0000950144-95-002374.txt : 19950816 0000950144-95-002374.hdr.sgml : 19950816 ACCESSION NUMBER: 0000950144-95-002374 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950702 FILED AS OF DATE: 19950815 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAVANNAH FOODS & INDUSTRIES INC CENTRAL INDEX KEY: 0000086941 STANDARD INDUSTRIAL CLASSIFICATION: SUGAR & CONFECTIONERY PRODUCTS [2060] IRS NUMBER: 581089367 STATE OF INCORPORATION: DE FISCAL YEAR END: 1003 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11420 FILM NUMBER: 95564282 BUSINESS ADDRESS: STREET 1: P O BOX 339 CITY: SAVANNAH STATE: GA ZIP: 31402 BUSINESS PHONE: 9122341261 10-Q 1 SAVANNAH FOODS 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended July 2, 1995 ------------------ 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 1-11420 --------- SAVANNAH FOODS & INDUSTRIES, INC. -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its Charter) Delaware 58-1089367 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) P. O. Box 339, Savannah, Georgia 31402 -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (912) 234-1261 ------------------------------ Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- As of July 2, 1995, there were 26,238,196 shares of common stock of Savannah Foods & Industries, Inc. outstanding. The exhibit index is located on page 10 of this filing. Page 1 of 12 pages 2 SAVANNAH FOODS & INDUSTRIES, INC. INDEX Part I. FINANCIAL INFORMATION: Page ---- Item 1. Financial Statements: Consolidated Balance Sheets at July 2, 1995 and October 2, 1994 3 Consolidated Statements of Operations for the 13 weeks ended July 2, 1995 and July 3, 1994 and the 39 weeks ended July 2, 1995 and July 3, 1994 4 Consolidated Statements of Cash Flows for the 39 weeks ended July 2, 1995 and July 3, 1994 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of the Company's Financial Position and Results of Operations 8 Part II. OTHER INFORMATION: Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11 Exhibit 27-1 Financial Data Schedule 12
Page 2 of 12 pages 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Savannah Foods & Industries, Inc. Consolidated Balance Sheets (In thousands except for shares and per share amounts) (Unaudited)
July 2, October 2, 1995 1994 ------- ---------- Assets ------ Current assets: Cash and cash equivalents $ 10,763 $ 28,436 Accounts receivable 65,282 75,776 Inventories (net of LIFO reserve of $12,382 in 1995 and $8,889 in 1994) (Note 3) 168,765 85,340 Other current assets 13,598 9,328 -------- -------- Total current assets 258,408 198,880 Property, plant and equipment (net of accumulated depreciation of $200,833 in 1995 and $180,810 in 1994) 235,457 241,885 Other assets 48,522 45,362 -------- -------- $542,387 $486,127 ======== ======== Liabilities and Stockholders' Equity ------------------------------------ Current liabilities: Short-term borrowings $ 44,200 $ - Current portion of long-term debt (Note 4) 1,690 1,643 Trade accounts payable 91,707 56,953 Dividends payable 656 3,542 Income taxes accrued - - Accrued expenses related to beet operations 13,138 - Other liabilities and accrued expenses 24,009 23,002 -------- -------- Total current liabilities 175,400 85,140 -------- -------- Long-term debt (Note 4) 111,976 140,224 -------- -------- Deferred employee benefits 74,892 72,589 -------- -------- Stockholders' equity: Common stock $.25 par value; $.55 stated value; 64,000,000 shares authorized; 31,306,800 shares issued 17,365 17,365 Capital in excess of stated value 12,190 12,190 Retained earnings 193,589 202,065 Minimum pension liability adjustment (8,210) (8,210) -------- -------- 214,934 223,410 Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275 - Note receivable from employee stock ownership trust 3,540 3,961 -------- -------- Total stockholders' equity 180,119 188,174 -------- -------- Commitments and contingencies (Note 7) - - -------- -------- $542,387 $486,127 ======== ========
(The accompanying notes are an integral part of the financial statements.) Page 3 of 12 pages 4 Savannah Foods & Industries, Inc. Consolidated Statements of Operations (In thousands of dollars except for per share amounts) (Unaudited)
For the 13 Weeks Ended For the 39 Weeks Ended ---------------------- ---------------------- July 2, July 3, July 2, July 3, 1995 1994 1995 1994 ------- ------- ------- ------- Net sales $275,554 $272,891 $811,408 $800,082 -------- -------- -------- -------- Operating expenses: Cost of sales and operating expenses 255,082 249,764 741,181 723,668 Selling, general and administrative expenses 12,896 12,471 39,444 40,994 Depreciation and amortization 7,359 7,459 21,769 22,293 -------- -------- -------- -------- 275,337 269,694 802,394 786,955 -------- -------- -------- -------- Income from operations 217 3,197 9,014 13,127 -------- -------- -------- -------- Other income and expenses: Interest and other investment income 290 330 1,178 1,771 Interest expense (Note 4) (3,827) (3,289) (11,218) (10,040) Other (263) 141 (175) 381 -------- -------- -------- -------- (3,800) (2,818) (10,215) (7,888) -------- -------- -------- -------- Income (loss) before income taxes (3,583) 379 (1,201) 5,239 (Provision for) benefit from income taxes (Note 5) 1,155 (146) 464 (1,736) -------- -------- -------- -------- Net income (loss) $ (2,428) $ 233 $ (737) $ 3,503 ======== ======== ======== ======== Per share: Net income (loss) (Note 6) $ (.10) $ .01 $ (.03) $ .13 ======== ======== ======== ======== Dividends $ .025 $ .135 $ .295 $ .405 ======== ======== ======== ========
(The accompanying notes are an integral part of the financial statements.) Page 4 of 12 pages 5 Savannah Foods & Industries, Inc. Consolidated Statements of Cash Flows (Unaudited)
For the 39 Weeks Ended ---------------------- July 2, July 3, 1995 1994 ------- ------- (In thousands of dollars) Cash flows from operations: Net income (loss) $ (737) $ 3,503 Adjustments to reconcile net income to net cash provided by operations - Depreciation and amortization 21,769 22,293 Provision for deferred income taxes (6,301) (4,881) Other 88 180 Changes in balance sheet accounts - Accounts receivable 10,494 23,054 Inventories (83,425) (28,792) Other current assets 1,168 1,540 Trade accounts payable 34,754 (9,960) Accrued expenses related to beet operations 13,138 13,817 Other liabilities and accrued expenses 1,007 (434) Other 1,847 2,369 ------- ------- Cash (used) provided by operations (6,198) 22,689 ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (13,070) (17,314) Proceeds from sale of property, plant and equipment 233 1,949 Acquisition of business (Note 2) (7,050) - Liquidation of short-term investments included in "Other current assets" - 19,700 Use of escrow balances related to industrial revenue bonds for additions to property, plant and equipment - 3,681 Other (2,854) (3,531) ------- ------- Cash (used) provided by investing activities (22,741) 4,485 ------- ------- Cash flows from financing activities: Increase (decrease) in short-term borrowings 44,200 (11,300) Payments of long-term debt (28,201) (2,164) Liquidation of unused industrial revenue bond escrow balances 5,662 - Collection of note receivable from employee stock ownership trust 500 - Dividends declared to stockholders (7,739) (10,626) Decrease in dividends payable (2,886) - Other (270) 27 ------- ------- Cash provided (used) by financing activities 11,266 (24,063) ------- ------- Cash flows for period (17,673) 3,111 Cash and cash equivalents, beginning of period 28,436 7,481 ------- ------- Cash and cash equivalents, end of period $10,763 $10,592 ======= =======
(The accompanying notes are an integral part of the financial statements.) Page 5 of 12 pages 6 Savannah Foods & Industries, Inc. Notes to Consolidated Financial Statements (Unaudited) (1) The information furnished reflects all adjustments (consisting of only normal recurring accruals) which are, in the opinion of Management, necessary for a fair statement of the results for the interim periods. These consolidated financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. Certain prior year amounts have been reclassified to conform to current year presentation. (2) On January 31, 1995, the Company acquired certain assets of Reckitt and Colman, Inc., which are used in the manufacture, sale and distribution of filled plastic salt and pepper shakers for $7,050,000 in cash. The transaction was accounted for using the purchase method and resulted in $6,050,000 of goodwill, which represents the excess of the purchase price over the fair market value of the assets acquired. (3) A summary of inventories by class is as follows:
July 2, October 2, 1995 1994 ------- ---------- (In thousands of dollars) Raw materials and work-in-process......... $ 66,373 $26,924 Packaging materials, parts and supplies... 27,189 27,115 Finished goods............................ 75,203 31,301 -------- ------- $168,765 $85,340 ======== =======
(4) Long-term debt is summarized as follows:
July 2, October 2, 1995 1994 ------- ---------- (In thousands of dollars) Senior notes - $50,000 Series A at 8.35% and $20,000 Series B at 7.15% payable through 2002.................... $ 70,000 $ 70,000 Long-term debt supported by revolving credit facilities with banks............ - 20,000 Notes payable to banks from 1997 to 2004 related to the ESOP..................... 14,100 15,500 Industrial revenue bonds.................. 22,500 28,000 Present value of non-compete agreements related to the purchase of King Packaging, payable monthly from 1993 to 1998, discounted at 5%.................. 5,136 6,314 Other long-term debt...................... 1,930 2,053 -------- -------- 113,666 141,867 Less - Current portion.................... (1,690) (1,643) -------- -------- $111,976 $140,224 ======== ========
During June, 1995, the Company entered additional interest rate exchange agreements which, together with the senior notes, fix the interest rate on Page 6 of 12 pages 7 approximately $80.0 million of the Company's long-term debt from fiscal 1998 through 2004. The average fixed interest rate on such indebtedness is projected to approximate 7.5% per annum for fiscal 1998 through fiscal 2004. These hedges were completed with the anticipation that scheduled repayments of fixed rate debt through 2004 would be replaced with variable rate borrowings. The Company's existing variable rate indebtedness has a maximum contractual rate of approximately the bank's cost of funds plus 1/2%. Cash interest payments during the first nine months of fiscal 1995 and 1994 amounted to $12,179,000 and $11,255,000, respectively. (5) Cash tax payments during the first nine months of fiscal 1995 and 1994 amounted to $6,571,000 and $6,582,000, respectively. (6) Earnings per share for fiscal 1995 and 1994 are based on weighted average outstanding shares of 26,238,196 for the 13 weeks and the 39 weeks ended July 2, 1995 and July 3, 1994. (7) Commitments and Contingencies: The Company has contracted for the purchase of a substantial portion of its future raw sugar requirements. Prices to be paid for raw sugar under these contracts are based in some cases on market prices during the anticipated delivery month. In other cases prices are fixed and, in these instances, the Company generally obtains commitments from its customers to buy the sugar prior to fixing the price, or enters into futures transactions to hedge the commitment. The Company uses interest rate exchange agreements, more commonly called interest rate swaps, to manage its interest rate exposure. The Company is exposed to loss in the event of non-performance by the other party to these swaps. However, the Company does not anticipate non-performance by the counter-parties to the transactions as the counter-parties are large world-wide commercial banks. In May 1992, the United States Customs Service (Customs) issued a bill to the Company for approximately $7,500,000 seeking reimbursement for certain drawback claims filed by the Company with Customs during the period 1984 through 1988. The Company disputes Customs' findings and is vigorously protesting the decision of Customs. As of July 1995, approximately $5,000,000 of the claim has been dismissed. Based upon the facts known to the Company at this time, the ultimate resolution of this matter is not expected to have a materially adverse effect on the Company's financial position or results of operations. In July 1991, National Utility Service, Inc. (NUS) filed a complaint against the Company in the United States District Court for the District of New Jersey seeking compensation and damages arising from a contract between the Company and NUS for energy cost saving recommendations. On September 12, 1994, summary judgment was entered against the Company in the amount of $2,973,000 in this case. On December 19, 1994, the judgment was amended to add $1,343,000 prejudgment interest. The United States Court of Appeals for the Third Circuit has affirmed the judgment subject to an insignificant reduction in the prejudgment interest. The Company is considering an appeal to the Supreme Court. Reserves were established for this claim in previous fiscal years, and the ultimate resolution of this matter is not expected to have a materially adverse effect on the Company's financial position or results of operations. Page 7 of 12 pages 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL POSITION AND RESULTS OF OPERATIONS. Liquidity Non-interest bearing working capital increased due to seasonal business activity by $31,141,000 from the end of fiscal 1994 and was funded by short-term borrowings. Cash and cash equivalents for the nine months decreased $17,673,000 due to long-term debt repayments. Capital Resources Long-term debt excluding the current portion, decreased $28,248,000. The Company paid $20,000,000 of long-term revolving credit debt in its first fiscal 1995 quarter with cash generated from working capital reductions in fiscal 1994. Additionally, the Company retired $5,500,000 of industrial revenue bonds in the third fiscal quarter. These bonds were paid from escrow accounts held by the Company containing the original proceeds from the issuance of the bonds. Changes in debt and equity resulted in a decrease from 43% to 38% in the ratio of long-term debt to total capital. At July 2, 1995, the Company had $145,000,000 in revolving credit facilities, of which $44,200,000 was outstanding as short-term debt. The remaining available balance of $100,800,000 is intended to meet working capital and other cash needs as they arise. All of the $145,000,000 of available facilities are committed through September 30, 1996. The revolving credit facilities, in general, enable the Company to borrow at the bank's cost of funds plus approximately 1/2%. During June, 1995, the Company entered into additional interest rate exchange agreements which, together with the senior notes and existing interest rate exchange agreements, fix the interest rate on approximately $80.0 million of the Company's long-term debt from 1998 through 2004. The average fixed interest rate for such indebtedness is expected to approximate 7.5% per year for fiscal 1998 through fiscal 2004. At July 2, 1995, stockholders' equity was $180,119,000 compared to equity at October 2, 1994, of $188,174,000. Equity changed primarily as a result of flat earnings and dividends of $7,739,000. The Company reduced its dividends from $.54 per share to $.10 per share effective for the third quarter of fiscal 1995. Dividends would have been approximately $5.8 million less for fiscal 1995 if dividends had been at the $.10 per share level for the full year. Fixed asset additions during the first nine months of fiscal 1995, excluding the Reckitt & Colman acquisition, were $13,070,000. The capital expenditures were primarily concentrated on cost saving projects. The Company expects that expenditures for fixed assets (exclusive of any acquisitions) will approximate $17,000,000 in fiscal 1995. Results of Operations The Company's net loss for the first nine months of fiscal 1995 was ($737,000), or ($.03) per share, compared to income of $3,503,000, or $.13 per share, for the first nine months of fiscal 1994. Net loss for Page 8 of 12 pages 9 the third quarter of fiscal 1995 was ($2,428,000), or ($.10) per share, compared to income of $233,000, or $.01 per share, for the third quarter of fiscal 1994. Sugar sales volumes were flat as compared with the same quarter and nine months of last year. Raw sugar spot prices are up $1.21 per cwt. for the third quarter of 1995 compared to the third quarter of 1994. Raw sugar spot prices are up $.54 per cwt. for the nine months this year versus last year. Sugar sales prices are up for the quarter and nine months of 1995 compared to last year; however the increase in sales prices has been significantly less than the increase in raw sugar costs. Sales volume at the cane refineries increased over the same quarter and nine months of last year. Cane refining margins have decreased compared to last year due to higher raw sugar prices and intense competition which has limited sales price increases to minimal levels. The higher raw sugar prices have significantly increased cost of sales for the quarter and nine months of 1995 as compared with the same periods of 1994. The Company uses the LIFO method to determine cost of sales and to value inventory of sugar. This method, on an annual basis, results in the most recent inventory purchases being charged to cost of sales. During interim periods the Company estimates the expected year-end value of sugar to determine both its cost of sales and inventory value for interim periods. At the end of the third quarter the price of raw sugar increased by over $2.50 per cwt. as compared with the price at the end of the March 1995 quarter. As a result of this increase, the Company revised its estimates of year-end inventory values. This caused an increase to cost of sales in the third quarter of approximately $3,000,000. Accordingly, income is down at the cane refineries compared to the same quarter and nine months of last year. Our beet operations, which include Michigan Sugar and our beet molasses desugarization facility, had lower sales volume compared to the previous year quarter and nine months due to the marketing allotments imposed October 1, 1994 for the 1994-95 crop year. Income at the beet operations was up slightly for the quarter when compared to last year. For the nine months of 1995 income is down compared to 1994 primarily due to higher operating costs at the beet molasses desugarization facility. The Company's foodservice sugar sales volume decreased from the same quarter and nine months last year while non-sugar sales volume increased moderately. Income for the quarter and nine months is up from last year as a result of an improved product mix and lower operating expenses. Raceland Sugars, Inc. showed a slight decrease in income for the quarter compared to last year. Income is up for the nine months of 1995 compared to 1994 as a result of a successful processing campaign which produced more sugar than last year at the same cost per unit. Selling, general and administrative expenses decreased 4%, or $1,550,000, for the nine months of fiscal 1995 compared to 1994 primarily due to lower selling costs resulting from lower sales volume at Michigan Sugar and reductions resulting from reduced overhead costs. One of the more significant factors that will affect the Company's future profitability is the 1995 Farm Bill currently being debated in Page 9 of 12 pages 10 Congress. One thing that seems clear is that the situation will not remain as it is. The 1995 Farm Bill, in whatever form it takes, may dramatically change the structure of the sugar industry in the United States. Management believes that the Company's low cost structure, efficient manufacturing operations and proven marketing skills will enable the Company to capitalize on these changes. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Page Exhibit No. Number Description --- ------ ----------- 12 27-1 Financial Data Schedule (for SEC use only) (b) Reports on Form 8-K, not applicable. Page 10 of 12 pages 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SAVANNAH FOODS & INDUSTRIES, INC. BY: /S/John M. Tatum --------------------------- JOHN M. TATUM DATE: AUGUST 14, 1995 SECRETARY BY: /S/W. R. Steinhauer --------------------------- W. R. STEINHAUER SENIOR VICE PRESIDENT - DATE: AUGUST 14, 1995 FINANCE & ADMINISTRATION Page 11 of 12 pages
EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF SAVANNAH FOODS & INDUSTRIES, INC. FOR THE PERIOD ENDED JULY 2, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS OCT-01-1995 JUL-02-1995 10,763 0 65,282 0 168,765 258,408 436,290 200,833 542,387 175,400 111,976 17,365 0 0 162,754 542,387 811,408 811,408 741,181 741,181 21,769 0 11,218 (1,201) (464) (737) 0 0 0 (737) (.03) 0