SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (fee required)
/X/ For the fiscal year ended: April 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 (no fee required)
For the transition period from ______ to________
Commission File Number: 0-1653
GENESEE CORPORATION
(Exact name of registrant as specified in its charter)
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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
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: Class B Common
Stock, par value
$.50 per share
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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 and (2) has been subject to such filing
requirements for the past 90 days. Yes x No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x
The aggregate market value of voting common stock (Class A) held by
non-affiliates, based on the price for Class B Common Stock at the close of
trading on July 15, 1996 was approximately $2,597,188.
The number of shares outstanding of each of the registrant's classes of
common stock as of July 15, 1996 was:
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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
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PART I
Item 1. Description of Business
General. Genesee Corporation (the "Corporation") was incorporated in 1932
under the laws of the State of New York. The Corporation functions as a holding
company, with wholly-owned subsidiaries that conduct business in the areas of
malt beverage production, dehydrated food processing and packaging, equipment
leasing and real estate investment.
Malt Beverage Business. The Corporation's malt beverage business is
conducted by its wholly-owned subsidiary, The Genesee Brewing Company, Inc.
("Genesee Brewing Company"). Genesee Brewing Company commenced brewing at the
end of Prohibition in 1932 and is the Corporation's dominant business.
During the fiscal year ended April 30, 1996, Genesee Brewing Company sold
approximately 1.9 million barrels of malt beverage products, an increase of 6%
over the prior fiscal year. Sales generally are greater in the summer than in
the winter months.
Malt beverage products produced by Genesee Brewing Company are marketed
under the following trademarks: Genesee Beer, Genesee Light Beer, Genesee
Cream Ale, Genesee 12-Horse Ale, Genesee Bock Beer, Genesee NA, Genny Ice Beer
and Genny Red Lager, Koch's Golden Anniversary Beer, Koch's Golden Anniversary
Light Beer and Koch's Golden Anniversary Ice Beer. The Genesee and Koch's
brands generate in excess of 80% of Genesee Brewing Company's sales volume.
In fiscal 1996, Genesee Brewing Company established a new brewing
division known as HighFalls Brewing Company to consolidate product development,
sales and marketing of its rapidly growing line of craft brands. The HighFalls
Brewing Company brands are marketed under the following trademarks: Michael
Shea's Irish Amber, Michael Shea's Black & Tan, Michael Shea's Blonde Lager, JW
Dundee's Honey Brown Lager and HighFalls India Pale Ale.
In October, 1995, Genesee Brewing Company commenced production of Samuel
Adams Boston Lager under a contract with Boston Beer Company. In fiscal 1996,
Genesee Brewing Company produced approximately 50,000 barrels for Boston Beer
Company.
Genesee Brewing Company owns no patents, licenses, franchises or
concessions, except for the trademarks identified above. These trademarks are
a valuable source of product identity for Genesee Brewing Company brands.
Except in Monroe County, New York, where Genesee Brewing Company sells its
products directly to retailers, beer and ale are sold to approximately 250
independent wholesale distributors. Through this distribution system, malt
beverages produced by Genesee Brewing Company are resold to retailers in
twenty-eight states and the Canadian provinces of Ontario and Quebec. Sales to
distributors located in New York, Pennsylvania and Ohio account for
approximately 80% of Genesee Brewing Company's sales. Demand for the HighFalls
Brewing Company craft brands caused Genesee Brewing Company to expand
distribution of the HighFalls brands to Missouri, Texas and Nebraska in fiscal
1996. Genesee Brewing Company plans to expand distribution of the HighFalls
brands to additional markets.
Genesee Brewing Company's marketing organization consists of advertising,
marketing, sales, graphics design, merchandising, sales administration and
field sales personnel. These sales personnel work with the independent
distributors to stimulate sales in each distributor's territory.
The brewing industry in the United States is mature and highly competitive.
Genesee Brewing Company's products compete with a growing number of national,
regional, microbrewed, contract brewed and imported brands. Genesee
Brewing Company competes on the basis of advertising and/or pricing,
depending on the competitive brand strategy and the particular market
involved. The domestic brewing industry is dominated by four brewers whose
brands accounted for approximately 90% of the beer and ale sold in the United
States in 1995. As a result of the recent acquisition of G. Heileman Brewing
Company by Stroh Brewing Company, Genesee Brewing Company's relative position
in the industry in terms of annual barrel sales is now believed to be sixth.
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Overall consumption of malt beverage products in the United States has
increased only slightly during the past ten years. Much of this growth in
recent years has come from the growing popularity of microbrewery and craft
brewed products which has spawned the small but rapidly growing craft beer
segment. Craft beers are brewed using a variety of traditional and non-
traditional ingredients and brewing recipes to create fuller flavored malt
beverage products. These craft products are usually produced in small
batches and do not have the broad appeal of the traditional American lager-
style beers. However, they now represent approximately two percent of the
malt beverage products consumed in the United States and the category grew by
approximately fifty percent in calendar 1995.
Genesee Brewing Company was an early entrant in the craft beer segment
when it introduced Michael Shea's Irish Amber in 1992. Genesee Brewing
Company's line of craft beers, now sold by its HighFalls Brewing Company
division, has grown to include Michael Shea's Irish Amber, Michael Shea's
Black & Tan, Michael Shea's Blonde Lager, JW Dundee's Honey Brown Lager and
HighFalls India Pale Ale. The HighFalls craft brands now account for almost 20%
of Genesee Brewing Company's overall barrel sales and represent a significant
opportunity in this growing segment of the malt beverage market. As part of
the Corporation's strategy to grow and strengthen its brewing business,
HighFalls Brewing Company will continue to develop new brands to expand its
line of craft products.
Beer and ale products are produced from barley malt, hops and other
agricultural ingredients. Genesee Brewing Company uses the Krausen process
in the brewing of beer. This process produces natural carbonation by the
addition of a small amount of beer in the early stages of fermentation to
fermented beer at the beginning of the aging process. Variations in flavor,
appearance and aroma are achieved by changing the proportions of the basic
ingredients, modifying the malting and finishing processes, using
different strains of yeast in the process of fermentation and altering the
aging period.
Genesee Brewing Company has several sources of supply available to it for
most of the ingredients, packaging materials and equipment utilized in the
brewing and bottling operations. Glass bottles in which beer and ale are
packaged are purchased from three sources. Genesee Brewing Company is not
under any contractual obligation to limit purchases of bottles to these
suppliers and alternative sources are available.
Genesee Brewing Company purchases all of its requirements for aluminum
cans from a single supplier under an agreement which runs through December 31,
1998. Although the cost of aluminum cans increased significantly in fiscal 1996
as a result of a world-wide increase in the price of aluminum, Genesee Brewing
Company did not experience any difficulty in obtaining sufficient supplies
of aluminum cans. This supplier has multiple plants which are qualified to
produce for Genesee Brewing Company. If the current supplier was unable
to supply Genesee Brewing Company's requirements, alternative sources
for aluminum cans might not be readily available.
Fiber board and chipboard used for secondary packaging of glass
bottles and aluminum cans (e.g., 6-pack baskets, 12-pack wraps, etc.) are
purchased from single sources to maintain compatibility with packaging equipment
used by Genesee Brewing Company. Alternate sources for these secondary packaging
materials might not be readily available.
Corrugated packaging used for 24-can trays and 24-pack cartons is
purchased from two suppliers. Genesee Brewing Company is not under any
contractual obligation to limit purchases of corrugated packaging to these two
suppliers and additional sources for these packaging materials are readily
available.
Genesee Brewing Company has an agreement to purchase virtually all of
its requirements for barley malt from a single supplier. This agreement
runs through December 1996 and can be renewed by Genesee Brewing Company for
an additional one-year term. Alternative sources for barley malt are readily
available, subject to the possibility of shortages which may affect the entire
commercial malting industry.
The price, quality and availability of agricultural ingredients used
in the brewing process are affected by weather and other climatic conditions
in the regions where these ingredients are grown. Wet conditions in key
growing regions during the summer of 1995 adversely affected crop yields
and the quality of barley. Although Genesee Brewing Company did not
experience any difficulty in obtaining
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sufficient supplies of barley malt meeting its quality requirements, the cost
of barley malt increased approximately ten percent in fiscal 1996 compared
to fiscal 1995.
Unfavorable weather conditions during the 1995 growing season produced
poor yields in many corn-growing regions which resulted in higher prices.
However, the availability and quality of corn products used in malt beverage
production were not adversely affected.
The price, quality and availability of agricultural ingredients for the
remainder of fiscal 1997 should be determined by climatic conditions during the
current growing season. To date, climatic conditions during the 1996 growing
season have been generally favorable in most regions where agricultural
ingredients used by Genesee Brewing Company are grown.
A substantial portion of Genesee Brewing Company's requirements for hops
is purchased on a contract basis two to three years in advance of harvest.
These contracts are firm with respect to quality, price and variety. The balance
of hops requirements is purchased as needed on the open market.
In addition to the governmental regulation common to most businesses,
Genesee Brewing Company is regulated by the U.S. Treasury Department's Bureau
of Alcohol, Tobacco and Firearms, the U. S. Food and Drug Administration,
the New York State Liquor Authority, the New York Department of Agriculture
and Markets and the state liquor control agencies in each state in which its
products are sold. These regulations cover, among other matters, collection
of federal and state taxes, physical changes in plant and other operating
facilities, types of credit allowed, reporting and changing prices, sales
promotion, advertising and public relations, labeling and packaging,
changes in officers and directors, investigations of employees, and
distribution methods and relationships.
Seven states where Genesee Brewing Company products are sold (New York,
Vermont, Maine, Connecticut, Massachusetts, Michigan and Delaware) require
consumers to pay a deposit on containers. The United States Congress and
several other states in which Genesee Brewing Company products are sold
have, from time to time, considered legislation that would require a
deposit on containers, impose special taxes on non-refillable containers
or non-biodegradable packaging materials, or require hazard warnings to be
included in advertising or posted at retail outlets.
Although Genesee Brewing Company has facilities for removing certain solid
waste materials from effluent discharged by its Rochester, New York brewing
plant, the effluent is discharged into the Rochester Pure Waters District
sewage system for further treatment. An agreement with the Rochester Pure
Waters District provides that Genesee Brewing Company will make annual
surcharge payments to the District which will fluctuate with production levels
and may vary according to effluent content. In fiscal 1996, a surcharge of
approximately $319,000 was paid in addition to the normal sanitary and combined
sewage charge for the year of approximately $524,000.
Food Business. The Corporation's food business is conducted by its wholly
- -owned subsidiary, Ontario Foods, Incorporated ("Ontario Foods"). Ontario Foods
produces a variety of dry and dehydrated food and beverage products, including
soup mixes, side dishes, infant cereals, iced tea mixes, instant beverage
mixes and hot cocoa. The products are produced by mixing and blending
various dry ingredients and packaging these products in a variety of
packaging configurations, including flexible pouches, cups, cartons , fiber
and metal cans and bulk packaging in fiber drums and polyethylene lined
cartons.
Food and beverage products produced by Ontario Foods are sold to food store
chains throughout the United States under as private label products under the
label of the food store chain Ontario Foods' proprietary labels. Chain store
private label products are a growing product category in the United States and
represent the largest component of Ontario Foods' revenues.
Ontario Foods' proprietary food and beverage products are marketed under
the Thirst Quench'r, Taste of the Alps, Sadano's, Golden Kettle and Van Dutch
trademarks. Except for these trademarks, Ontario Foods does not own any
trademarks, patents, franchises or concessions which are material to its
business.
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Ontario Foods also produces and packages dry food and beverage products
under contract processing/packaging arrangements with major food companies.
Contract processing/packaging agreements are typically short term in nature,
terminating with the end of the particular production run. The blending and
packaging of infant breakfast cereal accounted for a significant amount of
Ontario Foods' contract processing/packaging business in fiscal 1996. This
contract was terminated late in fiscal 1996 when the customer moved production
of this successful product into its own facility.
The food and beverage products produced by Ontario Foods utilize a variety
of ingredients. Some of these ingredients are processed by Ontario Foods from a
raw state while others have been pre-processed and are further processed by
Ontario Foods to produce the finished product. Numerous sources of supply are
available for the ingredients used in Ontario Food's products.
Packaging materials used by Ontario Foods are purchased from a variety
of sources. Products produced under contract processing/packaging
agreements typically utilize ingredients and packaging supplied by the customer.
Ontario Foods' product mix varies on a seasonal basis. For example, iced
tea and beverage mixes are produced in greater quantity in the summer months
whereas dry soup mixes, side dishes and hot cocoa are typically produced in the
fall and winter months.
The dehydrated food industry consists of thousands of producers ranging
from large multi-national companies with vast product offerings and operations,
to small specialty producers which serve specific geographic areas or market
niches. Ontario Foods competes primarily on the basis of quality, price and
service.
In addition to the governmental regulations common to most businesses, food
processing is regulated by the U.S. Food and Drug Administration, the U.S.
Department of Agriculture, the New York Department of Agriculture and Markets
and a variety of other state and local agencies. These regulations cover
ingredients and packaging materials, product labeling, plant sanitation and
processing methods, and disposal of adulterated or contaminated ingredients or
products.
Other Businesses. The Corporation's equipment leasing business is conducted
by a joint venture known as Cheyenne Leasing Company ("Cheyenne"), which is 85%
owned by the Corporation's Genesee Ventures, Inc. ("Genesee Ventures")
subsidiary. In the fiscal year ended April 30, 1996, Cheyenne financed leases
involving equipment having an initial cost of approximately $26 million.
Cheyenne's total lease portfolio as of April 30, 1996 included almost 300 leases
representing an initial equipment cost of approximately $125 million.
The Corporation's real estate investment activities are conducted by three
subsidiaries of Genesee Ventures. One real estate investment is a minority
interest in a Class A office building in Rochester, New York. The second is a
fifty-percent interest in a multi-unit residential property located in a suburb
of Syracuse, New York. The third real estate investment is a fifty-percent
interest in a multi-unit residential property located in a suburb of Rochester,
New York that was acquired in August 1995.
Employees. As of April 30, 1996, the Corporation and its subsidiaries
employed 703 people. Genesee Brewing Company employed 596 people, 396 of whom
are represented by six separate unions whose collective bargaining agreements
generally conform to those of the brewing industry. Employee relations with
Genesee Brewing Company's employees have been good.
As of April 30, 1996, Ontario Foods employed 104 people, none of whom are
represented by a union. Employee relations with Ontario Foods' have been
good.
Item 2. Properties
Brewing Operations. Genesee Brewing Company's brewing, bottling, racking,
storage, shipping, branch distribution, garage, office and maintenance
facilities are situated in Rochester, New York on approximately 26 acres of
land.
The original brewing building in Rochester is approximately 100 years old
and is of stone construction. A second brewhouse was built in 1980. Genesee
Brewing Company's other buildings in
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Rochester are of concrete block, steel or metal construction and have been
constructed since 1932 except for certain warehouse and distribution
facilities which are about 85 years old.
Based on current product and package mix, these facilities give Genesee
Brewing Company capacity for producing approximately 3,500,000 barrels of beer
and ale per year. If demand were to warrant, Genesee Brewing Company could
implement further phases of a planned brewing plant expansion which, based on
current product and package mix, would achieve a total annual capacity of
approximately 6,000,000 barrels.
Production equipment is upgraded or added as needed and is comparable to
that used in the industry. In fiscal 1996, Genesee Brewing Company completed a
$4 million capital project to improve the flexibility and capability of two of
its eight packaging lines. In May 1996, Genesee Brewing Company commenced work
on a $2 million capital project to replace one of its two keg filling lines with
a new keg filling line that will handle the Sankey-style tapping system that is
becoming the standard configuration for draft dispensing systems. The new Sankey
line will also require a substantial investment in new cooperage that Genesee
Brewing Company expects to spread out over the next few years. These
improvements will allow Genesee Brewing Company to package its products in every
package type, size and configuration currently utilized in the domestic brewing
industry.
All of the properties described above are owned free and clear of any
mortgages or other encumbrances. The Corporation considers the above properties
and equipment to be in generally good condition and suitable for the conduct of
its business.
In June 1995, Genesee Brewing Company was notified that Consolidated Rail
Corporation intends to abandon the track serving Genesee Brewing Company's
facility within three years. Rail service is used to deliver grains used in
brewing malt beverages and for shipment of some finished product. Other methods
for delivery of brewing grains and shipment of finished product are available
but may be more expensive.
Genesee Brewing Company owns and operates a fleet of 17 delivery trucks and
11 tractors and 15 trailers used to transport beer to customers. Genesee Brewing
Company also owns 75 automobiles used by salesmen and executives and 12 pick-up
trucks and vans.
Food Processing Operations. Ontario Foods leases approximately 220,000
square feet of office, production, laboratory and storage space in Albion, New
York. The term of the lease expires in the year 2000. Ontario Foods also
maintains a sales office in Ocean Township, New Jersey.
The production facility, which is comprised of several buildings with
attendant leasehold improvements, was designed and constructed for food
processing operations. The buildings and related equipment are considered to be
in generally good condition and are adequate and suitable for the current and
projected future needs of Ontario Foods.
Ontario Foods has production equipment for freeze drying, mixing and
packaging of food products. Equipment is regularly maintained and upgraded and
is comparable to that used in the industry.
Other. The Corporation's Genesee Ventures subsidiary has interests in three
real estate investments. Each real estate investment is owned by a separate
subsidiary of Genesee Ventures in partnership with a real estate investment and
management company.
A subsidiary of Genesee Ventures has a ten percent interest in the limited
partnership that owns a 14-story office building in Rochester, New York,
construction of which was completed in September 1990. A second Genesee Ventures
subsidiary owns a fifty percent interest in the limited partnership that owns a
408-unit apartment complex located in a suburb of Syracuse, New York. A third
Genesee Ventures subsidiary owns a fifty-five percent interest in a limited
liability company that in August 1995 acquired a 150-unit apartment complex
located in a suburb of Rochester, New York.
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Item 3. Legal Proceedings
In September 1992, Myrtha Hernandez, doing business as Upstate
Returns, commenced a lawsuit in U.S. District Court for the Western District
of New York against Genesee Brewing Company and beer distributors and
soft drink bottlers in Rochester, New York. The lawsuit alleged that Genesee
Brewing Company conspired with the other defendants in violation of federal and
state antitrust statutes to prohibit and restrain the plaintiff from entering
the beverage container recycling business. The complaint sought
compensatory damages of $1,000,000, trebling thereof under applicable antitrust
statutes, punitive damages of $15,000,000, attorneys fees, costs and
disbursements. Genesee Brewing Company filed an answer asserting affirmative
defenses and counterclaims. The District Court granted motions by Genesee
Brewing Company and the other defendants and dismissed all claims on May 2,
1995. On July 12, 1995, the Second Circuit Court of Appeals granted the
plaintiff's motion to withdraw its appeal. On April 22, 1996, the plaintiff
filed a motion with the District Court for relief from the judgement dismissing
all claims. The District Court entered an order on June 24, 1996 denying this
motion. On July 22, 1996, the plaintiff filed a motion with the Second Circuit
Court of Appeals to reinstate the appeal.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter ended April 30, 1996.
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters
The Corporation's Class B Common Stock trades on the Nasdaq National Market
tier of the Nasdaq Stock Market under the symbol GENBB. As of June 28, 1996, the
approximate number of holders of record of Class A and Class B Common Stock were
160 and 1,180 respectively. There is no established public trading market for
the Corporation's Class A (voting) Common Stock which has generally traded
within the same range as Class B (non-voting) stock. The price for the Class B
stock as reported by NASDAQ and the dividends paid per share on Class A and B
stock for each quarter for the past two years are shown below:
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Unaudited Fiscal Year Ended April 30, 1996 Fiscal Year Ended April 30, 1995
Market Price Market Price
High Low Dividends High Low Dividends
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First Quarter $ 38 1/2 36 1/2 .35 40 36 1/2 .30
Second Quarter 49 1/2 37 1/2 .35 42 37 .30
Third Quarter 48 43 3/4 .35 39 34 1/2 .30
Fourth Quarter 49 44 1/4 .75 39 1/4 35 1/2 .90
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The Corporation expects to continue its policy of paying dividends. The
dividends paid in any year, however, depend on earnings, capital requirements
and the overall financial condition of the Corporation.
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Item 6. Selected Financial Data
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Unaudited
Years Ended 4/30/96 4/30/95 4/30/94 4/30/93 4/30/92
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Net Revenues $143,108 131,367 137,142 138,745 145,148
Earnings Before CumulativeEffect of
Changes in Accounting Principles 3,321 5,608 4,080 342 7,427
Net Earnings / (Loss) 3,321 6,368 4,080 (6,505) 7,427
Total Assets 134,035 135,332 138,194 135,753 139,881
Total Long Term Debt - 4,038 9,869 10,154 10,410
Earnings Per Share Before Cumulative
Effect of Changes in Accounting Principles 2.06 3.50 2.55 0.21 4.64
Net Earnings / (Loss) Per Share 2.06 3.98 2.55 (4.06) 4.64
Cash Dividends Per Share 1.80 1.80 1.60 1.60 1.68
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(Dollars in thousands, except per share data)
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Summary. Revenues for the fiscal year ended April 30, 1996 were $184.1
million compared to fiscal 1995 revenues of $169.8 million, and fiscal 1994
revenues of $178.8 million. The Corporation reported net earnings of $3.3
million in fiscal 1996 compared to net earnings of $6.4 million in fiscal 1995
and $4.1 million in fiscal 1994.
Fiscal 1996 net earnings were adversely affected by a substantial increase
in the cost of aluminum cans that went into effect on January 1, 1995. This
increase depressed the Corporation's bottom line by approximately $3.4 million.
Aluminum can prices did, however, decline throughout the last half of fiscal
1996 but are still higher than they were prior to January 1, 1995. If current
aluminum prices had been effective for all of fiscal 1996, aluminum can costs
would have been approximately $1.2 million lower.
The decline in net earnings relative to last year also reflects two unusual
income items reported in fiscal 1995: a $1 million after tax gain from the sale
of the Corporation's interest in a residential real estate project in Columbus,
Ohio and a $760,000 after tax gain relating to the cumulative effect to May 1,
1994 of a change in the accounting treatment for investments in debt and equity
securities.
Results of Operations. Fiscal 1996 consolidated net revenues of $143.1
million were up $11.7 million compared to net revenues of $131.4 million in
fiscal 1995. Net sales for Genesee Brewing Company, the Corporation's largest
subsidiary, were $120.1 million, an increase of $9.8 million or 8.9% from the
$110.3 million reported in fiscal 1995. Genesee Brewing Company's barrel volume
for fiscal 1996 increased 6% to 1.9 million barrels compared to 1.8 million
barrels in fiscal 1995. The increase in malt beverage sales was due in part to
production under a contract to brew and package malt beverage products for the
Boston Beer Company. Production under the contract commenced in October 1995 and
generated sales of approximately 50,000 barrels in fiscal 1996. Although initial
volumes were small, production is expected to grow thereby allowing Genesee
Brewing Company to better utilize its existing plant capacity.
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The increase in Genesee Brewing Company's net sales and barrel sales is
also attributable to continued growth in the sales of HighFalls products and to
the popularity of value-priced 30 and 36 can "multi-paks". The increased volume
from HighFalls brands and from newly introduced "Genny Red" more than offset the
volume decline in Genesee Brewing Company's more established "core" brands. In
recent years, Genesee Brewing Company and most other brewers have experienced
volume declines in their established brands due to changing consumer preferences
that favor new products and "niche" brands targeted at specific consumer
markets. Genesee Brewing Company has addressed this trend with the introduction
of new products as described in Item 1 above. Barrel sales of Genesee Brewing
Company's HighFalls brands more than doubled in fiscal 1996 and now represent
approximately 18% of total (non-contract) barrel sales.
Genesee Brewing Company's net sales per barrel increased by $1.63 in fiscal
1996. The increase in net sales per barrel is due to a general industry price
increase that went into effect late in fiscal 1996 and to a shift in brand mix
towards the HighFalls brands which are priced higher than Genesee Brewing
Company's other brands.
Net sales for Ontario Foods increased $2.9 million in fiscal 1996 despite
lower sales revenue from contract packaging. Ontario Food' overall increase in
net sales is due primarily to continued growth in side dish sales, particularly
in its line of noodles and sauce products which were up $1 million in fiscal
1996.
Despite higher gross sales revenue, Genesee Corporation's consolidated
gross profit declined by $3.2 million in fiscal 1996 as compared to fiscal 1995.
This decrease in gross profit is due to lower margins reported by Genesee
Brewing Company, primarily as a result of the $3.4 million increase in the cost
of aluminum cans described above. This aluminum increase had an adverse impact
on the profitability of all domestic brewing companies that use aluminum cans.
Genesee Brewing Company did, however, benefit from falling aluminum prices later
in fiscal 1996. The Company negotiated a change in its aluminum can supply
contract commencing January 1, 1996. The change in the contract establishes a
ceiling price for aluminum cans in calendar years 1996 and 1997. The new lower
prices resulted in approximately $350,000 of cost savings in the Company's
fourth quarter and, if current aluminum pricing remains constant, will generate
approximately $1.5 million of cost savings in fiscal 1997 relative to the costs
Genesee Brewing Company would otherwise incur had the supply contract not been
renegotiated.
In addition to generally higher aluminum costs in fiscal 1996, Genesee
Brewing Company also experienced an unfavorable shift in package mix away from
higher margin 24-can packages and returnable, refillable bottle packages and
into lower margin, value-priced multi-paks. This shift in package mix more than
offset a favorable shift in brand mix mentioned above and further depressed
Genesee Brewing Company's gross profit margins. The unfavorable shift in package
mix was somewhat alleviated in the final months of fiscal 1996 by the general
price increase that went into effect late in fiscal 1996.
Ontario Foods' gross profit was up substantially in fiscal 1996 due to
higher sales volume. Gross profit margins as a percent of sales were also up due
to a more favorable sales mix. Side dish lines represented a greater percentage
of total sales in fiscal 1996 compared to fiscal 1995.
Consolidated selling, general, and administrative expenses were up $638,000
in fiscal 1996, primarily as a result of Genesee Brewing Company's planned
increases in selling and marketing expenditures to support the growth of its
HighFalls brands. Selling and marketing expenditures increased $1.7 million in
fiscal 1996 compared to fiscal 1995. Offsetting the selling and marketing
increases were decreases in various benefit and compensation accounts.
On a consolidated basis, Genesee Corporation reported operating income of
$900,000 in fiscal 1996 compared to operating income of $4.7 million in fiscal
1995.
Genesee Brewing Company reported an operating loss of $1.3 million, a
decrease of $4.2 million from fiscal 1995, primarily due to the previously
mentioned increase in aluminum cans costs, a less favorable package mix, and
planned increases in selling and marketing.
Ontario Foods' operating income of $682,000 in fiscal 1996 represents a
$211,000 increase over fiscal 1995's operating income of $470,000 and a $548,000
increase over fiscal 1994's operating
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income of $133,000. The increase in operating income was due to primarily
to the successful implementation of the restructuring program initiated in
fiscal 1994 whereby Ontario Foods eliminated low profit ingredients and
contract business and refocused its efforts on the growth opportunities in
private label packaged products. As a result of this restructuring, Ontario
Foods has greatly improved production efficiencies and pursued more promising
sales opportunities.
Genesee Ventures' fiscal 1996 operating income of $2.0 million decreased
$300,000 from fiscal 1995 operating income of $2.3 million. The decline in
operating income is primarily the result of the sale of Genesee Ventures'
majority interest in a Columbus, Ohio apartment project in August 1994. Last
year's results included three months of operating income from the project
whereas this year's results did not include any operating income from the
project. If income from the Columbus project is excluded, Genesee Venture's
fiscal 1996 operating income would have been up $14,000 compared to last year,
due to favorable lease residual experience.
Genesee Corporation's consolidated investment income -- representing
interest income, realized gains and losses on marketable securities, dividend
income from marketable equity securities, and, prior to fiscal 1995, unrealized
losses on marketable securities -- was $4.5 million in fiscal 1996 compared to
$3.5 million in fiscal 1995. The higher investment income is primarily due to
realized gains on the sale of marketable securities. During the fourth quarter
of fiscal 1996, the Corporation sold its interest in an equity fund at the
request of the fund manager in order to allow the fund to change its legal
structure. The Corporation then invested the proceeds in a new mutual fund
managed by the same fund manager. As a result of this transaction, the
Corporation was required to recognize a gain of approximately $1.2 million.
Prior to the transaction the after-tax portion of this gain had been shown in
the equity section of the Corporation's consolidated balance sheet.
In sum, the Corporation's net earnings were down $3.1 million in fiscal
1996 due to lower operating earnings for Genesee Brewing Company and the unusual
income items recorded in fiscal 1995.
Comparing fiscal 1995 to fiscal 1994, consolidated net revenues of $131.4
million were down $5.7 million. Genesee Brewing Company's net sales were $110.3
million in fiscal 1995, a decrease of $1.6 million or 1.4% from the $111.9
million reported in fiscal 1994. Genesee Brewing Company's barrel volume for
fiscal 1995 decreased 5.4% to 1.8 million barrels compared to 1.9 million
barrels in fiscal 1994. The decrease in malt beverage sales was primarily the
result of lower sales of Genesee Brewing Company's core brands. Despite the
overall decline in barrel sales, sales of Genesee Brewing Company's HighFalls
brands nearly doubled in fiscal 1995 to a total of 150,000 barrels
Genesee Brewing Company's net sales per barrel increased by almost $2.50 in
fiscal 1995. The increase in sales per barrel is due to a general industry price
increase that went into effect late in fiscal 1994, a $660,000 excise tax
credit, and a favorable change in brand mix. Genesee Brewing Company's HighFalls
brands are priced higher than its other brands and are generally more
profitable.
Net sales for Ontario Foods decreased $3.1 million in fiscal 1995 due to
the restructuring program initiated in fiscal 1994. The restructuring program
eliminated certain marginally profitable food ingredients and contract
manufacturing customers. In order to effect a smooth transition to other
suppliers, the customers for this business temporarily increased their
inventories which resulted in a one time surge in Ontario Foods' fiscal 1994
sales. Despite the overall sales decline, Ontario Foods' on-going private label
business showed a $2 million increase in sales. Side dish sales in particular
showed continued growth, increasing by $1.4 million over fiscal 1994 sales.
Fiscal 1995 sales also benefited from Ontario Foods' acquisition of several
private label product lines from a New Jersey food processing company. These
products contributed approximately $1 million to sales in fiscal 1995.
Genesee Corporation's consolidated gross profit was down by $810,000 in
fiscal 1995 as compared to fiscal 1994 due to lower sales volume. However, as a
percentage of net revenues, consolidated gross profit increased from 27% in
fiscal 1994 to 27.6% in fiscal 1995. The higher percentage gross profit margins
are attributable to the higher percentage margins reported by Genesee Brewing
Company. Genesee Brewing Company's gross profit margins, as a percent of net
sales, increased by 1.5 percentage points despite lower sales volume and the
substantial increase in the cost of aluminum cans that went into effect on
January 1, 1995. The improvement in Genesee Brewing Company's percentage gross
profit margins was primarily the result of increased sales of HighFalls brands
(i.e.,
10
<PAGE>
improved brand mix), the price increase previously mentioned, and
improved production efficiencies resulting from ongoing cost containment
efforts.
Ontario Foods' gross profit was down substantially in fiscal 1995 due to
lower sales volume. However, Ontario Foods' private label business showed higher
gross profits due to a more favorable sales mix. The more profitable side dish
lines represented a greater percentage of total sales in fiscal 1995 compared to
fiscal 1994. Ontario Foods had a higher percentage of low margin iced tea and
drink mix sales in fiscal 1994 than in fiscal 1995.
Consolidated selling, general, and administrative expenses were down over
$2 million in fiscal 1995, primarily as a result of Ontario Foods' restructuring
program. Elimination of the food ingredients division and most of the contract
manufacturing business greatly simplified the remaining business thereby
allowing substantial reductions in selling costs and administrative overhead.
Genesee Brewing Company's selling, general, and administrative expenses
were lower in fiscal 1995 compared to fiscal 1994 due to lower marketing
expenditures. Genesee Ventures' consolidated selling, general, and
administrative expenses were also lower due to the sale of Genesee Venture's 89%
interest in the Columbus, Ohio residential real estate project.
On a consolidated basis, Genesee Corporation reported operating income of
$4.7 million in fiscal 1995 compared to operating income of $3.5 million in
fiscal 1994. All three of the Corporation's subsidiaries showed higher operating
profits in fiscal 1995 than in the previous year.
Consolidated investment income was $3.5 million in fiscal 1995 compared to
$3.9 million in fiscal 1994. Fiscal 1995 investment income benefited from
generally higher interest rates and investable balances. However, the decline in
investment income is due to the fact that fiscal 1994's investment income was
especially high. During the second and third quarters of fiscal 1994, the
Corporation adjusted the asset allocation of its cash investment portfolio.
Consequently the Corporation realized a $1.7 million gain on the sale of
marketable securities as a result of this change. Investment income in fiscal
1994 would have been even higher had the Corporation not incurred a $1.2 million
of unrealized losses in the fourth quarter of fiscal 1994 when interest rates
rose dramatically and bond prices fell.
Earnings before income taxes and cumulative effects of changes in
accounting principles were $8.6 million in fiscal 1995 compared to $6.3 million
in fiscal 1994. More favorable sales mix, higher production efficiencies,
non-recurring income from the sale of the Ohio real estate investment, and
overhead cost containment efforts all contributed to the $2.3 million increase
in consolidated net earnings in fiscal 1995 versus fiscal 1994. In addition, the
Corporation recognized $760,000 (net of income taxes) in fiscal 1995 due to the
adoption of SFAS 115.
Liquidity and Capital Resources. Cash, cash equivalents and short term
investments in total were $37.5 million at April 30, 1996, a $7.2 million
decrease from the $44.7 million reported at April 30, 1995. The lower balances
were primarily due to the decreased profitability of Genesee Brewing Company as
a result of the higher cost of aluminum cans, capital spending for major
modifications to one of Genesee Brewing Company's packaging lines, the use of
funds to acquire an interest in another real estate investment, and increased
investment in the Corporation's equipment leasing portfolio.
The net accounts receivable balance at April 30, 1996 of $13.2 million is
$2.1 million higher than the balance at April 30, 1995 of $11.1 million. This is
primarily due to the Corporation's higher overall sales revenue. Accounts
payable were also somewhat higher at April 30, 1996 compared to the prior year
reflecting higher production volume.
Total inventories were $12 million at April 30, 1996 compared to $13.6
million at April 30, 1995. The lower inventory balances are mainly the result of
lower sugar inventory levels at Ontario Foods, which were at unusually high
levels on April 30, 1995. Ontario Foods increased sugar inventories at the end
of fiscal 1995 in anticipation of higher sugar costs in fiscal 1996.
Capital expenditures in fiscal 1996 totaled $6.7 million compared to $4.4
million in fiscal 1995. Fiscal 1996 capital expenditures include $2.6 million
from the final installation of new bottling equipment, $600,000 in brewing
equipment upgrades, and $450,000 for a new soup-cup machine at Ontario Foods.
11
<PAGE>
Investment in and notes receivable from unconsolidated real estate
partnerships was $8.5 million at April 30, 1996, compared to $4.3 million at
April 30, 1995. The increase is due to the August 1995 acquisition of a 50%
interest in a 125-unit apartment complex located in a suburb of Rochester, New
York. Also included in this line item is a $2.9 million note receivable from a
partnership in which the Corporation has a 10% equity share. The partnership was
created to build and operate a 13-story office building in Rochester, New York .
The note receivable comes due in September 1998. However, underlying bank
financing of the building comes due in September 1996. The partnership is
currently seeking an extension of the current bank loan or permanent financing
to replace it and the Corporation expects to extend the maturity of its note
receivable from the partnership beyond its current maturity of September 30,
1998.
At April 30, 1996, the Corporation showed $113,000 of unrealized losses in
the shareholders' equity section of its consolidated balance sheet. Previously,
on its January 27, 1996 balance sheet, the Corporation had been showing a
$954,000 unrealized gain. The change is attributable to the sale of marketable
securities in the Corporation's fourth quarter as described more fully in the
Results of Operations above.
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 $4.0
million at April 30, 1995. The receivable and notes payable relate to the
November 1990 sale of the Hamburg, New York manufactured home park that was
owned by a partnership in which the Corporation had a 50% (and later a 95%)
interest. As part of the sale, the partnership took back financing in the form
of a mortgage receivable that wrapped around the existing financing.
The Corporation has a strategy to search for and develop opportunities
which will contribute to the Corporation's future growth. The Corporation plans
to continue to use its strong financial position to further diversify its
business in order to broaden its profit base and contribute to the continued
long-term success of the Corporation.
The Corporation expects to fund all 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, which is usually obtained on a non-recourse
basis.
12
<PAGE>
Item 8. Financial Statements and Supplementary Data
<TABLE>
(a) Selected Quarterly Financial Data
(Unaudited)
First Second Third Fourth Total
Fiscal Year Ended 4/30/96 Quarter Quarter Quarter Quarter Year
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Revenues $ 38,363 35,326 32,368 37,051 143,108
Gross Profit 9,167 7,548 6,730 9,670 33,115
Net Earnings 901 (182) 59 2,543 3,321
Net Earnings Per Share .56 (.11) .04 1.57 2.06
- ---------------------------------------------------------------------------------------
First Second Third Fourth Total
Fiscal Year Ended 4/30/95 Quarter Quarter Quarter Quarter Year
- ---------------------------------------------------------------------------------------
Net Revenues $ 36,071 31,678 31,784 31,834 131,367
Gross Profit 9,859 9,377 8,837 8,196 36,269
Net Earnings 2,336 2,198 1,444 390 6,368
Net Earnings Per Share 1.46 1.37 0.90 0.25 3.98
- --------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
</TABLE>
13
<PAGE>
(b) Consolidated Financial Statements
Report of Independent Accountants
The Board of Directors and Shareholders
of Genesee Corporation:
In our opinion, the consolidated financial statements listed in the index
appearing under item 14 (a)(1) and (2) of the Annual Report on Form 10-K present
fairly, in all material respects, the financial position of Genesee Corporation
and its subsidiaries at April 30, 1996, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Corporation's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Rochester, New York
June 7, 1996
14
<PAGE>
Report of Independent Accountants
The Board of Directors and Shareholders
of Genesee Corporation:
We have audited the accompanying consolidated balance sheet of Genesee
Corporation and subsidiaries as of April 30, 1995, and the related consolidated
statements of earnings and retained earnings, and cash flows for the years ended
April 30, 1995 and 1994. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Genesee
Corporation and subsidiaries at April 30, 1995, and the results of their
operations and their cash flows for the year ended April 30, 1995 and 1994 in
conformity with generally accepted accounting principles.
As discussed in note 1, the Corporation changed its method of accounting
for debt and equity securities in fiscal 1995.
KPMG Peat Marwick LLP
Rochester, New York
June 2, 1995
15
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, 1996 and 1995
(Dollars in thousands)
<TABLE>
Assets 1996 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,560 10,422
Marketable securities available for sale 34,896 34,300
Trade accounts receivable, less allowance for doubtful
receivables of $433 in 1996 and $565 in 1995 13,168 11,067
Inventories, at lower of cost (first-in, first-out) or market 11,959 13,616
Deferred income tax assets 898 852
Real estate mortgage receivable - 5,807
Other current assets 1,376 1,460
Total current assets 64,857 77,524
Net property, plant and equipment 30,306 28,391
Investment in and notes receivable from
unconsolidated real estate partnerships 8,466 4,305
Investment in direct financing and leveraged leases 28,092 23,157
Other assets 2,314 1,955
Total assets 134,035 135,332
Liabilities and Shareholders' Equity
Current liabilities:
Current installments of long-term debt - 4,038
Accounts payable 10,210 9,278
Income taxes payable 455 742
Federal and state beer taxes payable 2,246 2,226
Accrued expenses and other 5,827 6,568
Total current liabilities 18,738 22,852
Deferred income tax liabilities 7,482 6,096
Accrued postretirement benefits 15,526 15,698
Other liabilities 428 308
Total liabilities 42,174 44,954
Minority interests in consolidated subsidiaries 1,527 1,428
Shareholders' equity:
Common stock:
Class A, voting, $.50 par value. Authorized 450,000
shares; 209,885 shares issued and outstanding 105 105
Class B, non-voting, $.50 par value. Authorized 3,850,000
shares; 1,506,876 shares issued 753 753
Additional paid-in capital 5,839 5,882
Retained earnings 87,285 86,870
Less unrealized loss on marketable securities, net of income taxes 113 652
Less Class B treasury stock, at cost; 100,410 shares in 1996 and
114,740 shares in 1995 3,535 4,008
Total shareholders' equity 90,334 88,950
Total liabilities and shareholders' equity $ 134,035 135,332
See accompanying notes to consolidated financial statements
</TABLE>
16
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Earnings and Retained Earnings
Years ended April 30, 1996, 1995 and 1994
(Dollars in thousands, except per share data)
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Revenues $ 184,050 169,754 178,756
Federal and state beer taxes 40,942 38,387 41,614
Net revenues 143,108 131,367 137,142
Cost of goods sold 109,993 95,098 100,063
Gross profit 33,115 36,269 37,079
Selling, general and administrative expenses 32,215 31,577 33,624
Operating income 900 4,692 3,455
Investment income 4,538 3,465 3,881
Other income / (expense), net 232 (461) (548)
Gain on sale of interest in real estate partnership - 1,670 -
Minority interests in earnings of subsidiaries (669) (721) (444)
Earnings before income taxes and cumulative
effect of change in accounting principle 5,001 8,645 6,344
Income taxes 1,680 3,037 2,264
Earnings before cumulative effect of
change in accounting principle 3,321 5,608 4,080
Cumulative effect of accounting change
net of income tax expense of $507 - 760 -
Net earnings 3,321 6,368 4,080
Retained earnings at beginning of year 86,870 83,385 81,867
Dividends - $1.80 per share in 1996 and
1995 and $1.60 per share in 1994 2,906 2,883 2,562
Retained earnings at end of year $ 87,285 86,870 83,385
Earnings per common share:
Earnings before cumulative effect of change
in accounting principle 2.06 3.50 2.55
Cumulative effect of accounting change - .48 -
Net earnings per common share $ 2.06 3.98 2.55
See accompanying notes to consolidated financial statements
</TABLE>
17
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended April 30, 1996, 1995 and 1994
(Dollars in thousands)
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,321 6,368 4,080
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Cumulative effect of change in accounting principle - (760) -
Gain on disposition of assets (1,416) (1,839) (1,798)
Provision for (gain) loss on disposition of property,
plant and equipment (9) 457 -
Depreciation 4,749 4,595 5,420
Provision for unrealized losses on marketable
securities - - 1,181
Deferred tax provision 980 1,294 1,001
Other 536 609 479
Changes in noncash assets and liabilities:
Trade accounts receivable (1,969) 524 (967)
Inventories 1,657 (2,903) 1,698
Other assets (274) (529) 34
Accounts payable 932 (340) (3,384)
Accrued expense and other (741) 418 165
Income taxes payable (287) 328 70
Federal and state beer taxes 20 79 1,164
Accrued postretirement benefits (172) 441 997
Other liabilities 120 238 (628)
Net cash provided by operating activities $ 7,447 8,980 9,512
</TABLE>
18
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from investing activities:
Capital expenditures $ (6,773) (4,379) (4,706)
Proceeds from sale of property, plant, and equipment 65 11,905 317
Sales of marketable securities 15,178 10,570 33,008
Purchases of marketable securities (13,406) (13,928) (26,983)
Investments in and advances to unconsolidated
real estate partnerships, net of distributions (4,161) 209 (1,827)
Net investment in direct financing and leveraged leases (4,935) (840) (2,351)
Repayment of real estate mortgage receivable 5,807 - -
Withdrawals by minority interest (570) (747) (191)
Other - 193 -
Net cash (used in) provided by investing activities (8,795) 2,983 (2,733)
Cash flows from financing activities:
Proceeds from refinancing of long-term debt - - 5,727
Principal payments on long-term debt (4,038) (5,831) (6,012)
Payment of dividends (2,906) (2,883) (2,562)
Proceeds from exercise of stock options 527 48 -
Purchase of treasury stock (97) (34) -
Net cash used in financing activities (6,514) (8,700) (2,847)
Net (decrease) / increase in cash and
cash equivalents (7,862) 3,263 3,932
Cash and cash equivalents at beginning of year 10,422 7,159 3,227
Cash and cash equivalents at end of year $ 2,560 10,422 7,159
See accompanying notes to consolidated financial statements.
</TABLE>
19
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
April 30, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
Principles of Consolidation and Nature of Operations
The consolidated financial statements of Genesee Corporation and
subsidiaries (the Corporation) include the consolidated accounts of Genesee
Corporation, The Genesee Brewing Company, Inc., Ontario Foods, Incorporated and
the consolidated accounts of Genesee Ventures, Inc., which is the Corporation's
wholly owned equipment leasing and real estate subsidiary. The vast majority of
the Corporation's production of beer, ale and food products is sold in the
United States to independent wholesalers or retail establishments.
The Corporation's investments in real estate limited partnerships, in which
it has less than a majority interest, are accounted for by the equity method.
The Corporation's proportionate shares of the results of operations of the
unconsolidated limited partnerships are recorded as other income or expense in
the consolidated statements of earnings.
All significant intercompany balances and transactions have been eliminated
in consolidation.
Cash, Cash Equivalents and Marketable Securities
Cash and cash equivalents include all cash balances and highly liquid
investments with an original maturity of three months or less. Marketable
securities include mutual funds; corporate, government and government agency
obligations; and common stock and equivalents.
During fiscal 1995, the Corporation adopted Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in Debt and
Equity Securities, (SFAS 115) effective May 1, 1994. See note 2 for details.
Returnable Containers
Returnable containers (kegs, bottles and related cases), specifically
identifiable as owned by The Genesee Brewing Company, Inc., are capitalized at
cost and are reflected in the consolidated financial statements in property,
plant and equipment. All generic returnable containers are expensed when
shipped.
A liability for deposits charged to customers for returnable containers is
included in the consolidated financial statements.
20
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
Revenue Recognition
Revenue from the sale of beer, ale and food products is recognized upon
shipment. Revenue from the Corporation's lease portfolio is recognized on a
level yield method. Revenue from real estate investments is recognized when rent
is earned.
Property, Plant and Equipment
The Corporation provides for depreciation at rates which are estimated to
write off the cost of depreciable assets over the following useful lives:
buildings, 25 to 50 years; machinery, 3 to 20 years; equipment, furniture and
fixtures, 3 to 20 years; returnable containers, estimated trip life or 8 years.
The straight-line method of depreciation is generally used on all assets.
Income taxes
The provision for income taxes is based upon pretax earnings with deferred
income taxes provided for the temporary differences between the financial
reporting basis and the tax basis of the Corporation's assets and liabilities.
Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which the temporary differences are expected to reverse
and gives immediate effect to changes in income tax rates
Concentration of credit risk
The majority of the accounts receivable balances are from malt beverage
distributors. The Corporation secures substantially all of this credit risk with
purchase money security interests in inventory and proceeds, personal guarantees
and/or letters of credit.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results may differ from those estimates.
21
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies (continued)
New accounting standards
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of" which requires losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. Statement No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed. The
Corporation will adopt Statement No. 121 in the first quarter of fiscal 1997
and, based on current circumstances, does not believe the effect of adoption
will be material.
In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation," which requires that the Corporation's financial
statements include certain disclosures about stock-based employee compensation
arrangements. As allowed by Statement No. 123, the Corporation will continue to
apply the accounting provisions of APB Opinion 25. The Corporation will adopt
Statement No. 123 during fiscal 1997 and should have no effect on future
reported net income or earnings per share.
Net Earnings Per Share
Net earnings per share amounts are based on the weighted average number of
combined shares of Class A and Class B common stock outstanding. Weighted
averages were 1,610,968 in fiscal 1996, 1,601,842 in fiscal 1995 and 1,601,322
in fiscal 1994.
Reclassifications
It is the Corporation's policy to reclassify certain amounts in the prior
year consolidated financial statements to conform with the current year
presentation.
22
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Financial Instruments
The following estimated fair value amounts have been determined, using
available market information and appropriate valuation methodologies. However,
considerable judgment is necessarily required in interpreting market data to
develop the estimates of value. Accordingly, the estimates presented herein are
not necessarily indicative of the amounts that the Corporation could realize in
a current market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
<TABLE>
APRIL 30, 1996 APRIL 30, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $ 2,560 2,560 10,422 10,422
Marketable Securities 34,896 34,896 34,300 34,300
Real Estate Mortgage Receivable - - 5,807 5,807
Long-Term Debt - - 4,038 4,038
(Dollars in thousands)
</TABLE>
The carrying amount of cash and cash equivalents approximate a reasonable
estimation of their fair value. Fair value of marketable securities is
determined based on quoted market prices for investments. Fair value of the
mortgage receivables is based on discounted cash flows. Fair value of long-term
debt is based on quoted market prices for the same or similar issues or the
current interest rates offered to the company for debt with similar maturities.
Marketable equity securities are classified as available for sale. The
amortized cost, gross unrealized gains/losses and fair values of marketable
securities at April 30, 1996 are as follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
(Dollars in thousands) Cost Gains Losses Value
<S> <C> <C> <C> <C>
Equity securities $ 1,598 420 10 2,008
Fixed income securities:
Debt securities issued by U.S. Government 1,943 13 89 1,867
Corporate debt securities 4,551 105 126 4,530
Mortgage-backed securities 946 34 - 980
Subtotal 7,440 152 215 7,377
</TABLE>
23
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Financial Instruments (continued)
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Mutual funds:
Equity funds 3,000 - - 3,000
Fixed income funds 12,852 - 792 12,060
Foreign funds 3,260 658 - 3,918
Mortgage-backed funds 6,004 - 400 5,604
Subtotal 25,116 658 1,192 24,582
Other 929 - - 929
Marketable securities available for sale $ 35,083 1,230 1,417 34,896
(Dollars in thousands)
</TABLE>
The amortized cost, gross unrealized gains/losses and fair values of
marketable equity securities at April 30, 1995 are as follows:
<TABLE>
<S> <C> <C> <C> <C>
Equity securities $ 1,809 189 77 1,921
Fixed income securities:
Debt securities issued by U.S. Government 1,716 14 71 1,659
Corporate debt securities 3,831 64 121 3,774
Mortgage-backed securities 946 12 5 953
Sub total 6,493 90 197 6,386
Mutual funds:
Equity funds 3,000 278 - 3,278
Fixed income funds 13,437 - 908 12,529
Foreign funds 3,134 151 1 3,284
Mortgage-backed funds 6,587 - 611 5,976
Sub total 26,158 429 1,520 25,067
Other 927 - 1 926
Marketable securities available for sale $ 35,387 708 1,795 34,300
(Dollars in thousands)
</TABLE>
24
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) Estimated Fair Values of Financial Instruments (continued)
The amortized cost and fair value of fixed income securities at April 30,
1996, by contractual maturity, are as follows:
<TABLE>
Amortized Fair
Cost Value
<S> <C> <C>
Contractual maturity:
Within one year $ 1,049 1,049
After one year, but within five years 1,973 1,959
After five years, but within ten years 2,906 2,836
After ten years 566 553
Sub total 6,494 6,397
Mortgage-backed securities 946 980
Total fixed income securities $ 7,440 7,377
(Dollars in thousands)
</TABLE>
The following represents the total proceeds from sales of marketable
securities for fiscal years 1996, 1995 and 1994 and the components of net gains
and losses realized on those sales which are determined on a weighted average
basis:
<TABLE>
Year Ended April 30, 1996 1995 1994
<S> <C> <C> <C>
Proceeds from sales $ 15,178 10,570 33,008
Gains from sales 1,656 178 2,218
Losses from sales (187) (216) (471)
Net gains / (losses) from sales $ 1,469 (38) 1,747
(Dollars in thousands)
</TABLE>
(3) Income Taxes
Components of income tax expense (benefit) are as follows:
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Current:
Federal $ 718 1,259 1,003
State (18) 484 260
Total current income tax expense 700 1,743 1,263
Deferred:
Federal 824 1,588 829
State 156 (294) 172
Total deferred income tax expense 980 1,294 1,001
Total income tax expense $ 1,680 3,037 2,264
(Dollars in thousands)
</TABLE>
25
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Income Taxes (continued)
The actual tax expense reflected in the consolidated statement of earnings
differs from the "expected" tax expense, computed by applying the U.S. federal
corporate tax rate to earnings before income taxes as follows:
<TABLE>
Year Ended April 30, 1996 1995 1994
<S> <C> <C> <C>
Computed "expected" tax expense @ 34% $ 1,700 2,939 2,157
State income taxes (net of federal income tax benefit) 298 125 285
Resolution of state tax audit (295) - -
Other, net (23) (27) (178)
Total income tax expense $ 1,680 3,037 2,264
Effective tax rate 33.6% 35.1% 35.7%
(Dollars in thousands)
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred income tax assets and liabilities at April 30, 1996 and
1995 are presented below:
<TABLE>
1996 1995
<S> <C> <C>
Deferred income tax assets:
Deposit liabilities $ 380 329
Allowance for doubtful accounts 173 226
Deferred compensation and other
employee related accruals 1,151 1,023
Postretirement benefits other than pensions 6,512 6,512
Alternative minimum tax credit carryforward 4,226 3,993
Unrealized losses on investments 75 435
State investment tax credit 965 615
Other 1,650 1,701
Gross deferred income tax assets 15,132 14,834
Valuation allowance for deferred income tax assets (815) (615)
Total deferred income tax assets 14,317 14,219
Deferred income tax liabilities:
Basis differential on leasing portfolio 16,295 14,971
Basis differential on real estate partnerships 44 389
Accelerated depreciation on plant and equipment 3,233 3,108
Returnable containers 821 780
Other 508 215
Total deferred income tax liabilities 20,901 19,463
Net deferred income tax liabilities$ 6,584 5,244
(Dollars in thousands)
</TABLE>
26
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Income Taxes (continued)
Deferred income tax assets at April 30, 1996 include $4,226,000 of
alternative minimum tax (AMT) credits, which carryforward indefinitely, and
$965,000 of state investment tax credits, which begin to expire in 1997 and are
limited in annual usage. A valuation allowance has been recorded to the extent
that credits may expire unused. During 1996, the Corporation resolved a state
tax audit, the result of which has increased the likelihood that a portion of
the state credits will be realized before their expiration.
(4) Inventories
Inventories at April 30, 1996 and 1995 are summarized as follows:
<TABLE>
1996 1995
<S> <C> <C>
Finished goods $ 3,219 3,933
Goods in process 1,891 1,190
Raw materials, containers and packaging supplies 6,849 8,493
Total inventories $ 11,959 13,616
(Dollars in thousands)
</TABLE>
(5) Property, Plant and Equipment
Property, plant and equipment at April 30, 1996 and 1995 are summarized as
follows:
<TABLE>
1996 1995
<S> <C> <C>
Land and land improvements $ 1,175 1,175
Buildings 21,190 20,764
Machinery, equipment, furniture and fixtures 74,377 68,411
Returnable containers 6,326 5,771
Construction in process 646 1,402
Total property, plant and equipment 103,714 97,523
Less accumulated depreciation 73,408 69,132
Net property, plant and equipment $ 30,306 28,391
(Dollars in thousands)
</TABLE>
27
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) Leasing Activities
The Corporation's leasing activity is conducted by Cheyenne Leasing
Company, a joint venture which is 85% owned by Genesee Ventures, Inc.
Information pertaining to the Corporation's net investment in direct financing
leases and leveraged leases at April 30, 1996 and 1995 is presented below:
<TABLE>
1996 1995
Direct Direct
Financing Leveraged Financing Leveraged
<S> <C> <C> <C> <C>
Minimum rentals receivable $ 3,686 1,405 3,284 1,736
Estimated unguaranteed residual
value of leased assets 1,158 29,946 826 23,931
Unearned and deferred income (819) (7,284) (599) (6,021)
Investment in leases $ 4,025 24,067 3,511 19,646
Investment in direct financing and leveraged leases 28,092 23,157
Deferred taxes arising from leases (16,295) (14,733)
Net after-tax investment in leases 11,797 8,424
(Dollars in thousands)
</TABLE>
The following is a schedule of minimum rentals receivable by year for
direct financing and leveraged leases at April 30, 1996:
Year ending April :
1997 $ 1,609
1998 1,407
1999 1,012
2000 601
2001 319
Thereafter 143
Total minimum rentals receivable $ 5,091
(Dollars in thousands)
28
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Industry Segments
The Corporation's principal business segments are: beer and ale products,
dehydrated food products, equipment leasing, and real estate investments.
Intersegment sales and transfers are not material. Financial information for
these segments is as follows:
<TABLE>
As of and for Operating
the fiscal year Net Income / Capital Idenifiable
ended April 30, Revenues (Loss) Depreciation Additions Assets
<S> <C> <C> <C> <C>
1996
Brewing $ 120,102 (1,289) 4,276 6,065 54,121
Food processing 20,890 682 473 708 11,613
Leasing and real estate 2,116 2,046 - - 37,925
Corporate and other - (539) - - 30,376
Total $ 143,108 900 4,749 6,773 134,035
1995
Brewing $ 110,323 2,936 4,190 3,559 54,018
Food processing 17,993 470 405 820 13,474
Leasing and real estate 3,051 2,324 - - 34,911
Corporate and other - (1,038) - - 32,929
Total $ 131,367 4,692 4,595 4,379 135,332
1994
Brewing $ 111,850 1,467 4,601 4,352 55,137
Food processing 21,108 133 522 232 10,553
Leasing and real estate 4,184 2,276 297 122 43,821
Corporate and other - (421) - - 28,683
Total $ 137,142 3,455 5,420 4,706 138,194
(Dollars in thousands)
</TABLE>
29
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Supplement Balance Sheet and Cash Flow Information
Debt
Long term debt of $4,038,000 at April 30, 1995 (consisting of a
mortgage payable relating to the Corporation's consolidated real estate limited
partnership) was paid in full during 1995 upon receipt of payment on the
$5,807,000 real estate mortgage receivable.
Cash Flow Information
Cash paid for taxes was $693,000, $1,609,000 and $1,476,000 in 1996, 1995
and 1994, respectively; cash paid for interest on debt of consolidated real
estate limited partnerships was $75,000, $598,000 and $737,000 in 1996, 1995 and
1994, respectively.
(9) Gain on Sale of Interest in Real Estate Partnership
In August 1994, the Corporation sold it's 89% interest in a real estate
limited partnership for cash and recognized a pre-tax gain of $1,670,000
recorded on the consolidated statement of earnings.
(10) Shareholders' Equity
A summary of changes in and balances of additional paid-in capital,
treasury stock and unrealized loss on marketable securities as of and for the
three years ended April 30, 1996 follows:
<TABLE>
Additional Treasury Stock Unrealized Loss on
Paid-in Capital Shares Amount Marketable Securities
<S> <C> <C> <C> <C>
Balances at April 30, 1993 and 1994 $5,882 115,439 $(4,022) -
Net change in unrealized loss
on marketable securities - - - (652)
Stock options exercised - (1,500) (48) -
Acquisition of stock - 1,178 48 -
Stock bonus issued - (377) 14 -
Balances at April 30, 1995 $ 5,882 114,740 $(4,008) (652)
Net change in unrealized loss
on marketable securities - - - 539
Stock options exercised (43) (16,250) 570 -
Acquisition of stock - 2,796 (131) -
Stock bonus issued - (876) 34 -
Balances at April 30, 1996 $ 5,839 100,410 $(3,535) (113)
(Dollars in thousands)
</TABLE>
30
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Stock Option and Bonus Plans
Under the Corporation's 1992 Stock Plan, as amended (the "Stock Plan"),
officers and other key employees may, at the discretion of the Management
Continuity Committee of the Board of Directors, be granted options which allow
for the purchase of shares of the Corporation's Class A and Class B common
stock. These options may be exercised any time from the award date to a
specified date not more than ten years from the award date or five years in the
case of ten percent or more shareholders. Under the Stock Plan, outside
directors are granted options each year to purchase shares of Class B common
stock. Outside director options may be exercised at any time from the option
award date until five years after the award date.
The Corporation has adopted a Stock Bonus Incentive Program under the Stock
Plan (the "Bonus Program"). The Bonus Program authorizes the board of directors
to award shares of Class B common stock to officers and other key employees
which shares are issued from treasury shares in five equal annual installments
commencing in the year in which the award takes place. Under the Bonus Program,
stock bonuses may be granted at the discretion of the board of directors at a
price less than the fair market value of the stock on the date the bonus is
granted.
Changes in stock options are as follows:
<TABLE>
Price Range
Shares Per Share
<S> <C> <C>
Outstanding at April 30, 1993 87,000 $31.00 - 49.78
Granted 20,000 34.62 - 38.08
Canceled (4,500) 40.75 - 45.25
Outstanding at April 30, 1994 102,500 31.00 - 49.78
Granted 31,000 37.75 - 41.80
Canceled (46,750) 34.00 - 49.78
Exercised ( 1,500) 34.62
Outstanding at April 30, 1995 85,250 31.00 - 49.78
Granted 7,000 44.27
Exercised (16,250) 31.00 - 37.75
Outstanding at April 30, 1996 76,000 34.62 - 49.78
</TABLE>
Common stock reserved for options and employee awards totaled 79,127 shares
as of April 30, 1996 and 86,758 as of April 30,1995.
31
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(12) Retirement Plans
Substantially all union employees are covered under a multi-employer
pension plan which requires the Corporation to contribute specified amounts per
employee. The Corporation has no current intentions to withdraw from this plan.
All costs under the plan are paid currently and charged directly to earnings
($815,000 in fiscal 1996, $793,000 in fiscal 1995 and $823,000 in fiscal 1994).
All salaried and office employees who have been employed by the Corporation
for two years are eligible for coverage in fully-trusted, contributory
(optional) profit sharing retirement plans. The plans generally provide for
annual contributions by the Corporation at the discretion of the Board of
Directors. Contributions under the plans are paid currently and charged directly
to earnings ($1,147,000 in fiscal 1996, $1,248,000 in fiscal 1995 and $1,036,000
in fiscal 1994).
(13) Post Retirement Benefits
The Corporation provides certain health care and life insurance benefits to
retired employees and spouses under a defined benefit plan covering
substantially all retirees and employees. The Corporation's share of
nonbargaining health care costs is limited to twice it's fiscal 1993 cost, with
the Corporation sharing future health care cost increases equally with
nonbargaining retirees until such limit is reached. The Corporation implemented
a cap on the future medical cost for bargaining retirees equal to 150% of it's
fiscal 1994 cost. The Corporation pays for all future health care cost increases
until the cap is reached.
The life insurance benefits are noncontributory and provide an earnings
related benefit to salaried exempt employees and executives and a fixed benefit
to other covered employees. This plan is not funded by the company.
32
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Post Retirement Benefits (continued)
The following table presents the plan's funded status reconciled with
amounts recognized in the Corporation's consolidated balance sheet at April 30,
1996 and 1995:
<TABLE>
1996 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 6,606 5,689
Fully eligible active plan participants 1,021 1,032
Other active plan participants 4,068 3,110
11,695 9,831
Unrecognized net gain from past experience
different from that assumed 1,073 2,708
Prior service benefit not yet recognized in net
periodic postretirement benefit cost 3,392 3,741
Accrued postretirement benefit cost
included in the balance sheets $ 16,160 16,280
(Dollars in thousands)
</TABLE>
Net periodic postretirement benefit cost for fiscal 1996, fiscal 1995 and
fiscal 1994 includes the following components:
<TABLE>
1996 1995 1994
<S> <C> <C> <C>
Service cost $ 173 291 437
Interest cost 805 989 1,215
Net amortization and deferral (464) (257) (30)
Net periodic postretirement benefit cost $ 514 1,023 1,622
(Dollars in thousands)
</TABLE>
The implementation of a cap on the medical cost for bargaining retirees
required an interim measurement as of November 1, 1994. The cap on bargaining
health care cost increases resulted in a $496,000 decrease in the fiscal 1995
net periodic postretirement benefit cost and a $3.5 million decrease in the
accumulated postretirement benefit obligation at April 30, 1995.
33
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Post Retirement Benefits (continued)
For measurement purposes, a 10.5 % annual rate of increase in the per
capita cost of covered benefits was assumed for fiscal 1996, 9.5% for fiscal
1997, decreasing gradually to 5.5 % by the year 2001 and remaining at that level
thereafter. Long-term rate for compensation increases for non-bargaining
employees is assumed to be 4.0% for each year. The weighted average discount
rate used in determining the accumulated postretirement benefit obligation was
8.0% at May 1, 1994, 9.0% at November 1, 1994, 8.5% at April 30, 1995, and 7.5%
at April 30, 1996.
Increasing the assumed health care cost trend rates by 1 percentage point
in each year would not have a significant impact on the accumulated
postretirement benefit obligation as of April 30, 1996 nor on the net periodic
postretirement benefit expense for fiscal 1996.
34
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
Inapplicable
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) Directors: The table below lists the directors of the Corporation and
sets forth their ages, their other positions with the Corporation and its
subsidiaries, the principal occupations of those directors who do not hold other
positions with the Corporation or its subsidiaries, and the expiration of their
terms in office. The term in office of each director expires at the annual
meeting of shareholders of the Class A Common Stock held in the year specified.
<TABLE>
Director Position and Principal Occupation Expiration
Name and Age Since for the Last Five Years of term
in Office
<S> <C> <C> <C>
Stephen B. Ashley (56) 1987 President and Chief Executive 1996
Officer of Sibley Real Estate
Services, Inc. (1)
William A. Buckingham (53) 1992 Executive Vice President of First 1996
Empire State Corporation and
Manufacturers and Traders Trust Company (2)
Thomas E. Clement (63) 1970 Partner - Nixon, Hargrave, Devans 1996
& Doyle, Attorneys
Gary C. Geminn (53) 1986 Vice President - Production of 1997
Genesee Brewing Company
William J. Hoot (79) 1960 Retired; formerly President of 1997
the Corporation
Samuel T. Hubbard, Jr.(46) 1992 President and Chief Executive 1998
Officer of The Alling and Cory
Company (3)
Robert N. Latella (53) 1986 Executive Vice President and 1998
Chief Operating Officer of the
Corporation
Richard P. Miller, Jr.(53) 1987 Senior Vice President and Chief 1997
Operating Officer, University
of Rochester (4)
John D. Reifenrath (68) 1982 Retired; formerly Senior Vice 1998
President - Marketing of Genesee
Brewing Company (5)
Charles S. Wehle (48) 1976 Senior Vice President of the 1997
Corporation (6)
John L. Wehle, Jr. (50) 1976 Chairman of the Board, President 1996
and Chief Executive Officer of
the Corporation (7)
</TABLE>
(1) Sibley Real Estate Services, Inc. is a privately-owned real estate
service company. Mr. Ashley is also a Director of Hahn Automotive
Warehouse, Inc. and the Federal National Mortgage Association.
35
<PAGE>
(2) First Empire State Corporation is a publicly-held bank holding company
and Manufacturers and Traders Trust Company is a New York State chartered
bank. Mr Buckingham is also a Director of M&T Securities, Inc.,
a registered broker-dealer.
(3) The Alling and Cory Company is a distributor of paper and packaging
products headquartered in Rochester, New York. Mr. Hubbard is also a
Director of First Empire State Corporation and Rochester Gas and Electric
Company, Inc.
(4) Mr. Miller is also a Director of Rochester Telephone Corporation.
(5) Mr. Reifenrath retired in 1993 as Senior Vice President - Marketing of
Genesee Brewing Company.
(6) See Note (3) to Item 10(b).
(7) Mr. Wehle is also a Director of First Empire State Corporation.
(b) Executive Officers and Significant Employees: The table below lists the
executive officers and significant employees of the Corporation and its
subsidiaries and sets forth their ages, the dates they became officers and the
offices held. Officers of the Corporation and its subsidiaries serve for a term
of one year beginning with the first meeting of the Board of Directors occurring
after the annual meeting of the holders of Class A Common Stock of the
Corporation.
<TABLE>
Officer of the
Name Age Company Since Office
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John L. Wehle, Jr. 50 1970 Chairman of the Board,
President and Chief Executive Officer (1)
Robert N. Latella 53 1986 Executive Vice President and
Chief Operating Officer (2)
Charles S. Wehle 48 1988 Senior Vice President (3)
Gary C. Geminn 53 1985 Vice President - Production
of Genesee Brewing Company (4)
Karl D. Simonson 53 1994 Vice President - Planning &
Development (5)
William A. Neilson 45 1986 Vice President - Human
Resources (6)
Mark W. Leunig 41 1988 Vice President, Secretary and
General Counsel (7)
Edward J. Rompala 36 1989 Vice President and Treasurer (8)
Michael C. Atseff 40 1992 Controller (9)
</TABLE>
(1) Mr. J. L. Wehle, Jr. was elected Chairman of the Board of Directors in
November 1993. He has been President and Chief Executive Officer
of the Corporation for more than five years. He is also a Director and
President and Chief Executive Officer of Genesee Brewing Company.
(2) Mr. Latella has been Executive Vice President and Chief Operating
Officer of the Corporation for more than five years. He is also a
Director and Executive Vice President and Chief Operating Officer of
Genesee Brewing Company.
(3) Mr. Wehle was elected Senior Vice President of the Corporation in January
1995. He is also Executive Vice President - Sales and Marketing of Genesee
Brewing Company, a position he has held for more than five years.
36
<PAGE>
(4) Mr. Geminn has been Vice President - Production of Genesee Brewing Company
for more than five years.
(5) Mr. Simonson was elected Vice President - Planning and Development of the
Corporation in October 1994. He is also President of Ontario Foods, a
position he has held since June 1993. He joined the Corporation in
September 1992 as Manager of Planning and Development. Prior to that he
held a variety of senior management positions in the food industry.
(6) Mr. Neilson has been Vice President - Human Resources of the Corporation
for more than five years. He is also Vice President - Human Resources of
Genesee Brewing Company.
(7) Mr. Leunig was elected Vice President of the Corporation and Genesee Brewing
Company in October 1994. He also serves as Secretary and General Counsel
of the Corporation and Genesee Brewing Company, positions he has held for
more than five years.
(8) Mr. Rompala was elected Vice President of the Corporation and Genesee
Brewing Company in October 1994. He also serves as Treasurer of the
Corporation and Genesee Brewing Company, positions he has held for more than
five years.
(9) Mr. Atseff was appointed Controller of the Corporation in January 1992.
Prior to that he held a variety of positions in the Corporation's Finance
Department.
John L. Wehle, Jr. and Charles S. Wehle are brothers.
(c) Compliance with Section 16(a) of Securities Exchange Act of 1934: To
the Corporation's knowledge, based solely on review of copies of reports of
initial ownership and changes of ownership furnished to the Corporation by its
directors, executive officers and persons who own more than ten percent of the
Corporation's Class B Common Stock, and written representations to the
Corporation by such persons that no other reports were required, there were no
failures by such persons to comply with the reporting requirements under Section
16(a) of the Act during the Corporation's fiscal year ended April 30, 1996.
Item 11. Executive Compensation
(a) Summary of Executive Compensation. The table below sets forth a summary
of compensation paid during the past three fiscal years for all services
rendered to the Corporation and its subsidiaries by the Chief Executive Officer
and the four other executive officers of the Corporation whose total annual
salary and bonus for the fiscal year ended April 30, 1996 exceeded $100,000.
37
<PAGE>
<TABLE>
Summary Compensation Table
Annual Compensation Long Term Compensation
- -----------------------------------------------------------------------------------------------------------------------
Name and Fiscal Other Annual Restricted Stock All Other
Principal Position Year Salary($) Bonus($) Compensation($) Stock Awards($)(4) Options Compensation($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
John L.Wehle, Jr., 1996 $ 327,200 $ 64,609(1) $ 1,811 0 0 $ 60,135 (5)
Chairman of the 1995 320,000 151,382(2) 1,500 6,930 5,000 54,547
Board, President 1994 280,085 52,407(3) 656 5,244 3,000 31,538
Chief Executive
Officer
Robert N. Latella, 1996 222,767 45,701(1) 1,811 0 0 42,393 (6)
Executive Vice 1995 214,065 104,616(2) 1,500 6,930 4,000 38,261
President, Chief 1994 200,717 38,197(3) 656 5,244 2,500 26,718
Operating Officer
Charles S. Wehle, 1996 163,375 35,008(1) 1,358 0 0 25,448 (7)
Senior Vice President 1995 142,625 35,668(2) 1,125 5,390 3,000 22,105
1994 124,364 13,857(3) 468 3,746 2,000 15,999
Gary C. Geminn, 1996 110,436 15,473(1) 1,245 0 0 17,286 (8)
Vice President- 1995 106,122 23,663(2) 1,031 4,620 2,000 17,776
Production of 1994 99,505 12,944(3) 3,746 3,746 1,000 12,844
Genesee Brewing
Company
Karl D. Simonson 1996 106,251 14,972(1) 1,245 0 0 16,784 (9)
Vice President- 1995 91,504 21,894(2) 1,031 4,620 1,500 8,046
Planning & Development 1994 - - - - - -
</TABLE>
1) Amounts reflect cash and stock bonuses earned during fiscal 1996 under the
Corporation's 1986 Incentive Bonus Plan and 1992 Stock Plan, which were
paid to the named executive officer in June and July 1996.
(2) Amounts reflect cash and stock bonuses earned during fiscal 1995 under the
Corporation's 1986 Incentive Bonus Plan and 1992 Stock Plan, which were paid
to the named executive officer in June 1995.
(3) Amounts reflect cash and stock bonuses earned during fiscal 1994 under the
Corporation's 1986 Incentive Bonus Plan and 1992 Stock Plan, which were paid
to the named executive officer in June 1994.
(4) The restricted stock awards reported in this column vest annually in one-
quarter increments over a four-year period. No dividends are paid on the
restricted stock. As of April 30, 1996, the aggregate number of shares and
corresponding value of restricted stock held by each of the named
individuals was as follows: 285 shares valued at $10,863 held by each of
Mr. J. L. Wehle, Jr. and Mr. Latella; 215 shares valued at $8,200 held by
Mr. C.S. Wehle; and 195 shares valued at $7,430 held by each of Mr. Geminn
and Mr. Simonson.
(5) Amount reflects $18,000 contribution under the Corporation's Profit Sharing
Retirement Plan, $40,221 contribution under the Corporation's Benefit
Restoration Plan and $1,914 in premiums paid by the Corporation on life
insurance policies for the benefit of Mr. Wehle.
(6) Amount reflects $18,000 contribution under the Corporation's Profit Sharing
Retirement Plan, $22,170 contribution under the Corporation's Benefit
Restoration Plan and $2,223 in premiums paid by the Corporation on life
insurance policies for the benefit of Mr. Latella.
38
<PAGE>
(7) Amount reflects $18,000 contribution under the Corporation's Profit Sharing
Retirement Plan, $6,623 contribution under the Corporation's Benefit
Restoration Plan and $825 in premiums paid by the Corporation on life
insurance policies for the benefit of Mr. Wehle.
(8) Amount reflects $16,330 contribution under the Corporation's Profit Sharing
Retirement Plan and $956 in premiums paid by the Corporation on life
insurance policies for the benefit of Mr. Geminn.
(9) Amount reflects $15,978 contribution under the Corporation's Profit Sharing
Retirement Plan and $806 in premiums paid by the Corporation on life
insurance policies for the benefit of Mr. Simonson.
(b) Options Granted to Executive Officers. No options were granted to the
named executive officers during the Corporation's fiscal year ended April 30,
1996.
(c) Exercise of Options by Executive Officers. The table below sets forth
information about the aggregate number of shares received and the value realized
by the named executive officer upon exercise of options exercised during the
Corporation's fiscal year ended April 30, 1996; and the aggregate number and
value of options held by the named executive officer at the end of the fiscal
year:
<TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of Unexercised Value of Unexercised In-the-Money
Options at FY-End (#) Options at FY-End ($)
- -------------------------------------------------------------------------------------------------------------------------
Share Aquired Value($)
on Exercise Realized Excerisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John L.Wehle, Jr. 3,750 $48,375 12,000 0 $30,760 0
Robert N. Latella 3,000 39,000 10,000 0 49,075 0
Charles S. Wehle 2,000 23,934 8,000 0 19,690 0
Gary C. Geminn 1,500 24,000 4,500 0 22,130 0
Karl D. Simonson - - 3,500 0 28,635 0
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(d) Director Compensation. Directors who are employees of the Corporation
do not receive directors' fees or other compensation for their services as
directors. Directors who are not employees receive an annual fee of $7,000 plus
$500 for each Board and Committee meeting they attend. Each director who is not
an employee is also granted an option each year under the Corporation's 1992
Stock Plan to purchase 1,000 shares of Class B Common Stock.
(e) Agreements With Named Executive Officers. The Corporation has
agreements with John L. Wehle, Jr., Charles S. Wehle and Robert N. Latella (the
"Agreements") which provide that, after a "Change in Control" (as that term is
defined in the Agreements), if employment of the named executive officers is
terminated by the Corporation without "Cause" (as that term is defined in the
Agreements) or by the named executive officers for "Good Reason" (as that term
is defined in the Agreements), the Corporation must pay a lump sum payment equal
to a maximum of three times the annual base salary of the named executive
officers in effect at the date of termination of employment, plus three times
the largest bonus paid to him at any time during the preceding five fiscal
years.
(f) Under an agreement with the Corporation, John L. Wehle, Jr. is employed
by the Corporation for so long as may be mutually agreed upon. Mr. Wehle is also
entitled to receive for so long as he lives a monthly payment of $7,500 in the
event he ceases to be employed by the Corporation, whether by reason of death,
disability or otherwise. If Mr. Wehle should die prior to having received 120
such monthly installments, the Corporation is obligated to pay the remainder of
such installments to his designated beneficiaries or to his estate. Installment
payments while Mr. Wehle is alive are contingent upon his not engaging in a
competing business without the Corporation's consent.
39
<PAGE>
(g) Compensation Committee Interlocks and Insider Participation. Stephen B.
Ashley, Thomas E. Clement and William J. Hoot served during the fiscal year
ended April 30, 1996 as members of the Management Continuity Committee of the
Corporation's Board of Directors. Mr. Hoot was an officer of the Corporation
prior to his retirement in 1982. See description of relationship with Mr.
Clement at Item 13.
Item 12. Security Ownership of Certain Beneficial
Owners and Management
(a) Security Ownership of Certain Beneficial Owners. The Corporation's only
class of voting securities is its Class A Common Stock. As of July 15, 1996,
persons who owned of record or were known by the Corporation to own beneficially
more than 5% of the outstanding Class A Common Stock were:
<TABLE>
- -------------------------------------------------------------------------------------------------------
Name and Address Amount Owned Percent of Class A Stock
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
John L. Wehle, Jr., as Trustee 73,845 (1) 35.2%
under the Will of Louis A. Wehle
P. O. Box 762
Rochester, New York 14603
John L. Wehle, Jr., Charles S. Wehle 41,957 (2) 20.0%
and Henry S. Wehle
P. O. Box 762
Rochester, New York 14603
John L. Wehle, Jr., as Trustee 12,145 (3) 5.8%
under Elizabeth R. Wehle Trust
P. O. Box 762
Rochester, New York 14603
Mutual Series Fund, Inc. 22,911 (4) 10.9%
51 John F. Kennedy Parkway
Short Hills, New Jersey 07078
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) The power to vote and otherwise act with respect to these shares is
vested in John L. Wehle, Jr. while a trustee. In the event of his death,
resignation or incapacity, such power would pass to Charles S. Wehle.
(2) Excludes shares owned by trusts described elsewhere in this table and
notes. Includes 31,443 shares held by Trust under Will of John L. Wehle, 8,595
shares owned individually by John L. Wehle, Jr., 1,890 shares owned individually
by Charles S. Wehle and 29 shares owned individually by Henry S. Wehle. Pursuant
to a Shareholder Agreement and Irrevocable Proxy dated June 22, 1988 (the
"Shareholder Agreement") among John L. Wehle, John L. Wehle, Jr., Charles S.
Wehle and Henry S. Wehle (the "Shareholders"), John L. Wehle, Jr. is appointed
proxy to vote all voting securities of the Corporation then owned or thereafter
acquired by the Shareholders. Under the Shareholder Agreement, Charles S. Wehle
would succeed John L. Wehle, Jr. as proxy in the event of the death, incapacity
or resignation of John L. Wehle, Jr. The Shareholder Agreement will continue in
effect until terminated in writing signed by all of the surviving Shareholders.
As of July 14, 1996, 41,957 Class A shares, constituting 20% of the Class A
shares outstanding, are subject to the Shareholder Agreement.
(3) The power to vote and otherwise act with respect to these shares is
vested in John L. Wehle, Jr. while a trustee.
(4) Power to vote and otherwise act with respect to these shares is vested
in Heine Securities Corporation under investment advisory agreements.
Information with respect to these shares is based on Schedule 13G filings with
the Securities and Exchange Commission.
40
<PAGE>
Except as otherwise described above, to the Corporation's knowledge the
persons listed above have sole voting and sole investment power with respect to
all Class A shares listed.
(b) Security Ownership of Management. The number of and percentage of
outstanding shares of Class A and Class B Common Stock of the Corporation
beneficially owned (as determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934) as of July 15, 1996 by each director and by all
directors and officers as a group are set forth in the following table:
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------------
Name of Director Shares of Class A Percentage of Class A Shares of Class B Percentage of Class B
or Executive Officer Common Stock Common Stock Common Stock Common Stock
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John L. Wehle, Jr. 127,947 (1) 61.0% 98,668 (3) (4) 6.9%
(5) (6)
William J. Hoot 119 (17) 3,343 (7) (17)
Robert N. Latella 604 (17) 17,195 (8) 1.2%
Gary C. Geminn None -- 8,514 (9) (17)
John D. Reifenrath None -- 4,072 (10) (17)
Charles S. Wehle (2) (2) 13,145 (4) (11) (17)
Thomas E. Clement None -- 2,104 (4) (12) (17)
Stephen B. Ashley None -- 2,200 (13) (17)
Richard P.Miller, Jr. None -- 2,100 (14) (17)
Karl D. Simonson None -- 5,135 (15) (17)
William A. Buckingham 240 (17) 2,000 (16) (17)
Samuel T. Hubbard, Jr. None -- 2,000 (16) (17)
All Directors and Executive _______ _____ _________ ____
Officers as a group 128,935 61.4% 181,947 12.2%
(16 persons)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See Table under Item 12(a) and Notes (1), (2) and (3) thereto.
(2) See Table under Item 12(a) and Notes (1) and (2) thereto.
(3) Includes 40,633 shares held as trustee under the will of Louis A. Wehle.
See Note (1) to table set forth in Item 12(a) above.
(4) These directors serve as trustees of Genesee Country Museum, which holds
37,638 Class B shares, none of which are included in the table above.
J. L. Wehle, Jr. is also an officer of the Museum.
(5) Includes 37,090 shares held as trustee under Elizabeth R. Wehle irrevocable
trust dated January 12,1950. The power to act with respect to those
shares is vested in John L. Wehle, Jr. while a trustee.
(6) Includes 3,945 shares owned individually and 17,000 shares which may be
acquired pursuant to presently exercisable stock options.
(7) Includes 1,343 shares owned individually and 2,000 shares which may be
acquired pursuant to presently exercisable stock options.
(8) Includes 3,195 shares owned individually and 13,000 shares which may be
acquired pursuant to presently exercisable stock options.
41
<PAGE>
(9) Includes 2,014 shares owned individually and 4,500 shares which may be
acquired pursuant to presently exercisable stock options.
(10) Includes 3,072 shares owned individually and 1,000 shares which may be
acquired pursuant to presently exercisable stock options.
(11) Includes 2,145 shares owned individually, 11,000 shares which may be
acquired pursuant to presently exercisable stock options and 262 shares
held as custodian under the New York Uniform Gifts to Minors Act.
(12) Includes 104 shares owned individually and 2,000 shares which may be
acquired pursuant to presently exercisable stock options.
(13) Includes 200 shares owned individually and 2,000 shares which may be
acquired pursuant to presently exercisable stock options.
(14) Includes 100 shares owned by Mr. Miller's wife, the beneficial ownership of
which is disclaimed by Mr. Miller, and 1,000 shares which may be acquired
pursuant to presently exercisable stock options.
(15) Includes 135 shares owned individually and 5,000 shares which may be
acquired pursuant to presently exercisable stock options.
(16) Shares which may be acquired pursuant to presently exercisable stock
options.
(17) Amount of shares owned does not exceed one-percent of shares outstanding.
(c) Change of Control Arrangements. A Shareholder Agreement and Irrevocable
Proxy among John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S.
Wehle dated June 22, 1988 may at a subsequent date result in a change in control
of the Corporation, which agreement is more fully described in Note (2) to Item
12(a).
Item 13. Certain Relationships and Related Transactions
The professional corporation of Thomas E. Clement, a director of the
Corporation, is a partner of the law firm of Nixon, Hargrave, Devans & Doyle,
which during fiscal year 1996 performed legal services for the Corporation and
which the Corporation intends to retain to provide such services in fiscal year
1997.
42
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statement Schedule:
Schedule II - Consolidated Valuation and Qualifying Accounts
for the years ended April 30, 1996, 1995 and 1994.
Other schedules have been omitted because they are either not applicable or
not required, or the required information is given in the consolidated financial
statements or the notes thereto.
2. Exhibits:
See Exhibit Index at Page 47 of this report.
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
GENESEE CORPORATION
7/25/96 By: /s/John L. Wehle, Jr.
(Date) John L. Wehle, Jr., Chairman,
President and Chief Executive Officer
7/25/96 By: /s/Edward J. Rompala
(Date) Edward J. Rompala, Vice President
and Treasurer (Principal Financial
Officer)
7/25/96 By: /s/Michael C. Atseff
(Date) Michael C. Atseff, Controller
43
<PAGE>
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
/s/Stephen B. Ashley 07/25/96 Director
Stephen B. Ashley (Date)
/s/William A. Buckingham 07/25/96 Director
William A. Buckingham (Date)
/s/Thomas E. Clement 07/25/96 Director
Thomas E. Clement (Date)
/s/Gary C. Geminn 07/25/96 Director
Gary C. Geminn (Date)
/s/William J. Hoot 07/25/96 Director
William J. Hoot (Date)
/s/Samuel T. Hubbard, Jr. 07/25/96 Director
Samuel T. Hubbard, Jr. (Date)
/s/Robert N. Latella 07/25/96 Director
Robert N. Latella (Date)
/s/Richard P. Miller, Jr. 07/25/96 Director
Richard P. Miller, Jr. (Date)
/s/John D. Reifenrath 07/25/96 Director
John D. Reifenrath (Date)
/s/Charles S. Wehle 07/25/96 Director
Charles S. Wehle (Date)
/s/John L. Wehle, Jr. 07/25/96 Director
John L. Wehle, Jr. (Date)
44
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
of Genesee Corporation:
Under date of June 2, 1995, we reported on the consolidated balance sheet
of Genesee Corporation and subsidiaries as of April 30, 1995, and the related
consolidated statements of earnings and retained earnings, and cash flows for
each of the years in the two-year period ended April 30, 1995, as contained in
the 1996 annual report to shareholders. These consolidated financial statements
and our report thereon are incorporated by reference in the annual report on
Form 10-K for the year 1996. In connection with our audits of the aforementioned
consolidated financial statements, we also have audited the related consolidated
financial statement schedules as listed in the accompanying index. These
consolidated financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statement schedules based on our audits.
In our opinion, such consolidated financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set forth
therein.
As discussed in note 1, the Corporation changed its method of accounting
for debt and equity securities in fiscal 1995.
KPMG Peat Marwick LLP
Rochester, New York
June 2, 1995
45
<PAGE>
SCHEDULE II
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years ended April 30, 1996, 1995 and 1994
<TABLE>
Balance at Additions Balance
beginning charged to at end
Description of period and expenses Deductions of period
----------- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(Dollars in Thousands)
1996
Allowance for doubtful
receivables $ 565 25 157 433
Allowance for loss on idle
plant and equipment 457 - 9 448
Allowance for obsolete
inventory 68 510 370 208
----------------------------------------------------------------------------------------
$ 1,090 535 536 1,089
========================================================================================
1995
Allowance for doubtful
receivables $ 677 (10) 102 565
Allowance for
loss on idle 486 457 486 457
plant and equipment
Allowance for obsolete
inventory 280 86 298 68
---------------------------------------------------------------------------------------
$ 1,443 533 886 1,090
=======================================================================================
1994
Allowance for doubtful
receivables 712 (3) 32 677
Allowance for loss on idle
plant and equipment 486 - - 486
Allowance for obsolete
inventory - 280 - 280
Allowance for malthouse
shutdown costs 353 - 353 -
----------------------------------------------------------------------------------------
$ 1,551 277 385 1,443
========================================================================================
</TABLE>
46
<PAGE>
Exhibit Index
- -------------------------------------------------------------------------------
Number Document Page
- -------------------------------------------------------------------------------
3-1 Certificate of Incorporation (incorporated by reference --
to Exhibit 3-1 to the Corporation's report on Form 10-K
for the fiscal year ended April 30,1994).
3-2 By-Laws (incorporated by reference to Exhibit 3-2 to --
the Corporation's report on Form 10-K for the fiscal
year ended April 30, 1995).
10-1 1986 Genesee Incentive Bonus Plan, as amended in 1990 48
10-2 1982 Incentive Stock Option Plan (incorporated by --
reference to Exhibit 10-2 to the Corporation's report
on Form 10-K for the fiscal year ended April 30,1994).
10-3 1992 Stock Plan as amended in 1994 (incorporated by --
reference to Exhibit 10-3 to the Corporation's report
on Form 10-K for the fiscal year ended April 30, 1995).
10-4 Stock Bonus Incentive Program under 1992 Stock Plan --
(incorporated by reference to Exhibit 10-6 to the
Corporation's report on Form 10-K for the fiscal year
ended April 30, 1992).
10-5 Agreement with John L. Wehle, Jr. dated August 29, --
1994 (incorporated by reference to Exhibit 10-5 to the
Corporation's report on Form 10-K for the fiscal year
ended April 30, 1995).
10-6 Executive Agreement with J. L. Wehle, Jr. dated --
February 27, 1995 (incorporated by reference to
Exhibit 10-6 to the Corporation's report on Form 10-K
for the fiscal year ended April 30, 1995). Substantially
identical agreements were executed with C.S. Wehle and R.N.
Latella.
10-7 Indemnification Agreement with J. L. Wehle, Jr. dated --
June 8, 1989 (incorporated by reference to Exhibit 10-7
to the Corporation's report on Form 10-K for the fiscal
year ended April 30, 1995). Substantially identical
agreements were executed with all other directors and
officers of the Corporation.
22 Subsidiaries of the Registrant 54
47
<PAGE>
Exhibit 10-1
GENESEE CORPORATION
1986 INCENTIVE BONUS PLAN
Adopted by the Management Continuity Committee: September 5, 1986
Ratified by the Board of Directors: October 23, 1986
Amended: April 27, 1987; June 8, 1988; June 12, 1990
48
<PAGE>
GENESEE CORPORATION
1986 INCENTIVE BONUS PLAN
Section 1 Purpose
This Plan is intended to further the attainment of the Company's long-term
profit and growth objectives by providing incentive to those key executives
whose management and individual performance have a direct impact on achieving
those objectives. The Plan also is expected to encourage the continued
employment of the Company's key executives and to facilitate the recruiting of
executive personnel in the future.
Section 2 Definitions
As used herein, the following terms shall have the following meanings:
(A) "Company" shall mean Genesee Corporation and its Subsidiaries, and
their successors and assigns.
"Brewery" shall mean The Genesee Brewing Company, Inc., its wholly
owned subsidiary, Fred B. Koch Brewery and their successors and assigns.
(B) "Plan" shall mean this Incentive Bonus Plan in its entirety, including
any amendments thereof and any rules and regulations adopted pursuant
hereto.
(C) "Committee" shall mean the Management Continuity Committee of the
Board of Directors of the Company (or such other successor Committee
as may be appointed by the Board). The Committee shall consist of at
least three members of the Board, none of whom shall be, while serving
on the Committee, eligible to receive an award under the Plan.
(D) "Eligible Employee" shall mean any employee of the Company who is a
member of a select group of management employees and who, upon the
recommendations Management of the Company and in the opinion of the
Committee, is in a position to have a direct and significant impact on
achieving the Company's long-term profit and growth objectives.
(E) "Participant" shall mean an eligible employee to whom an incentive
bonus award may be made under the Plan.
(F) "Company Pre-Tax Income" shall mean the consolidated income of the
Company for fiscal year before extraordinary items and before
provisions for federal, state or other taxes on income. For purposes
of the Plan, accruals or payments made pursuant to the Plan shall be
excluded from expenses when calculating Company Pre-Tax Income.
(G) "Brewery Operating Income" shall mean the income of the Brewery for a
fiscal year before provisions for federal, state or other taxes on
income and before interest income and "other income," solely from the
manufacture and sales of malt beverages and operations incident
thereto, including the manufacture and sales of malt as set forth on
the Brewery's internal financial statements, applied on a consistent
basis. For purposes of the Plan, accruals or payments made pursuant to
the Plan shall by excluded from expenses when calculating Operating
Income.
49
<PAGE>
(H) "Barrel Sales" shall mean the aggregate unit volume of sales of malt
beverages during a fiscal year of the Company, expressed in terms of
barrels sold.
(I) "Subsidiary" shall mean any corporation of which, at the time of
reference, 50% or more of the shares entitled to vote generally in an
election of directors are owned directly or indirectly by Genesee
Corporation or any Subsidiary thereof.
Other terms shall have the respective meanings given them in succeeding
sections of the Plan.
Section 3 Administration
(A) The Plan shall be administered by the Committee. The Committee (acting
by vote of a majority of the members present at the meeting at which a quorum if
present) shall have the authority, in its sole discretion and form time to time:
(I) to designate the employees or classes of employees eligible to participate
in the Plan; (ii) to grant awards under the Plan in such form and amount as the
Committee shall determine; (iii) to impose such limitations, restrictions and
conditions upon any such award as the Committee shall deem appropriate; (iv) to
interpret the Plan, to adopt, amend and rescind rules and regulations relating
to the Plan, and to make all other determinations and take all other actions
necessary or advisable for the implementation and administration of the Plan.
(B) From time to time, the Committee in its sole discretion may make
adjustments in the calculation of the quantitative targets established in an
Award Year so that changes in accounting principles, extraordinary or unusual
charges or credits, the effects of acquisitions, or mergers, consolidations, and
other corporate transactions, and other elements of or factors influencing the
calculation do not distort or affect the operation of the Plan in a manner
inconsistent with the achievement of its purposes.
(C) The decisions and determinations of the Committee on all matters
relating to the Plan shall be final, conclusive, and binding upon all parties.
In administering the Plan the Committee may employ accountants and counsel (who
may be the independent auditors and outside counsel for the Company) and other
persons to assist or render advice to it, all at the expense of the Company. No
member of the Committee shall be liable for any action taken or decision made in
good faith relating to the Plan or any award thereunder.
Section 4 Award Year
An Award Year shall be a fiscal year of the Company in respect of which an
incentive bonus award is made under this Plan.
Section 5 Incentive Bonus Awards
(A) The Committee may from time to time, after receiving recommendations
from the Chief Executive Officer of the Company, and subject to the provisions
of the Plan and such other terms and conditions as the Committee may prescribe,
grant one or more awards to one of more Eligible Employees (expressed in terms
of percentages of salaries paid during an Award Year), based upon the
achievement of quantitative targets established in respect of an Award Year.
50
<PAGE>
(B) The achievement of targets shall result in the payment to Participants
of cash bonuses (subject to the provisions of Section 6 hereof). In establishing
targets, the Committee shall determine three levels of awards, based upon the
achievement of (1) minimum, (2) primary and (3) maximum levels of achieve- ment
during an Award Year. In any case where the level achieved exceeds the primary
target level but is less than the maximum target level, the bonus to be paid
shall be increased so as to be proportionate to the difference between the two
levels. Thus, for example, of the Operating Income target achieved is 50% of the
difference between the primary target and the maximum target, the bonus to be
paid shall be equal to the percentage of salary awarded for achieving the
primary target plus 50% of the difference between that amount and the amount
which would have been paid if the maximum target had been achieved.
(C) There shall be three categories of Eligible Employees, each having a
separate award level expressed as a percentage of the salary paid to him or her
during the Award Year.
(1) Chairman of the Board; President and Chief Executive
Officer; and Executive Vice President and Chief Operating
Officer.
(2) All other officers of the Company; and
(3) All other Eligible Employees
(D) In addition, there shall be a discretionary component of awards, which
shall also be expressed in terms of a percentage of salary. The percentages of
salary established by the Committee for discretionary awards shall be the
maximum awards payable upon the achievement of targets, within which the amounts
to be paid to each Participant (which may range from no payments to the maximum
amount payable) shall be determined by the Committee in the case of Category 1
employees, and the Chairman of the Board and the Chief Executive Officer in the
case of all other employees, in their sole discretion after reviewing the
performance and contributions of each Participant.
(E) No Awards shall be made which, if maximum targets were achieved and the
maximum discretionary award were paid, would result in an Award in excess of the
following percentages of the salary paid to any Participant during the relevant
Award Year: Category 1 employees: 60%; Category 2 employees: 50%; Category 3
employees: 30%.
Section 6 Payment of Awards
Each participant shall elect prior to the commencement of each Award Year
whether to receive all of part of any possible bonus award in cash. Unless a
written election is made to receive the award in cash, payment of same will be
deferred. Cash payments shall be made as soon as practicable after the Company
has made the necessary calculations, and all payments shall be subject to the
withholding of any required taxes.
Section 7 Deferral of Payment
Bonus awards which are deferred will be credited to an account (''Deferred
Account'') established by the Company for each Participant and will be subject
to such conditions as the Committee may consider necessary to maintain an
effective deferral.
51
<PAGE>
Section 8 Deemed Investment of Deferred Amounts
Even though this Plan is totally unfunded and will not result in assets
being placed beyond the reach of the Company's creditors, each Participant will
be able to select the basis on Deferred Account will be deemed to be invested in
the T. Rowe Price family of mutual funds and each Participant shall be able to
elect, from time to time on forms provided by the Company, in which fund or
funds his Deferred Account shall be deemed invested. His Deferred Account shall
be credited with earnings and losses as a means of measuring the amount in such
account at any given time.
Section 9 Payment of Deferred Accounts
Payment of a Participant's Deferred Account shall commence as soon as
practicable after the Participant's termination of employment and shall be paid
in not more than ten annual installments. The Committee shall consult with the
Participant before determining the method and duration of such payments and
shall endeavor to accommodate the wishes of the Participant. In the case of a
Participant's death, payment shall be made in a lump sum to the Participant's
estate. Payment may also be made without a termination of employment if a
Participant makes a request on the basis of severe financial hardship, which is
here defined as having been caused by an accident, illness or event (affecting
either the Participant or his immediate family) beyond the control of the
Participant. The Committee, in its sole discretion, shall decide whether such
request qualifies as a hardship payment and shall limit the amount paid to the
Participant to that reasonably necessary to eliminate the hardship.
Section 10 Termination of Employment
Except as is herein provided, a Participant must continue in the employ of
the Company through the conclusion of the Award Year in order to be eligible for
payment of a bonus award.
In the event a Participant's employment terminates prior to the end of the
Award Year because of normal retirement on of after age 62, or disability under
the Company's long term disability policy, or death, the Participant shall be
entitled to a pro rata bonus based upon the percentage of the year completed
prior to termination of employment.
Section 11 Amendment
The Committee may from time to time amend, modify, suspend the operation of
or terminate in whole or in part any or all of the provisions of the Plan,
except that no such action shall deprive a Participant of any bonus award which
has been earned.
Section 12 Reorganization
In the event that Genesee Corporation ("Genesee") is merged or
consolidated with another corporation and Genesee if not the surviving
corporation, or in the event that a substantial part of the assets of Genesee
are acquired by another corporation, or in the event of the reorganization or
liquidation of Genesee (each such event being hereinafter referred to as a
"Reorganization Event") or in the event that the Board of Directors of Genesee
shall propose that Genesee enter into a Reorganization Event, then the Committee
may in its discretion modify any outstanding awards on an equitable basis,
including the modification of targets and/or the circumstances under which
awards shall be deemed to have been earned.
Section 13 Newly Eligible Employees
The Committee shall be entitled to make such rules, regulations,
determinations and awards as it deems appropriate in respect of any employee who
becomes eligible to participate in the Plan after the commencement of an Award
Year.
52
<PAGE>
Section 14 Effective Date
The Plan shall be effective as of May 1, 1986. The Committee may grant
awards in respect of fiscal year of the Company ending April 30, 1987.
Section 15 Miscellaneous
(A) No payment of Plan awards and no Deferred Account shall be subject in
any manner to anticipation, alienation, pledge, transfer, or assignment, except
by will or by the laws of descent and distribution and any attempt to
anticipate, alienate, pledge, transfer, or assign shall be void.
(B) Neither the granting of, nor any payout with respect to, any award
under the Plan shall limit a Participant's right to receive, or to be eligible
for, any other compensation or benefits.
(C) The selection of an Eligible Employee as a Participant for an award
shall not constitute a contract of employment between the Participant and the
Company or otherwise entitle the Participant to remain in the employ of the
Company.
(D) Bonus awards will not be considered as compensation for the purpose of
computing employee contributions or benefits under any Company profit sharing,
retirement, pension, thrift, group life insurance or other employee benefit
plan.
(E) Each payment that is to be made in cash shall be from the general funds
of the Company. No special or separate fund shall be established or other
segregation of assets made to assure payout of any such Plan awards or amounts
credited to Deferred Accounts. No Participant or other person shall have under
any circumstances any interest whatever in any particular property or assets of
the Company.
53
<PAGE>
Exhibit 22
<TABLE>
Subsidiaries
Names State of Incorporation
<S> <C>
The Genesee Brewing Company, Inc. New York
Genesee Ventures, Inc. New York
Ontario Foods, Incorporated New York
54
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S>
<C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> APR-30-1996
<CASH> 2,560
<SECURITIES> 34,896
<RECEIVABLES> 13,601
<ALLOWANCES> 433
<INVENTORY> 11,959
<CURRENT-ASSETS> 64,857
<PP&E> 125,818
<DEPRECIATION> 95,512
<TOTAL-ASSETS> 134,035
<CURRENT-LIABILITIES> 18,738
<BONDS> 0
<COMMON> 858
0
0
<OTHER-SE> 89,476
<TOTAL-LIABILITY-AND-EQUITY> 134,035
<SALES> 184,050
<TOTAL-REVENUES> 184,050
<CGS> 109,993
<TOTAL-COSTS> 40,942
<OTHER-EXPENSES> 32,215
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,001
<INCOME-TAX> 1,680
<INCOME-CONTINUING> 3,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,321
<EPS-PRIMARY> 2.06
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