-----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, KnRreNW6OIbSvkD3l0NQfmik0xT1xAiwGYxLb5hvuuHl/Gke5MvMNrE7IKjnhxgh BOrRrlnMUG+bsUdQIaYVjQ== 0000950152-02-001663.txt : 20020415 0000950152-02-001663.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950152-02-001663 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020126 FILED AS OF DATE: 20020311 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: 02572437 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 l93135ae10-q.txt GENESEE CORPORATION FORM 10-Q Page 1 of 14 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 January 26, 2002 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 14 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Net Assets In Liquidation (Liquidation Basis) January 26, 2002 (Dollars in thousands, except per share data)
UNAUDITED ASSETS Cash and cash equivalents $ 9,174 Marketable securities available for sale 9,538 Notes receivable 12,478 Investment in and notes receivable from unconsolidated real estate partnerships 6,061 Investment in direct financing and leveraged leases 512 Estimated income tax receivable 3,924 Other assets 597 ---------- Total assets $ 42,284 ========== LIABILITIES AND NET ASSETS Accrued compensation $ 1,593 Accrued expenses and other liabilities 1,439 Accrued self-insured workers compensation 1,710 ---------- Total liabilities 4,742 ---------- Net assets in liquidation $ 37,542 ========== Number of common shares outstanding 1,674,086 Net assets in liquidation per outstanding share $ 22.43 ==========
See accompanying notes to consolidated financial statements. Page 3 of 14 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Changes In Net Assets In Liquidation (Liquidation Basis) For the Seventeen and Thirteen Weeks Ended January 26, 2002 (Dollars in thousands)
UNAUDITED 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 Changes in estimated liquidation values of assets and liabilities (389) -------- Net assets in liquidation at January 26, 2002 $ 37,542 ========
See accompanying notes to consolidated financial statements. Page 4 of 14 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; 209,885 shares issued and outstanding 105 Class B common stock, non-voting, $.50 par value Authorized 3,850,000 shares; 1,506,876 shares issued 753 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 14 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings and Comprehensive Income (Going-Concern Basis) Thirteen Weeks Ended January 27, 2001 (Dollars in thousands, except per share data)
UNAUDITED Revenues $ -- Cost of goods sold 0 ----------- Gross profit 0 Selling, general and administrative expenses 591 ----------- Operating loss (591) Investment income 136 ----------- Loss from continuing operations before income taxes (455) Income tax benefit (182) ----------- Loss from continuing operations (273) Discontinued operations: Loss from operations of the discontinued segments (less applicable income tax benefit of $ 266) (334) Adjustment to the loss on disposal of Genesee Ventures, Inc. (less applicable income tax expense of $ 431 in fiscal 2001) 636 ----------- Net Earnings 29 Other comprehensive income, net of income taxes: Unrealized holding gains arising during the period 200 ----------- Comprehensive income $ 229 =========== Basic loss per share from continuing operations $ (0.17) Basic loss per share from discontinued operations $ (0.21) Basic gain per share from disposal of Genesee Ventures, Inc. $ 0.39 ----------- Basic earnings per share $ 0.01 =========== Diluted loss per share from continuing operations $ (0.17) Diluted loss per share from discontinued operations $ (0.20) Diluted gain per share from disposal of Genesee Ventures, Inc. $ 0.38 ----------- Diluted earnings per share $ 0.01 =========== Weighted average common shares outstanding 1,622,393 Weighted average and common equivalent shares 1,661,044
See accompanying notes to consolidated financial statements. Page 6 of 14 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Earnings and Comprehensive Loss (Going-Concern Basis) Twenty-two Weeks Ended September 29, 2001 and Thirty-Nine Weeks Ended January 27, 2001 (Dollars in thousands, except per share data)
UNAUDITED UNAUDITED 2002 2001 ----------- ----------- Revenues $ 0 $ 0 Cost of goods sold 0 0 ----------- ----------- Gross profit 0 0 Selling, general and administrative expenses 503 840 ----------- ----------- Operating loss (503) (840) Investment and interest income 735 435 Other income 5 0 ----------- ----------- Earnings / (loss) from continuing operations before income taxes 237 (405) Income tax expense / (benefit) 95 (162) ----------- ----------- Earnings / (loss) from continuing operations 142 (243) Discontinued operations: Loss from operations of the discontinued segments (less applicable income tax expense (benefit) of $ 714 and $ (526), respectively) (21,154) (1,619) Loss on sale of the Foods Division (1,166) 0 Adjustment to the loss on disposal of Genesee Ventures, Inc. (less applicable income tax expense of $ 145 and $ 600, respectively) 232 900 ----------- ----------- Net loss before extraordinary item (21,946) (962) Extraordinary item - Loss from the exstinguishment of debt, net of income tax benefit of $ 257 (385) 0 ----------- ----------- Net loss (22,331) (962) Other comprehensive income, net of income taxes: Unrealized holding gains arising during the period 157 320 ----------- ----------- Comprehensive loss $ (22,174) $ (642) =========== =========== Basic and diluted earnings / (loss) per share from continuing operations $ 0.08 $ (0.15) Basic and diluted loss per share from discontinued operations $ (12.64) $ (1.00) 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 $ 0.56 Basic and diluted loss per share from the extraordinary item $ (0.23) $ -- ----------- ----------- Basic and diluted loss per share $ (13.35) $ (0.59) =========== =========== Weighted average common shares outstanding 1,674,086 1,621,400 Weighted average and common equivalent shares 1,674,086 1,621,400
See accompanying notes to consolidated financial statements. Page 7 of 14 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Going-Concern Basis) TWENTY-TWO WEEKS ENDED SEPTEMBER 29, 2001 AND THIRTY-NINE WEEKS ENDED JANUARY 27, 2001 (Dollars in thousands)
UNAUDITED UNAUDITED 2002 2001 ---- ---- Cash flows from operating activities: Net earnings (loss) from continuing operations $ 142 $ (243) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities: Net (gain) loss on sale of marketable securities (8) 10 Unrealized gain on marketable securities 0 (512) Deferred tax provision (2) 0 Extraordinary loss from early exstinguishment of debt (642) 0 Other (293) (369) Changes in non-cash assets and liabilities, net of amounts sold: Other assets 0 425 Income taxes payable 545 383 Other liabilities 0 (744) -------- -------- Net cash used in continuing operating activities (258) (1,050) Net cash provided by (used in) discontinued operations 2,078 (8,575) -------- -------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,820 (9,625) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of marketable securities 2,018 425 Purchases of marketable securities and other investments (2,160) (751) -------- -------- Net cash used in continuing investing activities (142) (326) -------- -------- Proceeds from sale of brewing business 0 14,776 Proceeds from sale of equipment leases 0 12,103 Proceeds from sale of Foods Division 22,079 0 Other cash provided by discontinued operations 535 5,098 -------- -------- Net cash provided by discontinued operations 22,614 31,977 -------- -------- NET CASH PROVIDED BY INVESTING ACTIVITIES 22,472 31,651 -------- -------- 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) (224) -------- -------- NET CASH USED IN FINANCING ACTIVITIES (5,973) (791) -------- -------- Net increase in cash and cash equivalents 18,319 21,235 Cash and cash equivalents at beginning of the period 12,237 7,649 -------- -------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 30,556 $ 28,884 ======== ========
See accompanying notes to consolidated financial statements. Page 8 of 14 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE (A) Divestiture of the Corporation's Operating Businesses and Other Assets In October 2000, Genesee Corporation (the "Corporation") shareholders approved a plan to liquidate and dissolve the Corporation. The Corporation is being 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, is being 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 to High Falls Brewing Company, LLC ("High Falls") for $27.2 million. The Corporation received $11 million of the sale price in the form of notes receivable more fully described in Note D. The Corporation sold a significant portion of its equipment lease portfolio in December 2000 and received $12.8 million in proceeds and continues to hold some of the leases which it retained. On October 10, 2001, the Corporation sold all of the outstanding common stock of 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 (the "SEC") on October 24, 2001. Net of closing date adjustments, the Corporation received $22.1 million in cash at closing. In addition, a $2.25 million mortgage note more fully described in Note D (the "Mortgage Note") and $178,000 in cash were received by the Corporation and placed in escrow for eighteen months. The Mortgage Note is secured by a first mortgage on the Foods Division's facility 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, all of which have been adjusted to their estimated net realizable values as stated in Note B. Cash and cash equivalents are comprised of operating cash accounts and money market accounts. Marketable securities available for sale represents the Corporation's professionally managed bond portfolio. Notes receivable is comprised of the notes related to the sale of the brewery and the Foods Division (see Note D.) Investment in and notes receivable from unconsolidated real estate partnerships includes the Corporation's 50% investment in two entities that each own an apartment complex in New York State and a 10% investment in entities that own an office building in downtown Rochester, New York as well as a note receivable from one of those entities. Investment in direct financing and leveraged leases represents the Corporation's investment in equipment leases retained after the sale of a majority of the equipment lease portfolio. Estimated income tax receivable represents the amount expected to be received from government entities for previous overpayment of taxes. Other assets includes amounts due from certain loans to corporate officers, a minority interest in a privately-held company that distributes non-durable equipment and supplies to the food service industry and interest receivable on the notes described above. Page 9 of 14 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE (B) 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 liquidation and dissolution 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 the costs associated with carrying out the plan of liquidation and dissolution 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. In particular, the estimates of the Corporation's costs will vary with the length of time it operates. 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 Corporation's 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. Assumptions Following are assumptions utilized by management in assessing the fair value of assets and the expected settlement values of liabilities included in the Statement of Net Assets in Liquidation as of January 26, 2002. Cash and cash equivalents - Presented at face value. Marketable securities available for sale - Presented at quoted market prices. Notes receivable - Stated at face value and approximate fair value (see Note D). Investment in and notes receivable from unconsolidated real estate partnerships - Valued based on independent appraisals and management estimates. Investment in direct financing and leveraged leases - Presented at the present value of future lease payments of leases under renewal. Estimated income tax receivable - Based on management's estimate and tax advisors' calculation Other assets - Valued based on management estimates. Accrued compensation, accrued expenses, and other liabilities - Includes management's estimate of remaining corporate operating costs. Accrued self-insured workers compensation - Based on an independent actuarial valuation which is updated periodically. Page 10 of 14 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE (C) The Corporation's Statement of Net Assets in Liquidation and Statement of Changes in Net Assets in Liquidation for the thirteen weeks ended January 26, 2002 presented herein are unaudited. In the opinion of management, these financial statements reflect all adjustments which are necessary for a fair presentation of the results for the interim period presented. 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 at January 26, 2002. 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 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. For the prior year thirteen and thirty-nine week periods ended January 27, 2001, all of the Corporation's subsidiary businesses are reported as discontinued operations with only the corporate segment reported as continuing operations. 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 identified in Note A. All of the notes are presented at their outstanding principal balances, which management has deemed approximates fair value at January 26, 2002. 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. A principal balance of $4,000,000 was outstanding at January 26, 2002. 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 $3,250,000 was outstanding at January 26, 2002. 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 $2,978,000 was outstanding at January 26, 2002. Page 11 of 14 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE (D) Notes Receivable (continued) 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 January 26, 2002. 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. LIQUIDITY AND CAPITAL RESOURCES OCTOBER 28, 2001 TO JANUARY 26, 2002 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 paid its first partial liquidating distribution on March 1, 2001 in the amount of $7.50 per share. The Corporation expects to make additional liquidating distributions as the Corporation: (a) receives payment on the promissory notes described in Note D; (b) receives proceeds from the sale of the remaining assets of the Corporation and; (c) discharges post-closing obligations arising from the sale of its assets and other contingent liabilities. The length of time which will be required to wind-up the Corporation's affairs is uncertain and will impact the value of the Corporation's net assets in liquidation due to the ongoing expense of operating the Corporation. The Corporation's cash and cash equivalents are invested in money market funds. These funds are currently yielding approximately 2.0% per annum. Investment in money market funds is intended 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 $9,538,000 at January 26, 2002. The investments in this portfolio include approximately $3.6 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%. During the thirteen weeks ended January 26, 2002, the Corporation received $636,000 in principal payments from High Falls under the promissory notes described in Note D. During the thirteen weeks ended January 26, 2002, the Corporation received $337,000 in distributions and principal payments related to its investment in and a note receivable from unconsolidated real estate entities. The Corporation also increased the value of this line item by $250,000 during the third quarter of fiscal 2000. Page 12 of 14 GENESEE CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) During the quarter ended January 26, 2002, other assets decreased by $555,000 related to a $300,000 fiscal 2002 third quarter write-down of the Corporation's minority interest in the food service equipment and supplies business described in Note A to the financial statements, and to the collection of amounts due from certain loans to officers of the Corporation. The remaining balance of these officer receivables is $167,000 at January 26, 2002. During the quarter ended January 26, 2002, accrued compensation, accrued expenses, and other liabilities increased by $269,000 due primarily to a $900,000 increase in management's estimate of the Corporation's operating costs through final dissolution and normal and expected settlement of those liabilities. SUMMARY OF CONTINUING AND DISCONTINUED OPERATIONS As discussed in Note B, the Corporation adopted the liquidation basis of accounting on September 29, 2001. As a result of this adoption, the Corporation will no longer report the results of continuing and discontinued operations. Under the liquidation basis of accounting, the Corporation presents a Statement of Changes in Net Assets in Liquidation instead of the Statement of Earnings and Comprehensive Loss that was presented under the going concern basis of accounting used by the Corporation prior to September 29, 2001. Comparison of 22 weeks ended September 29, 2001 to 39 weeks ended January 27, 2001 On a consolidated basis, the Corporation reported net earnings from continuing operations of $142,000, or $.08 basic and diluted earnings per share, for the twenty-two weeks ended September 29, 2001, compared to a net loss from continuing operations of $243,000, or $.15 basic and diluted loss per share, for the thirty-nine week period ended January 27, 2001. As a result of the Corporation selling its Foods Division in October 2001, the operations of the Foods Division have been classified as discontinued operations for both periods presented leaving only corporate expenses and investment related income in continuing operations. The increase in net earnings from continuing operations is primarily attributable to interest income received from High Falls on the notes described in Note D to the financial statements as well as lower corporate expenses as the current period covers only twenty-two weeks whereas the comparative period covers thirty-nine weeks. 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 ended September 29, 2001, compared to a net loss from discontinued operations of $719,000, or $.44 basic and diluted loss per share for the thirty-nine week period ended January 27, 2001. This unfavorable variance is primarily related to the $21.8 million Foods Division impairment charge that was reported in the first quarter of fiscal 2002 and the loss on the sale of the Foods Division reported in the second quarter of fiscal 2002. In connection with the sale of the Foods Division, the Corporation also recorded an extraordinary loss of $385,000, net of taxes, associated with the early extinguishment of certain debt. Page 13 of 14 GENESEE CORPORATION AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) 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 which will vary with the length of time it operates. The cautionary statements regarding estimates of net assets in liquidation 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 described in Note D to the financial statements which accompany this report; the possible extension of payment terms under the promissory notes described in Note D to the financial statements related to the sale of the Corporation's brewing business; 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 the winding up and dissolution of the Corporation. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. None (b) Reports on Form 8-K. The Corporation did not file any reports on Form 8-K during the quarter ended January 26, 2002 Page 14 of 14 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: 3/11/02 /s/ Mark W. Leunig ------------------ ------------------------------------------ Mark W. Leunig Sr. Vice President and Chief Administrative Officer Date: 3/11/02 /s/ Steven M. Morse ------------------ ------------------------------------------ Steven M. Morse Vice President and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----