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 March 31, 1998
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
May 14, 1998: 10,309,975 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
March 31, 1998 (unaudited) and September 30, 1997 (audited) 3
Consolidated Statements of Operations (unaudited)
Six and Three Months ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows (unaudited)
Six Months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements (unaudited) 6-9
ITEM 2.
Management's Discussion and Analysis of Results of
Operations and Financial Condition 10-15
PART II. OTHER INFORMATION
ITEM 4.
Submission of Matters to a Vote of Security Holders 16
ITEM 6.
Exhibits and Reports on Form 8-K 16
SIGNATURES 16
-2-
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, September 30
1998 1997
ASSETS (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,255 $ 1,009
Receivables 14,122 8,441
Advances on fruit purchases 237 451
Inventories 57,881 47,089
Deferred income tax 3,763 2,398
Prepaid and other 330 683
--------- ---------
Total current assets 78,588 60,071
--------- ---------
Property and equipment, net 123,800 123,271
--------- ---------
Other assets:
Excess of cost over net assets of
acquired companies 10,836 11,024
Notes receivable 1,435 1,458
Other 5,217 5,305
--------- ---------
Total other assets 17,488 17,787
--------- ---------
Total assets $219,876 $201,129
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable $ 5,000 $ -
Current installments on long-term debt 6,858 7,276
Accounts payable 9,241 4,113
Accrued liabilities 10,365 9,154
--------- ---------
Total current liabilities 31,464 20,543
Deferred income taxes 22,952 23,676
Other liabilities 1,309 1,046
Long-term debt 58,907 46,764
--------- ---------
Total liabilities 114,632 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 issued 5,175 5,175
Capital in excess of par value 71,417 71,417
Retained earnings 29,026 32,887
--------- ---------
105,618 109,479
Less:
Treasury stock, at cost: 39,424 shares
at March 31, 1998 and 39,924 shares at
September 30, 1997 (374) (379)
--------- ---------
Total stockholders' equity 105,244 109,100
--------- ---------
Total liabilities and
stockholders' equity $219,876 $201,129
========= =========
</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 SIX AND THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
(in thousands except for per share data)
Six Months Three Months
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Sales $57,516 $57,578 $31,807 $29,154
Cost of sales 59,041 50,117 32,296 26,404
-------- -------- -------- --------
Gross profit(loss) (1,525) 7,461 (489) 2,750
Other costs and expenses, net:
Selling, general and administrative (2,691) (3,319) (1,368) (1,618)
Gain(loss) on disposition of property
and equipment 122 (18) (14) (18)
Other (264) (56) (223) (46)
Interest (1,590) (1,189) (859) (649)
-------- -------- -------- --------
Income(loss) before income taxes (5,948) 2,879 (2,953) 419
Income tax expense(benefit) (2,089) 1,065 (1,054) 143
-------- ------- -------- --------
Net income(loss) $(3,859) $1,814 $(1,899) $ 276
======== ======= ======== ========
Net income(loss) per common and
common equivalent shares $ (.37) $ .18 $ (.18) $ .03
======== ======= ======== ========
Average number of common and
common equivalent shares outstanding 10,310 10,305 10,310 10,307
======== ======= ======== ========
</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 SIX MONTHS ENDED MARCH 31, 1998 AND 1997
(unaudited)
(in thousands)
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income(loss) $(3,859) $ 1,814
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 3,482 2,793
Increase(decrease) in deferred
income taxes (2,089) 280
(Gain)loss on disposition of property,
equipment and other (122) 18
Change in assets & liabilities:
(Increase)decrease in receivables (5,681) 6,093
Decrease in advances on fruit purchases 214 544
(Increase) in inventory (10,792) (15,720)
(Increase)decrease in prepaid and other 353 (275)
Increase(decrease) in accounts payable and
accrued liabilities 6,339 (7,228)
Other, net 192 115
-------- -------
Total adjustments (8,104) (13,380)
-------- --------
Net cash (used for) operating activities (11,963) (11,566)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property & equipment 753 8
Decrease in note & mortgage receivables 23 166
Additions to property & equipment (4,359) (5,197)
(Increase)decrease in other assets 65 (451)
-------- --------
Net cash (used for) investing activities (3,518) (5,474)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of treasury stock 3 38
Payment of cash dividends - (1,031)
Proceeds from short-term debt 5,000 1,008
Proceeds from long-term debt 11,724 16,557
-------- --------
Net cash provided by financing activities 16,727 16,572
-------- --------
NET INCREASE(DECREASE) IN CASH AND CASH
EQUIVALENTS 1,246 (468)
-------- --------
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 1,009 1,508
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,255 $ 1,040
======== ========
</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 March 31, 1998
. Audited Consolidated Balance Sheet at September 30, 1997
. Unaudited Consolidated Statements of Operations for the six and
three month periods ended March 31, 1998 and 1997
. Unaudited Consolidated Statements of Cash Flows for the six
month periods ended March 31, 1998 and 1997
2. NOTES PAYABLE AND LONG-TERM DEBT
As of March 31, 1998, the Company had access to a $45 million
working capital credit facility payable in April 2000. Accordingly,
the balance at March 31, 1998 was classified as long-term debt.
This facility is collateralized by substantially all of the
Company's current assets. The outstanding balance at March 31, 1998
was approximately $41,938,000. The interest rate on the facility is
variable based upon the financial institution's cost of funds plus a
margin. Approximately $2,462,000 was additionally available to be
borrowed under this facility.
Additionally, as of March 31, 1998 the Company had a
$10,000,000 short-term capital revolving credit facility. As of
March 31, 1998 the outstanding balance on this facility was
$5,000,000. The interest rate on this facility is variable based
upon the financial institution's cost of funds plus a margin.
At March 31, 1998, the Company's outstanding long-term debt
(including the $41,938,000 balance on the working capital line of
credit facility) was approximately $65,765,000, of which $6,858,000
matures in the next twelve months and the remainder matures at
various times over the subsequent ten years.
Interest paid, net of amounts capitalized, was approximately
$1,623,000 and $1,177,000 for the six months ended March 31, 1998
and 1997, respectively. Interest capitalized was approximately
$249,000 and $425,000 for the six months ended March 31, 1998 and
1997, respectively.
Certain mortgage agreements contain loan covenants. At March
31, 1998, the Company was out of compliance with loan covenants
related to debt service coverage and debt to equity ratios. (See
Management's Discussion and Analysis - Liquidity and Capital
Resources.)
-6-
3. INVENTORIES
<TABLE>
<CAPTION>
The major components of inventory are summarized as follows (in thousands):
March 31, September 30,
1998 1997
<S> <C> <C>
Finished goods $47,032 $32,095
Fruit-on-tree inventory 8,215 10,514
Other 2,634 4,480
------- -------
Total $57,881 $47,089
======= =======
</TABLE>
As of March 31, 1998, the Company held futures contracts as hedge
positions for frozen concentrated orange juice ("FCOJ"). The net futures
positions totaled approximately $25,016,000 with unrealized losses
of approximately $1,078,000. 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
March 31, 1998 deposits with brokers totaled $827,000.
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 six and three month periods ended March 31, 1998, the
Company had two customers who individually accounted for
approximately 19.5% and 13.3%, and 17.0% and 13.7% of total sales
for the respective periods. During the six and three month periods
ended March 31, 1997, the Company had two customers who individually
accounted for approximately 18.9% and 14.7% and 17.9% and 13.6% of
total sales for the respective periods.
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" ("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) attributable to income for the six
and three month periods ended March 31, 1998 and 1997 consists of
the following (in thousands):
Six Months Three Months
Ended March 31, Ended March 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Current:
Federal income tax(benefit) $ - $ 658 $ - $(165)
State income tax(benefit) - 127 - 30
------- --------- ------- -------
Total $ - $ 785 $ - $ (135)
------- --------- ------- -------
Deferred:
Federal income tax(benefit) $(1,887) $ 294 $ (953) $ 293
State income tax(benefit) (202) (14) (101) (15)
-------- ------- ------- ------
Total $(2,089) $ 280 $(1,054) $ 278
-------- ------- -------- ------
Total provision for income
tax(benefit) $(2,089) $1,065 $(1,054) $ 143
======== ======= ======== ======
</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(benefit) provisions for the six and three
month periods ended March 31, 1998 and 1997 (in thousands):
Six Months Three Months
Ended March 31, Ended March 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Expected income tax(benefit) $(2,022) $ 979 $(1,004) $ 143
Increase(decrease) resulting from:
Permanent items and other 45 12 (15) (41)
State income tax and other,
net of federal tax benefit (112) 74 (35) 41
-------- ------- -------- -------
Total provision for income
tax(benefit) $(2,089) $1,065 $(1,054) $ 143
======== ======= ======== =======
</TABLE>
-8-
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, dividends paid,
and treasury stock transactions (in thousands):
Treasury
September 30, Stock March 31,
1997 Net Income Issued 1998
<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 (3,859) (2) 29,026
Treasury stock (379) - 5 (374)
--------- -------- ---- ---------
Total stockholders'
equity $109,100 $(3,859) $ 3 $105,244
========= ======== ==== =========
</TABLE>
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 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
Fiscal 1998 versus 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 six and three month periods ended March 31, 1998 to
operations for the six and three month periods ended March 31, 1997.
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 between the respective periods.
<TABLE>
<CAPTION>
Six Months (YTD) and Three Months (QTR) Ended March 31, 1998
Versus
Six Months (YTD) and Three Months (QTR) Ended March 31, 1997
Increases/(Decreases)
(in thousands)
Cost of Net Change to
Sales Sales Income
YTD QTR YTD QTR YTD QTR
<S> <C> <C> <C> <C> <C> <C>
Beverage Division $ 7 $2,706 $8,843 $6,023 $(8,836) $(3,317)
Grove Management Division (69) (53) 81 (131) (150) 78
----- ------- ------ ------- -------- --------
Total $(62) $2,653 $8,924 $5,892 (8,986) (3,239)
===== ======= ====== =======
Other costs and expenses net:
Selling, general and administrative 628 250
Gain on disposition of property and equipment 140 4
Other (208) (177)
Interest (401) (210)
-------- --------
Income before income taxes (8,827) (3,372)
Income tax expense 3,154 1,197
-------- --------
Net income $(5,673) $(2,175)
======== ========
</TABLE>
SALES
Sales for the six and three month periods ended March 31, 1998
decreased approximately $62,000 or 0.1% and increased approximately
$2,653,000 or 9.1%, respectively compared to the same periods in the
prior year. The Beverage Division accounted for the principal
increases for the six and three month periods with increased sales
of approximately $7,000 and $2,706,000 respectively. Grove Management
Division sales decreased by approximately $69,000 and $53,000 for the
current six and three month periods compared to the same periods in the
prior year.
BEVERAGE DIVISION The Beverage Division sales increased
approximately $7,000 and $2,706,000 or 9.8% in the current six and
three month respective periods compared to the same periods in the
prior year. Of these increases, revenues from the sale of the
Company's bulk citrus juice products increased approximately
$2,193,000 and $3,828,000 during the current six month and three
month period as a result of offsetting increases and decreases. As
part of the increase during the current six and three month period,
revenues from the volume of bulk citrus juice
-10-
products sold increased approximately $12,215,000 and $6,365,000
respectively. These increases in sales volumes were due primarily
to an improving sales program for bulk citrus juice products.
Partially offsetting these increases in volume during the current
periods were decreased prices for bulk citrus juice products of
approximately $10,022,000 and $2,537,000 compared to the same periods
in the prior year.
As the Company entered the 1997-98 season, the United States
Department of Agriculture ("USDA") announced in October 1997 a
significantly increased crop estimate of approximately 254,000,000
boxes of round oranges. This estimate, revised to 248,000,000 boxes
in April 1998, 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 increase in the crop has had a deflating effect on prices
throughout the first two quarters of fiscal 1998.
Sales of the Company's packaged citrus juice products sold
decreased approximately $1,007,000 and $532,000 during the current
six and three month periods compared to the same periods in the
prior year. Contributing to these decreases were reductions in the
prices of packaged citrus juice products sold during the current six
and three month periods of approximately $1,051,000 and $610,000
respectively. However, partially offsetting these decreases were
increases in volumes which resulted in increased revenues of
approximately $44,000 and $78,000 during the current six and three
month periods.
The Company's non-orange packaged juices and drink base product
sales increased approximately $227,000 and $111,000 during the
current six and three month periods compared to the same periods in
the prior year. Increases in the volume of sales of these products
accounted for increases of approximately $342,000 and $168,000
during the current six and three month periods. Price decreases
resulted in decreased revenues of approximately $115,000 and $57,000
on these products during the current six and three month periods.
Revenues from the sale of the Company's citrus by-products,
including feed, pulp cells, and citrus oils, decreased approximately
$309,000 and $37,000 during the current six and three month periods
compared to the same periods in the prior year. Revenues from by-
products decreased approximately $1,395,000 and $920,000 during the
current six and three month periods as a result of lower prices for
by-products sold compared to the same periods in the prior year.
Partially offsetting these decreases were increases in the volumes
of by-products produced and sold of approximately $1,086,000 and
$883,000 during the current six and three month periods. The
combination of decreased prices and increased volumes for by-
products during the current periods 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 $1,097,000 and
$664,000 during the current six and three month periods compared to
the same periods in the prior year. These decreases were due
primarily to decreases in the volumes of these services performed
during the current six and three month periods compared to the same
periods in the prior year.
GROVE MANAGEMENT DIVISION Grove Management Division sales decreased
approximately $69,000 or 2.3% and $53,000 or 3.3% for the current
six and three month periods compared to the same periods in the
prior year. The principal decreases in revenues of approximately
$177,000 and $126,000 during the current six and three month periods
resulted from a reduction in fruit sold to third party packers and
processors. However, partially offsetting these decreases were
increases during the current six and three month periods in revenues
of approximately $108,000 and $73,000 as a result of increases in
the volume of harvesting services performed.
-11-
GROSS PROFIT
Gross profit for the current six and three month periods ended
March 31, 1998 decreased approximately $8,986,000 or 120% and
approximately $3,239,000 or 118% compared to the same periods in the
prior year. The principal decreases of approximately $8,836,000 and
$3,317,000 during the current six and three month periods occurred
in the Beverage Division. Gross profit for the Grove Management
Division decreased during the current six month period by
approximately $150,000 and increased approximately $78,000 during
the current three month period compared to the same periods in the
prior year.
BEVERAGE DIVISION Gross profit of the Beverage Division decreased
approximately $8,836,000 and $3,317,000 during the current six and
three month respective periods compared to the same periods in the
prior year. Contributing to the decrease in gross profit were
decreases during the current six and three month respective periods
of approximately $5,571,000 and $1,313,000 from the sale of bulk
citrus juice products. Of the decreases during the current six
month and three month respective periods, approximately $10,022,000
and $2,536,000 resulted from the previously mentioned decreased
prices for bulk citrus juice products. Partially offsetting these
decreases were increases in gross profit of approximately $3,714,000
and $1,223,000 during the current six and three month periods
principally due to lower cost of raw fruit and concentrate used in
the production of bulk citrus juice products sold compared to the
same periods in the prior year. Additionally, during the current
six month period gross profit increased approximately $737,000
primarily due to an increase in the volume of these products sold
during the current period.
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 March 31, 1998 the Company held contracts for FCOJ
futures with unrealized losses of approximately $1,078,000 which
would have been realized if said positions had been prematurely
liquidated on that date. These unrealized losses 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 decreased
approximately $1,298,000 and $840,000 during the current six and
three month respective periods compared to the same periods in the
prior year. Lower prices during the current six and three month
periods accounted for decreases in gross profit of approximately
$1,051,000 and $610,000 respectively. Additionally, gross profit
decreased approximately $247,000 and $230,000 during the current six
and three month periods as a result of higher cost of production of
packaged citrus juices sold.
Gross profit from the sale of the Company's non-orange packaged
juices and drink base products decreased approximately $800,000 and
$473,000 during the current six and three month periods compared to
the same periods in the prior year. Of these decreases higher
production costs, primarily ingredients, resulted in decreases in
gross profit of approximately $551,000 and $334,000 during the
current periods. Decreases in the volume of sales of these products
resulted in decreases in gross profit of approximately $134,000 and
$81,000. Additionally, decreases during the current six and three
month periods of $115,000 and $58,000 resulted from decreased
prices.
Gross profit from citrus by-products, including feed, pulp cells,
and citrus oils, decreased approximately $1,311,000 and $500,000
during the current six and three month respective periods compared
to the same periods in the prior year. Of these decreases
approximately $1,395,000 and $920,000 resulted from the previously
mentioned lower prices for by-products sold compared to the same
period in the prior year. Partially offsetting these decreases were
increases of approximately $507,000 and $119,000 as a result of higher
volumes of sales of
-12-
these products. Additionally, higher costs of production during the
current six month period resulted in a decrease in gross profit of
approximately $423,000. However, during the current three month period
gross profit increased approximately $301,000 as a result of lower
production costs compared to the prior year.
Gross profit from storage, handling, and other activities increased
by approximately $144,000 during the current six month period and decreased
approximately $191,000 during the current three month period principally due
to fluctuations in the volume of these services provided compared to the
same periods in the prior year.
GROVE MANAGEMENT DIVISION Grove Management Division gross profit
decreased approximately $150,000 or 24.6% during the current six
month period and increased approximately $78,000 or 38.5% during the
current three month period compared to the same periods in the prior
year. The primary decrease of approximately $295,000 in gross
profit during the current six month period resulted from a reduction
in fruit sold to third party packers and processors. However,
partially offsetting this decrease in the current six month period
was an increase of approximately $145,000 resulting from an increase
in the volume of harvesting services performed. During the current
three month period gross profit increased approximately $224,000 as
a result of an increase in the volume of harvesting and grove
management services performed. Partially offsetting this increase
was a decrease in gross profit of approximately $146,000 during the
current three month period resulting from a decrease in the volume
of fruit sold to third party packers and processors.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses decreased
approximately $628,000 or 18.9% and $250,000 or 15.4% for the
current six and three month periods compared to the same periods in
the prior year. Of these decreases, approximately $288,000 and
$149,000 resulted from a decrease in salary and benefit costs in the
current respective periods. Additionally, approximately $340,000
and $101,000 were a result of decreases in other costs.
GAIN/(LOSS) ON DISPOSITION OF PROPERTY AND EQUIPMENT
The increased gain on the disposition of property and equipment
of approximately $140,000 for the six month period ending March 31,
1998 compared to the same periods in the prior year was principally
due to the gain from insurance proceeds on damage to the product
storage warehouse previously reported. There was no comparable
event in the same period in the prior year. The decreased loss on
the disposition of property and equipment of approximately $4,000
for the three month period ending March 31, 1998 compared to the
same period of the prior year resulted from differences in losses on
the sales of commercial properties not utilized in citrus production
or processing.
OTHER EXPENSE
Other expense increased approximately $208,000 and $177,000 for
the current six and three month periods respectively as compared to
the same periods in the prior year. The principal component for
both periods was an increase of approximately $189,000 in the
provision for uncollectible notes receivable.
INTEREST EXPENSE
Interest expense increased approximately $401,000 or 33.7% and
$210,000 or 32.4% during the current six and three month periods
compared to the same periods in the prior year. Of these increases,
increases in the average outstanding debt resulted in increases of
interest expense of approximately $164,000 and $43,000 for the
current six and three month periods respectively. Increases in the
-13-
average interest rate resulted in increases in interest expense of $14,000
and $125,000 during the current respective six and three month periods.
Also, decreases in capitalized interest resulted in increased interest
expense of approximately $176,000 and $60,000 during the current respective
six and three month periods, compared to the prior year. Other interest
charges resulted in an increase of approximately $47,000 during the
current six month period and a decrease of approximately $18,000
during the current three month period compared to the same periods
in the prior year.
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 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 primary $45 million
credit facility. This facility is principally secured by
substantially all of the Company's current assets. The outstanding
balance at March 31, 1998 was approximately $41,938,000. 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 2000; 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.
Additionally, as of March 31, 1998 the Company had a $10 million
short-term capital revolving credit facility. As of March 31, 1998
the outstanding balance on this facility was $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 increased approximately $18,517,000 as of March
31, 1998 compared to September 30, 1997. The principal component of
this was an increase in inventories of approximately $10,792,000 in
the first six months of the current year due to the seasonal
accumulation of inventories. The Company's accounts receivable
balance increased approximately $5,681,000 during the six months
ending March 31, 1998. Additionally, there was an increase in cash
and cash equivalents of approximately $1,246,000. Advances on fruit
purchases decreased approximately $214,000 as the Company began
processing the purchased fruit and collected these advances.
Current liabilities increased approximately $10,921,000 during
the first six months of fiscal 1998 compared to September 30, 1997.
This increase was due principally to increases in accounts payable
and accrued liabilities of approximately $6,339,000 as the Company
is processing the current season's fruit crop. Also, the short-term
working capital note payable increased approximately $5,000,000 to meet
current requirements. Offsetting these increases was a decrease of
$418,000 in the current portion of long-term debt.
At March 31, 1998 the Company's outstanding long-term debt was
approximately $58,907,000 including the working capital facility of
approximately $41,938,000. In addition, current installments of long-
term debt were approximately $6,858,000 with the remaining amounts
due on various dates over the subsequent ten years. The Company
anticipates that amounts due over the next twelve months will be
paid out of working capital or be refinanced through extending
current mortgages. At March 31, 1998 the Company was out of
compliance with loan covenants related to debt service coverage and
debt to equity ratios as a result of recent losses and high seasonal
working capital requirements. The lenders have waived these
requirements for the current periods without penalty. Management
believes its relationships with its lenders are good.
-14-
During the first six months of the current fiscal year, capital
expenditures of approximately $651,000 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 $756,000 were capitalized and
expenditures of approximately $90,000 were made for grove operations
equipment. Additionally, expenditures of approximately $2,862,000
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.
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's systems will then be in compliance with
"Year 2000" issues.
The Company has not determined what impact the "Year 2000" problem
may have on its customers, vendors, creditors or others with whom the
Company conducts business, and therefore, has not ascertained what effect,
if any, their level of compliance may have on the Company.
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. This
estimate was most recently revised in April 1998 to approximately
248,000,000 boxes. This estimate, if true, will provide the largest
Florida Crop in history.
-15-
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
<TABLE>
<CAPTION>
At the Annual Meeting of Stockholders on February 19, 1998, the
stockholders of the Company elected directors. The results of these
votes were as follows:
AUTHORITY
DIRECTOR NOMINEES FOR WITHHELD
<S> <C> <C>
John R. Alexander 9,434,546 31,547
Richard A. Coonrod 9,434,456 31,637
Paul E. Coury, MD 9,433,563 32,530
Ben Hill Griffin, III 9,434,804 31,289
George W. Harris, Jr. 9,434,556 31,537
Dr. W. Bernard Lester 9,434,556 31,537
Gene Mooney 9,434,556 31,537
C. B. Myers, Jr. 9,433,579 32,514
Thomas H. Taylor 9,434,520 31,573
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit EXHIBIT Page
No. No.
10.29 Revewal Term Note between Orange-co, Inc. 17
and Farm Credit of Southwest Florida, A.C.A.
dated April 1, 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: May 15, 1998 By: /s/Gene Mooney
Gene Mooney
President and
Chief Operating Officer
Date: May 15, 1998 By: /s/Dale A. Bruwelheide
Dale A. Bruwelheide
Vice President,
Chief Financial Officer, and
Principal Accounting Officer
-16-
</TABLE>
RENEWAL TERM NOTE
$3,990,000.00 Arcadia, Florida
Loan #03-75-90-454892-01 Effective April 1, 1998
FOR VALUE RECEIVED, Orange-co, Inc., a Florida Corporation
and Orange-co of Florida, Inc., a Florida Corporation (hereafter
"Borrower" and if more than one, jointly and severally), promise
to pay to the order of Farm Credit of Southwest Florida ACA, its
successors and/or assigns (hereafter "Lender") at the office of
the Lender at P. O. Box 1070, Arcadia, Florida 34265, or such
other place as the holder hereof may designate in writing, in
immediately available funds, the principal sum of Three Million
Nine Hundred Ninety Thousand and 00/100 ($3,990,000.00) Dollars,
or so much thereof as may be advanced from time to time, payable
at the Maturity Date (as described below).
Interest. Borrower shall pay interest to the order of
Lender on the principal amount outstanding from time to time from
and including the date hereof until payment in full. Except as
otherwise provided below in this Note, interest due hereunder
shall accrue under the method selected by Borrower below:
- At a fixed rate for a fixed period of time (not to exceed the
duration of the note) based upon an equivalent length Treasury
note plus 225 basis points. Interest shall accrue and be
computed on the basis of a year of 365 or 366 days, as
applicable, based upon actual days elapsed in each year, or;
- At the LIBOR Variable Rate. For purposes of this Note, "LIBOR
Variable Rate" means a variable rate per annum equal to the three
(3) month London Interbank Offered Rate (hereafter "LIBOR"), as
published in The Wall Street Journal on the 15th day of each
month, plus two percent (2.0%) (two hundred basis points). The
LIBOR Variable Rate shall change on the first day of each month,
if necessary, based upon the LIBOR rate published on the 15th day
of the preceding month (if such rate is not published on the 15th
day of the preceding month, then the last published rate prior to
the 15th day shall prevail). If the LIBOR rate should no longer
be published, Lender, in the exercise of reasonable judgment,
shall substitute another means of determining an annual interest
rate which shall apply thereafter. Lender will give Borrower
written notice of such substitution. Interest shall accrue and
be computed on the basis of a year of 365 or 366 days, as
applicable, based upon actual days elapsed in each year.
Anything contained herein to the contrary notwithstanding,
if for any reason, the effective rate of interest on this Note,
should exceed the maximum lawful rate, any sums of interest which
have been collected in excess of such maximum lawful rate shall
be applied as a credit against the unpaid balance due hereof.
Repayment of Principal and Interest. Principal, interest
and other charges due hereunder are payable in United States
dollars, without offset or deduction of any kind. At Lender's
option, any repayments of this Note other than by United States
currency will not be credited until Lender receives collected
funds. The principal shall be payable quarter-annually in the
amount of $190,000.00, beginning July 1, 1998, and continuing on
the like day of each calendar quarter thereafter for a total of
21 consecutive quarterly principal payments. The accrued
interest shall be payable monthly beginning on July 1, 1998, and
on the first day of each successive month thereafter during the
term of this Note and continuing so long as there is any
principal amount or accrued interest outstanding, with all
outstanding principal and accrued interest to be paid in full on
the Maturity Date of July 1, 2003.
Default Interest Rate. If any installment of interest or
principal is not paid when due and remains unpaid for thirty days
(30) days or more, or if any other event of default under the
Commitment Letter or dated March 11, 1998 or Loan Agreement
dated April 19, 1993 or any other loan documents associated with
the original note dated April 19, 1993 and all extensions and
modifications thereto (herein collectively referred to as the
Loan Documents) shall occur and continue uncured as provided
under the Loan Documents, the applicable interest rate hereunder,
with or without notice from Lender, shall be increased to the
Default Rate as provided in the Loan Documents until such default
is cured, whereupon the interest rate shall revert to the
original amount set forth under this Note; provided however, that
in no event shall the default interest rate together with late
charges charged hereunder, exceed the maximum rate allowed by
law.
Late Charges. In the event any installment of principal or
interest is overdue for a period of ten (10) days, Borrower
agrees to pay Lender a late charge of one and one-half percent
(1.50%) of the overdue installment; provided, however, in no
event shall late charges, together with the default interest rate
charged hereunder, exceed the rate allowed by law.
Prepayments of Principal. Borrower, at its option, subject
to the limitations contained in the Loan Documents and the
payment of any applicable Prepayment Premium as set forth in the
Loan Documents and the payment of accrued interest to the date of
prepayment, may prepay, all or part of the principal this Note.
All such prepayments shall be applied in the inverse order of
maturity without suspension of regularly scheduled payments due
under this Note.
This Note is secured by a mortgage and associated security
agreements dated April 19, 1993, as modified, ("Mortgage") and
the terms and conditions of the Mortgage are incorporated herein
by reference and Lender is entitled to the benefits thereof. The
holder of this Note may enforce the agreements of Borrower
contained in the Loan Documents and Mortgage and may exercise the
remedies provided for therein or otherwise available at law or in
equity.
Upon the occurrence of an event of default as described in
the Loan Documents or the Mortgage, any principal amounts
advanced under the Note, interest accrued thereon, and other
charges due hereunder or under the Loan Documents, may be
declared to be immediately due and payable as provided in the
Loan Documents.
This Note may be enforced in any court or other tribunal
having jurisdiction over the subject matter hereof, and Borrower
shall pay to the holder hereof on demand such amounts in United
States dollars as shall be sufficient to pay the enforcement
costs and expenses of such holder, including, without limitation,
reasonable attorney's fees and expenses, including those
attorney's fees and expenses incurred on appeal or in the event
the holder takes actions to protects its interest hereunder in
proceedings in bankruptcy. As used herein, attorney's fees shall
include a separate award for paralegal or legal assistant's fees.
Such costs, expenses and attorney's fees shall become part of the
indebtedness secured by the Mortgage and shall draw interest from
the date incurred until paid at the applicable Default Rate of
interest provided in the Loan Documents.
No reference herein to the Loan Documents and no provision
of this Note or the Loan Documents shall alter or impair the
obligation of Borrower, which is absolute and unconditional, to
pay the principal of and interest (and any default interest rate
or other charges due) on this Note as provided herein.
Borrower shall be in default under this Note upon the
happening of any of the following events, circumstances or
conditions; namely:
(1) Borrower fails to make payment of any principal,
interest, or other amount due on any indebtedness owed Lender
under this Note or any of the Loan Documents, or fails to make
any other payment to Lender as contemplated thereunder either by
the terms hereof or otherwise.
(2) Any Borrower defaults under any other loan with Lender
in which such Borrower is a maker or a guarantor or fails to make
payment on any contract obligation in excess of $50,000.00 or of
principal or interest on any indebtedness in excess of $50,000.00
other than that created under the Loan Documents, whether owed to
Lender or others, beyond any period of grace provided with
respect thereto or defaults in the performance of any other
agreement, or condition contained in any agreement under which
any such other indebtedness is created, or there is otherwise a
default or event of default thereunder, if the effect of any such
failure or default is to cause, or permit the holder or holders
of such indebtedness (or a trustee or other person or entity
acting in behalf of such holder or holders) to cause such
indebtedness to become due prior to its stated maturity.
(3) Any representation or warranty made or deemed made by
any Borrower herein or in any writing furnished in connection
with or pursuant to the Loan Documents shall be false in any
material respect on the date when made or when deemed made.
(4) Any Borrower defaults in the performance or observance
of or breaches any agreement, covenant, or condition binding on
Borrower contained in the Mortgage or Loan Documents, or there is
otherwise a default or event of default under the Mortgage or
Loan Documents.
(5) A default by any Borrower in the performance or
observance of a provision of any lease, contract, agreement,
mortgage, promissory note, instrument, or other obligation or
commitment in excess of $50,000.00 to which Borrower is a party
or in respect of which Borrower is obligated.
(6) Liquidation or dissolution of any Borrower, suspension
of the business of any Borrower, or the filing or commencement by
any Borrower of a voluntary petition, case, proceeding or other
action seeking reorganization, arrangement, readjustment of its
debts or any other relief under any existing or future law of any
jurisdiction, domestic or foreign, state or federal, relating to
bankruptcy, insolvency, reorganization or relief of debtors, or
any other action of any Borrower indicating its consent to,
approval of, or acquiescence in, any such petition, case,
proceeding or other action seeking to have an order for relief
entered with respect to Borrower or its debts; the application by
any Borrower for, or the appointment, by consent or acquiescence
of, a receiver, trustee, custodian or other similar official for
any Borrower or for all or a substantial part of its property;
the death of any Borrower; the making by any Borrower of an
assignment for the benefit of creditors; the inability of any
Borrower, or the admission by any Borrower in writing of its
inability, to pay its debts as they mature.
(7) Commencement of an involuntary petition, case,
proceeding, or other action against any Borrower under the
Bankruptcy Code or seeking reorganization, arrangement,
readjustment of its debts, or any other relief under any existing
or future law of any jurisdiction, domestic or foreign, state or
federal, relating to bankruptcy, insolvency, reorganization, or
relief of debtors not dismissed within 30 days of the filing
thereof; or the involuntary appointment of a receiver, trustee,
custodian, or other similar official for any Borrower or for all
or a substantial part of such Borrower's property or assets; or
there shall be commenced against any Borrower any case,
proceeding, or other action seeking issuance of a warrant of
attachment, execution, distraint, or similar process against all
or any substantial part of any Borrower's assets or property
which results in the entry of an order for such relief, and the
continuance of any of such for thirty (30) days without being
vacated, discharged, stayed, bonded, or dismissed.
(8) Any report, certificate, financial statement or other
instrument delivered to Lender by any Borrower is at any time
false or misleading in any material respect.
(9) The rendition of a final judgment against any Borrower
for the payment of damages or money in an amount greater than
$50,000.00 if the same is not discharged or if a writ of
execution or similar process is issued with respect thereto and
is not stayed within the time allowed by law for filing notice of
appeal of the final judgment.
(10) The issuance of any attachment or garnishment or the
violation of any law or any act or omission by any Borrower that
results in the imposition of a lien by operation of law on any of
its property, if the lien is not discharged within ten (10) days
after it has attached.
(11) Any act or omission (formal or informal) of any
Borrower or its partners, or the officers, directors, or
shareholders of its partners resulting in the termination,
invalidation (partial or total), revocation, suspension,
interruption, or unenforceability of its partnership existence,
or its material rights, licenses, franchises, or permits, or the
transfer or disposition (whether by sale, lease, or otherwise) to
any person of all or a substantial part of its property.
Each Borrower hereby waives presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the holder of
any of its rights hereunder in any particular instance shall not
constitute a waiver hereof in that or any subsequent instance.
This Note, except as governed by applicable federal law and
regulations, shall be construed in accordance with and governed
by the laws of the State of Florida.
BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER,
OR IN CONNECTION WITH THE LOAN DOCUMENTS AND ANY OTHER DOCUMENT
EXECUTED IN CONJUNCTION WITH THE LOANS HEREUNDER, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER VERBAL OR
WRITTEN), OR ACTION OF EITHER PARTY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO ANY LOAN
TRANSACTIONS HEREUNDER.
This Note renews that certain $7,600,000.00 Promissory Note
from Borrowers to Lender dated April 19, 1993, and is exempt from
documentary stamp taxes.
Agreed to effective this April 1, 1998, given and under the
hand and seal of the undersigned.
Orange-co, Inc., a Florida Corporation
By:/s/ Gene Mooney
-----------------------------------(SEAL)
Gene Mooney, its President
Tax Identification Number: 59-0918547
By:/s/ Dale Bruwelheide
-----------------------------------(SEAL)
Dale Bruwelheide, its Vice President and
Chief Financial Officer
Orange-co of Florida, Inc., a Florida Corporation
By:/s/ Gene Mooney
-----------------------------------(SEAL)
Gene Mooney, its President
Tax Identification Number:59-1320991
By:/s/ Dale Bruwelheide
-----------------------------------(SEAL)
Dale Bruwelheide, its Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000004507
<NAME> ORANGE-CO, INC.
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 2,255
<SECURITIES> 0
<RECEIVABLES> 14,794
<ALLOWANCES> (672)
<INVENTORY> 57,881
<CURRENT-ASSETS> 78,588
<PP&E> 170,580
<DEPRECIATION> 46,780
<TOTAL-ASSETS> 219,876
<CURRENT-LIABILITIES> 31,464
<BONDS> 0
0
0
<COMMON> 76,218
<OTHER-SE> 29,026
<TOTAL-LIABILITY-AND-EQUITY> 219,876
<SALES> 57,516
<TOTAL-REVENUES> 57,516
<CGS> (59,041)
<TOTAL-COSTS> (59,041)
<OTHER-EXPENSES> (2,833)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,590)
<INCOME-PRETAX> (5,948)
<INCOME-TAX> (2,089)
<INCOME-CONTINUING> (3,859)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,859)
<EPS-PRIMARY> (.37)
<EPS-DILUTED> (.37)
</TABLE>
