UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 27, 2001
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-9273 75-1285071
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
110 South Texas Street
Pittsburg, Texas 75686-0093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (903) 855-1000
Item 2. Acquisition or Disposition of Assets.
This Form 8-K/A is an amendment to the Form 8-K filed on February 8,
2001, relating to the acquisition by a wholly-owned subsidiary of Pilgrim's
Pride Corporation, Inc. ("Pilgrim's Pride") of WLR Foods, Inc. ("WLR
Foods"). The purpose of this amendment is to file the financial statements
of WLR Foods and the unaudited pro forma condensed financial data of
Pilgrim's Pride for the fiscal year ended September 30, 2000 and as of and
for the three months ended December 31, 2000, which give effect to the WLR
Foods acquisition.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
Filed as Exhibit 99.1 hereto.
(b) Pro Forma Financial Information.
Filed as Exhibit 99.2 hereto.
(c) Exhibits.
2 Agreement and Plan of Merger dated September 27, 2000
(incorporated by reference to Exhibit 2 of WLR Foods, Inc.'s
Current Report on Form 8-K (File No. 000-17060) dated
September 28, 2000).*
23 Consent of KPMG LLP.
99.1 Consolidated Financial Statements of WLR Foods, Inc.
99.2 Unaudited Pro Forma Condensed Financial Data.
* Previously filed.
SIGNATURE
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 hereunto duly authorized.
Pilgrim's Pride Corporation
By: /S/ RICHARD A. COGDILL
Richard A. Cogdill
Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer
Date: April 12, 2001
EXHIBIT INDEX
EXHIBIT NUMBER
DESCRIPTION
2 Agreement and Plan of Merger dated September 27, 2000
(incorporated by reference to Exhibit 2 of WLR Foods, Inc.'s
Current Report on Form 8-K (File No. 000-17060) dated September
28, 2000).*
23 Consent of KPMG LLP.
99.1 Consolidated Financial Statements of WLR Foods, Inc.
99.2 Unaudited Pro Forma Condensed Financial Data.
* Previously filed.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Pilgrim's Pride Corporation
We consent to the incorporation by reference in the Registration Statements
(No. 333-84861) on Form S-3 and (No. 3-12043) on Form S-8 of Pilgrim's
Pride Corporation of our report dated August 11, 2000, relating to the
consolidated balance sheets of WLR Foods, Inc. and subsidiaries as of July
1, 2000 and July 3, 1999 and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the fiscal
years in the three-year period ended July 1, 2000, which report appears in
the Form 8-K/A, to be filed on or about April 11, 2001, of Pilgrim's Pride
Corporation.
Richmond, Virginia
April 9, 2001
The Board of Directors and Shareholders
WLR Foods, Inc.
We have audited the accompanying consolidated balance sheets of WLR
Foods, Inc. and subsidiaries as of July 1, 2000 and July 3, 1999 and the
related consolidated statements of operations, shareholders' equity and
cash flows for each of the fiscal years in the three-year period ended July
1, 2000. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United
States of America. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
WLR Foods, Inc. and subsidiaries as of July 1, 2000 and July 3, 1999 and
the results of their operations and their cash flows for each of the fiscal
years in the three-year period ended July 1, 2000, in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
Richmond, Virginia
August 11, 2000
EXHIBIT 99.1
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, JULY 1, JULY 3,
(IN THOUSANDS) 2000 2000 1999
ASSETS (UNAUDITED)
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 120 $ 85 $ 210
ACCOUNTS RECEIVABLE, LESS
ALLOWANCE FOR DOUBTFUL
ACCOUNTS OF $1,628, $1,909
AND $1,886 63,220 59,541 59,026
INVENTORIES (NOTE 2) 108,244 110,980 106,679
INCOME TAXES RECEIVABLE - 323 355
PREPAID EXPENSES 2,459 2,670 2,574
OTHER CURRENT ASSETS 1,516 39 3,853
TOTAL CURRENT ASSETS 175,559 173,638 172,697
PROPERTY, PLANT AND EQUIPMENT,
NET (NOTE 3) 99,915 102,070 107,945
DEFERRED INCOME TAXES (NOTE 6) 1,259 2,910 3,009
OTHER ASSETS 4,417 4,897 5,446
TOTAL ASSETS $ 281,150 $ 283,515 $ 289,097
LIABILITIES AND SHAREHOLDERS'EQUITY
CURRENT LIABILITIES:
CURRENT MATURITIES OF LONG-
TERM DEBT (NOTE 4) $ 6,299 $ 6,052 $ 5,046
EXCESS CHECKS OVER BANK BALANCES 13,031 14,014 13,912
TRADE ACCOUNTS PAYABLE 21,847 24,627 26,500
ACCRUED PAYROLL AND RELATED BENEFITS 14,891 15,148 24,729
OTHER ACCRUED EXPENSES 15,079 12,659 8,677
DEFERRED INCOME TAXES (NOTE 6) 6,920 8,725 9,817
TOTAL CURRENT LIABILITIES 78,067 81,225 88,681
LONG-TERM DEBT, EXCLUDING CURRENT
MATURITIES (NOTE 4) 50,229 51,036 48,845
OTHER LIABILITIES 7,652 7,250 7,636
COMMITMENTS AND OTHER MATTERS
(NOTES 9, 14 AND 17)
SHAREHOLDERS' EQUITY (NOTES 7 AND 8)
COMMON STOCK, NO PAR VALUE(AUTHORIZED
100,000,000 SHARES, ISSUED AND
OUTSTANDING 16,172,410, 16,541,691
AND 16,209,067 SHARES) 67,119 66,961 69,125
ADDITIONAL PAID-IN CAPITAL 2,974 2,974 2,974
RETAINED EARNINGS 77,975 74,069 71,836
ACCUMULATED OTHER COMPREHENSIVE
INCOME (2,866) - -
TOTAL SHAREHOLDERS'EQUITY 145,202 144,004 143,935
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 281,150 $ 283,515 $ 289,097
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
WLR FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Thirteen Weeks
Ended YEARS ENDED
SEPTEMBER 30, OCTOBER 2, JULY 1, JULY 3, JUNE 27,
2000 1999 2000 1999 1998
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NET SALES $ 211,881 $ 202,007 $ 832,728 $ 888,086 $ 945,967
COST OF SALES 179,265 172,705 726,253 750,942 876,287
GROSS PROFIT 32,616 29,302 106,475 137,144 69,680
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES 25,218 24,355 99,958 98,478 91,745
OPERATING INCOME (LOSS) 7,398 4,947 6,517 38,666 (22,065)
OTHER (INCOME) EXPENSE:
INTEREST EXPENSE(NOTE 4) 1,506 1,233 4,968 10,931 22,539
GAIN ON SALE OF GOLDSBORO
COMPLEX (NOTE 13) - - - (7,699) -
OTHER INCOME, NET (26) (371) (1,280) (515) (106)
OTHER EXPENSE, NET 1,480 862 3,688 2,717 22,433
EARNINGS (LOSS) BEFORE
INCOME TAXES AND MINORITY
INTEREST 5,918 4,085 2,829 35,949 (44,498)
INCOME TAX EXPENSE
(BENEFIT) (NOTE 6) 2,012 1,542 596 13,211 (16,352)
MINORITY INTEREST IN NET
EARNINGS OF CONSOLIDATED
SUBSIDIARY - - - - 66
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS $ 3,906 $ 2,543 $ 2,233 $ 22,738 $(28,212)
EARNINGS FROM DISCONTINUED
OPERATIONS, NET OF TAX
NOTE 12) - - - 664 2,858
GAIN ON DISPOSAL OF
DISCONTINUED OPERATIONS,
NET OF TAX (NOTE 12) - - - 17,927 -
TOTAL EARNINGS FROM
DISCONTINUED OPERATIONS - - - 18,591 2,858
EXTRAORDINARY CHARGE ON
EARLY EXTINGUISHMENT OF
DEBT, NET OF TAX (NOTE4) - - - (2,559) -
NET EARNINGS (LOSS) $ 3,906 $ 2,543 $ 2,233 $ 38,770 $(25,354)
BASIC NET EARNINGS (LOSS)
PER COMMON SHARE,
CONTINUING OPERATIONS $ 0.24 $ 0.15 $ 0.13 $ 1.35 $ (1.72)
BASIC EARNINGS PER COMMON
SHARE, DISCONTINUED
OPERATIONS - - - 1.11 0.17
BASIC LOSS PER COMMON
SHARE, EXTINGUISHMENT OF
DEBT - - - (0.15) -
TOTAL BASIC EARNINGS (LOSS)
PER COMMON SHARE $ 0.24 $ 0.15 $ 0.13 $ 2.31 $ (1.55)
DILUTED NET EARNINGS (LOSS)
PER COMMON SHARE,
CONTINUING OPERATIONS $ 0.24 $ 0.15 $ 0.13 $ 1.34 $ (1.72)
DILUTED EARNINGS PER COMMON
SHARE, DISCONTINUED
OPERATIONS - - - $ 1.10 $ 0.17
DILUTED LOSS PER COMMON
SHARE, EXTINGUISHMENT
OF DEBT - - - $ (0.15) $ -
TOTAL DILUTED EARNINGS
(LOSS)PER COMMON SHARE $ 0.24 $ 0.15 $ 0.13 $ 2.29 $ (1.55)
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
WLR FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON STOCK PAID-IN RETAINED COMPREHENSIVE SHAREHOLDER'S
SHARES AMOUNT CAPITAL EARNINGS LOSS EQUITY
DOLLARS IN THOUSANDS
BALANCE AT
JUNE 28, 1997 16,597 $64,206 $ 2,974 $ 59,378 $ - $ 126,558
NET LOSS - (25,354) (25,354)
STOCK DIVIDEND 102 958 - (958) -
COMMON STOCK
ISSUED 147 2,710 - - 2,710
COMMON STOCK
REPURCHASED (446) (23) - - (23)
BALANCE AT
JUNE 27, 1998 16,400 67,851 2,974 33,066 - 103,891
NET EARNINGS - 38,770 38,770
COMMON STOCK
REPURCHASED (17) (152) - - (152)
COMMON STOCK
ISSUED 159 1,426 - - 1,426
BALANCE AT
JULY 3, 1999 16,542 69,125 2,974 71,836 - 143,935
NET EARNINGS - 2,233 2,233
COMMON STOCK
REPURCHASED (470) (2,719) - - (2,719)
COMMON STOCK
ISSUED 100 555 - - 555
BALANCE AT
JULY 1, 2000 16,172 $ 66,961 $ 2,974 $74,069 $ - $ 144,004
COMPREHENSIVE INCOME:
NET EARNINGS
(UNAUDITED) - - - 3,906 3,906
NET DEFERRED LOSS
ON OPTION CONTRACTS,
NET OF TAX EFFECT OF
$1,476(UNAUDITED) - - - - (2,866) (2,866)
TOTAL COMPREHENSIVE
INCOME 1,040
COMMON STOCK ISSUED
(UNAUDITED) 37 158 - - 158
BALANCE AT
SEPTEMBER 30, 2000
(UNAUDITED) 16,209 $ 67,119 $ 2,974 $77,975 $2,866) $ 145,202
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
WLR FOODS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
THIRTEEN WEEKS
ENDED YEARS ENDED
SEPTEMBER 30, OCTOBER 2, JULY 1, JULY 3, JUNE 27,
(IN THOUSANDS) 2000 1999 2000 1999 1998
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET EARNINGS (LOSS) $ 3,906 $ 2,543 $ 2,233 $ 38,770 $(25,354)
ADJUSTMENTS TO RECONCILE NET
EARNINGS (LOSS) TO NET
CASH PROVIDED BY OPERATING
ACTIVITIES:
EXTRAORDINARY LOSS ON EARLY
EXTINGUISHMENT OF DEBT, - - - 2,559 -
NET OF TAX
DEPRECIATION AND AMORTIZATION 4,583 4,831 18,674 21,755 28,321
(GAIN) LOSS ON SALES OF
PROPERTY, PLANT AND EQUIPMENT (4) (131) (631) 1,159 916
GAIN ON SALE OF GOLDSBORO
COMPLEX - - - (7,699) -
GAIN ON SALE OF DISCONTINUED
OPERATION - - - (28,187) -
DEFERRED INCOME TAXES 1,322 (1,172) (993) 14,419 (14,974)
PAYMENT ON CLOSED OPTION
CONTRACTS (4,342)
OTHER, NET - - 107 (592)
CHANGE IN OPERATING ASSETS AND
LIABILITIES:
(INCREASE) DECREASE IN ACCOUNTS
RECEIVABLE (3,679) 654 (515) 8,355 5
(INCREASE) DECREASE IN
INVENTORIES 2,736 (5,749) (4,301) 12,234 37,520
(INCREASE) DECREASE IN PREPAID
EXPENSES 211 8 (96) (704) 341
DECREASE IN OTHER CURRENT
ASSETS (1,154) 342 96 106 3,655
(INCREASE) DECREASE IN LONG-
TERM ASSETS 275 (44) (281) (170) 815
DECREASE IN ACCOUNTS PAYABLE (2,780) (483) (1,873) (655) (6,263)
INCREASE (DECREASE) IN ACCRUED
EXPENSES AND OTHER 2,566 (1,874) (5,985) 9,042 5,675
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,640 (1,075) 6,328 71,091 30,065
CASH FLOWS FROM INVESTING
ACTIVITIES:
ADDITIONS TO PROPERTY, PLANT
AND EQUIPMENT (2,237) (2,254) (12,225) (22,072) (22,149)
ACQUISITION OF BUSINESSES - - - - (650)
PROCEEDS FROM NOTES RECEIVABLE - - 3,750 - -
PROCEEDS FROM SALE OF GOLDSBORO
COMPLEX - - - 37,582 -
PROCEEDS FROM SALE OF
DISCONTINUED OPERATION - - - 55,068 -
PROCEEDS FROM SALES OF
PROPERTY, PLANT AND EQUIPMENT 18 241 887 1,245 1,706
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (2,219) (2,013) (7,588) 71,823 (21,093)
CASH FLOWS FROM FINANCING
ACTIVITIES:
PROCEEDS FROM ISSUANCE OF
REVOLVER AND LONG-TERM
DEBT 206,081 199,213 730,430 634,724 41,485
PAYMENTS ON REVOLVER AND LONG-
TERM DEBT (206,642) (193,872) (727,233)(780,482) (35,234)
FINANCING COSTS PAID - - - (1,969) (5,401)
NOTES PAYABLE TO BANKS - - - - (4,031)
ISSUANCE OF COMMON STOCK 158 146 555 701 892
REPURCHASE OF COMMON STOCK - - (2,719) - (4,438)
INCREASE (DECREASE) IN EXCESS
CHECKS OVER BANK BALANCES (983) (2,351) 102 3,987 (2,193)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,386) 3,136 1,135 (143,039) (8,920)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 35 48 (125) (125) 52
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 85 210 210 335 283
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 120 $ 258 $ 85 $ 210 $ 335
SUPPLEMENTAL CASH FLOW INFORMATION:
CASH PAID (RECEIVED) FOR:
INTEREST $ 1,381 $ 1,146 $ 4,403 $13,366 $15,365
INCOME TAXES 78 456 2,404 6,204 (3,139)
NON-CASH FINANCING ACTIVITIES:
IN FISCAL 1999:
THE COMPANY RECORDED 142,384 STOCK WARRANTS AT A VALUE OF $904,136 WHICH
RELATED TO THE FEBRUARY 1998 DEBT REFINANCING.
THE COMPANY HAD 28,180 STOCK WARRANTS EXPIRE AT A VALUE OF $178,943 WHEN A
PORTION OF THE FEBRUARY 1998 DEBT WAS REPAID IN THE FIRST QUARTER.
THE COMPANY INCURRED AN EXTRAORDINARY CHARGE ON EARLY EXTINGUISHMENT OF
DEBT IN THE AMOUNT OF $4.1 MILLION.
THE COMPANY RECORDED A NOTE RECEIVABLE IN THE AMOUNT OF $3,750,000 FOR THE
SALE OF ITS MONROE DIVISION, DUE IN FISCAL YEAR 2000.
IN FISCAL 1998:
THE COMPANY ISSUED 102,296 SHARES AS A STOCK DIVIDEND IN THE FIRST QUARTER.
THE COMPANY ISSUED 889,898 STOCK WARRANTS IN THE THIRD QUARTER RELATING TO
THE DEBT REFINANCING; OF THESE 266,969 WERE IMMEDIATELY EXERCISABLE AND
WERE RECORDED AT A VALUE OF $1,695,256.
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
WLR Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies and Other Information
Organization
WLR Foods, Inc. and subsidiaries (WLR Foods or the Company) are primarily
engaged in fully integrated turkey and chicken production, processing,
further processing and marketing. The Company's operations are
predominantly located in the mid-Atlantic region of the United States. WLR
Foods sells products through a variety of selected national and
international retail, foodservice and institutional markets.
Fiscal Year
The Company's fiscal year ends on the Saturday closest to June 30. Fiscal
years 2000, 1999 and 1998 ended on July 1, July 3, and June 27,
respectively, and included 52 weeks in fiscal year 2000, 53 weeks in fiscal
year 1999 and 52 weeks in fiscal year 1998.
Principles of Consolidation and Presentation
The accompanying consolidated financial statements include the accounts of
WLR Foods and all of its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments purchased with an original maturity
of three months or less to be cash equivalents.
Inventories
Inventories of feed, grain, eggs, packaging supplies, processed poultry and
meat products are stated at the lower of cost or market as determined by
the first-in, first-out valuation method. Live poultry and breeder flocks
consist of poultry raised for slaughter and breeders. Poultry raised for
slaughter are stated at the lower of average cost or market. Breeders are
stated at average cost less accumulated amortization. The cost of breeders
is accumulated during their development stage and then amortized into the
cost of the eggs produced over the egg production cycle of the breeders.
The Company has four methods of purchasing grain: cash purchasing, forward
purchasing, grain options, and hedging with futures contracts. Each
purchasing method creates varying degrees of risk for WLR Foods. The
Company uses futures contracts, grain options and forward purchases to
hedge the risk of fluctuating grain prices. The gains or losses from
hedging transactions become part of the cost of the related inventory items
and are expensed during the time period for which the hedge was intended.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method over the useful lives of the respective
assets. In general, the estimated useful lives for computing depreciation
are: 15 to 20 years for buildings and improvements; 3 to 8 years for
machinery and equipment; and 3 to 5 years for transportation equipment. The
costs of maintenance and repairs are charged to operations, while costs
associated with renewals, improvements and major replacements are
capitalized.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income for the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
in the period that includes the enactment date.
Advertising and Promotion Expenses
Advertising and promotion expenses are charged to operations in the period
incurred.
Financial Instruments
The estimated fair value of financial instruments has been determined by
the Company using available market information. Except for financial
instruments used for hedging and debt instruments (Notes 2 and 4), the
carrying amounts of all other financial instruments approximate their fair
values due to their short maturities.
Stock-Based Compensation
As permitted under SFAS No. 123, Accounting for Stock-Based Compensation,
the Company continues to account for employee stock option plans using the
intrinsic value method of accounting and provides the pro-forma disclosures
of SFAS No. 123.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires the Company to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Recently Issued Accounting Standards
In June 1998, SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, was issued. The Company adopted SFAS 133 on July 2,
2000. The Company anticipates that the adoption of this statement, which
will occur in fiscal 2001, will result primarily in quarterly fluctuations
to accumulated other comprehensive income, which is a component of
shareholder's equity, but will not have a significant impact on the
Company's consolidated statements of operations. The Company anticipates
that the implementation of this statement on July 2, 2000 will result in a
charge of approximately $3.4 million to accumulated other comprehensive
income, representing the deferred losses on grain options and futures
contracts on July 1, 2000.
Unaudited Interim Financial Information
The consolidated balance sheet as of September 30, 2000; the consolidated
statements of operations for the thirteen weeks ended September 30, 2000
and October 2, 1999; the consolidated statement of shareholders' equity and
comprehensive income (loss) for the thirteen weeks ended September 30,
2000; and the consolidated statements of cash flows for the thirteen weeks
ended September 30, 2000 and October 2, 1999 are unaudited. In the opinion
of management, all adjustments necessary for fair presentation of such
consolidated financial statements have been included. Such adjustments
consisted only of normal recurring accruals and the use of estimates.
Interim results are not necessarily indicative of results for the entire
fiscal year.
The consolidated financial statements and notes are presented in conformity
with the requirements for Form 10-Q and do not contain certain information
included in the Company's annual consolidated financial statements and
notes.
The Company's unaudited interim financial statements should be read in
conjunction with the consolidated financial statements included in the
Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the fiscal year ended July 1, 2000. In both, the accounting
policies and principles used are consistent in all material respects.
2. INVENTORIES
A SUMMARY OF INVENTORIES AT SEPTEMBER 30, 2000, JULY 1, 2000 AND JULY 3,
1999 FOLLOWS:
SEPTEMBER 30, JULY 3, JULY 1,
(IN THOUSANDS) 2000 1999 2000
(Unaudited)
LIVE POULTRY AND BREEDER FLOCKS $ 48,412 $ 48,275 $ 51,283
PROCESSED POULTRY AND MEAT PRODUCTS 35,313 31,510 30,655
PACKAGING SUPPLIES, PARTS AND OTHER 12,873 12,859 12,654
FEED, GRAIN AND EGGS 11,646 14,035 16,388
TOTAL INVENTORIES $108,244 $106,679 $110,980
The cost of grain, the principal feed ingredient for live birds, is subject
to price changes caused by weather, size of harvest, changes in demand,
transportation and storage costs. To reduce the risks of price
fluctuations, the Company has entered into grain option and futures
contracts. As of July 1, 2000, the Company had $3.4 million of deferred
losses on option contracts. There were no deferred amounts relating to
options for fiscal year 1999. The notional amount of grain futures
contracts at July 1, 2000 and July 3, 1999 was $0.5 million and $23.2
million, respectively. The fair value of grain futures contracts used in
hedging at July 1, 2000 and July 3, 1999 was $0.6 million and $20.6
million, respectively. The Company had $0.1 million of deferred gains on
futures contracts at July 1, 2000 and $2.6 million of deferred losses on
futures contracts at July 3, 1999. The notional amount and fair value of
open grain options at July 1, 2000 was $1.1 million and ($2.3) million,
respectively. There were no open grain option contracts at July 3, 1999.
3. PROPERTY, PLANT AND EQUIPMENT
WLR FOODS' INVESTMENT IN PROPERTY, PLANT AND EQUIPMENT AT JULY 1, 2000 AND
JULY 3, 1999 WAS AS FOLLOWS:
(IN THOUSANDS) 2000 1999
LAND AND IMPROVEMENTS $ 18,520 $ 18,198
BUILDINGS AND IMPROVEMENTS 98,531 97,670
MACHINERY AND EQUIPMENT 162,993 156,281
TRANSPORTATION EQUIPMENT 18,518 22,020
CONSTRUCTION IN PROGRESS 3,846 2,382
302,408 296,551
LESS ACCUMULATED DEPRECIATION 200,338 188,606
PROPERTY, PLANT AND EQUIPMENT, NET $102,070 $107,945
4. LONG-TERM DEBT AND BANK REVOLVING CREDITS
LONG-TERM DEBT AND OTHER CREDIT FACILITIES AT JULY 1, 2000 AND JULY 3, 1999
CONSISTED OF THE FOLLOWING OBLIGATIONS:
(IN THOUSANDS) 2000 1999
VARIABLE RATE NOTE:
SECURED BANK TERM NOTE DUE 2001 $ 40,435 $ 49,000
REVOLVING CREDIT NOTE:
SECURED BANK REVOLVING CREDIT NOTE DUE 2001 15,811 3,753
OTHER NOTES:
NOTES WITH VARIOUS TERMS AND RATES 842 1,138
TOTAL LONG-TERM DEBT 57,088 53,891
LESS CURRENT MATURITIES OF LONG-TERM DEBT 6,052 5,046
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES $ 51,036 $ 48,845
The Company refinanced certain term notes and revolving credit notes due in
2000 as of November 20, 1998. The new facility is a three-year financing
agreement that provides a total borrowing capacity of $150 million. The
agreement includes a $50 million term loan and $100 million revolving
credit facility. Both facilities have a maturity date of November 20, 2001
and are secured by virtually all of the Company's assets. The carrying
value of all debt approximates fair value at July 1, 2000, based on quoted
market prices for similar issues.
At July 1, 2000, borrowings on the term loan, which had $40.4 million
outstanding, were based on LIBOR of 6.68% plus the applicable margin of 140
basis points for a total rate of 8.08%. Revolving credit borrowings totaled
$15.8 million as of July 1, 2000, with $15.0 million tied to LIBOR of 6.66%
plus the 140 basis point applicable margin for a total rate of 8.06%. The
remaining $0.8 million in revolving credit borrowings was based on the
prime rate of 9.5%. At the end of each quarter, the applicable margin is
adjusted based upon certain Company performance metrics.
Principal payments of $1.25 to $1.5 million are required at the end of each
fiscal quarter, and began with the fourth quarter of fiscal 1999 for the
term loan portion of the credit facility. Additionally, principal payments
are required from the proceeds of asset sales in excess of $1.0 million
annually and for substantial new issuances of common stock.
During the first quarter of fiscal year 1999, the Company recorded an
extraordinary charge of $2.6 million ($1.6 million after tax) for the early
extinguishment of debt resulting from the permanent reduction of its prior
credit facility due to the sale of its Cassco Ice & Cold Storage, Inc.
subsidiary and its Goldsboro, North Carolina chicken complex. The Company
also recorded an extraordinary non-cash charge to write off the remaining
unamortized debt issue costs of the prior credit facility during the second
quarter of fiscal 1999 of $1.5 million ($1.0 million after tax). This
charge is also shown as an extraordinary item for the early extinguishment
of debt. Total charges for the early extinguishment of debt during fiscal
1999 were $4.1 million ($2.6 million after tax).
The Company incurred approximately $2.0 million in costs to establish the
new credit facility. These costs have been capitalized, included in other
assets, and are being amortized to interest expense over the life of the
new facility.
In relation to the debt refinancing in fiscal year 1998, warrants totaling
320,363 are outstanding and exercisable with an exercise price of $0.01.
In connection with the refinancing, an interest rate swap and an interest
rate cap that were required under the prior credit facility were assigned
from First Union National Bank to the Bank of Montreal. Accordingly, the
swap was marked to market as of November 20, 1998, with a non-cash charge
of $0.6 million recorded as interest expense. As of July 1, 2000, the
interest rate swap and the interest rate cap were no longer outstanding.
The Company's credit agreement with its lenders contains restrictive
covenants. As of July 1, 2000, the Company was in compliance with all
covenants.
Required annual principal repayments of long-term debt with original
maturities of greater than one year are as follows:
(IN THOUSANDS )
Fiscal 2001 $ 6,052
Fiscal 2002 50,802
Fiscal 2003 89
Fiscal 2004 95
Fiscal 2005 50
Total $57,088
5. Employee Benefits
The Company maintains a Profit Sharing and Salary Savings Plan that is
available to substantially all employees who meet certain age and service
requirements. In fiscal year 1998, most participants could contribute up to
15% of their salary. Under the Company's restated plan, most participants
could contribute up to 20% of their salary for fiscal years 1999 and 2000.
For each employee dollar contributed (limited to the first 4% of an
employee's compensation), the Company contributes a matching amount of 50
cents. The Company can also make additional contributions at its
discretion. WLR Foods' total contributions under this plan were
approximately $1.4 million, $2.4 million and $1.6 million, for fiscal 2000,
1999 and 1998, respectively.
6. INCOME TAXES
THE PROVISION FOR INCOME TAXES FOR CONTINUING OPERATIONS WAS AS FOLLOWS FOR
FISCAL YEARS 2000, 1999 AND 1998:
(IN THOUSANDS) 2000 1999 1998
CURRENT:
FEDERAL $ 1,373 $ 3,908 $ -
STATE 216 2,178 166
1,589 6,086 166
DEFERRED:
FEDERAL (866) 6,664 (14,625)
STATE (127) 461 (1,893)
(993) 7,125 (16,518)
TOTAL TAX EXPENSE (BENEFIT) $ 596 $ 13,211 $(16,352)
THE PROVISION FOR INCOME TAXES FOR CONTINUING OPERATIONS DIFFERS FROM THE
AMOUNTS RESULTING FROM APPLYING THE FEDERAL STATUTORY TAX RATES (34% FOR
FISCAL 2000, AND 35% FOR FISCAL 1999 AND 1998) TO EARNINGS (LOSS) BEFORE
INCOME TAXES AND MINORITY INTEREST AS FOLLOWS FOR FISCAL YEARS 2000, 1999
AND 1998:
(IN THOUSANDS) 2000 1999 1998
TAXES COMPUTED USING FEDERAL
STATUTORY TAX RATES $ 962 $ 12,582 $ (15,574)
STATE INCOME
TAXES, NET OF FEDERAL TAX
EFFECT 59 1,715 (1,123)
WORK OPPORTUNITY TAX CREDIT (218) (293) (97)
FOREIGN SALES CORPORATION (153) (344) (221)
OTHER, NET (54) (449) 663
TOTAL TAX EXPENSE(BENEFIT) $ 596 $ 13,211 $ (16,352)
EFFECTIVE TAX RATE 21.1% 36.7% 36.7%
INCOME TAX EXPENSE (BENEFIT) IS INCLUDED IN THE FINANCIAL STATEMENTS AS
FOLLOWS FOR FISCAL YEARS 2000, 1999 AND 1998:
(IN THOUSANDS) 2000 1999 1998
CONTINUING OPERATIONS $ 596 $ 13,211 $ (16,352)
DISCONTINUED OPERATIONS - 10,667 1,671
EXTRAORDINARY CHARGE - (1,569) -
$ 596 $ 22,309 $ (14,681)
THE TAX EFFECTS OF TEMPORARY DIFFERENCES THAT GIVE RISE TO SIGNIFICANT
PORTIONS OF DEFERRED TAX ASSETS AND DEFERRED TAX LIABILITIES AT JULY 1,
2000 AND JULY 3, 1999 ARE LISTED BELOW:
(IN THOUSANDS) 2000 1999
DEFERRED TAX LIABILITIES:
INVENTORIES, PRINCIPALLY DUE TO THE
ACCOUNTING FOR LIVE INVENTORIES ON
THE FARM PRICE METHOD FOR TAX
PURPOSES $ (13,357) $ (13,577)
PLANT AND EQUIPMENT, PRINCIPALLY DUE
TO DIFFERENCES IN DEPRECIATION
AND CAPITALIZED INTEREST (1,963) (2,854)
EMPLOYEE BENEFIT DEDUCTION (497) (1,326)
GROSS DEFERRED TAX LIABILITIES (15,817) (17,757)
DEFERRED TAX ASSETS:
NET OPERATING LOSS CARRYFORWARDS $ 1,217 $ 1,230
INSURANCE ACCRUALS, PRINCIPALLY DUE
TO TIMING OF PAYMENTS VERSUS
RECORDING OF EXPENSES 2,768 3,085
DEFERRED COMPENSATION, PRINCIPALLY DUE TO
ACCRUAL FOR FINANCIAL REPORTING
PURPOSES 1,362 1,356
TAX CREDITS 2,269 2,544
FINANCING COSTS, PRINCIPALLY DUE TO
ACCRUAL FOR FINANCIAL PURPOSES 642 642
COMPENSATED ABSENCES, PRINCIPALLY DUE
TO ACCRUAL FOR FINANCIAL REPORTING
PURPOSES 1,000 972
ACCOUNTS RECEIVABLE, PRINCIPALLY DUE
TO ALLOWANCE FOR DOUBTFUL ACCOUNTS 635 745
OTHER 109 375
GROSS DEFERRED TAX ASSETS 10,002 10,949
NET DEFERRED TAX (LIABILITY) ASSET $ (5,815) $ (6,808)
In assessing the recoverability of deferred tax assets, management
considers whether it is reasonably probable that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of the
deferred tax assets is dependent on the generation of future taxable
income, during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, projected future taxable income and tax planning strategies in
making this assessment. Based on the future expectation of taxable income
and reversal of deferred tax liabilities, management believes it is more
likely than not that the Company will realize the benefits of these
deductible differences as reflected at July 1, 2000 and July 3, 1999.
7. Shareholders' Equity
In February 1994, the Board of Directors approved the adoption of the
Shareholder Protection Rights Plan (the Plan) wherein one right attaches to
and trades with each share of common stock. Each right entitles the
registered holder to purchase from the Company, at an exercise price of
$45.33, the number of shares of common stock or participating preferred
stock having a market value of twice the exercise price. Such participating
preferred stock is designed to have economic and voting terms similar to
those of one share of common stock. Rights will separate from the common
stock and become exercisable following the earlier of 1) the date a person
or group acquires 15% or more of the outstanding stock, or 2) the 10{th}
business day (or such later date the Board may decide) after any person
commences a tender offer that would result in such person or group holding
a total of 15% or more of the common stock. Additionally, in either case,
rights owned by the acquiring person or group would automatically become
void.
If a person acquires between 15% and 50% of the outstanding common stock,
the Board may, in lieu of allowing rights to be exercised, require each
outstanding right to be exchanged for one share of common stock or
participating preferred stock. A provision in the Plan allows for rights
holders to acquire stock of the acquiring person or group, in the event a
change in control of the Company has occurred.
The rights are redeemable by the Company at $0.01 per right prior to
becoming exercisable and expire 10 years from issuance. WLR Foods has
100,000,000 shares of common stock authorized, with 16,172,410 outstanding
on July 1, 2000 and 16,541,691 outstanding on July 3, 1999. Additionally,
there are 50,000,000 shares of preferred stock authorized with none
outstanding as of July 1, 2000 or July 3, 1999.
8. STOCK OPTION AND STOCK PURCHASE PLANS
STOCK OPTION PLAN
WLR FOODS STOCK OPTION PLAN WAS ADOPTED BY THE BOARD OF DIRECTORS IN
ACCORDANCE WITH THE LONG-TERM INCENTIVE PLAN WHICH WAS RATIFIED BY THE
SHAREHOLDERS OF THE COMPANY ON OCTOBER 31, 1998. THE PLAN PROVIDES FOR THE
GRANTING OF INCENTIVE OR NONQUALIFIED COMMON STOCK OPTIONS. THE OPTION
PRICE UNDER THE PLAN SHALL NOT BE LESS THAN THE FAIR MARKET VALUE OF THE
COMMON SHARES AS OF THE DATE OF THE GRANT. THE OPTIONS VEST AFTER THREE
YEARS, WITH ONE-THIRD VESTING EACH YEAR AFTER THE DATE OF GRANT. THE
OPTIONS ARE EXERCISABLE AT VARYING DATES NOT TO EXCEED 10 YEARS FROM THE
DATE OF GRANT. THE CHANGES IN THE OUTSTANDING COMMON SHARES UNDER OPTION
FOR FISCAL 2000, 1999 AND 1998 ARE LISTED BELOW:
COMMON SHARES WEIGHTED AVERAGE
UNDER OPTION EXERCISE PRICE
OUTSTANDING AT JUNE 28, 1997 710,666 $13.85
CANCELED OR EXPIRED (226,041) $14.29
GRANTED IN FISCAL 1998 158,750 $6.88
OUTSTANDING AT JUNE 27, 1998 643,375 $11.98
CANCELED OR EXPIRED (262,126) $13.85
EXERCISED (5,833) $8.31
GRANTED IN FISCAL 1999 144,000 $8.34
OUTSTANDING AT JULY 3, 1999 519,416 $10.07
CANCELED OR EXPIRED (27,000) $8.96
GRANTED IN FISCAL 2000 215,250 $5.05
OUTSTANDING AT JULY 1, 2000 707,666 $8.58
THERE WERE 327,497, 270,416, AND 343,374 SHARES EXERCISABLE UNDER OPTION
WITH WEIGHTED AVERAGE EXERCISE PRICES OF $11.17, $12.06, AND $15.08 AT
FISCAL YEAR END 2000, 1999 AND 1998, RESPECTIVELY. THE FOLLOWING TABLE
SUMMARIZES INFORMATION ABOUT STOCK OPTIONS OUTSTANDING AS OF JULY 1, 2000:
STOCK OPTIONS OUTSTANDING: STOCK OPTIONS EXERCISABLE:
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
EXERCISE PRICE SHARES LIFE (YEARS) SHARES
$ 5.047 213,000 9.8 -
6.875 105,000 8.0 69,998
8.281 126,500 9.0 -
8.310 88,500 7.0 88,500
9.219 8,500 8.4 2,833
14.125 88,666 5.5 88,666
15.000 77,500 4.6 77,500
TOTAL 707,666 327,497
ACCOUNTING FOR STOCK OPTION PLAN
THE COMPANY HAS ELECTED TO ACCOUNT FOR ITS EMPLOYEE STOCK OPTION PLAN USING
THE INTRINSIC VALUE METHOD OF ACCOUNTING. ACCORDINGLY, NO COMPENSATION COST
HAS BEEN RECOGNIZED IN THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS
BECAUSE THE EXERCISE PRICE OF THE STOCK OPTIONS EQUALS THE MARKET PRICE OF
THE UNDERLYING STOCK ON THE DATE OF GRANT. PRO FORMA INFORMATION REGARDING
NET EARNINGS (LOSS) AND NET EARNINGS (LOSS) PER SHARE IS REQUIRED BY SFAS
NO. 123. ASSUMING THE COMPANY ACCOUNTED FOR ITS EMPLOYEE STOCK OPTIONS
USING THE FAIR VALUE METHOD, THE COMPANY'S NET EARNINGS (LOSS) AND NET
EARNINGS (LOSS) PER SHARE FROM CONTINUING OPERATIONS WOULD APPROXIMATE THE
PRO FORMA AMOUNTS INDICATED BELOW:
FISCAL YEARS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) JULY 1, 2000 JULY 3, 1999 JUNE 27, 1998
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS
AS REPORTED $ 2,233 $ 22,738 $ (28,212)
PRO FORMA $ 1,838 $ 22,292 $ (28,537)
NET EARNINGS (LOSS) PER COMMON SHARE
FROM CONTINUING OPERATIONS
AS REPORTED, BASIC $ 0.13 $ 1.35 $ (1.72)
AS REPORTED, DILUTED $ 0.13 $ 1.34 $ (1.72)
PRO FORMA, BASIC $ 0.11 $ 1.33 $ (1.74)
PRO FORMA, DILUTED $ 0.11 $ 1.32 $ (1.74)
NOTE: THE PRO FORMA DISCLOSURES SHOWN MAY NOT BE REPRESENTATIVE OF THE
EFFECTS ON REPORTED NET EARNINGS IN FUTURE YEARS.
THE FAIR VALUE OF EACH STOCK OPTION GRANT USED TO COMPUTE PRO FORMA NET
EARNINGS (LOSS) AND NET EARNINGS (LOSS) PER SHARE DISCLOSURES IS ESTIMATED
AT THE TIME OF THE GRANT USING THE BLACK-SCHOLES OPTION-PRICING MODEL. THE
WEIGHTED-AVERAGE ASSUMPTIONS USED IN THE MODEL ARE AS FOLLOWS:
2000 1999 1998
EXPECTED DIVIDEND YIELD 0.0% 0.0% 0.0%
EXPECTED VOLATILITY 54% 55% 31%
RISK-FREE INTEREST RATE 6.5% 5.5% 5.7%
EXPECTED TERM (IN YEARS) 10 10 10
USING THESE ASSUMPTIONS IN THE BLACK-SCHOLES MODEL, THE WEIGHTED AVERAGE
FAIR VALUE OF OPTIONS GRANTED WAS $0.7 MILLION, $0.8 MILLION, AND $0.6
MILLION IN FISCAL YEARS 2000, 1999 AND 1998, RESPECTIVELY.
ON OCTOBER 29, 1994, THE SHAREHOLDERS OF WLR FOODS APPROVED THE POULTRY
PRODUCER STOCK PURCHASE PLAN AND AMENDED AND RESTATED THE EMPLOYEE STOCK
PURCHASE PLAN. THESE PLANS ALLOW CONTRACT PRODUCERS AND EMPLOYEES TO
PURCHASE STOCK AT A 10% DISCOUNT FROM THE MARKET PRICE. ALL SHARES MUST BE
HELD IN THE PLANS FOR A PERIOD OF TWO YEARS. UPON TERMINATION OF EMPLOYMENT
OR CONTRACT, PARTICIPANTS ARE TERMINATED FROM THE RESPECTIVE PLANS.
9. LEASES
WLR FOODS HAS ENTERED INTO VARIOUS OPERATING LEASE AGREEMENTS FOR MACHINERY
AND EQUIPMENT. THE LEASES ARE NONCANCELABLE AND EXPIRE ON VARIOUS DATES
THROUGH 2006. TOTAL RENT EXPENSE WAS APPROXIMATELY $3.4 MILLION, $3.4
MILLION, AND $5.1 MILLION FOR FISCAL 2000, 1999 AND 1998, RESPECTIVELY. THE
FOLLOWING SCHEDULE PRESENTS THE FUTURE MINIMUM RENTAL PAYMENTS REQUIRED
UNDER THE OPERATING LEASES THAT HAVE INITIAL OR REMAINING NONCANCELABLE
LEASE TERMS IN EXCESS OF ONE YEAR AS OF JULY 1, 2000:
(IN THOUSANDS)
FISCAL 2001 $ 2,399
FISCAL 2002 1,347
FISCAL 2003 623
FISCAL 2004 150
FISCAL 2005 36
FISCAL 2006 12
TOTAL MINIMUM LEASE PAYMENTS $ 4,567
10. RELATED PARTY TRANSACTIONS
CERTAIN DIRECTORS OF WLR FOODS ARE CONTRACT GROWERS OF LIVE POULTRY FOR THE
COMPANY. IN ADDITION, A WLR FOODS DIRECTOR IS A DIRECTOR/OFFICER OF A
COMPANY WHICH SUPPLIES FUEL AND RELATED PRODUCTS TO CERTAIN LOCATIONS OF
THE COMPANY. TRANSACTIONS WITH THESE RELATED PARTIES DURING THE PAST THREE
FISCAL YEARS ARE AS FOLLOWS:
PURCHASES FROM
(IN THOUSANDS) RELATED PARTIES
FISCAL 2000 $ 700
FISCAL 1999 967
FISCAL 1998 1,381
IN MANAGEMENT'S OPINION, ALL RELATED PARTY TRANSACTIONS ARE CONDUCTED UNDER
NORMAL BUSINESS CONDITIONS, WITH NO PREFERENTIAL TREATMENT GIVEN TO RELATED
PARTIES.
11. EARNINGS PER SHARE
THE FOLLOWING IS A RECONCILIATION BETWEEN THE CALCULATION OF BASIC AND
DILUTED NET EARNINGS (LOSS) PER SHARE:
THIRTEEN WEEKS ENDED YEARS ENDED
SEPTEMBER 30, OCTOBER 2, JULY 1, JULY 3, JUNE 27,
2000 1999 2000 1999 1998
(UNAUDITED)
(DOLLARS IN THOUSANDS)
NUMERATOR:
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS $ 3,906 $ 2,543 $ 2,233 $22,738 $(28,212)
DENOMINATOR:
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 16,193 16,550 16,419 16,479 16,315
EFFECT OF OUTSTANDING
STOCK WARRANTS 320 302 320 300 88
BASIC WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 16,513 16,852 16,739 16,779 16,403
BASIC NET EARNINGS(LOSS) FROM
CONTINUING OPERATIONS
PER COMMON SHARE $ 0.24 $ 0.15 $ 0.13 $ 1.35 $ (1.72)
NUMERATOR:
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS $ 3,906 $ 2,543 $ 2,233 $ 22,738 $(28,212)
DENOMINATOR:
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 16,193 16,550 16,419 16,479 16,315
EFFECT OF OUTSTANDING
STOCK OPTIONS 3 5 22 11 -
EFFECT OF OUTSTANDING
STOCK WARRANTS 320 302 320 407 88
DILUTED WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 16,516 16,857 16,761 16,897 16,403
DILUTED NET EARNINGS
(LOSS) FROM CONTINUING
OPERATIONS PER COMMON
SHARE $ 0.24 $ 0.15 $ 0.13 $ 1.34 $ (1.72)
OPTIONS TO PURCHASE 707,666, 519,416 AND 643,375 SHARES OF COMMON STOCK, AT
PRICES BETWEEN $5.05 AND $15.00, $6.88 AND $15.00, AND $6.88 AND $20.00 PER
SHARE WERE OUTSTANDING IN 2000, 1999, AND 1998, RESPECTIVELY. THE
OUTSTANDING OPTIONS WERE NOT INCLUDED IN THE COMPUTATION OF DILUTED
EARNINGS PER SHARE FOR FISCAL YEAR 1998 BECAUSE THE EFFECT OF INCLUDING
THESE OPTIONS WOULD HAVE BEEN ANTI-DILUTIVE.
12. DISCONTINUED OPERATIONS
DURING FISCAL YEAR 1998, THE COMPANY'S BOARD OF DIRECTORS ADOPTED A PLAN TO
DISCONTINUE OPERATIONS OF ITS SUBSIDIARY, CASSCO ICE & COLD STORAGE. THE
TRANSACTION INVOLVED THE SALE OF THE DIVISION AND WAS COMPLETED ON JULY 31,
1998. NET PROCEEDS OF APPROXIMATELY $55 MILLION WERE RECEIVED, RESULTING
IN A GAIN OF APPROXIMATELY $28 MILLION ($18 MILLION AFTER TAX). EARNINGS
FROM DISCONTINUED OPERATIONS IN FISCAL YEAR 1999 WERE APPROXIMATELY $1
MILLION ($0.7 MILLION AFTER TAX). ACCORDINGLY, THE OPERATING RESULTS OF THE
CASSCO ICE OPERATIONS HAVE BEEN SEGREGATED FROM CONTINUING OPERATIONS AND
REPORTED AS SEPARATE LINE ITEMS ON THE CONSOLIDATED STATEMENT OF
OPERATIONS. OPERATING RESULTS OF DISCONTINUED OPERATIONS WERE AS FOLLOWS:
(IN THOUSANDS) 2000 1999 1998
NET SALES $ - $4,641 $22,063
INCOME BEFORE TAX - 1,071 4,529
INCOME TAX EXPENSE - 407 1,671
NET EARNINGS $ - $ 664 $ 2,858
13. SALE OF ASSETS
On August 14, 1998, the Company completed the sale of its Goldsboro, North
Carolina chicken complex. Net proceeds of approximately $38 million were
received in exchange for assets totaling approximately $30 million. The
gain of approximately $8 million ($5 million after tax) is included in the
results of operations for fiscal year 1999. The Company also completed the
sale of its Monroe, North Carolina processing plant in fiscal year 1999.
The sale resulted in a loss of approximately $1.5 million ($0.9 million
after tax).
14. Contingencies
The Company is a defendant in a pending litigation proceeding in the state
of West Virginia alleging violations of the West Virginia Consumer
Protection Act and West Virginia Antitrust Law. The suit alleges, among
other things, that the Company provided substandard chicks and feed to
growers who raise chickens for the Company in West Virginia. The suit was
dismissed by the Hardy County Circuit Court and is currently being appealed
before the West Virginia Supreme Court. While any potential damages in the
suit cannot be determined, the lawsuit is not expected to have a material
effect on the Company's consolidated financial statements. The Company
believes the suit is without merit and intends to defend it vigorously.
15. SEGMENT, GEOGRAPHIC, AND MAJOR CUSTOMER INFORMATION
IN FISCAL YEAR 1999, THE COMPANY ADOPTED SFAS NO. 131, "DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION." THIS STATEMENT REQUIRES
COMPANIES TO REPORT CERTAIN INFORMATION ABOUT OPERATING SEGMENTS IN THEIR
FINANCIAL STATEMENTS AND ESTABLISHES STANDARDS FOR RELATED DISCLOSURES
ABOUT PRODUCTS AND SERVICES, GEOGRAPHIC AREAS AND MAJOR CUSTOMERS.
THE COMPANY HAS TWO REPORTABLE SEGMENTS: CHICKEN AND TURKEY. THE THIRD
SEGMENT, OTHER, INCLUDES REVENUES FROM THE COMPANY'S PROTEIN CONVERSION
PLANTS, UNALLOCATED CORPORATE-RELATED ITEMS AND OTHER MISCELLANEOUS ITEMS.
CHICKEN SEGMENT REVENUES ARE PRIMARILY SALES OF CHICKEN-RELATED PRODUCTS,
SUCH AS RETAIL TRAYPACK ITEMS, WHOLE BIRDS CUT UP FOR FAST-FOOD RESTAURANTS
AND PORTION-CONTROLLED PRODUCTS FOR FOODSERVICE DISTRIBUTORS. TURKEY
SEGMENT REVENUES ARE PRIMARILIY SALES OF TURKEY-RELATED PRODUCTS AND
FURTHER PROCESSED PRODUCTS, INCLUDING BOTH TURKEY AND CHICKEN ITEMS,
PRODUCED AT THE COMPANY'S FURTHER PROCESSING PLANTS. THESE ITEMS INCLUDE
FRESH AND FROZEN WHOLE BIRDS AND PARTS, INCLUDING RETAIL TRAYPACK ITEMS,
TURKEY BURGERS AND A FULL LINE OF FURTHER PROCESSED PRODUCTS, INCLUDING
DELI MEATS, FRANKFURTERS AND SALADS. TO BETTER UTILIZE ITS FEED
MANUFACTURING CAPABILITIES, THE COMPANY SELLS FEED TO OTHER USERS,
PRIMARILY FROM ITS MARSHVILLE, NORTH CAROLINA FEEDMILL. SALES FROM THIS
MILL WERE INCLUDED IN TURKEY SEGMENT SALES THROUGH THE FIRST QUARTER OF
FISCAL 1999, WHEN THE COMPLEX WAS CONVERTED TO CHICKEN PROCESSING. EACH
SEGMENT IS EVALUATED BY MANAGEMENT BASED ON OPERATING PROFIT (LOSS) AND NET
EARNINGS (LOSS).
THE FOLLOWING TABLES SET FORTH SPECIFIC OPERATING INFORMATION ABOUT EACH
SEGMENT AS REVIEWED BY THE COMPANY'S MANAGEMENT. NET EARNINGS (LOSS) FOR
SEGMENT REPORTING IS PRESENTED ON THE SAME BASIS AS THAT USED FOR
CONSOLIDATED NET EARNINGS (LOSS). THE ACCOUNTING POLICIES OF THE SEGMENTS
ARE THE SAME AS THOSE DESCRIBED IN THE SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES. ADMINISTRATIVE SERVICES PROVIDED BY THE CORPORATE OFFICES ARE
PRIMARILY ALLOCATED TO THE INDIVIDUAL SEGMENTS BASED ON LEVELS OF
INVENTORIES AND PROPERTY, PLANT AND EQUIPMENT. DUE TO CERTAIN ASSETS WHICH
ARE SHARED BETWEEN SEGMENTS, MANAGEMENT EVALUATES ASSETS AND CAPITAL
EXPENDITURES ON A CONSOLIDATED BASIS; THEREFORE, SUCH INFORMATION IS NOT
PRESENTED ON A SEGMENT BASIS.
YEAR ENDED JULY 1, 2000 CHICKEN TURKEY OTHER ELIMINATIONS TOTAL
(IN THOUSANDS)
EXTERNAL SEGMENT REVENUES $403,060 $421,616 $ 8,052 $ - $832,728
INTERSEGMENT REVENUES - - 12,655 (12,655) -
TOTAL REVENUES 403,060 421,616 20,707 (12,655) 832,728
INTEREST EXPENSE 2,520 2,549 - (101) 4,968
INTEREST INCOME - 205 145 (101) 249
INCOME TAXES (BENEFIT) (6,718) 5,675 1,639 - 596
NET EARNINGS(LOSS) FROM
CONTINUING OPERATIONS (11,078) 9,360 3,951 - 2,233
DEPRECIATION EXPENSE 9,852 6,678 1,314 - 17,844
YEAR ENDED JULY 3,1999
EXTERNAL SEGMENT REVENUES $452,513 $427,637 $ 7,936 $ - $888,086
INTERSEGMENT REVENUES - - 12,882 (12,882) -
TOTAL REVENUES 452,513 427,637 20,818 (12,882) 888,086
INTEREST EXPENSE 4,974 6,060 - (103) 10,931
GAIN ON SALE OF
GOLDSBORO COMPLEX 7,699 - - - 7,699
INTEREST INCOME 1 103 299 (103) 300
INCOME TAXES (BENEFIT) 13,561 (1,861) 1,511 - 13,211
NET EARNINGS(LOSS) FROM
CONTINUING OPERATIONS 22,193 (3,046) 3,591 - 22,738
EXTRAORDINARY CHARGE - - (2,559) - (2,559)
DEPRECIATION EXPENSE 9,754 8,218 1,408 - 19,380
YEAR ENDED JUNE 27, 1998
EXTERNAL SEGMENT REVENUES $388,559 $546,256 $11,152 $ - $945,967
INTERSEGMENT REVENUES 22,912 - 13,460 (36,372) -
TOTAL REVENUES 411,471 546,256 24,612 (36,372) 945,967
INTEREST EXPENSE 8,239 14,376 13 (89) 22,539
INTEREST INCOME 70 6 88 (89) 75
INCOME TAXES (BENEFIT) 3,277 (20,563) 934 - (16,352)
NET EARNINGS(LOSS) FROM
CONTINUING OPERATIONS 6,085 (36,158) 1,927 (66) (28,212)
DEPRECIATION EXPENSE 9,432 11,169 2,242 - 22,843
THIRTEEN WEEKSENDED SEPTEMBER 30, 2000
(IN THOUSANDS) CHICKEN TURKEY OTHER ELIMINATIONS TOTAL
EXTERNAL SEGMENT REVENUES $106,978 $102,835 $ 2,068 $ - $211,881
INTERSEGMENT REVENUES - - 3,080 (3,080) -
TOTAL REVENUES 106,978 102,835 5,148 (3,080) 211,881
INTEREST EXPENSE 757 776 - (27) 1,506
INTEREST INCOME - 1 27 (27) 1
INCOME TAXES (BENEFIT) 158 1,444 410 - 2,012
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 306 2,802 798 - 3,906
DEPRECIATION EXPENSE 2,438 1,635 305 - 4,378
THIRTEEN WEEKS ENDED OCTOBER 2, 1999
EXTERNAL SEGMENT REVENUES $102,351 $ 97,771 $ 1,885 $ - $202,007
INTERSEGMENT REVENUES - - 3,143 (3,143) -
TOTAL REVENUES 102,351 97,771 5,028 (3,143) 202,007
INTEREST EXPENSE 627 629 - (23) 1,233
INTEREST INCOME - 98 58 (23) 133
INCOME TAXES (BENEFIT) (37) 1,020 559 - 1,542
NET EARNINGS (LOSS)FROM
CONTINUING OPERATIONS (61) 1,682 922 - 2,543
DEPRECIATION EXPENSE 2,524 1,762 329 - 4,615
A RECONCILIATION OF TOTAL SEGMENT EARNINGS (LOSS) TO CONSOLIDATED NET
EARNINGS (LOSS) IS AS FOLLOWS:
Thirteen Weeks Ended YEARS ENDED
SEPTEMBER 30, October 2, JULY 1, JULY 3, JUNE 27,
2000 1999 2000 1999 1998
(UNAUDITED)
SEGMENT EARNINGS
(LOSS) $ 3,906 $ 2,543 $ 2,233 $22,738 $(28,212)
UNALLOCATED:
EARNINGS FROM DISCONTINUED
OPERATIONS,
NET OF TAX - - - 664 2,858
GAIN ON SALE OF
DISCONTINUED OPERATIONS,
NET OF TAX - - - 17,927 -
EXTRAORDINARY CHARGE ON
EARLY EXTINGUISHMENTS
OF DEBT, NET OF TAX - - - (2,559) -
NET EARNINGS(LOSS) $ 3,906 $ 2,543 $ 2,233 $38,770 $(25,354)
GEOGRAPHIC INFORMATION.
NO INDIVIDUAL FOREIGN COUNTRY ACCOUNTS FOR 10% OR MORE OF SALES TO EXTERNAL
CUSTOMERS.
MAJOR CUSTOMERS.
REVENUES FROM ONE CUSTOMER REPRESENTED APPROXIMATELY $129 MILLION AND $113
MILLION, OR 16% AND 13%, OF TOTAL COMPANY NET SALES IN FISCAL YEARS 2000
AND 1999, RESPECTIVELY. NO CUSTOMER REPRESENTED 10% OR MORE OF TOTAL
COMPANY'S NET SALES IN FISCAL YEAR 1998.
16. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THE UNAUDITED SUMMARY OF QUARTERLY RESULTS OF CONTINUING OPERATIONS FOR
FISCAL 2000 AND 1999 FOLLOWS:
FISCAL YEAR ENDED JUNE 30, 2001 FIRST SECOND THIRD FOURTH
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NET SALES $ 211,881
OPERATING INCOME (LOSS) 7,398
NET EARNINGS(LOSS) FROM
CONTINUING OPERATIONS 3,906
PER SHARE DATA:
DILUTED EARNINGS(LOSS) FROM
CONTINUING OPERATIONS PER
COMMON SHARE $ 0.24
FISCAL YEAR ENDED JULY 1,2000 FIRST SECOND THIRD FOURTH
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NET SALES $202,007 $218,803 $199,182 $212,736
OPERATING INCOME (LOSS) 4,946 8,233 (6,961) 299
NET EARNINGS(LOSS) FROM
CONTINUING OPERATIONS 2,543 4,784 (4,970) (124)
PER SHARE DATA:
DILUTED EARNINGS(LOSS) FROM
CONTINUING OPERATIONS
PER COMMON SHARE $ 0.15 $ 0.28 $ (0.30)$ (0.01)
FISCAL YEAR ENDED JULY 3, 1999 FIRST SECOND THIRD FOURTH
NET SALES $237,941 $229,276 $192,881 $227,988
OPERATING INCOME 15,889 15,094 759 6,924
NET EARNINGS (LOSS) FROM
CONTINUING OPERATIONS 11,717 7,222 (127) 3,926
PER SHARE DATA:
DILUTED EARNINGS(LOSS) FROM
CONTINUING OPERATIONS PER
COMMON SHARE $ 0.70 $ 0.43 $ (0.01)$ 0.23
PER SHARE CALCULATIONS ARE BASED ON EACH STAND ALONE PERIOD PRESENTED;
THEREFORE, THE ANNUAL PER SHARE RESULTS MAY NOT BE THE SUM OF THE FOUR
QUARTERS.
17. Subsequent Event
On January 27, 2001, a wholly owned subsidiary of Pilgrim's Pride
Corporation acquired WLR Foods, Inc. and WLR Foods became a wholly-owned
subsidiary of Pilgrim's Pride.
In connection with the merger, each share of WLR Foods common stock
converted into the right to receive $14.25 in cash. The merger
consideration was determined based upon arms'-length negotiations between
Pilgrim's Pride and WLR Foods. As a result, Pilgrim's Pride will pay
approximately $234.5 million in consideration for the WLR shares, and also
repaid approximately $45.5 million in debt of WLR Foods. Pilgrim's Pride
financed the merger through a combination of cash on hand and borrowings
under its credit facility with CoBank, ABC.
EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED
FINANCIAL DATA
The unaudited pro forma condensed consolidated statement of operations
for the three months ended December 31, 2000 and the unaudited pro forma
condensed consolidated balance sheet as of December 31, 2000 are based on
the historical unaudited consolidated financial statements of Pilgrim's
Pride Corporation (Pilgrim's Pride) and the historical unaudited
consolidated financial statements of WLR Foods, Inc. (WLR) and on the
assumptions and adjustments described in the notes to the unaudited pro
forma financial data, including assumptions relating to the allocation of
the consideration paid for WLR to the assets and liabilities acquired,
based on preliminary estimates of their respective fair values. Pilgrim's
Pride's management does not expect the final allocation of this
consideration to significantly differ from that reflected in the unaudited
pro forma combined consolidated financial data. WLR's fiscal year end was
July 1, 2000, and ,as such, their results have been adjusted so that they
coincide with the periods presented for the Pilgrim's Pride fiscal year
ended September, 30 2000 and the first quarter ended December 30, 2000.
The unaudited pro forma balance sheet data has been presented as if
the acquisition of WLR had occurred as of December 31, 2000, and the
proforma condensed consolidated statement of operations data has been
prepared as if the acquisition occurred at the beginning of each period
presented.
The unaudited pro forma condensed statement of operations for the year
ended September 30, 2000 is based on the historical audited consolidated
financial statements of Pilgrim's Pride for the fiscal year ended September
30, 2000, and the historical consolidated financial statements of WLR
adjusted to be presented on the same fiscal year basis as Pilgrim's Pride
and for other assumptions and adjustments described in the notes to the
unaudited pro forma financial data.
The acquisition of WLR was completed effective January 27, 2001.
The acquisition of WLR has been accounted for using the purchase
method of accounting. The total purchase cost of the acquisition will be
allocated to the tangible and intangible assets and liabilities acquired
based upon their estimated fair values. The purchase price allocation is
preliminary, based on facts currently known to Pilgrim's Pride. Management
is not aware of any significant unrecorded obligations or contingencies,
other than those disclosed in the pro forma financial statements.
Pilgrim's Pride Corporation
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 30, 2000
(IN THOUSANDS)
PILGRIM'S WLR PRO FORMA PRO FORMA
PRIDE (A) ADJUSTMENTS COMBINED
CURRENT ASSETS
CASH AND CASH
EQUIVALENTS $11,277 $179 $ - $11,456
ACCOUNTS
RECEIVABLE 64,286 62,152 - 126,438
INVENTORIES 167,212 97,471 - 264,683
PREPAIDS AND OTHER
CURRENT ASSETS 10,394 2,916 - 13,310
TOTAL CURRENT ASSETS 253,169 162,718 - 415,887
OTHER ASSETS
PROPERTY, PLANT AND
EQUIPMENT, NET 442,164 98,022 151,282 (B) 691,468
OTHER LONG-TERM
ASSETS 19,007 5,250 24,257
$714,340 $265,990 $151,282 $1,131,612
CURRENT LIABILITIES
NOTES PAYABLE TO
BANKS $ 9,500 $ - $ - $ 9,500
ACCOUNTS PAYABLE
AND OTHER CURRENT
LIABILITIES 131,419 70,515 6,733 (B) 208,667
CURRENT MATURITIES OF
LONG TERM DEBT 4,742 36,172 (36,172)(C) 4,742
TOTAL CURRENT
LIABILITIES 145,661 106,687 (29,439) 222,909
LONG TERM DEBT, LESS
CURRENT
MATURITIES 156,546 453 275,672 (C) 432,671
DEFERRED INCOME TAXES 56,568 - 56,374 (B) 112,942
OTHER LONG TERM
LIABILITIES 889 7,525 8,414
TOTAL STOCKHOLDER'S
EQUITY 354,676 151,325 (151,325)(C) 354,676
TOTAL LIABILITIES AND
EQUITY $714,340 $265,990 $151,282 $1,131,612
PILGRIM'S PRIDE CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
(IN THOUSANDS)
PILGRIM'S PRO FORMA PRO FORMA
PRIDE WLR (A) ADJUSTMENTS COMBINED
REVENUES $1,499,439 $842,602 $ - $2,342,041
COST OF SALES 1,333,611 768,194 15,128 (D) 2,116,933
SELLING, GENERAL AND
ADMINISTRATIVE 85,340 65,440 - 150,780
OPERATING INCOME
(LOSS) 80,488 8,968 (15,128) 74,328
INTEREST EXPENSE,
NET 17,779 5,374 25,833 (F) 48,986
OTHER (INCOME)
EXPENSE, NET (77) (1,068) - (1,145)
INCOME (LOSS)
BEFORE TAXES 62,786 4,662 (40,961) 26,487
PROVISION(BENEFIT)
FOR INCOME TAXES 10,442 1,066 (15,975)(E) (4,467)
NET INCOME $52,344 $3,596 $(24,986) $ 30,954
EBITDA (G) $116,592 $28,710 $ - $ 145,302
Earnings per common share
Basic $ 1.27 $ 0.22 $ - $ 0.73
Diluted 1.27 0.22 - 0.73
PILGRIM'S PRIDE CORPORATION
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED DECEMBER, 30 2000
(IN THOUSANDS)
PILGRIM'S PRO FORMA PRO FORMA
PRIDE WLR (A) ADJUSTMENTS COMBINED
REVENUES $386,032 $222,947 $ - $608,979
COST OF SALES 338,866 198,527 3,782 (D) 541,175
SELLING, GENERAL AND
ADMINISTRATIVE 23,955 16,187 - 40,142
OPERATING INCOME
(LOSS) 23,211 8,233 (3,782) 27,662
INTEREST EXPENSE,
NET 4,140 1,245 6,617 (F) 12,002
OTHER (INCOME)
EXPENSE, NET (1) 3 - 2
INCOME (LOSS)
BEFORE TAXES 19,072 6,985 (10,399) 15,658
PROVISION(BENEFIT)
FOR INCOME TAXES 6,335 2,375 (4,056)(E) 4,654
NET INCOME $12,737 $4,610 $(6,343) $11,004
EBITDA (G) $31,880 $12,519 - $44,399
Earnings per common share
Basic $ 0.31 $ 0.28 - $ 0.27
Diluted 0.31 0.28 - 0.27
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(in thousands, except per-share amounts)
(A)The WLR historical financial statements have been adjusted to reflect
the same periods as Pilgrim's Pride fiscal year end and fiscal first
quarter. In addition, certain reclassifications have been made to the WLR
historical financial statements to conform to the presentation used by
Pilgrim's Pride.
On January 27, 2001 the Company completed the acquisition of all of the
outstanding shares of WLR common stock for $14.25 per share, or
approximately $234,500.
(B)The WLR acquisition will be accounted for as a purchase business
combination. The unaudited Pro Forma Condensed Consolidated Financial
Statements do not include any adjustments related to WLR restructuring
costs or recurring benefits expected from synergies.
The purchase price includes an adjustment for deferred income taxes
representing the tax effect of the differences between the assigned
values and the tax basis of the assets and liabilities acquired. The
purchase price allocation is preliminary and further adjustments may be
made based on the completion of final valuation and other studies.
Components of purchase price:
Cash paid for outstanding shares of common stock $234,500
Estimated transaction costs 5,000
Less: Book value of net assets acquired (151,325)
Plus: Establishment of deferred taxes 56,374
Excess consideration over book value of assets acquired $144,549
Preliminary purchase price allocation and other adjustments:
Increase in fair value of property, plant and equipment 151,282
Fair value adjustments for acquired liabilities (6,733)
$144,549
(A)Represents the payment of the purchase price for WLR's common stock plus
the refinancing of WLR's outstanding debt, with proceeds from borrowings
under Pilgrim's Pride's available $400 million secured term borrowing
facility. (See footnote C to Pilgrim's Pride annual report on Form 10-K
for the year ended September 30, 2000 for additional information about the
secured term borrowing facility)
(B)Pro forma adjustments have been included to adjust depreciation expense
based on the fair value preliminarily assigned to property, plant and
equipment. An average useful life of 10 years was estimated for
property, plant and equipment.
(C)Represents the income tax effect of pro forma adjustments.
(D)Pro forma adjustments have been included to adjust interest expense to
consider the following attributes of the acquisition of WLR;
i. Elimination of WLR's historical interest expense.
ii. Interest expense on borrowings under the senior secured
credit facility to finance the acquisition and refinance
WLR's outstanding debt.
iii. Consideration of the 1% guarantee fee paid to the
Company's major stockholder, for his guarantees on the
increased borrowings.
iv. Increase in interest expense on certain of the Company's
other outstanding debt instruments as a result of the
increased leverage resulting from the acquisition of WLR and
the related transactions.
(G) "EBITDA" is defined as the sum of operating income (loss) and
depreciation and amortization. EBITDA should not be considered an
alternative to, or more meaningful than, net income as a measure
of the Company's operating performance or cash flows as a measure
of the Company's liquidity. EBITDA is presented here not as an
alternative measure of operating results or liquidity, but rather
to provide additional information related to the Company's performance.