0000897069-95-000107.txt : 19950815 0000897069-95-000107.hdr.sgml : 19950815 ACCESSION NUMBER: 0000897069-95-000107 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD 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: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16130 FILM NUMBER: 95563792 BUSINESS ADDRESS: STREET 1: 800 FIRST AVE SO CITY: WISCONSIN RAPIDS STATE: WI ZIP: 54494 BUSINESS PHONE: 7154244444 10-Q 1 NORTHLAND CRANBERRIES, INC. FORM 10-Q 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 June 30, 1995 OR /_/ TRANSITION REPORT PURSUANT TO SECTION 13 OF 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 Incorporation or organization) Identification No.) 800 First Avenue South 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 _____ 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 July 31, 1995 4,010,613 Class B Common Stock July 31, 1995 318,101 NORTHLAND CRANBERRIES, INC. FORM 10-Q INDEX Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets . . . . . . . . . 3 Condensed Consolidated Statements of Operations . . . . 4 Condensed Consolidated Statements of Cash Flows . . . . 5 Notes to Condensed Consolidated Financial Statements . 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 7 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10 SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PART I - FINANCIAL INFORMATION Item 1. Financial Statements NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS (Unaudited) JUNE 30, 1995 MARCH 31, 1995 Current assets: Cash and cash equivalents $ 174 $ 223 Accounts and notes receivable 1,510 1,855 Investments 1,260 1,260 Inventories 834 853 Deferred costs of growing crop 4,854 -- Other 662 1,249 Deferred income taxes 1,306 1,306 -------- -------- Total current assets $ 10,600 6,746 -------- -------- Property and equipment - at cost 116,439 108,649 Less accumulated depreciation 14,234 13,458 --------- -------- Net property and equipment 102,205 95,191 Investments 2,519 2,519 Leasehold interests, net 1,381 1,421 Other 2,210 1,868 --------- -------- Total assets $ 118,915 $ 107,745 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 1,599 $ 1,982 Accrued liabilities 3,045 2,384 Current portion of long-term obligations 24,037 5,802 --------- -------- Total current liabilities 28,681 10,168 Long-term obligations 48,867 55,793 Deferred income taxes 7,205 7,157 -------- -------- Total liabilities 84,753 73,118 -------- -------- Shareholders' equity: Common stock - Class A 40 40 Common stock - Class B 3 3 Additional paid-in capital 28,908 28,908 Retained earnings 5,211 5,676 --------- --------- Total shareholders' equity 34,162 34,627 --------- --------- Total liabilities and shareholders' equity $ 118,915 $ 107,745 ========== =========== See accompanying notes to condensed consolidated financial statements NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS) (Unaudited) For the 3 months ended JUNE 30, 1995 1994 Revenues $ 683 $ 1,120 Cost of sales 668 1,059 -------- --------- Gross profit 15 61 Cost and expenses: Selling, general and administrative 929 732 Interest 1,041 681 --------- --------- Total costs and expenses 1,970 1,413 --------- --------- Loss before income taxes and cumulative effect of change in accounting method (1,955) (1,352) Income taxes (758) (527) ------- -------- Loss before cumulative effect of change in accounting method (1,197) (825) Cumulative effect of change in accounting method (net of taxes of $806,000) 1,249 -- --------- --------- Net income (loss) $ 52 $ (825) ========= ======== Net loss per common share (based on 4,462,977 and 4,425,027 weighted average common shares outstanding, respectively): Loss before cumulative effect of change in accounting method (0.27) $ (0.19) Cumulative effect of change in accounting method 0.28 -- ------ -------- Net income (loss) per common share $ 0.01 $ (0.19) ------- -------- See accompanying notes to condensed consolidated financial statements NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (Unaudited) For the 3 months ended JUNE 30, 1995 1994 Cash flows from operating activities: Net income (loss) $ 52 $ (825) Cumulative effect of change in accounting method (1,249) -- Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation and amortization 806 663 Changes in assets and liabilities: Receivables and other current assets 932 (267) Inventories 19 (78) Accounts payable and accrued liabilities 62 1,004 Deferred income tax benefit 48 (588) Deferred costs of growing crop (3,605) (1,577) --------- --------- Net cash provided by (used for) operating activities (2,935) (1,668) --------- -------- Investing activities: Acquisitions of cranberry operations (4,440) -- Property and equipment additions, net (3,311) (2,421) Other (47) (1) --------- -------- Net cash used for investing activities (7,798) (2,422) --------- -------- Financing activities: Increase in debt 11,309 3,869 Dividends paid (301) (296) Exercise of stock options -- 43 Other (324) -- ---------- -------- Net cash provided by financing activities 10,684 3,616 ---------- -------- Net decrease in cash and cash equivalents (49) (474) Cash and cash equivalents: Beginning of period 223 650 --------- --------- End of period $ 174 $ 176 ========= ========= Supplemental disclosures of cash flow information: Cash paid for: Interest (net of amount capitalized) $ 794 $ 87 ========= ========= See accompanying notes to condensed consolidated financial statements NORTHLAND CRANBERRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. BASIS OF PRESENTATION The condensed consolidated financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the foregoing statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 1995, and its results of operations and its cash flows for the three months ended June 30, 1995 and 1994. The consolidated balance sheet as of March 31, 1995 has been taken from the audited financial statements of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report. NOTE 2. CHANGE IN ACCOUNTING METHOD Effective April 1, 1995, the Company changed its method of deferring crop growing costs to conform with the provisions of Statement of Position 85-3 "Accounting by Agricultural Producers and Agricultural Cooperatives" which had not previously been adopted by the Company. This change was made to defer crop growing costs based on a November 1 to October 31 crop year which management of the Company believes is its natural crop year. Historically the Company had deferred certain crop costs based on a crop year of April 1 through October 31. This change resulted in an increase in net income for the three months ended June 30, 1995 of $1,249,000 (net of income taxes of $806,000) reflecting the cumulative effect of this change for periods prior to April 1, 1995. The pro forma effects for the three months ended June 30, 1994, assuming the change had been in effect prior to and throughout such period and without taking into account the cumulative effect of such change, would have been to reduce the reported net loss by $291,000 or $0.07 per share. NOTE 3. CHANGE IN FISCAL YEAR In view of the Company's strategy to begin marketing and selling value-added processed consumer cranberry products, the Company is changing its fiscal year end from March 31 to August 31 in order to correspond the Company's fiscal year with the anticipated new annual business cycle expected to result from the implementation of its strategy. Also, the change in fiscal year end should best match the cost and expenses associated with growing each year's crop with the expected revenues to be generated from the anticipated sales of the consumer products produced from such crop. As a result of the changing fiscal year end, the Company will report its results of operations and financial condition for its interim quarter ending on June 30, 1995 and for the five-month interim transitional period ending on August 31, 1995. After August 31, 1995, the Company will report its results of operations and financial condition for the fiscal quarters ending on November 30, February 28 or 29 and May 31 of each fiscal year, and for its fiscal year ending on August 31. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations The Company is in the process of changing its fiscal year end from March 31 to August 31 in order to correspond the Company's fiscal year with the expected new annual business cycle resulting from the implementation of its current business strategy of beginning to market and sell value-added cranberry juice, sauce and other processed consumer cranberry products. As a result, the Company is reporting its results of operations and financial condition for its interim transitional quarter ended June 30, 1995. The Company will next report its results of operations and financial condition for its five-month transitional period ending on August 31, 1995. Consistent with the extreme seasonality of the Company's current business, the Company expects to report a net loss from operations for such transitional period. After August 31, 1995, the Company will report its results of operations and financial condition for the respective fiscal quarters ending on November 30, February 28 or 29 and May 31 of each fiscal year, and for its fourth fiscal quarter and fiscal year end ending on August 31. The components of the Company's revenues for the interim transitional three-month period ended June 30, 1995 compared to the same period in the prior fiscal year are summarized below: Three months ended June 30, 1995 1994 Vine sales . . . . . . $ 92,000 $ 712,000 Fertilizer and chemical sales . . . . . . 527,000 250,000 Other income . . . . . 64,000 158,000 -------- --------- Total revenues . $ 683,000 $1,120,000 ======== ========= The $437,000, or 39%, decrease in revenues for the three months ended June 30, 1995 was due to the anticipated reduced volume in vine sales caused principally by current regulatory restrictions on the further development of wetlands for cranberry cultivation. The increase in fertilizer and chemical sales did not impact the Company's net loss for the interim transitional period. The Company does not expect fertilizer and chemical sales in future periods to substantially exceed the sales levels recognized in the prior year's comparable period. Cost of sales decreased $391,000, or 37%, to $668,000 in the three months ended June 30, 1995 from $1,059,000 during the same period in fiscal 1995. As a result of the Company's change in accounting method, as described below, this comparison is not considered particularly meaningful or informative. See Note 2 of Notes to Condensed Consolidated Financial Statements. Selling, general and administrative expense was $929,000 in the three-month interim transitional period, a 27% increase from $732,000 during the same period in the prior fiscal year. The increase was due primarily to costs associated with the Company's growth in productive acreage and the Company's preparation to enter the branded juice market. Interim transitional period interest expense was $1,041,000, a 53% increase over interest expense of $681,000 during the same three-month period in fiscal 1995. The significant increase in interest expense was due to increased debt levels primarily as a result of financing the Company's September 1994 cranberry marsh acquisitions and the June 1995 purchase of the previously leased Hanson marshes. For the three-month period ended June 30, 1995, the Company recognized net income of $52,000, or $0.01 per share, after the cumulative effect of a change in accounting method. The accounting method change reflects the Company's deferral of costs related to the growing of its crop until the end of the fiscal year and the inclusion of those deferred costs as part of the inventory cost of the cranberries harvested in October and November. This method is intended to best reflect the actual cost of the Company's inventory of grown and harvested cranberries. As anticipated, prior to the change in the accounting method, the Company reported a net loss for the period of $1.2 million, or $0.27 per share. During the comparable period last year, the Company reported a loss of $825,000, or $0.19 per share. Due to the highly seasonal nature of the Company's current business, the Company has always recognized a net loss during this quarter because operating costs and other expenses are incurred without significant offsetting revenues from the sale of its fruit. Virtually all of the Company's income has historically been recognized in the quarter following the harvest of its crop. Financial Condition The Company's current ratio was 0.37 to 1 at June 30, 1995, compared to 0.67 to 1 at March 31, 1995. The lower comparative current ratio at June 30, 1995 was due to $18 million of short-term borrowing then outstanding which was incurred to fund the Company's September 1994 Yellow River marsh acquisitions and the Company's June 7, 1995 exercise of its option to purchase its leased Hanson Division marsh. The Company has retired the $18 million in short-term borrowing with part of the $26.5 million in net proceeds from its public stock offering which closed on August 14, 1995. As a result of the extreme seasonality of its current business, the Company does not believe that its current ratio or its underlying stated working capital at June 30, 1995 is a meaningful indication of the Company's liquidity. The Company has historically recorded virtually all of its revenue and resulting accounts receivable in the fall of each year when its crop is harvested and received full payment for its harvested crop prior to the following March 31, with the resulting cash received from such payments used to reduce indebtedness. The Company utilizes its revolving bank credit facility, together with cash generated from operations, to fund its working capital requirements through its growing season. The Company's total debt (including current portion) was $72.9 million at June 30, 1995 for a total debt-to-equity ratio of 2.1 to 1 compared to total debt of $61.6 million and a total debt-to-equity ratio of 1.8 to 1 at March 31, 1995. The $11.3 million increase in debt was the result of financing $4.4 million for the Company's June 7, 1995 exercise of its option to purchase its leased Hanson Division marsh, financing $3.3 million for property and equipment additions, and funding operating activities during the quarter. The Company closed its public offering and sale of 2,000,000 Class A shares on August 14, 1995 and received net proceeds of approximately $26.5 million. As indicated above, $18 million of such net proceeds were used to repay the principal and accrued interest outstanding under the Company's acquisition credit facility. The remainder of the net proceeds was used to reduce outstanding amounts under the Company's revolving line of credit facility. Giving effect to completion of the stock offering and the application of the net proceeds thereof, the Company's debt-to-equity ratio at June 30, 1995 would have been 0.8 to 1. The underwriters for the Company's stock offering have a 30-day option to purchase up to 300,000 additional Class A shares at $13.465 per share to cover over-allotments, if any. If the over-allotment option is exercised in full, the Company would receive additional net proceeds of approximately $4 million. Any such additional net proceeds would be used to reduce outstanding amounts under the Company's line of credit facility. First quarter property and equipment additions included (i) $1.9 million for fixed asset additions and upgrades; (ii) $608,000 to cultivate and maintain 390 pre-productive acres; (iii) $509,000 to improve the Company's fresh fruit handling facilities; and (iv) $277,000 to begin construction of the Company's concentrate manufacturing facility. Total cost of the concentrate manufacturing facility is estimated at $4.5 million, with completion scheduled for May 1996. During the three-month period ended June 30, 1995, the Company entered into multi-year contracts to purchase up to approximately 50,000-75,000 barrels of cranberries annually from other independent growers, beginning in the fall of 1995. The Company is attempting to enter into additional crop purchase contracts. Ten dollars of the per barrel purchase price under such contracts will be payable in Northland stock, with the remainder in cash. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K a. Exhibits. Exhibit 27 - Financial Data Schedule b. Reports on Form 8-K. On June 30, 1995, the Company filed a Form 8-K report, dated June 21, 1995, with the Securities and Exchange Commission to report under Item 8 of such report the Company's change in fiscal year. 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 Chief Accounting Officer thereunto duly authorized. NORTHLAND CRANBERRIES, INC. Date: August 14, 1995 By: /s/ John Pazurek John Pazurek Vice President - Finance, Treasurer, and Chief Accounting Officer EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule. EX-27 2 EXHIBIT 27
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF NORTHLAND CRANBERRIES, INC. AS OF AND FOR THE THREE MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS AUG-31-1995 APR-01-1995 JUN-30-1995 174 1,260 1,510 0 834 10,600 116,439 14,234 118,915 28,681 48,867 43 0 0 34,119 118,915 0 683 668 929 0 0 1,041 (1,955) (758) (1,197) 0 0 1,249 52 (0.27) 0.01