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 December 31, 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 33831
(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
February 13, 1998: 10,309,975 shares
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ORANGE-CO, INC. AND SUBSIDIARIES
FORM 10-Q
TABLE OF CONTENTS
PAGE NO.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
December 31, 1997 (unaudited) and September 30, 1997 (audited) 3
Consolidated Statements of Operations (unaudited)
Three Months ended December 31, 1997 and 1996 4
Consolidated Statements of Cash Flows (unaudited)
Three Months ended December 31, 1997 and 1996 5
Notes to Consolidated Financial Statements (unaudited) 6-8
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Conditions 9-13
PART II. OTHER INFORMATION
ITEM 6.
Exhibits and Reports on Form 8 K 14
SIGNATURES 14
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<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, September 30,
ASSETS 1997 1997
(unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,354 $ 1,009
Receivables 11,122 8,441
Advances on fruit purchases 432 451
Inventories 40,868 47,089
Deferred income taxes 2,680 2,398
Prepaid and other 390 683
--------- ---------
Total current assets 56,846 60,071
--------- ---------
Property and equipment, net 123,446 123,271
--------- ---------
Other assets:
Excess of cost over net assets of
acquired companies 10,930 11,024
Notes receivable 1,443 1,458
Other 5,115 5,305
--------- ---------
Total other assets 17,488 17,787
--------- ---------
Total assets $197,780 $201,129
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note Payable $ 5,000 $ -
Current installments on long-term debt 7,087 7,276
Accounts payable 3,768 4,113
Accrued liabilities 9,763 9,154
--------- ---------
Total current liabilities 25,618 20,543
Deferred income taxes 22,923 23,676
Other liabilities 1,171 1,046
Long-term debt 40,925 46,764
--------- ---------
Total liabilities 90,637 92,029
--------- ---------
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 shares issued 5,175 5,175
Capital in excess of par value 71,417 71,417
Retained earnings 30,925 32,887
---------- ---------
107,517 109,479
Less:
Treasury stock, at cost: 39,424
shares at December 31, 1997 and 39,924
shares at September 30, 1997 (374) (379)
--------- ---------
Total stockholders' equity 107,143 109,100
--------- ---------
Total liabilities and
stockholders' equity $197,780 $201,129
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(unaudited)
(in thousands except for per share data)
1997 1996
<S> <C> <C>
Sales $25,710 $28,424
Cost of sales 26,745 23,713
-------- --------
Gross profit(loss) (1,035) 4,711
Other costs and expenses, net:
Selling, general and administrative (1,323) (1,701)
Gain on disposition of property and
equipment 136 -
Other (42) (10)
Interest (731) (540)
-------- -------
Income(loss) before income taxes (2,995) 2,460
Income tax expense(benefit) (1,035) 922
-------- -------
Net income(loss) $(1,960) $ 1,538
======== ========
Net income(loss) per common share, basic
and diluted: $ (.19) $ .15
========= ========
Average number of common and common
equivalent shares outstanding 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 THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
(unaudited)
(in thousands)
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income(loss) $(1,960) $ 1,538
-------- --------
Adjustments to reconcile net income(loss)
to net cash provided by (used for)
operating activities:
Depreciation and amortization 1,742 1,369
Increase(decrease) in deferred
income taxes (1,035) 2
(Gain) on disposition of property and
equipment (136) -
Change in assets & liabilities:
Decrease(increase) in receivables (2,681) 5,114
Decrease in advance on fruit purchases 19 73
Decrease(increase) in inventory 6,221 (5,649)
Decrease(increase) in prepaids and
other 293 (369)
Increase in accounts payable
and accrued liabilities 264 4,235
Other, net 299 41
-------- --------
Total adjustments 4,986 4,816
-------- --------
Net cash provided by operating activities 3,026 6,354
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property & equipment 750 4
Decrease in note & mortgage receivables 15 136
Additions to property & equipment (2,401) (3,286)
(Increase) in other assets (20) (72)
-------- --------
Net cash (used for) investing activities (1,656) (3,218)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt 5,000 -
(Payments on)long-term debt (6,028) (3,659)
Issuance of treasury stock 3 -
-------- --------
Net cash (used for) financing activities (1,025) (3,659)
-------- --------
NET INCREASE(DECREASE) IN CASH AND CASH
EQUIVALENTS 345 (523)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,009 1,508
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 1,354 $ 985
======== ========
</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 December 31, 1997
Audited Consolidated Balance Sheet at September 30, 1997
Unaudited Consolidated Statements of Operations and Statements
of Cash Flows for the three month periods ended December 31,
1997 and 1996
2. NOTES PAYABLE AND LONG-TERM DEBT
As of December 31, 1997, the Company had access to a $45
million working capital line of credit facility payable in April
2000. Accordingly, the balance at December 31, 1997 was classified
as long-term. This facility is collateralized by most of the
Company's current assets. The outstanding balance at December 31,
1997 was approximately $23,249,000. Approximately $8,002,000 was
additionally available to be borrowed under a borrowing base
calculation of this facility. The interest rate on the facility
is variable based upon the financial institution's cost of funds
plus a margin. At December 31, 1997, the Company was in compliance
with all but one of its loan covenants. The lender has waived
the requirement for the current three month period without penalty.
(See Management Discussion and Analysis - Liquidity and Capital
Resources.)
Additionally, as of December 31, 1997 the Company had a
$10,000,000 short-term capital revolving credit facility. As of
December 31, 1997 there was an outstanding balance on this facility
of $5,000,000. The interest rate is variable based upon the financial
institution's cost of funds plus a margin.
At December 31, 1997, the Company's outstanding long-term debt
(including the $23,249,000 balance on the working capital line of
credit facility) was approximately $48,012,000, of which $7,087,000
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
$724,000 and $447,000 for the three months ended December 31, 1997
and 1996, respectively. Interest capitalized was approximately
$115,000 and $231,000 for the three months ended December 31, 1997
and 1996, respectively.
-6-
3. INVENTORIES
<TABLE>
<CAPTION>
Inventories are stated at the lower of cost or market. Inventories
are maintained on a full absorption cost method and flow on a first-in,
first-out average cost basis. The cost of growing fruit is
accounted for as fruit on tree inventory.
The major components of inventory are summarized as follows (in
thousands):
December 31, September 30,
1997 1997
<S> <C> <C>
Finished goods $28,468 $32,095
Fruit-on-tree 8,507 10,514
Other 3,893 4,480
------- -------
Total $40,868 $47,089
======= =======
</TABLE>
As of December 31, 1997 the Company held contracts for
frozen concentrated orange juice ("FCOJ") futures positions
and net options totaling approximately $25,489,000 and $138,000,
respectively with unrealized gains on futures positions of
approximately $1,124,000 and unrealized losses on options of
approximately $110,000. 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.
Cash deposit requirements with brokers as of December 31, 1997
totaled $957,000 and vary with market price fluctuations.
4. OTHER
The Company operates in one industry segment, "Citrus".
Substantially all sales are to entities that market citrus and
citrus-related products.
During the three month period ended December 31, 1997 the Company
had two customers who individually accounted for approximately 22.4%
and 12.8% of total sales. During the three month period ended
December 31, 1996 the Company had two customers who individually
accounted for approximately 20.0% and 15.8% of total sales.
5. INCOME TAXES
The provision for income taxes is calculated using the asset and
liability method prescribed by Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes". 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 is recognized in
income in the period that includes the enactment date.
-7-
<TABLE>
<CAPTION>
The provision for income taxes for the three month periods ended
December 31, 1997 and 1996 is summarized as follows (in thousands):
1997 1996
<S> <C> <C>
Current:
Federal income tax $ - $823
State income tax - 97
------ ----
Total $ - $920
------ ----
Deferred:
Federal income tax (benefit) $ (935) $ 2
State income tax (benefit) (100) -
-------- ----
Total $(1,035) $ 2
-------- ----
Total (benefit)expense for
income taxes $(1,035) $922
======== ====
</TABLE>
<TABLE>
<CAPTION>
The following is a reconciliation of the expected income tax
expense computed at the U.S. Federal statutory rate of 34% and the
actual income tax provisions for the quarters ended December 31,
1997 and 1996 (in thousands):
1997 1996
<S> <C> <C>
Expected income tax (benefit) $(1,018) $836
Increase(decrease) resulting from:
State income taxes, net of federal tax benefit (77) 97
Permanent items and other 60 (11)
-------- -----
Total provision for income taxes $(1,035) $922
======== =====
</TABLE>
6. CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
The following table reflects the changes in Stockholders' Equity
since September 30, 1997 as a result of net income(loss) (in
thousands):
Treasury
September 30, Net Stock December 31,
1997 (Loss) Issued 1997
<S> <C> <C> <C> <C>
Common stock $ 5,175 $ - $ - $ 5,175
Capital in excess
of par value 71,417 - - 71,417
Retained
earnings 32,887 (1,960) (2) 30,925
Treasury stock (379) - 5 (374)
-------- -------- ------- --------
Total
stockholders'
equity $109,100 $(1,960) $ 3 $107,143
========= ======== ======= =========
</TABLE>
-8-
7. APPLICATION OF ACCOUNTING STANDARDS
Effective for interim and annual financial statements for fiscal periods
ending after December 15, 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 128
"Earnings Per Share" (SFAS 128). SFAS 128 requires the calculation of the
Basic Earnings Per Share and the Diluted Earnings Per Share. The Company
has adopted SFAS 128 for its first quarter of fiscal 1998 ended December 31,
1997, the effect of which was immaterial.
Additionally, the Company adopted SFAS 129 "Disclosure of Information
about Capital Structure". The effect of adopting SFAS 129 was immaterial.
-9-
ORANGE-CO, INC. AND SUBSIDIARIES
PART I - ITEM 2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
First Quarter of Fiscal 1998 versus First Quarter of Fiscal 1997
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 three month period ended December 31, 1997 to operations for
the three month period ended December 31, 1996.
The following table reflects changes in and the effects on sales,
cost of sales and gross profit by division and other changes in the
Statements of Operations through net income between the respective
periods.
<TABLE>
<CAPTION>
Three Months Ended December 31, 1997 vs Three Months Ended December 31, 1996
Increases/(Decreases)
(in thousands)
Cost of Net Changes
Sales Sales to Income
<S> <C> <C> <C>
Beverage Division . . . . . . . . $(2,698) $2,819 $(5,517)
Grove Management Division . . . . (16) 213 (229)
-------- ------ --------
Total . . . . . . . . . . . . . . $(2,714) $3,032 $(5,746)
======== ======
Other costs and expenses, net:
Selling, general and administrative .. . . . . . . . . . . . . 378
Gain on disposition of property and equipment. . . . . . . . . 136
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32)
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . (191)
--------
Income before income taxes . . . . . . . . . . . . . . . . . . (5,455)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . 1,957
--------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $(3,498)
========
</TABLE>
SALES
Sales for the three month period ended December 31, 1997
decreased approximately $2,714,000 or 9.6% compared to the same
period in the prior year. The Beverage Division accounted for the
principal decrease for the current period with decreased sales of
approximately $2,698,000. Grove Management Division sales decreased
approximately $16,000 for the current period compared to the same
period in the prior year.
BEVERAGE DIVISION The Beverage Division sales decreased
approximately $2,698,000 or 10.0% during the current three month
period compared to the same period in the prior year. Of this
decrease, revenues from the sale of the Company's bulk citrus juice
products decreased approximately $1,635,000. The principal
component of this decrease in bulk citrus juice products resulted
from lower prices of bulk citrus juice products sold of
approximately $7,306,000 during the current period compared to the
same period in the prior year. As we entered the 1997-98 season,
the United States Department of Agriculture (USDA) announced in
October 1997 an estimated Florida orange crop of approximately
254,000,000 boxes of round oranges. This estimate, if true,
represents a significant increase from the 1996-97 crop of
226,200,000 boxes of round oranges and the 1995-96 crop of
203,300,000 boxes. The anticipation of a second consecutive
significant
-10-
increase in the crop has had a deflating effect on prices throughout
the first quarter of fiscal 1998.
Partially offsetting the decrease in sales from lower prices was
an increase of approximately $5,671,000 from increased volumes of
bulk citrus juices sold in the current three month period compared
to the same period in the prior year. This increase in sales volume
was due primarily to an improving sales program for the bulk citrus
juice products.
Sales of the Company's packaged citrus juice products sold
decreased approximately $466,000 compared to the same period in the
prior year. Lower prices for these products resulted in a decrease
of approximately $370,000. Additionally, decreases of approximately
$96,000 were a result of lower volumes compared to the same period
in the prior year.
The Company's non-orange packaged juices and drink base products
sales increased approximately $108,000 during the current period
compared to the same period in the prior year. Of this total,
increases in the volume of sales of these products accounted for
increases of approximately $161,000. Price decreases resulted in
decreased revenues of approximately $53,000 on these products
during the current period compared to the same period in the
prior year.
Revenues from the sale of the Company's citrus by-products,
including feed, pulp cells, and citrus oils, decreased approximately
$272,000 principally as a result of lower prices for by-products
being produced and sold during the current period compared to the
same period in the prior year. This decrease in prices during the
current period is primarily a result of the previously mentioned
larger crops for the past two seasons.
Storage, handling, processing citrus for customers under
contract, and other revenues decreased approximately $433,000 during
the current period compared to the same period in the prior year.
This decrease was due primarily to a decrease in the volume of
services performed during the current three month period.
GROVE MANAGEMENT DIVISION Grove Management Division sales decreased
approximately $16,000 or 1.1% in the current three month period
compared to the same period in the prior year. The principal
decrease of approximately $51,000 resulted from a decrease in
revenues from the sale of fruit to third party packers and
processors. Additionally, revenues from caretaking activities
decreased approximately $24,000 during the current three month
period compared to the same period in the prior year. Partially
offsetting these decreases was an increase of approximately $59,000
in revenues from harvesting activities.
GROSS PROFIT
Gross profit for the three month period ended December 31, 1997
decreased approximately $5,746,000 or 122.0% compared to the same
period in the prior year. The principal decrease of approximately
$5,517,000 occurred in the Beverage Division. Additionally, there
was a decrease in gross profit of approximately $229,000 in the
Grove Management Division during the current period compared to the
same period in the prior year.
BEVERAGE DIVISION The gross profit of the Company's Beverage
Division decreased approximately $5,517,000 during the current
period compared to the same period in the prior year as a result of
numerous offsetting increases and decreases.
A principal component was a decrease of approximately $4,258,000
which resulted from the sale of bulk citrus juice products during
the current period compared to the same period in the prior year.
Of this amount, approximately $7,306,000 resulted from lower prices
for the Company's bulk citrus juice products. Partially offsetting
this decrease was an increase in gross profit of
-11-
approximately $2,459,000 due to lower cost of raw fruit and concentrate
used in the production of bulk citrus juice products sold during the
current three month period compared to the same period in the prior year.
Additionally, higher volumes contributed to an increase in gross
profit of approximately $589,000 during the current three month
period compared to the same period in the prior year.
The Company utilizes the FCOJ futures market to hedge fruit
inventory, anticipated requirements and sales commitments of FCOJ.
The effects of this hedging activity, if any, flow through the
Consolidated Statements of Operations as the associated products are
sold. As of December 31, 1997 the Company held contracts for FCOJ
futures with unrealized gains of approximately $1,124,000 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 the sales of packaged citrus juice products
decreased approximately $456,000 during the current three month
period compared to the same period in the prior year. Of this
decrease approximately $370,000 resulted from decreased prices.
Additionally, gross profit decreased approximately $86,000 as a
combined result of a higher cost carryover of inventory and lower
volumes in the current period.
Gross profit from the sale of the Company's non-orange packaged
juices and drink base products decreased approximately $328,000
during the current period compared to the same period in the prior
year. This decrease was primarily a result of higher cost of
ingredients and conversion cost in the current period.
Gross profit from citrus by-products, including feed, pulp cells,
and citrus oils, decreased approximately $811,000 during the current
period compared to the same period in the prior year. The principal
reason for this decrease was an increase in the cost of production
of approximately $536,000 compared to the same period in the prior
year. Additionally, decreased prices of approximately $335,000
during the current three month period resulted in a reduction of
gross profit. Partially offsetting these decreases was an increase
in gross profit of approximately $60,000 due to an increase in the
volume of by-products sold during the current three month period.
Gross profit from storage, handling, and other activities
decreased by approximately $14,000 during the current period due
principally to a decrease in the volume of these services provided
compared to the same period in the prior year.
During the current three month period gross profit increased by
approximately $350,000 as a result of the partial settlement of an
insurance claim related to the recovery of certain operating
expenses incurred as a result of an involuntary conversion of
certain inventory. In July 1997, a storm containing strong winds
damaged a product storage warehouse and some inventory. Continuing
operations of the Company were not materially affected. As of
December 31, 1997, the damage to the warehouse was under repair.
The Company has adequate replacement cost insurance to recover
damages.
GROVE MANAGEMENT DIVISION Grove Management Division gross profit
decreased approximately $229,000 or 56.0% during the current three
month period compared to the same period in the prior year. The
principal decrease of approximately $149,000 resulted primarily from
decreases in fruit sold to third party packers and processors.
Additionally, gross profit from caretaking activities decreased
approximately $80,000 during the current three month period.
-12-
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased
approximately $378,000 for the current three month period
compared to the same period in the prior year. Of this
decrease approximately $138,000 resulted from a decrease in salary
benefit costs while approximately $240,000 resulted from a decrease
in other costs.
GAIN ON DISPOSITION OF PROPERTY AND EQUIPMENT
The gain on the disposition of property and equipment increased
approximately $136,000 for the current three month period as
compared to the same period in the prior year. This increase
resulted from the gain from insurance proceeds on damage to the
product storage warehouse previously mentioned to which there was no
comparable event in the same period in the prior year.
INTEREST EXPENSE
Interest expense increased approximately $191,000 or 35.3% during
the current three month period compared to the same period in the
prior year. The principal increase of approximately $127,000 was
due to an increase in the average outstanding debt. Additionally,
an increase of approximately $116,000 was the result of a decrease
in capitalized interest, while an increase of approximately $7,000
was due to an increase in miscellaneous interest charges. Partially
offsetting these increases was a decrease of approximately $59,000
as a result of a decrease in interest rates.
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 deliveries 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
1997-98 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 $45 million credit
facility. This facility is secured principally by most of the
Company's current assets. The outstanding balance at December 31,
1997 was approximately $23,249,000 and approximately $8,002,000 of
additional borrowings were available under a borrowing base calculation
of this facility. The interest rate is variable based upon the financial
institution's cost of funds plus a margin. The terms of this agreement call
for repayment of the principal amount in April 2000; accordingly, it is
classified as long-term. The Company anticipates that the working
capital facility will be adequately serviced with cash proceeds from
operations.
Additionally, as of December 31, 1997, the Company had a $10
million short-term capital revolving credit facility. As of December
31, 1997, there was an outstanding balance on this facility of $5,000,000.
The interest rate on this facility is variable based upon the financial
institution's cost of funds plus a margin.
Current assets decreased approximately $3,225,000 as of December
31, 1997 compared to the fiscal year ended September 30, 1997. The
principal component of this was a decrease in inventories of
approximately $6,221,000 in the current three month period due
principally to increased bulk sales compared to the fourth quarter
of fiscal 1997 ended September 30, 1997. The Company's accounts
-13-
receivable balance increased approximately $2,681,000 during the
current period also as a result of increased sales in the current
quarter compared to the fourth quarter of fiscal 1997. There was
also an increase in cash and cash equivalents of approximately
$345,000. Advances on fruit purchases decreased approximately
$19,000 as the Company began processing fruit associated with the
1997-98 season. Also, there was a decrease of approximately
$293,000 in prepaid expenses and other current assets and an
increase of approximately $282,000 in deferred tax assets.
Current liabilities increased approximately $5,075,000 during the
current three month period compared to the fiscal year ended
September 30, 1997. There was an increase of approximately $264,000
in accounts payable and accrued liabilities as a result of the
beginning of the processing season. The current portion of long-term
debt decreased approximately $189,000, and note payable increased by
$5,000,000.
At December 31, 1997 the Company's outstanding long-term debt was
approximately $40,925,000 including the working capital facility of
approximately $23,249,000. In addition, current installments of
long-term debt were approximately $7,087,000 with the remaining
amounts due on various dates over the subsequent eleven years. The
Company anticipates that the amounts due over the next twelve
months will be paid out of working capital or refinancing of existing
mortgages. At December 31, 1997, the Company was in compliance
with all but one of its loan covenants. That covenant calls
for consolidated net income available for debt service to be at
least 1.25 times debt service measured over the last four quarters.
As a result of the losses in the first quarter of fiscal 1998, the
Company only achieved a ratio of consolidated net income available
for debt service to debt service of .90 for the past four quarters.
The lender has waived this requirement for the current three month
period without penalty. Management believes its relationships with
its lenders are good.
During the first quarter of the current fiscal year, capital
expenditures of approximately $454,000 were made for the installation
of new irrigation systems on 2,025 acres of Company-owned groves.
Also, cost of caring for newly planted citrus trees in the amount of
approximately $374,000 were capitalized. Additional expenditures of
approximately $1,511,000 were made during the current period primarily
for the purpose of improving the efficiency and capacity of the Bartow
processing facility. Also during the current period expenditures of
approximately $37,000 were made for grove operations equipment.
The Company anticipates that these improvements will be financed
principally from working capital or by securing additional funds
under existing mortgages.
During the past three fiscal years, the Company has been making
capital expenditures to improve and update the computer systems to
enhance the efficiency of its production, processing, marketing, sales
and management systems. As a result, it has concurrently addressed the
"Year 2000 Issue" related to its older computer systems. Management
believes that the new systems will be completed in fiscal 1998 and that
the Company will then be in compliance with "Year 2000 Issues".
OTHER SIGNIFICANT EVENTS
In October 1997 the United States Department of Agriculture ("USDA")
announced a Florida crop estimate of approximately 254,000,000 boxes of round
oranges for the 1997-98 season, which, if true, would be the largest Florida
crop in history. In February 1998, the USDA left this estimate unchanged.
-14-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
Exhibit EXHIBIT Page
No. No.
10.28 The Seventh Amendment to the Loan Agreement
By and Among Orange-co, Inc., Orange-co of
Florida, Inc. and SunTrust Bank, Central
Florida, National Association dated
February 3, 1998.
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: February 13, 1998 By:/s/ Gene Mooney
---------------
Gene Mooney
President and
Chief Operating Officer
Date: February 13, 1998 By:/s/ Dale A. Bruwelheide
-----------------------
Dale A. Bruwelheide
Vice President,
Chief Financial Officer, and
Principal Accounting Officer
-15-
SEVENTH AMENDMENT TO LOAN AGREEMENT
THIS SEVENTH AMENDMENT TO LOAN AGREEMENT dated as of
February 3, 1998, by and between:
ORANGE-CO, INC., a Florida corporation and
ORANGE-CO OF FLORIDA, INC., a Florida
corporation, 2020 Highway 17 South, Bartow,
Florida 33830 (hereinafter collectively
referred to as the "Borrowers");
and
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL
ASSOCIATION, a national banking association,
200 South Orange Avenue, Post Office Box
3833, Orlando, Florida 32897 (hereinafter
referred to as the "Bank").
W I T N E S S E T H:
WHEREAS, pursuant to the Loan Agreement, dated June 16,
1993, by and among the Bank and the Borrowers, as amended, the
Bank agreed to extend to the Borrowers a working capital line of
credit loan in the maximum principal amount of $45,000,000.00
(the "Working Capital Loan") and a revolving line of credit loan
in the maximum principal amount of $10,000,000.00 (the
"Revolving Loan" ); and
WHEREAS, the Borrowers have requested the Bank to (a) renew
and extend the maturity of the Revolving Loan from April 30, 1998
until April 30, 1999, (b) renew and extend the maturity date of
the Working Capital Loan from April 30, 1999 until April 30,
2000, (c) modify the definition of Borrowing Base to provide that
it includes the Borrower's margin accounts at brokers who trade
frozen concentrate orange juice futures and options on behalf of
the Borrowers, and (d) modify the definition of Borrowing Base to
provide that the portion of Finished Goods Inventory that has not
been sold short in the futures market shall be valued either the
average selling price for the most recent month or such other
price as determined by the Bank; and
WHEREAS, the Bank has agreed to the foregoing subject to the
terms and conditions hereof and the other Loan Documents.
NOW, THEREFORE, for and in consideration of the above
premises, and the mutual covenants and agreements contained
herein, the Borrowers and the Bank do hereby agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement is
hereby amended as follows:
(a) The definition of "Borrowing Base" is hereby
deleted and, in lieu thereof, there is substituted the following:
"'Borrowing Base' shall mean, at any date of
determination thereof, an amount equal to the then
aggregate of (i) eighty-five percent (85%) of the
Qualified Accounts, plus (ii) eighty-five percent
(85%) Finished Goods Inventory, plus (iii) eighty
five percent (85%) of Specialty Products Inventory
and plus (iv) the greater of (A) zero or (B)
ninety-five percent (95%) of the sum of (w) the
aggregate dollar value, determined at the lower
cost or market, of all assets then held in
Qualified Margin Accounts on behalf of the
Borrowers, plus (x) all amounts which have been
demanded in margin calls with respect to Finished
Goods Inventory that has been hedged by being sold
short on the New York Cotton Exchange, minus (y)
any amounts in Qualified Margin Accounts that may
be withdrawn by the Borrowers or that are in
excess of required levels to be held in Qualified
Margin Accounts with regard to the Finished Goods
Inventory that has been hedged by being sold short
on the New York Cotton Exchange, minus (z) any
amounts that may be owed to brokers that are
secured by a lien on the Qualified Margin
Accounts. The value of Qualified Accounts shall be
reasonably determined by the Bank. The Finished
Goods Inventory that has been hedged shall be
valued at the hedged price. The Finished Goods
Inventory that has not been hedged shall be valued
at the average selling price for such Finished
Goods Inventory for the most recent month or such
other price acceptable to the Bank. The Specialty
Products Inventory shall be valued at standard
cost.
(b) The definition of "Margin Account" is hereby
inserted into the Section 1.01 of the Loan Agreement to read as
follows:
"'Margin Account' shall mean an account of the
Borrower maintained with a licensed commodity
broker for the purpose of meeting reserve
requirements of the Citrus Associates of the New
York Cotton Exchange. Margin Accounts shall not
be classified as "Qualified Accounts" for the
purposes of computing the Borrowing Base."
(c) The definition of "Qualified Margin Accounts" is
hereby inserted into the Section 1.01 of the Loan Agreement to
read as follows:
"'Qualified Margin Accounts' shall mean Margin
Accounts arising that are maintained with
commodities brokers identified to the Banks and
are otherwise acceptable to the Bank."
(d) The definition of "Revolving Period" is hereby
deleted and, in lieu thereof, there is substituted the following:
"'Revolving Period' shall mean the
period during the term of the
Loans, which, in the case of the
Revolving Loan, shall commence on
the date hereof and end on the
earlier of the occurrence of (i) an
Event of Default or (ii) April 30,
1999, or such later date as the
Bank may agree to in writing, and
in the case of the Working Capital
Loan, shall commence on the date
hereof and end on the occurrence of
(i) an Event of Default or (ii)
April 30, 2000, or such later date
as the Bank may agree to in
writing."
2. Capitalized Terms. All capitalized terms contained
herein shall have the meanings assigned to them in the applicable
Loan Documents (as defined in the Loan Agreement) unless the
context herein otherwise dictates or unless different meanings
are specifically assigned to such terms herein.
3. Representations and Warranties. Each of the Borrowers
represents and warrants as follows:
(a) The execution, delivery and performance of this
Seventh Amendment to Loan Agreement and the other loan documents
provided to the Bank in connection therewith has been duly
authorized by all requisite action of the Borrowers; and
(b) The Loan Documents are valid, legal binding
obligations of the Borrowers enforceable in accordance with their
terms. There are no defenses, counterclaims, rights of setoff or
recoupment thereunder.
4. Miscellaneous. The Borrowers hereby confirm the terms
conditions, representations and warranties of the Loan Agreement.
The Loan Agreement, as amended hereby, shall remain in full force
and effect and this Seventh Amendment to Loan Agreement shall not
be deemed to be a novation.
5. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties
hereto may execute this Agreement by signing any such
counterpart.
IN WITNESS WHEREOF, the parties have executed the Seventh
Amendment to Loan Agreement as of the day and year first above
written.
BORROWERS:
ORANGE-CO, INC., a Florida corporation
By:/s/Dale A. Bruwelheide
-----------------------------------
Dale A. Bruwelheide, Vice President
(CORPORATE SEAL)
ORANGE-CO OF FLORIDA, INC., a Florida
corporation
By:/s/Dale A. Bruwelheide
-----------------------------------
Dale A. Bruwelheide, Vice President
(CORPORATE SEAL)
BANK:
SUNTRUST BANK, CENTRAL FLORIDA,
NATIONAL ASSOCIATION
By:/s/William A. Mang
-------------------------------------
William A. Mang, First Vice President
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