Provena Foods Inc., a 15-year-old specialty food processor and distributor with headquarters in Santa Ana, said Monday that it intends to raise up to $9.6 million with an initial public offering of 1.2 million shares of common stock.
The company estimated the offering price at $7 to $8 per share.
Officials at Provena declined comment on the offering Monday, citing the Securities and Exchange Commission's "quiet period" rule barring most pre-offering publicity.
The prospectus filed with the SEC, however, shows that Provena was formed in 1972 when a number of companies merged. It currently has 110 employees and does business through three units: Sav-On Food Co. Inc., a Santa Ana food distribution company; Swiss American Sausage, a 60-employee division in San Francisco, and Royal-Angelus Macaroni, a pasta manufacturing unit in Los Angeles.
The company reported 1986 net income of $766,000, a 32% increase from the $578,000 posted a year earlier. Revenues for the year rose 3.7% to $24.7 million from $23.8 million.
Sales to Pizza Chains
For the first quarter of this year, according to the prospectus, Provena recorded profits of $187,000, up 47% from $127,000 a year earlier. Revenues of $6.8 million were up 27% from $5.4 million.
The biggest chunk of Provena's net sales last year--$15.1 million or 61%--came from the Swiss American division, which sells processed meat products to pizza chains, including Pizza Hut and Round Table Pizza. Plans call for the division's Bay Area facility to be expanded to increase sales to its larger customers, the prospectus states.
The Sav-On distribution division added $7.3 million, or 30%, to Provena's net sales last year. Royal-Angelus, the pasta division, accounted for $2.3 million or 9% of 1986 net sales.
Provena intends to use proceeds from the offering to develop its meat-processing division, expand its pasta and food distribution businesses and repay almost all of its debt, including about $1.9 million of long-term debt and $900,000 in short-term bank debt, according to the prospectus.
After the offering, company directors and officers will own about 60% of the outstanding common shares, the prospectus states. Company officers and directors now own virtually all of Provena's 1.88 million shares outstanding.
Timing Not Ideal
The prospectus warns that a substantial portion of Provena's revenues are from sales to a small number of customers, with only seven clients accounting for 42% of total sales in 1986.
One Baltimore, Md., analyst said Monday that the company's apparent dependency on a relatively few customers might be an issue to be watched.
While the analyst, Franklin Morton of Alex Brown & Sons Inc., said there is "always room for a company with a good story," he added that now is not the ideal time for an initial public offering.
With the Dow Jones Industrial Index down 50 points on Friday and an additional 14 points Monday, Morton said, "this is certainly a difficult market . . . and less receptive than a few months ago" for new offerings.
But the specialty foods segment is pretty attractive to investors even though food stocks in general have been out of favor, said L. Craig Carver, a research analyst with Dain, Bosworth Inc. in Minneapolis.