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 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 0 - 1653
GENESEE CORPORATION
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 16-0445920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
445 St. Paul Street, Rochester, New York 14605
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 546-1030
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
As of the date of this report, the Registrant had the following
shares of common stock outstanding:
Number of Shares
Class Outstanding
Class A Common Stock (voting), 209,885
par value $.50 per share
Class B Common Stock (non-voting), 1,408,194
par value $.50 per share
<PAGE>
GENESEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, 1998 and May 3, 1997
<TABLE>
<S> <C> <C>
UNAUDITED AUDITED
(Dollars in Thousands) January 31, 1998 May 3, 1997
ASSETS
Current assets:
Cash and cash equivalents $ 2,559 4,521
Marketable securities available for sale 17,078 32,627
Trade accounts receivable, less allowance for doubtful receivables
of $426 at January 31, 1998; $408 at May 3, 1997 10,321 11,037
Inventories, at lower of cost (first-in, first-out) or market 15,269 13,957
Deferred income tax assets 760 760
Other current assets 1,523 1,219
Total current assets 47,510 64,121
Net property, plant and equipment 34,910 32,986
Investment in and notes receivable from unconsolidated real estate partnerships 4,906 4,949
Investments in direct financing and leveraged leases 33,684 32,144
Goodwill 9,308 -
Other assets 4,827 2,729
Total assets 135,145 136,929
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 8,157 9,611
Income taxes payable 392 932
Federal and state beer taxes payable 940 2,029
Accrued expenses and other 8,518 6,395
Total current liabilities 18,007 18,967
Deferred income tax liabilities 8,657 8,789
Accrued postretirement benefits 15,515 15,515
Mortgage payable 541 -
Other liabilities 344 413
Total liabilities 43,064 43,684
Minority interests in consolidated subsidiaries 2,120 1,690
Shareholders' equity:
Common stock Class A 105 105
Common stock Class B 753 753
Additional paid-in capital 5,842 5,834
Retained earnings 86,322 87,720
Unrealized gain on marketable securities, net of income taxes 414 648
Less treasury stock, at cost 3,475 3,505
Total shareholders' equity 89,961 91,555
Total liabilities and shareholders' equity $ 135,145 136,929
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF EARNINGS AND RETAINED EARNINGS
Thirteen Weeks Ended January 31, 1998 and January 25, 1997
<TABLE>
(Dollars in Thousands,
Except Per Share Data)
<S> <C> <C>
UNAUDITED
1998 1997
Revenues $ 42,560 44,644
Federal and state beer taxes 6,701 9,315
Net revenues 35,859 35,329
Cost of sales 28,877 27,557
Gross profit 6,982 7,772
Selling, general and administrative expenses 8,532 8,242
Operating loss (1,550) (470)
Investment income 1,336 1,120
Other income / (expense), net (73) 150
Interest of minority partners in earnings of
consolidated subsidiaries (199) (154)
Earnings / (loss) before income taxes (486) 646
Income taxes (139) 232
Net earnings / (loss) (347) 414
Basic and Diluted earnings / (loss) per share (.21) .26
Retained earnings at beginning of period 86,669 87,015
Retained earnings at end of period $ 86,322 87,429
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
GENESEE CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF EARNINGS AND RETAINED EARNINGS
Thiry Nine Weeks Ended January 31, 1998 and January 25, 1997
<TABLE>
(Dollars in Thousands,
Except Per Share Data) UNAUDITED
<S> <C> <C>
1998 1997
Revenues $ 143,440 143,508
Federal and state beer taxes 24,721 30,780
Net revenues 118,719 112,728
Cost of sales 91,965 85,881
Gross profit 26,754 26,847
Selling, general and administrative expenses 28,042 26,010
Operating income (1,288) 837
Investment income 2,725 2,252
Other income / (expense), net (233) 292
Interest of minority partners in earnings of
consolidated subsidiaries (582) (503)
Earnings before income taxes 622 2,878
Income taxes 322 1,036
Net earnings 300 1,842
Basic and Diluted earnings per share 0.18 1.14
Retained earnings at beginning of period 87,720 87,285
Less: Dividends - $1.05 per share in 1998
and $1.05 per share in 1997 1,698 1,698
Retained earnings at end of period $ 86,322 87,429
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
GENESEE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty Nine Weeks Ended January 31, 1998 and January 25, 1997
<TABLE>
UNAUDITED
<S> <C> <C>
(Dollars in thousands) 1998 1997
Cash flows from operating activities:
Net earnings $ 300 1,842
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,985 3,549
Other 599 285
Changes in non-cash assets and liabilities:
Trade accounts receivable 999 1,964
Inventories (932) (1,024)
Other assets 166 49
Accounts payable (1,589) (850)
Accrued expenses and other 1,079 1,790
Income taxes payable (540) 480
Federal and state beer taxes (1,089) (1,328)
Other liabilities (69) (23)
Net cash provided by operating activities 3,909 6,734
Cash flows from investing activities:
Purchase of Freedom Foods, net of cash acquired (11,060) -
Capital expenditures (5,170) (6,024)
Sales of marketable securities 29,816 11,694
Purchases of marketable securities and other investments (16,133) (7,493)
Investments in and advances to unconsolidated real
estate investments, net of distributions 43 121
Net investment in direct financing and leveraged leases (1,540) (3,807)
Withdrawals by minority interest (152) (202)
Net cash used in investing activities (4,196) (5,711)
Cash flows from financing activities:
Principle payments on mortgage payable (15) -
Payment of dividends (1,698) (1,698)
Proceeds from excersise of stock options 38 40
Net cash used in financing activities (1,675) (1,658)
Net decrease in cash and cash equivalents (1,962) (635)
Cash and cash equivalents at beginning of the year 4,521 2,560
Cash and cash equivalents at end of the period $ 2,559 1,925
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
GENESEE CORPORATION
Notes to Consolidated Financial Statements
NOTE (A) The Corporation's consolidated financial statements
enclosed herein are unaudited with the exception of the
Consolidated Balance Sheet at May 3, 1997 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 May
3, 1997.
NOTE (B) Inventories are summarized as follows:
<TABLE>
<S> <C> <C>
Dollars in thousands
January 31, 1998 May 3, 1997
Finished goods $ 5,729 5,250
Goods in process 3,532 2,301
Raw materials, containers and packaging supplies 6,008 6,406
Total inventories $ 15,269 13,957
</TABLE>
NOTE (C) During the third quarter of fiscal 1998, the Corporation
adopted the provisions of Statement of Financial
Accounting Standards No. 128, Earnings Per Share (SFAS
128) effective January 31, 1998. This statement replaces
the presentation of primary earnings per share with Basic
earnings per share, which is computed by dividing the
income available to common shareholders by the weighted
average number of common shares outstanding for the
period. SFAS 128 also requires the presentation of
Diluted earnings per share, which reflects the potential
dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into
common stock. The effects of SFAS 128 are as follows:
<TABLE>
<S> <C> <C>
January 31, 1998 January 25, 1997
Thirteen weeks ending:
Basic and diluted earnings / (loss) per share ($.21) $.26
Weighted average common shares outstanding 1,618,079 1,617,227
Weighted average and common equivalent shares 1,622,607 1,621,472
Thirty nine weeks ending:
Basic and diluted earnings per share $.18 $1.14
Weighted average common shares outstanding 1,617,923 1,617,058
Weighted average and common equivalent shares 1,622,700 1,622,587
</TABLE>
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Comparison of 13 weeks ended January 31, 1998 to 13 weeks ended
January 25, 1997
Consolidated net revenues for the thirteen weeks ended January 31,
1998 were $35.9 million, an increase of $530,000 over consolidated net
revenues reported for the same period last year. The higher revenues
were due to increased sales by the Corporation's Foods Division.
On a consolidated basis, the Corporation reported a net loss of
$347,000, or $.21 basic and diluted loss per share, in the third quarter
this year, compared to a net profit of $414,000, or $.26 basic and
diluted earnings per share, for the same period last year. The loss for
the current year was attributable to lower sales and a larger pre-tax
loss in the Corporation's brewing operations.
Genesee Brewing Company
Genesee Brewing Company's net sales in the third quarter were
$26.5 million, a decrease of $2.5 million from last year's third quarter
net sales of $29.0 million. Barrel sales (which include volume under
the contract to brew and package product for Boston Beer Company) were
down 43,900 barrels, or 9.6%, despite a 1,635 barrel increase in
contract brewing volume. Volume under the contract to brew and package
product for Boston Beer Company increased 2.9% in the third quarter to
57,550 barrels.
The slower growth under the Boston Beer contract is primarily the
result of production approaching the maximum level required by Boston
Beer Company to meet consumer demand in the markets where Boston Beer
Company products produced by Genesee Brewing Company are sold. With
Boston Beer Company reporting that sales of its Samuel Adams craft
brands declined slightly in calendar 1997, volume under Genesee Brewing
Company's contract with Boston Beer Company is not expected to
significantly exceed current levels. Future changes in volume will
depend on consumer demand for Boston Beer Company products and on
decisions made by Boston Beer Company regarding allocation of production
among its several sources of supply.
As has been the case for several years, Genesee Brewing Company's
core brands continued to experience declining volume. Core brand volume
was down 30,000 barrels, or 11.3% in the third quarter. Within the core
brands, higher-margin returnable glass packages and 24-can packages
showed the largest volume declines. These declines were partially
offset by higher unit sales of lower margin, value-priced 30 and 36 can
"Multipaks".
The beer industry in the United States is highly competitive. The
industry is dominated by three large national brewers who account for
approximately 83% of domestic production: Anheuser Busch, Inc., Miller
Brewing Company and Coors Brewing Company. In comparison, the volume of
malt beverages produced by Genesee Brewing Company in calendar 1997
represented only about 1% of domestic production. During the past two
years, per capita consumption of malt beverages in the United States has
declined and total consumption has grown by an average of less than 1%
a year. However, consumption of domestically produced malt beverages
has remained basically flat during this period, with the increase in
overall consumption coming largely from the increasing popularity of
imported malt beverages.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
During the past ten years, demand for many established domestic brands has
declined as consumers turned to the many new domestic brands, the wide
array of imported brands and the diverse range of beer styles offered by
the craft beer segment.
As a result of these trends and the excess capacity that exists in
the industry, brewers have attempted to gain market share through
reduced pricing, intensive marketing and promotional programs, new
product introductions and innovative packaging. Intense price
competition has prevented any meaningful price increases during the past
two years. In addition, the industry has seen increased levels of
price discounting and price promotions and a growth in popularity of
value priced 30 and 36 can Multipaks.
The competitive position of smaller brewers like Genesee Brewing
Company has also been adversely affected by the consolidation that is
occurring within the distribution tier of the brewing industry. The
National Beer Wholesalers Association estimates that the number of beer
wholesalers in the United States declined by 14% between 1992 and 1997.
The effects of this consolidation have been aggravated by the aggressive
efforts of the large national brewers to obtain an increasing share of
the distributor's time and attention devoted to their brands. During
the past several years, the large national brewers have implemented a
wide range of inducements, incentives and contractual terms to cause
their distributors to make a greater commitment to their brands, largely
at the expense of the brands of smaller brewers, like Genesee, that are
also sold by these distributors. These developments have made it
increasingly difficult for Genesee Brewing Company to effectively
promote and sell its brands in its core markets and to expand sales of
its products in new or lower share markets.
Growth of the craft beer segment of the industry slowed
dramatically in 1997, especially during the second half of the year.
Over the five-year period ended December 31, 1996, the craft beer
segment grew at a compounded annual rate of almost 40%. However, the
company believes the growth rate for the craft beer segment fell to
single digit in 1997, with several of the larger craft brewers reporting
no gains or even declining sales. The large national brewers have now
entered the craft segment with craft-style products of their own or by
acquiring ownership interests in existing craft brewers. These trends
suggest that the craft segment may experience, at best, only modest
growth in the near term and that competitive pressures in the segment
will continue to increase. Reflecting these trends, sales of the
company's HighFalls craft brands during the third quarter were down
12,000 barrels, or 11.3%, compared to the same period a year ago.
The negative volume trends for both the Genesee core brands and
the HighFalls craft brands, together with the unfavorable shift in
product mix towards lower-margin contract volume and Multipak can
packages contributed to a $1.6 million decline in gross profit for the
third quarter this year. In addition, intense competition has resulted
in price stagnation over the past two years, further depressing Genesee
Brewing Company's gross profit margins. Genesee Brewing Company's gross
profit per barrel declined to $12.14 for the third quarter this year
compared to $14.56 for the same period last year, reflecting the
continued price pressure and the unfavorable shift in package mix.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Selling, general and administrative expenses were up $78,000 in
the third quarter of fiscal 1998 compared to the same period last year.
The increase was due to the timing of planned increases in sales and
marketing expenditures -- primarily to support the company's HighFalls
brands and expansion of those brands into new markets.
As a result of lower volume, the unfavorable shift in product mix
and increased sales and marketing expenditures, Genesee Brewing Company
showed an operating loss of $2.6 million for the third quarter this year
versus a $931,000 operating loss for the third quarter last year.
The competitive conditions in the brewing industry that are
impacting the performance of Genesee Brewing Company are not expected to
abate in the near term. In response to these conditions, Genesee
Brewing Company has reduced planned increases in its fiscal 1998 sales
and marketing budgets by $920,000 resulting in third quarter savings of
$300,000 against plan. In addition, Genesee Brewing Company is
proceeding more slowly with plans to expand distribution of the
HighFalls brands into additional states and to add new brands to the
HighFalls product line. Genesee Brewing Company is focusing its
resources on stabilizing sales and improving trends for its current
brand portfolio in existing markets. Among initiatives currently under
way is a television and radio advertising campaign being developed to
promote the JW Dundee's Honey Brown Lager brand.
In addition to reducing sales and marketing spending, Genesee
Brewing Company has intensified efforts to reduce its production costs
and administrative expenses, but these cost reductions did not
materially improve third quarter performance and it will be extremely
difficult to realize additional cost reductions sufficient to offset the
year to date operating loss of $5.4 million.
Foods Division
Third quarter net sales for the Foods Division were up $2.9
million, or 50.4%, over the prior year period. Sales of bouillon cubes
and powder, resulting from the May 1997 acquisition of Freedom Foods,
Inc., accounted for $2.3 million of the Foods Division's overall sales
increase. Sales and operating profit from the newly acquired bouillon
business generally met expectations in the third quarter.
Sales of the Foods Division's existing private label product lines
increased by $600,000 compared to the third quarter last year, due to
higher iced tea sales and to a recently completed contract to supply dry
soup mix to the U.S. Government. Sales revenue under this contract
totaled $617,000 in the third quarter.
Gross profit for the quarter was up $685,000 compared to the same
period last year due to higher sales volume. However, the Foods
Division's gross profit margin as a percent of sales was lower in the
third quarter this year due to unfavorable manufacturing variances
arising from the ramping up of bouillon production to meet new orders.
In addition, the Foods Division experienced higher outside warehousing
costs.
Selling, general and administrative expenses were up $257,000
primarily due to increased broker commissions as a result of higher
sales volume but also due to higher profit sharing and bonus accruals.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Due to continued and profitable growth in existing product lines
and the acquisition of the Freedom Foods bouillon business, the Foods
Division showed operating income of $465,000 for the quarter, an
increase of approximately $427,000 compared to the same period last year.
Genesee Ventures
Genesee Ventures, Inc., the Corporation's equipment leasing and
real estate investment subsidiary, reported operating income of $739,000
for the third quarter of fiscal 1998, compared to $575,000 for the third
quarter of fiscal 1997. Lease revenues were up $152,000 for the quarter
reflecting continued growth in Genesee Ventures' leasing portfolio. The
performance of Genesee Ventures' real estate investments was generally
on plan for the third quarter and slightly ahead of last year.
Comparison of 39 weeks ended January 31, 1998 to 39 weeks ended January
25, 1997
Consolidated year-to-date net revenues were $118.7 million, an
increase of $6.0 million from the consolidated net revenues of $112.7
million reported for the same period last year. The higher revenues
were the result of increased sales by the Corporation's Foods Division.
On a consolidated basis, the Corporation reported net earnings of
$300,000, or $.18 basic and diluted earnings per share, for the first
three quarters of this year, compared to net earnings of $1.8 million,
or $1.14 basic and diluted earnings per share, for the same period last
year. The $1.5 million, or $.96 per share, decrease in net earnings was
primarily attributable to a decline in Genesee Brewing Company's
operating performance.
Genesee Brewing Company
Genesee Brewing Company's net sales in the first three quarters of
fiscal 1998 were $90.4 million, a decrease of $4.0 million, or 4.2%,
from the prior year's net sales of $94.4 million. Barrel sales (which
include volume under the contract to brew and package product for Boston
Beer Company) were down 46,000 barrels, or 3.1%, in the first three
quarters of fiscal 1998. Volume under the Boston Beer Company contract
totaled 232,000 barrels through January, compared to 184,000 barrels in
the same period last year, an increase of 46,000 barrels, or 25.4%.
Sales of Genesee Brewing Company's HighFalls craft brands were up
5,700 barrels, or 1.8%, over the same period a year ago. However,
through the first nine months of fiscal 1998, only one HighFalls brand
showed increased volume relative to the prior year -- Honey Brown Lager
volume was up 1.2%. Honey Brown Light, a new product introduced in the
fourth quarter of fiscal 1997, has produced incremental volume in fiscal
1998, but at lower than projected levels. The slower growth rates this
year are generally consistent with the trend for the craft beer segment
discussed above.
Genesee Brewing Company's established core brands also continued
to show negative trends. Core brand volume during the first three
quarters was down 11% compared to the same period last year and the
package mix continued to shift towards lower-margin 30 and 36 can
"Multipaks".
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
These negative volume trends and the unfavorable shift in product
mix towards lower-margin contract volume and Multipak can packages
contributed to a $3.1 million decline in gross profit this year. In
addition, intense competition has resulted in price stagnation over the
past two years, further depressing Genesee Brewing Company's gross
profit margins. Genesee Brewing Company's gross profit per barrel declined
to $13.98 for the first three quarters this year compared to $15.63
for the same period last year, reflecting the continued price pressure
and the unfavorable shift in package mix.
Selling, general and administrative expenses were up $1.6 million
compared to the same period last year. The increase was primarily due
to the timing of planned increases in sales and marketing expenditures
- -- primarily to support the company's HighFalls brands which included
expansion into new markets. Much of this fiscal year's selling and
marketing spending has been front loaded into the early part of the year
in an effort to spur sales during the critical summer selling season.
Last year's expenditures were greater in the latter portion of the year.
Due to lower volume, an unfavorable shift in product mix and
increased sales and marketing expenditures, Genesee Brewing Company
showed an operating loss of $5.4 million for the first three quarters of
this year, versus a $649,000 operating loss last year.
The competitive conditions in the brewing industry that are
impacting the performance of Genesee Brewing Company are not expected to
abate in the near term. In response to these conditions, Genesee
Brewing Company has reduced planned increases in its fiscal 1998 sales
and marketing budgets resulting in year to date savings of $920,000
against plan. Despite these reductions, total sales and marketing
expenses of $18.6 million year to date represent an increase of
approximately $1.9 million over the prior year.
In addition to reducing sales and marketing spending, the company
has also redoubled its efforts to reduce its production costs and
administrative expenses. However, to date, these cost reductions have
not materially improved Genesee Brewing Company's bottom line and it
will be extremely difficult to realize additional cost reductions
sufficient to offset the year-to-date operating loss of $5.4 million.
Foods Division
Net sales for the Foods Division were $26.1 million in the first
three quarters of fiscal 1998, compared to $16.5 million for the same
period last year. The increase in net sales of $9.6 million, or 58.2%,
for the first half was attributable to the bouillon business acquired in
May 1997, a new short term government soup contract and continued growth
in iced tea sales.
The Foods Division reported operating income of $2.2 million for
the first three quarters this year, compared to operating income of
$174,000 for the same period last year. The $2.0 million increase in
operating income was due to the increased sales volume and higher profit
margins of the bouillon business.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Genesee Ventures
Genesee Ventures, Inc., the Corporation's equipment leasing and
real estate investment subsidiary, reported operating income of $2.1
million for the first three quarters of fiscal 1998, compared to $1.8
million for the first three quarters of fiscal 1997. The increase in
operating income was primarily attributable to higher lease revenues
from Cheyenne Leasing. However, the volume of equipment leases closed
by Cheyenne Leasing during the first three quarters of fiscal 1998 was
lower than expected, reflecting the general effects of a strong economy
and low interest rates, which have caused increased competition and
lower pricing within the leasing industry.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents, and marketable securities totaled $19.6
million at January 31, 1998, compared to $37.1 million at May 3, 1997.
The decrease was primarily due to the internally funded
acquisition of Freedom Foods for $11.3 million in May 1997. In
addition, cash was used to finance an inventory build by the Foods
Division. Inventories at January 31, 1998 were $1.3 million higher than
the balances reported at May 3, 1997, primarily as a result of increased
sales by the Foods Division and due to the higher inventory balances
needed to maintain service levels for bouillon customers. In addition,
capital spending was up in the first three quarters of this fiscal year
as a result of site development work and new equipment purchases
necessary for moving bouillon production from Florida to the Foods
Division facility in Albion, New York and due to additional plant
improvements made by Genesee Brewing Company.
Trade receivables at January 31, 1998 were $716,000 lower than the
balances reported at May 3, 1997. Genesee Brewing Company's receivables
were lower due to seasonality and lower sales volume. The Foods
Division's receivable balances increased due to higher sales volume.
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 future capital needs internally as
it has in the past. With respect to real estate and equipment leasing,
such investments may also include a debt component, generally obtained
on a non-recourse basis. Any future acquisitions are expected to be
financed primarily with cash but may also involve debt financing.
In November 1997, the New York Department of Environmental
Conservation denied a request by Genesee Brewing Company for a
variance from compliance with New York regulations governing bulk
storage of chemicals used to clean and sanitize brewing equipment
and refillable bottles. An engineering study is currently under way
to determine the extent and cost of any modifications, upgrades or
new equipment needed to achieve compliance with the chemical bulk
storage requirements, which become effective in December 1999.
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
The Corporation has developed a plan in the past year to fully address the
year 2000 compliance and it does not expect that the cost to modify its
information technology infrastructure will be material to its financial
condition or results of operations. The Corporation does not anticipate any
material disruption in its operations as a result of any failure by the
Corporation to be in compliance. In the event that any of the Corporation's
significant suppliers or customers do not successfully and timely achieve Year
2000 compliance, the Corporation's business or operations should not be
materially affected.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. No exhibits are being filed with this report.
(b) Reports on Form 8-K. The Corporation did not file any
reports on Form 8-K during the quarter for which this
report is filed.
<PAGE>
GENESEE CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GENESEE CORPORATION
Date: 3/12/98 /s /Robert N. Latella
Robert N. Latella
Executive Vice President and Chief Operating Officer
Date: 3/12/98 /s /Edward J. Rompala
Edward J. Rompala
Vice President - Finance and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S>
<C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-02-1998
<PERIOD-END> JAN-31-1998
<CASH> 2,559
<SECURITIES> 17,078
<RECEIVABLES> 10,747
<ALLOWANCES> 426
<INVENTORY> 15,269
<CURRENT-ASSETS> 47,510
<PP&E> 118,439
<DEPRECIATION> 83,529
<TOTAL-ASSETS> 135,145
<CURRENT-LIABILITIES> 18,007
<BONDS> 0
<COMMON> 858
0
0
<OTHER-SE> 89,103
<TOTAL-LIABILITY-AND-EQUITY> 135,145
<SALES> 143,440
<TOTAL-REVENUES> 143,440
<CGS> 91,965
<TOTAL-COSTS> 28,042
<OTHER-EXPENSES> 24,721
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 622
<INCOME-TAX> 322
<INCOME-CONTINUING> 300
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 300
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0
</TABLE>
