EXHIBIT 99.3
INTERNATIONAL HOME FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
Three Months Ended
March 31,
2000 1999
------------ ------------
Net sales $ 561,374 $ 514,186
Cost of sales 293,133 280,362
------------ ------------
Gross profit 268,241 233,824
Marketing expenses 128,598 109,739
Selling, general, and administrative expenses 71,541 60,959
------------ ------------
Income from operations 68,102 63,126
Interest expense 25,074 25,751
Other (income) expense, net 244 (175)
Gain on sale of business -- (15,779)
------------ ------------
Income before provision for income taxes 42,784 53,329
Provision for income taxes 16,258 20,798
------------ ------------
Net income $ 26,526 $ 32,531
============ ============
Basic earnings per share:
Net income $ 0.36 $ 0.44
------------ ------------
Shares used in computing basic earnings per share 73,918,374 73,303,266
------------ ------------
Diluted earnings per share:
Net income $ 0.35 $ 0.43
------------ ------------
Shares used in computing diluted earnings per share 76,028,707 75,802,674
------------ ------------
See accompanying notes to consolidated financial statements.
INTERNATIONAL HOME FOODS, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
(UNAUDITED)
March 31, December 31,
2000 1999
------------ ------------
ASSETS
Current Assets:
Cash and cash equivalents $ 16,369 $ 14,310
Accounts receivable, net of allowances 181,530 180,671
Inventories 307,095 282,911
Prepaid expenses and other current assets 31,893 34,345
Deferred income taxes 16,317 16,113
------------ ------------
Total current assets 553,204 528,350
Property, plant and equipment, net 311,953 306,042
Intangible assets, net 434,565 432,732
Deferred income taxes 253,985 262,563
Other assets 18,120 19,686
------------ ------------
Total assets $ 1,571,827 $ 1,549,373
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 83,249 $ 73,084
Revolving credit facility 118,013 78,536
Accounts payable 56,945 69,669
Book overdrafts 26,186 22,457
Accrued compensation and benefits 25,055 22,288
Accrued advertising and promotion 48,450 39,550
Accrued interest 17,079 10,278
Other accrued liabilities 35,328 38,967
------------ ------------
Total current liabilities 410,305 354,829
Long-term debt 962,671 1,024,378
Post-retirement benefits obligation 27,990 27,216
Other non-current liabilities 253 898
------------ ------------
Total liabilities 1,401,219 1,407,321
------------ ------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock - par value $0.01 per share; authorized,
100,000,000 shares; no shares issued or outstanding $ -- $ --
Common stock - par value $0.01 per share; authorized,
300,000,000 shares; issued 78,364,174 and
78,218,034 shares 784 782
Additional paid-in capital 63,655 62,475
Treasury stock, at cost 4,400,000 shares (57,200) (57,200)
Retained earnings 164,453 137,927
Accumulated other comprehensive loss (1,084) (1,932)
------------ ------------
Total stockholders' equity 170,608 142,052
------------ ------------
Total liabilities and stockholders' equity $ 1,571,827 $ 1,549,373
============ ============
See accompanying notes to consolidated financial statements.
INTERNATIONAL HOME FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Three Months Ended
March 31,
2000 1999
------------ ------------
OPERATING ACTIVITIES:
Net income $ 26,526 $ 32,531
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 11,142 10,621
Deferred income taxes 8,374 10,921
Stock option compensation -- 26
Gain on sale of business -- (15,779)
Changes in assets and liabilities, net of acquisitions and divestiture:
Increase in accounts receivable (859) (18,331)
(Increase) decrease in inventories (24,184) 26,088
Decrease (increase) in other current assets 2,452 (3,424)
(Decrease) increase in accounts payable (12,724) 6,471
Increase in accrued liabilities 14,829 28,773
Increase in non-current assets (632) (179)
Increase in non-current liabilities 129 738
------------ ------------
Net cash provided by operating activities 25,053 78,456
------------ ------------
INVESTING ACTIVITIES:
Purchases of plant and equipment, net (12,375) (10,865)
Payments for acquired businesses, net of cash
acquired (4,067) (37,733)
Proceeds from sale of business -- 30,000
------------ ------------
Net cash used in investing activities (16,442) (18,598)
------------ ------------
FINANCING ACTIVITIES:
Increase (decrease) in book overdrafts 3,729 (2,993)
Repayment of long-term debt (51,542) (25,802)
Borrowings from revolving credit facility 89,500 13,124
Repayment of borrowings from revolving
credit facility (49,909) (40,210)
Proceeds from exercise of stock options 1,182 1,232
------------ ------------
Net cash used in financing activities (7,040) (54,649)
------------ ------------
Effect of exchange rate changes on cash 488 821
------------ ------------
Increase in cash and cash equivalents 2,059 6,030
Cash and cash equivalents at beginning of period 14,310 17,201
------------ ------------
Cash and cash equivalents at end of period $ 16,369 $ 23,231
============ ============
Cash paid during the period for:
Interest 17,185 14,604
Income taxes 1,404 1,814
See accompanying notes to consolidated financial statements.
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. ACCOUNTING POLICIES
Interim Financial Statements
In the opinion of International Home Foods, Inc. ("the Company"), the
accompanying consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to present
fairly the Company's financial position as of March 31, 2000 and the
results of operations and cash flows for the three months ended March 31,
2000 and 1999. The results of operations for the three month period are
not necessarily indicative of the results to be expected for the full
year.
The December 31, 1999 consolidated balance sheet was derived from the
Company's audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's 1999 Annual Report on Form 10-K.
Use of Estimates
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles and necessarily include
amounts based on judgments and estimates made by management. Actual
results could differ from these estimates. Estimates are used when
accounting for potential bad debts, inventory obsolescence and spoilage,
trade and promotion allowances, coupon redemptions, depreciation and
amortization, stock option compensation, deferred income taxes and tax
valuation allowances, pension and post-retirement benefits, restructuring
charges and contingencies, among other items.
Reclassifications
Certain 1999 amounts have been reclassified to conform with the 2000
presentation.
2. INVENTORIES
Inventories consist of:
March 31, December 31,
2000 1999
------------ ------------
Raw materials $ 77,298 $ 65,483
Work in progress 8,789 8,841
Finished goods 221,008 208,587
------------ ------------
Total $ 307,095 $ 282,911
============ ============
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
3. COMPREHENSIVE INCOME
Comprehensive income is as follows:
Three Months Ended
March 31,
2000 1999
------------ ------------
(unaudited)
Net income $ 26,526 $ 32,531
Foreign currency translation
Amount before taxes $ 1,467 $ (89)
Income tax (expense) benefit (619) 260
------------ ------------
Other comprehensive income $ 848 $ 171
------------ ------------
Total comprehensive income $ 27,374 $ 32,702
============ ============
The following amounts are included in Accumulated other comprehensive
loss at March 31, 2000 and December 31, 1999:
March 31, December 31,
2000 1999
------------ ------------
Minimum pension liability $ (29) $ (29)
Foreign currency translation (1,055) (1,903)
------------ ------------
Accumulated other comprehensive loss $ (1,084) $ (1,932)
============ ============
4. BUSINESS SEGMENT INFORMATION
The Company manufactures and markets a diversified portfolio of
shelf-stable food products including entrees, side dishes, snacks, canned
fish, canned meats as well as refrigerated surimi. The Company sells its
products primarily in the United States, Canada and Mexico, and is not
dependent on any single or major group of customers for its sales. The
Company has three reportable business segments - Branded Products,
Seafood and Private Label and Foodservice. Branded Products is defined as
U.S. grocery sales for the following products: Chef Boyardee(R), Canned
Meat and Beans brands (Libby's(R), Dennison's(R), Luck's(R) and Ranch
Style(R), Ro*Tel(R), Specialty and Snack brands (PAM(R) cooking spray,
Gulden's(R), Maypo(R), Wheatena(R), Maltex(R), G. Washington's(R), Crunch
'n Munch(R), Jiffy pop(R) and Campfire(R)). Seafood includes all sales
for the Bumble Bee(R), Orleans(R), Libby's, Clover Leaf(R), Paramount(R)
and Louis Kemp(R) brands of seafood products as well as private label and
foodservice seafood sales. Private Label and Foodservice includes all
private label canned pasta, cooking spray, fruit snacks, ready-to-eat
cereals, wholesome snack bars, pie crust and personal care products and
the sales to foodservice distributors. The All Other category is
comprised of sales to the military, contract sales to Nestle, sales of
Polaner(R) products and international sales which includes branded,
private label and foodservice sales in Canada, Mexico, Puerto Rico, and
other export sales.
The Company sold its Polaner fruit spreads and spices business on
February 5, 1999 (Note 6).
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Business Segment Information, (Continued)
The Company sells the products in each of its segments primarily to
grocery wholesalers and distributors, grocery stores and supermarkets,
convenience stores, drug and mass merchants and warehouse clubs. The
Company evaluates segment performance based upon segment operating income
(earnings before interest expense, net other [income] expense, and income
taxes excluding unusual or infrequently occurring items, restructuring
charge and stock compensation expense [income]). Certain centrally
incurred costs (Corporate), are not allocated to the operating segments.
The Company allocates certain charges, including depreciation,
amortization, agent and broker commissions, storage, packing and shipping
charges, and administrative costs for salaries, insurance and employee
benefits, to its Branded Products segment, and to its Private Label and
Foodservice segment based on a percentage of net sales.
For the Three Months Ended
March 31,
2000 1999
------------ ------------
Net sales:
Branded Products $ 220,614 $ 206,029
Seafood 187,427 159,966
Private Label and Foodservice 79,290 78,563
------------ ------------
Subtotal - Reportable Segments 487,331 444,558
All Other 74,043 69,628
------------ ------------
Total $ 561,374 $ 514,186
============ ============
Segment operating income:
Branded Products $ 41,342 $ 39,801
Seafood 13,033 9,834
Private Label and Foodservice 13,838 10,393
------------ ------------
Subtotal - Reportable Segments 68,213 60,028
All Other 5,521 5,750
------------ ------------
Total $ 73,734 $ 65,778
============ ============
For the Three Months Ended
March 31,
2000 1999
------------ ------------
Reconciliation to Consolidated Results
Segment operating income $ 73,734 $ 65,778
Less:
Stock compensation expense -- 26
Unallocated expense 5,632 2,626
------------ ------------
Total consolidated income
from operations $ 68,102 $ 63,126
============ ============
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
5. ACQUISITIONS
On July 19, 1999, the Company, through its subsidiary Bumble Bee
Seafoods, Inc., acquired the manufacturing, sales distribution and
marketing operations of Louis Kemp from Tyson Foods, Inc. for $68,792,
including transaction fees. The Company financed this acquisition with
borrowings under its Senior Bank Facilities. Louis Kemp manufactures and
sells refrigerated and frozen surimi products. Surimi-based products are
made from North Pacific ocean pollack and whiting fish meats. These
products are primarily sold under the tradename Louis Kemp and other
tradenames such as Captain Jac(R), SeaFest(R) and Pacific Mate(R).
On January 19, 1999, the Company, through its subsidiary Bumble Bee
Seafoods, Inc., acquired the Clover Leaf and Paramount canned seafood
brands and business of British Columbia Packers ("Clover Leaf/Paramount
brands") from George Weston Ltd. of Canada for a total purchase price of
$40,394, including transaction fees. The acquisition was funded with
borrowings under the Company's Senior Bank Facilities and cash on hand.
The excess of cost over fair value of net assets acquired for the above
acquisitions is amortized over 40 years for identifiable intangibles and
for goodwill. These acquisitions have been accounted for using the
purchase method of accounting, and the operating results of the acquired
companies have been included in the consolidated financial statements
from the dates of acquisition. The information below includes non-cash
investing and financing activities supplemental to the consolidated
statements of cash flows. A summary of the excess of cost over fair value
of net assets acquired resulting from purchase price allocations for the
1999 acquisitions is as follows:
CLOVER LEAF/
LOUIS PARAMOUNT
KEMP BRANDS
------------ ------------
Cost of acquisition, including
transaction fees $ 68,792 $ 40,394
Less acquired assets:
Current assets 10,094 38,962
Property, plant and equipment 18,111 1,180
Other assets -- --
Add: liabilities assumed 1,016 9,411
------------ ------------
Excess of cost over net assets acquired,
including identifiable intangibles $ 41,603 $ 9,663
============ ============
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Acquisitions, (Continued)
The following unaudited pro forma consolidated results of operations have
been prepared as if the acquisitions of Clover Leaf/Paramount and Louis
Kemp and divestiture of Polaner had occurred as of the beginning of 1999
and reflect proforma adjustments for goodwill, interest expense and tax
expense:
For the Three Months Ended
March 31, 1999
---------------------------------------
IHF(1) Acquisitions(2) Total
-------- --------------- --------
Net sales $509,122 $33,952 $543,074
Operating income $ 62,767 $ 379 $ 63,146
Net income $ 22,547 $ (486) $ 22,061
Earnings per share:
Basic $ 0.31 $ (0.01) $ 0.30
Diluted $ 0.30 $ (0.01) $ 0.29
(1) Excludes operations of and gain on sale of Polaner (See Note 6).
(2) Amounts include Louis Kemp and Clover Leaf/Paramount brands.
The unaudited pro forma consolidated results do not purport to be
indicative of results that would have occurred had the acquisitions been
in effect for the period presented, nor do they purport to be indicative
of the results that will be obtained in the future.
6. SALE OF BUSINESS
On February 5, 1999 the Company sold its Polaner fruit spreads and spices
business to B&G Foods, Inc. for approximately $30.0 million in cash,
resulting in a gain of $15.8 million ($9.6 million, net of tax or $0.13
per diluted share).
7. RELATED PARTY TRANSACTIONS
Effective November 1, 1996, the Company entered into a 10-year monitoring
and oversight agreement with an affiliate of its largest stockholder. The
agreement provides for an annual fee of the greater of $1,000 or 0.1% of
the budgeted consolidated net sales of the Company for the current year.
In addition, effective November 1, 1996, the Company entered into a
financial advisory agreement with the affiliate under which the affiliate
will be entitled to a fee of 1.5% of the transaction value, as defined,
for each add-on transaction, as defined. The Company incurred monitoring
and oversight fees of $579 and $487 and financial advisory fees of $0 and
$546 for the three months ended March 31, 2000 and 1999, respectively.
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
8. GUARANTOR FINANCIAL DATA
The Company's Senior Subordinated Notes are fully and unconditionally
guaranteed by each of the Company's subsidiary guarantors on a joint and
several basis. The Company has not presented separate financial
statements and other disclosures concerning each of the subsidiary
guarantors because management has determined that such information is not
material to the holders of the Senior Subordinated Notes. The financial
information for 2000 reflects the corporate re-organization, resulting
from the Company's tax restructuring, effective January 1, 2000. Certain
intercompany sales transactions between the parent and guarantor
subsidiaries have been eliminated. Presented below is consolidating
financial information including summarized combined financial information
of the subsidiary guarantors:
FOR THE THREE MONTHS ENDED
MARCH 31, 2000
(unaudited)
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------ ------------
Net sales $ 265,650 $ 514,241 $ 47,133 (265,650) $ 561,374
Gross profit 154,992 268,811 17,302 (172,864) 268,241
Net income 14,627 11,049 850 -- 26,526
Net cash provided by (used in)
operating activities 10,552 15,781 (1,280) -- 25,053
Net cash provided by (used in)
investing activities 359 (16,287) (514) -- (16,442)
Net cash provided by (used in)
financing activities 27,674 (36,156) 1,442 -- (7,040)
FOR THE THREE MONTHS ENDED
MARCH 31, 1999
(unaudited)
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------ ------------
Net sales $ 220,671 $ 250,911 $ 42,604 -- $ 514,186
Gross profit 128,854 92,109 12,861 -- 233,824
Net income 7,304 23,411(1) 1,816 -- 32,531(1)
Net cash provided by (used in)
operating activities 53,535 33,488 (8,567) -- 78,456
Net cash (used in) provided by
investing activities (531) 13,538 (31,605) -- (18,598)
Net cash (used in) provided by
financing activities (52,453) (45,002) 42,806 -- (54,649)
The 1999 amounts have been reclassified for consistency from amounts
previously reported. Amounts are not intended to report results as if the
subsidiaries were separate stand-alone entities.
(1) Includes an after-tax gain of $9.6 million ($15.8 million pre-tax)
from sale of the Polaner fruit spread and spice business.
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
Guarantor Financial Data, (Continued)
MARCH 31, 2000
(unaudited)
Non-
Guarantor Guarantor
Parent Subsidiaries Subsidiaries Eliminations Consolidated
--------- ------------ ------------ ------------ ------------
Current assets $ 34,545 $ 433,725 $ 84,934 $ -- $ 553,204
Non-current assets 1,120,208 675,209 14,219 (791,013) 1,018,623
Current liabilities 220,889 174,748 14,668 -- 410,305
Non-current liabilities 963,535 50,572 35,374 (58,567) 990,914
DECEMBER 31, 1999
Current assets $ 132,979 $ 304,110 $ 91,261 $ -- $ 528,350
Non-current assets 1,091,493 670,803 808 (742,081) 1,021,023
Current liabilities 200,671 132,201 21,957 -- 354,829
Non-current liabilities 1,041,449 5,195 33,109 (27,261) 1,052,492
9. IMPACT OF RECENT ACCOUNTING STANDARDS
In June 1998, SFAS 133, "Accounting for Derivative Instruments and
Hedging Activities", was issued to establish standards for accounting for
derivatives and hedging activities and supersedes and amends a number of
existing standards. This statement requires all derivatives to be
recognized in the statement of financial position as either assets or
liabilities and measured at fair value. In addition, all hedging
relationships must be designated, reassessed and documented pursuant to
the provisions of SFAS 133. SFAS 133, as amended by SFAS 137, "Deferral
of the effective date of SFAS 133", is effective for fiscal years
beginning after June 15, 2000. The Company is currently evaluating the
effect this statement will have on its financial statements.
INTERNATIONAL HOME FOODS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
10. EARNINGS PER SHARE
The table below summarizes the numerator and denominator for the basic
and diluted earnings per share calculations (in thousands, except per
share amounts).
For the Three Months Ended
March 31,
2000 1999
-------- --------
Numerator:
Net income available to common
shares $ 26,526 $ 32,531
Denominator:
Average number of shares outstanding 73,918 73,303
Effect of dilutive stock options 2,111 2,500
-------- --------
Total number of shares outstanding 76,029 75,803
Basic earnings per share $ 0.36 $ 0.44
Diluted earnings per share $ 0.35 $ 0.43
11. RESTRUCTURING
In September 1998, in conjunction with management's plan to reduce costs
and improve operational efficiencies, the Company recorded a
restructuring charge of $118.1 million ($75.3 million after tax). The
principal actions in the restructuring plan involved the closure of the
Vacaville, California and Clearfield, Utah production facilities and the
related impact of the transfer of production to other facilities, mainly
Milton, Pennsylvania, and the write-down of goodwill associated with the
Campfire crisp rice snack bar brand and the Polaner fruit spreads brand.
The Polaner business was subsequently sold (Note 6).
At March 31, 2000, $3.0 million of restructuring charges remained in
other accrued liabilities. This amount is comprised of multi-employer
pension plan settlements and certain other employee benefit related
costs. Payments totaling $8.1 million have been made to date, including
$0.2 million for the three months ended March 31, 2000.