-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VfE5ZbSy7mKYhSaAelHMDm+uBTGkBnavDNqrDpR9IUyfBF6sNjPr03UGvxp+mfNO boImtm2YPMb9+O0NPkw8YQ== 0000950144-96-007078.txt : 19961016 0000950144-96-007078.hdr.sgml : 19961016 ACCESSION NUMBER: 0000950144-96-007078 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961015 SROS: AMEX SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED FOODS INC CENTRAL INDEX KEY: 0000728258 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 741264568 STATE OF INCORPORATION: DE FISCAL YEAR END: 0228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08574 FILM NUMBER: 96643478 BUSINESS ADDRESS: STREET 1: 10 PICTSWEET DR CITY: BELLS STATE: TN ZIP: 38006 BUSINESS PHONE: 9014227600 MAIL ADDRESS: STREET 1: 10 PICTSWEET DRIVE CITY: BELLS STATE: TN ZIP: 38006 10-Q 1 UNITED FOODS, INC. 10-Q 8-31-96 1 =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------------------- FORM 10-Q --------------------------- (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996 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 1-8574 UNITED FOODS, INC. (Exact name of registrant as specified in its charter) DELAWARE 74-1264568 (State of Incorporation) (I.R.S. Employer Identification No.) TEN PICTSWEET DRIVE, BELLS, TN 38006 (Address of principal executive offices) (Zip Code) Registrants telephone number, including area code: (901) 422-7600 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 October 10, 1996, 5,110,425 shares of Class A Common Stock and 5,699,504 shares of Class B Common Stock of United Foods, Inc. were outstanding. =============================================================================== 2 INDEX PAGE Part I: Financial Information: Item 1: Financial Statements: Balance Sheets 2-3 Statements of Operations 4 Statements of Cash Flows 5-6 Notes to Financial Statements 7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 8-10 Part II: Other Information and Signatures 11 Exhibit A - Computation of Earnings Per Common Share 12
1 3 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS UNITED FOODS, INC. BALANCE SHEETS (DOLLARS IN THOUSANDS)
AUGUST 31, FEBRUARY 29, 1996 1996 ---------- ------------ Unaudited --------- ASSETS Current Assets: Cash $ 538 $ 1,029 Accounts Receivable 14,598 14,502 Inventories (Note 3) 47,800 43,099 Prepaid Expenses and Miscellaneous 3,114 4,592 Deferred Income Taxes (Note 5) 1,015 777 -------- -------- Total Current Assets 67,065 63,999 -------- -------- Property and Equipment: Land and Land Improvements 8,825 8,965 Buildings and Leasehold Improvements 21,098 21,039 Machinery, Equipment and Improvements 92,444 92,536 -------- -------- 122,367 122,540 Less Accumulated Depreciation (63,754) (60,204) -------- -------- Net Property and Equipment 58,613 62,336 -------- -------- Other Assets 1,428 1,853 -------- -------- Total Assets $127,106 $128,188 -------- --------
See accompanying notes to financial statements. 2 4 UNITED FOODS, INC. BALANCE SHEETS (DOLLARS IN THOUSANDS)
AUGUST 31, FEBRUARY 29, 1996 1996 ---------- ------------ Unaudited --------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts Payable $ 17,166 $ 11,092 Accruals 7,045 5,870 Income Taxes Payable (Note 5) 187 206 Current Maturities of Long-term Debt 4,672 4,667 -------- -------- Total Current Liabilities 29,070 21,835 Long-term Debt, Less Current Maturities 38,454 46,650 Deferred Income Taxes (Note 5) 4,924 5,169 -------- -------- Total Liabilities 72,448 73,654 -------- -------- Stockholders' Equity: Common Stock, Class A (Notes 6 and 7) 5,110 7,650 Common Stock, Class B, Convertible (Notes 6 and 7) 5,700 7,096 Additional Paid-in Capital 2,463 8,644 Retained Earnings 41,385 41,261 -------- -------- 54,658 64,651 Less Cost of Treasury Stock (Note 7) - (10,117) -------- -------- Total Stockholders' Equity 54,658 54,534 -------- -------- Total Liabilities and Stockholders' Equity $127,106 $128,188 -------- --------
See accompanying notes to financial statements. 3 5 UNITED FOODS, INC. STATEMENTS OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED AUGUST 31, ENDED AUGUST 31, -------------------- ------------------ 1996 1995 1996 1995 ------- ------- ------- ------- Gross Sales and Services Less Discounts, Returns and Allowances $42,628 $39,885 $91,336 $84,704 Costs of Sales and Services (Note 3) 34,809 32,489 74,650 68,132 ------- ------- ------- ------- Gross Profit 7,819 7,396 16,686 16,572 Selling, Administrative and General Expenses 6,924 7,446 14,971 15,408 ------- ------- ------- ------- Operating Income (Loss) 895 (50) 1,715 1,164 ------- ------- ------- ------ Interest Income (Expense) - Net (887) (855) (1,951) (1,542) Miscellaneous Income (Expense) - Net (Note 4) 34 (9) 437 (13) ------- ------- ------ ------- Total Other Income and (Expense) (853) (864) (1,514) (1,555) ------- ------- ------ ------- Income (Loss) Before Taxes on Income (Benefit) 42 (914) 201 (391) Taxes on Income (Benefit) (Note 5) 16 (362) 77 (155) ------- ------- ------ ------- Net Income (Loss) $ 26 $ (552) $ 124 $ (236) ======= ======= ====== ======= Common Share and Common Share Equivalent (Note 8) 11,107 11,797 11,112 11,796 ======= ======= ======= ======= EARNINGS (LOSS) PER COMMON SHARE AND COMMON SHARE EQUIVALENT: (NOTE 8) $ .00 $ (.05) $ .01 $ (.02) ======= ======= ======= ======= Cash Dividends Per Common Share: Class A $ -0- $ -0- $ -0- $ -0- Class B $ -0- $ -0- $ -0- $ -0-
See accompanying notes to financial statements. 4 6 UNITED FOODS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) (DOLLARS IN THOUSANDS)
FOR THE SIX MONTHS ENDED AUGUST 31, ----------------------- 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ 124 $ (236) Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 3,947 3,577 Provision for losses on accounts receivable 83 94 (Gain) loss on disposal of property and equipment (55) 4 Adjustments to property held for disposal (212) - Deferred income taxes (483) (475) Change in assets and liabilities: Accounts and notes receivable (179) 1,467 Inventories (4,701) (17,150) Prepaid expenses and miscellaneous 1,478 1,283 Other assets 425 516 Accounts payable and accruals 7,409 10,298 Income taxes (19) (919) ------- -------- Net cash provided (used) by operations 7,817 (1,541) ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (669) (8,815) Proceeds from sale of other property and equipment 552 16 ------- -------- Net cash used by investing activities (117) (8,799) ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term borrowings - 12,865 Payments of long-term debt (8,191) (2,233) Exercise of stock options - 6 ------- -------- Net cash provided (used) by financing activities (8,191) 10,638 ------- -------- NET INCREASE (DECREASE) IN CASH FOR THE PERIOD (491) 298 CASH AND CASH EQUIVALENTS, beginning of period 1,029 452 ------- -------- CASH AND CASH EQUIVALENTS, end of period $ 538 $ 750 ======= ========
See accompanying notes to financial statements. 5 7 UNITED FOODS, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) (CONCLUDED) (DOLLARS IN THOUSANDS)
FOR THE SIX MONTHS ENDED AUGUST 31, ----------------------- 1996 1995 ---- ---- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the six months for: Interest $2,215 $1,441 Income taxes $ 704 $1,364 NON-CASH INVESTING AND FINANCING ACTIVITIES: Capital expenditures of $-0-, $160, $142 and $310 are included in accounts payable at August 31, 1996, February 29, 1996, August 31, 1995 and February 28, 1995, respectively.
See accompanying notes to financial statements. 6 8 UNITED FOODS, INC. NOTES TO FINANCIAL STATEMENTS 1. The interim financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended February 29, 1996. Significant accounting policies and other disclosures normally provided have been omitted since such items are disclosed therein. In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly its financial position as of August 31, 1996 and its results of operations and cash flows for the six months ended August 31, 1996 and 1995. 2. The results of operations for the six months ended August 31, 1996 and 1995 are not necessarily indicative of the results to be expected for the fiscal year. 3. Inventories are summarized as follows:
AUGUST 31, 1996 FEBRUARY 29, 1996 --------------- ----------------- Finished products $41,783,000 $36,863,000 Raw materials 2,450,000 3,129,000 Growing crops 2,389,000 1,948,000 Merchandise and supplies 1,178,000 1,159,000 ----------- ----------- $47,800,000 $43,099,000 =========== ===========
Substantially all of the Company's inventories are valued at the lower of cost (first-in, first-out) or market at each fiscal year end. However, due to the seasonality of vegetable processing, the gross profit method, at the estimated annual rate, is used to determine frozen vegetable cost of goods sold in interim financial statements. 4. Miscellaneous Income for the six months ended August 31, 1996 includes the recognition of a claim in the amount of $167,000 and $212,000 to restore the carrying value of property held for disposal to its original cost, based on its current estimated fair value. 5. Taxes on income consist of the current and deferred taxes required to be recognized for the periods. Approximately $2,000,000 in operating loss carryforwards is available to reduce future taxable income through 2008 and, in accordance with the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", the related future income tax benefits have been recognized by the Company. 6. Each Class B common share is convertible into one share of Class A common stock at the holder's election. Holders of the Class A common stock are entitled to a preference dividend of $.025 per share for any quarter and each preceding quarter of the Company's fiscal year before the holders of the Class B common stock are entitled to any regular cash dividend. Class A shareholders have the right to elect a number of directors that equal at least 25% of the members of the board of directors. In addition, on matters requiring the classes to vote together, the Class A holders are entitled to 1/10 vote per share and holders of Class B common stock are entitled to one vote per share. 7. In August 1996, the Company cancelled and retired 2,539,382 shares of Class A Common Stock, $1.00 par value and 1,396,326 shares of Class B Common Stock, $1.00 par value, previously held in its treasury. 8. Earnings per share of common stock and common stock equivalents have been computed based upon the weighted average number of shares outstanding during the three and six months ended August 31, 1996 and August 31, 1995, respectively. The assumed exercise of common stock options does not materially dilute earnings per share for the three and six months ended August 31, 1996 and common stock equivalents are not considered in the computation for the three and six months ended August 31, 1995, as the effect would be anti-dilutive. 7 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of certain significant factors which have affected the Company's financial condition and earnings during the periods included in the accompanying balance sheets and statements of income. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES The Company's primary sources of cash are operations and external committed credit facilities. At August 31, 1996 the Company's revolving credit facilities totaled $26,000,000, all of which was currently available. During fiscal 1996, the Company obtained a $5,000,000 increase in one of its revolving credit facilities for the months of September through November, 1995, such increase reducing to $3,000,000 for December, 1995, $2,000,000 for January, 1996 and $1,000,000 for February, 1996. In September 1996, the Company received a $6,000,000, 8.98%, 10-year term loan commitment, with a 15-year amortization, on its Ogden, Utah facility. Closing is expected during October, 1996 and funds received will be applied against current revolving debt. The Company's sources of liquidity are expected to adequately meet requirements for the upcoming year and the foreseeable future; however, new financing alternatives are constantly evaluated to determine their practicality and availability in order to provide the Company with sufficient and timely funding at the least possible cost. The $3,000,000 and $23,000,000 revolving credit facilities currently mature in fiscal 1999. One-year extensions of maturity dates of the revolving credit facilities will be considered by the lenders annually. If annual extensions are not granted, the Company will then investigate revolving credit facilities with other lenders and believes it can replace any current revolving credit facility within its remaining 24-month term. Operations provided net cash of $7,817,000 during the six months ended August 31, 1996 and used cash of $1,541,000 during the same period of the prior year. A substantial portion of this increase is attributable to decreases in inventories, primarily as the result of weather related shortages and delays related to the current year's vegetable pack, offset in part by increases in accounts and notes receivable and decreases in accounts payable and accruals. Investing activities used cash of $117,000 for the six months ended August 31, 1996 compared with cash used of $8,799,000 during the same period of the prior year, primarily as the result of decreased capital expenditures in the current year. Financing activities used cash of $8,191,000 for the six months ended August 31, 1996 and provided net cash of $10,638,000 during the same period of the prior year. This decrease was primarily due to reduced borrowings attributable to the decreased inventories and capital expenditures previously mentioned. Working capital at August 31, 1996 was $37,995,000, compared to $42,164,000 at February 29, 1996. The decrease is primarily due to the increases in accounts payable and accruals, offset in part by increased inventories. The Company's ratio of debt to equity decreased to 1.33 to 1 at August 31, 1996 from 1.35 to 1 at February 29, 1996. CAPITAL EXPENDITURES Capital expenditures for fiscal 1997 are estimated to be approximately $1,000,000, which is approximately $7,000,000 less than depreciation expense projected for fiscal 1997. Capital expenditures are expected to be for normal replacement of older equipment with more efficient and energy saving equipment. These expenditures are expected to be funded from operations and the Company's revolving credit facilities. 8 10 RESULTS OF OPERATIONS OVERVIEW AND TRENDS The Company's product line is made up of agricultural products which are subject to the cyclical conditions and risks inherent in the agricultural industry. The Company bears part of the growing risks and all of the processing and marketing risks of these agricultural products. Weather abnormalities and excess inventories sometimes cause substantial reductions in the annual volume of product processed in facilities that are owned or leased by the Company. When this happens, the unit cost of that year's production will increase substantially, resulting in reduced profit margins for one or more years. On the other hand, when bumper crops occur unit costs will decrease but selling prices will, in general, be depressed. The Company has always been faced with very strong competition in the marketplace from large brand name competitors, private regional U. S. vegetable processors, and privately-owned Mexican vegetable processors. These competitive pressures, coupled with low overall growth, have led to weak market pricing. We anticipate that this condition will continue. In addition to general inflation and the growing, processing and marketing risks described above, the Company faces significant costs associated with increasing governmental regulation, the loss of land and water available for agriculture in California and the increasing competition due to world-wide facilitation of trade. As a result of these factors, the Company's earnings history is cyclical and will continue to be so in the future. The effect on the Company's operations and its ability to withstand the costs of ongoing and developing healthcare, labeling, OSHA, EPA, taxation and other governmental regulations is unknown. SUPPLY AGREEMENTS The Company has entered into two multi-year reciprocal supply agreements with other food processing companies. Through these agreements the Company procures frozen vegetables to meet certain production and inventory requirements. Also, the Company sells frozen vegetables and fresh mushrooms to the other food processors. REVENUES Net sales and service revenue increased $2,743,000 (6.9%) and $6,632,000 (7.8%) for the three and six months periods ended August 31, 1996, respectively, as compared with the same periods of the prior year. Sales volume increased 8.3% and 12.4% for the three and six month periods, respectively. The increase in revenues is attributable primarily to sales associated with the Company's Supply Agreements (previously mentioned), distribution gains for certain of the Company's marketing programs and stronger first six months sales volumes for existing customers as compared with the first six months of the prior year. Sales allowances increased $227,000 (6.5%) for the quarter and $222,000 (2.8%) for the six months, as compared to the prior year, primarily due to increased gross sales. COST OF SALES AND SERVICES AND GROSS PROFIT Gross profit increased $423,000 (5.7%) and $114,000 (.7%) for the three and six month periods ended August 31, 1996, respectively as compared with the same periods of the prior year. The gross margin decreased from 18.54% to 18.34% and from 19.56% to 18.26% for the quarter and six months, respectively. The gross profit method, at the estimated annual gross profit rate, is used to determine cost of goods sold in interim financial statements (See Note 3 - Notes to Financial Statements). Cost of sales and services increased $2,320,000 (7.1%) for the quarter and $6,518,000 (9.6%) for the six months as compared with the same periods of the prior year, primarily as the result of the 8.3% and 12.4% respective sales volume increases in the current year. 9 11 SELLING, ADMINISTRATIVE AND GENERAL EXPENSES Selling, general administrative expenses decreased $522,000 (7.0%) and $437,000 (2.8%) respectively, for the three and six month periods ended August 31, 1996, as compared with the same periods of the prior year. Administrative and general expenses accounted for $327,000 (8.2%) and $333,000 (3.9%) of the decrease for the three and six months respectively, primarily as the result of decreased incentive compensation and related benefits and decreased production incentive compensation related to the Company's mushroom farms. Storage expenses decreased $238,000 (10.9%) and $209,000 (4.9%) for the three and six months respectively, primarily due to lower average inventories in fiscal 1997. Other expenses increased $43,000 (3.3%) and $105,000 (3.9%) for the three and six months, respectively, primarily as the result of increased brokerage, advertising and other selling expenses. INTEREST EXPENSE Interest expense - net increased $32,000 (3.7%) for the quarter and $409,000 (26.5%) for the six months as compared to the same periods of the prior year, primarily as the result of borrowings related to fiscal 1996 capital expenditures, offset in part by decreased borrowings related to lower average inventories. MISCELLANEOUS INCOME Miscellaneous income in the amount of $34,000 for the three months ended August 31, 1996 consists primarily of net gains from the sale of plant, property and equipment. Miscellaneous income in the amount of $437,000 for the six months ended August 31, 1996 consists of $212,000 to restore the carrying value of certain property held for disposal to its original cost, based on its current fair market value. Further, miscellaneous income includes the recognition of a claim in the amount of $167,000 and net gains on the sale of plant, property and equipment. TAXES ON INCOME Taxes on income for the three and six months ended August 31, 1996 and 1995 consist of current and deferred taxes provided at the estimated effective federal and state tax rates expected to be recognized for the respective periods. 10 12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 12 - Computation of earnings per common share. Exhibit 27 - Financial Data Schedule (SEC use only). (b) Reports on Form 8-K - There were no reports on Form 8-K filed for during the three months ended August 31, 1996. 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. UNITED FOODS, INC. Date: October 14, 1996 By s/n Carl W. Gruenewald, II -------------------- --------------------------------------- C. W. Gruenewald, II Senior Vice President, Chief Financial Officer & Treasurer 11 EX-12 2 COMPUTATION OF EARNINGS PER COMMON SHARE 1 EXHIBIT 12 UNITED FOODS, INC. COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED AUGUST 31, ENDED AUGUST 31, --------------------- --------------------- 1996 1995 1996 1995 -------- -------- -------- --------- SHARES: Weighted average number of common shares outstanding 10,809,929 11,797,498 10,809,929 11,795,840 Effect of shares issuable under option plan and warrants as determined by the treasury stock method 297,500 (A) 301,822 (A) ---------- ----------- ----------- ----------- Weighted average number of common shares outstanding as adjusted 11,107,429 11,797,498 11,111,751 11,795,840 ========== =========== =========== =========== PER COMMON SHARE COMPUTATIONS: Net Income (Loss) $ 26,000 $ (552,000) $ 124,000 $ (236,000) =========== =========== =========== =========== Net Income (Loss) $ .00 $ (.05) $ .01 $ (.02) =========== =========== =========== ===========
(A) Not considered in computation as the effect would be anti-dilutive. EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS FEB-28-1997 AUG-31-1996 538 0 14,945 347 47,800 67,065 122,367 63,754 127,106 29,070 38,454 0 0 10,810 43,848 127,106 91,336 91,336 74,650 74,650 14,971 83 1,951 201 77 124 0 0 0 124 .01 .01
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