10-K 1 l27171ae10vk.txt GENESEE CORPORATION 10-K Index to Exhibits at Page 25 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: April 28, 2007 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES NO X --- --- Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES NO X --- --- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES NO X --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (sec. 229.405) 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 the Form 10-K or any amendment to this Form 10-K. X --- Page 2 of 28 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer 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 --- --- Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) YES NO X --- --- The aggregate market value of voting and non-voting common stock (Class A and Class B, respectively) held by non-affiliates, based on the price for Class B Common Stock at the close of trading on October 27, 2006, the last business day of the fiscal 2007 second quarter, was $2,789,990. The number of shares outstanding of each of the registrant's classes of common stock as of July 9, 2007 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 28 PART I Item 1. 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. In October 2000, Corporation shareholders approved a plan to divest all of the Corporation's operations and then liquidate and dissolve the Corporation (the "Plan of Liquidation and Dissolution.") Since then, as discussed below, the Corporation has divested all of its operations and substantially all of its other assets. The proceeds from these divestitures, net of amounts paid or reserved to discharge all of the Corporation's obligations and liabilities, are being distributed to the Corporation's shareholders in a series of liquidating distributions. The following are the significant transactions that have occurred since the Corporation's shareholders approved the Plan of Liquidation and Dissolution: - In December 2000 the Corporation sold its brewing business to High Falls Brewing Company, LLC ("High Falls") for $27.2 million of which it eventually received $24.2 million. - In December 2000 the Corporation sold a significant portion of its equipment lease portfolio and received $12.8 million in proceeds. - In October 2001 the Corporation sold its Foods Division to Associated Brands, Inc. for $24.4 million. - On May 31, 2002, the Corporation sold its ten-percent interest in an office building located in Rochester, New York and a related note receivable from the building owner for $2.4 million in cash. - 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. - On May 24, 2004, the Corporation sold the remaining High Falls debt for $1.0 million. - On July 21, 2005, the Corporation purchased a New York workers compensation insurance policy from a New York State approved insurance carrier for $2.36 million. With the purchase of this policy, the Corporation was relieved of its self-insured workers compensation status and related obligation. - On August 16, 2006 the Corporation was dissolved upon the filing of its Certificate of Dissolution with the New York Secretary of State. The liquidation of the Corporation will be complete upon payment of a final liquidating distribution. 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 eight liquidating distributions totaling $65.3 million, or $39.00 per share as of April 28, 2007. 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. Page 4 of 28 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. Employees. As of April 28, 2007, the Corporation had no employees. Item 1A. Risk Factors The Corporation has only one director and one officer and the loss of either of their services could have a material adverse effect on the Corporation. There are risks associated with the estimates of the net assets of the Corporation in liquidation, the amount and timing of the payment of additional liquidating distributions and the Corporation's operating costs through final dissolution, including the additional wind-up costs, which will vary with the length of time it operates. The cautionary statements regarding estimates of net assets in liquidation set forth in the Notes to the accompanying financial statements that accompany this report are incorporated herein by reference. The Corporation is subject to a number of other significant risks. These 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 income, sales, use and/or other tax returns filed by the Corporation 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, 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 expenses and contingent liabilities associated with the winding up and dissolution of the Corporation. Item 1B. Unresolved Staff Comments None Item 2. Properties None Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders Not applicable Page 5 of 28 PART II Item 5. Market for the Registrant's Common Equity, 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 National Stock Market (the "Nasdaq NMS") under the symbol GENBB until 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 9, 2007, the numbers of holders of record of Class A (voting) Common Stock and Class B (non-voting) Common Stock were 82 and 789, respectively. Effective December 31, 2003, the Corporation's Class B Common Stock ceased trading on the NASDAQ NMS. On June 18, 2004 the Corporation paid a liquidating distribution of $1.50 per share to both Class A and Class B Common Stock shareholders. No dividend or liquidating distribution was paid in fiscal 2006 or fiscal 2007. Item 6. Selected Financial Data The selected historical financial data included in the table below as of April 28, 2007, April 29, 2006, April 30, 2005, May 1, 2004, and May 3, 2003 is derived from the financial statements of the Corporation and should be read in conjunction herewith. As further described in Note 1 to the accompanying financial statements, the Corporation adopted the liquidation basis of accounting effective September 29, 2001. Therefore, information in the table below follows this basis of accounting.
April 28, April 29, April 30, May 1, May 3, 2007 2006 2005 2004 2003 --------- --------- --------- ------ ------- Total Assets $4,291 $3,518 $5,897 $8,839 $15,935 Net Assets in Liquidation 4,205 3,088 2,939 6,842 8,377 Liquidating Distributions Per Share 0.00 0.00 1.50 0.00 17.00
(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 6 of 28 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 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 financial statements. LIQUIDITY AND CAPITAL RESOURCES - APRIL 28, 2007 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 June 18, 2004 2,511,000 1.50 ----------- ------ TOTAL $65,290,000 $39.00 =========== ======
The Corporation anticipates paying a final liquidating distribution to Class A and Class B common shareholders in the third quarter of calendar 2007. Management estimates that the remaining costs required to wind up the Corporation's business affairs totals $86,000 as of April 28, 2007. This amount has been recorded on the accrued expenses and other liabilities line in the accompanying Statement of Net Assets in Liquidation. The value of the net assets in liquidation per outstanding share could be less or more 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. The Corporation's 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 5.2% per annum. Previously, the Corporation adopted a Contingent Liability Reserve Policy whereby the Corporation maintains a cash contingency for unexpected expenses of the Corporation. This reserve was equal to $837,000, or approximately $0.50 per share as of April 28, 2007, but was reduced to $0 during July 2007 in anticipation of the Corporation declaring a final liquidating distribution and since management does not believe that such a contingency is required. This reserve is not classified as restricted or as a liability in the accompanying Statement of Net Assets in Liquidation. On January 19, 2007, the Corporation determined that it owned marketable securities that had not been included in the Corporation's previous statements of net assets in liquidation. These marketable securities were sold during the fourth quarter of fiscal 2007 and the Corporation received $289,000 in proceeds from those sales. Page 7 of 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) During the fourth quarter of fiscal 2006 the Corporation finalized income tax audits from the New York State Department of Taxation for the fiscal years ended May 3, 2003, May 1, 2004, and April 30, 2005 and remitted payment to New York State during the first quarter of fiscal 2007. Also, during the first quarter of fiscal 2007, the Corporation finalized and filed a federal income tax carryback claim for the fiscal year ended April 29, 2006; the Corporation received a refund in connection with this carryback claim during the second quarter of fiscal 2007. As a result of the tax payments made to New York State and the receipt of the federal carryback claim, the estimated income tax liability of $195,000 as of April 29, 2006 was reduced to $179,000 as of October 28, 2006 (end of second quarter) and remained at $179,000 as of January 27, 2007 (end of third quarter.) During the fourth quarter of fiscal 2007, the Corporation released tax reserves in the amount of $231,000 resulting in the current $52,000 estimated net income tax receivable balance that represents previous overpayments of federal and New York State taxes. In addition, during the fourth quarter of fiscal 2007, the Corporation received $467,000 (including interest) in response to an additional federal income tax refund claim of $460,000 for the 2001 fiscal year that had been previously filed with the Internal Revenue Service. Due to the uncertainty of collection on this claim, this amount had not been previously recorded in the Corporation's financial statements. During July 2007, the Corporation received $73,000 in additional interest income from the Internal Revenue Service as a final payment related to the refund claim described in this paragraph. This $73,000 amount represents interest receivable as of April 28, 2007 and is accordingly recorded in the Other Assets line item of the accompanying financial statements as of April 28, 2007. See also Note 2 to the accompanying financial statements. Other assets increased by $14,000 when comparing April 28, 2007 and April 29, 2006 balances, primarily as a result of a) amortization of prepaid insurance and collection of amounts due under a note receivable with a previous customer of the Genesee Brewing Company, Inc. which the Corporation retained after the sale of its brewing business to High Falls (combined decrease in other assets of $59,000) and b) the recording of the $73,000 interest receivable from the Internal Revenue Service described in the preceding paragraph. Accrued expenses and other liabilities as presented in the Statement of Net Assets in Liquidation decreased from its April 29, 2006 balance by $149,000. This decrease is a result of the payment of operating costs of approximately $276,000 and an increase in the run-out accrual in the third and fourth quarters by $107,000 and $20,000, respectively. RECENTLY ISSUED ACCOUNTING STANDARDS In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in GAAP and expands disclosures about fair value measurements. Specifically, this Statement sets forth a definition of fair value, and establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable inputs. The provisions of SFAS No. 157 are generally required to be applied on a prospective basis, except to certain financial instruments accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, for which the provisions of SFAS No. 157 should be applied retrospectively. The adoption of this standard will not impact the Corporation's financial statements. Page 8 of 28 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) In September 2006, the FASB issued SFAS No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R). SFAS No. 158 requires an employer to recognize the funded status of its defined benefit pension and postretirement plans as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income. In addition, SFAS No. 158 requires an employer to measure the funded status of a plan as of the date of the employer's fiscal year-end statement of financial position, which is consistent with the measurement date for the Company's defined benefit plans. SFAS No. 158 made no changes to the recognition of expense. SFAS No. 158 will be effective as of the fiscal year ending April 28, 2007. The adoption of this standard will not impact the Corporation's financial statements. In September 2006, the SEC staff issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB 108 was issued in order to eliminate the diversity in practice surrounding how public companies quantify financial statement misstatements. SAB 108 requires that registrants quantify errors using both a balance sheet and income statement approach and evaluate whether either approach results in a misstated amount that, when all relevant quantitative and qualitative factors are considered, is material. The adoption of this standard will not impact the Corporation's financial statements. 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 and final liquidating distributions and statements about the Corporation's operating costs through final dissolution, including the additional wind-up costs, which will vary with the length of time it continues to operate. The cautionary statements regarding estimates of net assets in liquidation set forth in the Notes to the accompanying 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 income, sales, use and/or other tax returns filed by the Corporation 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, 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 expenses, discharge of contingent liabilities, reliance on sole director and sole officer and the risk of losing either, and the winding up and dissolution of the Corporation. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Page 9 of 28 Item 8. Financial Statements and Supplementary Data (a) Selected Quarterly Financial Data - Not Applicable (b) Index to Financial Statements
Page ---- Report of Independent Registered Public Accounting Firm- PricewaterhouseCoopers LLP 10 Statement of Net Assets in Liquidation (Liquidation Basis) at April 28, 2007 and April 29, 2006 11 Statement of Changes in Net Assets in Liquidation (Liquidation Basis) For the years ended April 28, 2007, April 29, 2006, and April 30, 2005 12 Notes to Financial Statements 13
Page 10 of 28 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 April 28, 2007 and April 29, 2006, and the related statements of changes in net assets in liquidation for each of the three years in the period ended April 28, 2007. 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. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Genesee Corporation as of April 28, 2007 and April 29, 2006, and the changes in its net assets in liquidation for each of the three years in the period ended April 28, 2007, in conformity with accounting principles generally accepted in the United States of America. As described in Note 1, the financial statements 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 25, 2007 Page 11 of 28 GENESEE CORPORATION Statement Of Net Assets In Liquidation (Liquidation Basis) April 28, 2007 and April 29, 2006 (Dollars in thousands, except per share data)
2007 2006 ---------- ---------- ASSETS Cash and cash equivalents $ 4,131 $ 3,424 Estimated net income tax receivable 52 0 Other assets 108 94 ---------- ---------- Total assets $ 4,291 $ 3,518 ========== ========== LIABILITIES AND NET ASSETS Accrued expenses and other liabilities $ 86 $ 235 Estimated net income tax payable 0 195 ---------- ---------- Total liabilities 86 430 ---------- ---------- Net assets in liquidation $ 4,205 $ 3,088 ========== ========== 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 $ 2.51 $ 1.84 ========== ==========
See accompanying notes to financial statements. Page 12 of 28 GENESEE CORPORATION Statement Of Changes In Net Assets In Liquidation (Liquidation Basis) For the Years ended April 28, 2007, April 29, 2006, and April 30, 2005 (Dollars in thousands)
2007 2006 2005 ------ ------ ------- Net assets in liquidation at April 30, 2006, May 1, 2005, and May 2, 2004, respectively $3,088 $2,939 $ 6,842 Liquidating distributions paid to shareholders 0 0 (2,511) Interest income (expense), net 244 143 91 Changes in estimated liquidation values of assets and liabilities 873 6 (1,483) ------ ------ ------- Net assets in liquidation at April 28, 2007, April 29, 2006, and April 30, 2005, respectively $4,205 $3,088 $ 2,939 ====== ====== =======
See accompanying notes to financial statements. Page 13 of 28 GENESEE CORPORATION Notes to Financial Statements April 28, 2007, April 29, 2006, and April 30, 2005 (1) Liquidation Basis Note LIQUIDATION BASIS FINANCIAL STATEMENTS With the sale of its Foods Division in 2001, the Corporation adopted the liquidation basis of accounting. 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 are 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. General assumptions used, asset and liability values, and changes to asset and liability values under the Liquidation Basis of Accounting from April 29, 2006 to April 28, 2007. 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 April 28, 2007 and April 29, 2006. Cash and cash equivalents and restricted cash - 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 April 28, 2007 and April 29, 2006, substantially all cash balances were in excess of federally insured limits and were yielding approximately 5.2% and 4.7% per annum, respectively. The Corporation adopted a Contingent Liability Reserve Policy whereby the Corporation will maintain a cash contingency reserve for unexpected expenses of the Corporation. The amount of the reserve may be modified as deemed necessary. The balance of this reserve was $837,000, or approximately $0.50 per outstanding share at April 28, 2007, but was reduced to $0 during July 2007 in anticipation of the Corporation declaring a final liquidating distribution and since management does not believe that such a contingency is required. This reserve is not classified as restricted or as a liability in the accompanying Statement of Net Assets in Liquidation. Page 14 of 28 GENESEE CORPORATION Notes to Financial Statements (1) Liquidation Basis Note (continued) 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 the state and / or federal taxing authorities, most notably as it relates to the fiscal years ended May 1, 2004, April 30, 2005, April 29, 2006, and April 28, 2007. The Corporation has settled audits from the federal taxing authority through the fiscal tax year ended April 27, 2002 and audits from the New York State taxing authority through the fiscal tax year ended April 30, 2005. 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 and reviewed by the taxing authorities. To the extent that the Corporation is audited for other years by federal and/or state taxing authorities, such an audit or audits could result in an increase or decrease in the Corporation's income tax receivable or create a net income tax payable. During the fourth quarter of fiscal 2006 the Corporation finalized income tax audits from the New York State Department of Taxation for the fiscal years ended May 3, 2003, May 1, 2004, and April 30, 2005 and remitted payment to New York State during the first quarter of fiscal 2007. Also, during the first quarter of fiscal 2007, the Corporation finalized and filed a federal income tax carryback claim for the fiscal year ended April 29, 2006; the Corporation received a refund in connection with this carryback claim during the second quarter of fiscal 2007. As a result of the tax payments made to New York State and the receipt of the federal income tax carryback claim, the estimated income tax liability of $195,000 as of April 29, 2006 was reduced to $179,000 as of October 28, 2006 (end of second quarter) and remained at $179,000 as of January 27, 2007 (end of third quarter.) During the fourth quarter of fiscal 2007, the Corporation released tax reserves in the amount of $231,000 resulting in the current $52,000 estimated net income tax receivable balance that represents previous overpayments of federal and New York State taxes. In addition, during the fourth quarter of fiscal 2007, the Corporation received $467,000 (including interest) in response to an additional federal refund claim of $460,000 for the 2001 fiscal year that had been previously filed with the Internal Revenue Service. Due to the uncertainty of collection on this claim, this amount had not been previously recorded in the Corporation's financial statements. During July 2007, the Corporation received $73,000 in additional interest income from the Internal Revenue Service as a final payment related to the refund claim described in this paragraph. This $73,000 amount represents interest receivable as of April 28, 2007 and is accordingly recorded in the Other Assets line item of the accompanying financial statements as of April 28, 2007. See also Note 2. The Corporation may incur additional professional fees as a result of any additional income tax audits. Page 15 of 28 GENESEE CORPORATION Notes to Financial Statements (1) Liquidation Basis Note (continued) The following table depicts the estimated net income tax payable/receivable as of April 28, 2007 and April 29, 2006, respectively, reported on the accompanying Statement of Net Assets in Liquidation.
2007 2006 ---- ---- Estimated net income tax receivable $52 $ 0 --- ---- Estimated net income tax payable $ 0 $195 --- ----
(Dollars in thousands) Other assets - Valued based on management estimates. At April 28, 2007 and April 29, 2006 the $108,000 and $94,000 balances, respectively, are comprised of prepaid insurance (2006), a note receivable (2006 and 2007), and a $73,000 interest receivable from the Internal Revenue Service described in Note 2 (2007.) 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 represent the estimated cash costs of operating the Corporation through its expected termination which management has estimated to occur during the third quarter of calendar 2007. These costs, which include facilities, professional fees, and other related costs, are estimated based on various assumptions regarding 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. Page 16 of 28 GENESEE CORPORATION Notes to Financial Statements (1) Liquidation Basis Note (continued) The tables below detail these costs by category as of April 28, 2007 and April 29, 2006 and the expenditures and management adjustments that occurred during the fiscal years then ended. Fiscal Year Ended April 28, 2007
April 29, 2006 Fiscal 2007 Fiscal 2007 April 28, 2007 Category Balance Expenditures Adjustments Balance -------- -------------- ------------ ----------- -------------- Office expenses, Including rent $ 11,000 $ (4,000) $ (5,000) $ 2,000 Insurance expense 21,000 (42,000) 22,000 1,000 Professional fees 174,000 (224,000) 124,000 74,000 Other 29,000 (6,000) (14,000) 9,000 -------- --------- -------- ------- Totals $235,000 $(276,000) $127,000 $86,000 ======== ========= ======== =======
During the third and fourth quarters of fiscal 2007 the Corporation increased its run-out accrual by $107,000 and $20,000, respectively. These additional costs, which are comprised primarily of professional fees as shown in the table above, are directly related to the length of time the Corporation anticipates will be required to wind-up the business affairs of the Corporation. As stated above, management has now estimated the Corporation's expected termination to occur during the third quarter of calendar 2007. Fiscal Year Ended April 29, 2006
April 30, 2005 Fiscal 2006 Fiscal 2006 April 29, 2006 Category Balance Expenditures Adjustments Balance -------- -------------- ------------ ----------- -------------- Office expenses, $ 17,000 $ (6,000) $ 0 $ 11,000 Including rent Insurance expense 26,000 (5,000) 0 21,000 Professional fees 338,000 (310,000) 146,000 174,000 Other 77,000 (16,000) (32,000) 29,000 -------- --------- -------- -------- Totals $458,000 $(337,000) $114,000 $235,000 ======== ========= ======== ========
The Corporation's estimate of remaining operating costs through final dissolution and other accrued expenses was increased by $14,000 and $100,000 in the first and third quarters of fiscal 2006, respectively. As of April 29, 2006, the Corporation has $235,000 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 winding up of the Corporation's business. Page 17 of 28 GENESEE CORPORATION Notes to Financial Statements (1) Liquidation Basis Note (continued) Contingent liabilities - As with any business, the Corporation may have potential contingent liabilities in addition to the liabilities recorded in the accompanying financial statements. Because no claims for contingent liabilities have been made or threatened, no amount has been recorded for such liabilities in the accompanying 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 April 28, 2007 and April 29, 2006. 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 June 18, 2004 2,511,000 1.50 ----------- ------ TOTAL $65,290,000 $39.00 =========== ======
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 April 28, 2007, April 29, 2006, and April 30, 2005. (2) Subsequent Event During July 2007, the Corporation received $73,000 in additional interest income from the Internal Revenue Service related to the fiscal 2001 $460,000 federal refund claim described in Note 1. The Corporation has recorded this amount as an interest receivable in the Other Assets line item in the accompanying financial statements. Page 18 of 28 GENESEE CORPORATION Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure Not applicable. Item 9A. Controls and Procedures The management of the Corporation is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934. As of April 28, 2007, an evaluation was performed under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Corporation's disclosure controls and procedures. Based on that evaluation, management concluded that the Corporation's disclosure controls and procedures as of April 28, 2007 were effective in ensuring that information required to be disclosed in this Annual Report on Form 10-K was recorded, processed, summarized, and reported within the time period required by the United States Securities and Exchange Commission's rules and forms. There has been no change in the Corporation's internal control over financial reporting that occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to affect, the Corporation's internal control over financial reporting. Item 9B. Other Information Not applicable. Page 19 of 28 GENESEE CORPORATION PART III Item 10. Directors and Executive Officers of the Registrant and Corporate Governance (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 (67) 1987 Former President of the Corporation (1) 2007
(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. (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 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 ---- --- -------------- --------------------------------------- Steven M. Morse 43 2000 President, Treasurer, and Secretary (1)
(1) Mr. Morse was elected President, Treasurer, and Secretary of the Corporation on May 31, 2004. 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 - Institute Audit, Compliance & Advisement at Rochester Institute of Technology, a university located in Rochester, New York. Page 20 of 28 GENESEE CORPORATION (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 April 28, 2007. (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 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. Item 11. Executive Compensation The only compensation paid by the Corporation is paid to its sole director, Stephen B. Ashley, and its sole officer, Chief Executive Officer and Chief Financial Officer, Steven M. Morse. Mr. Ashley is paid $500 per month and was paid a total of $6,000 in fiscal 2007. Mr. Morse, an independent contractor who is paid $150 per hour, was paid $44,513 in fiscal 2007. The Corporation's compensation philosophy is to minimize its compensation expense while efficiently winding up of its affairs, so as to maximize the liquidation proceeds available for distribution to shareholders. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (a) Security Ownership of Certain Beneficial Owners. The Corporation's only class of voting securities is its Class A Common Stock. As of July 9, 2007, 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 700 Powers Building 16 West Main Street Rochester, New York 14614 Charles S. Wehle and Henry S. Wehle 41,957(2) 20.0% 700 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 700 Powers Building 16 West Main Street Rochester, New York 14614
Page 21 of 28 GENESEE CORPORATION (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 9, 2007, 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. (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 9, 2007 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 (1) Stephen B. Ashley NONE 0% 896 (1) All Directors and Executive Officers as a group (2 persons) NONE 0% 1,146 0%
(1) 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) above. Page 22 of 28 GENESEE CORPORATION Item 13. Certain Relationships, Related Transactions, and Director Independence. Effective May 1, 2004 the Corporation 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. Stephen B. Ashley, the sole director of the Corporation, is an officer, director and majority owner of S.B. Ashley Management Corporation. During the fiscal year ending April 28, 2007, the Corporation paid $2,667 to S.B. Ashley Management Corporation for rent. As indicated above, the Corporation has only one director and no committees of the Board of Directors. Because of the run-out status of the Corporation and the fact that it has only one director, Board committees, a director nominating policy, a shareholder communication policy, and other corporate governance is unnecessary. Further, Mr. Ashley is "independent" as defined under the rules of NASDAQ, where its Class B stock formerly traded. Page 23 of 28 GENESEE CORPORATION PART IV Item 14. Principal Accounting Fees and Services
Fiscal 2007 Fiscal 2006 ----------- ----------- Audit Fees $26,000 $ 24,500 Audit-Related Fees 8,500 0 Tax Fees 43,145 104,590 All Other Fees 0 0 ------- -------- Total $77,645 $129,090 ======= ========
Item 15. Exhibits and Financial Statement Schedules. (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 financial statements or the notes thereto. 2. Exhibits: See Exhibit Index at Page 25 of this report. Page 24 of 28 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 25, 2007 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 25, 2007 Director ------------------------------------- (Date) Stephen B. Ashley /s/ Steven M. Morse July 25, 2007 President, Treasurer, ------------------------------------- (Date) and Secretary (Principal Steven M. Morse Executive Officer and Principal Financial and Accounting Officer)
Page 25 of 28 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 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). 10-2 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). 10-3 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. 10-4 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). 10-5 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). 10-6 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) 10-7 Independent Contractor Agreement dated May 3, 2004 between Genesee -- Corporation and Steven M. Morse, CPA d/b/a Concorde Accounting and Tax Services (incorporated by reference to Exhibit 10-34 to the Corporation's annual report on Form 10-K for the fiscal year ended May 1, 2004) 10-8 NYS Workers Compensation Policy effective June 1, 2005 (incorporated by -- reference to Exhibit 10-1 to the Corporation's report on Form 8-K filed on July 26, 2005) 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) 31.1 Officer Certification as required by Section 302 of the Sarbanes-Oxley 26 Act of 2002 31.2 Officer Certification as required by Section 302 of the Sarbanes-Oxley 27 Act of 2002 32 Officer Certifications as required by Section 906 of the Sarbanes-Oxley 28 Act of 2002