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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
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|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED
AUGUST 31, 2000 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO .
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COMMISSION FILE NUMBER: 333-17865
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CENEX HARVEST STATES COOPERATIVES
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0251095
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5500 CENEX DRIVE (651) 451-5151
INVER GROVE HEIGHTS, MINNESOTA 55077 (Registrant's Telephone number,
(Address of principal executive office) including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES |X| NO ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K: Not applicable
State the aggregate market value of the voting stock held by non-affiliates
of the registrant: The registrant has no voting stock outstanding.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: The registrant has
no common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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CENEX HARVEST STATES COOPERATIVES
Pursuant to the requirements of Section 210.3-09 of Regulation S-X under the
Securities Exchange Act of 1934, as amended, the undersigned registrant hereby
amends Item 8, Item 14(a)(1) and Item 14(a)(3) of its annual report on Form 10-K
for fiscal year ended August 31, 2000 to add the separate financial statements
of Ventura Foods, LLC, a non-consolidated 50% owned equity investment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8 is hereby amended to include the financial statements of Ventura Foods,
LLC, a non-consolidated 50% owned equity investment. The financial statements of
Ventura Foods, LLC, which are included in this Form 10-K/A following the
signatures, are hereby incorporated by reference in this Item 8.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS FILED ON FORM 8-K
(a)(1) FINANCIAL STATEMENTS
Item 14(a)(1) is hereby amended to add the following:
IV. Ventura Foods, LLC, a non-consolidated 50% owned equity investment
Independent Auditors' Report F-53
Consolidated Balance Sheets as of December 31, 2000 and 1999 F-54
Consolidated Statements of Income for the years ended
December 31, 2000, 1999 and 1998 F-55
Consolidated Statements of Members' Capital for the
years ended December 31, 2000 1999 and 1998 F-56
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999 and 1998 F-57
Notes to Consolidated Financial Statements for the
years ended December 31, 2000, 1999 and 1998 F-58
(a)(3) EXHIBITS
Item 14(a)(3) is amended to add the following exhibit:
23.3 Independent Auditors' Consent
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this Report to
be signed on its behalf by the undersigned, thereunto duly authorized.
CENEX HARVEST STATES COOPERATIVES
By: /s/ JOHN SCHMITZ Date: April 2, 2001
----------------------------------------------- -----------------
John Schmitz
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
INDEPENDENT AUDITORS' REPORT
Members Committee of Ventura Foods, LLC:
We have audited the accompanying consolidated balance sheets of Ventura Foods,
LLC and subsidiary (the "Company") as of December 31, 2000 and 1999, and the
related consolidated statements of income, members' capital, and cash flows for
each of three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Ventura Foods, LLC and subsidiary
as of December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of three years in the period ended December 31, 2000 in
conformity with accounting principles generally accepted in the United States of
America.
As discussed in Note 2 to the financial statements, the Company changed its
method of accounting for start-up activities in 1999.
DELOITTE & TOUCHE LLP
March 21, 2001
Los Angeles, California
F-53
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
- -------------------------------------------------------------------------------------------------------
ASSETS (NOTE 4) 2000 1999
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 4,285,000 $ 11,676,000
Trade receivables, net of allowance for doubtful accounts of $822,000
and $1,268,000 in 2000 and 1999, respectively (Notes 2 and 5) 57,348,000 56,989,000
Inventories (Note 2) 71,769,000 67,886,000
Prepaid expenses and other current assets 1,820,000 1,846,000
Due from Wilsey Foods, Inc. (Note 5) 48,000 341,000
------------ ------------
Total current assets 135,270,000 138,738,000
------------ ------------
PROPERTY (Note 2):
Land, buildings, and improvements 94,836,000 89,772,000
Machinery and equipment 119,565,000 109,750,000
Construction-in-progress 5,761,000 9,334,000
Other property 8,764,000 8,362,000
------------ ------------
Total 228,926,000 217,218,000
Less accumulated depreciation and amortization 81,596,000 71,814,000
------------ ------------
Property, net 147,330,000 145,404,000
------------ ------------
GOODWILL, Net of amortization of $14,144,000 and $10,144,000 in
2000 and 1999, respectively (Notes 2 and 3) 47,099,000 46,823,000
TRADEMARKS, Net of amortization of $5,407,000 and $3,696,000
in 2000 and 1999, respectively (Note 2) 23,255,000 24,900,000
OTHER ASSETS, Net of amortization of $3,512,000 and $2,792,000
in 2000 and 1999, respectively (Note 2) 5,500,000 6,019,000
------------ ------------
TOTAL $358,454,000 $361,884,000
============ ============
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND MEMBERS' CAPITAL 2000 1999
CURRENT LIABILITIES:
Accounts payable (Note 5) $ 59,479,000 $ 64,133,000
Accrued liabilities (Note 5) 18,082,000 15,874,000
Accrued compensation (Note 6) 10,926,000 9,723,000
Dividends payable 10,312,000 4,843,000
Bank lines of credit (Note 4) 15,000,000
Current portion of long-term debt (Note 4) 12,566,000 12,423,000
Current portion of long-term liability - Wilsey Foods, Inc. (Note 1) 974,000 487,000
------------ ------------
Total current liabilities 112,339,000 122,483,000
------------ ------------
LONG-TERM DEBT (Note 4) 110,527,000 123,087,000
------------ ------------
LONG-TERM LIABILITY - WILSEY FOODS, INC. (Note 1) 491,000 978,000
------------ ------------
ACCRUED COMPENSATION (Note 6) 9,407,000 3,144,000
------------ ------------
Total liabilities 232,764,000 249,692,000
COMMITMENTS AND CONTINGENCIES (Note 7)
MEMBERS' CAPITAL 125,690,000 112,192,000
------------ ------------
TOTAL $358,454,000 $361,884,000
============ ============
See notes to consolidated financial statements.
F-54
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
- -------------------------------------------------------------------------------------------
2000 1999 1998
NET SALES (Notes 2 and 5) $ 890,042,000 $ 918,043,000 $ 844,843,000
COST OF GOODS SOLD (Notes 2 and 5) 744,282,000 798,891,000 765,776,000
------------- ------------- -------------
GROSS PROFIT 145,760,000 119,152,000 79,067,000
------------- ------------- -------------
OPERATING EXPENSES:
Selling, general, and administrative
(Notes 2 and 5) 78,145,000 69,127,000 54,210,000
Amortization of intangibles (Note 2) 6,431,000 6,379,000 3,840,000
------------- ------------- -------------
Total operating expenses 84,576,000 75,506,000 58,050,000
------------- ------------- -------------
OPERATING INCOME 61,184,000 43,646,000 21,017,000
INTEREST EXPENSE, Net 9,585,000 10,146,000 10,339,000
OTHER INCOME (Note 7) (5,907,000) (2,413,000) (1,666,000)
------------- ------------- -------------
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 57,506,000 35,913,000 12,344,000
CUMULATIVE EFFECT OF ACCOUNTING
CHANGE (Note 2) -- 563,000 --
------------- ------------- -------------
NET INCOME $ 57,506,000 $ 35,350,000 $ 12,344,000
============= ============= =============
See notes to consolidated financial statements.
F-55
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF MEMBERS' CAPITAL
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
- ------------------------------------------------------------------------------------
CENEX
WILSEY HARVEST
FOODS, INC. STATES TOTAL
BALANCE, JANUARY 1, 1998 $ 46,520,000 $ 31,013,000 $ 77,533,000
Net income 7,406,000 4,938,000 12,344,000
Dividends (5,555,000) (3,703,000) (9,258,000)
------------- ------------- -------------
BALANCE, DECEMBER 31, 1998 48,371,000 32,248,000 80,619,000
Net income 21,210,000 14,140,000 35,350,000
Contributions (Note 3) 12,000,000 8,000,000 20,000,000
Dividends (14,266,000) (9,511,000) (23,777,000)
------------- ------------- -------------
BALANCE, DECEMBER 31, 1999 67,315,000 44,877,000 112,192,000
Net income 30,593,000 26,913,000 57,506,000
Transfer of interest (Note 1) (11,775,000) 11,775,000 --
Dividends (23,288,000) (20,720,000) (44,008,000)
------------- ------------- -------------
BALANCE, DECEMBER 31, 2000 $ 62,845,000 $ 62,845,000 $ 125,690,000
============= ============= =============
See notes to consolidated financial statements.
F-56
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
- ---------------------------------------------------------------------------------------------------------------
2000 1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 57,506,000 $ 35,350,000 $ 12,344,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 10,829,000 9,740,000 8,535,000
Amortization of intangibles 6,431,000 6,379,000 3,840,000
(Gain) loss on disposal/impairment of assets (139,000) 2,576,000 1,596,000
Changes in operating assets and liabilities:
Trade receivables (359,000) 6,198,000 (9,371,000)
Inventories (3,246,000) 4,600,000 (2,631,000)
Prepaid expenses and other current assets 234,000 2,442,000 7,099,000
Accounts payable (4,654,000) (1,023,000) 5,740,000
Accrued liabilities 1,780,000 900,000 313,000
Accrued compensation 7,466,000 8,867,000 (129,000)
Due to/from affiliates 293,000 (266,000) 40,000
------------ ------------ ------------
Net cash provided by operating activities 76,141,000 75,763,000 27,376,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property (13,037,000) (17,841,000) (8,913,000)
Proceeds from sale of property 1,021,000 51,000 371,000
Acquisitions, net of cash acquired (Note 3) (5,312,000) (50,028,000)
Acquisition of trademarks (47,000)
Other assets (201,000) (1,355,000) (574,000)
------------ ------------ ------------
Net cash used in investing activities (17,576,000) (69,173,000) (9,116,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 35,000,000 35,000,000
Repayment of long-term debt (12,417,000) (9,490,000) (7,500,000)
Net payments on line of credit (15,000,000) (26,000,000) (29,500,000)
Payment to Wilsey Foods, Inc. (Note 1) (487,000) (974,000)
Payment of bank loan fees (105,000) (281,000)
Dividends paid (38,539,000) (23,274,000) (9,084,000)
Contributions received 20,000,000
------------ ------------ ------------
Net cash used in financing activities (65,956,000) (4,356,000) (12,339,000)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,391,000) 2,234,000 5,921,000
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 11,676,000 9,442,000 3,521,000
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,285,000 $ 11,676,000 9,442,000
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for interest $ 10,181,000 $ 10,296,000 $ 10,290,000
============ ============ ============
See notes to consolidated financial statements.
F-57
VENTURA FOODS, LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
- --------------------------------------------------------------------------------
1. GENERAL MATTERS
Ventura Foods, LLC and its subsidiary (the "Company") is a processor and
distributor of edible oils used in food preparation and a packager of food
products. The Company sells its products to national and regional
restaurant chains and food wholesalers, as well as retail chains.
The Company was formed pursuant to a Joint Venture Agreement (the
"Agreement") dated August 30, 1996 between Wilsey Foods, Inc. ("Wilsey")
and Cenex Harvest States Cooperatives ("Cenex") whereby substantially all
the assets and liabilities of Wilsey and Holsum Foods (a division of
Cenex) were transferred and assigned, with certain exclusions, to the
Company. Wilsey is a majority-owned subsidiary of Mitsui & Co., Ltd. From
the period of inception through March 31, 2000, Wilsey and Cenex owned 60%
and 40% of the Company, respectively. On March 31, 2000, Wilsey sold a 10%
interest in the Company to Cenex. Accordingly, at December 31, 2000,
Wilsey and Cenex each owned 50% of the Company, respectively.
At the formation date, a liability equal to the net deferred income tax
liability of Wilsey at August 30, 1996 was assumed by the Company and was
included in long-term liability - Wilsey Foods, Inc. The amount is payable
in five equal annual installments of $487,000 plus a final installment of
$491,000.
2. ACCOUNTING POLICIES
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION - The consolidated
financial statements include the accounts of Ventura Foods, LLC and its
100%-owned subsidiary, Ventura Jets, Inc. All material intercompany
transactions have been eliminated.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - In connection with the adoption
of Statement of Position ("SOP") 98-5, REPORTING ON THE COSTS OF START-UP
ACTIVITIES, on January 1, 1999, the Company charged $563,000 of previously
deferred start-up costs to expense.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash
equivalents.
INVENTORIES AND FUTURES CONTRACTS - Inventories consist of the following
at December 31, 2000 and 1999:
2000 1999
Bulk oil $28,673,000 $25,261,000
Finished goods 24,411,000 24,564,000
Ingredients and supplies 18,685,000 18,061,000
----------- -----------
Total $71,769,000 $67,886,000
=========== ===========
The Company accounts for bulk oil, including bulk oil in finished goods,
at market prices. This method approximates lower of cost or market, using
the first-in, first-out method, given the rapid inventory turns. In
F-58
addition, futures contracts and forward purchase and sales contracts are
marked to market through cost of sales, with the unrealized gains and/or
losses recorded in inventories. All other inventories are accounted for at
the lower of cost or market, using the first-in first-out method.
The Company enters into forward purchase and sales contracts in connection
with its food oil processing and distribution activities. The Company also
uses futures contracts to hedge price volatility of bulk oil held in
inventory. A significant portion of such contracts is based on the soybean
market. In addition, the Company enters into purchase and sales
commitments with major suppliers and customers at a specified premium or
discount from a future market price (the "Basis Contracts").
The following summarizes the Company's positions at December 31, 2000 and
1999:
UNREALIZED
FORWARD CONTRACTS AND COMMITMENTS POUNDS DOLLARS (LOSS) GAIN
(IN THOUSANDS)
DECEMBER 31, 2000
Forward purchases 468,300 $ 85,300 $ (1,841)
Forward sales 423,900 78,200 6,488
Basis purchase 675,500 (263)
Basis sales 84,600 136
Futures contracts 123,300 (429)
--------- ---------
1,775,600 $ 4,091
========= =========
DECEMBER 31, 1999
Forward purchases 439,600 $ 82,300 $ (366)
Forward sales 407,300 77,300 4,622
Basis purchase 364,000 1,887
Basis sales 83,200 (857)
Futures contracts 97,200 (24)
--------- ---------
1,391,300 $ 5,262
========= =========
The fair value of futures, forward purchases, and forward sales contracts
are determined primarily from quotes listed on the Chicago Board of Trade.
The dollar amount of commitments under Basis Contracts is not known until
the contracts are converted to orders at which time they are priced.
The Company is exposed to loss in the event of nonperformance by the other
parties to the contracts. However, the Company does not anticipate
nonperformance by counterparties.
PROPERTY AND DEPRECIATION - Property is stated at cost, and depreciation
is provided for using the straight-line method over the estimated useful
lives of the assets, as follows:
Buildings 40 years
Leasehold improvement 3 - 19 years
Machinery and equipment 10 - 25 years
Other fixed assets 3 - 20 years
F-59
FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company estimates the fair value
of financial instruments using the following methods and assumptions:
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE - The carrying amounts
approximate fair value, due to the short maturities of these
instruments.
LINES OF CREDIT - The carrying amounts approximate fair value, as the
interest rates are based upon variable reference rates.
LONG-TERM DEBT - Based on the borrowing rates currently available to
the Company for bank loans with similar terms and remaining maturities,
the carrying amounts approximate fair value.
FUTURES CONTRACTS - The fair value of futures contracts (used for
hedging purposes) is determined from quotes listed on the Chicago Board
of Trade.
CONCENTRATION OF CREDIT RISK - Financial instruments that subject the
Company to credit risk consist primarily of accounts receivable. During
2000, 1999, and 1998, net sales to one customer were 21%, 18%, and 18% of
total net sales, respectively. This customer represents approximately 3%
and 13% of trade receivables at December 31, 2000 and 1999, respectively.
The Company performs ongoing credit evaluations of its customers and
maintains an allowance for potential credit losses.
The Company maintains cash deposits with various financial institutions.
The Company periodically evaluates the credit standing of these financial
institutions and has not sustained any credit losses relating to such
balances.
GOODWILL AND TRADEMARKS - The Company's goodwill relates to various
acquisitions of businesses and is being amortized using the straight-line
method over periods ranging from 15 to 20 years. Trademarks are amortized
using the straight-line method over 10 to 15 years. Patents and other
intangibles are amortized using the straight-line method over 1 to 15
years.
IMPAIRMENT OF LONG-LIVED ASSETS - Long-lived assets, including
identifiable intangibles and goodwill are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. In performing the review for recoverability,
future cash flows expected to result from the use of the asset and its
eventual disposition are estimated. If the sum of the expected future cash
flows (undiscounted and without interest charges) is less than the
carrying amount of the asset, an impairment loss is recorded under the
discounted future cash flow method. During 2000, 1999, and 1998,
impairment losses of approximately $0, $1,277,000, and $240,000,
respectively, were recognized.
ADVERTISING COSTS - The Company expenses advertising costs in the period
incurred. For the years ended December 31, 2000, 1999, and 1998, the
Company incurred advertising expenses of approximately $6,100,000,
$4,500,000, and $4,800,000, respectively.
INCOME TAXES - The Company is a limited liability company and has no
liability for federal and state income taxes. Income is taxed to the
members based on their allocated share of taxable income or loss. However,
certain states tax the income of limited liability companies. The
Company's liability for such state income taxes is not significant.
REVENUE RECOGNITION - Revenue is recognized after the related product has
been shipped and title has transferred to the customer. Sales are
presented net of discounts and sales allowances.
F-60
USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
RECLASSIFICATIONS - Certain reclassifications have been made to the 1999
and 1998 financial statements to conform to the 2000 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS - Statement of Financial Accounting
Standards ("SFAS") No.133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES, is effective for all fiscal years beginning after June
15, 2000. SFAS No. 133, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities. Under
SFAS No. 133, certain contracts that were not formerly considered
derivatives may now meet the definition of a derivative. The Company will
adopt SFAS No. 133 effective January 1, 2001. Management does not expect
the adoption of SFAS No. 133 to have a significant impact on the financial
position, results of operations, or cash flows of the Company.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101 ("SAB 101"), which provides the Staff's view
in applying accounting principles generally accepted in the United States
of America to selected revenue recognition issues. The Company has adopted
all applicable provisions of SAB 101, as amended. Such adoption did not
have a material impact on the Company's consolidated financial statements.
Emerging Issues Task Force Issue 00-10 ("EITF 00-10"), ACCOUNTING FOR
SHIPPING AND HANDLING FEES AND COSTS, is effective for all fiscal years
beginning after December 15, 1999. EITF 00-10 states that all amounts
billed to a customer in a sale transaction related to shipping and
handling represent revenues earned for the goods provided and should be
classified as revenue. Accordingly, the Company has presented such amounts
as a component of net sales for the year ended December 31, 2000, and has
reclassified such amounts for the years ended December 31, 1999 and 1998
to conform to the current-period presentation. Costs incurred for shipping
and handling are reported as a component of cost of goods sold.
3. ACQUISITIONS
During 2000, the Company acquired substantially all the assets and
liabilities of Sona and Hollen for $5,740,000 ($428,000 of which was
withheld from the purchase price and will be paid at certain specific
dates within the next two years). Sona and Hollen is a portion packing
company located in Los Alamitos, California.
F-61
The acquisition has been accounted for as a purchase, and accordingly, the
purchase price has been allocated based on the estimated fair values of
the assets acquired. The excess of the purchase price over the fair value
of the assets acquired, approximately $4,276,000, was recorded as goodwill
and is being amortized over a 15-year period. The following is a summary
of the assets acquired at estimated fair market value:
Inventories $ 637,000
Prepaid expenses and other assets 208,000
Property and equipment 600,000
Trademark 19,000
Goodwill 4,276,000
----------
Net assets of business acquired $5,740,000
==========
On January 11, 1999, the Company acquired substantially all the assets and
liabilities of Sunnyland Refining Company ("Sunnyland") from its parent,
Kane-Miller Corp, for $53.2 million in cash. Sunnyland is a manufacturer
and national distributor of margarine products located in Birmingham,
Alabama.
The acquisition has been accounted for as a purchase, and accordingly, the
purchase price has been allocated based on the estimated fair values of
the assets acquired. The excess of the purchase price over the fair value
of the assets acquired, approximately $38.8 million, was recorded as
goodwill and is being amortized over a 15-year period. The purchase price
was funded by additional members' contributions of $20,000,000 and
additional bank borrowings.
The following is a summary of the assets acquired and liabilities assumed
at estimated fair market value:
Cash $ 3,201,000
Accounts receivable 6,513,000
Inventories 2,577,000
Prepaid expenses and other assets 486,000
Property and equipment 12,445,000
Goodwill 38,837,000
------------
64,059,000
------------
Accounts payable (7,653,000)
Accrued liabilities (3,177,000)
------------
(10,830,000)
------------
Net assets of business acquired $ 53,229,000
============
4. LINES OF CREDIT AND LONG-TERM DEBT
LINES OF CREDIT - At December 31, 2000, the Company had a revolving
line-of-credit agreement with a banking group to provide for borrowings of
up to an aggregate of $72,000,000. Borrowings at December 31, 2000 and
1999 under such lines were $0 and $15,000,000, respectively. The interest
rates applicable to borrowings are based, at the option of the Company, at
a London Interbank Offered Rate ("LIBOR") based or a term federal funds
rate ("TFFR") based option. The weighted-average rate at
F-62
December 31, 1999 was 6.33%. The credit agreement is subject to renewal
annually with the banking group.
LONG-TERM DEBT - At December 31, 2000 and 1999, balances outstanding on
long-term debt were $123,093,000 and $135,510,000, respectively. The
interest rate applicable to term loans is based, at the option of the
Company, at a TFFR-based, LIBOR-based, or a fixed rate option. The
weighted-average interest rate on borrowings at December 31, 2000 and 1999
was 6.93% and 6.87%, respectively.
The term loans are collateralized by substantially all property,
equipment, and intellectual property rights, and the lines of credit are
collateralized by substantially all trade receivables and inventories of
the Company. The loan agreements contain various covenants, including
compliance with tangible net worth (as defined) and other financial
ratios, restrictions on the payment of dividends, and restrictions on the
incurrence of additional debt.
Annual maturities of long-term debt at December 31, 2000 are:
2001 $ 12,566,000
2002 12,718,000
2003 74,180,000
2004 2,754,000
2005 2,939,000
Thereafter 17,936,000
------------
Total 123,093,000
Less current portion 12,566,000
------------
Long-term debt $110,527,000
============
5. TRANSACTIONS WITH AFFILIATES
At December 31, 2000 and 1999, the Company had receivable balances of
$48,000 and $341,000, respectively, due from Wilsey for reimbursement of
expenses paid by the Company on behalf of Wilsey.
Included in accounts payable at December 31, 2000 and 1999 were $3,214,000
and $5,743,000, respectively, payable to Cenex for purchases of oil.
Purchases from Cenex for the years ended December 31, 2000, 1999, and 1998
were $48,916,000, $84,872,000, and $105,874,000, respectively. Sales to
Cenex for the years ended December 31, 2000, 1999, and 1998 totaled
$950,000, $1,130,000, and $0, respectively.
Included in accounts payable at December 31, 2000 and 1999 were $759,000
and $668,000, respectively, payable to Mitsui USA for the Company's
participation in Mitsui USA's insurance plans. During the years ended
December 31, 2000, 1999, and 1998, the Company recorded expenses of
$5,049,000, $5,677,000 and $5,171,000, respectively, in connection with
its participation in such plans.
Included in trade receivables at December 31, 2000 and 1999 were $103,000
and $239,500, respectively, of receivables from Mitsui USA for product
sales. Sales to Mitsui USA for the years ended December 31, 2000, 1999,
and 1998 totaled $1,569,000, $2,509,000,and $3,429,000, respectively.
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Forward purchase contracts as of December 31, 2000 included commitments
for purchases of 40,530,000 pounds of oil from Cenex. The Company
recognized (losses) gains of $(363,000), $(25,000) and $426,000,
respectively, on such related party commitments for the years ended
December 31, 2000, 1999, and 1998.
6. EMPLOYEE BENEFIT PLANS
The Company has long-term incentive arrangements whereby certain key
executives can earn additional compensation. Under these arrangements, the
amount of additional compensation is based on the attainment of cumulative
income-based targets over a multi-year period, ranging from three to five
years. At the end of such periods, amounts earned by individual executives
will be contributed to a rabbi trust unless representatives of Wilsey and
Cenex elect to pay such amounts directly to the respective key executives.
For the years ended December 31, 2000, 1999, and 1998, the Company
recognized compensation expense under these long-term incentive
arrangements of $5,883,929, $1,780,445, and $281,300, respectively. At
December 31, 2000 and 1999, a liability for such awards of $8,269,874 and
$2,385,945, respectively, is classified as long-term accrued compensation
in the accompanying consolidated balance sheets.
The Company has a combined 401(k) and defined contribution profit-sharing
plan (the "Plan") covering substantially all employees not covered by
collective bargaining agreements. Under the Plan, employees can make
annual voluntary contributions not to exceed the lesser of an amount equal
to 15% of their compensation or limits established by the Internal Revenue
Code. The Company is required by the Plan to make certain matching
contributions of up to 4% of each participant's salary and may make
discretionary profit-sharing contributions. The Company also established a
401(k) defined contribution plan covering employees under certain
collective bargaining agreements. Under such plan, employees can make
annual voluntary contributions of up to 15% of their compensation. Expense
for the years ended December 31, 2000, 1999, and 1998 totaled $5,139,000,
$5,212,000, and $2,989,000, respectively. Certain of the Company's union
employees are participants in multi-employer plans. Payments to
multi-employer pension plans are negotiated in various collective
bargaining agreements and aggregated $1,640,915, $1,465,000, and
$1,431,000 for the years ended December 31, 2000, 1999, and 1998,
respectively. The actuarial present value of accumulated plan benefits and
net assets available for benefits to union employees under these
multi-employer pension plans are not available, as the Company does not
administer these plans.
Effective January 1, 1999, the Company established a Supplemental
Executive Retirement Plan for certain of its employees. The projected
benefit obligation as of December 31, 2000 and 1999 was $1,392,000 and
$1,072,000, respectively. A liability of $1,137,000 and $758,000 as of
December 31, 2000 and 1999, respectively, is included in long-term accrued
compensation in the accompanying consolidated balance sheets. The plan is
unfunded. During 2000 and 1999, the Company recorded benefit expense
related to the plan of $379,000 and $412,000, respectively. The
assumptions used in the measurement of the Company's benefit obligation
are as follows:
DECEMBER 31,
--------------------
2000 1999
Discount rate 7.0% 7.5%
Rate of compensation increase 3.0% 4.0%
The Company accrues the actuarially determined amount necessary to fund
the participants' benefits in accordance with the requirements of the
Employee Retirement Income Security Act of 1974.
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7. COMMITMENTS AND CONTINGENCIES
Future minimum annual payments under noncancelable operating leases with
lease terms in excess of one year at December 31, 2000 are as follows:
2001 $ 4,296,000
2002 3,630,000
2003 2,744,000
2004 2,233,000
2005 1,520,000
Thereafter 915,000
-----------
Total $15,338,000
===========
Under the lease agreements, the Company is obligated to pay certain
property taxes, insurance, and maintenance costs. Certain leases contain
renewal and purchase options. Rental expense for the years ended December
31, 2000, 1999, and 1998 under operating leases totaled $5,205,000,
$5,121,000, and $4,231,000, respectively.
During the year ended December 31, 2000, the Company received a payment of
approximately $2.4 million in connection with the settlement of a class
action lawsuit. This amount has been recorded as a component of other
income in the accompanying consolidated statements of income.
The Company is involved from time to time in routine legal matters
incidental to its business. The Company believes that the resolution of
such matters will not have a material adverse effect on the Company's
business, financial condition, or results of operations.
8. SUBSEQUENT EVENT
Effective January 1, 2001, the Company has changed its fiscal year-end
from December 31 to March 31.
******
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