We have historically financed our operations and growth primarily with cash flows from operations, borrowings under our credit facilities, the issuance of long-term debt, operating leases, normal trade credit terms and the sale of our common stock. Despite our growth in net sales, we have reduced our working capital needs by financing our investment in inventory principally with accounts payable and outstanding checks in excess of deposits. We typically fund our acquisitions and expect to fund future acquisitions, with our existing cash, additional borrowings under our credit facility and the issuance of debt or equity securities.
Cash and cash equivalents totaled $39.2 million at March 29, 2003, an increase of $5.5 million from December 28, 2002. The increase was the result of cash provided by operating activities of $64.2 million, partially offset by cash used in investing activities of $25.4 million and cash used in financing activities of $33.3 million.
Cash flows from operating activities. Cash provided by operating activities was $64.2 million in the 2003 quarter. In the 2003 quarter, the primary sources of cash from operating activities were net earnings and increased levels of trade payables, income taxes payable and accrued expenses, partially offset by increased levels of accounts receivable and inventories. Cash provided by operating activities was $33.3 million in the 2002 quarter. In the 2002 quarter, the primary sources of cash from operations were net earnings and increased levels of trade payables and accrued expenses and decreased levels of income taxes receivable, partially offset by increased levels of inventories.
Cash used in investing activities. Cash used in investing activities was $25.4 million in the 2003 quarter. Capital expenditures, excluding acquisitions of other businesses, were $20.2 million in the 2003 quarter. Capital expenditures in the 2003 quarter included Fresh-cut processing equipment and an expansion of our Customized facility in Maryland. We anticipate that our total capital expenditures, excluding acquisitions, for fiscal 2003 will be approximately $130 million. Cash used in investing activities in the 2003 quarter also included $10.0 million paid to the former shareholders of Fresh Express as a result of certain contractual obligations contained in the purchase agreement for Fresh Express, which we acquired in 2001. In the 2003 quarter, we also received $296,000, net, related to contractual obligations in the purchase agreements for other companies acquired in 2001 and as a result of the closing net worth adjustment and certain related claims in connection with our 2002 acquisition of Middendorf Meat. In the 2003 quarter, we also received proceeds of $4.5 million from the sale of our investment in a fresh-cut produce facility and recorded a gain on the sale of $956,000. Cash used in investing activities in the 2002 quarter was $11.2 million. Capital expenditures in the 2002 quarter totaled $11.7 million.
Cash used in financing activities. Cash used in financing activities was $33.3 million in the 2003 quarter. In the 2003 quarter, cash used in financing activities included net payments of $18.0 million on our revolving credit facility and an increase in outstanding checks in excess of deposits of $17.7 million. In the 2003 quarter, cash flows from financing activities consisted of $3.3 million of proceeds from the exercise of stock options and purchases under our employee stock purchase plan. Cash provided by financing activities was $554,000 in the 2002 quarter. In the 2002 quarter, cash flows from financing activities consisted of proceeds of $3.4 million from the exercise of stock options and purchases under our employee stock purchase plan. Cash used in financing activities in the 2002 quarter included a decrease in outstanding checks in excess of deposits of $2.2 million.
Financing Activities
In October 2001, we entered into a $200.0 million revolving credit facility, referred to as the Credit Facility, with several financial institutions. The Credit Facility expires in 2006 and bears interest at a floating rate equal to, at our election, the agent bank's prime rate or a spread over LIBOR, which varies based upon our leverage ratio, as defined in the credit agreement. The Credit Facility has a commitment fee, ranging from 0.20% to 0.25% of the average daily unused portion of the total facility, based on our leverage ratio, as defined in the credit agreement. The Credit Facility also requires the maintenance of certain financial ratios, as defined in the credit agreement, and contains customary events of default. The Credit Facility allows for the issuance of up to $90.0 million of standby letters of credit, which reduce borrowings available under the Credit Facility. At March 29, 2003, we had $28.3 million of outstanding letters of credit under the Credit Facility. The Cre dit Facility also requires that our existing subsidiaries and future subsidiaries that engage in any business operation or own assets with a fair market value in excess of $5 million guarantee all of our borrowings, letters of credit and other obligations under the Credit Facility. At March 29, 2003, we had $80.0 million outstanding under the Credit Facility and $91.7 million available under the Credit Facility, subject to compliance with customary borrowing conditions. At March 29, 2003, our borrowings under the Credit Facility bore interest at a rate of 2.06% per annum. On April 28, 2003, subsequent to the end of the 2003 quarter, we amended and restated our Credit Facility, which, among other things, increased the facility to $350.0 million from $200.0 million. For further details, refer to "Subsequent Events" below.
We believe that our cash flows from operations, borrowings under our credit facilities and the sale of undivided interests in receivables under the Receivables Facility, discussed below, will be sufficient to fund our operations and capital expenditures for the foreseeable future. However, we will likely require additional sources of financing to the extent that we make additional acquisitions in the future.
Off Balance Sheet Financing Activities
We utilize two sources of funding that could generally be described as off balance sheet financing - the Receivables Facility and our two master operating lease facilities. The Receivables Facility represents off balance sheet financing because the transaction and the financial institution's ownership interest in certain of our accounts receivable results in assets being removed from our consolidated balance sheet to the extent that the transaction qualifies for sale treatment under generally accepted accounting principles. This treatment requires us to account for the transaction with the financial institution as a sale of the undivided interest in the accounts receivable instead of reflecting the financial institution's net investment of $78.0 million as debt.
In July 2001, we entered into the Receivables Facility, under which PFG Receivables Corporation, a wholly owned, special-purpose subsidiary, sold an undivided interest in certain of our trade receivables. PFG Receivables Corporation was formed for the sole purpose of buying receivables generated by certain of our operating units and selling an undivided interest in those receivables to a financial institution. Under the Receivables Facility, certain of our operating units sell a portion of their accounts receivable to PFG Receivables Corporation, which in turn, subject to certain conditions, may from time to time sell an undivided interest in these receivables to a financial institution. Our operating units continue to service the receivables on behalf of the financial institution at estimated market rates. Accordingly, we have not recognized a servicing asset or liability. The amount of the undivided interest in the receivables owned by the financial institution cannot exceed $90.0 m illion at any one time. In July 2002, we extended our Receivables Facility through July 11, 2003.
We record the sale of the undivided interest in accounts receivable to the financial institution according to Statement of Financial Accounting Standards, or SFAS, No. 140,Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Accordingly, at the time the undivided interest in receivables is sold, the receivables are removed from our consolidated balance sheet. We record a loss on the sale of the undivided interest in these receivables, which includes a discount, based upon the receivables' credit quality and a financing cost for the financial institution, based upon a 30-day commercial paper rate. At March 29, 2003, the rate under the Receivables Facility was 1.78% per annum.
We received $78.0 million of proceeds from the sale of the undivided interest in receivables under the Receivables Facility in 2001, and we continue to securitize our accounts receivable. At March 29, 2003, securitized accounts receivable totaled $117.8 million, which included $78.0 million sold to a financial institution and derecognized from the consolidated balance sheet and included our residual interest in accounts receivable of $39.8 million, which was included in accounts receivable on our consolidated balance sheet. The Residual Interest represents our retained interest in receivables held by PFG Receivables Corporation. We measured the Residual Interest using the estimated discounted cash flows of the underlying accounts receivable, based on estimated collections and a discount rate approximately equivalent to our incremental borrowing rate. The loss on sale of the undivided interest in receivables of $324,000 and $438,000 in the 2003 and 2002 quarters, respectively, is includ ed in other expense, net, in the condensed consolidated statement of earnings and represents our cost of securitizing those receivables with the financial institution.
We have two master operating lease facilities. In September 1997, we entered into our first master operating lease facility, referred to as the First Facility, to construct or purchase various distribution centers and processing plants. In February 2001, we increased the First Facility from $47.0 million to $55.0 million. In September 2002, the lessor sold one processing plant previously included in the First Facility to a third party unaffiliated with us. We concurrently entered into an operating lease with that unaffiliated third party for the same processing plant. The operating lease has an initial term of 22 years, plus five renewal options of five years each. Also in September 2002, the original expiration date of the leases in the First Facility, we extended the expiration date of the remaining leases in this facility to June 9, 2005, and decreased the size of this facility to $35.8 million. As of March 29, 2003, the First Facility included three distribution centers. Throug h March 29, 2003, construction expenditures by the lessor under the First Facility for these three centers totaled $35.8 million.
In June 2000, we entered into a $60.0 million master operating lease facility, referred to as the Second Facility, to construct or purchase various office buildings and distribution centers. In September 2002, the lessor sold one distribution center previously included in the Second Facility to a third party unaffiliated with us. We concurrently entered into an operating lease with that unaffiliated third party for the same distribution center. The operating lease has an initial term of 22 years, plus five renewal options of five years each. Also in September 2002, we reduced the size of this facility to $24.2 million. As of March 29, 2003, the Second Facility included two distribution centers and one office building. The leases relating to these three properties, as well as any other leases that we may enter into under this facility in the future, end on June 9, 2005. Through March 29, 2003, construction expenditures by the lessor under the Second Facility totaled $20.5 million.
Under both of these master operating lease facilities, the lessor owns the distribution centers and office building, incurs the related debt to construct the properties, and thereafter leases each property to us. We have entered into leases for each of the properties in these facilities. Upon the expiration of the leases under the First and Second Facilities, we may seek to renew the leases. If we are unable to or choose not to renew the leases, we have the option of facilitating the sale of the properties to third parties or purchasing the properties at their original cost. If the properties in the First Facility and the Second Facility are sold to third parties for less than their aggregate original cost, we are obligated, under residual value guarantees, to pay the lessor an amount equal to the lesser of either the shortfall or 88% and 85%, respectively, of original cost. We may not be able to renew the leases or sell the properties to third parties, and we may require substantial additional financing if we are required to purchase these properties upon the expiration of the master operating lease facilities. Because of the location and condition of each of the distribution centers and office building in the First and Second Facilities, we believe that the anticipated fair value of these properties could eliminate or substantially reduce our exposure under the residual value guarantees.
Our leases under the two master operating lease facilities qualify for operating lease accounting treatment under SFAS No. 13,Accounting for Leases.Therefore, the buildings and the debt incurred to construct them of $56.3 million as of March 29, 2003 were not included on our consolidated balance sheet. In the third quarter of 2003, we will be required to adopt the provisions of Financial Accounting Standards Board, or FASB, Interpretation No. 46, or FIN 46,Consolidation of Variable Interest Entities. Under the current structure of our First and Second Facilities, we will be required to consolidate these facilities upon the adoption of FIN 46. If consolidated, our property, plant and equipment and current and long-term debt will increase on our consolidated balance sheet. We are currently evaluating the impact of adopting FIN 46 on our consolidated financial position and results of operations.
Contractual Obligations
At March 29, 2003, our Fresh-cut segment had contracts to purchase produce totaling $82.5 million. These contracts expire at various times throughout 2003 and 2004. Amounts due under these contracts were not included on our consolidated balance sheet at March 29, 2003, in accordance with generally accepted accounting principles.
In connection with certain acquisitions, we have entered into earnout agreements with certain of the former owners of the businesses that we have acquired. These agreements are based upon certain net earnings and synergy targets, as defined in each agreement, and discussed in more detail below in "Business Combinations." These earnout payments are for companies acquired from 2000 to 2002, and may include payments in cash and/or shares of our common stock. As of March 29, 2003, the maximum potential earnout obligation, assuming all future earnout targets are met in their earliest possible years, totaled $49.4 million: $14.7 million in the remainder of 2003, $21.0 million in 2004, $12.0 million in 2005 and $1.7 million in 2006. These contingent payments are not recorded on our consolidated balance sheet at March 29, 2003, in accordance with generally accepted accounting principles. If paid, these earnout payments would increase the goodwill of the companies acquired. If the future ear nout targets are not met, these maximum amounts will be lower, or we may not be required to make any payments.
Our two master operating lease facilities and certain of our other operating leases, including leases of tractors and trailers, contain residual value guarantees. These guarantees are not recorded on our consolidated balance sheet as of March 29, 2003, in accordance with generally accepted accounting principles. At March 29, 2003, the undiscounted maximum amount of potential future payments under our residual value guarantees for all of our other operating leases totaled approximately $6.5 million, which would be mitigated by the fair value of the leased assets at lease expiration. These leases have expiration dates ranging from 2003 to 2010. The undiscounted maximum amount of potential future payments under residual value guarantees relative to the properties in the First and Second Facilities is $48.5 million. As discussed above in "Liquidity and Capital Resources," we believe that the anticipated fair value of the properties in the master operating lease facilit ies could eliminate or substantially reduce our exposure under these residual value guarantees. Note 10 to the condensed consolidated financial statements provide further discussion of these guarantees and the related accounting pronouncements. In the 2003 quarter, we adopted FIN 45,Guarantor's Accounting and Disclosure Requirements for Guarantees Including Indirect Guarantees of Indebtedness of Others, which required us to record a liability on our consolidated balance sheet for the fair value of guarantees for issued or modified after December 15, 2002.
