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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2003
Commission File Number 0-18339
SYLVAN INC.
(Exact name of registrant as specified in its charter)
NEVADA 25-1603408
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
333 MAIN STREET, P.O. BOX 249, SAXONBURG, PA 16056-0249
(Address of principal executive offices) (Zip Code)
(724) 352-7520
(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 by Rule 12b-2).
Yes No X
----- -----
Number of shares of common stock outstanding as of May 1, 2003...5,131,131
SYLVAN INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Balance Sheets,
March 30, 2003 and December 29, 2002......................................3
Condensed Consolidated Statements of Income, Three Months
Ended March 30, 2003 and March 31, 2002...................................5
Condensed Consolidated Statements of Cash Flows, Three Months
Ended March 30, 2003 and March 31, 2002...................................6
Notes to Condensed Consolidated Financial Statements,
March 30, 2003............................................................7
Item 2. Management's Discussion and Analysis.....................................13
Item 3. Quantitative and Qualitative Disclosures about Market Risk...............17
Item 4. Controls and Procedures..................................................17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.......................................................17
Item 5. Other Information ......................................................18
Item 6. Exhibits and Reports on Form 8-K........................................19
Signatures........................................................................22
Certifications....................................................................23
Index to Exhibits.................................................................25
Exhibit 99 .......................................................................27
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In thousands)
March 30, 2003 December 29, 2002
-------------- -----------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 6,857 $ 5,624
Trade accounts receivable, net of allowance
for doubtful accounts of $832 and $795, respectively 14,187 14,399
Inventories 12,578 11,425
Prepaid income taxes and other expenses 1,509 1,495
Other current assets 1,497 1,494
- ------------------------------------------------------------------------------- ------------------
Total current assets 36,628 34,437
Property, plant and equipment, net 58,878 58,787
Intangible assets, net of accumulated amortization
of $4,849 and $4,691, respectively 12,579 12,321
Other assets, net of accumulated amortization
of $622 and $597, respectively 1,062 1,261
- ------------------------------------------------------------------------------- ------------------
TOTAL ASSETS $ 109,147 $ 106,806
=============================================================================== ==================
The accompanying notes are an integral part of these financial statements.
3
CONDENSED CONSOLIDATED BALANCE SHEETS
Sylvan Inc. and Subsidiaries
(In thousands except share data)
March 30, 2003 December 29, 2002
-------------- -----------------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 186 $ 223
Accounts payable - trade 4,115 3,895
Accrued salaries, wages and employee benefits 2,191 2,771
Other accrued liabilities 1,421 1,413
Income taxes payable 1,478 1,545
- --------------------------------------------------------------------------------------------------
Total current liabilities 9,391 9,847
- --------------------------------------------------------------------------------------------------
Long-term and revolving-term debt 39,147 38,162
- --------------------------------------------------------------------------------------------------
Other long-term liabilities:
Other employee benefits 9,507 9,538
Other 279 256
- --------------------------------------------------------------------------------------------------
Total other long-term liabilities 9,786 9,794
- --------------------------------------------------------------------------------------------------
Minority interest 1,788 1,741
SHAREHOLDERS' EQUITY:
Common stock, voting, par value $0.001, 10,000,000
shares authorized, 6,728,405 shares issued at
March 30, 2003 and December 29, 2002 7 7
Additional paid-in capital 17,284 17,284
Retained earnings 65,798 64,965
Less: Treasury stock at cost, 1,597,274 shares at
March 30, 2003 and December 29, 2002 (16,669) (16,669)
Accumulated other comprehensive deficit (17,385) (18,325)
- --------------------------------------------------------------------------------------------------
Total shareholders' equity 49,035 47,262
- --------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 109,147 $ 106,806
==================================================================================================
The accompanying notes are an integral part of these financial statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Sylvan Inc. and Subsidiaries
(Unaudited, in thousands except share data)
--------Three Months Ended---------
March 30, 2003 March 31, 2002
-------------- --------------
NET SALES $ 22,382 $ 20,918
- -----------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES:
Cost of sales 13,791 12,078
Selling, administration, research and development 5,302 5,171
Depreciation 1,557 1,394
- -----------------------------------------------------------------------------------------------------
20,650 18,643
- -----------------------------------------------------------------------------------------------------
OPERATING INCOME 1,732 2,275
INTEREST EXPENSE, NET, INCLUDING
AMORTIZATION OF DEBT ISSUANCE COSTS 422 430
OTHER INCOME 4 3
- -----------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 1,314 1,848
PROVISION FOR INCOME TAXES 434 610
- -----------------------------------------------------------------------------------------------------
INCOME BEFORE MINORITY INTEREST IN
INCOME OF CONSOLIDATED SUBSIDIARIES 880 1,238
MINORITY INTEREST IN INCOME OF
CONSOLIDATED SUBSIDIARIES 47 22
- -----------------------------------------------------------------------------------------------------
NET INCOME $ 833 $ 1,216
=====================================================================================================
NET INCOME PER SHARE - BASIC $ 0.16 $ 0.22
=====================================================================================================
NET INCOME PER SHARE - DILUTED $ 0.16 $ 0.22
=====================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 5,131,131 5,432,052
=====================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT SHARES 5,144,419 5,481,924
=====================================================================================================
The accompanying notes are an integral part of these financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Sylvan Inc. and Subsidiaries
(Unaudited, in thousands)
------ Three Months Ended ------
March 30, 2003 March 31, 2002
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 833 $ 1,216
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,610 1,448
Employee benefits (673) (779)
Trade accounts receivable 413 (94)
Inventories (958) (651)
Prepaid expenses and other assets 216 2,404
Accounts payable and accrued liabilities 71 189
Income taxes payable (67) 446
Other 67 168
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,512 4,347
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (813) (981)
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities (813) (981)
- -----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (66) (2,133)
Net borrowings (repayments) under revolving credit line 411 (400)
Proceeds from exercise of stock options -- 220
Purchase of treasury shares -- (268)
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 345 (2,581)
- -----------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES ON CASH 189 (88)
- -----------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,233 697
CASH AND CASH EQUIVALENTS, beginning of period 5,624 5,072
- -----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 6,857 $ 5,769
=====================================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW DATA:
Interest paid $ 716 $ 687
Income taxes paid 417 451
The accompanying notes are an integral part of these financial statements.
6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SYLVAN INC. AND SUBSIDIARIES
MARCH 30, 2003
(UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
General
These condensed consolidated financial statements of Sylvan Inc. are
unaudited and reflect all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the results of operations for the interim period. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto contained in the company's Annual Report to
Shareholders and its Form 10-K, as amended, for the year ended December
29, 2002. The condensed consolidated December 29, 2002 balance sheet was
derived from the audited balance sheet, included in the most recent Form
10-K, as amended.
Cash
The company had a French-franc denominated loan of FF16.2 million ($2.2
million) that was repaid in January 2002.
Inventories
Inventories at March 30, 2003 and December 29, 2002 consisted of the
following:
(in thousands) March 30, 2003 December 29, 2002
-------------- -----------------
Growing crops and compost material $ 5,632 $ 4,975
Stores and other supplies 2,135 2,039
Finished products 4,811 4,411
------ ------
$ 12,578 $ 11,425
========= =========
Earnings Per Common Share
Earnings per share were calculated using the weighted average number of
shares outstanding during the period, including the effect of stock
options outstanding. Pursuant to the company's 1990 and 1993 stock option
plans, options for a total of 1,365,081 shares of the company's common
stock have been granted and options for a total of 583,612 of these shares
have been exercised as of March 30, 2003.
7
The following tables reconcile the number of shares utilized in the
earnings per share calculations for the three months ended March 30, 2003
and March 31, 2002:
Three Months Ended
March 30, 2003 March 31, 2002
-------------- --------------
Net income (in thousands) $ 833 $ 1,216
========= ==========
Earnings per common share - basic $ 0.16 $ 0.22
========= ==========
Earnings per common share - diluted $ 0.16 $ 0.22
========= ==========
Common shares - basic 5,131,131 5,432,052
Effect of dilutive securities: stock options 13,288 49,872
--------- ----------
Common shares - diluted 5,144,419 5,481,924
========= ==========
Options to purchase approximately 618,000 and 298,000 shares of common
stock in the three months ended March 30, 2003 and March 31, 2002,
respectively, were outstanding, but were not included in the computation
of diluted earnings per share because the exercise prices of these options
were greater than the average market prices of the company's common shares
for the respective periods.
Intangible Assets
Sylvan's intangible assets, which relate solely to its Spawn Products
Segment, are as follows:
Gross Carrying Amount Accumulated Amortization
Cultures Cultures
(in thousands) Goodwill and Other Goodwill and Other Net
-------- --------- --------- ---------- --------
December 29, 2002 $ 15,998 $ 1,014 $ (4,262) $ (429) $ 12,321
Additions -- -- -- (32) (32)
Currency Translation 416 -- (126) -- 290
-------- -------- --------- --------- --------
March 30, 2003 $ 16,414 $ 1,014 $ (4,388) $ (461) $ 12,579
======== ======== ========= ========= ========
The remaining useful lives of the cultures range from eight to eleven
years and the other intangible assets range from three to six years.
Amortization expense for intangible assets was $32,000 for the three
months ended March 30, 2003. Estimated amortization expense for the
remainder of 2003 and the five succeeding years is as follows:
(in thousands)
2003 (remainder) $ 95
2004 122
2005 67
2006 67
2007 65
2008 59
8
2. LONG-TERM DEBT AND BORROWING ARRANGEMENTS:
The company has a Revolving Credit Agreement with two commercial banks,
dated August 6, 1998 and amended, in part, December 29, 2002. It provides
for revolving credit loans on which the aggregate outstanding balance
available to the company may not initially exceed $55.0 million. The
maximum aggregate outstanding balance will decline over the life of the
agreement as follows:
Maximum Aggregate
Period Beginning Outstanding Balance
---------------- -------------------
August 6, 2003 $50.0 million
August 6, 2004 45.0 million
Outstanding borrowings under the agreement bear interest at either the
Prime Rate or LIBOR (plus an applicable margin) at the company's option.
On March 30, 2003, the company had outstanding borrowings under the
agreement of $38.0 million. The revolving credit loans mature on August 5,
2005.
The agreement provides for the maintenance of various financial covenants
and includes limitations as to incurring additional indebtedness and the
granting of security interests to third parties. Obligations under the
agreement are guaranteed by certain wholly owned subsidiaries of the
company.
The company has several additional loan obligations. The outstanding
balances related to these loans totaled approximately $1.3 million as of
March 30, 2003 and $1.4 million as of December 29, 2002. Interest rates on
these loans vary.
3. COMPREHENSIVE INCOME:
Comprehensive income consisted of the following:
Three Months Ended
(in thousands) March 30, 2003 March 31, 2002
-------------- --------------
Net income $ 833 $ 1,216
Other comprehensive income:
Foreign currency translation adjustment 935 (424)
Unrealized income on derivatives
and qualified cash flow hedges, net of tax of
$3 and $47, respectively 5 92
------- -------
$ 1,773 $ 884
======= =======
9
The components of accumulated other comprehensive deficit consist of the
following:
(in thousands) March 30, 2003 December 29, 2002
-------------- -----------------
Unrealized losses on derivatives and
qualified cash flow hedges, net of tax of $438
and $441, respectively $ (850) $ (855)
Foreign currency translation adjustments (7,023) (7,958)
Minimum pension liability adjustment,
net of tax of $4,902 (9,512) (9,512)
--------- ---------
Total accumulated other comprehensive deficit $ (17,385) $ (18,325)
========= =========
Floating-to-fixed interest rate swap agreements, designated as cash flow
hedges, hedge the company's floating rate debt and will mature at various
times through August 2007. The fair value of these contracts is recorded
in the balance sheet, with the offset to "Accumulated Other Comprehensive
Deficit," net of tax. Based on interest rates at March 30, 2003, the
company expects to expense $36,000 in the next 12 months related to
derivative instruments.
4. BUSINESS SEGMENT INFORMATION:
Sylvan is a worldwide producer and distributor of products for the
mushroom industry, specializing in spawn (the equivalent of seed for
mushrooms) and spawn-related products and services, and is a major grower
of fresh mushrooms in the United States. The company has two reportable
business segments: Spawn Products, which includes spawn-related products,
services and bioproducts; and Fresh Mushrooms. Spawn-related products
include casing inoculum, nutritional supplements and disease-control
agents. During the quarter ended March 30, 2003, the company made no
changes in the basis of segmentation or in the basis of measurement of
segment profit or loss from that reported in the December 29, 2002
financial statements.
10
Three Spawn Fresh Total
Months Products Mushrooms Reportable
(in thousands) Ended Segment Segment Segments
----- ------- -------- --------
Total revenues 2003 $ 15,452 $ 7,258 $ 22,710
2002 15,006 6,239 21,245
Intersegment revenues 2003 328 -- 328
2002 327 -- 327
Operating income 2003 2,237 853 3,090
2002 2,566 816 3,382
Reconciliation to Consolidated Financial Data:
Three Months Ended
(in thousands) March 30, 2003 March 31, 2002
-------------- --------------
Total revenues for reportable segments $ 22,710 $ 21,245
Elimination of intersegment revenues (328) (327)
-------- --------
Total consolidated revenues $ 22,382 $ 20,918
======== ========
Total operating income for reportable segments $ 3,090 $ 3,382
Unallocated corporate expenses (1,358) (1,107)
Interest expense, net (422) (430)
Other income 4 3
-------- --------
Consolidated income before income taxes $ 1,314 $ 1,848
======== ========
5. STOCK OPTIONS:
In June 1991, the shareholders approved a stock option plan (the 1990 Plan)
for employees and others who perform substantial services for the company.
In April 1999, the shareholders approved an amendment and restatement of
the 1990 Plan to provide for an increase to 1,700,000 in the number of
shares of the company's stock which are available for the granting of
options. In June 1993, the shareholders approved a stock option plan (the
1993 Plan) for nonemployee directors of the company, covering 100,000
shares of common stock. The company accounts for both plans under the
Accounting Principles Board Opinion No. 25, under which no compensation
cost is recognized for options granted at fair market value.
11
In December 2002, the Financial Accounting Standards Board issued SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure."
SFAS No. 148 amends SFAS No. 123, "Accounting for Stock-Based
Compensation," to provide alternative methods of transition to SFAS No.
123's fair value method of accounting for stock-based compensation. While
the Statement does not amend SFAS No. 123 to require companies to account
for employee stock options using the fair value method, the disclosure
provisions of the Statement are applicable to all companies with
stock-based compensation. Had compensation cost for these plans been
determined in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation," the company's net income and earnings per share (EPS) would
have been reduced to the following pro forma amounts:
Three Months Ended
(in thousands except per share data) March 30, 2003 March 31, 2002
-------------- --------------
Net income as reported $ 833 $ 1,216
Total stock-based employee compensation determined
under fair value method for all awards, net of tax
benefit of $16 and $28 for 2003 and 2002, respectively $ (32) $ (58)
-------- ---------
Pro forma net income $ 801 $ 1,158
======== =========
Basic earnings per share
As reported $ 0.16 $ 0.22
======== =========
Pro forma $ 0.16 $ 0.21
======== =========
Diluted earnings per share
As reported $ 0.16 $ 0.22
======== =========
Pro forma $ 0.16 $ 0.21
======== =========
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants made in 2002: risk-free interest rates of
3.17%; no expected dividend yields; expected lives of 8.0 years; expected
volatility of 34%. No new grants have been made in 2003.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
SYLVAN INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS (Three Months Ended March 30, 2003 and March 31, 2002)
CONSOLIDATED REVIEW
Net Sales
(in thousands) 2003 2002 % Change
---- ---- --------
Net sales $ 22,382 $ 20,918 7
Net sales increased 7% to $22.4 million, when compared with $20.9 million for
the corresponding 2002 quarter. Net sales of the Fresh Mushrooms Segment
increased $1.0 million, or 16.3%, while net sales of the Spawn Products Segment
increased $0.4 million, or 3.0%. On average, for the first quarter of 2003, the
U.S. dollar was approximately 22% weaker, when measured against the company's
applicable foreign currencies, than for the first quarter of 2002. The weakening
had the effect of increasing sales and operating income during the 2003 period,
as compared with the corresponding 2002 period, by approximately $2.4 million
and $260,000, respectively. Overseas sales, as a percentage of net sales, were
49% in the quarter ended March 30, 2003 and 50% in the quarter ended March 31,
2002.
Operating Costs and Expenses
(in thousands) 2003 2002 % Change
---- ---- --------
Cost of sales $ 13,791 $ 12,078 14
Selling, administration,
research and development 5,302 5,171 3
Depreciation 1,557 1,394 12
The company's cost of sales, expressed as a percentage of net sales, was 61.6%
for the first quarter of 2003, as compared with 57.7% for the first quarter of
2002. The cost of sales percentage increased in both the Fresh Mushrooms and
Spawn Products Segments as detailed in the Business Segments presentation.
Selling, administration, research and development expenses were $5.3 million for
the March 30, 2003 quarter and $5.2 million for the March 31, 2002 quarter and
were 23.7% and 24.7% of net sales, respectively.
The company recorded a net periodic pension expense of $167,500 during the
quarter ended March 30, 2003 from a pension plan of a former subsidiary as
compared with a net periodic pension benefit of $37,500 for the quarter ended
March 31, 2002. This increase in expense related to poor plan asset performance
and a decrease in the plan's discount rate assumption.
13
Interest Expense
Net interest expense for the first quarter of 2003 decreased to $422,000 from
$430,000 for the first quarter of 2002. The effective interest rate for the
first quarter of 2003 was 4.4%, as compared with 4.6% for the first quarter of
2002. The company recorded interest income of $35,000 in the first quarter of
2003 and $46,000 in the first quarter of 2002 related to SFAS No. 133. The
effective borrowing rates, excluding the effect of SFAS No. 133, were 4.8% for
the quarter ended March 30, 2003 and 5.1% for the quarter ended March 31, 2002.
During the 2003 quarter, the company had $20.0 million of variable-to-fixed
interest rate swaps in place to manage interest rate risk that increased the
average borrowing rate 1.53%. During 2002, $15 million of swaps increased the
average borrowing rate 1.47%.
Income Tax Expense
The effective income tax rate for the first quarter of 2003 and for the
corresponding 2002 quarter was 33%.
BUSINESS SEGMENTS
Spawn Products
(in thousands) 2003 2002 % Change
---- ---- --------
Sales, including intersegment $ 15,452 $ 15,006 3
Operating expenses 13,215 12,440 6
Operating income 2,237 2,566 (13)
Net sales of spawn and spawn-related products were $15.5 million for the current
quarter, a 3.0% increase as compared with net sales of $15.0 million for the
corresponding 2002 quarter. The weaker U.S. dollar had the effect of increasing
sales on a quarter-over-quarter comparison by $2.4 million. Spawn product sales
volume decreased 7.0%, with a 1.2% decrease in the Americas and a 10.1% decrease
in overseas markets. Most of the volume decrease in the overseas markets was
associated with a reduction in sales to French and U.K. mushroom growers. Sales
of disease-control agents and nutritional supplements increased 3.2% and
accounted for 14.7% of Sylvan's consolidated net sales for the quarter ended
March 30, 2003.
The overseas U.S. dollar equivalent selling price was 20.5% higher during the
first quarter of 2003, as compared with the corresponding quarter of 2002,
primarily due to the weakening of the U.S. dollar. The overseas local currency
selling prices decreased by approximately 1%. The selling price in the Americas
decreased 4.6% as adjustments were made to the pricing structure in order to
compete with the lower-priced spawn offerings of other suppliers.
Operating expenses were $13.2 million for the first quarter of 2003, a 6.2%
increase when compared with the first quarter of 2002. Within operating
expenses, cost of sales was 56.3% of net sales, as compared with 52.8% for the
corresponding 2002 quarter. Spawn production in the overseas markets was 16.4%
lower than for the first quarter of 2002, spreading costs that are primarily
fixed in nature over fewer units. The overall discard rate for spawn production
was 4.6% for both the first quarter of 2003 and for the corresponding quarter of
2002. The remaining operating expenses were $4.5 million during the first
quarters of 2003 and 2002. Operating income for the first quarter of 2003 was
$2.2 million, as compared with $2.6 million for the corresponding 2002 quarter.
Operating income, as a percentage of net sales, was 14.5% for the first quarter
of 2003, as compared with 17.1% for the first quarter of 2002. Operating income
was positively impacted by the weakening of the U.S. dollar, with an effect of
approximately $260,000. The company's Bioproducts division recorded operating
income of $11,000 for the first quarter of 2003. This is an improvement of
approximately $150,000 over the operating loss recorded for the first quarter of
2002.
14
Fresh Mushrooms
(in thousands) 2003 2002 % Change
---- ---- --------
Sales $ 7,258 $ 6,239 16
Operating expenses 6,405 5,423 18
Operating income 853 816 5
Net sales of fresh mushrooms increased during the current quarter to $7.3
million, as compared with $6.2 million for the corresponding period of 2002. The
Fresh Mushrooms Segment had an 8.3% increase in the number of pounds sold and
the average selling price per pound was virtually unchanged. Quincy Farms
experienced an improvement in the quality of its mushrooms and an increase in
its yield per square foot.
Quincy sold $0.8 million of ready-to-grow mushroom compost to its satellite
farms and purchased $1.3 million of high-quality mushrooms from the satellites
for immediate resale to its third-party wholesaler during the first quarter of
2003. By comparison, Quincy sold $0.3 million of ready-to-grow mushroom compost
to its satellite farms and purchased $0.6 million of high-quality mushrooms in
the first quarter of 2002.
The cost of sales was $5.1 million, or 70.2% of net sales, for the quarter ended
March 30, 2003, as compared with $4.2 million, or 66.7%, for the 2002 first
quarter. The increase in the cost of sales percentage was primarily due to the
increase in the purchase of mushrooms from the satellite farms. The increased
sale of ready-to-grow mushroom compost to the satellite farms contributed to the
improved financial results. The Fresh Mushrooms Segment operating income for the
quarter was $0.9 million, or 11.8% of net sales, and was 4.5% greater than the
amount reported for the first quarter of 2002.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended March 30,
2003 was $1.5 million, as compared with $4.3 million for the corresponding
quarter of 2002. During the first quarter of 2002, the company reduced "Other
Current Assets" by approximately $2.2 million due to the release of cash that
had been collateralized to support a loan from a European bank. This loan was
repaid in the first quarter of 2002.
Cash used by investing activities was $0.8 million for the three months ended
March 30, 2003, as compared with $1.0 million used during the corresponding
period of 2002. During the 2003 quarter, approximately $0.4 million was expended
on growth opportunities, primarily for the satellite farms at Quincy.
Total capital expenditures in 2003 are expected not to exceed $4.0 million, with
additional expenditures as required for any acquisitions or new initiatives. The
company routinely assesses its requirements for additional capital investments
and believes that it has sufficient cash resources from current cash balances,
internally generated funds and available bank credit facilities to meet its
ongoing capital needs.
Available credit under the company's revolving credit arrangement was $17.0
million as of March 30, 2003. Term and revolving credit increased by $1.0
million during the three months ended March 30, 2003, as compared with a
decrease of $2.5 million during the corresponding quarter of 2002. Most of the
2002 decrease related to the repayment of a European bank loan supported by the
cash deposit mentioned earlier.
No shares of Sylvan common stock were purchased during the first quarter of
2003. The share purchase program was suspended due to the nonbinding indication
of interest detailed in Item 5.
15
CRITICAL ACCOUNTING POLICIES
The preparation of the financial statements in accordance with generally
accepted accounting principles requires management to make judgments, estimates,
and assumptions regarding uncertainties that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses. Areas of uncertainty that require
judgments, estimates, and assumptions include the accounting for derivatives,
environmental matters, the testing of goodwill and other intangible assets for
impairment, pensions and other postretirement benefits, and tax matters.
Management uses historical experience and all available information to make
these judgments and estimates, and actual results will differ from those
estimates and assumptions that are used to prepare the company's financial
statements. Despite these inherent limitations, management believes that
Management's Discussion and Analysis (MD&A) and the financial statements and
related footnotes provide a fair presentation. A discussion of the judgments and
uncertainties associated with accounting for derivatives can be found in the
Market Risks section of the MD&A included in the company's Form 10-K, as
amended.
A summary of the company's significant accounting policies is included in Note 1
to the Consolidated Financial Statements, included with the Form 10-K, as
amended, filed with the Securities and Exchange Commission for the year ended
December 29, 2002. Management believes that the application of these policies on
a consistent basis enables the company to provide the users of the financial
statements with useful and reliable information about the company's operating
results and financial condition.
In July 2001, the Financial Accounting Standards Board issued SFAS No. 142,
"Goodwill and Other Intangible Assets." SFAS No. 142 eliminates amortization of
goodwill and amortization of indefinitely lived intangible assets and provides
for impairment tests to be performed at least annually. Sylvan adopted this
pronouncement on December 31, 2001, which was the first day of Sylvan's 2002
fiscal year. During the quarter ended March 31, 2002, the company retained a
professional services firm to complete the initial assessment to test for
transitional goodwill impairment as of December 31, 2001 and a subsequent
assessment as of September 29, 2002. The assessments determined that there was
no goodwill impairment.
In August 2001, the Financial Accounting Standards Board issued SFAS No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." Under its
provisions, all tangible long-lived assets, whether to be held and used or to be
disposed of by sale or other means, will be tested for recoverability whenever
events or changes in circumstances indicate the carrying amount may not be
recoverable. Sylvan adopted this pronouncement on December 31, 2001. The
adoption of this pronouncement did not have a material impact on the company.
Other areas of significant judgments and estimates include the liabilities and
expenses for pensions and other postretirement benefits. These amounts are
determined using actuarial methodologies and incorporate significant
assumptions, including the rate used to discount the future estimated liability
and the long-term rate of return on plan assets. The rate used to discount
future estimated liabilities is determined considering the rates available at
year-end on debt instruments that could be used to settle the obligations. The
long-term rate of return is estimated by considering historical returns and
expected returns on current and projected asset allocations and is generally
applied to a five-year average market value of assets. Effective October 31,
2002, Sylvan reduced the assumption for the expected long-term return on plan
assets to 8.5% from 9.0%.
Sylvan is a global company and records an estimated liability for income taxes
based on what it determines will likely be paid in the various tax jurisdictions
in which it operates. Management uses its best judgment in the determination of
these amounts; however, the liabilities ultimately realized and paid are
dependent on various matters and may differ from the amounts recorded. An
adjustment to the estimated liability would be recorded through income in the
period in which it becomes probable that the amount of the actual liability
differs from the amount recorded.
16
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
References are made in this report to expectations regarding capital
expenditures, share repurchases, future cash availability and the future
performance of the company, in general. These "forward-looking statements" are
based on currently available competitive, financial and economic data and the
company's operating plans, but they are inherently uncertain. Events could turn
out to be significantly different from what is expected, depending upon such
factors as mushroom growing process inconsistencies, specific pricing or product
initiatives of the company's competitors and competitive conditions in the
mushroom market in general, changes in currency and exchange risks, a loss of a
major customer, fluctuations of the values of the assets in the defined benefit
plan of a former subsidiary of the company, or changes in a specific country's
or region's political or economic conditions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information presented under this item in the company's Form 10-K, as
amended, for the fiscal year ended December 29, 2002 has not changed materially.
Information relating to the sensitivity to foreign currency exchange rate
changes of the company's firmly committed sales transactions, in addition to
what is presented in Item 2 of this filing, is omitted because it is an
immaterial portion of total sales.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
Sylvan's chief executive officer and chief financial officer evaluated the
company's disclosure controls and procedures as of March 25, 2003, and they
concluded that these controls and procedures are effective.
(b) Changes in Internal Controls
There are no significant changes in internal controls or in other factors that
could significantly affect these controls subsequent to March 25, 2003.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 30, 2003, May 7, 2003 and May 8, 2003, Sylvan and the six members of
its board of directors, as individuals, were served with notice that they were
named as defendants in a total of five lawsuits that were filed in the District
Court of Clark County, Nevada; the Court of Common Pleas, Butler County,
Pennsylvania; and the District Court of Washoe County, Nevada, respectively. All
of the suits are putative class actions filed by and on behalf of Sylvan's
shareholders. They allege that the defendants breached their fiduciary duties
and have conflicts of interest in connection with the board's undertaking of an
assessment of a recently received nonbinding indication of interest to acquire
Sylvan's shares. The company has retained outside counsel and is evaluating the
plaintiffs' claims.
There are no other pending legal proceedings to which Sylvan or any of its
subsidiaries is a party, or of which any of their property is subject, other
than ordinary, routine litigation incidental to their respective businesses.
17
ITEM 5. OTHER INFORMATION
SHAREHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING OF SHAREHOLDERS
Rule 14a-8 under the Securities Exchange Act of 1934, as amended, requires that
a shareholder intending to submit a proposal to be considered at a company's
annual meeting notify the company not less than 120 calendar days before the
date of the proxy statement that the company released to shareholders the
previous year, or, if the date of the annual meeting has been changed by more
than 30 days from the date of the previous year's meeting, a reasonable time
before the company begins to print and mail the proxy statement for the current
year's annual meeting. In addition, the advanced notice provisions in the
company's bylaws require that a shareholder intending to submit a proposal or
nominate directors must give written notice to the company's secretary at least
30 days, but not more than 60 days, prior to the meeting; provided, however,
that in the event that less than 40 days notice or prior public disclosure of
the date of the annual meeting is given to shareholders, notice must be received
from the shareholder no later than the close of business on the tenth day
following the date on which notice of the date of the current annual meeting is
mailed or the date on which the company first publicly announces the date of the
current annual meeting.
On April 16, 2003, the company announced the receipt of a nonbinding indication
of interest from a group of Sylvan Inc. senior officers and private investors to
acquire shares of its common stock for $11.00 per share in cash. Sylvan's board
of directors established a special committee of independent directors to
evaluate the indication of interest and to assess a course of action that is in
the best interest of the company and its shareholders. On April 21, 2003, the
company announced that its board of directors had postponed the 2003 annual
meeting to provide the committee with sufficient time to evaluate the indication
of interest. A new date for the meeting has not been selected, but the company
anticipates that the meeting will be held after June 30, 2003, which will be
more than 30 days after the date of its 2002 annual meeting. The company will
notify its shareholders when it selects a date for the 2003 annual meeting and
the dates on which any shareholder proposals must be received in order to be
properly brought before the 2003 annual meeting.
18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K
3.3 Articles of Incorporation of S. F. Nevada, Inc. (Exhibit 3.3
to the company's Form 10-Q for the quarter ended October 3,
1999*)
3.4 Articles of Merger of S. F. Nevada, Inc. and Sylvan Foods
Holdings, Inc. with exhibit (Exhibit 3.4 to the company's Form
10-Q for the quarter ended October 3, 1999*)
3.5 Bylaws (Exhibit 3.5 to the company's Form 10-Q for the quarter
ended October 3, 1999*)
Compensation Plans and Arrangements
10.1.2 Sylvan Foods, Inc. Target Benefit Annuity Purchase Plan
(Exhibit 3.3.2 to the company's Form 10-K for the year ended
January 3, 1993*)
10.1.3 Sylvan Foods Holdings, Inc. 1993 Stock Option Plan for
Nonemployee Directors (Exhibit 10.1.3 to the company's Form
10-K for the year ended January 2, 1994*)
10.12 Sylvan Inc. 1990 Stock Option Plan (amended and restated)
(Exhibit 10.12 to the company's Form 10-Q for the quarter
ended October 3, 1999*)
Material Contracts
10.2.1 Revolving Credit Agreement, dated as of August 6, 1998, by and
among Sylvan Inc., a Nevada corporation, Sylvan Foods
(Netherlands) B.V., a Dutch corporation, as Borrowers, the
Banks party thereto from time to time and Mellon Bank, N.A., a
national banking association, as issuing bank and as agent for
the Banks thereunder (Exhibit 10.1 to the company's Form 10-Q
for the quarter ended September 27, 1998*)
10.2.2 Revolving Credit Note, dated August 6, 1998, payable to Mellon
Bank, N.A. in the amount of $25,000,000 (Exhibit 10.2 to the
company's Form 10-Q for the quarter ended September 27, 1998*)
10.2.3 Revolving Credit Note, dated August 6, 1998, payable to ABN
AMRO Bank, Pittsburgh Branch, in the amount of $25,000,000
(Exhibit 10.3 to the company's Form 10-Q for the quarter ended
September 27, 1998*)
10.2.4 Promissory Note, dated August 6, 1998, payable to Mellon Bank,
N.A. in the amount of $5,000,000 (Exhibit 10.4 to the
company's Form 10-Q for the quarter ended September 27, 1998*)
10.2.5 Mellon Global Cash Management ABS Agreement, dated August 6,
1998, by and between Sylvan Inc. and Mellon Bank, N.A.
(Exhibit 10.5 to the company's Form 10-Q for the quarter ended
September 27, 1998*)
10.2.6 Guaranty and Suretyship Agreement, dated August 6, 1998, by
and between Sylvan Inc. and Mellon Bank, N.A. (Exhibit 10.6 to
the company's Form 10-Q for the quarter ended September 27,
1998*)
10.2.7 Guaranty and Suretyship Agreement, dated August 6, 1998, by
and between Sylvan Foods, Inc. and Mellon Bank, N.A. (Exhibit
10.7 to the company's Form 10-Q for the quarter ended
September 27, 1998*)
10.2.8 Guaranty and Suretyship Agreement, dated August 6, 1998, by
and between Sylvan America, Inc. (a Pennsylvania corporation)
and Mellon Bank, N.A. (Exhibit 10.8 to the company's Form 10-Q
for the quarter ended September 27, 1998*)
19
10.2.9 Guaranty and Suretyship Agreement, dated August 6, 1998, by
and between Sylvan America, Inc. (a Nevada corporation) and
Mellon Bank, N.A. (Exhibit 10.9 to the company's Form 10-Q for
the quarter ended September 27, 1998*)
10.2.10 Guaranty and Suretyship Agreement, dated August 6, 1998, by
and between Quincy Corporation and Mellon Bank, N.A. (Exhibit
10.10 to the company's Form 10-Q for the quarter ended
September 27, 1998*)
10.2.11 Index of Other Exhibits to the Revolving Credit Agreement
(Exhibit 10.11 to the company's Form 10-Q for the quarter
ended September 27, 1998*)
10.5.1 Agreement, dated January 14, 2000, by and between C And C
Carriage Mushroom Co., t/a Modern Sales Company, and Quincy
Corporation (Exhibit 10.5.1 to the company's Form 10-K for the
year ended January 2, 2000*)
10.5.2 Index of Exhibits to the C And C Agreement referenced above
(Exhibit 10.5.2 to the company's Form 10-K for the year ended
January 2, 2000*)
10.40 Collective Bargaining Agreement, dated January 21, 2001,
between Quincy Corporation and the United Farm Workers of
America, AFL-CIO (Exhibit 10.40 to the company's Form 10-K for
the year ended December 31, 2000*)
10.41 Letter dated October 12, 2001 from Mellon Bank, advising the
company of Mellon's assignment and transfer to Citizens
Financial Group, Inc. of all of Mellon's right, title and
interest in and to the Revolving Credit Agreement, dated
August 6, 1998, between the company and Mellon (Exhibit 10.41
to the company's Form 10-K filed for the year ended December
30, 2001*)
10.43 Employment Continuation Agreement with Dennis C. Zensen, dated
September 24, 2002 (Exhibit 10.43 to the company's Form 10-Q
filed for the quarter ended September 29, 2002**)
10.44 Employment Continuation Agreement with Monir K. Elzalaki,
dated September 21, 2002 (Exhibit 10.44 to the company's Form
10-Q filed for the quarter ended September 29, 2002**)
10.45 Employment Continuation Agreement with Donald A. Smith, dated
September 19, 2002 (Exhibit 10.45 to the company's Form 10-Q
filed for the quarter ended September 29, 2002**)
10.46 Employment Continuation Agreement with Gary D. Walker, dated
September 24, 2002 (Exhibit 10.46 to the company's Form 10-Q
filed for the quarter ended September 29, 2002**)
10.47 Manager's Service Agreement with Michael A. Walton, dated
April 17, 1988 (Exhibit 10.47 to the company's Form 10-Q filed
for the quarter ended September 29, 2002**)
10.48 Amendment No. 1 to Revolving Credit Agreement, dated as of
December 29, 2002, among Sylvan Inc., a Nevada corporation,
Sylvan Foods (Netherlands) BV, a Dutch corporation, the banks
listed on the signature page and Citizens Bank of
Pennsylvania, as agent for the Banks and for the Issuing Bank
under the Original Agreement (Exhibit 10.48 to the company's
Form 10-K for the year ended December 29, 2002*)
11 Statement re computation of per share earnings is not required
because the relevant computation can be clearly determined
from the material contained in the financial statements
included herein
20
99 Statement of Dennis C. Zensen, chairman, president and chief
executive officer of Sylvan Inc. and Donald A. Smith, chief
financial officer of Sylvan Inc., as required by Section 906
of the Sarbanes-Oxley Act of 2002
- ------------------
* Incorporated by reference.
** Management contract.
(b) Reports on Form 8-K
None
21
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.
Date: May 14, 2003 SYLVAN INC.
----------------------
By: /s/ DONALD A. SMITH
-------------------------------
Donald A. Smith
Chief Financial Officer
By: /s/ FRED Y. BENNITT
-------------------------------
Fred Y. Bennitt
Secretary/Treasurer
22
CERTIFICATIONS
I, Dennis C. Zensen, Chairman of the Board, President and Chief Executive
Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sylvan Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
May 14, 2003 /s/ DENNIS C. ZENSEN
--------------------------
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
23
I, Donald A. Smith, Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Sylvan Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
May 14, 2003 /s/ DONALD A. SMITH
--------------------------
Chief Financial Officer
(Principal Financial Officer)
24
INDEX TO EXHIBITS
Exhibit No. Description Page No.
- ----------- ----------- --------
3.3 Articles of Incorporation of S. F. Nevada, Inc. (a)
3.4 Articles of Merger of S. F. Nevada, Inc. and Sylvan Foods Holdings, Inc. with exhibit (a)
3.5 Bylaws (a)
10.1.2 Sylvan Foods, Inc. Target Benefit Annuity Purchase Plan (b)
10.1.3 Sylvan Foods Holdings, Inc. 1993 Stock Option Plan for Nonemployee Directors (c)
10.12 Sylvan Inc. 1990 Stock Option Plan, as amended and restated (a)
10.2.1 Revolving Credit Agreement, dated as of August 6, 1998, by and among Sylvan Inc.,
a Nevada corporation, and Sylvan Foods (Netherlands) B.V., a Dutch
corporation, as Borrowers; the Banks party thereto from time to time and Mellon
Bank, N.A., a national banking association, as issuing bank and as agent for the
Banks thereunder, together with various annexes, exhibits, and schedules (d)
10.2.2 Revolving Credit Note, dated August 6, 1998, payable to Mellon Bank, N.A. in the
amount of $25,000,000 (d)
10.2.3 Revolving Credit Note, dated August 6, 1998, payable to ABN AMRO Bank,
Pittsburgh Branch, in the amount of $25,000,000 (d)
10.2.4 Promissory Note, dated August 6, 1998, payable to Mellon Bank, N.A. in the
amount of $5,000,000 (d)
10.2.5 Mellon Global Cash Management ABS Agreement, dated August 6, 1998, by and
between Sylvan Inc. and Mellon Bank, N.A. (d)
10.2.6 Guaranty and Suretyship Agreement, dated August 6, 1998, by and between
Sylvan Inc. and Mellon Bank, N.A. (d)
10.2.7 Guaranty and Suretyship Agreement, dated August 6, 1998, by and between
Sylvan Foods, Inc. and Mellon Bank, N.A. (d)
10.2.8 Guaranty and Suretyship Agreement, dated August 6, 1998, by and between
Sylvan America, Inc. (a Pennsylvania corporation) and Mellon Bank, N.A. (d)
10.2.9 Guaranty and Suretyship Agreement, dated August 6, 1998, by and between
Sylvan America, Inc. (a Nevada corporation) and Mellon Bank, N.A. (d)
10.2.10 Guaranty and Suretyship Agreement, dated August 6, 1998, by and
between Quincy Corporation and Mellon Bank, N.A. (d)
10.2.11 Index of Other Exhibits to the Revolving Credit Agreement referenced in Exhibit 10.2.1 (d)
25
10.5.1 Agreement, dated January 14, 2000, by and between C And C Carriage Mushroom Co.,
t/a Modern Sales Company and Quincy Corporation (e)
10.5.2 Index of Exhibits to the Agreement referenced in Exhibit 10.5.1 (e)
10.40 Collective Bargaining Agreement, dated January 21, 2001, between Quincy Corporation
and the United Farm Workers of America, AFL-CIO (f)
10.41 Notification letter, dated October 12, 2001, regarding Mellon Bank's transfer to Citizens
Financial Group, Inc. of its right, title and interest in the Revolving Credit Agreement,
dated August 6, 1998 (g)
10.43 Employment Continuation Agreement with Dennis C. Zensen, dated September 24, 2002* (h)
10.44 Employment Continuation Agreement with Monir K. Elzalaki, dated September 21, 2002* (h)
10.45 Employment Continuation Agreement with Donald A. Smith, dated September 19, 2002* (h)
10.46 Employment Continuation Agreement with Gary D. Walker, dated September 24, 2002* (h)
10.47 Employment Continuation Agreement with Michael A. Walton, dated April 17, 1988* (h)
10.48 Amendment No. 1 to Revolving Credit Agreement, dated as of December 29, 2002,
among Sylvan Inc., a Nevada corporation, Sylvan Foods (Netherlands) BV, a Dutch
corporation, the banks listed on the signature page and Citizens Bank of
Pennsylvania, as agent for the Banks and for the Issuing Bank under the Original
Agreement (i)
99 Statement of Dennis C. Zensen, chairman, president and chief executive officer of
Sylvan Inc. and Donald A. Smith, chief financial officer of Sylvan Inc., as required
by Section 906 of the Sarbanes-Oxley Act of 2002 27
- ------------------
(a) This exhibit was previously filed with the company's Form 10-Q for the
quarter ended October 3, 1999 and is incorporated herein by reference.
(b) This exhibit was previously filed with the company's Form 10-K for the
year ended January 3, 1993 and is incorporated herein by reference.
(c) This exhibit was previously filed with the company's Form 10-K for the
year ended January 2, 1994 and is incorporated herein by reference.
(d) This exhibit was previously filed as one of Exhibits 10.1 through
10.11 with the company's Form 10-Q for the quarter ended September 27,
1998 and is incorporated herein by reference.
(e) This exhibit was previously filed with the company's Form 10-K for the
year ended January 2, 2000 and is incorporated herein by reference.
(f) This exhibit was previously filed with the company's Form 10-K for the
year ended December 31, 2000 and is incorporated herein by reference.
(g) This exhibit was previously filed with the company's Form 10-K for the
year ended December 30, 2001 and is incorporated herein by reference.
(h) This exhibit was previously filed with the company's Form 10-Q for the
quarter ended September 29, 2002 and is incorporated herein by
reference.
(i) This exhibit was previously filed with the company's Form 10-K for the
year ended December 29, 2002 and is incorporated herein by reference.
* Management Contract
26