-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ShbXG74UVUL5A4/oh5KqM1TVh8599S0OP6aVlpUJk3bxi+ZyjfiIlXUCNW8n2jG3 T97SaSRNUl5jptIwuWKUsA== 0000897069-03-000063.txt : 20030114 0000897069-03-000063.hdr.sgml : 20030114 20030114173209 ACCESSION NUMBER: 0000897069-03-000063 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20021130 FILED AS OF DATE: 20030114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHLAND CRANBERRIES INC /WI/ CENTRAL INDEX KEY: 0000818010 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 391583759 STATE OF INCORPORATION: WI FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16130 FILM NUMBER: 03514013 BUSINESS ADDRESS: STREET 1: 800 FIRST AVE SO STREET 2: P O BOX 8020 CITY: WISCONSIN RAPIDS STATE: WI ZIP: 54494 BUSINESS PHONE: 7154244444 10-Q 1 irm93.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended November 30, 2002 ----------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 AND 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________to ________ Commission File Number 0-16130 ------------ NORTHLAND CRANBERRIES, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Wisconsin 39-1583759 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 2930 Industrial Street P.O. Box 8020 Wisconsin Rapids, Wisconsin 54495-8020 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) Registrant's telephone number, including area code (715) 424-4444 - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2). Yes No X APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes____No____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class A Common Stock January 14, 2003 91,548,580 1 NORTHLAND CRANBERRIES, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements....................................... 3 Condensed Consolidated Balance Sheets...................... 3 Condensed Consolidated Statements of Operations............ 4 Condensed Consolidated Statements of Cash Flows............ 5 Condensed Consolidated Statement of Shareholders' Equity... 6 Notes to Condensed Consolidated Financial Statements...... 7-14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 15-19 Item 3. Quantitative and Qualitative Disclosure About Market Risk....................................... 19 Item 4. Controls and Procedures.................................... 20 PART II. OTHER INFORMATION Item 1. Legal Proceedings.......................................... 20 Item 2. Changes in Securities and Use of Proceeds.................. 20 Item 3. Defaults Upon Senior Securities............................ 21 Item 4. Submission of Matters to a Vote of Security Holders........ 21 Item 6. Exhibits and Reports on Form 8-K........................... 21 SIGNATURE.................................................. 21 Certifications........................................... 22-23 Exhibit Index.............................................. 24 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited)
November 30, August 31, 2002 2002 ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 1,227 $ 264 Accounts receivable - net 6,796 7,498 Current portion of note receivable and accounts receivable - other 10,110 10,190 Inventories 25,595 18,273 Prepaid expenses and other current assets 698 606 Assets held for sale 2,540 3,100 -------- --------- Total current assets 46,966 39,931 Note receivable, less current portion 17,250 18,500 Property and equipment - net 63,003 63,836 Other assets 872 825 Debt issuance cost - net 3,421 3,793 -------- --------- Total assets $131,512 $ 126,885 ======== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Revolving line of credit facility $ 3,739 $ 560 Accounts payable 14,216 7,905 Accrued liabilities 8,273 9,028 Current maturities of long-term debt 14,007 15,568 -------- --------- Total current liabilities 40,235 33,061 Long-term debt, less current maturities 50,971 54,532 -------- --------- Total liabilities 91,206 87,593 -------- --------- Shareholders' equity: Common stock - Class A, $.01 par value, 91,548,580 and 91,548,580 shares issued and outstanding, respectively 915 915 Redeemable preferred stock - Series B, $.01 par value, 100 and 100 shares issued and outstanding, respectively 0 0 Additional paid-in capital 154,902 154,902 Accumulated deficit (115,511) (116,525) -------- --------- Total shareholders' equity 40,306 39,292 -------- --------- Total liabilities and shareholders' equity $131,512 $ 126,885 ======== ========= See notes to condensed consolidated financial statements.
3 NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited) Three months ended November 30, November 30, 2002 2001 Net revenues $ 21,739 $ 30,316 Cost of sales (15,165) (20,733) --------- ---------- Gross profit 6,574 9,583 Selling, general and administrative expenses (6,594) (5,921) Other income (Note 4) 1,500 0 -------- --------- Income from operations 1,480 3,662 Interest expense (1,040) (3,090) Interest income 574 650 Gain on forgiveness of indebtedness 0 83,299 -------- --------- Income before income taxes 1,014 84,521 Income tax expense 0 (32,800) -------- --------- Net income $ 1,014 $ 51,721 ======== ========= Net income per common share: Basic: $ 0.01 $ 3.06 Diluted: $ 0.01 $ 1.70 Shares used in computing net income per share: Basic 91,548,580 16,884,777 Diluted 101,126,227 30,492,464 See notes to condensed consolidated financial statements. 4 NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (Unaudited)
Three months ended November 30, November 30, 2002 2001 ------------ ------------ Operating activities: Net income $ 1,014 $ 51,721 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property and equipment 893 1,028 Amortization of debt issuance costs and debt discount 438 156 Gain on forgiveness of indebtedness (net of income taxes 0 (50,499) of $32,800) Changes in assets and liabilities: Receivables, prepaid expenses and other current assets 873 (837) Inventories (7,322) 1,344 Accounts payable and accrued liabilities 5,455 2,396 -------- -------- Net cash provided by operating activities 1,351 5,309 -------- -------- Investing activities: Collections on note receivable 1,000 500 Property and equipment purchases (196) (6) Proceeds from disposals of assets held for sale and of property and equipment 715 79 -------- -------- Net cash provided by investing activities 1,519 573 -------- -------- Financing activities: Net increase in borrowings under revolving line of credit facility 3,179 8,327 Proceeds from issuance of long-term debt 0 20,000 Payments on long-term debt and other obligations (5,086) (1,231) Net payment in settlement of revolving credit facility 0 (38,388) Payments for debt issuance costs 0 (1,259) Proceeds from issuance of preferred stock 0 2,942 Proceeds from issuance of common stock 0 2,618 -------- -------- Net cash used in financing activities (1,907) (6,991) -------- -------- Net increase (decrease) in cash and cash equivalents 963 (1,109) Cash and cash equivalents, beginning of period 264 1,487 -------- -------- Cash and cash equivalents, end of period $ 1,227 $ 378 ======== ======== See notes to condensed consolidated financial statements.
5 NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY THREE MONTHS ENDED NOVEMBER 30, 2002 (DOLLARS IN THOUSANDS) (Unaudited) Common Additional Total Stock - Paid-in Accumulated Shareholders' Class A Capital Deficit Equity BALANCE, AUGUST 31, 2002 $ 915 $154,902 $(116,525) $39,292 Net income - - 1,014 1,014 ----- -------- --------- ------- BALANCE, NOVEMBER 30, 2002 $ 915 $154,902 $ (115,511) $40,306 ===== ======== =========== ======= See notes to condensed consolidated financial statements. 6 NORTHLAND CRANBERRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared by Northland Cranberries, Inc. (collectively with its subsidiaries, the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission and reflect normal and recurring adjustments, which are, in the opinion of the Company, considered necessary to present fairly the financial position of the Company as of November 30, 2002 and August 31, 2002 and its related results of operations and cash flows for the three months ended November 30, 2002 and 2001. As permitted by these regulations, these condensed consolidated financial statements do not include all information required by accounting principles generally accepted in the United States of America to be included in an annual set of financial statements, however, the Company believes that the disclosures are adequate to make the information presented not misleading. The Company's condensed consolidated balance sheet as of August 31, 2002 was derived from the Company's latest audited consolidated financial statements. It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the latest audited consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K. Business Risks - Prices paid to growers for raw cranberries are effectively determined by Ocean Spray, the industry leader, which controls the bulk of the cranberry supply in North America. The Company currently operates in a marketplace that has experienced aggressive selling activities as the industry responds to the excess cranberry supply levels. On November 6, 2001, as described in Note 2, the Company completed a debt and equity restructuring. Management believes, as a result of the restructuring, the Company's debt facilities and expected cash flows from operations will be sufficient to support the Company's liquidity requirements for the remainder of the year ending August 31, 2003, and the forseeable future. Net Income Per Common Share - Net income per common share is calculated in accordance with Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares outstanding increased by the number of dilutive potential common shares based on the treasury stock method. The weighted average shares outstanding used in calculating net income per common share for the three months ended November 30, 2002 and 2001 consisted of the following: 7 November 30, 2002 November 30, 2002 Basic: Shares outstanding at beginning of period 91,548,580 5,084,606 Issuance of fractional shares due to reverse stock split 167 Issuance of new shares 11,800,004 ----------------- ----------------- Total 91,548,580 16,884,777 Effect of dilution: Convertible preferred stock - 11,003,637 Warrants 5,032,525 1,335,266 Options 4,545,122 1,268,784 ----------------- ----------------- Diluted 101,126,227 30,492,464 ----------------- ----------------- The shares outstanding used to compute the diluted earnings per share for November 30, 2002 exclude outstanding options to purchase 645,525 shares of Class A Common Stock. The options were excluded because their weighted average exercise prices were greater than the average market price of the common shares and their inclusion would have been antidilutive. New Accounting Standards - Effective in the first quarter of fiscal 2003 the Company adopted the following Statements of Financial Accounting Standards ("SFAS"): (i) SFAS No. 143, "Accounting For Asset Retirement Obligations," (ii) SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and (iii) SFAS No. 145, "Rescission of Financial Accounting Standards Board ("FASB") Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. SFAS No. 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period the asset was acquired. When the liability is initially recorded, the entity capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period and the capitalized cost is depreciated over the estimated useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The adoption of SFAS No. 143 did not have a material impact on the consolidated financial statements. SFAS No. 144 was issued in October 2001 and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the accounting and reporting provisions of Accounting Principles Board Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transaction." SFAS No. 144 also amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. SFAS No. 144 requires that one accounting model be used for long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. SFAS No. 144 also broadens the presentation of discontinued operations to include more disposal transactions. The adoption of SFAS No. 144 did not have a material impact on the consolidated financial statements. 8 SFAS No. 145 requires that gains and losses from the early extinguishment of debt are now classified as an extraordinary item only if they meet the "unusual and infrequent" criteria contained in Accounting Principles Board Opinion ("APBO") No. 30. In addition, upon adoption of SFAS No. 145, all gains and losses from early extinguishment of debt that had previously been classified as an extraordinary item are to be reassessed to determine if they would have met the "unusual and infrequent" criteria of APBO No. 30; any such gain or loss that would not have met the APBO No. 30 criteria are retroactively reclassified and reported as a component of income before extraordinary item. The Company, in adopting this standard, has now classified the gain on debt forgiveness in fiscal 2002 as a component of income before income taxes. On November 25, 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which elaborates on the disclosures to be made by a guarantor about its obligations under certain guarantees issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The Interpretation expands on the accounting guidance of SFAS No. 5, "Accounting for Contingencies," SFAS No. 57, "Related-Party Disclosures," and SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." The Interpretation also incorporates, without change, the provisions of FASB Interpretation No. 34, "Disclosure of Indirect Guarantees of Indebtedness of Others," which it supersedes. The Interpretation does identify several situations where the recognition of a liability at inception for a guarantor's obligation is not required. The initial recognition and measurement provisions of Interpretation 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002, regardless of the guarantor's fiscal year end. The disclosures are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company does not anticipate the adoption of FASB Interpretation No. 45 will have a material impact on the consolidated financial statements. Reclassifications - Certain amounts previously reported have been reclassified to conform to the current presentation. 2. DEBT AND EQUITY RESTRUCTURING On November 6, 2001 (during the first quarter of fiscal 2002), the Company completed a debt and equity restructuring. The debt restructuring was accomplished through the exchange by the participants of the Company's then current bank group of approximately $153,754,000 of total outstanding revolving credit agreement indebtedness for an aggregate cash payment of $38,388,000, as well as by the Company's issuance of revised debt obligations with an aggregate stated principal amount of $25,714,000 and 7,618,987 shares of newly-issued Class A Common Stock which represented approximately 7.5% of the Company's then fully-diluted common shares to certain bank group members which decided to continue as lenders to the Company. The debt restructuring occurred pursuant to an agreement for the assignment and assumption by Sun Northland, LLC ("Sun Northland"), an affiliate of Sun Capital Partners Inc., of the Company's bank group indebtedness. Sun Northland then invested approximately $7,000,000 of equity capital into the Company together with the assignment of Sun Northland's rights to the Company's bank debt (of which approximately $81,219,000 was forgiven for financial reporting purposes) in exchange for 37,122,695 shares of newly-issued Class A Common Stock, 1,668,885 shares of newly-created, convertible Series A Preferred Stock, and 100 shares of newly created 9 Series B Preferred Stock, which together represented approximately 77.5% of the Company's then fully-diluted common shares. The 1,668,885 shares of the Series A Preferred Stock were subsequently converted into 41,722,125 shares of Class A Common Stock of the Company. The 100 shares of Series B Preferred Stock were subsequently transferred by Sun Northland, LLC for nominal consideration to a limited liability company whose managing member is the Company's Chief Executive Officer and whose members include among others certain officers of the Company. In addition, on November 6, 2001, the Company restructured and modified the terms of approximately $20,680,000 in outstanding borrowings under two term loans with an insurance company. Additionally, as part of the restructuring, the Company entered into a management services agreement with Sun Capital Partners Management, LLC, an affiliate of Sun Capital Partners, Inc., pursuant to which Sun Capital Partners Management, LLC will provide various financial and management consulting services to the Company in exchange for an annual fee (which is to be paid in quarterly installments) equal to the greater of $400,000 or 6% of EBITDA (as defined therein), provided that the fee may not exceed $1,000,000 per year unless approved by a majority of the Company's directors who are not affiliates of Sun Capital Partners Management, LLC. In fiscal 2002, the Company paid approximately $460,000 under this agreement, which terminates on the earlier of November 6, 2008 or the date on which Sun Northland and its affiliates no longer own at least 50% of the Company's voting power. Financing for the debt restructuring, and for additional working capital, was provided by Foothill Capital Corporation ("Foothill") and Ableco Finance LLC ("Ableco"). Foothill and Ableco provided the Company with $20 million in term loan financing and a new $30 million revolving credit facility. As part of the consideration to Foothill and Ableco to provide the new credit facilities to the Company, Foothill and Ableco received warrants to purchase a total of 5,086,106 shares of Class A Common Stock, or approximately 5% of the Company's then fully-diluted common shares, at an exercise price of $0.01 per share. The warrants expire on November 6, 2011. The Company also issued non-interest bearing fee notes to Foothill and Ableco in the aggregate amount of $5,000,000, which are payable in full on November 6, 2006. The fee notes have been discounted for financial reporting purposes and interest expense is recognized over the terms of the related debt. 3 LEGAL PROCEEDINGS On March 8, 2000, the Company sold the net assets of its private label juice business to Cliffstar Corporation ("Cliffstar"), pursuant to an asset purchase agreement ("Asset Purchase Agreement"), dated January 4, 2000. The private label juice business assets sold consisted primarily of finished goods and work-in-process inventories, raw materials inventories consisting of labels and ingredients that relate to customers of the private label juice business (other than cranberry juice and cranberry juice concentrates), certain trademarks and goodwill, contracts relating to the purchase of raw materials inventory and the sale of products, and 135,000 gallons of cranberry juice concentrate. No plants or equipment were included in the sale. Cliffstar also assumed certain obligations under purchased contracts. In connection with the sale, the Company received from Cliffstar an unsecured, subordinated promissory note for $28,000,000 10 (non-cash investing activity) which is to be collected over six years and which bears interest at a rate of 10% per annum, as well as approximately $6,800,000 in cash (subject to potential post-closing adjustments) related to inventory transferred to Cliffstar on the closing date. The Company recognized a pre-tax gain of approximately $2,100,000 in connection with the sale of the net assets. Additionally, Cliffstar is contractually obligated to make certain annual earn-out payments to the Company for a period of six years from the closing date based generally on operating profit from Cliffstar's sale of cranberry juice products. The Company also entered into certain related agreements with Cliffstar, including among them, a co-packing agreement pursuant to which Cliffstar contracted for specified quantities of Cliffstar juice products to be packed by the Company. The private label juice business had revenues of approximately $23,600,000 for the year ended August 31, 2000. The Company recognized gross profit of approximately $3,700,000 on such revenues during the year ended August 31, 2000. Information with respect to selling, general and administrative expenses with respect to the private label juice business is not available, as the Company's accounting system did not segregate such expenses by type of product. On July 7, 2000, Cliffstar filed suit against the Company in the United States District Court, Western District of New York, alleging, among other things, that the Company breached certain representations and warranties in the Asset Purchase Agreement. That lawsuit was subsequently dismissed, and on July 31, 2000, the Company filed a lawsuit against Cliffstar in the Northern District of Illinois. The Company claims that (1) Cliffstar breached the Asset Purchase Agreement by failing to make required payments under the Asset Purchase Agreement and by failing to negotiate in good faith concerning a cranberry sauce purchase agreement between the parties; (2) Cliffstar breached an interim cranberry sauce purchase agreement between the two companies by failing to adequately perform and to pay the Company the required amounts due under it; (3) Cliffstar breached its fiduciary duty to the Company based on the same (or similar) conduct; (4) Cliffstar breached the promissory note issued by it in the transaction by failing to make its payments in a timely manner and failing to pay all of the interest due; (5) Cliffstar breached a co-packing agreement entered into in connection with the sale by failing to make required payments thereunder and other misconduct; and (6) Cliffstar breached the Asset Purchase Agreement's arbitration provision, which provides that any disagreements over the valuation of finished goods, work-in-process and raw material inventory purchased by Cliffstar shall be submitted to arbitration for resolution. On April 10, 2001, the Court granted the Company's Petition to Compel Arbitration. Accordingly, the price dispute over finished goods, work-in-process and raw material inventory is currently in arbitration. Cliffstar asserted counterclaims against the Company, alleging that (1) the Company fraudulently induced Cliffstar to enter into the Asset Purchase Agreement; (2) the Company has breached the Asset Purchase Agreement by failing to negotiate in good faith a cranberry sauce purchase agreement, by failing to provide Cliffstar with sufficient quantities of cranberry concentrate meeting Cliffstar's "specifications," by selling inventory that did not have a commercial value at least equal to the Company's carrying value, by failing to notify Cliffstar that the Company intended to write-down its cranberry inventory, by not providing Cliffstar its selling prices, by decreasing its level of service to customers after the parties signed the Asset Purchase Agreement, and by refusing to turn over certain labels, films and plates relating to the private 11 label juice business to Cliffstar; (3) the Company breached the co-packing agreement by prematurely terminating that agreement; (4) the Company converted the labels, films and plates relating to the private label juice business; (5) the Company intentionally interfered with Cliffstar's contractual relations, or reasonable expectations of entering into business relations, with the printers who hold the labels, films and plates; and (6) the Company breached the Transition Agreement by failing to remit to Cliffstar the excess of Cliffstar's interim payment for work-in-process and raw material inventory, by withholding a portion of the work-in-process and raw material inventory from Cliffstar, and by artificially building up its work-in-process and raw material inventory before and after the sale of the private label juice business to Cliffstar. The Company has denied the allegations of Cliffstar's counterclaims in all material respects. On June 7, 2002, the court granted the Company's motion for summary judgment and dismissed Cliffstar's fraud claim. On October 23, 2002, after a trial to a jury on the remaining claims, the District Court entered judgment in favor of the Company and against Cliffstar in the amount of $6,674,450 (this includes outstanding accounts receivable aggregating $3,414,000 due from Cliffstar as of August 31, 2002). Final judgment in the amount of $7,732,057 (which includes an additional award to the Company for prejudgment interest following post-verdict motions) was entered by the court on December 23, 2002 and is subject to appeal. It is the opinion of the Company's management, after consulting with outside legal counsel, that the judgment will be affirmed if appealed. However, the resolution of the legal proceedings cannot be predicted with certainty at this time. Accordingly, no amounts have been recorded with respect to the judgment. The jury found that Cliffstar breached its payment obligations under the note by failing to timely make the required $250,000 principal and related accrued interest payment that was due on May 31, 2000. Thus, the note is in default with future interest accruing at the default rate of 12%. The Company has received all scheduled principal payments, together with accrued interest at 10%. The Company has recognized interest income on the note receivable at a rate of 10% for financial reporting purposes, pending resolution of this matter. Although the note is in default, the Company has classified the balance outstanding in the accompanying consolidated balance sheets in accordance with the scheduled payment dates provided for in the note, as this is how the Company anticipates payments will be received pending final resolution of this matter. On May 13, 2002, the Company received Cliffstar's earn-out calculation for 2000. The Company believes that Cliffstar's earn-out calculation was not prepared in accordance with the Asset Purchase Agreement. On December 13, 2002, the Company received an estimate of the earn-out calculation from Cliffstar for 2001 in the amount of $1,177,621. To date, however, Cliffstar has not provided the Company with an audited earn-out calculation for 2001 in accordance with the Asset Purchase Agreement. The Company believes that the estimate provided by Cliffstar significantly understates the earn-out payment due under the Asset Purchase Agreement. On June 7, 2002, the Company filed a separate suit against Cliffstar in the United States District Court, Northern District of Illinois, seeking access to all relevant books and records of Cliffstar relating to the earn-out calculations and claiming Cliffstar breached the Asset Purchase Agreement by failing to pay the Company earn-out payments for the years 2000 and 2001. The Company seeks compensatory damages in an amount in excess of $1,000,000, plus attorneys' 12 fees. The legal proceeding is in its early stages and the resolution cannot be predicted with certainty. On November 11, 2002, the Company together with Clermont, Inc, filed an antitrust lawsuit against Ocean Spray Cranberries, Inc. ("Ocean Spray"). The lawsuit, which was filed in the United Stated District Court for the District of Columbia, alleges that Ocean Spray has engaged in anticompetitive tactics and unlawfully monopolized the cranberry products industry to the detriment of its competitors and customers. As the proceeding is in the preliminary stages, management is unable to predict the outcome of this matter with certainty. However, management does not believe that the resolution of this matter will have an adverse effect on the Company's financial condition or results of operations. 4. OTHER INCOME During fiscal 2002, inventory held at one of the Company's third party storage facilities was handled improperly by the third party following delivery to the facility. This resulted in a damage claim being made by the Company. The Company and the owner of the facility have entered into a settlement and release agreement with respect to the Company's claims. Under the terms of the settlement and release agreement, the Company received cash proceeds in the amount of $1,500,000, as well as $200,000 in credits toward storage fees over the next four years. Based on the terms of the settlement and release agreement, the Company has recognized income of $1,500,000 for the three months ended November 30, 2002. 5. INVENTORIES Inventories as of November 30, 2002 and August 31, 2002 consisted of the following (in thousands): November 30, 2002 August 31, 2002 Raw materials $ 22,110 $ 8,396 Finished goods 3,485 3,189 Deferred crop costs 0 6,688 -------- --------- Total inventories $ 25,595 $ 18,273 ======== ========= 6. LONG-TERM DEBT Long-term debt as of November 30, 2002 and August 31, 2002 consisted of the following (in thousands): 13 November 30, August 31, 2002 2002 Term loans payable $ 13,103 $ 15,461 Fee note payable 3,804 3,738 Bank notes 25,998 28,297 Insurance company note 19,364 19,689 Other obligations 2,709 2,915 --------- --------- Total 64,978 70,100 Less current maturities of long-term debt 14,007 15,568 --------- --------- Long-term debt $ 50,971 $ 54,532 ========= ========= As of November 30, 2002 and August 31, 2002 the Company was in compliance with its various financial covenants contained in its agreements covering its long-term debt obligations. The restructuring of the Company's debt on November 6, 2001 (see Note 2) resulted in a gain of $83,299,046 during fiscal 2002. 7. INCOME TAXES The Company accounts for income taxes using an asset and liability approach which generally requires the recognition of deferred income tax assets and liabilities based on the expected future income tax consequences of events that have previously been recognized in the Company's financial statements or tax returns. In addition, a valuation allowance is recognized if it is more likely than not that some or all of the deferred income tax assets will not be realized. There was no income tax expense recognized, for financial reporting purposes, for the three months ended November 30, 2002 due to the utilization of certain net operating loss carryforwards for which no benefit had been previously provided. As described in Note 2, the Company completed a debt and equity restructuring on November 6, 2001. This restructuring resulted in a gain on the forgiveness of indebtedness of differing amounts for financial and income tax reporting purposes that will reduce the available net operating loss carryforwards. The income tax effect of this gain resulted in the recognition of an income tax benefit of approximately $32,800,000 for financial reporting purposes as of August 31, 2001 and a charge to income taxes of a like amount for the three month period ended November 30, 2001. The "change of ownership" provisions of the Tax Reform Act of 1986 significantly restrict the utilization for income tax reporting purposes of all net operating losses and tax credit carryforwards remaining after the debt and equity restructuring. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Early in fiscal 2002, primarily as a result of losses suffered in the previous two fiscal years, we reached the point where we felt it was imperative to reach an agreement with our then-current bank group and to refinance our bank debt. To do otherwise, we believed, we would be faced with liquidating or reorganizing the company in a bankruptcy proceeding in which our creditors would have likely received substantially less value than we felt they could receive in a restructuring transaction and our shareholders would have likely been left holding shares with no value. On November 6, 2001, we consummated the transactions that we refer to as the Restructuring. Generally speaking, in the Restructuring, Sun Northland entered into certain Assignment, Assumption and Release Agreements with members of our then-current bank group which gave Sun Northland, or its assignee, the right to acquire our indebtedness held by members of our then-current bank group in exchange for a total of approximately $38.4 million in cash, as well as our issuance of a promissory note in the principal amount of approximately $25.7 million and 7,618,987 Class A shares to certain bank group members which decided to continue as our lenders after the Restructuring. Sun Northland did not provide the foregoing consideration to our former bank group; instead, Sun Northland entered into the Purchase Agreement with us, pursuant to which Sun Northland assigned its rights to those Assignment, Assumption and Release Agreements to us and gave us $7.0 million in cash, in exchange for (i) 37,122,695 Class A shares, (ii) 1,668,885 Series A Preferred shares (each of which was automatically converted into 25 Class A shares upon adoption of an amendment to our articles of incorporation on February 4, 2002 increasing our authorized Class A shares), and (iii) 100 shares of our newly created Series B Preferred Stock, which were subsequently transferred to a limited liability company controlled by our Chief Executive Officer. Using funding provided by our new secured lenders and Sun Northland, we acquired a substantial portion of our outstanding indebtedness from the members of our then-current bank group (under the terms of the Assignment, Assumption and Release Agreements that were assigned to us by Sun Northland) in exchange for the consideration noted above, which resulted in the forgiveness of approximately $81.2 million (for financial reporting purposes) of our outstanding indebtedness (or approximately $89.0 million of the aggregate principal and interest due the then-current bank group as of the date of the Restructuring). We also issued warrants to acquire an aggregate of 5,086,106 Class A shares to Foothill Capital Corporation and Ableco Finance LLC which are immediately exercisable and have an exercise price of $.01 per share. See Note 2 of Notes to Condensed Financial Statements for a further discussion of the Restructuring. With the equity capital we received in the Restructuring, combined with the associated debt forgiveness, we were once again able to market our Northland and Seneca brand products for the 15 remainder of fiscal 2002 and build on the operational improvements and cost reduction measures we began in the prior fiscal year. During the first quarter of fiscal 2003 we focused our efforts on regaining market share, through a balanced marketing approach of advertising, trade spending, slotting and consumer coupons. Critical Accounting Policies We prepare our financial statements in accordance with generally accepted accounting principles which, through the application of certain critical accounting policies, require management to make judgments, estimates and assumptions regarding matters which are inherently uncertain. We have stated our inventory carrying value at the lower of cost (using the first-in, first-out costing method) or estimated market values, based upon management's best estimates of future product selling prices and costs for the periods during which the cranberries are grown and the cranberries and cranberry related products are expected to be sold. The market estimates are dependent upon several factors including, but not limited to, price, product mix, demand, costs and the period of time it takes to sell the inventory. Such factors are all subject to significant fluctuations. We also use estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net revenues and expenses during the reporting period. On an ongoing basis, management reviews these estimates, including those related to allowances for doubtful accounts, product returns, trade discounts and incentives, valuation of inventories, future cash flows associated with assets held for sale and long-lived assets, useful lives for depreciation and amortization, valuation allowances for deferred income tax assets, litigation, environmental liabilities and contracts, based on currently available information. Changes in facts and circumstances or the use of different assumptions may result in revised estimates and actual results could differ from those estimates. RESULTS OF OPERATIONS Total net revenues for the three months ended November 30, 2002 were $21.7 million, a decrease of 28.3% from net revenues of $30.3 million in the prior year's first quarter. The decrease resulted primarily from (i) reduced sales of cranberry concentrate; and (ii) reduced co-packing revenue. These revenue decreases were offset by increased sales of Northland 100% juice products. Trade industry data for the 12-week period ended December 1, 2002 showed that our Northland brand 100% juice products achieved a 5.4% market share of the supermarket shelf-stable cranberry beverage category on a national basis, up from a 5.1% market share for the 12-week period ended December 2, 2001. The market share of Seneca branded cranberry juice products decreased from 0.1% to less than 0.1%, resulting in a total combined market share of supermarket shelf-stable cranberry beverages for our Northland and Seneca branded product lines of 5.4% for the 12-week period ended December 1, 2002 compared to 5.2% for the 12-week period ended December 2, 2001. Cost of sales for the first quarter of fiscal 2003 was $15.2 million compared to $20.7 million for the first quarter of fiscal 2002, resulting in gross margins of 30.2% and 31.7% in each respective period. The decline in gross margins in the first quarter of fiscal 2003 was primarily the result of increased costs of cranberries and cranberry concentrate. 16 Selling, general and administrative expenses were $6.6 million, or 30.3% of net revenues, for the first quarter of fiscal 2003 compared to $5.9 million, or 19.5% of net revenues, in the prior year's first fiscal quarter. The increase in selling, general and administrative expenses in fiscal 2003 was primarily the result of a $2.8 million increase in media advertising spending, from $0.7 million in the first quarter of fiscal 2002 compared with $3.5 million in the first quarter of fiscal 2003. This increase was partially offset by a decline in wages, consulting expenses and depreciation. Included in the fiscal 2002 amount were approximately $1.3 million of charges relating to our restructuring. Excluding these restructuring charges, selling, general and administrative expenses were approximately $4.6 million, or 15.2% of net revenues. During fiscal 2002, inventory held at one of our third party storage facilities was handled improperly by the third party following delivery to the facility. We entered into a settlement and release agreement with the third party pursuant to which we received cash proceeds in the amount of $1,500,000, as well as $200,000 in credits toward storage fees over the next four years. Based on the terms of the settlement and release agreement, we recognized other income of $1,500,000 for the three months ended November 30, 2002. Interest expense was $1.0 million in the first quarter of fiscal 2003 compared to $3.1 million during the same period of fiscal 2002. The decrease resulted primarily from reduced debt levels and lower interest rates following our restructuring. Interest income of $0.6 million in the first quarter of fiscal 2003 and $0.7 million in the comparable period of fiscal 2002 is associated with an unsecured, subordinated promissory note receivable from Cliffstar Corporation. In the first quarter of fiscal 2002, we realized a gain on forgiveness of indebtedness in connection with the restructuring of approximately $83.3 million, net of legal fees and other direct costs incurred and the estimated fair value of the shares of Class A Common Stock issued to the participating banks. This gain was further reduced by $32.8 million of income taxes resulting in a net gain on forgiveness of indebtedness of $50.5 million, or $2.99 and $1.66 per basic and diluted share, respectively. In the first quarter of fiscal 2003 there were no income taxes on operating income due to the utilization of certain net operating loss carryforwards for which no benefit had been previously provided. FINANCIAL CONDITION Net cash provided by operating activities was $1.4 million in the first quarter of fiscal 2003 compared to net cash provided of $5.3 million in the same period of fiscal 2002. Net income plus depreciation and amortization was $2.3 million in the first quarter of fiscal 2003 compared to $2.4 million (before gain on forgiveness of indebtedness net of income taxes) in the comparable period of fiscal 2002. Receivables, prepaid expenses and other current assets decreased $0.9 million in the first quarter of fiscal 2003 compared to an increase of $0.8 million in the first quarter of fiscal 2002. Increases in accounts payable and accrued liabilities provided cash of $5.5 million in the first quarter of fiscal 2003 compared to $2.4 million in the first quarter of fiscal 2002. Inventories increased $7.3 million in the first quarter of fiscal 2003, primarily as a 17 result of the fall 2002 cranberry harvest and the purchase of cranberries from our contract growers. Working capital was $6.7 million at November 30, 2002 compared to $6.9 million at August 31, 2002. Our current ratio was 1.2 to 1.0 at August 31, 2002, compared to 1.2 to 1.0 at November 30, 2002. Net cash provided by investing activities was $1.5 million in the first quarter of fiscal 2003 compared to $0.6 million in the similar quarter of fiscal 2002. Collections on our note receivable from Cliffstar Corporation contributed toward the positive cash flow in both quarters. In fiscal 2003, proceeds from disposals of property and equipment provided $0.7 million In fiscal 2002, proceeds from disposals of property and equipment provided $0.1 million. Purchases of property and equipment were $0.2 million in fiscal 2003 and $0.01 million in fiscal 2002. Our net cash used in financing activities was $1.9 million in the first quarter of fiscal 2003 compared to $7.0 million in the first quarter of the prior year. In fiscal 2002 in order to accomplish the restructuring, we obtained proceeds from our new revolving credit facility and two term loans, along with proceeds, net of legal and other costs, from the issuance of Class A Common Stock and Series A Preferred Stock. These proceeds were used to pay various banks in settlement of our previous revolving credit facility (see "General" and Note 2 of Notes to Condensed Consolidated Financial Statements) and to pay various debt issuance costs. Also, we made payments on long-term debt and other obligations of $5.1 million in the first quarter of fiscal 2003 and $1.2 million in the first quarter of fiscal 2002. In both quarters monthly principal payments were made on other obligations, and in the first quarter of fiscal 2003 additional payments were made as required under our restructured debt agreements. The following schedule sets forth our contractual long-term debt obligations as of November 30, 2002 (in thousands): Payments Due by Period ---------------------- After 5 Total 0-1 year 2-3 years 4-5 years years ----- -------- --------- --------- ------- Long-Term Debt $64,978 $14,007 $14,777 $17,722 $18,472 As of November 30, 2002, we had outstanding borrowings of $3.8 million under our $30.0 million revolving credit facility with Foothill and Ableco. As of November 30, 2002, we had approximately $7.2 million of unused borrowing availability under the facility. We believe that we will be able to fund our ongoing operational needs for fiscal 2003 through (i) cash generated from operations; and (ii) financing available under our revolving credit facility with Foothill and Ableco. We do not have any significant capital expenditure commitments and continue to review our capital requirements in an effort to match expenditures with revenues. As of November 30, 2002, we were in compliance with all of our debt arrangements. 18 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ------------------------------------------------- We make certain "forward-looking statements" in this Form 10-Q, such as statements about our future plans, goals and other events which have not yet occurred. We intend that these statements will qualify for the safe harbors from liability provided by the Private Securities Litigation Reform Act of 1995. You can generally identify these forward-looking statements because we use words such as we "believe," "anticipate," "expect" or similar words when we make them. Forward-looking statements include, among others, statements about actions by our competitors, sufficiency of our working capital, potential operational improvements and our efforts to improve profitability, sales and marketing strategies, expected levels of trade and marketing spending, anticipated market share and sales of our branded products, cranberry concentrates and other products, and disposition of significant litigation. These forward-looking statements involve risks and uncertainties and the actual results could differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, without limitation, risks associated with (i) our ability to reinvigorate our Northland and Seneca brand names, regain lost distribution capabilities and branded products market share and generate increased levels of branded product sales; (ii) the level of cranberry inventory held by industry participants; (iii) the development, market share growth and consumer acceptance of our branded juice products; (iv) the resolution of certain litigation related to the sale of the net assets of our private label juice business and claims asserted by us against our principal competitor regarding what we believe to be anticompetitve tactics and unlawful monopolization within the cranberry products industry; (v) agricultural factors affecting our crop and the crop of other North American growers; and (vi) our ability to comply with the terms and conditions of, and to satisfy our responsibilities under, our credit facilities and other debt agreements. You should consider these risks and factors and the impact they may have when you evaluate our forward-looking statements. We make these statements based only on our knowledge and expectations on the date of this Form 10-Q. We disclaim any duty to update these statements or other information in this Form 10-Q based on future events or circumstances. Please read this entire Form 10-Q to better understand our business and the risks associated with our operations. Specifically, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of our current financial condition. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We do not enter into any material futures, forwards, swaps, options or other derivative financial instruments for trading or other purposes. Our primary exposure to market risk is related to changes in interest rates and the effects those changes may have on our earnings as a result of our long-term financing arrangements. We manage our exposure to this market risk by monitoring interest rates and possible alternative means of financing. Our earnings may be affected by changes in short-term interest rates under our revolving line of credit facility and certain term loans, pursuant to which our borrowings bear interest at a variable rate, subject to minimum interest rates payable on certain loans. Based upon the debt outstanding under our revolving line of credit facility and certain term loans as of November 30, 2002, an increase of 1.0% in market interest rates would increase annual interest expense by approximately $0.2 million. 19 ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures. In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), within 90 days prior to the filing date of this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Vice President-Finance, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-14(c) under the Exchange Act). Based upon their evaluation of these disclosure controls and procedures, the Chief Executive Officer and Vice President-Finance concluded that the disclosure controls and procedures were effective as of the date of such evaluation to ensure that material information relating to us, including our consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report on Form 10-Q was being prepared. (b) Changes in internal controls. There were no significant changes in our internal controls or other factors that could significantly affect those controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. On October 23, 2002, after a trial to a jury, the District Court entered judgment in our favor and against Cliffstar Corporation in the amount of $6,674,450 with respect to litigation related to the March 8, 2000 sale of the net assets of our private label juice business to Cliffstar. Final judgment in the amount of $7,732,057 (which includes an additional award to us for prejudgment interest following post-verdict motions) was entered by the court on December 23, 2002 and is subject to appeal. It is our opinion, after consulting with outside legal counsel, that the judgment will be affirmed if appealed. Further, on November 11, 2002, we filed together with Clermont, Inc. an antitrust lawsuit against Ocean Spray Cranberries, Inc. The lawsuit, which was filed in the United Stated District Court for the District of Columbia, alleges that Ocean Spray has engaged in anticompetitive tactics and unlawfully monopolized the cranberry products industry to the detriment of its competitors and customers. As the proceeding is in the preliminary stages, we are unable to predict the outcome of this matter with certainty. However, we do not believe that the resolution of this matter will have an adverse effect on our financial condition or results of operations. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. 20 ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. A. Exhibits Exhibits filed with this Form 10-Q report are incorporated herein by reference to the Exhibit Index accompanying this report. B. Form 8-K We did not file any Current Reports on Form 8-K during the first quarter of fiscal 2003. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHLAND CRANBERRIES, INC. DATE: January 14, 2003 By: /s/ Nigel J. Cooper --------------------------------- Nigel J. Cooper Vice President - Finance 21 CERTIFICATIONS I, John Swendrowski, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Northland Cranberries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date January 14, 2003 -------------------------------------- /s/ John Swendrowski -------------------------------------- John Swendrowski Chairman of the Board, Chief Executive Officer and Director 22 I, Nigel Cooper, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Northland Cranberries, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date January 14, 2003 -------------------------------------- /s/ Nigel Cooper -------------------------------------- Nigel Cooper Vice President - Finance 23 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 99.1 Certification of John Swendrowski, Chairman and Chief Executive Officer of Northland Cranberries, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.2 Certification of Nigel Cooper, Vice President - Finance of Northland Cranberries, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 24 EX-99.1 3 irm93a.txt CERTIFICATION OF JOHN SWENDROWSKI Certification of the Chief Executive Officer Pursuant to 18 U.S.C. ss.1350, I, the undersigned Chairman and Chief Executive Officer of Northland Cranberries, Inc. (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended November 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ John Swendrowski - -------------------------------------- John Swendrowski January 13, 2003 EX-99.2 4 irm93b.txt CERTIFICATION OF NIGEL COOPER Certification of the Vice President-Finance Pursuant to 18 U.S.C. ss.1350, I, the undersigned Vice President-Finance of Northland Cranberries, Inc. (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended November 30, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Nigel Cooper - ----------------------------------- Nigel Cooper January 13, 2003 -----END PRIVACY-ENHANCED MESSAGE-----