Delaware | 36-2495346 |
(State or other jurisdiction | (I.R.S. Employer |
of incorporation or organization) | Identification Number) |
251 O'Connor Ridge Blvd., Suite 300 | |
Irving, Texas | 75038 |
(Address of principal executive offices) | (Zip Code) |
Page
No.
|
||
PART
I: FINANCIAL INFORMATION
|
||
Item
1.
|
FINANCIAL
STATEMENTS
|
|
Consolidated
Balance Sheets
|
3
|
|
March
31, 2007 (unaudited) and December 30, 2006
|
||
Consolidated
Statements of Operations (unaudited)
|
4
|
|
Three
months
ended March 31, 2007 and April 1, 2006
|
||
Consolidated
Statements of Stockholders’ Equity (unaudited)
|
5
|
|
Year
ended December 30, 2006 and three months ended March 31,
2007
|
||
Consolidated
Statements of Cash Flows (unaudited)
|
6
|
|
Three
months ended March 31, 2007 and April 1, 2006
|
||
Notes
to Consolidated Financial Statements (unaudited)
|
7
|
|
Item
2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
|
|
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
16
|
|
Item
3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES
|
|
ABOUT
MARKET RISK
|
29
|
|
Item
4.
|
CONTROLS
AND PROCEDURES
|
30
|
PART
II: OTHER INFORMATION
|
||
Item
6.
|
EXHIBITS
|
32
|
Signatures
|
33
|
|
|
March
31,
2007
|
|
|
December
30,
2006
|
|
ASSETS
|
|
(unaudited
|
)
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
5,271
|
|
$
|
5,281
|
|
Restricted cash
|
|
458
|
|
|
480
|
|
Accounts receivable
|
|
44,616
|
|
|
42,381
|
|
Inventories
|
|
18,248
|
|
|
14,562
|
|
Other current assets
|
|
3,861
|
|
|
5,036
|
|
Deferred income taxes
|
|
8,317
|
|
|
6,921
|
|
Total
current assets
|
|
80,771
|
|
|
74,661
|
|
Property,
plant and equipment, less accumulated depreciation of
$187,841 at March 31, 2007 and $184,061 at December 30,
2006
|
|
130,015
|
|
|
132,149
|
|
Intangible
assets, less accumulated amortization of
$38,817 at March 31, 2007 and $37,599 at December 30, 2006
|
|
32,440
|
|
|
33,657
|
|
Goodwill
|
|
71,856
|
|
|
71,856
|
|
Other
assets
|
|
6,603
|
|
|
6,683
|
|
Deferred
income taxes
|
|
1,923
|
|
|
1,800
|
|
|
$
|
323,608
|
|
$
|
320,806
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Current portion of long-term debt
|
$
|
5,000
|
|
$
|
5,004
|
|
Accounts payable, principally trade
|
|
16,390
|
|
|
17,473
|
|
Accrued expenses
|
|
39,091
|
|
|
34,319
|
|
Total
current liabilities
|
|
60,481
|
|
|
56,796
|
|
|
|
|
|
|
|
|
Long-term
debt, net
|
|
66,250
|
|
|
78,000
|
|
Other
non-current liabilities
|
|
35,378
|
|
|
34,685
|
|
Total
liabilities
|
|
162,109
|
|
|
169,481
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
Common stock, $0.01 par value; 100,000,000 shares authorized;
80,931,035 and 80,875,453 shares issued at March 31, 2007
and at December 30, 2006 respectively
|
|
809
|
|
|
809
|
|
Additional paid-in capital
|
|
150,606
|
|
|
150,045
|
|
Treasury stock, at cost; 59,136 and 21,000 shares at
March 31, 2007 and December 30 2006, respectively
|
|
(378
|
)
|
|
(172
|
)
|
Accumulated other comprehensive loss
|
|
(11,635
|
)
|
|
(11,733
|
)
|
Retained earnings
|
|
22,097
|
|
|
12,376
|
|
Total
stockholders’ equity
|
|
161,499
|
|
|
151,325
|
|
|
$
|
323,608
|
|
$
|
320,806
|
|
|
March
31,
2007 |
April
1,
2006 |
||||||
Net
sales
|
$
|
138,612
|
$
|
76,400
|
||||
Costs
and expenses:
|
||||||||
Cost
of sales and operating expenses
|
103,244
|
60,681
|
||||||
Selling,
general and administrative expenses
|
12,581
|
9,687
|
||||||
Depreciation
and amortization
|
5,744
|
4,133
|
||||||
Total
costs and expenses
|
121,569
|
74,501
|
||||||
Operating
income
|
17,043
|
1,899
|
||||||
Other
income/(expense):
|
||||||||
Interest
expense
|
(1,633
|
)
|
(1,542
|
)
|
||||
Other,
net
|
(429
|
)
|
231
|
|||||
Total
other income/(expense)
|
(2,062
|
)
|
(1,311
|
)
|
||||
Income
from operations before income taxes
|
14,981
|
588
|
||||||
Income
taxes
|
5,401
|
222
|
||||||
Net
income
|
$
|
9,580
|
$
|
366
|
||||
Basic
income per share
|
$
|
0.12
|
$
|
0.01
|
||||
Diluted
income per share
|
$
|
0.12
|
$
|
0.01
|
Common
Stock
|
|
Number
of Outstanding
Shares
|
$.01
par Value |
Additional
Paid-In
Capital
|
Treasury
Stock |
Accumulated
Other Comprehensive
Loss |
Retained
Earnings
(Accumulated
Deficit)
|
Unearned
Compen-
sation |
Total
Stockholders’
Equity/
(Deficit) |
|||||
Balances
at December 31, 2005
|
64,437,410
|
$
644
|
$79,370
|
$
(172)
|
$
(9,282)
|
$
4,447
|
$
(1,327)
|
$73,680
|
|||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
5,107
|
-
|
5,107
|
|||||
Minimum
pension liability
adjustment, net of tax (revised) |
-
|
-
|
-
|
-
|
2,415
|
-
|
-
|
2,415
|
|||||
Interest
rate swap derivative
adjustment, net of tax |
-
|
-
|
-
|
-
|
(408)
|
-
|
-
|
(408)
|
|||||
Total
comprehensive income
(revised) |
-
|
-
|
-
|
-
|
-
|
-
|
-
|
7,114
|
|||||
Adjustment
to initially apply
FASB Statement No. 158, net of tax (revised) |
-
|
-
|
-
|
-
|
(4,458)
|
-
|
-
|
(4,458)
|
|||||
Adjustment
to opening
stockholders’ equity |
-
|
-
|
-
|
-
|
-
|
2,822
|
-
|
2,822
|
|||||
Adjustment
to initially apply
SFAS No. 123R |
-
|
-
|
(1,327)
|
-
|
-
|
-
|
1,327
|
-
|
|||||
Stock-based
compensation
|
-
|
-
|
1,488
|
-
|
-
|
-
|
-
|
1,488
|
|||||
Excess
tax benefits associated
with stock-based compensation |
-
|
-
|
50
|
-
|
-
|
-
|
-
|
50
|
|||||
Issuance
of common stock
|
16,417,043
|
165
|
70,464
|
-
|
-
|
-
|
-
|
70,629
|
|||||
Balances
at December 30, 2006
|
80,854,453
|
$
809
|
$150,045
|
$
(172)
|
$(11,733)
|
$
12,376
|
$ -
-
|
$151,325
|
|||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
9,580
|
-
|
9,580
|
|||||
Pension
liability adjustment,
net of tax |
-
|
-
|
-
|
-
|
194
|
-
|
-
|
194
|
|||||
Interest
rate swap derivative
adjustment, net of tax |
-
|
-
|
-
|
-
|
(96)
|
-
|
-
|
(96)
|
|||||
Total
comprehensive income
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
9,678
|
|||||
Adjustment
to initially apply
FIN 48 |
-
|
-
|
-
|
-
|
-
|
141
|
-
|
141
|
|||||
Stock-based
compensation
|
-
|
-
|
265
|
-
|
-
|
-
|
-
|
265
|
|||||
Excess
tax benefits associated
with stock-based compensation |
-
|
-
|
89
|
-
|
-
|
-
|
-
|
89
|
|||||
Treasury
stock
|
(38,136)
|
-
|
-
|
(206)
|
-
|
-
|
-
|
(206)
|
|||||
Issuance
of common stock
|
55,582
|
-
|
207
|
-
|
-
|
-
|
-
|
207
|
|||||
Balances
at March 31, 2007
|
80,871,899
|
$
809
|
$150,606
|
$
(378)
|
$(11,635)
|
$
22,097
|
$
-
|
$161,499
|
|
March
31,
2007 |
April
1,
2006
|
||||
Cash
flows from operating activities:
|
||||||
Net
income
|
$
|
9,580
|
$
|
366
|
||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||
Depreciation
and amortization
|
5,744
|
4,133
|
||||
Gain
on disposal of property, plant, equipment and other
assets
|
(39
|
)
|
(25
|
)
|
||
Deferred
taxes
|
(1,519
|
)
|
(1,170
|
)
|
||
Stock-based
compensation expense
|
540
|
424
|
||||
Changes
in operating assets and liabilities:
|
||||||
Restricted
cash
|
22
|
11
|
||||
Accounts
receivable
|
(2,235
|
)
|
3,418
|
|||
Inventories
and prepaid expenses
|
(2,582
|
)
|
277
|
|||
Accounts
payable and accrued expenses
|
3,534
|
(3,561
|
)
|
|||
Other
|
1,110
|
1,035
|
||||
Net
cash provided by operating activities
|
14,155
|
4,908
|
||||
Cash
flows from investing activities:
|
||||||
Capital
expenditures
|
(2,385
|
)
|
(2,503
|
)
|
||
Gross
proceeds from disposal of property, plant and equipment and
other assets
|
57
|
57
|
||||
Net
cash used by investing activities
|
(2,328
|
)
|
(2,446
|
)
|
||
Cash
flows from financing activities:
|
||||||
Proceeds
from debt
|
5,500
|
-
|
||||
Payments
on debt
|
(17,254
|
)
|
(1,256
|
)
|
||
Deferred
loan costs
|
(16
|
)
|
-
|
|||
Contract
payments
|
(37
|
)
|
(33
|
)
|
||
Issuance
of common stock
|
87
|
11
|
||||
Minimum
withholding taxes paid on stock awards
|
(206
|
)
|
-
|
|||
Excess
tax benefits from stock-based compensation
|
89
|
4
|
||||
Net
cash used by financing activities
|
(11,837
|
)
|
(1,274
|
)
|
||
Net
(decrease)/increase in cash and cash equivalents
|
(10
|
)
|
1,188
|
|||
Cash
and cash equivalents at beginning of period
|
5,281
|
36,000
|
||||
Cash
and cash equivalents at end of period
|
$
|
5,271
|
$
|
37,188
|
||
Supplemental
disclosure of cash flow information:
|
||||||
Cash
paid during the period for:
|
||||||
Interest
|
$
|
1,634
|
$
|
1,403
|
||
Income
taxes, net of refunds
|
$
|
3,631
|
$
|
1,326
|
(1)
|
General
|
The
accompanying consolidated financial statements for the three
month periods
ended March 31, 2007 and April 1, 2006 have been prepared in
accordance
with generally accepted accounting principles in the United
States of
America by Darling International Inc. (“Darling”) and its subsidiaries
(Darling and its subsidiaries are collectively referred to
herein as the
“Company”) without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (“SEC”). The information furnished
herein reflects all adjustments (consisting only of normal
recurring
accruals) that are, in the opinion of management, necessary
to present a
fair statement of the financial position and operating results
of the
Company as of and for the respective periods. However, these
operating
results are not necessarily indicative of the results expected
for a full
fiscal year. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance
with
generally accepted accounting principles have been omitted
pursuant to
such rules and regulations. However, management of the Company
believes,
to the best of their knowledge, that the disclosures herein
are adequate
to make the information presented not misleading. The accompanying
consolidated financial statements should be read in conjunction
with the
audited consolidated financial statements contained in the
Company’s Form
10-K for the fiscal year ended December 30,
2006.
|
(a)
|
Basis
of Presentation
|
(b)
|
Fiscal
Periods
|
The
Company has a 52/53 week fiscal year ending on the Saturday
nearest
December 31. Fiscal periods for the consolidated financial
statements
included herein are as of March 31, 2007, and include the 13
weeks ended
March 31, 2007, and the 13 weeks ended April 1,
2006.
|
(c)
|
Statement
of Stockholders’ Equity
|
(d)
|
Earnings
Per Share
|
Basic
income per common share is computed by dividing net income
by the weighted
average number of common shares outstanding during the period.
Diluted
income per common share is computed by dividing net income
by the weighted
average number of common shares outstanding during the period
increased by
dilutive common equivalent shares determined using the treasury
stock
method.
|
|
Net
Income per Common Share (in thousands, except per share
data)
|
|||||||||||||||||
|
Three
Months Ended
|
|||||||||||||||||
|
|
|
March
31, 2007 |
|
|
|
|
|
|
|
April
1, 2006 |
|
||||||
|
Income
|
|
Shares
|
|
Per
Share
|
|
|
Income
|
|
|
Shares
|
|
Per
Share
|
|||||
Basic:
|
||||||||||||||||||
Net
income
|
$
9,580
|
80,429
|
$ 0.12
|
|
$ 366
|
63,952
|
$
0.01
|
|||||||||||
Diluted:
|
||||||||||||||||||
Effect
of dilutive securities:
|
||||||||||||||||||
Add:
Option shares in the money
and
dilutive effect
of restricted stock
|
—
|
2,075
|
—
|
—
|
1,894
|
—
|
||||||||||||
Less:
Pro forma treasury
shares
|
—
|
(857
|
)
|
—
|
—
|
(1,074
|
)
|
—
|
||||||||||
Net
income
|
$
9,580
|
81,647
|
$
0.12
|
|
$
366
|
64,772
|
$
0.01
|
April
1,
2006
|
|
Net
sales
|
$127,124
|
Income
from continuing operations
|
3,576
|
Net
income
|
3,576
|
Earnings
per share
|
|
Basic and diluted
|
$
0.04
|
(5) |
Business
Segments
|
Business
Segment Net Sales (in thousands):
|
Three
Months Ended
|
||||||
|
March
31,
2007
|
April
1,
2006
|
||||
Rendering:
|
||||||
Trade
|
$
|
101,665
|
$
|
45,502
|
||
Intersegment
|
8,831
|
7,252
|
||||
110,496
|
52,754
|
|||||
Restaurant
Services:
|
||||||
Trade
|
36,947
|
30,898
|
||||
Intersegment
|
1,060
|
1,037
|
||||
38,007
|
31,935
|
|||||
Eliminations
|
(9,891
|
)
|
(8,289
|
)
|
||
Total
|
$
|
138,612
|
$
|
76,400
|
Three
Months Ended
|
|||||||
|
March
31,
2007
|
April
1,
2006
|
|||||
Rendering
|
$
|
17,908
|
$
|
4,388
|
|||
Restaurant
Services
|
7,363
|
3,098
|
|||||
Corporate
|
(14,058
|
)
|
(5,578
|
)
|
|||
Interest
expense
|
(1,633
|
)
|
(1,542
|
)
|
|||
Income from continuing operations
|
$
|
9,580
|
$
|
366
|
|
March
31,
2007 |
December
30,
2006
|
||||
Rendering
|
$
|
155,776
|
$
|
153,798
|
||
Restaurant
Services
|
39,185
|
36,359
|
||||
Combined
Rendering/Restaurant Services
|
104,230
|
105,402
|
||||
Corporate
|
24,417
|
25,247
|
||||
Total
|
$
|
323,608
|
$
|
320,806
|
(6) |
Income
Taxes
|
(7) |
Financing
|
|
March
31,
2007
|
December
30,
2006
|
||||
Term
Loan
|
$
|
46,250
|
$
|
47,500
|
||
Revolving
Credit Facility:
|
||||||
Maximum availability
|
$
|
125,000
|
$
|
125,000
|
||
Borrowings outstanding
|
25,000
|
35,500
|
||||
Letters of credit issued
|
17,896
|
18,391
|
||||
Availability
|
$
|
82,104
|
$
|
71,109
|
(8) |
Derivative
Instruments
|
|
March
31,
2007
|
||
Derivative
adjustment included in accumulated other comprehensive loss/(gain)
at beginning of period
|
$
|
408
|
|
Net change arising from current period hedging
transactions (a)
|
103
|
||
Reclassifications into earnings
|
(6
|
)
|
|
Accumulated other comprehensive loss
|
$
|
505
|
(a)
|
Reported
as accumulated other comprehensive loss of approximately $0.2
million
recorded net of taxes of approximately $0.1 million for the
three months
ended March 31, 2007.
|
March
31, 2007 |
|||
Loss/(gain) to interest expense related to interest rate
swap agreements
(effective portion)
|
$
|
6
|
|
Loss/(gain) to other expenses related to net change arising
from current
period hedging transactions
|
-
|
||
Total reclassifications into earnings
|
$
|
6
|
(9) |
Revenue
Recognition
|
(10) |
Employee
Benefit Plans
|
|
March
31,
2007
|
April
1,
2006
|
||||
Service cost
|
$
|
582
|
$
|
564
|
||
Interest
cost
|
1,253
|
1,114
|
||||
Expected
return on plan assets
|
(1,409
|
)
|
(1,242
|
)
|
||
Amortization
of prior service cost
|
29
|
35
|
||||
Amortization
of net loss
|
288
|
413
|
||||
Net
pension cost
|
$
|
743
|
$
|
884
|
(11) |
New
Accounting Pronouncements
|
· |
Higher
finished product commodity prices were experienced in the first
quarter of
fiscal 2007 as a result of a global tightening of feed grains
and oils
from a growing global demand for bio-fuels. Higher finished product
prices
were favorable to the Company’s sales revenue, but this favorable result
was partially offset by the negative impact on raw material cost,
due to
the Company’s formula pricing arrangements with raw material suppliers,
which index raw material cost to the prices of finished product
derived
from the raw material. The financial impact of finished goods
prices on
sales revenue and raw material cost is summarized below in Results
of
Operations. Comparative sales price information from the Jacobsen
index,
an established trading exchange publisher used by management,
is listed
below in Summary of Key Indicators.
|
· |
The
Company has the ability to burn alternative fuels, including
its fats and
greases, at a majority of its plants as a way to help manage
the Company’s
exposure to high natural gas prices. Beginning
October 1, 2006, the federal government effected a program which
will
provide Federal tax credits under certain circumstances for commercial
use
of alternative fuels in lieu of fossil-based fuels. Beginning
in the
fourth quarter of 2006, the Company filed documentation with
the Internal
Revenue Service (“IRS”) to recover these Alternative Fuel Mixture Credits
as a result of its use of fats and greases to fuel boilers at
its plants.
The Company has received approval from the IRS to apply for these
credits.
However, the Federal regulations relating to the Alternative
Fuel Mixture
Credits are complex and further clarification is needed by the
Company
prior to recognition of any tax credits received. The Company
has not
recorded these credits as income due to pending clarification
of the
federal regulations. The Company is in the process of pursuing
clarification and eligibility to receive the Alternative Fuel
Mixture
Credits. As of March 31, 2007, the Company has applied for approximately
$1.1 million in Alternative Fuel Mixture Credits and has received
approximately $0.4 million from the IRS relating to these credits,
which
are included in current liabilities on the balance sheet as deferred
income. The
Company expects to continue to burn alternative fuels at its
plants in
future periods as long as the price of natural gas remains
high.
|
· |
Higher
raw material volumes were collected from suppliers during the
first
quarter of 2007 as compared to fiscal 2006. Extreme winter conditions,
Midwest swine diseases and strong West Coast production contributed
to the
Company’s increase in raw material volumes. The financial impact of higher
raw material volumes on sales revenue and raw material cost is
summarized
below in Results of Operations.
|
· |
Energy
prices for natural gas and diesel fuel are expected to remain
relatively
high in fiscal 2007. The Company consumes significant volumes
of natural
gas to operate boilers in its plants, which generate steam to
heat raw
material. High natural gas prices represent a significant cost
of factory
operation included in cost of sales. The Company also consumes
significant
volumes of diesel fuel to operate its fleet of tractors and trucks
used to
collect raw material. High diesel fuel prices represent a significant
component of cost of collection expenses included in cost of
sales. Though
the Company will continue to manage these costs and attempt to
minimize
these expenses, prices remained relatively high in the first
quarter of
2007 and represent an ongoing challenge to the Company’s operating results
for future periods.
|
· |
Avian
influenza (“H5N1”), or Bird Flu, a highly contagious disease that affects
chickens and other poultry species, has spread throughout Asia
and Europe.
The H5N1 strain is highly pathogenic, which has caused concern
that a
pandemic could occur if the disease migrates from birds to humans.
This
highly pathogenic strain has not been detected in North or South
America
as of April 30, 2007, but low pathogenic strains that are not
a threat to
human health have been reported in the U.S. The USDA has developed
safeguards to protect the U.S. poultry industry from the H5N1
strain of
Bird Flu. These safeguards are based on import restrictions,
disease
surveillance and a response plan for isolating and depopulating
infected
flocks if the disease is detected. Notwithstanding these safeguards,
any
significant outbreak of Bird Flu in the U.S. could have a negative
impact
on the Company’s business by reducing demand for
MBM.
|
· |
Expenses
related to compliance with requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 (the “Sarbanes Act”) are expected to continue
throughout 2007 and thereafter. The Company expects recurring
compliance
costs related to the required updating of documentation and the
testing
and auditing of the Company’s system of internal control over financial
reporting, as required by the Sarbanes Act. Additionally, the
Company
expects to incur higher costs related to the Sarbanes Act in
fiscal 2007
over the previous year due to the inclusion of NBP in the internal
control
documentation and testing process.
|
· |
In
fiscal 2007, the integration of information systems used by NBP
into the
Company’s information systems could have a significant impact on the
Company’s operations. Additionally, continued attention to integration
activities, particularly as they relate to systems integration
and
internal control integration, may distract Company management
from
operating issues.
|
· |
In
March 2007, U.S. federal and state regulatory authorities put
increased
emphasis on pet and livestock food safety as a result of the
discovery of
adulterated imported pet and livestock food additives. It is
unclear
whether, or to what extent, any increased regulatory attention
on animal
food safety will impact the Company.
|
· |
As
a result of the first case of bovine spongiform encephalopathy
(“BSE”), on
October 6, 2005, the FDA proposed to amend the agency’s regulations to
prohibit certain cattle origin materials in the food or feed
of all
animals (“Proposed Rule”). The materials that were proposed to be banned
include: 1) the brain and spinal cord from cattle 30 months and
older that
are inspected and passed for human consumption; 2) the brain
and spinal
cord from cattle of any age not inspected and passed for human
consumption; and 3) the entire carcass of cattle not inspected
and passed
for human consumption if the brains and spinal cords have not
been
removed. In addition, the Proposed Rule provides that tallow
containing
more than 0.15% insoluble impurities also be banned from all
animal food
and feed if this tallow is derived from the proposed prohibited
materials.
As of April 30, 2007, the FDA has not finalized the Proposed
Rule and no
new regulations affecting animal feed or modifying the Proposed
Rule have
been issued. The Company’s management will continue to monitor this and
other regulatory issues.
|
·
|
The
inclusion of the operations of NBP,
|
·
|
Higher
finished product prices,
|
·
|
$2.2
million received for sale of judgment, and
|
·
|
Higher
raw material volume.
|
·
|
Higher
raw material prices.
|
·
|
Finished
product commodity prices (quoted on the Jacobsen
index),
|
·
|
Raw
material volume,
|
·
|
Production
volume and related yield of finished product, and
|
·
|
Collection
fees and collection operating
expense.
|
Avg.
Price
1st
Quarter
2007
|
Avg.
Price
1st
Quarter
2006
|
Increase/
(Decrease)
|
%
Increase/
(Decrease)
|
|
MBM (Illinois) |
$203.73
/ton
|
$169.40
/ton
|
$34.33
/ton
|
20.3%
|
MBM
(California)
|
$201.48
/ton
|
$114.73
/ton
|
$86.75
/ton
|
75.6%
|
BFT
(Chicago)
|
$
21.52 /cwt
|
$
16.43 /cwt
|
$5.09
/cwt
|
31.0%
|
YG
(Illinois)
|
$
18.65 /cwt
|
$
12.71 /cwt
|
$5.94
/cwt
|
46.7%
|
|
Rendering
|
Restaurant
Services |
Corporate
|
Total
|
||||
Net
sales due to contribution from NBP assets
|
$
52.0
|
$
3.9
|
$
-
|
$
55.9
|
||||
Higher
finished goods prices
|
6.9
|
2.7
|
-
|
9.6
|
||||
Other
sales increase
|
1.6
|
(1.0
|
)
|
-
|
0.6
|
|||
Purchase
of finished product for resale
|
(2.7
|
)
|
(1.2
|
)
|
-
|
(3.9
|
)
|
|
Product
transfers
|
(1.6
|
)
|
1.6
|
-
|
-
|
|||
$
56.2
|
$
6.0
|
$
-
|
$
62.2
|
|
Rendering |
Restaurant
Services
|
Corporate
|
Total
|
||||
Cost
of sales and operating expenses related
to
NBP assets |
$
40.8
|
$
1.5
|
$
-
|
$
42.3
|
||||
Higher
raw material prices
|
4.2
|
0.4
|
-
|
4.6
|
||||
Other
expenses
|
0.8
|
(0.5
|
)
|
0.4
|
0.7
|
|||
Purchases
of finished product for resale
|
(2.7
|
)
|
(1.2
|
)
|
-
|
(3.9
|
)
|
|
Sale
of judgment
|
(1.2
|
)
|
-
|
-
|
(1.2
|
)
|
||
Product
transfers
|
(1.6
|
)
|
1.6
|
-
|
-
|
|||
$
40.3
|
$
1.8
|
$
0.4
|
$
42.5
|
|
Rendering
|
Restaurant
Services
|
Corporate
|
Total
|
||||
Selling, general and administrative expenses
related to NBP assets |
$
1.2
|
$
0.2
|
$
0.8
|
$
2.2
|
||||
Payroll and related expense
|
(0.1
|
)
|
-
|
1.7
|
1.6
|
|||
Other expense increase
|
-
|
(0.1
|
)
|
0.2
|
0.1
|
|||
Sale of judgment
|
-
|
-
|
(1.0
|
)
|
(1.0
|
)
|
||
$
1.1
|
$
0.1
|
$
1.7
|
$
2.9
|
· |
The
Credit Agreement provides for a total of $175.0 million in financing
facilities, consisting of a $50.0 million term loan facility
and a $125.0
million revolving credit facility, which includes a $35.0 million
letter
of credit sub-facility.
|
· |
The
$125.0 million revolving credit facility has a term of five years
and
matures on April 7, 2011.
|
· |
As
of March 31, 2007, the Company has borrowed all $50.0 million
under the
term loan facility, which provides for scheduled quarterly amortization
payments of $1.25 million over a six-year term ending April 7,
2012. The
Company has reduced the term loan facility by quarterly payments
totaling
$3.75 million, for an aggregate of $46.25 million principal outstanding
under the term loan facility at March 31,
2007.
|
· |
Alternative
base rate loans under the Credit Agreement bear interest at a
rate per
annum based on the greater of (a) the prime rate and (b) the
federal funds
effective rate (as defined in the Credit Agreement) plus ½ of 1% plus, in
each case, a margin determined by reference to a pricing grid
and adjusted
according to the Company’s adjusted leverage ratio. Eurodollar
loans bear interest at a rate per annum based on the then-applicable
LIBOR
multiplied by the statutory reserve rate plus a margin determined
by
reference to a pricing grid and adjusted according to the Company’s
adjusted leverage ratio.
|
· |
The
Credit Agreement provided sufficient liquidity to complete the
Transaction
and to retire the Company’s senior subordinated notes in the aggregate
amount of $37.6 million in principal, accrued interest and fees
on June 1,
2006. Additionally, the Credit Agreement has an extended term,
lower
interest rates, fewer restrictions on investments, and improved
flexibility for paying dividends or repurchasing Company stock
(all of
which are subject to the terms of the Credit Agreement) than
the Company’s
prior credit facility.
|
· |
The
Credit Agreement contains restrictive covenants that are customary
for
similar credit arrangements and requires the
maintenance of certain minimum financial ratios. The Credit Agreement
also
requires the Company to make certain mandatory prepayments of
outstanding
indebtedness using the net cash proceeds received from certain
dispositions of property, casualty or condemnation, any sale
or issuance
of equity interests in a public offering or in a private placement,
unpermitted additional indebtedness incurred by the Company and
excess
cash flow under certain circumstances.
|
Credit
Agreement:
|
|
Term
Loan
|
$
46,250
|
Revolving
Credit Facility:
|
|
Maximum
availability
|
$
125,000
|
Borrowings
outstanding
|
25,000
|
Letters
of credit issued
|
17,896
|
Availability
|
$
82,104
|
31.1 |
Certification pursuant to Rule 13a-14(a)
or Rule
15d-14(a) of the Securities Exchange Act of 1934, of Randall
C. Stuewe,
the Chief Executive Officer of the Company.
|
31.2 |
Certification pursuant to Rule 13a-14(a)
or Rule
15d-14(a) of the Securities Exchange Act of 1934, of John O.
Muse, the
Chief Financial Officer of the Company.
|
32 |
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002, of Randall C. Stuewe, the Chief
Executive
Officer of the Company, and of John O. Muse, the Chief Financial
Officer
of the Company.
|