UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 29, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission file number 001-11621
F O O D B R A N D S A M E R I C A, I N C.
______________________________________________________
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-2535513
_______________________________ __________________
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1601 NW Expressway, Suite 1700, Oklahoma City, Oklahoma 73118
_______________________________________________________ _________
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (405)879-4100
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES __X__ NO _____
On May 2, 1997, the number of shares outstanding of the
registrant's common stock, $.01 par value, was 12,468,287.
<PAGE>
FOODBRANDS AMERICA, INC.
_________________________
TABLE OF CONTENTS
FORM 10-Q
Page
PART I. FINANCIAL INFORMATION ____
Item 1. Financial Statements:
Condensed Consolidated Balance Sheet at
March 29, 1997 (Unaudited) and
December 28, 1996 . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statement of
Operations - Unaudited, Three Months
Ended March 29, 1997 and March 30, 1996 . . . . . 4
Condensed Consolidated Statement of Cash
Flows - Unaudited, Three Months Ended
March 29, 1997 and March 30, 1996 . . . . . . . . 5-6
Notes to the Condensed Consolidated
Financial Statements - Unaudited . . . . . . . . 7-9
Report of Independent Accountants . . . . . . . . 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . 11-14
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders . . . . . . . . . . . . . . . . . . . . . 15
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 15-16
Signatures . . . . . . . . . . . . . . . . . . . 17
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar amounts in thousands, except par value)
<CAPTION>
March 29, December 28,
ASSETS 1997 1996
_________ ____________
<S> <C> <C>
Current assets: (Unaudited)
Cash and cash equivalents $ 7,178 $ 10,442
Receivables 47,245 46,582
Inventories 70,675 62,960
Other current assets 29,985 26,342
________ ________
Total current assets 155,083 146,326
Property, plant and equipment, net of
accumulated depreciation and amortization
of $58,768 and $56,434 155,406 152,778
Intangible assets, net of accumulated
amortization of $11,949 and $10,623 193,344 193,390
Deferred charges and other assets 53,808 56,032
________ ________
$557,641 $548,526
======== ========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 34,839 $ 28,368
Accounts payable 36,421 33,298
Accrued liabilities 56,524 47,542
________ ________
Total current liabilities 127,784 109,208
Long-term debt 306,120 310,307
Other long-term liabilities 65,926 73,393
Stockholders' equity:
Preferred stock, 4,000,000 shares
authorized, none issued and outstanding - -
Common stock, $.01 par value, 20,000,000
shares authorized, 12,467,015 shares
issued and outstanding (12,464,080
shares at December 28, 1996) 125 125
Capital in excess of par value 151,418 151,364
Retained earnings (deficit) (92,197) (94,336)
Minimum pension liability adjustment (1,535) (1,535)
________ ________
Total stockholders' equity 57,811 55,618
________ ________
$557,641 $548,526
======== ========
<FN>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS - UNAUDITED
(Dollar amounts in thousands, except per share figures)
<CAPTION>
Three Months Ended
_____________________
March 29, March 30,
1997 1996
_________ _________
<S> <C> <C>
Net sales $210,768 $185,783
Cost of sales 171,010 146,688
________ ________
Gross profit 39,758 39,095
Operating expenses:
Selling 17,577 18,280
General and administrative 9,098 7,924
Amortization of intangible assets 1,326 1,747
________ ________
Total 28,001 27,951
________ ________
Operating income 11,757 11,144
Other income (expense):
Interest and financing costs (8,054) (7,419)
Other, net 49 32
________ ________
Total (8,005) (7,387)
________ ________
Income before income taxes 3,752 3,757
Income tax provision 1,613 1,635
________ ________
Net income $ 2,139 $ 2,122
======== ========
Primary and fully diluted earnings per share:
Net income $0.17 $0.17
===== =====
Weighted average number of common and
common equivalent shares outstanding
used for:
Primary calculation 12,686 12,468
Fully diluted calculation 12,888 12,620
<FN>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Three Months Ended
_____________________
March 29, March 30,
1997 1996
_________ _________
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,139 $ 2,122
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation and amortization 4,952 4,350
Amortization of intangible assets 1,326 1,747
Amortization included in interest expense 384 492
Deferred income taxes 1,452 1,535
Payments for restructuring/integration - (245)
Deferred compensation 723 378
Changes in:
Receivables (659) 6,237
Inventories (7,715) (5,785)
Other current assets (3,465) (3,281)
Deferred charges and other assets 166 24
Accounts payable and accrued liabilities 2,715 (11,965)
Other long-term liabilities (82) 103
Other (4) (4)
_______ _______
Net cash provided (used) by operating
activities 1,932 (4,292)
_______ _______
Cash flows from investing activities:
Purchase of property, plant and equipment (7,285) (4,974)
Acquisition of KPR Holdings, L.P. - (165)
Acquisition of TNT Crust, Inc. - (82)
Payments received on notes receivable 42 43
Proceeds from sale of property, plant and
equipment 186 22
Increase in notes receivable - (450)
_______ _______
Net cash provided (used) by investing
activities (7,057) (5,606)
_______ _______
Cash flows from financing activities:
Proceeds from debt obligations, net of
issuance costs - 49,614
Borrowings under revolving working capital
facility 44,500 50,500
Payments on revolving working capital
facility (40,500) (49,500)
Payment on promissory note - (50,000)
Payments on capital lease and debt
obligations (2,193) (590)
Issuance of common stock 54 5
_______ _______
Net cash provided (used) by financing
activities 1,861 29
_______ _______
Continued
</TABLE>
<PAGE>
<TABLE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED (continued)
Increase (Decrease) in Cash and Cash Equivalents
(Dollar amounts in thousands)
<CAPTION>
Three Months Ended
_____________________
March 29, March 30,
1997 1996
________ _________
<S> <C> <C>
Increase (decrease) in cash and cash
equivalents $ (3,264) $ (9,869)
Cash and cash equivalents at beginning of
period 10,442 18,207
________ ________
Cash and cash equivalents at end of period $ 7,178 $ 8,338
======== ========
Supplemental disclosure of noncash
investing activities:
Capital lease obligations $ 477 $ -
<FN>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
</TABLE>
<PAGE>
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
NOTE 1 GENERAL
The accompanying condensed consolidated financial
statements include the accounts of Foodbrands America, Inc. and
all majority-owned subsidiaries (collectively, the "Company") and
have been prepared without audit. The Balance Sheet at December
28, 1996, has been derived from financial statements which have
been audited by Coopers & Lybrand L.L.P., independent
accountants. Certain reclassifications have been made to prior
year balances to conform to the current year presentation.
In the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements contain all
adjustments (adjustments are of a normal, recurring nature)
necessary for a fair presentation of the financial position as of
March 29, 1997 and December 28, 1996, and the results of
operations for the three months ended March 29, 1997 and March
30, 1996 and cash flows for the three months ended March 29, 1997
and March 30, 1996. Results for the three months ended March 29,
1997 are not necessarily indicative of the results which will be
realized for the year ending January 3, 1998. The financial
statements should be read in conjunction with the Company's
Annual Report on Form 10-K, as amended, for the year ended
December 28, 1996.
NOTE 2 INVENTORIES
Inventories at March 29, 1997 and December 28, 1996 are
summarized as follows (in thousands):
March 29, December 28,
1997 1996
_________ ____________
Raw materials and supplies $24,933 $19,234
Work in process 7,926 8,499
Finished goods 37,816 35,227
_______ _______
$70,675 $62,960
======= =======
NOTE 3 INCOME TAXES
The provision for income taxes consists of the following
components (in thousands):
Three Months Ended
_______________________________
March 29, 1997 March 30, 1996
______________ ______________
Current:
Federal $ 81 $ 50
State 80 50
______ ______
161 100
______ ______
Deferred:
Federal 1,228 1,263
State 224 272
______ ______
1,452 1,535
______ ______
Total $1,613 $1,635
====== ======
The effective tax rate differs from the statutory rate due
primarily to amortization of certain intangible assets which are
not deductible for tax purposes. The effective tax rate was
calculated based on the projected taxable income for the full
fiscal year and the anticipated changes in the deferred tax
assets and the deferred tax liabilities.
NOTE 4 MERGER AGREEMENT
On March 25, 1997, Foodbrands America entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of
March 25, 1997, with IBP, inc. ("IBP") and IBP Sub, Inc., a
wholly owned subsidiary of IBP (the "Purchaser"), providing for
the acquisition of the Company by IBP. Pursuant to the Merger
Agreement, and subject to the terms and conditions therein, the
Purchaser commenced a tender offer (the "Tender Offer") for any
and all outstanding shares of common stock, par value $.01 per
share, of the Company (the "Common Stock") at a price of $23.40
per share net to the seller in cash. The Tender Offer was
completed on April 29, 1997 resulting in a change of control of
Foodbrands America. IBP, through the Purchaser, acquired
approximately 93.0% of the Company's Common Stock (representing
11,577,000 shares of Common Stock). The source of the funds used
to acquire control of Foodbrands America was from IBP's available
cash and borrowings under IBP's existing credit facility with a
syndicate of banks including Bank of America National Trust and
Savings Association as co-agent and First Bank National
Association as administrative agent. The credit facility is a
revolving facility which provides for borrowings up to an
aggregate principal amount of $500 million with a maturity date
of December 20, 2000 which may be extended for one year
increments annually during the revolving period with the consent
of the banks involved. The applicable rate of interest as of
December 28, 1996, was 5.5%. Pursuant to the Merger Agreement,
the Purchaser has the right to require each of the members
of the board of directors of Foodbrands America to resign and to
nominate and elect new directors to fill the subsequent
vacancies.
Pursuant to the Merger Agreement the Purchaser will be
merged with and into the Company on or about May 7, 1997 (the
"Merger"), with the Company being the surviving corporation and
becoming a wholly owned subsidiary of IBP. At the effective time
of the Merger, each outstanding share of Common Stock (other than
shares held by IBP, the Company or their respective subsidiaries
and other than shares the holders of which have validly perfected
their dissenters rights under Delaware law) shall be canceled and
converted into the right to receive $23.40 per share in cash.
Concurrently with the execution and delivery of the Merger
Agreement, Joseph Littlejohn & Levy, L.P., a Delaware limited
partnership, and Joseph Littlejohn & Levy Fund II, L.P., a
Delaware limited partnership (together, "JLL"), entered into a
Tender Agreement dated as of March 25, 1997 (the "JLL Tender
Agreement") among JLL, IBP and the Purchaser pursuant to which
JLL tendered all of their shares of Common Stock in the Tender
Offer. Concurrently with the execution and delivery of the
Merger Agreement, The Airlie Group, L.P., a Delaware limited
partnership ("Airlie"), entered into a Tender Agreement dated as
of March 25, 1997 (the "Airlie Tender Agreement") among Airlie,
IBP and the Purchaser pursuant to which Airlie tendered
a number of shares which when taken together with the number of
shares of Common Stock (i) beneficially owned by IBP or its
subsidiaries and (ii) which IBP or its affiliates have the right
to acquire from JLL pursuant to the JLL Tender Agreement, caused
IBP or its affiliates to beneficially own 49.9% of the aggregate
voting power represented by the issued and outstanding capital
stock of the Company.
Upon consummation of the Tender Offer, the contingent
payment payable as a result of the 1995 acquisition of KPR
Holdings, L.P. ("KPR") was amended. The KPR payment due on April
1, 1997 was made in cash and an additional payment of
approximately $3.8 million was paid as a result of the Tender
Offer. The contingent payments which can be earned in 1997 and
1998 can now be elected to be taken in cash or common stock of
IBP (at a price of $22.50 per share), at the option of the
sellers. Following the Merger of the Company, the contingent
payment payable as a result of the 1995 acquisition of TNT Crust,
Inc. ("TNT"), will be deleted and the sellers of TNT will receive
a cash payment of $9.5 million.
In connection with the Merger, the Company will be required
to make other cash payments totaling approximately $37.0 million.
These payments include fees and expenses associated with the
Merger, payments to the holders of the Company's outstanding
stock options, stock warrants and other stock plans as the
holders become fully vested upon a change of control and payments
under certain employment agreements which become due upon a
change of control. The funding for these payments, and the
payments to KPR and TNT, will be provided by operations, the
Company's working capital revolving facility and by IBP.
As a result of the change of control which will occur
pursuant to the Tender Offer, the Company is required under the
Indenture for the Company's 10-3/4% Senior Subordinated Notes due
2006 (the "Notes") to make an offer not more than 60 nor less
than 30 days following the occurrence of the change of control to
repurchase the outstanding Notes at a purchase price of 101% of
the principal amount, plus accrued and unpaid interest. Also as
a result of the Merger, the Company's annual utilization of its
net operating loss carryforwards will be limited.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Foodbrands America, Inc.
We have reviewed the condensed consolidated balance sheet
of Foodbrands America, Inc. and subsidiaries as of March 29,
1997, and the related condensed consolidated statements of
operations and cash flows for the three month periods ended March
29, 1997, and March 30, 1996. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures to financial data
and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing
standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material
modifications that should be made to the condensed consolidated
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally
accepted auditing standards, the consolidated balance sheet as of
December 28, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the period
ended December 28, 1996 (not presented herein), and in our report
dated February 18, 1997, except as to the information presented
in the last paragraph of Note 14, and the information presented
in Note 15, for which the date is March 26, 1997, we expressed an
unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying
condensed consolidated balance sheet as of December 28, 1996, is
fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
COOPERS & LYBRAND L.L.P.
Oklahoma City, Oklahoma
May 5, 1997
<PAGE>
FOODBRANDS AMERICA, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended March 29, 1997 Compared to the Three Months
Ended March 30, 1996. The Company's net sales for the first
quarter of 1997 were $210.8 million, an increase of 13% over
sales of $185.8 million for the first quarter of 1996. The
increase in net sales was primarily due to sales volume increases
in the Food Service Division and in the KPR Division's soups and
sauces business and due to a price increase at the KPR Division
as a result of a formula change developed in conjunction with the
Division's major customer.
Gross profit for the first quarter of 1997 of $39.8 million
increased $0.7 million, or 2%, over the gross profit of $39.1
million for the first quarter of 1996. The increase in gross
profit was due to the sales volume increases in the Food Service
and KPR Divisions. This increase was partially offset by reduced
gross profit percentages in the Food Service and Specialty Brands
Division due to higher raw material prices which began in the
second quarter of 1996 and have continued through the first
quarter of 1997.
Selling expenses of $17.6 million in the first quarter of
1997 decreased $0.7 million over the 1996 period selling expenses
of $18.3 million. The decrease was due to lower selling and
marketing expenditures in the Specialty Brands Division in 1997
compared to the prior year due to the restructuring that occurred
in this Division in the third quarter of 1996 which resulted in a
reduction in headcount and a change to an Everyday Low Pricing
concept and due to a reduction in sales personnel in the first
quarter of 1997 which resulted from normal turnover.
General and administrative expenses increased $1.2 million
from $7.9 million to $9.1 million. The increase was primarily
due to (i) non-cash expenses for performance based employee stock
options due to the increase in the market value of the Company's
stock, (ii) the expense associated with the annual employee
incentive program resulting from higher current year performance
levels, and (iii) an increase in overhead cost at the KPR
Division as a result of the increased production and the ongoing
product development.
Amortization of intangible assets decreased $0.4 million
due to the reduction in intangible assets which occurred in the
second quarter of 1996 in connection with the elimination of the
deferred tax asset valuation allowance.
Interest, financing and other costs increased from $7.4
million to $8.0 million due to the $10.0 million increase in
outstanding indebtedness and the 1% increase in interest rates on
the Company's senior subordinated notes which occurred in the
second quarter of 1996 in connection with refinancing the
Company's debt.
Income tax expense in both the first quarter of 1997 and
1996 of $1.6 million was based on the effective tax rates for
projected income from operations for the respective year. The
effective tax rates were calculated based on the projected
taxable income for the full fiscal year and the anticipated
changes for the year in the deferred tax assets and the deferred
tax liabilities.
Liquidity and Capital Resources
On March 29, 1997, amounts outstanding under the Company's
Credit Agreement consisted of $137.1 million under term loans,
$56.1 million under the acquisition term loan, and $19.5 million
under the working capital revolving facility. At March 29, 1997,
$45.8 million was available for borrowing under the working
capital revolving facility based on current working capital and
amounts outstanding.
The Company received a waiver, consent and amendment dated
as of April 24, 1997, from the lenders under its Credit Agreement
which (i) waived any event of default which would occur when IBP,
inc. acquired the stock of the Company pursuant to the Tender
Offer (as subsequently defined and discussed under "Merger
Agreement"), (ii) consented to the Merger (as subsequently
defined under "Merger Agreement") and waived the breach of the
negative covenant which would occur as a result of the Merger,
and (iii) amended the Credit Agreement to continue to provide the
current credit facilities for a period of 120 days following the
Merger. Furthermore, as a result of the change of control which
will occur pursuant to the Tender Offer, the Company is required
under the Indenture for the Company's 10-3/4% Senior Subordinated
Notes due 2006 (the "Notes") to make an offer not more than 60
nor less than 30 days following the occurrence of the change of
control to repurchase the outstanding Notes at a purchase price
of 101% of the principal amount, plus accrued and unpaid
interest. The funding for any of the Notes tendered will be
provided by IBP, inc.
In connection with the Merger (as subsequently defined
under "Merger Agreement"), the Company will be required to make
certain cash payments totaling approximately $50.3 million.
These payments include (i) certain contingent payments payable as
a result of the 1995 acquisition of KPR Holdings, L.P. ("KPR")
and TNT Crust, Inc. ("TNT") (see additional discussion of these
payments under "Merger Agreement"), (ii) payments to the holders
of the Company's outstanding stock options, stock warrants, and
other stock plans as the holders become fully vested upon a
change of control, (iii) payments under certain employment
agreements which become due upon a change of control and (iv)
certain fees and expenses associated with the Merger. The
funding for these payments will be provided by operations, the
Company's working capital revolving facility and by the purchaser
of the Company, IBP, inc.
Cash Flows and Capital Expenditures.
First three months of 1997. For the first quarter of 1997, net
cash provided by operating activities was $1.9 million. The
increase in cash resulted primarily from the results of
operations after adding back noncash items of depreciation,
amortization, deferred income taxes and deferred compensation
coupled with an increase in accounts payable and accrued
liabilities. The total increases in cash were partially offset
by an increase in accounts receivable, inventory and other
current assets.
Expenditures for additions to property, plant and equipment
were $7.8 million during the first quarter of 1997. The primary
source of the funds for these expenditures was from cash provided
by operations with approximately $0.5 million of the funding
being provided from capital leases. Approximately $5.0 million
of these expenditures related to expansion of production
facilities at KPR and TNT and the remainder was for cost savings
programs and for replacements and modifications to existing
facilities. The Company received a net of $1.9 million of cash
from financing activities.
First three months of 1996. For the first quarter of 1996, net
cash used by operating activities was $4.3 million. The decrease
in cash resulted primarily from increases in inventory and other
current assets, payments for promotional programs, interest and
benefit programs and a decrease in accounts payable. The total
decreases in cash were partially offset by a decrease in accounts
receivable and by cash generated from the results of operations
after adding back noncash items of depreciation, amortization,
and deferred income taxes.
Expenditures for additions to property, plant and equipment
were $5.0 million. Approximately $0.7 million of these
expenditures related to expansion of production facilities and
the remainder was for cost savings programs and for replacements
and modifications to existing facilities. The source of the
funds for these expenditures was from cash provided by
operations. Also during the first quarter of 1996, the Company
paid the $50.0 million promissory note that was executed as part
of the KPR Holdings, L.P. acquisition by drawing down the
remaining balance available under its bank credit agreement term
loan.
Merger Agreement
On March 25, 1997, Foodbrands America entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of
March 25, 1997, with IBP, inc. ("IBP") and IBP Sub, Inc., a
wholly owned subsidiary of IBP (the "Purchaser"), providing for
the acquisition of the Company by IBP. Pursuant to the Merger
Agreement, and subject to the terms and conditions therein, the
Purchaser commenced a tender offer (the "Tender Offer") for any
and all outstanding shares of common stock, par value $.01 per
share, of the Company (the "Common Stock") at a price of $23.40
per share net to the seller in cash. The Tender Offer was
completed on April 29, 1997 resulting in a change of control of
Foodbrands America. IBP, through the Purchaser, acquired
approximately 93.0% of the Company's Common Stock (representing
11,577,000 shares of Common Stock). The source of the funds used
to acquire control of Foodbrands America was from IBP's available
cash and borrowings under IBP's existing credit facility with a
syndicate of banks including Bank of America National Trust and
Savings Association as co-agent and First Bank National
Association as administrative agent. The credit facility is a
revolving facility which provides for borrowings up to an
aggregate principal amount of $500 million with a maturity date
of December 20, 2000 which may be extended for one year
increments annually during the revolving period with the consent
of the banks involved. The applicable rate of interest as of
December 28, 1996, was 5.5%. Pursuant to the Merger Agreement,
the Purchaser has the right to require each of the members of the
board of directors of Foodbrands America to resign and to
nominate and elect new directors to fill the subsequent
vacancies.
Pursuant to the Merger Agreement the Purchaser will be
merged with and into the Company on or about May 7, 1997 (the
"Merger"), with the Company being the surviving corporation and
becoming a wholly owned subsidiary of IBP. At the effective time
of the Merger, each outstanding share of Common Stock (other than
shares held by IBP, the Company or their respective subsidiaries
and other than shares the holders of which have validly perfected
their dissenters rights under Delaware law) shall be canceled and
converted into the right to receive $23.40 per share in cash.
Concurrently with the execution and delivery of the Merger
Agreement, Joseph Littlejohn & Levy, L.P., a Delaware limited
partnership, and Joseph Littlejohn & Levy Fund II, L.P., a
Delaware limited partnership (together, "JLL"), entered into a
Tender Agreement dated as of March 25, 1997 (the "JLL Tender
Agreement") among JLL, IBP and the Purchaser pursuant to which
JLL tendered all of their shares of Common Stock in the Tender
Offer. Concurrently with the execution and delivery of the
Merger Agreement, The Airlie Group, L.P., a Delaware limited
partnership ("Airlie"), entered into a Tender Agreement dated as
of March 25, 1997 (the "Airlie Tender Agreement") among Airlie,
IBP and the Purchaser pursuant to which Airlie tendered a number
of shares which when taken together with the number of shares
of Common Stock (i) beneficially owned by IBP or its subsidiaries
and (ii) which IBP or its affiliates have the right to acquire
from JLL pursuant to the JLL Tender Agreement, caused IBP or its
affiliates to beneficially own 49.9% of the aggregate voting
power represented by the issued and outstanding capital stock of
the Company.
Upon consummation of the Tender Offer, the contingent
payment payable as a result of the 1995 acquisition of KPR was
amended. The KPR payment due on April 1, 1997 was made in cash
and an additional payment of approximately $3.8 million was paid
as a result of the Tender Offer. The contingent payments which
can be earned in 1997 and 1998 can now be elected to be taken in
cash or common stock of IBP (at a price of $22.50 per share), at
the option of the sellers. Following the Merger of the Company,
the contingent payment payable as a result of the 1995
acquisition of TNT, will be deleted and the sellers of TNT will
receive a cash payment of $9.5 million.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On March 25, 1997, the Board of Directors of the
Company adopted a resolution setting forth a proposed
amendment of the Amended and Restated Certificate of
Incorporation of the Company to permit the Board of
Directors to waive certain stock transfer restrictions when
the Board determines that such proposed transfer would not
jeopardize the Company's full utilization of net operating
loss carry-forwards (the "Charter Amendment"), declared its
advisability and called a special meeting of the
stockholders entitled to vote on the Charter Amendment.
The Charter Amendment was adopted by the Board to expedite
the transactions contemplated by the Merger Agreement.
Thereafter, and as requested by IBP, JLL and Airlie, each
executed a written consent approving the Charter Amendment,
effective upon the expiration of the twenty calendar day
period following the mailing of an Information Statement to
the stockholders, and delivered such written consent to the
Company (the "Written Consent"). The Written Consent
contained the consent of the holders of 6,313,033 shares of
the Company's common stock, par value $.01 per share. The
Charter Amendment was effective April 28, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (the following exhibits are listed and numbered
in accordance with Item 601 of Regulation S-K as of the
date of this filing)
Exhibit Number Description
______________ ___________
3.1a Certificate of Amendment to the
Amended and Restated
Certificate of Incorporation of
Foodbrands America, Inc.
4.1a Certificate of Amendment to the
Amended and Restated
Certificate of Incorporation of
Foodbrands America, Inc. (see
Exhibit 3.1a above)
10.1c Waiver, Consent and Amendment
to Credit Agreement among
Foodbrands America, Inc., the
Lender parties thereto, The
Chase Manhattan Bank (formerly
known as Chemical Bank) and
Citibank, N.A. dated as of
April 24, 1997
11.1 Calculation of Earnings per
Share
15.1 Letter re: Unaudited Interim
Financial Information
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during this
quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.
FOODBRANDS AMERICA, INC.
Dated: May 6, 1997 By:/s/ William L. Brady
____________________
William L. Brady
Vice President and Controller
EXHIBIT 3.1a
CERTIFICATE OF AMENDMENT
TO THE
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
FOODBRANDS AMERICA, INC.
_________________________________________________________________
Pursuant to Sections 228 and 242 of the
General Corporation Law of the State of Delaware
_________________________________________________________________
Foodbrands America, Inc., a Delaware corporation (the
"Corporation"), does hereby certify as follows:
FIRST: The name of the corporation is Foodbrands
America, Inc., a Delaware corporation.
SECOND: Effective immediately upon filing of this
Amendment and without further action on the part of the
Corporation or its stockholders the provisions of Section 5.1 of
the Corporation's Amended and Restated Certificate of
Incorporation shall be amended as described herein.
THIRD: That the Amended and Restated Certificate of
Incorporation of the Corporation is hereby as follows:
(i) Section 5.1(3) is amended by deleting the
last sentence thereof.
(ii) A new Section 5.1(4) is added to read in its
entirety as follows:
"(4) Notwithstanding anything contained herein to
the contrary, this Article Fifth shall not apply to any
transaction or series of transactions which the Board,
in it sole discretion upon the exercise of its
fiduciary duties in accordance with applicable law,
determines to be in the best interests of the
stockholders of the Corporation. In addition, and in
any event, this Article Fifth shall not apply to any of
the transactions contemplated by the Agreement and Plan
of Merger (the "Merger Agreements"), dated as of March
25, 1997, by and among IBP, inc. ("IBP"), IBP Sub,
Inc. and the Company and the Tender Agreements (as
defined in the Merger Agreement)."
FOURTH: That this Amendment has been duly adopted in
accordance with the provisions of Section 242 and 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this
Certificate of Amendment to be executed in its corporate name as
of the 28th day of April, 1997.
FOODBRANDS AMERICA, INC.
By: /s/ Bryant P. Bynum
_________________________
Bryant P. Bynum
Vice President - Finance
EXHIBIT 10.1c
WAIVER, CONSENT AND AMENDMENT
Dated as of April 24, 1997
PRELIMINARY STATEMENTS.
(1) Reference is hereby made to the Credit Agreement
dated as of December 11, 1995 among Foodbrands America, Inc., a
Delaware corporation (the "Borrower"), the financial institutions
parties thereto as lenders (the "Lenders"), The Chase Manhattan
Bank, formerly known as Chemical Bank, a New York banking
corporation, as administrative agent for the Lenders (in such
capacity, the "Administrative Agent"), collateral agent and
issuing lender and Citibank, N.A. as managing agent, as amended
by Amendment No. 1 to the Credit Agreement dated as of May 13,
1996 and Amendment No. 2 dated as of January 31, 1997. The
Credit Agreement as so amended shall be referred to herein as the
"Credit Agreement". Capitalized terms used in this Waiver,
Consent and Amendment and not otherwise defined herein shall have
the meanings ascribed to such terms in the Credit Agreement.
(2) The Borrower has notified the Administrative
Agent that IBP, inc., a Delaware corporation ("IBP"), has entered
into an agreement to acquire the outstanding shares of the stock
of the Borrower pursuant to a cash tender offer (the "Tender
Offer") and that, upon its acquisition of at least 50% of the
outstanding shares of the Borrower, IBP intends to merge IBP
Sub, Inc., a Delaware corporation and wholly-owned subsidiary of
IBP, with and into the Borrower, with the Borrower as the
surviving corporation (the "Merger").
(3) The Borrower has requested that the Lenders (i)
waive any event of default that might occur under Article VII of
the Credit Agreement if sufficient shares of the Borrower
are tendered to IBP to constitute a "Change of Control", as such
term is defined in the Credit Agreement, (ii) consent to the
Merger and waive any breach of the negative covenant contained
in Section 7.05 of the Credit Agreement which might occur because
of the Merger and (iii) continue to provide the credit facilities
under the terms of the Credit Agreement to the Borrower for a
specified period of time after the Merger or the Tender Offer.
In consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto
agree, on the terms and subject to the conditions set forth
herein, as follows:
SECTION 1. Waiver.
(a) The Lenders hereby waive the event of default
which will occur pursuant to paragraph (n) of Article VIII of the
Credit Agreement when IBP acquires the shares of stock of the
Borrower tendered pursuant to the Tender Offer.
(b) The Lenders hereby also waive the breach of the
negative covenant contained in Section 7.09(e) of the Credit
Agreement which will occur when the Borrower delivers notice of
its offer to purchase the Subordinated Notes under Section 4.12
of the 2006 Subordinated Note Indenture; provided, however, that
such waiver shall only be effective if all such purchases are
made using funds borrowed in a transaction which qualifies as
Subordinated Note Refinancing Debt under the Credit Agreement.
SECTION 2. Consent. The Lenders hereby consent to the
Merger and waive the breach of the negative covenant contained in
Section 7.05 of the Credit Agreement which will occur as a result
of the Merger.
SECTION 3. Amendment of the Credit Agreement. The
Credit Agreement is amended as follows:
(a) The following definitions are added to the Credit
Agreement:
" "Merger" shall have the meaning assigned to such
term in the Waiver, Consent and Amendment.
"Tender Offer" shall have the meaning assigned to
such term in the Waiver, Consent and Amendment.
"Waiver, Consent and Amendment" shall mean the
Waiver, Consent and Amendment dated as of April 24,
1997 among the Borrower, the Lenders party thereto,
the Administrative Agent and the Subsidiaries party
thereto."
(b) Section 2.13 of the Credit Agreement is amended to
replace the phrase "and paragraph (g)" in paragraph (e) thereof
with "and paragraphs (g) and (i)", to replace the phrase "and
paragraph (d)" in paragraph (g) thereof with ", paragraph (d) and
paragraph (i)" and to add paragraph (i) at the end of Section
2.13 as follows:
" (i) On the earlier of the date that is 120 days
after the Merger and the date that is 165 days after
the consummation of the tender of shares pursuant to
the Tender Offer, (i) the Borrower shall prepay all
Obligations then outstanding under the Credit Agreement
or any other Loan Document, (ii) the Borrower shall
return all outstanding Letters of Credit for
cancellation, and (iii) the Commitments and LC
Commitment shall terminate automatically and without
notice. Notwithstanding any other provision of this
Agreement, no Lender may decline any prepayment
provided for in this clause (i)."
SECTION 4. Conditions of Effectiveness. This
Waiver, Consent and Amendment shall be effective upon the
execution hereof by the Borrower, each Subsidiary Guarantor and
Lenders constituting the Required Lenders and upon the
satisfaction of the following conditions precedent:
(a) Holders of shares of the capital stock of the
Borrower representing not less that 50% of the aggregate
ordinary voting power of such shares shall have tendered
such shares pursuant to the Tender Offer;
(b) The terms of the Tender Offer shall be
substantially identical to those disclosed in the Schedule
14D-1 Tender Offer Statement and Schedule 13D of Foodbrands
America, Inc., IBP Sub, Inc., IBP Foodservice, L.L.C., and
IBP, inc. dated March 25, 1997, including all exhibits
attached thereto and documents incorporated by reference
therein; and
(c) The terms of the Merger shall be substantially
identical to those disclosed in the Agreement and Plan of
Merger by and among Foodbrands America, Inc. and IBP, inc.
and IBP Sub, Inc. dated as of March 25, 1997.
SECTION 5. Representations and Warranties. The
Borrower represents and warrants to each of the Lenders, the
Administrative Agent, the Collateral Agent and the Issuing
Lender that:
(a) This Waiver, Consent and Amendment has been duly
authorized by all necessary corporate action, and duly
executed and delivered by the Borrower and constitutes its
legal, valid and binding obligation, enforceable in
accordance with its terms except as such enforceability may
be limited by bankruptcy, insolvency, reorganization,
fraudulent transfer, moratorium or other similar laws
affecting creditors' rights generally and by general
principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in
equity).
(b) Before and after giving effect to this Waiver,
Consent and Amendment, the representations and warranties
set forth in Article IV of the Credit Agreement are true and
correct in all material respects with the same effect as if
made on the date hereof, except to the extent such
representations and warranties expressly relate to an
earlier date.
(c) Before and after giving effect to this Waiver,
Consent and Amendment, no Event of Default or Default has
occurred and is continuing.
SECTION 6. Credit Agreement. Except as specifically
set forth herein, this Waiver, Consent and Amendment shall not
constitute a consent to any departure from, or waiver of, any of
the terms and provisions of the Credit Agreement or any other
Loan Document. Except as specifically amended hereby, the Credit
Agreement shall continue in full force and effect in accordance
with the provisions thereof as in existence on the date hereof.
After the date hereof, any reference to the Credit Agreement
shall mean the Credit Agreement as amended hereby.
SECTION 7. Counterparts. This Waiver, Consent and
Amendment may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken
together shall constitute but one agreement.
SECTION 8. Reaffirmation. By executing this Consent
in the space provided below, each Subsidiary Guarantor reaffirms
its obligations under the Guarantee Agreement, the Security
Agreement and each other Loan Document to which it is a party,
all of which agreements remain in full force and effect.
SECTION 9. Applicable Law. THIS WAIVER, CONSENT AND
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 10. Expenses. The Borrower agrees to
reimburse the Administrative Agent for its reasonable
out-of-pocket expenses in connection with this Waiver, Consent
and Amendment, including the reasonable fees, charges and
disbursements of Sidley & Austin, counsel for the Administrative
Agent.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Waiver, Consent and Amendment to be duly executed by their
respective authorized officers as of the day and year first
written above.
FOODBRANDS AMERICA, INC.,
By: /s/ Bryant P. Bynum
______________________
Name: Bryant P. Bynum
Title: Vice President
THE CHASE MANHATTAN BANK,
individually, as
Administrative Agent, as
Collateral Agent and as
Issuing Lender,
By: /s/ Timothy J. Storms
_________________________
Name: Timothy J. Storms
Title: Managing Director
CITIBANK, N.A., individually
and as Managing Agent,
By: /s/ Charles S. Foster
__________________________
Name: Charles S. Foster
Title: Attorney-in-Fact
CREDIT LYONNAIS, CAYMAN
ISLANDS BRANCH,
By:
__________________________
Name:
Title:
CREDIT LYONNAIS, NEW YORK
BRANCH,
By:
________________________
Name:
Title:
FIRST BANK NATIONAL
ASSOCIATION,
By: /s/ Bradley R. Sprang
_________________________
Name: Bradley R. Sprang
Title: Commercial
Banking Officer
THE FIRST NATIONAL BANK OF
BOSTON,
By: /s/ Kimberly F. Harris
___________________________
Name: Kimberly F. Harris
Title: Vice President
HELLER FINANCIAL, INC.,
By: /s/ Christina M. Rashid
___________________________
Name: Christina M. Rashid
Title: Vice President
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., CHICAGO BRANCH,
By: /s/ Masaharu Kuhara
________________________
Name: Masaharu Kuhara
Title: General Manager
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
By: /s/ Patricia Loret de Mola
___________________________
Name: Patricia Loret de Mola
Title: Senior Vice President
NATIONSBANK OF TEXAS, N.A.,
By: /s/ Bianca Hemmen
_______________________
Name: Bianca Hemmen
Title: Senior Vice President
BANQUE FRANCAISE DU COMMERCE
EXTERIEUR,
By: /s/ G. Kevin Dooley
_________________________
Name: G. Kevin Dooley
Title: Vice President
By: /s/ William C. Maier
_________________________
Name: William C. Maier
Title: VP-Group Manager
LIBERTY BANK AND TRUST
COMPANY OF OKLAHOMA CITY,
N.A.,
By: /s/ Mark C. Demos
________________________
Name: Mark C. Demos
Title: Vice President
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS
BRANCHES,
By: /s/ Stephan A. Wiedemann
_________________________
Name: Stephan A. Wiedemann
Title: Director
By: /s/ Thomas A. Foley
_________________________
Name: Thomas A. Foley
Title: Assistant Vice
President
BANQUE PARIBAS,
By: /s/ Charles N. Rolfe
_________________________
Name: Charles N. Rolfe
Title: Vice President
By: /s/ Kenneth E. Moore, Jr.
__________________________
Name: Kenneth E. Moore, Jr.
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST,
By: /s/ Jeffrey W. Maillet
___________________________
Name: Jeffrey W. Maillet
Title: Senior V.P. &
Director
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS B.V.
By: Chancellor LGT Senior
Secured Management, Inc., as
Portfolio Advisor
By:
__________________________
Name:
Title:
AERIES FINANCE, LTD.,
By: /s/ Andrew Ian Wignall
___________________________
Name: Andrew Ian Wignall
Title: Director
CAPTIVA FINANCE LTD.,
By: /s/ Derrie Boggess
_______________________
Name: Derrie Boggess
Title: Director
MORGAN STANLEY SENIOR
FUNDING, INC.,
By: /s/ Christopher Pucillo
___________________________
Name: Christopher Pucillo
Title: Vice President
ACKNOWLEDGED AND AGREED TO:
JOS. COPPERFIELD & SONS, INC.
By: /s/ Bryant P. Bynum
________________________
Name: Bryant P. Bynum
Title: Vice President
CONTINENTAL DELI FOODS, INC.
By: /s/ Bryant P. Bynum
________________________
Name: Bryant P. Bynum
Title: Vice President
SPECIALTY BRANDS, INC.
By: /s/ Bryant P. Bynum
_______________________
Name: Bryant P. Bynum
Title: Vice President
FBAI INVESTMENTS CORPORATION
By: /s/ Bryant P. Bynum
________________________
Name: Bryant P. Bynum
Title: Vice President
BRENNAN PACKING CO., INC.
By: /s/ Bryant P. Bynum
________________________
Name: Bryant P. Bynum
Title: Vice President
NATIONAL SERVICE CENTER, INC.
By: /s/ Bryant P. Bynum
________________________
Name: Bryant P. Bynum
Title: Vice President
DOSKOCIL FOOD SERVICE COMPANY, L.L.C.
By: Continental Deli Foods, Inc., as Member
By: /s/ Bryant P. Bynum
________________________
Name: Bryant P. Bynum
Title: Vice President
KPR HOLDINGS, L.P.
By: Jos. Copperfield & Sons, Inc.
General Partner
By: /s/ Bryant P. Bynum
________________________
Name: Bryant P. Bynum
Title: Vice President
<TABLE>
EXHIBIT 11.1
FOODBRANDS AMERICA, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE - UNAUDITED
(Dollar amounts in thousands, except per share figures)
<CAPTION>
Three Months Ended
____________________
March 29, March 30,
1997 1996
_________ _________
<S> <C> <C>
Net income $2,139 $2,122
====== ======
Primary earnings per share:
Weighted average number of common shares
outstanding 12,465 12,468
Common stock equivalents:
Dilutive options and warrants 221 -
______ ______
Weighted average number of common and common
equivalent shares outstanding 12,686 12,468
====== ======
Net income per share $0.17 $0.17
===== =====
Fully diluted earnings per share:
Weighted average number of common shares
outstanding 12,465 12,468
Common stock equivalents:
Dilutive options and warrants 423 152
______ ______
Weighted average number of common and common
equivalent shares outstanding 12,888 12,620
====== ======
Net income per share $0.17 $0.17
===== =====
</TABLE>
EXHIBIT 15.1
May 5, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: Foodbrands America, Inc.
Registration on Form S-8
We are aware that our report dated May 5, 1997 on our review of
interim financial information of Foodbrands America, Inc. for the
periods ended March 29, 1997, and March 30, 1996, and included in
the Company's quarterly report on Form 10-Q for the quarter ended
March 29, 1997, is incorporated by reference in the Registration
Statements on Form S-8 (File Nos. 333-04915, 333-04925, 333-
04665, 333-04671, 33-45974, 33-59331 and 33-62611) of Foodbrands
America, Inc. Pursuant to Rule 436(c) under the Securities Act
of 1933, this report should not be considered a part of the
Registration Statement prepared or certified by us within the
meaning of Sections 7 and 11 of that Act.
COOPERS & LYBRAND L.L.P.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 29,
1997, CONTAINED IN THE FIRST QUARTER 1997 FORM 10-Q REPORT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 7,178
<SECURITIES> 0
<RECEIVABLES> 47,245
<ALLOWANCES> 0
<INVENTORY> 70,675
<CURRENT-ASSETS> 155,083
<PP&E> 214,174
<DEPRECIATION> 58,768
<TOTAL-ASSETS> 557,641
<CURRENT-LIABILITIES> 127,784
<BONDS> 306,120
0
0
<COMMON> 125
<OTHER-SE> 57,686
<TOTAL-LIABILITY-AND-EQUITY> 557,641
<SALES> 210,768
<TOTAL-REVENUES> 210,768
<CGS> 171,010
<TOTAL-COSTS> 171,010
<OTHER-EXPENSES> 28,001
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,054
<INCOME-PRETAX> 3,752
<INCOME-TAX> 1,613
<INCOME-CONTINUING> 2,139
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,139
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
