-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WwLC7cbmk4B0zBuYdzQTQpsZStxu5nYOl/4rvIzQH1Y97MbKMySc5AdRyNpTFuxw BZ4a7u6Ez5idxNaMxdPlAQ== 0000040934-97-000007.txt : 19970918 0000040934-97-000007.hdr.sgml : 19970918 ACCESSION NUMBER: 0000040934-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970802 FILED AS OF DATE: 19970912 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENESEE CORP CENTRAL INDEX KEY: 0000040934 STANDARD INDUSTRIAL CLASSIFICATION: MALT BEVERAGES [2082] IRS NUMBER: 160445920 STATE OF INCORPORATION: NY FISCAL YEAR END: 0503 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-01653 FILM NUMBER: 97679516 BUSINESS ADDRESS: STREET 1: 445 ST PAUL ST CITY: ROCHESTER STATE: NY ZIP: 14605 BUSINESS PHONE: 7165461030 MAIL ADDRESS: STREET 1: 445 ST PAUL STREET CITY: ROCHESTER STATE: NY ZIP: 14605 FORMER COMPANY: FORMER CONFORMED NAME: GENESEE BREWING CO INC DATE OF NAME CHANGE: 19880322 10-Q 1 FORM 10-Q FOR PERIOD ENDING 8/2/97 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. FORM 10-Q [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended AUGUST 2, 1997 OR [ ] 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 0 - 1653 GENESEE CORPORATION (Exact name of registrant as specified in its charter) STATE OF NEW YORK 16-0445920 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 445 St. Paul Street, Rochester, New York 14605 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (716)546-1030 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 As of the date of this report, the Registrant had the following shares of common stock outstanding: Number of Shares Class Outstanding Class A Common Stock (voting), 209,885 par value $.50 per share Class B Common Stock (non-voting), 1,408,194 par value $.50 per share GENESEE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS August 2, 1997 and May 3, 1997 UNAUDITED AUDITED (Dollars in Thousands) August 2, 1997 May 3, 1997 ASSETS Current assets: Cash and cash equivalents $ 964 4,521 Marketable securities available for sale 20,396 32,627 Trade accounts receivable, less allowance for doubtful receivables of $414 at August 2, 1997; $408 at May 3, 1997 12,953 11,037 Inventories, at lower of cost (first-in, first-out) or market 15,940 13,957 Deferred income tax assets 760 760 Other current assets 1,963 1,219 Total current assets 52,976 64,121 Net property, plant and equipment 35,094 32,986 Investment in and notes receivable from unconsolidated real estate partnerships 4,961 4,949 Investments in direct financing and leveraged leases 32,716 32,144 Goodwill 9,500 - Other assets 3,923 2,729 Total assets 139,170 136,929 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 9,944 9,611 Income taxes payable 1,361 932 Federal and state beer taxes payable 2,060 2,029 Accrued expenses and other 5,399 6,395 Total current liabilities 18,764 18,967 Deferred income tax liabilities 9,114 8,789 Accrued postretirement benefits 15,515 15,515 Mortgage payable 552 - Other liabilities 344 413 Total liabilities 44,289 43,684 Minority interests in consolidated subsidiaries 1,860 1,690 Shareholders' equity: Common stock Class A 105 105 Common stock Class B 753 753 Additional paid-in capital 5,842 5,834 Retained earnings 88,571 87,720 Unrealized gain on marketable securities, net of income tax 1,225 648 Less treasury stock, at cost 3,475 3,505 Total shareholders' equity 93,021 91,555 Total liabilities and shareholders' equity $ 139,170 136,929
See accompanying notes to consolidated financial statements. GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS Thirteen Weeks Ended August 2, 1997 and July 27, 1996 (Dollars in Thousands, Except Per Share Data) UNAUDITED 1997 1996 Revenues $53,052 51,569 Federal and state beer taxes 10,107 11,225 Net revenues 42,945 40,344 Cost of sales 32,082 29,695 Gross profit 10,863 10,649 Selling, general and administrative expenses 9,218 8,950 Operating income 1,645 1,699 Investment income 834 604 Other income / (expense), net (31) 60 Interest of minority partners in earnings of consolidated subsidiaries (189) (188) Earnings before income taxes 2,259 2,175 Income taxes 842 783 Net earnings - $.88 per share in 1997 and $.86 in 1996 1,417 1,392 Retained earnings at beginning of period 87,720 87,285 Less: dividends - $.35 per share in 1997 and $.35 per share in 1996 566 565 Retained earnings at end of period $88,571 88,112
See accompanying notes to consolidated financial statements. GENESEE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Thirteen Weeks Ended August 2, 1997 and July 27, 1996 UNAUDITED (Dollars in thousands) 1997 1996 Cash flows from operating activities: Net earnings $ 1,417 1,392 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 1,399 1,244 Other 211 230 Changes in non-cash assets and liabilities: Trade accounts receivable (1,621) (515) Inventories (1,603) (1,103) Other assets (669) (160) Accounts payable 198 139 Accrued expenses and other (2,041) 765 Income taxes payable 428 843 Federal and state beer taxes 31 (290) Accrued postretirement benefits - 67 Other liabilities (69) (23) Net cash (used in) provided by operating activities (2,319) 2,589 Cash flows from investing activities: Purchase of Freedom Foods, net of cash acquired (11,060) - Capital expenditures (2,173) (1,580) Sales of marketable securities 21,456 4,220 Purchases of marketable securities (8,324) (2,988) Investments in and advances to unconsolidated real estate investments, net of distributions (11) (3) Net investment in direct financing and leveraged lease (572) 68 Withdrawals by minority interest (19) (107) Net cash used in investing activities (703) (390) Cash flows from financing activities: Principle payments on mortgage payable (4) 0 Payment of dividends (566) (565) Net proceeds from treasury stock transactions 35 40 Net cash used in financing activities (535) (525) Net (decrease) increase in cash and cash equivalents (3,557) 1,674 Cash and cash equivalents at beginning of the year 4,521 2,560 Cash and cash equivalents at end of the period $ 964 4,234
See accompanying notes to consolidated financial statements. GENESEE CORPORATION Notes to Consolidated Financial Statements NOTE (A) The Corporation's consolidated financial statements enclosed herein are unaudited with the exception of the Consolidated Balance Sheet at May 3, 1997 and, because of the seasonal nature of the business and the varying schedule of its special sales efforts, these results are not necessarily indicative of the results to be expected for the entire year. In the opinion of management, the interim financial statements reflect all adjustments, consisting of only normal recurring items which are necessary for a fair presentation of the results for the periods presented. The accompanying financial statements have been prepared in accordance with GAAP and SEC guidelines applicable to interim financial information. These statements should be reviewed in conjunction with the financial statements presented in the Corporation's Annual Report to shareholders for the year ended May 3, 1997. NOTE (B) The weighted average number of Class A and Class B shares outstanding used in the computation of net earnings per share is 1,618,079 for the thirteen week period ended August 2, 1997 and 1,616,709 for the thirteen week period ended July 27, 1996. NOTE (C) Inventories are summarized as follows: Dollars in thousands August 2, 1997 May 3, 1997 Finished goods $ 5,274 $ 5,250 Goods in process 2,141 2,301 Raw materials, containers and packaging supplies 8,525 6,406 Total inventories $ 15,940 $ 13,957
NOTE (D) In February 1997, the Financial Accounting Standard Board (FASB) issued Statement No. 128, Earnings per Share (SFAS 128), which requires presentation of earnings per share by all entities that have issued common stock or potential common stock if those securities trade in a public market. SFAS No. 128 requires basic and diluted earnings per share be presented for all periods for which a statement of earnings is presented. The Corporation is required to adopt SFAS No. 128 in the third quarter of fiscal 1998. The pro forma effect of SFAS 128 would result in basic earnings per share of $.88 and $.86 in the first quarter of fiscal 1998 and 1997, respectively. The pro forma effect of SFAS 128 would result in diluted earnings per share of $.87 and $.86 in the first quarter of fiscal 1998 and 1997, respectively. GENESEE CORPORATION Notes to Consolidated Financial Statements (continued) NOTE (E) On May 15, 1997, the Corporation acquired all of the common stock of Freedom Foods, Inc., a food company located in Odessa, Florida, for $11.3 million. For the year ended December 31, 1996, Freedom Foods reported $6 million in sales from the manufacture and sale of private label bouillon cubes and powder. Freedom Foods sells to many of the same supermarket chains already buying private label soup, side dish, and drink mix products from Ontario Foods. The Corporation recently completed the relocation of Freedom Foods' manufacturing and sales operations to Ontario Foods' facility in Albion, New York. The acquisition was financed internally and was accounted for using the purchase method. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Comparison of 13 weeks ended August 2, 1997 to 13 weeks ended July 27, 1996 Consolidated net revenues for the thirteen weeks ended August 2, 1997 were $42.9 million, an increase of $2.6 million over the consolidated net revenues reported for the same period last year. The higher revenues were the result of higher private label sales at Ontario Foods and contract brewing volume at Genesee Brewing Company. In addition, the Corporation's net revenues were also favorably impacted by the acquisition of Freedom Foods, Inc. on May 15, 1997. Freedom Foods produces private label bouillon cubes and powder. For the year ended December 31, 1996, Freedom Foods reported annual sales of $6 million, selling to many of the same supermarket chains currently buying private label soup, side dish, and drink mix products from Ontario Foods. On a consolidated basis, the Corporation reported operating income of $1.6 million for the first quarter this year compared to operating income of $1.7 million for the same period last year. Earnings before income taxes were up $84,000 due in part to the $468,000 of capital gains realized when the Corporation sold marketable securities in order to finance the acquisition of Freedom Foods. The Corporation reported consolidated net earnings of $1.4 million, or $.88 per share, in the first quarter this year, compared to net earnings of $1.4 million, or $.86 per share, for the same period last year. The effective income tax rate for the first quarter of fiscal 1998 was 37.3%, an increase from 36.0% in the first quarter of fiscal 1997, due to the effect of non-deductible goodwill amortization resulting from the acquisition of Freedom Foods, Inc. GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Genesee Brewing Company Genesee Brewing Company's net sales in the first quarter were $35.1 million, an increase of $315,000 from last year's first quarter net sales. Barrel sales for the first quarter this year were up 3.2% over last year due to higher volume of Genesee Brewing Company's HighFalls brands and contract production for Boston Beer Company. HighFalls brands were up over 11,000 barrels (or 10%) due to the Genesee Brewing Company's plan of geographic expansion and to continued growth in the craft segment of the beer business. Although the craft segment continues to grow, it is now growing at a slower pace than last year due to the continued proliferation of brands and the natural maturation of the segment. Contract brewing volume was up 29,000 barrels (or 63%) over the first quarter last year as the relationship with Boston Beer Company continued to grow and develop. On April 30, 1997, the contract between Genesee Brewing Company and Boston Beer Company was amended and extended through the year 2016. Either party has the right to terminate the contract without cause after giving the other party advance notice of its intent to terminate. The required notification period runs from one to four years depending on the volume of product produced under the contract in the twelve months preceding the notice of termination -- the greater the volume, the longer the required notification period. Partially offsetting the growth of HighFalls and contract volume was the continued decline in the sales of Genesee Brewing Company's core products. The Genesee and Koch's brands were down a combined 9% in the first quarter. Genesee Brewing Company's gross profit decreased $482,000 to $9.2 million, or 26.2% of net sales, in the first quarter of fiscal 1998, compared to $9.7 million, or 27.8% of net sales, in the first quarter of fiscal 1997. The decrease in percentage gross profit margins was primarily the result of the shift in sales mix towards lower-margin contract business. In the first quarter this year, contract volume represented 13% of total barrel volume whereas it represented 8% of total volume in the first quarter last year. Genesee Brewing Company's selling, general and administrative expenses were up $324,000 in the first quarter of fiscal 1998 compared to the same period last year. This increase is the result of the timing of planned increases in selling and marketing expenditures to support the geographic expansion of HighFalls distribution. During the first quarter this year, Genesee Brewing Company expanded sales of its HighFalls products to Wisconsin and Louisiana. Due to the decline in core brand volume and the higher sales and marketing expenses, first quarter operating income for Genesee Brewing Company declined to $530,000, compared to operating income of $1.3 million in the first quarter last year. GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Foods Division Net sales for the Foods Division were $7.1 million in the first quarter of fiscal 1998, compared to $4.9 million for the first quarter last year. The sales increase was attributable to continued growth in private label sales of iced tea mix and side dish sales and an increase in contract manufacturing revenues, primarily due a government soup contract. In addition, the acquisition of Freedom Foods added $718,000 of bouillon sales in the first quarter. Operating income in the first quarter was up $513,000 to a profit of $368,000, compared to a $145,000 operating loss in the first quarter last year. Due to transaction costs and other expenses incurred in moving Freedom Foods' production from Florida to New York and the seasonality of its bouillon business, Freedom Foods contributed only $29,000 to the Foods Division's operating income. Genesee Ventures Genesee Ventures, Inc., the Corporation's equipment leasing and real estate investment subsidiary, reported operating income of $673,000 for the first quarter of fiscal 1998, compared to $641,000 for the first quarter of fiscal 1997. The higher operating income was primarily due to an increase in lease revenue. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents, and marketable securities totaled $21.4 million at August 2, 1997 and $37.1 million at May 3, 1997. This decrease in cash, cash equivalents and marketable securities was primarily due to the acquisition of Freedom Foods on May 15, 1997. The acquisition was financed internally, through the sale of marketable securities, and was accounted for using the purchase method. The decline in cash, cash equivalents, and marketable securities was also the result of an inventory build at Ontario Foods due to increased sales and the Freedom Foods acquisition. Trade receivables at August 2, 1997 were approximately $1.9 million higher than the balances reported at May 3, 1997 due to the increased sales volume in the first quarter of fiscal 1998. Genesee Brewing Company's accounts receivable also increased from May 3, 1997 due to seasonality. Inventories at August 2, 1997 were approximately $2.0 million higher than the balances reported at May 3, 1997 due to the continued growth of the Foods Division. The increase in net plant, property and equipment was primarily due to the addition of Freedom Foods assets. GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) During the first quarter of fiscal 1998, the Corporation and its partners in a Rochester, New York office building engaged in negotiations with a new lender to refinance the mortgage on the building. The closing on this refinancing is currently scheduled for September 25, 1997. In September 1996, the mortgage on the building (in which the Corporation has both a partner's and creditor's interest) was extended to September 31, 1997 by the existing lender. As part of that extension, the Corporation agreed to extend its $2.5 million limited guarantee of the mortgage loan to September 31, 1997. The building is 97% occupied, operating on plan and in compliance with all covenants and obligations contained in the mortgage loan agreement. The building has an appraised value in excess of the debt against it. In addition, the other partners in the project have provided the Corporation with additional collateral to secure the Corporation's obligation under its guarantee to the lender. The Corporation has a strategy to search for and develop opportunities which will contribute to the Corporation's future growth. The Corporation plans to continue to use its strong financial position to further diversify its business in order to broaden its profit base and contribute to the continued long-term success of the Corporation. The Corporation expects to fund future capital needs internally as it has in the past. With respect to real estate and equipment leasing, such investments may also include a debt component, generally obtained on a non-recourse basis. The Corporation also continues to seek acquisition opportunities in the foods industry. Any such acquisition may involve new debt or the assumption of existing debt. GENESEE CORPORATION PART II. OTHER INFORMATION Item 1. Legal Proceedings In September 1992, Myrtha Hernandez, doing business as Upstate Returns, commenced a lawsuit in U.S. District Court for the Western District of New York against Genesee Brewing Company and beer distributors and soft drink bottlers in Rochester, New York. The lawsuit alleged that Genesee Brewing Company conspired with the other defendants in violation of federal and state antitrust statutes to prohibit and restrain the plaintiff from entering the beverage container recycling business. The complaint sought compensatory damages of $1,000,000, trebling thereof under applicable antitrust statutes, punitive damages of $15,000,000, attorneys fees, costs and disbursements. On May 2, 1995, the District Court granted Genesee Brewing Company's motion and dismissed all claims. The plaintiff appealed the dismissal to the Second Circuit Court of Appeals, which affirmed the dismissal of all claims on March 18, 1997. The order of dismissal was entered by the District Court on April 17, 1997 and the time to file an appeal to the U. S. Supreme Court expired on July 16, 1997. Item 6. Exhibits and Reports on Form 8-K (a) No exhibits are being filed with this report. (b) The Corporation did not file any reports on Form 8-K during the quarter for which this report is filed. 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. Date: 9/12/97 / s / Mark W. Leunig Mark W. Leunig Vice President, Secretary Date: 9/12/97 / s / Edward J. Rompala Edward J. Rompala Vice President and Treasurer EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS MAY-2-1997 AUG-2-1997 964 20,396 13,367 414 15,940 52,976 115,442 80,348 139,170 18,764 0 858 0 0 91,063 139,170 53,052 53,052 32,082 10,107 9,218 0 0 2,259 842 1,417 0 0 0 1,417 0.88 0
-----END PRIVACY-ENHANCED MESSAGE-----