10-K 1 l08941ae10vk.txt GENESEE CORPORATION 10-K/FISCAL YEAR END 5-1-04 Index to Exhibits at Page 46 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: May 1, 2004 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) 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 Securities Registered Pursuant to Section 12(b) of the Act: NONE Securities Registered Pursuant to Section 12(g) of the Act: Class B Common Stock, par value $.50 per share 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 and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [x] The aggregate market value of voting common stock (Class A) held by non-affiliates, based on the price for Class B Common Stock at the close of trading on October 31, 2003, the last business day of the fiscal 2004 second quarter, was $369,540. Page 2 of 55 The number of shares outstanding of each of the registrant's classes of common stock as of July 12, 2004 was:
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 3 of 55 PART I Item 1. Description of Business General. Genesee Corporation (the "Corporation") was incorporated in 1932 under the laws of the State of New York. Until 1986, the Corporation was known as The Genesee Brewing Company, Inc. and was engaged solely in the production and sale of malt beverages. In 1986, the Corporation implemented a strategy to diversify its business operations beyond its traditional brewing business. The Corporation subsequently restructured to become a holding company, changed its name and expanded its business to include subsidiaries conducting dry food processing and packaging, equipment leasing and real estate investment. On October 19, 2000, the Corporation's shareholders approved a plan to liquidate and dissolve the Corporation. Pursuant to this plan, the Corporation has now liquidated all of its operating businesses and its real estate investments, as follows: On December 15, 2000, the Corporation sold substantially all of the assets and certain liabilities of its brewing business to High Falls Brewing Company, LLC ("High Falls") for $27.2 million, of which $16.2 million was paid in cash and $11.0 million was represented by notes receivable from High Falls. At May 1, 2004, the amount remaining due the Corporation from High Falls was $4 million under a subordinated note receivable with an original face amount of $4.5 million. On May 25, 2004 the Corporation sold this note to a third party for $1.0 million. The Corporation filed a Current Report on Form 8-K on June 4, 2004 detailing the terms of this transaction. On December 28, 2000, the Corporation's equipment leasing subsidiary, Cheyenne Leasing Company ("Cheyenne") sold a significant portion of its lease portfolio for $15.3 million, generating net cash proceeds to the Corporation of $12.8 million. Cheyenne retained a small portion of its lease portfolio that it continued to manage through the maturity of its final lease in November 2003. On October 10, 2001, the Corporation sold all of the outstanding stock of its Ontario Foods, Incorporated, subsidiary, which constituted its Foods Division, to Associated Brands, Inc. ("ABI") for $27 million. Net of purchase price adjustments, the Corporation received $22.1 million in cash. The Corporation also took back a $2.25 million note and mortgage. The note and mortgage, together with $178,000 in cash paid by ABI, were placed in escrow for a period of eighteen months to cover any contingent liabilities or post-closing obligations of the Corporation. On April 5, 2002 ABI paid in full the $2.25 million note and mortgage with the proceeds being placed in the escrow account. On April 9, 2003 all but $25,000 of the escrow account, which was retained for claims presented by ABI against the escrow, was released to the Corporation. In May 2003, the escrow account was closed with $10,277 paid to ABI and the balance paid to the Corporation. On May 31, 2002, the Corporation sold its ten-percent interest in an office building in Rochester, New York and a related note receivable from the building owner for $2.4 million in cash. In connection with this transaction, the purchasers have agreed to indemnify the Corporation for any liability arising from the Corporation's guaranty of half of a $5.5 million senior subordinated loan on the building. On September 16, 2002, the Corporation sold its 50% interests in a 408-unit apartment complex located in Syracuse, New York and a 150-unit apartment complex located in Rochester, New York for a combined sales price of $4.5 million. Page 4 of 55 With the sale of the Foods Division, 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. Under the Plan of Liquidation and Dissolution, the Corporation has paid to Class A and Class B shareholders seven liquidating distributions totaling $62.8 million, or $37.50 per share as of May 1, 2004. On June 18, 2004, the Corporation paid its eighth partial liquidating distribution to Class A and Class B shareholders in the amount of $2,511,000 or $1.50 per outstanding share. During fiscal 2004, the Corporation's Class B common stock was delisted from the Nasdaq National Market and its Class A and Class B common stock books were closed. Effective April 30, 2004, all the Corporation's employees were terminated. Effective May 31, 2004, all the directors of the Corporation and its subsidiaries, with the exception of Stephen B. Ashley, resigned. Also effective May 31, 2004, all officers of the Corporation and its subsidiaries, with the exception of Steven M. Morse, resigned. Going forward, Mr. Ashley, as the Corporation's sole director, and Mr. Morse, as the Corporation's sole officer, will continue to lead the Corporation towards the conclusion of its Plan of Liquidation and Dissolution. Employees. As of May 1, 2004, the Corporation had no employees. Item 2. Properties None Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fiscal quarter ended May 1, 2004. Page 5 of 55 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities The Corporation's Class B Common Stock traded on the NASDAQ National Market tier of the NASDAQ Stock Market (the "Nasdaq NMS") under the symbol GENBB through December 31, 2003 at which time it was delisted from the Nasdaq NMS. There is no established public trading market for the Corporation's Class A or Class B stock; however, shares of both classes trade occasionally on the OTC Bulletin Board. As of July 12, 2004, the numbers of holders of record of Class A (voting) Common Stock and Class B (non-voting) Common Stock were 82 and 790, respectively. The price for the Class B Common Stock as reported by NASDAQ through December 31, 2003 and the liquidating distributions paid per share on Class A and Class B stock for each quarter for the past two years are shown below:
UNAUDITED FISCAL YEAR ENDED MAY 1, 2004 FISCAL YEAR ENDED MAY 3, 2003 Market Price Liquidating Market Price Liquidating High Low Distribution High Low Distribution ---- --- ------------ ---- --- ------------ First Quarter $ 5.10 4.20 .00 $ 21.90 15.51 5.00 Second Quarter 5.04 4.40 .00 17.51 6.91 8.00 Third Quarter 4.69 * 3.51 * .00 9.84 7.52 .00 Fourth Quarter N/A * N/A * .00 9.96 4.85 4.00
* Effective December 31, 2003, the Corporation's Class B Common Stock ceased trading on the Nasdaq NMS as described above. Page 6 of 55 Item 6. Selected Financial Data The selected historical financial data included in the table below as of May 1, 2004, May 3, 2003, April 27, 2002, the twenty two weeks ended September 29, 2001 and for the two fiscal years ended April 28, 2001 is derived from the consolidated financial statements of the Corporation and should be read in conjunction herewith. As described in Note 1 to the accompanying consolidated financial statements, the Corporation adopted the liquidation basis of accounting effective September 29, 2001. Therefore, information in the May 1, 2004, May 3, 2003, April 27, 2002 and September 29, 2001 columns below follow this basis of accounting. The information for the two years ended April 28, 2001 follows the going-concern basis of accounting.
YEARS ENDED May 1, May 3, April 27, Sept. 29, -------------------- 2004 2003 2002 2001 4/28/01 4/29/00 ---- ---- ---- ---- ------- ------- Net Revenues From Continuing Operations N/A N/A N/A $ 0 $ 0 $ 0 Net Earnings/(Loss) From Continuing Operations N/A N/A N/A 142 (1,120) (897) Net Loss From Discontinued Operations N/A N/A N/A (22,473) (1,294) (2,503) Total Assets $8,839 $15,935 $ 41,860 N/A 81,665 95,771 Total Long Term Debt N/A N/A N/A N/A 5,973 6,273 Net Assets in Liquidation $6,842 8,377 29,622 59,086 N/A N/A Basic Earnings/ (Loss) Per Share From Continuing Operations N/A N/A N/A .08 (.69) (.55) Basic Loss Per Share From Discontinued Operations N/A N/A N/A (13.43) (.79) (1.55) Diluted Earnings/ (Loss) Per Share From Continuing Operations N/A N/A N/A .08 (.69) (.55) Diluted Loss Per Share From Discontinued Operations N/A N/A N/A (13.43) (.79) (1.55) Cash Dividends Per Share 0.00 17.00 13.00 0.00 7.85 1.40
(Dollars in thousands, except per share data) After paying a regular quarterly dividend of $.35 per share on June 1, 2000, the Board of Directors suspended the payment of quarterly dividends, choosing instead to make liquidating distributions as and when feasible under the Corporation's Plan of Liquidation and Dissolution. Page 7 of 55 Item 7. 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. Effective September 29, 2001 the Corporation adopted the liquidation basis of accounting which is described in detail in Note 1 to the accompanying consolidated financial statements. LIQUIDITY AND CAPITAL RESOURCES - MAY 1, 2004 Liquidating distributions have been paid to Class A and Class B shareholders under the Corporation's Plan of Liquidation and Dissolution as follows:
AMOUNT AMOUNT DATE PAID DISTRIBUTED PER SHARE ---------- ----------- - --------- March 1, 2001 $12,557,000 $ 7.50 November 1, 2001 21,763,000 13.00 May 17, 2002 8,370,000 5.00 August 26, 2002 8,370,000 5.00 October 11, 2002 5,023,000 3.00 March 17, 2003 4,185,000 2.50 April 28, 2003 2,511,000 1.50 ----------- --------- TOTAL $62,779,000 $ 37.50 =========== =========
On June 18, 2004, the Corporation paid its eighth partial liquidating distribution to Class A and Class B shareholders in the amount of $2,511,000 or $1.50 per outstanding share. Subject to amounts that the Corporation may hold to discharge obligations and potential contingent liabilities (see Contingent Liability Reserve Policy described below), the Corporation expects to pay additional liquidating distributions as the Corporation is allowed to reduce the financial assurance for its self-insured workers compensation liability described below and reduces the amount of the Contingent Liability Reserve described below. The length of time that 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. While the Corporation had originally targeted that the Plan of Liquidation and Dissolution would be completed by April 2004, there will be a further phase required to wind up its business, necessitated by certain assets and liabilities having a longer maturity or term. While the duration of this additional phase is unknown, there will be costs associated with it. The Corporation has estimated the present value of those costs at $379,000 and this amount has been recorded as a part of the run-out accrual and reflected in the accrued expenses and other liabilities line in the accompanying Statement of Net Assets in Liquidation. As a result of certain assets and liabilities having a maturity or term beyond April 2004, the net realizable value of certain assets were not distributable to shareholders by that date and certain of the Corporation's liabilities, including the workers compensation liability described below, were not be discharged by that date. Such assets and liabilities will be retained by the Corporation or transferred to a post-dissolution entity to be held for the benefit of the Corporation's shareholders and cash will be distributed to shareholders as the net realizable values of such retained assets become distributable after discharging any retained liabilities. Since it is unknown how long it will be before a final liquidating distribution is paid to shareholders, the present value of the net assets in liquidation per outstanding share could be less than is reported in the accompanying Statement of Net Assets in Liquidation and the ultimate distributions to shareholders may differ materially from the Corporation's current estimate. Page 8 of 55 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) The Corporation's unrestricted and restricted cash and cash equivalents are invested in commercial bank money market funds to earn a market rate of return on those funds and give the Corporation the security and flexibility required as it completes the liquidation and dissolution process. These funds are currently yielding approximately 1.0% per annum. The Corporation's Board of Directors (the "Board") has adopted a Contingent Liability Reserve Policy whereby the Corporation will maintain a cash contingency for unexpected expenses of the Corporation. The amount of the reserve may be modified in the future by the Board as deemed necessary. The balance of this reserve was $2.5 million, or approximately $1.50 per share at May 1, 2004; however, it is not classified as restricted or as a liability in the accompanying Statement of Net Assets in Liquidation. After the sale of the High Falls Note on May 25, 2004, the Corporation's Board further reduced the Contingent Liability Reserve to $1.6 million, or approximately $1.00 per share. Restricted cash represents cash that the Corporation is temporarily unable to access. At May 1, 2004, restricted cash in the amount of $3.2 million is being held in a money-market account with a commercial bank as collateral required for a standby letter of credit issued by the bank to provide statutorily required financial assurance for the Corporation's self-insured workers compensation liability. The Corporation is required by the New York Workers Compensation Board (the "Compensation Board") to maintain the standby letter of credit, which is in effect through August 2005. The Compensation Board reviewed the $3.2 million financial security requirement in February 2004, and effective June 18, 2004 the Compensation Board agreed to reduce the Corporation's financial assurance amount to $2.4 million. Effective July 7, 2004 the standby letter of credit was reduced to $2.4 million and simultaneously the restricted cash was reduced to the same amount. It is management's current expectation that the Compensation Board will require the Corporation to maintain some amount of financial assurance for the actuarially determined duration of the self-insured workers compensation liability, which is currently estimated to be twenty to twenty-five years, and any such amount will not be available for distribution to shareholders until the Corporation is relieved of its financial assurance obligation. The Corporation is investigating potential alternatives to obtain a substitute for the self-insured workers compensation financial assurance amount which would allow it to accelerate the resolution of the self-insured workers compensation liability. The Corporation could incur additional costs to settle this workers compensation liability. The Corporation's marketable securities consisted of a bond portfolio managed by an investment management firm. This portfolio was liquidated during the second quarter of fiscal 2004 with the proceeds invested in commercial bank money market funds. During fiscal 2004, the Corporation received $362,000 in interest from High Falls on the High Falls Note as described in Note 1 to the accompanying consolidated financial statements. As described in Note 2 to the consolidated financial statements, which is incorporated herein by reference thereto, a creditor of High Falls senior to the Corporation claims approximately $120,000 of this interest should have been paid to it rather than the Corporation. The Corporation has been advised by High Falls that High Falls intends to pay this creditor the $120,000 due on July 30, 2004. Therefore, Corporation management has not accrued this amount at May 1, 2004. The High Falls Note was sold to a third party on May 25, 2004 (see Note 2 to the accompanying consolidated financial statements.) Other assets remained relatively constant when comparing May 1, 2004 and May 3, 2003 balances. Page 9 of 55 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Combined accrued compensation and accrued expenses and other liabilities as presented in the Statement of Net Assets in Liquidation decreased from its May 3, 2003 balance by $1,010,000. This decrease is a result of the payment of compensation related costs and operating costs of approximately $1.4 million and an increase in the run-out and additional winding-up phase accruals in the second, third and fourth quarters by $177,000, $83,000 and $148,000 respectively. During fiscal 2004, the estimated net income tax payable of $4,664,000 at May 3, 2003 became an estimated net income tax receivable of $515,000 at fiscal year end. This change from liability to asset resulted primarily from approximately $4.7 million of tax being paid by the Corporation to the Internal Revenue Service during the first quarter of fiscal 2004. It also reflects the favorable settlement of an audit from the federal taxing authorities that covers the Corporation's fiscal years ending April 27, 2002, April 28, 2001, and April 29, 2000. The $515,000 net income tax receivable is an estimation of the accumulation of the payments and refunds expected through the fiscal year ended May 1, 2004 and reflects the estimated impact on cash flow under an orderly liquidation scenario. The accrued self-insured workers compensation liability increased by $113,000 during fiscal 2004 as a result of regular and expected payments on claims and New York State assessments of $487,000 and a $600,000 increase in the liability as a result of negative development of certain claims. The Corporation is investigating potential alternatives to obtain a substitute for the self-insured workers compensation financial assurance amount which would allow it to accelerate the resolution of this liability. The Corporation could incur additional costs to settle this workers compensation liability. Page 10 of 55 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) RECENTLY ISSUED ACCOUNTING STANDARDS In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities," an Interpretation of Accounting Research Bulletin (ARB) No. 51, "Consolidated Financial Statements." FIN 46 addresses the consolidation by business enterprises of variable interest entitles (VIEs) either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. In December 2003, the FASB completed deliberations of proposed modifications to FIN 46 (Revised Interpretations) resulting in multiple effective dates based on the nature and creation date of the VIE. The Revised Interpretations must be applied to all VIEs no later than the end of the first interim or annual reporting period ending after March 15, 2004. However, prior to the required application of the Revised Interpretations, its provisions must be adopted by the end of the first interim or annual reporting period that ends after December 15, 2003 (for the year ended May 1, 2004 for the Corporation) for VIEs considered to be special purpose entities (SPEs). SPEs for this provision include any entity whose activities are primarily related to securitizations or other forms of asset-backed financings or single-lessee leasing arrangements. The adoption of this standard will not impact the Corporation's financial position. 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, including the additional wind-up phase beyond April 2004, which will vary with the length of time it operates. The cautionary statements regarding estimates of net assets in liquidation set forth in Note 1 to the accompanying consolidated financial statements that 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, possible contingent liabilities and post-closing indemnification and other obligations arising from the sale of the Corporation's operating businesses and other assets; the risk that federal, state or local taxing authorities will audit the tax returns filed by the Corporation that report the sale of its brewing, foods and equipment leasing businesses and other assets resulting in additional taxes being assessed against the Corporation; the risk that income, sales, use and other tax returns filed by the Corporation prior to the divestiture of its brewing, foods and equipment leasing businesses might be audited by federal, state or local taxing authorities resulting in additional taxes being assessed against the Corporation; the risk that the Corporation may not be able to realize its current estimate of the net value of its assets; the risk that the Corporation may have underestimated the settlement expense of its obligations and liabilities, including without limitation, its estimates of self-insured workers compensation liability, accrued compensation, and tax liabilities; risks associated with the liquidation and dissolution of the Corporation, including without limitation, settlement of the Corporation's liabilities and obligations, costs, including professional fees, incurred in connection with carrying out the Plan of Liquidation and Dissolution and additional run-out expense, discharge of contingent liabilities, and the winding up and dissolution of the Corporation. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Page 11 of 55 Item 8. Financial Statements and Supplementary Data (a) Selected Quarterly Financial Data (Unaudited)
9 WEEKS 22 WEEKS FIRST ENDED ENDED 22 WEEKS ENDED 9/29/01 QUARTER 9/29/01 9/29/01 ---------------------- -------- ------- -------- Net Revenues From Continuing Operations $ 0 $ 0 $ 0 Gross Profit From Continuing Operations 0 0 0 Net Earnings From Continuing Operations 104 38 142 Net Loss From Discontinued Operations (21,187) (1,286) (22,473) Basic Earnings Per Share From Continuing Operations .06 .02 .08 Basic Loss Per Share From Discontinued Operations (12.66) (.77) (13.43) Diluted Earnings Per Share From Continuing Operations .06 .02 .08 Diluted Loss Per Share From Discontinued Operations (12.66) (.77) (13.43)
(Dollars in thousands, except per share data) Page 12 of 55 Item 8. Financial Statements and Supplementary Data (b) Index to Financial Statements
Page ---- Report of Independent Registered Public Accounting Firm- PricewaterhouseCoopers LLP 13 Statement of Net Assets in Liquidation (Liquidation Basis) at May 1, 2004 And May 3, 2003 14 Statement of Changes in Net Assets in Liquidation (Liquidation Basis) For the years ended May 1, 2004 and May 3, 2003 and for the thirty weeks ended April 27, 2002 15 Consolidated Statement of Loss and Comprehensive Loss (Going Concern Basis) For the twenty two weeks ended September 29, 2001 16 Consolidated Statement of Shareholders' Equity (Going Concern Basis) For the twenty two weeks ended September 29, 2001 17 Consolidated Statement of Cash Flows (Going Concern Basis) For the twenty two weeks ended September 29, 2001 18 Notes to Consolidated Financial Statements 19
Page 13 of 55 Report of Independent Registered Public Accounting Firm To the Stockholders of Genesee Corporation We have audited the statements of net assets in liquidation of Genesee Corporation as of May 1, 2004 and May 3, 2003, and the related statements of changes in net assets in liquidation for the years then ended and the period from September 30, 2001 to April 27, 2002. In addition, we have audited the consolidated statements of loss and comprehensive loss, shareholders' equity, and cash flows for the period from April 29, 2001 to September 29, 2001. These financial statements are the responsibility of the Corporation management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Note 1, the Corporation is currently being liquidated. As a result, the Corporation has changed its basis of accounting for periods subsequent to September 29, 2001 from the going-concern basis to a liquidation basis. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Genesee Corporation as of May 1, 2004 and May 3, 2003, the changes in its net assets in liquidation for the years then ended and the period from September 30, 2001 to April 27, 2002, and the results of its operations and its cash flows for the period from April 29, 2001 to September 29, 2001, in conformity with accounting principles generally accepted in the United States of America applied on the bases described in the preceding paragraph. As described in Note 1, the financial statements for periods subsequent to September 29, 2001 have been prepared on the liquidation basis of accounting, which requires management to make significant assumptions and estimates regarding the fair value of assets and the estimate of liquidating costs to be incurred. Because of the inherent uncertainty related to these estimates and assumptions, there will likely be differences between these estimates and the actual results and those differences may be material. /s/ PricewaterhouseCoopers LLP Rochester, New York July 27, 2004 Page 14 of 55 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Net Assets In Liquidation (Liquidation Basis) May 1, 2004 and May 3, 2003 (Dollars in thousands, except per share data)
2004 2003 ---------- ---------- ASSETS Cash and cash equivalents $ 3,731 $ 6,572 Restricted cash 3,200 3,200 Marketable securities available for sale 0 3,010 Notes receivable 1,000 2,800 Investment in direct financing and leveraged leases 0 7 Estimated net income tax receivable 515 0 Other assets 393 346 ---------- ---------- Total assets $ 8,839 $ 15,935 ========== ========== LIABILITIES AND NET ASSETS Accrued compensation $ - $ 525 Accrued expenses and other liabilities 389 874 Estimated net income tax payable 0 4,664 Accrued self-insured workers compensation 1,608 1,495 ---------- ---------- Total liabilities 1,997 7,558 ---------- ---------- Net assets in liquidation $ 6,842 $ 8,377 ========== ========== Number of common shares outstanding (Class A - 209,885; Class B - 1,464,201) 1,674,086 1,674,086 Net assets in liquidation per outstanding share $ 4.09 $ 5.00 ========== ==========
See accompanying notes to consolidated financial statements. Page 15 of 55 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Changes In Net Assets In Liquidation (Liquidation Basis) For the Years ended May 1, 2004 and May 3, 2003 and the Thirty Weeks Ended April 27, 2002 (Dollars in thousands)
2004 2003 2002 ---- ---- ---- Net assets in liquidation at May 4, 2003, April 28, 2002 and September 29, 2001, respectively $ 8,377 $ 29,622 $ 59,086 Liquidating distributions paid to shareholders 0 (20,089) (21,763) Liquidating distribution payable to shareholders 0 0 (8,370) High Falls subordinated note receivable: Interest income 268 510 518 Change in fair value (1,800) (1,200) 0 Interest (expense) income, net (89) 734 446 Changes in estimated liquidation values of assets and liabilities 86 (1,200) (295) -------- -------- -------- Net assets in liquidation at May 1, 2004, May 3, 2003 and April 27, 2002, respectively $ 6,842 $ 8,377 $ 29,622 ======== ======== ========
See accompanying notes to consolidated financial statements. Page 16 of 55 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statement of Loss and Comprehensive Loss (Going-Concern Basis) For the Twenty Two Weeks Ended September 29, 2001 (Dollars in thousands, except per share data)
SEPTEMBER 29, 2001 ------------- Revenues $ - Cost of goods sold - ------------- Gross profit - Compensation expense - stock options - Selling, general and administrative expenses 503 ------------- Operating loss (503) Investment and interest income 735 Other income 5 Interest expense - ------------- Earnings from continuing operations before income taxes 237 Income tax expense 95 ------------- Earnings (loss) from continuing operations 142 Discontinued operations: Loss from operations of the discontinued segments (less applicable income tax expense of $714) (21,154) Loss on sale of the Foods Division (less applicable income tax benefit of $0) (1,551) Adjustment to the loss and the loss on disposal of Genesee Ventures, Inc., respectively (less applicable income tax expense of $145) 232 ------------- Net loss (22,331) Other comprehensive income, net of income taxes: Unrealized holding gains arising during the period 157 ------------- Comprehensive loss $ (22,174) ============= Basic and diluted earnings per share from continuing operations $ 0.08 Basic and diluted loss per share from discontinued operations $ (12.64) Basic and diluted loss per share from sale of the Foods Division $ (0.93) Basic and diluted gain per share from disposal of Genesee Ventures, Inc. $ 0.14 ------------- Basic and diluted loss per share $ (13.35) ============= Weighted average common shares outstanding 1,674,086 Weighted average and common equivalent shares 1,674,086
See accompanying notes to consolidated financial statements. Page 17 of 55 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statement of Shareholders' Equity (Going-Concern Basis) (Dollars in thousands, except per share data)
Accumulated Other Common Stock Additional Retained Officer Comprehensive Treasury Stock Class A Class B Paid-In Capital Earnings Loans Income Class B Total ------- ------- --------------- -------- ------- ------------- -------------- -------- BALANCE AT APRIL 28, 2001 105 753 5,803 64,485 (411) 91 (1,493) 69,333 ======= ======= =============== ======== ======= ============= ============== ======== Comprehensive income: Net loss (22,331) (22,331) Other comprehensive income 157 157 -------- Total comprehensive loss (22,174) ------- ------- --------------- -------- ------- ------------- -------------- -------- BALANCE AT SEPTEMBER 29, 2001 $ 105 $ 753 $ 5,803 $ 42,154 $ (411) $ 248 $ (1,493) $ 47,159 ======= ======= =============== ======== ======= ============= ============== ========
See accompanying notes to consolidated financial statements Page 18 of 55 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statement of Cash Flows (Going-Concern Basis) For the Twenty Two Weeks Ended September 29, 2001 (Dollars in thousands)
SEPTEMBER 29, 2001 ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings from continuing operations $ 142 Adjustments to reconcile net earnings to net cash provided by operating activities: Net gain on sale of marketable securities (8) Deferred tax provision (2) Other (550) Changes in non-cash assets and liabilities, net of amounts sold: Trade accounts receivable 3 Accounts payable 174 Accrued expenses and other 80 Income taxes payable 545 ------------- Net cash provided by continuing operating activities 384 Net cash provided by discontinued operations 1,436 ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 1,820 ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of marketable securities 2,018 Purchases of marketable securities and other investments (2,160) ------------- Net cash used in continuing investing activities (142) ------------- Proceeds from sale of Foods Division 22,079 Other cash provided by discontinued operations 535 ------------- Net cash provided by discontinued operations 22,614 ------------- NET CASH PROVIDED BY INVESTING ACTIVITIES 22,472 ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net cash used in discontinued operations (5,973) ------------- NET CASH USED IN FINANCING ACTIVITIES (5,973) ------------- Net increase in cash and cash equivalents 18,319 Cash and cash equivalents at beginning of the period 12,237 ------------- CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 30,556 =============
See accompanying notes to consolidated financial statements. Page 19 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements May 1, 2004, May 3, 2003, April 27, 2002, and September 29, 2001 (1) Liquidation Basis Note LIQUIDATION BASIS FINANCIAL STATEMENTS With the sale of its Foods Division, which is described Note 7, Genesee Corporation and Subsidiaries (the Corporation) adopted the liquidation basis of accounting effective September 29, 2001. Upon adopting the liquidation basis of accounting, adjustments were made to the Corporation's recorded assets and liabilities, details of which are included below. 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. A Statement of Net Assets and a Statement of Changes in Net Assets are the two financial statements presented under the Liquidation Basis of Accounting. 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. In addition, the estimate of net assets in liquidation per share presented in accordance with accounting principles generally accepted in the United States of America (GAAP) in the accompanying Statement of Net Assets in Liquidation generally does not incorporate a present value discount to reflect the amount of time that will transpire before the value of those assets is distributed to shareholders. 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 estimate of net assets in liquidation per share presented in the accompanying Statement of Net Assets in Liquidation or the price or prices at which the Corporation's common stock has traded or is expected to trade in the future. Page 20 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) General assumptions used and asset and liability values under the Liquidation Basis of Accounting 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 May 1, 2004. Cash and cash equivalents - Presented at face value. The Corporation considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The Corporation maintains balances in various operating and money market accounts in excess of federally insured limits. At May 1, 2004, substantially all cash balances were in excess of federally insured limits. The Corporation's Board of Directors (the "Board") has adopted a Contingent Liability Reserve Policy whereby the Corporation will maintain a cash contingency reserve equal to $2.5 million, or $1.50 per outstanding share, for unexpected expenses of the Corporation. The amount of the reserve may be modified in the future by the Board as deemed necessary. The balance of this reserve was $2.5 million at May 1, 2004; however, it is not classified as restricted or as a liability in the accompanying Statement of Net Assets in Liquidation. After the sale of the High Falls Note on May 25, 2004, the Corporation's Board reduced the Contingent Liability Reserve to $1.6 million, or approximately $1.00 per share. Page 21 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) Marketable securities available for sale - Presented at quoted market prices. Prior to August 2003 when its investment portfolio was liquidated, the Corporation maintained a portfolio that consisted predominantly of high quality corporate bonds which was managed by an independent third party investment manager. Valuation of the Corporation's marketable securities was based upon closing prices of their marketable securities, as provided by the investment manager, at May 3, 2003. The fair value of the Corporation's portfolio can be summarized as follows (dollars in thousands): Fixed Income Securities Debt securities issued by the U.S. Government $ 311 Corporate debt Securities 2,460 ------- 2,771 Other 239 ------- Marketable Securities $ 3,010 -------
The fair value of fixed income securities, by contractual maturity, are as follows (dollars in thousands): Contractual maturity Less than one year $ 673 After one year, but within five years 2,049 After five years 49 ------- Total fixed income securities $ 2,771 -------
Notes receivable - Stated at fair value, which has been discounted from face value as described below. As partial consideration for the sale of its brewing business in December 2000, the Corporation received $11 million in notes receivable from High Falls Brewing Company, LLC ("High Falls"). On July 30, 2002 the Corporation received $5.9 million in satisfaction of the remaining principal balance due on two bridge notes with original face amounts of $3.5 million and $3 million. This prepayment was in accordance with the terms of the notes, which required prepayment at such time as the buyer received proceeds from government backed loans. At May 1, 2004, the amount remaining due to the Corporation from High Falls was $4 million under a subordinated note with an original face amount of $4.5 million (the "High Falls Note"). The $4 million balance was payable as follows: $1 million was due on December 15, 2002 and $3 million was due on December 15, 2003. High Falls did not make the $1 million principal payment due on December 15, 2002, the $3 million principal payment due on December 15, 2003, or the March 2004 interest payment and therefore continued to be in default under the terms of the High Falls Note. During the second quarter of fiscal 2003 the Corporation adjusted the value of the $4 million balance due on the High Falls Note to $2.8 million to reflect management's estimate of the value of the note, based on the fair market value of publicly traded debt instruments of similar quality. The Corporation had been in discussions with High Falls regarding the restructuring of the High Falls Note in connection with the possible recapitalization of High Falls Brewing Company. In November 2003 High Falls notified the Corporation that High Falls' efforts to recapitalize High Falls in a transaction with a third party had ended unsuccessfully and that High Falls would not be able to make the December 15, 2003 $3 million principal payment. Page 22 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) As a result of these developments, in November 2003 management reduced its estimate of the value of the High Falls Note by another $1.7 million to $1.1 million, based on the fair market value of publicly traded debt instruments of similar quality. On May 25, 2004 the Corporation sold the High Falls Note receivable to a third party for $1.0 million. See Note 2 below. Estimated income tax receivable/payable - Based on management's estimate. Amount reflects the impact on cash flow under an orderly liquidation scenario. It includes adjustments for estimates of future expenditures, the utilization of tax credits, and carryforwards and carrybacks. Certain amounts included in the estimated income tax receivable are subject to audit by both state and federal taxing authorities, most notably as it relates to the fiscal years ended May 3, 2003 and May 1, 2004. The Corporation requested, and has settled, accelerated audits from the federal taxing authorities for the tax years ending April 27, 2002, April 28, 2001, and April 29, 2000. State audits have also been resolved through the fiscal year ended April 27, 2002. As tax returns are filed utilizing management's interpretation of applicable rules, the actual tax liability or refund determined after a tax audit can be different from amounts initially claimed when filing tax returns. Based upon all known facts, management has made an estimation of the range of probable outcomes after all tax returns have been filed through the fiscal year end May 1, 2004 and reviewed by the taxing authorities. The estimated income tax receivable of $515,000 recorded on the accompanying Statement of Net Assets in Liquidation is management's estimate of the most probable point within the range. Such estimates are often updated as additional information becomes available. The Corporation may incur additional professional fees as a result of any additional income tax audits. The following table depicts the receivable and payable components of the estimated net income tax receivable and payable as of May 1, 2004 and May 3, 2003, respectively, reported on the accompanying Statement of Net Assets in Liquidation.
2004 2003 -------- -------- Income tax receivable $ 515 $ 0 Income tax payable 0 (4,664) -------- -------- Estimated net income tax receivable (payable) $ 515 $ (4,664) ======== ========
Dollars in thousands Page 23 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) Other assets - Valued based on management estimates. At May 1, 2004 the $393,000 balance is primarily comprised of prepaid insurance, a deposit with the Corporation's third party administrator for its self-insured workers compensation claims, and a note receivable from a former customer of the Genesee Brewing Company, Inc., that the Corporation retained after the sale of its brewing business to High Falls. Accrued compensation, accrued expenses, and other liabilities - Based on management's estimate. These are the estimated costs to complete the Corporation's Plan of Liquidation and Dissolution, and represents the estimated cash costs of operating the Corporation through its expected termination. These costs, which include personnel, facilities, professional fees, and other related costs, are estimated based on various assumptions regarding the number of employees, the use of outside professionals (including attorneys and accountants) and other costs. Given that there is inherent uncertainty in the estimation process, actual results could be materially different. The table below details these costs by category as of May 1, 2004 and May 3, 2003.
2004 2003 ---------- ---------- Compensation and related costs $ 0 $ 525,000 Office expenses, including rent 8,000 54,000 Insurance expense 24,000 200,000 Professional fees 275,000 205,000 Post April 2004 costs (allocated at May 1, 2004) 0 300,000 Other 82,000 115,000 ---------- ---------- $ 389,000 $1,399,000 ========== ==========
Liquidating distribution payable - Exists when the Corporation has declared a partial liquidating distribution prior to the date of the statement of net assets in liquidation with such distribution to be paid subsequent to the statement date. This amount is calculated by multiplying the number of outstanding Class A and Class B shares by the declared dollar per share amount. Page 24 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) Accrued self-insured workers compensation - Based on management's estimate. The Corporation's brewing and foods businesses were self-insured for workers compensation claims and the Corporation retained this liability after those businesses were sold. The Corporation is investigating potential alternatives to obtain a substitute for the self-insured workers compensation financial assurance amount which would allow it to accelerate the resolution of this liability. The Corporation could incur additional costs to settle this workers compensation liability. Contingent liabilities - As with any operating business, the Corporation may have potential contingent liabilities in addition to the liabilities recorded in the accompanying consolidated financial statements. Because no claims for contingent liabilities have been made or threatened, no amount has been recorded for such liabilities in the accompanying consolidated financial statements. 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 combined total of Class A and Class B shares outstanding at May 1, 2004. Page 25 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) Changes to asset and liability values under the Liquidation Basis of Accounting from May 3, 2003 to May 1, 2004 . In November 2003, the value of the High Falls note receivable was reduced by $1.7 million to $1.1 million. See explanation above in this Note 1. The Corporation's estimate of remaining operating costs through final dissolution, compensation and other accrued expenses, was increased by $177,000, $83,000, and $148,000 in the second, third and fourth quarters of fiscal 2004, respectively. As of May 1, 2004, the Corporation has $389,000 recorded for these run-out costs covering all general and administrative costs such as professional fees, office related costs, insurance expense, and other miscellaneous costs expected to be incurred during the additional phase of unknown term to wind up the Corporation's business. The Corporation's cash operating expenses, which reduced the run-out accrual discussed above from May 3, 2003 through May 1, 2004, were as follows: Compensation and related costs $ 526,000 Office expenses including rent 47,000 Insurance expense 293,000 New York Sales tax and related expense 22,000 Professional fees 431,000 Other 101,000 ----------- $ 1,420,000 ===========
The accrued self-insured workers compensation liability was increased during the fourth quarter by $600,000 primarily due to negative development of some of open claims. The Corporation is investigating potential alternatives to obtain a substitute for the self-insured workers compensation financial assurance amount which would allow it to accelerate the resolution of this liability. The Corporation could incur additional costs to settle this workers compensation liability. Changes to asset and liability values under the Liquidation Basis of Accounting from April 27, 2002 to May 3, 2003. Page 26 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements 1) Liquidation Basis Note (continued) During the second quarter of fiscal 2003, the value of the High Falls note receivable was reduced by $1.2 million to $2.8 million. See explanation above in this note. The value of the Corporation's investment in and notes receivable from unconsolidated real estate partnerships was increased by approximately $500,000 in the first quarter of fiscal 2003 based on a negotiated sales price of the Corporation's investment in two apartment complexes that were subsequently sold in the second quarter of fiscal 2003 for $4.5 million. The Corporation's estimate of remaining operating costs through final dissolution, compensation and other accrued expenses, was increased by $450,000, $200,000, and $539,000 in the second, third and fourth quarters of fiscal 2003, respectively. As of May 3, 2003, the Corporation has $1,399,000 recorded for these run-out costs. $525,000 is allocated to compensation-type costs while the remaining $874,000 covers all other general and administrative costs such as professional fees, office related costs, insurance expense, and other miscellaneous costs expected to be incurred during the run-out period, which is targeted to be April 2004, plus an additional phase of unknown term to wind up the Corporation's business. The Corporation's cash operating expenses, which reduced the run-out accrual discussed above from April 27, 2002 through May 3, 2003, were as follows: Compensation and related costs $ 804,000 Office expenses including rent 71,000 Insurance and workers compensation State assessment expense 382,000 New York Sales tax and related expense 413,000 Professional fees 350,000 Other 36,000 ------------ $ 2,056,000 ============
The accrued self-insured workers compensation liability was increased during the fourth quarter by $250,000 primarily due to negative development of some of open claims. Changes to asset and liability values under the Liquidation Basis of Accounting from September 29, 2001 to April 27, 2002. The value of the Corporation's investment in and notes receivable from unconsolidated real estate partnerships was increased by $250,000 in the third quarter of fiscal 2002 based on an updated independent appraisal and management's estimate. This line item was further increased by Page 27 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) $290,000 in the fourth quarter based on the sales price realized in May 2002 on the sale of the Corporation's 10% investment in entities that own an office building in downtown Rochester, New York and a related note receivable. The value of the Corporation's investment in a food service equipment and supplies business was reduced by $355,000 to $0 in the last half of fiscal 2002. This investment had previously been included in other assets in the statement of net assets in liquidation. The Corporation's estimate of remaining operating costs through final dissolution was increased by $900,000 in the third quarter of fiscal 2002. As of April 27, 2002, the Corporation has approximately $2.0 million recorded for these run-out costs. $1.2 million is allocated to compensation-type costs while the remaining $800,000 covers all other general and administrative costs such as professional fees, office related costs, insurance expense, and other miscellaneous costs expected to be incurred during the run-out period. The Corporation's cash operating expenses, which reduced the run-out accrual discussed above from September 29, 2001 through April 27, 2002, were as follows: Compensation and related costs $ 780,000 Office expenses including rent 38,000 Insurance expense 115,000 Professional fees 243,000 Other 33,000 ---------- $1,209,000 ==========
Partial Liquidating Distributions Under its Plan of Liquidation and Dissolution the Corporation has paid the following partial liquidating distributions to its Class A and Class B shareholders.
AMOUNT AMOUNT DATE PAID DISTRIBUTED PER SHARE --------- ----------- --------- March 1, 2001 $12,557,000 $ 7.50 November 1, 2001 21,763,000 13.00 May 17, 2002 8,370,000 5.00 August 26, 2002 8,370,000 5.00 October 11, 2002 5,023,000 3.00 March 17, 2003 4,185,000 2.50 April 28, 2003 2,511,000 1.50 ----------- --------- TOTAL $62,779,000 $ 37.50 =========== =========
Page 28 of 55 GENESEE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Liquidation Basis Note (continued) On June 18, 2004, the Corporation paid a partial liquidating distribution to its Class A and Class B shareholders in the amount of $2,511,000 or $1.50 per outstanding share. See Note 2 below. Fiscal Year The Corporation's fiscal year ends on the Saturday closest to April 30. The fiscal year for the financial statements included herein is for the 52-week period ending May 1, 2004, the 53-week period ending May 3, 2003, and the 52-week period ending April 27, 2002. (2) Subsequent Events On May 25, 2004 GBC Liquidating Corp. (formerly The Genesee Brewing Co., Inc.) a wholly-owned subsidiary of Genesee Corporation, sold the High Falls Note to a third party for $1,000,000. In accordance with liquidation basis accounting the High Falls Note was last valued, based on the fair market value of publicly-traded debt instruments of similar quality, at $1,100,000 in the Corporation's Form 10-Q for the fiscal quarter ended January 31, 2004. The High Falls Note had been in default since December 2002, when High Falls missed a $1,000,000 principal payment, and continued to be in default as the December 2003 $3,000,000 principal payment, and March 2004 interest payment were missed as well. As of the date of the High Falls Note sale, approximately $300,000 of interest had accrued on the High Falls Note, which has been written off by the Corporation. However, High Falls agreed to pay the Corporation $100,000 if, prior to April 30, 2006, certain conditions are satisfied and High Falls' senior creditors consent to the payment. A party to the December 2000 brewery sale claims that the Corporation has received approximately $120,000 in interest payments from High Falls, which should have been paid to it, as a creditor of High Falls that is senior to the Corporation. High Falls' senior creditors have imposed a number of conditions which, if satisfied by July 31, 2004, would result in this claim being resolved by High Falls paying the $120,000 claimed by the creditor that is senior to the Corporation, and High Falls has agreed to reimburse the Corporation in the event the Corporation makes this payment. The Corporation has been advised by High Falls that High Falls intends to pay this creditor the $120,000 due on July 30, 2004. Therefore, Corporation management has not accrued this amount at May 1, 2004. The sale of the High Falls Note, with the exception of the possible receipt of $100,000 mentioned above, completes the sale of the Corporation's brewing business, which was effected in December 2000. The Corporation's Board of Directors declared a partial liquidating distribution in the amount of $1.50 per outstanding share of the Corporation's Class A and Class B common stock in May 2004. Shareholders of record on June 11, 2004 received this distribution, which was paid on June 18, 2004. This was the eighth partial liquidating distribution paid to shareholders under the Corporation's Plan of Liquidation and Dissolution and brings the Corporation's total liquidating distributions to date to $65,289,000, or $39.00 per share. Page 29 of 55 GENESEE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (3) Summary of Significant Accounting Policies - Going-Concern Basis GOING-CONCERN BASIS FINANCIAL STATEMENTS Prior to September 29, 2001, the date at which the liquidation basis of accounting was adopted, the Corporation followed the going-concern basis of accounting. Following are notes to the consolidated financial statements prepared under the going-concern basis of accounting. The going-concern basis financial statements consist of the Consolidated Statement of Loss and Comprehensive Loss for the twenty-two weeks ended September 29, 2001, the Consolidated Statement of Cash Flows for the twenty-two weeks ended September 29, 2001, and the Consolidated Statement of Shareholders' Equity for the twenty-two weeks ended September 29, 2001. Principles of Consolidation and Nature of Operations The consolidated financial statements of the Corporation include for continuing operations, the Corporation's corporate segment. The corporate segment retains the Corporation's cash, investments in marketable securities, and significant notes receivable, which in turn generates investment income which is then used in support of corporate costs. (See Note 7 for information related to the Corporation's discontinued segments.) All significant inter-company balances and transactions have been eliminated in consolidation. Recently Issued Accounting Standards In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities," an Interpretation of Accounting Research Bulletin (ARB) No. 51, "Consolidated Financial Statements." FIN 46 addresses the consolidation by business enterprises of variable interest entities (VIEs) either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. In December 2003, the FASB completed deliberations of proposed modifications to FIN 46 (Revised Interpretations) resulting in multiple effective dates based on the nature and creation date of the VIE. The Revised Interpretations must be applied to all VIEs no later than the end of the first interim or annual reporting period ending after March 15, 2004. However, prior to the required application of the Revised Interpretations, its provisions must be adopted by the end of the first interim or annual reporting period that ends after December 15, 2003 (for the year ended May 1, 2004 for the Corporation) for VIEs considered to be special purpose entities (SPEs). SPEs for this provision include any entity whose activities are primarily related to securitizations or other forms of asset-backed financings or single-lessee leasing arrangements. The adoption of this standard will not impact the Corporation's financial position. Page 30 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Summary of Significant Accounting Policies - Going Concern Basis (continued) Comprehensive Loss The Corporation reports comprehensive income or loss in accordance with the provisions of SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and display of comprehensive income or loss and its components (revenues, expenses, gains, losses, and other comprehensive income) in a set of financial statements in order to report a measure of all changes in equity of an enterprise. Other comprehensive income or loss refers to revenues, expenses, gains and, losses that are included in comprehensive income or loss but excluded from net earnings or loss. The amount of income tax expense allocated to other comprehensive income for the twenty-two weeks ended September 29, 2001 was approximately $105,000. Income Taxes The provision for income taxes is based upon pre-tax earnings, with deferred income taxes arising from the permanent and temporary differences between the financial reporting basis and the tax basis of the Corporation's assets and liabilities. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Earnings Per Share The Corporation presents basic earnings per share, which is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding for the period, and diluted earnings per share, which reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. At September 29, 2001, 9,500 shares of potential common stock are considered anti-dilutive and are excluded from the calculation of diluted earnings per share. Page 31 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Summary of Significant Accounting Policies - Going Concern Basis (continued) Reclassifications It is the Corporation's policy to reclassify certain amounts in the prior year consolidated financial statements to conform to the current year presentation. Fiscal Year The Corporation's fiscal year ends on the Saturday closest to April 30. (4) Income Taxes - Going Concern Basis Components of income tax expense from continuing operations for the twenty-two weeks ended September 29, 2001 are as follows: Current: Federal $ 74 State 21 ---- Total current income tax expense 95 ---- Deferred: Federal 0 State 0 ---- Total deferred income tax expense 0 ---- Total income tax expense $ 95 ====
(Dollars in thousands) Page 32 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (4) Income Taxes - Going Concern Basis (continued) The actual tax expense reflected in the consolidated statements of earnings differs from the expected tax expense, computed by applying the U.S. federal corporate tax rate to earnings before income taxes as follows for the twenty-two weeks ended September 29, 2001: Computed expected tax expense @ 34% $ 80 State income taxes (net of federal income tax benefit) 15 ---- Total income tax expense $ 95 ==== Effective tax rate 40% ====
(Dollars in thousands) (5) Segment Reporting - Going Concern Basis As stated in Note 3, the Corporation's corporate segment is the only reporting segment for continuing operations. The corporate segment retains the Corporation's investments in marketable securities, significant notes receivable, generating investment income as well as supporting corporate costs. (See Note 7 for information related to the Corporation's discontinued segments.) (6) Supplemental Cash Flow Information - Going Concern Basis Cash refunded for taxes was approximately $11,000 for the twenty-two weeks ended September 29, 2001; cash paid for interest was approximately $134,000 for the twenty-two weeks ended September 29, 2001. No interest was capitalized during the twenty-two weeks ended September 29, 2001. Page 33 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis In October 2000, the Corporation's shareholders approved a plan to liquidate and dissolve the Corporation. The Corporation is liquidating by selling or otherwise disposing of its assets and winding up its affairs. The proceeds from the 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 for $27.2 million. The Corporation received $11 million of the sale price in the form of notes receivable more fully described in Note 1. The Corporation sold a significant portion of its equipment lease portfolio in December 2000 and received $12.8 million in proceeds. The Corporation retained a small portion of its lease portfolio which it continued to manage through the maturity of its final lease in November 2003. On October 10, 2001, the Corporation sold all of the outstanding 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. Net of closing date adjustments, the Corporation received $22.1 million in cash at closing. In addition, a $2.25 million note and mortgage and $178,000 in cash were received by the Corporation and placed in escrow for eighteen months. The mortgage note has since been paid and the $2.4 million cash escrow has been released except for $25,000 which remains in the escrow account for claims presented by ABI. These minor final claims have been settled with the remaining account balance distributed accordingly. Page 34 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) On May 31, 2002, the Corporation sold its ten-percent interest in an office building in Rochester, New York and a related note receivable from the building owner for $2.4 million in cash. In connection with this transaction, the purchasers have agreed to indemnify the Corporation for any liability arising from the Corporation's guaranty of half of a $5.5 million senior subordinated loan on the building. On September 16, 2002, the Corporation sold its 50% interests in a 408-unit apartment complex located in Syracuse, New York and a 150-unit apartment complex located in Rochester, New York for a combined sales price of $4.5 million. With the sale of its interest in the apartment complexes mentioned above, the Corporation completed the liquidation phase of its Plan of Liquidation and Dissolution. Page 35 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) The results of operations for the discontinued foods, equipment leasing and real estate investment businesses for the twenty-two week period ended September 29, 2001 were as follows: (Dollars in thousands) Revenue $ 19,903 --------- Net revenue 19,903 Cost of goods sold (15,936) Selling, general, and admin. (2,080) Impairment charge (21,833) Other loss (1,925) Loss from operations of the discontinued segments, net of tax benefit or expense (21,154) ========= Loss on sale of Foods Division (1,551) ========= Adjustment to the loss on disposal of Genesee Ventures, Inc., net of tax expense $ 232 =========
Page 36 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) The Corporation's previous investment in a real estate limited partnership in which it has less than a majority interest was accounted for by the equity method. The Corporation's proportionate share of the results of operations of this unconsolidated limited partnership was recorded net of tax in discontinued operations. Revenue Recognition Revenue from the Corporation's lease portfolio is recognized on a level yield method. Concentration of Credit Risk The Corporation's lease receivable balances are from a diversity of lessees in various industries and businesses. This diversity, in addition to security interests in the leased equipment, allows the Corporation to minimize its credit risk on lease receivables. Substantially all of the accounts receivable balances are from food retailers. Property, Plant and Equipment The Corporation regularly assesses all of its long-lived assets for impairment and recognizes a loss when the carrying value of an asset exceeds its expected future cash flows. The Corporation determined that no impairment loss needed to be recognized for applicable assets in fiscal 2001. In the first quarter of fiscal 2002, the Corporation recorded a $21.8 million impairment charge related to the Foods Division. This charge is included as a part of the first quarter's operating loss with an equivalent reduction in goodwill. Goodwill and Other Intangibles Goodwill and other intangibles are amortized on a straight-line basis ranging from 3 to 25 years. The carrying value of goodwill and other intangibles are assessed periodically based on the expected future cash flows of the assets associated with the goodwill and other intangibles. As noted above, goodwill was reduced by $21.8 million in the first quarter of fiscal 2002 related to an impairment charge. Leasing Activities The Corporation's leasing activity is conducted by Cheyenne Leasing Company, a wholly owned subsidiary of Genesee Ventures, Inc. On October 31, 2000, Genesee Ventures, Inc. bought out the 15% minority interest in Cheyenne Leasing Company from its joint venture partner to obtain this wholly owned status. Page 37 of 55 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) Postretirement Benefits The Corporation previously provided certain health care and life insurance benefits to eligible retired employees and spouses under a welfare benefit plan (the Plan) covering substantially all retirees and employees of Genesee Brewing Company. Effective with the sale of its brewing business on December 15, 2000, the Corporation was relieved of its liability and responsibility for these postretirement benefits. However, the Corporation implemented a phase-out plan whereby retiree postretirement benefits continued at decreasing levels through the end of calendar 2001 at which time benefits were discontinued. Even though the Corporation's health insurance premium subsidy concluded at December 31, 2001, the Corporation continues to administer the retiree group's health insurance arrangement. This administrative support ceased on December 31, 2003. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures In accordance with Securities Exchange Act of 1934 rules, the Chief Executive Officer and Chief Financial Officer conducted an evaluation of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation, the Corporation concluded that the design and operation of its disclosure controls and procedures were effective. There were no changes in the Corporation's internal control over financial reporting that occurred during the Corporation's most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Corporation's internal control over financial reporting. Page 38 of 55 GENESEE CORPORATION AND SUBSIDIARIES PART III Item 10. Directors and Executive Officers of the Registrant (a) Directors: The table below lists the sole director of the Corporation and sets forth his age, his other positions with the Corporation and its subsidiaries, his principal occupation, and the expiration of his term in office. The term in office expires at the annual meeting of shareholders of the Class A Common Stock held in the year specified.
Expiration Director Position and Principal Occupation of Term Name and Age Since for the Last Five Years in Office ------------ ----- ----------------------- --------- Stephen B. Ashley (64) 1987 Former President of the Corporation (1) 2005
(1) See Note (1) to Item 10(b). (b) Executive Officers: The table below lists the executive officer of the Corporation and its subsidiaries and sets forth his age, the dates he became an officer and the offices held. Officers of the Corporation and its subsidiaries serve for a term of one year beginning with the first meeting of the Board of Directors occurring after the annual meeting of the holders of Class A Common Stock of the Corporation.
Officer of the Name Age Company Since Office ---- --- ------------- ------ Stephen B. Ashley 64 2000 Former President (1) Steven M. Morse 40 2000 President, Treasurer, and Secretary (2)
(1) Mr. Ashley was elected President of the Corporation in December 2000. Effective May 31, 2004, Mr. Ashley resigned as President of the Corporation; however, he remains as the sole Director. Since July 1996 Mr. Ashley has been Chairman and Chief Executive Officer of The Ashley Group, an affiliated group of privately owned real estate management and investment companies. Mr. Ashley is also a Director of Federal National Mortgage Association, Exeter Fund, Inc. and Exeter Insurance Fund, Inc. Page 39 of 55 (2) Mr. Morse was elected President, Treasurer, and Secretary of the Corporation on May 31, 2004. On that same date he resigned as the Corporation's Vice-President, Chief Financial Officer and Treasurer. Mr. Morse was elected Vice President, Chief Financial Officer and Treasurer of the Corporation on December 13, 2001. He was elected Vice President and Treasurer in December 2000. From 1999 to 2000, Mr. Morse served as the Corporation's Corporate Consolidations Manager. From 1996 to 1999, he served as an Audit Manager at the public accounting firm of Deloitte & Touche, LLP. Mr. Morse is a certified public accountant. He currently serves as the Executive Director - Internal Audit and Compliance at Rochester Institute of Technology, a university located in Rochester, New York. (c) Compliance with Section 16(a) of Securities Exchange Act of 1934: To the Corporation's knowledge, based solely on review of copies of reports of initial ownership and changes of ownership furnished to the Corporation by its directors, executive officers and persons who own more than ten percent of the Corporation's Class B Common Stock, and written representations to the Corporation by such persons that no other reports were required, there were no failures by such persons to comply with the reporting requirements under Section 16(a) of the Securities Exchange Act of 1934 during the Corporation's fiscal year ended May 1, 2004. (d) Financial Code of Ethics: See Exhibit 14 for the Corporation's Financial Code of Ethics which is incorporated herein by reference thereto. The Corporation will provide a copy to any person without charge upon request of the Corporation's President, Treasurer, and Secretary at the Corporation's place of business. (e) Audit Committee Financial Expert: The Corporation has only one director, and accordingly has no committees of the board and no audit committee financial expert. Page 40 of 55 Item 11. Executive Compensation (a) Summary of Executive Compensation. The table below sets forth a summary of compensation paid during the past three fiscal years for all services rendered to the Corporation and its subsidiaries by the former President of the Corporation (who was acting in the capacity of the Chief Executive Officer), and the current President, Treasurer, and Secretary who is the former Vice President, Chief Financial Officer, and Treasurer of the Corporation. SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation ----------------------------------- ------------------------------------- Other Annual Restricted Stock All Other Name and Compen- Stock Options / Compensa- Principal Position Fiscal Year Salary ($) Bonus ($) sation ($) Awards ($) SARs (#) tion ($) ------------------ ----------- ---------- --------- ---------- ---------- -------- -------- Stephen B. Ashley, Former 2004 60,000 0 0 0 0 0 President 2003 60,000 0 0 0 0 0 2002 60,000 0 0 0 0 0 Steven M. Morse, 2004 100,000 35,000 0 0 0 123,237(2) President, Treasurer, and 2003 101,923 25,482 92,716(1) 0 0 39,317(3) Secretary (Former 2002 90,481 25,000 0 0 0 103,228(4) Vice President, Chief Financial Officer, and Treasurer)
(1) Amount paid upon exercise of stock appreciation rights. (2) Amount reflects a $21,249 retirement payment under employment agreement with Corporation, $1,613 payment in lieu of flexible spending account benefit under employment agreement with the Corporation, $375 in premiums paid by the Corporation on life insurance policies, and $100,000 severance payment under an employment agreement with the Corporation. (3) Amount reflects a $37,000 retirement payment under employment agreement with Corporation, $1,613 payment in lieu of flexible spending account benefit under employment agreement with the Corporation, and $704 in premiums paid by the Corporation on life insurance policies. (4) Amount reflects $81,080 of above-market value stock appreciation rights held at April 27, 2002, $19,143 retirement payment under employment agreement with the Corporation, $2,975 payment in lieu of flexible spending account benefit under employment agreement with the Corporation, and $130 in premiums paid by the Corporation on life insurance policies. (b) Grant of Options or Stock Appreciation Rights. The Corporation did not grant any options or stock appreciation rights to the executive officers identified in Item 11(a) during the Corporation's fiscal year ended May 1, 2004. (c) Exercise of Options by Executive Officers. The table below sets forth information about the aggregate number of shares received and the value realized by the named executive officer upon exercise of options exercised during the Corporation's fiscal year ended May 1, 2004; and the aggregate number and value of options held by the named executive officer at the end of the fiscal year: Page 41 of 55 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Value of Unexercised Number of Unexercised In-the-Money Options at FY-End (#) Options at FY-End ($) ---------------------- ----------------------- Shares Acquired on Value Exercis- Unexercis- Exercis- Unexercis- Name Exercise Realized ($) able able able able ----------------- ----------- ------------ -------- ---------- -------- ---------- Stephen B. Ashley 0 0 1,000 0 0 0 Steven M. Morse 0 0 0 0 0 0
(d) Director Compensation. The sole director receives an annual fee of $6,000. (e) Agreements With Named Executive Officers. The Corporation executed on May 3, 2004 an independent contractor agreement with Mr. Morse d/b/a Concorde Accounting & Tax Services whereby he renders professional tax and accounting services and other related services to the Corporation. Mr. Morse is paid an hourly rate of $150 plus related expenses. See Exhibit 10-34 which is incorporated herein by reference thereto. (f) Compensation Committee Interlocks and Insider Participation. Stephen B. Ashley served during the fiscal year ended May 1, 2004 as a member of the Management Continuity Committee of the Corporation's Board of Directors which functioned as the Board's Compensation Committee. Page 42 of 55 Item 12. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners. The Corporation's only class of voting securities is its Class A Common Stock. As of July 12, 2004, persons who owned of record or were known by the Corporation to own beneficially more than 5% of the outstanding Class A Common Stock were:
Percent of Name and Address Amount Owned Class A Stock -------------------------------------------------- ------------ ------------- Charles S. Wehle as Trustee 73,845 (1) 35.2% under the Will of Louis A. Wehle 600 Powers Building 16 West Main Street Rochester, New York 14614 Charles S. Wehle and Henry S. Wehle 41,957 (2) 20.0% 600 Powers Building 16 West Main Street Rochester, New York 14614 Charles S. Wehle as Trustee under 12,145 (3) 5.8% Elizabeth R. Wehle Trust 600 Powers Building 16 West Main Street Rochester, New York 14614
(1) The power to vote and otherwise act with respect to these shares is vested in Charles S. Wehle while a trustee. In the event of his death, resignation or incapacity, such power would pass to Henry S. Wehle. (2) Excludes shares owned by trusts described elsewhere in this table and notes. Includes 31,443 shares held by Trust under Will of John L. Wehle, 8,595 shares owned individually by the Estate of John L. Wehle, Jr., 1,890 shares owned individually by Charles S. Wehle and 29 shares owned individually by Henry S. Wehle. Pursuant to a Shareholder Agreement and Irrevocable Proxy dated June 22, 1988 (the "Shareholder Agreement") among John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle (the "Shareholders"), Charles S. Wehle is appointed proxy to vote all voting securities of the Corporation then owned or thereafter acquired by the Shareholders. Under the Shareholder Agreement, Henry S. Wehle would succeed Charles S. Wehle as proxy in the event of the death, incapacity or resignation of Charles S. Wehle. The Shareholder Agreement will continue in effect until terminated in writing signed by all of the surviving Shareholders. As of July 12, 2004, 41,957 Class A shares, constituting 20% of the Class A shares outstanding, are subject to the Shareholder Agreement. (3) The power to vote and otherwise act with respect to these shares is vested in Charles S. Wehle while a trustee. In the event of his death, resignation or incapacity, such power would pass to Henry S. Wehle. Except as otherwise described above, to the Corporation's knowledge the persons listed above have sole voting and sole investment power with respect to all Class A shares listed. Page 43 of 55 (b) Security Ownership of Management. The number of and percentage of outstanding shares of Class A and Class B Common Stock of the Corporation beneficially owned (as determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934) as of July 12, 2004 by each director and by all directors and executive officers as a group are set forth in the following table:
Shares of Percentage Of Shares of Percentage of Name of Director Class A Class A Class B Class B Or Executive Officer Common Stock Common Stock Common Stock Common Stock -------------------- ------------ ------------ ------------ ------------ Steven M. Morse NONE 0% 250 (2) Stephen B. Ashley NONE 0% 1,896(1) (2) All Directors and Executive Officers as a group (2 persons) NONE 0% 2,146 0%
(1) Includes 896 shares owned individually and 1,000 shares which may be acquired pursuant to presently exercisable stock options. (2) Amount of shares owned does not exceed one-percent of shares outstanding. (c) Change of Control Arrangements. A Shareholder Agreement and Irrevocable Proxy among John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle dated June 22, 1988 may at a subsequent date result in a change in control of the Corporation, which agreement is more fully described in Note (2) to Item 12(a). Item 13. Certain Relationships and Related Transactions. (a) Related Transactions. The Corporation subleased approximately 1,200 square feet of office space from S.B. Ashley Management Corporation during fiscal 2004. Stephen B. Ashley, a director of the Corporation, is an officer, director and majority owner of S.B. Ashley Management Corporation. During the fiscal year ending May 1, 2004, the Corporation paid approximately $18,000 to S.B. Ashley Management Corporation for rent, utilities, taxes and ancillary services under the sublease with S.B. Ashley Management Corporation. Effective May 1, 2004 the Corporation vacated this 1,200 square feet of office space and executed a short-term lease with S.B. Ashley Management Corporation for office space and records storage space totaling approximately 100 square feet and 200 square feet, respectively. The total monthly cost to the Corporation commencing May 3, 2004 is approximately $200. Page 44 of 55 PART IV Item 14. Principal Accounting Fees and Services
Fiscal 2004 Fiscal 2003 ----------- ----------- Audit Fees $ 23,500 $ 28,000 Audit-Related Fees 0 0 Tax Fees 166,958 50,485 All Other Fees 1,850 8,150 ----------- ----------- Total $ 192,308 $ 86,635
The Corporation's then-existing Audit Committee pre-approved all of the foregoing services and reviewed the fees noted above for non-audit services and believed they were compatible with the independent accountants' independence. Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) The following documents are filed as part of this report: 1. Financial Statement Schedules: All schedules have been omitted because they are either not applicable or not required, or the required information is given in the consolidated financial statements or the notes thereto. 2. Exhibits: See Exhibit Index at Page 46 of this report. (b) Reports on Form 8-K. The Corporation filed a report on Form 8-K on April 1, 2004 to report information under Item 5 (Other Events). Page 45 of 55 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. GENESEE CORPORATION July 29, 2004 By: /s/ Steven M. Morse ------------------ --------------------------------------- (Date) Steven M. Morse, President, Treasurer, and Secretary Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/Stephen B. Ashley July 29, 2004 Director ------------------------------- ----------------- Stephen B. Ashley (Date) /s/Steven M. Morse July 29, 2004 President, Treasurer, ------------------------------- ----------------- and Secretary (Principal Steven M. Morse (Date) Executive Officer and Principal Financial and Accounting Officer) Page 46 of 55 EXHIBIT INDEX
NUMBER DOCUMENT PAGE ------ -------- ---- 3-1 Certificate of Incorporation (incorporated by reference to Exhibit -- 3-1 to the Corporation's report on Form 10-K for the fiscal year ended April 29, 2000). 3-2 Certificate of Amendment of the Certificate of Incorporation -- (incorporated by reference to the Corporation's report on Form 10-Q for the fiscal quarter ended January 27, 2001). 3-3 By-Laws (incorporated by reference to Exhibit 3-2 to the Corporation's report on Form -- 10-K for the fiscal year ended April 29, 2000). 10-1 Asset Purchase Agreement, dated as of August 29, 2000 between The Genesee Brewing -- Company, Inc. and High Falls Brewing Company, LLC (incorporated by reference to Exhibit 10-1 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-2 Amendment No. 1 to Asset Purchase Agreement dated as of December 15, 2000, between The -- Genesee Brewing Company, Inc. and High Falls Brewing Company, LLC (incorporated by reference to Exhibit 10-2 to the Corporation's report on Form 8-K filed on January 2, 2001.) 10-3 $3,500,000 First Senior Bridge Note dated December 15, 2000 executed by High Falls -- Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-3 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-4 $3,000,000 First Senior Bridge Note dated December 15, 2000 executed by High Falls -- Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-4 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-5 Mortgage dated as of December 15, 2000 executed by High Falls Brewing Company, LLC in -- favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-5 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-6 $4,500,000 Subordinated Promissory Note dated December 15, 2000 executed by High Falls -- Brewing Company, LLC in favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-6 to the Corporation's report on Form 8-K filed January 2, 2001). 10-7 Security Agreement dated as of December 15, 2000 executed by High Falls Brewing Company, -- LLC in favor of The Genesee Brewing Company, Inc. (incorporated by reference to Exhibit 10-7 to the Corporation's report on Form 8-K filed on January 2, 2001). 10-8 Intercreditor Agreement dated as of December 15, 2000 among High Falls Brewing Company, -- LLC, The Genesee Brewing Company, Inc., Manufacturers and Traders Trust Company and Cephas Capital Partners, LP (incorporated by reference to Exhibit 10-8 to the Corporation's report on Form 8-K filed on January 2, 2001).
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NUMBER DOCUMENT PAGE ------ -------- ---- 10-9 Indemnification Agreement dated as of December 15, 2000 between The Genesee Brewing -- Company, Inc. and High Falls Brewing Company, LLC (incorporated by reference to Exhibit 10-10 to the Corporation's report on Form 8-K filed January 2, 2001). 10-10 Employment and Stock Appreciation Agreement with S.M. Morse dated as of December 15, -- 2000 (incorporated by reference to Exhibit 10-16 to the Corporation's report on Form 10-K for the fiscal year ended April 28, 2001). 10-11 Letter agreement with S.B. Ashley dated January 8, 2001 (incorporated by reference to -- Exhibit 10-17 to the Corporation's report on Form 10-K for the fiscal year ended April 28, 2001). 10-12 Indemnification Agreement with Steven M. Morse dated June 27, 2001 (incorporated by -- reference to Exhibit 10-18 to the Corporation's report on Form 10-K for the fiscal year ended April 28, 2001). Substantially identical agreements were executed with all other directors and officers of the Corporation. 10-13 1992 Stock Plan (incorporated by reference to Exhibit 10-1 to the Corporation's report -- on Form 10-Q for the fiscal quarter ended October 30, 1999). 10-14 Stock Bonus Incentive Program under 1992 Stock Plan (incorporated by reference to -- Exhibit 10-3 to the Corporation's report on Form 10-K for the fiscal year ended May 2, 1998). 10-15 Agreement of Sublease by and between S.B. Ashley Management Corporation and the -- Corporation dated May 18, 2001 (incorporated by reference to Exhibit 10-27 to the Corporation's report on Form 10-K for the fiscal year ended April 28, 2001). 10-16 Plan of Liquidation and Dissolution adopted by the Corporation's shareholders on -- October 29, 2000 (incorporated by reference to Exhibit 10-28 to the Corporation's report on Form 10-K for the fiscal year ending April 28, 2001). 10-17 Purchase Agreement dated September 21, 2001 by and among Associated Brands, Inc., -- Associated Brands Inc. and Genesee Corporation (incorporated by reference to Exhibit 10-1 to the Corporation's report on Form 8-K filed on October 24, 2001). Exhibits and schedules pursuant to the Purchase Agreement have not been filed by the registrant, which hereby undertakes to file such exhibits and schedules upon request by the Commission. 10-18 Transfer Agreement dated May 31, 2002 by and among Genesee Ventures Inc., Home Leasing -- Corporation, Norman Leenhouts and Nelson B. Leenhouts (incorporated by reference to Exhibit 10-26 to the Corporation's report on Form 10-K for the fiscal year ended April 27, 2002.) Exhibits pursuant to the Transfer Agreement have not been filed by the registrant, who hereby undertakes to file such exhibits upon request by the Commission. 10-19 Indemnification Agreement dated May 31, 2002 by and between Genesee Corporation, Norman -- Leenhouts, Nelson B. Leenhouts and Home Leasing Corporation (incorporated by reference to Exhibit 10-26 to the Corporation's report on Form 10-K for the fiscal year ended April 27, 2002.)
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NUMBER DOCUMENT PAGE ------ -------- ---- 10-20 Amendment to Employment Agreement with S.M. Morse (see Exhibit 10-10 above) dated as of -- May 4, 2003. (Incorporated by reference to Exhibit 10-26 to the Corporation's report on Form 10-K for the fiscal year ended May 3, 2003) 10-21 Agreement dated May 25, 2004 between High Falls Brewing Company, LLC and GBC Liquidating -- Corp. (incorporated by reference to Exhibit 10-1 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-22 Bill of Sale dated May 25, 2004 between GBC Liquidating Corp. and St. Paul Associates, -- LLC (incorporated by reference to Exhibit 10-2 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-23 General Release dated May 25, 2004 from GBC Liquidating Corp. to High Falls Brewing -- Company, LLC (incorporated by reference to Exhibit 10-3 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-24 Letter agreement dated May 25, 2004 between St. Paul Associates, LLC and High Falls -- Brewing Company, LLC (incorporated by reference to Exhibit 10-4 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-25 General Release dated May 25, 2004 from High Falls Brewing Company, LLC to GBC -- Liquidating Corp. (incorporated by reference to Exhibit 10-5 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-26 Note Purchase Agreement dated May 25, 2004 between GBC Liquidating corp. and St. Paul -- Associates, LLC (incorporated by reference to Exhibit 10-6 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-27 Amended and Restated Subordinated Promissory Note dated May 25, 2004 from High Falls -- Brewing company, LLC to GBC Liquidating Corp. (incorporated by reference to Exhibit 10-7 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-28 Buyer's Certificate dated May 25, 2004 from St. Paul Associates, LLC (incorporated by -- reference to Exhibit 10-8 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-29 Assumption of Intercreditor Agreement dated May 25, 2004 among High Falls Brewing -- company, LLC, Manufacturers & Traders Trust Company, Cephas Capital Partners, LP and GBC Liquidating Corp. (incorporated by reference to Exhibit 10-9 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-30 General release dated May 21, 2004 from Manufacturers and Traders Trust Company to GBC -- Liquidating Corp. (incorporated by reference to Exhibit 10-10 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-31 General Release dated May 21, 2004 from Cephas Capital Partners, LP to GBC Liquidating -- Corp. (incorporated by reference to Exhibit 10-11 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-32 Letter dated May 11, 2004 from Manufacturers and Traders Trust Company to High Falls -- Brewing Company, LLC (incorporated by reference to Exhibit 10-12 to the Corporation's report on Form 8-K filed on June 4, 2004)
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NUMBER DOCUMENT PAGE ------ -------- ---- 10-33 Closing Certificate dated May 24, 2004 from GBC Liquidating Corp. (incorporated by -- reference to Exhibit 10-13 to the Corporation's report on Form 8-K filed on June 4, 2004) 10-34 Independent Contractor Agreement dated May 3, 2004 between Genesee Corporation and Steven M. Morse, CPA d/b/a Concorde Accounting and Tax Services 50 14 Genesee Corporation Financial Code of Ethics (incorporated by reference to Exhibit 14 to -- the Corporation's report on Form 10-K for the fiscal year ended May 3, 2003) 21 Subsidiaries of the Registrant 52 31 Officer Certifications as required by Section 302 of the Sarbanes-Oxley Act of 2002 53 32 Officer Certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002 55