UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 December 23, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
File Number 0-20539
PRO-FAC COOPERATIVE, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-6036816
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
90 Linden Place, PO Box 682, Rochester, NY 14603
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (716) 383-1850
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 twelve months (or 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
---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of January 27, 2001.
Class A Common Stock - 2,184,230
Class B Common Stock - 723,229
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statements of Operations, Net Proceeds and Comprehensive Income
(Unaudited)
(Dollars in Thousands)
Three Months Ended Six Months Ended
------------------------------ ------------------------------
December 23, December 25, December 23, December 25,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net sales $ 374,659 $ 373,962 $ 677,148 $ 670,210
Cost of sales (257,800) (245,030) (474,639) (455,686)
---------- ----------- ---------- ----------
Gross profit 116,859 128,932 202,509 214,524
Selling, administrative, and general expense (82,833) (91,481) (147,170) (155,467)
Income from joint venture 949 1,204 1,224 1,695
Gain on sale of assets 0 2,293 0 2,293
---------- ----------- ---------- ----------
Operating income 34,975 40,948 56,563 63,045
Interest expense (22,415) (21,835) (43,941) (42,484)
---------- ----------- ---------- ----------
Income before taxes, dividends, and allocation of net proceeds 12,560 19,113 12,622 20,561
Tax provision (3,321) (4,633) (4,164) (5,678)
---------- ----------- ---------- ----------
Net income $ 9,239 $ 14,480 $ 8,458 $ 14,883
========== =========== ========== ==========
Allocation of net proceeds:
Net income $ 9,239 $ 14,480 $ 8,458 $ 14,883
Dividends on common and preferred stock (1,840) (1,603) (4,210) (3,706)
---------- ----------- ---------- ----------
Net proceeds 7,399 12,877 4,248 11,177
Allocation to earned surplus (5,303) (6,301) (2,152) (4,601)
---------- ----------- ---------- ----------
Net proceeds available to members $ 2,096 $ 6,576 $ 2,096 $ 6,576
========== =========== ========== ==========
Net proceeds available to members:
Estimated cash payment $ 524 $ 1,644 $ 524 $ 1,644
Qualified retains 1,572 4,932 1,572 4,932
---------- ----------- ---------- ----------
Net proceeds available to members $ 2,096 $ 6,576 $ 2,096 $ 6,576
========== =========== ========== ==========
Net income $ 9,239 $ 14,480 $ 8,458 $ 14,883
Other comprehensive income:
Unrealized (loss)/gain on hedging activity (1,414) 0 890 0
---------- ----------- ---------- ----------
Comprehensive income $ 7,825 $ 14,480 $ 9,348 $ 14,883
========== =========== ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Balance Sheets
(Dollars in Thousands) ASSETS December 23, June 24, December 25,
2000 2000 1999
------------ -------- ------------
(Unaudited) (Unaudited)
Current assets:
Cash and cash equivalents $ 5,763 $ 4,994 $ 10,489
Accounts receivable, trade, net 126,239 101,065 122,849
Accounts receivable, other 14,337 10,488 13,163
Income taxes refundable 1,511 9,869 0
Current deferred tax asset 12,176 12,176 16,160
Inventories 419,338 341,931 437,750
Current investment in CoBank 976 2,927 801
Prepaid manufacturing expense 4,675 26,364 3,962
Prepaid expenses and other current assets 20,268 19,688 20,664
---------- ---------- ----------
Total current assets 605,283 529,502 625,838
Investment in CoBank 16,203 16,203 19,693
Investment in joint venture 8,000 6,775 8,374
Property, plant, and equipment, net 339,859 348,359 349,459
Assets held for sale, at net realizable value 339 339 329
Goodwill and other intangible assets, net 253,680 258,545 259,832
Other assets 32,091 27,543 29,073
---------- ---------- ----------
Total assets $1,255,455 $1,187,266 $1,292,598
========== ========== ==========
Liabilities and Shareholders' and Members' Capitalization
Current liabilities:
Notes payable - Agrilink Foods $ 103,700 $ 5,700 $ 73,600
Current portion of debt - AgriFrozen Foods 82,769 44,100 50,100
Current portion of obligations under capital leases 218 218 208
Current portion of long-term debt 16,596 16,583 16,580
Accounts payable 50,035 89,612 98,591
Income taxes payable 0 0 549
Accrued interest 9,193 11,398 8,594
Accrued employee compensation 9,189 11,216 15,229
Other accrued expenses 68,763 66,397 92,480
Dividends payable 13 41 15
Amounts due Class B members 0 2,060 0
Amounts due Class A members 33,689 21,696 25,171
---------- ---------- ----------
Total current liabilities 374,165 269,021 381,117
Obligations under capital leases 520 520 568
Long-term debt 637,304 679,205 687,025
Deferred income tax liabilities 36,825 36,825 23,072
Other non-current liabilities 33,928 33,852 30,733
Non-controlling interest in AgriFrozen Foods 8,000 8,000 8,000
---------- ---------- ----------
Total liabilities 1,090,742 1,027,423 1,130,515
---------- ---------- ----------
Commitments and contingencies
Class B cumulative redeemable preferred stock liquidation preference $10 per
share, authorized - 500,000 shares; issued and
outstanding 23,664, 23,664, and 26,061 shares, respectively 237 237 261
Class A common stock, par value $5, authorized 5,000,000 shares
December 23, June 24, December 23,
2000 2000 1999
------------ ----------- ------------
Shares issued 2,184,230 2,132,981 2,083,601
Shares subscribed 189,786 233,977 303,196
--------- --------- ---------
Total subscribed and issued 2,374,016 2,366,958 2,386,797
Less subscriptions receivable in installments (189,786) (233,977) (303,196)
--------- --------- ---------
Total issued and outstanding 2,184,230 2,132,981 2,083,601 10,921 10,665 10,418
========= ========= =========
Class B common stock, par value $5, authorized
2,000,000 shares; issued and outstanding 723,229, 723,229 and 0, respectively 0 0 0
Shareholders' and members' capitalization:
Retained earnings allocated to members 18,163 16,591 30,505
Non-qualified allocation to members 300 300 2,050
Non-cumulative preferred stock, par value $25; authorized
5,000,000 shares; issued and outstanding - 34,400,
34,400, and 39,635, respectively 860 860 991
Class A cumulative preferred stock, liquidation preference
$25 per share; authorized 10,000,000 shares; issued and
outstanding 4,249,007 , 4,249,007 and 3,694,495 shares, respectively 106,225 106,225 92,362
Special membership interests 0 0 0
Earned surplus 27,642 25,490 26,259
Accumulated other comprehensive income:
Unrealized gain on hedging activity 890 0 0
Minimum pension liability adjustment (525) (525) (763)
---------- ---------- ----------
Total shareholders' and members' capitalization 153,555 148,941 151,404
---------- ---------- ----------
Total liabilities and capitalization $1,255,455 $1,187,266 $1,292,598
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
Pro-Fac Cooperative, Inc. and Consolidated Subsidiaries - Agrilink Foods, Inc. and AgriFrozen Foods, Inc.
Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Six Months Ended
-------------------------------------
December 23, December 25,
2000 1999
-------------- --------------
Cash flows from operating activities:
Net income $ 8,458 $ 14,883
Estimated cash payment due to Class A members (524) (1,644)
Adjustments to reconcile net income to net cash used in operating activities:
Gain on sale of assets 0 (2,293)
Depreciation 16,275 16,838
Amortization of goodwill and other intangible assets 4,964 4,332
Interest in-kind on subordinated promissory note 814 776
Amortization of debt issue and amendment costs
and discount on subordinated promissory notes 2,680 2,357
Equity in undistributed earnings of joint venture (1,224) (1,695)
Change in assets and liabilities:
Accounts receivable (29,023) (38,286)
Inventories and prepaid manufacturing expenses (55,718) (130,575)
Income taxes refundable 8,358 11,844
Accounts payable and other accrued expenses (41,471) 21,781
Amounts due to Class A members 11,993 5,126
Amounts due to/from Class B members (3,895) (1,453)
Other assets and liabilities, net (285) 8,956
----------- -----------
Net cash used in operating activities (78,598) (89,053)
----------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (14,963) (16,009)
Proceeds from disposals 5,072 53,497
Proceeds from investment in CoBank 1,951 1,602
----------- -----------
Net cash (used in)/provided by investing activities (7,940) 39,090
----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of short-term debt 101,900 68,800
Payments on long-term debt (8,932) (8,997)
Cash paid in conjunction with debt amendment (1,707) (2,624)
Issuances of common stock, net 256 439
Cash dividends paid (4,210) (3,706)
----------- -----------
Net cash provided by financing activities 87,307 53,912
----------- -----------
Net change in cash and cash equivalents 769 3,949
Cash and cash equivalents at beginning of period 4,994 6,540
----------- -----------
Cash and cash equivalents at end of period $ 5,763 $ 10,489
=========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
PRO-FAC COOPERATIVE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF ACCOUNTING POLICIES
The Cooperative: Pro-Fac Cooperative, Inc. ("Pro-Fac" or the "Cooperative") is
an agricultural cooperative which processes and markets crops grown by its
members through its wholly-owned subsidiary Agrilink Foods, Inc. ("Agrilink
Foods") and through its subsidiary PF Acquisition II, Inc. in which it has a
controlling interest. PF Acquisition II, Inc. conducts business under the name
AgriFrozen Foods ("AgriFrozen"). Unless the context otherwise requires, the
terms "Cooperative" and "Pro-Fac" refer to Pro-Fac Cooperative, Inc. and its
subsidiaries.
Agrilink Foods has four primary product lines including: vegetables, fruits,
snacks, and canned meals. AgriFrozen has vegetables as its one primary product
line. The majority of each of the product lines' net sales are within the United
States. In addition, all of the Cooperative's operating facilities, excluding
one in Mexico, are within the United States.
Basis of Presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States of America ("GAAP") for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulations
S-X. Accordingly, they do not include all of the information required by GAAP
for complete financial statement presentation. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the results of operations have been included. Operating
results for the three months and six months ended December 23, 2000 are not
necessarily the results to be expected for other interim periods or the full
year. These financial statements should be read in conjunction with the
financial statements and accompanying notes contained in the Pro-Fac
Cooperative, Inc. Form 10-K for the fiscal year ended June 24, 2000.
New Accounting Pronouncement: In December 1999, the Securities and Exchange
Commission ("SEC") issued Staff Accounting Bulletin No. 101 "Revenue Recognition
in Financial Statements" ("SAB No. 101"). SAB No. 101 provides additional
guidance on revenue recognition as well as criteria for when revenue is
generally realized and earned. The Cooperative plans to adopt SAB No. 101
effective in the fourth quarter of fiscal 2001 and is currently determining the
impact of the adoption on its results of operations and financial position.
Consolidation: The consolidated financial statements include the Cooperative and
its subsidiaries, Agrilink Foods and AgriFrozen. The financial statements are
after elimination of intercompany transactions and balances. Investments in
affiliates owned more than 20 percent but not in excess of 50 percent are
recorded under the equity method of accounting.
Reclassification: Certain items for fiscal 2000 have been reclassified to
conform with the current period presentation.
NOTE 2. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
On June 25, 2000, the Cooperative adopted Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
requires the recognition of all derivative financial instruments as either
assets or liabilities in the Consolidated Balance Sheet and measurement of those
instruments at fair value. Changes in the fair values of those derivatives will
be reported in earnings or other comprehensive income depending on the use of
the derivative and whether it qualifies for hedge accounting. The accounting for
gains and losses associated with changes in the fair value of a derivative and
the effect on the consolidated financial statements will depend on its hedge
designation and whether the hedge is highly effective in achieving offsetting
changes in the fair value or cash flow of the asset or liability hedged. Under
the provisions of SFAS No. 133, the method that will be used for assessing the
effectiveness of a hedging derivative, as well as the measurement approach for
determining the ineffective aspects of the hedge, must be established at the
inception of the hedge.
The Cooperative, as a result of its operating and financing activities, is
exposed to changes in foreign currency exchange rates, certain commodity prices,
and interest rates, which may adversely affect its results of operations and
financial position. In seeking to minimize the risks and/or costs associated
with such activities, the Cooperative may enter into derivative contracts.
The adoption of SFAS No. 133 did not materially affect the Cooperative's results
of operations or financial position.
Foreign Currency: Agrilink Foods manages its foreign currency related risk
primarily through the use of foreign currency forward contracts. The contracts
held by Agrilink Foods are denominated in Mexican pesos.
Agrilink Foods has entered into foreign currency forward contracts that are
designated as cash flow hedges of exchange rate risk related to forecasted
foreign currency-denominated intercompany sales. At December 23, 2000, Agrilink
Foods has cash flow hedges for the Mexican peso with maturity dates ranging from
December 2000 to April 2001. At December 23, 2000, the fair value of the open
contracts was an after-tax gain of approximately $0.1 million recorded in
accumulated other comprehensive income in shareholders' equity. Amounts deferred
to accumulated other comprehensive income will be reclassified into cost of
goods sold within the next 12 months. During the second quarter and first six
months of fiscal 2001, approximately $0.1 million and $0.2 million,
respectively, was reclassified from other comprehensive income to cost of goods
sold. Hedge ineffectiveness was insignificant.
Subsequent to December 23, 2000, Agrilink Foods entered into additional cash
flow hedges for 132 million Mexican pesos with maturity dates through June 2002.
Commodity Prices: Agrilink Foods is exposed to commodity price risk related to
forecasted purchases of soybean oil, an ingredient in the manufacturing of salad
dressings and mayonnaise. To mitigate this risk, Agrilink Foods designates
soybean oil forward contracts as cash flow hedges of its forecasted soybean oil
purchases. Agrilink Foods maintained soybean oil contracts that hedged
approximately 70 percent of its planned soybean oil requirements during fiscal
2001. These contracts were either sold or expired during the second quarter of
fiscal 2001 and an immaterial loss on these transactions was recorded in cost of
goods sold.
Agrilink Foods is also exposed to commodity price risk to forecasted purchases
of flour in its manufacturing process. To mitigate this risk, Agrilink Foods
designates a swap agreement as a cash flow hedge of its forecasted flour
purchases. At December 23, 2000, Agrilink Foods had an open swap hedging
approximately 59 percent of its planned flour requirements during fiscal 2001.
The termination date for the agreement is March 2001. The fair value of this
agreement was immaterial at December 23, 2000. During the second quarter and
first six months of fiscal 2001, an immaterial loss on this contract was
recorded in cost of goods sold.
Agrilink Foods is also exposed to commodity price risk related to forecasted
purchases of corrugated (unbleached kraftliner) in its manufacturing process. To
mitigate this risk, Agrilink Foods designates a swap agreement as a cash flow
hedge of its forecasted corrugated purchases. At December 23, 2000, Agrilink
Foods had an open swap hedging approximately 80 percent of its planned
corrugated requirements. The fair value of this agreement was immaterial at
December 23, 2000. The termination date for the agreement is June 2001.
Interest Rates: Agrilink Foods is exposed to interest rate risk primarily
through its borrowing activities. The majority of Agrilink Foods' long-term
borrowings are variable rate instruments. Agrilink Foods entered into two
interest rate swap contracts under which Agrilink Foods agrees to pay an amount
equal to a specified fixed rate of interest times a notional principal amount,
and to receive in return an amount equal to a specified variable rate of
interest times the same notional principal amount. The notional amounts of the
contract are not exchanged and no other cash payments are made. The two interest
rate swap contracts were entered into with a major financial institution in
order to minimize credit risk.
The first interest rate swap contract requires payment of a fixed rate of
interest (4.96 percent) and the receiving of a variable rate of interest
(three-month LIBOR of 6.80 percent as of December 23, 2000) on $150 million
notional amount of indebtedness. Agrilink Foods had a second interest rate swap
contract to pay a fixed rate of interest (5.32 percent) and receive a variable
rate of interest (three-month LIBOR of 6.80 percent as of December 23, 2000) on
$100 million notional amount of indebtedness. Approximately 60 percent of the
underlying debt is being hedged with these interest rate swaps.
Agrilink Foods designates these interest rate swap contracts as cash flow
hedges. At December 23, 2000, the fair value of the contracts was an after-tax
gain of $0.8 million, recorded in accumulated other comprehensive income in
shareholder's equity.
To the extent that any of these contracts are not considered effective in
offsetting the change in the value of the interest payments being hedged, any
changes in fair value relating to the ineffective portion of these contacts are
immediately recognized in income. However, the net gain or loss on the
ineffective portion of these interest rate swap contracts was not material
during the second quarter and first six months of fiscal 2001. Amounts deferred
to other comprehensive income will be reclassified into interest expense over
the life of the swap contracts.
NOTE 3. CLOSINGS AND DISPOSITIONS
AgriFrozen to Close Facilities: On January 22, 2001, AgriFrozen Foods announced
it is closing its frozen vegetable business facilities in Woodburn, Oregon and
Walla Walla and Grandview, Washington. This announcement followed the recent
decision by AgriFrozen's board of directors not to plant or process crops for
the 2001 growing season and indications by AgriFrozen's lender that it would not
continue to fund AgriFrozen's operations. The combination of current industry
trends, which have shown a steady decline in private label and industrial frozen
vegetable sales and pricing, and the highly competitive nature of the business,
were the basis for this action. The repacking operations at the Woodburn
facility are expected to continue through April 2001 and warehousing operations
at the Woodburn and Walla Walla facilities are expected to continue through June
2001. In addition, certain administrative functions are expected to continue
through a transition period.
At the request of AgriFrozen's lender, Agrilink Foods has submitted a proposal
to purchase the inventory of AgriFrozen. AgriFrozen and its lender have reached
an agreement in principle on this transaction, which is dependent upon a number
of conditions, including the final approval of Pro-Fac's, Agrilink Foods' and
AgriFrozen's respective lenders, and the approval and execution of definitive
agreements. If these conditions and other conditions to closing are satisfied,
it is expected that the acquisition of the AgriFrozen inventory will close in
February 2001.
The obligations of AgriFrozen are not guaranteed by Pro-Fac or Agrilink Foods
and are expressly nonrecourse. We anticipate that Pro-Fac will abandon its
ownership interest in AgriFrozen as a result of these recent closings. The
recent decisions regarding AgriFrozen are not expected to have a material
adverse effect on Pro-Fac or Agrilink Foods.
See further discussion at "Agreements with AgriFrozen" at NOTE 4 to the "Notes
to Consolidated Financial Statements" and at "Other Matters" within the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Sale of Pickle Business: On June 23, 2000, Agrilink Foods sold its pickle
business based in Tacoma Washington to Dean Pickle and Specialty Products
Company. This business included pickle, pepper, and relish products sold
primarily under the Nalley and Farman's brand names. Agrilink Foods will
continue to contract pack Nalley and Farman's pickle products for a period of
two years beginning June 23, 2000, at the existing Tacoma processing plant which
Agrilink Foods will operate.
In a related transaction, on July 21, 2000, Agrilink Foods sold the machinery
and equipment utilized in the production of pickles and other related products
to Dean Pickle and Specialty Products Company. No significant gain or loss was
recognized on this transaction. Agrilink Foods received proceeds of $5.0 million
which were applied to bank loans ($3.2 million of which was applied to the
Agrilink Foods' term loan facility and $1.8 million of which was applied to the
Agrilink Foods' revolving credit facility).
Sale of Midwest Private Label Canned Vegetable Business: On November 8, 1999,
Agrilink Foods completed the sale of its Midwest private label canned vegetable
business to Seneca Foods. Included in this transaction was the Arlington,
Minnesota facility. Agrilink Foods received proceeds of approximately $42.4
million which were applied to borrowings outstanding under Agrilink Foods'
revolving credit facility. In addition, Seneca Foods issued to Agrilink Foods a
$5.0 million unsecured subordinated promissory note due February 8, 2009. This
transaction did not include the Agrilink Foods' retail branded canned
vegetables, Veg-All and Freshlike. No significant gain or loss was recognized on
this transaction.
On December 17, 1999, Agrilink Foods completed the sale of its Cambria,
Wisconsin processing facility to Del Monte. The sale includes an agreement for
Del Monte to produce a portion of Agrilink Foods product needs during the 2000
packing season. Agrilink Foods received proceeds of approximately $10.5 million
which were applied to bank loans. A gain of approximately $2.3 million was
recognized on this transaction.
NOTE 4. AGREEMENTS WITH AGRILINK FOODS AND AGRIFROZEN
Agrilink Foods: The contractual relationship between Pro-Fac and Agrilink Foods
is defined in the Pro-Fac Marketing and Facilitation Agreement (the "Pro-Fac
Marketing Agreement"). Under the Pro-Fac Marketing Agreement, Agrilink Foods
pays Pro-Fac the commercial market value ("CMV") for all crops supplied by
Pro-Fac. CMV is defined as the weighted average price paid by other commercial
processors for similar crops sold under preseason contracts and in the open
market in the same or competing market area. Although CMV is intended to be no
more than the fair market value of the crops purchased by Agrilink Foods, it may
be more or less than the price Agrilink Foods would pay in the open market in
the absence of the Pro-Fac Marketing Agreement.
Under the Pro-Fac Marketing Agreement, Agrilink Foods is required to have on its
board of directors individuals who are neither members of nor affiliated with
Pro-Fac ("Disinterested Directors"). The number of Disinterested Directors must
at least equal the number of directors who are members of Pro-Fac's board of
directors. The volume and type of crops to be purchased by Agrilink Foods from
Pro-Fac under the Pro-Fac Marketing Agreement are determined pursuant to its
annual profit plan, which requires the approval of a majority of the
Disinterested Directors of Agrilink Foods. In addition, in any year in which
Agrilink Foods has earnings on products which were processed from crops supplied
by Pro-Fac ("Pro-Fac Products"), Agrilink Foods pays to Pro-Fac, as additional
patronage income, up to 90 percent of such earnings, but in no case more than 50
percent of all pretax earnings (before dividing with Pro-Fac) of Agrilink Foods.
In years in which Agrilink Foods has losses on Pro-Fac Products, Agrilink Foods
reduces the CMV it would otherwise pay to Pro-Fac by up to 90 percent of such
losses, but in no case by more than 50 percent of all pretax losses (before
dividing with Pro-Fac) of Agrilink Foods. Additional patronage income is paid to
Pro-Fac for services provided to Agrilink Foods, including the provision of a
long term, stable crop supply, favorable payment terms for crops and the sharing
of risks in losses of certain operations of the business. Earnings and losses
are determined at the end of the fiscal year, but are accrued on an estimated
basis during the year. Under the Pro-Fac Marketing Agreement, Pro-Fac is
required to reinvest at least 70 percent of the additional patronage income in
Agrilink Foods.
Amounts received by Class A members of Pro-Fac from Agrilink Foods for the six
months ended December 23, 2000 and December 25, 1999 include: commercial market
value of crops delivered $66.9 million and $67.2 million, respectively; and
additional proceeds from profit sharing provisions of, $6.3 million and $10.3
million, respectively.
AgriFrozen: The contractual relationship between Pro-Fac and AgriFrozen is
defined in a marketing and facilitation agreement between Pro-Fac and AgriFrozen
(the "AgriFrozen Marketing Agreement"). Under this agreement, AgriFrozen
purchases raw products from Pro-Fac and processes and markets the finished
products. AgriFrozen will pay Pro-Fac CMV for the crops supplied by Pro-Fac. In
addition, in any year in which AgriFrozen has earnings, AgriFrozen will
distribute such earnings to Class B members of Pro-Fac. However, in the event
AgriFrozen experiences any losses, AgriFrozen will deduct the losses from the
total CMV payable. If there are earnings, the agreement permits AgriFrozen to
pay 20 percent in cash and retain 80 percent of its earnings on Pro-Fac products
as working capital. Earnings and losses are determined at the end of the fiscal
year, but are accrued on an estimated basis during the year.
Under the AgriFrozen Marketing Agreement, the board of directors of AgriFrozen
is required to consist of: (i) at least three and as many as five directors who
are individuals who currently serve as directors of Pro-Fac and who are chosen
by Pro-Fac's board of directors; (ii) one director who is nominated by the
president of Agrilink Foods from among Agrilink Foods' management employees; and
(iii) any number of Disinterested Directors who are to be elected from
individuals suggested by the president of Agrilink Foods. Disinterested
Directors are persons who are neither employees, shareholders, nor otherwise
affiliated with Pro-Fac or AgriFrozen, but may include a Disinterested Director
of Agrilink Foods. The current composition of the board meets these requirements
and includes two Class B members.
Amounts received by Class B members of Pro-Fac from AgriFrozen for the six
months ended December 23, 2000 and December 25, 1999 for the commercial market
value of crops delivered was $9.4 million and $13.9 million, respectively. Due
to the current operating losses of AgriFrozen, it is anticipated that there will
be no additional earnings to distribute to Class B members of Pro-Fac for fiscal
2001. See further discussion at NOTE 3 to the "Notes to Consolidated Financial
Statements."
NOTE 5. INVENTORIES
The major classes of inventories are as follows:
(Dollars in Thousands)
December 23, June 24, December 25,
2000 2000 1999
------------ ---------- ------------
Finished goods $ 387,070 $ 290,195 $ 404,893
Raw materials and supplies 32,268 51,736 32,857
---------- ---------- ---------
$ 419,338 $ 341,931 $ 437,750
========== ========== =========
NOTE 6. DEBT
Summary of Long-Term Debt:
(Dollars in Thousands) December 23, 2000 June 24, December 25,
--------------------------------------------
Agrilink Foods AgriFrozen Total 2000 1999
---------------- ------------- ---------- ----------- --------------
Term Loan Facility $ 419,700 $ 30,000 $ 449,700 $ 458,300 $ 467,700
Senior Subordinated Notes 200,015 0 200,015 200,015 200,015
Subordinated Promissory Note (net of discount) 27,682 4,769 32,451 30,637 28,989
Other 6,503 48,000 54,503 6,836 6,901
---------- -------- ---------- ---------- ----------
Total debt 653,900 82,769 736,669 695,788 703,605
Less current portion (16,596) (82,769) (99,365) (16,583) (16,580)
---------- -------- ---------- ---------- ----------
Total long-term debt $ 637,304 $ 0 $ 637,304 $ 679,205 $ 687,025
========== ======== ========== ========== ==========
Amendments to Agrilink Foods' Term Loan Facility: The Agrilink Foods' term loan
facility contains customary covenants and restrictions on Agrilink Foods' and
the Cooperative's ability to engage in certain activities, including, but not
limited to: (i) limitations on the incurrence of indebtedness and liens, (ii)
limitations on sale-leaseback transactions, consolidations, mergers, sale of
assets, transactions with affiliates and investments and (iii) covenants which
require Pro-Fac to maintain a minimum level of consolidated EBITDA, a minimum
consolidated interest coverage ratio, a minimum consolidated fixed charge
coverage ratio, a maximum consolidated leverage ratio, and a minimum level of
consolidated net worth. Under the Credit Agreement, the assets, liabilities, and
results of operations of AgriFrozen, a subsidiary of Pro-Fac, are not
consolidated with Pro-Fac for purposes of determining debt covenant compliance.
During the first quarter of fiscal 2001, Agrilink Foods negotiated an amendment
to the covenants outlined under the credit facility. In consideration for this
amendment, Agrilink Foods incurred a fee of approximately $1.7 million. This fee
is being amortized over the life of the credit facility. Pursuant to the
amendment, the interest rates were modified and the credit facility currently
bears interest, at Agrilink Foods' option, at the Administrative Agent's
alternate base rate or the London Interbank Offered Rate ("LIBOR") plus, in each
case, applicable margins of: (i) in the case of alternate base rate loans, (x)
1.25 percent for loans under the Revolving Credit Facility and the Term A
Facility, (y) 3.00 percent for loans under the Term B Facility and (z) 3.25
percent for loans under the Term C Facility and (ii) in the case of LIBOR loans,
(x) 3.00 percent for loans under the Revolving Credit Facility and the Term A
Facility, (y) 4.00 percent for loans under the Term B Facility and (z) 4.25
percent for loans under the Term C Facility. The Administrative Agent's
"alternate base rate" is defined as the greater of: (i) the prime commercial
rate as announced by the Administrative Agent or (ii) the Federal Funds rate
plus 0.50 percent. Pro-Fac and Agrilink Foods are in compliance with all
covenants, restrictions, and requirements under the terms of the credit facility
as amended.
Agrilink Foods' Subordinated Promissory Note: As partial consideration for the
Dean Foods Vegetable Company acquisition, Agrilink Foods issued to Dean Foods a
Subordinated Promissory Note for $30 million aggregate principal amount due
November 22, 2008. Interest on the Subordinated Promissory Note is accrued
quarterly in arrears commencing December 31, 1998, at a rate per annum of 5
percent until November 22, 2003, and at a rate of 10 percent thereafter. As the
rates on the Note are below market value, Agrilink Foods has imputed the
appropriate discount utilizing an effective interest rate of 11-7/8 percent.
Interest accruing through November 22, 2003 is required to be paid in kind
through the issuance by Agrilink Foods of additional subordinated promissory
notes identical to the Subordinated Promissory Note. Interest accruing after
November 22, 2003 is payable in cash. The Subordinated Promissory Note may be
prepaid at Agrilink Foods' option without premium or penalty.
The Subordinated Promissory Note is expressly subordinate to its Senior
Subordinated Notes and the credit facility and contains no financial covenants.
The Subordinated Promissory Note is guaranteed by Pro-Fac.
On December 1, 2000, Dean Foods sold the Subordinated Promissory Note to Great
Lakes Kraut Company, LLC, a joint venture between Agrilink Foods and Flanagan
Brothers, Inc. This sale did not affect the terms of the note.
Credit Agreement and Subordinated Note Agreement of AgriFrozen: Under
AgriFrozen's Credit Facility, AgriFrozen is able, under certain conditions, to
borrow up to $50.0 million for seasonal working capital purposes under the
AgriFrozen Revolving Credit Facility. As of December 23, 2000, (i) cash
borrowings outstanding under the AgriFrozen Revolving Credit Facility were $48.0
million, and (ii) additional availability under the AgriFrozen Revolving Credit
Facility, after taking into account the amount of borrowings, was $2.0 million.
The AgriFrozen Revolving Credit Facility requires that AgriFrozen meet certain
financial tests and ratios and comply with certain restrictions and limitations.
As reported in our Form 10-Q for the fiscal quarter ended September 23, 2000,
AgriFrozen's lender had previously verbally agreed to forbear from enforcing
rights or exercising remedies in respect of existing noncompliance with certain
financial tests and ratios and
existing noncompliance with certain restrictions and limitations. Subsequent to
December 23, 2000, and as previously highlighted in NOTE 3 to the "Notes to
Consolidated Financial Statements," AgriFrozen's lender has indicated it will
not continue to fund AgriFrozen's operations indefinitely.
AgriFrozen's obligations are not guaranteed by Pro-Fac or Agrilink Foods and are
expressly nonrecourse as to Pro-Fac and Agrilink Foods. In addition, neither
Pro-Fac nor Agrilink Foods pledged any of their respective properties as
security for AgriFrozen's indebtedness. As such, these current circumstances of
AgriFrozen's debt and liquidity are not expected to have a material effect on
the business of Pro-Fac or Agrilink Foods.
NOTE 7: OPERATING SEGMENTS
The Cooperative is organized by product line for management reporting with
operating income being the primary measure of segment profitability.
Accordingly, no items below operating earnings are allocated to segments. The
Cooperative's four primary operating segments are as follows: vegetables,
fruits, snacks, and canned meals.
The vegetable product line consists of canned and frozen vegetables, chili
beans, and various other products. Branded products within the vegetable
category include Birds Eye, Birds Eye Voila!, Freshlike, Veg-All, McKenzies, and
Brooks Chili Beans. The fruit product line consists of canned and frozen fruits
including fruit fillings and toppings. Branded products within the fruit
category include Comstock and Wilderness. The snack product line consists of
potato chips, popcorn and other corn-based snack items. Branded products within
the snacks category include Tim's Cascade Chips, Snyder of Berlin, Husman, La
Restaurante, Erin's, Beehive, Pops-Rite, and Super Pop. The canned meal product
line includes canned meat products such as chilies, stew, soups, and various
other ready-to-eat prepared meals. Branded products within the canned meal
category include Nalley. Other product lines primarily represent salad
dressings. Branded products within the "other" category include Bernstein's and
Nalley.
The following table illustrates the Cooperative's operating segment information:
(Dollars in Millions)
Three Months Ended Six Months Ended
------------------------------ -----------------------------
December 23, December 25, December 23, December 25,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Net Sales:
Vegetables $ 265.2 $ 236.4 $ 472.9 $ 408.7
Fruits 45.2 45.6 70.7 68.9
Snacks 23.3 22.0 46.7 43.4
Canned Meals 17.8 18.4 33.5 35.0
Other 11.0 13.2 23.7 27.9
-------- --------- -------- ---------
Continuing segments 362.5 335.6 647.5 583.9
Businesses sold or to be closed1 12.1 38.4 29.6 86.3
-------- --------- -------- ---------
Total $ 374.6 $ 374.0 $ 677.1 $ 670.2
======== ========= ======== =========
Operating income:
Vegetables2 $ 21.1 $ 26.5 $ 31.6 $ 39.9
Fruits 7.2 6.3 11.0 9.6
Snacks 1.9 1.4 3.6 2.9
Canned Meals 2.2 2.6 4.7 4.5
Other 0.4 0.6 1.2 1.5
-------- --------- -------- ---------
Continuing segments 32.8 37.4 52.1 58.4
Businesses sold or to be closed1 2.2 1.2 4.5 2.3
-------- --------- -------- ---------
Total 35.0 38.6 56.6 60.7
Gain on sale of assets 0.0 2.3 0.0 2.3
-------- --------- -------- ---------
Total consolidated operating income 35.0 40.9 56.6 63.0
Interest expense (22.4) (21.8) (44.0) (42.5)
-------- --------- -------- ---------
Income before taxes, dividends, and allocation of net proceeds $ 12.6 $ 19.1 $ 12.6 $ 20.5
======== ========= ======== =========
<FN>
1 Includes the private label canned vegetable business and pickle business
sold in fiscal 2000, and the activity of AgriFrozen facilities due to the
recent announcement regarding the closing of this operation. See NOTES 3
and 4 to the "Notes to Consolidated Financial Statements."
2 The vegetable product line includes earnings derived from Agrilink Foods'
investment in Great Lakes Kraut Company of $0.9 million and $1.2 million
for the three months ended December 23, 2000 and December 25, 1999,
respectively, and $1.2 million and $1.7 million for the six months ended
December 23, 2000 and December 25, 1999, respectively.
</FN>
NOTE 8. SUBSIDIARY GUARANTORS
Kennedy Endeavors, Incorporated and Linden Oaks Corporation wholly-owned
subsidiaries of Agrilink Foods ("Subsidiary Guarantors"), and Pro-Fac, have
jointly and severally, fully and unconditionally guaranteed, on a senior
subordinated basis, the obligations of Agrilink Foods with respect to Agrilink
Foods' 11-7/8 percent Senior Subordinated Notes due 2008 ("the Notes") and the
Credit Facility. The covenants in the Notes and the Credit Facility do not
restrict the ability of the Subsidiary Guarantors to make cash distributions to
Agrilink Foods.
Separate financial statements and other disclosures concerning the Subsidiary
Guarantors are not presented because management has determined that such
financial statements and other disclosures are not material. Accordingly, set
forth below is certain summarized financial information derived from unaudited
historical financial information for the Subsidiary Guarantors, on a combined
basis.
(Dollars in Millions)
Three Months Ended Six Months Ended
----------------------------------------------------------------
December 23, December 25, December 23, December 25,
2000 1999 2000 1999
------------ ------------ ------------ ------------
Summarized Statement of Operations:
Net sales $ 22.4 $ 20.9 $ 41.4 $ 39.2
Gross profit 18.5 17.4 33.3 31.8
Income from continuing operations 19.8 17.6 35.5 31.7
Net income 12.9 11.4 23.1 20.6
Summarized Balance Sheet:
Current assets $ 3.5 $ 2.9
Noncurrent assets 207.9 214.3
Current liabilities 9.3 7.7
NOTE 9. OTHER MATTERS
Restructuring: During the third quarter of fiscal 1999, Agrilink Foods completed
a corporate-wide restructuring program. The overall objectives of the plan were
to reduce expenses, improve productivity, and streamline operations. The total
restructuring charge amounted to $5.0 million and was primarily comprised of
employee termination benefits. Efforts have focused on the consolidation of
operating functions and the elimination of approximately five percent of the
work force. Reductions in personnel include operational and administrative
positions and have improved annual earnings by approximately $8.0 million. Of
this charge, $4.8 million has been liquidated to date, and the remaining
termination benefits are anticipated to be liquidated during fiscal 2001.
Dividends: Subsequent to quarter end, the Cooperative declared a cash dividend
of $0.43 per share on the Class A Cumulative Preferred Stock. These dividends
approximate $1.9 million and were paid on January 31, 2001.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
From time to time, the Cooperative makes oral and written statements that may
constitute "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the "Act") or by the Securities and Exchange
Commission ("SEC") in its rules, regulations, and releases. The Cooperative
desires to take advantage of the "safe harbor" provisions in the Act for
forward-looking statements made from time to time, including, but not limited
to, the forward-looking information contained in the Management's Discussion and
Analysis of Financial Condition and Results of Operations (pages 12 to 18) and
other statements made in this Form 10-Q and in other filings with the SEC.
The Cooperative cautions readers that any such forward-looking statements made
by or on behalf of the Cooperative are based on management's current
expectations and beliefs but are not guarantees of future performance. Actual
results could differ materially from those expressed or implied in the
forward-looking statements. Among the factors that could impact the Cooperative
are:
|X| the impact of strong competition in the food industry;
|X| the impact of changes in consumer demand;
|X| the impact of weather on the volume and quality of raw product;
|X| the inherent risks in the marketplace associated with new product
introductions, including uncertainties about trade and consumer acceptance;
|X| the continuation of the Cooperative's success in integrating operations
(including the realization of anticipated synergies in operations and the
timing of any such synergies), and the availability of acquisition and
alliance opportunities;
|X| the Cooperative's ability to achieve gains in productivity and improvements
in capacity utilization; and
|X| the Cooperative's ability to service debt.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pro-Fac Cooperative, Inc. is an agricultural cooperative corporation formed in
1960 under the Cooperative Corporation Laws of New York to process and market
crops grown by its members. Unless the context otherwise requires, the terms
"Cooperative" and "Pro-Fac" refer to Pro-Fac Cooperative, Inc. and its
subsidiaries.
The purpose of this discussion is to outline the significant reasons for changes
in the unaudited Consolidated Statement of Operations, Net Proceeds and
Comprehensive Income in the second quarter and first six months of fiscal 2001
versus such periods in fiscal 2000.
Pro-Fac Cooperative, Inc.'s ("Pro-Fac" or the "Cooperative") wholly-owned
subsidiary, Agrilink Foods, Inc. ("Agrilink Foods") has four primary product
lines including: vegetables, fruits, snacks and canned meals. The Cooperative's
subsidiary, AgriFrozen Foods, Inc. ("AgriFrozen"), in which it has a controlling
interest, has vegetables as its primary product line. See NOTE 3 to the "Notes
to Consolidated Financial Statements" regarding the closure of the AgriFrozen
facilities. The majority of each of the product lines' net sales are within the
United States. In addition, all of the Cooperative's operating facilities,
excluding one in Mexico, are within the United States.
The vegetable product line consists of canned and frozen vegetables, chili
beans, and various other products. Branded products within the vegetable
category include Birds Eye, Birds Eye Voila!, Freshlike, Veg-All, McKenzies, and
Brooks Chili Beans. The fruit product line consists of canned and frozen fruits
including fruit fillings and toppings. Branded products within the fruit
category include Comstock and Wilderness. The snack product line consists of
potato chips, popcorn and other corn-based snack items. Branded products within
the snack category include Tim's Cascade Chips, Snyder of Berlin, Husman, La
Restaurante, Erin's, Beehive, Pops-Rite, and Super Pop. The canned meal product
line includes canned meat products such as chilies, stews, soups, and various
other ready-to-eat prepared meals. Branded products within the canned meal
category include Nalley. The Cooperative's other product line primarily
represents salad dressings. Brand products within this category include
Bernstein's, and Nalley.
The following tables illustrate the results of operations by product line for
the three and six months ended December 23, 2000 and December 25, 1999.
EBITDA1,2
(Dollars in Millions)
Three Months Ended Six Months Ended
------------------------------------------ -------------------------------------------
December 23, December 25, December 23, December 25,
2000 1999 2000 1999
------------------- ------------------ ------------------- -------------------
% of % of % of % of
$ Total $ Total $ Total $ Total
---------- -------- ---------- ------ ---------- -------- ---------- ------
Vegetables $ 28.6 62.8% $ 33.6 68.3% $ 46.6 59.9% $ 53.6 65.5%
Fruits 7.8 17.1 6.7 13.6 12.2 15.7 10.4 12.7
Snacks 2.8 6.1 2.1 4.3 5.6 7.2 4.5 5.5
Canned Meals 2.7 5.9 3.1 6.3 5.5 7.1 5.4 6.6
Other 1.0 2.2 1.0 2.0 2.4 3.0 2.4 2.9
------ ----- ------- ------ ------- ------ ------- -----
Continuing operations 42.9 94.1 46.5 94.5 72.3 92.9 76.3 93.2
Businesses sold or to be closed3 2.7 5.9 2.7 5.5 5.5 7.1 5.6 6.8
------ ----- ------- ------ ------- ------ ------- -----
Total $ 45.6 100.0% $ 49.2 100.0% $ 77.8 100.0% $ 81.9 100.0%
====== ===== ======= ====== ======= ====== ======= =====
<FN>
1 Earnings before interest, taxes, depreciation, and amortization ("EBITDA")
is defined as the sum of pretax income before dividends, allocation of net
proceeds, interest expense, depreciation and amortization of goodwill and
other intangibles.
EBITDA should not be considered as an alternative to net income or cash
flows from operations or any other generally accepted accounting principles
measure of performance or as a measure of liquidity.
EBITDA is included herein because the Cooperative believes EBITDA is a
financial indicator of a Cooperative's ability to service debt. EBITDA as
calculated by the Cooperative may not be comparable to calculations as
presented by other companies.
2 Excludes gain on sale of assets in fiscal 2000. See NOTE 3 to the "Notes to
Consolidated Financial Statements."
3 Represents the operating results of the private label canned vegetable
business and pickle business sold in fiscal 2000 and the announced closing
of the AgriFrozen facilities in fiscal 2001. See NOTES 3 and 4 to the
"Notes to Consolidated Financial Statements."
</FN>
Net Sales
(Dollars in Millions)
Three Months Ended Six Months Ended
------------------------------------------ -------------------------------------------
December 23, December 25, December 23, December 25,
2000 1999 2000 1999
------------------- ------------------ ------------------- -------------
% of % of % of % of
$ Total $ Total $ Total $ Total
---------- -------- ---------- ------ ---------- -------- ---------- ------
Vegetables $ 265.2 70.8% $ 236.4 63.2% $ 472.9 69.9% $ 408.7 61.0%
Fruits 45.2 12.1 45.6 12.2 70.7 10.4 68.9 10.3
Snacks 23.3 6.2 22.0 5.9 46.7 6.9 43.4 6.5
Canned Meals 17.8 4.8 18.4 4.9 33.5 4.9 35.0 5.2
Other 11.0 2.9 13.2 3.5 23.7 3.5 27.9 4.2
-------- ----- -------- ------ ------- ----- -------- ------
Continuing segments 362.5 96.8 335.6 89.7 647.5 95.6 583.9 87.2
Businesses sold or to be closed1 12.1 3.2 38.4 10.3 29.6 4.4 86.3 12.8
-------- ----- -------- ------ ------- ----- -------- ------
Total $ 374.6 100.0% $ 374.0 100.0% $ 677.1 100.0% $ 670.2 100.0%
======== ===== ======== ===== ======= ===== ======== ======
<FN>
1 Includes net sales of the private label canned vegetable business and
pickle business sold in fiscal 2000 and the announced closing of the
AgriFrozen facilities in fiscal 2001. See NOTES 3 and 4 to the "Notes to
Consolidated Financial Statements."
</FN>
Operating Income1
(Dollars in Millions)
Three Months Ended Six Months Ended
------------------------------------------ -------------------------------------------
December 23, December 25, December 23, December 25,
2000 1999 2000 1999
------------------- ------------------ ------------------- -------------------
% of % of % of % of
$ Total $ Total $ Total $ Total
---------- -------- ---------- ------ ---------- -------- ---------- ------
Vegetables $ 21.1 60.3% $ 26.5 68.7% $ 31.6 55.8% $ 39.9 65.7%
Fruits 7.2 20.6 6.3 16.3 11.0 19.4 9.6 15.8
Snacks 1.9 5.4 1.4 3.6 3.6 6.4 2.9 4.8
Canned Meals 2.2 6.3 2.6 6.7 4.7 8.3 4.5 7.4
Other 0.4 1.1 0.6 1.6 1.2 2.1 1.5 2.5
------ ----- ------- ------- ------- ------ -------- ------
Continuing segments 32.8 93.7 37.4 96.9 52.1 92.0 58.4 96.2
Businesses sold or to be closed2 2.2 6.3 1.2 3.1 4.5 8.0 2.3 3.8
------ ----- ------- ------- ------- ------ -------- ------
Total $ 35.0 100.0% $ 38.6 100.0% $ 56.6 100.0% $ 60.7 100.0%
====== ===== ======= ======= ======= ====== ======== ======
<FN>
1 Excludes the gain on sale of assets in fiscal 2000. See NOTE 3 to the
"Notes to Consolidated Financial Statements."
2 Represents the operating results of the private label canned vegetable
business and pickle business sold in fiscal 2000 and the announced closing
of the AgriFrozen facilities in fiscal 2001. See NOTES 3 and 4 to the
"Notes to Consolidated Financial Statements."
</FN>
CHANGES FROM SECOND QUARTER FISCAL 2001 TO SECOND QUARTER FISCAL 2000
Excluding the gain on sale of assets, net income for the second quarter of
fiscal 2001 decreased modestly as compared to the second quarter of fiscal 2000.
However, net sales from continuing segments showed an increase of $26.9 million,
or 8.0 percent. Approximately $19.9 million of the net sales improvement was
attributable to an increase in frozen vegetable sales, and an additional $11.9
million was associated with various co-pack agreements into which Agrilink Foods
has recently entered. These increases were somewhat offset by a decrease in
various canned meal and canned vegetable sales as compared to the second quarter
in fiscal 2000. Management attributes the higher canned meal and canned
vegetable sales in fiscal 2000 to increased consumer purchases related to the
year 2000 millenium issue. In the second quarter of fiscal 2001, Agrilink Foods
also experienced an increase in its manufacturing costs associated with lower
than anticipated crop intake in the eastern part of the country contributing to
less than optimal plant efficiencies as well as higher freight and utility costs
throughout the nation. To mitigate the increase in manufacturing costs,
management initiated efforts to reduce administrative and general expenses by
$8.6 million or 9.5 percent primarily associated with a reduction in the accrual
related to Agrilink Foods' incentive programs and a reduction in its marketing
programs.
In reviewing the quarter, management also utilizes an evaluation of EBITDA from
continuing segments, as presented on page 13, as a measure of performance.
Excluding businesses sold or to be closed, EBITDA from continuing segments
decreased $3.6 million, or 7.7 percent, to $42.9 million in the second quarter
of the current fiscal year from $46.5 million in the second quarter of the prior
fiscal year. A detailed accounting of the significant reasons for changes in net
sales and EBITDA by product line follows.
Vegetable sales increased $28.8 million or 12.2 percent. This growth is
primarily attributable to a $13.1 million increase in sales in branded frozen
vegetables primarily within the Birds Eye product group. For the 12 weeks ended
December 10, 2000, the total frozen vegetable category unit sales percentage
change versus a year ago, as reported by Information Resources Inc., decreased
by 2.5 percent, while the Birds Eye brand unit volume for the same timeframe
decreased by only 0.5 percentage points, and the category leader decreased by
8.8 percentage points. The Birds Eye brand unit share change for the same
timeframe increased by 0.3 percentage points again, while the category leader
decreased by 1.3 percentage points. In addition, volume improvements in food
service frozen vegetables accounted for $3.5 million of the increase in net
sales and various co-pack agreements for canned vegetables in the Midwest and
for pickles in the Northwest accounted for $11.9 million of the increase. These
co-pack agreements typically yield lower margins than Agrilink Foods' other
product lines but do provide for greater utilization of manufacturing
facilities. Although vegetables experienced an increase in net sales, EBITDA
decreased $5.0 million and, while the branded businesses continued to show
improvements as highlighted above, the reduction in EBITDA was impacted by both
competitive pressures experienced within the non-branded segment of Agrilink
Foods' businesses and, as discussed above, Agrilink Foods has experienced an
increase in its manufacturing costs which has negatively impacted results.
Net sales for the fruit product line decreased $0.4 million, or 0.9 percent,
while EBITDA increased $1.1 million, or 16.4 percent. The variance in EBITDA is
attributable to a decrease in branded pie filling volume which was offset by a
price increase recognized in the
third quarter of fiscal 2000. This product line was also impacted by declines in
the applesauce category both on a net sales and margin basis due to competitive
pressures within the industry.
Net sales for the snack product line increased $1.3 million, or 5.9 percent,
primarily due to increased volume within the potato chip category. Accordingly,
EBITDA also showed improvements of $0.7 million, or 33.3 percent. EBITDA further
benefited from lower packaging costs.
Net sales for canned meals decreased $0.6 million, or 3.3 percent while EBITDA
decreased $0.4 million from $3.1 million to $2.7 million. The variance is
attributable to a decrease in volume and a change in product mix.
The other product line, which primarily represents salad dressings, experienced
a decrease in net sales of approximately $2.2 million, or 16.7 percent, due
primarily to a decline in unit volume associated with the loss of a private
label customer. EBITDA, however, remained consistent as the decrease in private
label sales was offset with branded sales at a higher margin. Agrilink Foods
also benefited from reductions in product costs, primarily in its cost of oils.
Operating Income: Excluding the impact of businesses sold and to be closed and
gain on sale of assets, operating income decreased from $37.4 million in the
second quarter of fiscal 2000 to $32.8 million in the second quarter of fiscal
2001. This represents a decrease of $4.6 million or 12.3 percent. Significant
variances are highlighted above in the discussion of EBITDA and net sales from
continuing segments.
Selling, Administrative, and General Expenses: Selling, administrative, and
general expenses have decreased $8.6 million, or 9.5 percent, as compared with
the second quarter of the prior fiscal year. The decrease is primarily
attributable to a reduction in the accrual related to Agrilink Foods' incentive
program as well as a reduction in certain marketing costs. In addition,
restructuring efforts at AgriFrozen contributed to the decrease.
Income from Joint Venture: This amount represents earnings received from the
investment in Great Lakes Kraut LLC, a joint venture between Agrilink Foods and
Flanagan Brothers, Inc. Earnings from the joint venture decreased $0.3 million
as compared to the prior year. This decline is attributable to a decrease in net
sales due to competitive pressures and an increase in freight costs due to
higher fuel prices.
Gain on Sale of Assets: On December 17, 1999, Agrilink Foods sold its Cambria,
Wisconsin facility to Del Monte. Agrilink Foods received proceeds of
approximately $10.5 million which were applied to bank loans. A gain of
approximately $2.3 million was recognized on this transaction.
Interest Expense: Interest expense increased $0.6 million to $22.4 million in
the second quarter of fiscal 2001 from $21.8 million in the second quarter of
fiscal 2000. The increase is the result of an increase in the weighted average
interest rate of 0.75 percent resulting from amendments to Agrilink Foods'
credit facility during September 2000 and general interest rate increases during
the second quarter of fiscal 2001. The increase was offset by lower average
outstanding balances during the quarter of approximately $37.1 million due to
inventory reductions related to the sale of Agrilink Foods' canned vegetable and
pickle business. Agrilink Foods continues to focus its efforts on inventory
reduction to reduce seasonal borrowing requirements.
Tax Provision: The provision for income taxes decreased approximately $1.3
million from the prior year as a result of the change in earnings before tax.
The Cooperative's effective tax rate is impacted by the net proceeds distributed
to members and the non-deductibility of certain amounts of goodwill.
CHANGES FROM FIRST SIX MONTHS FISCAL 2001 TO FIRST SIX MONTHS FISCAL 2000
Excluding the gain on sale of assets, net income for the first six months of
fiscal 2001 decreased modestly from fiscal 2000. However, net sales from
continuing segments showed an increase of $63.6 million, or 10.9 percent.
Approximately $31.1 million of the net sales improvement was attributable to an
increase in frozen vegetable sales, and an additional $33.4 million was
associated with various co-pack agreements into which Agrilink Foods has
recently entered. While Agrilink Foods benefited from this significant
improvement in net sales, it also experienced a significant increase in its
manufacturing costs resulting in optimal production efficiencies. The increase
in manufacturing costs was associated with lower than anticipated crop intake in
the eastern part of the country and higher freight and utility costs throughout
the nation. To mitigate the increase in manufacturing costs, management has
taken steps to decrease administrative and general expenses primarily associated
with a reduction in the accrual related to Agrilink Foods' incentive programs
and a reduction in its marketing programs. Management will continue to focus its
efforts on cost savings initiatives to reduce its overall spending.
In reviewing the first half of its fiscal year, management also utilizes an
evaluation of EBITDA from continuing segments, as presented on page 13 as a
measure of performance. Excluding businesses sold and to be closed, EBITDA from
continuing segments decreased $4.0 million, or 5.2 percent, to $72.3 million in
the first six months of the current fiscal year from $76.3 million in the first
six months of the prior fiscal year. A detailed accounting of the significant
reasons for changes in net sales and EBITDA by product line follows.
Vegetable sales increased $64.2 million or 15.7 percent. This growth is
primarily attributable to a $20.8 million increase in sales in branded frozen
vegetables primarily within the Birds Eye product group. In addition, volume
improvements in private label and food service frozen vegetables accounted for
$4.7 million of the increase. Further, various co-pack agreements for canned
vegetables in the Midwest and for pickles in the Northwest in total accounted
for an additional $33.4 million of the net sales increase. While these co-pack
agreements typically yield lower margins than Agrilink Foods' other product
lines, they do provide for greater utilization of manufacturing facilities.
Although vegetables experienced an increase in net sales, EBITDA decreased $7.0
million and, while the branded businesses continued to show improvements as
highlighted above, the reduction in EBITDA was impacted by both competitive
pressures experienced within the non-branded segment of Agrilink Foods'
businesses and, as highlighted above, Agrilink Foods has experienced an increase
in its manufacturing costs which has negatively impacted results.
Net sales for the fruit product line increased $1.8 million, or 2.6 percent,
while EBITDA increased $1.8 million, or 17.3 percent. The variance in EBITDA is
attributable to a decrease in branded pie filling volume which was offset by a
price increase recognized in the third quarter of fiscal 2000. This product line
was also impacted by a decline in the applesauce category, both on a net sales
and margin basis, due to competitive pressures within the industry.
Net sales for the snack product line increased $3.3 million, or 7.6 percent,
primarily due to increased volume within the potato chip category. Accordingly,
EBITDA also showed improvements of $1.1 million, or 24.4 percent. EBITDA further
benefited from lower packaging costs. In addition, in fiscal 2000, Agrilink
Foods incurred residual strike related costs at the Snyder of Berlin facility in
its first fiscal quarter. This matter was settled in July 2000, and management
believes its current relationship with these employees is good.
Net sales for canned meals decreased $1.5 million, or 4.3 percent. However,
EBITDA increased $0.1 million from $5.4 million to $5.5 million. The variance is
attributable to a decrease in volume offset by a change in product mix and a
reduction in marketing costs.
The other product line, which primarily represents salad dressings, experienced
a decrease in net sales of approximately $4.2 million, or 15.1 percent, due
primarily to a decline in unit volume associated with a private label customer.
EBITDA, however, remained consistent as the decrease in private label sales was
offset with branded sales at a higher margin. In addition, Agrilink Foods
benefited from reductions in product costs, primarily in its cost of oils.
Operating Income: Excluding the impact of businesses sold or to be closed and
gain on sale of assets, operating income decreased from $58.4 million in the
first six months of fiscal 2000 to $52.1 million in the first six months of
fiscal 2001. This represents a decrease of $6.3 million or 10.8 percent.
Significant variances are highlighted above in the discussion of EBITDA and net
sales from continuing segments.
Selling, Administrative, and General Expenses: Selling, administrative, and
general expenses have decreased $8.3 million, or 5.3 percent, as compared with
the first six months of the prior fiscal year. As noted above, the decrease is
primarily attributable to a reduction in the accrual related to Agrilink Foods'
incentive program as well as a reduction in certain marketing costs. In
addition, restructuring efforts at AgriFrozen contributed to the decrease.
Income from Joint Venture: This amount represents earnings received from the
investment in Great Lakes Kraut LLC, a joint venture between Agrilink Foods and
Flanagan Brothers, Inc. Earnings from the joint venture decreased $0.5 million
as compared to the same period of the prior fiscal year. This decline is
attributable to a decrease in net sales due to competitive pressures and an
increase in freight costs due to higher fuel prices.
Gain on Sale of Assets: On December 17, 1999, Agrilink Foods sold its Cambria,
Wisconsin facility to Del Monte. Agrilink Foods received proceeds of
approximately $10.5 million which were applied to bank loans. A gain of
approximately $2.3 million was recognized on this transaction.
Interest Expense: Interest expense increased $1.5 million from the prior year to
$43.9 million. The increase is the result of an increase in the weighted average
interest rate of 0.64 percent resulting from amendments to Agrilink Foods'
credit facility during September 2000 and general interest rate increases during
the first six months of fiscal 2001. In addition, interest expense was
negatively impacted by the amortization of fees paid in conjunction with the
September 2000 amendments to the Agrilink Foods' credit facility. Such increases
were offset by lower average outstanding balances during the six months of
approximately $38.4 million, primarily within inventory related to the sale of
Agrilink Foods' pickle business. Agrilink Foods continues to focus its efforts
on inventory reduction to reduce seasonal borrowings.
Tax Provision: The provision for taxes decreased approximately $1.5 million from
the prior year as a result of the change in earnings before tax. The
Cooperative's effective tax rate is impacted by the net proceeds distributed to
members and the non-deductibility of certain amounts of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
The following discussion highlights the major variances in the unaudited
"Consolidated Statement of Cash Flows" for the six months ended December 23,
2000 compared to the six months ended December 25, 1999.
Net cash used in operating activities decreased $10.5 million over the six
months of the prior fiscal year. This decrease primarily results from a decrease
in inventories due to both management efforts to reduce outstanding inventory
levels and reductions caused by the condition of crops in the eastern part of
the country which limited Agrilink Foods' intake. The decrease was offset by
variances within accounts payable and other accruals due to the timing of
liquidation of outstanding balances. Agrilink Foods negotiates payment terms
with its can and other packaging suppliers. The timing of these agreements
required payment in December of 2000, while in the prior year, comparable
payments were made in the third quarter.
Net cash used in investing activities in the first six months of fiscal 2001
increased $47.0 million from the first six months of fiscal 2000. The change was
primarily a result of a reduction in proceeds received from asset sales of $48.4
million (see NOTE 3 to the "Notes to Consolidated Financial Statements") offset
by a slight reduction in equipment purchases of $1.0 million. The purchase of
property, plant, and equipment was for general operating purposes.
Net cash provided by financing activities increased $33.4 million and was
primarily due to mandatory prepayments of short-term debt related to the sale of
Agrilink Foods' private label canned vegetable business ($42.4 million) and
Cambria, Wisconsin facility ($4.5 million) in fiscal 2000 compared to the sale
of pickle equipment ($1.8 million) in fiscal 2001 (see NOTE 3 to the "Notes to
Consolidated Financial Statements").
AGRILINK FOODS DEBT
Borrowings: Under Agrilink Foods' existing credit facility, Agrilink Foods is
able to borrow up to $200 million for seasonal working capital purposes under
the Revolving Credit Facility. The Revolving Credit Facility may also be
utilized in the form of letters of credit.
As of December 23, 2000, (i) cash borrowings outstanding under the Revolving
Credit Facility were $103.7 million, (ii) there were $13.2 million in letters of
credit outstanding, and (iii) additional availability under the Revolving Credit
Facility, after taking into account the amount of borrowings and letters of
credit outstanding, was $83.1 million. Agrilink Foods believes that the cash
flow generated by operations and the amounts available under the Revolving
Credit Facility provide adequate liquidity to fund working capital needs and
capital expenditures.
Certain financing arrangements require that Pro-Fac and Agrilink Foods meet
certain financial tests and ratios and comply with certain restrictions and
limitations. During the first quarter of fiscal 2001, Agrilink Foods negotiated
an amendment to the covenants outlined under its credit facility. See NOTE 6 of
the "Consolidated Financial Statements" for further details. As of December 23,
2000, Pro-Fac and Agrilink Foods were in compliance with all covenants,
restrictions, and limitations under the terms of the credit facility as amended.
AGRIFROZEN DEBT
Borrowings: AgriFrozen is able, under certain conditions, to borrow up to $50.0
million for seasonal working capital purposes under the AgriFrozen Revolving
Credit Facility. As of December 23, 2000, (i) cash borrowings outstanding under
the AgriFrozen Revolving Credit Facility were $48.0 million, and (ii) additional
availability under the AgriFrozen Revolving Credit Facility, after taking into
account the amount of borrowings, was $2.0 million. The AgriFrozen Revolving
Credit Facility requires that AgriFrozen meet certain financial tests and ratios
and comply with certain restrictions and limitations.
As reported in our Form 10-Q for the fiscal quarter ended September 23, 2000,
AgriFrozen's lender had previously verbally agreed to forbear from enforcing
rights or exercising remedies in respect of existing noncompliance with certain
financial tests and ratios and existing noncompliance with certain restrictions
and limitations. Subsequent to December 23, 2000, and, as previously highlighted
in NOTE 3 to the "Notes to Consolidated Financial Statements," AgriFrozen's
lender has indicated it will not continue to fund AgriFrozen's operations
indefinitely.
AgriFrozen's obligations are not guaranteed by Pro-Fac or Agrilink Foods and are
expressly nonrecourse as to Pro-Fac and Agrilink Foods. In addition, neither
Pro-Fac nor Agrilink Foods pledged any of their respective properties as
security for AgriFrozen's indebtedness. As such, these current circumstances of
AgriFrozen's debt and liquidity are not expected to have a material effect on
the business of Pro-Fac or Agrilink Foods.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Cooperative and its subsidiaries, as a result of its operating and financing
activities, is exposed to changes in foreign currency exchange rates, certain
commodity prices, and interest rates, which may adversely affect its results of
operations and financial position. In seeking to minimize the risks and/or costs
associated with such activities, the Cooperative may enter into derivative
contracts.
Foreign Currency: Agrilink Foods manages its foreign currency related risk
primarily through the use of foreign currency forward contracts. The contracts
held by Agrilink Foods are denominated in Mexican pesos.
Agrilink Foods has entered into foreign currency forward contracts that are
designated as cash flow hedges of exchange rate risk related to forecasted
foreign currency-denominated intercompany sales. At December 23, 2000, Agrilink
Foods had cash flow hedges for the Mexican peso with maturity dates ranging from
December 2000 to April 2001. At December 23, 2000, the fair value of the open
contracts was an after-tax gain of approximately $0.1 million recorded in
accumulated other comprehensive income in shareholder's equity. Amounts deferred
to accumulated other comprehensive income will be reclassified into cost of
goods sold within the next 12 months. During the second quarter of fiscal 2001,
approximately $0.1 million was reclassified from other comprehensive income to
cost of goods sold. For the first six months of fiscal 2001, approximately $0.2
million has been reclassified from other comprehensive income to cost of goods
sold. Hedge ineffectiveness was insignificant.
Foreign Currency
Forward
-------------------
Contract amounts 63 million Pesos
Weighted average settlement exchange rate 10.4685%
Subsequent to December 23, 2000, Agrilink Foods entered into additional cash
flow hedges for 132 million Mexican pesos with maturity dates through June 2002.
Commodity Prices: Agrilink Foods is exposed to commodity price risk related to
forecasted purchases of soybean oil, an ingredient in the manufacture of salad
dressings and mayonnaise. To mitigate this risk, Agrilink Foods designates
soybean oil forward contracts as cash flow hedges of its forecasted soybean oil
purchases. Agrilink Foods maintained soybean oil contracts that hedged
approximately 70 percent of its planned soybean oil requirements during fiscal
2001. These contracts were either sold or expired during fiscal 2001, and an
immaterial loss was recorded in cost of goods sold.
Agrilink Foods is also exposed to commodity price risk related to forecasted
purchases of flour in its manufacturing process. To mitigate this risk, Agrilink
Foods designates a swap agreement as a cash flow hedge of its forecasted flour
purchases. The termination date for the agreement is March 2001. At December 23,
2000, Agrilink Foods had an open swap hedging approximately 59 percent of its
planned flour requirements during fiscal 2001. The fair value of this agreement
was immaterial at December 23, 2000.
Swap
Flour
--------------------
Notional amount 240,000 bushels
Weighted average strike price $2.80/bushel
Agrilink Foods is also exposed to commodity price risk related to forecasted
purchases of corrugated (unbleached kraftliner) in its manufacturing process. To
mitigate this risk, Agrilink Foods designates a swap agreement as a cash flow
hedge of its forecasted corrugated purchases. At December 23, 2000, Agrilink
Foods had an open swap hedging approximately 80 percent of its planned
corrugated requirements. The fair value of this agreement was immaterial at
December 23, 2000. The termination date for the agreement is June 2001.
Swap
Corrugated
(Unbleached Kraftliner)
------------------------------
Notional amount 30,000 short tons
Average paid rate $475/short ton
Average receive rate Floating rate/short ton - $475
Maturities through June 2001
Interest Rates: Agrilink Foods is exposed to interest rate risk primarily
through its borrowing activities. The majority of Agrilink Foods' long-term
borrowings are variable rate instruments. Agrilink Foods entered into two
interest rate swap contracts under which Agrilink Foods agrees to pay an amount
equal to a specified fixed rate of interest times a notional principal amount,
and to receive in return an amount equal to a specified variable rate of
interest times the same notional principal amount. The notional amounts of the
contract are not exchanged and no other cash payments are made. Two interest
rate swap contracts were entered into with a major financial institution in
order to minimize credit risk.
The first interest rate swap contract required payment of a fixed rate of
interest (4.96 percent) and the receiving of a variable rate of interest
(three-month LIBOR of 6.80 percent as of December 23, 2000) on $150 million
notional amount of indebtedness. Agrilink Foods had a second interest rate swap
contract to pay a fixed rate of interest (5.32 percent) and receive a variable
rate of interest (three-month LIBOR of 6.80 percent as of December 23, 2000) on
$100 million notional amount of indebtedness. Approximately 60 percent of the
underlying debt is being hedged with these interest rate swaps.
Agrilink Foods designates these interest rate swap contracts as cash flow
hedges. At December 23, 2000, the fair value of the contracts was an after-tax
gain of $0.8 million, recorded in accumulated other comprehensive income in
shareholders' equity.
To the extent that any of these contracts are not considered effective in
offsetting the change in the value of the interest payments being hedged, any
changes in fair value relating to the ineffective portion of these contacts are
immediately recognized in income. However, the net gain or loss on the
ineffective portion of these interest rate swap contracts was not material
during the second quarter and first six months of fiscal 2001. Amounts deferred
to other comprehensive income will be reclassified into interest expense over
the life of the swap contracts.
The following is a summary of Agrilink Foods' interest rate swap agreements:
December 23, 2000
Interest Rate Swap: ---------------------
Variable to Fixed - notional amount $250 million
Average pay rate 4.96 - 5.32%
Average receive rate Floating rate - 6.80%
Maturities through 2001
Although it is possible that interest rates will decrease and thereby minimize
the benefits of the hedge position, Agrilink Foods believes that on a long-term
basis the possibility of interest rates exceeding the interest rate swap is not
likely. Agrilink Foods will, however, monitor market conditions to adjust its
position as it considers necessary.
OTHER MATTERS
AgriFrozen Foods: On January 22, 2001, AgriFrozen announced the closing of its
facilities in Oregon and Washington. AgriFrozen has operated at a loss since its
inception in February 1999, and its lender has indicated that it will no longer
continue to fund AgriFrozen's operations indefinitely. Neither Pro-Fac nor
Agrilink Foods guarantees the debts of AgriFrozen or otherwise pledges any of
their respective properties as security for AgriFrozen's indebtedness. In fact,
all of AgriFrozen's indebtedness is expressly without recourse to Pro-Fac and
Agrilink Foods.
Restructuring: During the third quarter of fiscal 1999, Agrilink Foods completed
a corporate-wide restructuring program. The overall objectives of the plan were
to reduce expenses, improve productivity, and streamline operations. The total
restructuring charge amounted to $5.0 million and was primarily comprised of
employee termination benefits. Efforts have focused on the consolidation of
operating functions and the elimination of approximately five percent of the
workforce. Reductions in personnel include operational and administrative
positions and have improved annual earnings by approximately $8.0 million. Of
this charge, $4.8 million has been liquidated to date, and the remaining
termination benefits are anticipated to be liquidated during fiscal 2001.
Short- and Long-Term Trends: The vegetable and fruit portions of the business
can be positively or negatively affected by weather conditions nationally and
the resulting impact on crop yields. Favorable weather conditions can produce
high crop yields and an oversupply situation. This results in depressed selling
prices and reduced profitability on the inventory produced from that year's
crops. Excessive rain or drought conditions can produce low crop yields and a
shortage situation. This typically results in higher selling prices and
increased profitability. While the national supply situation controls the
pricing, the supply can differ regionally because of variations in weather.
The crop and yield resulting from the 2000 growing season has provided a
sufficient, if not ample, supply throughout the industry. Accordingly, and as in
past years, management anticipates pricing may be negatively impacted primarily
in non-branded businesses. However, harsh weather conditions did impact corn
yields which reduced supply and, in turn, resulted in higher pricing for this
commodity.
MARKET AND INDUSTRY DATA
Unless otherwise stated herein, industry and market share data used throughout
this discussion was derived from industry sources believed by the Cooperative to
be reliable, including information provided by Information Resources, Inc. Such
data was obtained or derived from consultants' reports and industry
publications. Consultants' reports and industry publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. The Cooperative has not independently verified such data and
makes no representation to its accuracy.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Description
-------------- -------------------------------------------------
10.27 Excess Benefit Retirement Plan, as amended.
10.28 Supplemental Executive Retirement Agreement
(b) Reports on Form 8-K:
No reports on Form 8-K were filed in the second quarter of fiscal 2001.
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.
PRO-FAC COOPERATIVE, INC.
Date: February 5, 2001 BY:/s/ Earl L. Powers
---------------- --------------------------------
EARL L. POWERS
TREASURER
(Principal Financial Officer and
Principal Accounting Officer)