SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended JANUARY 25, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0-1653
GENESEE CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 16-0445920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 St. Paul Street, Rochester, New York 14605
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code (716) 546-1030
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months(or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
As of the date of this report, the Registrant had the following shares of
common stock outstanding:
Number of Shares
Class Outstanding
Class A Common Stock (voting), 209,885
par value $.50 per share
Class B Common Stock (non-voting), 1,407,342
par value $.50 per share
1
<PAGE>
GENESEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 25, 1997 and April 30, 1996
<TABLE>
UNAUDITED AUDITED
(Dollars in Thousands) January 25, 1997 April 30, 1996
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,925 2,560
Marketable securities available for sale 32,042 34,896
Trade accounts receivable, less allowance for doubtful receivables
of $402 at January 25, 1997; $433 at April 30, 1996 11,235 13,168
Inventories, at lower of cost (first-in, first-out) or market 12,983 11,959
Deferred income tax assets 899 898
Other current assets 1,238 1,376
Total current assets 60,322 64,857
Net property, plant and equipment 32,779 30,306
Investment in and notes receivable from unconsolidated real estate partnerships 8,345 8,466
Investments in direct financing and leveraged leases 31,899 28,092
Other assets 2,403 2,314
Total assets 135,748 134,035
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 9,360 10,210
Income taxes payable 935 455
Federal and state beer taxes payable 918 2,246
Accrued expenses and other 7,617 5,827
Total current liabilities 18,830 18,738
Deferred income tax liabilities 7,899 7,482
Accrued postretirement benefits 15,526 15,526
Other liabilities 405 428
Total liabilities 42,660 42,174
Minority interests in consolidated subsidiaries 1,828 1,527
Shareholders' equity:
Common stock Class A 105 105
Common stock Class B 753 753
Additional paid-in capital 5,849 5,839
Retained earnings 87,429 87,285
Unrealized gain / (loss) on marketable securities, net of income taxes 629 (113)
Less treasury stock, at cost 3,505 3,535
Total shareholders' equity 91,260 90,334
Total liabilities and shareholders' equity $ 135,748 134,035
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF EARNINGS AND RETAINED EARNINGS
Thirteen Weeks Ended January 25, 1997 and January 27, 1996
(Dollars in Thousands,
Except Per Share Data)
UNAUDITED
1997 1996
<S> <C> <C>
Revenues $44,644 41,358
Federal and state beer taxes 9,315 8,990
Net revenues 35,329 32,368
Cost of sales 27,557 25,638
Gross profit 7,772 6,730
Selling, general and administrative expenses 8,242 7,486
Operating loss (470) (756)
Investment income 1,120 959
Other income / (expense), net 150 99
Interest of minority partners in earnings of
consolidated subsidiaries (154) (204)
Earnings before income taxes 646 98
Income taxes 232 39
Net earnings - $.26 per share in 1997
and $.04 in 1996 414 59
Retained earnings at beginning of period 87,015 85,895
Retained earnings at end of period $87,429 85,954
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF EARNINGS AND RETAINED EARNINGS
Thirty Nine Weeks Ended January 25, 1997 and January 27, 1996
(Dollars in Thousands,
Except Per Share Data)
UNAUDITED
1997 1996
<S> <C> <C>
Revenues $143,508 136,881
Federal and state beer taxes 30,780 30,824
Net revenues 112,728 106,057
Cost of sales 85,881 82,612
Gross profit 26,847 23,445
Selling, general and administrative expenses 26,010 24,366
Operating income / (loss) 837 (921)
Investment income 2,252 2,561
Other income / (expense), net 292 175
Interest of minority partners in earnings of
consolidated subsidiaries (503) (519)
Earnings before income taxes 2,878 1,296
Income taxes 1,036 518
Net earnings - $1.14 per share in 1997
and $.48 in 1996 1,842 778
Retained earnings at beginning of period 87,285 86,870
Less: Dividends - $1.05 per share in 1997
and $1.05 per share in 1996 1,698 1,694
Retained earnings at end of period $87,429 85,954
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
GENESEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thiry Nine Weeks Ended January 25, 1997 and Janaury 27, 1996
UNAUDITED
(Dollars in thousands) 1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,842 778
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,549 3,348
Gain on disposition of assets (188) 0
Deferred tax provision (1) 111
Other 474 538
Changes in non-cash assets and liabilities:
Trade accounts receivable 1,964 2,219
Inventories (1,024) 1,689
Other assets 49 (666)
Accounts payable (850) (790)
Accrued expenses and other 1,790 (1,208)
Income taxes payable 480 (446)
Federal and state beer taxes (1,328) (888)
Other liabilities (23) 120
Net cash provided by operating activities 6,734 4,805
Cash flows from investing activities:
Capital expenditures (6,024) (4,862)
Sales of marketable securities 11,694 8,568
Purchases of marketable securities (7,493) (8,407)
Investments in and advances to unconsolidated real
real estate investments, net of distributions 121 (4,164)
Net investment in direct financing and leveraged leases (3,807) (3,578)
Withdrawals by minority interest (202) (470)
Repayment of real estate mortgage receivable 0 5,807
Net cash used in investing activities (5,711) (7,106)
Cash flows from financing activities:
Principal payments on long term debt 0 (4,038)
Payment of dividends (1,698) (1,693)
Net proceeds from treasury stock transactions 40 430
Net cash used in financing activities (1,658) (5,301)
Net decrease in cash and cash equivalents (635) (7,602)
Cash and cash equivalents at beginning of the year 2,560 10,422
Cash and cash equivalents at end of the period $ 1,925 2,820
See accompanying notes to consolidated financial statements.
</TABLE>
5
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GENESEE CORPORATION
Notes to Consolidated Financial Statements
NOTE (A) The Corporation's consolidated financial statements enclosed
herein are unaudited with the exception of the Consolidated Balance Sheet at
April 30, 1996 and, because of the seasonal nature of the business and the
varying schedule of its special sales efforts, these results are not necessarily
indicative of the results to be expected for the entire year. In the opinion of
management, the interim financial statements reflect all adjustments, consisting
of only normal recurring items, which are necessary for a fair presentation of
the results for the periods presented. The accompanying financial statements
have been prepared in accordance with GAAP and SEC guidelines applicable to
interim financial information. These statements should be reviewed in
conjunction with the annual report to shareholders for the year ended April 30,
1996.
NOTE (B) The weighted average number of Class A and Class B shares
outstanding used in the computation of net earnings per share is 1,617,227 for
the thirteen week period ended January 25, 1997 and 1,616,250 for the thirteen
week period ended January 27, 1996. The weighted average number of Class A and
Class B shares outstanding used in the computation of net earnings per share is
1,617,057 for the thirty nine weeks ended January 25, 1997 and 1,609,121 for the
thirty nine weeks ended January 27, 1996.
NOTE (C) Inventories are summarized as follows:
<TABLE>
Dollars in thousands
January 25, 1997 April 30, 1996
<S> <C> <C>
Finished goods $ 4,425 $ 3,219
Goods in process 1,701 1,891
Raw materials, containers and packaging supplies 6,857 6,849
Total inventories $ 12,983 $ 11,959
</TABLE>
6
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GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Comparison of 13 weeks ended January 25, 1997 to 13 weeks ended January 27,
1996
Consolidated net revenues for the thirteen weeks ended January 25, 1997
were $35.3 million, an increase of $2.9 million over consolidated net revenues
reported for the same period last year. The higher revenues were due to
increased malt beverage sales by Genesee Brewing Company and higher sales by
Ontario Foods.
On a consolidated basis, the Corporation reported net earnings of $414,000,
or $.26 per share, in the third quarter this year, compared to a net earnings of
$59,000, or $.04 per share, for the same period last year. The higher profit
relative to last year was primarily attributable to improved performance by
Genesee Brewing Company.
Genesee Brewing Company
Genesee Brewing Company's net sales in the third quarter were $29.0
million, an increase of $2.5 million from last year's third quarter net sales of
$26.5 million. Barrel sales (which include volume under the contract to brew and
package product for Boston Beer Company) were up 28,000 barrels, or 6.6%. The
increase in barrel sales was primarily attributable to higher volume under the
contract with Boston Beer Company. Volume under this contract was up 41,000
barrels compared to the third quarter last year when production had just
recently commenced. In addition, sales of Genesee Brewing Company's HighFalls
craft brands continued to grow, with third quarter barrel sales up 22,000
barrels, or 25%, relative to the same period a year ago. Sales of Genesee
Brewing Company's established core brands continued to decline, although the
rate of decline in the third quarter was lower than the rate experienced in the
first two quarters this year.
The overall increase in barrel sales as well as the shift in product mix
towards higher priced HighFalls products also resulted in increased sales
revenues. In addition, sales revenues in the third quarter this year benefited
from a general industry price increase that went into effect late in fiscal
1996.
The price increase, in turn, had a favorable impact on Genesee Brewing
Company's gross profit which increased to $6.7 million, or 23.0% of net sales,
in the third quarter of fiscal 1997, compared to $5.7 million, or 21.4% of net
sales, in the third quarter of fiscal 1996.
The increase in gross profit was also attributable to lower aluminum can
costs. The unit prices paid by Genesee Brewing Company for aluminum cans
increased substantially on January 1, 1995 due to sharply higher world aluminum
prices. However, commencing January 1, 1996, aluminum can prices began to
decline. Thus, although aluminum can prices for the third quarter this year were
still higher than they were in the third quarter of fiscal 1995, they were below
the prices paid in the third quarter last year.
7
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GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Genesee Brewing Company's selling, general and administrative expenses were
up $756,000 in the third quarter of fiscal 1997 compared to the same period last
year. The increase was primarily due to the timing of planned increases in sales
and marketing expenditures to support the company's HighFalls brands. In
particular, Genesee Brewing Company increased its HighFalls sales force as it
pursued its strategy to expand distribution of its craft brands to new markets.
Genesee Brewing Company reported an operating loss of $930,000 for the
third quarter this year versus a $1.2 million operating loss for the third
quarter last year. Increased contract brewing and HighFalls volume, higher
selling prices and lower aluminum can costs all contributed to Genesee Brewing
Company's improved profit performance in the third quarter of fiscal 1997
despite lower core brand volume.
Ontario Foods
Third quarter net sales for Ontario Foods were $5.7 million, compared to
$5.2 million for the third quarter last year. The sales increase was
attributable to higher private label tea and side dish sales. Contract sales
were down due to the loss of a major contract customer that moved production to
its own production facility late in fiscal 1996.
Ontario Foods reported a third quarter operating profit of $38,000,
compared to an operating loss of $40,000 in the third quarter last year. Despite
the lower contract sales, Ontario Food's operating profit increased due to
higher private label sales and a more favorable product mix.
Genesee Ventures
Genesee Ventures, Inc., the Corporation's equipment leasing and real estate
investment subsidiary, reported operating income of $575,000 for the third
quarter of fiscal 1997, compared to $583,000 for the third quarter of fiscal
1996. Lease revenues continued to be strong, reflecting the effect of the large
volume of leases closed last year. Genesee Ventures' real estate investments
maintained high occupancy rates and performance was generally on plan for the
third quarter.
Comparison of 39 weeks ended January 25, 1997 to 39 weeks ended January 27,
1996
Consolidated net revenues for the thirty-nine weeks ended January 25, 1997
were $112.7 million, an increase of $6.7 million from the consolidated net
revenues of $106.0 million reported for the same period last year. The higher
revenues were due to increased malt beverage sales by Genesee Brewing Company
and higher sales by Ontario Foods.
8
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GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
On a consolidated basis, the Corporation reported net earnings of $1.8
million, or $1.14 per share, for the first three quarters this year, compared to
net earnings of $778,000, or $.48 per share, for the same period last year. The
$1.1 million, or $.66 per share, increase in net earnings was primarily
attributable to Genesee Brewing Company's improved operating performance.
Genesee Brewing Company
Genesee Brewing Company's net sales in the first three quarters of fiscal
1997 were $94.4 million, an increase of $5.1 million, or 5.7%, from the prior
year's net sales of $89.3 million. Barrel sales (which include volume under the
contract to brew and package product for Boston Beer Company) were up 56,000
barrels, or 3.8%, in the first three quarters of fiscal 1997. The increase in
barrel sales for Genesee Brewing Company were the result of higher sales under
the Boston Beer Company contract, which totaled 184,000 barrels in the first
three quarters of this year compared to 20,000 barrels in the same period last
year, an increase of 164,000 barrels. HighFalls craft brand sales were also up
on a year-to-date basis, increasing 89,000 barrels or 38%. Sales of Genesee
Brewing Company's core brands, however, continued to decline, although the rate
of decline in the third quarter was lower than the rate of the first two
quarters this year. The increase in net sales revenue was attributable to the
overall barrelage increase as well as to the general industry price increase.
Genesee Brewing Company's gross profit was $23.4 million, or 24.8% of net
sales, in the first three quarters of fiscal 1997, compared to $20.2 million, or
22.6% of net sales, in the first three quarters of fiscal 1996. The increase in
gross profit as a percent of net sales was primarily the result of the industry
price increase and lower aluminum can costs.
Genesee Brewing Company's selling, general and administrative expense
increased $1.6 million in the first three of fiscal 1997 compared to the same
period last year. The increase was primarily due to the timing of planned
increases in selling and marketing expenditures to support the growth of the
company's HighFalls brands, including expansion into new markets, such as
Arkansas, California, New Mexico and Oklahoma in the current fiscal year.
Genesee Brewing Company reported an operating loss of $649,000 for the
first three quarters of this year compared to an operating loss of $2.3 million
reported in the first three quarters of last year. Increased contract brewing
and HighFalls volume, higher selling prices and lower aluminum can costs all
contributed to Genesee Brewing Company's improved profit performance in the
first three quarters of fiscal 1997 despite lower core brand volume.
9
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GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Ontario Foods
Net sales for Ontario Foods were $16.5 million in the first three quarters
of fiscal 1997, compared to $15.2 million for the first three quarters last
year. The increase in net sales of $1.3 million, or 8.6%, for the first three
quarters was attributable to a $1.3 million increase in private label tea sales
and a $1.4 million increase in side dish sales, offset by a $1.3 million decline
in contract revenues.
Ontario Foods reported operating income of $174,000 for the first three
quarters of fiscal 1997, compared to operating income of $276,000 for the same
period last year. The decrease in operating income was due to lower contract
manufacturing volume, higher sugar costs and an increase in freight costs.
Genesee Ventures
Genesee Ventures, Inc. reported operating income of $1.8 million for the
first three quarters of fiscal 1997, compared to $1.5 million for the same
period last year. The increase in operating income was primarily attributable to
higher equipment lease revenues, which were due to the high volume of leases
closed in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and marketable securities totaled $34.0 million at
January 25, 1997, compared to $37.5 million at April 30, 1996. This decrease of
$3.5 million is largely attributable to internally funded capital expenditures
of Genesee Brewing Company.
During fiscal 1997, Genesee Brewing Company began on a multi-million dollar
capital project to install a new keg filling system and purchase new cooperage
to run on the system. This new system enhances Genesee Brewing Company's overall
packaging capabilities and allows it to package draft beer for both types of
draft dispensing systems currently used by the retail trade. The capital project
was substantially completed during the third quarter of fiscal 1997 and
expenditures for this project totaled approximately $5 million of which $3.5
million was expended in the third quarter.
The Corporation accounts receivable balance at January 25, 1997 was
approximately $2.0 million lower than the balance at April 30, 1996. The peak
selling season for Genesee Brewing Company is typically April through August.
Genesee Brewing Company's receivables are traditionally higher at fiscal year
end and throughout the summer months. In addition, consolidated accounts
receivable at April 30, 1996 included a receivable created when the Corporation
re-balanced its cash investment portfolio. The receivable was collected the
following day and the cash was re-invested in marketable securities.
10
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GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Inventories at January 25, 1997 were $1.0 million higher than the balance
reported at April 30, 1996. The higher inventory balances were due primarily to
the timing of an inventory buildup prior to planned annual maintenance on
Genesee Brewing Company's packaging lines.
The Corporation expects to fund future capital needs internally as it has
in the past. With respect to equipment leasing and real estate, such investments
may also include a debt component, generally obtained on a non-recourse basis.
During the second quarter this year, the mortgage on the Clinton Square
office building (in which the Corporation has both a partner's and creditor's
interest) was extended for one year with the existing lender. As part of that
extension, the Corporation agreed to extend its $2.5 million limited guarantee
of the mortgage loan for one year. The building is currently 97% occupied,
operating on plan and in compliance with all covenants and obligations contained
in the mortgage loan agreement. The building has an appraised value in excess of
the debt against it. In addition, the other partners in the project have
provided the Corporation with additional collateral to secure the Corporation's
obligation under its guaranty to the bank.
To enhance the Corporation's opportunities for future growth and to
capitalize on its strong financial condition, the Corporation's long term
strategy includes plans to seek investment opportunities outside its core
brewing business. The Corporation continues to search for and develop such
opportunities.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) No exhibits are being filed with this report.
(b) The Corporation filed a report on Form 8-K on January 22, 1997
to report the change in the Corporation's fiscal year from a
fiscal year ending on April 30th in each year to a fiscal year ending
on the Saturday nearest to April 30th in each year.
11
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GENESEE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENESEE CORPORATION
Date: 3/11/97 / s / Robert N. Latella
Robert N. Latella
Executive Vice President
and Chief Operating Officer
Date: 3/11/97 / s / Edward J. Rompala
Edward J. Rompala
Vice President and Treasurer
12
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S>
<C> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-3-1997
<PERIOD-END> JAN-27-1997
<CASH> 1,925
<SECURITIES> 32,042
<RECEIVABLES> 11,637
<ALLOWANCES> 402
<INVENTORY> 12,983
<CURRENT-ASSETS> 60,322
<PP&E> 109,738
<DEPRECIATION> 76,959
<TOTAL-ASSETS> 135,748
<CURRENT-LIABILITIES> 18,830
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<COMMON> 858
0
0
<OTHER-SE> 91,260
<TOTAL-LIABILITY-AND-EQUITY> 135,748
<SALES> 143,508
<TOTAL-REVENUES> 143,508
<CGS> 85,881
<TOTAL-COSTS> 30,780
<OTHER-EXPENSES> 26,010
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