of business on May 3, 1996 ($88 million aggregate principal amount), as if each
such transaction had occurred on March 30, 1996. A condition of the Tender Offer
is an amendment to the Credit Agreement which, among other things, extends the
amortization and maturity of certain of the Company's obligations thereunder.
The following table gives effect to such amendment. See "Use of Proceeds" and
the Company's consolidated financial statements and the related notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 30, 1996
----------------------------
ACTUAL AS ADJUSTED
------------- ------------
(IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt........................................................... $ 23,843 $ 6,156(1)
------------- ------------
------------- ------------
Long-term debt, excluding current maturities:
Credit Agreement............................................................................. $ 188,771 $ 186,498(1)
Notes offered hereby......................................................................... -- 120,000
9 3/4% Notes, net of unamortized discount.................................................... 109,755 21,951
Long-term obligations under capital leases................................................... 1,803 1,803
------------- ------------
Total long-term debt....................................................................... 300,329 330,252(2)
------------- ------------
Stockholders' equity:
Preferred stock, 4,000,000 shares authorized, none issued and outstanding.................... -- --
Common stock, $.01 par value 20,000,000 shares authorized; 12,468,238 shares issued and
outstanding................................................................................. 125 125
Capital in excess of par value............................................................... 151,253 151,253
Retained earnings (deficit).................................................................. (103,081) (107,170)(3)
Minimum pension liability adjustment......................................................... (2,941) (2,941)
------------- ------------
Total stockholders' equity................................................................. 45,356 41,267(3)
------------- ------------
Total capitalization........................................................................... $ 345,685 $ 371,519(2)
------------- ------------
------------- ------------
</TABLE>
- ------------------------
(1) Any proceeds remaining after the purchase of the 9 3/4% Notes tendered will
be used to retire obligations under the term facility of the Credit
Agreement and will be applied pro rata between current maturities and long
term debt.
(2) If 100% of the 9 3/4% Notes were tendered, total long-term debt would be
$326.1 million and total capitalization would be $366.4 million.
(3) Includes $4.1 million extraordinary loss, net of income tax benefit,
resulting from the early extinguishment of the $88 million aggregate
principal amount of 9 3/4% Notes tendered as of the close of business on May
3, 1996. If 100% of the 9 3/4% Notes were tendered, the extraordinary loss,
net of income tax benefit, would be $5.1 million.
15
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The unaudited PRO FORMA consolidated financial information set forth below
for the fiscal year ended December 30, 1995 is presented as if the Acquisitions
and the financing thereof, and this Offering and the use of proceeds therefrom
to purchase the 9 3/4% Notes tendered as of the close of business on May 3, 1996
($88 million aggregate principal amount) had each occurred on January 1, 1995.
The unaudited PRO FORMA consolidated financial information has been prepared on
the basis of assumptions described in the notes thereto and includes assumptions
relating to the allocation of the consideration paid for the acquisition of KPR
and TNT to the respective assets and liabilities of KPR and TNT based on
preliminary estimates of fair values or, with respect to real property assets,
based on preliminary appraisals. The actual allocation of such consideration may
differ from that reflected in the PRO FORMA consolidated financial statements
after valuation and other studies are completed. The Acquisitions have been
accounted for using the purchase method of accounting. The unaudited PRO FORMA
consolidated financial information does not necessarily represent what the
Company's results of operations would have been if the Acquisitions and the
financing thereof and the Offering and the use of proceeds therefrom had
actually been completed as of January 1, 1995, and is not intended to project
the Company's results of operations for any future period. The unaudited PRO
FORMA consolidated financial information should be read in conjunction with the
consolidated financial statements of the Company, and the related notes thereto,
and the financial statements of KPR and TNT and the related notes thereto, and
information included in, or incorporated by reference into, this Prospectus.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 30, 1995
------------------------------------------------------------------
ACQUISITION PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA FOR THE
-------------------------- INCREASE FOR THE OFFERING
COMPANY ACQUISITIONS (A) (DECREASE) ACQUISITIONS (H)
---------- -------------- ------------ ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales................................................. $ 634,700 $ 123,978 $ (7,670)(b) $ 751,008 $ 751,008
Cost of sales............................................. 499,985 94,727 (6,056)(b) 588,656 588,656
---------- -------------- ----------- -----------
Gross profit.............................................. 134,715 29,251 162,352 162,352
Operating expenses:
Selling, general & administrative....................... 95,117 10,131 (466)(b) 104,782 104,782
Amortization of intangible assets......................... 4,495 1,698 (177)(b) 7,152 7,152
1,136(c)
---------- -------------- ----------- -----------
Total................................................. 99,612 11,829 111,934 111,934
---------- -------------- ----------- -----------
Operating income.......................................... 35,103 17,422 50,418 50,418
Other income (expense):
Interest and financing costs............................ (17,268) (3,767) 8,722(d) (29,757) (31,845)
Other, net.............................................. (1,193) (18) (1,211) (1,211)
---------- -------------- ----------- -----------
Total................................................. (18,461) (3,785) (30,968) (33,056)
---------- -------------- ----------- -----------
Income from continuing operations before income taxes..... 16,642 13,637 19,450 17,362
Provision for income taxes................................ 7,041 1,069 (8,110)(e) 8,567 7,773
8,567(f)
---------- -------------- ----------- -----------
Income from continuing operations......................... $ 9,601 $ 12,568 $ 10,883 $ 9,589
---------- -------------- ----------- -----------
---------- -------------- ----------- -----------
Earnings per share:
Income from continuing operations....................... $ 0.77 $ 0.87(g) $ 0.77
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
- ------------------------
(a) The "Acquisitions" financial information does not reflect special bonuses of
$12.3 million declared and paid by KPR upon sale to Foodbrands America which
are reflected in the historical financial statements of KPR on file with the
Commission for the period ended December 10, 1995.
16
<PAGE>
(b) Reflects the elimination of those results of KPR and TNT for 1995 already
included in the Company's financial statements since December 11, 1995 and
December 18, 1995, the respective dates of the Acquisitions.
(c) Reflects the net change in amortization expense related to the Acquisitions
based on the amortization of goodwill over a period of 40 years and the
elimination of the amortization of the historical intangible assets of KPR
and TNT.
(d) Reflects interest attributable to financing the Acquisitions at the weighted
average interest rate in effect at March 30, 1996 (7.75%) on bank borrowings
of $157.5 million, amortization of debt issuance costs associated with the
Credit Agreement of approximately $1.3 million, offset by the elimination of
historical interest expense of the Acquisitions and elimination of
historical 1995 amortization of debt issue costs of approximately $1.0
million related to debt extinguished with proceeds from the Credit
Agreement. Each .25% change in applicable interest rate would produce a $0.4
million per annum change in interest expense and a corresponding change in
provision for income taxes and in income from continuing operations.
(e) Reflects the elimination of historical income tax expense.
(f) Records income tax expense at the statutory rate (federal and state). The
PRO FORMA tax provision and effective tax rate is not necessarily indicative
of the actual amounts and rates.
(g) The weighted average number of common and common equivalent shares used in
the PRO FORMA earnings per share computation was 12,453,000.
(h) The PRO FORMA consolidated financial information does not reflect the
extraordinary loss, net of income tax benefit, arising from the
extinguishment of the $88 million in aggregate principal amount of 9 3/4%
Notes tendered as of the close of business on May 3, 1996, estimated at $4.1
million. Assuming all 9 3/4% Notes are tendered and purchased pursuant to
the Tender Offer, the extraordinary loss, net of income tax benefit, is
estimated to be $5.1 million. The PRO FORMA consolidated financial
information has been prepared based upon an assumed interest rate for the
Notes offered hereby of 10 1/4%. Each .25% change in such interest rate
would produce a $0.3 million per annum change in interest expense. Due to
the different interest rates applicable to the 9 3/4% Notes and the term
obligations outstanding under the Credit Agreement (giving effect to the
weighted average interest rate in effect as of March 30, 1996), each $1.0
million change in principal amount of 9 3/4% Notes tendered would produce a
$20,000 per annum change in interest rate expense (up the maximum amount of
net proceeds from this Offering).
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following is certain selected financial information relating to the
Company. The Retail Division was sold in 1995 and has been reported as a
discontinued operation. Accordingly, the historical financial data has been
restated. As a result of the adoption of Fresh Start Reporting, historical
financial data for the period ended September 28, 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. The information presented below, for and as of
the end of, the nine months ended September 28, 1991, the three months ended
December 28, 1991 and each of the fiscal years in the four-year period ended
December 30, 1995, is derived from audited consolidated financial statements of
the Company. The unaudited PRO FORMA consolidated financial information for the
Company set forth below gives effect to (i) the Acquisitions and the financing
thereof and (ii) the Offering and the use of proceeds therefrom to purchase the
$88 million of the 9 3/4% Notes which had been tendered as of the close of
business on May 3, 1996, as if each such transaction had occurred on January 1,
1995. The unaudited PRO FORMA consolidated financial information does not
necessarily represent what the Company's results of operations would have been
if the Acquisitions and the financing thereof and this Offering and the use of
proceeds therefrom had actually been completed on that date, and are not
intended to project the Company's results of operations for any future period.
The table should be read in conjunction with the "Pro Forma Consolidated
Financial Information" and "Management's Discussion and Analysis" and the
consolidated financial statements of the Company and related notes thereto, and
the financial statements of KPR and TNT and the related notes thereto, included
in, or incorporated by reference into, this Prospectus.
<TABLE>
<CAPTION>
POST-CONFIRMATION
PRE- -------------------------------------------------------------
CONFIRMATION THREE
------------- MONTHS PRO FORMA
NINE MONTHS ENDED FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR FISCAL YEAR
ENDED SEPT. DEC. 28, ENDED JAN. ENDED JAN. ENDED DEC. ENDED DEC. ENDED DEC.
28, 1991 1991 2, 1993 1, 1994 31, 1994 30, 1995 30, 1995
------------- --------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net sales.......................... $ 277,902 $ 86,843 $ 365,950 $ 393,270 $ 512,352 $ 634,700 $ 751,008
Gross profit....................... 42,513 14,743 58,104 57,482 102,234 134,715 162,352
Provision for restructuring and
integration and plant closing..... -- -- -- 500 10,586 -- --
Operating income................... 8,036 2,449 9,016 3,428 11,209 35,103 50,418
Income (loss) from continuing
operations........................ (46,683)(2) (1,756) 644 (4,374) (5,195) 9,601 9,589
Net income (loss).................. 65,370(3) 3,943 (26,834)(5) (32,019)(6) (16,198)(7) (34,095)(8)
Earnings (loss) per share - primary
and fully diluted:
Income (loss) from continuing
operations...................... $ (9.12)(4) $ (0.30) $ 0.11 $ (0.59) $ (0.59) $ 0.77 $ 0.77
Net income (loss)................ 12.78(4) 0.68 (4.63) (4.32) (1.85) (2.73)
BALANCE SHEET DATA:
Working capital.................... $ 16,938 $ 15,852 $ 14,428 $ 34,682 $ 50,657 $ 20,430
Total assets....................... 309,111 271,539 255,464 304,560 453,734 532,572
Long-term debt..................... 148,160 135,627 134,409 122,377 224,260 305,407
Total debt......................... 154,718 140,206 143,354 123,830 225,914 323,748
OTHER DATA:
Net cash provided (used) by
operating activities.............. $ (78) $ 11,577 $ 4,610 $ 17,590 $ 33,094 $ 12,844
Net cash provided (used) by
investing activities.............. (3,363) (1,014) 2,113 (21,187) (151,196) (67,133)
Net cash provided (used) by
financing activities.............. (4,534) (7,384) (4,534) (60) 134,988 43,653
Adjusted EBITDA (9)................ 25,581 5,355 20,370 16,714 36,592 50,861 $ 73,061
Adjusted EBITDA margin (9)......... 9.2% 6.2% 5.6% 4.3% 7.1% 8.0% 9.7%
Interest expense (10).............. $ 10,999 $ 2,992 $ 6,599 $ 9,078 $ 14,175 $ 16,567 $ 30,937
Capital expenditures............... 2,669 551 3,421 8,934 10,063 24,255 30,855
Ratio of Adjusted EBITDA to
interest expense (9).............. 2.3x 1.8x 3.1x 1.8x 2.6x 3.1x 2.4x
Ratio of total debt to Adjusted
EBITDA (9)........................ 6.0x 26.2x 7.0x 7.4x 6.2x 6.4x 4.6x
Ratio of earnings to fixed charges
(11).............................. -- -- 1.4x -- -- 1.8x 1.5x
</TABLE>
- ------------------------------
(1) Net income (loss) includes the income (loss), net of applicable income
taxes, from operations of the discontinued Retail Division of $(1.7)
million, $5.7 million, $(27.5) million, $6.8 million, $(8.5) million and
$(4.1) million for the nine months ended September 28, 1991, the three
months ended December 28, 1991 and each of the fiscal years 1992 through
1995, respectively.
18
<PAGE>
(2) Includes reorganization expenses of $41.0 million for the nine months ended
September 28, 1991.
(3) 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.
(4) The per share amounts for the period ended September 28, 1991 do not provide
meaningful comparisons due to the Company's Chapter 11 reorganization.
(5) Includes a $32.0 million provision from a Retail Division plant closing.
(6) Includes the cumulative effect on years prior to the 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.
(7) Includes an extraordinary loss of $2.5 million associated with the early
extinguishment of debt.
(8) Includes the loss on disposal of the Retail Division of $38.5 million and an
extraordinary loss on early extinguishment of debt of $1.0 million.
(9) Adjusted EBITDA represents income (loss) from continuing operations before
income taxes, reorganization items, interest and financing costs,
restructuring/integration and plant closing provisions, depreciation,
amortization and other non-cash expenses. Adjusted EBITDA margin represents
Adjusted EBITDA as a percentage of net sales. The Company has included
information concerning Adjusted EBITDA as it understands that such
information is used by certain investors as one measure of an issuer's
historical ability to service its debt. Adjusted EBITDA should not be
considered as an alternative to, or more meaningful than, operating income
or cash flow determined by generally accepted accounting principles as an
indication of the Company's operating performance. Adjusted EBITDA is not
presented here as an alternative measure of operating results or cash flow,
but rather to provide additional information related to debt service
capability.
(10) Interest expense does not include amortization of financing costs, fees
paid to banks and others or imputed interest relating to the retiree medical
benefits obligation (nine months ended September 28, 1991), which are
included in "Interest and Financing Costs" in the Company's Consolidated
Statement of Operations.
(11) For purposes of computing this ratio, earnings consist of income (loss)
from continuing operations before income taxes and fixed charges. Fixed
charges consist of interest on indebtedness, amortization of debt issuance
costs and a portion of operating lease expense which is representative of
the interest factor attributable to interest expense. Such earnings were
insufficient to cover fixed charges by $46.7 million, $0.7 million, $5.7
million and $4.7 million in the nine months ended September 28, 1991, the
three months ended December 28, 1991, the fiscal year ended January 1, 1994
and the fiscal year ended December 31, 1994, respectively.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
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 the notes to "Selected Consolidated Financial Information,"
the following is a general discussion of the impact of certain factors on the
Company's financial statements.
ACQUISITIONS. 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 is operated as
the Specialty Brands Division of the Company, manufactures frozen food products,
including ethnic foods in the Mexican and Italian categories, 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 $68.3 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.
On December 11, 1995, the Company purchased KPR for approximately $101.9
million, including transaction-related costs of the acquisition. In addition,
the Company has agreed to certain contingent payments, payable in Common Stock
based on a value of $13.125 per share or cash, at the option of the sellers,
aggregating up to approximately $15.0 million over the next three years based on
the attainment of specified earnings levels. These payments, if made, will
increase goodwill. KPR produces and markets custom prepared foods and prepared
meat items for multi-unit restaurant chains. The acquisition has been accounted
for by the purchase method of accounting based on preliminary estimates. Final
adjustments are not expected to be material. The excess of the total purchase
price over fair value of net assets acquired of approximately $65.8 million has
been recognized as goodwill and is being amortized over 40 years.
On December 18, 1995, the Company purchased all the outstanding stock of TNT
for approximately $56.4 million, including transaction-related costs of the
acquisition. In addition, the Company has agreed to a contingent earnout,
payable in Common Stock based on a value of $11.54 per share or cash, at the
option of the sellers, not to exceed $6.5 million based on sales growth to
certain customers. These payments, if made, will increase goodwill. The business
operates as a segment of the Food Service Division. TNT produces and markets
partially baked and frozen self-rising crusts for use by pizza chains,
restaurants and frozen pizza manufacturers. The acquisition has been accounted
for by the purchase method of accounting based on preliminary estimates. Final
adjustments are not expected to be material. The excess of the total purchase
price over fair value of net assets acquired of approximately $47.5 million has
been recognized as goodwill and is being amortized over 40 years.
DISCONTINUED OPERATIONS. On May 30, 1995, the Company sold the assets of
its Retail Division (operated as a separate industry segment) to Thorn Apple
Valley, Inc. The sales price approximated $65.8 million in cash payments plus
the assumption of long-term debt of approximately $6.0 million and certain
current liabilities related to the division of approximately $4.5 million. In
connection with the sale the Company wrote off approximately $64.3 million of
intangible assets and recorded a net loss on disposition of approximately $38.5
million. The results of operations and cash flows of the Retail Division have
been reported as discontinued operations and prior years have been restated to
reflect this treatment. Accordingly, the results of continuing operations do not
include the operations of the Retail Division.
INTEGRATION AND COST REDUCTION. In December 1994, the Company announced a
restructuring program that resulted in a $10.6 million charge against operating
income in 1994. The restructuring program identified specific manufacturing
facilities and operations that related to excess capacity, as well as
duplication of activities after the acquisition of Specialty Brands.
As of December 30, 1995, the Company had consolidated production operations,
closed two production facilities and two distribution facilities and
discontinued a production operation. In connection with these actions, the
Company paid $3.5 million in 1995, which was charged against the reserve, and
charged an additional $2.1 million against the reserve for property, plant and
equipment. Of the total amount paid in
20
<PAGE>
1995, $0.8 million was for employee termination benefits for 35 employees
terminated during the year. The balance of the restructuring reserve remaining
at December 30, 1995 was comprised of accrued liabilities of $1.2 million and a
reserve against property, plant and equipment of $2.2 million. Management
believes that the remainder of the reserve is adequate to complete the
restructuring and integration program and plans to complete the program by the
end of 1996.
CHAPTER 11 REORGANIZATION. Foodbrands America's predecessor was founded
under the name Doskocil Companies Incorporated ("Doskocil") in 1964 as a
breakfast sausage producer. In the late 1960's, the Company became the first
commercial producer of pre-cooked pizza toppings. In 1985, the Company expanded
its product lines by acquiring a leading pepperoni manufacturer, Stoppenbach,
Inc. In 1988, Doskocil acquired Wilson Foods Corporation ("Wilson Foods").
Wilson Foods provided the Company with a broad line of meat products and
additional channels of distribution in the foodservice and delicatessen markets.
The Wilson Foods acquisition was predicated on the planned divestiture of
the Retail Division and the inability of the Company to complete such a sale on
a timely basis led to a liquidity crisis. As a result, Doskocil filed for
voluntary protection under Chapter 11 of the United States Bankruptcy Code, as
amended ("Chapter 11"), on March 5, 1990. Doskocil successfully completed its
financial reorganization under Chapter 11 on October 31, 1991, pursuant to a
plan of reorganization which allowed Doskocil to significantly improve its
financial condition by restructuring its bank and other indebtedness and
reducing its current and future obligations for retiree medical expenses.
INCOME TAXES. After considering utilization restrictions, the Company had
approximately $108.5 million of NOLs as of December 30, 1995, which will be
available as follows: $76.3 million in 1996, $13.3 million in each of the years
1997 and 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 to
reduce taxable income earned in subsequent years, subject to their expiration
provisions. These carryforwards expire as follows: $10.9 million in 1996, $21.7
million in 1998, $6.0 million in 1999, $0.9 million in 2000 and $69.0 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. The
Company has implemented certain stock transfer restrictions which reduce this
risk of loss. In accordance with Fresh Start Reporting as prescribed by
Statement of Position 90-7, "Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code," issued by the American Institute of Certified Public
Accountants, the Company will not reflect the realized income tax benefit of
pre-reorganization NOLs and deductible temporary differences in its statement of
operations. Instead, such benefit is reflected first as a reduction in the
"Reorganization Value in Excess of Amounts Allocable to Identifiable Assets"
("Reorganization Value") and then as a reduction in other intangible assets
arising from bankruptcy, thus reducing future intangible amortization expense.
Due to the non-deductibility of amortization of certain intangible assets, the
annual effective tax rate in future years is expected to be in excess of the
statutory income tax rate.
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. 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 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,
21
<PAGE>
and historical operating margins but does not anticipate any material asset
sales or other unusual transactions. The acquisitions of KPR and TNT are
expected to increase the likelihood that the net deferred tax asset will be
realized. This analysis is performed on a quarterly basis. The Company will
adjust the valuation allowance when it becomes more likely than not that the net
deferred tax benefits will be realized in the future. The Company anticipates
that this analysis will support the elimination of a significant portion of the
valuation allowance in 1996. Because a majority of the deferred tax assets and
NOLs are attributable to pre-reorganization temporary differences, the majority
of the adjustment will be recorded as a reduction of Reorganization Value and
other intangible assets arising from bankruptcy and the remainder will be
recorded as a reduction of income tax expense.
RESULTS OF OPERATIONS
COMPARABILITY OF PERIODS. For the year ended December 30, 1995, the
operating results attributable to KPR and TNT since their acquisitions in
December 1995 are sales of $7.7 million, gross profit of $1.6 million and
operating income of $1.0 million. Because of the acquisition of Specialty Brands
on June 1, 1994, the financial statements for the year ended December 31, 1994
reflect the operating results attributable to Specialty Brands for the months of
June through December 1994 only. The operating results attributable to Specialty
Brands for the first five months of 1995 include net sales of $74.6 million,
gross profit of $22.9 million and operating income of $6.0 million.
The Fiscal Year Ended December 30, 1995 ("Fiscal 1995") Compared to the
Fiscal Year Ended December 31, 1994 ("Fiscal 1994"). Net sales for Fiscal 1995
of $634.7 million increased over net sales for Fiscal 1994 of $512.4 million by
$122.3 million, or 24%. The increase is due to (i) $82.3 million of increased
sales related to the addition of Specialty Brands, KPR and TNT and (ii)
increased sales volumes in the Food Service and Deli Divisions.
Gross profit for Fiscal 1995 of $134.7 million increased over gross profit
for 1994 of $102.2 million by $32.5 million, or 32%. Of this total increase,
$24.5 million resulted from the acquisitions. The remaining $8.0 million
increase resulted from improved manufacturing throughput, manufacturing cost
reductions, including those anticipated under the restructuring/integration
program announced in 1994 and changes in sales mix. Gross profit as a percentage
of sales for Fiscal 1995 and Fiscal 1994 is 21% and 20%, respectively.
Selling expenses for Fiscal 1995 of $69.5 million increased 33%, or $17.3
million, over Fiscal 1994 selling expenses of $52.2 million. The addition of
Specialty Brands, KPR and TNT accounts for $14.8 million of the increase. The
remaining increase of $2.5 million relates to increased costs associated with
the increased volumes noted above as well as higher marketing costs in response
to increased competition.
General and administrative expenses increased 6%, or $1.4 million, from
$24.2 million in Fiscal 1994 to $25.6 million in Fiscal 1995. The increase
resulting from the acquisitions noted above was $1.7 million. The offsetting
$0.3 million reduction is attributable to overhead reduction efforts.
Amortization of intangibles, a noncash element of operating expense,
increased $0.4 million due to the amortization of intangibles related to the
acquisitions of Specialty Brands, KPR and TNT partially offset by the reduction
of amortization of intangibles created by the utilization of net operating
losses which reduced the intangible asset "Reorganization Value in Excess of
Amounts Allocable to Identifiable Assets."
Interest and financing costs increased $2.2 million because of the debt
associated with the acquisitions partially offset by the reduction in debt
associated with the sale of the Retail Division. Amortization of debt issue
costs and debt discount included in interest expense for Fiscal 1995 and Fiscal
1994 was $1.2 million and $1.3 million, respectively.
Income tax expense for Fiscal 1995 of $7.0 million is based on the statutory
(federal and state) tax rate applied to income from continuing operations after
adding back expenses with no future tax deductibility. Income tax expense for
Fiscal 1994 of $0.6 million consisted solely of state income taxes.
Fiscal 1994 Compared to the Fiscal Year Ended January 1, 1994 ("Fiscal
1993"). The Company's net sales for Fiscal 1994 increased $119.1 million, or
30%, over Fiscal 1993 sales of $393.3 million. Net sales for
22
<PAGE>
Fiscal 1994 of $512.4 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
decreases in raw material costs which resulted in decreases in sales dollars per
pound.
Gross profit for Fiscal 1994 increased 78%, or $44.7 million, over Fiscal
1993 gross profit of $57.5 million. Fiscal 1994 gross profit of $102.2 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.
Gross profit as a percentage of sales for Fiscal 1994 and Fiscal 1993 is 20% and
15%, respectively.
Selling expenses of $52.2 million in Fiscal 1994 increased 80%, or $23.2
million, over Fiscal 1993 selling expenses of $29.0 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. The increases in
the Food Service and Deli Divisions are due to improved sales volume.
General and administrative expenses in Fiscal 1994 increased $2.5 million
over Fiscal 1993 expenses of $21.7 million, an increase of 12%. Included in the
Fiscal 1994 total of $24.2 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 increased approximately $1.3 million in
Fiscal 1994 over Fiscal 1993 due to the Specialty Brands acquisition.
Interest and financing costs for Fiscal 1994 of $15.1 million increased $5.9
million, or 64%, over Fiscal 1993 costs of $9.2 million. The increase is due to
increased interest costs of $5.0 million as a result of increased borrowings,
generally higher interest rates and increased amortization of debt issue costs
of $0.9 million. Amortization of debt issue costs and debt discount included in
interest expense for Fiscal 1994 and Fiscal 1993 was $1.3 million and $0.4
million, respectively.
Income tax benefit for Fiscal 1993 of $1.2 million represents the tax
benefit of losses from continuing operations offsetting income from discontinued
operations.
DISCONTINUED OPERATIONS
Discontinued operations includes the net sales and related expenses
associated with the Retail Division's operations. Net sales for Fiscal 1995,
1994 and 1993 were $72.4 million, $238.3 million and $254.9 million,
respectively. Gross profit was $9.1 million, $44.2 million and $53.2 million,
respectively. Operating income (loss) was $(4.8) million, $(3.5) million and
$13.1 million for each year, respectively. Corporate interest expense allocated
to the Retail Division based on net assets was $2.0 million, $4.4 million and
$4.6 million for each fiscal year, respectively. Net income (loss) attributable
to the Retail Division after allocated interest expense was $(4.1) million,
$(8.5) million and $6.8 million. The loss for Fiscal 1995 was net of income tax
benefit of $2.9 million and income for Fiscal 1993 was net of income tax expense
of $1.6 million. No income tax benefit or expense was recognized in Fiscal 1994.
Amortization of intangible assets included in operating expense of the
Retail Division was $1.6 million, $3.2 million and $3.3 million for Fiscal 1995,
1994 and 1993, respectively.
EXTRAORDINARY LOSSES
During Fiscal 1995 and Fiscal 1994, the Company incurred an extraordinary
loss on early extinguishment of debt of $1.0 million and $2.5 million,
respectively. These losses related to the write-off of remaining unamortized
deferred loan costs associated with debt extinguished when the Company
consummated new bank financing in connection with the acquisitions of KPR and
TNT in 1995 and Specialty Brands in 1994. The loss in Fiscal 1994 included the
termination of a related interest rate swap agreement. The Fiscal 1995 loss is
net of income tax benefit of $0.7 million.
23
<PAGE>
CASH FLOWS AND CAPITAL EXPENDITURES
Fiscal 1995. Net cash provided by continuing operations activities was
$25.1 million for Fiscal 1995 compared to $32.5 million in Fiscal 1994. The
operations of the discontinued Retail Division used $12.3 million of cash in
Fiscal 1995. Cash of $33.9 million was provided by the results of continuing
operations after adding back noncash items. Increases of cash were also provided
by increases in accounts payable and accrued liabilities and noncurrent
liabilities. Decreases in cash were due to increases in accounts receivable,
inventories and other assets as well as payments under the Fiscal 1994
restructuring/integration program.
The KPR acquisition costs of $101.9 million included net accounts receivable
of $6.8 million, inventory of $6.9 million, investment in foreign joint venture
of $2.0 million, intangible assets of $65.8 million and property, plant and
equipment of $23.9 million. The Company also assumed liabilities of $3.5
million.
The TNT acquisition costs of $56.4 million included net accounts receivable
of $1.7 million, inventory of $0.3 million, other assets of $0.1 million,
intangible assets of $47.5 million and property, plant and equipment of $8.5
million. The Company also assumed liabilities of $1.7 million.
Assets sold with the disposal of the Retail Division included net accounts
receivable of $10.8 million, inventories of $8.6 million, other current assets
of $0.7 million, other assets of $0.2 million and property, plant and equipment
of $22.2 million. The purchaser also assumed liabilities of $10.5 million. Net
cash proceeds to the Company were $65.8 million. The Company reduced its debt
under its term loan by $58.0 million and used the remainder to pay expenses
related to the sale.
Expenditures for additions to property, plant and equipment were $24.3
million for continuing operations and $0.8 for discontinued operations.
Approximately $6.9 million of these expenditures related to increased capacity
in production, $6.2 million related to new equipment and fixtures to accommodate
the transfer of production to other facilities resulting from the integration
and restructuring program and the sale of the Retail Division and the remainder
was for replacements and modifications of existing facilities. The source of the
funds for these expenditures was from cash provided by operations.
Fiscal 1994. Operating activities provided net cash of $33.1 million in
Fiscal 1994 compared to $17.6 million in Fiscal 1993. The Specialty Brands
Division provided $10.6 million of the total for Fiscal 1994. The operations of
the discontinued Retail Division provided $0.6 million of cash flow in Fiscal
1994. The cash provided by the results of continuing operations after adding
back noncash items of depreciation and amortization, postretirement medical
benefits, provisions for restructuring, integration and plant closings was $21.0
million in Fiscal 1994, of which $11.8 million was provided by the Specialty
Brands Division. Additional increases in cash from operating activities resulted
primarily from decreases in accounts receivable, inventories, deferred charges
and other assets and increases in accounts payable and accrued liabilities
offset partially by increases in other current assets.
The Company's Specialty Brands 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.
Capital expenditures for additions to property, plant and equipment were
approximately $10.1 million for continuing operations and $4.5 million for
discontinued operations 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,
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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, affiliates of JLL, a
New York investment firm and the Company's largest shareholder, increased their
ownership of the Company to approximately 44.3% from 27.4% at January 1, 1994.
Fiscal 1993. Operating activities provided net cash of $17.6 million in
Fiscal 1993. Operations of the discontinued Retail Division provided $10.5
million of cash flow in Fiscal 1993. Investments in property, plant and
equipment totaled $8.9 million for continuing operations and $10.8 million for
discontinued operations during Fiscal 1993. 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, all of which are included in net investment activities of
discontinued operations.
The Company reduced its net borrowings by $26.8 million during Fiscal 1993.
The Company issued $110.0 million of 9 3/4% 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, an affiliate of 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 affiliates
owned approximately 25% of the Common Stock.
FINANCIAL CONDITION AND LIQUIDITY
On December 11, 1995, Foodbrands America entered into a Credit Agreement
providing for (i) a term loan for $145.0 million ($95.0 million was outstanding
and $50.0 million was utilized to support the KPR Note with a letter of credit
on December 30, 1995, and $144.7 million was outstanding on May 3, 1996), (ii) a
revolving credit facility available, subject to certain approvals and
conditions, to fund acquisitions in an amount not to exceed $100.0 million
($56.5 million was outstanding as of December 30, 1995, and $56.4 million was
outstanding on May 3, 1996) and (iii) a working capital revolving credit
facility available in an amount not to exceed $75.0 million, of which $55.0
million can be used to fund acquisitions ($9.0 million was outstanding as of
December 30, 1995, and $10.0 million was outstanding on May 3, 1996). The
proceeds received in December 1995 were net of $3.9 million of debt issuance
costs and were used to repay the existing bank debt outstanding and to finance
the Acquisitions. The total debt outstanding under all facilities (excluding the
letter of credit supporting the KPR Note) at December 30, 1995, was $160.5
million. In January 1996, $50.0 million under the term loan was used to retire
the KPR Note and the letter of credit supporting it was terminated. The Credit
Agreement includes a subfacility for standby and commercial letters of credit
not to exceed $7.0 million. The term loan requires quarterly payments beginning
May 1996. The acquisition revolving facility requires quarterly payments
beginning May 1997. To the extent not previously paid, all borrowings under the
Credit Agreement are due and payable on January 15, 2000. Payments totaling
$16.9 million will be required in 1996. At December 30, 1995, $50.9 million was
available for borrowing at that date based on the Company's inventory and
accounts receivable borrowing base and the Company also had the ability to
borrow an additional $43.5 million under the acquisition revolving facility in
1996 to fund future qualified acquisitions. If the Tender Offer is consummated,
the Credit Agreement will be amended to, among other things, extend the
maturities and scheduled amortization thereunder. See "Description of Other
Indebtedness -- The Credit Agreement."
The Credit Agreement and the 9 3/4% Notes contain customary covenants
associated with similar facilities, including, without limitation, maintenance
of a specific ratio of total debt to EBITDA (as defined therein), maintenance of
a specific ratio of EBITDA minus capital expenditures to interest expenses, a
prohibitation on the payment of Company dividends and limitations on Company
stock repurchases, and limitations on certain liens, acquisitions, mergers,
consolidations, sale of assets or incurrence of debt and additional guarantees,
etc. (see "Description of Other Indebtedness -- The Credit Agreement/COVENANTS"
and "-- The 9 3/4% Notes/COVENANTS AND EVENTS OF DEFAULT"). The Company
currently is in compliance with all such covenants. Company obligations under
the Credit Agreement and the 9 3/4% Notes are, and obligations
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under the Notes will be, guaranteed by substantially all of the Company's direct
and indirect subsidiaries. There are currently no restrictions on the ability of
the subsidiaries to transfer funds to the Company in the form of cash dividends,
loans or advances.
The Company expects capital expenditures for 1996 to equal approximately
$30.0 million for general expansion, modification and maintenance of the
Company's facilities, and will be financed by the Company's cash flow, capital
leases and advances under the Credit Agreement.
Management believes that cash flow from operations combined with the
borrowing capacity available under the Company's Credit Agreement will be
sufficient to meet the Company's existing operating and debt interest service
cash requirements for the foreseeable future. Management also believes the
reduction of debt as a result of the sale of the Retail Division along with the
reduced working capital requirements has benefited the Company's overall
liquidity and capital resources and is allowing the Company to more rapidly
execute its strategy to acquire higher margin food businesses, such as the
recently completed acquisitions of KPR and TNT.
The Company's primary raw materials are fresh and frozen meat, flour, cheese
and other dairy products, vegetables, sugar and vegetable oil. 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 and in connection with fixed price sales
agreements to hedge the cost of raw materials for both firm and forecasted sales
commitments that will occur during a seasonal sales peak.
Futures contracts as described above are accounted for as hedges.
Accordingly, resulting gains or losses are deferred and recognized as part of
the product cost. The maximum absolute dollar value of hedging contracts
outstanding during each of the fiscal years 1995, 1994 and 1993 was $3.1
million, $11.8 million and $5.2 million, respectively, representing 0.6%, 2.9%
and 1.6% of total cost of sales for each year. Total realized loss for fiscal
year 1995 from futures trading was $0.3 million, total realized loss for fiscal
year 1994 from futures trading was $1.7 million and total realized profit for
fiscal year 1993 was $0.4 million. The Company's fiscal year end is typically a
seasonal low point in hedging activities and deferred losses as of the end of
Fiscal 1995, 1994 and 1993 were each less than $0.1 million.
OTHER
KPR is a defendant in a lawsuit filed prior to its acquisition by the
Company. The plaintiff alleges liability based upon patent infringement,
misappropriation of proprietary information, unfair business practices and
breach of contract. Although the pleadings do not specify any amount of damages,
liability for patent infringement may include disgorgement of profits which the
Company believes could be material. KPR has denied these allegations and
contends that the plaintiff's patents are invalid and that, even if valid, the
process and equipment used by the subsidiary does not infringe the patents. See
"Business -- Legal Proceedings."
The litigation is complex and the ultimate outcome can not be presently
determined. Although the Company will vigorously defend its interests, no
assurance can be given that a material adverse effect will not result from the
litigation.
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 impact of changing prices on raw materials has
decreased since the Company exited the volatile retail refrigerated processed
meat case business. The Company does not
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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 1995, Fiscal 1994
or Fiscal 1993. Like many food processors, the Company periodically adjusts
selling prices of its products, subject to competitive constraints and costs of
raw materials.
RECENT DEVELOPMENTS
Sales in the first quarter of 1996 were $186.0 million, an increase of 33%
from sales of $139.4 million reported in the first quarter of last year. Of the
$46.6 million increase in sales for the quarter, $35.3 million was the result of
the Acquisitions, both completed in the fourth quarter of fiscal 1995. The
remaining increase was attributable to an 8.1% growth in sales for the Company's
existing business.
Operating income for the quarter was $11.4 million compared to $7.8 million
in the previous year. The increase resulted from the Acquisitions as well as
overall increases in the Company's business. These increases were partially
offset by higher amortization of intangible assets associated with the
Acquisitions and increased administrative expenses, including non-cash expenses
for employee stock options not occurring in the prior year quarter. Total
depreciation and amortization for the quarter was $6.1 million compared to $3.8
million for the same quarter last year.
Net income for the quarter ended March 30, 1996 was $2.1 million, or $0.17
per share compared to income from continuing operations in the first quarter of
1995 of $1.8 million, or $0.14 per share and net loss from the prior year
quarter of $0.6 million, or ($0.05) per share. The net loss in the prior year
quarter was the result of losses on discontinued operations pertaining to the
Company's Retail Division, which was sold in May 1995.
As of March 30, 1996, the Company had expended $5.0 million for additions to
property, plant and equipment out of an anticipated capital expenditure budget
for 1996 of $30 million. Approximately $0.7 million of these expenditures were
used for expansion of production facilities and the remainder were used for cost
savings programs and for replacements and modification to the existing
facilities. The source of funds for these expenditures was cash provided by
operations.
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BUSINESS
The Company produces, markets and distributes frozen and refrigerated
processed food products to the foodservice industry including pepperoni, beef
and pork pizza toppings, partially baked and self-rising pizza crusts,
appetizers, Mexican and Italian foods, sauces, soups and side dishes and
processed meat products. The Company's products are marketed principally in the
United States under proprietary brand names that include WILSON'S CONTINENTAL
DELI-REGISTERED TRADEMARK-, AMERICAN FAVORITE-TM-, DOSKOCIL FOODS-TM-, JEFFERSON
MEATS-TM-, FRED'S-REGISTERED TRADEMARK-, ROTANELLI'S-REGISTERED TRADEMARK-,
POSADA-REGISTERED TRADEMARK- AND BUTCHER BOY-REGISTERED TRADEMARK-. The Company
currently operates twelve production facilities and distributes the majority of
its products from two distribution centers to wholesale foodservice
distributors, multi-unit restaurant chains, food processors, grocery store
delicatessens and warehouse clubs.
INDUSTRY OVERVIEW
Purchases of food prepared outside of the home have grown and currently
represent over 50% of total food purchases. Demand has risen due to various
demographic changes, including increases in personal disposable income, the
increasing number of single-parent households and the rising number of
two-income families as more women enter the work force. The foodservice industry
itself has undergone significant consolidation, and at the same time, in
response to these consumer and demographic trends, segmentation of the
foodservice industry has occurred, with certain segments such as "ethnic foods"
and convenience foods growing at a faster rate than the foodservice industry in
general. The Company believes that it is well-positioned to continue to identify
and capitalize on these profitable, under-served and growing segments of the
foodservice industry.
It is estimated that over $20 billion of pizza is consumed in the U.S.
annually. Pizza accounted for one in four entrees ordered from foodservice
establishments in 1994. This growth has resulted in the penetration of pizza
sales into a number of non-traditional pizza outlets including quick service
restaurants, convenience stores and grocery store delicatessens. Additionally,
pepperoni, a product in which the Company holds a leading market position, is
the most popular pizza topping, included on approximately 50% of all pizzas sold
in America.
The ethnic food category has grown rapidly in the last few years and is
expected to continue to experience sustained growth in the near future,
supported by the growing ethnic diversity of the U.S. population. Among the most
popular foods in the ethnic segment are Mexican, Italian, and Oriental.
The appetizer market increased at a rate of approximately 5% in 1994. The
Company expects this trend to continue as restaurants use appetizers to increase
profit margins, and as customers view appetizers as a lower-cost alternative to
full meals when dining out.
The Company believes that restaurants and other foodservice providers are
seeking to outsource more of the "back-of-the-house" food preparation process in
order to ensure product quality and consistency, reduce preparation costs and
increase food safety. According to industry sources, restaurant sales continue
to grow at a more rapid pace than overall grocery store sales. Management
believes the growth in the foodservice industry, combined with the trend of
outsourcing food preparation will enhance the growth of food processors serving
this niche.
Grocery store delicatessen sales are estimated by SUPERMARKET BUSINESS, an
industry trade publication, to have been approximately $20.0 billion in 1995 and
to have grown by approximately 6.7% in 1995 over 1994. This category has seen
rapid growth over the past five years as supermarkets, seeking to profit from
the general growth in foodservice sales, have added in-store specialty
delicatessen departments and increased foodservice offerings to meet changing
consumer demands.
BUSINESS STRATEGY
The Company's mission is to be a leading high-quality manufacturer and
marketer of value-added frozen and refrigerated products targeted to segments of
the foodservice industry which the Company believes will experience faster
growth and provide higher margins than the foodservice industry as a whole. The
Company has undertaken several initiatives during the prior two years to
implement its strategy.
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ADDITIONS TO MANAGEMENT. The Company has strengthened its management team
with the additions of key officers, many of which have extensive experience in
the food and beverage industry. R. Randolph Devening was named Chairman,
President and Chief Executive Officer of Foodbrands America in August 1994;
Horst O. Sieben was named Senior Vice President and Chief Financial Officer in
October 1994; and Patrick O'Ray joined Foodbrands America as Senior Vice
President and President of the Company's Specialty Brands Division in September
1995. The Company has also retained the experienced management teams of the
recently acquired KPR and TNT. See "Management."
DIVESTITURE. In May 1995, the Company sold the assets of its Retail
Division to Thorn Apple Valley, Inc., for approximately $65.8 million in cash
and the assumption of approximately $6.0 million of debt. The Retail Division
was the Company's only non-foodservice division and operated in a separate
industry segment. The divestiture represented the Company's exit from the
volatile retail commodity meat case business, permitting management to focus on
its business strategy.
ACQUISITIONS. In June 1994, the Company acquired the frozen specialty foods
division of International Multifoods Corporation which provided the Company with
its first significant value-added specialty product lines. The business, which
is operated as the Specialty Brands Division of the Company, manufactures frozen
food products, including ethnic foods in the Mexican and Italian categories, as
well as appetizers, entrees and portioned meats.
In December 1995, the Company acquired KPR, which enhanced the Company's
position in the pizza industry and increased its presence in specialty non-meat
based foods. KPR produces and markets meat-based pizza toppings (pepperoni,
Italian sausage, ham, and beef and pork pizza toppings) and kettle-cooked
products (soups, sauces and side dishes) marketed to multi-unit restaurant
chains. KPR provides the Company with a number of opportunities including access
to a leading pizza restaurant chain not previously served by the Company,
enhancement of the Company's leading market share in pizza toppings, an
expanding international joint venture with manufacturing facilities in Ireland,
and a new product line of soups, sauces and side dishes.
In December 1995, the Company acquired TNT, which produces and markets pizza
crusts (both partially baked and self-rising) for foodservice operators and
industrial accounts (including manufacturers of frozen pizza). Partially baked
pizza crusts are expected to gain market share as more and more operators move
away from preparing crusts in-house toward outsourcing in order to increase
consistency and reduce operating costs. The Company believes TNT to be the
nation's largest producer of partially baked and self-rising pizza crusts.
INTEGRATION AND COST REDUCTIONS. The Company has substantially completed
the restructuring and integration program it announced following its acquisition
of Specialty Brands in 1994. As of December 30, 1995, the Company had
consolidated production operations, closed two production facilities and two
distribution facilities and discontinued a production operation.
EQUITY ISSUANCES. In March 1993, Foodbrands America sold two million shares
of Common Stock at $15.00 per share to an affiliate of JLL. In October 1994, the
Company completed an equity rights offering with net proceeds of $38.6 million,
of which $35.0 million was used to reduce bank debt. As a result of the rights
offering (and certain open market purchases), JLL affiliates increased their
percentage ownership of the Common Stock to approximately 44.3%.
In recognition of its overall business strategy, the Company reincorporated
in Delaware in 1995 and changed its name from Doskocil Companies Incorporated to
Foodbrands America, Inc. to communicate the mission and future direction of the
Company more clearly. Recently, the Company's Common Stock began trading on the
New York Stock Exchange under the symbol "FDB."
In pursuit of its overall business strategy in the future, the Company will
seek to:
- expand market penetration in its existing foodservice markets;
- leverage its leadership position in the pizza toppings and partially baked
pizza crust business;
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- further emphasize the development and sale of higher-margin processed
specialty products;
- invest in its manufacturing and distribution operations with the objective
of further improving its status as a low-cost producer; and
- exploit growth opportunities through selective acquisitions of well
positioned premium producers of value-added processed food products
serving niche markets in the foodservice industry.
In the past two years, the Company has repositioned itself moving from a
supplier of primarily meat-based products, such as commodity and fresh pork
products, to a leading, high quality manufacturer and marketer of value-added
frozen and refrigerated food products. As a result, during 1995, on a PRO FORMA
basis after giving effect to the Acquisitions, over one-third of the Company's
sales were of specialty, non-meat products, while commodity products accounted
for only 13% of sales.
The Company has increased sales from continuing operations from $366.0
million in 1992 to $751.0 million on a PRO FORMA basis after giving effect to
the Acquisitions in 1995. Income from continuing operations increased from $0.6
million in 1992 to $9.6 million in 1995 on the same PRO FORMA basis. Cash flow
from operating activities increased from $4.6 million in 1992 to $12.8 million
in 1995 on an historical basis. The Company also increased Adjusted EBITDA from
continuing operations from $20.4 million in 1992 to $73.1 million in 1995, on
the same PRO FORMA basis, resulting in an increase in its Adjusted EBITDA margin
from 5.6% of sales in 1992 to 9.7%.
PRODUCTS AND CHANNELS OF DISTRIBUTION
The Company's products are marketed and distributed through separate sales
and marketing organizations associated with each of its four operational
divisions. Each division is structured to focus on different purchasing groups
within the foodservice industry. Recognizing the unique requirements of its
separate buying sectors, the Company offers each sector a complete product line
designed to meet its specific needs through a specially trained sales
organization. The Company markets the products of each division as an integrated
line, offering products at several price points to each buying sector and the
convenience of consolidated delivery of a broad range of products through its
centralized distribution system. The Company believes this focused approach
gives it a competitive advantage with its customers, many of whom are limiting
the number of suppliers from whom they purchase. No single customer represented
10% or more of the Company's net sales in 1995.
- FOOD SERVICE DIVISION. The Food Service Division provides 600 products
under the brand names of DOSKOCIL FOODS-TM- and WILSON
FOODSERVICE-Registered Trademark-, as well as private labels. The division
is a leader in processed meats, pepperoni, beef and pork pizza toppings,
and partially baked and self-rising pizza crusts in the United States. The
Company has four production plants in Kansas and Wisconsin. The Division
markets products through a broker network and direct sales force to
customers who re-market the products for "food-away-from-home" preparation
and consumption. Customers include national and regional restaurant
chains, institutional foodservice customers, foodservice distributors
(such as Alliant-TM-Foodservice, Inc. ("Alliant") and Sysco Corporation
("Sysco")), buying group associations (such as ComSource Independent
Foodservice Companies, Inc.), warehouse clubs (such as Sam's Club, a
division of Wal-mart Stores, Inc. ("Wal-mart")) and large food processors
(such as Tombstone Pizza Corporation and the manufacturer of Tony's
Pizza). The Food Service Division accounted for 41.7% of the Company's
sales in 1995, on a PRO FORMA basis after giving effect to the
Acquisitions.
- KPR FOODS DIVISION. KPR is a producer and marketer of meat-based pizza
toppings and soups, sauces and side dishes to a limited number of large,
multi-unit restaurant chains (such as TGI Friday's and chains owned by
Brinker International) through a direct sales force. The Division's
kettle-cooked products include soups such as Southwestern chicken chili,
chicken noodle, baked potato, tortilla and others; sauces such as alfredo
and marinara; and side dishes such as creamed spinach, macaroni and
cheese, Mexican rice, broccoli au gratin and cinnamon apples. The Division
operates two production facilities in Texas and is currently involved in a
50/50 joint venture to manufacture pepperoni and beef and pork pizza
toppings in Ireland for sale to pizza operators in Europe, the Middle
East, Northern
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Africa and Asia. Products are marketed directly to a select group of large
chain customers with centralized buying and specialized product
requirements. As a result, the Division's product development group is
heavily involved in new and existing customer sales by developing specific
products for each customer. The KPR Foods Division accounted for 13.4% of
the Company's sales in 1995, on a PRO FORMA basis after giving effect to
the Acquisitions.
- SPECIALTY BRANDS DIVISION. The Specialty Brands Division holds major
market positions in the ethnic prepared-food and appetizer categories.
Ethnic product offerings include premium and price/value burritos,
chimichangas, taquitos and other Mexican food items, frozen stuffed pastas
and other Italian entrees, and egg rolls, "pot-stickers" and other
Oriental foods. The Division's appetizer offerings include breaded and
fried vegetables and mozzarella sticks, cheese-stuffed jalapenos, as well
as ethnic-based appetizers. Products are offered under trademarks that
include FRED'S-Registered Trademark-, ROTANELLI'S-Registered Trademark-,
POSADA-Registered Trademark- and DELIFEST-TM- Gourmet Salads. The Company
has five production plants in California, New Mexico, Missouri and New
York. Specialty Brands' brokered sales force sells to major foodservice
distributors (such as Alliant and Sysco), to buying group associations
(such as Emco Food Service Systems, Inc.) and to smaller distributors.
These distributors resell products to restaurants, hotels and school
systems. Consumer products are sold primarily through food brokers to
grocery stores, warehouse clubs and military stores. The Division's
in-house sales force sells to vending operators and convenience stores
(such as VSA, Inc, a subsidiary of International Multifoods Corporation,
McLane Company, Inc. -- a subsidiary of Wal-Mart and National Convenience
Stores). Major national and regional restaurant chains (such as
Applebee's, Steak-N'-Shake, Inc., a subsidiary of Consolidated Products,
Inc. and Shoney's, Inc.) and foodservice management firms (such as
Marriott International) purchase products through the Division's direct
sales force and through brokers. The Specialty Brands Division accounted
for 25.4% of the Company's sales in 1995, on a PRO FORMA basis after
giving effect to the Acquisitions.
- DELI DIVISION. The Deli Division, a leading provider of deli meats,
produces 130 products primarily at its facility in Iowa, and offers
products such as premium and flavored ham products, dry sausages, cold
cuts, poultry and other value-added meat and non-meat prepared foods under
the WILSON'S CONTINENTAL DELI-Registered Trademark-, AMERICAN FAVORITE-TM-
and FRESH CUTS-TM- labels. The Deli Division is a leading provider to
grocery store delicatessens with a customer base consisting of national
grocery chains (such as Albertson's, Inc.), national and regional
wholesale distributors (such as SuperValu Stores, Inc., Fleming Companies,
Inc. and Associated Wholesale Grocers Inc.), regional grocery chains (such
as Hy-Vee Food Stores, Inc.) and independent distributors to grocery
stores (such as CCS Distributors, Inc.). The Division markets its products
primarily through a food broker network. The Deli Division accounted for
19.5% of the Company's sales in 1995, on a PRO FORMA basis after giving
effect to the Acquisitions.
The percentage of net sales for each of the Company's major product lines
for the years 1995, 1994 and 1993, respectively, are (i) pizza toppings and
crusts -- 23.3%, 26.8% and 34.9%; (ii) processed meat -- 46.3%, 50.1% and 63.3%;
and (iii) frozen entrees and vegetables -- 29.7%, 22.0% and no percentage of net
sales (the frozen entree and vegetable line of products was acquired in 1994).
The Company's products are transported by independent carriers from its
distribution/customer service centers in Edwardsville, Kansas and Rialto,
California or are shipped directly from the production facility with a view
toward achieving an efficient, cost-effective method of distribution. Customer
requirements vary from the need for large quantities of a limited number of
products to small quantities of a number of items, each requiring a different
distribution method. From the distribution centers, 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 flexible distribution system allows
the Company to provide superior service to its customers by reducing the time
between the placement of customer orders and delivery of the Company's products
and, by lowering customer shipping costs through the elimination of higher-cost,
fragmented deliveries.
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PRODUCT INNOVATION
The Company has a strong history of innovation in the development,
production and market introduction of commercially successful product lines. For
example, the Company became the first commercial producer of pre-cooked pizza
toppings in the 1960's by developing a continuous production system for
manufacturing pre-cooked pork and beef pizza toppings. Recently, the Company
opened its new Technology Center in South Hutchinson, Kansas, which houses
state-of-the-art test kitchens and a fully-equipped pilot plant for customer
project work. The Company also maintains product development groups at
Riverside, California and Ft. Worth, Texas whose primary focus is the
development of new products for customers of the Specialty Brands and KPR Foods
Divisions, respectively. Product development employees work directly with
customers in finding ways to meet numerous taste, texture, quality and cost
requirements.
COMPETITION
The Company competes in highly competitive markets with a significant number
of companies of various sizes, including divisions or subsidiaries of larger
companies. The principal competitive factors in its market are service,
innovative products, quality and cost. The Company maintains leading market
positions even though many of its competitors are considerably larger with
greater financial resources.
The Company competes with H&M Foods and Hormel Foods Corporation ("Hormel")
in the pizza topping business. Crest Star Foods and Rich's Products are the
Company's primary competitors in the partially baked and self-rising pizza crust
industry.
The appetizer business is dominated by three key providers: Anchor Food
Products, Inc., Ore-Ida Foods Inc., a subsidiary of H.J. Heinz, and Specialty
Brands.
The Company's principal competitor in Mexican burrito and taquito programs
is Fernando's Foods Corporation. Other suppliers of frozen Mexican products,
such as Ruiz Food Products, ConAgra, Inc. ("ConAgra") and Camino Real Foods, are
more focused on the retail market than is the Company.
The main competitors of the Company's Deli Division and processed meat
operations are ConAgra and Sara Lee Corporation as well as various regional
competitors. Key factors which will continue to affect the grocery store
delicatessen business are the changing formats of the supermarket, consolidation
of customers and competitors, growing importance of carry-out, ready-to-eat
foods, self-service, and shortages of high-quality, cost-effective labor at
grocery store delicatessens.
The markets for the Company's kettle-cooked products (soups, sauces and side
dishes) are very fragmented. Although national manufacturers such as Campbell's
Soup, Nestle and Heinz offer canned, dry and frozen soups to the restaurant
trade, the kettle-cooked products compete primarily with regional food
processors.
GOVERNMENT REGULATION
The Company is subject to various laws and regulations of federal, state and
government entities, including the United States Department of Agriculture
("USDA"), the Food and Drug Administration ("FDA") and the Occupational Safety
and Health Administration. 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 daily operations. Management
believes that the Company is currently in compliance in all material respects
with all applicable health and safety laws and regulations and management does
not believe that the costs of continued compliance with existing laws and
regulations will have a material adverse effect on the Company's financial
condition.
As with similar companies, the Company's operations and properties are also
subject to a wide variety of increasingly complex and stringent federal, state
and local laws and regulations, including those governing the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes, the remediation of contaminated soil
and groundwater, and the health and safety of employees. As such, the nature of
the Company's operations exposes it to the risk of claims with respect to
environmental matters. Based upon its experience to date, the Company believes
that the future cost of compliance with existing environmental laws and
regulations, and liability for known environmental
32
<PAGE>
claims, will not have a material adverse effect on the Company's business or
financial position. However, future events, such as changes in existing laws and
regulations or their interpretation, and more vigorous enforcement policies of
regulatory agencies, may give rise to additional expenditures or liabilities
that could be material.
SEASONALITY
While net sales of the Company's products historically have been higher in
the fourth quarter than in any other quarter of the year, the Company believes
that the divestiture of the Retail Division and the Acquisitions will reduce
seasonality of the Company's business. Consequently, the Company believes that
it is not subject to material seasonality of sales.
EMPLOYEES
At December 30, 1995, the Company employed approximately 3,200 persons,
approximately 40% of whom are covered by collective bargaining agreements which
extend through various dates from May, 1997 to March, 1999. Substantially all of
the Company's employees covered by collective bargaining agreements are members
of the United Food and Commercial Workers Union. The Company believes it has
satisfactory relations with its employees and all representative unions.
INTELLECTUAL PROPERTY
The Company owns or has the right to use 94 trademarks and 7 patents. The
Company's products are marketed under numerous Company-owned registered and
unregistered trademarks, symbols, emblems, logos and designs, including the
following trademarks: BUTCHER BOY-REGISTERED TRADEMARK-, CONTINENTAL DELI
LITE-TM-, DOSKOCIL-REGISTERED TRADEMARK-, FRED'S-REGISTERED TRADEMARK-,
JEFFERSON MEATS-TM-, LITTLE JUAN-REGISTERED TRADEMARK-, MARQUEZ-REGISTERED
TRADEMARK-, MR. NUCCIO-TM-, PIZZA TOPPER-REGISTERED TRADEMARK-,
PIZZANO-REGISTERED TRADEMARK-, POCO POSADA-REGISTERED TRADEMARK-,
POSADA-REGISTERED TRADEMARK-, ROTANELLI'S-REGISTERED TRADEMARK-, WILSON'S
CONTINENTAL DELI-REGISTERED TRADEMARK-, WILSON FOODSERVICE-REGISTERED TRADEMARK-
AND AMERICAN FAVORITE-TM-. 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 frozen and fresh meat, flour,
vegetables, cheese and other dairy products, sugar, other agricultural products
and vegetable oils. 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
resulting 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.
LEGAL PROCEEDINGS
C&F PACKING COMPANY, INC. V. KPR, INC., D/B/A ROSANI FOODS, AND PIZZA HUT,
INC., United States District Court for the Northern District of Texas, Ft. Worth
Division, Case No. 4:93-CV-525-Y, filed April 13, 1993:
Prior to Foodbrands America acquiring KPR, C&F Packing Company, Inc. ("C&F")
asserted claims against KPR alleging that KPR, using equipment and a process to
make Italian sausage, infringed the C&F patents. C&F has requested damages
including disgorgement of profits, which the Company believes could be material.
KPR has denied these allegations and contends that C&F's patents are invalid and
that, even if valid, the process and equipment used by KPR do not infringe the
C&F patents. C&F has also alleged misappropriation of trade secrets and
proprietary information and other claims, all of which KPR denies.
In 1988 and 1989, C&F filed actions against Doskocil, (the Company's
predessor) alleging patent infringement and misappropriation of trade secrets
and proprietary information. In 1991, as part of Doskocil's bankruptcy
reorganization, and in settlement of the litigation, Doskocil entered into a
license agreement and two consent decrees with C&F. Because of these consent
decrees, prior to acquiring KPR,
33
<PAGE>
Foodbrands America, and KPR, instituted a joint declaratory judgment action
against C&F on November 15, 1995 in United States District Court for the
Northern District of Texas, Ft. Worth Division. The action sought a ruling that
the equipment and process used by KPR do not violate the C&F patents and that,
in any event, it is not a violation of the consent decrees for KPR to continue
to use the equipment and process which was being utilized by KPR prior to its
acquisition by Foodbrands America. C&F responded to the declaratory judgment
action with a motion to dismiss, which was granted on April 10, 1996, on the
grounds that the case discussed above would be dispositive of the declaratory
judgement issues.
KPR intends to vigorously defend the suit by C&F. The litigation is complex
and the ultimate outcome can not be presently determined. Although the Company
will vigorously defend its interests, no assurance can be given that a material
adverse effect will not result from the litigation. See "Management Discussion
and Analysis -- Other."
UNITED REFRIGERATED SERVICES, INC. V. WILSON FOODS CORPORATION, ET AL.,
Circuit Court of Saline, Missouri, Division Four, Case No. CO492-235, filed
September 11, 1992; CONAGRA, INC. V. WILSON FOODS CORPORATION, ET AL., Circuit
Court of Saline, Missouri, Division Four, Case No. CO493-282, filed October 28,
1993:
United Refrigerated Services, Inc. ("URS") filed suit against Wilson Foods,
a wholly-owned subsidiary of the Company, and unaffiliated parties Normac Foods,
Inc. ("Normac") and Thompson Builders of Marshall, Inc. ("Thompson") claiming
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.
URS claims damages of approximately $9.8 million, and has requested trebling of
the real property damage which is included in such amount, for total claims in
the aggregate up to as much as $13.8 million.
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 also stored in the Marshall warehouse
at the time of the fire and allegedly damaged. The ConAgra case also is in
discovery.
In its answer, Wilson Foods filed a counterclaim against URS and a
cross-claim against other co-defendants for indemnity and/or contribution. The
fire occurred in a part of the URS warehouse being leased by Wilson Foods 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.
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 while there can be no assurances, the Company believes it is not
likely that Wilson Foods will ultimately incur a loss in excess of its insurance
coverage.
In addition to the foregoing, the Company is a party to ordinary, routine
litigation, none of which is expected, individually or in the aggregate, to have
a material adverse effect on the Company.
34
<PAGE>
MANAGEMENT
The following sets forth certain information with respect to the Company's
senior management:
<TABLE>
<CAPTION>
NAME AGE TITLE
- -------------------------- --- ----------------------------------------------------------------------
<S> <C> <C>
R. Randolph Devening 54 Chairman, President and Chief Executive Officer
Horst O. Sieben 57 Senior Vice President and Chief Financial Officer
Thomas G. McCarley 50 Senior Vice President and President, Food Service
Patrick A. O'Ray 43 Senior Vice President and President, Specialty Brands
William E. Rosenthal 45 Senior Vice President and President, KPR Foods
Raymond J. Haefele 45 Vice President and President, Deli
William L. Brady 48 Vice President and Controller
Bryant P. Bynum 33 Vice President-Finance, Treasurer and Secretary
David J. Clapp 51 Vice President-Operating Systems
Howard S. Katz 45 Vice President and President, Kettle Cooked Foods
Roger D. LeBreck 49 Vice President and President, TNT Crust
Howard C. Madsen 52 Vice President-Procurement
Tony L. Prater 47 Vice President
</TABLE>
R. RANDOLPH DEVENING has been Chairman, President and Chief Executive
Officer and a director of the Company since August 1994. From May 1993 to July
1994, Mr. Devening was Vice Chairman and Chief Financial Officer of Fleming
Companies, Inc. ("Fleming"), one of the largest food marketing and distribution
companies in the United States, and one of the Company's largest customers. From
June 1989 to April 1993, Mr. Devening was Executive Vice President and Chief
Financial Officer of, and from February 1990 to July 1994 was a director of,
Fleming. Mr. Devening currently serves as a director for Arkwright Mutual
Insurance Company, Del Monte Corporation, Hancock Fabrics, Inc. and Autocraft
Industries, Inc.
HORST O. SIEBEN has been Senior Vice President and Chief Financial Officer
since October, 1994. For the six years prior to joining Foodbrands America, Mr.
Sieben was the CFO for various companies operated by Lancer Industries, Inc., a
private industrial holding company affiliated with the Company's largest
shareholder. Mr. Sieben has also acted as a consultant to Foodbrands America
during its 1994 acquisition of the Specialty Brands Division. He previously
worked at two public companies, at Nashua Corporation in various controllership
positions and at Gradco Systems, Inc. as Chief Financial Officer. He is
responsible for all corporate finance functions.
THOMAS G. MCCARLEY has been Senior Vice President of the Company and
President of the Food Service Division since September 1994. Prior to that he
was Senior Vice President-General Manager of the Division since October 1991,
and Senior Vice President-Sales and Marketing of the Company from January 1989
to October 1991. Mr. McCarley was Senior Vice President of Sara Lee Bakery F.S.
Division, a diversified food company, and of Chef Pierre, a division of Sara Lee
Corporation, from January 1988 to December 1988 and Vice President-Marketing and
Research and Development for Sara Lee Bakery F.S. Division prior thereto.
PATRICK A. O'RAY has been Senior Vice President of the Company and President
of the Specialty Brands Division since October 1995. Prior to joining the
Company, Mr. O'Ray was Vice President of the Foodservice America Division of
American Home Food Products from 1988 to 1995 with the added responsibility of
General Manager of the Foodservice America and International Divisions since
1993. Previously, he was National Sales Manager-Foodservice America Division of
McCormick & Company.
WILLIAM E. ROSENTHAL has been Senior Vice President and President of the KPR
Foods Division since December 1995. From 1990 to 1995, Mr. Rosenthal was
President of KPR Holdings, L.P. Mr. Rosenthal was President of Standard Meat
Company, a division of Sara Lee Corporation, prior thereto.
RAYMOND J. HAEFELE has been Vice President and President of the Deli
Division, since September 1994. Prior to that he was Vice President-General
Manager, Deli Division since January 1993. Mr. Haefele was
35
<PAGE>
Vice President-Retail Sales of the Company from October 1991 to January 1993 and
Vice President of Sales of Wilson Brands from October 1989 to October 1991.
Prior to that time, Mr. Haefele was Director and National Sales Manager-Deli of
Wilson Foods.
WILLIAM L. BRADY has been Vice President of the Company since January 1990
and Controller of the Company since May 1990. Mr. Brady served as Vice President
and Controller of Wilson Foods prior thereto.
BRYANT P. BYNUM has been Vice President-Finance since February 1993 and
Treasurer since January 1994 and Corporate Secretary since July 1995. Mr. Bynum
was Director-Corporate Planning and Development from November 1989 to February
1993. Prior thereto Mr. Bynum was a management consultant at the accounting firm
of Coopers & Lybrand.
DAVID J. CLAPP has been Vice President-Operating Services of the Company
since October 1991. Mr. Clapp was Vice President of Operations of Wilson Brands
from October 1989 to September 1991 and was Corporate Director of Engineering of
Wilson Foods prior thereto.
HOWARD S. KATZ has been Vice President of the Company since December 1995.
From 1989 to December 1995, Mr. Katz was President of Kettle Cooked Foods, a
division of KPR Holdings, L.P. Prior thereto, he was Vice President of Sales of
Standard Meat Company, a division of Sara Lee Corporation.
ROGER D. LEBRECK has been Vice President of the Company since December 1995.
From September 1990 to December 1995, Mr. LeBreck was President of TNT Crust,
Inc. Mr. LeBreck was Vice President of Operations of Frigo Cheese Corporation
prior thereto.
HOWARD C. MADSEN has been Vice President-Procurement of the Company since
February 1994. Dr. Madsen, a Ph.D. in agricultural economics, was Vice President
of Purchasing at Sara Lee Meat Group from December 1989 to February 1994.
TONY L. PRATER has been Vice President of the Company since December 1995.
From 1989 to December 1995, Mr. Prater was a Vice President of KPR Holdings,
L.P. Prior thereto, Mr. Prater held various positions in sales and planning and
was Operations Manager and Vice President of Technical Services at Standard Meat
Company, a division of Sara Lee Corporation.
36
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
THE CREDIT AGREEMENT
On December 11, 1995, Foodbrands America executed the Credit Agreement with
Chemical Bank, as managing agent and lender ("Administrative Agent") and other
domestic and foreign financial institutions, as lenders (collectively,
"Lenders"). The Credit Agreement provides three facilities: (i) a $145 million
term loan facility (the "Term Loan Facility"), (ii) a $75 million revolving loan
facility (the "Revolving Loan Facility") and (iii) a $100 million loan facility
designated for acquisitions (the "Acquisition Loan Facility"). The following
discussion of the material provisions of the Credit Agreement is not intended to
be exhaustive and is qualified by the provisions of the Credit Agreement
included as an Exhibit to the Company's Annual Report on 10-K for the fiscal
year ended December 30, 1995 (the "Annual Report"), which is incorporated in
this Prospectus by reference.
AVAILABILITY: Borrowings under the Term Loan Facility cannot be reborrowed
following repayment. Borrowings under the Acquisition Loan Facility cannot
exceed an aggregate of $100 million at any time outstanding and may be
reborrowed following repayment until December 11, 1996, after which the
revolving feature of the Acquisition Loan Facility terminates and repayments of
loans under the Acquisition Loan Facility can no longer be reborrowed.
Borrowings under the Revolving Loan Facility cannot exceed the lesser of $75
million or the "Borrowing Base," calculated as 75% of the Company's eligible
accounts receivable PLUS 50% of the value of the Company's eligible inventory
(calculated at the lesser of cost or market value). The Revolving Loan Facility
contains a $7 million subfacility in respect of letters of credit.
Borrowings under each of the Acquisition Loan Facility and the Revolving
Loan Facility are subject to customary conditions. Borrowings under the
Acquisition Loan Facility may only be used for a qualified acquisition, which is
subject to the additional conditions that the acquired entity have positive cash
flow in its four most recent fiscal quarters, the acquired entity be in the same
line of business as the Company, the Company is in compliance with certain
financial covenants after giving PRO FORMA effect to the proposed acquisition,
and the requisite lenders approve the acquisition.
GUARANTEES: Foodbrands America's obligations under the Credit Agreement are
unconditionally guaranteed, on a joint and several basis, by substantially all
of its direct and indirect subsidiaries (the "Bank Guarantors").
COLLATERAL: Borrowings under the Credit Agreement (and obligations under
certain letters of credit) are secured by a perfected pledge of substantially
all of the assets of Foodbrands America and the Bank Guarantors.
MANDATORY PAYMENTS: The following table reflects the current amortization
schedule of loans under the Term Loan Facility:
<TABLE>
<CAPTION>
DATE AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
May 31, 1996................................................................... $ 5,625,000
August 31, 1996................................................................ $ 5,625,000
November 30, 1996.............................................................. $ 5,625,000
February 28, 1997.............................................................. $ 5,625,000
May 31, 1997................................................................... $ 7,750,000
August 31, 1997................................................................ $ 7,750,000
November 30, 1997.............................................................. $ 7,750,000
February 28, 1998.............................................................. $ 7,750,000
May 31, 1998................................................................... $ 10,937,500
August 31, 1998................................................................ $ 10,937,500
November 30, 1998.............................................................. $ 10,937,500
February 28, 1999.............................................................. $ 10,937,500
May 31, 1999................................................................... $ 11,937,500
August 31, 1999................................................................ $ 11,937,500
November 30, 1999.............................................................. $ 11,937,500
January 15, 2000............................................................... $ 11,937,500
</TABLE>
37
<PAGE>
Pursuant to the proposed amendment to the Credit Agreement, which will become
effective only if the Tender Offer is consummated in accordance with its terms,
the amortization schedule will be amended as follows (assuming all 9 3/4% Notes
are tendered and accepted):
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
INITIAL TERM SUPPLEMENTAL TERM
DATE LOANS LOANS
- ------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
May 31, 1996........................................... $ 1,735,000 $ --
August 31, 1996........................................ 1,735,000 --
November 30, 1996...................................... 1,735,000 --
February 28, 1997...................................... 1,735,000 --
May 31, 1997........................................... 2,390,000 1,250,000
August 31, 1997........................................ 2,390,000 1,250,000
November 30, 1997...................................... 2,390,000 1,250,000
February 28, 1998...................................... 2,390,000 1,250,000
May 31, 1998........................................... 3,373,000 1,250,000
August 31, 1998........................................ 3,373,000 1,250,000
November 30, 1998...................................... 3,373,000 1,250,000
February 28, 1999...................................... 3,373,000 1,250,000
May 31, 1999........................................... 3,681,000 1,250,000
August 31, 1999........................................ 3,681,000 1,250,000
November 30, 1999...................................... 3,681,000 1,250,000
January 15, 2000....................................... 3,681,000 --
February 28, 2000...................................... -- 1,250,000
May 31, 2000........................................... -- 6,250,000
August 31, 2000........................................ -- 6,250,000
November 30, 2000...................................... -- 6,250,000
February 28, 2001...................................... -- 6,250,000
May 31, 2001........................................... -- 7,500,000
August 31, 2001........................................ -- 7,500,000
November 30, 2001...................................... -- 7,500,000
February 28, 2002...................................... -- 7,500,000
May 31, 2002........................................... -- 7,500,000
August 31, 2002........................................ -- 7,500,000
November 30, 2002...................................... -- 7,500,000
February 28, 2003...................................... -- 7,500,000
</TABLE>
Additionally, Foodbrands America will repay on May 31, 1997 and thereafter
on each term loan repayment date until and including January 15, 2000, a
principal amount equal to one-twelfth (1/12) of the outstanding aggregate
principal amount of loans under Acquisition Loan Facility on December 12, 1996.
In addition, mandatory prepayment obligations apply to borrowings in excess
of the Borrowing Base under the Revolving Loan Facility, certain asset sales and
sale-leaseback transactions, and the incurrence of certain indebtedness.
Seventy-five percent of excess cash flow (generally defined as the amount of
cash flow in excess of fixed charges PLUS $1 million) must also be used to
prepay loans under the Credit Agreement.
INTEREST RATE: Under the Credit Agreement, the interest rate for any loan
may be based on LIBOR or an Alternative Base Rate (defined as the highest of
Chemical Bank's prime rate, the secondary market rate for certificates of
deposit, plus 1%, and the federal funds rate, plus 0.5%), as selected by
Foodbrands America from time to time, plus the applicable margin established in
accordance with a pricing grid determined with reference to Foodbrands America's
EBITDA (as defined therein) for the four prior fiscal quarters. The applicable
margin for LIBOR loans ranges from 175 basis points corresponding to a total
debt to EBITDA ratio of less than 4.0x, to 250 basis points corresponding to a
ratio greater than 4.75x. The applicable margin for Alternative Base Rate loans
ranges from 75 basis points corresponding to a total debt to EBITDA ratio of
less than 4.0x, to 150 basis points corresponding to a ratio greater than 4.75x.
38
<PAGE>
COVENANTS: The Credit Agreement contains customary covenants associated
with similar facilities, including, without limitation maintenance of a
specified ratio of total debt to EBITDA, maintenance of a specified ratio of
EBITDA minus capital expenditures to interest expense, a prohibition on payment
of dividends and limitations on company stock repurchases, a prohibition against
certain liens, restrictions on certain acquisitions, mergers, consolidations and
sales of assets, restrictions on the incurrence of debt and additional
guarantees, limitations on sale and leaseback transactions, limitations on
leases, limitations on transactions with affiliates, limitations on investments,
loans and advances and limitations on debt prepayments.
EVENTS OF DEFAULT. The Credit Agreement contains events of default,
including, but not limited to, failure to pay principal or interest, failure to
comply with covenants, if any representations or warranties are false in any
material respect, a cross default to other indebtedness of Foodbrands America
and a change of control of Foodbrands America.
BANK WARRANTS. On October 31, 1991, Doskocil entered into a Warrant
Agreement (the "Warrant Agreement") with Chemical Bank as agent and other
domestic and foreign financial institutions who were also lenders under the
Company's credit agreement in effect at that time. The warrants, which may be
exercised through December 31, 1998, entitle the holder to purchase an aggregate
of approximately 290,300 shares of Foodbrands America's Common Stock, as of
March 30, 1996, at an exercise price of 125% of the reorganization value per
share (approximately $17.53). Upon a change of control, the holders of warrants
may require Foodbrands America to repurchase the warrants at a price equal to
the amount by which the Current Market Price (as defined in the Warrant
Agreement) exceeds $17.53 per share. The Warrant Agreement also grants to
holders of warrants certain rights regarding registration of warrant shares
under the Securities Act. The preceding discussion is not intended to be
exhaustive and is qualified in its entirety by reference to the provisions of
the Warrant Agreement included as an Exhibit to the Annual Report, which is
incorporated in this Prospectus by reference. The warrants issued to and
currently held by Chemical Bank pursuant to the Warrant Agreement entitle it to
purchase an aggregate of approximately 58,000 shares of Foodbrands America's
Common Stock. Chemical Bank is an affiliate of Chase Securities Inc. which is
one of the Underwriters of the offering of the Notes.
THE 9 3/4% NOTES
On April 28, 1993, Foodbrands America entered into an Indenture with First
Fidelity Bank, National Association, New York, as Trustee, regarding $110
million of 9 3/4% Senior Subordinated Redeemable Notes due July 15, 2000. The
following discussion of the material provisions of the 9 3/4% Notes is not
intended to be exhaustive and is qualified by the provisions of the 9 3/4%
Indenture included as an Exhibit to the Annual Report.
GUARANTEES: Foodbrands America's obligations under the 9 3/4% Indenture are
guaranteed, on a senior subordinated joint and several basis, by substantially
all of Foodbrands America's direct and indirect subsidiaries.
COLLATERAL: The 9 3/4% Notes are unsecured.
MANDATORY PREPAYMENTS: None.
SUBORDINATION: Foodbrands America's payment obligations under the 9 3/4%
Indenture are subordinated to the payment in full in cash of all existing and
future "Senior Indebtedness" of Foodbrands America as defined in the 9 3/4%
Indenture. The guarantors' obligations are similarly subordinated. The
obligations of Foodbrands America and the guarantors under the Indenture will
rank PARI PASSU with their respective obligations under the 9 3/4% Indenture.
COVENANTS AND EVENTS OF DEFAULT. The 9 3/4% Indenture currently contains
covenants and events of default similar to the covenants described herein under
"Description of the Notes," including a change of control provision which
obligates Foodbrands America to make an offer to repurchase the 9 3/4% Notes
upon a change of control at a purchase price equal to 101% of the principal
amount, plus accrued and unpaid interest, if any. Upon the consummation of the
Tender Offer, the 9 3/4% Indenture will be amended to eliminate substantially
all financial covenants.
39
<PAGE>
DESCRIPTION OF THE NOTES
The Notes will be issued under the Indenture to be dated as of ,
1996, between Foodbrands America, the Subsidiary Guarantors and The Liberty Bank
and Trust Company of Oklahoma City, National Association, as trustee (the
"Trustee"). The following summary of the material provisions of the Indenture
does not purport to be complete and is subject to, and qualified by, reference
to the provisions of the Indenture, including the definitions of certain terms
contained therein and those terms made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended, as in effect on the date of the
Indenture. The definitions of certain capitalized terms used in the following
summary are set forth below under "-- Certain Definitions."
GENERAL
The Notes will be unsecured senior subordinated obligations of Foodbrands
America limited to $120,000,000 aggregate principal amount. The Notes will be
issued only in registered form without coupons, in denominations of $1,000 and
integral multiples thereof. Principal of, premium, if any, and interest on the
Notes will be payable, and the Notes will be transferable, at the corporate
trust office or agency of the Trustee in The City of New York maintained for
such purposes at 55 Water Street, First Floor, Jeanette Park Entrance, New York,
New York 10041. In addition, interest may be paid at the option of Foodbrands
America by check mailed to the person entitled thereto as shown on the security
register. No service charge will be made for any transfer, exchange or
redemption of Notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith.
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on , 2006. Interest on the Notes will
accrue at the rate of % per annum and will be payable semi-annually on each
and , commencing , 1996, to the holders of
record of the Notes at the close of business on the and
immediately preceding such interest payment date. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from the original date of issuance of the Notes (the
"Issue Date"). Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The Notes are not subject to the benefit of any mandatory sinking fund.
However, upon the occurrence of certain Asset Sales or a Change of Control,
holders of Notes will have the right to require Foodbrands America to purchase
their Notes, as more fully described under "-- Certain Covenants -- Disposition
of Proceeds of Asset Sales" and "-- Change of Control," respectively.
REDEMPTION
OPTIONAL REDEMPTION. The Notes will be redeemable at the option of
Foodbrands America, in whole or in part, at any time on or after ,
2001, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest to the redemption date, if
redeemed during the 12-month period beginning of the years indicated below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- -----------------
<S> <C>
2001........................................................................ %
2002........................................................................ %
2003........................................................................ %
2004 and thereafter......................................................... 100%
</TABLE>
OPTIONAL REDEMPTION UPON CHANGE OF CONTROL. Upon the occurrence of a Change
of Control, the Notes will be redeemable, in whole but not in part, at the
option of Foodbrands America, upon not less than 30 nor more than 60 days' prior
notice to each holder of Notes to be redeemed, at a redemption price equal to
the sum of (i) the then outstanding principal amount thereof, PLUS (ii) accrued
and unpaid interest, if any, to the redemption date PLUS (iii) the Applicable
Premium.
OPTIONAL REDEMPTION UPON PUBLIC EQUITY OFFERING. On or prior to
, 1999, Foodbrands America may, at its option, use the net proceeds
of a Public Equity Offering (as defined below) which yields
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gross proceeds (before discounts, commissions and expenses) of $50.0 million or
more to redeem up to an aggregate of 25% of the principal amount of Notes
originally issued from the holders of Notes, on a PRO RATA basis (or as nearly
PRO RATA as practicable), at a redemption price equal to % of the principal
amount thereof plus accrued and unpaid interest, if any, to the date of
redemption; PROVIDED that not less than $75.0 million in aggregate principal
amount of Notes is outstanding following such redemption. In order to effect the
foregoing redemption with the net proceeds of a Public Equity Offering,
Foodbrands America shall send the redemption notice not later than 60 days after
the consummation of the Public Equity Offering.
As used in the preceding paragraph, a "Public Equity Offering" means an
underwritten public offering of Capital Stock (other than Disqualified Capital
Stock) of Foodbrands America made on a primary basis by Foodbrands America
pursuant to a registration statement filed with and declared effective by the
Commission in accordance with the Securities Act.
SELECTION AND NOTICE. In the event that less than all of the Notes are to
be redeemed at any time, selection of such Notes for redemption will be made by
the Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Notes are listed or, if the Notes are
not then listed on a national securities exchange (or if the Notes are so listed
but the exchange does not impose requirements with respect to the selection of
debt securities for redemption), on a PRO RATA basis, by lot or by such method
as the Trustee shall deem fair and appropriate; PROVIDED that no Notes of a
principal amount of $1,000 or less shall be redeemed in part; PROVIDED, FURTHER,
that any such redemption pursuant to the provisions relating to a Public Equity
Offering shall be made on a PRO RATA basis or on as nearly a PRO RATA basis as
practicable (subject to the procedures of The Depository Trust Company or any
other depositary). Notice of redemption shall be mailed by first-class mail at
least 30 but not more than 60 days before the redemption date to each holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon surrender for cancellation of the original Note.
On and after the redemption date, interest will cease to accrue on Notes or
portions thereof called for redemption unless Foodbrands America defaults in the
payment of the redemption price.
THE NOTE GUARANTEES
Upon issuance, each of the Subsidiary Guarantors will fully and
unconditionally guarantee (each, a "Note Guarantee") on a joint and several
basis all of Foodbrands America's obligations under the Notes and the Indenture,
including its obligations to pay principal, premium, if any, and interest with
respect to the Notes. Except as provided in "-- Certain Covenants" below,
Foodbrands America is not restricted from selling or otherwise disposing of any
of the Subsidiary Guarantors.
Pursuant to the Note Guarantees, if Foodbrands America defaults in payment
of any amount owing in respect of any Notes, each Subsidiary Guarantor will be
obligated to duly and punctually pay the same. Pursuant to the terms of the
Indenture, each of the Subsidiary Guarantors has agreed that its obligations
under its Note Guarantee will be unconditional, irrespective of the validity,
regularity or enforceability of the Notes or the Indenture, the absence of any
action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
If no Default exists or would exist under the Indenture, concurrently with
any sale or disposition (by merger or otherwise) of any Subsidiary Guarantor
(other than a transaction subject to the provisions described under "--
Consolidation, Merger, Sale of Assets, Etc.") by Foodbrands America or a
Restricted Subsidiary to any person that is not an Affiliate of Foodbrands
America or any of the Restricted Subsidiaries which is in compliance with the
terms of the Indenture, such Subsidiary Guarantor and each Wholly-Owned
Subsidiary of such Subsidiary Guarantor that is also a Subsidiary Guarantor will
automatically and unconditionally be released from all obligations under its
Note Guarantee; PROVIDED that (i) no Indebtedness under the Credit Agreement or
the 9 3/4% Notes is being assumed by the person to whom such sale or disposition
is made and (ii) each such Subsidiary Guarantor is sold or disposed of in
accordance with the "Disposition of Proceeds of Asset Sales" covenant described
under "-- Certain Covenants"; PROVIDED, FURTHER, that the
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foregoing proviso shall not apply to the sale or disposition of a Subsidiary
Guarantor in a foreclosure to the extent that such proviso would be inconsistent
with the requirements of the Uniform Commercial Code. In addition, if no Default
exists or would exist under the Indenture, at the request of Foodbrands America,
a Subsidiary Guarantor that is not a Leveraged Subsidiary will be released from
all obligations under its Note Guarantee if the Subsidiary Guarantors have been
unconditionally released from their obligations under the Credit Agreement and
the 9 3/4% Indenture.
SUBORDINATION OF NOTES AND NOTE GUARANTEES
The payment of the Senior Subordinated Note Obligations will be
subordinated, to the extent set forth in the Indenture, in right of payment to
the prior payment in full in cash or cash equivalents of all existing and future
Senior Indebtedness of Foodbrands America or Guarantor Senior Indebtedness of
any Subsidiary Guarantor, as the case may be. The Notes and the Note Guarantees
will be senior subordinated indebtedness of Foodbrands America or the Subsidiary
Guarantors, as the case may be, ranking PARI PASSU with all other future senior
subordinated indebtedness of Foodbrands America or Guarantor Senior Indebtedness
of the applicable Subsidiary Guarantor, as the case may be, and senior to all
future Subordinated Indebtedness of Foodbrands America or the applicable
Subsidiary Guarantor, as the case may be. There is currently no indebtedness of
Foodbrands America or the Subsidiary Guarantors which is Subordinated
Indebtedness. The Senior Subordinated Note Obligations will be effectively
subordinate to the claims of general creditors of Foodbrands America's
subsidiaries that are not Subsidiary Guarantors. See "Risk Factors --
Subordination and Potential Release of Note Guarantees."
The Indenture will provide that in the event of any insolvency or bankruptcy
case or proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relating to Foodbrands
America or any Subsidiary Guarantor (individually an "Obligor" and,
collectively, the "Obligors") or its assets, or any liquidation, dissolution or
other winding-up of any Obligor, whether voluntary or involuntary, or any
assignment for the benefit of creditors or other marshalling of assets or
liabilities of any Obligor, all Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, of such Obligor (including, in the case of Credit
Agreement Obligations, Other Designated Senior Indebtedness Obligations and
Related Currency and Interest Rate Protection Obligations of Foodbrands America,
any interest accruing subsequent to the filing of a petition for bankruptcy
whether or not such interest is an allowed claim in such bankruptcy proceeding)
must be paid in full in cash or cash equivalents before any payment or
distribution, whether in cash, property or securities (excluding certain
permitted equity or subordinated debt securities of an Obligor), is made on
account of the Senior Subordinated Note Obligations.
During the continuance of any default in the payment when due (whether at
stated maturity, by acceleration or otherwise) of principal, premium, if any, or
interest on, or of unreimbursed amounts under drawn letters of credit or fees
relating to letters of credit constituting, any Senior Indebtedness or Guarantor
Senior Indebtedness, as applicable of an Obligor, (in either case, a "Payment
Default"), no direct or indirect payment by or on behalf of such Obligor of any
kind or character shall be made on account of the Senior Subordinated Note
Obligations of such Obligor unless and until such default has been cured or
waived or has ceased to exist or such Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, shall have been discharged or paid in full in cash
or cash equivalents.
In addition, during the continuance of any other default with respect to any
Designated Senior Indebtedness of an Obligor pursuant to which the maturity
thereof may be accelerated (a "Non-Payment Default"), after receipt by the
Trustee from a representative of holders of such Designated Senior Indebtedness
of a written notice of such Non-payment Default specifying, among other things,
the applicable Designated Senior Indebtedness and Obligor to which such
Non-Payment Default relates, no payment of any kind or character may be made by
such Obligor on account of the Senior Subordinated Note Obligations for the
period specified below (the "Payment Blockage Period").
The Payment Blockage Period shall commence upon the receipt of notice of a
Non-payment Default by the Trustee from a representative of holders of
Designated Senior Indebtedness stating that such notice is a payment blockage
notice pursuant to the Indenture and shall end on the earliest to occur of the
following
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events: (i) 179 days shall have elapsed since the receipt of such notice; (ii)
the date on which such default is cured or waived or ceases to exist (provided
that no other Payment Default or Non-payment Default has occurred or is then
continuing after giving effect to such cure or waiver); (iii) the date on which
such Designated Senior Indebtedness is discharged or paid in full in cash or
cash equivalents; or (iv) the date on which such Payment Blockage Period shall
have been terminated by written notice to Foodbrands America and/or the
applicable Subsidiary Guarantors, as the case may be, or the Trustee from the
representative of holders of Designated Senior Indebtedness initiating such
Payment Blockage Period, after which Foodbrands America and the Subsidiary
Guarantors, subject to the existence of another Payment Default, shall promptly
resume making any and all required payments in respect of the Notes and the Note
Guarantees, as applicable, including any missed payments. Only one Payment
Blockage Period, whether with respect to the Notes, any Note Guarantee or the
Notes and Note Guarantees collectively, may be commenced within any 360
consecutive day period. No Non-payment Default with respect to Designated Senior
Indebtedness that existed or was continuing on the date of the commencement of
any Payment Blockage Period with respect to the Designated Senior Indebtedness
initiating such Payment Blockage Period will be, or can be, made the basis for
the commencement of a second Payment Blockage Period, whether or not within a
period of 360 consecutive days, unless such default has been cured or waived for
a period of not less than 90 consecutive days (it being acknowledged that any
subsequent action, or any breach of any financial covenant for a period
commencing after the date of commencement of such Payment Blockage Period, that,
in either case, would give rise to a Non-payment Default pursuant to any
provision under which a Non-payment Default previously existed or was continuing
shall constitute a new Non-payment Default for this purpose; PROVIDED that, in
the case of a breach of a particular financial covenant, the applicable Obligor
shall have been in compliance for at least one full period commencing after the
date of commencement of such Payment Blockage Period). In no event will a
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Trustee of the notice and there must be a 181 consecutive day period in any
360 day period during which no Payment Blockage Period is in effect.
If Foodbrands America fails to make any payment on the Notes when due or
within any applicable grace period, whether or not on account of the payment
blockage provisions referred to above, such failure would constitute an Event of
Default under the Indenture and would enable the holders of the Notes to
accelerate the maturity thereof. See "-- Events of Default."
By reason of such subordination, in the event of liquidation, receivership,
reorganization or insolvency, creditors of an Obligor who are holders of Senior
Indebtedness or Guarantor Senior Indebtedness may recover more, ratably, than
the holders of the Notes, and funds which would be otherwise payable to the
holders of the Notes will be paid to the holders of the Senior Indebtedness to
the extent necessary to pay the Senior Indebtedness in full, and Foodbrands
America may be unable to meet its obligations in full with respect to the Notes.
In addition, as described above, the Senior Subordinated Note Obligations will
be effectively subordinate to the claims of creditors of Foodbrands America's
subsidiaries (other than subsidiaries that are or hereafter become Subsidiary
Guarantors).
As of December 30, 1995, on a pro forma basis after giving effect to the
issuance of the Notes and the application of the net proceeds therefrom to
purchase all of the 9 3/4% Notes pursuant to the Tender Offer, the aggregate
amount of outstanding Senior Indebtedness and Guarantor Senior Indebtedness of
Foodbrands America and the Subsidiary Guarantors would have been approximately
$334.0 million. See "Description of Other Indebtedness -- the Credit Agreement."
The Indenture will limit, but not prohibit, the incurrence by Foodbrands America
and the Subsidiary Guarantors of additional Indebtedness, which may be senior or
PARI PASSU in right of payment to the Notes and the Note Guarantees, and will
prohibit the incurrence by Foodbrands America and the Subsidiary Guarantors of
Indebtedness which is contractually subordinated in right of payment to any
Senior Indebtedness of Foodbrands America or Guarantor Senior Indebtedness and
senior in right of payment to the Notes or the Note Guarantees, as applicable.
After giving effect to the issuance of the Notes and the application of the net
proceeds therefrom, there will be no indebtedness of any Obligor which is
subordinated in right of payment to the Notes.
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CERTAIN COVENANTS
The Indenture will contain the following covenants, among others:
LIMITATION ON INDEBTEDNESS. The Indenture will provide that Foodbrands
America will not, and will not permit any of its Restricted Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or in any other
manner become liable, contingently or otherwise (in each case, to "incur"), for
the payment of any Indebtedness (including any Acquired Indebtedness); PROVIDED
that (i) Foodbrands America or any Subsidiary Guarantor will be permitted to
incur Indebtedness (including Acquired Indebtedness) and (ii) a Restricted
Subsidiary will be permitted to incur Acquired Indebtedness if, immediately
after giving PRO FORMA effect thereto, the Consolidated Fixed Charge Coverage
Ratio of Foodbrands America would be equal to or greater than (a) 2.00:1.0 if
such Indebtedness is incurred on or prior to December 31, 1998 and (b) 2.25 :1.0
if such Indebtedness is incurred after December 31, 1998.
Notwithstanding the foregoing, Foodbrands America and, to the extent
specifically set forth below, the Restricted Subsidiaries may incur each and all
of the following:
(1) Indebtedness of Foodbrands America or any Subsidiary Guarantor under
the Credit Agreement in an aggregate principal amount at any time
outstanding not to exceed $320,000,000; PROVIDED that (a) term and revolving
acquisition loans under the Credit Agreement shall not exceed $245,000,000
in aggregate principal amount at any time outstanding, less the sum of,
without duplication, (i) the amount of any scheduled amortization payments
and mandatory prepayments of principal amount of such loans, whether or not
actually made, and (ii) the amount of any other repayments of such loans
actually made (other than, in the case of this clause (ii), repayments of
the net cash proceeds of the issuance and sale of Capital Stock (other than
Redeemable Capital Stock) to the extent the commitments in respect of such
loans are not reduced thereby) and (b) revolving credit loans and the
undrawn portion of unpaid reimbursement obligations in respect of letters of
credit under the Credit Agreement shall not exceed the sum of 60% of the
book value of inventory and 90% of the book value of accounts receivable of
Foodbrands America and the Restricted Subsidiaries, determined on a
consolidated basis in accordance with GAAP as of the date of the
determination of such borrowing base under the Credit Agreement for the
particular incurrence of Indebtedness;
(2) Indebtedness of Foodbrands America or any Subsidiary Guarantor
evidenced by the Notes or any Note Guarantee;
(3) (a) Interest Rate Protection Obligations of Foodbrands America or
any guarantee thereof by a Restricted Subsidiary covering Indebtedness of
Foodbrands America or any Restricted Subsidiary of Foodbrands America and
(b) Interest Rate Protection Obligations of any Restricted Subsidiary of
Foodbrands America covering Indebtedness of such Restricted Subsidiary;
PROVIDED that, in the case of either clause (a) or (b), the aggregate
notional principal amount of any such Interest Rate Protection Obligations
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Protection Obligations relate;
(4) Indebtedness of Foodbrands America owed to a Restricted Subsidiary
and Indebtedness of a Restricted Subsidiary owed to Foodbrands America or a
Restricted Subsidiary; PROVIDED that (a) any subsequent issuance or transfer
of Capital Stock or any Designation that results in such Restricted
Subsidiary ceasing to be a Restricted Subsidiary or any subsequent transfer
or assignment of such Indebtedness (other than to Foodbrands America or a
Restricted Subsidiary) will be deemed to constitute the incurrence of such
Indebtedness by Foodbrands America or such Restricted Subsidiary, as the
case may be, and (b) any such Indebtedness of Foodbrands America owed to a
Restricted Subsidiary that is not a Subsidiary Guarantor and any such
Indebtedness of a Restricted Subsidiary that is a Subsidiary Guarantor owed
to a Restricted Subsidiary that is not a Subsidiary Guarantor must be
subordinated in right of payment to the prior payment in full and
performance of Foodbrands America's or the Subsidiary Guarantor's
obligations under the Indenture, the Notes and the Note Guarantees, as the
case may be;
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(5) Indebtedness of Foodbrands America or any Restricted Subsidiary
incurred in respect of performance bonds, surety bonds and bankers'
acceptances provided in the ordinary course of business;
(6) Indebtedness of Foodbrands America or any Restricted Subsidiary in
respect of the undrawn portion of the face amount of or unpaid reimbursement
obligations in respect of letters of credit issued in the ordinary course of
business for the account of Foodbrands America or any of the Restricted
Subsidiaries in an amount outstanding at any time not to exceed the
difference between (a) $10,000,000 and (b) the amount of Indebtedness in
respect of the undrawn portion or unpaid reimbursement obligations in
respect of letters of credit outstanding under subclause (b) of the proviso
to clause (1) above;
(7) (a) Indebtedness in respect of Purchase Money Obligations for
property acquired in the ordinary course of business (and not, in any event,
in connection with an Asset Acquisition or a Capitalized Lease Obligation)
and (b) Indebtedness of Foodbrands America or any Restricted Subsidiary
representing any Capitalized Lease Obligations if, in the case of this
clause (b) only after giving pro forma effect to such incurrence of
Indebtedness, (i) the aggregate principal amount of Capitalized Lease
Obligations incurred in any fiscal year pursuant to this clause (7) would
not exceed $15,000,000 and (ii) the aggregate principal amount of
Capitalized Lease Obligations pursuant to this clause (7) after the Issue
Date would not exceed $45,000,000 in the aggregate;
(8) Indebtedness of Foodbrands America or any Restricted Subsidiary
arising from the honoring by a bank or other financial institution of a
check, draft or similar instrument inadvertently (except in the case of
daylight overdrafts) drawn against insufficient funds in the ordinary course
of business; PROVIDED that such Indebtedness is extinguished within 30 days
of incurrence;
(9) (a) Indebtedness of Foodbrands America or any Subsidiary Guarantor
to the extent the proceeds thereof are used to refinance (whether by
amendment, renewal, extension or refunding) Indebtedness of Foodbrands
America or any Subsidiary Guarantor (including all or a portion of the
Notes) or any Restricted Subsidiary and (b) Indebtedness of any Restricted
Subsidiary that is not a Subsidiary Guarantor to the extent the proceeds
thereof are used to refinance (whether by amendment, renewal, extension or
refunding) Indebtedness of any Restricted Subsidiary that is not a
Subsidiary Guarantor, in each case other than the Indebtedness to be
refinanced, redeemed or retired as described under "Use of Proceeds" herein
and Indebtedness incurred under clauses (1), (3), (4), (5), (7)(b) or (8);
PROVIDED that the principal amount of Indebtedness incurred pursuant to this
clause (9) (or, if such Indebtedness provides for an amount less than the
principal amount thereof to be due and payable upon a declaration of
acceleration of the maturity thereof, the original issue price of such
Indebtedness) shall not exceed the sum of the principal amount of
Indebtedness so refinanced (or, if such Indebtedness provides for an amount
less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the maturity thereof, the original issue
price of such Indebtedness PLUS any accreted value attributable thereto
since the original issuance of such Indebtedness) plus the amount of any
premium required to be paid in connection with such refinancing pursuant to
the terms of such Indebtedness or the amount of any premium reasonably
determined by Foodbrands America or a Restricted Subsidiary, as applicable,
as necessary to accomplish such refinancing by means of a tender offer or
privately negotiated purchase, plus the amount of expenses in connection
therewith; and
(10) additional Indebtedness of Foodbrands America or any Restricted
Subsidiary (including, without limitation, Indebtedness under the Credit
Agreement in excess of the amounts permitted under clause (1) above) not to
exceed $20,000,000 in aggregate principal amount at any time outstanding.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture will provide that
Foodbrands America will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly:
(i) declare or pay any dividend or make any other distribution or
payment on or in respect of Capital Stock of Foodbrands America or any
payment made to the direct or indirect holders (in their
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capacities as such) of Capital Stock of Foodbrands America (other than
dividends or distributions payable solely in rights to purchase Capital
Stock of Foodbrands America (other than Redeemable Capital Stock)); or
(ii) purchase, redeem, defease or otherwise acquire or retire for value
any Capital Stock of Foodbrands America (other than any such Capital Stock
owned by a Restricted Subsidiary); or
(iii) make any principal payment on, or purchase, defease, repurchase,
redeem or otherwise acquire or retire for value, prior to any scheduled
maturity, scheduled repayment, scheduled sinking fund payment or other
Stated Maturity, any Subordinated Indebtedness (other than any such
Subordinated Indebtedness owed to a Restricted Subsidiary); or
(iv) make any Investment (other than any Permitted Investment) in any
person
(such payments or Investments described in the preceding clauses (i), (ii),
(iii) and (iv) are collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to the proposed Restricted
Payment (the amount of any such Restricted Payment, if other than in cash,
shall be the Fair Market Value of the asset(s) proposed to be transferred by
Foodbrands America or such Restricted Subsidiary, as the case may be,
pursuant to such Restricted Payment), (A) no Default shall have occurred and
be continuing, (B) the aggregate amount of all Restricted Payments declared
or made from and after the Issue Date would not exceed the sum of (1) 50% of
the aggregate Consolidated Net Income of Foodbrands America accrued on a
cumulative basis during the period (treated as one accounting period)
beginning on April 1, 1996 and ending on the last day of the fiscal quarter
of Foodbrands America immediately preceding the date of such proposed
Restricted Payment (or, if such aggregate cumulative Consolidated Net Income
of Foodbrands America for such period shall be a deficit, minus 100% of such
deficit) PLUS (2) the aggregate net cash proceeds received by Foodbrands
America either (x) as capital contributions in the form of common equity to
Foodbrands America after the Issue Date or (y) from the issuance or sale of
Capital Stock (excluding Redeemable Capital Stock but including Capital
Stock issued upon the conversion of convertible Indebtedness, in exchange
for outstanding Indebtedness or from the exercise of options, warrants or
rights to purchase Capital Stock (other than Redeemable Capital Stock)) of
Foodbrands America to any person (other than to a Subsidiary of Foodbrands
America) after the Issue Date PLUS (3) in the case of the disposition or
repayment of any Investment constituting a Restricted Payment made after the
Issue Date (excluding any Investment made pursuant to clause (iv) of the
following paragraph), an amount equal to the lesser of the return of capital
with respect to such Investment and the initial amount of such Investment,
in either case, less the cost of the disposition of such Investment and (C)
Foodbrands America could incur $1.00 of additional Indebtedness under the
first paragraph of the "Limitation on Indebtedness" covenant described
above. For purposes of the preceding clause (B)(2), upon the issuance of
Capital Stock either from the conversion of convertible Indebtedness or in
exchange for outstanding Indebtedness or upon the exercise of options,
warrants or rights, the amount counted as net cash proceeds received will be
the cash amount received by Foodbrands America at the original issuance of
the Indebtedness that is so converted or exchanged or from the issuance of
options, warrants or rights, as the case may be, plus the incremental amount
of cash received by Foodbrands America, if any, upon the conversion,
exchange or exercise thereof.
None of the foregoing provisions will prohibit (i) the payment of any
dividend within 60 days after the date of its declaration, if at the date of
declaration such payment would be permitted by the foregoing paragraph; (ii) the
redemption, repurchase or other acquisition or retirement of any shares of any
class of Capital Stock of Foodbrands America or any Restricted Subsidiary in
exchange for, or out of the net cash proceeds of, a substantially concurrent
issue and sale of other shares of Capital Stock (other than Redeemable Capital
Stock) of Foodbrands America to any person (other than to a Subsidiary of
Foodbrands America); PROVIDED that such net cash proceeds are excluded from
clause (B)(2)(y) of the preceding paragraph; (iii) so long as no Default shall
have occurred and be continuing, any redemption, repurchase or other acquisition
or retirement of Subordinated Indebtedness by exchange for, or out of the net
cash proceeds of, a substantially concurrent issue and sale of (1) Capital Stock
(other than Redeemable Capital
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Stock) of Foodbrands America; PROVIDED that any such net cash proceeds are
excluded from clause (B)(2)(y) of the preceding paragraph; or (2) Indebtedness
of Foodbrands America so long as such Indebtedness (x) is subordinated to the
Notes in the same manner and at least to the same extent as the Subordinated
Indebtedness being redeemed, repurchased, acquired or retired and (y) has no
Stated Maturity earlier than the 91st day after the Stated Maturity for the
final scheduled principal payment of the Notes; (iv) so long as no Default shall
have occurred and be continuing, the making of Investments constituting
Restricted Payments (valued at their initial amount) not to exceed $20,000,000
at any time outstanding; (v) the repurchase of the Bank Warrants in accordance
with their terms as in effect on the Issue Date; (vi) Investments constituting
Restricted Payments made as a result of the receipt of non-cash consideration
from any Asset Sale made pursuant to and in compliance with the covenant "--
Disposition of Proceeds of Asset Sales"; or (vii) so long as no Default shall
have occurred and be continuing, the purchase of "odd lot" shares of Common
Stock of Foodbrands America in an amount not to exceed $500,000 in the
aggregate. In computing the amount of Restricted Payments previously made for
purposes of clause (B) of the preceding paragraph, Restricted Payments made
under the immediately preceding clauses (i), (iv), (v), (vi) and (vii) shall be
included.
LIMITATION ON LIENS. The Indenture will provide that Foodbrands America
will not, and will not permit any Restricted Subsidiary to, create, incur,
assume or suffer to exist any Liens of any kind against or upon any of its
property or assets, or any proceeds therefrom, which secure either (i)
Subordinated Indebtedness unless the Notes and the Note Guarantees, as
applicable, are secured by a Lien on such property, assets or proceeds that is
senior in priority to the Liens securing such Subordinated Indebtedness or (ii)
Pari Passu Indebtedness unless the Notes and the Note Guarantees, as applicable,
are equally and ratably secured with the Liens securing such Pari Passu
Indebtedness.
CHANGE OF CONTROL. Upon the occurrence of a Change of Control, Foodbrands
America shall be obligated to make an offer to purchase (a "Change of Control
Offer") and shall, subject to the provisions described below, purchase, on a
business day (the "Change of Control Purchase Date") not more than 60 nor less
than 30 days following the occurrence of the Change of Control, all of the then
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid interest,
if any, to the Change of Control Purchase Date. Foodbrands America shall,
subject to the provisions described below, be required to purchase all Notes
properly tendered into the Change of Control Offer and not withdrawn. Prior to
the mailing of the notice to holders provided for below, Foodbrands America
shall have (x) terminated all commitments and repaid in full all Indebtedness
under the Credit Agreement, or offered to terminate such commitments and repay
in full such Indebtedness and have in fact terminated the commitments of and
repaid all Indebtedness of any lender under the Credit Agreement Obligations who
accepts such offer, or (y) obtained the requisite consents under the Credit
Agreement Obligations to permit the purchase of the Notes as provided for under
this covenant. If a notice has been mailed when such condition precedent has not
been satisfied, Foodbrands America shall have no obligation to (and shall not)
effect the purchase of Notes until such time as such condition precedent is
satisfied. Failure to mail the notice on the date specified below or to have
satisfied the foregoing condition precedent by the date that the notice is
required to be mailed shall in any event constitute a covenant Default under
clause (iv) of "-- Events of Default" herein. The Change of Control Offer is
required to remain open for at least 20 business days and until the close of
business on the Change of Control Purchase Date.
In order to effect such Change of Control Offer, Foodbrands America shall,
not later than the 30th day after the Change of Control, mail to each holder of
Notes notice of the Change of Control Offer, which notice shall govern the terms
of the Change of Control Offer and shall state, among other things, the
procedures that holders of Notes must follow to accept the Change of Control
Offer.
If a Change of Control Offer is made, there can be no assurance that
Foodbrands America will have available funds sufficient to pay the Change of
Control Purchase Price for all of the Notes that might be delivered by holders
of Notes seeking to accept the Change of Control Offer. Foodbrands America shall
not be required to make a Change of Control Offer upon a Change of Control if a
third party makes the Change
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of Control Offer in the manner, at the times and otherwise in compliance with
the requirements applicable to a Change of Control Offer made by Foodbrands
America and purchases all Notes validly tendered and not withdrawn under such
Change of Control Offer.
The occurrence of the events constituting a Change of Control under the
Indenture will result in an event of default under the Credit Agreement and,
thereafter, the lenders will have the right to require repayment of the
borrowings thereunder in full. Foodbrands America's obligations under the Credit
Agreement represent obligations senior in right of payment to the Notes and the
Credit Agreement will not permit the purchase of the Notes absent consent of the
lenders thereunder in the event of a Change of Control (although the failure by
Foodbrands America to comply with its obligations in the event of a Change of
Control would constitute a Default under the Notes).
Foodbrands America will comply with Section 14(e) and Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that a Change of
Control occurs and Foodbrands America is required to purchase Notes as described
above. The existence of a holder's right to require, subject to certain
conditions, Foodbrands America to repurchase its Notes upon a Change of Control
may deter a third party from acquiring Foodbrands America in a transaction which
constitutes a Change of Control.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture will provide that
Foodbrands America will not, and will not permit any of the Restricted
Subsidiaries to, make any Asset Sale unless (i) Foodbrands America or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the fair market value, as determined in good
faith by the Board of Directors of Foodbrands America, of the shares or assets
sold or otherwise disposed of and (ii) at least 75% of such consideration
consists of cash and/or Cash Equivalents and/or readily marketable securities
which Foodbrands America in good faith expects to liquidate promptly following
such Asset Sale (with Indebtedness of Foodbrands America or any Restricted
Subsidiary being counted as cash for such purposes if Foodbrands America or the
Restricted Subsidiary is unconditionally released from any liability therefor).
Net Cash Proceeds of any Asset Sale may be applied, to the extent required by
the terms of any Specified Indebtedness, to repay Specified Indebtedness (but
only if the commitments or amounts available to be borrowed under such Specified
Indebtedness are permanently reduced by the amount of such payment). To the
extent that such Net Cash Proceeds are not applied as provided in the preceding
sentence, Foodbrands America or a Restricted Subsidiary, as the case may be, may
apply the Net Cash Proceeds from such Asset Sale, within 360 days of such Asset
Sale, to an investment in properties and assets that were the subject of such
Asset Sale or in properties and assets that will be used in the business of
Foodbrands America and the Restricted Subsidiaries existing on the Issue Date or
in businesses reasonably related thereto ("Replacement Assets") so long as
Foodbrands America or such Restricted Subsidiary has notified the Trustee in
writing within 270 days of such Asset Sale, that it has determined to apply the
Net Cash Proceeds from such Asset Sale to an investment in such Replacement
Assets. Any Net Cash Proceeds from any Asset Sale not applied as provided in the
preceding two sentences, within 360 days of such Asset Sale, constitute "Excess
Proceeds" subject to disposition as provided below.
When the aggregate amount of Excess Proceeds exceeds $10,000,000, Foodbrands
America shall make an offer to purchase, from all holders of the Notes, an
aggregate principal amount of Notes equal to such Excess Proceeds, at a price in
cash equal to 100% of the outstanding principal amount thereof plus accrued and
unpaid interest, if any, to the purchase date. To the extent that the aggregate
principal amount of Notes tendered pursuant to an offer to purchase is less than
the Excess Proceeds, Foodbrands America may use such deficiency for general
corporate purposes. If the aggregate principal amount of Notes validly tendered
and not withdrawn by holders thereof exceeds the Excess Proceeds, Notes to be
purchased will be selected on a PRO RATA basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset to zero.
Foodbrands America will comply with Section 14(e) and Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that an Asset Sale
occurs and Foodbrands America is required to purchase Notes as described above.
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LIMITATION ON ISSUANCE AND SALE OF PREFERRED STOCK BY RESTRICTED
SUBSIDIARIES. The Indenture will provide that Foodbrands America (i) will not
permit any of the Restricted Subsidiaries to issue any Preferred Stock (other
than to Foodbrands America or a Wholly-Owned Restricted Subsidiary) and (ii)
will not permit any person (other than Foodbrands America or a Wholly-Owned
Restricted Subsidiary) to own any Preferred Stock of any Restricted Subsidiary.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture will provide that
Foodbrands America will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, transfer, disposition, purchase, exchange or lease of assets, property
or services) with, or for the benefit of, any Affiliate of Foodbrands America
(other than a Restricted Subsidiary of Foodbrands America so long as no
Affiliate or beneficial holder of 10% or more of any class of Capital Stock of
Foodbrands America shall beneficially own any Capital Stock in such Restricted
Subsidiary) or any beneficial holder of 10% or more of any class of Capital
Stock of Foodbrands America, except (i) on terms that are no less favorable to
Foodbrands America, or the Restricted Subsidiary, as the case may be, than those
which could have been obtained in a comparable transaction at such time from
persons who do not have such a relationship with Foodbrands America, (ii) with
respect to a transaction or series of transactions involving aggregate payments
or value equal to or greater than $10,000,000, Foodbrands America has obtained a
written opinion from a nationally recognized investment banking firm stating
that the terms of such transactions or series of transactions are fair to
Foodbrands America or the Restricted Subsidiary, as the case may be, from a
financial point of view, and (iii) with respect to any transaction or series of
transactions involving aggregate payments or value equal to or greater than
$1,000,000, Foodbrands America shall have delivered an officer's certificate to
the Trustee certifying that such transaction or series of transactions comply
with the preceding clause (i) and, if applicable, certifying that the opinion
referred to in the preceding clause (ii) is correct and that such transaction or
series of transactions have been approved by a majority of the Board of
Directors of Foodbrands America, including a majority of the disinterested
directors of the Board of Directors of Foodbrands America. This covenant will
not restrict Foodbrands America from (a) making dividends permitted by the
covenant "-- Limitation on Restricted Payments," (b) paying reasonable and
customary regular fees to directors of Foodbrands America who are not employees
of Foodbrands America and (c) making loans or advances to officers of Foodbrands
America and the Restricted Subsidiaries for bona fide business purposes of
Foodbrands America.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture will provide that Foodbrands America will not, and
will not permit any of the Restricted Subsidiaries to, directly or indirectly,
create or otherwise cause or suffer to exist or become effective any encumbrance
or restriction on the ability of any Restricted Subsidiary to (a) pay dividends,
in cash or otherwise, or make any other distributions on or in respect of its
Capital Stock or any other interest or participation in, or measured by, its
profits, (b) pay any Indebtedness owed to Foodbrands America or any other
Restricted Subsidiary, (c) make loans or advances to Foodbrands America or any
other Restricted Subsidiary, (d) transfer any of its properties or assets to
Foodbrands America or any other Restricted Subsidiary (other than any customary
restriction on transfers of property subject to a Lien permitted under the
Indenture (other than a Lien on cash not constituting proceeds of non-cash
property subject to a Lien permitted under the Indenture) which would not
materially adversely affect Foodbrands America's ability to satisfy its
obligations hereunder), or (e) guarantee any Indebtedness of Foodbrands America
or any other Restricted Subsidiary, except for such encumbrances or restrictions
existing under or by reason of (i) applicable law, (ii) customary non-assignment
provisions of any contract or any licensing agreement entered into by Foodbrands
America or any of the Restricted Subsidiaries in the ordinary course of business
or any lease governing a leasehold interest of Foodbrands America or any
Restricted Subsidiary, (iii) any agreement or other instrument of a person
acquired by Foodbrands America or any Restricted Subsidiary in existence at the
time of such acquisition (but not created in contemplation thereof), which
encumbrance or restriction is not applicable to any person, or the properties or
assets of any person, other than the person, or the property or assets of the
person, so acquired, (iv) any encumbrance or restriction in the Credit Agreement
as in effect on the Issue Date and (v) any encumbrance or restriction pursuant
to any agreement that extends, refinances, renews or
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replaces any agreement described in clause (iii) above, which is not materially
more restrictive or less favorable to the holders of Notes and Note Guarantees
than those existing under the agreement being extended, refinanced, renewed or
replaced.
LIMITATION ON GUARANTEES BY RESTRICTED SUBSIDIARIES. The Indenture will
provide that no Restricted Subsidiary that is not a Subsidiary Guarantor may at
any time guarantee any Debt Securities of Foodbrands America or any Subsidiary
Guarantor or issue any Debt Securities, unless, at the time of such guarantee or
issue either (A) such Debt Securities constitute Acquired Indebtedness permitted
to be incurred pursuant to the first paragraph of the covenant "Limitation on
Indebtedness" or Indebtedness incurred by such Restricted Subsidiary pursuant to
clause (10) of the second paragraph of such covenant or (B) such Restricted
Subsidiary becomes an Subsidiary Guarantor as contemplated by the following
sentence. The Indenture will further provide that Foodbrands America may, at any
time, cause a Restricted Subsidiary to become a Subsidiary Guarantor by
executing and delivering a supplemental indenture providing for the guarantee of
payment of the Notes by such Restricted Subsidiary on the basis provided in the
Indenture.
LIMITATION ON OTHER SENIOR SUBORDINATED INDEBTEDNESS. The Indenture will
provide that neither Foodbrands America nor any Subsidiary Guarantor will incur,
directly or indirectly, any Indebtedness which is subordinate or junior in right
of payment in any respect to Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, unless such Indebtedness ranks PARI PASSU in right
of payment with the Notes or the Note Guarantees, as applicable, or is expressly
subordinated in right of payment to the Notes or the Note Guarantees, as
applicable.
LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Indenture will
provide that Foodbrands America may designate any Subsidiary of Foodbrands
America (other than a Subsidiary Guarantor) as an "Unrestricted Subsidiary"
under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation;
(b) Foodbrands America would be permitted under the Indenture to make an
Investment at the time of Designation (assuming the effectiveness of such
Designation) in an amount (the "Designation Amount") equal to the Fair
Market Value of the Capital Stock of such Subsidiary on such date; and
(c) Foodbrands America would be permitted under the Indenture to incur
$1.00 of additional Indebtedness pursuant to the first paragraph of the
covenant described under "-- Limitation on Indebtedness" at the time of
Designation (assuming the effectiveness of such Designation).
In the event of any such Designation, Foodbrands America shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to the
covenant "-- Limitation on Restricted Payments" for all purposes of the
Indenture in the Designation Amount. The Indenture will further provide that (i)
Foodbrands America shall not and shall not permit any Restricted Subsidiary to,
at any time (x) provide credit support for, or a guarantee of, any Indebtedness
of any Unrestricted Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness), (y) be directly or indirectly liable
for any Indebtedness of any Unrestricted Subsidiary or (z) be directly or
indirectly liable for any Indebtedness which provides that the holder thereof
may (upon notice, lapse of time or both) declare a default thereon or cause the
payment thereof to be accelerated or payable prior to its final scheduled
maturity upon the occurrence of a default with respect to any Indebtedness of
any Unrestricted Subsidiary (including any right to take enforcement action
against such Unrestricted Subsidiary), except in the case of clause (x) or (y)
to the extent permitted under the covenant described under "-- Limitation on
Restricted Payments," and (ii) no Unrestricted Subsidiary shall at any time
guarantee or otherwise provide credit support for any obligation of Foodbrands
America or any Restricted Subsidiary.
The Indenture will further provide that Foodbrands America may revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
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(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the Indenture;
All Designations and Revocations must be evidenced by Board Resolutions of
Foodbrands America delivered to the Trustee certifying compliance with the
foregoing provisions.
REPORTING REQUIREMENTS. The Indenture will require that Foodbrands America
file with the Commission the annual reports, quarterly reports and other
documents required to be filed with the Commission pursuant to Sections 13 and
15 of the Exchange Act, whether or not Foodbrands America has a class of
securities registered under the Exchange Act. Foodbrands America will be
required to file with the Trustee within 15 days after it files them with the
Commission copies of such reports and documents.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indenture will provide that Foodbrands America will not, in any
transaction or series of related transactions, merge or consolidate with or
into, or sell, assign, convey, transfer, lease or otherwise dispose of all or
substantially all of its properties and assets as an entirety to, any person or
persons, and that Foodbrands America will not permit any of the Restricted
Subsidiaries to enter into any such transaction or series of related
transactions if such transaction or series of related transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
Foodbrands America or of Foodbrands America and the Restricted Subsidiaries,
taken as a whole, to any other person or persons, unless at the time and after
giving effect thereto (i) either (A)(1) if the transaction or transactions is a
merger or consolidation involving Foodbrands America, Foodbrands America shall
be the surviving person of such merger or consolidation or (2) if the
transaction or transactions is a merger or consolidation involving a Restricted
Subsidiary, such Restricted Subsidiary shall be the surviving person of such
merger or consolidation and such surviving person shall be a Restricted
Subsidiary, or (B)(1) the person formed by such consolidation or into which
Foodbrands America or such Restricted Subsidiary is merged or to which the
properties and assets of Foodbrands America or such Restricted Subsidiary, as
the case may be, substantially as an entirety, are transferred (any such
surviving person or transferee person being the "Surviving Entity") shall be a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and (2)(x) in the case of
a transaction involving Foodbrands America, the Surviving Entity shall expressly
assume by a supplemental indenture executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of Foodbrands America
under the Notes and the Indenture, and in each case, the Indenture shall remain
in full force and effect, or (y) in the case of a transaction involving a
Restricted Subsidiary that is a Subsidiary Guarantor, the Surviving Entity shall
expressly assume by a supplemental indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of such
Restricted Subsidiary under its Note Guarantee and related supplemental
indenture, and in each case, such Note Guarantee and supplemental indenture
shall remain in full force and effect; and (ii) immediately after giving effect
to such transaction or series of related transactions on a PRO FORMA basis
(including, without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series of
transactions), no Default shall have occurred and be continuing and Foodbrands
America, or the Surviving Entity, as the case may be, after giving effect to
such transaction or series of transactions on a PRO FORMA basis, could incur
$1.00 of additional Indebtedness under the first paragraph of the "-- Limitation
on Indebtedness" covenant described above.
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, Foodbrands America shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements under the
Indenture. In addition, each Subsidiary Guarantor, unless it is the other party
to the transaction or unless its Note Guarantee will be released and discharged
in accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its Note Guarantee will apply to the
obligations of Foodbrands America or the Surviving Entity under the Indenture.
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Upon any consolidation or merger or any transfer of all or substantially all
of the assets of Foodbrands America in accordance with the foregoing, in which
Foodbrands America or a Restricted Subsidiary, as applicable, is not the
continuing corporation, the successor corporation formed by such a consolidation
or into which Foodbrands America or such Restricted Subsidiary, as the case may
be, is merged or to which such transfer is made, shall succeed to, and be
substituted for, and may exercise every right and power of, Foodbrands America
under the Indenture with the same effect as if such successor corporation had
been named as Foodbrands America therein; PROVIDED that, solely for purposes of
computing cumulative Consolidated Net Income for purposes of clause (B) of the
first paragraph of the covenant "Limitation on Restricted Payments" above, the
cumulative Consolidated Net Income of any persons other than Foodbrands America
and the Restricted Subsidiaries shall only be included for periods subsequent to
the effective time of such merger, consolidation, combination or transfer of
assets.
The Indenture will provide that for all purposes of the Indenture and the
Notes (including the provision of this covenant and the covenants described in
"-- Limitation on Indebtedness," "-- Limitation on Restricted Payments" and "--
Limitation on Liens"), Subsidiaries of any Surviving Entity will, upon such
transaction or series of related transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries as provided pursuant to the covenant described under
"-- Limitation on Designations of Unrestricted Subsidiaries" and all
Indebtedness, and all Liens on property or assets, of Foodbrands America and the
Restricted Subsidiaries immediately prior to such transaction or series of
related transactions will be deemed to have been incurred upon such transaction
or series of related transactions.
EVENT OF DEFAULT
The following will be "Events of Default" under the Indenture:
(i) default in the payment of the principal of, or premium, if any, when
due and payable, on any of the Notes (at its Stated Maturity, upon optional
redemption, required purchase, or otherwise); or
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, for 30 days; or
(iii) the failure by Foodbrands America to comply with its obligations
under "Consolidation, Merger, Sale of Assets, Etc." above; or
(iv) the failure by Foodbrands America to perform or observe any other
term, covenant or agreement contained in the Notes or the Indenture (other
than a default specified in clause (i), (ii) or (iii) above) for a period of
45 days after written notice of such failure requiring Foodbrands America to
remedy the same shall have been given (x) to Foodbrands America by the
Trustee or (y) to Foodbrands America and the Trustee by the holders of at
least 25% in aggregate principal amount of the Notes then outstanding; or
(v) any default or defaults under one or more agreements, instruments,
mortgages, bonds, debentures or other evidences of Indebtedness (a "Debt
Instrument") under which Foodbrands America or one or more Restricted
Subsidiaries or Foodbrands America and one or more Restricted Subsidiaries
then have outstanding Indebtedness in excess of $15,000,000, individually or
in the aggregate, and either (x) such Indebtedness is already due and
payable in full or (y) such default or defaults have resulted in the
acceleration of the maturity of such Indebtedness; or
(vi) one or more judgments, orders or decrees of any court or regulatory
or administrative agency of competent jurisdiction for the payment of money
in excess of $15,000,000, either individually or in the aggregate, over (a)
the coverage under applicable binding insurance policies issued by a solvent
insurer which has accepted such coverage and (b) the extent to which the
Company or any such Restricted Subsidiary shall be entitled pursuant to the
terms of any agreement then in effect, to reimbursement, indemnity or
contribution from any person (other than the Company or any of its
Subsidiaries) that is solvent for amounts as to which the Company or such
Restricted Subsidiary may become liable and has accepted such liability,
shall be entered against Foodbrands America or any
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Restricted Subsidiary or any of their respective properties and shall not be
discharged or fully bonded and there shall have been a period of 60 days
after the date on which any period for appeal has expired and during which a
stay of enforcement of such judgment, order or decree shall not be in
effect; or
(vii) either (i) the collateral agent under the Credit Agreement or (ii)
any holder of at least $15,000,000 in aggregate principal amount of
Indebtedness of Foodbrands America or any of the Restricted Subsidiaries
shall commence (or have commenced on its behalf) judicial proceedings to
foreclose upon assets of Foodbrands America or any of the Restricted
Subsidiaries having an aggregate Fair Market Value, individually or in the
aggregate, in excess of $15,000,000 or shall have exercised any right under
applicable law or applicable security documents to take ownership of any
such assets in lieu of foreclosure; or
(viii) any Note Guarantee ceases to be in full force and effect (other
than as expressly provided for under the Indenture) or is declared null and
void, or any Subsidiary Guarantor denies that it has any further liability
under any Note Guarantee, or gives notice to such effect (other than by
reason of the termination of the Indenture or the release of any such Note
Guarantee in accordance with the Indenture); or
(ix) certain events of bankruptcy, insolvency or reorganization with
respect to Foodbrands America, any Subsidiary Guarantor or any Significant
Subsidiary of Foodbrands America shall have occurred.
If an Event of Default (other than as specified in clause (ix) above with
respect to Foodbrands America or any Subsidiary Guarantor) shall occur and be
continuing, the Trustee, by notice to Foodbrands America, or the holders of at
least 25% in aggregate principal amount of the Notes then outstanding, by notice
to the Trustee and Foodbrands America, may declare the principal of, premium, if
any, and accrued interest on all of the outstanding Notes to be due and payable
immediately, upon which declaration, all amounts payable in respect of the Notes
shall become and be immediately due and payable; PROVIDED that so long as the
Credit Agreement shall be in full force and effect, if an Event of Default shall
have occurred and be continuing (other than an Event of Default under clause
(ix) with respect to Foodbrands America or any Subsidiary Guarantor), any such
acceleration shall not be effective until the earlier to occur of (x) five
business days following delivery of a notice of such acceleration to the agent
under the Credit Agreement and (y) the acceleration of any Indebtedness under
the Credit Agreement. If an Event of Default specified in clause (ix) above with
respect to Foodbrands America or any Subsidiary Guarantor occurs and is
continuing, then the principal of, premium, if any, and accrued interest on all
of the outstanding Notes shall IPSO FACTO become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
holder of Notes.
Notwithstanding the foregoing, in the event of a declaration of acceleration
in respect of the Notes because an Event of Default specified in clause (v)
above shall have occurred and be continuing, such declaration of acceleration
shall be automatically annulled if the Indebtedness that is the subject of such
Event of Default has been discharged or paid or such Event of Default shall have
been cured or waived by the holders of such Indebtedness and written notice of
such discharge, cure or waiver, as the case may be, shall have been given to the
Trustee by Foodbrands America or by the requisite holders of such Indebtedness
or a trustee, fiduciary or agent for such holders, within 60 days after such
declaration of acceleration in respect of the Notes and no other Event of
Default shall have occurred which has not been cured or waived during such
60-day period.
After a declaration of acceleration under the Indenture, but before a
judgment or decree for payment of money due has been obtained by the Trustee,
the holders of a majority in aggregate principal amount of the outstanding
Notes, by written notice to Foodbrands America and the Trustee, may rescind such
declaration and its consequences if: (a) Foodbrands America has paid or
deposited with the Trustee a sum sufficient to pay (i) all sums paid or advanced
by the Trustee under the Indenture and the reasonable compensation, expenses,
disbursements, and advances of the Trustee, its agents and counsel, (ii) all
overdue interest on all Notes, (iii) the principal of and premium, if any, on
any Notes which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Notes, and (iv) to
the extent
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that payment of such interest is lawful, interest upon overdue interest and
overdue principal at the rate borne by the Notes which has become due otherwise
than by such declaration of acceleration; (b) the rescission would not conflict
with any judgment or decree of a court of competent jurisdiction; and (c) all
Events of Default, other than the non-payment of principal of, premium, if any,
and interest on the Notes that has become due solely by such declaration of
acceleration, have been cured or waived.
The holders of not less than a majority in aggregate principal amount of the
outstanding Notes may on behalf of the holders of all the Notes waive any past
defaults under the Indenture except a default in the payment of the principal
of, premium, if any, or interest on any Note, or in respect of a covenant or
provision which under the Indenture cannot be modified or amended without the
consent of the holder of each Note outstanding.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in aggregate principal amount of the outstanding Notes have made
written request, and offered reasonable indemnity, to the Trustee to institute
such proceeding within 60 days after receipt of such notice and the Trustee,
within such 60-day period, has not received directions inconsistent with such
written request by holders of a majority in aggregate principal amount of the
outstanding Notes. Such limitations do not apply, however, to a suit instituted
by a holder of a Note for the enforcement of the payment of the principal of,
premium, if any, or interest on, such Note on or after the respective due dates
expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, whether or not an Event of Default shall occur and be continuing, the
Trustee under the Indenture is not under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any of the
holders of the Notes unless such holders shall have offered to the Trustee
reasonable security or indemnity. Subject to certain provisions concerning the
rights of the Trustee, the holders of a majority in aggregate principal amount
of the outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee under the Indenture.
If a Default or an Event of Default occurs and is continuing and is known to
the Trustee, the Trustee shall mail to each holder of the Notes notice of the
Default or Event of Default within 30 days after obtaining knowledge thereof;
PROVIDED that, except in the case of a Default or an Event of Default in payment
of principal of, premium, if any, or interest on any Notes, the Trustee may
withhold the notice to the holders of such Notes if a committee of its trust
officers in good faith determines that withholding the notice is in the interest
of the Noteholders.
Foodbrands America is required to furnish to the Trustee annual and
quarterly statements as to the performance by Foodbrands America of its
obligations under the Indenture and as to any default in such performance.
Foodbrands America is also required to notify the Trustee within ten days of any
event which is, or after notice or lapse of time or both would become, an Event
of Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
Foodbrands America may, at its option and at any time, terminate the
obligations of Foodbrands America and the Subsidiary Guarantors with respect to
the outstanding Notes and Note Guarantees ("defeasance"). Such defeasance means
that Foodbrands America shall be deemed to have paid and discharged the entire
Indebtedness represented by the then outstanding Notes, except for (i) the
rights of holders of outstanding Notes to receive payment in respect of the
principal of, premium, if any, and interest on such Notes when such payments are
due, (ii) Foodbrands America's obligations to issue temporary Notes, register
the transfer or exchange of any Notes, replace mutilated, destroyed, lost or
stolen Notes and maintain an office or agency for receipt of payments in respect
of the Notes, (iii) the rights, powers, trusts, duties and immunities of the
Trustee, (iv) the defeasance provisions of the Indenture and (v) the Note
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Guarantees to the extent they relate to the foregoing. In addition, Foodbrands
America may, at its option and at any time, elect to terminate its and the
Subsidiary Guarantors' obligations with respect to certain covenants that are
set forth in the Indenture, some of which are described under "-- Certain
Covenants" above, and any subsequent failure to comply with such obligations
shall not constitute a Default or an Event of Default with respect to the Notes
("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (i)
Foodbrands America must irrevocably deposit with the Trustee, in trust for the
benefit of the holders of the Notes, cash in United States dollars, U.S.
Government Obligations (as defined in the Indenture), or a combination thereof,
in such amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium, if
any, and interest on the outstanding Notes to redemption or maturity, (ii)
Foodbrands America shall have delivered to the Trustee an opinion of counsel to
the effect that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such defeasance or covenant defeasance had not occurred (in the case of
defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws),
(iii) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit, (iv) such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest with respect to any securities
of Foodbrands America, (v) such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any material
agreement or instrument to which Foodbrands America is a party or by which
Foodbrands is bound, (vi) Foodbrands America shall have delivered to the trustee
an opinion of counsel to the effect that (A) the trust funds will not be subject
to any rights of holders of Senior Indebtedness, including, without limitation,
those arising under the Indenture and (B) after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally, and (vii) Foodbrands America shall have delivered to the
Trustee an officers' certificate and an opinion of counsel, each stating that
all conditions precedent under the Indenture to either defeasance or covenant
defeasance, as the case may be, have been complied with and that no violations
under agreements governing any other outstanding Indebtedness would result.
SATISFACTION AND DISCHARGE
The Indenture will be discharged and will cease to be of further effect
(except as to surviving rights or registration of transfer or exchange of the
Notes, as expressly provided for in the Indenture) to all outstanding Notes when
(i) either (a) all the Notes theretofore authenticated and delivered (except
lost, stolen or destroyed Notes which have been replaced or paid and Notes for
which payment money has theretofore been deposited in trust or segregated and
held in trust by Foodbrands America and thereafter repaid to Foodbrands America
or discharged from such trust) have been delivered to the Trustee for
cancellation or (b) all Notes not theretofore delivered to the Trustee for
cancellation have become due and payable and Foodbrands America has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire Indebtedness on the Notes not
theretofore delivered to the Trustee for cancellation, for principal of,
premium, if any, and interest on the Notes to the date of deposit together with
irrevocable instructions from Foodbrands America directing the Trustee to apply
such funds to the payment thereof at maturity or redemption, as the case may be,
(ii) Foodbrands America has paid all other sums payable under the Indenture by
Foodbrands America, and (iii) Foodbrands America has delivered to the Trustee an
officers' certificate and an opinion counsel stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
AMENDMENTS AND WAIVERS
From time to time, Foodbrands America and the Subsidiary Guarantors, when
authorized by a resolution of their respective Boards of Directors, and the
Trustee may, without the consent of the holders of any outstanding Notes, amend,
waive or supplement the Indenture or the Notes for certain specified purposes,
including, among other things, curing ambiguities, defects or inconsistencies,
qualifying, or maintaining the qualification of, the Indenture under the Trust
Indenture Act of 1939, adding any Subsidiary of Foodbrands America as a
Subsidiary Guarantor or making any change that does not adversely affect the
rights of any
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holder; PROVIDED that Foodbrands America has delivered to the Trustee an opinion
of counsel stating that such change does not adversely affect the rights of any
holder of the Notes. Other amendments and modifications of the Indenture or the
Notes may be made by Foodbrands America and the Trustee with the consent of the
holders of not less than a majority of the aggregate principal amount of the
outstanding Notes; PROVIDED that no such modification or amendment may, without
the consent of the holder of each outstanding Note affected thereby, (i) reduce
the principal amount of, extend the fixed maturity of or alter the redemption
provisions of, the Notes, (ii) change the currency in which the Notes or any
premium or the interest thereon is payable, (iii) reduce the percentage in
principal amount of outstanding Notes that must consent to an amendment,
supplement or waiver or consent to take any action under the Indenture, the
Notes or any Note Guarantee, (iv) impair the right to institute suit for the
enforcement of any payment on or with respect to the Notes or the Note
Guarantees, (v) waive a default in payment with respect to the Notes, (vi)
following the occurrence of a Change of Control or an Asset Sale, amend, change
or modify the obligation of Foodbrands America to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate the
offer with respect to any Asset Sale or modify any of the provisions or
definitions with respect thereto, (vii) reduce or change the rate or time for
payment of interest on the Notes, (viii) modify or change any provision of the
Indenture affecting the subordination of the Notes or any Note Guarantee in a
manner adverse to the holders of the Notes and the Note Guarantees, or (ix)
release any Subsidiary Guarantor from any of its obligations under its Note
Guarantee or the Indenture other than in compliance with other provisions of the
Indenture permitting such release.
THE TRUSTEE
Liberty Bank and Trust Company of Oklahoma City, National Association is to
be the Trustee under the Indenture and has been appointed by Foodbrands America
as Registrar and Paying Agent with regard to the Notes.
GOVERNING LAW
The Indenture, the Notes and the Note Guarantees will be governed by the
laws of the State of New York, without regard to the principles of conflicts of
law.
CERTAIN DEFINITIONS
"ACQUIRED INDEBTEDNESS" means Indebtedness of a person (a) assumed in
connection with an Asset Acquisition from such person or (b) existing at the
time such person becomes a Subsidiary of any other person, but not including
Indebtedness incurred in connection with, or in anticipation of, such person
becoming a Subsidiary.
"AFFILIATE" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person.
"AIRLIE AGREEMENT" means the Stockholders Agreement by and between
Foodbrands America and The Airlie Group, L.P. dated March 22, 1993.
"APPLICABLE PREMIUM" means with respect to a Note, the greater of (i) 1.0%
of the then outstanding principal amount of such Note or (ii) the excess of (A)
the present value of the required interest and principal payments due on such
Note, computed using a discount rate equal to the Treasury Rate plus 100 basis
points, over (B) the then outstanding principal amount of such Note; PROVIDED
that in no event will the Applicable Premium exceed the amount of the applicable
redemption price upon an optional redemption less 100%, at any time on or after
, 2001.
"ASSET ACQUISITION" means (a) an Investment by Foodbrands America or any
Subsidiary of Foodbrands America in any other person pursuant to which such
person shall become a Restricted Subsidiary, or shall be merged with or into
Foodbrands America or any Restricted Subsidiary, or (b) the acquisition by
Foodbrands America or any Restricted Subsidiary of the assets of any person
which constitute all or substantially all of the assets of such person or any
division, operating unit or line of business of such person.
"ASSET SALE" means any sale, issuance, conveyance, transfer, lease or other
disposition by Foodbrands America or any Restricted Subsidiary to any person
other than Foodbrands America or a Restricted
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Subsidiary, in one or a series of related transactions, of: (a) any Capital
Stock of any Subsidiary of Foodbrands America; (b) all or substantially all of
the properties and assets of any division or line of business of Foodbrands
America or any Restricted Subsidiary; or (c) any other properties or assets of
Foodbrands America or a Restricted Subsidiary (including proprietary brand
names, whether registered or otherwise) other than in the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include (i) any sale, issuance, conveyance, transfer, lease or other disposition
of properties or assets that is governed by the provisions described under "--
Merger, Sale of Assets, Etc.," (ii) sales of obsolete equipment or of real
property no longer used or useful in the Company's business, (iii) any direct or
indirect sale of inventory or accounts receivable to the extent the proceeds
thereof are required to repay a lender or lenders that are owed Indebtedness of
Foodbrands America or any Restricted Subsidiary that is secured by such
inventory and accounts receivable; and (iv) any sale, issuance, conveyance,
transfer, lease or other disposition of properties or assets, whether in one
transaction or a series of related transactions, involving assets with a fair
market value, as determined by Foodbrands America, not in excess of $1,000,000.
"AVERAGE LIFE TO STATED MATURITY" means, with respect to any Indebtedness,
as at any date of determination, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from such date to the date or dates
of each successive scheduled principal payment (including, without limitation,
any sinking fund requirements) of such Indebtedness multiplied by (ii) the
amount of each such principal payment by (b) the sum of all such principal
payments.
"BANK WARRANTS" means the warrants evidencing the right to purchase shares
of Common Stock pursuant to the Warrant Agreement dated as of October 31, 1991,
between Foodbrands America and the banks named therein as in effect on the date
of the Indenture.
"BANKRUPTCY LAW" means Title 11 of the United States Code or any similar
federal, state or foreign law for the relief of debtors.
"CAPITAL STOCK" means, with respect to any person, any and all shares,
interests, participations, rights in or other equivalents (however designated)
of such person's capital stock, and any rights (other than debt securities
convertible into capital stock), warrants or options exchangeable for or
convertible into such capital stock.
"CAPITALIZED LEASE OBLIGATION" means any obligation under a lease of (or
other agreement conveying the right to use) any property (whether real, personal
or mixed) that is required to be classified and accounted for as a capital lease
obligation under GAAP, and, for the purpose of the Indenture, the amount of such
obligation at any date shall be the capitalized amount thereof at such date,
determined in accordance with GAAP consistently applied.
"CASH EQUIVALENTS" means, at any time: (i) any evidence of Indebtedness with
a maturity of 365 days or less issued or directly and fully guaranteed or
insured by the United States of America or any agency or instrumentality thereof
(PROVIDED that the full faith and credit of the United States of America is
pledged in support thereof); (ii) certificates of deposit or acceptances with a
maturity of 365 days or less of any financial institution that is a member of
the Federal Reserve System having combined capital and surplus and undivided
profits of not less than $500,000,000; (iii) commercial paper with a maturity of
365 days or less issued by a corporation that is not an Affiliate of Foodbrands
America organized under the laws of any state of the United States or the
District of Columbia and rated at least A-1 by S&P or at least P-1 by Moody's or
at least an equivalent rating category of another nationally recognized
securities rating agency; (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the government of the United States of America or issued by any
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within 365 days from the date of acquisition;
PROVIDED that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions With Securities
Dealers and Others, as adopted by the Comptroller of the Currency on October 31,
1985; and (v) money market funds organized under the laws of the United States
of America or any state thereof that invest substantially all of their assets in
any of the types of investments described in clause (i), (ii) or (iii) above.
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"CHANGE OF CONTROL" means the occurrence of any of the following events: (a)
any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of
the Exchange Act), excluding Permitted Holders, is or becomes the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of Foodbrands America; (b) Foodbrands America
consolidates with, or merges with or into, another person or sells, assigns,
conveys, transfers, leases or otherwise disposes of all or substantially all of
its assets to any person, or any person consolidates with, or merges with or
into, Foodbrands America, in any such event pursuant to a transaction in which
the outstanding Voting Stock of Foodbrands America is converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Stock of Foodbrands America is
converted into or exchanged for (1) Voting Stock (other than Redeemable Capital
Stock) of the surviving or transferee corporation or (2) cash, securities and
other property in an amount which could be paid by Foodbrands America as a
Restricted Payment under the Indenture and (ii) immediately after such
transaction, no "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), excluding Permitted Holders, is the "beneficial
owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
a person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly, of more
than 50% of the total Voting Stock of the surviving or transferee corporation;
(c) during any consecutive two-year period, individuals who at the beginning of
such period constituted the Board of Directors of Foodbrands America (together
with any new directors whose election by such Board of Directors or whose
nomination for election by the stockholders of Foodbrands America was approved
by a vote of 66 2/3% of the directors then still in office who (i) are entitled
to vote to elect such new director or who are entitled to nominate such director
pursuant to Foodbrands America's bylaws, the JLL Agreement, or the Airlie
Agreement and (ii) were either directors at the beginning of such period or
persons whose election as directors or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of Foodbrands America then in office; (d) during any consecutive
two-year period individuals who were Non Investor Directors (as defined below)
at the beginning of such period (together with any new Non Investor Directors
whose election by the Board of Directors of Foodbrands America or whose
nomination for election by the stockholders of Foodbrands America was approved
by a vote of 66 2/3% of the Non Investor Directors then still in office who were
either Non Investor Directors at the beginning of such period or whose election
or nomination for election as directors was so approved) cease for any reason to
constitute a majority of the Non Investor Directors then in office or (e) JLL
assigns any of its rights under Section 4.6 of the JLL Agreement, or any
successor provision, to nominate directors of Foodbrands America and at any time
thereafter a majority of the directors of Foodbrands America designated pursuant
to the JLL Agreement are persons who were not directors 60 days prior to the
date of such assignment or persons whose election or nomination for election was
approved by 66 2/3% of the Non Investor Directors. For purposes of the
foregoing, a "Non Investor Director" means a director of Foodbrands America
other than a director nominated, designated or elected pursuant to the JLL
Agreement or the Airlie Agreement.
"COMMON STOCK" means, with respect to any person, any and all shares,
interests or other participations in, and other equivalents (however designated
and whether voting or nonvoting) of, such person's common stock, whether
outstanding at the Issue Date or issued after the Issue Date, and includes,
without limitation, all series and classes of such common stock.
"CONSOLIDATED EBITDA" means, with respect to Foodbrands America for any
period, (i) the sum of, without duplication, the amount for such period, taken
as a single accounting period, of (a) Consolidated Net Income, (b) Consolidated
Non-cash Charges, (c) Consolidated Interest Expense and (d) Consolidated Income
Tax Expense, LESS (ii) non-cash items increasing Consolidated Net Income for
such period.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect to Foodbrands
America, the ratio of the aggregate amount of Consolidated EBITDA of Foodbrands
America for the four full fiscal quarters for which financial information in
respect thereof is available immediately preceding the date of the transaction
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(the "Transaction Date") giving rise to the need to calculate the Consolidated
Fixed Charge Coverage Ratio (such four full fiscal quarter period being referred
to herein as the "Four Quarter Period") to the aggregate amount of Consolidated
Fixed Charges of Foodbrands America for the Four Quarter Period. In addition to
and without limitation of the foregoing, for purposes of this definition
"Consolidated EBITDA" and "Consolidated Fixed Charges" shall be calculated after
giving effect on a PRO FORMA basis for the period of such calculation to,
without duplication, (a) the incurrence of any Indebtedness of Foodbrands
America or any of the Restricted Subsidiaries during the period commencing on
the first day of the Four Quarter Period to and including the Transaction Date
(the "Reference Period"), including, without limitation, the incurrence of the
Indebtedness giving rise to the need to make such calculation (and the
application of the net proceeds thereof), as if such incurrence (and
application) occurred on the first day of the Reference Period, (b) an
adjustment to eliminate or include, as the case may be, the Consolidated EBITDA
and Consolidated Fixed Charges of such person directly or indirectly
attributable to assets which are the subject of any Asset Sale or Asset
Acquisition (including, without limitation, any Asset Acquisition giving rise to
the need to make such calculation as a result of Foodbrands America or one of
the Restricted Subsidiaries (including any person who becomes a Restricted
Subsidiary as a result of the Asset Acquisition) incurring, assuming or
otherwise being liable for Acquired Indebtedness) occurring during the Reference
Period, as if such Asset Sale (after giving effect to any Designation of
Unrestricted Subsidiaries) or Asset Acquisition occurred on the first day of the
Reference Period and (c) the retirement of Indebtedness during the Reference
Period which cannot thereafter be reborrowed occurring as if retired on the
first day of the Reference Period. For purposes of calculating "Consolidated
Fixed Charges" for this "Consolidated Fixed Charge Coverage Ratio," interest on
Indebtedness incurred during the Four Quarter Period under any revolving credit
facility which can be borrowed and repaid without reducing the commitments
thereunder shall be the actual interest during the Four Quarter Period.
Furthermore, in calculating "Consolidated Fixed Charges" for purposes of
determining the denominator (but not the numerator) of this "Consolidated Fixed
Charge Coverage Ratio," (i) interest on outstanding Indebtedness determined on a
fluctuating basis as of the Transaction Date and which will continue to be so
determined thereafter shall be deemed to have accrued at a fixed rate PER ANNUM
equal to the rate of interest on such Indebtedness in effect on the Transaction
Date, (ii) if interest on any Indebtedness actually incurred on the Transaction
Date may optionally be determined at an interest rate based upon a factor of a
prime or similar rate, a eurocurrency interbank offered rate, or other rates,
then the interest rate in effect on the Transaction Date will be deemed to have
been in effect during the Reference Period; and (iii) notwithstanding clauses
(i) and (ii) above, interest on Indebtedness determined on a fluctuating basis,
to the extent such interest is covered by agreements relating to Interest Rate
Protection Obligations, shall be deemed to have accrued at the rate PER ANNUM
resulting after giving effect to the operation of such agreements. If Foodbrands
America or any of the Restricted Subsidiaries directly or indirectly guaranteed
Indebtedness of a third person, the above clauses shall give effect to the
incurrence of such guaranteed Indebtedness as if Foodbrands America or such
Restricted Subsidiary had directly incurred or otherwise assumed such guaranteed
Indebtedness.
"CONSOLIDATED FIXED CHARGES" means, with respect to Foodbrands America for
any period, the sum of, without duplication, the amounts for such period of (i)
Consolidated Interest Expense and (ii) the aggregate amount of dividends and
other distributions paid or accrued during such period in respect of Redeemable
Capital Stock of Foodbrands America and the Restricted Subsidiaries on a
consolidated basis.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to Foodbrands America
for any period, the provision for federal, state, local and foreign income taxes
of such person and the Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to Foodbrands America
for any period, without duplication, the sum of (i) the interest expense of
Foodbrands America and the Restricted Subsidiaries for such period as determined
on a consolidated basis in accordance with GAAP, excluding the amortization of
fees related to the issuance of the Notes and fees (other than letter of credit
fees) related to the initial execution and delivery of the Credit Agreement, but
including, without limitation, (a) any amortization of debt discount, (b) the
net cost under Interest Rate Protection Obligations (including any amortization
of discounts), (c) the interest portion of any deferred payment obligation which
in accordance with GAAP is
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required to be reflected on an income statement, (d) all commissions, discounts
and other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, and (e) all accrued interest and (ii) the interest
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by Foodbrands America and the Restricted Subsidiaries during
such period as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to Foodbrands America, for any
period, the consolidated net income (or loss) of Foodbrands America and the
Restricted Subsidiaries for such period as determined in accordance with GAAP
consistently applied adjusted, to the extent included in calculating such net
income, by excluding, without duplication, (i) all extraordinary gains or losses
(net of fees and expenses relating to the transaction giving rise thereto) and
the non-recurring cumulative effect of accounting charges, (ii) the portion of
net income (or loss) of Foodbrands America and the Restricted Subsidiaries
allocable to minority interests in unconsolidated persons to the extent that
cash dividends or distributions have not actually been received by Foodbrands
America or one of the Restricted Subsidiaries, (iii) net income (or loss) of any
person combined with Foodbrands America or one of the Restricted Subsidiaries on
a "pooling of interests" basis attributable to any period prior to the date of
combination, (iv) any gain or loss realized upon the termination of any employee
pension benefit plan, on an after-tax basis, (v) gains or losses in respect of
any Asset Sales by Foodbrands America or one of the Restricted Subsidiaries (net
of fees and expenses relating to the transaction giving rise thereto), on an
after-tax basis, (vi) reduction of reorganization value in excess of amounts
allocable to tangible assets resulting from the utilization of net operating
losses, and (vii) the net income of any Restricted Subsidiary of Foodbrands
America to the extent that the declaration of dividends or similar distributions
by that Restricted Subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"CONSOLIDATED NET TANGIBLE ASSETS" means, with respect to Foodbrands America
at any date, the total assets shown on the consolidated balance sheet of
Foodbrands America and the Restricted Subsidiaries prepared in accordance with
GAAP as of the last day of the immediately preceding fiscal quarter less the sum
of (a) all current liabilities plus (b) goodwill and other intangibles shown on
such balance sheet.
"CONSOLIDATED NON-CASH CHARGES" means, with respect to Foodbrands America
for any period, the aggregate depreciation, amortization and other non-cash
expenses (including, without limitation, non-cash reserves and non-cash charges)
of Foodbrands America and the Restricted Subsidiaries reducing Consolidated Net
Income of Foodbrands America and the Restricted Subsidiaries for such period,
determined on a consolidated basis in accordance with GAAP.
"CREDIT AGREEMENT" means the Credit and Security Agreement dated as of
December 11, 1995, among Foodbrands America, as borrower, Chemical Bank, as
agent, and the lenders which are to become parties from time to time thereto,
together with the related documents thereto (including, without limitation, any
guarantee agreements permitted under the Indenture and security documents), in
each case as such agreement may be amended (including any agreement extending
the maturity of, refinancing, replacing or otherwise restructuring (including,
subject to the covenants of the Indenture, adding Subsidiary Guarantors as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement) or any successor or replacement agreement
permitted under the Indenture.
"CREDIT AGREEMENT OBLIGATIONS" means all monetary obligations of every
nature of Foodbrands America or a Restricted Subsidiary, including without
limitation, obligations to pay principal and interest, reimbursement obligations
under letters of credit, fees, expenses and indemnities, from time to time owed
to the lenders, the agent, the co-agents or any collateral agent under or in
respect of the Credit Agreement.
"DEBT SECURITIES" means any debt securities (including any guarantee of such
securities) issued by Foodbrands America and/or any Subsidiary Guarantor,
whether in a public offering or a private placement.
"DEFAULT" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
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"DESIGNATED SENIOR INDEBTEDNESS" means (i) all Senior Indebtedness and
Guarantor Senior Indebtedness under the Credit Agreement Obligations and (ii)
any other Senior Indebtedness (or for certain purposes more fully described in
the Indenture, Guarantor Senior Indebtedness) which (a) at the time of
incurrence exceeds $25,000,000 in aggregate principal amount and (b) is
specifically designated by Foodbrands America (or, in the case of Guarantor
Senior Indebtedness, by the relevant Subsidiary Guarantor) in the instrument
evidencing such Senior Indebtedness or Guarantor Senior Indebtedness as
"Designated Senior Indebtedness."
"DESIGNATION" has the meaning set forth under "-- Certain Covenants --
Limitation on Designations of Unrestricted Subsidiaries."
"DESIGNATION AMOUNT" has the meaning set forth under "-- Certain Covenants
- -- Limitation on Designations of Unrestricted Subsidiaries."
"EVENT OF DEFAULT" has the meaning set forth under "-- Events of Default"
herein.
"FAIR MARKET VALUE" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined by the Board of Directors of Foodbrands America acting in good faith
and shall be envidenced by a Board Resolution of Foodbrands America delivered to
the Trustee.
"GAAP" means generally accepted accounting principles in the United States
set forth in the Statements of Financial Accounting Standards and the
Interpretations, Accounting Principles Board Opinions and AICPA Accounting
Research Bulletins which are applicable as of the Issue Date and consistently
applied.
"GUARANTEE" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"GUARANTOR SENIOR INDEBTEDNESS" means, with respect to any Subsidiary
Guarantor, the principal of, premium, if any, and interest on any Indebtedness
of such Subsidiary Guarantor, whether outstanding on the Issue Date or
thereafter created, incurred or assumed, unless, in the case of any particular
Indebtedness, the instrument creating or evidencing the same or pursuant to
which the same is outstanding expressly provides that such Indebtedness shall
not be senior in right of payment to the Note Guarantee of such Subsidiary
Guarantor. Without limiting the generality of the foregoing, "GUARANTOR SENIOR
INDEBTEDNESS" shall also include the principal of, premium, if any, and interest
(including interest accruing after the filing of a petition initiating any
proceeding under any Bankruptcy Law whether or not such interest is an allowable
claim in such proceeding) on, and all other amounts owing in respect of (i) all
Credit Agreement Obligations and Other Designated Guarantor Senior Indebtedness
Obligations, if any, of such Subsidiary Guarantor and (ii) all Related Currency
and Interest Rate Protection Obligations, if any, of such Subsidiary Guarantor.
Notwithstanding the foregoing, "Guarantor Senior Indebtedness" shall not include
(a) Indebtedness evidenced by the Note Guarantee of such Subsidiary Guarantor,
(b) Indebtedness that is expressly subordinate or junior in right of payment to
any Guarantor Senior Indebtedness of such Subsidiary Guarantor, (c) Indebtedness
which, when incurred and without respect to any election under Section 1111(b)
of Title 11, United States Code, is by its terms without recourse to such
Subsidiary Guarantor, (d) any repurchase, redemption or other obligation in
respect of Redeemable Capital Stock of such Subsidiary Guarantor, (e) to the
extent it might constitute Indebtedness, amounts owing for goods, materials or
services purchased in the ordinary course of business or consisting of trade
payables or other current liabilities (other than any current liabilities owing
under the Credit Agreement Obligations or the current portion of any long-term
Indebtedness which would constitute Guarantor Senior Indebtedness but for the
operation of this clause (e)), (f) to the extent it might constitute
Indebtedness, amounts owed by such Subsidiary Guarantor for compensation
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to employees or for services rendered to such Subsidiary Guarantor, (g) to the
extent it might constitute Indebtedness, any liability for federal, state, local
or other taxes owed or owing by such Subsidiary Guarantor, (h) Indebtedness of
such Subsidiary Guarantor to a Subsidiary of Foodbrands America or any other
Affiliate of Foodbrands America or any of such Affiliate's Subsidiaries, and (i)
that portion of any Indebtedness of such Subsidiary Guarantor which at the time
of issuance is issued in violation of the Indenture (but, as to any such
Indebtedness, no such violation shall be deemed to exist for purposes of this
clause (i) if the holder(s) of such Indebtedness or their representative or such
Subsidiary Guarantor shall have furnished to the Trustee an opinion of
independent legal counsel, unqualified in all material respects, addressed to
the Trustee (which legal counsel may, as to matters of fact, rely upon a
certificate of such Subsidiary Guarantor) to the effect that the incurrence of
such Indebtedness does not violate the provisions of such Indenture).
"INDEBTEDNESS" means, with respect to any person, without duplication, (a)
all liabilities of such person for borrowed money or for the deferred purchase
price of property or services, excluding any trade payables and other accrued
current liabilities incurred in the ordinary course of business, but including,
without limitation, all obligations, contingent or otherwise, of such person in
connection with any letters of credit, banker's acceptance or other similar
credit transaction, (b) all obligations of such person evidenced by bonds,
notes, debentures or other similar instruments, (c) all indebtedness created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such person (even if the rights and remedies of
the seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), but excluding trade accounts payable
arising in the ordinary course of business, (d) all Capitalized Lease
Obligations of such person, (e) all Indebtedness referred to in the preceding
clauses of other persons and all dividends of other persons, the payment of
which is secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon
property (including, without limitation, accounts and contract rights) owned by
such person, even though such person has not assumed or become liable for the
payment of such Indebtedness (the amount of such obligations being deemed to be
the lesser of the value of such property or asset or the amount of the
obligation so secured), (f) all guarantees of Indebtedness referred to in this
definition by such person, (g) all Redeemable Capital Stock valued at the
greater of its voluntary or involuntary maximum fixed repurchase price plus
accrued dividends, (h) all obligations under or in respect of currency exchange
contracts and Interest Rate Protection Obligations of such person and (i) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of the types referred to in clauses (a) through (h) above. For
purposes hereof, (x) the "maximum fixed repurchase price" of any Redeemable
Capital Stock which does not have a fixed repurchase price shall be calculated
in accordance with the terms of such Redeemable Capital Stock as if such
Redeemable Capital Stock were purchased on any date on which Indebtedness shall
be required to be determined pursuant to the Indenture, and if such price is
based upon, or measured by, the fair market value of such Redeemable Capital
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Redeemable Capital Stock, and (y) Indebtedness
is deemed to be incurred pursuant to a revolving credit facility each time an
advance is made thereunder. For purposes of the covenant "Limitation on
Indebtedness," in determining the principal amount of any Indebtedness to be
incurred by Foodbrands America or a Restricted Subsidiary or which is
outstanding at any date, the principal amount of any Indebtedness which provides
that an amount less than the principal amount thereof shall be due upon any
declaration of acceleration thereof shall be the accreted value thereof at the
date of determination. When any person becomes a Restricted Subsidiary, there
shall be deemed to have been an incurrence by such Restricted Subsidiary of all
Indebtedness for which it is liable at the time it becomes a Restricted
Subsidiary. If Foodbrands America or any of the Restricted Subsidiaries,
directly or indirectly, guarantees Indebtedness of a third person, there shall
be deemed to be an incurrence of such guaranteed Indebtedness as if Foodbrands
America or such Restricted Subsidiary had directly incurred or otherwise assumed
such guaranteed Indebtedness.
"INTEREST RATE PROTECTION OBLIGATIONS" means the obligations of any person
pursuant to any arrangement with any other person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional
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amount in exchange for periodic payments made by such person calculated by
applying a fixed or a floating rate of interest on the same notional amount and
shall include, without limitation, interest rate swaps, caps, floors, collars
and similar agreements.
"INVESTMENT" means, with respect to any person, any direct or indirect loan
or other extension of credit, guarantee or capital contribution to (by means of
any transfer of cash or other property to others or any payment for property or
services for the account or use of others), or any purchase or acquisition by
such person of any Capital Stock, bonds, notes, debentures or other securities
or evidences of Indebtedness issued by, any other person. "Investments" shall
exclude extensions of trade credit by any person in the ordinary course of
business in accordance with normal trade practices of such person. In addition
to the foregoing, any foreign exchange contract, currency swap or similar
agreement shall constitute an Investment hereunder.
"JLL" means Joseph Littlejohn & Levy Associates, L.P.
"LEVERAGED SUBSIDIARY" means any Restricted Subsidiary that has incurred
Indebtedness (other than Acquired Indebtedness pursuant to the first paragraph
of the covenant "Limitation on Indebtedness" and Indebtedness described in
clauses (3) through (8) and (10) of the second paragraph of the covenant
"Limitation on Indebtedness," and any permitted refinancings or replacements
thereof incurred under clause (9) of the second paragraph of the covenant
"Limitation on Indebtedness") pursuant to the covenant "Limitation on
Indebtedness" for so long as such Indebtedness, or any refinancings thereof, is
outstanding.
"LIEN" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any property of any
kind. A person shall be deemed to own subject to a Lien any property which such
person has acquired or holds subject to the interest of a vendor or lessor under
any conditional sale agreement, capital lease or other title retention
agreement.
"MOODY'S" means Moody's Investors Services, Inc. and its successors.
"NET CASH PROCEEDS" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents or marketable securities (valued
at their market value on the date of receipt), including, without limitation,
payments in respect of deferred payment obligations when received in the form of
cash or Cash Equivalents (except to the extent that such obligations are
financed or sold with recourse to Foodbrands America or any Restricted
Subsidiary) net of (i) brokerage commissions and other fees and expenses
(including, without limitation, fees and expenses of legal counsel and
investment bankers) related to such Asset Sale, (ii) provisions for all taxes
payable as a result of such Asset Sale, (iii) amounts required to be paid and
which have been paid, or amounts required to be pledged and which are pledged,
to secure Indebtedness owed, to any person (other than Foodbrands America or any
Restricted Subsidiary) owning a beneficial interest in the assets subject to the
Asset Sale (which, in the case of a Lien, is being pledged to permanently reduce
Indebtedness secured by such Lien) and (iv) appropriate amounts to be provided
by Foodbrands America or any Restricted Subsidiary, as the case may be, as a
reserve required in accordance with GAAP against any liabilities associated with
such Asset Sale and retained by Foodbrands America or any Restricted Subsidiary,
as the case may be, after such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as reflected in an officers' certificate
delivered to the Trustee.
"OTHER DESIGNATED SENIOR INDEBTEDNESS OBLIGATIONS" means all monetary
obligations of every nature of Foodbrands America or a Subsidiary Guarantor, as
applicable, including, without limitation, obligations to pay principal and
interest, reimbursement obligations under letters of credit, fees, expenses and
indemnities, from time to time owed (by reason of a guarantee or otherwise) to
any holder of Designated Senior Indebtedness in respect of Designated Senior
Indebtedness.
"PARI PASSU INDEBTEDNESS" means any Indebtedness of Foodbrands America or
any Subsidiary Guarantor ranking PARI PASSU in right of payment with the Notes
or the Note Guarantees, as applicable.
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"PERMITTED HOLDERS" means (i) JLL and its Affiliates and (ii) any "group"
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) comprised
solely of JLL and its Affiliates and The Airlie Group, L.P. and its Affiliates
(it being understood that a "group" that includes any other person shall not be
a Permitted Holder).
"PERMITTED INVESTMENT" means any of the following: (a) Investments in any
Restricted Subsidiary (including any person that pursuant to such Investment
becomes a Restricted Subsidiary) and any person that is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets to,
Foodbrands America or any Restricted Subsidiary at the time such Investment is
made; (b) Investments in Cash Equivalents; (c) Investments in deposits with
respect to leases or utilities provided to third parties in the ordinary course
of business; (d) Investments in the Notes; (e) Investments in Interest Rate
Protection Agreements and currency exchange contracts permitted by the covenant
"-- Limitation on Indebtedness" and Related Currency and Interest Rate
Protection Obligations; (f) loans or advances to officers, employees or
consultants of Foodbrands America and its Restricted Subsidiaries in the
ordinary course of business for bona fide business purposes of Foodbrands
America and the Restricted Subsidiaries (including travel and moving expenses)
not in excess of $1,000,000 in the aggregate at any one time outstanding; (g)
loans to any 401(k) plan qualified under the Internal Revenue Code and
maintained for the benefit of employees of Foodbrands America and the Restricted
Subsidiaries; and (h) Investments in evidences of Indebtedness, securities or
other property received from another person by Foodbrands America or any of the
Restricted Subsidiaries in connection with any bankruptcy proceeding or by
reason of a composition or readjustment of debt or a reorganization of such
person or as a result of foreclosure, perfection or enforcement of any Lien in
exchange for evidences of Indebtedness, securities or other property of such
person held by Foodbrands America or any of the Restricted Subsidiaries, or for
other liabilities or obligations of such other person to Foodbrands America or
any of the Restricted Subsidiaries that were created in accordance with the
terms of the Indenture.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"PREFERRED STOCK" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock whether now outstanding or issued after
the Issue Date, and including, without limitation, all classes and series of
preferred or preference stock of such person.
"PURCHASE MONEY OBLIGATION" means any Indebtedness secured by a Lien on
assets related to the business of Foodbrands America or the Restricted
Subsidiaries, and any additions and accessions thereto, which are purchased or
constructed by Foodbrands America or any Restricted Subsidiary at any time after
the Issue Date; PROVIDED that (i) any security agreement or conditional sales or
other title retention contract pursuant to which the Lien on such assets is
created (collectively a "Security Agreement") shall be entered into within 90
days after the purchase or substantial completion of the construction of such
assets and shall at all times be confined solely to the assets so purchased or
acquired, any additions and accessions thereto and any proceeds therefrom, (ii)
at no time shall the aggregate principal amount of the outstanding Indebtedness
secured thereby be increased, except in connection with the purchase of
additions and accessions thereto and except in respect of fees and other
obligations in respect of such Indebtedness and (iii) (A) the aggregate
outstanding principal amount of Indebtedness secured thereby (determined on a
per asset basis in the case of any additions and accessions) shall not at the
time such Security Agreement is entered into exceed 100% of the purchase price
to Foodbrands America or any Restricted Subsidiary of the assets subject thereto
or (B) the Indebtedness secured thereby shall be with recourse solely to the
assets so purchased or acquired, any additions and accessions thereto and any
proceeds therefrom.
"REDEEMABLE CAPITAL STOCK" means any class or series of Capital Stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to any Stated
Maturity of the Notes or is redeemable at the option of the holder thereof at
any time prior to any Stated Maturity of the
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Notes, or, at the option of the holder thereof, is convertible into or
exchangeable for debt securities at any time prior to any Stated Maturity of the
Notes. Notwithstanding the foregoing, Redeemable Capital Stock shall not include
the Bank Warrants.
"RELATED CURRENCY AND INTEREST RATE PROTECTION OBLIGATIONS" means all
monetary obligations of every nature of Foodbrands America or a Subsidiary
Guarantor under or in respect of currency exchange contracts and Interest Rate
Protection Obligations of Foodbrands America or such Guarantor either (a) to the
extent such monetary obligations relate to Credit Agreement Obligations or Other
Designated Senior Indebtedness Obligations or (b) to the extent such monetary
obligations are secured by collateral securing Credit Agreement Obligations or
Other Designated Senior Indebtedness Obligations (in either case, as
conclusively evidenced by an officers' certificate of Foodbrands America or such
Guarantor delivered to the Trustee at the time such obligations are initially
incurred by Foodbrands America or such Restricted Subsidiary).
"RESTRICTED PAYMENT" has the meaning set forth under "-- Limitation on
Restricted Payments" covenant above.
"RESTRICTED SUBSIDIARY" means any Subsidiary of Foodbrands America that has
not been designated by the Board of Directors of Foodbrands America, by a Board
Resolution of Foodbrands America delivered to the Trustee, as an Unrestricted
Subsidiary pursuant to and in compliance with the covenant described under "--
Certain Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
Any such designation may be revoked by a Board Resolution of Foodbrands America
delivered to the Trustee, subject to the provisions of such covenant.
"REVOCATION" has the meaning ascribed to that term under "-- Certain
Covenants -- Limitation on Designations of Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Corporation and its successors.
"SENIOR INDEBTEDNESS" means the principal of, premium, if any, and interest
on any Indebtedness of Foodbrands America, whether outstanding on the Issue Date
or thereafter created, incurred or assumed, unless, in the case of any
particular Indebtedness, the instrument creating or evidencing the same or
pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes. Without
limiting the generality of the foregoing, "Senior Indebtedness" shall also
include the principal of, premium, if any, and interest (including interest
accruing after the filing of a petition initiating any proceeding under any
Bankruptcy Law whether or not such interest is an allowable claim in such
proceeding) on, and all other amounts owing in respect of (i) all Credit
Agreement Obligations and Other Designated Senior Indebtedness Obligations of
Foodbrands America and (ii) all Related Currency and Interest Rate Protection
Obligations of Foodbrands America. Notwithstanding the foregoing, "Senior
Indebtedness" shall not include (a) Indebtedness evidenced by the Notes, (b)
Indebtedness that is expressly subordinate or junior in right of payment to any
Senior Indebtedness of Foodbrands America, (c) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code, is by its terms without recourse to Foodbrands America, (d) any
repurchase, redemption or other obligation in respect of Redeemable Capital
Stock of Foodbrands America, (e) to the extent it might constitute Indebtedness,
amounts owing for goods, materials or services purchased in the ordinary course
of business or consisting of trade payables or other current liabilities (other
than any current liabilities owing under the Credit Agreement Obligations or the
current portion of any long-term Indebtedness which would constitute Senior
Indebtedness but for the operation of this clause (e)), (f) to the extent it
might constitute Indebtedness, amounts owed by Foodbrands America for
compensation to employees or for services rendered to Foodbrands America, (g) to
the extent it might constitute Indebtedness, any liability for federal, state,
local or other taxes owed or owing by Foodbrands America, (h) Indebtedness of
Foodbrands America to a Subsidiary of Foodbrands America or any other Affiliate
of Foodbrands America or any of such Affiliate's Subsidiaries, and (i) that
portion of any Indebtedness of Foodbrands America which at the time of issuance
is issued in violation of the Indenture (but, as to any such Indebtedness, no
such violation shall be deemed to exist for purposes of this clause (i) if the
holder(s) of such Indebtedness or their representative or Foodbrands America
shall have furnished to the Trustee an opinion of independent legal
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counsel, unqualified in all material respects, addressed to the Trustee (which
legal counsel may, as to matters of fact, rely upon a certificate of Foodbrands
America) to the effect that the incurrence of such Indebtedness does not violate
the provisions of such Indenture).
"SENIOR SUBORDINATED NOTE OBLIGATIONS" means (i) any principal of, premium,
if any, and interest on, and any other amounts owing in respect of, the Notes
payable pursuant to the terms of the Notes or the Indenture or upon acceleration
of the Notes, including, without limitation, amounts received upon the exercise
of rights of rescission or other rights of action (including claims for damages)
or otherwise, to the extent relating to the purchase price of the Notes or
amounts corresponding to such principal of, premium, if any, interest, or other
amounts owing with respect to, the Notes and (ii) in the case of any Subsidiary
Guarantor, any obligations with respect to the foregoing or otherwise under its
Note Guarantee.
"SIGNIFICANT SUBSIDIARY" shall have the same meaning as in Rule 1.02(v) of
Regulation S-X under the Securities Act, provided that (i) each Subsidiary
Guarantor shall in all events be deemed a Significant Subsidiary and (ii) no
Unrestricted Subsidiary shall be deemed a Significant Subsidiary.
"SPECIFIED INDEBTEDNESS" means (i) any Senior Indebtedness, (ii) any
Guarantor Senior Indebtedness and (iii) any Indebtedness of any Restricted
Subsidiary (other than a Subsidiary Guarantor) which is not subordinated to any
other Indebtedness of such Restricted Subsidiary.
"STATED MATURITY" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which any principal of such Note or such installment of interest is due
and payable, and when used with respect to any other Indebtedness or any
installments of interest thereon, means any date specified in the instrument
governing such Indebtedness as the fixed date on which the principal of such
Indebtedness, or such installment of interest thereon, is due and payable.
"SUBORDINATED INDEBTEDNESS" means, with respect to Foodbrands America,
Indebtedness of Foodbrands America which is expressly subordinated in right of
payment to the Notes or, with respect to any Subsidiary Guarantor, Indebtedness
of such Subsidiary Guarantor which is expressly subordinated in right of payment
to the Note Guarantee of such Subsidiary Guarantor.
"SUBSIDIARY" means, with respect to any person, (i) a corporation a majority
of whose Voting Stock is at the time, directly or indirectly, owned by such
person, by one or more Subsidiaries of such person or by such person and one or
more Subsidiaries of such person and (ii) any other person (other than a
corporation), including, without limitation, a joint venture, in which such
person or one or more Subsidiaries of such person, directly or indirectly, at
the date of determination thereof, has at least a majority ownership interest
entitled to vote in the election of directors, managers or trustees thereof (or
other person performing similar functions). For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
"TREASURY RATE" means, the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15 (519)
which has become publicly available at least two business days prior to the date
fixed for redemption of the Notes following a Change of Control (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Average Life to
Stated Maturity of the Notes; PROVIDED that if the Average Life to Stated
Maturity of the Notes is not equal to the constant Maturity of a United States
Treasury security for which a weekly average yield is given, the Treasury Rate
shall be obtained by linear interpolation (calculated to the nearest one-twelfth
of a year) from the weekly average yields of United States Treasury securities
for which such yields are given, except that if the Average Life to Stated
Maturity of the Notes is less than one year, the weekly average yield on
actually traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
"UNRESTRICTED SUBSIDIARY" means a Subsidiary of Foodbrands America (other
than a Subsidiary Guarantor) designated as such pursuant to and in compliance
with the covenant described under "-- Certain Covenants -- Limitation on
Designations of Unrestricted Subsidiaries." Any such designation may be revoked
by a Board Resolution of Foodbrands America delivered to the Trustee, subject to
the provisions of such covenant.
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"VOTING STOCK" means any class or classes of Capital Stock pursuant to which
the holders thereof have the general voting power under ordinary circumstances
to elect at least a majority of the board of directors, managers or trustees of
any person (irrespective of whether or not, at the time, stock of any other
class or classes shall have, or might have, voting power by reason of the
happening of any contingency).
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by Foodbrands America
and/or another Wholly-Owned Restricted Subsidiary. For purposes of this
definition, any directors' qualifying shares or investments by foreign nationals
mandated by applicable law shall be disregarded in determining the ownership of
a Restricted Subsidiary.
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UNDERWRITING
Subject to the terms and conditions set forth in a purchase agreement (the
"Purchase Agreement") among Foodbrands America, the Subsidiary Guarantors and
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Chase
Securities Inc. ("Chase Securities") and Dillon, Read & Co. Inc. (collectively,
the "Underwriters"), Foodbrands America has agreed to sell to the Underwriters,
and the Underwriters have severally agreed to purchase, the respective principal
amounts of the Notes set forth after their names below. The Purchase Agreement
provides that the obligations of the Underwriters are subject to certain
conditions precedent and that the Underwriters will be obligated to purchase the
entire principal amount of the Notes, if any Notes are purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- -------------------------------------------------------------------------------------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................................ $
Chase Securities Inc..................................................................
Dillon, Read & Co. Inc................................................................
----------------
Total....................................................................... $ 120,000,000
----------------
----------------
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the Notes to the public at the public offering price set forth on the
cover page of this Prospectus, and to certain dealers at such price less a
concession not in excess of % of the principal amount of the Notes. The
Underwriters may allow, and such dealers may reallow, a discount not in excess
of % of the principal amount of the Notes to certain other dealers. After the
initial public offering, the public offering price, concession and discount may
be changed.
The Notes have been authorized for listing on the New York Stock Exchange
subject to effective registration under the Securities Act of 1933. No
assurances, however, can be given that an active market for the Notes will
develop. If an active public trading market for the Notes does not develop, the
market price and liquidity of the Notes may be adversely affected.
Foodbrands America and the Subsidiary Guarantors have agreed, jointly and
severally, to indemnify the Underwriters against certain liabilities, including
civil liabilities under the Securities Act, or to contribute to payments which
the Underwriters may be required to make in respect thereof.
The Underwriters have from time to time provided and may in the future
provide investment banking and financial advisory services to Foodbrands
America, and have received and may in the future receive customary fees for such
services.
Chase Securities is an affiliate of Chemical Bank which is the lead agent
bank and a lender to the Company under the Credit Agreement. Chemical Bank will
receive its proportionate share of any repayment by the Company of amounts
outstanding under the Credit Agreement from the proceeds of the offering of the
Notes. In addition, Chemical Bank, or its affiliates, participates on a regular
basis in various general financing and banking transactions for the Company. See
"Description of Other Indebtedness" for information concerning certain warrants
to purchase Common Stock of Foodbrands America that have been issued to Chemical
Bank.
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LEGAL MATTERS
The validity of the Notes offered hereby and the Note Guarantees will be
passed upon for the Company by McAfee & Taft A Professional Corporation, Tenth
Floor, Two Leadership Square, Oklahoma City, Oklahoma 73102, and certain legal
matters will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), 80 Pine Street, New York, New
York 10005.
INDEPENDENT PUBLIC ACCOUNTANTS
The consolidated balance sheets of the Company as of December 30, 1995 and
December 31, 1994 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 30, 1995,
December 31, 1994, and January 1, 1994, included in the Prospectus, have been
included in reliance on the 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, of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing. With respect to the unaudited interim financial
information for the periods ended March 30, 1996 and April 1, 1995, incorporated
by reference in this Prospectus, the independent accountants have reported that
they have applied limited procedures in accordance with professional standards
for a review of such information. However, their separate report included in the
Company's quarterly report on Form 10-Q for the quarter ended March 30, 1996,
and incorporated by reference herein, states that they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their report on such information should be restricted in
light of the limited nature of the review procedures applied. The accountants
are not subject to the liability provisions of Section 11 of the Securities Act
of 1933 for their report on the unaudited interim financial information because
that report is not a "report" or a "part" of the registration statement prepared
or certified by the accountants within the meaning of Sections 7 and 11 of the
Act.
The financial statements of TNT Crust, Inc. for the fiscal year ended August
31, 1995 incorporated by reference in this Prospectus have been audited by
Arthur Andersen LLP, independent auditors, as stated in their report therein,
and are incorporated herein in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing. The balance sheets of TNT
Crust, Inc. as of August 31, 1994 and 1993 and the related statements of
operations, changes in shareholder's equity, and cash flows for the years then
ended, incorporated by reference in this Prospectus, have been incorporated
herein in reliance on the report of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The financial statements of KPR Holdings, L.P. for the period ended December
10, 1995 and for each of the fiscal years ended December 31, 1994 and January 1,
1994 incorporated by reference in this Prospectus have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report therein, and are
incorporated herein in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
69
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Report of Independent Accountants.................................................... F-2
<S> <C>
Consolidated Balance Sheet at December 31, 1994 and December 30, 1995................ F-3
Consolidated Statement of Operations For the Years Ended January 1, 1994, December
31, 1994 and December 30, 1995...................................................... F-4
Consolidated Statement of Stockholders' Equity For the Years Ended January 1, 1994,
December 31, 1994 and December 30, 1995............................................. F-5
Consolidated Statement of Cash Flows For the Years Ended January 1, 1994, December
31, 1994 and December 30, 1995...................................................... F-6
Notes to Consolidated Financial Statements........................................... F-8
Quarterly Results of Operations (Unaudited).......................................... F-23
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Foodbrands America, Inc.
We have audited the consolidated balance sheets of Foodbrands America, Inc.
and subsidiaries as of December 31, 1994 and December 30, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended January 1, 1994, December 31, 1994 and December 30, 1995. 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 Foodbrands
America, Inc. and subsidiaries as of December 31, 1994 and December 30, 1995,
and the consolidated results of their operations and their cash flows for the
years ended January 1, 1994, December 31, 1994 and December 30, 1995 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
February 12, 1996, except as to the information
presented in Note 13, for which the date is
May 8, 1996
F-2
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PAR VALUE)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 28,843 $ 18,207
Receivables........................................................................ 29,472 46,166
Inventories........................................................................ 48,488 58,523
Other current assets............................................................... 2,365 3,130
Net current assets of discontinued operations...................................... 12,145 --
------------ ------------
Total current assets............................................................. 121,313 126,026
Property, plant and equipment -- net of accumulated depreciation and amortization of
$31,685 in 1994 and $38,188 in 1995................................................. 92,902 139,926
Intangible assets, net of accumulated amortization of $2,654 in 1994 and $5,375 in
1995................................................................................ 83,687 195,025
Deferred charges and other assets.................................................... 43,419 46,284
Reorganization value in excess of amounts allocable to identifiable assets, net of
accumulated amortization of $7,867 in 1994 and $9,641 in 1995....................... 39,204 25,311
Net noncurrent assets of discontinued operations..................................... 73,209 --
------------ ------------
$ 453,734 $ 532,572
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt............................................... $ 1,654 $ 18,341
Accounts payable................................................................... 24,820 36,961
Accrued liabilities................................................................ 44,182 50,294
------------ ------------
Total current liabilities........................................................ 70,656 105,596
Long-term debt....................................................................... 224,260 305,407
Other long-term liabilities.......................................................... 80,331 78,340
Commitments and contingencies (Note 12)
Stockholders' equity:
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
12,467,738 shares issued and outstanding, respectively............................ 124 125
Capital in excess of par value..................................................... 151,046 151,248
Retained earnings (deficit)........................................................ (71,108) (105,203)
Minimum pension liability adjustment............................................... (1,575) (2,941)
------------ ------------
Total stockholders' equity....................................................... 78,487 43,229
------------ ------------
$ 453,734 $ 532,572
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Net sales.................................................................... $ 393,270 $ 512,352 $ 634,700
Cost of sales................................................................ 335,788 410,118 499,985
---------- ---------- ----------
Gross profit................................................................. 57,482 102,234 134,715
Operating expenses:
Selling.................................................................... 28,979 52,165 69,483
General and administrative................................................. 21,732 24,151 25,634
Amortization of intangible assets.......................................... 2,843 4,123 4,495
Provision for restructuring and integration (Note 4)....................... -- 10,586 --
Provision for plant closings (Note 6)...................................... 500 -- --
---------- ---------- ----------
Total.................................................................... 54,054 91,025 99,612
---------- ---------- ----------
Operating income............................................................. 3,428 11,209 35,103
Other income (expense):
Interest and financing costs............................................... (9,240) (15,102) (17,268)
Other, net................................................................. 226 (702) (1,193)
---------- ---------- ----------
Total.................................................................... (9,014) (15,804) (18,461)
---------- ---------- ----------
Income (loss) from continuing operations before income taxes................. (5,586) (4,595) 16,642
Income tax provision (benefit)............................................... (1,212) 600 7,041
---------- ---------- ----------
Income (loss) from continuing operations..................................... (4,374) (5,195) 9,601
Discontinued operations (Notes 3 and 10):
Income (loss) from operations of the Retail Division, net of income tax.... 6,781 (8,522) (4,121)
Loss on disposal of the Retail Division (plus applicable income tax expense
of $10,300)............................................................... -- -- (38,526)
Extraordinary loss on early extinguishment of debt (less income tax benefit
of $673 in 1995) (Note 8)................................................... -- (2,481) (1,049)
Cumulative effect on prior years (to January 2, 1993) of change in accounting
for postretirement benefits other than pensions
(Note 11)................................................................... (34,426) -- --
---------- ---------- ----------
Net income (loss)............................................................ $ (32,019) $ (16,198) $ (34,095)
---------- ---------- ----------
---------- ---------- ----------
Earnings (loss) per share -- primary and fully diluted:
Income (loss) from continuing operations................................... $ (0.59) $ (0.59) $ 0.77
Income (loss) from discontinued operations................................. 0.91 (0.98) (0.33)
Loss on disposal of discontinued operations................................ -- -- (3.09)
Extraordinary loss on early extinguishment of debt......................... -- (0.28) (0.08)
Cumulative effect of a change in accounting for post-retirement benefits
other than pensions....................................................... (4.64) -- --
---------- ---------- ----------
Net income (loss).......................................................... $ (4.32) $ (1.85) $ (2.73)
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of common and common equivalent shares outstanding --
primary and fully diluted................................................... 7,419 8,727 12,453
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
MINIMUM
COMMON STOCK CAPITAL IN RETAINED PENSION UNEARNED
---------------------- EXCESS OF EARNINGS LIABILITY COMPEN-
SHARES AMOUNT PAR VALUE (DEFICIT) ADJUSTMENT SATION
--------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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...................... 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) --
Net Loss.................................... -- -- -- (34,095) -- --
Issuance of new shares...................... 20 1 202 -- -- --
Minimum pension liability adjustment, net of
deferred tax............................... -- -- -- -- (1,366) --
--------- ----- ---------- ----------- ----------- -----
Balance, December 30, 1995.................. 12,468 $ 125 $ 151,248 $ (105,203) $ (2,941) $ --
--------- ----- ---------- ----------- ----------- -----
--------- ----- ---------- ----------- ----------- -----
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations................................. $ (4,374) $ (5,195) $ 9,601
Adjustments to reconcile income (loss) from continuing operations to net
cash provided (used) by continuing operating activities:
Depreciation and amortization.......................................... 7,806 10,508 11,509
Amortization of intangible assets...................................... 2,843 4,123 4,495
Provision for restructuring and integration............................ -- 10,586 --
Postretirement medical benefits........................................ 1,090 670 487
Provision for plant sale............................................... 500 -- --
Deferred compensation.................................................. -- -- 460
Amortization included in interest expense.............................. 416 1,279 1,195
Deferred income taxes.................................................. (1,631) -- 6,138
Payments for restructuring/integration................................. -- (1,020) (3,240)
Changes in:
Receivables.......................................................... (2,181) 430 (8,413)
Inventories.......................................................... (6,126) 1,713 (2,844)
Other current assets................................................. 1,450 (354) (587)
Deferred charges and other assets.................................... (609) 357 (219)
Accounts payable and accrued liabilities............................. 8,095 9,348 4,357
Noncurrent liabilities............................................... (159) -- 2,250
Other.................................................................. (18) 22 (51)
----------- ----------- -----------
Net cash provided by continuing operations........................... 7,102 32,467 25,138
Net cash provided (used) by discontinued operations including changes
in working capital.................................................... 10,488 627 (12,294)
----------- ----------- -----------
Net cash provided (used) by operating activities........................... 17,590 33,094 12,844
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment................................ (8,934) (10,063) (24,255)
Acquisition of KPR Holdings, L.P......................................... -- -- (51,935)
Acquisition of TNT Crust, Inc............................................ -- -- (56,379)
Acquisition of International Multifoods Foodservice Corp................. -- (137,684) --
Payments received on notes receivable.................................... 517 672 358
Proceeds from sale of property, plant and equipment...................... -- 436 130
Proceeds from sale of Retail Division.................................... -- -- 65,786
Net investing activities of discontinued operations...................... (12,770) (4,557) (838)
----------- ----------- -----------
Net cash used by investing activities.................................... (21,187) (151,196) (67,133)
----------- ----------- -----------
(CONTINUED)
</TABLE>
F-6
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C> <C>
Proceeds from debt obligations, net of issuance costs.................... 105,953 141,154 147,636
Borrowings under revolving working capital facility...................... 99,233 195,500 30,000
Payments on revolving working capital facility........................... (157,011) (203,500) (21,000)
Payments on capital lease and debt obligations........................... (74,437) (36,720) (112,629)
Payment on early extinguishment of debt.................................. -- (1,088) --
Issuance of common stock................................................. 26,722 38,626 195
Net financing activities of discontinued operations...................... (520) 1,016 (549)
----------- ----------- -----------
Net cash provided (used) by financing activities......................... (60) 134,988 43,653
----------- ----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... (3,657) 16,886 (10,636)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................... 15,614 11,957 28,843
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................. $ 11,957 $ 28,843 $ 18,207
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF NONCASH OPERATING ACTIVITIES:
Loss on early extinguishment of debt, net of income taxes................ $ -- $ (2,419) $ (1,049)
Cumulative effect on prior years of change in accounting for
post-retirement benefits other than pensions............................ (34,426) -- --
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Promissory note issued upon acquisition.................................. $ -- $ -- $ 50,000
Capital lease obligations-
Continuing operations.................................................. 1,285 550 22
Discontinued operations................................................ 331 2,853 --
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................................................... $ 8,406 $ 19,441 $ 19,944
Income taxes........................................................... 815 442 727
Reorganization professional and financing fees......................... 319 -- --
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. DESCRIPTION OF BUSINESS:
The Company produces, markets and distributes frozen and refrigerated
products targeted to growth segments of the foodservice industry, which
encompasses all aspects of away-from-home food preparation. The Company's
products include pepperoni, beef and pork toppings, as well as partially baked
pizza crusts, marketed to the pizza industry, appetizers, Mexican and Italian
foods, sauces, soups and side dishes and branded and processed meat products.
Customers include large multi-unit food chains, major foodservice distributors,
warehouse clubs and grocery store delicatessens, principally in the United
States.
The Company's annual reporting period ends on the Saturday nearest December
31. Accordingly, the annual reporting periods ended January 1, 1994, December
31, 1994 and December 30, 1995 contained 52 weeks.
B. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Foodbrands
America, Inc. ("Foodbrands America") and all of its subsidiaries. Prior year
balances have been restated to conform to the current year's presentation for
discontinued operations (See Note 3).
C. USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Significant estimates made by the Company include accrued pension costs,
including a minimum pension liability adjustment, accrued postretirement medical
benefits and a valuation allowance for deferred tax assets. Accrued pension
costs and postretirement benefits involve the use of actuarial assumptions,
including selection of discount rates (See Note 11). Determination of the
valuation allowance for deferred tax assets considers estimates of projected
taxable income (See Note 10). It is reasonably possible that the Company's
estimates for such items could change in the near term.
D. 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 $10.1 million at December 31, 1994 and December 30, 1995 represent
investments primarily in Commercial Paper and U.S. Government Securities,
carried at cost, which approximates market. The Company nets its account
balances within the same bank and presents positive cash balances as cash and
negative balances as accounts payables.
E. 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. 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 in 9 banks. As of
December 30, 1995, the Company had concentrations of cash in bank balances
totaling approximately $4.2 million located at 6 banks which exposes the Company
to concentrations of credit risk.
F. INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out) or market.
The Company periodically enters into futures contracts as deemed appropriate to
reduce the risk of future price increases. These
F-8
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
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.
G. 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.
H. 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 re-evaluates 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.
I. DEFERRED CHARGES AND OTHER ASSETS:
Included in deferred charges and other assets are net deferred tax assets of
$32.7 million. Deferred loan costs associated with various debt instruments are
being amortized over the terms of the related debt using the interest method. At
December 31, 1994 and December 30, 1995, $7.0 million and $6.1 million,
respectively, remained to be amortized over future periods. Amortization expense
for these loans included in interest expense for fiscal 1993, 1994 and 1995 was
approximately $0.3 million, $1.2 million and $1.1 million, respectively.
Deferred loan costs of $2.5 million and $1.7 million were written off in Fiscal
1994 and 1995, respectively, due to early extinguishment of debt.
J. 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.
F-9
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 -- DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. This analysis is performed
quarterly based on the best information available. The Company will make
adjustments as necessary to the valuation allowance when it becomes more likely
than not that the net deferred tax benefits will be realized in the future.
K. 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.
L. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS:
IMPAIRMENT OF LONG-LIVED ASSETS. Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," requires that long-lived assets
and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Impairment is
evaluated by comparing future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition to the carrying amount of the asset. This new accounting
principle is effective for the Company's fiscal year ending December 28,
1996. The Company believes that adoption will not have a material impact on
its financial position.
STOCK-BASED COMPENSATION. Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," encourages, but does not
require, companies to recognize compensation expense for grants of stock,
stock options and other equity instruments to employees based on new fair
value accounting rules. Although expense recognition for employee stock
based compensation is not mandatory, SFAS 123 requires companies that choose
not to adopt the new fair value accounting to disclose pro-forma net income
and earnings per share under the new method. This new accounting principle
is effective for the Company's fiscal year ending December 28, 1996. The
Company believes that adoption will not have a material impact on its
financial condition as the Company will not adopt the fair value accounting,
but will instead comply with the disclosure requirements.
M. RECLASSIFICATIONS:
Certain reclassifications have been made to the historical financial
statements to conform with current presentation.
NOTE 2 -- ACQUISITIONS
On December 11, 1995, the Company purchased KPR Holdings, L.P. ("KPR") for
approximately $101.9 million, including transaction related costs of the
acquisition. In addition, the Company has agreed to certain contingent payments
payable in Common Stock of the Company or cash, at the option of the sellers,
aggregating up to approximately $15.0 million, over the next three years based
on the attainment of specified earnings levels. These payments, if made, will
increase goodwill. KPR produces and markets custom prepared foods and prepared
meat items for multi-unit restaurant chains. The acquisition has been accounted
for by the purchase method of accounting based on preliminary estimates. Final
adjustments are not expected to be material. The excess of the total purchase
price over fair value of net assets acquired of approximately $65.8 million has
been recognized as goodwill and is being amortized over 40 years.
On December 18, 1995, the Company purchased all the outstanding stock of TNT
Crust, Inc. ("TNT") for approximately $56.4 million, including transaction
related costs of the acquisition. In addition, the Company has agreed to a
contingent earnout payment payable in Common Stock of the Company or cash, at
the option of the sellers, not to exceed $6.5 million, based on sales growth to
certain customers. These payments, if made, will increase goodwill. The business
operates as a segment of the Food Service Division.
F-10
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- ACQUISITIONS (CONTINUED)
TNT produces and markets partially baked and frozen self-rising crusts for use
by pizza chains, restaurants and frozen pizza manufacturers. The acquisition has
been accounted for by the purchase method of accounting based on preliminary
estimates. Final adjustments are not expected to be material. The excess of the
total purchase price over fair value of net assets acquired of approximately
$47.5 million has been recognized as goodwill and is being amortized over 40
years.
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, manufactures frozen food products, including ethnic
foods in the Mexican and Italian categories, 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 $68.3 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 acquisitions are included in the Company's
consolidated results of operations from the dates of acquisition. The following
unaudited PRO FORMA consolidated financial information assumes the acquisitions
of KPR and TNT occurred at the beginning of 1994 and the acquisition of
Specialty Brands 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 the
periods presented, or of the results which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
----------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net sales.......................................................... $ 576,600 $ 689,577 $ 751,008
Operating income................................................... 17,188 28,457 50,418
Income (loss) from continuing operations........................... (703) (5,349) 10,385
Net income (loss).................................................. (28,348) (16,352) (33,311)
Earnings (loss) per share -primary and fully diluted:
Income (loss) from continuing operations......................... $ (0.09) $ (0.61) $ 0.83
Net income (loss)................................................ (3.82) (1.87) (2.67)
</TABLE>
NOTE 3 -- DISCONTINUED OPERATIONS
On May 30, 1995, the Company sold the assets of its Retail Division (a
separate industry segment) to Thorn Apple Valley, Inc. The sales price
approximated $65.8 million in cash payments plus the assumption of long-term
debt of approximately $6.0 million and certain current liabilities related to
the division of approximately $4.5 million. In connection with this sale the
Company wrote off approximately $64.3 million of post-bankruptcy intangible
assets and recorded a net loss on disposition of approximately $38.5 million.
The agreement also includes potential consideration of an additional $10 million
based upon an increase in the market value of the purchaser's common stock.
Proceeds of the sale were used to reduce the Company's debt under its term loan
by $58 million. The remainder of the proceeds have been or will be used to pay
expenses related to the sale. The results of operations and cash flows
attributable to the Retail Division are reported as discontinued operations and
accordingly the balance sheet at December 31, 1994 and the results of operations
for years prior to fiscal 1995 have been restated. Corporate interest expense
was allocated to the Retail Division based on its net assets in proportion to
the Company's consolidated net assets.
F-11
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- DISCONTINUED OPERATIONS (CONTINUED)
The results of discontinued operations are (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
---------- ---------- ---------
<S> <C> <C> <C>
Net sales............................................................ $ 254,937 $ 238,308 $ 72,357
---------- ---------- ---------
---------- ---------- ---------
Income (loss) before taxes........................................... $ 8,412 $ (8,522) $ (7,020)
Tax expense (benefit)................................................ 1,631 -- (2,899)
---------- ---------- ---------
Net income (loss).................................................... $ 6,781 $ (8,522) $ (4,121)
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
The assets and liabilities of discontinued operations included in the
December 31, 1994 balance sheet are (in thousands):
<TABLE>
<S> <C>
Working capital............................................................ $ 12,145
Net property, plant and equipment.......................................... 22,822
Intangible and other assets................................................ 57,013
Long-term debt............................................................. 6,626
</TABLE>
Included in accounts payable and accrued liabilities at December 30, 1995,
are certain amounts, totalling $2.1 million, relating to the sale of the Retail
Division. The payments associated with these accruals will be reflected in
future consolidated statements of cash flows as net cash flows used by
discontinued operations.
The assets included in the sale of the Retail Division had significantly
different financial and tax basis. Therefore, for income tax purposes this
transaction generated taxable income of approximately $25.1 million requiring
the utilization of net operating loss carryforwards. The tax affect of this
utilization is approximately $9.6 million. As a direct result of the sale and
the related tax affect, the Company reduced the Reorganization Value and other
post-bankruptcy intangible assets by $64.3 million, which will in turn reduce
the amortization of that asset in the future, in accordance with Fresh Start
Reporting.
NOTE 4 -- RESTRUCTURING AND INTEGRATION
In December 1994, the Company announced a restructuring program that
resulted in a $10.6 million charge against operating income in 1994. The
restructuring program identified 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.
As of December 30, 1995, the Company had consolidated production operations,
closed two production facilities and two distribution facilities and
discontinued a production operation. In connection with these actions, the
Company paid $3.5 million in 1995 that was charged against the reserve and
charged an additional $2.1 million against the reserve for property, plant and
equipment. Of the total amount paid in 1995, $0.8 million was for employee
termination benefits for 35 employees terminated during the year. The
restructuring reserve remaining at December 30, 1995 was comprised of accrued
liabilities of $1.2 million and a reserve against property, plant and equipment
of $2.2 million. Management believes that the remainder of the reserve is
adequate to complete the restructuring and integration program and plans to
complete the program by the end of 1996.
F-12
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- INVENTORIES
Inventories at December 31, 1994 and December 30, 1995 are summarized as
follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Raw materials and supplies........................................................ $ 16,077 $ 20,147
Work in process................................................................... 4,310 7,365
Finished goods.................................................................... 28,101 31,011
--------- ---------
$ 48,488 $ 58,523
--------- ---------
--------- ---------
</TABLE>
NOTE 6 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1994 and December 30, 1995 is
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Land............................................................................ $ 2,283 $ 3,053
Buildings and improvements...................................................... 47,971 68,461
Machinery and equipment......................................................... 66,347 97,705
Construction in progress........................................................ 4,663 5,621
---------- ----------
121,264 174,840
Less accumulated depreciation and amortization.................................. 31,685 38,188
---------- ----------
89,579 136,652
Assets to be disposed of, net................................................... 3,323 3,274
---------- ----------
$ 92,902 $ 139,926
---------- ----------
---------- ----------
</TABLE>
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 7 -- ACCRUED LIABILITIES
Accrued liabilities at December 31, 1994 and December 30, 1995 are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Interest.......................................................................... $ 6,368 $ 5,883
Salaries, wages and payroll taxes................................................. 7,966 9,285
Employee medical benefits......................................................... 8,890 11,361
Workers' compensation benefits.................................................... 1,374 2,404
Pension and retirement benefits................................................... 1,797 2,098
Marketing expenses................................................................ 5,301 5,360
Provisions for facility restructuring and integration............................. 4,500 1,240
Provisions for discontinued operations, closed and sold facilities................ 506 2,968
Other............................................................................. 7,480 9,695
--------- ---------
$ 44,182 $ 50,294
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- LONG-TERM DEBT
Long-term debt, more fully described below, at December 31, 1994 and
December 30, 1995 consisted of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Notes payable to banks.......................................................... $ 111,000 $ 160,500
Promissory note................................................................. -- 50,000
Industrial revenue bonds and mortgage notes..................................... 280 --
9 3/4% Senior Subordinated Redeemable Notes due 2000,
net of discount................................................................ 109,684 109,741
Capital lease obligations....................................................... 4,950 3,507
---------- ----------
225,914 323,748
Less current maturities......................................................... 1,654 18,341
---------- ----------
$ 224,260 $ 305,407
---------- ----------
---------- ----------
</TABLE>
Based on the borrowing rates currently available to the Company for bank
borrowings with similar terms and average maturities, the Company believes that
the carrying amount of these borrowings at December 30, 1995, 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 at December 30, 1995, approximates the carrying amount of $109.7
million.
The aggregate amounts of long-term obligations, excluding obligations under
capitalized leases, which become due during each of the next five fiscal years
are as follows (in millions): $16.9 in 1996, $43.0 in 1997, $59.3 in 1998, $65.5
in 1999 and $135.5 in 2000.
NOTES PAYABLE TO BANKS
On December 11, 1995, the Company consummated a credit agreement consisting
of (i) a term loan for $145.0 million, (ii) an acquisition revolving facility
not to exceed $100.0 million and (iii) a working capital revolving facility not
to exceed $75.0 million ("the Credit Agreement"). The proceeds received on that
date were net of $3.9 million of debt issuance costs and were used to repay the
existing bank debt outstanding under the previous bank term loan totaling $53.0
million and to fund the acquisition of KPR. The acquisition revolving facility
was subsequently drawn down to finance the acquisition of TNT. The Credit
Agreement includes a subfacility for standby and commercial letters of credit
not to exceed $7.0 million. The Credit Agreement ranks senior to all existing
indebtedness and is collateralized by essentially all the assets of the Company
including accounts receivable, inventory, general intangibles and mortgaged
properties.
Borrowings under the Credit Agreement bear interest at an annual rate equal
to, at the Company's option, either the Eurodollar Rate, as defined by the
agreement, plus 1.75% (subject to adjustment based on the Company's Total Debt
Ratio, as defined) or an Alternate Base Rate, as defined in the agreement, which
is based on Chemical Bank's prime rate, plus 0.75% (subject to adjustment based
on the Company's Total Debt Ratio, as defined). On December 30, 1995 the
weighted average interest rate on the borrowings was 7.97%. Interest on the
borrowings is payable quarterly in arrears. The term loan requires quarterly
payments beginning May 1996. The acquisition revolving facility requires
quarterly payments beginning May 1997. To the extent not previously paid, all
borrowings under the Credit Agreement are due and payable January 15, 2000.
Payments totaling $16.9 million will be required in 1996. At December 30, 1995,
borrowings under the working capital revolving facility were $9.0 million and
$50.9 million was available for borrowing at that date based on accounts
receivable and inventory. The Company also has the ability to borrow an
additional $43.5 million under the acquisition revolving facility in 1996 to
fund future acquisitions.
In connection with the extinguishment of debt discussed above, the Company
incurred an extraordinary loss of $1.0 million, net of $0.7 million income tax
benefit.
F-14
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- LONG-TERM DEBT (CONTINUED)
In connection with the early extinguishment of debt in 1994 and termination
of a related interest rate swap agreement, the Company incurred an extraordinary
loss in the amount of $2.5 million.
The Credit Agreement and the Senior Subordinated Notes described below
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 a maximum total debt ratio and minimum
interest expense coverage.
PROMISSORY NOTE
Upon the acquisition of KPR, the Company executed a promissory note to the
sellers for $50.0 million. The note was payable on January 15, 1996, and bore
interest at the rate of 6%. The note was retired using funds previously not
drawn down under the term loan facility of the Credit Agreement. The note has
been classified as long term based on the classification of the Credit
Agreement.
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 Credit Agreement.
The Senior Subordinated Notes are guaranteed by substantially all direct and
indirect subsidiaries of the Company, all of which are wholly owned. The
guarantees are joint and several, full, complete and unconditional. There are
currently no restrictions on the ability of the subsidiaries to transfer funds
to the Company in the form of cash dividends, loans or advances. The Company is
a holding company with no assets, liabilities, or operations, other than its
investments in its subsidiaries. The non-guarantors are inconsequential,
individually and in the aggregate, to the consolidated financial statements and
separate financial statements of the guarantors are not presented because
management has determined that they would not be material to investors.
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 December 30,
1995 are as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Buildings............................................................................ $ 2,666 $ 2,666
Machinery and equipment.............................................................. 6,479 6,079
--------- ---------
9,145 8,745
Accumulated amortization............................................................. 3,413 4,207
--------- ---------
$ 5,732 $ 4,538
--------- ---------
--------- ---------
</TABLE>
F-15
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- LONG-TERM DEBT (CONTINUED)
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 30, 1995 (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
1996............................................................................... $ 1,717 $ 4,413
1997............................................................................... 981 3,949
1998............................................................................... 396 3,838
1999............................................................................... 250 3,792
2000............................................................................... 142 3,754
Future years....................................................................... 673 4,235
--------- -----------
Total minimum lease payments....................................................... 4,159 $ 23,981
-----------
-----------
Amounts representing interest...................................................... 652
---------
Present value of net minimum payments.............................................. 3,507
Current portion.................................................................... 1,466
---------
$ 2,041
---------
---------
</TABLE>
The Company's rental expense for operating leases was (in millions) $4.0,
$4.5 and $5.3 for the fiscal years ended January 1, 1994, December 31, 1994 and
December 30, 1995.
In connection with the KPR acquisition, the Company entered into a ten-year
operating lease for a production facility. The base rent is $0.8 million per
year and is payable to a corporation related to the former owners and current
management of KPR. Rent expense for 1995 was less than $0.1 million.
NOTE 9 -- 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 30, 1995, 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 10 -- 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. Income tax
expense results from the income tax payable for the year and the change during
the year in deferred tax assets and liabilities including the realization of
prereorganization net operating losses.
F-16
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 -- INCOME TAXES (CONTINUED)
The provision (benefit) for income taxes in continuing operations consists
of the following components (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
--------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal................................................................. $ 44 $ -- $ 103
State................................................................... 375 600 800
--------- ----- -----------
419 600 903
--------- ----- -----------
Deferred:
Federal................................................................. (1,370) -- 5,168
State................................................................... (261) -- 970
--------- ----- -----------
(1,631) -- 6,138
--------- ----- -----------
Total................................................................. $ (1,212) $ 600 $ 7,041
--------- ----- -----------
--------- ----- -----------
</TABLE>
The income tax provision (benefit) applicable to the net losses from
discontinued operations associated with the Retail Division are (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
--------- ----------- ---------
<S> <C> <C> <C>
Operations of the Retail Division
Deferred expense (benefit).............................................. $ 1,631 $ -- $ (2,899)
--------- ----- ---------
--------- ----- ---------
Disposal of the Retail Division:
Current expense:
Federal............................................................... $ -- $ -- $ 278
State................................................................. -- -- 469
Deferred expense........................................................ -- -- 9,553
--------- ----- ---------
$ -- $ -- $ 10,300
--------- ----- ---------
--------- ----- ---------
</TABLE>
The effective tax rate on income (loss) from continuing operations differs from
the statutory rate as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------
JAN. 1, DEC. 31, DEC. 30,
1994 1994 1995
----------- ----------- -----------
(LIABILITY METHOD)
<S> <C> <C> <C>
Statutory rate....................................................... (34.0)% (34.0)% 35.0%
Tax effect of:
Amortization of intangible assets................................. 15.2 18.4 4.0
State taxes, net of federal benefit............................... (1.3) 8.6 3.1
Limitation on recognition of tax benefit.......................... -- 20.1 --
Benefit of net deductible temporary differences................... -- -- --
Other............................................................. (1.6) -- 0.2
----- ----- -----
(21.7)% 13.1% 42.3%
----- ----- -----
----- ----- -----
</TABLE>
F-17
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 10 -- INCOME TAXES (CONTINUED)
At December 31, 1994 and December 30, 1995, the deferred tax assets and
deferred tax liabilities were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Retiree medical benefit plan accruals......................................... $ 26,805 $ 26,962
Pension plan accruals......................................................... 5,373 5,487
Plant closing accruals........................................................ 2,524 2,036
Employee compensation and benefits accruals................................... 7,111 5,531
Other accrued expenses........................................................ 1,227 978
Net operating loss carryforwards.............................................. 53,360 43,385
---------- ----------
Total deferred tax assets................................................... 96,400 84,379
---------- ----------
Deferred tax liabilities:
Capitalized leases............................................................ (265) (420)
Accumulated depreciation...................................................... (1,496) (3,046)
Intangible assets............................................................. (9,059) (4,787)
Other......................................................................... (78) (72)
---------- ----------
Total deferred tax liabilities.............................................. (10,898) (8,325)
---------- ----------
Net deferred tax assets......................................................... 85,502 76,054
Valuation allowance............................................................. (54,564) (43,314)
---------- ----------
Net deferred tax assets......................................................... $ 30,938 $ 32,740
---------- ----------
---------- ----------
</TABLE>
In accordance with Fresh Start Reporting as prescribed by Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" issued by the American Institute of Certified Public
Accountants, the tax benefit realized from utilizing the pre-reorganization net
operating loss carryforwards should be recorded as a reduction of the
Reorganization Value rather than be realized as a benefit in the statement of
operations. In 1995, the Company reduced the Reorganization Value by $12.1
million.
At December 30, 1995, after considering utilization restrictions, the
Company's tax loss carryforwards approximated $108.5 million. 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: $76.3 million in 1996, $13.3 million in each of years
1997 and 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: $10.9 million in 1996, $21.7 million in 1998,
$6.0 million in 1999, $.9 million in 2000 and $69.0 million during the years
2001 through 2009.
NOTE 11 -- 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.
F-18
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
Substantially all of the hourly employees at the Cherokee, Iowa, Jefferson,
Wisconsin and Riverside, California facilities participate in defined benefit
pension plans. Information presented below also 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 December 30,
1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation....................................................... $ 59,992 $ 65,972
--------- ---------
--------- ---------
Accumulated benefit obligation.................................................. $ 61,516 $ 68,229
--------- ---------
--------- ---------
Projected benefit obligation.................................................... $ 61,516 $ 68,229
Plan assets at fair value......................................................... 48,722 55,170
--------- ---------
Projected benefit obligation in excess of plan assets............................. 12,794 13,059
Unrecognized net actuarial loss -- difference in assumptions and actual
experience....................................................................... (1,637) (5,010)
Adjustment required to recognize additional minimum liability..................... 1,575 4,743
--------- ---------
Accrued pension cost.............................................................. $ 12,732 $ 12,792
--------- ---------
--------- ---------
</TABLE>
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 plan at the Cherokee facility is to contribute amounts sufficient
to meet the minimum funding requirements of the Employee Retirement Income
Security Act of 1974 (ERISA), and the plans at the Jefferson and Riverside
facilities are funded based upon a recommendation from the Company's actuary.
Such contributions for the plan at the Jefferson facility have, in prior years,
exceeded the minimum funding requirements.
Pension costs of the defined benefit plans for fiscal 1993, 1994 and 1995
are composed of the following components, based on expected long-term rates of
return of 9.0%, 8.5% and 9.0% and discount rates of 7.5%, 8.75% and 7.5% for the
plan at the Jefferson facility, expected long-term rates of return of 8.5%, 8.5%
and 8.5% and discount rates of 7.5%, 8.75% and 7.5% for the plan at the Cherokee
facility and expected long-term rate of return of 9.0% and discount rate of 7.5%
for fiscal 1995 for the plan at the Riverside facility which became effective in
1995 (in thousands):
<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31, DECEMBER 30,
1994 1994 1995
----------- ------------- -------------
<S> <C> <C> <C>
Service cost for benefits earned during the year............... $ 304 $ 370 $ 465
Interest cost on projected benefit obligation.................. 5,104 4,991 5,121
Return on plan assets.......................................... (3,667) (4,330) (4,094)
Amortization of transition obligation and unrecognized prior
service cost.................................................. 41 -- 11
----------- ------ ------
Total pension cost............................................. $ 1,782 $ 1,031 $ 1,503
----------- ------ ------
----------- ------ ------
</TABLE>
Expenses for all of the Company's retirement plans for fiscal years 1993,
1994 and 1995 were (in millions) $3.0, $2.1 and $2.6, respectively.
The Company provides life insurance and medical benefits ("Postretirement
Medical Benefits") for substantially all retired hourly and salaried employees
of one of its subsidiaries under various defined benefit plans. 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
F-19
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
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).
The components of net periodic postretirement benefit cost for the years
ended December 31, 1994 and December 30, 1995 were as follows (in thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Service cost....................................................................... $ 241 $ 231
Interest on accumulated benefit obligation......................................... 5,372 5,399
Other.............................................................................. (21) (61)
--------- ---------
Net periodic postretirement benefit cost........................................... $ 5,592 $ 5,569
--------- ---------
--------- ---------
</TABLE>
The actuarial and recorded liabilities for these Postretirement Medical
Benefits at December 31, 1994 and December 30, 1995 were as follows (in
thousands):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees and dependents......................................................... $ 58,421 $ 68,095
Actives not fully eligible...................................................... 5,535 6,203
Actives fully eligible.......................................................... 341 226
--------- ---------
64,297 74,524
Assets at fair value............................................................ (641) (1,056)
--------- ---------
Accumulated postretirement benefit obligation in excess of plan assets............ 63,656 73,468
Unrecognized net gain (loss).................................................... 2,965 (6,443)
Unrecognized prior service cost................................................. 391 379
--------- ---------
Liability recognized on the balance sheet......................................... 67,012 67,404
Less current portion.............................................................. 5,076 7,854
--------- ---------
Noncurrent liability for postretirement medical benefits.......................... $ 61,936 $ 59,550
--------- ---------
--------- ---------
</TABLE>
For measuring the accumulated postretirement medical benefit obligation, a
10.5% annual rate of increase in the per capita claims cost was assumed for
1996. This rate was assumed to decrease gradually to 8.9% by 2000, 7.7% 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 1995, respectively. The expected long-term rate of return on
plan assets was 6.0% for both fiscal years 1994 and 1995.
If the health care cost trend rate were increased 1.0%, the accumulated
benefit obligation as of December 30, 1995 would have increased by $1.4 million.
The effect of this change on the aggregate of service and interest cost for the
year ended December 30, 1995 would be an increase of $0.3 million.
The 1992 Stock Incentive Plan, as amended, (the "Plan") authorizes the
Company to grant stock options and/or Common Stock aggregating 1,900,000 shares
to directors, officers and other key employees. In February 1992, the Company
granted 105,000 restricted shares (11,666 shares subsequently lapsed), one-
F-20
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- EMPLOYEE BENEFIT PLANS (CONTINUED)
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 vested is 51,670 (which includes 35,416
shares issued under employee separation agreements). As of December 30, 1995,
the Company had also granted under the Plan 1,426,547 Common Stock options at
option prices ranging from $9.00 to $15.25 per share. The options are
exercisable over a three to five year period. At December 30, 1995, 328,443
Common Stock options were available for future issuance.
Stock option transactions are as follows:
<TABLE>
<CAPTION>
OPTIONS PRICE RANGE
---------- ----------------
<S> <C> <C>
Outstanding, January 2, 1993............................................. 249,500 $ 14.00 - 14.38
Granted................................................................ 27,166 $ 9.88 - 16.00
Canceled and forfeited................................................. (35,000)
----------
Outstanding, January 1, 1994............................................. 241,666 $ 9.88 - 16.00
Granted................................................................ 913,528 $ 9.00 - 11.00
Canceled and forfeited................................................. (34,000)
----------
Outstanding, December 31, 1994........................................... 1,121,194 $ 9.00 - 16.00
Granted................................................................ 475,128 $ 7.88 - 13.18
Exercised.............................................................. (19,686) $ 9.00 - 10.75
Canceled and forfeited................................................. (169,775)
----------
Outstanding, December 30, 1995........................................... 1,406,861 $ 9.00 - 15.25
----------
----------
</TABLE>
The Company has issued 25,000 Common Stock options to members of the Board
of Directors under an option plan covering nonemployee directors. The options
vested upon granting at an exercise price of $7.875.
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 12 -- COMMITMENTS AND CONTINGENCIES
The Company has committed to minimum purchases of raw materials, supplies
and equipment for delivery at various times in 1996. The total of such
commitments at December 30, 1995, is approximately $17.5 million.
The Company is involved in two related actions alleging infringement of two
patents held by C&F Packing Company, Inc. ("C&F"). Prior to Foodbrands America
acquiring KPR, C&F had instituted a civil action against KPR alleging that KPR,
using equipment and a process to make Italian sausage, infringed the C&F
patents. KPR has denied these allegations and contends that C&F's patents are
invalid and that, even if valid, the process and equipment used by KPR does not
infringe the patents. C&F has also alleged misappropriation of trade secrets and
proprietary information, as well as other claims, all of which KPR denies.
F-21
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
In 1988 and 1989, C&F filed actions against Doskocil Companies Incorporated
(Foodbrands America's predecessor) alleging patent infringement and
misappropriation of trade secrets and proprietary information. In 1991, as part
of Doskocil's bankruptcy reorganization, and in settlement of the litigation,
Doskocil entered into a license agreement with C&F and two consent decrees were
entered.
Prior to acquiring KPR, Foodbrands America instituted a declaratory judgment
action against C&F, joined by KPR. The action seeks a ruling that the equipment
and process used by KPR do not violate the C&F patents and that, in any event,
it is not a violation of the consent decrees for KPR to continue to use the
equipment and process being utilized by KPR prior to Foodbrands America
acquiring KPR. C&F has responded to the declaratory judgment action with a
Motion to Dismiss or to Transfer the actions to the Court that entered the
consent decrees. These motions are pending and have not been ruled upon.
Although the plaintiff has not specified any amount of damages, liability for
patent infringement may include disgorgement of profits which the Company
believes could be material. The litigation is complex and the ultimate outcome
can not be presently determined. The Company and KPR intend to vigorously
prosecute the declaratory judgment action against C&F and KPR intends to
vigorously defend the suit by C&F.
In September 1992, United Refrigerated Services, Inc. ("URS") filed suit
against Wilson Foods Corporation ("Wilson Foods"), a wholly-owned subsidiary of
Foodbrands America, 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. URS claims real
and personal property damage of approximately $9.8 million and has requested
trebling of the real property damage which is included in such amount, for total
claims in the aggregate up to as much as $13.8 million.
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 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 while there can be no assurances, 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 13 -- SUBSEQUENT EVENT
On March 22, 1996, the Company filed a registraton statement to offer $120
million Senior Subordinated Notes due 2006 (the "New Notes") which was amended
on April 26, 1996 and May 9, 1996. The New Notes being offered are unsecured and
subordinated in right of payment to all existing and future senior indebtedness.
On March 29, 1996, the Company commenced a tender offer to purchase up to all of
its outstanding Senior Subordianted Notes (existing 9 3/4% Senior Subordinated
Notes) and a related consent
F-22
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- SUBSEQUENT EVENT (CONTINUED)
solicitation to amend or remove certain covenants. The net proceeds from the New
Notes are expected to be used to consummate the tender offer, and if any net
proceeds remain after consummation of the tender offer, to reduce the Company's
outstanding indebtedness under its Credit Agreement.
Terms of the New Notes include a guarantee by substantially all of the
Company's direct and indirect subsidiaries, all of which are wholly-owned. The
guarantees are joint and several, full, complete and unconditional. There are no
restrictions on the ability of any subsidiaries to transfer funds to the Company
in the form of cash dividends, loans or advances. The Company is a holding
company with no assets, liabilities, or operations other than its investments in
its subsidiaries. The non-guarantors are inconsequential, individually and in
the aggregate to the consolidated financial statements, and separate financial
statements of the guarantors are not presented because management has determined
that they would not be material to investors.
F-23
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
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 December 30, 1995 (amounts are in
thousands except per share data).
<TABLE>
<CAPTION>
QUARTER
-----------------------------------------------
YEAR ENDED DECEMBER 31, 1994 (1)(2) FIRST SECOND (3) THIRD (4) FOURTH (5)
- ----------------------------------------------------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales........................................................ $ 94,347 $ 111,556 $ 152,189 $ 154,260
Gross profit..................................................... 14,614 19,936 32,858 34,826
Income (loss) from continuing operations......................... (448) (396) 1,255 (5,606)
Net income (loss)................................................ (478) (1,767) (3,526) (10,427)
Earnings (loss) per share, primary and fully diluted:
Income (loss) from continuing operations....................... $ (0.06) $ (0.05 ) $ 0.16 $ (0.50)
Net income (loss).............................................. (0.06) (0.22 ) (0.44) (0.93)
<CAPTION>
QUARTER
-----------------------------------------------
YEAR ENDED DECEMBER 30, 1995 FIRST (6) SECOND (7) THIRD FOURTH (8)
- ----------------------------------------------------------------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales........................................................ $ 139,412 $ 146,582 $ 169,223 $ 179,483
Gross profit..................................................... 31,165 32,587 34,463 36,500
Income (loss) from continuing operations......................... 1,792 1,932 2,503 3,374
Net income (loss)................................................ (563) (38,360) 2,503 2,325
Earnings (loss) per share, primary and fully diluted:
Income (loss) from continuing operations....................... $ 0.14 $ 0.16 $ 0.20 $ 0.27
Net income (loss).............................................. (0.05) (3.07) 0.20 0.19
</TABLE>
- ------------------------
(1) Includes the results of operations of the Specialty Brands Division acquired
June 1, 1994.
(2) Net income includes net losses from operations of the discontinued Retail
Division of breakeven, $0.4 million, $3.3 million and $4.8 million for the
first, second, third and fourth quarters, respectively.
(3) Net income for 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.
(4) Net income for 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.
(5) Net income for the fourth quarter of the year ended December 31, 1994,
included a charge of $10.6 million for restructuring and integration.
(6) Net income includes net loss from operating activities of the discontinued
Retail Division of $2.3 million.
(7) Net income includes net loss from operating activities of the discontinued
Retail Division of $1.8 million and loss on disposal of the division of
$38.5 million.
(8) Net income includes extraordinary loss on early extinguishment of debt of
$1.0 million, net of income tax benefit of $0.7 million.
F-24
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES OFFERED HEREBY IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference..................................... 2
Prospectus Summary............................. 3
Risk Factors................................... 9
Use of Proceeds................................ 14
Capitalization................................. 15
Pro Forma Consolidated Financial Information... 16
Selected Consolidated Financial Information.... 18
Management's Discussion and Analysis........... 20
Business....................................... 28
Management..................................... 35
Description of Other Indebtedness.............. 37
Description of the Notes....................... 40
Underwriting................................... 68
Legal Matters.................................. 69
Experts........................................ 69
Index to Financial Statements.................. F-1
</TABLE>
[LOGO]
$120,000,000
FOODBRANDS AMERICA, INC.
% SENIOR SUBORDINATED NOTES DUE 2006
---------------------
PROSPECTUS
---------------------
MERRILL LYNCH & CO.
CHASE SECURITIES INC.
DILLON, READ & CO. INC.
MAY , 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 41,380
NASD Fee.................................................................. 12,500
Trustee's Fees and Expenses............................................... 7,500
Printing and Engraving Expenses........................................... 225,000
Accountant's Fees and Expenses............................................ 150,000
Legal Fees and Expenses................................................... 215,000
Blue Sky Fees and Expenses................................................ 35,000
Miscellaneous............................................................. 13,620
---------
Total................................................................... $ 700,000
---------
---------
</TABLE>
Except for the SEC registration fee and the NASD fee, all expenses are
estimated. All of the above expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) The Delaware General Corporation Act, the jurisdiction in which the
Company is incorporated, provides, under certain circumstances, for
indemnification of the directors or officers of a Delaware corporation for
expenses in connection with the defense of any action, suit or proceeding, in
relation to certain matters, brought against them as such directors and
officers. In addition, the Company maintains insurance policies which insure its
officers and directors against certain liabilities.
The Purchase Agreement, filed as Exhibit 1 to this Registration Statement
and incorporated herein by reference, contains certain indemnifications made by
the Underwriters with respect to the accuracy and completeness of this
Registration Statement and with respect to certain civil liabilities, including
liabilities under the Securities Act of 1933.
(b) Article Ninth of the By-Laws of Foodbrands America, Inc. provides
indemnification of directors, officers and agents under certain circumstances.
These provisions may be sufficiently broad to indemnify such persons for
liabilities under the Securities Act of 1933.
ITEM 16. EXHIBITS.
<TABLE>
<C> <S>
1 Purchase Agreement between the Company and the Underwriters
4 Form of Indenture between the Company and The Liberty Bank and Trust Company
of Oklahoma City, National Association, as Trustee
5 Opinion of McAfee & Taft A Professional Corporation, including consent
12 Computation of Ratio of Earnings to Fixed Charges
15 Letter from Coopers & Lybrand, L.L.P. regarding unaudited financial
information
*23.1 Consent of Coopers & Lybrand, L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of McAfee & Taft A Professional Corporation (included in Exhibit 5
hereto)
24.1 Power of Attorney of the Registrant
24.2 Powers of Attorney of the Additional Registrants
25 Form T-1 Statement of Eligibility of Trustee under the Trust Indenture Act
of 1939
</TABLE>
- ------------------------
*Filed herewith.
II-1
<PAGE>
ITEM 17. UNDERTAKINGS.
Each of the undersigned registrants hereby undertakes:
(1) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference to the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(2) For the purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of the registration statement in reliance upon Rule 430A and contained
in the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of the
registration statement at the time it was declared effective.
(3) For the purposes of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted
against the registrant by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by its is against the public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
(5) The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to
be presented by Article 3 of Regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
FOODBRANDS AMERICA, INC.
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* Chairman, President, Chief Executive
------------------------------------------- Officer and Director (Principal
R. Randolph Devening Executive Officer)
/s/ HORST O. SIEBEN* Senior Vice President and Chief
------------------------------------------- Financial Officer (Principal Financial
Horst O. Sieben Officer)
/s/ WILLIAM L. BRADY Vice President and Controller
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ THEODORE AMMON* Director
-------------------------------------------
Theodore Ammon
/s/ RICHARD T. BERG* Director
-------------------------------------------
Richard T. Berg
/s/ DORT A. CAMERON III* Director May 10, 1996
-------------------------------------------
Dort A. Cameron III
/s/ TERRY M. GRIMM* Director
-------------------------------------------
Terry M. Grimm
/s/ PAUL S. LEVY* Director
-------------------------------------------
Paul S. Levy
/s/ PETER A. JOSEPH* Director
-------------------------------------------
Peter A. Joseph
/s/ ANGUS C. LITTLEJOHN, JR.* Director
-------------------------------------------
Angus C. Littlejohn, Jr.
/s/ PAUL W. MARSHALL* Director
-------------------------------------------
Paul W. Marshall
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
BRENNAN PACKING CO., INC., a Delaware
corporation
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY Vice President, Controller and May 10, 1996
------------------------------------------- Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM* Vice President, Treasurer and
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
CONTINENTAL DELI FOODS, INC.,
a Delaware corporation
By /s/ RAYMOND J. HAEFELE*
------------------------------------
Raymond J. Haefele,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ RAYMOND J. HAEFELE* President
------------------------------------------- (Principal Executive Officer)
Raymond J. Haefele
/s/ WILLIAM L. BRADY Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM* Vice President, Treasurer and May 10, 1996
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ DIANE EMRICK* Controller
------------------------------------------- (Principal Accounting Officer)
Diane Emrick
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
DOSKOCIL FOOD SERVICE COMPANY, L.L.C.,
an Oklahoma limited liability company
By Continental Deli Foods, Inc., a
Delaware corporation, Member-Manager
By /s/ RAYMOND J. HAEFELE*
---------------------------------
Raymond J. Haefele,
PRESIDENT
By RKR-GP, Inc., a Delaware
corporation, Member-Manager
By /s/ WILLIAM E. ROSENTHAL*
---------------------------------
William E. Rosenthal,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
CONTINENTAL DELI FOODS, INC.:
/s/ RAYMOND J. HAEFELE* President
------------------------------------------- (Principal Executive Officer)
Raymond J. Haefele
/s/ WILLIAM L. BRADY Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM* Vice President, Treasurer and May 10, 1996
------------------------------------------- Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ DIANE EMRICK* Controller
------------------------------------------- (Principal Accounting Officer)
Diane Emrick
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
RKR-GP, INC.:
<C> <S> <C>
/s/ WILLIAM E. ROSENTHAL* President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ TONY L. PRATER* Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN* Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ* Vice President and Director May 10, 1996
-------------------------------------------
Howard S. Katz
/s/ BRYANT P. BYNUM* Vice President, Assistant Secretary
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ WILLIAM L. BRADY Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
SPECIALTY BRANDS, INC.
a Delaware corporation (formerly,
Doskocil Specialty Brands Company)
By /s/ PATRICK A. O'RAY*
------------------------------------
Patrick A. O'Ray,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ PATRICK A. O'RAY* President
------------------------------------------- (Principal Executive Officer)
Patrick A. O'Ray
/s/ WILLIAM L. BRADY Vice President, Assistant Controller
------------------------------------------- and Director
William L. Brady
/s/ BRYANT P. BYNUM* Vice President, Treasurer May 10, 1996
------------------------------------------- and Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ ROBIN BHAT* Controller
------------------------------------------- (Principal Accounting Officer)
Robin Bhat
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
FBAI INVESTMENTS CORPORATION, an
Oklahoma corporation
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY Vice President, Controller May 10, 1996
------------------------------------------- and Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM* Vice President, Treasurer
------------------------------------------- and Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
KPR HOLDINGS, L.P., a Delaware limited
partnership
By RKR-GP, Inc., a Delaware
corporation,
General Partner
By /s/ WILLIAM E. ROSENTHAL*
------------------------------------
William E. Rosenthal,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
RKR-GP, INC.:
/s/ WILLIAM E. ROSENTHAL* President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ WILLIAM L. BRADY Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ BRYANT P. BYNUM* Vice President, Assistant Secretary May 10, 1996
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ TONY L. PRATER* Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN* Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ* Vice President and Director
-------------------------------------------
Howard S. Katz
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
NATIONAL SERVICE CENTER, INC.,
a Delaware corporation
By /s/ R. RANDOLPH DEVENING*
------------------------------------
R. Randolph Devening,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ R. RANDOLPH DEVENING* President and Director
------------------------------------------- (Principal Executive Officer)
R. Randolph Devening
/s/ WILLIAM L. BRADY Vice President, Controller May 10, 1996
------------------------------------------- and Director
William L. Brady (Principal Accounting Officer)
/s/ BRYANT P. BYNUM* Vice President, Treasurer
------------------------------------------- and Secretary
Bryant P. Bynum (Principal Financial Officer)
/s/ HORST O. SIEBEN* Director
-------------------------------------------
Horst O. Sieben
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Oklahoma City, State of Oklahoma, on the 10th
day of May, 1996.
RKR-GP, INC., a Delaware corporation
By /s/ WILLIAM E. ROSENTHAL*
------------------------------------
William E. Rosenthal,
PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------------- -----------------
<C> <S> <C>
/s/ WILLIAM E. ROSENTHAL* President and Director
------------------------------------------- (Principal Executive Officer)
William E. Rosenthal
/s/ WILLIAM L. BRADY Vice President and Assistant Secretary
------------------------------------------- (Principal Accounting Officer)
William L. Brady
/s/ BRYANT P. BYNUM* Vice President, Assistant Secretary May 10, 1996
------------------------------------------- and Assistant Treasurer
Bryant P. Bynum (Principal Financial Officer)
/s/ TONY L. PRATER* Vice President and Director
-------------------------------------------
Tony L. Prater
/s/ JOSEPH C. PENSHORN* Treasurer and Director
-------------------------------------------
Joseph C. Penshorn
/s/ HOWARD S. KATZ* Vice President and Director
-------------------------------------------
Howard S. Katz
/s/ R. RANDOLPH DEVENING* Director
-------------------------------------------
R. Randolph Devening
*By /s/ WILLIAM L. BRADY
-------------------------------------------
William L. Brady
ATTORNEY-IN-FACT
</TABLE>
II-12
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ---------------------------------------------------------------------------------------- ---------------
<C> <S> <C>
1 Purchase Agreement between the Company and the Underwriters
4 Form of Indenture between the Company and The Liberty Bank and Trust Company of Oklahoma
City, National Association, as Trustee
5 Opinion of McAfee & Taft A Professional Corporation, including consent
12 Computation of Ratio of Earnings to Fixed Charges
15 Letter from Coopers & Lybrand, L.L.P. regarding unaudited financial information
*23.1 Consent of Coopers & Lybrand, L.L.P.
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Deloitte & Touche LLP
23.4 Consent of McAfee & Taft A Professional Corporation (included in Exhibit 5 hereto)
24.1 Power of Attorney of the Registrant
24.2 Powers of Attorney of the Additional Registrants
25 Form T-1 Statement of Eligibility of Trustee under the Trust Indenture Act of 1939
</TABLE>
- ------------------------
*Filed herewith.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion and/or incorporation by reference in this
Amendment No. 4 to the Registration Statement on Form S-3 (File No. 333-01911)
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 February 12, 1996, except as to the
information presented in Note 13, for which the date is May 8, 1996 on our
audits of the consolidated financial statements and our report, dated February
12, 1996, on our audit of the related financial statement schedule of Foodbrands
America, Inc. as of December 30, 1995 and December 31, 1994, and for the years
ended December 30, 1995, December 31, 1994 and January 1, 1994. We also consent
to the incorporation by reference in this registration statement of our report
dated September 23, 1994, on our audits of the financial statements of TNT
Crust, Inc. as of August 31, 1994 and 1993, and for the years then ended, which
report is included in Foodbrands America, Inc.'s Amendments One, Two and Three
on Form 8-K/A (filed on February 26 and 29 and April 25, 1996, respectively) to
the Current Report on Form 8-K dated December 11, 1995, which Forms 8-K/A and
8-K are incorporated by reference in this registration statement. We also
consent to the reference to our firm under the caption "Independent Public
Accountants."
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
May 10, 1996
