-----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, GyPK2gplih9FkJhAIkhdfLiI6KIRy4xYIhJYQrY6/XMTEAiI7HQg0rq6DAePWjBb 0R4qAwh6VLp3+DfM9sTcIw== 0000950152-01-506305.txt : 20020412 0000950152-01-506305.hdr.sgml : 20020412 ACCESSION NUMBER: 0000950152-01-506305 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20011027 FILED AS OF DATE: 20011211 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: 1934 Act SEC FILE NUMBER: 000-01653 FILM NUMBER: 1811310 BUSINESS ADDRESS: STREET 1: 600 POWERS BUILDING STREET 2: 16 WEST MAIN STREET CITY: ROCHESTER STATE: NY ZIP: 14614 BUSINESS PHONE: 7164541250 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 l91806ae10-q.txt GENESEE CORPORATION FORM 10-Q 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 October 27, 2001 ----------------- 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.) 600 Powers Bldg., 16 W. Main Street, Rochester, New York 14614 - ---------------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (585) 454-1250 ---------------- 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), par value $.50 per share 209,885 Class B Common Stock (non-voting), par value $.50 per share 1,464,201 Page 2 of 16 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Net Assets In Liquidation (Liquidation Basis) October 27, 2001 (Dollars in thousands, except per share data)
UNAUDITED OCTOBER 27, 2001 ---------------- ASSETS - ------ Cash and cash equivalents $ 29,581 Marketable securities available for sale 9,553 Notes receivable 13,114 Property, plant and equipment 41 Investment in and notes receivable from unconsolidated real estate partnerships 6,148 Investment in direct financing and leveraged leases 636 Estimated income tax receivable 4,015 Other assets 1,152 -------------- Total assets $ 64,240 ============== LIABILITIES AND NET ASSETS - -------------------------- Accrued compensation 1,362 Accrued expenses and other liabilities 1,401 Liquidating distribution payable 21,763 Accrued self-insured workers compensation 1,783 -------------- Total liabilities 26,309 -------------- Net assets in liquidation $ 37,931 ============== Number of common shares outstanding 1,674,086 Net assets in liquidation per outstanding share $ 22.66 ==============
See accompanying notes to consolidated financial statements. Page 3 of 16 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Changes In Net Assets In Liquidation For The Four Weeks Ended October 27, 2001 (Dollars in thousands, except per share data) Net assets in liquidation at September 29, 2001 $ 59,086 Liquidating distribution payable to shareholders (21,763) Changes in estimated liquidation values of assets and liabilities 608 -------------- Net assets in liquidation at October 27, 2001 $ 37,931 ==============
See accompanying notes to consolidated financial statements. Page 4 of 16 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheet (Going-Concern Basis) April 28, 2001 (Dollars in thousands, except per share data)
AUDITED APRIL 28, 2001 ---------------- ASSETS - ------ Current assets: Cash and cash equivalents $ 12,237 Marketable securities available for sale 9,037 Trade accounts receivable, less allowance for doubtful receivables of $262 2,700 Notes receivable, current portion 771 Inventories, at lower of cost (first-in, first-out) or market 8,758 Deferred income tax assets, current portion 338 Other current assets 180 Net assets held for disposal - current 5,179 -------------- Total current assets 39,200 Net property, plant and equipment 12,237 Goodwill and other intangibles net of accumulated amortization of $4,070 25,426 Notes receivable, noncurrent portion 10,229 Other assets 1,138 Deferred income tax assets, noncurrent portion 1,772 -------------- Total assets $ 90,002 ============== LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Notes payable, current portion $ 1,474 Accounts payable 1,281 Accrued compensation 493 Accrued expenses and other 975 -------------- Total current liabilities 4,223 Notes payable, noncurrent portion 4,499 Deferred gain on sale of brewing business 11,926 Other liabilities 21 -------------- Total liabilities 20,669 -------------- Shareholders' equity: Common stock: Class A common stock, voting, $.50 par value. Authorized 450,000 shares; 105 209,885 shares issued and outstanding Class B common stock, non-voting, $.50 par value. Authorized 3,850,000 shares; 753 1,506,876 shares issued Additional paid-in capital 5,803 Retained earnings 64,485 Officer loans (411) Accumulated other comprehensive income 91 Less: Class B treasury stock, at cost; 42,675 shares (1,493) -------------- Total shareholders' equity 69,333 -------------- Total liabilities and shareholders' equity $ 90,002 ==============
See accompanying notes to consolidated financial statements. Page 5 of 16 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings and Comprehensive Loss Nine Weeks Ended September 29, 2001 and Thirteen Weeks Ended October 28, 2000 (Dollars in thousands, except per share data)
UNAUDITED UNAUDITED 2001 2000 ------------- ------------- Revenues $ 0 $ 0 Cost of goods sold 0 0 ------------- ------------- Gross profit 0 0 Selling, general and administrative expenses 227 150 ------------- ------------- Operating loss (227) (150) Investment and interest income 290 146 ------------- ------------- Earnings (loss) from continuing operations before income taxes 63 (4) Income tax expense (benefit) 25 (1) ------------- ------------- Earnings (loss) from continuing operations 38 (3) Discontinued operations: Earnings (loss) from operations of the discontinued segments (less applicable income tax expense (benefit) of $ 369 and $ (331), respectively) 387 (1,145) Loss on sale of the Foods Division (less applicable income tax benefit of $0) (1,166) 0 Adjustment to the loss on disposal of Genesee Ventures, Inc. (less applicable income tax (benefit) expense of $ (82) and $ 89, respectively) (122) 139 ------------- ------------- Net loss before extraordinary item (863) (1,009) Extraordinary item - Loss from the exstinguishment of debt, net of income tax benefit of $ 257 (385) 0 ------------- ------------- Net loss (1,248) (1,009) Other comprehensive income, net of income taxes: Unrealized holding gains arising during the period 75 51 ------------- ------------- Comprehensive loss $ (1,173) $ (958) ============= ============= Basic and diluted earnings (loss) per share from continuing operations $ 0.02 $ (0.00) Basic and diluted earnings (loss) per share from discontinued operations $ 0.23 $ (0.71) Basic and diluted loss per share from the sale of the Foods Division $ (0.70) $ -- Basic and diluted (loss) gain per share from disposal of Genesee Ventures, Inc. $ (0.07) $ 0.09 Basic and diluted loss per share from the extraordinary item $ (0.23) $ -- ------------- ------------- Basic and diluted loss per share $ (0.75) $ (0.62) ============= ============= Weighted average common shares outstanding 1,674,086 1,621,164 Weighted average and common equivalent shares 1,674,086 1,621,164 See accompanying notes to consolidated financial statements.
Page 6 of 16 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings and Comprehensive Loss Twenty-two Weeks Ended September 29, 2001 and Twenty-Six Weeks Ended October 28, 2000 (Dollars in thousands, except per share data)
UNAUDITED UNAUDITED 2001 2000 ------------- ------------- Revenues $ 0 $ 0 Cost of goods sold 0 0 ------------- ------------- Gross profit 0 0 Selling, general and administrative expenses 503 250 ------------- ------------- Operating loss (503) (250) Investment and interest income 735 298 Other income 5 0 ------------- ------------- Earnings from continuing operations before income taxes 237 48 Income tax expense 95 19 ------------- ------------- Earnings from continuing operations 142 29 Discontinued operations: Loss from operations of the discontinued segments (less applicable income tax expense (benefit) of $ 714 and $ (259), respectively) (21,154) (1,285) Loss on sale of the Foods Division (less applicable income tax benefit of $0) (1,166) 0 Adjustment to the loss on disposal of Genesee Ventures, Inc. (less applicable income tax expense of $ 145 and $ 168, respectively) 232 264 ------------- ------------- Net loss before extraordinary item (21,946) (992) Extraordinary item - Loss from the exstinguishment of debt, net of income tax benefit of $ 257 (385) 0 ------------- ------------- Net loss (22,331) (992) Other comprehensive income, net of income taxes: Unrealized holding gains arising during the period 157 120 ------------- ------------- Comprehensive loss $ (22,174) $ (872) ============= ============= Basic and diluted earnings per share from continuing operations $ 0.08 $ 0.02 Basic and diluted loss per share from discontinued operations $ (12.64) $ (0.79) Basic and diluted loss per share from the sale of the Foods Division $ (0.70) $ -- Basic and diluted gain per share from disposal of Genesee Ventures, Inc. $ 0.14 $ 0.16 Basic and diluted loss per share from the extraordinary item $ (0.23) $ -- ------------- ------------- Basic and diluted loss per share $ (13.35) $ (0.61) ============= ============= Weighted average common shares outstanding 1,674,086 1,620,904 Weighted average and common equivalent shares 1,674,086 1,620,904 See accompanying notes to consolidated financial statements.
Page 7 of 16 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows TWENTY-TWO WEEKS ENDED SEPTEMBER 29, 2001 AND TWENTY-SIX WEEKS ENDED OCTOBER 28, 2000 (Dollars in thousands)
UNAUDITED UNAUDITED 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings from continuing operations $ 142 $ 29 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities: Net (gain) loss on sale of marketable securities (8) 10 Deferred tax provision (2) 0 Extraordinary loss from early exstinguishment of debt (642) 0 Other (293) 35 Changes in non-cash assets and liabilities, net of amounts sold: Income taxes payable 545 134 Other liabilities 0 (625) ------------------ ------------------- Net cash used in continuing operating activities (258) (417) Net cash provided by (used in) discontinued operations 2,078 (2,708) ----------------------------------------------------------------------------------- ------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,820 (3,125) ----------------------------------------------------------------------------------- ------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of marketable securities 2,018 408 Purchases of marketable securities and other investments (2,160) (654) ------------------ ------------------- Net cash used in continuing investing activities (142) (246) ------------------ ------------------- Proceeds from sale of Foods Division 22,079 0 Other cash provided by discontinued operations 535 342 ------------------ ------------------- Net cash provided by discontinued operations 22,614 342 ----------------------------------------------------------------------------------- ------------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 22,472 96 ----------------------------------------------------------------------------------- ------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of dividends 0 (567) ------------------ ------------------- Net cash used in continuing financing activities 0 (567) Net cash used in discontinued operations (5,973) (150) ----------------------------------------------------------------------------------- ------------------- NET CASH USED IN FINANCING ACTIVITIES (5,973) (717) ----------------------------------------------------------------------------------- ------------------- Net increase (decrease) in cash and cash equivalents 18,319 (3,746) Cash and cash equivalents at beginning of the period 12,237 7,649 --------------------------------------------------------------------------------------------- ------------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 30,556 $ 3,903 ============================================================================================= =================== See accompanying notes to consolidated financial statements.
Page 8 of 16 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements - ------------------------------------------ NOTE (A) Divestiture of the Corporation's Operating Businesses ----------------------------------------------------- On October 19, 2000, Genesee Corporation (the "Corporation") shareholders approved a plan to liquidate and dissolve the Corporation. The Corporation will be liquidated by selling or otherwise disposing of all the Corporation's assets and winding up its affairs. The proceeds from this liquidation, net of amounts paid or reserved to discharge all of the Corporation's obligations and liabilities, will be distributed to the Corporation's shareholders in a series of liquidating distributions, after which the Corporation will be dissolved. The Corporation sold its brewing business in December 2000 for $27.2 million. A pretax deferred gain of $11.9 million on the sale of the brewing business had been reported in previous consolidated balance sheets. The gain was deferred due to the Corporation's receipt of a significant portion of the sale price in the form of notes receivable and certain performance based guarantees in place between the Corporation and a significant contract customer. However, with the adoption of the liquidation basis of accounting that is described in Note B, this deferred gain is eliminated. The Corporation sold a significant portion of its equipment lease portfolio in December 2000 for $15.3 million, generating net proceeds to the Corporation of $12.8 million. The Corporation recorded an estimated pretax loss of $3.1 million in the fourth quarter of fiscal 2000 related to this sale. The Corporation favorably adjusted this loss by $ 1.7 million, pretax, for fiscal 2001 and $ 377,000, pretax, in the first five months of fiscal 2002, which reflects better than expected operating results on the portion of the lease portfolio which the Corporation retained. On October 10, 2001, the Corporation sold all of the outstanding common stock of Ontario Foods, Incorporated ("OFI"), a wholly owned subsidiary of the Corporation which comprised its Foods Division, to Associated Brands, Inc. ("ABI") for $27 million. The sale was completed in accordance with the terms of a Purchase Agreement (the "Agreement") which is filed as an exhibit to the Corporation's Current Report on Form 8-K filed with the Securities and Exchange Commission on October 24, 2001. The sale resulted in a book loss of $1.2 million. Net of closing date adjustments, the Corporation received $22.1 million in cash at closing. In addition, a $2.25 million mortgage note (the "Mortgage Note") and $178,000 in cash were received by the Corporation and placed in escrow for eighteen months after the closing under the terms of an Escrow Agreement. The Mortgage Note is secured by a first mortgage on OFI's real property located in Medina, New York and by a $500,000 letter of credit. The purchase price is subject to post-closing adjustment in accordance with the provisions of the Agreement. The Corporation is evaluating strategies to sell or otherwise divest the Corporation's remaining assets. In accordance with generally accepted accounting principles, the results of operations of the Corporation's brewing, foods, equipment leasing and real estate businesses have been segregated from the Corporation's continuing operations and accounted for as discontinued operations in the accompanying consolidated statements of earnings and comprehensive loss and in the consolidated statements of cash flows through September 29, 2001, the date at which the Corporation adopted the liquidation basis of accounting (see Note B). Continuing operations through September 29, 2001 consist of the corporate segment. Page 9 of 16 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements - ------------------------------------------ NOTE (A) Divestiture of the Corporation's Operating Businesses ----------------------------------------------------- (continued) ----------- The results of operations for the discontinued brewing, foods, equipment leasing and real estate investment businesses were as follows:
Twenty-two weeks Twenty-six weeks Nine weeks ended Thirteen weeks ended ended ended (Dollars in thousands) September 29, 2001 October 28, 2000 September 29, 2001 October 28, 2000 -------------------------------------------------------------------------------------- Revenue $ 7,891 $ 38,606 $ 19,535 $ 79,567 Less beer taxes -- (4,751) -- (10,742) Net revenue 7,891 33,855 19,535 68,825 Cost of goods sold (6,550) (27,207) (15,936) (55,404) Selling, general, and admin (857) (7,880) (23,913) (14,663) Other income 68 (16) 251 130 Earnings from operations of the discontinued segments, net of tax expense (benefit) 387 (1,145) (21,154) (1,285) -------------------------------------------------------------------------------------- Loss on sale of the Foods Division (1,166) -- (1,166) -- -------------------------------------------------------------------------------------- Adjustment to the loss on disposal of Genesee Ventures, Inc., net of tax expense (benefit) $ (122) $ 139 $ 232 $ 264 --------------------------------------------------------------------------------------
Page 10 of 16 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements - ------------------------------------------ NOTE (B) Change to Liquidation Basis of Accounting ----------------------------------------- With the sale of the Foods Division, which is described in Note A, the Corporation adopted the liquidation basis of accounting effective September 29, 2001. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts, which estimates will be periodically reviewed and adjusted. The valuation of assets at their net realizable value and liabilities at their anticipated settlement amounts necessarily requires many estimates and assumptions. In addition, there are substantial risks and uncertainties associated with carrying out the dissolution and liquidation of the Corporation. The valuations presented in the accompanying Statement of Net Assets in Liquidation represent estimates, based on present facts and circumstances, of the net realizable values of assets and costs associated with carrying out the dissolution and liquidation plan based on the assumptions set forth below. The actual values and costs are expected to differ from the amounts shown herein and could be greater or lesser than the amounts recorded. Accordingly, it is not possible to predict the aggregate amount that will ultimately be distributable to shareholders and no assurance can be given that the amount to be received in liquidation will equal or exceed the net assets in liquidation per share in the accompanying Statement of Net Assets in Liquidation or the price or prices at which the Common Stock has generally traded or is expected to trade in the future. The cautionary statements regarding estimates of net assets in liquidation set forth in the Forward-Looking Statements portion of this report are incorporated herein by reference. Adjustments from Going-Concern to Liquidation Basis of Accounting (Dollars in Thousands):
---------------------------------------------------------------------------------- ---------------------- Shareholders' Equity at September 29, 2001 (Going-Concern Basis) $ 47,159 ---------------------------------------------------------------------------------- ---------------------- ---------------------------------------------------------------------------------- ---------------------- To adjust assets to net realizable values 2,001 ---------------------------------------------------------------------------------- ---------------------- ---------------------------------------------------------------------------------- ---------------------- To adjust liabilities to anticipated settlement amounts 9,926 ---------------------------------------------------------------------------------- ---------------------- ---------------------------------------------------------------------------------- ---------------------- Net Assets in Liquidation at September 29, 2001 (Liquidation Basis) $ 59,086 ---------------------------------------------------------------------------------- ----------------------
Assumptions Management currently estimates that the estimated aggregate fair value of the Corporation's investment in and notes receivable from unconsolidated real estate partnerships and one 10% equity investment exceeds cost by approximately $500,000 and that the estimated fair value of property, plant and equipment exceeds cost by approximately $30,000. Management also currently estimates that the fair value of income taxes receivable is approximately $1.1 million greater than the net amount of tax accounts previously included on the Corporation's September 29, 2001 balance sheet under going concern accounting. These amounts are included in the $2 million adjustment shown above, the difference being the $411,000 of officer loans reclassified from shareholders' equity to assets for purposes of liquidation basis accounting and reporting. Page 11 of 16 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements - ------------------------------------------ NOTE (B) Change to Liquidation Basis of Accounting (continued) ----------------------------------------------------- Management currently estimates that the Corporation will spend approximately $2 million in operating costs through final dissolution. This amount has been accrued at September 29, 2001 in accordance with liquidation accounting and is reflected in the $9.9 million adjustment shown above which is net of the $11.9 million deferred gain on the sale of the brewing business that no longer exists under liquidation accounting. NOTE (C) The Corporation's consolidated financial statements presented herein are unaudited with the exception of the Consolidated Balance Sheet at April 28, 2001. In the opinion of management, the interim financial statements reflect all adjustments which are necessary for a fair presentation of the results for the periods presented. As a result of adopting the liquidation basis of accounting on September 29, 2001, the accompanying current consolidated statements of earnings and comprehensive loss are for the nine week and twenty-two week periods ended September 29, 2001. The Corporation's results of operations from September 30, 2001 to the end of the quarter, October 27, 2001, are reported in the accompanying statement of changes in net assets in liquidation. The comparative consolidated statements of earnings and comprehensive loss are for the thirteen week and twenty-six week periods ended October 28, 2000. Net assets in liquidation per outstanding share, which is reported in the Statement of Net Assets in Liquidation, is calculated by dividing net assets in liquidation by the number of common shares outstanding. The accompanying financial statements have been prepared in accordance with GAAP and Securities and Exchange Commission ("SEC") guidelines applicable to interim financial information. These statements should be reviewed in conjunction with the Corporation's annual report on Form 10-K for the year ended April 28, 2001. It is the Corporation's policy to reclassify certain amounts in the prior year consolidated financial statements to conform to the current year presentation. NOTE (D) Notes Receivable ---------------- Notes receivable consists of three separate notes dated December 15, 2000 which were executed by the purchaser in connection with the sale of the Corporation's brewing business and one note dated October 5, 2001 which was executed by the purchaser in connection with the sale of the Corporation's Foods Division. Both transactions are described in Note A. All of the notes are presented at their outstanding principal balances which management has deemed approximates fair value at October 27, 2001. The general terms of the notes follow. Subordinated Promissory Note dated December 15, 2000 - $4,500,000 note receivable with an original maturity date of December 15, 2003 bearing interest at 12% per annum payable quarterly with principal payments of $500,000, $1,000,000 and $3,000,000 due on the first, second and third anniversary dates of the note, respectively. Under certain circumstances, the final $3,000,000 of principal may be paid $1,000,000, $1,000,000 and $1,000,000 on the third, fourth, and fifth anniversary dates, respectively. The entire principal balance was outstanding at October 27, 2001. Page 12 of 16 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements - ------------------------------------------ NOTE (D) Notes Receivable (continued) ---------------------------- First Senior Bridge Note dated December 15, 2000 - $3,500,000 note receivable with a maturity date of June 1, 2004 bearing interest at Manufacturers & Traders Trust Company's prime rate plus 1% per annum payable quarterly with principal payments of $125,000 commencing September 15, 2001 and quarterly thereafter through the maturity date at which time the entire outstanding principal and accrued interest is due. The note provides for a mandatory prepayment to the extent High Falls receives proceeds from HUD financing or JDA financing. A principal balance of $3,375,000 was outstanding at October 27, 2001. Second Senior Bridge Note dated December 15, 2000 - $3,000,000 note receivable with a maturity date of June 1, 2004 bearing interest at Manufacturers & Traders Trust Company's prime rate plus 1% per annum payable monthly through August 15, 2001 with principal and interest payments based on an amortization period of 240 months commencing September 15, 2001 and monthly thereafter through the maturity date at which time the entire outstanding principal and accrued interest is due. The note provides for a mandatory prepayment to the extent High Falls receives proceeds from HUD financing or JDA financing. A principal balance of $2,989,000 was outstanding at October 27, 2001. Restated Mortgage Note dated October 5, 2001 - $2,250,000 note receivable with a maturity date of March 31, 2003 bearing interest at 12% per annum payable monthly through March 31, 2002 after which the note bears interest at 15% per annum payable monthly through maturity. Upon reaching maturity, the outstanding principal and unpaid interest is due and payable. After the maturity date, any unpaid principal bears interest at the default rate which is 18% per annum. The note allows for prepayment without premium. The entire $2,250,000 loan was outstanding at October 27, 2001. Page 13 of 16 GENESEE CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This financial review should be read in conjunction with the accompanying consolidated financial statements. The discussion of operating results and liquidity and capital resources for the nine week period ended September 29, 2001 and the thirteen week period ended October 28, 2000 excludes the discontinued brewing, foods, equipment leasing and real estate investment businesses discussed in Note (A) to the accompanying consolidated financial statements. SUMMARY OF CONTINUING AND DISCONTINUED OPERATIONS Comparison of 9 weeks ended September 29, 2001 to 13 weeks ended October 28, - ---------------------------------------------------------------------------- 2000 - ---- On a consolidated basis, the Corporation reported an operating loss from continuing operations of $227,000, which was unfavorable by $77,000 as compared to the thirteen week period last year. On a consolidated basis, the Corporation reported net earnings from continuing operations of $38,000, or $.02 basic and diluted earnings per share, in the first nine weeks of the second quarter this year, compared to a net loss from continuing operations of $3,000, or $.00 basic and diluted loss per share, for the thirteen week period last year. The Corporation reported a net loss from discontinued operations of $901,000, or $.54 basic and diluted loss per share, in the first nine weeks of the second quarter of fiscal 2002, compared to a net loss from discontinued operations of $1.0 million, or $.62 basic and diluted loss per share, for the thirteen week period last year. This overall favorable variance was the net effect of the Corporation's brewing business still operating in the prior year and generating losses which was offset by the loss on the sale of the Foods Division. In connection with the sale of the Foods Division (see Note A), the Corporation paid off a mortgage note payable of the Foods Division. As a result of that prepayment, the Corporation paid a pre-tax prepayment charge in the amount of $642,000. In accordance with GAAP, this amount is reported, net of tax, as an extraordinary item in the accompanying statements of earnings and comprehensive loss. Comparison of 22 weeks ended September 29, 2001 to 26 weeks ended October - ------------------------------------------------------------------------- 28, 2000 - -------- On a consolidated basis, the Corporation reported an operating loss from continuing operations of $503,000, which was unfavorable by $253,000 as compared to the twenty-six week period last year. On a consolidated basis, the Corporation reported net earnings from continuing operations of $142,000, or $.08 basic and diluted earnings per share, in the first twenty-two weeks of fiscal 2002, compared to net earnings from continuing operations of $29,000, or $.02 basic and diluted earnings per share, for the twenty-six week period last year. The Corporation reported a net loss from discontinued operations of $22.1 million, or $13.20 basic and diluted loss per share, for the twenty-two weeks in the first half of fiscal 2002, compared to a net loss from discontinued operations of $1.0 million, or $.63 basic and diluted loss per share, for the twenty-six week period last year. This unfavorable variance is primarily related to the $21.8 million Foods Division impairment charge that was reported in the first quarter this year and the loss on the sale of the Foods Division that was reported this quarter, the sum of which is partially offset because the Corporation's brewing business was still operating in the prior year and was generating losses. Page 14 of 16 GENESEE CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) In connection with the sale of the Foods Division (see Note A), the Corporation paid off a mortgage note payable of the Foods Division. As a result of that prepayment, the Corporation paid a pre-tax prepayment charge in the amount of $642,000. In accordance with GAAP, this amount is reported, net of tax, as an extraordinary item in the accompanying statements of earnings and comprehensive loss. SALE OF THE FOODS DIVISION As described in Note A, the Corporation sold its Foods Division in the second quarter of fiscal 2002. In connection with that sale transaction the Corporation incurred a $642,000 pre-tax prepayment charge when the Corporation paid off the mortgage note payable by the Foods Division. The Corporation also reported a preliminary $1.2 million loss on the sale of the Foods Division. The loss on the sale is comprised primarily of certain professional and employee-related costs. In accordance with the Agreement, an audit of the Foods Division as of the effective date will be performed and could result in adjustment to the purchase price, total transaction proceeds and the loss on the sale recorded by the Corporation. LIQUIDITY AND CAPITAL RESOURCES APRIL 28, 2001 TO OCTOBER 27, 2001 - ------------------------------------------------------------------ On November 1, 2001 the Corporation paid a partial liquidating distribution of $13 per share to shareholders of record as of October 25, 2001. The distribution totaled $21,763,000 and represented the second distribution paid to shareholders under the Corporation's plan of liquidation and dissolution. The Corporation expects to make additional liquidating distributions as the Corporation: (a) receives payment from High Falls and OFI on the promissory notes that financed a portion of the purchase price in the sale of those businesses; (b) receives proceeds from the sale of the remaining assets of the Corporation and; (c) discharges post-closing obligations arising from such transactions and other contingent liabilities. The Corporation's cash and cash equivalents are invested in money market funds. These funds are currently yielding about 2.3% per annum. Investment in money market funds is expected to give the Corporation the security and flexibility required as it proceeds in the liquidation and dissolution process as well as earn a reasonable return on those funds. The Corporation's marketable securities consist of a bond portfolio managed by an investment management firm. This portfolio had a fair market value of $9,553,000 at October 27, 2001. The investments in this portfolio include approximately $4.0 million in US treasury notes and government agency bonds with the balance invested in corporate bonds with a Moody's dollar weighted average rating of Aa2. The entire portfolio currently has a weighted average duration of approximately 2.1 years. The current yield to maturity is approximately 4.0%. Page 15 of 16 GENESEE CORPORATION AND SUBSIDIARIES Forward-Looking Statements - -------------------------- This report contains forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include estimates of the net assets of the Corporation in liquidation, statements about the amount and timing of the payment of additional liquidating distributions and statements about the Corporation's operating costs through final dissolution. Cautionary statements regarding estimates of net assets in liquidation are set forth in Note B to the financial statements which accompany this report are incorporated herein by reference. The forward-looking statements in this report are subject to a number of other significant risks and uncertainties, and there can be no assurance that the expectations reflected in those statements will be realized or achieved. Such risks and uncertainties include, without limitation, the risk of default by the purchasers of the Corporation's brewing and foods businesses on their payment and other obligations under the promissory notes held by the Corporation; the possibility of delay in finding buyers and completing the divestiture of the remaining assets of the Corporation; the amounts that the Corporation is able to realize from the divestiture of the remaining assets of the Corporation; possible contingent liabilities and post-closing indemnification and other obligations arising from the sale of the Corporation's operating businesses and other assets; and risks associated with the liquidation and dissolution of the Corporation, including without limitation, settlement of the Corporation's liabilities and obligations, costs incurred in connection with carrying out the plan of liquidation and dissolution, the amount of income earned during the liquidation period on the Corporation's bond portfolio and investment in money market funds, risks that the market value of the Corporation's bond portfolio could decline, risks associated with investments in bonds and money market funds in the current low interest rate environment, and the actual timing of liquidating distributions. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders The Corporation's annual meeting of Class A shareholders was held on October 25, 2001. At the annual meeting, shareholders elected William A. Buckingham and Carl E. Sassano by a vote of 150,761 shares for and 4,631 withheld to serve as directors until the annual meeting of shareholders in 2004. The terms of office of Stephen B. Ashley, Thomas E. Clement, and Charles S. Wehle continued after the annual meeting of shareholders. Item 6. Exhibits and Reports on Form 8-K (a) EXHIBITS. None (b) REPORTS ON FORM 8-K. The Corporation filed the following reports on Form 8-K during the quarter ended October 27, 2001: Date of Report Items Reported -------------- -------------- October 10, 2001 News release announcing the sale of Ontario Foods, Incorporated and $13 per share liquidating distribution. October 24, 2001 Sale of Ontario Foods, Incorporated and related transaction documents. Page 16 of 16 GENESEE CORPORATION AND SUBSIDIARIES 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. GENESEE CORPORATION Date: 12/11/01 /s/ Mark W. Leunig ------------- --------------------------------------------------- Mark W. Leunig Sr. Vice President and Chief Administrative Officer Date: 12/11/01 /s/ Steven M. Morse ------------- --------------------------------------------------- Steven M. Morse Vice President and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----