NORTHLAND CRANBERRIES, INC. For More Information Contact:
[LOGO] John Swendrowski, Chairman & CEO
Northland Cranberries, Inc.
800 First Avenue South, P.O. Box 8020
Wisconsin Rapids, WI 54495-8020
Tel: 715-424-4444 Fax: 715-422-6897
www.northlandcran.com
Affiliate of Sun Capital Partners Acquires Control of Northland Cranberries,
Inc. As Part of A Successful Debt and Equity Restructuring; Northland
Anticipates Reporting A Pre-Tax Loss of Approximately $100-110 Million for
Fiscal 2001, Including Approximately $100 Million of Asset Writedown Charges
NEWS RELEASE
For Immediate Release, November 6, 2001
Wisconsin Rapids, Wisconsin - Northland Cranberries, Inc. (OTC: NRCNA),
manufacturer and marketer of Northland 100% juice cranberry blends and Seneca
fruit juice products, announced that it consummated a debt and equity
restructuring that allows it to successfully avoid a bankruptcy proceeding.
Northland expects that this restructuring will provide it with sufficient
working capital and new borrowing capacity to once again aggressively market and
support the sale of its Northland and Seneca brand juice products.
The debt restructuring was accomplished through the exchange by the
members of Northland's then current bank group of approximately $151 million of
total outstanding revolving credit agreement indebtedness for a total of $38.4
million in cash, as well as by Northland's issuance of revised debt obligations
in the total principal amount of $25.7 million and newly-issued shares of common
stock representing a total of 7.5% of Northland's fully-diluted common shares to
the certain bank group members which decided to continue as lenders to
Northland. The debt restructuring occurred pursuant to an agreement for the
assignment and assumption by Sun Northland, LLC, an affiliate of Sun Capital
Partners, Boca Raton, Florida, of a portion of Northland's bank group
indebtedness. The debt restructuring resulted in the cancellation of
approximately $87 million of the
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Company's then existing outstanding revolving bank debt. Financing for the debt
restructuring, and for additional working capital availability to Northland, was
provided by Foothill Capital Corporation, Los Angeles, California. Foothill
provided Northland with $20 million in term loan financing and a new $30 million
revolving credit facility. As part of the consideration to Foothill to provide
the new credit facilities to Northland, Foothill (and its assigns) received
warrants to purchase up to a total of 5% of Northland's fully-diluted common
shares at an exercise price equal to one cent per share.
Northland's equity restructuring was accomplished through an investment
of $7 million of equity capital into Northland by Sun Northland, LLC, an
affiliate of Sun Capital Partners, together with the assignment of Sun
Northland's rights to Northland's cancelled bank debt of approximately $87
million, in exchange for Class A common shares, a newly-created series of
convertible, voting preferred stock and a second newly-created series of
preferred stock, which together represent 77.5% of Northland's fully-diluted
common shares.
After giving effect to the debt and equity restructuring transactions,
as well as the anticipated future issuances of stock options to key employees of
Northland, Northland's existing shareholders' ownership percentage is expected
to constitute approximately 5% of Northland's fully-diluted common shares.
Earlier in the day, Northland announced that it had effected a
one-for-four reverse stock split to facilitate the restructuring and that it had
voluntarily delisted its common shares from trading on the NASDAQ national
market system so that its shares could be traded under its new symbol "NRCNA" on
the over-the-counter bulletin board.
Northland also announced separately that, while its financial
statements for its fiscal year ended August 31, 2001 have not yet been
finalized, it anticipates reporting a pre-tax loss of approximately $100-110
million for the fiscal year that will include charges of approximately
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$100 million, reflecting writedowns on various impaired assets, including assets
held for sale, cranberry properties, receiving and concentrate production
facilities and various inventory items. The writedowns are expected to consist
of approximately $18 million in writedowns to net realizable value in the
carrying value of raw cranberry and cranberry concentrate inventories and
approximately $82 million in writedowns for cranberry bogs and other facilities
and assets. The impairment resulted primarily from the continued deterioration
in the long-term prospects for the cranberry growing and processing industry
over the summer due, in part, to the implementation of an inadequate USDA
cranberry marketing order for the 2001 crop year, continued large levels of
excess cranberry inventories held by Northland and other industry participants,
as well as continued long-term cranberry market prices which are under growers'
costs of production. The post-writedown values of Northland's assets are
supported by appraisals and were considered by Northland's lenders in connection
with the debt restructuring.
In connection with the equity restructuring and investment by Sun
Northland, LLC, Northland appointed a new Board of Directors. John Swendrowski,
Northland's Chairman and Chief Executive Officer, will continue as a member of
Northland's Board. Additionally, five representatives of Sun Capital Partners
have been appointed to replace Northland's other existing Board members.
John Swendrowski, Northland's Chairman and CEO, stated "We have worked
diligently over the last year to restructure our balance sheet and capital
structure to reduce our debt burden and provide us with the necessary working
capital to again aggressively compete on the juice aisle and start regaining the
lost market share of our Northland and Seneca brands through renewed media and
trade promotions. After lengthy and difficult negotiations, we reached the point
where it was imperative to reach an agreement with our current bank group and to
refinance our bank debt with a new lender, or else we were faced with
liquidating or reorganizing the company in a bankruptcy proceeding in which
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our creditors would have likely received substantially less value than they are
now receiving and our shareholders would have been completely wiped out."
"After a very lengthy exploration and pursuit of many possible
available strategic alternatives, we believe that this restructuring provides
our current shareholders and our creditors with the maximum value attainable
given the current financial condition of our company and the current difficult
economic realities of the cranberry industry," said Swendrowski.
"Our restructuring will also help maintain both jobs for our employees
and our excellent ongoing relationships with our customers, vendors, growers and
trade creditors," said Swendrowski.
M. Steven Liff, Vice President of Sun Capital Partners, Inc, said: "Sun
Capital is very enthusiastic about its investment in Northland Cranberries, Inc.
We believe there are tremendous opportunities to promote Northland's brands and
increase its market position. With our capital infusion and operational
expertise, coupled with John Swendrowski and his outstanding management team,
Northland should be well positioned to benefit from a much healthier capital
structure. Furthermore, the new capital base will allow for continued investment
in Northland's brands and its business in general."
Swendrowski said, "We couldn't be more pleased to have the financial
and operational support of Sun Capital to help us aggressively begin the process
of rebuilding our brands and returning to profitability, so that we can again
begin growing our company and work towards increasing shareholder value over the
long-term. Sun Capital has an outstanding reputation and history of adding value
to its portfolio companies and we think this combination will make us a very
strong competitor on the juice aisle."
"We intend to launch a new advertising campaign focused on the health
benefits of our Northland juice line of products during the week of
Thanksgiving. Over the next twelve months, in
1
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addition to our new media campaign, we will focus on regaining lost distribution
and reinforcing our current trade promotional programs," said Swendrowski.
Foothill Capital is a specialty financial services company that
provides asset-based financing to middle-market companies across the United
States and Canada. Foothill has a proven track record of nearly 30 years of
service, excellent turnaround times and an interactive loan approval process.
Foothill provides secured commercial loans to a broad spectrum of industries,
under a variety of structures designed to fit a company's unique financing
needs. Foothill is a wholly-owned subsidiary of Wells Fargo & Company, one of
North American's largest financial services companies with over $200 billion in
assets.
Sun Capital Partners, Inc. is a leading merchant banking firm focused
on leveraged buyouts. Sun Capital has invested in approximately 30 companies
during the past several years with combined sales in excess of $2 billion. Sun
Capital recently completed the formation of its latest private equity fund,
which raised $200 million. Participating in Sun Capital's fund are leading
fund-of-funds investors, university endowments, pension funds, financial
institutions and high net worth individuals, families and trusts.
Northland is a vertically integrated grower, handler, processor and
marketer of cranberries and value-added cranberry products. The Company
processes and sells Northland brand 100% juice cranberry blends, Seneca brand
juice products, Northland brand fresh cranberries and other cranberry products
through retail supermarkets and other distribution channels. Northland also
sells cranberry and other fruit concentrates to industrial customers who
manufacture juice products.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this press release are "forward-looking
statements," including statements about the Company's future plans, goals and
other events, which have not yet occurred. These statements are intended to
qualify for the safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. Forward-looking statements can
generally be identified because the context of such statements will include
words such as "believes," "anticipates," "expects," or words of similar import.
Whether or not these forward-looking statements will be accurate in the future
will depend on certain risks and factors, including risks associated with (i)
the Company's ability to reinvigorate its Northland and Seneca brand names,
regain its lost distribution capabilities and branded products market share and
generate increased levels of branded product sales; (ii) the ongoing impact of
the continuing significant industry oversupply of cranberries; (iii) the
development, market share growth and continued consumer acceptance of the
Company's branded juice products, including consumer acceptance of its "27%
Solution"; (iv) the disposition of certain litigation related to the sale of the
net assets of the Company's private label juice business; (v) the impact of the
marketing order of the United States Department of Agriculture relative to the
2001 crop year, as well as the cranberry purchase program adopted by the United
States Congress; (vi) agricultural factors affecting the Company's crop and the
crop of other North American growers; (vii) the Company's ability to comply with
the terms and conditions of, and to satisfy its responsibilities under, its new
credit facilities and its other debt agreements; (viii) finalizing the financial
treatment and accounting for certain matters related to the Company's fiscal
year ended August 31, 2001 and its debt and equity restructuring. Readers should
consider these risks and factors and the impact they have when evaluating these
forward-looking statements. These statements are based only on management's
knowledge and expectations on the date of this press release. The Company will
not necessarily
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update these statements or other information in this press
release based on future events or circumstances.