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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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Form 10-Q
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(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
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 0-20539
PRO-FAC COOPERATIVE, INC.
(Exact Name of Registrant as Specified in its Charter)
New York 16-6036816
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
350 Linden Place, PO Box 30682, Rochester, NY 14603-0682
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (585) 218-4210
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 twelve 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
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Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
YES NO X
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date. As of November 8, 2004.
Common Stock - 1,833,738
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Page 1 of 18 Pages
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Pro-Fac Cooperative, Inc.
Condensed Statements of Operations, Allocation of Net Income/(Loss) and
Comprehensive Income/(Loss)
(Unaudited)
(Dollars in Thousands)
Three Months Ended
----------------------------------
September 25, September 27,
2004 2003
---- ----
Net sales $ 0 $ 0
Cost of sales 0 0
------- -------
Gross profit 0 0
Equity in loss of Birds Eye Holdings LLC (2,622) (621)
Gain from transaction with Birds Eye Foods, Inc. and related agreements 2,380 2,491
Commercial market value adjustment 0 449
Selling, administrative, and general expense (305) (258)
Legal matters and settlement expenses (36) (194)
Other income 51 0
------- -------
Operating income/(loss) (532) 1,867
Interest income 12 3
Interest expense (25) (11)
------- -------
Net income/(loss) $ (545) $ 1,859
======= =======
Allocations of net income/(loss):
Net income/(loss) $ (545) $ 1,859
Dividends on preferred stock (2,102) (2,024)
------- -------
Net deficit (2,647) (165)
Allocation to accumulated deficit 2,647 165
------- -------
Net income/(loss) available to members $ 0 $ 0
======= =======
Net income/(loss) $ (545) $ 1,859
Other comprehensive income/(loss):
Unrealized gain/(loss) on hedging activity of equity investee 59 (211)
------- -------
Comprehensive income/(loss) $ (486) $ 1,648
======= =======
The accompanying notes are an integral part of these condensed financial
statements.
2
Pro-Fac Cooperative, Inc.
Condensed Balance Sheets
(Unaudited)
(Dollars in Thousands)
ASSETS
September 25, June 26,
2004 2004
---- ----
Current assets:
Cash and cash equivalents $ 2,288 $ 3,394
Accounts receivable, trade 2,740 1,343
Accounts receivable from Birds Eye Foods, Inc. 16,657 7,783
Current portion of Transitional Services receivable from Birds Eye Foods, Inc. 0 71
Prepaid expenses and other current assets 62 10
--------- ---------
Total current assets 21,747 12,601
Fixed assets, net 18 0
Investment in Birds Eye Holdings LLC 17,314 21,497
--------- ---------
Total assets $ 39,079 $ 34,098
========= =========
LIABILITIES AND SHAREHOLDERS' AND MEMBERS' CAPITALIZATION
Current liabilities:
Accounts payable $ 75 $ 457
Accrued interest 6 86
Other accrued expenses 96 833
Amounts due members 20,845 12,077
--------- ---------
Total current liabilities 21,022 13,453
Long-term debt 1,000 1,000
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Total liabilities 22,022 14,453
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Commitments and contingencies
Class B cumulative redeemable preferred stock, liquidation preference $10 per
share; authorized - 500,000 shares; issued and
outstanding 12,109 shares 108 108
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Common stock, par value $5, authorized - 5,000,000 shares; issued
and outstanding 1,833,738 shares 9,169 9,169
--------- ---------
Shareholders' and members' capitalization:
Retained earnings allocated to members 9,793 9,793
Non-cumulative preferred stock, par value $25, authorized
5,000,000 shares; issued and outstanding 28,297 shares 707 707
Class A cumulative preferred stock, liquidation preference
$25 per share, authorized 10,000,000 shares; issued and
outstanding 4,789,575 shares 119,741 119,741
Special membership interests 21,733 21,733
Accumulated deficit (139,559) (136,912)
Accumulated other comprehensive (loss)/income:
Unrealized gain/(loss) on hedging activity of equity investee 148 89
Minimum pension liability adjustment of equity investee (4,783) (4,783)
--------- ---------
Total shareholders' and members' capitalization 7,780 10,368
--------- ---------
Total liabilities and shareholders' and members' capitalization $ 39,079 $ 34,098
========= =========
The accompanying notes are an integral part of these condensed financial
statements.
3
Pro-Fac Cooperative, Inc.
Condensed Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
Three Months Ended
----------------------------------
September 25, September 27,
2004 2003
---- ----
Cash Flows from Operating Activities:
Net income/(loss) $ (545) $ 1,859
Adjustments to reconcile net income/(loss) to net cash used in operating
activities:
Amortization of transition service receivable 71 132
Depreciation 1 0
Gain from transaction with Birds Eye Foods, Inc. and related agreements (2,380) (2,491)
Equity in loss of Birds Eye Holdings LLC 2,622 621
Change in assets and liabilities:
Accounts receivable (10,271) 0
Accounts payable and other accrued expenses (1,199) (1,303)
Amounts due members 8,768 119
Other assets and liabilities, net (52) (69)
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Net cash used in operating activities (2,985) (1,132)
-------- -------
Cash Flows from Investing Activities:
Proceeds from Termination Agreement with Birds Eye Foods, Inc. 4,000 4,000
Purchase of property, plant and equipment (19) 0
Proceeds from investment in CoBank 0 14
-------- -------
Net cash provided by investing activities 3,981 4,014
-------- -------
Cash Flows from Financing Activities:
Payments on long-term debt 0 (200)
Repurchases of common stock, net 0 (41)
Cash dividends paid (2,102) (2,024)
-------- -------
Net cash used in financing activities (2,102) (2,265)
-------- -------
Net change in cash and cash equivalents (1,106) 617
Cash and cash equivalents at beginning of period 3,394 367
-------- -------
Cash and cash equivalents at end of period $ 2,288 $ 984
======== =======
The accompanying notes are an integral part of these condensed financial
statements.
4
PRO-FAC COOPERATIVE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Description of Business: Pro-Fac Cooperative, Inc. ("Pro-Fac" or the
"Cooperative") is a New York agricultural cooperative corporation operating in
one segment, the marketing of crops grown by its members.
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, Birds Eye Foods, Inc. ("Birds Eye Foods"), at
the time a New York corporation and a wholly-owned subsidiary of Pro-Fac, and
Vestar/Agrilink Holdings LLC, a Delaware limited liability company
("Vestar/Agrilink Holdings"):
(i) Pro-Fac contributed to the capital of Birds Eye Holdings LLC, a Delaware
limited liability company ("Holdings LLC"), all of the shares of Birds Eye
Foods common stock owned by Pro-Fac, constituting 100 percent of the issued
and outstanding shares of Birds Eye Foods capital stock, in consideration
for Class B common units of Holdings LLC, representing a 40.72 percent
common equity ownership at the Closing Date; 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 and Class A common
units and warrants to acquire additional Class A common units, which
warrants were immediately exercised, representing, at the Closing Date,
56.24 percent of the common equity of Holdings LLC, inclusive of the
additional Class A common units issued to Vestar upon its exercise of the
warrants. The co-investors are either under common control with, or have
delivered an unconditional voting proxy to, Vestar. 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
thereof to one vote for each common unit held. Accordingly, Vestar has a
voting majority of all common units.
Immediately following Pro-Fac's contribution of its shares of Birds Eye Foods
common stock to Holdings LLC, Holdings LLC contributed those shares to Birds Eye
Holdings, Inc., ("Holdings Inc.") a Delaware corporation and a direct,
wholly-owned subsidiary of Holdings LLC. As a result, Birds Eye Foods became an
indirect, wholly-owned subsidiary of Holdings LLC.
The transactions consummated pursuant to the Unit Purchase Agreement are
referred to herein collectively as the "Transaction."
As a result of the Transaction, Pro-Fac no longer reports its financial
statements on a consolidated basis with that of Birds Eye Foods. As outlined
above, Pro-Fac owns Class B common units of Holdings LLC. Subsequent to the
Transaction, Pro-Fac accounts for its investment in Holdings LLC under the
equity method of accounting.
See NOTE 2 to the "Notes to Condensed Financial Statements" for additional
disclosures regarding agreements with Birds Eye Foods.
Basis of Presentation: The accompanying unaudited condensed financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP") for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information required by GAAP for
complete annual financial statement presentation. Accounting for the
Cooperative's investment in Holdings LLC is based upon financial information
provided by Holdings LLC. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of the results of operations have been included. Operating results
for the period ended September 25, 2004 are not necessarily indicative of the
results to be expected for other interim periods or the full year. These
financial statements should be read in conjunction with the consolidated
financial statements and accompanying notes contained in the Pro-Fac
Cooperative, Inc. Form 10-K for the fiscal year ended June 26, 2004.
Fixed Assets, net: Fixed assets, which consist of office and computer equipment,
are recorded at cost. Depreciation is provided using the straight-line method
over the estimated useful lives of the related assets, which range from 5 to 7
years.
5
Commercial Market Value Adjustment: At its January 2003 board meeting, in an
action aimed at improving the Cooperative's short-term liquidity, the Board of
Directors of Pro-Fac decided to deduct one (1) percent of the commercial market
value ("CMV") otherwise payable to Pro-Fac's member-growers for crops supplied
by Pro-Fac member-growers through the Cooperative for the 2002 and 2003 growing
seasons. The one (1) percent CMV deduction was withheld from the July 2003 and
the July 2004 CMV payments. The Board of Directors of Pro-Fac will consider
annually whether similar action should be taken with respect to CMV payable to
Pro-Fac's member-growers for subsequent growing seasons based on Pro-Fac's
operations and anticipated cash flow needs.
Equity Method of Accounting: Pro-Fac accounts for its investment in Holdings LLC
under the equity method of accounting. Under the equity method of accounting,
Pro-Fac records its share of the earnings or loss of Holdings LLC available to
common unit holders based on its ownership percentage. The earnings or loss of
Holdings LLC available to common unit holders is adjusted by subtracting the
preferred return on Holdings LLC's preferred units and the accretion there on
and adding the expense recorded by Holdings LLC related to termination payments,
as described below. Pro-Fac's share of these earnings or losses is reflected as
"Equity in income/(loss) of Birds Eye Holdings LLC" on Pro-Fac's Statement of
Operations. The "Investment in Birds Eye Holdings LLC" on Pro-Fac's balance
sheet is also increased for earnings of Holdings LLC and decreased for losses of
Holdings LLC.
Pro-Fac also records its share, based on its ownership percentage, of the change
in Holdings LLC's other comprehensive income/(loss) items including minimum
pension liabilities and unrealized holding gains and losses on hedging
transactions. These changes are reflected as increases, if income, or decreases,
if a loss, in the "Investment in Birds Eye Holdings LLC" and the equity of
Pro-Fac and are also included in determining Pro-Fac's comprehensive
income/(loss).
Also under the equity method, Pro-Fac records a portion of termination payments
received as a result of the Transaction as "Gain from transaction with Birds Eye
Foods, Inc. and related agreements" on Pro-Fac's statement of operations. The
portion of termination payments recorded in the statement of operations is based
on the percentage of Birds Eye Foods indirectly owned by Vestar and unrelated
parties which is currently approximately 59.5%. The remaining portion of
termination payments received, currently approximately 40.5%, is recorded as a
reduction in Pro-Fac's investment in Holdings LLC because of Pro-Fac's
continuing ownership interest in Holdings LLC.
The following schedule sets forth summarized financial information of Holdings
LLC for the periods indicated (dollars in thousands):
Three Months Ended
-----------------------------------------
September 25, September 27
2004 2003(1)
---- ----
Net sales $ 177,344 $ 189,667
Gross profit 34,354 41,254
(Loss)/income from continuing operations (213) 2,810
Net (loss)/income (213) 2,882
(1) During fiscal 2004 Birds Eye Foods, a subsidiary of Holdings LLC, sold
certain businesses. These businesses are classified as discontinued and
their operations are therefore, excluded from continuing operations. The
information for the three months ended September 27, 2003 has been
reclassified to reflect the discontinuance of these operations.
Holdings LLC has $137.5 million of preferred units which accrue a preferred
return at the rate of 15 percent per annum compounded quarterly, based on a 360
day year. The preferred units are subject to redemption at the option of at
least a majority of the preferred unitholders upon an initial public offering of
Holdings LLC or any subsidiary, upon the sale of Holdings LLC or after August
19, 2010. The preferred units may also be redeemed at the option of Holdings LLC
after August 19, 2005 at a premium. At the time of issuance of the preferred
units, $3.9 million in fees were charged against the proceeds. Holdings LLC is
accreting the preferred units up to their redemption value through transfers
from retained earnings using the effective interest method to the date of
earliest redemption. At September 25, 2004, Pro-Fac owned 40.49 percent of the
remaining common equity interest in Holdings LLC. The preferred return on
Holdings LLC's preferred units and the accretion thereon and expense related to
termination payments, aggregating $6.3 million, net, and $4.4 million, net, for
the three months ended September 25, 2004 and the three months ended September
27, 2003, respectively, are taken into account in determining Pro-Fac's share of
the earnings of Holdings LLC under the equity method of accounting.
6
NOTE 2. AGREEMENTS WITH BIRDS EYE FOODS
In connection with the Transaction, Birds Eye Foods and Pro-Fac entered into
several agreements effective as of the Closing Date, including the following:
Termination Agreement: Pro-Fac and Birds Eye Foods entered into a letter
agreement dated as of the Closing Date (the "Termination Agreement"), pursuant
to which, among other things, the marketing and facilitation agreement between
Pro-Fac and Birds Eye Foods (the "Marketing and Facilitation Agreement") was
terminated and, in consideration of such termination, Birds Eye Foods agreed to
pay Pro-Fac a termination fee of $10.0 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. The $10.0 million
payment is payable to the Cooperative in quarterly installments as follows: $4.0
million on each July 1, and $2.0 million each on October 1, January 1, and April
1.
Payments under the Termination Agreement are considered additional consideration
related to the Transaction. Accordingly, the portion of the payments received
under the Termination Agreement related to Pro-Fac's continuing ownership
percentage are recorded as a reduction of Pro-Fac's investment in Holdings LLC.
The remaining portion of the payments is recognized as additional gain on the
transaction with Birds Eye Foods in the period it is received. Accordingly, in
the first quarter of fiscal 2005 and fiscal 2004, Pro-Fac recognized
approximately $2.4 million and $2.5 million, respectively, as additional gain
from the receipt of termination payments.
Transitional Services Agreement: Pro-Fac and Birds Eye Foods entered into a
transitional services agreement (the "Transitional Services Agreement") dated as
of the Closing Date, pursuant to which Birds Eye Foods agreed to provide Pro-Fac
certain administrative and other services for a period of 24 months from the
Closing Date. Pursuant to its terms, the Transitional Services Agreement
terminated on August 19, 2004. Under the Transitional Services Agreement, the
general manager of Pro-Fac was also an employee of Birds Eye Foods, reporting to
the Chief Executive Officer of Birds Eye Foods with respect to his duties for
Birds Eye 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 were employees of Birds Eye Foods and
reported to the Chief Executive Officer or other representatives of Birds Eye
Foods. Stephen R. Wright, who was the General Manager and Secretary of Pro-Fac
in 2004, was an employee of Birds Eye Foods until August 19, 2004. As an
employee of Birds Eye Foods, Mr. Wright's salary was paid by Birds Eye Foods.
Effective August 19, 2004, Mr. Wright and two other individuals previously
employed by Birds Eye Foods and providing services to Pro-Fac under the
Transitional Services Agreement became employees of Pro-Fac. Accordingly, for
the approximate five week period ended September 25, 2004, the salaries and
benefits of Mr. Wright and other Pro-Fac employees were paid by and expenses of
Pro-Fac.
In fiscal 2003, Pro-Fac recorded the estimated value of these services, $1.0
million, as services receivable and proceeds from the Transaction, prior to
elimination of 40.72 percent of the amount of Pro-Fac's investment in Holdings
LLC. This estimated value of the services received by the Cooperative was
amortized to expense over the term of the Transitional Services Agreement.
Gain from Transaction with Birds Eye Foods: As a result of the agreements
described above, based on the approximate 40.49 percent common equity ownership,
the Cooperative recognized a total gain in the first quarter of fiscal 2005 and
fiscal 2004 of approximately $2.4 million and $2.5 million, respectively.
7
Amended and Restated Marketing and Facilitation Agreement: Pro-Fac and Birds Eye
Foods are parties to 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 provides that, among other things, Pro-Fac will be Birds Eye Foods'
preferred supplier of crops. Pursuant to the Amended and Restated Marketing and
Facilitation Agreement, Birds Eye Foods buys crops from Pro-Fac grown by
Pro-Fac's members. Birds Eye Foods pays Pro-Fac the CMV of the crops supplied in
installments corresponding to the dates payment is made by Pro-Fac to its
members for the delivered crops. CMV is defined as the weighted average price
paid by other commercial processors for similar crops sold under preseason
contracts and in the open market in the same or competing market areas. Birds
Eye Foods makes 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 of Pro-Fac meet with Birds Eye Foods management to
establish CMV or receivable guidelines, review calculations, and report to a
joint CMV committee of Pro-Fac and Birds Eye Foods. The Amended and Restated
Marketing and Facilitation Agreement also provides that Birds Eye Foods will
provide 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, Birds
Eye 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 Birds Eye Foods' incremental and out-of-pocket
expenses related to providing such services as agreed to by Pro-Fac and Birds
Eye Foods).
Under the Amended and Restated Marketing and Facilitation Agreement, Birds Eye
Foods determines the amount of crops which Birds Eye Foods will acquire from
Pro-Fac for each crop year. If the amount to be purchased by Birds Eye Foods
during a particular crop year does not meet (i) a defined crop amount or (ii) a
defined target percentage of Birds Eye Foods' needs for each particular crop,
then certain shortfall payments will be made by Birds Eye Foods to Pro-Fac. The
defined crop amounts and targeted percentages were set based upon the needs of
Birds Eye Foods in the 2002 crop year (fiscal 2003). The shortfall payment
provisions of the agreement include a maximum shortfall payment, determined for
each crop, that can be paid over the term of the Amended and Restated Marketing
and Facilitation Agreement. The aggregate shortfall payment amounts for all
crops covered under the agreement cannot exceed $20.0 million over the term of
the agreement.
Unless terminated earlier, the Amended and Restated Marketing and Facilitation
Agreement will continue in effect until August 19, 2012. Birds Eye Foods may
terminate the Amended and Restated Marketing and Facilitation Agreement prior to
August 19, 2012 upon the occurrence of certain events, including in connection
with a change in control transaction affecting Birds Eye Foods or Holdings Inc.
However, in the event Birds Eye Foods terminates the Amended and Restated
Marketing and Facilitation Agreement as a result of a change in control
transaction within three years of the Closing Date, Birds Eye Foods must pay
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, Birds Eye Foods sells one or more portions of its
business, and if the purchaser does not continue to purchase the crops
previously purchased by Birds Eye Foods with respect to the transferred
business, then such failure will be taken into consideration when determining if
Birds Eye Foods is required to make any shortfall payments to Pro-Fac. After
such three-year period, Birds Eye Foods may sell portions of its business and
the volumes of crop purchases previously made by Birds Eye Foods with respect to
such transferred business will be disregarded for purposes of determining
shortfall payments.
NOTE 3. DEBT
Credit Agreement: Birds Eye Foods and Pro-Fac entered into a Credit Agreement,
dated August 19, 2002 (the "Credit Agreement"), pursuant to which Birds Eye
Foods 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 draw up
to $1.0 million per year under the Credit Facility, unless Birds Eye Foods is
prohibited from making such advances under the terms of certain third party
indebtedness of Birds Eye Foods. Pro-Fac elected not to borrow $1.0 million
which was available during the second year of the Credit Agreement, reducing the
maximum amount which may be borrowed to $4.0 million. 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 pledged all of its Class B common units in Holdings
LLC as security for advances under the Credit Facility. Advances outstanding
under the Credit Agreement bear interest at 10 percent per annum. Amounts
borrowed and accrued interest are required to be paid only upon sale of
Pro-Fac's ownership interest in Holdings LLC or receipt of a distribution from
Holdings LLC in connection the sale or liquidation of all or substantially all
of the assets of Holdings LLC or one of more of its subsidiaries. Pro-Fac may
voluntarily repay amounts borrowed and interest at any time. As of September 25,
2004 and June 26, 2004, the principal amount outstanding under the Credit
Facility was $1.0 million.
8
Line of Credit : The Cooperative may borrow up to $2.0 million under the terms
of a line of credit (the "M&T Line of Credit") from Manufacturers and Traders
Trust Company ("M&T Bank"). As of September 25, 2004 and June 26, 2004, there
were no borrowings outstanding under the M&T Line of Credit. Principal amounts
borrowed bear interest at .75 percent per annum above the prime rate in effect
on the day proceeds are disbursed, as announced by M&T Bank as its prime rate of
interest. Interest is payable monthly. Amounts extended under the M&T Line of
Credit are required to be paid down to zero during each year by July 15, and
maintained for a minimum of 60 consecutive days. The Cooperative's obligations
under the M&T Line of Credit are secured by a security interest granted to M&T
Bank in substantially all of the assets of the Cooperative, excluding its Class
B common units owned in Holdings LLC. However, collateral does include any
distributions from the common units and cash payments made by Birds Eye Foods to
the Cooperative.
Contractual Obligations Guaranteed: Pro-Fac guarantees certain obligations of
Birds Eye Foods. Following is a schedule of obligations guaranteed by Pro-Fac at
September 25, 2004:
(Dollars in Millions)
Amounts
Committed Expiration
Senior Subordinated Notes - 11 7/8 Percent $ 52.4 November 2008
Subordinated Promissory Notes $ 38.8 November 2008
NOTE 4. SPECIAL MEMBERSHIP INTERESTS
In conjunction with the Transaction, the special membership interests were
allocated to the then current and former members of Pro-Fac who had made
patronage deliveries to or on behalf of Pro-Fac in the six fiscal years ended
June 29, 2002, in proportion to the patronage deliveries made by those members
in each case during that six fiscal year period. The purpose of the allocation
of the special membership interests was to preserve for the then current and
former members at the date of the Transaction, appreciation in book value of
their former investment in Birds Eye Foods.
NOTE 5. OTHER MATTERS
Legal Matters: The Cooperative is party to various legal proceedings from time
to time in the normal course of its business. In the opinion of management, any
liability that might be incurred upon the resolution of these proceedings will
not, in the aggregate, have a material adverse effect on the Cooperative's
business, financial condition, and results of operations. Further, no such
proceedings are known to be contemplated. The Cooperative maintains general
liability insurance coverage in amounts deemed to be adequate by the Board of
Directors.
Guarantees and Indemnifications: Pro-Fac is a guarantor, under an Indenture
dated November 18, 1998, between Birds Eye Foods, the Guarantors named therein
and IBJ Schroder Bank & Trust Company, Inc., as trustee, which Indenture was
amended by a First Supplemental Indenture dated July 22, 2002, among Birds Eye
Foods, the Guarantors named therein and The Bank of New York (as successor
trustee to IBJ Schroder Bank & Trust Company), as trustee, and as further
amended by a Second Supplemental Indenture dated March 1, 2003, of Birds Eye
Foods' obligations under its 11 7/8 percent Senior Subordinated Notes issued in
fiscal 1999 in the original aggregate principal amount of $200.0 million. The
$200.0 million aggregate principal amount is due November 1, 2008. Interest on
the Notes accrues at the rate of 11 7/8 percent per annum and is payable
semi-annually in arrears on May 1 and November 1. Pro-Fac, jointly and
severally, guarantees Birds Eye Foods' obligations under the 11 7/8 percent
Senior Subordinated Notes, including the payment in full when due of all
principal and interest on the 11 7/8 percent Senior Subordinated Notes at
maturity or otherwise and, in the event of any extension of time of payment or
renewal of any of the 11 7/8 percent Senior Subordinated Notes, that the Notes
will be promptly paid in full when due pursuant to the terms of any such
extension or renewal. In the event of a shortfall, Pro-Fac would be required to
pay any interest payments due as well as any unpaid principal balance due on the
11 7/8 percent Senior Subordinated Notes. As of September 25, 2004, the
outstanding loan amount subject to the Cooperative's guarantee included
principal of $50.0 million and accrued interest of $2.4 million.
9
As partial consideration for the acquisition in fiscal 1999 of the frozen and
canned vegetable business of Dean Foods Company, Birds Eye Foods issued to Dean
Foods a Subordinated Promissory Note for $30 million due November 22, 2008. The
Subordinated Promissory Note is currently owned by GLK, LLC, a New York limited
liability company, whose members are Birds Eye Foods and GLK Holdings, Inc.,
which is a wholly owned subsidiary of Birds Eye Foods. Pro-Fac guarantees Birds
Eye Foods' obligations under that Note. Interest on the Subordinated Promissory
Note accrued quarterly in arrears, commencing December 31, 1998, at a rate per
annum of 5 percent until November 22, 2003, and accrues at a rate of 10 percent
thereafter. Interest accrued through November 22, 2003 was paid in kind through
the issuance by Birds Eye Foods of additional subordinated promissory notes
identical to the Subordinated Promissory Note. Interest accruing after November
22, 2003 is payable in cash. Pro-Fac, jointly and severally, guarantees Birds
Eye Foods' obligations under the Subordinated Promissory Notes, including the
payment in full when due of all principal and interest on the Notes. In the
event of a shortfall, Pro-Fac would be required to pay any interest payments due
as well as any unpaid principal balance due on the Note. As of September 25,
2004, the outstanding loan amount subject to the Cooperative's guarantee
included principal of $38.8 million.
Historically, when Pro-Fac has sold assets, it may have retained certain
liabilities for known exposures and provided indemnification to the buyer(s)
with respect to future claims for certain unknown liabilities existing, or
arising from events occurring, prior to the sale date, including liabilities for
taxes, legal matters, environmental exposures, labor contingencies, product
liability, and other obligations. Pro-Fac may enter into similar arrangements in
the future. Agreements to provide indemnifications may vary in duration,
generally for two years for certain types of indemnities, to terms for tax
indemnifications that are generally aligned to the applicable statute of
limitations for the jurisdiction in which the tax is imposed, and to terms for
certain liabilities (i.e., warranties of title and environmental liabilities)
that typically do not expire. The maximum potential future payments that the
Cooperative could be required to make under agreements of indemnification are
(or may be) either contractually limited to a specified amount or unlimited. The
maximum potential future payments that the Cooperative could be required to make
under agreements of indemnification are not determinable at this time, as any
future payments would be dependent on the type and extent of the related claims,
and all relevant defenses, which are not estimable. Historically, costs incurred
to resolve claims related to agreements of indemnification have not been
material to the Cooperative's financial position, results of operations or cash
flows.
From time to time, in the ordinary course of its business, Pro-Fac has, or may,
enter into agreements with its customers, suppliers, service providers and
business partners which contain indemnification provisions. Generally, such
indemnification provisions require the Cooperative to indemnify and hold
harmless the indemnified party(ies) and to reimburse the indemnified party(ies)
for claims, actions, liabilities, losses and expenses in connection with any
personal injuries or property damage resulting from any Pro-Fac products sold or
services provided. Additionally, the Cooperative may from time to time agree to
indemnify and hold harmless its providers of services from claims, actions,
liabilities, losses and expenses relating to their services to Pro-Fac, except
to the extent finally determined to have resulted from the fault of the provider
of services relating to such services. The level of conduct constituting fault
of the service provider will vary from agreement to agreement and may include
conduct which is defined in terms of negligence, gross negligence, willful
misconduct, omissions or other culpable behavior. The term of these
indemnification provisions are generally not limited. The maximum potential
future payments that the Cooperative could be required to make under these
indemnification provisions are unlimited and are not determinable at this time,
as any future payments would be dependent on the type and extent of the related
claims, and all relevant defenses to the claims, which are not estimable.
Historically, costs incurred to resolve claims related to these indemnification
provisions have not been material to the Cooperative's financial position,
results of operations or cash flows.
The Cooperative has by-laws, policies, and agreements under which it indemnifies
its directors and officers from liability for certain events or occurrences
while the directors or officers are, or were, serving at Pro-Fac's request in
such capacities. Pro-Fac indemnifies its officers and directors to the fullest
extent allowed by law. The maximum potential amount of future payments that the
Cooperative could be required to make under these indemnification provisions is
unlimited, but would be affected by all relevant defenses to the claims.
As part of the Transaction, Pro-Fac agreed to indemnify Birds Eye Foods for
certain environmental liabilities, provided any single claim for indemnification
must exceed $200,000. This obligation, however, is only triggered once the
aggregate of all liabilities subject to indemnification under the Unit Purchase
Agreement (including those unrelated to environmental matters) exceeds $10
million.
As of the date of this Report, Pro-Fac does not expect to be required to perform
under the guarantees and indemnifications described above.
NOTE 6. SUBSEQUENT EVENT
Subsequent to September 25, 2004, the Cooperative declared a cash dividend of
$.43 per share on the Class A Cumulative Preferred Stock. These dividends
approximate $2.1 million and were paid on October 30, 2004.
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CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
From time to time, Pro-Fac or persons acting on behalf of Pro-Fac may make oral
and written statements that may constitute "forward-looking statements" as
defined in the Private Securities Litigation Reform Act of 1995 (the "PSLRA") or
by the Securities and Exchange Commission ("SEC") in its rules, regulations, and
releases. The Cooperative desires to take advantage of the "safe harbor"
provisions in the PSLRA for forward-looking statements made from time to time,
including, but not limited to, the forward-looking information contained in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" section of this Report and other statements made in this Report and
in other filings with the SEC.
The Cooperative cautions readers that any such forward-looking statements made
by or on behalf of the Cooperative are based on management's current
expectations and beliefs but are not guarantees of future performance. Actual
results could differ materially from those expressed or implied in the
forward-looking statements. Among the factors that could impact the Cooperative
include:
the impact of weather on the volume and quality of raw product;
the impact of strong competition in the food industry, including
competitive pricing;
the impact of changes in consumer demand;
the ability of Birds Eye Foods to service its debt that is guaranteed by
Pro-Fac (see the information under the heading "Liquidity and Capital
Resources" in Part I, Item 2 of this Report and "NOTE 5. Other Matters -
Guarantees and Indemnifications" under "Notes to Condensed Financial
Statements" in Part I, Item 1 of this Report);
risks associated with the Cooperative's contractual relationship with Birds
Eye Foods, including the possibility of a reduced demand for crops produced
by Pro-Fac members, the availability and sufficiency of shortfall payments
by Birds Eye Foods under the Amended and Restated Marketing and
Facilitation Agreement, and the potential consequences of a termination of
that relationship;
the ability of the Cooperative to operate its business using the cash made
available under the Termination Agreement with Birds Eye Foods and
Pro-Fac's ability to operate its business and pay dividends after the
expiration of that agreement (see the discussion of this Agreement under
the headings: "Liquidity and Capital Resources" in Part I, Item 2 of this
Report, and "NOTE 2. Agreements with Birds Eye Foods" under "Notes to
Condensed Financial Statements" in Part I, Item 1 of this Report).
the issuance of additional common units of Holdings LLC, which will reduce
Pro-Fac's common unit percentage ownership in Holdings LLC, one of the
factors in determining the amount of annual distributions that may be paid
to the Cooperative under the Limited Liability Company Agreement (see the
discussion under the heading "Liquidity and Capital Resources" section in
Part I, Item 2 of this Report).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The purpose of this discussion is to outline the reasons for material changes in
Pro-Fac's financial condition and results of operations in the first quarter of
fiscal 2005 as compared to the first quarter of fiscal 2004. This section should
be read in conjunction with Part I, Item 1, Financial Statements of this Report.
RESULTS OF OPERATIONS - FIRST QUARTER 2004 COMPARED TO FIRST QUARTER 2005
Equity in loss of Holdings LLC: For the quarter ended September 25, 2004, the
Cooperative recognized a loss of approximately $2.6 million from its investment
in Holdings LLC, as compared to a loss of approximately $0.6 million in the
first quarter of fiscal 2004.
Gain from transaction with Birds Eye Foods and related agreements: As part of
the Transaction, Pro-Fac and Birds Eye Foods entered into a letter agreement
dated as of the Closing Date (the "Termination Agreement"), pursuant to which,
among other things, the Marketing and Facilitation Agreement was terminated, and
in consideration of such termination, Pro-Fac is entitled to the payment of a
termination fee of $10.0 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. The $10.0 million payment is
payable in quarterly installments to the Cooperative as follows: $4.0 million on
each July 1, and $2.0 million each October 1, January 1, and April 1.
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Payments under the Termination Agreement are considered additional consideration
related to the Transaction. Accordingly, the portion of the payments received
under the Termination Agreement related to Pro-Fac's continuing ownership
percentage are recorded as an adjustment to Pro-Fac's investment in Holdings
LLC. The remaining portion of payments received is recognized as additional gain
on the Transaction with Birds Eye Foods in the period it is received.
Accordingly, in the first quarter of both fiscal 2005 and the first quarter of
fiscal 2004, Pro-Fac recognized approximately $2.4 million as additional gain
from the receipt of termination payments ($4.0 million on each of July 1, 2004
and July 1, 2003).
Commercial market value adjustment: At its January 2003 board meeting, in an
action aimed at improving the Cooperative's short-term liquidity, the Board of
Directors of Pro-Fac decided to deduct one (1) percent of the commercial market
value ("CMV") otherwise payable to Pro-Fac's member-growers for crops supplied
by Pro-Fac member-growers through the Cooperative for the 2002 and 2003 growing
seasons. The one (1) percent CMV deduction for the 2003 growing season was
withheld from the July 2004 CMV payments. The one (1) percent deduction for the
2003 growing season resulted in approximately $0.4 million of income for the
first quarter of fiscal 2004. The Board of Directors of Pro-Fac will consider
annually whether similar action should be taken with respect to CMV payable to
Pro-Fac's member-growers for subsequent growing seasons based on Pro-Fac's
operations and anticipated cash flow needs.
Selling, administrative, and general expense: Selling, administrative, and
general expenses totaled $0.3 million for the quarter ended September 25, 2004,
as compared to $0.3 million in the comparable fiscal 2004 period.
Tax provision: On June 11, 2003, the Cooperative received notification from the
Internal Revenue Service that effective August 19, 2002 the Cooperative
qualified for tax exempt status as a farmers' cooperative under Section 521 of
the Internal Revenue Code. Exempt cooperatives are permitted to reduce or
eliminate taxable income through the use of special deductions (such as
dividends paid on its common and preferred stock). The Cooperative will use
these special deductions and patronage distributions to reduce the Cooperative's
taxable income to zero for periods after August 19, 2002.
CRITICAL ACCOUNTING POLICIES
"NOTE 1. Description of Business and Summary of Accounting Policies" under
"Notes to Condensed Financial Statements" included in Part I, Item 1 of this
Report discusses the significant accounting policies of Pro-Fac. Pro-Fac's
discussion and analysis of its financial condition and results of operations are
based upon its condensed financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires Pro-Fac's management to
make estimates, judgments and assumptions that affect the reported amount of
assets, liabilities, revenues and expenses. On an ongoing basis, Pro-Fac
evaluates its estimates.
Pro-Fac's estimates affecting the financial statements relate primarily to
contingencies. Certain accounting policies deemed critical to Pro-Fac's results
of operations or financial position are discussed below.
Pro-Fac markets and sells its members' crops to food processors, including Birds
Eye Foods. Under the provisions of Emerging Issues Task Force Issue No. 99-19,
"Reporting Revenue Gross Versus Net as an Agent", the Cooperative records
activity between Birds Eye Foods and other customers, itself and its members on
a net basis.
Pro-Fac accounts for its investment in Holdings LLC under the equity method of
accounting. Under the equity method of accounting, Pro-Fac records its share of
the earnings or loss of Holdings LLC available to common unit holders based on
its ownership percentage. The earnings or loss of Holdings LLC available to
common unit holders is adjusted by subtracting the preferred return on Holdings
LLC's preferred units and the accretion there on and adding the expense recorded
by Holdings LLC related to termination payments, as described below. Pro-Fac's
share of these earnings or losses is reflected as "Equity in income/(loss) of
Birds Eye Holdings LLC" on Pro-Fac's Statement of Operations. The "Investment in
Birds Eye Holdings LLC" on Pro-Fac's balance sheet is also increased for
earnings of Holdings LLC and decreased for losses of Holdings LLC.
Pro-Fac also records its share, based on its ownership percentage, of the change
in Holdings LLC's other comprehensive income/(loss) items including minimum
pension liabilities and unrealized holding gains and losses on hedging
transactions. These changes are reflected as increases, if income, or decreases,
if a loss, in the "Investment in Birds Eye Holdings LLC" and the equity of
Pro-Fac and are also included in determining Pro-Fac's comprehensive
income/(loss).
Also under the equity method, Pro-Fac records a portion of termination payments
received as a result of the Transaction as "Gain from transaction with Birds Eye
Foods, Inc. and related agreements" on Pro-Fac's statement of operations. The
portion of termination payments recorded in the statement of operations is based
on the percentage of Birds Eye Foods indirectly owned by Vestar and unrelated
parties which is currently approximately 59.5%. The remaining portion of
termination payments received, currently approximately 40.5%, is recorded as a
reduction in Pro-Fac's investment in Holdings LLC because of Pro-Fac's
continuing ownership interest in Holdings LLC.
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LIQUIDITY AND CAPITAL RESOURCES
As discussed under "NOTE 1. Description of Business and Summary of Significant
Accounting Policies" under "Notes to Condensed Financial Statements" included in
Part I, Item 1 of this Report, Pro-Fac's balance sheet reflects Pro-Fac's
ownership interest in Holdings LLC, which is accounted for under the equity
method.
From and after August 19, 2002 and through and including August 19, 2007,
Pro-Fac's primary source of cash is presently expected to be the $10.0 million
annual payments due to it from Birds Eye Foods pursuant to the Termination
Agreement, the last installment payment of $2.0 million pursuant to that
agreement being payable on April 1, 2007, and the commercial market value or
"CMV" payments made to it by Birds Eye Foods for crops pursuant to the Amended
and Restated Marketing and Facilitation Agreement. Although Pro-Fac's business
strategy is to expand its sources of cash through expanding the types of
products and/or services it offers, the actual amount of cash that may be
generated from Pro-Fac's expanded operations depends on how successful Pro-Fac
is in implementing its business strategy, including controlling any associated
costs.
Subsequent to August 19, 2007 and prior to any sale (or dissolution) of Holdings
LLC, Pro-Fac's primary source of cash is expected to be the annual
distributions, if any, from Holdings LLC pursuant to the limited liability
company agreement of Holdings LLC to which Pro-Fac, together with others,
including Vestar, are parties, dated August 19, 2002 (the "Limited Liability
Company Agreement"). The Limited Liability Company Agreement contains terms and
conditions relating to the management of Holdings LLC and its subsidiaries
(including Birds Eye Foods), the distribution of profits and losses and the
rights and limitations of members of Holdings LLC, and provides that, subject to
any restrictions contained in any financing arrangements of Holdings LLC and/or
Birds Eye Foods, after August 19, 2007, Holdings LLC will use commercially
reasonable efforts to cause Birds Eye Foods to distribute annually to Holdings
LLC up to $24.8 million of cash flow from operations of Birds Eye Foods, which
Holdings LLC will then distribute to the holders of its common units. Assuming
$24.8 million of annual distributions, and further assuming that Pro-Fac's
distributable interest is 40.49%, Pro-Fac's annual distributable share would be
approximately $10.0 million. The actual amount of annual distributions to
Pro-Fac, if any, will depend upon the operating results of Birds Eye Foods for
the particular year and Pro-Fac's distributable percentage interest.
Although CMV payments are a source of cash to Pro-Fac, with the exception of the
Board's decision to deduct 1% of CMV otherwise payable to its grower-members for
crops delivered in 2003 and 2004, Pro-Fac has typically paid 100% of CMV to its
member-growers. The Pro-Fac Board of Directors determines annually the amount of
CMV that will be paid out to the Pro-Fac member-growers for crops supplied for
the immediately preceding growing season after taking into account Pro-Fac's
need to establish reserves for its anticipated operating and other expenses.
Any cash generated from expanded products and/or services offerings by Pro-Fac
is currently anticipated to be a secondary source of cash.
In addition to the cash payments to Pro-Fac pursuant to the Termination
Agreement and the possible cash distributions to Pro-Fac pursuant to the Limited
Liability Company Agreement, Pro-Fac has available up to $1.0 million per year,
until August 19, 2007, under the Credit Agreement with Birds Eye Foods and up to
$2.0 million under a line of credit from M&T Bank, as discussed below.
The Cooperative may borrow up to $2.0 million under the terms of a line of
credit with M&T Bank (the "M&T Line of Credit"). Principal amounts borrowed
under the M&T Line of Credit bear interest at .75 basis points above the prime
rate in effect on the day proceeds are disbursed, as announced by M&T Bank as
its prime rate of interest. Interest is payable monthly. Amounts extended under
the M&T Line of Credit are required to be repaid in full during each year by
July 15, with further borrowings prohibited for a minimum of 60 consecutive days
after such repayment. Pro-Fac's obligations under the M&T Line of Credit are
secured by a security interest granted to M&T in substantially all of its
assets, excluding Pro-Fac's Class B common units owned in Holdings LLC. However,
the collateral does include any distributions made in respect of the Class B
common units and cash payments made by Birds Eye Foods to the Cooperative.
As of September 25, 2004, there was no outstanding amount under the M&T Line of
Credit.
Under the Transitional Services Agreement which terminated by its terms on
August 19, 2004, Birds Eye Foods provided Pro-Fac certain administrative and
other services until August 19, 2004. Since the termination of that Agreement,
Pro-Fac pays for the services previously provided under that Agreement,
including salary, administrative and other expenses. The Cooperative believes it
has adequate cash resources to fund these expenses.
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Net cash available to Pro-Fac, after payment of CMV to Pro-Fac's member-growers,
is used to pay Pro-Fac's operating expenses as well as to pay dividends on its
capital stock and fund repurchases of its common stock. Dividends on Pro-Fac's
preferred stock were $2.1 million and $2.0 million in the first quarter of
fiscal 2005 and 2004, respectively.
A discussion of "Condensed Statement of Cash Flows" for the quarter ended
September 25, 2004 of fiscal 2005 follows:
Net cash used in operating activities of $3.0 million for the first quarter of
fiscal 2005 primarily represents an increase in accounts receivable, net of an
increase in accounts payable of approximately $2.7 million due to the timing of
cash receipts related to member-grower deliveries.
Net cash provided by investing activities for the first quarter of fiscal 2005
was $4.0 million. This amount primarily represents the receipt by the
Cooperative of $4.0 million from Birds Eye Foods under the Termination
Agreement.
Net cash used in financing activities of approximately $2.1 million primarily
represents dividends paid of approximately $2.1 million by the Cooperative
during the first quarter of fiscal 2005.
At its January 2003 board meeting, in an action aimed at improving the
Cooperative's short-term liquidity, the Board of Directors of Pro-Fac authorized
the suspension of annual dividends on the Cooperative's common stock for an
indefinite period of time and the deduction of one (1) percent of the commercial
market value ("CMV") otherwise payable to Pro-Fac's member-growers for crops
supplied by Pro-Fac member-growers through the Cooperative for the 2002 and 2003
growing seasons. The one (1) percent CMV deduction was withheld from the July
2003 and the July 2004 CMV payments. The Board of Directors of Pro-Fac will
consider whether similar action should be taken with respect to CMV payable to
Pro-Fac's member-growers for subsequent growing seasons on an annual basis.
Pro-Fac believes that its sources of cash described above will be sufficient to
fund its operations and meet its cash requirements for at least the next 12
months. Pro-Fac's ability to fund these requirements will depend on Pro-Fac's
future operations, performance and cash flow and is subject to prevailing
economic conditions and financial, business and other factors, some of which are
beyond Pro-Fac's control.
Contractual Obligations: There have been no material changes to Pro-Fac's
contractual obligations since June 26, 2004 except for normal payment of a legal
settlement previously accrued in the amount of $832,000 which was contractually
due in July 2004.
OTHER MATTERS
The vegetable and fruit portions of the business can be positively or negatively
affected by weather conditions nationally and the resulting impact on crop
yields. Favorable weather conditions can produce high crop yields and an
oversupply situation. This results in depressed selling prices. Excessive rain
or drought conditions can produce low crop yields and a shortage situation. This
typically results in higher selling prices. While the national supply situation
controls the pricing, the supply can differ regionally because of variations in
weather.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Since the Transaction, Pro-Fac is subject to interest rate fluctuations related
to borrowings under the M&T Line of Credit. Amounts borrowed bear interest at
the prime rate. See "NOTE 3. Debt" in the "Notes to Condensed Financial
Statements".
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures: Pro-Fac's Principal Executive Officer and
Principal Financial Officer evaluated the effectiveness of the design and
operation of Pro-Fac's disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act")). Based on that evaluation, Pro-Fac's Principal Executive and Principal
Financial Officer concluded that Pro-Fac's disclosure controls and procedures as
of September 25, 2004 (the end of the period covered by this Report) have been
designed and are functioning effectively to provide reasonable assurance that
the information required to be disclosed by Pro-Fac in reports filed or
submitted by it under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
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PART II
ITEM 1. LEGAL PROCEEDINGS
The information called for by this Item is disclosed in NOTE 5. "Other Matters -
Legal Matters" under "Notes to Condensed Financial Statements" in Part I, Item 1
of this Form 10-Q, and is incorporated herein by reference in answer to this
Item.
ITEM 6 - EXHIBITS
Exhibits
Exhibit Number Description
-------------- --------------------------------------------------------------------------------------
31. Certification required by Rule 13a-14 (a) of the Securities Exchange Act of 1934
of the Principal Executive Officer and the Principal Financial Officer (filed herewith).
32. Certification required by Rule 13a-14 (b) of the Securities Exchange Act of 1934 and
pursuant to 18 U.S.C., Section 1350. as adopted pursuant to Section 906 of the Sarbanes
Oxley Act at 2002, of the Principal Executive Officer and the Principal Financial Officer
(filed herewith).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Quarterly Report on Form 10-Q to be signed on
its behalf by the undersigned thereunto duly authorized.
PRO-FAC COOPERATIVE, INC.
Date: November 8, 2004 BY:/s/ Stephen R. Wright
------------------------ --------------------------------
General Manager, Chief Executive
Officer, Chief Financial Officer
and Secretary
(On Behalf of the Registrant and as
Principal Executive Officer
Principal Financial Officer, and
Principal Accounting Officer)
16