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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): August 19, 2002
PRO-FAC COOPERATIVE, Inc.
(Exact Name of Registrant as Specified in Charter)
New York 0-20539 16-6036816
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(State or other jurisdiction of incorporation) (Commission File Number) (IRS Employer Identification Number)
90 Linden Oaks, Rochester, New York 14625
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number Including Area Code: (585) 383-1850
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Item 2. Acquisition or Disposition of Assets
The Disposition (the "Transaction")
On August 19, 2002 (the "Closing Date"), pursuant to the terms of the
Unit Purchase Agreement dated as of June 20, 2002 (the "Unit Purchase
Agreement"), by and among Pro-Fac Cooperative, Inc., a New York agricultural
cooperative ("Pro-Fac"), Agrilink Foods, Inc., at the time a New York
corporation and a wholly-owned subsidiary of Pro-Fac ("Agrilink Foods") and
Vestar/Agrilink Holdings LLC, a Delaware limited liability company
("Vestar/Agrilink Holdings"):
(i) Pro-Fac contributed to the capital of Agrilink Holdings LLC, a
Delaware limited liability company ("Holdings LLC"), all of the shares of
Agrilink Foods' common stock owned by Pro-Fac, constituting 100% of the issued
and outstanding shares of Agrilink Foods' capital stock, in consideration for
Class B common units of Holdings LLC, representing a 40.72% common equity
ownership; and
(ii) Vestar/Agrilink Holdings and certain co-investors (collectively,
"Vestar") contributed cash in the aggregate amount of $175.0 million to the
capital of Holdings LLC, in consideration for preferred units, Class A common
units, and warrants which were immediately exercised to acquire additional Class
A common units. After exercising the warrants, Vestar owns 56.24% of the common
equity of Holdings LLC. The co-investors are either under common control with,
or have delivered an unconditional voting proxy to, Vestar/Agrilink Holdings.
The transactions contemplated in and consummated pursuant to the Unit Purchase
Agreement, are referred to herein collectively as the "Transaction".
In addition, as part of the Transaction certain amounts owed by Pro-Fac
to Agrilink Foods were forgiven.
Also, as part of the Transaction, Stephen R. Wright, the general
manager and secretary of Pro-Fac, together with executive officers of Agrilink
Foods and certain other members of Agrilink Foods' management, entered into
subscription agreements (attached hereto as Exhibit 99.1, which is incorporated
herein by reference, is a form of Management Unit Subscription Agreement) with
Holdings LLC, to acquire with a combination of cash and promissory notes an
aggregate of approximately $1.3 million of Class C common units and Class D
common units of Holdings LLC, representing approximately 3.04% of the common
equity ownership. As of the Closing Date, an additional approximately $0.5
million of Class C common units and Class D common units, representing less than
1% of the common equity ownership remained unissued. The foregoing individuals
are also parties to the Securityholders Agreement and the Limited Liability
Company Agreement discussed below. Attached to this Report as Exhibit 99.2,
which is incorporated herein by reference, is the Unit Purchase Agreement.
Immediately following Pro-Fac's contribution of its shares of Agrilink
Foods' common stock to Holdings LLC, Holdings LLC contributed those shares to
Agrilink Holdings Inc. ("Holdings Inc."), a Delaware corporation and a direct,
wholly-owned subsidiary of Holdings LLC, and Agrilink Foods became an indirect,
wholly-owned subsidiary of Holdings LLC. As a result of the Transaction, Pro-Fac
owns 40.72% and Vestar owns 56.24% of the common equity securities of Holdings
LLC. The Class A common units entitle the owner thereof - Vestar - to two votes
for each Class A common unit held. All other Holdings LLC common units entitle
the holder(s) thereof to one vote for each common unit held. Accordingly, Vestar
has a voting majority of all common units.
In connection with the Transaction, Pro-Fac entered into several
agreements effective as of the Closing Date, including the following:
(i) Termination Agreement. Pro-Fac and Agrilink Foods entered into a
letter agreement dated as of the Closing Date (the "Termination Agreement"),
pursuant to which, among other things, the existing marketing and facilitation
agreement between Pro-Fac and Agrilink Foods (the "Existing Marketing and
Facilitation Agreement") has been terminated and, in consideration of such
termination, Agrilink Foods will pay Pro-Fac a termination fee of $10.0
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million per year for five years, provided that certain ongoing conditions are
met, including maintaining grower membership levels sufficient to generate
certain minimum crop supply. Attached hereto as Exhibit 99.3, which is
incorporated herein by reference, is the Termination Agreement.
(ii) Amended and Restated Marketing and Facilitation Agreement. Pro-Fac
and Agrilink Foods entered into an amended and restated marketing and
facilitation agreement dated as of the Closing Date (the "Amended and Restated
Marketing and Facilitation Agreement"). The Amended and Restated Marketing and
Facilitation Agreement supersedes and replaces the Existing Marketing and
Facilitation Agreement and provides that, among other things, Pro-Fac will be
Agrilink Foods' preferred supplier of crops. Agrilink Foods will continue to pay
Pro-Fac the Commercial Market Value ("CMV") of crops supplied by Pro-Fac, in
installments corresponding to the dates of payment by Pro-Fac to its members for
crops delivered. The processes for determining CMV under the Amended and
Restated Marketing and Facilitation Agreement are substantially the same as the
processes used under the Existing Marketing and Facilitation Agreement. Agrilink
Foods will make payments to Pro-Fac of an estimated CMV for a particular crop
year, subject to adjustments to reflect the actual CMV following the end of such
year. Commodity committees will meet with Agrilink Foods management to establish
CMV guidelines, review calculations, and report to a joint CMV committee. Unlike
the Existing Marketing and Facilitation Agreement, the Amended and Restated
Marketing and Facilitation Agreement does not permit Agrilink Foods to offset
its losses from products supplied by Pro-Fac or require it to share with Pro-Fac
its profits and it does not require Pro-Fac to reinvest in Agrilink Foods any
part of Pro-Fac's patronage income.
The Amended and Restated Marketing and Facilitation Agreement provides
that Agrilink Foods will continue to provide to Pro-Fac services relating to
planning, consulting, sourcing and harvesting crops from Pro-Fac members in a
manner consistent with past practices. In addition, for a period of five years
from the Closing Date, Agrilink Foods will provide Pro-Fac with services related
to the expansion of the market for the agricultural products of Pro-Fac members
(at no cost to Pro-Fac other than reimbursement of Agrilink Foods' incremental
and out-of-pocket expenses related to providing such services as agreed to by
Pro-Fac and Agrilink Foods).
The Amended and Restated Marketing and Facilitation Agreement may be
terminated by Agrilink Foods in connection with certain change in control
transactions affecting Agrilink Foods or Holdings Inc.; provided, however, that
in the event that any such change in control occurs during the first three years
after the Closing Date, Agrilink Foods must pay to Pro-Fac a termination fee of
$20.0 million (less the total amount of any shortfall payments previously paid
to Pro-Fac under the Amended and Restated Marketing and Facilitation Agreement).
Also, if, during the first three years after the Closing Date, Agrilink Foods
sells one or more portions of its business, and if the purchaser does not
continue to purchase the crops previously purchased by Agrilink Foods with
respect to the transferred business, then such failure will be taken into
consideration when determining if Agrilink Foods is required to make any
shortfall payments to Pro-Fac. After such three-year period, Agrilink Foods may
sell portions of its business and the volumes of crop purchases previously made
by Agrilink Foods with respect to such transferred business will be disregarded
for purposes of determining shortfall payments. Attached hereto as Exhibit 99.4,
which is incorporated herein by reference, is the Amended and Restated Marketing
and Facilitation Agreement.
(iii) Transitional Services Agreement. Pro-Fac and Agrilink Foods
entered into a transitional services agreement (the "Transitional Services
Agreement") dated as of the Closing Date, pursuant to which Agrilink Foods will
provide Pro-Fac certain administrative and other services for a period of 24
months from the Closing Date. Agrilink Foods will generally provide such
services at no charge to Pro-Fac, other than reimbursement of the incremental
and out-of-pocket costs associated with performing those services for Pro-Fac.
Also pursuant to the Transitional Services Agreement, the general manager of
Pro-Fac may also be an employee of Agrilink Foods, in which case he will report
to the chief executive officer of Agrilink Foods with respect to his duties for
Agrilink Foods, and to the Pro-Fac board of directors with respect to duties
performed by him for Pro-Fac. All other individuals performing services under
the Transitional Services Agreement will report only to the chief executive
officer (or other representative) of Agrilink Foods. Attached hereto as Exhibit
99.5, which is incorporated herein by reference, is the Transitional Services
Agreement.
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(iv) Credit Agreement. Agrilink Foods and Pro-Fac have entered into a
Credit Agreement, dated August 19, 2002 (the "Credit Agreement"), pursuant to
which Agrilink Foods has agreed to make available to Pro-Fac loans in an
aggregate principal amount of up to $5.0 million (the "Credit Facility ").
Pro-Fac is permitted to drawdown up to $1.0 million per year under the Credit
Facility, unless Agrilink Foods is prohibited from making such advances under
the terms of certain third party indebtedness of Agrilink Foods. The amount of
the Credit Facility will be reduced, on a dollar-for-dollar basis, to the extent
of certain distributions made by Holdings LLC to Pro-Fac in respect of its
ownership in Holdings LLC. Pro-Fac has delivered to Agrilink Foods a promissory
note in the aggregate principal amount of $5.0 million and has pledged all of
its Class B Common Units in Holdings LLC as security for advances under the
Credit Facility. Attached hereto as Exhibit 99.6, which is incorporated herein
by reference, is the Credit Agreement.
Certain Relationships
As part of the Transaction, Holdings LLC, Pro-Fac and Vestar, together
with others, entered into a securityholders agreement dated August 19, 2002 (the
"Securityholders Agreement") containing terms and conditions relating to the
transfer of membership interests in and the management of Holdings LLC. Among
other things, the Securityholders Agreement includes a voting agreement pursuant
to which the holders of common units agree to vote their common units and to
take any other action necessary to cause the authorized number of members or
directors for each of the respective management committees or boards of
directors of Holdings LLC, Holdings Inc. and Agrilink Foods to be set at nine
and to elect or cause to be elected to the respective management committees or
boards of directors of Holdings LLC, Holdings Inc. and Agrilink Foods, five
members/directors designated by Vestar, two members/directors designated by
Pro-Fac, one member/director who shall be the chief executive officer of
Agrilink Foods and one member/director designated by Vestar who shall be
independent of Holdings LLC, its subsidiaries' management (including Agrilink
Foods) and Vestar. Attached hereto as Exhibit 99.7, which is incorporated herein
by reference, is the Securityholders Agreement.
Pro-Fac, Vestar and Holdings LLC, together with others, including Mr.
Stephen R. Wright, the general manager and secretary of Pro-Fac, are parties to
a limited liability company agreement dated August 19, 2002 (the "Limited
Liability Company Agreement") that contains terms and conditions relating to the
management of Holdings LLC and its subsidiaries (including Agrilink Foods), the
distribution of profits and losses and the rights and limitations of members of
Holdings LLC. Attached hereto as Exhibit 99.8, which is incorporated herein by
reference, is the Limited Liability Company Agreement.
Agrilink Foods, Holdings Inc. and Vestar Capital Partners entered into
a management agreement dated as of August 19, 2002 (the "Management Agreement")
pursuant to which Vestar Capital Partners, an investment firm and manager of
Vestar Capital Partners IV, L.P., a Delaware limited partnership and the sole
member of Vestar/Agrilink Holdings ("Vestar Capital Partners"), will provide
advisory and consulting services to Holdings Inc. and Agrilink Foods. In
consideration for such services, Holdings Inc. and Agrilink Foods will, jointly
and severally, pay Vestar Capital Partners an annual management fee equal to the
greater of $1.0 million and 0.7% of Agrilink Foods' earnings before interest,
tax, depreciation and amortization. In addition, on the Closing Date, Agrilink
Foods and Holdings LLC, jointly paid to Vestar Capital Partners a transaction
fee equal to $8.0 million plus all of the out-of-pocket expenses incurred by
Vestar Capital Partners in connection with the Transaction. Attached to this
Report as Exhibit 99.9, which is incorporated herein by reference, is the
Management Agreement.
As a result of the Transaction, Pro-Fac will no longer report its
financial statements on a consolidated basis with that of Agrilink Foods. Also
effective as of the Closing Date, Pro-Fac will no longer conduct business under
the name "Agrilink".
Item 7. Financial Statements, Pro-Forma Financial Information and Exhibits
(a) Financial Statements of Business Acquired.
None
(b) Pro-Forma Financial Information.
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UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The unaudited pro forma condensed financial information below includes
an Unaudited Pro Forma Condensed Balance Sheet at March 30, 2002,and Unaudited
Pro Forma Condensed Statements of Operations for the fiscal year ended June 30,
2001 and the nine months ended March 30, 2002. The Unaudited Pro Forma Condensed
Balance Sheet at March 30, 2002 gives effect to Pro-Fac's disposition of its
ownership interest in Agrilink Foods as if it had occurred on March 30, 2002.
The Unaudited Pro Forma Condensed Statement of Operations for the fiscal year
ended June 30, 2001 gives effect to Pro-Fac's disposition of its ownership
interest in Agrilink Foods as if it had occurred on June 25, 2000, and the
Unaudited Pro Forma Condensed Statement of Operations for the nine months ended
March 30, 2002 gives effect to Pro-Fac's disposition of its ownership interest
in Agrilink Foods as if it had occurred on July 1, 2001.
The Unaudited Pro Forma Condensed Statements of Operations do not
purport to represent what Pro-Fac's results of operations would actually have
been if the disposition had occurred on June 25, 2000 or July 1, 2001, and do
not purport to project the results of operations of Pro-Fac for the current year
or for any future period. The adjustments in the pro forma financial information
are based on available information and on assumptions which management believes
are reasonable. All information contained in this item 7 should be read in
conjunction with the Notes to Unaudited Pro Forma Condensed Balance Sheet and
Statements of Operations included in this Report, and the Consolidated Financial
Statements, the Notes to the Consolidated Financial Statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included in Pro-Fac's Form 10-K for the fiscal year ended June 30, 2001 and in
the Form 10-Q's for the quarters ended September 29, 2001, December 29, 2001 and
March 30, 2002.
In the unaudited pro forma condensed financial information below,
Pro-Fac is at times referred to as "we," "us," or "our."
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Pro-Fac Cooperative, Inc.
Unaudited Pro Forma Condensed Balance Sheet
March 30, 2002
(Dollars in Millions)
Deconsolidation
Pro-Fac of Transaction
Historical Agrilink Foods, Inc. Adjustments Pro Forma
---------- -------------------- ----------- ---------
(a) (b)
Assets
Current assets
Cash and cash equivalents $ 7.6 $ (7.6) $ 1.0 (c) $ 1.0
Accounts receivable 89.9 (89.9) 0.0 0.0
Inventories 337.3 (337.3) 0.0 0.0
Due from Agrilink Foods 0.0 0.0 1.0 (d) 1.0
Other current assets 35.5 (35.5) 0.0 0.0
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Total current assets 470.3 (470.3) 2.0 2.0
Investment in Holdings LLC 0.0 176.2 (149.4)(e) 26.8
Net property, plant and equipment 295.9 (295.9) 0.0 0.0
Goodwill 236.3 (236.3) 0.0 0.0
Intangible assets, net 11.6 (11.6) 0.0 0.0
Due from Agrilink Foods 0.0 14.0 1.0 (d) 15.0
Other assets 38.4 (38.3) 0.0 0.1
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Total assets $ 1,052.5 $ (862.2) $ (146.4) $ 43.9
============= ============= ============ ============
Liabilities and shareholders' equity
Current liabilities:
Revolving credit facility $ 75.4 $ (75.4) $ 0.0 $ 0.0
Current portion of long-term debt and capital leases 15.7 (15.7) 0.0 0.0
Accounts payable, accruals and other current liabilities 100.5 (98.8) 0.0 1.7
Amounts due to Class A members 15.7 0.0 0.0 15.7
Due to Agrilink Foods 0.0 21.9 (21.8)(c)(e) 0.1
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Total current liabilities 207.3 (168.0) (21.8) 17.5
Long-term debt under capital leases 2.9 (2.9) 0.0 0.0
Long-term debt under credit facility 392.7 (392.7) 0.0 0.0
Senior subordinated notes 200.0 (200.0) 0.0 0.0
Subordinated promissory note 31.8 (31.8) 0.0 0.0
Long-term debt, other 0.3 (0.3) 0.0 0.0
Long-term debt due Agrilink Foods 0.0 0.0 1.0 (c) 1.0
Other long-term liabilities 55.4 (55.4) 0.0 0.0
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Total liabilities 890.4 (851.1) (20.8) 18.5
Class B preferred stock 0.2 0.0 0.0 0.2
Class A common stock 10.5 0.0 0.0 10.5
Shareholders' equity 151.4 (11.1) (125.6) (e) 14.7
------------- ------------- ------------ ------------
Total liabilities and shareholders' equity $ 1,052.5 $ (862.2) $ (146.4) $ 43.9
============= ============= ============ ============
See accompanying notes to unaudited pro forma condensed balance sheet.
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Notes to Unaudited Pro Forma Condensed Balance Sheet as of March 30, 2002
a) Represents our unaudited condensed balance sheet as of March 30, 2002 as
presented in our Quarterly Report on Form 10-Q for the period then ended.
b) Represents the deconsolidation of Agrilink Foods. Subsequent to the
Transaction, we will use the equity method of accounting to account for our
investment in Holdings LLC.
c) Represents the first annual borrowing ($1.0 million) under the $5.0 million
Credit Facility available under the Credit Agreement between Agrilink Foods
and Pro-Fac and the related interest due. The Credit Agreement has a
five-year term. Interest is calculated at 10% compounded annually. We have
pledged our interest in Holdings LLC as security for repayment of the debt.
d) Represents the estimated benefit of administrative services to be provided
to us under the Transitional Services Agreement. Under the Transitional
Services Agreement, Agrilink Foods will provide us certain services for a
period of 24 months subsequent to closing. The value of these services is
currently estimated at $2.0 million.
e) As outlined in the Unit Purchase Agreement, we will receive common units
representing a 40.72% common ownership in Holdings LLC. In addition, as
part of the Transaction, certain amounts we owe Agrilink Foods will be
forgiven. As of March 30, 2002, the amounts to be forgiven were $21.9
million. Our fiscal 2002 results will reflect a goodwill impairment charge
of approximately $138 million (net of taxes) which results in a writedown
of our investment in Agrilink Foods.
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Pro-Fac Cooperative, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended March 30, 2002
(Dollars in Millions)
(b)
(a) Deconsolidation
Pro-Fac of Transaction
Historical Agrilink Foods, Inc. Adjustments Pro Forma
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Net sales $ 788.7 $ (788.7) $ 0.0 $ 0.0
Cost of sales (618.2) 618.2 0.0 0.0
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Gross profit 170.5 (170.5) 0.0 0.0
Selling, administrative and general expense (94.8) 94.8 (1.1) (c) (1.1)
Restructuring (2.6) 2.6 0.0 0.0
Gain from pension curtailment 2.5 (2.5) 0.0 0.0
Income from Great Lakes Kraut Company, LLC 1.8 (1.8) 0.0 0.0
Income from Termination Agreement 0.0 0.0 4.5 (d) 4.5
Income from Agrilink Holdings LLC 0.0 0.0 4.8 (e) 4.8
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Operating income 77.4 (77.4) 8.2 8.2
Interest expense (51.7) 51.7 (0.1) (f) (0.1)
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Pretax income before dividends, and allocation of net proceeds 25.7 (25.7) 8.1 8.1
Provision for taxes (7.7) 5.5 2.2 (g) 0.0
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Net income $ 18.0 $ (20.2) $ 10.3 $ 8.1
========== =========== ======== =========
Net income $ 18.0 $ (20.2) $ 10.3 $ 8.1
Dividends on common and preferred stock (6.4) 0.0 0.0 (6.4)
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Net proceeds/(deficit) 11.6 (20.2) 10.3 1.7
Allocation from/(to) earned surplus (5.1) 20.2 (16.8) (1.7)
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Net proceeds available to members $ 6.5 $ 0.0 $ (6.5) $ 0.0
========== =========== ======== ==========
See accompanying notes to unaudited pro forma consolidated statement of
operations.
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Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Nine Months Ended March 30, 2002
a) Represents our unaudited consolidated statement of operations for the
nine-month period ended March 30, 2002 as presented in our Quarterly Report
on Form 10-Q for the period then ended.
b) Represents the deconsolidation of Agrilink Foods. Subsequent to the
Transaction, we will use the equity method of accounting to account for our
investment in Holdings LLC.
c) Represents the total net of the following (dollars in millions):
The estimated value of administrative services to be provided by Agrilink Foods
under the Transition Services Agreement......................................... $ (0.8)
The estimated value of general operating expenses.................................. (0.3)
--------
$ (1.1)
========
d) As part of the Transaction, we entered into a Termination Agreement with
Agrilink Foods, providing for the termination of the Existing Marketing and
Facilitation Agreement and the payment, upon satisfaction of certain
ongoing conditions, of an annual termination fee to us. We have entered
into an Amended and Restated Marketing and Facilitation Agreement, which
supersedes and replaces the Existing Marketing and Facilitation Agreement
between us and Agrilink Foods. The Termination Agreement and the Amended
and Restated Marketing and Facilitation Agreement are effective as of the
date of the closing of the Transaction. The Termination Agreement calls for
the payment by Agrilink Foods to us, upon satisfaction of certain ongoing
conditions, of $10.0 million annually ($7.5 million for the nine-month
period) for the next five years as consideration for terminating the
Existing Marketing and Facilitation Agreement. The $10.0 million annual
payment will be recognized as both revenue and an elimination of our 40.72%
interest in Holdings LLC. Revenue of $4.5 million will be recognized for a
nine-month period representing our non-ownership interest in Holdings LLC.
The Amended and Restated Marketing and Facilitation Agreement is a ten-year
supply agreement under which we will be a preferred supplier to Agrilink
Foods.
e) As part of the Transaction, we will obtain common units representing a
40.72% common ownership in Holdings LLC. We will account for our investment
in Holdings LLC under the equity method of accounting. On an annual basis,
we will account for our share of the operating results of Holdings LLC.
f) Represents interest on the first annual borrowing ($1.0 million) under the
$5.0 million Credit Facility available under the Credit Agreement between
Agrilink Foods and Pro-Fac. The Credit Agreement has a five-year term.
Interest is calculated at 10% compounded annually. We have pledged our
interest in Holdings LLC as security for the debt.
g) Subsequent to the completion of the Transaction, we will seek to qualify
for exempt status as a farmers' cooperative under Section 521 of the
Internal Revenue Code. Exempt cooperatives are permitted to reduce or avoid
taxation through the use of special deductions (such as dividends paid on
its common and preferred stock). In addition, our net proceeds available to
members will be calculated on a tax basis of earnings.
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Pro-Fac Cooperative, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended June 30, 2001
(Dollars in Millions)
(b)
(a) Deconsolidation
Pro-Fac of Transaction
Historical Agrilink Foods, Inc. Adjustments Pro Forma
---------- -------------------- ----------- ---------
Net sales $ 1,177.3 $ (1,177.3) $ 0.0 $ 0.0
Cost of sales (956.2) 956.2 0.0 0.0
---------- ----------- ----------- ------------
Gross profit 221.1 (221.1) 0.0 0.0
Selling, administrative and general expense (136.4) 136.4 (1.5)(c) (1.5)
Revenue under Termination Agreement 0.0 0.0 5.9 (d) 5.9
Income from Agrilink Holdings LLC 0.0 0.0 0.9 (e) 0.9
Income from Great Lakes Kraut Company, LLC 1.8 (1.8) 0.0 0.0
---------- ----------- ----------- ------------
Operating income 86.5 (86.5) 5.3 5.3
Interest expense (85.1) 85.1 (0.1)(f) (0.1)
---------- ----------- ----------- ------------
Pretax income before dividends, and allocation of
net proceeds 1.4 (1.4) 5.2 5.2
Provision for taxes (0.9) 0.6 0.3 (g) 0.0
---------- ----------- ----------- ------------
Net income $ 0.5 $ (0.8) $ 5.5 $ 5.2
========== =========== =========== ============
Net income $ 0.5 $ (0.8) $ 5.5 $ 5.2
Dividends on common and preferred stock (8.1) 0.0 0.0 (8.1)
---------- ----------- ----------- ------------
Net (deficit)/proceeds (7.6) (0.8) 5.5 (2.9)
Allocation from/(to) earned surplus 7.6 0.8 (5.5) 2.9
---------- ----------- ------------ ------------
Net proceeds available to members $ 0.0 $ 0.0 $ 0.0 $ 0.0
========== =========== =========== ============
See accompanying notes to unaudited pro forma consolidated statement of
operations
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Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the Year Ended June 30, 2001
a) Represents our unaudited consolidated statement of operations for fiscal
year ended June 30, 2001 as presented in our Annual Report on Form 10-K for
the year then ended. These results have been reclassified in accordance
with the Financial Accounting Standards Board's Emerging Issues Task Force
("EITF") Issue No. 01-09, "Accounting for the Consideration Given by a
Vendor to a Customer or a Reseller of the Vendor's Products" which we
adopted in the first quarter of fiscal 2002. Accordingly, we have
reclassified promotions, slotting fees and coupon expense, previously
classified as selling, general and administrative expense as a reduction of
gross sales. The adoption of EITF 01-09 did not impact our profitability.
b) Represents the deconsolidation of Agrilink Foods. Subsequent to the
Transaction, we will use the equity method of accounting to account for our
investment in Holdings LLC.
c) Represents the total net of the following (dollars in millions):
The estimated value of administrative services to be provided by Agrilink Foods
under the Transition Services Agreement............................................ $ (1.0)
The estimated value of general operating expenses.................................. (0.5)
--------
$ (1.5)
========
d) As part of the Transaction, we entered into a Termination Agreement with
Agrilink Foods, providing for the termination of the Existing Marketing and
Facilitation Agreement and the payment, upon satisfaction of certain
ongoing conditions, of an annual termination fee to us. We have entered
into an Amended and Restated Marketing and Facilitation Agreement, which
supersedes and replaces the Existing Marketing and Facilitation Agreement
between us and Agrilink Foods. The Termination Agreement and the Amended
and Restated Marketing and Facilitation Agreement are effective as of the
date of the closing of the Transaction. The Termination Agreement calls for
the payment by Agrilink Foods to us, upon satisfaction of certain ongoing
conditions, of $10.0 million annually for the next five years as
consideration for terminating the Existing Marketing and Facilitation
Agreement. The $10.0 million annual payment will be recognized as both
revenue and an elimination of our 40.72% interest in Holdings LLC. Revenue
of $5.9 million will be recognized annually representing our non-ownership
interest in Holdings LLC. The Amended and Restated Marketing and
Facilitation Agreement is a ten-year supply agreement under which we will
be a preferred supplier to Agrilink Foods.
e) As part of the Transaction, we will obtain common units representing a
40.72% common ownership in Holdings LLC. We will account for our investment
in Holdings LLC under the equity method of accounting. On an annual basis,
we will account for our share of the operating results of Holdings LLC.
f) Represents interest on the first annual borrowing ($1.0 million) under the
$5.0 million Credit Facility available under the Credit Agreement between
Agrilink Foods and Pro-Fac. The Credit Agreement has a five-year term.
Interest is calculated at 10% compounded annually. We have pledged our
interest in Holdings LLC as security for the debt.
g) Subsequent to the completion of the Transaction, we will seek to qualify
for exempt status as a farmers' cooperative under Section 521 of the
Internal Revenue Code. Exempt cooperatives are permitted to reduce or avoid
taxation through the use of special deductions (such as dividends paid on
its common and preferred stock). In addition, our net proceeds available to
members will be calculated on a tax basis of earnings.
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(c) Exhibits
99.1 Form of Management Unit Subscription Agreement (filed herewith).
99.2 Unit Purchase Agreement dated June 20, 2002 among, Pro-Fac Cooperative, Inc., Agrilink Foods and
Vestar/Agrilink Holdings LLC (filed as Exhibit 2.1 to Pro-Fac's Current Report on Form 8-K filed
on June 21, 2002 and incorporated herein by reference).
99.3 Termination Agreement dated August 19, 2002 (filed herewith).
99.4 Amended and Restated Marketing and Facilitation Agreement dated August 19, 2002 between Pro-Fac
Cooperative, and Agrilink Foods, Inc. (filed herewith).
99.5 Transitional Services Agreement dated August 19, 2002 (filed herewith).
99.6 Credit Agreement dated August 19, 2002 between Pro-Fac Cooperative, Inc., as borrower, and
Agrilink Foods, Inc., as lender (filed herewith).
99.7 Securityholders Agreement dated August 19, 2002 among Agrilink Holdings LLC., Pro-Fac Cooperative,
Inc., Vestar/Agrilink Holdings LLC, and others, including Stephen R. Wright (filed herewith).
99.8 Limited Liability Company Agreement of Agrilink Holdings LLC dated August 19, 2002 among Agrilink
Holdings LLC, Pro-Fac Cooperative, Inc., Vestar/Agrilink Holdings LLC, and others, including
Stephen R. Wright (filed herewith).
99.9 Management Agreement dated August 19, 2002 among Agrilink Foods, Inc., Agrilink Holdings Inc. and
Vestar Capital Partners (filed herewith).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRO-FAC COOPERATIVE, INC.
Date: September 3, 2002 By: /s/ Earl L. Powers
-------------------------------------
Earl L. Powers,
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
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INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
99.1 Form of Management Unit Subscription Agreement (filed herewith).
99.2 Unit Purchase Agreement dated June 20, 2002 among, Pro-Fac Cooperative,
Inc., Agrilink Foods and Vestar/Agrilink Holdings LLC (filed as Exhibit 2.1
to Pro-Fac's Current Report on Form 8-K filed on June 21, 2002 and
incorporated herein by reference).
99.3 Termination Agreement dated August 19, 2002 (filed herewith).
99.4 Amended and Restated Marketing and Facilitation Agreement dated August 19,
2002 between Pro-Fac Cooperative, and Agrilink Foods, Inc. (filed
herewith).
99.5 Transitional Services Agreement dated August 19, 2002 (filed herewith).
99.6 Credit Agreement dated August 19, 2002 between Pro-Fac Cooperative, Inc.,
as borrower, and Agrilink Foods, Inc., as lender (filed herewith).
99.7 Securityholders Agreement dated August 19, 2002 among Agrilink Holdings
LLC., Pro-Fac Cooperative, Inc., Vestar/Agrilink Holdings LLC, and others,
including Stephen R. Wright (filed herewith).
99.8 Limited Liability Company Agreement of Agrilink Holdings LLC dated
August 19, 2002 among Agrilink Holdings LLC, Pro-Fac Cooperative, Inc.,
Vestar/Agrilink Holdings LLC, and others, including Stephen R. Wright
(filed herewith).
99.9 Management Agreement dated August 19, 2002 among Agrilink Foods, Inc.,
Agrilink Holdings Inc. and Vestar Capital Partners (filed herewith).
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STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as................................. 'SS'