Changing Business Structures
Steve Wright
General Manager & CEO
Pro-Fac Cooperative
History
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Pro-Fac Cooperative
– 1961 - Present
Our beginnings...
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1961 - Western N.Y. growers formed partnership
with local food processors
Cooperative named “Pro-Fac,” to symbolize
producers and facilities
Agway played significant role in start-up
Company - Curtice-Burns - assured of supply
Grower/members assured of markets
700+ growers in New York State joined
by buying stock
Innovators from the start...
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Members bought stock to join Co-op
Operated under detailed agreement
between Co-op and processor partner
Separate responsibilities
– Curtice Burns - processed and marketed products
(Brand, Private Label, Food Service)
– Pro-Fac – Supplied Raw Product
– Owned Facilities
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Profits and losses shared equally
by series of agreements
Strengths & Benefits - Cooperative Structure
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Cooperative form enabled multi-crop, single
pool patronage proceeds distributions THUS,
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Risk/reward sharing (20+ crops) removed
impact of short-term single commodity profit
swings and geographic issues
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Capper-Volstead protection provided
opportunities for marketing alliances and
strategic partnerships with other Coops.
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Tax Benefits - At patron level vs. corporate rate
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Access to Farm Credit System - Favorable rate
structure
Growth through expansion...
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Company grew through acquisitions expanding grower opportunities and regions
1973 - corporation became public listed first on NASDAQ, then AMEX
Grower needs began to compete
with public stockholders
Acquisitions of regional companies
continued through 70’s & 80’s
Strategic changes...
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Restructuring began in 90’s
1993 - Majority owner Agway decided
to sell food businesses
Lengthy change-of-control battle began
Pro-Fac ultimately acquired Curtice-Burns
to maintain members’ markets…
took public company private (Coop.)
With acquisition came significant debt
– Debt $328 million
– Interest Expense $42 million
Consolidations...
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Divisional consolidations
1997 - Company name changed to “Agrilink
Foods”
1998 - acquired DFVC & Birds Eye brand increased debt load
– Debt $679 million
– Interest Expense $83.5 million
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Voila! successful national introduction
1999 - Remaining operations combined
under one company
The need for change within
Pro-Fac and Agrilink
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Highly leveraged
Inadequate resources to grow the business
– Marketing
– New products
– Capital expenditures
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Approaching deadline for refinancing
Bank Consolidation
American National Bank & Trust
Bank of America
Bank of Boston
Bank of New England
Bank One
Bank South
Bankers Trust
Barclays Business Credit
Casco Northern Bank
Central Fidelity Bank
Chase Manhattan Bank
Chemical Bank
Citibank
Citizens and Southern
Congress Financial Corp.
Connecticut National Bank
Continental Bank
Corestates Bank
Cresatar
Deutsche Bank
First Bank System
First City BankCorporation
First Fidelity Bancorporation
First National Bank of Chicago
First Pennsylvania Bank
First Union
Firstar
Fleet Bank
Hamilton Bank
JP Morgan
Manufacturers Hanover Trust
Maryland National Bank
Mercantile Bank
Meridian Bank
Montgomery Securities
Nations Bank
NBD Bank N.A.
NCNB
New Jersey National Bank
Norstar Bank
OFFITBANK Holdings
Philadelphia National Bank
Republic Security Financial
RIHT National Bank
Salomon Smith Barney
Seattle-First National Bank
Security Pacific
Shawmut Bank
Signet Banking Corporation
Sovran Bank
Star Bank
Summit Bancorp
Texas Commerce Bank
Travelers
Trust Company of Georgia
U.S. Bancorp
Merged Into
Bank of America
Bank One
Citigroup
Deutsche Bank
FleetBoston
J.P. Morgan
SunTrust
U.S. Bancorp
Wachovia
Major Cooperatives in Trouble
January 1999
July 2000
May 2002
- Agripac declared bankruptcy
- Tri-Valley declared bankruptcy
- Farmland Industries declared
bankruptcy (largest coop in U.S.)
May 2002
- Mason County Fruit Packers
declared bankruptcy (Michigan
fruit cooperative)
September 2002 - Agway declared bankruptcy
October 2002
- Spring Wheat Bakers closed
(N.D. based coop)
Options Explored
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Management and board explored
alternatives
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IPO
Sale of the company
Strategic investor
Synergistic partner (LLC)
Private equity infusion
Tough it out
Tough it out
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Jeopardized
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100% CMV
future dividend payments
value of preferred investment
retention of key management talent
What was the deal?
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A recapitalization that did the following
– $175 mm capital infusion to reduce debt
– Established Pro-Fac as a separate entity
– Supply Agreement
10 years with liquidated damages
 Maintained the CMV process
 Payment to Pro-Fac of $10 mm/year for 5 years
(for terminating the previous supply agreement)
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– Transition Services Agreement (24 months)
– Use of the Ag. Services staff
– $1 million annual credit facility (5 years)
What has changed for Pro-Fac?
Pre-Vestar
Pro-Fac ownership of Birds Eye
Pro-Fac Board Members
Member-owned delivery rights
Annual marketing plan
Payment of full CMV
Annual earnings distribution
Preferred stock Dividends
Member equity
100%
12
Post-Vestar
40%
15
YES
YES
YES
YES
At Risk
Less Risk
YES
NO
YES
YES
At Risk
Less Risk/
Growth
Potential
What was in it for Birds Eye Foods?
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The opportunity to create more value
for all stakeholders
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new products
capital investment
marketing to enhance its brands
potential for acquisitions
attract and retain talent
enhancing the viable employment opportunity
for our associates
Pro-Fac transformation
has commenced
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Pro-Fac Board began the strategic planning
process November, 2002
– Use “expert” reactor panel
Agriculture
 Academia
 Coop. structure/organization
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Strategic Direction
Maintain cooperative structure 
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$10 million annual payment from
Birds Eye Foods
Maintain membership base for
supply agreement
Assure SEC and NASDAQ requirements
are met (Sarbanes-Oxley Act)
Ownership in Birds Eye Holdings, LLC
Strategic Direction
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Continue to strongly support current supply agreements
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Establish and maintain a healthy capital structure
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Develop new customers
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Consider structures which would align the Cooperative
with commodity or regional opportunities
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Central management, admin., bargaining/negotiation,
customer service
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Commodity/Regional focus on business development,
strategy and capital initiatives
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Leverage Ag. Services Information System (ASIS) (Traceability/Food Safety - Leading edge software)
Strategic Direction
Post a Change of Control
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Some members may want to cash out - Can with
sufficient proceeds
Offer membership to only top producers (evaluations)
Capitalization
– May vary with commodity/region
– Some re-investment
– Possibly base capital plan
Mission Statement
“To be the acknowledged leader in
supplying the food industry with
dependable, superior quality, efficiently
and safely produced fruits, vegetables
and other agricultural products.”
Pro-Fac Geographic Breadth
and Customers
CAHOON
FARMS
Results to Date - Birds Eye Foods
(Dollars in Millions)
2002
2003
$964.4
$878.3
$6.8
$20.8
Cash
$14.7
$153.8
Interest Expense
$63.0
$40.8
$623.1
$459.9
Net Sales
Net Earnings
Debt
Down the Road...
“The Birds Eye business will be harvested someday”
J.P. Morgan Advisor
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Provide return to Vestar Capital Partners and their
investors (State pension funds and University
endowments)
Provide return to Pro-Fac Cooperative
– Supply Agreement in new business structure
– Consider equity redemption
– Recapitalize the Cooperative
Investment - Business ventures
 Growth - New customers, areas and members
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Provide return to management investors
Pro-Fac Liquidation Values
and Preference (1/04)
LIQUIDATION VALUE
($ Mils.)
SECURITY
Qualified Retains
$
Preferred Stock
$ 120.7
Common Stock
$
9.6
Special Membership Interests
$
21.7
Total
9.8
$ 161.8 million
Hypothetical
Pro-Fac Proceeds from its Investment in Birds Eye Foods
Birds Eye EBITDA ($ Mils.)
Multiple
Enterprise Value
Net Debt
Equity Value
Vestar Preferred ($137.5 mil. @ 15% PIK)
Common Equity Value
Pro-Fac Portion @ 37.80% *
Present Value of Termination Agreement Payment
Total Proceeds
*
$130.0
7.5 x
$975.0
(175.0)
$800.0
(241.0)
$559.0
211.3
-0$211.3 million
Assumes management ownership grows from 3.04% to 10.0%
NOTE: Vestar Common moves from 56.34% to 52.20%
The following example illustrates one method for calculating what Pro-Fac might receive for its investment in Birds
Eye Foods. The numbers used do not represent actual results of Birds Eye Foods for any past period or projected
results of Birds Eye Foods for any future period. The numbers and method illustrated are not based upon any
actual transaction under consideration
Thank you for inviting
me to your meeting and
for your kind attention...