EX-99.3 6 0006.txt UNAUDITED FINANCIALS EXHIBIT 99.3 INTERNATIONAL HOME FOODS, INC. CONSOLIDATED STATEMENTS OF INCOME (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS) (UNAUDITED) Three Months Ended March 31, 2000 1999 ------------ ------------ Net sales $ 561,374 $ 514,186 Cost of sales 293,133 280,362 ------------ ------------ Gross profit 268,241 233,824 Marketing expenses 128,598 109,739 Selling, general, and administrative expenses 71,541 60,959 ------------ ------------ Income from operations 68,102 63,126 Interest expense 25,074 25,751 Other (income) expense, net 244 (175) Gain on sale of business -- (15,779) ------------ ------------ Income before provision for income taxes 42,784 53,329 Provision for income taxes 16,258 20,798 ------------ ------------ Net income $ 26,526 $ 32,531 ============ ============ Basic earnings per share: Net income $ 0.36 $ 0.44 ------------ ------------ Shares used in computing basic earnings per share 73,918,374 73,303,266 ------------ ------------ Diluted earnings per share: Net income $ 0.35 $ 0.43 ------------ ------------ Shares used in computing diluted earnings per share 76,028,707 75,802,674 ------------ ------------
See accompanying notes to consolidated financial statements. INTERNATIONAL HOME FOODS, INC. CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS) (UNAUDITED) March 31, December 31, 2000 1999 ------------ ------------ ASSETS Current Assets: Cash and cash equivalents $ 16,369 $ 14,310 Accounts receivable, net of allowances 181,530 180,671 Inventories 307,095 282,911 Prepaid expenses and other current assets 31,893 34,345 Deferred income taxes 16,317 16,113 ------------ ------------ Total current assets 553,204 528,350 Property, plant and equipment, net 311,953 306,042 Intangible assets, net 434,565 432,732 Deferred income taxes 253,985 262,563 Other assets 18,120 19,686 ------------ ------------ Total assets $ 1,571,827 $ 1,549,373 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Current portion of long-term debt $ 83,249 $ 73,084 Revolving credit facility 118,013 78,536 Accounts payable 56,945 69,669 Book overdrafts 26,186 22,457 Accrued compensation and benefits 25,055 22,288 Accrued advertising and promotion 48,450 39,550 Accrued interest 17,079 10,278 Other accrued liabilities 35,328 38,967 ------------ ------------ Total current liabilities 410,305 354,829 Long-term debt 962,671 1,024,378 Post-retirement benefits obligation 27,990 27,216 Other non-current liabilities 253 898 ------------ ------------ Total liabilities 1,401,219 1,407,321 ------------ ------------ Commitments and contingencies STOCKHOLDERS' EQUITY Preferred stock - par value $0.01 per share; authorized, 100,000,000 shares; no shares issued or outstanding $ -- $ -- Common stock - par value $0.01 per share; authorized, 300,000,000 shares; issued 78,364,174 and 78,218,034 shares 784 782 Additional paid-in capital 63,655 62,475 Treasury stock, at cost 4,400,000 shares (57,200) (57,200) Retained earnings 164,453 137,927 Accumulated other comprehensive loss (1,084) (1,932) ------------ ------------ Total stockholders' equity 170,608 142,052 ------------ ------------ Total liabilities and stockholders' equity $ 1,571,827 $ 1,549,373 ============ ============
See accompanying notes to consolidated financial statements. INTERNATIONAL HOME FOODS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (UNAUDITED) Three Months Ended March 31, 2000 1999 ------------ ------------ OPERATING ACTIVITIES: Net income $ 26,526 $ 32,531 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 11,142 10,621 Deferred income taxes 8,374 10,921 Stock option compensation -- 26 Gain on sale of business -- (15,779) Changes in assets and liabilities, net of acquisitions and divestiture: Increase in accounts receivable (859) (18,331) (Increase) decrease in inventories (24,184) 26,088 Decrease (increase) in other current assets 2,452 (3,424) (Decrease) increase in accounts payable (12,724) 6,471 Increase in accrued liabilities 14,829 28,773 Increase in non-current assets (632) (179) Increase in non-current liabilities 129 738 ------------ ------------ Net cash provided by operating activities 25,053 78,456 ------------ ------------ INVESTING ACTIVITIES: Purchases of plant and equipment, net (12,375) (10,865) Payments for acquired businesses, net of cash acquired (4,067) (37,733) Proceeds from sale of business -- 30,000 ------------ ------------ Net cash used in investing activities (16,442) (18,598) ------------ ------------ FINANCING ACTIVITIES: Increase (decrease) in book overdrafts 3,729 (2,993) Repayment of long-term debt (51,542) (25,802) Borrowings from revolving credit facility 89,500 13,124 Repayment of borrowings from revolving credit facility (49,909) (40,210) Proceeds from exercise of stock options 1,182 1,232 ------------ ------------ Net cash used in financing activities (7,040) (54,649) ------------ ------------ Effect of exchange rate changes on cash 488 821 ------------ ------------ Increase in cash and cash equivalents 2,059 6,030 Cash and cash equivalents at beginning of period 14,310 17,201 ------------ ------------ Cash and cash equivalents at end of period $ 16,369 $ 23,231 ============ ============ Cash paid during the period for: Interest 17,185 14,604 Income taxes 1,404 1,814
See accompanying notes to consolidated financial statements. INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 1. ACCOUNTING POLICIES Interim Financial Statements In the opinion of International Home Foods, Inc. ("the Company"), the accompanying consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the Company's financial position as of March 31, 2000 and the results of operations and cash flows for the three months ended March 31, 2000 and 1999. The results of operations for the three month period are not necessarily indicative of the results to be expected for the full year. The December 31, 1999 consolidated balance sheet was derived from the Company's audited financial statements but does not include all disclosures required by generally accepted accounting principles. The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's 1999 Annual Report on Form 10-K. Use of Estimates The accompanying financial statements have been prepared in accordance with generally accepted accounting principles and necessarily include amounts based on judgments and estimates made by management. Actual results could differ from these estimates. Estimates are used when accounting for potential bad debts, inventory obsolescence and spoilage, trade and promotion allowances, coupon redemptions, depreciation and amortization, stock option compensation, deferred income taxes and tax valuation allowances, pension and post-retirement benefits, restructuring charges and contingencies, among other items. Reclassifications Certain 1999 amounts have been reclassified to conform with the 2000 presentation. 2. INVENTORIES Inventories consist of: March 31, December 31, 2000 1999 ------------ ------------ Raw materials $ 77,298 $ 65,483 Work in progress 8,789 8,841 Finished goods 221,008 208,587 ------------ ------------ Total $ 307,095 $ 282,911 ============ ============
INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 3. COMPREHENSIVE INCOME Comprehensive income is as follows: Three Months Ended March 31, 2000 1999 ------------ ------------ (unaudited) Net income $ 26,526 $ 32,531 Foreign currency translation Amount before taxes $ 1,467 $ (89) Income tax (expense) benefit (619) 260 ------------ ------------ Other comprehensive income $ 848 $ 171 ------------ ------------ Total comprehensive income $ 27,374 $ 32,702 ============ ============
The following amounts are included in Accumulated other comprehensive loss at March 31, 2000 and December 31, 1999: March 31, December 31, 2000 1999 ------------ ------------ Minimum pension liability $ (29) $ (29) Foreign currency translation (1,055) (1,903) ------------ ------------ Accumulated other comprehensive loss $ (1,084) $ (1,932) ============ ============
4. BUSINESS SEGMENT INFORMATION The Company manufactures and markets a diversified portfolio of shelf-stable food products including entrees, side dishes, snacks, canned fish, canned meats as well as refrigerated surimi. The Company sells its products primarily in the United States, Canada and Mexico, and is not dependent on any single or major group of customers for its sales. The Company has three reportable business segments - Branded Products, Seafood and Private Label and Foodservice. Branded Products is defined as U.S. grocery sales for the following products: Chef Boyardee(R), Canned Meat and Beans brands (Libby's(R), Dennison's(R), Luck's(R) and Ranch Style(R), Ro*Tel(R), Specialty and Snack brands (PAM(R) cooking spray, Gulden's(R), Maypo(R), Wheatena(R), Maltex(R), G. Washington's(R), Crunch 'n Munch(R), Jiffy pop(R) and Campfire(R)). Seafood includes all sales for the Bumble Bee(R), Orleans(R), Libby's, Clover Leaf(R), Paramount(R) and Louis Kemp(R) brands of seafood products as well as private label and foodservice seafood sales. Private Label and Foodservice includes all private label canned pasta, cooking spray, fruit snacks, ready-to-eat cereals, wholesome snack bars, pie crust and personal care products and the sales to foodservice distributors. The All Other category is comprised of sales to the military, contract sales to Nestle, sales of Polaner(R) products and international sales which includes branded, private label and foodservice sales in Canada, Mexico, Puerto Rico, and other export sales. The Company sold its Polaner fruit spreads and spices business on February 5, 1999 (Note 6). INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) Business Segment Information, (Continued) The Company sells the products in each of its segments primarily to grocery wholesalers and distributors, grocery stores and supermarkets, convenience stores, drug and mass merchants and warehouse clubs. The Company evaluates segment performance based upon segment operating income (earnings before interest expense, net other [income] expense, and income taxes excluding unusual or infrequently occurring items, restructuring charge and stock compensation expense [income]). Certain centrally incurred costs (Corporate), are not allocated to the operating segments. The Company allocates certain charges, including depreciation, amortization, agent and broker commissions, storage, packing and shipping charges, and administrative costs for salaries, insurance and employee benefits, to its Branded Products segment, and to its Private Label and Foodservice segment based on a percentage of net sales. For the Three Months Ended March 31, 2000 1999 ------------ ------------ Net sales: Branded Products $ 220,614 $ 206,029 Seafood 187,427 159,966 Private Label and Foodservice 79,290 78,563 ------------ ------------ Subtotal - Reportable Segments 487,331 444,558 All Other 74,043 69,628 ------------ ------------ Total $ 561,374 $ 514,186 ============ ============ Segment operating income: Branded Products $ 41,342 $ 39,801 Seafood 13,033 9,834 Private Label and Foodservice 13,838 10,393 ------------ ------------ Subtotal - Reportable Segments 68,213 60,028 All Other 5,521 5,750 ------------ ------------ Total $ 73,734 $ 65,778 ============ ============ For the Three Months Ended March 31, 2000 1999 ------------ ------------ Reconciliation to Consolidated Results Segment operating income $ 73,734 $ 65,778 Less: Stock compensation expense -- 26 Unallocated expense 5,632 2,626 ------------ ------------ Total consolidated income from operations $ 68,102 $ 63,126 ============ ============
INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 5. ACQUISITIONS On July 19, 1999, the Company, through its subsidiary Bumble Bee Seafoods, Inc., acquired the manufacturing, sales distribution and marketing operations of Louis Kemp from Tyson Foods, Inc. for $68,792, including transaction fees. The Company financed this acquisition with borrowings under its Senior Bank Facilities. Louis Kemp manufactures and sells refrigerated and frozen surimi products. Surimi-based products are made from North Pacific ocean pollack and whiting fish meats. These products are primarily sold under the tradename Louis Kemp and other tradenames such as Captain Jac(R), SeaFest(R) and Pacific Mate(R). On January 19, 1999, the Company, through its subsidiary Bumble Bee Seafoods, Inc., acquired the Clover Leaf and Paramount canned seafood brands and business of British Columbia Packers ("Clover Leaf/Paramount brands") from George Weston Ltd. of Canada for a total purchase price of $40,394, including transaction fees. The acquisition was funded with borrowings under the Company's Senior Bank Facilities and cash on hand. The excess of cost over fair value of net assets acquired for the above acquisitions is amortized over 40 years for identifiable intangibles and for goodwill. These acquisitions have been accounted for using the purchase method of accounting, and the operating results of the acquired companies have been included in the consolidated financial statements from the dates of acquisition. The information below includes non-cash investing and financing activities supplemental to the consolidated statements of cash flows. A summary of the excess of cost over fair value of net assets acquired resulting from purchase price allocations for the 1999 acquisitions is as follows: CLOVER LEAF/ LOUIS PARAMOUNT KEMP BRANDS ------------ ------------ Cost of acquisition, including transaction fees $ 68,792 $ 40,394 Less acquired assets: Current assets 10,094 38,962 Property, plant and equipment 18,111 1,180 Other assets -- -- Add: liabilities assumed 1,016 9,411 ------------ ------------ Excess of cost over net assets acquired, including identifiable intangibles $ 41,603 $ 9,663 ============ ============
INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) Acquisitions, (Continued) The following unaudited pro forma consolidated results of operations have been prepared as if the acquisitions of Clover Leaf/Paramount and Louis Kemp and divestiture of Polaner had occurred as of the beginning of 1999 and reflect proforma adjustments for goodwill, interest expense and tax expense: For the Three Months Ended March 31, 1999 --------------------------------------- IHF(1) Acquisitions(2) Total -------- --------------- -------- Net sales $509,122 $33,952 $543,074 Operating income $ 62,767 $ 379 $ 63,146 Net income $ 22,547 $ (486) $ 22,061 Earnings per share: Basic $ 0.31 $ (0.01) $ 0.30 Diluted $ 0.30 $ (0.01) $ 0.29
(1) Excludes operations of and gain on sale of Polaner (See Note 6). (2) Amounts include Louis Kemp and Clover Leaf/Paramount brands. The unaudited pro forma consolidated results do not purport to be indicative of results that would have occurred had the acquisitions been in effect for the period presented, nor do they purport to be indicative of the results that will be obtained in the future. 6. SALE OF BUSINESS On February 5, 1999 the Company sold its Polaner fruit spreads and spices business to B&G Foods, Inc. for approximately $30.0 million in cash, resulting in a gain of $15.8 million ($9.6 million, net of tax or $0.13 per diluted share). 7. RELATED PARTY TRANSACTIONS Effective November 1, 1996, the Company entered into a 10-year monitoring and oversight agreement with an affiliate of its largest stockholder. The agreement provides for an annual fee of the greater of $1,000 or 0.1% of the budgeted consolidated net sales of the Company for the current year. In addition, effective November 1, 1996, the Company entered into a financial advisory agreement with the affiliate under which the affiliate will be entitled to a fee of 1.5% of the transaction value, as defined, for each add-on transaction, as defined. The Company incurred monitoring and oversight fees of $579 and $487 and financial advisory fees of $0 and $546 for the three months ended March 31, 2000 and 1999, respectively. INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) 8. GUARANTOR FINANCIAL DATA The Company's Senior Subordinated Notes are fully and unconditionally guaranteed by each of the Company's subsidiary guarantors on a joint and several basis. The Company has not presented separate financial statements and other disclosures concerning each of the subsidiary guarantors because management has determined that such information is not material to the holders of the Senior Subordinated Notes. The financial information for 2000 reflects the corporate re-organization, resulting from the Company's tax restructuring, effective January 1, 2000. Certain intercompany sales transactions between the parent and guarantor subsidiaries have been eliminated. Presented below is consolidating financial information including summarized combined financial information of the subsidiary guarantors: FOR THE THREE MONTHS ENDED MARCH 31, 2000 (unaudited) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ Net sales $ 265,650 $ 514,241 $ 47,133 (265,650) $ 561,374 Gross profit 154,992 268,811 17,302 (172,864) 268,241 Net income 14,627 11,049 850 -- 26,526 Net cash provided by (used in) operating activities 10,552 15,781 (1,280) -- 25,053 Net cash provided by (used in) investing activities 359 (16,287) (514) -- (16,442) Net cash provided by (used in) financing activities 27,674 (36,156) 1,442 -- (7,040)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (unaudited) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ Net sales $ 220,671 $ 250,911 $ 42,604 -- $ 514,186 Gross profit 128,854 92,109 12,861 -- 233,824 Net income 7,304 23,411(1) 1,816 -- 32,531(1) Net cash provided by (used in) operating activities 53,535 33,488 (8,567) -- 78,456 Net cash (used in) provided by investing activities (531) 13,538 (31,605) -- (18,598) Net cash (used in) provided by financing activities (52,453) (45,002) 42,806 -- (54,649)
The 1999 amounts have been reclassified for consistency from amounts previously reported. Amounts are not intended to report results as if the subsidiaries were separate stand-alone entities. (1) Includes an after-tax gain of $9.6 million ($15.8 million pre-tax) from sale of the Polaner fruit spread and spice business. INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (UNAUDITED) Guarantor Financial Data, (Continued) MARCH 31, 2000 (unaudited) Non- Guarantor Guarantor Parent Subsidiaries Subsidiaries Eliminations Consolidated --------- ------------ ------------ ------------ ------------ Current assets $ 34,545 $ 433,725 $ 84,934 $ -- $ 553,204 Non-current assets 1,120,208 675,209 14,219 (791,013) 1,018,623 Current liabilities 220,889 174,748 14,668 -- 410,305 Non-current liabilities 963,535 50,572 35,374 (58,567) 990,914 DECEMBER 31, 1999 Current assets $ 132,979 $ 304,110 $ 91,261 $ -- $ 528,350 Non-current assets 1,091,493 670,803 808 (742,081) 1,021,023 Current liabilities 200,671 132,201 21,957 -- 354,829 Non-current liabilities 1,041,449 5,195 33,109 (27,261) 1,052,492
9. IMPACT OF RECENT ACCOUNTING STANDARDS In June 1998, SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", was issued to establish standards for accounting for derivatives and hedging activities and supersedes and amends a number of existing standards. This statement requires all derivatives to be recognized in the statement of financial position as either assets or liabilities and measured at fair value. In addition, all hedging relationships must be designated, reassessed and documented pursuant to the provisions of SFAS 133. SFAS 133, as amended by SFAS 137, "Deferral of the effective date of SFAS 133", is effective for fiscal years beginning after June 15, 2000. The Company is currently evaluating the effect this statement will have on its financial statements. INTERNATIONAL HOME FOODS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 10. EARNINGS PER SHARE The table below summarizes the numerator and denominator for the basic and diluted earnings per share calculations (in thousands, except per share amounts). For the Three Months Ended March 31, 2000 1999 -------- -------- Numerator: Net income available to common shares $ 26,526 $ 32,531 Denominator: Average number of shares outstanding 73,918 73,303 Effect of dilutive stock options 2,111 2,500 -------- -------- Total number of shares outstanding 76,029 75,803 Basic earnings per share $ 0.36 $ 0.44 Diluted earnings per share $ 0.35 $ 0.43
11. RESTRUCTURING In September 1998, in conjunction with management's plan to reduce costs and improve operational efficiencies, the Company recorded a restructuring charge of $118.1 million ($75.3 million after tax). The principal actions in the restructuring plan involved the closure of the Vacaville, California and Clearfield, Utah production facilities and the related impact of the transfer of production to other facilities, mainly Milton, Pennsylvania, and the write-down of goodwill associated with the Campfire crisp rice snack bar brand and the Polaner fruit spreads brand. The Polaner business was subsequently sold (Note 6). At March 31, 2000, $3.0 million of restructuring charges remained in other accrued liabilities. This amount is comprised of multi-employer pension plan settlements and certain other employee benefit related costs. Payments totaling $8.1 million have been made to date, including $0.2 million for the three months ended March 31, 2000.