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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 2-22791
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AGWAY INC.*
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(Exact name of registrant as specified in its charter)
DELAWARE 15-0277720
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Butternut Drive, DeWitt, New York 13214
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(Address of principal executive offices) (Zip Code)
315-449-6431
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(Registrant's telephone number, including area code)
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
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at January 24, 1995
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Common Stock, $25 par value per share 110,104 shares
* Agway is a taxpaying corporation founded on cooperative principles.
Membership is limited to farmers and each may hold only one share
of common stock.
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PART I. FINANCIAL INFORMATION (continued)
AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(Unaudited)
(Thousands of Dollars)
Discontinued Operations
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On March 23, 1993, the Company's Board of Directors authorized
management to sell its 34% interest in Curtice Burns Foods, Inc.
(Curtice Burns) and 99% interest in H. P. Hood Inc. (Hood).
Management and the Board had specific plans for the divestiture of
these operations and expected the divestiture of both investments in
fiscal 1994; however, due to unanticipated occurrences, neither
transaction was consummated by June 30, 1994. The investment in
Curtice Burns has been sold effective November 3, 1994. The
investment in Hood is expected to consummate within this fiscal year.
Accordingly, these operations are reflected as discontinued operations.
The Company's decision to make these sales is part of the overall
strategic plan of focusing on its agriculture, consumer, energy,
insurance and leasing businesses.
The November 3, 1994 sale of the Company's investment in Curtice
Burns was not significantly different on terms than those previously
estimated, and there have been no recent developments regarding the
anticipated terms of the sale of Hood that would require recognition of
further losses on disposal of these investments.
Curtice Burns
On September 28, 1994, Curtice Burns accepted an offer from Pro-Fac
Cooperative Inc. to acquire all outstanding shares of Curtice Burns for
$19 per share in cash, and had entered into a definitive merger
agreement with Pro-Fac. (See also Item 6. Exhibits and Reports on
Form 8-K.)
This agreement closed on November 3, 1994 and the Company
received $55,786 in cash proceeds. The financial impact of this sale
is disclosed in Note 6 to the financial statements and in Item 5. Other
Information.
Hood
During the quarter, negotiations with an investor group, led by the
management of Hood in a transaction expected to involve the use of an
employee stock ownership plan, continued to progress according to
schedule. The investor group is still intact and interested in the
acquisition of Hood based on terms being negotiated that are consistent
with the current market conditions and financial plans for Hood.
Agriculture & Consumer Group
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Net sales and revenues for the first quarter of fiscal 1995 of $225,500
increased $3,900 (1.8%) as compared to the corresponding period in
the prior fiscal year. Increases in Consumer sales are primarily due to
the impact of a marketing program which increased power equipment
sales by approximately $7,700 in the first quarter. Of this increase,
$4,000 is an increase in sales, and approximately $3,700 is an
acceleration of sales, which last year occurred primarily in the second
quarter. This increase was offset by sales declines in Agriculture feed
sales due primarily to price declines in corn and soybean products.
Operating losses for the first quarter of fiscal 1995 of $10,600
decreased $1,100 as compared to the corresponding period in the prior
fiscal year. Gross margin percentage for the Group improved from
11.2% in the first quarter of fiscal 1994 to 11.9% in the first quarter
of fiscal 1995 due primarily to enhanced pricing of agricultural
commodities, primarily in the feed business. This improvement was
somewhat offset by declines in gross margin percentage for the
Consumer Retail segment due to product mix, and increases in
commodity prices on the Country Foods segment. This improvement
was also partially offset by increases in expense due to reductions
in personnel in connection with ongoing efforts to improve
profitability, and due to timing of expenditures.
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PART I. FINANCIAL INFORMATION (continued)
AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
(Unaudited)
(Thousands of Dollars)
Energy Group
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Energy Group net sales and revenues of $107,300 for the first quarter
of fiscal 1995 increased $1,800 (1.7%) as compared to the first quarter
of the prior year. Total unit volume (in millions of gallons) for the
first quarter increased 1,100 gallons as compared to the corresponding
period in the prior year. Volume increases in heating oil and propane,
due primarily to an early tank filling program, were offset by a volume
decline in diesel, due to plant divestitures and fewer keytrol facilities.
Overall average selling price increased slightly versus the prior year,
reflecting increased gasoline and diesel prices, offset by declines in
heating oil and propane. Service revenues also increased in the first
quarter of fiscal 1995 versus 1994 due to an increased emphasis on
customer service in the field and a growing customer base.
Net operating losses for the Energy Group of $4,000 for the first
quarter of fiscal 1995 were $600 lower than the corresponding period
in the prior year, due primarily to improved gross margins offset by
increased administrative expenses resulting from higher product taxes.
Gross margins improved due to increases in sales volume as well as
overall increases in average gross margin per unit of 3.1%.
Financial Services Group
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For segment reporting purposes, the Financial Services Group consists
of Telmark Inc., Agway Insurance Company, and Agway General
Agency, Inc.
Net sales and revenues of $17,000 for the Financial Services Group for
the first quarter of fiscal 1995 increased $1,300 (8.2%) as compared to
the first quarter of the prior year. The increase for the quarter is
attributed to Telmark Inc. which increased revenues by $1,500 due to
a higher average net investment in leases compared to the first quarter
of the previous year. The increased net investment resulted from new
business being booked during the past year at a faster rate than the
existing business terminated, partially offset by a lease sale of $5,500
in the third quarter of fiscal 1994. Agway General Agency Inc.
revenues declined $200 for the first quarter as compared to the
corresponding period in the prior year due to a decline in administrative
fees on a declining base of participants in the Agway member group
health insurance plan.
Operating profit increased in the first quarter of fiscal 1995 by $100
(4.3%) over the same period in the previous year. Telmark Inc.'s
operating margins increased $200 in the first quarter due primarily to
the increased size of the lease portfolio generating additional gross
margins on a relatively flat expense base. This was offset by a first
quarter decline of $100 in operating margins for the Agway Insurance
Company due to unfavorable underwriting experience versus the prior
year and smaller capital gains on investments.
Corporate Groups
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The net sales and revenues of the Corporate Groups represent external
revenues generated from the Information Services Department and the
elimination of sales and revenues between the operating segments.
The operating profit (loss) of the Corporate Groups represents
corporate expenses and other income generated from assets not
allocable to segments. The increase in expenses for the first quarter of
fiscal 1995 versus 1994 of $1,100 is primarily the effect of recognition
of separation expenses for recent executive officer and staff changes
versus salaries normally occurring throughout the quarter.
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PART I. FINANCIAL INFORMATION (continued)
AGWAY INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
(Unaudited)
(Thousands of Dollars)
LIQUIDITY AND CAPITAL RESOURCES
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Cash flows from operating activities for the three months ended
September 30, 1994 decreased $4,500 to $29,600 as compared to the
first three months of fiscal 1994 due primarily to changes in working
capital. Net cash utilized in investing activities for the three months
ended September 30, 1994 was $27,200 as compared to $15,800 for the
same period last year due primarily to increased leasing activity in
fiscal 1995 resulting in the use of an additional $10,800 of cash
compared to the same period last year. As a result of cash utilized in
investing activities, net cash flows used in financing activities was
decreased from $19,100 in the first quarter of fiscal 1994 to $2,400 in
the first quarter of fiscal 1995. The majority of this change was seen
in short-term borrowings, where additional borrowings of $5,700
occurred in the first quarter of fiscal 1995 versus payments of $18,400
in the same period of the prior fiscal year, and increased net
redemptions of subordinated debt and preferred stock in the first
quarter of the current year versus the same period in the prior year.
The Company finances its operations and the operations of all its
continuing businesses and subsidiaries, except Telmark and Agway
Insurance Company, through Agway Financial Corporation (AFC).
Telmark and Agway Insurance Company finance themselves through
operations or direct borrowing arrangements. Each business unit is
financed with a combination of short- and long-term credit facilities as
appropriate. External sources of short-term financing for the Company
and all its continuing operations include revolving credit lines, letters
of credit, and commercial paper programs. Sources of longer-term
financing include borrowings from banks and insurance companies,
subordinated debt, and capital leases. In addition, Telmark has
occasionally sold blocks of its lease portfolio.
As of September 30, 1994, lines of credit were available to AFC of
$105,000 and Telmark of $23,000 compared to $135,000 and $23,000,
respectively, in the prior year. The AFC credit facilities are adequate
for the Company's current needs and are available through December
31, 1994, with conclusion of longer-term renewal negotiations pending
the sale of Curtice Burns, the cash proceeds from which impact the
forecasted short-term debt need for the coming year. This sale closed
on November 3, 1994, and the Company received $55,786 in proceeds
(See also Note 6 to the financial statements and Item 5. Other
Information). These longer-term renewals are in the final stages of
negotiation and are expected to close in December 1994. Telmark's
lines of credit expire at various times throughout the fall of 1994. It
is management's expectation that appropriate facilities will be in place
to meet the ongoing needs of Telmark and the Company.
Certain of the AFC agreements are collateralized by the Company's
accounts receivable and non-petroleum inventories. Amounts which
can be drawn under these agreements are limited to a specific
calculation based upon the total of certain accounts receivable and non-
petroleum inventories ("collateral"). Adequate collateral has existed
throughout the fiscal year to meet the ongoing needs of the Company.
In addition, the agreements include certain covenants, the most
restrictive of which requires the Company to maintain specific monthly
levels of interest coverage and tangible net worth.
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SIGNATURES
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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.
AGWAY INC.
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(Registrant)
Date January 27, 1995 /s/ PETER J. O'NEILL
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Peter J. O'Neill
Senior Vice President
Corporate Finance and Control
(Principal Financial Officer and
Chief Accounting Officer)
