10-Q 1 dg10q3rdqtr2004.txt QUARTERLY REPORT PERIOD ENDED SEPTEMBER 25, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended September 25, 2004 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ______ to _____ Commission File Number: 1-1790 DI GIORGIO CORPORATION (Exact name of registrant as specified in its charter) Delaware 94-0431833 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 380 Middlesex Avenue Carteret, New Jersey 07008 (Address of principal executive offices) (Zip Code) (732) 541-5555 (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 in Exchange Act Rule 12b-2 of the Exchange Act) Yes__ No_X As of October 29, 2004, there were outstanding 78.1158 shares of Class A Common Stock and 76.8690 shares of Class B Common Stock. The aggregate market value of the voting and non-voting stock held by non-affiliates of the registrant is $0 because all voting and non-voting stock is held by affiliates of the registrant. DI GIORGIO CORPORATION AND SUBSIDIARIES INDEX PART 1. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheets, December 27, 2003 and September 25, 2004 (Unaudited).................... 1 Consolidated Condensed Income Statements, Thirteen Weeks and Thirty-nine Weeks Ended September 27, 2003 and September 25, 2004 (Unaudited)..................................... 2 Consolidated Condensed Statement of Stockholders' Equity, Thirty-nine Weeks Ended September 25, 2004 (Unaudited).................. 3 Consolidated Condensed Statements of Cash Flows, Thirty-nine Weeks Ended September 27, 2003 (Restated) and September 25, 2004 (Unaudited)...................................... 4 Notes to Consolidated Condensed Financial Statements (Unaudited).......... 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .............................................. 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk........... 12 Item 4. Controls and Procedures.............................................. 12 PART II. OTHER INFORMATION Item 6. Exhibits............................................................ 13 Signatures ................................................................. 14 Di Giorgio Corporation and Subsidiaries Consolidated Condensed Balance Sheets (in thousands) December 27, September 25, 2003 2004 (unaudited) ASSETS Current Assets: Cash $ 10,367 $ 10,745 Accounts and notes receivable-net 109,738 113,594 Inventories 61,204 60,068 Deferred income taxes 2,205 2,058 Prepaid expenses 3,606 4,788 ------- ------- Total current assets 187,120 191,253 --------- --------- Property, Plant and Equipment Cost 29,290 29,951 Accumulated depreciation and amortization (19,450) (21,295) ------- ------- Net 9,840 8,656 --------- --------- Long-term notes receivable 11,082 7,902 Other assets 24,764 25,551 Deferred financing costs-net 1,886 1,829 Goodwill 68,893 68,893 --------- --------- Total assets $ 303,585 $ 304,084 ========= ========= LIABILITIES & STOCKHOLDERS' EQUITY Current Liabilities: Revolving credit facility $12,880 $13,324 Accounts payable 67,896 67,194 Accrued expenses 30,652 36,174 Notes and leases payable within one year 64 68 ------- ------- Total current liabilities 111,492 116,760 --------- --------- Long-term debt 148,300 148,300 Capital lease liability 1,877 1,825 Other long-term liabilities 9,394 8,598 Stockholders' Equity: Common stock -- -- Additional paid-in-capital 8,002 8,002 Retained earnings 24,520 20,599 --------- --------- Total stockholders' equity 32,522 28,601 --------- --------- Total liabilities & stockholders' equity $ 303,585 $ 304,084 ========= ========= See Notes to Consolidated Condensed Financial Statements -1- Di Giorgio Corporation and Subsidiaries Consolidated Condensed Income Statements (in thousands) (unaudited)

Thirteen weeks ended ~~Twenty~~Thirty-~~six~~nine weeks ended ~~June~~Sept 2827, ~~June~~Sept 2625, ~~June~~Sept 2827, ~~June~~Sept 2625, 2003 2004 2003 2004 Revenue: Net sales $~~400~~ 391,~~433~~582 $~~312~~ 302,~~150~~961 $~~783~~ 1,~~448~~175,030 $~~623~~ 926,~~294~~255 Other revenue 2,~~512~~453 2,~~977~~867 47,~~751~~204 58,~~599~~466 ----------- ----------- ----------- ----------- Total revenue ~~402~~394,~~945~~035 ~~315~~305,~~127~~828 ~~788~~1,~~199~~182,234 ~~628~~934,~~893~~721 Cost of products sold ~~362~~352,~~223~~788 ~~277~~270,~~504~~760 ~~707~~1,~~638~~060,426 ~~553~~824,~~789~~549 ----------- ----------- ----------- ----------- Gross profit-exclusive of warehouse expense shown below 4041,~~722~~247 3735,~~623~~068 80121,~~561~~808 75110,~~104~~172 Warehouse expense 15,~~324~~906 14,~~822~~587 3046,~~556~~462 2944,~~578~~165 Transportation expense 7,~~545~~774 67,~~674~~019 1523,~~393~~167 1320,~~649~~668 Selling, general and administrative expense 87,~~116~~799 87,~~872~~925 1624,~~323~~122 1725,~~318~~243 ----------- ----------- ----------- ----------- Operating income 9,~~737~~768 75,~~255~~537 1828,~~289~~057 1420,~~559~~096 Interest expense 3,~~736~~699 3,~~804~~802 711,~~529~~228 711,~~581~~383 Amortization-deferred financing costs 157 ~~174~~175 ~~314~~471 ~~343~~518 Other (income)-net (~~1,000~~542) (~~666~~903) (12,~~848~~390) (12,~~497~~400) ----------- ----------- ----------- ----------- Income before income taxes 6,~~844~~454 32,~~943~~463 1218,~~294~~748 810,~~132~~595 Income tax expense 2,~~895~~723 1,~~688~~036 57,~~224~~947 34,~~480~~516 ----------- ----------- ----------- ----------- Net income $ 3,~~949~~731 $ 21,~~255~~427 $ 710,~~070~~801 $ 46,~~652~~079 =========== =========== =========== ===========

See Notes to Consolidated Condensed Financial Statements -2- Di Giorgio Corporation and Subsidiaries Consolidated Condensed Statement of Stockholders' Equity (in thousands, except share data) (unaudited)

Class A Common Stock Class B Common Stock Additional -------------------- -------------------- Paid-in Retained Shares Amount Shares Amount Capital Earnings Total Balance at ~~December 27, 2003~~ 78.1158 $-- 76.8690 $-- $8,002 $24,520 $32,522 December 27, 2003 Net income -- -- -- -- -- 46,~~652~~079 46,~~652~~079 Dividends -- -- -- -- -- (10,000) (10,000) ------- ---- ------ ---- ------ ------ ------ Balance at ~~June~~September 2625, 2004 78.1158 $-- 76.8690 $-- $8,002 $1920,~~172~~599 $2728,~~174~~601 ======= ==== ======= ==== ====== ======= =======

See Notes to Consolidated Condensed Financial Statements -3- Di Giorgio Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (in thousands) (unaudited)

AsThirty-nine ofweeks ~~March~~ended ----------------------- September 27, September 25, 2003 2004 As(as restated see note 4) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 10,801 $ 6,079 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization of ~~December~~fixed 27assets 1,672 ~~2003~~1,684 AsOther amortization 1,803 635 Provision for doubtful accounts 375 375 Actuarially calculated pension expense 728 1,013 Gain on sale of ~~December~~equipment 28-- (18) Deferred income taxes (528) (423) Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 3,795 ~~2002~~(9,134) Inventories 2,448 1,136 Prepaid expenses 82 (1,182) Other assets (494) (1,737) Increase (decrease) in: Accounts payable 7,202 (702) Accrued expenses and other liabilities 7,988 5,117 ------ ----- Net cash provided by operating activities 35,872 2,843 ------- ----- CASH FLOWS FROM INVESTING ACTIVITIES Additions to notes receivable (7,213) (4,988) Collections of notes receivable 11,705 11,090 Proceeds from note participation sale -- 1,981 Additions to property, plant and equipment (718) (572) Proceeds from sale of equipment -- 90 -- -- Net cash provided by investing activities 3,774 7,601 ------ ----- CASH FLOWS FROM FINANCING ACTIVITIES Net (repayments) borrowings under revolving line-of-credit (2,693) 444 Dividends paid (10,000) (10,000) Financing fees paid -- (462) Capital lease payments (45) (48) ---- ---- Net cash used in financing activities (12,738) (10,066) -------- -------- AsIncrease ~~previously~~in Ascash ~~previously~~26,908 As378 ~~previously~~Cash ~~reported~~at Asbeginning ~~restated~~of ~~reported~~period As6,429 ~~restated~~10,367 ~~reported As restated Balance Sheet:~~ ------ -------- Cash $at ~~1,635~~end $of ~~8,293~~period $ 133,~~637~~337 $ 10,~~367~~745 $======== ~~629~~======= $Supplemental ~~6,429~~Disclosure ~~Accounts~~of ~~payable~~Cash Flow Information Cash paid during the period: Interest $59 7,~~810~~533 $66 7,~~468~~695 ======= ====== Income taxes $59 5,~~166~~262 $ 674,~~896~~902 ======= ====== Noncash additions to notes receivable $77 1,~~833~~559 $83 1,~~633~~201 ======= ======

See Notes to Consolidated Condensed Financial Statements -4- DI GIORGIO CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (UNAUDITED) 1. BASIS OF PRESENTATION The consolidated condensed balance sheet as of September 25, 2004, the consolidated condensed income statements for the thirty-nine weeks and the thirteen weeks ended September 27, 2003 and September 25, 2004, the consolidated condensed statement of stockholders' equity for the thirty-nine weeks ended September 25, 2004, and the consolidated condensed statements of cash flows for the thirty-nine weeks ended September 27, 2003 and September 25, 2004, and related notes are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States ("GAAP") have been omitted pursuant to such rules and regulations. The accompanying unaudited interim consolidated condensed financial statements and related notes should be read in conjunction with the financial statements and related notes included in the Form 10-K/A for the fiscal year ended December 27, 2003 (where the consolidated condensed balance sheet as of December 27, 2003 has been derived) as well as the Form 10-Q/A for the quarter ended March 27, 2004 and the Form 10-Q for the quarter ended June 26, 2004, as filed with the Securities and Exchange Commission. The information furnished herein reflects, in the opinion of the management of the Company, all adjustments, consisting of normal recurring accruals, which are necessary to present a fair statement of the results for the interim periods presented. The interim figures are not necessarily indicative of the results to be expected for the full fiscal year. Certain reclassifications have been made to the prior period financial statements in order to conform them to the current period presentation. -5- 2. PENSION BENEFITS Net periodic costs for the thirteen and thirty-nine week periods ended September 27, 2003 and September 25, 2004 include the following components:

Weighted-average assumptions used to determine Net periodic benefit cost for years ended December 31 2003 2004 Discount rate 6.75% 6.25% Expected long-term return on plan assets 8.25% 8.25% Rate of compensation increase 6.00% 6.00% Consistent with past practice, the Company expects to make a tax deductible contribution to its defined benefit pension plan before the end of the fiscal year. The range of the expected payment is $6.0 to $11.0 million. The exact number will be determined by the appropriate discount rate in effect at the end of the fiscal year as the Company estimates its accumulated benefit obligation ("ABO") and compares it to the fair market value of the plan assets ("FMV"). 3. CONTINGENCIES Legal Proceedings -- Various suits and claims arising in the ordinary course of business are pending against the Company. In the opinion of management, these matters are appropriately provided for and are not expected to materially affect the Company's consolidated financial position, cash flows or results of operations. The Company has been named in various claims and litigation relating to potential environmental problems. In the opinion of management, these claims are either without merit, covered by insurance, adequately provided for, or not expected to result in any material loss to the Company. -6- 4. RESTATEMENT OF STATEMENT OF CASH FLOWS On September 16, 2004 the Company filed a Form 10-K/A for the fiscal year ended December 27, 2003 that disclosed that the Company had determined that certain cash balances should not have been offset against other balances in the same bank and that cash flows related to the loans provided by the Company to its customers should be classified as investing activities rather than as operating activities or financing activities in its statement of cash flows. As a result, the accompanying consolidated condensed statement of cash flows for the thirty-nine weeks ended September 27, 2003 has been restated from amounts previously reported. A summary of the significant effects of the restatement is as follows (in thousands): Thirty-nine weeks ended September 27, 2003 As Previously STATEMENT OF CASH FLOWS: Reported As Restated ------------------------ -------- ---------- Cash flows from operating activities: Changes in assets and liabilities: (increase) decrease in: Accounts and notes receivable $ 5,287 $ 3,795 Long-term notes receivable 3,000 -- Increase (decrease) in: Accounts payable 6,237 7,202 Net cash provided by operating activities 39,399 35,872 Cash flows from investing activities: Additions to notes receivable -- (7,213) Collections of notes receivable -- 11,705 Net cash (used in) provided by investing activities (718) 3,774 Increase in cash 25,943 26,908 Cash at beginning of period 629 6,429 ---- ----- Cash at end of period $ 26,572 $ 33,337 ======== ======== Supplemental disclosure of cash flow information: Non cash changes to notes receivable $ -- $ 1,559 ==== ======== -7- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward- Looking Statements Forward-looking statements in this Form 10-Q include, without limitation, statements relating to the Company's plans, strategies, objectives, expectations, intentions and adequacy of resources and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements may be identified by the use of words like "plans", "expects" "aims" "believes", "projects" "anticipates", "intends" "estimates" "will" " should" "could" and other expressions that indicate future events and trends. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following: general economic and business conditions and those in particular in the New York City metropolitan area; the Company's reliance on several significant customers; potential losses from loans to its retailers; restrictions imposed by the documents governing the Company's indebtedness; current wholesale competition, as well as future competition from presently unknown sources; competition in the retail segment of the supermarket business; the Company's labor relations; potential environmental liabilities which the Company may incur; dependence on key personnel; business abilities and judgment of personnel; changes in, or failure to comply with government regulations; potential commercial vehicle restrictions; inflation, especially with respect to wages and energy costs; and the effects of terrorism or terrorist acts against the Company. General As previously announced, the Company ceased doing business with the Great Atlantic & Pacific Tea Company ("A&P") in October 2003. While the Company has reduced expenses to help compensate for the reduced sales, the loss of this business will continue to have a negative impact on earnings when compared to prior periods. Sales to A&P were $276.4 million in the first three fiscal quarters of 2003. The loss of these sales was partially offset by increased sales to a new group of customers in the Philadelphia area that the Company began servicing in the second quarter of 2003. Results of Operations Thirteen weeks ended September 25, 2004 and September 27, 2003 Net sales for the thirteen weeks ended September 25, 2004 decreased $88.6 million to $303.0 million from $391.6 million in the prior period. Excluding sales of $89.9 million to A&P during the 2003 period, sales increased $.9 million in the current period. Other revenue, consisting of recurring customer related services, increased to $2.9 million for the thirteen weeks ended September 25, 2004 as compared to $2.5 million in the prior period due to modest growth in other services provided to customers. -8- Gross margin increased to 11.6% of net sales or $35.1 million for the thirteen weeks ended September 25, 2004, as compared to 10.5% of net sales or $41.2 million for the prior period reflecting a change in mix of both customers and products sold and increased other revenue from frozen warehousing services. Factors such as changes in customer mix, changes in manufacturers' promotional activities, changes in product mix, or competitive pricing pressures may have an effect on gross margin. It is uncertain that the improvement in gross margin realized in this quarter will continue. Caution should be taken when comparing the Company's gross margin to that of other companies because other companies, while still complying with GAAP, may characterize income and expenses differently. Warehouse expense increased as a percentage of net sales to 4.8% of net sales or $14.6 million for the thirteen weeks ended September 25, 2004, as compared to 4.1% of net sales or $15.9 million in the prior period, primarily as a result of fixed costs being compared to lower overall sales. In addition, rent expense increased $.2 million in the current period as compared to the prior period as a result of increased outside storage and occupancy costs related to the Company's specialty food division. The Company plans to eliminate a portion of these expenses in early 2005 as it integrates these operations into its expanded dry grocery warehouse, which should be completed late in the fourth quarter of 2004. Transportation expense increased as a percentage of net sales to 2.3% of net sales or $7.0 million for the thirteen weeks ended September 25, 2004 as compared to 2.0% of net sales or $7.8 million in the prior period, primarily as a result of fixed costs being compared to lower overall sales. In addition, due to a 47% rise in the average price per gallon for diesel fuel in the current period as compared to the prior period, diesel expense increased $.1 million even though fewer gallons were purchased in the current period due to the lost A&P business. Selling, general and administrative expense increased to 2.6% of net sales or $7.9 million for the thirteen weeks ended September 25, 2004 as compared to 2.0% of net sales or $7.8 million in the prior period as a result of fixed costs being compared to lower overall sales, additional expenses including salaries of $.4 million related to the Company's newest distribution operations (specialty foods and Puerto Rico), and additional pension expense of $.1 million as compared to the prior period. These additional expenses were partially offset by a recoupment of prior transaction related expenses of $.5 million. Net income for the thirteen weeks ended September 25, 2004 was $1.4 million as compared to net income of $3.7 million in the prior period. Thirty-nine weeks ended September 25, 2004 and September 27, 2003 Net sales for the thirty-nine weeks ended September 25, 2004 decreased $248.8 million to $926.3 million from $1,175.0 million in the prior period. Excluding sales of $276.4 million to A&P during the 2003 period, sales increased 3.5% in the current period mostly as a result of sales to the new customers discussed above. Other revenue, consisting of recurring customer related services, increased to $8.5 million for the thirty-nine weeks ended September 25, 2004 as compared to $7.2 million in the prior period, primarily as a result of increased storage and warehousing services provided by the Company to a national manufacturer which accounted for $.9 million of the increased other revenue in the current period. -9- Gross margin increased to 11.9% of net sales or $110.2 million for the thirty-nine weeks ended September 25, 2004, as compared to 10.4% of net sales or $121.8 million for the prior period reflecting a change in mix of both customers and products sold and increased other revenue from frozen warehousing services. Factors such as changes in customer mix, changes in manufacturers' promotional activities, changes in product mix, or competitive pricing pressures may have an effect on gross margin. It is uncertain that the improvement in gross margin realized in this period will continue. Caution should be taken when comparing the Company's gross margin to that of other companies because other companies, while still complying with GAAP, may characterize income and expenses differently. Warehouse expense increased as a percentage of net sales to 4.8% of net sales or $44.2 million for the thirty-nine weeks ended September 25, 2004, as compared to 4.0% of net sales or $46.5 million in the prior period, primarily as a result of fixed costs being compared to lower overall sales. In addition, rent expense for the thirty-nine weeks ended September 25, 2004 increased approximately $.7 million as a result of increased outside storage and occupancy costs related to the Company's specialty food division. Transportation expense increased as a percentage of net sales to 2.2% of net sales or $20.7 million for the thirty-nine weeks ended September 25, 2004 as compared to 2.0% of net sales or $23.2 million in the prior period, primarily as a result of fixed costs being compared to lower overall sales. Selling, general and administrative expense increased to 2.7% of net sales or $25.2 million for the thirty-nine weeks ended September 25, 2004 as compared to 2.1% of net sales or $24.1 million in the prior period as a result of fixed costs being compared to lower overall sales, additional expenses including salaries of $1.2 million related to the Company's newest distribution operations and additional pension expense of $.3 million as compared to the prior period. These additional expenses were partially offset by a recoupment of prior transaction expenses of $.5 million Net income for the thirty-nine weeks ended September 25, 2004 was $6.1 million as compared to net income of $10.8 million in the prior period. EBITDA was $24.3 million for the thirty-nine weeks ended September 25, 2004 as compared to $33.5 million in the prior period. While the loss of A&P was the primary reason for the decline, the Company also incurred $1.7 million in operating losses attributable to its newest distribution operations. Reconciliation of EBITDA to net income (in thousands): Thirty-nine weeks ended Sept 25, 2004 Sept 27, 2003 EBITDA $24,297 $33,451 Less: depreciation and amortization of fixed assets 1,684 1,672 Less: other amortization 635 1,803 Less: interest expense 11,383 11,228 Less: income tax provision 4,516 7,947 -------- -------- Net income $ 6,079 $10,801 ====== ======= -10- The Company has presented EBITDA supplementally because management believes this information enables management, investors, and others readers to evaluate and compare, from period to period, the Company's results from ongoing operations in a more meaningful and consistent manner. We believe net income is the most closely comparable GAAP measure as opposed to cash flow from operations. Similar to net income, management uses EBITDA as a measure of the performance of our operations without the vagaries of fluctuations in working capital that cash flow from operations would have. Management also uses the EBITDA results when making operating decisions that require additional resources and as a basis for certain calculations for compensation programs. We believe that the relevant statistic for our business to measure liquidity is our working capital plus our availability under our existing line of credit, both of which are disclosed in our liquidity discussion under Liquidity and Capital Resources below. Liquidity and Capital Resources Cash flows from operations, cash on hand, and amounts available under the Company's $90 million bank credit facility are the Company's principal sources of liquidity. The Company's bank credit facility is scheduled to mature on February 1, 2007. The Company believes that cash flows from operations and amounts available under the bank credit facility will be adequate to meet its anticipated working capital needs, capital expenditures, dividend payments, if any, and debt service requirements during the next twelve months, as well as any investments the Company may make. There were $13.3 million of borrowings under the Company's revolving bank credit facility (excluding $6.0 million of outstanding letters of credit) at September 25, 2004. The Company had additional borrowing capacity of $73.4 million available at that time under the Company's then current borrowing base availability certificate. The Company's bank credit facility bears interest at a rate per annum equal to (at the Company's option): (i) the Euro dollar offering rate plus 1.625% or (ii) the lead bank's prime rate. During the thirty-nine weeks ended September 25, 2004, cash flows provided by operating activities were approximately $2.8 million, consisting primarily of cash generated from income before non-cash expenses of $9.3 million and an increase in accrued expenses and other liabilities of $5.1 million and a decrease in inventory of $1.1 million, offset by (i) an increase in accounts receivable of $9.1 million; (ii) an increase in prepaid expenses of $1.2 million, (iii) a decrease in accounts payable of $.7 million and (iv) an increase in other assets of $1.7 million. Cash flows provided by investing activities during the thirty-nine weeks ended September 25, 2004 were approximately $7.6 million consisting of $11.1 million of note receivable collections, $2.0 million of proceeds from note participation sales and $.1 million from proceeds from the sale of excess trailers offset by $5.0 million of new notes receivable and $.6 million for capital expenditures. Net cash used in financing activities of approximately $10.1 million consisted primarily of a $10.0 million dividend paid, and $.5 million of financing fees paid offset by $.4 million of borrowings under the bank credit facility. -11- The consolidated indebtedness of the Company increased to $163.5 million at September 25, 2004 as compared to $163.1 million at December 27, 2003 and stockholders' equity decreased to $28.6 million at September 25, 2004 as compared to $32.5 million at December 27, 2003 primarily as a result of the $10.0 million dividend paid March 31, 2004. Consistent with past practice, the Company expects to make a tax deductible contribution to its defined benefit pension plan before the end of the fiscal year. The range of the expected payment is $6.0 to $11.0 million. The exact number will be determined by the appropriate discount rate in effect at the end of the fiscal year as the Company estimates its ABO and compares it to FMV. As previously reported, the Company anticipates that it will begin occupying the 160,000 square foot dry grocery warehouse expansion late in the fourth quarter of 2004. Expected annual rent costs are approximately $1.2 million which should be partially offset by a reduction in short term rent expense of public warehouse space and improved productivity. The Company expects to spend approximately $1.3 million in leasehold improvements related to the expansion. Under the terms of the Company's bank credit facility, the Company is required to meet certain financial tests, including minimum interest coverage ratios. As of September 25, 2004, the Company was in compliance with its covenants. From time to time when the Company considered market conditions attractive, the Company has purchased, and may in the future purchase its notes on the open market and retire a portion of its public debt. Item 3. Quantitative and Qualitative Disclosures About Market Risk There were no material changes in market risk for the Company in the period covered by this report. See our Annual Report on Form 10-K/A for the year ended December 27, 2003 for a discussion of market risk for the Company. Item 4. Controls and Procedures As of the end of the period covered by this report, an evaluation was performed with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of September 25, 2004. The Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, evaluated the Company's internal control over financial reporting to determine whether any changes occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Based on that evaluation, there have been no such changes during the quarter covered by this quarterly report. -12- II-OTHER INFORMATION Item 6. Exhibits (a) 31.1 - Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. Filed herewith. 31.2- Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley Act of 2002. Filed herewith. 32.1 - Certification of Chief Executive Officer and Chief Financial Officer of Di Giorgio Corporation Pursuant to 18 U. S.C. Section 1350. -13- 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. DI GIORGIO CORPORATION By: /s/ Richard B. Neff ---------------------------------- Richard B. Neff Co-Chairman and Chief Executive Officer By: /s/ Stephen R. Bokser ---------------------------------- Stephen R. Bokser Co-Chairman, President, and Chief Operating Officer By: /s/ Lawrence S. Grossman -------------------------- Lawrence S. Grossman Senior Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Date: November 8, 2004 -14-

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