-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, cIjIlFeLNEOLSgJGbJ2TMODayYXSdjGnlnCBcVGB7qvFb61MdOKH84M2a3p2Zkkf u1J+CCiJH5Z1FSMDO+Q++A== 0000950144-94-001533.txt : 19940822 0000950144-94-001533.hdr.sgml : 19940822 ACCESSION NUMBER: 0000950144-94-001533 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940703 FILED AS OF DATE: 19940817 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SAVANNAH FOODS & INDUSTRIES INC CENTRAL INDEX KEY: 0000086941 STANDARD INDUSTRIAL CLASSIFICATION: 2060 IRS NUMBER: 581089367 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11420 FILM NUMBER: 94544731 BUSINESS ADDRESS: STREET 1: P O BOX 339 CITY: SAVANNAH STATE: GA ZIP: 31402 BUSINESS PHONE: 9122341261 10-Q 1 SAVANNAH FOODS 10-Q - JULY 3, 1994 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 3, 1994 -------------- 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 3, 1994, there were 26,238,196 shares of common stock of Savannah Foods & Industries, Inc. outstanding. Page 1 of 11 pages 2 SAVANNAH FOODS & INDUSTRIES, INC. INDEX Part I. FINANCIAL INFORMATION: Page ---- Item 1. Financial Statements: Consolidated Balance Sheets at July 3, 1994 and October 3, 1993 3 Consolidated Statements of Operations for the 13 weeks ended July 3, 1994 and July 4, 1993, the 39 weeks ended July 3, 1994 and the 40 weeks ended July 4, 1993 4 Consolidated Statements of Cash Flows for the 39 weeks ended July 3, 1994 and the 40 weeks ended July 4, 1993 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 Page 2 of 11 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 3, October 3, 1994 1993 ---------- ---------- Assets - - - ------ Current assets: Cash and cash equivalents $ 10,592 $ 7,481 Accounts receivable 63,976 87,030 Inventories (net of LIFO reserve of $9,228 in 1994 and $9,011 in 1993) (Note 2) 174,431 145,639 Other current assets 14,124 29,840 -------- -------- Total current assets 263,123 269,990 Property, plant and equipment (net of accumulated depreciation of $177,238 in 1994 and $159,111 in 1993) 244,333 249,047 Other assets 46,271 48,815 -------- -------- $553,727 $567,852 ======== ======== Liabilities and Stockholders' Equity - - - ------------------------------------ Current liabilities: Short-term borrowings $ 15,000 $ 26,300 Current portion of long-term debt (Note 3) 1,719 2,421 Trade accounts payable 96,450 106,410 Income taxes accrued - - Accrued expenses related to beet operations 13,817 - Other liabilities and accrued expenses 19,195 19,629 -------- -------- Total current liabilities 146,181 154,760 -------- -------- Long-term debt (Note 3) 140,616 142,078 -------- -------- Deferred income taxes 3,361 3,951 -------- -------- Deferred employee benefits 75,335 72,349 -------- -------- 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 203,368 210,491 Minimum pension liability adjustment (9,453) (9,453) -------- -------- 223,470 230,593 Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275 - Note receivable from employee stock ownership trust 3,961 4,604 -------- -------- Total stockholders' equity 188,234 194,714 -------- -------- Commitments and contingencies (Note 8) - - -------- -------- $553,727 $567,852 ======== ========
(The accompanying notes are an integral part of the financial statements.) Page 3 of 11 pages 4 Savannah Foods & Industries, Inc. Consolidated Statements of Operations (In thousands of dollars except for per share amounts) (Unaudited)
For the 39 For the 40 For the 13 Weeks Ended Weeks Ended Weeks Ended ---------------------- ----------- ----------- July 3, July 4, July 3, July 4, 1994 1993 1994 1993 ---------- ---------- ----------- ----------- Net sales $272,891 $270,979 $800,082 $830,767 -------- -------- -------- -------- Operating expenses: Cost of sales and operating expenses 249,764 244,937 723,668 744,758 Selling, general and administrative expenses 12,471 14,087 40,994 40,881 Depreciation and amortization 7,459 6,638 22,293 18,959 -------- -------- -------- -------- 269,694 265,662 786,955 804,598 -------- -------- -------- -------- Income from operations 3,197 5,317 13,127 26,169 -------- -------- -------- -------- Other income and expenses: Interest and other investment income 330 390 1,771 1,677 Interest expense (3,289) (3,461) (10,040) (9,791) Other 141 60 381 1,699 -------- -------- -------- -------- (2,818) (3,011) (7,888) (6,415) -------- -------- -------- -------- Income before income taxes and change in accounting principle 379 2,306 5,239 19,754 Provision for income taxes (Note 4) (146) (816) (1,736) (5,994) -------- -------- -------- -------- Income before change in accounting principle 233 1,490 3,503 13,760 Cumulative effect of change in accounting principle (Note 5) - - - 600 -------- -------- -------- -------- Net income $ 233 $ 1,490 $ 3,503 $ 14,360 ======== ======== ======== ======== Income per weighted average share outstanding (Note 6): Income before change in accounting principle $ .01 $ .06 $ .13 $ .53 Cumulative effect of change in accounting principle - - - .02 -------- -------- -------- -------- Net income $ .01 $ .06 $ .13 $ .55 ======== ======== ======== ======== Dividends $ .135 $ .135 $ .405 $ .405 ======== ======== ======== ========
(The accompanying notes are an integral part of the financial statements.) Page 4 of 11 pages 5 Savannah Foods & Industries, Inc. Consolidated Statements of Cash Flows (Unaudited)
For the 39 For the 40 Weeks Ended Weeks Ended ----------- ----------- July 3, July 4, 1994 1993 ----------- ----------- (In thousands of dollars) Cash flows from operations: Net income $ 3,503 $14,360 Adjustments to reconcile net income to net cash provided by operations - Depreciation and amortization 22,293 18,959 Cumulative effect of change in accounting principle - (600) Provision for deferred income taxes (4,881) (3,683) Other - 330 Working capital changes affecting cash provided by operations - Accounts receivable 22,654 10,920 Inventories (28,792) (49,652) Other current assets 20,597 (17,954) Trade accounts payable (9,960) 10,762 Income taxes accrued - 1,955 Accrued expenses related to beet operations 13,817 10,334 Other liabilities and accrued expenses 609 (4,226) ------- ------- Cash provided by (used for) operations 39,840 (8,495) ------- ------- Cash flows from investing activities: Additions to property, plant and equipment (17,314) (34,382) Decrease in investments of unexpended IDB funds included in other assets 3,681 - Acquisition of long-term investments - (5,491) Other 967 85 ------- ------- Cash used for investing activities (12,666) (39,788) ------- ------- Cash flows from financing activities: Increase (decrease) in short-term borrowings (11,300) 40,166 Increase in long-term debt - 70,300 Payments on long-term debt (2,164) (51,300) Dividends paid to stockholders (10,626) (14,047) Treasury stock repurchases - (977) Other 27 658 ------- ------- Cash provided by (used for) financing activities (24,063) 44,800 ------- ------- Cash flows for period 3,111 (3,483) Cash and cash equivalents, beginning of period 7,481 9,897 ------- ------- Cash and cash equivalents, end of period $10,592 $ 6,414 ======= =======
(The accompanying notes are an integral part of the financial statements.) Page 5 of 11 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. See Note 5 for discussion of the effect of a change in accounting principle reflected in the accompanying interim financial statements. 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. (2) A summary of inventories by class is as follows: July 3, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Raw materials and work-in-process.......... $ 81,706 $ 76,802 Packaging materials, parts and supplies.... 26,086 26,002 Finished goods............................. 66,639 42,835 Costs related to future inventory purchases...................... - - -------- -------- $174,431 $145,639 ======== ======== (3) Long-term debt is summarized as follows: July 3, October 3, 1994 1993 ---------- ---------- (In thousands of dollars) Senior notes - $50,000,000 Series A at 8.35% and $20,000,000 Series B at 7.15% with final maturity 2002........... $ 70,000 $ 70,000 Long-term debt supported by revolving credit facilities with banks............. 20,000 20,000 Notes payable to bank from 1996 to 1998 related to ESOP trust with interest at 85% or 86% of LIBOR...................... 15,500 15,500 Variable rate industrial revenue bonds..... 28,000 28,000 Present value of non-compete agreements related to the purchase of King Packaging, payable monthly from 1993 to 1998, discounted at 5%................... 6,687 7,808 Other long-term debt....................... 2,148 3,191 -------- -------- 142,335 144,499 Less - Current portion..................... (1,719) (2,421) -------- -------- $140,616 $142,078 ======== ======== The Company has entered into "Interest Rate Exchange Agreements," more commonly called "interest rate swaps," which fixed the rate on $50,000,000 of the Company's debt for a period of approximately three years at an average fixed rate of 8.57%. The Company has also entered into an interest rate swap agreement on a principal amount of $50,000,000 whereby the Company receives a fixed rate and pays the counter-parties a floating rate based on 6-month LIBOR. The remaining maturity on this swap is approximately 1 1/4 years. The purpose of this transaction was to achieve a lower Page 6 of 11 pages 7 effective interest rate on the Company's senior notes. Cash interest payments during the first nine months of fiscal 1994 and 1993 amounted to $11,255,000 and $8,285,000, respectively. (4) Cash tax payments during the first nine months of fiscal 1994 and 1993 amounted to $6,582,000 and $12,255,000 respectively. (5) Change in accounting principle: The Company prospectively adopted Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes (FAS 109) effective September 28, 1992, the first day of the fiscal year ended October 3, 1993. The cumulative effect of this accounting change was a credit to net income of $600,000. (6) Earnings per share for fiscal 1994 are based on weighted average outstanding shares of 26,238,196 for the 13 weeks and the 39 weeks ended July 3, 1994. Earnings per share for fiscal 1993 are based on weighted average outstanding shares of 26,238,196 for the 13 weeks ended July 4, 1993 and 26,247,469 for the 40 weeks then ended. (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. 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. Customs has alleged that drawback claims prepared by the Company for certain export shipments of sugar during these years are technically and/or substantively deficient, and that the Company therefore is not entitled to monies previously received under these drawback claims. The Company disputes Customs' findings and is vigorously protesting the decision of Customs. While it is not certain how long the protest (administrative appeal) process will take, 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 of 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. Discovery in this case has been completed, and based upon the information obtained, the Company has determined that NUS is seeking approximately $4,000,000 inclusive of prejudgment interest from the Company. The Company intends to defend the action vigorously and strongly contends that no amounts are due to NUS. The ultimate resolution of this matter is not expected to have a material effect on the Company's financial position or results of operations. Page 7 of 11 pages 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL POSITION AND RESULTS OF OPERATIONS - JULY 3, 1994 FINANCIAL POSITION: Stockholders' equity decreased during the first nine months of fiscal 1994 from $194,714,000 to $188,234,000. Equity decreased as a result of earnings of $3,503,000 offset by dividends of $10,626,000 and increased by a $643,000 reduction of the note receivable from the employee stock ownership trust. Long-term debt decreased since year-end by $1,462,000 due to principal repayments. Cash and cash equivalents increased $3,111,000 for the first nine months of this year compared to a decrease in cash and cash equivalents of $3,483,000 for the related period last year. Cash was used primarily for capital improvements, dividends and repayment of short-term debt. Changes in working capital include an increase in inventory levels offset by decreases in accounts receivable and other current assets. The Company's investment in working capital at the end of the third quarter of fiscal 1994 is 7% lower than at the end of the third quarter in the prior fiscal year. This reduction is the result of an aggressive program aimed at minimizing the Company's investment in working capital. Inventories are down 6% at the cane refineries and down 12% at Michigan Sugar compared to the same period last year. At the end of the third quarter, the Company had $145,000,000 in revolving credit facilities of which $20,000,000 was outstanding as long- term debt and $15,000,000 was outstanding for working capital requirements and included in short-term borrowings. The remaining available balance of $110,000,000 is intended to meet working capital requirements. These facilities are committed until September, 1996, with an option to extend the agreement through September, 1998. Fixed asset additions during the first nine months of 1994 were $17,314,000. Of this amount, the Company spent $10,675,000 at the cane refineries and raw sugar mill including expenditures for improvements in process equipment, storage facilities and information systems; $3,199,000 on projects at the beet refineries and molasses desugarization facility; and $3,440,000 at the Foodservice facilities. Total fixed asset additions in fiscal 1994 are expected to approximate $20,000,000 with expenditures being concentrated on cost saving or expansion projects which are expected to benefit the Company through increased efficiency and expanded operational capabilities. RESULTS OF OPERATIONS: Net income for the nine months ended July 3, 1994 was $3,503,000, or $.13 per share, on sales of $800,082,000, compared to $14,360,000, or $.55 per share, on sales of $830,767,000 for the comparable period of fiscal 1993. Results of operations for the first nine months of fiscal 1993 reflect the cumulative effect of change in accounting principle of $600,000 for the adoption of Statement of Financial Accounting Standards No. 109 - Accounting for Income Taxes. Net income for the third quarter of fiscal 1994 was $233,000, or $.01 per share, on sales of $272,891,000, compared to net income of $1,490,000, or $.06 per share, on sales of $270,979,000 for the comparable quarter in 1993. Page 8 of 11 pages 9 The U. S. Department of Agriculture (USDA) announced its intention not to impose marketing allotments on July 1 in spite of written notice that a sugar company would forfeit sugar to it under the current sugar program. The current Farm Bill mandates that the sugar program operate at no cost, and provides for marketing allotments as a method to achieve that goal. By not imposing allotments and thereby incurring cost by acquiring forfeited sugar, the Company believes that the USDA is in violation of the no-cost provision. The Company and others in the industry are pursuing several avenues to ensure that the rules of the Farm Bill are followed. Sales dollars for the third fiscal quarter were up 1% from the same quarter last year. Domestic sugar sales volume was up 1.2% to date compared to last year. Profit margins for the quarter were down over 30% compared to the third fiscal quarter of last year because a 1% increase in refined sugar prices was more than offset by a 4% increase in raw sugar prices. The cane refineries reported improved productivity, with a 1% increase in production this quarter compared to the same quarter last year. This productivity increase will help profitability when refining margins return to normal. As mentioned in the second quarter report, Michigan Sugar had an excellent processing campaign in Michigan in fiscal 1994, but the Great Lakes facility in Ohio had a short campaign due to a drought. Profits at Michigan Sugar are down because of lower sugar prices, lower by-product prices and lower profits at Great Lakes. Dixie Crystals(R) Foodservice reported 42% lower operating income the first nine months of this fiscal year compared to last year due to lower refined sugar prices and higher sugar cost. However, manufacturing costs decreased as a result of continued investment in cost reduction programs. Raceland Sugars operating income for the current year is 4% higher than last year on a 4% smaller crop. The increase in income is due to a 4% higher net sales price for raw sugar and higher by-product sales prices in the current year. Selling, general and administrative expenses decreased 11% this quarter compared to the same quarter last year, and were almost flat for the first nine months of fiscal 1994 compared to the first nine months of fiscal 1993. The primary problem in the industry is excess sugar produced from several consecutive large or record sugar beet crops. Beet sugar continues to grow as a percentage of the total sugar supply in the U.S. Historically, refined sugar from cane represented over 70% of the sugar industry. At that time, refined sugar prices moved in direct relationship with raw sugar prices because cane refiners had similar economics. Since 1980, the substitution of High Fructose Corn Syrup for sugar and other factors have caused 30% of the cane refining industry to cease operation. At the same time, the beet side of the industry has expanded such that beet refined sugar deliveries are almost 50% of total sugar deliveries today. Page 9 of 11 pages 10 The result of this shift in the industry is that refined sugar prices now move in relationship to the size of the sugar beet crop. When the beet crop is large, refined sugar prices are lower, and, conversely, when the beet crop is less, refined prices are higher. This year and last, refined sugar prices have at times been close to the price of raw sugar. To avoid sugar forfeitures and to comply with the no-cost provisions of the current Farm Bill, the USDA imposed marketing allocations in July 1993. This reduced the beet sugar supply and raised refined sugar prices. However, because marketing allotments were not continued in the current crop year, the unsold sugar from the 1993 crop increased the effective size of the current crop, depressing sales prices this year. The USDA announced on August 8, 1994 a quota level of 1,458,000 short tons for the period from August 1, 1994 to September 30, 1995. This announcement is expected to result in greater sugar imports before September 30, 1994, and during fiscal year 1995, thereby lowering raw sugar prices. The Company completed the agreements with its Mexican partners this quarter. The agreements are to jointly market sugar in Mexico, as well as to provide technical assistance. The Company and its partners are currently installing packaging facilities in Guadalajara and Monterey which are expected to be fully operational by October 1994. Little immediate impact is expected on net income, but the joint ventures are expected to contribute to net income in the future. PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits, not applicable. (b) Reports on Form 8-K, not applicable. Page 10 of 11 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 17, 1994 SECRETARY BY: /S/ W. R. Steinhauer ------------------------------- W. R. STEINHAUER SENIOR VICE PRESIDENT - DATE: AUGUST 17, 1994 FINANCE & ADMINISTRATION Page 11 of 11 pages -----END PRIVACY-ENHANCED MESSAGE-----