UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 25, 2004
[ ] 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: 1-1790
DI GIORGIO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-0431833
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
380 Middlesex Avenue
Carteret, New Jersey 07008
(Address of principal executive offices) (Zip Code)
(732) 541-5555
(Registrant's Telephone Number, Including Area Code)
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 whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2 of the Exchange Act) Yes__ No_X
As of October 29, 2004, there were outstanding 78.1158 shares of Class A Common
Stock and 76.8690 shares of Class B Common Stock. The aggregate market value of
the voting and non-voting stock held by non-affiliates of the registrant is $0
because all voting and non-voting stock is held by affiliates of the registrant.
DI GIORGIO CORPORATION AND SUBSIDIARIES
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
December 27, 2003 and September 25, 2004 (Unaudited).................... 1
Consolidated Condensed Income Statements,
Thirteen Weeks and Thirty-nine Weeks Ended September 27, 2003
and September 25, 2004 (Unaudited)..................................... 2
Consolidated Condensed Statement of Stockholders' Equity,
Thirty-nine Weeks Ended September 25, 2004 (Unaudited).................. 3
Consolidated Condensed Statements of Cash Flows,
Thirty-nine Weeks Ended September 27, 2003 (Restated)
and September 25, 2004 (Unaudited)...................................... 4
Notes to Consolidated Condensed Financial Statements (Unaudited).......... 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .............................................. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk........... 12
Item 4. Controls and Procedures.............................................. 12
PART II. OTHER INFORMATION
Item 6. Exhibits............................................................ 13
Signatures ................................................................. 14
Di Giorgio Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(in thousands)
December 27, September 25,
2003 2004
(unaudited)
ASSETS
Current Assets:
Cash $ 10,367 $ 10,745
Accounts and notes receivable-net 109,738 113,594
Inventories 61,204 60,068
Deferred income taxes 2,205 2,058
Prepaid expenses 3,606 4,788
------- -------
Total current assets 187,120 191,253
--------- ---------
Property, Plant and Equipment
Cost 29,290 29,951
Accumulated depreciation and amortization (19,450) (21,295)
------- -------
Net 9,840 8,656
--------- ---------
Long-term notes receivable 11,082 7,902
Other assets 24,764 25,551
Deferred financing costs-net 1,886 1,829
Goodwill 68,893 68,893
--------- ---------
Total assets $ 303,585 $ 304,084
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving credit facility $12,880 $13,324
Accounts payable 67,896 67,194
Accrued expenses 30,652 36,174
Notes and leases payable within one year 64 68
------- -------
Total current liabilities 111,492 116,760
--------- ---------
Long-term debt 148,300 148,300
Capital lease liability 1,877 1,825
Other long-term liabilities 9,394 8,598
Stockholders' Equity:
Common stock -- --
Additional paid-in-capital 8,002 8,002
Retained earnings 24,520 20,599
--------- ---------
Total stockholders' equity 32,522 28,601
--------- ---------
Total liabilities & stockholders' equity $ 303,585 $ 304,084
========= =========
See Notes to Consolidated Condensed Financial Statements
-1-
Di Giorgio Corporation and Subsidiaries
Consolidated Condensed Income Statements
(in thousands)
(unaudited)
Thirteen weeks ended Thirty-nine weeks ended
Sept 27, Sept 25, Sept 27, Sept 25,
2003 2004 2003 2004
Revenue:
Net sales $ 391,582 $ 302,961 $ 1,175,030 $ 926,255
Other revenue 2,453 2,867 7,204 8,466
----------- ----------- ----------- -----------
Total revenue 394,035 305,828 1,182,234 934,721
Cost of products sold 352,788 270,760 1,060,426 824,549
----------- ----------- ----------- -----------
Gross profit-exclusive of warehouse expense
shown below 41,247 35,068 121,808 110,172
Warehouse expense 15,906 14,587 46,462 44,165
Transportation expense 7,774 7,019 23,167 20,668
Selling, general and administrative expense 7,799 7,925 24,122 25,243
----------- ----------- ----------- -----------
Operating income 9,768 5,537 28,057 20,096
Interest expense 3,699 3,802 11,228 11,383
Amortization-deferred financing costs 157 175 471 518
Other (income)-net (542) (903) (2,390) (2,400)
----------- ----------- ----------- -----------
Income before income taxes 6,454 2,463 18,748 10,595
Income tax expense 2,723 1,036 7,947 4,516
----------- ----------- ----------- -----------
Net income $ 3,731 $ 1,427 $ 10,801 $ 6,079
=========== =========== =========== ===========
See Notes to Consolidated Condensed Financial Statements
-2-
Di Giorgio Corporation and Subsidiaries
Consolidated Condensed Statement of Stockholders' Equity
(in thousands, except share data)
(unaudited)
Class A Common Stock Class B Common Stock Additional
-------------------- -------------------- Paid-in Retained
Shares Amount Shares Amount Capital Earnings Total
Balance at 78.1158 $-- 76.8690 $-- $8,002 $24,520 $32,522
December 27, 2003
Net income -- -- -- -- -- 6,079 6,079
Dividends -- -- -- -- -- (10,000) (10,000)
------ ---- ------ ---- ------ ------ ------
Balance at
September 25, 2004 78.1158 $-- 76.8690 $-- $8,002 $20,599 $28,601
====== ==== ====== ==== ====== ====== ======
See Notes to Consolidated Condensed Financial Statements
-3-
Di Giorgio Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(in thousands)
(unaudited)
Thirty-nine weeks ended
-----------------------
September 27, September 25,
2003 2004
(as restated
see note 4)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,801 $ 6,079
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization of fixed assets 1,672 1,684
Other amortization 1,803 635
Provision for doubtful accounts 375 375
Actuarially calculated pension expense 728 1,013
Gain on sale of equipment -- (18)
Deferred income taxes (528) (423)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable 3,795 (9,134)
Inventories 2,448 1,136
Prepaid expenses 82 (1,182)
Other assets (494) (1,737)
Increase (decrease) in:
Accounts payable 7,202 (702)
Accrued expenses and other liabilities 7,988 5,117
------ -----
Net cash provided by operating activities 35,872 2,843
------- -----
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to notes receivable (7,213) (4,988)
Collections of notes receivable 11,705 11,090
Proceeds from note participation sale -- 1,981
Additions to property, plant and equipment (718) (572)
Proceeds from sale of equipment -- 90
-- --
Net cash provided by investing activities 3,774 7,601
------ -----
CASH FLOWS FROM FINANCING ACTIVITIES
Net (repayments) borrowings under revolving line-of-credit (2,693) 444
Dividends paid (10,000) (10,000)
Financing fees paid -- (462)
Capital lease payments (45) (48)
---- ----
Net cash used in financing activities (12,738) (10,066)
-------- --------
Increase in cash 26,908 378
Cash at beginning of period 6,429 10,367
------ ------
Cash at end of period $ 33,337 $ 10,745
======== =======
Supplemental Disclosure of Cash Flow Information
Cash paid during the period:
Interest $ 7,533 $ 7,695
======= ======
Income taxes $ 5,262 $ 4,902
======= ======
Noncash additions to notes receivable $ 1,559 $ 1,201
======= ======
See Notes to Consolidated Condensed Financial Statements
-4-
DI GIORGIO CORPORATION AND SUBSIDIARIES
NOTES TO
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (UNAUDITED)
1. BASIS OF PRESENTATION
The consolidated condensed balance sheet as of September 25, 2004, the
consolidated condensed income statements for the thirty-nine weeks and the
thirteen weeks ended September 27, 2003 and September 25, 2004, the consolidated
condensed statement of stockholders' equity for the thirty-nine weeks ended
September 25, 2004, and the consolidated condensed statements of cash flows for
the thirty-nine weeks ended September 27, 2003 and September 25, 2004, and
related notes are unaudited and have been prepared in accordance with generally
accepted accounting principles for interim financial information and pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") have been omitted pursuant to such
rules and regulations. The accompanying unaudited interim consolidated condensed
financial statements and related notes should be read in conjunction with the
financial statements and related notes included in the Form 10-K/A for the
fiscal year ended December 27, 2003 (where the consolidated condensed balance
sheet as of December 27, 2003 has been derived) as well as the Form 10-Q/A for
the quarter ended March 27, 2004 and the Form 10-Q for the quarter ended June
26, 2004, as filed with the Securities and Exchange Commission. The information
furnished herein reflects, in the opinion of the management of the Company, all
adjustments, consisting of normal recurring accruals, which are necessary to
present a fair statement of the results for the interim periods presented.
The interim figures are not necessarily indicative of the results to be expected
for the full fiscal year. Certain reclassifications have been made to the prior
period financial statements in order to conform them to the current period
presentation.
-5-
2. PENSION BENEFITS
Net periodic costs for the thirteen and thirty-nine week periods ended September
27, 2003 and September 25, 2004 include the following components:
Thirteen Weeks Ended Thirty-nine Weeks Ended
-------------------- -----------------------
Sept 27, 2003 Sept 25, 2004 Sept 27, 2003 Sept 25, 2004
Service cost $ 262 $ 301 $ 785 $ 903
Interest cost 918 913 2,754 2,740
Expected return on plan assets (1,156) (1,181) (3,468) (3,544)
Amortization of prior service cost 5 5 15 15
Amortization of net (gain) / loss 214 300 642 899
--- --- --- ---
Net periodic benefit cost $ 243 $ 338 $ 728 $ 1,013
===== ===== ===== =======
Weighted-average assumptions used to determine
Net periodic benefit cost for years ended December 31 2003 2004
Discount rate 6.75% 6.25%
Expected long-term return on plan assets 8.25% 8.25%
Rate of compensation increase 6.00% 6.00%
Consistent with past practice, the Company expects to make a tax deductible
contribution to its defined benefit pension plan before the end of the fiscal
year. The range of the expected payment is $6.0 to $11.0 million. The exact
number will be determined by the appropriate discount rate in effect at the end
of the fiscal year as the Company estimates its accumulated benefit obligation
("ABO") and compares it to the fair market value of the plan assets ("FMV").
3. CONTINGENCIES
Legal Proceedings -- Various suits and claims arising in the ordinary course of
business are pending against the Company. In the opinion of management, these
matters are appropriately provided for and are not expected to materially affect
the Company's consolidated financial position, cash flows or results of
operations.
The Company has been named in various claims and litigation relating to
potential environmental problems. In the opinion of management, these claims are
either without merit, covered by insurance, adequately provided for, or not
expected to result in any material loss to the Company.
-6-
4. RESTATEMENT OF STATEMENT OF CASH FLOWS
On September 16, 2004 the Company filed a Form 10-K/A for the fiscal year ended
December 27, 2003 that disclosed that the Company had determined that certain
cash balances should not have been offset against other balances in the same
bank and that cash flows related to the loans provided by the Company to its
customers should be classified as investing activities rather than as operating
activities or financing activities in its statement of cash flows. As a result,
the accompanying consolidated condensed statement of cash flows for the
thirty-nine weeks ended September 27, 2003 has been restated from amounts
previously reported.
A summary of the significant effects of the restatement is as follows (in
thousands):
Thirty-nine weeks ended
September 27, 2003
As Previously
STATEMENT OF CASH FLOWS: Reported As Restated
- ------------------------ -------- ----------
Cash flows from operating activities:
Changes in assets and liabilities:
(increase) decrease in:
Accounts and notes receivable $ 5,287 $ 3,795
Long-term notes receivable 3,000 --
Increase (decrease) in:
Accounts payable 6,237 7,202
Net cash provided by operating activities 39,399 35,872
Cash flows from investing activities:
Additions to notes receivable -- (7,213)
Collections of notes receivable -- 11,705
Net cash (used in) provided by investing activities (718) 3,774
Increase in cash 25,943 26,908
Cash at beginning of period 629 6,429
---- -----
Cash at end of period $ 26,572 $ 33,337
======== ========
Supplemental disclosure of cash flow information:
Non cash changes to notes receivable $ -- $ 1,559
==== ========
-7-
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward- Looking Statements
Forward-looking statements in this Form 10-Q include, without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These statements may be identified by the use of words like "plans", "expects"
"aims" "believes", "projects" "anticipates", "intends" "estimates" "will" "
should" "could" and other expressions that indicate future events and trends.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or achievement
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. These
factors include, among others, the following: general economic and business
conditions and those in particular in the New York City metropolitan area; the
Company's reliance on several significant customers; potential losses from loans
to its retailers; restrictions imposed by the documents governing the Company's
indebtedness; current wholesale competition, as well as future competition from
presently unknown sources; competition in the retail segment of the supermarket
business; the Company's labor relations; potential environmental liabilities
which the Company may incur; dependence on key personnel; business abilities and
judgment of personnel; changes in, or failure to comply with government
regulations; potential commercial vehicle restrictions; inflation, especially
with respect to wages and energy costs; and the effects of terrorism or
terrorist acts against the Company.
General
As previously announced, the Company ceased doing business with the Great
Atlantic & Pacific Tea Company ("A&P") in October 2003. While the Company has
reduced expenses to help compensate for the reduced sales, the loss of this
business will continue to have a negative impact on earnings when compared to
prior periods. Sales to A&P were $276.4 million in the first three fiscal
quarters of 2003. The loss of these sales was partially offset by increased
sales to a new group of customers in the Philadelphia area that the Company
began servicing in the second quarter of 2003.
Results of Operations
Thirteen weeks ended September 25, 2004 and September 27, 2003
Net sales for the thirteen weeks ended September 25, 2004 decreased $88.6
million to $303.0 million from $391.6 million in the prior period. Excluding
sales of $89.9 million to A&P during the 2003 period, sales increased $.9
million in the current period. Other revenue, consisting of recurring customer
related services, increased to $2.9 million for the thirteen weeks ended
September 25, 2004 as compared to $2.5 million in the prior period due to modest
growth in other services provided to customers.
-8-
Gross margin increased to 11.6% of net sales or $35.1 million for the thirteen
weeks ended September 25, 2004, as compared to 10.5% of net sales or $41.2
million for the prior period reflecting a change in mix of both customers and
products sold and increased other revenue from frozen warehousing services.
Factors such as changes in customer mix, changes in manufacturers' promotional
activities, changes in product mix, or competitive pricing pressures may have an
effect on gross margin. It is uncertain that the improvement in gross margin
realized in this quarter will continue. Caution should be taken when comparing
the Company's gross margin to that of other companies because other companies,
while still complying with GAAP, may characterize income and expenses
differently.
Warehouse expense increased as a percentage of net sales to 4.8% of net sales or
$14.6 million for the thirteen weeks ended September 25, 2004, as compared to
4.1% of net sales or $15.9 million in the prior period, primarily as a result of
fixed costs being compared to lower overall sales. In addition, rent expense
increased $.2 million in the current period as compared to the prior period as a
result of increased outside storage and occupancy costs related to the Company's
specialty food division. The Company plans to eliminate a portion of these
expenses in early 2005 as it integrates these operations into its expanded dry
grocery warehouse, which should be completed late in the fourth quarter of 2004.
Transportation expense increased as a percentage of net sales to 2.3% of net
sales or $7.0 million for the thirteen weeks ended September 25, 2004 as
compared to 2.0% of net sales or $7.8 million in the prior period, primarily as
a result of fixed costs being compared to lower overall sales. In addition, due
to a 47% rise in the average price per gallon for diesel fuel in the current
period as compared to the prior period, diesel expense increased $.1 million
even though fewer gallons were purchased in the current period due to the lost
A&P business.
Selling, general and administrative expense increased to 2.6% of net sales or
$7.9 million for the thirteen weeks ended September 25, 2004 as compared to 2.0%
of net sales or $7.8 million in the prior period as a result of fixed costs
being compared to lower overall sales, additional expenses including salaries of
$.4 million related to the Company's newest distribution operations (specialty
foods and Puerto Rico), and additional pension expense of $.1 million as
compared to the prior period. These additional expenses were partially offset by
a recoupment of prior transaction related expenses of $.5 million.
Net income for the thirteen weeks ended September 25, 2004 was $1.4 million as
compared to net income of $3.7 million in the prior period.
Thirty-nine weeks ended September 25, 2004 and September 27, 2003
Net sales for the thirty-nine weeks ended September 25, 2004 decreased $248.8
million to $926.3 million from $1,175.0 million in the prior period. Excluding
sales of $276.4 million to A&P during the 2003 period, sales increased 3.5% in
the current period mostly as a result of sales to the new customers discussed
above. Other revenue, consisting of recurring customer related services,
increased to $8.5 million for the thirty-nine weeks ended September 25, 2004 as
compared to $7.2 million in the prior period, primarily as a result of increased
storage and warehousing services provided by the Company to a national
manufacturer which accounted for $.9 million of the increased other revenue in
the current period.
-9-
Gross margin increased to 11.9% of net sales or $110.2 million for the
thirty-nine weeks ended September 25, 2004, as compared to 10.4% of net sales or
$121.8 million for the prior period reflecting a change in mix of both customers
and products sold and increased other revenue from frozen warehousing services.
Factors such as changes in customer mix, changes in manufacturers' promotional
activities, changes in product mix, or competitive pricing pressures may have an
effect on gross margin. It is uncertain that the improvement in gross margin
realized in this period will continue. Caution should be taken when comparing
the Company's gross margin to that of other companies because other companies,
while still complying with GAAP, may characterize income and expenses
differently.
Warehouse expense increased as a percentage of net sales to 4.8% of net sales or
$44.2 million for the thirty-nine weeks ended September 25, 2004, as compared to
4.0% of net sales or $46.5 million in the prior period, primarily as a result of
fixed costs being compared to lower overall sales. In addition, rent expense for
the thirty-nine weeks ended September 25, 2004 increased approximately $.7
million as a result of increased outside storage and occupancy costs related to
the Company's specialty food division.
Transportation expense increased as a percentage of net sales to 2.2% of net
sales or $20.7 million for the thirty-nine weeks ended September 25, 2004 as
compared to 2.0% of net sales or $23.2 million in the prior period, primarily as
a result of fixed costs being compared to lower overall sales.
Selling, general and administrative expense increased to 2.7% of net sales or
$25.2 million for the thirty-nine weeks ended September 25, 2004 as compared to
2.1% of net sales or $24.1 million in the prior period as a result of fixed
costs being compared to lower overall sales, additional expenses including
salaries of $1.2 million related to the Company's newest distribution operations
and additional pension expense of $.3 million as compared to the prior period.
These additional expenses were partially offset by a recoupment of prior
transaction expenses of $.5 million
Net income for the thirty-nine weeks ended September 25, 2004 was $6.1 million
as compared to net income of $10.8 million in the prior period.
EBITDA was $24.3 million for the thirty-nine weeks ended September 25, 2004 as
compared to $33.5 million in the prior period. While the loss of A&P was the
primary reason for the decline, the Company also incurred $1.7 million in
operating losses attributable to its newest distribution operations.
Reconciliation of EBITDA to net income (in thousands):
Thirty-nine weeks ended
Sept 25, 2004 Sept 27, 2003
EBITDA $24,297 $33,451
Less: depreciation and
amortization of fixed assets 1,684 1,672
Less: other amortization 635 1,803
Less: interest expense 11,383 11,228
Less: income tax provision 4,516 7,947
-------- --------
Net income $ 6,079 $10,801
====== =======
-10-
The Company has presented EBITDA supplementally because management believes this
information enables management, investors, and others readers to evaluate and
compare, from period to period, the Company's results from ongoing operations in
a more meaningful and consistent manner. We believe net income is the most
closely comparable GAAP measure as opposed to cash flow from operations. Similar
to net income, management uses EBITDA as a measure of the performance of our
operations without the vagaries of fluctuations in working capital that cash
flow from operations would have. Management also uses the EBITDA results when
making operating decisions that require additional resources and as a basis for
certain calculations for compensation programs. We believe that the relevant
statistic for our business to measure liquidity is our working capital plus our
availability under our existing line of credit, both of which are disclosed in
our liquidity discussion under Liquidity and Capital Resources below.
Liquidity and Capital Resources
Cash flows from operations, cash on hand, and amounts available under the
Company's $90 million bank credit facility are the Company's principal sources
of liquidity. The Company's bank credit facility is scheduled to mature on
February 1, 2007. The Company believes that cash flows from operations and
amounts available under the bank credit facility will be adequate to meet its
anticipated working capital needs, capital expenditures, dividend payments, if
any, and debt service requirements during the next twelve months, as well as any
investments the Company may make.
There were $13.3 million of borrowings under the Company's revolving bank credit
facility (excluding $6.0 million of outstanding letters of credit) at September
25, 2004. The Company had additional borrowing capacity of $73.4 million
available at that time under the Company's then current borrowing base
availability certificate. The Company's bank credit facility bears interest at a
rate per annum equal to (at the Company's option): (i) the Euro dollar offering
rate plus 1.625% or (ii) the lead bank's prime rate.
During the thirty-nine weeks ended September 25, 2004, cash flows provided by
operating activities were approximately $2.8 million, consisting primarily of
cash generated from income before non-cash expenses of $9.3 million and an
increase in accrued expenses and other liabilities of $5.1 million and a
decrease in inventory of $1.1 million, offset by (i) an increase in accounts
receivable of $9.1 million; (ii) an increase in prepaid expenses of $1.2
million, (iii) a decrease in accounts payable of $.7 million and (iv) an
increase in other assets of $1.7 million.
Cash flows provided by investing activities during the thirty-nine weeks ended
September 25, 2004 were approximately $7.6 million consisting of $11.1 million
of note receivable collections, $2.0 million of proceeds from note participation
sales and $.1 million from proceeds from the sale of excess trailers offset by
$5.0 million of new notes receivable and $.6 million for capital expenditures.
Net cash used in financing activities of approximately $10.1 million consisted
primarily of a $10.0 million dividend paid, and $.5 million of financing fees
paid offset by $.4 million of borrowings under the bank credit facility.
-11-
The consolidated indebtedness of the Company increased to $163.5 million at
September 25, 2004 as compared to $163.1 million at December 27, 2003 and
stockholders' equity decreased to $28.6 million at September 25, 2004 as
compared to $32.5 million at December 27, 2003 primarily as a result of the
$10.0 million dividend paid March 31, 2004.
Consistent with past practice, the Company expects to make a tax deductible
contribution to its defined benefit pension plan before the end of the fiscal
year. The range of the expected payment is $6.0 to $11.0 million. The exact
number will be determined by the appropriate discount rate in effect at the end
of the fiscal year as the Company estimates its ABO and compares it to FMV.
As previously reported, the Company anticipates that it will begin occupying the
160,000 square foot dry grocery warehouse expansion late in the fourth quarter
of 2004. Expected annual rent costs are approximately $1.2 million which should
be partially offset by a reduction in short term rent expense of public
warehouse space and improved productivity. The Company expects to spend
approximately $1.3 million in leasehold improvements related to the expansion.
Under the terms of the Company's bank credit facility, the Company is required
to meet certain financial tests, including minimum interest coverage ratios. As
of September 25, 2004, the Company was in compliance with its covenants.
From time to time when the Company considered market conditions attractive, the
Company has purchased, and may in the future purchase its notes on the open
market and retire a portion of its public debt.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There were no material changes in market risk for the Company in the period
covered by this report. See our Annual Report on Form 10-K/A for the year ended
December 27, 2003 for a discussion of market risk for the Company.
Item 4. Controls and Procedures
As of the end of the period covered by this report, an evaluation was performed
with the participation of the Company's management, including the Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(c) and
15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that
evaluation, the Company's management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company's disclosure controls and
procedures were effective as of September 25, 2004. The Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
evaluated the Company's internal control over financial reporting to determine
whether any changes occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Based on that evaluation,
there have been no such changes during the quarter covered by this quarterly
report.
-12-
II-OTHER INFORMATION
Item 6. Exhibits
(a) 31.1 - Certification of the Chief Executive Officer pursuant to
Section 302 of the Sarbanes Oxley Act of 2002. Filed herewith.
31.2- Certification of the Chief Financial Officer pursuant to Section
302 of the Sarbanes Oxley Act of 2002. Filed herewith.
32.1 - Certification of Chief Executive Officer and Chief Financial
Officer of Di Giorgio Corporation Pursuant to 18 U. S.C. Section 1350.
-13-
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.
DI GIORGIO CORPORATION
By: /s/ Richard B. Neff
----------------------------------
Richard B. Neff
Co-Chairman and Chief
Executive Officer
By: /s/ Stephen R. Bokser
----------------------------------
Stephen R. Bokser
Co-Chairman, President, and Chief
Operating Officer
By: /s/ Lawrence S. Grossman
--------------------------
Lawrence S. Grossman
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: November 8, 2004
-14-