SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended JULY 29, 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 0 - 1653
GENESEE CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 16-0445920
(State or other juriction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 St. Paul Street, Rochester, New York 14605
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 546-1030
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 the date of this report, the Registrant had the following shares of
common stock outstanding:
Number of Shares
Class Outstanding
Class A Common Stock (voting), 209,885
par value $.50 per share
Class B Common Stock (non-voting), 1,393,012
par value $.50 per share
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<TABLE>
GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
July 29, 1995 and April 30, 1995
UNAUDITED AUDITED
(Dollars in Thousands) July 29, 1995 April 30, 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $7,903 $10,422
Marketable securities available for sale, at market 37,121 34,300
Trade accounts receivable, less allowance for doubtful accounts
of $572 at July 29, 1995; $565 at April 30, 1995 13,445 11,067
Inventories, at lower of cost (FIFO) or market;
Finished goods 3,342 3,933
In process 1,337 1,190
Raw materials 8,185 8,493
Total Inventories 12,864 13,616
Deferred income tax assets - current 1,680 1,680
Real estate mortgage receivable - current - 5,807
Other current assets 2,155 1,460
Total current assets 75,168 78,352
Property, plant and equipment, at cost 121,211 119,444
Less accumulated depreciation 92,300 91,053
Net property, plant and equipment 28,911 28,391
Investment in and notes receivable from unconsolidated real estate 4,321 4,305
partnership
Investment in:
Direct financing leases 3,879 3,511
Leveraged leases 19,611 19,646
Total investments in leases 23,490 23,157
Deferred income tax assets - long term 12,142 12,539
Other non current assets 1,827 1,955
Total assets $145,859 $148,699
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long term debt of consolidated real $ - $ 4,038
estate partnerships
Accounts payable 8,636 9,278
Accrued expenses and other liabilities 5,826 5,986
Federal and state income and excise taxes payable 1,059 742
Federal and state beer taxes 2,542 2,226
Deferred income taxes - current 828 828
Accrued postretirement benefits - current 582 582
Total current liabilities 19,473 23,680
Deferred income taxes - long term 18,764 18,635
Accrued postretirement benefits - long term 15,698 15,698
Other liabilities 444 308
Total liabilities 54,379 58,321
Minority interests in consolidated subsidiaries 1,369 1,428
Shareholders' equity:
Common stock Class A 105 105
Common stock Class B 753 753
Additional paid-in capital 5,881 5,882
Retained earnings 87,209 86,870
Unrealized gain / (loss) on marketable securities, net of 137 (652)
income taxes
Less treasury stock 3,974 4,008
Total shareholders' equity 90,111 88,950
Total liabilities and shareholders' equity $145,859 $148,699
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
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<TABLE>
GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF EARNINGS AND RETAINED EARNINGS
Thirteen Weeks Ended July 29, 1995 and July 31, 1994
(Dollars in Thousands,
Except Per Share Data) UNAUDITED
1995 1994
<S> <C> <C>
Revenues $51,141 48,024
Less:
Federal and state beer taxes 11,909 11,229
Sales returns and allowances 869 724
12,778 11,953
Net revenues 38,363 36,071
Cost of sales 29,196 26,212
Gross profit 9,167 9,859
Selling, general and administrative expenses 8,358 7,722
Operating income 809 2,137
Investment income 822 820
Other income / (expense), net (7) (143)
Interest of minority partners in earnings of
consolidated subsidiaries (122) (207)
Earnings before income taxes and cumulative
effect of change in accounting principle 1,502 2,607
Income taxes 601 1,031
Net earnings before cumulative effect
of change in accounting principle 901 1,576
Cumulative effect to May 1, 1994 of change
in accounting for investments in debt and
equity securities - 760
Net earnings - $.56 per share
in 1995, $1.46 in 1994 901 2,336
Retained earnings at beginning of period 86,870 83,385
Less: Dividends - $.35 per share in 1995
and $.30 per share in 1994 562 481
Retained earnings at end of period $87,209 $85,240
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
GENESEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirteen Weeks Ended July 29, 1995 and July 31, 1994
UNAUDITED
(Dollars in thousands) 1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 901 $ 2,336
Adjustments to reconcile net income to net
cash provided by operating activities:
Cumulative effect of change in accounting principle - (760)
Depreciation 1,247 1,317
Other 128 202
Changes in non-cash assets and liabilities:
Trade accounts receivable (2,385) (476)
Inventories 752 795
Deferred income tax assets 397 -
Other assets (567) (315)
Accounts payable (642) (299)
Accrued expenses and other liabilities (160) 174
Income taxes payable 317 914
Federal and state beer taxes 316 (12)
Deferred income tax liabilities (397) (12)
Accrued postretirement benefits - 301
Other liabilities 136 (13)
Net cash provided by operating activities 43 4,152
Cash flows from investing activities:
Capital expenditures (1,767) (553)
Proceeds from sale of property, plant, and equipment - 21
Sale of marketable securities 1,470 803
Purchases of marketable securities (2,976) (1,694)
Investments in and advances to unconsolidated real estate (16) 46
partnership, net of distributions
Net investment in direct financing and leveraged leases (333) 181
Repayment of real estate mortgage receivable 5,807 193
Withdrawals by minority interest (181) (138)
Net cash (used in) provided by investing activities 2,004 (1,141)
Cash flows from financing activities:
Principal payments on long term debt of consolidated real (4,038) (76)
estate partnerships
Dividends Paid (562) (481)
Net proceeds from treasury stock transaction 34 14
Net cash (used in) provided by financing activities (4,566) (543)
Net increase / (decrease) in cash and cash equivalents (2,519) 2,468
Cash and cash equivalents at beginning of the year 10,422 7,159
Cash and cash equivalents at end of the month $ 7,903 $ 9,627
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes $94 $128
Interest paid on consolidated real estate investment $76 $220
mortgage debt
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
GENESEE CORPORATION
Notes to Consolidated Financial Statements
NOTE (A) The weighted average number of Class A and Class B shares outstanding
used in the computation of net earnings per share is 1,602,897 for the
thirteen week period ended July 29, 1995 and 1,601,699 for the
thirteen week period ended July 31, 1994.
NOTE (B) The Corporation's consolidated financial statements enclosed herein
are unaudited with the exception of the Consolidated Balance Sheet at
April 30, 1995 and, because of the seasonal nature of the business and
the varying schedule of its special sales efforts, these results are
not necessarily indicative of the results to be expected for the
entire year.
NOTE (C) In the opinion of management, the interim financial statements reflect
all adjustments, consisting of only normal recurring items which are
necessary for a fair presentation of the results for the periods
presented.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of 13 weeks ended July 29, 1995 to 13 weeks ended July 31, 1994
Consolidated net revenues for the 13 weeks ended July 29, 1995 were $38.4
million, up $2.3 million from consolidated net revenues reported for the same
period last year. Consolidated net earnings were $900,000 or $.56 per share in
the 13 weeks this year, compared to net earnings of $2.3 million, or $1.46 per
share, for the same period last year. Last year's consolidated net earnings
included a $760,000 after-tax benefit from a change in accounting treatment for
debt and equity securities required by Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities (SFAS 115). SFAS 115 expands the use of fair value accounting for
securities to be classified as "held to maturity," "available for sale" or
"trading" based on the Corporation's intentions with respect to the ultimate
disposition of the security. The Corporation has classified its entire
investment portfolio as "available for sale," which is reported at fair value,
with unrealized gains and losses posted directly to shareholders' equity, net of
tax effect.
Genesee Brewing Company's net sales in the first quarter were $34.1 million, an
increase of $2.7 million or 8.5% from last year's net sales of $31.4 million.
Barrelage increased 6.3% to 553,000 barrels in the first quarter this year. The
increases in net revenues and barrel sales for Genesee Brewing Company were
primarily the result of the growth in sales of JW Dundee's Honey Brown Lager
and Genny Red Lager. Increased sales of 30 and 36 can "multi-pak" packages
also contributed to Genesee Brewing Company's improved revenue and barrel sales
in the first quarter. These package configurations were introduced in several
major markets, at competitive price points, in an effort to capitalize on the
continued popularity of can packages. Sales of Honey Brown Lager and the
multi-paks have helped to offset lower sales of Genesee Brewing Company's
established brands.
Genesee Brewing Company's net sales per barrel were up $1.22 per barrel or 2.0%
for the first quarter this year compared to the first quarter last year
primarily as a result of a shift in product mix to Genesee Brewing Company's
higher-priced specialty products.
In the first quarter, Genesee Brewing Company entered into a contract to brew
and package Samuel Adams products for Boston Brewing Company, Inc. The parties
are currently reviewing various technical details and commercial production is
not expected to commence until late in the second quarter or early in the third
quarter of fiscal 1996. The annual volume of Samuel Adams products that will be
produced by Genesee Brewing Company cannot be determined at this time, but
initial volume is expected to be small as production levels gradually build.
Net sales for Ontario Foods were $3.9 million in the first quarter, compared to
$3.7 million for the first quarter of fiscal 1995. The increase was primarily
due to the acquisition of several private label product lines from a New Jersey
food processing company in the third quarter of fiscal 1995. In addition, side
dish sales continued to grow, offsetting a decline in iced tea mix sales.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Consolidated gross profit was $9.2 million or 23.9% of net sales for the first
quarter this year compared to $9.9 million or 27.3% of net sales for the same
period last year. The decline in gross profit was primarily attributable to
Genesee Brewing Company's lower gross margins (28.7% of net sales in the first
quarter of fiscal 1995 compared to 24.9% of net sales in the first quarter of
fiscal 1996) which was mostly the result of a general increase in the price of
aluminum cans that went into effect January 1, 1995 and has adversely affected
all major domestic brewing companies. The higher can costs reduced Genesee
Brewing Company's gross profit margin by $1.6 million in the first quarter this
year. If current aluminum can prices hold, Genesee Brewing Company's cost of
sales will continue to be adversely affected.
Selling, general and administrative expenses for the Corporation increased by
$636,000 or 8.2%, over the first quarter last year. The majority of this
increase reflects increases in Genesee Brewing Company's selling and marketing
spending. In addition, selling expenses at Ontario Foods increased due to the
commissions paid on the new products acquired in the third quarter of fiscal
1995. The increase in selling, general and administrative expenses was partially
offset by a reduction in the annual accrual required under Statement of
Financial Accounting Standards No. 106, Employers' Accounting for
Post-retirement Benefits other than Pensions (SFAS 106). This reduction resulted
from the Corporation instituting a cap on post-retirement health care benefits
for all union and non-union employees and from an adjustment in the actuarial
assumptions used to determine the amount of the accrual for fiscal 1996.
Consolidated operating income for the first quarter was $809,000 compared to
operating income of $2.1 million for the same period last year. This decrease
was primarily due to reduced operating income at Genesee Brewing resulting from
higher aluminum can cost mentioned previously.
Ontario Foods' first quarter operating loss was $173,000 this year, compared to
a $71,000 operating loss last year. This year's loss is primarily attributable
to the timing of sales under a large manufacturing contract.
Genesee Ventures, Inc., the Corporation's equipment leasing and real estate
investment subsidiary, reported operating income of $393,000 for the first
quarter of fiscal 1996, compared to $716,000 for the first quarter of fiscal
1995. Last year's operating income included income from Genesee Venture's
interest in a Columbus, Ohio apartment project that was sold in August 1994.
Other expense decreased $136,000 in the first quarter of fiscal 1996 due to
lower interest expense on the Corporation's real estate investments. Interest
payments on mortgage debt were eliminated with the sale of the Columbus, Ohio
apartment project and the June 1995 repayment of the mortgage receivable from
the November 1990 sale of the Corporation's interest in a Hamburg, New York
manufactured home park.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
In sum, the Corporation's consolidated earnings before income taxes and
cumulative effect of changes in accounting principles totaled $1.5 million for
the first quarter of fiscal 1996, compared to $2.6 million last year primarily
as a result of increased aluminum can costs for Genesee Brewing Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and marketable securities totaled $45.0 million at
July 29, 1995, compared to $44.7 million at April 30, 1995.
Accounts Receivable, net of allowance, at July 29, 1995 were $2.4 million higher
than reported at April 30, 1995. The increase is primarily due to increased
sales volume in the first quarter of fiscal 1996.
Inventories at July 29, 1995 were approximately $752,000 lower than the balances
reported at April 30, 1995. The decrease is primarily due to lower sugar
inventories at Ontario Foods. Ontario Foods purchases sugar in the winter months
in sufficient quantities for spring and summer production of iced tea and drink
mixes.
On June 12, 1995 the Corporation received payment in full on the $5.8 million
mortgage receivable shown on the Corporation's consolidated balance sheet at
April 30, 1995. Simultaneously, the Corporation paid off underlying mortgages
and term notes payable having a combined principal balance of approximately $4
million at April 30, 1995. The mortgage receivable and notes payable relate to
the November 1990 sale of the Hamburg, New York manufactured home park owned by
a partnership in which the Corporation had a 50% (and later a 95%) interest.
During fiscal 1995, Genesee Brewing Company initiated a plan to make major
modifications to one of its bottling lines. These modifications include
installation of packaging equipment that will allow Genesee Brewing Company to
improve the appearance of its packaging and enhance the flexibility of packaging
operations. This improvement in packaging capability is an important component
of Genesee Brewing Company's strategy to capitalize on the growing popularity of
craft brewed and specialty beers. The capital project should be completed by the
third quarter of fiscal 1996 and is expected to cost in excess of $3 million. At
the end of the first quarter of fiscal 1996, $1.1 million had been spent on this
project.
The Corporation expects to fund future capital needs internally as it has in the
past. With respect to real estate and equipment leasing, such investments may
also include a debt component, generally obtained on a non-recourse basis.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
To enhance the Corporation's opportunities for future growth and to capitalize
on its strong financial condition, the Corporation's long term strategy includes
plans to seek investment opportunities outside its core brewing business. The
Corporation will continue to search for and develop such opportunities.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are being filed with this report.
(b) The Corporation did not file any reports on Form 8-K during the quarter for
which this report is filed.
<PAGE>
GENESEE CORPORATION
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.
GENESEE CORPORATION
Date: 9/8/95 / s / Robert N. Latella
Robert N. Latella
Executive Vice President
and Chief Operating Officer
Date: 9/8/95 / s / Edward J. Rompala
Edward J. Rompala
Vice President and Treasurer
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-27-1996
<PERIOD-END> JUL-29-1995
<CASH> 7,903
<SECURITIES> 37,121
<RECEIVABLES> 14,017
<ALLOWANCES> 572
<INVENTORY> 12,864
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<PP&E> 121,211
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0
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