UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the Quarter Ended June 30, 1997
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 No. 1-6442
ORANGE-CO, INC.
(Exact name of registrant as specified in its charter)
FLORIDA
(State or other jurisdiction of incorporation or organization)
59-0918547
(IRS Employer Identification Number)
2020 U.S. Highway 17 South, P. O. Box 2158, Bartow, Florida 33830
(Address of principal executive offices)
(941) 533-0551
(Registrant's telephone no.)
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 XX No
Number of shares outstanding of common stock, $.50 par value, as of
July 31, 1997: 10,308,975 shares
-1-
ORANGE-CO, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
June 30, 1997 (unaudited) and September 30, 1996 (audited)
Consolidated Statements of Operations (unaudited) 4
Nine and Three Months ended June 30, 1997 and 1996
Consolidated Statements of Cash Flows (unaudited) 5
Nine Months ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements (unaudited) 6-9
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Conditions 10-15
PART II. OTHER INFORMATION
ITEM 6.
Exhibits and Reports on Form 8-K 16
SIGNATURES 16
-2-
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, September 30,
1997 1996
ASSETS (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and short-term investments $ 1,276 $ 1,508
Receivables 9,622 14,905
Advances on fruit purchases - 717
Inventories 58,503 42,148
Deferred income tax 2,327 1,166
Prepaid and other 192 18
---------- ----------
Total current assets 71,920 60,462
---------- ----------
Property and equipment, net 123,103 120,538
---------- ----------
Other assets:
Excess of cost over net assets of
acquired companies 11,119 11,401
Notes receivable 1,866 2,558
Other 5,404 4,736
---------- ----------
Total other assets 18,389 18,695
---------- ----------
Total assets $ 213,412 $ 199,695
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments on long-term debt $ 7,460 $ 3,655
Note payable to bank 3,000 -
Accounts payable 3,175 5,493
Accrued liabilities 8,377 11,997
---------- ----------
Total current liabilities 22,012 21,145
Deferred income taxes 23,735 22,247
Other liabilities 842 629
Long-term debt 57,445 46,663
---------- ----------
Total liabilities 104,034 90,684
---------- ----------
Stockholders' equity:
Preferred stock, $.10 par value,
10,000,000 shares authorized;
none issued - -
Common stock, $.50 par value, 30,000,000
shares authorized; 10,349,399 issued 5,175 5,175
Capital in excess of par value 71,417 71,417
Retained earnings 33,170 32,869
--------- ---------
109,762 109,461
Less:
Treasury stock, at cost: 40,424 shares
at June 30, 1997 and 47,424 shares at
September 30, 1996 (384) (450)
--------- ---------
Total stockholders' equity 109,378 109,011
--------- ---------
Total liabilities and stockholders'
equity $213,412 $199,695
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-3-
<TABLE>
<CAPTION>
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE AND THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
(in thousands except for per share data)
Nine Months Three Months
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales $83,938 $85,379 $26,360 $34,023
Cost of sales 75,479 70,219 25,362 28,659
-------- -------- -------- --------
Gross profit 8,459 15,160 998 5,364
Other costs and expenses, net:
Selling, general and administrative (4,247) (3,837) (928) (1,315)
Gain (loss) on disposition of
property and equipment (18) 77 - 14
Other (9) 12 47 18
Interest (2,006) (1,580) (817) (584)
-------- -------- ------- -------
Income(loss) before income taxes 2,179 9,832 (700) 3,497
Income tax expense (benefit) 819 3,071 (245) 1,021
-------- -------- ------- -------
Net income(loss) $ 1,360 $ 6,761 $ (455) $2,476
======== ======== ======= =======
Net income(loss) per common and
common equivalent shares: $ .13 $ .66 $ (.04) $ .24
========= ======== ======== =======
Average number of common and
common equivalent shares outstanding 10,306 10,301 10,309 10,302
======== ======== ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-4-
<TABLE>
<CAPTION>
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1997 AND 1996
(unaudited)
(in thousands)
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,360 $ 6,761
-------- --------
Adjustments to reconcile net income to net
cash provided by (used for) operating
activities:
Depreciation and amortization 4,288 3,534
Increase(decrease)in deferred income taxes 327 (65)
(Gain) loss on disposition of property
and equipment and other 18 (77)
Change in assets & liabilities:
Decrease in receivables 5,283 1,293
Decrease in advances on fruit purchases 717 787
(Increase) in inventory (16,355) (22,463)
(Increase) in prepaid and other (174) (119)
Increase(decrease) in accounts payable and
accrued liabilities (4,470) 216
(Decrease) in income taxes payable (1,468) (74)
Other, net 63 (105)
-------- --------
Total adjustments (11,771) (17,073)
-------- --------
Net cash (used for) operating activities (10,411) (10,312)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property & equipment 8 503
Decrease in note & mortgage receivables 692 104
Additions to property & equipment (6,460) (13,556)
Increase in other assets (655) (836)
--------- --------
Net cash (used for) investing activities (6,415) (13,785)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of treasury stock 38 18
Cash dividends paid (1,031) (1,030)
Proceeds from short-term debt 3,000 3,000
Proceeds from long-term debt 14,587 21,909
-------- --------
Net cash provided by financing activities 16,594 23,897
-------- --------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (232) (200)
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,508 845
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,276 $ 645
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
-5-
ORANGE-CO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. MANAGEMENT'S OPINION
The Consolidated Financial Statements include the accounts of
Orange-co, Inc. and Subsidiaries (the "Company"), after elimination
of material intercompany accounts and transactions.
In the opinion of the management of the Company, the
accompanying financial statements reflect adjustments, consisting
only of normal recurring adjustments unless otherwise disclosed,
which are necessary to present fairly the financial position,
results of operations and cash flows for the periods presented:
. Unaudited Consolidated Balance Sheet at June 30, 1997
. Audited Consolidated Balance Sheet at September 30, 1996
. Unaudited Consolidated Statements of Operations for the
nine and three month periods ended June 30, 1997 and 1996
. Unaudited Consolidated Statements of Cash Flows for the
nine month periods ended June 30, 1997 and 1996
2. NOTES PAYABLE AND LONG-TERM DEBT
As of June 30, 1997, the Company had a $45 million working
capital line of credit payable in April, 1999. Accordingly, the
balance at June 30, 1997 was classified as long-term. This facility
is collateralized by most of the Company's current assets. The
outstanding balance at June 30, 1997 was approximately $38,341,000
leaving approximately $2,926,000 additional funds available under a
borrowing base calculation. The interest rate is variable based
upon the financial institution's cost of funds plus a margin.
Additionally, as of June 30, 1997 the Company had a $10,000,000
short-term capital revolving credit facility. As of June 30, 1997
the balance on this facility was $3,000,000 leaving $7,000,000
additional funds available. The interest rate on this facility is
also variable based upon the financial institution's cost of funds
plus a margin.
As of June 30, 1997, the Company's outstanding long-term debt
(including the $38,341,000 balance on the working capital line of
credit) was approximately $64,905,000 of which $7,460,000 matures in
the next twelve months and the remainder matures at various times
over the subsequent eleven years.
Interest paid, net of amounts capitalized, was approximately
$1,995,000 and $1,536,000 for the nine months ended June 30, 1997
and 1996, respectively. Interest capitalized was approximately
$569,000 and $461,000 for the nine months ended June 30, 1997 and
1996, respectively.
Certain mortgage agreements contain loan covenants. As of June
30, 1997, the Company was in compliance with these loan covenants.
-6-
3. INVENTORIES
<TABLE>
<CAPTION>
The major components of inventory are summarized as follows (in
thousands):
June 30, September 30,
1997 1996
---- ----
<S> <C> <C>
Finished goods $ 47,567 $ 28,634
Fruit-on-tree 8,070 9,626
Other 2,866 3,888
-------- --------
Total $ 58,503 $ 42,148
======== ========
</TABLE>
As of June 30, 1997 the Company held futures contracts for frozen
concentrated orange juice ("FCOJ"). The net futures positions
totaled approximately $7,265,000 with unrealized gains of
approximately $873,000. Exposure to off-balance sheet risk related
to these positions results from market fluctuations of FCOJ futures
prices relative to the Company's open positions. As of June 30,
1997 deposits with brokers totaled $284,000.
4. OTHER
The Company operates in one industry segment, "Citrus".
Substantially all sales are to entities that market citrus beverages
and related products.
During the nine and three month periods ended June 30, 1997, the
Company had two customers who individually accounted for
approximately 20.5% and 14.0%, and 23.8% and 12.5% of total sales
for the respective periods. During the nine and three month periods
ended June 30, 1996, the Company had two customers who individually
accounted for approximately 21.2% and 18.9%, and 20.9% and 16.8%
of total sales for the respective periods.
5. INCOME TAXES
Income tax expense is calculated using the asset and liability
method prescribed by Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" ("FAS No. 109"). Under this
method deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences
are expected to be recovered or settled. Under FAS No. 109, the
effect on deferred tax assets and liabilities of a change in tax
rates or a deferred tax asset valuation reserve is recognized in
income in the period that includes the enactment or revaluation
date.
-7-
<TABLE>
<CAPTION>
Income tax expense (benefit) for the nine and three month periods
ended June 30, 1997 and 1996 consists of the following (in thousands):
Nine Months Three Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Current:
Federal income tax $ 365 $2,639 $ (293) $ 952
State income tax 128 497 1 169
-------- ------- ------- -------
Total 493 3,136 (292) 1,121
-------- ------- ------- -------
Deferred:
Federal income tax $ 365 $ (58) $ 71 $ (90)
State income tax (39) (7) (24) (10)
------- ------- ------- -------
Total 326 (65) 47 (100)
------- ------- -------- -------
Income tax expense
(benefit) $ 819 $3,071 $ (245) $1,021
======= ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
Following is a reconciliation of the expected income tax expense
(benefit) computed at the U.S. Federal statutory rate of 34% and the
actual income tax expense (benefit) for the nine and three month
periods ended June 30, 1997 and 1996 (in thousands):
Nine Months Three Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Expected income tax $ 741 $3,343 $ (238) $1,189
Increase(decrease) in income
taxes resulting from:
Loss on foreign operations - 44 - 19
Permanent items 17 96 11 32
State income taxes, net of
federal tax benefit 59 328 (15) 112
Change in valuation allowance
for deferred tax asset - (806) - (299)
Other, net 2 66 (3) (32)
----- ------- ------ -------
Total provision for income
tax expense (benefit) $ 819 $3,071 $(245) $1,021
====== ======= ====== =======
</TABLE>
The reduction of $806,000 and $299,000, during the nine and three
month periods ended June 30, 1996, in the valuation allowance for a
deferred tax asset reflects management's estimate that the Company
is more likely than not to receive benefit from investment tax
credit carryforwards which expire in 1997 and thereafter.
-8-
6. CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
The following table reflects the changes in Stockholders' Equity
since September 30, 1996 as a result of net income, dividends paid,
and treasury stock transactions (in thousands):
Treasury
September 30, Net Dividends Stock June 30,
1996 Income Paid Issued 1997
---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C>
Common stock $ 5,175 $ - $ - $ - $ 5,175
Capital in excess
of par value 71,417 - - - 71,417
Retained earnings 32,869 1,360 (1,031) (28) 33,170
Treasury stock (450) - - 66 (384)
--------- -------- -------- ------- ---------
Total stockholders'
equity $109,011 $ 1,360 $(1,031) $ 38 $ 109,378
========= ======= ======== ======== ==========
</TABLE>
-9-
ORANGE-CO, INC. AND SUBSIDIARIES
PART I - ITEM 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Fiscal 1997 versus Fiscal 1996
The following is management's discussion and analysis of
significant factors which have affected the Company's operations
during the periods included. It compares the Company's operations
for the nine and three month periods ended June 30, 1997 to
operations for the nine and three month periods ended June 30, 1996.
The following table reflects changes in sales, cost of sales and
gross profit by division and other changes in the Statements of
Operations through net income (loss) between the respective periods.
<TABLE>
<CAPTION>
Nine Months (YTD) and Three Months (QTR) Ended June 30, 1997
vs Nine Months (YTD) and Three Months (QTR) Ended June 30, 1996
Increases/(Decreases)
(in thousands)
Sales Cost of Sales Net Change
YTD QTR YTD QTR YTD QTR
<S> <C> <C> <C> <C> <C> <C>
Beverage Division $(1,486) $(7,429) $5,066 $(3,231) $(6,552) $(4,198)
Grove Management
Division 45 (234) 194 (66) (149) (168)
------ -------- ------- -------- -------- --------
Total $(1,441) $(7,663) $5,260 $(3,297) $(6,701) $(4,366)
Other costs and expenses net:
Selling, general and administrative (410) 387
Gain on disposition of property and equipment (95) (14)
Other income and expense (21) 29
Interest (426) (233)
-------- --------
Income (loss) before income taxes (7,653) (4,197)
Provision for income taxes 2,252 1,266
-------- --------
Net income (loss) $(5,401) $(2,931)
======== ========
</TABLE>
SALES
Sales for the nine and three month periods ended June 30, 1997
decreased approximately $1,441,000 or 1.7% and approximately
$7,663,000 or 22.5%, respectively compared to the same periods in
the prior year. The Beverage Division accounted for the principal
decreases for the nine and three month periods with decreases in
sales of approximately $1,486,000 and $7,429,000. Grove Management
Division sales increased by approximately $45,000 and decreased
approximately $234,000 for the current nine and three month
respective periods compared to the same periods in the prior year.
BEVERAGE DIVISION The Beverage Division sales decreased
approximately $1,486,000 or 1.8% and $7,429,000 or 22.9% in the
current nine and three month periods respectively compared to the
same periods in the prior year as a result of offsetting increases
and decreases.
Revenues from the sale of the Company's bulk citrus
juice products decreased approximately $2,738,000 during the current
nine month period and approximately $7,195,000 during the current
three month period As part of the decrease during the current nine
month period, revenues from the volume of bulk citrus juice products
sold increased approximately $7,393,000. However,this increase in
volume during the current nine month period was more than offset by
decreased prices for bulk citrus juice products of approximately
$10,131,000 compared to the same period in the prior year. During
the current three month period a decrease in prices resulted in a
decrease in revenues of approximately $6,086,000 for bulk citrus
juice products compared to the same period in the prior year.
Additionally, the volume of bulk citrus juice products sold during
the current three month period decreased approximately $1,109,000
compared to the same period in the prior year.
-10-
As the Company entered the 1996-97 season, the United States
Department of Agriculture ("USDA") announced a significantly
increased crop estimate of approximately 220,000,000 boxes of round
oranges. The final crop was 225,700,000 boxes of round oranges which provided
the largest Florida crop in history. The expectation of this record crop
has resulted in sharply decreased prices of bulk FCOJ. Management expects
the price of bulk FCOJ to be significantly lower for at least the next two
fiscal quarters as compared to fiscal 1996 levels. The Florida citrus
industry is highly cyclical subject to varying weather conditions and other
natural phenomena sometimes creating wide swings in economic conditions
and opportunities.
Sales of the Company's packaged citrus juice products
increased approximately $1,480,000 and $466,000 during the current
nine and three month respective periods compared to the same periods
in the prior year. Contributing to these increases were increases
in the volumes of packaged citrus juice products sold during the
current nine and three month periods of approximately $553,000 and
$353,000 respectively. Additionally, higher prices resulted in
increased revenues of approximately $927,000 and $113,000 during the
current nine and three month respective periods.
The Company's non-orange packaged juices and drink base product
sales decreased approximately $42,000 and $636,000 during the
current nine and three month periods compared to the same periods in
the prior year. Decreases in the volume of sales of these products
accounted for decreases of approximately $1,360,000 and $1,053,000
during the current nine and three month periods. Offsetting
increases in prices contributed approximately $1,318,000 and
$417,000 to increased revenues during the current nine and three
month respective periods compared to the same periods in the prior
year.
Revenues from the sale of the Company's citrus by-products,
including feed, pulp cells, and citrus oils, increased approximately
$566,000 and $868,000 during the current nine and three month
periods compared to the same periods in the prior year. Seasonal
fluctuations in the sale of the volume of by-products sold was the
principal reason for these increases of approximately $914,000 and
$1,188,000 during the current nine and three month periods.
Revenues decreased approximately $348,000 and $320,000 during the
current nine and three month periods as a result of lower prices for
by-products sold compared to the same periods in the prior year.
Storage, handling, processing citrus for customers under
contract, and other revenues decreased approximately $752,000 and
$932,000 during the current nine and three month periods respectively
compared to the same periods in the prior year. The decrease in the
current nine months was due primarily to decreases in the volume of these
services performed compared to the same period in the prior year.
Of the decrease during the current three month period approximately
$531,000 resulted from a revision of estimated service revenues which
were over-accrued and previously reported in prior periods of the
current year.
GROVE MANAGEMENT DIVISION Grove Management Division sales increased
approximately $45,000 or 1.0% for the current nine month period and
decreased approximately $234,000 or 15.0% for the current three
month period compared to the same periods in the prior year. The
principal increase of approximately $173,000 during the current nine
month period occurred in harvesting revenues and resulted from the
increase in volume of boxes harvested compared to the same period in
the prior year. Revenues also increased approximately $48,000
during the current nine month period as a result of increases in
caretaking activities. Offsetting these increases during the
current nine month period was a decrease of approximately $176,000
resulting from a decrease in the volume of fruit sold to third party
packers and processors. The principal decrease of approximately
$183,000 during the current three month period occurred in
harvesting revenue and resulted from both a decrease in boxes
harvested and a reduction in fees charged for harvesting services.
Revenues also decreased approximately $51,000 in the current three
month period as a combined result of a decrease in the volume of
fruit sold to third party packers and processors and a decrease in
the caretaking activities.
-11-
GROSS PROFIT
Gross profit for the current nine and three month periods ended
June 30, 1997 decreased approximately $6,701,000 or 44.2% and
approximately $4,366,000 or 81.4% compared to the same periods in
the prior year. The principal decreases of approximately $6,552,000
and $4,198,000 during the current nine and three month periods
occurred in the Beverage Division. Gross profit for the Grove
Management Division also decreased during the current nine and three
month periods by approximately $149,000 and $168,000 respectively
compared to the same periods in the prior year.
BEVERAGE DIVISION Gross profit of the Beverage Division decreased
approximately $6,552,000 or 44.9% and $4,198,000 or 80.5% during the
current nine and three month respective periods compared to the same
periods in the prior year.
Contributing to the decrease in gross profit were decreases of
approximately $8,174,000 and $4,376,000 during the current nine and
three month respective periods from the sale of bulk citrus juice products.
Of the decreases in the bulk citrus products during the current nine
month and three month respective periods, approximately $10,131,000
and $6,086,000 resulted from decreased prices for bulk citrus juice
products. Additionally, during the current nine and three month periods
gross profit increased approximately $1,278,000 and decreased approximately
$502,000 respectively as a result of fluctuations in sales volumes for bulk
citrus juice products sold during the current periods compared to the
same periods in the prior year. Gross profit also increased during the
current nine and three month periods by approximately $679,000 and
$2,212,000 due to lower cost of production principally as result of
lower costs of raw fruit and concentrate.
The Company has in the past utilized and may in the future
utilize the FCOJ futures market to hedge fruit, inventory,
anticipated requirements and sales commitments of FCOJ. The effects
of this hedging activity, if any, are reflected in the cost of
inventories and flow through cost of sales in the Consolidated
Statements of Operations as the associated products are sold. As of
June 30, 1997 the Company held contracts for FCOJ futures with
unrealized gains of approximately $873,000 which would have been
realized if said positions had been prematurely liquidated on that
date. These unrealized gains are based upon the closing market
prices of equivalent futures obligations and do not necessarily
represent prices at which the Company expects to sell the FCOJ.
Gross profit on sales of packaged citrus juice products increased
approximately $869,000 and $121,000 during the current nine and
three month respective periods compared to the same periods in the
prior year. Higher prices during the current nine and three month
periods accounted for increases in gross profit of approximately
$927,000 and $113,000 respectively. Additionally, gross profit
increased approximately $681,000 and $212,000 during the current
nine and three month periods as a result of increases in the volume
of packaged citrus juices sold. Partially offsetting the increased
prices were higher costs of production of approximately $739,000 and
$204,000 during the current nine and three month periods.
Gross profit from the sale of the Company's non-orange packaged
juices and drink base products increased approximately $711,000 and
$267,000 during the current nine and three month respective periods
compared to the same periods in the prior year. Gross profit
increased approximately $1,318,000 and $417,000 during the current
nine and three month periods as a result of increased prices. These
increases were partially offset by decreases in gross profit of
approximately $607,000 and $150,000 as a combined result of higher
cost of production and decreases in sales volumes.
-12-
Gross profit from citrus by-products, including feed, pulp cells,
and citrus oils, decreased approximately $316,000 and $112,000
during the current nine and three month respective periods compared
to the same periods in the prior year. These decreases generally
resulted from lower prices and higher production costs.
Gross profit from storage, handling, and other activities increased
by approximately $358,000 during the current nine period due to a reduction
in the cost to perform these services compared to the prior year. However,
during the current three month period gross profit from storage, handling
and other activities decreased by approximately $98,000 as a combined result
of a decrease in the volume of services performed and a revision of estimated
service revenues as previously discussed compared to the same period in
the prior year.
GROVE MANAGEMENT DIVISION Grove Management Division gross profit
decreased approximately $149,000 or 17.8% and $168,000 or 70.0% in
the current nine and three month periods, respectively, compared to
the same periods in the prior year. The primary decrease in gross
profit of approximately $102,000 during the current nine and three
month periods was the result of decreases in the volume of fruit
sold to third party packers and processors. During the current nine
month period gross profit also decreased by approximately $13,000
due to a reduction in fees charged for harvesting services. An
additional decrease in gross profit of approximately $34,000 during
the current nine month period resulted from a decrease in grove
caretaking activities compared to the same period in the prior year.
During the current three month period gross profit decreased by
approximately $66,000 due to a combination of a reduction in grove
caretaking activities and a reduction in the volume of boxes
harvested along with a reduction of fees charged for harvesting services.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased
approximately $410,000 or 10.7% and decreased approximately $387,000
or 29.4% for the current nine and three month periods compared to
the same periods in the prior year. Of the increase in the current
nine month period, approximately $302,000 was due to an increase in
salary and benefit costs, and $108,000 resulted from an increase in
other costs. In the current three month period an increase of
approximately $53,000 was due to an increase in salary and benefit
costs while a decrease of approximately $440,000 resulted from a
decrease in other costs. Included in the current nine and three month
periods changes were decreases of approximately $157,000 in salary and
benefit costs and approximately $185,000 in other costs which were
reclassified from selling, general and administrative expenses to
cost of sales.
GAIN/(LOSS) ON DISPOSITION OF PROPERTY AND EQUIPMENT AND OTHER
The decreased gain on the disposition of property, equipment and
other of approximately $116,000 for the current nine month period and
the increase of approximately $15,000 in the current three month
period ending June 30, 1997 compared to the same periods in the
prior year was principally due to differences in gains on sales of
commercial properties not utilized in citrus production or
processing.
INTEREST EXPENSE
Interest expense increased approximately $426,000 or 27.0% and
$233,000 or 39.9% in the current nine and three month periods
respectively, compared to the same periods in the prior year. The
primary increases of approximately $511,000 and $56,000 in the
current nine month period, and approximately $146,000 and $54,000 in
the current three month period were due to increases in the average
outstanding debt and interest rates respectively. Partially
offsetting the increase in interest expense in the current nine
month period was an increase in capitalized interest of
approximately $108,000, and a decrease in other related interest
charges of approximately $33,000. Also, an increase in interest expense
in the current three month period resulted from a decrease in capitalized
interest of approximately $20,000, and an increase in amortization
of deferred loan costs and other related interest charges of
approximately $13,000.
-13-
LIQUIDITY AND CAPITAL RESOURCES
The Company's Bartow processing plant normally operates from
early November through late May or June. While the plant is in
operation, the inventory of processed juice increases to a level
which will cover anticipated sales until the following November when
the plant begins operation again. The Company's working capital
credit facility is generally utilized to finance these inventories.
Borrowings under this credit facility normally peak in late May or
June. The Company began processing activities for the 1996-97
season in November.
The Company's ability to generate cash adequate to meet its
needs, including the financing of its inventories and trade
receivables, has been supported primarily by cash flow from
operations and periodic borrowings under its primary $45 million
credit facility. This facility is principally secured by
substantially all of the Company's current assets. The outstanding
balance at June 30, 1997 was approximately $38,341,000. The
interest rate is variable based upon the financial institution's
cost of funds plus a margin. The terms of the agreement call for
repayment of the principal amount in April 1999; accordingly, it is
classified as long-term debt. The Company anticipates that the
working capital facility will be adequately serviced with cash
proceeds from operations. In April 1997 this facility was increased
from $40 million to $45 million to more adequately service the
Company's working capital needs. As of August 12, 1997 the balance
on this facility was approximately $35,766,000.
Additionally, as of June 30, 1997 the Company had a $10 million
short-term capital revolving credit facility. As of June 30, 1997
the outstanding balance on this facility was $3,000,000. The interest
rate on this facility is variable based upon the financial institution's
cost of funds plus a margin. The terms of this facility call for repayment
of the principal amount in April 1998. As of August 12, 1997 there
was no outstanding balance on this facility and all of the $10,000,000
of additional borrowings were available.
Current assets increased approximately $11,458,000 as of June 30,
1997 compared to September 30, 1996. The principal component of
this was an increase in inventories of approximately $16,355,000 due
to the seasonal accumulation of inventories. Also, deferred tax assets
increased approximately $1,161,000. The Company's accounts receivable
balance decreased approximately $5,283,000 during the nine months ending
June 30, 1997. Additionally, there was a decrease in cash and short-
term cash investments of approximately $232,000. Advances on fruit
purchases decreased approximately $717,000 as the Company processed
the purchased fruit and collected these advances. Other current
assets increased approximately $174,000.
Current liabilities increased approximately $867,000 during the
first nine months of fiscal 1997 compared to September 30, 1996.
There was a decrease of approximately $2,393,000 in accrued expenses
associated with fruit purchases and decreases in accounts payable and
other accrued expenses of approximately $3,545,000. Offsetting
these decreases was an increase of $3,805,000 in the current portion
of long-term debt and an increase in notes payable of $3,000,000.
Long-term debt increased approximately $10,782,000 during the
current nine month period. This was primarily the result of an
increase of approximately $17,255,000 in the Company's long-term
working capital facility. There was a decrease of approximately
$2,668,000 which represents scheduled principal payments made on
long-term debt during the nine month period. There was also a
decrease of approximately $3,805,000 which represents portions of
long-term debt reclassified to the current portion, as these amounts
are due within the next twelve months.
At June 30, 1997 the Company's outstanding long-term debt was
approximately $57,445,000 including the working capital facility of
approximately $38,341,000. In addition current installments of long-
term debt were approximately $7,460,000 with the remaining amounts
due on various dates over the subsequent eleven years. The Company
anticipates that amounts due over the next twelve months will be
paid out of working capital. At June 30, 1997 the Company was in
compliance with its loan covenants.
-14-
During the first nine months of the current fiscal year, capital
expenditures of approximately $730,000 were made for the
installation of new irrigation systems on 3,369 acres of Company-
owned groves. Also, cost of caring for newly planted citrus trees
in the amount of $1,354,000 were capitalized, and expenditures of
approximately $233,000 were made for grove operations equipment.
Additionally, expenditures of approximately $3,395,000 were made
during the same period primarily for the purpose of improving the
efficiency of the Bartow processing facility. The Company
anticipates that these improvements will be financed principally by
working capital or by securing additional funds under existing
mortgages.
OTHER SIGNIFICANT EVENTS
In October 1996 the USDA announced a Florida crop estimate of
approximately 220,000,000 boxes of round oranges for the 1996-97
season. The final crop of 225,700,000 boxes of round oranges has
provided the largest Florida Crop in history. The expectation of
this record crop resulted in sharply decreased prices of bulk FCOJ.
Management expects the price of bulk FCOJ to be significantly lower
for at least the next two fiscal quarters as compared to fiscal 1996
levels. The Florida citrus industry is highly cyclical subject to
varying weather conditions and other natural phenomena sometimes
creating wide swings in economic conditions and opportunities.
-15-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit No. EXHIBIT
27 Financial Data Schedule (Electronic Filing Only)
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.
ORANGE-CO, INC.
(Registrant)
Date: August 14, 1997 By: /s/Gene Mooney
-----------------------
Gene Mooney
President and
Chief Operating Officer
Date: August 14, 1997 By: /s/Dale A. Bruwelheide
-----------------------
Dale A. Bruwelheide
Vice President and
Chief Financial Officer
-16-
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