CFP Holdings Outlook Revised to Neg by S&P;Rtgs Afrmd.NEW YORK--(BUSINESS WIRE)--S&P CreditWire 8/18/97--Standard & Poor's today revised its outlook to negative from stable on CFP 1. CFP - Constraint Functional Programming. 2. CFP - Communicating Functional Processes. 3. CFP - Call For Papers (for a conference). Holdings Inc. due to the slower-than-expected realization of cost savings associated with the consolidation of the company's recently acquired Quality Foods unit into a new facility in Philadelphia, Pa. Additionally, the company has experienced higher raw material costs, which it has not been able to fully pass on to customers. Also, Standard & Poor's affirmed the company's single-'B'-plus corporate credit, senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. , and bank loan ratings. The ratings reflect CFP's weak financial profile resulting from the company's recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. , following its $87.2 million leveraged acquisition of Quality Foods L.P. and the company's earnings concentration with two customers. This is partially offset by the company's solid niche position as a national supplier of value-added processed beef and poultry products for the growing domestic food service industry and select industrial customers. The bulk of CFP's earnings are generated by value-added products resulting in significantly better operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: and less exposure to commodity beef prices than nonvalue-added manufacturers. However, sales are concentrated, with three customers -- Subway, Arby's, and Chef America -- that account for about 63% of sales. While Subway and Chef America have experienced good growth in recent years, a substantial reduction in sales to either of these customers would have a significant negative impact on CFP. Until the Quality acquisition, CFP was capacity constrained, but the acquisition should give the company additional production capacity that may allow the company to begin to diversify its customer base. The pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma operating margin through the nine month period ended June 30, 1997 was about 10.5%, significantly below the 15% pro forma for the year ended Sept. 30, 1996. Pro forma earnings pro forma earnings Income not necessarily calculated in accordance with generally accepted accounting principles. For example, a company might report pro forma earnings that exclude depreciation expense and nonrecurring expenses such as restructuring costs. before interest, taxes, depreciation, and amortization to interest for the nine month period was also very weak at slightly over 1 times (x), compared with about 1.8x pro forma for the year ended Sept. 30, 1996. Liquidity is sufficient, as debt maturities are very low for the next several years and the company's $20 million revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility was unused as of June 30, 1997. Standard & Poor's expects CFP to achieve quarter over quarter operating improvements beginning in the three-month period ending Sept. 30, 1997 as the company begins to benefit from cost-saving projects at Quality Foods and, to a lesser extent, better pricing over time. OUTLOOK: NEGATIVE CFP's financial profile is currently weak for the rating. If the company does not achieve operating improvements in the near term, the rating could be lowered. -- CreditWire CONTACT: Pamela L Atkins, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of (1) 212-208-8343 |
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