-----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, Qv/kuRzbZSUFiRNBX1bZM1j3BkMt9g8pNisOnYPiplLuOIxfW6mvsUJgX/S3YDQ5 nq7/VrXGrKcGHK7IMEJmOw== 0000040934-98-000008.txt : 19980914 0000040934-98-000008.hdr.sgml : 19980914 ACCESSION NUMBER: 0000040934-98-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980801 FILED AS OF DATE: 19980911 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: 98708305 BUSINESS ADDRESS: STREET 1: 445 ST PAUL ST CITY: ROCHESTER STATE: NY ZIP: 14605 BUSINESS PHONE: 7162639440 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 8/1/98 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 1, 1998 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), 1,409,024 par value $.50 per share 2 GENESEE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS August 1, 1998 and May 2, 1998 UNAUDITED AUDITED (Dollars in Thousands) August 1, 1998 May 2, 1998 ASSETS Current assets: Cash and cash equivalents $ 10,977 2,692 Marketable securities available for sale 8,053 17,808 Trade accounts receivable, less allowance for doubtful receivables of $442 at August 1, 1998; $433 at May 2, 1998 11,691 10,163 Inventories, at lower of cost (first-in, first-out) or market 14,921 14,258 Deferred income tax assets 1,315 1,315 Other current assets 993 683 Total current assets 47,950 46,919 Net property, plant and equipment 32,871 33,311 Investment in and notes receivable from unconsolidated real estate partnerships 5,495 5,534 Investments in direct financing and leveraged leases 34,116 34,638 Goodwill and other intangibles, net 10,399 10,737 Other assets 4,674 4,450 Total assets 135,505 135,589 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable 7,801 8,358 Income taxes payable 1,148 692 Federal and state beer taxes payable 1,725 1,756 Accrued expenses and other 7,665 7,255 Total current liabilities 18,339 18,061 Deferred income tax liabilities 8,958 9,295 Accrued postretirement benefits 15,415 15,415 Other liabilities 412 471 Total liabilities 43,124 43,242 Minority interests in consolidated subsidiaries 2,211 2,227 Shareholders' equity: Common stock Class A 105 105 Common stock Class B 753 753 Additional paid-in capital 5,856 5,842 Retained earnings 86,709 86,143 Unrealized gain on marketable securities, net of income taxes 190 752 Less treasury stock, at cost 3,443 3,475 Total shareholders' equity 90,170 90,120 Total liabilities and shareholders' equity $ 135,505 135,589 See accompanying notes to consolidated financial statements.
3 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS Thirteen Weeks Ended August 1, 1998 and August 2, 1997 (Dollars in Thousands, Except Per Share Data) UNAUDITED 1998 1997 Revenues $ 48,595 53,052 Federal and state beer taxes 9,204 10,107 Net revenues 39,391 42,945 Cost of sales 29,709 32,082 Gross profit 9,682 10,863 Selling, general and administrative expenses 9,088 9,218 Operating Income 594 1,645 Investment income 1,199 834 Other income / (expense), net 166 (31) Interest of minority partners in earnings of consolidated subsidiaries (197) (189) Earnings before income taxes 1,762 2,259 Income taxes 630 842 Net earnings 1,132 1,417 Basic and Diluted earnings per share 0.70 0.88 Retained earnings at beginning of period 86,143 87,720 Less: dividends - $.35 per share in 1998 and $.35 per share in 1997 566 566 Retained earnings at end of period $ 86,709 88,571 See accompanying notes to consolidated financial statements.
4 GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Thirteen Weeks Ended August 1, 1998 and August 2, 1997 (Dollars in Thousands) UNAUDITED 1998 1997 Cash flows from operating activities: Net earnings $ 1,132 $ 1,417 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amorization 1,590 1,399 Other 205 211 Changes in non-cash assets and liabilities: Trade accounts receivable (1,461) (1,621) Inventories (663) (1,603) Other assets (417) (669) Account payable (556) 198 Accrued expenses and other 411 (2,041) Income taxes payable 456 428 Federal and state beer taxes (31) 31 Other liabilities (59) (69) Net cash provided by (used in) operating activities 607 (2,319) Cash flows from investing activities: Purchase of Freedom Foods, net of cash acquired - (11,060) Capital expenditures (1,006) (2,173) Sales of marketable securities 9,304 21,456 Purchase of marketable securities (447) (8,324) Investments in and advances to unconsolidated real estate investments, net of distributors 40 (11) Net investment in direct financing and leveraged leases 522 (572) Withdrawals by minority interest (214) (19) Net cash provided by (used in) investing activities 8,199 (703) Cash flows from financing activities: Principle payments on mortgage payable - (4) Payment of dividends (567) (566) Net proceeds from treasury stock transactions 46 35 Net cash used in financing activities (521) (535) Net increase (decrease) in cash and cash equivalents 8,285 (3,557) Cash and cash equivalents at beginning of the year 2,692 4,521 Cash and cash equivalents at end of period $ 10,977 $ 964 See accompanying notes to consolidated financial statements.
5 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 2, 1998 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 2, 1998. NOTE (B) The weighted average number of Class A and Class B shares outstanding used in the computation of basic earnings per share is 1,618,444 for the thirteen week period ended August 1, 1998 and 1,617,611 for the thirteen week period ended August 2, 1997. The weighted average and common equivalent shares of Class A and Class B used in the computation of diluted earnings per share is 1,619,350 for the thirteen week period ended August 1, 1998 and 1,621,513 for the thirteen week period ended August 2, 1997. NOTE (C) Inventories are summarized as follows: Dollars in thousands August 1, 1998 May 2, 1998 Finished goods $ 4,858 $ 5,567 Goods in process 1,919 1,664 Raw materials, containers and packaging supplies 8,144 7,027 Total inventories $ 14,921 $ 14,258
NOTE (D) On August 3, 1998, the Corporation acquired all of the capital stock of TKI Foods, Inc., a food company located in Springfield, Illinois, and certain assets of Spectrum Foods, Inc., an affiliated company located in Decatur, Illinois for $19.9 million. For the year ended December 31, 1997, TKI Foods and the lines of business acquired from Spectrum Foods recorded approximately$21 million in sales from the manufacture and sale of artificial sweeteners and other private label food products. TKI Foods sells to many of the same supermarket chains already buying private label soup, side dish, drink mix and bouillon products from the Corporation's Foods Division. The Corporation intends to relocate TKI Foods' manufacturing and sales operations to its Foods Division facility in western, New York. The acquisition was financed through the combination of $10.0 million from a commercial bank credit facility and $9.9 million of internally generated funds. The acquisition will be accounted for using the purchase method, whereby the purchase price will be allocated to the underlying assets and liabilities based upon their estimated fair values. 6 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Comparison of 13 weeks ended August 1, 1998 to 13 weeks ended August 2, 1997 Consolidated net revenues for the thirteen weeks ended August 1, 1998 were $39.4 million, as compared to $42.9 million for the same period last year. The lower revenues were the result of lower sales volume at the Genesee Brewing Company and lower contract manufacturing revenue for the Foods Division. Consolidated operating income was down $1.1 million, primarily due to lower sales volume at Genesee Brewing Company and Ontario Foods. Earnings before income taxes were $1.8 million, down $497,000 from the prior year. The decrease was reduced by an increase of $415,000 of realized capital gains. Realized capital gains of $883,000 were recorded in the first quarter of fiscal 1999 when the corporation sold marketable securities in order to finance the acquisitions of TKI Foods, Inc. and Spectrum Foods, Inc. Realized capital gains of $468,000 were recorded in the first quarter of fiscal 1998 when the corporation sold marketable securities in order to finance the acquisition of Freedom Foods. On a consolidated basis, the Corporation reported consolidated net earnings of $1.1 million, or $.70 basic and diluted earnings per share, in the first quarter this year, compared to net earnings of $1.4 million, or $.88 basic and diluted earnings per share, for the same period last year. Genesee Brewing Company Genesee Brewing Company's net sales in the first quarter were $32.4 million, a decrease of $2.8 million from last year's first quarter net sales. Barrel sales for the first quarter this year were down 10.7% over last year due primarily to an 9.6% decrease in Genesee Brewing Company's Core brands and lower volume under the brewing contract with Boston Beer Company. The Highfalls brands, which represent 25% of total volume, declined slightly in the first quarter, despite a slight increase in volume for JW Dundee's Honey Brown Lager. Contract brewing volume was down 24,000 barrels (or 31%) over the first quarter last year. The decline in volume was partially due to the planned reallocation of production during the first quarter of a portion of Boston Beer Company's requirements in anticipation of the start of production of a new package configuration by Genesee Brewing Company. Production of the new package configuration was then delayed by the inability of a Boston Beer Company supplier to deliver packaging materials. The decline in volume was also due to a shift in production and sale of a seasonal product to August versus July in the prior year and Boston Beer Company moving a short run brand and 22oz. packages to their Cincinnati, Ohio plant. Volume under this contract has reached the maximum level required by Boston Beer Company to meet consumer demand in the markets where Boston Beer Company products produced by Genesee Brewing Company are sold. 7 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Genesee Brewing Company's gross profit decreased $802,000 to $8.4 million, or 25.9% of net sales, in the first quarter of fiscal 1999, compared to $9.2 million, or 26.2% of net sales, in the first quarter of fiscal 1998. The decrease in gross profit margins was primarily the result of the continued shift in sales mix towards lower-margin multipak can packages. Genesee Brewing Company's selling, general and administrative expenses were down $745,000 in the first quarter of fiscal 1999 compared to the same period last year. This decrease is primarily the result of planned decreases in spending as a result of cost reduction efforts implemented in fiscal 1998. Due to the decline in barrel volume and revenues, first quarter operating income for Genesee Brewing Company declined to $474,000, compared to operating income of $531,000 in the first quarter last year. As previously reported, the beer industry in the United States continues to be highly competitive. The industry is dominated by Anheuser Busch, Inc., Miller Brewing Company and Coors Brewing Company which together account for more than 80% of domestic production. In comparison, the volume of malt beverages produced by Genesee Brewing Company represents only about 1% of annual domestic production. In recent years, per capita consumption of malt beverages in the United States has declined and total consumption has grown by an average of less than 1% a year. However, consumption of domestically produced malt beverages has remained basically flat during this period, with the increase in overall consumption coming largely from the increasing popularity of imported malt beverages. During the past ten years, demand for many established domestic brands has declined as consumers have turned to new domestic brands, imports and the diverse range of beer styles offered by the craft beer segment. However, a slowdown in the craft beer segment of the industry that began in 1997 has continued so far in calendar 1998. As a result of these trends and the excess capacity that exists in the industry, brewers are attempting to gain market share through reduced pricing, intensive marketing and promotional programs, new product introductions and innovative packaging. In addition, the industry has seen increased levels of price discounting and price promotions and a growth in popularity of value priced 30 and 36 can Multipaks. Although Anheuser Busch, the largest domestic brewer, recently announced its intention to increase prices on certain brands and packages in certain markets, there can be no assurance that these increases will remain in place if they are implemented or that they will provide any meaningful relief in the markets where Genesee Brewing Company products are sold. The competitive position of smaller brewers like Genesee Brewing Company has also been adversely affected by the consolidation that is occurring within the distribution tier of the brewing industry. The National Beer Wholesalers Association estimates that the number of beer wholesalers in the United 8 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) States declined by 14% between 1992 and 1997. The effects of this consolidation have been aggravated by the aggressive efforts of the large national brewers to obtain an increasing share of the distributor's time and attention devoted to their brands. During the past several years, the large national brewers have implemented a variety of inducements, incentives and contractual terms to cause their distributors to make a greater commitment to their brands, largely at the expense of the brands of smaller brewers, like Genesee, that are also sold by these distributors. These developments have made it increasingly difficult for Genesee Brewing Company to effectively promote and sell its brands in its core markets and to expand sales of its products in new or lower share markets. The competitive conditions in the brewing industry that are impacting the performance of Genesee Brewing Company are not expected to abate in the near term. Foods Division Net sales for the Foods Division were $6.2 million in the first quarter of fiscal 1999, compared to $7.1 million for the first quarter last year, traditionally the slowest period for the Foods Division. The decline in sales was attributable to lower contract manufacturing revenues in the first quarter. The prior year benefited from a government soup contract and a contract to package infant cereal that were completed in fiscal 1998. The Foods Division is not aggressively seeking to replace this contract manufacturing business, instead devoting resources to its core retail private label business and the relocation and integration of the recently acquired TKI Foods, Inc. and Spectrum Foods, Inc. business into the Foods Division. Lower then expected sales of iced tea mix and side dishes also contributed to the decline in Foods Division sales in the first quarter of fiscal 1999. Foods Division iced tea mix and side dish sales were adversely affected by heavy promotions for branded ice tea and side dish products. Despite lower iced tea mix and side dish sales, retail private label net sales increased $324,000 in the first quarter to $6.1 million, due in part to a $236,000 increase in bouillon sales. The Freedom Foods line of bouillon cubes and powder were acquired during the first quarter of fiscal 1998 so the prior year period included two fewer weeks of bouillon business. The Foods Division had an operating loss of $265,000, compared to an operating profit of $253,000 in the first quarter last year, a decrease of $518,000. Genesee Ventures Genesee Ventures, Inc., the Corporation's equipment leasing and real estate investment subsidiary, reported operating income of $787,000 for the first quarter of fiscal 1999, compared to 9 GENESEE CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) $673,000 for the first quarter of fiscal 1998. The higher operating income was primarily due to an increase in equipment lease revenue. LIQUIDITY AND CAPITAL RESOURCES Cash, cash equivalents, and marketable securities totaled $19.0 million at August 1, 1998 and $20.5 million at May 2, 1998. The decline in cash, cash equivalents, and marketable securities was the result of an increase in accounts receivable. The Genesee Brewing Company's accounts receivable is traditionally larger at the end of the first quarter due to higher summer sales as compared to fiscal year end sales levels. Marketable securities decreased $9.8 million in the first quarter, which was partially offset by an $8.3 million increase in cash and cash equivalents to position the cash balances for the purchase of all the capital stock of TKI Foods, Inc. and certain assets of Spectrum Foods, Inc. Inventories at August 1, 1998 were approximately $663,000 higher than the balances reported at May 2, 1998 partially due to an inventory build to support sales of a seasonal product for Boston Beer. Foods Division inventory also increased in the first quarter to support fall bouillon sales. The Corporation has a strategy to search for and develop opportunities which will contribute to the future growth of its non-brewing business. The Corporation plans to use its significant capital resources to further expand its Foods Division 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. The Corporation is addressing Year 2000 compliance to ensure the availability and integrity of its financial, operating and information systems. The Corporation is making investments in its information systems and applications to ensure they are Year 2000 compliant through either replacement of existing systems with new Year 2000 compatible systems or modifications of its current systems. The Corporation does not expect that the cost of replacing and modifying its information systems to achieve Year 2000 compliance will be material to its financial condition or results of operations. The Corporation is also working with its suppliers and customers to ensure their compliance with Year 2000 issues in an effort to avoid any business interruptions. At this time the Corporation does not expect that its business or operations will be materially affected if significant suppliers or customers do not successfully and timely achieve Year 2000 compliance. 10 GENESEE CORPORATION PART II. OTHER INFORMATION 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: 9/11/98 / s / Robert N. Latella Robert N. Latella Executive Vice President and Chief Operating Officer Date: 9/11/98 / s / Michael C. Atseff Michael C. Atseff Vice President and Controller EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 1,000 3-MOS MAY-1-1999 AUG-1-1998 10,977 8,053 12,133 442 14,921 47,950 118,915 86,044 135,505 18,339 0 858 0 0 89,312 135,505 48,595 48,595 29,709 9,204 9,088 0 0 1,762 630 1,132 0 0 0 1,132 0.70 0.70
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