Current Report — Form 8-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 8-K Current Report 24 110K
2: EX-1 Letter From P.B. Kazarian to F.J. Tasco - 5/24/94 1 11K
3: EX-2 Letter From P.B. Kazarian to F.J. Tasco - 6/5/94 1 11K
4: EX-3 Letter From Japonica to J. Rosenfeld - 6/8/94 1 11K
5: EX-4 Letter From F.J. Tasco to Japonica - 6/13/94 1 11K
6: EX-5 Letter From P.B. Kazarian to Rosenfeld - 6/20/94 1 11K
7: EX-6 Letter From P.B. Kazarian to David-Weill - 6/24/94 1 12K
8: EX-7 Letter From P.B. Kazarian to F.J. Tasco - 7/5/94 2 14K
9: EX-8 Letter From P.B. Kazarian to F.J. Tasco - 7/14/94 1 12K
10: EX-9 Letter From F.J. Tasco to P.B. Kazarian - 7/19/94 1 12K
11: EX-10 Letter From Japonica to J. Rosenfeld - 7/26/94 2 14K
12: EX-11 Letter From Japonica to F.J. Tasco - 7/26/94 2 15K
13: EX-12 Letter From P.B. Kazarian to F.J. Tasco - 8/11/94 1 12K
14: EX-13 Letter From P.B. Kazarian to F.J. Tasco - 8/19/94 1 12K
15: EX-14 Letter From Japonica to E.R. Shames - 9/7/94 6 27K
16: EX-15 Letter From P.B. Kazarian to F.J. Tasco - 8/19/94 2 17K
17: EX-16 Letter Form A.L. Miller to Kazarian 9/14/94 1 12K
18: EX-17 Letter From Japonica to Tasco - 9/15/94 2 15K
19: EX-18 Letter From Tasco to Kazarian W/ Attach. 9/16/94 5 24K
20: EX-19 Letter From Japonica to Tasco 9/17/94 2 16K
21: EX-20 Letter From Tasco to Kazarian 9/19/94 1 12K
22: EX-21 Letter From Japonica to Tasco W/ Attach. 9/21/94 7 25K
23: EX-22 Letter From Japonica to Borden Board 9/22/94 4 22K
24: EX-23 Letter From Tasco to Kazarian 9/23/94 1 12K
25: EX-24 Letter From Brownstein to Nussbaum 9/26/94 1 12K
26: EX-25 Letter From Japonica to Tasco 9/27/94 1 13K
27: EX-26 Letter From Nussbaum to Lipton 10/5/94 2± 13K
28: EX-99.27 Letter From Japonica to Board 10-5-94 3 17K
29: EX-99.28 Opinion of Cs First Boston 4 23K
30: EX-99.29 Opinion of Lazard 4 23K
EX-14 — Letter From Japonica to E.R. Shames – 9/7/94
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EXHIBIT 14
[LETTERHEAD OF JAPONICA PARTNERS]
VIA FACSIMILE
HIGHLY CONFIDENTIAL
September 7, 1994
Mr. Ervin R. Shames
President and CEO
Borden, Inc.
180 East Broad Street
Columbus, Ohio 43215-3799
Dear Mr. Shames:
We respectfully request that all stockholders be
expeditiously provided with information and answers to the attached questions.
Filing such information with the SEC and/or
scheduling an analyst/shareholders meeting may be an appropriate first step.
Very truly yours,
/s/ JAPONICA PARTNERS
------------------------
JAPONICA PARTNERS
cc: List
Highly Confidential Draft
September 7, 1994
06:15 PM
September 6th Questions to Management
Cash Flow
1. Without proceeds from asset sales, how much 1st half interest expense
would have been paid?
2. With first half negative free cash flow of $62 million before
proceeds from asset sales, what is the Company's targets for free
cash flow in 1994 and 1995 excluding proceeds from assets sales?
3. How can management be meeting its cash flow targets when net debt
(including A/R financing, TMI, discontinued operations and other off
balance sheet financing) has remained essentially unchanged?
4. With the latest asset sale of Jays, reportedly selling for between
12% to 14% of sales, how can management be meetings its target of
$400 million in net proceeds from asset sales? Will the remaining
snack assets be sold at similar revenue multiples? Please provide
expected asset sale proceeds.
5. Would a 5th major restructuring cause 1995 free cash flow to be
negative? What would be the estimated cash cost of such a
restructuring?
6. Will the Company provide shareholders with monthly, or at a minimum,
quarterly itemized cash flow targets and results? Components of
operating cash flow should include restructuring cash costs,
discontinued business cash costs, individual asset sale proceeds,
working capital components, depreciation, deferred and current taxes,
Other Assets and Other, Net.
7. How much will annualized interest expense increased from that
projected in early 1994 given deteriorating credit spread costs,
essentially no debt reduction by mid-year, rising interest rates and
increased financing fees?
8. Without the apparent decrease in quarter to quarter cash interest to
book interest ratio of approximately $12 million and the positive
cash tax effect of $11 million, wouldn't Free Cash Flow after the $87
million in asset proceeds be nominal to negative? Will second half
cash expense increase proportionately? Please explain the $11
million cash tax line item.
9. Please provide components of Other assets and Other, net in the
annual and quarterly cash flows.
1
Highly Confidential Draft
September 7, 1994
06:15 PM
September 6th Questions to Management (cont.)
10. What are the debt repayment requirements in 1994 and 1995?
11. What is the status of the $52 million in IRS contested items?
12. Given the apparent delay in cash spending on restructuring and
capital expenditures to conserve cash in the first half, what will be
the impact on second half free cash flow? How has this affected
planned cost reductions and the Company's competitive position?
Please provide revised 1994 cap-ex projections.
Bank Debt
13. What are waiver provisions for covenant violations under the new bank
loan agreement? What percentage of the banks must agree for covenant
amendments?
14. What are upcoming 1994 and 1995 monthly/quarterly covenant compliance
dates, and what are these covenants? Please provide statistics and
definitions.
15. Can the holders of the Company's zero-coupon bonds demand redemption
for cash in 1997, or can the Company compel them to accept stock (see
page 24 of the 1993 Annual Report)?
16. What is the dollar amount of dividend "basket" cushion under the new
bank agreement?
17. If the new bank agreement fees total $20 to $30 million, will this be
funded with additional debt?
18. How much, if any, does the cost of the bank debt increase with rating
downgrades?
19. When will the Company file a copy of the new bank agreement with the
SEC?
20. How much commercial paper is currently issued and outstanding? What
are the projections for the remainder of the year? How much
commercial paper will be classified as long-term debt?
21. Given the possibility that monthly bank covenant requirements to pay
down debt are top priority, would shareholders' needs be
subordinated?
2
Highly Confidential Draft
September 7, 1994
06:15 PM
September 6th Questions to Management (cont.)
Operating
22. What are the Company's new EPS estimates for 1994 and 1995?
23. Is the approximately 220 and 330 basis point gross and operating
margin decline, respectively, for the first six months in 1994
considered "on target?"
24. What effect, if any, would a major reduction to the already reduced
capital expenditure further weaken the Company's competitive position
and jeopardize product quality?
25. Will any recent "me-too" new products out-perform past new product
introductions? Also, what has been the total unexpensed cash cost of
new products introduced or re-introduced over the past 12 months?
26. Given some estimates that pasta operating profit up-side is $5
million to $10 million per quarter, does that mean domestic pasta
sales of an estimated $120 million broke even in the second quarter?
27. Do the 80% of brands market share improvement comments apply to only
about $100 million of quarterly domestic product sales when domestic
pasta and dairy are excluded?
28. With the exception of major asset sales, are current management's
plans essentially the same as those in 1992, including the addition
of new management and focus on brand equity?
29. What are the components of the $7.7 million change in Other (income)
and expense, net between second quarter 1993 and 1994 that provided
almost all the earnings in the second quarter 1994.
30. With the sale of snacks and other businesses, as well as the
speculated disposal of dairy, will the Company suffer a significant
loss of competitive advantage and leverage with its retailers and
consumers?
31. Did pasta dollar market share, not tonnage volume, decline by one
point in the second quarter, as shown by IRI?
32. How much of Dairy's increased operating loss was associated with the
introduction of "low bidding" business strategies?
3
Highly Confidential Draft
September 7, 1994
06:15 PM
September 6th Questions to Management (cont.)
33. How many of the supposedly reduced employees are still getting paid,
or retained and paid as consultants, e.g., P.R. consultant? What is
the annualized dollar amount?
Restructuring and Sale of Assets
34. Would any disposal and restructuring expenses associated with dairy
and/or other assets eliminate any incremental proceeds from asset
sale?
35. Given Chairman Tasco's statements in early 1994 that improving Dairy
was the single greatest potential for increasing shareholder value in
the near term, has this changed?
36. Would any up-side shareholder value be lost from asset sales with
insufficient proceeds to pay down significant debt?
37. If the North American food business is at break-even levels before
interest, could further downsizing be expected to reverse the
negative trend?
38. Quantify the impact of any expected increase in overhead burden rate
resulting from major asset sales. How is overhead and fixed burden
allocated among the various dairy products?
39. How much as been paid and committed to be paid to outside consultants
and advisors, both business and legal, in 1993 and 1994?
40. What was the peak operating profit of discontinued businesses and
dairy during the past 5 years?
41. How much expense and cash costs associated with Columbus and New York
headquarters have been historically and currently allocated to
discontinued operations and dairy? How has that recently changed?
42. Given that the Dairy business provided $90 million in operating
income in 1991, has the opportunity to recover that potential value
been essentially eliminated?
43. Given that the $1.2 billion in sales from discontinued operations
operated profitably as recently as 1991, does the disposal of these
businesses and the mounting phase-out losses eliminate the potential
to recover that lost value?
4
Highly Confidential Draft
September 7, 1994
06:15 PM
September 6th Questions to Management (cont.)
44. With regards to the $1.2 billion in sales from discontinued
businesses and the Dairy business, is the loss of operating profit
and potential shareholder value consistent with management's stated
objective of building shareholder value?
Accounting
45. Should the TMI and Sale of accounts receivable debt and associated
financing expenses be classified as debt and interest expense,
respectively? What is the all-in cost of the A/R program, and where
is it classified?
46. Is actual total debt currently at approximately $2.5 billion and
interest at $170 to $180 million, with TMI and A/R sales classified
as debt?
47. How much debt and interest expense is being allocated to discontinued
operations?
48. Are operating earnings significantly lower if restructuring charge
reversals are added back to the P&L?
49. Given the $94 million pretax charge for asset write downs and changes
in accounting estimates primarily relating to the cost of consumer
and trade promotions in 1993, is there any write down expected in
1994 relating to consumer and trade promotions?
50. Please provide disclosure of balance sheet, P&L and cash flow
information relating to discontinued operations. Given the frequent
statements that results are on target, please provide the targets as
well.
51. Should the 2nd quarter environmental charge be considered a one-time
charge given the recent reduction in spending? (1993 expected
spending was $18.4 million, and actual spending was only $4.3
million). See Annual Reports.
5
Dates Referenced Herein and Documents Incorporated by Reference
| Referenced-On Page |
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| This ‘8-K’ Filing | | Date | | First | | Last | | | Other Filings |
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| |  |
| Filed on / For Period End: | | 10/5/94 | | | | | | | 8-K |
| | 9/7/94 | | 1 | | 6 |
| List all Filings |
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