SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended July 29, 2000
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), par
value $.50 per share 209,885
Class B Common Stock (non-voting), par
value $.50 per share 1,411,279
1
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
July 29, 2000 and April 29, 2000
(Dollars in thousands, except per share data)
<TABLE>
<S> <C> <C>
UNAUDITED AUDITED
July 29, 2000 April 29, 2000
Assets
Current assets:
Cash and cash equivalents $ 6,185 $ 7,649
Marketable securities available for sale 8,272 8,029
Trade accounts receivable, less allowance for doubtful receivables
of $262 at July 29, 2000 and at April 29, 2000 3,272 2,776
Inventories, at lower of cost (first-in, first-out) or market 11,190 9,197
Deferred income tax assets, current portion 83 113
Other current assets 340 61
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Total current assets 29,342 27,825
Net property, plant and equipment 12,764 12,629
Goodwill and other intangibles net of accumulated amortization of $3,426 at
July 29, 2000 and $3,107 at April 29, 2000 26,343 26,662
Other assets 1,438 1,446
Net assets held for disposal - noncurrent 26,213 27,209
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Total assets $ 96,100 $ 95,771
---------------------------------------------------------------------------------==========-----============
---------------------------------------------------------------------------------==========-----============
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable, current portion 300 300
Accounts payable 2,399 1,454
Income taxes payable 0 64
Accrued compensation 315 235
Accrued expenses and other 1,802 1,384
Net liabilities held for disposal - current 1,604 2,127
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Total current liabilities 6,420 5,564
Notes payable, noncurrent portion 5,898 5,973
Deferred income tax liabilities, noncurrent portion 418 381
Other liabilities 646 646
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Total liabilities 13,382 12,564
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Shareholders' equity:
Common stock:
Class A common stock, voting, $.50 par value. Authorized 450,000 shares 105 105
;209,885 shares issued and outstanding
Class B common stock, non-voting, $.50 par value. Authorized 3,850,000 753 753
shares; 1,506,876 shares issued
Additional paid-in capital 5,831 5,847
Retained earnings 79,447 80,023
Accumulated other comprehensive loss (51) (120)
Less: Class B treasury stock, at cost; 95,597 shares in July 2000 and
96,564 shares in April 2000 (3,367) (3,401)
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Total shareholders' equity 82,718 83,207
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Total liabilities and shareholders' equity $ 96,100 $ 95,771
---------------------------------------------------------------------------------==========-----============
---------------------------------------------------------------------------------==========-----============
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Earnings and Comprehensive Income
Thirteen Weeks Ended July 29, 2000 and July 31, 1999
(Dollars in thousands, except per share data)
<TABLE>
<S> <C> <C>
UNAUDITED UNAUDITED
2000 1999
Revenues $ 11,074 $ 10,483
Cost of goods sold 10,665 9,643
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Gross profit 409 840
Selling, general and administrative expenses 1,404 1,615
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Operating loss (995) (775)
Investment income 153 161
Other income 245 28
Interest expense (108) (141)
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Loss from continuing operations before income taxes (705) (727)
Income tax benefit (176) (183)
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Loss from continuing operations (529) (544)
Discontinued operations:
Earnings from operations of the discontinued segments
(less applicable income tax expense of $ 347 and $ 631 ,respectively) 520 1,070
-------------------------------------------------------------------------------------------------------------------
Net (loss)/earnings (9) 526
Other comprehensive income / (loss), net of income taxes:
Unrealized holding gains / (losses) arising during the period 69 (130)
-------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 60 $ 396
--------------------------------------------------------------------------------===========-===========------------
--------------------------------------------------------------------------------===========-===========------------
Basic loss per share from continuing operations $ (0.33) $ (0.34)
Basic earnings per share from discontinued operations $ 0.32 $ 0.66
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Basic (loss)/earnings per share $ (0.01) $ 0.32
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-------------------------------------------------------------------------------------------------------------------
Diluted loss per share from continuing operations $ (0.33) $ (0.34)
Diluted earnings per share from discontinued operations $ 0.32 $ 0.66
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Diluted (loss)/earnings per share $ (0.01) $ 0.32
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 1,620,643 1,619,461
Weighted average and common equivalent shares 1,620,643 1,619,461
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
GENESEE CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Thirteen Weeks Ended July 29, 2000 and July 31, 1999
(Dollars in thousands)
<TABLE>
<S> <C> <C>
UNAUDITED UNAUDITED
2000 1999
Cash flows from operating activities:
Net loss from continuing operations $ (529) $ (544)
Adjustments to reconcile net loss to net
cash used in operating activities:
Net loss / (gain) on sale of marketable securities 10 (30)
Depreciation and amortization 762 699
Other 540 195
Changes in non-cash assets and liabilities:
Trade accounts receivable (496) (247)
Inventories (1,993) 677
Other assets 320 27
Accounts payable 945 (524)
Accrued expenses and other (136) (1,032)
Income taxes payable 105 (491)
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Net cash used in continuing operating activities (472) (1,270)
Net cash provided by discontinued operations 150 246
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Net cash used in operating activities (322) (1,024)
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Cash flows from investing activities:
Capital expenditures (418) (2,061)
Proceeds from sale of marketable securities 382 1,313
Purchases of marketable securities and other investments (509) (1,461)
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Net cash used in continuing investing activities (545) (2,209)
Net cash provided by (used in) discontinued operations 45 (12)
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Net cash used in investing activities (500) (2,221)
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Cash flows from financing activities:
Proceeds from acquisition of debt 0 1,546
Principal payments on debt (75) (20)
Payment of dividends (567) (567)
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Net cash (used in) provided by financing activities (642) 959
--------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (1,464) (2,286)
Cash and cash equivalents at beginning of the period 7,649 5,836
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of the period $ 6,185 $ 3,550
---------=============================================================== ===========---=============-----------------
---------=============================================================== ===========---=============-----------------
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
GENESEE CORPORATION
Notes to Consolidated Financial Statements
NOTE (A) Planned Divestiture of the Corporation's Brewing and Equipment
Leasing and Real Estate Investment Businesses
The Corporation has entered into an agreement to sell substantially all the
assets of the brewing business for $22 million plus net working capital at the
closing date to a management group led by the Corporation's President and Chief
Executive Officer. The Corporation has also entered into a letter of intent to
sell all of the outstanding stock of Ontario Foods, Inc., which represents the
Corporation's Foods Division. Terms of this transaction have not been disclosed.
The Corporation's equipment leasing subsidiary has entered into an agreement in
principle to sell a significant portion of its lease portfolio for $15.3
million, generating net proceeds to the Corporation of approximately $13
million. This transaction is expected to result in an estimated net loss of
approximately $3.1 million, which was recorded in the fourth quarter of fiscal
2000. The Corporation is evaluating strategies to sell or otherwise divest the
Corporation's remaining assets. In accordance with generally accepted accounting
principles, the results of operations of the Corporation's brewing and equipment
leasing and real estate businesses have been segregated from the Corporation's
continuing operations and accounted for as discontinued operations in the
accompanying consolidated statements of earnings and comprehensive income and in
the consolidated statements of cash flows. Continuing operations consist of the
Corporate segment, which operates primarily as the Corporation's treasury, and
the Foods Division segment. The results of operations for the discontinued
brewing and equipment leasing and real estate investment businesses were as
follows:
Thirteen weeks ended
(Dollars in thousands) July 29, 2000 July 31, 1999
Revenue $ 29,886 $ 37,024
Less Beer Taxes (5,991) (7,833)
Net Revenue 23,895 29,191
Cost of Goods Sold (17,532) (20,831)
Selling, General, and Admin. (5,507) (6,765)
Other Income 11 106
Earnings from operations of
discontinued operations, net of tax
expense 520 1,070
5
<PAGE>
GENESEE CORPORATION
Notes to Consolidated Financial Statements
NOTE (A) Planned Divestiture of the Corporation's Brewing and Equipment
Leasing and Real Estate Investment Businesses (continued)
The net assets of the brewing and equipment leasing and real estate investment
businesses have been excluded from their respective captions and reported as net
(liabilities) assets held for disposal in the accompanying consolidated balance
sheet at July 29, 2000. The net assets of the brewing and equipment leasing and
real estate investment businesses at July 29, 2000 were as follows:
(Dollars in thousands)
Accounts receivable, net $ 5,497
Inventory 5,559
Net deferred income tax asset, current portion 1,008
Other current assets 663
Accounts payable (6,244)
Federal and state beer taxes payable (1,385)
Income tax payable (347)
Accrued compensation (2,354)
Accrued postretirement benefits, current portion (600)
Accrued expenses and other (3,401)
-----------------
Net liabilities held for disposal - current ($1,604)
-----------------
-----------------
Net property, plant and equipment $ 22,422
Investment in and notes receivable from unconsolidated real
estate partnerships 5,322
Investment in direct financing and leveraged leases 21,050
Other assets 1,022
Net deferred income tax liability, noncurrent portion (6,372)
Accrued postretirement benefits, noncurrent portion (14,476)
Other liabilities (74)
Minority interest (2,681)
-----------------
Net assets held for disposal - noncurrent $ 26,213
-----------------
-----------------
6
<PAGE>
GENESEE CORPORATION
Notes to Consolidated Financial Statements
NOTE(B) The Corporation's consolidated financial statements presented
herein are unaudited with the exception of the Consolidated Balance Sheet at
April 29, 2000 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 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 on Form 10-K for the
year ended April 29, 2000. It is the Corporation's policy to reclassify certain
amounts in the prior year consolidated financial statements to conform with the
current year presentation. Certain reclassifications of the July 31, 1999
financial statements have been made to reflect the Company's fiscal 2001
discontinued operations (as discussed in Note A above.)
NOTE (C) Inventories of continuing operations are summarized as follows:
Dollars in thousands
July 29, 2000 April 29,2000
Finished goods $ 4,313 $ 4,867
Raw materials, containers and packaging
supplies 6,877 4,330
----------- ---------
Total inventories $ 11,190 $ 9,197
NOTE (D) Segment Reporting
The Corporation has two reportable segments included in continuing operations:
food processing and corporate. The food processing segment produces dry side
dish, bouillon, artificial sweeteners, soup, drink mix and instant iced tea
products under private label for many of the country's largest supermarket
chains. The corporate segment retains the Corporation's investments in
marketable securities, generating investment income as well as supporting
corporate costs.
The Corporation has two business segments included in discontinued operations:
brewing and equipment leasing and real estate. The brewing segment produces
beers and ales for wholesale and retail distribution throughout the United
States, primarily in the northeast region of the country. The equipment leasing
and real estate segment leases construction, transportation and other high-value
equipment and machinery, and partners with experienced real estate developers to
invest in certain properties.
The Corporation evaluates performance based on operating income or loss and
earnings before income taxes.
Intersegment sales and transfers are not material and are eliminated in
consolidation. No single customer accounted for more than 10% of revenues, and
the Corporation's international revenues are not significant.
The Corporation's segments, other than corporate, are strategic business units
that offer different products and services. They are managed separately because
each business requires different technology and marketing strategies.
7
<PAGE>
GENESEE CORPORATION
Notes to Consolidated Financial Statements
Financial information for the Corporation's reportable segments is as follows:
<TABLE>
<S> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------
Food Discontinued
For the thirteen week period ended: Processing Corporate Operations Consolidated
----------------------------------------------------------------------------------------------------------
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July 29, 2000
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Net revenues from external customers $ 11,074 $ - $ - $ 11,074
Depreciation and amortization 762 - - 762
Operating loss (895) (100) - (995)
Investment income - 153 - 153
(Loss)/earnings from continuing
operations before income taxes (758) 53 - (705)
Identifiable assets 56,057 13,830 26,213 96,100
Capital expenditures 418 - - 418
----------------------------------------------------------------------------------------------------------
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July 31, 1999
----------------------------------------------------------------------------------------------------------
Net revenues from external customers $ 10,483 $ - $ - $ 10,483
Depreciation and amortization 699 - - 699
Operating loss (566) (209) - (775)
Investment income - 161 - 161
Loss from continuing
operations before income taxes (629) (98) - (727)
Identifiable assets 55,139 1,614 86,220 142,973
Capital expenditures 2,061 - - 2,061
----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE (E) Supplemental Cash Flow Information Cash paid for taxes was $
66,000 and $ 451,000 for the thirteen week period ended July 29, 2000 and July
31, 1999, respectively; cash paid for interest was $ 108,000 and $ 142,000 for
the thirteen week period ended July 29, 2000 and July 31, 1999, respectively.
NOTE (F) Corporate Dissolution and Liquidation
As mentioned in Note A, the Corporation is in the process of attempting to
sell its brewing, foods and equipment leasing businesses. The Corporation's
Board of Directors has authorized the sale of all of the Corporation's assets
and the dissolution and liquidation of the Corporation and will seek shareholder
approval of these actions.
8
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This financial review should be read in conjunction with the
accompanying consolidated financial statements. The discussion of operating
results and liquidity and capital resources for fiscal 2001 and fiscal 2000
excludes the discontinued brewing and equipment leasing and real estate
investment businesses discussed in Note (A) to the accompanying consolidated
financial statements.
SUMMARY OF CONTINUING AND DISCONTINUED OPERATIONS
Comparison of 13 weeks ended July 29, 2000 to 13 weeks ended July 31, 1999
On a consolidated basis, the Corporation reported an operating loss
from continuing operations of $995,000, which was an increase of $220,000 as
compared to the same period last year.
On a consolidated basis, the Corporation reported a loss from
continuing operations of $529,000, or $.33 basic and diluted loss per share, in
the first quarter this year, compared to a loss from continuing operations of $
544,000, or $.34 basic and diluted loss per share, for the same period last
year.
The Corporation reported net earnings from discontinued operations of
$520,000, net of tax expense of $347,000, or $.32 basic and diluted earnings per
share for the first quarter of fiscal 2001, compared to net earnings from
discontinued operations of $1.1 million, net of tax expense of $631,000, or $.66
basic and diluted earnings per share for the same period last year.
RESULTS OF CONTINUING OPERATIONS
Comparison of 13 weeks ended July 29, 2000 to 13 weeks ended July 31, 1999
Foods Division
Net sales for the Corporation's Foods Division increased $591,000 to
$11.1 million in the first quarter this year as compared to $10.5 million for
the same period last year. The increase in net sales was primarily attributable
to increased sales of a new drink mix product.
Gross profit for the Foods Division decreased by $431,000 when
comparing the first quarters of fiscal 2001 and fiscal 2000. Gross profit for
the first quarter of fiscal 2001 includes a $900,000 pre-tax charge for
estimated costs associated with a recently discovered product quality problem
involving the new drink mix product while the prior year first quarter's gross
profit reflects $630,000 of costs associated with transitioning production to
the Medina, New York facility.
Selling, general and administrative expenses decreased $102,000 in the
first quarter of fiscal 2001 compared to the same period last year. This
decrease is the result of a variety of reductions in SG&A costs realized in the
first quarter of fiscal 2001.
The Foods Division had an operating loss of $895,000 in fiscal 2001,
which was $329,000 greater than the $566,000 operating loss reported in fiscal
2000. Foods Division profitability in fiscal 2001 was adversely impacted by the
reasons identified above.
9
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES (from continuing operations)
Cash and cash equivalents and marketable securities in the aggregate
decreased $1.2 million from April 29, 2000 to July 29, 2000. Cash and cash
equivalents decreased $1.5 million from April 29, 2000 to July 29, 2000.
Marketable securities increased $243,000 from April 29, 2000 to July 29, 2000.
Net trade accounts receivable increased by $496,000. This increase
from the April 29, 2000 balance is primarily attributable to timing and
increased sales volume at the Foods Division.
Inventories increased by $2.0 million. This increase from April 29,
2000 is related to additional purchases of sugar by the Foods Division.
Net property, plant and equipment increased an immaterial amount as
a result of routine capital expenditures by the Foods division exceeding normal
depreciation expense for the first quarter of fiscal 2001.
Other current assets increased by $ 279,000. This increase from April
29, 2000 is due to a variety of insignificant account balance changes.
Current liabilities increased $856,000. This increase from April 29,
2000 is primarily related to an increase in accounts payable at the Foods
Division resulting from increased purchases of sugar as mentioned above, and
timing.
Notes payable decreased $75,000. This decrease from April 29, 2000
is a result of normal debt payments and expected amortization of notes payable.
In connection with the decision to sell or dispose of all the
Corporation's assets and the proposed liquidation and dissolution of the
Corporation, the Corporation's Board of Directors has decided to suspend the
payment of regular quarterly dividends, preferring to make liquidating
distributions following shareholder approval of the proposal to liquidate and
dissolve the Corporation and consummation of the transactions identified in Note
A of this report.
10
<PAGE>
GENESEE CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Forward-Looking Statements
This report contains forward-looking statements within the meaning
of the federal securities laws. These forward-looking statements may include
statements about the operations and prospects for the Corporation and its
subsidiary businesses. These forward-looking statements include statements
regarding the timing and results of the sale of the Corporation's brewing and
equipment leasing businesses, the estimated loss from the sale of the equipment
leasing businesses, and the dissolution and liquidation of the Corporation.
These forward-looking statements involve significant risks and uncertainties and
there can be no assurance that the expectations or results reflected in these
statements will be realized or achieved. Such risks and uncertainties include,
without limitation, the failure of the proposed transactions to close for
whatever reasons, further negotiation of terms and conditions, purchase price
adjustments, post-closing indemnification obligations, the failure of the
purchaser of the brewing business to obtain financing necessary to consummate
the transaction, the failure to satisfy other conditions necessary to consummate
the sale of the Corporation's operating businesses such as completion of
satisfactory due diligence, negotiation of definitive agreements for the sale of
the foods and equipment leasing businesses, failure to obtain necessary
regulatory approvals and third party consents, the possibility that a delay in
resolving such conditions could jeopardize the transactions, and the possibility
that Cheyenne Leasing Company may not achieve the residual value projected for
equipment coming off leases as Cheyenne's lease portfolio matures.
11
<PAGE>
GENESEE CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. None
(b) Reports on Form 8-K. The Corporation filed reports on
Form 8-K on May 2, 2000, May 5, 2000 and June 29, 2000
to report information under Item 5 (Other Events.)
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: 09/15/00 /s /Samuel T. Hubbard, Jr.
Samuel T. Hubbard, Jr.
President and Chief Executive Officer
Date: 09/15/00 /s / John B. Henderson
John B. Henderson
Senior Vice President and
Chief Financial Officer
12
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