================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-K/A
--------------------
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE1 FISCAL YEAR ENDED
AUGUST 31, 2001 OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_______ TO _______.
COMMISSION FILE NUMBER: 333-17865
--------------------
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)
--------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
--------------------
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.
================================================================================
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, 2001 to add the separate consolidated financial
statements of Ventura Foods, LLC and subsidiary, a non-consolidated 50% owned
equity investment.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8 is hereby amended to include the current consolidated financial
statements of Ventura Foods, LLC and subsidiary, a non-consolidated 50% owned
equity investment. The consolidated financial statements of Ventura Foods, LLC
and subsidiary, 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:
V. Ventura Foods, LLC and subsidiary, a non-consolidated 50% owned equity
investment
Independent Auditors' Report F-62
Consolidated Balance Sheets as of March 31, 2002 and 2001 F-63
Consolidated Statements of Income for the years ended
March 31, 2002, December 31, 2000 and 1999 and the three
months ended March 31, 2001 F-65
Consolidated Statements of Members' Capital for the years ended
March 31, 2002, December 31, 2000 and 1999 and the three
months ended March 31, 2001 F-66
Consolidated Statements of Cash Flows for the years ended
March 31, 2002, December 31, 2000 and 1999 and the three
months ended March 31, 2001 F-67
Notes to Consolidated Financial Statements for the years ended
March 31, 2002, December 31, 2000 and 1999 and the three
months ended March 31, 2001 F-69
(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: June 28, 2002
---------------------------------------- ------------------
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 March 31, 2002 and 2001, and the
related consolidated statements of income, members' capital, and cash flows for
the year ended March 31, 2002, the three months ended March 31, 2001, and the
years ended December 31, 2000 and 1999. 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 March 31, 2002 and 2001, and the results of their operations and their
cash flows for the year ended March 31, 2002, the three months ended March 31,
2001, and the years ended December 31, 2000 and 1999 in conformity with
accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the consolidated financial statements, the Company
changed its method of accounting for start-up activities in 1999.
/s/ Deloitte & Touche LLP
Los Angeles, California
June 19, 2002
F-62
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2002 AND 2001
- ----------------------------------------------------------------------------------------------------------
ASSETS (NOTE 4) 2002 2001
CURRENT ASSETS:
Cash and cash equivalents (Note 2) $ 9,300,000 $ 14,150,000
Trade receivables, net of allowance for doubtful accounts of
$1,543,000 and $2,000,000 at 2002 and 2001, respectively
(Notes 2, 4 and 5) 57,139,000 56,368,000
Inventories (Notes 2, 4 and 5) 62,799,000 66,680,000
Prepaid expenses and other current assets 2,283,000 1,490,000
Due from Wilsey Foods, Inc. (Note 5) 47,000
Derivative contract asset (Note 2) 13,298,000 12,193,000
------------ ------------
Total current assets 144,819,000 150,928,000
------------ ------------
PROPERTY (Notes 2 and 4):
Land, buildings, and improvements 98,840,000 96,082,000
Machinery and equipment 129,133,000 120,932,000
Construction-in-progress 6,489,000 7,581,000
Other property 10,494,000 8,798,000
------------ ------------
Total 244,956,000 233,393,000
Less accumulated depreciation and amortization 95,052,000 84,178,000
------------ ------------
Property, net 149,904,000 149,215,000
GOODWILL, Net of amortization of $18,087,000 and $15,180,000
at 2002 and 2001, respectively (Notes 2 and 3) 43,156,000 46,063,000
TRADEMARKS, Net of amortization of $8,814,000 and $5,862,000
at 2002 and 2001, respectively (Notes 2 and 4) 19,991,000 22,838,000
DEFERRED COMPENSATION PLAN TRUST (Note 6) 14,240,000
OTHER ASSETS, Net of amortization of $4,181,000 and $3,813,000
(Note 2) 4,879,000 5,304,000
------------ ------------
TOTAL $376,989,000 $374,348,000
============ ============
See notes to consolidated financial statements.
F-63
- ----------------------------------------------------------------------------------------------------------
LIABILITIES AND MEMBERS' CAPITAL 2002 2001
CURRENT LIABILITIES:
Accounts payable (Note 5) $ 52,045,000 $ 56,536,000
Accrued liabilities (Note 5) 25,784,000 22,891,000
Deferred compensation obligations (Note 6) 9,660,000
Dividends payable 9,550,000 18,625,000
Bank lines of credit (Note 4) 8,000,000 5,000,000
Current portion of long-term debt (Note 4) 12,758,000 12,603,000
Current portion of long-term liability - Wilsey Foods, Inc. (Note 1) 491,000 978,000
Derivative contract liability (Note 2) 4,120,000 4,818,000
------------ ------------
Total current liabilities 112,748,000 131,111,000
------------ ------------
LONG-TERM DEBT (Note 4) 97,178,000 109,936,000
------------ ------------
DEFERRED COMPENSATION OBLIGATIONS (Note 6) 16,347,000 1,557,000
------------ ------------
Total liabilities 226,273,000 242,604,000
COMMITMENTS AND CONTINGENCIES (Notes 6 and 7)
MEMBERS' CAPITAL 150,716,000 131,744,000
------------ ------------
TOTAL $376,989,000 $374,348,000
============ ============
F-64
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED MARCH 31, 2002 AND THE THREE MONTHS ENDED MARCH 31, 2001
AND THE YEARS ENDED DECEMBER 31, 2000 AND 1999
- -------------------------------------------------------------------------------------------------------------------
THREE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
MARCH 31, MARCH 31, --------------------------------
2002 2001 2000 1999
NET SALES (Notes 2 and 5) $ 965,728,000 $ 215,187,000 $ 890,042,000 $ 918,043,000
COST OF GOODS SOLD
(Notes 2 and 5) 792,689,000 177,748,000 744,282,000 798,891,000
------------- ------------- ------------- -------------
GROSS PROFIT 173,039,000 37,439,000 145,760,000 119,152,000
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Selling, general, and
administrative (Notes 2 and 5) 92,034,000 20,121,000 78,145,000 69,127,000
Amortization of intangibles
(Note 2) 6,227,000 1,581,000 6,431,000 6,379,000
------------- ------------- ------------- -------------
Total operating expenses 98,261,000 21,702,000 84,576,000 75,506,000
------------- ------------- ------------- -------------
OPERATING INCOME 74,778,000 15,737,000 61,184,000 43,646,000
INTEREST EXPENSE, Net 7,474,000 2,071,000 9,585,000 10,146,000
OTHER INCOME (Note 7) (3,182,000) (702,000) (5,907,000) (2,413,000)
------------- ------------- ------------- -------------
INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING
CHANGE 70,486,000 14,368,000 57,506,000 35,913,000
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE
(Note 2) 563,000
------------- ------------- ------------- -------------
NET INCOME $ 70,486,000 $ 14,368,000 $ 57,506,000 $ 35,350,000
============= ============= ============= =============
See notes to consolidated financial statements.
F-65
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF MEMBERS' CAPITAL
YEAR ENDED MARCH 31, 2002 AND THE THREE MONTHS ENDED MARCH 31, 2001
AND THE YEARS ENDED DECEMBER 31, 2000 AND 1999
- ------------------------------------------------------------------------------------------------
CENEX
HARVEST
WILSEY STATES
FOODS, INC. COOPERATIVES TOTAL
BALANCE, JANUARY 1, 1999 $ 48,371,000 $ 32,248,000 $ 80,619,000
Net income 21,210,000 14,140,000 35,350,000
Contributions 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
Net income 7,184,000 7,184,000 14,368,000
Dividends (4,157,000) (4,157,000) (8,314,000)
------------- ------------- -------------
BALANCE, MARCH 31, 2001 65,872,000 65,872,000 131,744,000
Net income 35,243,000 35,243,000 70,486,000
Dividends (25,757,000) (25,757,000) (51,514,000)
------------- ------------- -------------
BALANCE, MARCH 31, 2002 $ 75,358,000 $ 75,358,000 $ 150,716,000
============= ============= =============
See notes to consolidated financial statements.
F-66
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 2002 AND THE THREE MONTHS ENDED MARCH 31, 2001
AND THE YEARS ENDED DECEMBER 31, 2000 AND 1999
- -----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
MARCH 31, MARCH 31, -------------------------------
2002 2001 2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 70,486,000 $ 14,368,000 $ 57,506,000 $ 35,350,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 12,186,000 2,833,000 10,829,000 9,740,000
Amortization of intangibles 6,227,000 1,581,000 6,431,000 6,379,000
Loss (gain) on disposal/impairment of assets 324,000 128,000 (139,000) 2,576,000
Derivative contract asset (1,803,000) (7,375,000)
Gain on deferred compensation plan trust assets (264,000)
Changes in operating assets and liabilities:
Trade receivables (771,000) 980,000 (359,000) 6,198,000
Inventories 3,881,000 5,089,000 (3,246,000) 4,600,000
Prepaid expenses and other current assets (793,000) 330,000 234,000 2,442,000
Accounts payable (4,491,000) (2,943,000) (4,654,000) (1,023,000)
Accrued liabilities 2,893,000 (2,540,000) 2,499,000 5,932,000
Deferred compensation obligations 5,130,000 (1,767,000) 6,747,000 3,835,000
Due from/to affiliates 47,000 1,000 293,000 (266,000)
------------ ------------ ------------ ------------
Net cash provided by operating activities 93,052,000 10,685,000 76,141,000 75,763,000
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property (13,268,000) (4,869,000) (13,037,000) (17,841,000)
Proceeds from sale of property 69,000 23,000 1,021,000 51,000
Acquisitions, net of cash acquired (Note 3) (5,312,000) (50,028,000)
Acquisition of trademarks (47,000)
Investment in rabbi trust (13,976,000)
Other assets (48,000) 67,000 (201,000) (1,355,000)
------------ ------------ ------------ ------------
Net cash used in investing activities (27,223,000) (4,779,000) (17,576,000) (69,173,000)
------------ ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt 35,000,000
Repayment of long-term debt (12,603,000) (554,000) (12,417,000) (9,490,000)
Net borrowings (payments) on line of credit 3,000,000 5,000,000 (15,000,000) (26,000,000)
Payment to Wilsey Foods, Inc. (Note 1) (487,000) (487,000) (487,000)
Payment of bank loan fees (105,000)
Dividends paid (60,589,000) (38,539,000) (23,274,000)
Contributions received 20,000,000
------------ ------------ ------------ ------------
Net cash (used in) provided by financing activities (70,679,000) 3,959,000 (65,956,000) (4,356,000)
------------ ------------ ------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (4,850,000) 9,865,000 (7,391,000) 2,234,000
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 14,150,000 4,285,000 11,676,000 9,442,000
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 9,300,000 $ 14,150,000 $ 4,285,000 $ 11,676,000
============ ============ ============ ============
(Continued)
F-67
VENTURA FOODS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MARCH 31, 2002 AND THE THREE MONTHS ENDED MARCH 31, 2001
AND THE YEARS ENDED DECEMBER 31, 2000 AND 1999
- ---------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS YEAR ENDED
YEAR ENDED ENDED DECEMBER 31,
MARCH 31, MARCH 31, -------------------------------
2002 2001 2000 1999
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid during the period for interest $ 8,129,000 $ 653,054 $ 10,181,000 $ 10,296,000
============ ============ ============ ============
See notes to consolidated financial statements. (Concluded)
F-68
VENTURA FOODS, LLC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2002 AND THE THREE MONTHS ENDED MARCH 31, 2001
AND THE YEARS ENDED DECEMBER 31, 2000 AND 1999
- --------------------------------------------------------------------------------
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, food wholesalers, and 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
percent and 40 percent of the Company, respectively. On March 31, 2000,
Wilsey sold a 10 percent interest in the Company to Cenex. Accordingly,
Wilsey and Cenex each own 50 percent of the Company.
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 percent-owned subsidiary, Ventura Jets, Inc. All material intercompany
transactions have been eliminated.
FISCAL YEAR-END - During 2001, the Company changed its fiscal year-end to
March 31. Prior to such change, the Company's fiscal year-end had been
December 31.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE - In connection with the adoption
of Statement of Position 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.
F-69
INVENTORIES - Inventories consist of the following at March 31, 2002 and
2001:
2002 2001
Bulk oil $17,654,000 $24,642,000
Finished goods 27,696,000 24,692,000
Ingredients and supplies 17,449,000 17,346,000
----------- -----------
Total $62,799,000 $66,680,000
=========== ===========
Inventories are accounted for at the lower of cost or market, using the
first-in first-out method.
DERIVATIVE FINANCIAL INSTRUMENTS - The Company's use of derivative
financial instruments is limited to forwards, futures, and certain other
delivery contracts as discussed below. The Company enters into these
contracts to limit its exposure to price volatility of various food oils
that are critical to its processing and distribution activities. It is the
Company's policy to remain substantially hedged with respect to edible oil
product price risk; derivative contracts are used to maintain this hedged
position. Forward purchase and sales contracts with established market
participants as well as exchange traded futures contracts are entered into
in amounts necessary to protect against price changes on raw materials
needed for the Company's food oil processing and distribution activities.
The Company also enters into purchase and sales commitments with major
suppliers and customers at a specified premium or discount from a future
market price ("Basis Contracts"). Additionally, the Company's policies do
not permit speculative trading of such contracts. All of these qualify as
derivatives under Statement of Financial Accounting Standards ("SFAS") No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, and are
stated at market value. Changes in market value are recognized in the
consolidated statements of income, through cost of sales, in the periods
such changes occur. The adoption of SFAS No. 133, on January 1, 2001, did
not have a significant impact on the Company's results of operations, as
the Company historically recorded its financial instruments at market
value. Prior to the adoption of SFAS No. 133, the market value of futures
contracts, basis contracts, and forward purchase and sales contracts were
recorded as a component of inventory. Beginning with the adoption of SFAS
No. 133, the market value of these contracts is now recorded separately
on the balance sheet as derivative contract assets or liabilities. These
contracts have maturities of less than one year.
F-70
The following summarizes the Company's various derivative contracts
outstanding at March 31, 2002 and 2001:
NET
UNREALIZED
FORWARD CONTRACTS AND COMMITMENTS POUNDS GAIN (LOSS)
(IN THOUSANDS)
MARCH 31, 2002
Forward purchases 490,500 $ 7,873
Forward sales 454,100 (1,117)
Basis purchase 390,300 2,304
Basis sales 62,600 (303)
Futures contracts 96,100 421
---------- -------
1,493,600 $ 9,178
========== =======
MARCH 31, 2001
Forward purchases 391,800 $ 3,836
Forward sales 395,200 741
Basis purchase 1,316,200 1,989
Basis sales 151,500 163
Futures contracts 117,900 646
---------- -------
2,372,600 $ 7,375
========== =======
The fair value of futures contracts are determined from quotes listed on
the Chicago Board of Trade or other market makers. Forward purchase and
sales contracts are with various counterparties, and the fair values of
such contracts are determined from the market price of the underlying
product.
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 improvements 3 - 19 years
Machinery and equipment 10 - 25 years
Other property 3 - 20 years
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.
F-71
FUTURES CONTRACTS - The fair value of futures contracts (used for
hedging purposes) is determined from quotes listed principally on
the Chicago Board of Trade.
CONCENTRATION OF CREDIT RISK - During the year ended March 31, 2002 and
the three months ended March 31, 2001 and the years ended December 31,
2000 and 1999, net sales to one customer were 22 percent, 22 percent, 21
percent, and 18 percent of total net sales, respectively. This customer
represents approximately 19 percent and 17 percent of trade receivables at
March 31, 2002 and 2001, 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.
MARKETABLE SECURITIES - The Company's marketable securities are composed
of equity securities that have been classified as trading securities. The
equity securities are carried at fair market value based upon quoted
market prices of those investments at March 31, 2002. Unrealized gains and
losses on equity securities are recognized in net income.
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 (see "Recent Accounting Pronouncements").
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. Impairment losses of
$1,277,000 were recognized during 1999.
ADVERTISING COSTS - The Company expenses advertising costs in the period
incurred. For the year ended March 31, 2002 and the three months ended
March 31, 2001 and the years ended December 31, 2000 and 1999, the
Company incurred advertising expenses of approximately $7,100,000,
$1,300,000, $6,100,000, and $4,500,000, 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-72
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 prior
periods' financial statements to conform to the 2002 presentation.
RECENT ACCOUNTING PRONOUNCEMENTS - In June 2001, the Financial Accounting
Standards Board ("FASB") approved the issuance of SFAS No. 141, BUSINESS
COMBINATIONS, and SFAS No. 142, GOODWILL AND OTHER INTANGIBLE Assets. SFAS
No. 141 requires that the purchase method of accounting be used for all
business combinations initiated after June 30, 2001. SFAS No. 142 changes
the accounting for goodwill from an amortization method to an
impairment-only approach. Amortization of goodwill, including goodwill
recorded in business combinations occurring prior to June 30, 2001, will
cease upon adoption of this statement. In addition, the standard includes
provisions for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles out of
previously reported goodwill, and the identification of reporting units
for purposes of assessing potential future impairments of goodwill. Under
SFAS Nos. 141 and 142, goodwill and other intangibles are initially
assessed for impairment upon adoption of the statements, with subsequent
assessments required annually and when there is reason to suspect that
their values have been diminished or impaired and with any corresponding
write-downs recognized as necessary.
The Company adopted SFAS No. 141 on July 1, 2001. The adoption did not
have a material impact on its consolidated financial statements. The
Company adopted SFAS No. 142 on April 1, 2002. SFAS No. 142 requires the
Company to complete a transitional goodwill and other intangible assets
impairment test. The Company does not believe that the results of the
impairment tests will have a material impact on its consolidated financial
statements. Annual goodwill amortization of approximately $4,000,000
ceased upon the adoption of SFAS No. 142. Amortization of other intangible
assets for the year ended March 31, 2002 and the three months ended March
31, 2001 and the years ended December 31, 2000 and 1999 was approximately
$1,900,000, $430,000, $1,750,000 and $1,700,000, respectively.
In June 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET
RETIREMENT OBLIGATIONS, which addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This statement will be
adopted as required in fiscal year 2004. The Company is currently
assessing, but has not yet determined, the impact this statement will have
on its consolidated financial statements.
In July 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, and the accounting and
reporting provisions of Accounting Principles Board Opinion No. 30,
REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF
A SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY
OCCURRING EVENTS AND TRANSACTIONS. This statement retains the requirements
of SFAS No. 121 to (a) recognize an impairment loss only if the carrying
amount of a long-lived asset is not recoverable from its undiscounted cash
flows and (b) measure an impairment loss as the difference between the
carrying amount and fair value of the asset, and establishes a single
accounting model, based on the framework established in SFAS No. 121, for
long-lived assets to be disposed of by sale. This statement will be
adopted as required in fiscal year 2003. The Company is currently
assessing, but has not yet determined, the impact this statement will have
on its consolidated financial statements.
F-73
In November 2001, the Emerging Issues Task Force ("EITF") issued EITF
Issue No. 01-09, ACCOUNTING FOR CONSIDERATION GIVEN BY A VENDOR TO A
CUSTOMER OR A RESELLER OF THE VENDOR'S PRODUCTS, which addresses the
accounting for consideration given by a vendor to a customer or a reseller
of the vendor's products. This new guidance provides that consideration
from a vendor to a reseller is generally presumed to be a reduction of the
selling prices of the vendor's products and therefore should be
characterized as a reduction of revenue when recognized in the vendor's
income statement. This statement will be adopted as required in fiscal
year 2003. The Company is currently assessing, but has not yet determined,
the impact this guidance will have on its consolidated financial
statements.
3. ACQUISITIONS
During 2000, the Company acquired substantially all the assets and
liabilities of Sona and Hollen for $5,740,000. Sona and Hollen is a
portion packing company located in Los Alamitos, California. 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 had been amortized using a 15-year life. 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 has been amortized using a 15-year life.
F-74
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
------------
Assets acquired 64,059,000
------------
Accounts payable (7,653,000)
Accrued liabilities (3,177,000)
------------
Liabilities assumed (10,830,000)
------------
Net assets of business acquired $ 53,229,000
============
4. LINES OF CREDIT AND LONG-TERM DEBT
LINES OF CREDIT - At March 31, 2002, 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 March 31, 2002 and 2001
under such lines were $8,000,000 and $5,000,000, respectively. The
interest rates applicable to borrowings are based, at the option of the
Company, at a London Interbank Offered Rate ("LIBOR") or a term federal
funds rate ("TFFR") option. The weighted-average rate at March 31, 2002
and 2001 was 2.24 percent and 5.67 percent, respectively. The credit
agreement is subject to renewal annually with the banking group.
LONG-TERM DEBT - At March 31, 2002 and 2001, balances outstanding on
long-term debt were $109,936,000 and $122,539,000, respectively, and
represent term loans with a banking group. The interest rate applicable to
these 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 March 31, 2002 and 2001 was 6.59 percent and 6.83 percent,
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.
F-75
Annual maturities of long-term debt at March 31, 2002 are as follows:
2003 $ 12,758,000
2004 74,223,000
2005 2,799,000
2006 2,987,000
2007 3,187,000
Thereafter 13,982,000
------------
Total 109,936,000
Less current portion 12,758,000
------------
Long-term debt $ 97,178,000
============
5. TRANSACTIONS WITH AFFILIATES
At March 31, 2002, the Company had a receivable balance of $47,000 due
from Wilsey for reimbursement of expenses paid by the Company on behalf of
Wilsey.
Included in accounts payable at March 31, 2002 and 2001 were $5,976,000
and $3,347,000, respectively, payable to Cenex for purchases of oil.
Purchases from Cenex for the year ended March 31, 2002 and for the three
months ended March 31, 2001 and the years ended December 31, 2000 and 1999
were $47,745,000, $8,575,000, $48,916,000, and $84,872,000, respectively.
Sales to Cenex for the year ended March 31, 2002 and for the three months
ended March 31, 2001 and the years ended December 31, 2000 and 1999,
totaled $883,000, $109,000, $950,000, and $1,130,000, respectively.
Included in accounts payable at March 31, 2002 and 2001 were $817,000 and
$448,000, respectively, payable to Mitsui USA for the Company's
participation in Mitsui USA's insurance plans. During the year ended March
31, 2001 and the three months ended March 31, 2001 and the years ended
December 31, 2000 and 1999, the Company recorded expenses of $8,487,000,
$1,380,000, $5,049,000, and $5,677,000, respectively, in connection with
its participation in such plans.
Included in trade receivables at March 31, 2002 and 2001 were $69,000 and
$110,000, respectively, of receivables from Mitsui USA for product sales.
Sales to Mitsui USA for the year ended March 31, 2002 and the three months
ended March 31, 2001 and the years ended December 31, 2000 and 1999,
totaled $1,406,000, $341,000, $1,569,000, and $2,509,000, respectively.
Forward purchase contracts as of March 31, 2002 included commitments for
purchases of 78,653,000 pounds of oil from Cenex. The Company recognized
gains (losses) of $934,000, $1,788,000, $(363,000), and $(25,000),
respectively, on such related party commitments for the year ended March
31, 2002 and for the three months ended March 31, 2001 and the years ended
December 31, 2000 and 1999.
F-76
6. EMPLOYEE BENEFIT PLANS
The Company had long-term incentive arrangements for certain key
executives. Benefits under the arrangements were based on earnings over a
three- to five-year period (as defined) from inception of the arrangements
(January 1, 1997) through December 31, 2001. The incentive period ended on
December 31, 2001. An amount equal to the obligation incurred under the
plan was contributed to a rabbi trust that would be available to general
creditors in the event of bankruptcy. The trust holds investments
primarily in marketable securities that are recorded at market value
(classified as trading securities). The assets in the trust are to be
distributed to the employees upon retirement. The liability under the
arrangements was $14,240,000 and $8,774,000 as of March 31, 2002 and 2001,
respectively, and is included in accrued compensation in the accompanying
consolidated balance sheets.
On January 1, 2002, the Company established new long-term incentive
arrangements with certain key executives under which they can earn
additional compensation. Under these arrangements, the amount of
additional compensation is based on the attainment of cumulative
income-based or equity-based targets over a two- to three-year period. 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. At
March 31, 2002, a liability for such awards of $439,000 is classified as
accrued compensation in the accompanying consolidated balance sheets.
For the year ended March 31, 2002 and the three months ended March 31,
2001 and the years ended December 31, 2000 and 1999, the Company
recognized compensation expense under the long-term incentive arrangements
of $5,657,544, $749,815, $5,883,929, and $1,780,445, respectively.
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 percent 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 percent 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 this plan, employees can make
annual voluntary contributions of up to 15 percent of their compensation.
Expense for the years ended March 31, 2002 and the three months ended
March 31, 2001 and the years ended December 31, 2000 and 1999 was
$5,855,000, $1,343,000, $5,139,000, and $5,212,000, 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 $1,162,000, $416,000,
$1,641,000, and $1,465,000, for the year ended March 31, 2002 and for the
three months ended March 31, 2001 and the years ended December 31, 2000
and 1999, 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 March 31, 2002 and 2001 was $2,049,000 and
$1,484,000, respectively. A liability of $1,668,000 and $1,557,000, as of
March 31, 2002 and 2001, respectively, is included in long-term accrued
compensation in the accompanying consolidated balance sheets. The plan is
unfunded. During the year ended March 31, 2002 and the
F-77
three months ended March 31, 2001 and the years ended December 31, 2000
and 1999, the Company recorded benefit expense related to the plan of
$111,000, $420,000, $379,000, and $412,000, respectively.
The assumptions used in the measurement of the Company's benefit
obligation are as follows:
MARCH 31, DECEMBER 31,
--------------- ---------------
2002 2001 2000 1999
Discount rate 7.0% 7.0% 7.0% 7.5%
Rate of compensation increase 3.0% 3.0% 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.
7. COMMITMENTS AND CONTINGENCIES
Future minimum annual payments under noncancelable operating leases with
lease terms in excess of one year at March 31, 2002 are as follows:
2003 $ 4,960,000
2004 3,881,000
2005 3,092,000
2006 1,826,000
2007 669,000
Thereafter 203,000
------------
Total $ 14,631,000
============
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 year ended March 31,
2002 and for the three months ended March 31, 2001 and the years ended
December 31, 2000 and 1999 under operating leases totaled $5,671,000,
$1,476,000, $5,205,000, and $5,121,000, 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.
F-78
8. QUARTERLY INFORMATION (UNAUDITED)
As discussed in Note 2, the Company changed its fiscal year-end to March
31. Audited financial information for the three months ended March 31,
2001 has been included herein. For comparison purposes, selected unaudited
financial information for the three months ended March 31, 2000 is as
follows:
Sales $ 211,815,000
Cost of goods sold 172,818,000
Net income 17,123,000
Total assets 362,382,000
Total liabilities 231,789,000
Members' capital 130,593,000
******
(20149)
F-79