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 27, 1996
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 jurisdiction 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), 1,407,342
par value $.50 per share
1
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
July 27, 1996 and April 30, 1996
(Dollars in thousands)
<TABLE>
Assets July 27, 1996 April 30, 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,234 2,560
Marketable securities available for sale 33,261 34,896
Trade accounts receivable, less allowance for doubtful
receivables of $390 at July 27, 1996; $433 at April 30, 1996 13,640 13,168
Inventories, at lower of cost (first-in, first-out) or market 13,062 11,959
Deferred income tax assets 899 898
Other current assets 1,701 1,376
Total current assets 66,797 64,857
Net property, plant and equipment 30,642 30,306
Investment in and notes receivable from
unconsolidated real estate partnerships 8,469 8,466
Investment in direct financing and leveraged leases 28,024 28,092
Other assets 2,149 2,314
Total assets 136,081 134,035
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 10,349 10,210
Income taxes payable 1,298 455
Federal and state beer taxes payable 1,956 2,246
Accrued expenses and other 6,592 5,827
Total current liabilities 20,195 18,738
Deferred income tax liabilities 7,321 7,482
Accrued postretirement benefits 15,593 15,526
Other liabilities 405 428
Total liabilities 43,514 42,174
Minority interests in consolidated subsidiaries 1,608 1,527
Shareholders' equity:
Common stock:
Class A 105 105
Class B 753 753
Additional paid-in capital 5,849 5,839
Retained earnings 88,112 87,285
Less unrealized loss on marketable securities, net of income taxes (355) (113)
Less treasury stock, at cost 3,505 3,535
Total shareholders' equity 90,959 90,334
Total liabilities and shareholders' equity $ 136,081 134,035
See accompanying notes to consolidated financial statements
</TABLE>
2
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Earnings and Retained Earnings
Thirteen Weeks Ended July 27, 1996 and July 29, 1995
(Dollars in thousands, except per share data)
<TABLE>
1996 1995
<S> <C> <C>
Revenues $ 51,569 50,272
Federal and state beer taxes 11,225 11,909
Net revenues 40,344 38,363
Cost of sales 29,695 29,196
Gross profit 10,649 9,167
Selling, general and administrative expenses 8,950 8,358
Operating income 1,699 809
Investment income 604 822
Other income / (expense), net 60 (7)
Interest of minority partners in earnings of
consolidated subsidiaries (188) (122)
Earnings before income taxes 2,175 1,502
Income taxes 783 601
Net earnings - $ .86 per share in 1996
and $ .56 in 1996 1,392 901
Retained earnings at beginning of period 87,285 86,870
Less: dividends - $ .35 per share in 1996
and $ .35 per share in 1995 565 562
Retained earnings at end of period 88,112 87,209
See accompanying notes to consolidated financial statements
</TABLE>
3
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Thrirteen Weeks Ended July 27, 1996 and July 29, 1995
(Dollars in thousands)
<TABLE>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,392 901
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 1,244 1,247
Deferred tax provision (1) 0
Other 231 129
Changes in non-cash assets and liabilities:
Trade accounts receivable (515) (2,385)
Inventories (1,103) 752
Other assets (160) (567)
Accounts payable 139 (642)
Accrued expense and other 765 (160)
Income taxes payable 843 317
Federal and state beer taxes (290) 316
Accrued postretirement benefits 67 0
Other liabilities (23) 136
Net cash provided by operating activities $ 2,589 44
Cash flows from investing activities:
Capital expenditures $ (1,580) (1,767)
Sales of marketable securities 4,220 1,470
Purchases of marketable securities (2,988) (2,976)
Investments in and advances to unconsolidated
real estate partnerships, net of distributions (3) (16)
Net investment in direct financing and leveraged leases 68 (333)
Withdrawals by minority interest (107) (181)
Repayment of real estate mortgage receivable 0 5,805
Net cash (used in)provided by investing activities (390) 2,002
Cash flows from financing activities:
Principal payments on long-term debt 0 (4,038)
Payment of dividends (565) (561)
Net proceeds from treasury stock transactions 40 34
Net cash (used in) financing activities (525) (4,565)
Net increase / (decrease) in cash and
cash equivalents 1,674 (2,519)
Cash and cash equivalents at beginning of year 2,560 10,422
Cash and cash equivalents at end of period $ 4,234 7,903
See accoumpanying notes to conolidated financial statements
</TABLE>
4
<PAGE>
GENESEE CORPORATION
Notes to Consolidated Financial Statements
NOTE (A) The Corporation's consolidated financial statements
enclosed herein are unaudited with the exception of the
Consolidated Balance Sheet at April 30, 1996 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. 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. The accompanying financial statements
have been prepared in accordance with GAAP and SEC
guidelines applicable to interim financial information.
These statements should be reviewed in conjunction with
the annual report to shareholders for the year ended April
30, 1996.
NOTE (B) The weighted average number of Class A and Class B shares
outstanding used in the computation of net earnings per
share is 1,616,709 for the thirteen week period ended July
27, 1996 and 1,602,897 for the thirteen week period ended
July 29, 1995.
NOTE (C) Inventories are summarized as follows:
(Dollars in Thousands)
July 27, 1996 April 30, 1996
Finished goods $ 3,506 $ 3,219
Goods in process 2,532 1,891
Raw materials, containers
and packaging supplies 7,024 6,849
Total inventories $ 13,062 $ 11,959
5
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Comparison of 13 weeks ended July 27, 1996 to 13 weeks ended July
29, 1995
Consolidated net revenues for the thirteen weeks ended July 27,
1996 were $40.3 million, an increase of $1.9 million over the
consolidated net revenues reported for the same period last year.
The higher revenues were the result of higher private label sales at
Ontario Foods and higher craft brand sales and increased revenues from
the general price increase and contract brewing at Genesee Brewing
Company.
On a consolidated basis, the Corporation reported operating
income of $1.7 million for the first quarter this year compared to
operating income of $800,000 for the same period last year. Each of
the Corporation's three subsidiaries, Genesee Brewing Company,
Ontario Foods, and Genesee Ventures showed improved operating
results in the first quarter this year compared to last year.
The Corporation reported consolidated net earnings of $1.4
million, or $.86 per share, in the first quarter this year, compared
to net earnings of $900,000, or $.56 per share, for the same period
last year. The effective income tax rate for the first quarter of
fiscal 1997 was 36%, down from 40% in the first quarter of fiscal
1996, due to lower expected income tax expense.
Genesee Brewing Company
Genesee Brewing Company's net sales in the first quarter were
$34.8 million, an increase of $729,000 from last year's first
quarter net sales. Barrel sales for the first quarter however were
down 1.5% due to much lower sales volume in Genesee Brewing
Company's core brands. Intense competition and poor weather early in
the first quarter contributed to the lower than expected sales of
core products. Overall barrelage trends benefitted from continued
growth in the sales of the HighFalls craft brands and growth of
contract brewing for Boston Beer Company. In addition, the higher
sales revenues were due to a general industry price increase that
went into effect late in fiscal 1996.
Genesee Brewing Company's gross profit increased to $9.7
million, or 27.8% of net sales, in the first quarter of fiscal 1997,
compared to $8.5 million, or 24.9% of net sales, in the first
quarter of fiscal 1996. The increase in gross profit was primarily
the result of the general price increase and lower aluminum can
costs.
Genesee Brewing Company's selling, general and administrative
expenses were up $560,000 in the first quarter of fiscal 1997
compared to the same period last year. This increase is primarily
the result of the timing of sales and marketing expenditures.
The decrease in aluminum can costs, higher selling prices and
contract brewing revenues all contributed to Genesee Brewing
Company's improved operating performance. First quarter operating
income for Genesee Brewing Company was $1.3 million, compared to
operating income of $723,000 in the first quarter last year.
6
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
In July 1996, Genesee Brewing Company's HighFalls division
entered into an agreement with Upper Canada Brewing Company Limited
(a Toronto-based microbrewery, which is publicly traded on the
Toronto Stock Exchange) to test market certain Upper Canada products
in selected markets in the United States. Commencing in late August
1996, distribution and sales of Upper Canada Brewing Company's
products began in selected eastern U.S. markets. If this test is
successful, the High Falls division will expand distribution of the
Upper Canada brands to additional markets in 1997.
During the first quarter of fiscal 1997, Genesee Brewing
Company continued to improve capacity utilization by strengthening
its contract brewing relationship with Boston Beer Company. Genesee
Brewing Company agreed to produce several seasonal products for
Boston Beer Company with production on the first seasonal product
commencing in July 1996. Production of other seasonal products was
scheduled for the second and third quarters. Production on each of
these seasonal products is expected to be concentrated in two to
three month production periods. Genesee Brewing Company is working
with Boston Beer Company to add other brands to the contract as
demand dictates and capacity permits.
Ontario Foods
Net sales for Ontario Foods were $4.9 million in the first
quarter of fiscal 1997, compared to $3.9 million for the first
quarter last year. The sales increase was attributable to continued
growth in side dish sales and higher sales of iced tea mix. Private
label sales were up more than $1.5 million compared to the first
quarter last year.
Ontario Foods reported a first quarter operating loss of
$145,000, compared to a $173,000 operating loss in the first quarter
last year. The first quarter is typically Ontario Foods' least
profitable due to higher sales of low margin sugar based drink
mixes. In addition, the first quarter operating performance this
year was adversely impacted by the loss of a major contract customer
which moved production of an infant cereal product to its own
production facility late in fiscal 1996. This is not unusual in the
contract manufacturing business. Contract customers often move volume
back into their own plants once a product has attained general market
acceptance and sufficient volume. The first quarter last year included
approximately $400,000 of sales from this discontinued business.
Genesee Ventures
Genesee Ventures, Inc., the Corporation's equipment leasing and
real estate investment subsidiary, reported operating income of
$641,000 for the first quarter of fiscal 1997, compared to $394,000
for the first quarter of fiscal 1996. The higher operating income
was primarily due to gains realized from the sale of equipment that
came off lease in the first quarter and to an increase in lease
revenue resulting from the nearly $26 million (gross equipment cost)
in leases that closed in fiscal 1996.
7
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and marketable securities totaled $37.5
million at July 27, 1996 and at April 30, 1996.
Trade receivables at July 27, 1996 were approximately $470,000
higher than the balances reported at April 30, 1996 due to the price
increase that went into effect late in the fourth quarter of fiscal
1996.
Inventories at July 27, 1996 were approximately $1.1 million
higher than the balances reported at April 30, 1996 due to first
quarter sales volume being lower than anticipated.
Other current assets increased $325,000 due to prepaid real
estate taxes and insurance expenses.
In May 1996, Genesee Brewing Company commenced work on a $2
million capital project to install a new keg filling system to
replace one of its two keg filling lines. The new system will also
require a substantial investment in new cooperage that Genesee
Brewing Company expects to make over the next few years. These
improvements will allow Genesee Brewing Company to package its draft
products in both of the draft dispensing systems utilized by the
retail trade.
Current liabilities at July 27, 1996 increased approximately
$1.5 million from fiscal year end primarily due to accrued income taxes
payable. The increase in accrued income taxes payable reflects the
timing of tax payments.
The Corporation expects to fund future capital needs internally
as it has in the past. With respect to real esate and equipment
leasing, such investments may also include a debt component,
generally obtained on a non-recourse basis.
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.
8
<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: 9/10/96 / s / Mark W. Leunig
Mark W. Leunig
Vice President and Secretary
Date: 9/10/96 / s / Edward J. Rompala
Edward J. Rompala
Vice President and Treasurer
9
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<SECURITIES> 33,261
<RECEIVABLES> 14,030
<ALLOWANCES> 390
<INVENTORY> 13,062
<CURRENT-ASSETS> 66,797
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