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, 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 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 12, 1999: 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
December 31, 1998 (unaudited) and September 30, 1998 (audited) 3
Consolidated Statements of Operations (unaudited)
Three Months ended December 31, 1998 and 1997 4
Consolidated Statements of Cash Flows (unaudited)
Three Months ended December 31, 1998 and 1997 5
Notes to Consolidated Financial Statements (unaudited) 6-8
ITEM 2.
Management's Discussion and Analysis of Results of Operations
and Financial Condition 9-14
PART II. OTHER INFORMATION
ITEM 6.
Exhibits and Reports on Form 8 K 15
SIGNATURES 15
-2-
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, September 30,
1998 1998
ASSETS (unaudited) (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 479 $ 841
Receivables 10,958 8,621
Advances on fruit purchases 955 879
Inventories 57,012 50,482
Deferred income taxes 2,451 2,476
Prepaid and other 460 57
--------- ---------
Total current assets 72,315 63,356
--------- ---------
Property and equipment, net 126,641 126,992
--------- ---------
Other assets:
Excess of cost over net assets of
acquired companies 10,553 10,647
Notes receivable 1,276 1,196
Other 6,776 6,171
--------- ---------
Total other assets 18,605 18,014
--------- ---------
Total assets $217,561 $208,362
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments on long-term debt 3,730 3,753
Accounts payable 8,192 5,697
Accrued liabilities 11,094 11,690
========= =========
Total current liabilities 23,016 21,140
Deferred income taxes 23,425 23,129
Other liabilities 1,623 1,502
Long-term debt 60,232 54,901
========= =========
Total liabilities 108,296 100,672
========= =========
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 33,047 31,472
--------- ---------
109,639 108,064
Less:
Treasury stock, at cost: 39,424
shares at December 31, 1998 and
September 30, 1998 (374) (374)
--------- ---------
Total stockholders' equity 109,265 107,690
Total liabilities and stockholders'
equity $217,561 $208,362
</TABLE>
THE ACCOMPANYING NOTES ARE ANINTEGRAL PART OF THE FINANCIAL STATEMENTS.
-3-
<TABLE>
<CAPTION>
ORANGE-CO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998 AND 1997
(unaudited)
(in thousands except for per share data)
1998 1997
<S> <C> <C>
Sales $32,996 $25,710
Cost of sales 27,983 26,745
-------- --------
Gross profit(loss) 5,013 (1,035)
Other costs and expenses, net:
Selling, general and administrative (1,575) (1,323)
Gain on disposition of property and
equipment - 136
Other (28) (42)
Interest (846) (731)
-------- --------
Income(loss) before income taxes 2,564 (2,995)
Income tax expense(benefit) 989 (1,035)
-------- --------
Net income(loss) $ 1,575 $(1,960)
======== ========
Net income(loss) per common share,
basic and diluted: $ .15 $ (.19)
======== ========
Average number of common and common
equivalent shares outstanding 10,310 10,309
======== ========
</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, 1998 AND 1997
(unaudited)
(in thousands)
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income(loss) $ 1,575 $(1,960)
-------- --------
Adjustments to reconcile net
income(loss) to net cash provided by
(used for) operating activities:
Depreciation and amortization 1,927 1,742
Increase(decrease) in deferred income taxes 321 (1,035)
Gain on disposition of property and equipment - (136)
Change in assets & liabilities:
(Increase) in receivables (2,337) (2,681)
(Increase)decrease in advance on fruit purchases (76) 19
(Increase)decrease in inventory (6,530) 6,221
(Increase)increase in prepaids and other (403) 293
Increase in accounts payable and
accrued liabilities 1,899 264
Other, net 80 299
------- -------
Total adjustments (5,119) 4,986
------- -------
Net cash (used for)provided by operating
activities (3,544) 3,026
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property & equipment 29 750
(Increase)decrease in note & mortgage receivables (80) 15
Additions to property & equipment (1,447) (2,401)
Increase in other assets (628) (20)
------- -------
Net cash (used for) investing activities (2,126) (1,656)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term debt - 5,000
Proceeds from(payments on)long-term debt 5,308 (6,028)
Issuance of treasury stock - 3
------- -------
Net cash provided by(used for) financing
activities 5,308 (1,025)
------- -------
NET (DECREASE)INCREASE IN CASH AND CASH
EQUIVALENTS (362) 345
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 841 1,009
------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 479 $ 1,354
======= ========
</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 unaudited interim 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, 1998
- Audited Consolidated Balance Sheet at September 30, 1998
- Unaudited Consolidated Statements of Operations and Statements
of Cash Flows for the three month periods ended December 31, 1998
and 1997
2. NOTES PAYABLE AND LONG-TERM DEBT
As of December 31, 1998, the Company had access to a $45
million working capital line of credit facility collateralized by
most of the Company's current assets which is payable in April 2000.
Accordingly, the balance at December 31, 1998 was classified as long-
term. The outstanding balance at December 31, 1998 was approximately
$30,293,000 with approximately $9,120,000 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.
Additionally, as of December 31, 1998 the Company had a $10
million short-term capital revolving credit facility. As of
December 31, 1998 there was no outstanding balance on this facility.
The interest rate is variable based upon the financial institution's
cost of funds plus a margin.
At December 31, 1998, the Company's outstanding long-term debt
(including the $30,293,000 balance on the working capital line of
credit facility) was approximately $63,962,000, of which $3,730,000
matures in the next twelve months and the remainder matures at
various times over the subsequent ten years. At December 31, 1998,
the Company was in compliance with all of its loan covenants.
Interest paid, net of amounts capitalized, was approximately
$882,000 and $724,000 for the three months ended December 31, 1998
and 1997, respectively. Interest capitalized was approximately
$119,000 and $115,000 for the three months ended December 31, 1998
and 1997, 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,
1998 1998
<S> <C> <C>
Finished goods $42,377 $35,390
Fruit-on-tree 11,293 11,099
Other 3,342 3,993
------- -------
Total $57,012 $50,482
======= =======
</TABLE>
As of December 31, 1998 the Company held contracts for frozen
concentrated orange juice ("FCOJ") futures positions totaling
approximately $13,785,000 with unrealized losses of approximately
$502,000. 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 deposits with
brokers as of December 31, 1998 totaled $1,065,000 and vary with
market price fluctuations.
4. OTHER
Substantially all sales are to entities that market citrus and
citrus-related products. During the three month period ended
December 31, 1998 the Company had two customers who individually
accounted for approximately 18.6% and 17.0% of total sales. 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.
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, 1998 and 1997 is summarized as follows (in thousands):
1998 1997
<S> <C> <C>
Current:
Federal income tax $ 553 $ -
State income tax 116 -
----- ---------
Total 669 $ -
----- ---------
Deferred:
Federal income tax (benefit) $ 289 $ (935)
State income tax (benefit) 31 (100)
----- ---------
Total $ 320 $ (1,035)
----- ---------
Total provision for income
taxes(benefit) $ 989 $(1,035)
===== ========
</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,
1998 and 1997 (in thousands):
1998 1997
<S> <C> <C>
Expected income tax (benefit) $ 872 $(1,018)
Increase(decrease) resulting from:
State income taxes, net of federal tax benefit 71 (77)
Permanent items and other 46 60
------ --------
Total provision for income taxes $ 989 $(1,035)
====== ========
</TABLE>
No material tax payments were required in the first quarter of
1999 or 1998.
6. APPLICATION OF ACCOUNTING STANDARDS
In June 1998 FASB issued SFAS No. 133 (SFAS 133), "Accounting
for Derivative Instruments and Hedging Activities". SFAS 133
requires that an entity recognize all derivatives as either assets
or liabilities in the statement of financial position and measure
those instruments at fair value. Under the comprehensive income
reporting method adopted under SFAS 130 "Reporting Comprehensive
Income", gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the
derivative and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must
be highly effective in achieving offsetting changes in fair value or
cash flows. SFAS 133 is effective for interim and annual periods
beginning after June 15, 1999. The Company is currently evaluating,
and has not yet determined, the effect that the adoption of SFAS 133
will have on its financial statements.
The Financial Accounting Standards Board recently issued SFAS
131, "Disclosures about Segments of an Enterprise and Related
Information", which is effective for the Company's fiscal year
beginning October 1, 1998. Under SFAS 131 the basis for determining
an enterprise's operating segments is the manner in which management
operates the businesses. The Company plans to adopt these
disclosures as of the end of the current fiscal year as provided for
in the application requirement of SFAS 131.
-8-
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 1999 versus First Quarter of Fiscal 1998
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, 1998 to operations for
the three month period ended December 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>
Three Months Ended December 31, 1998 vs. Three Months Ended December 31, 1997
Increases/(Decreases)
(in thousands)
Net
Changes to
Sales Cost of Sales Income
<S> <C> <C> <C>
Beverage Division . . . . . . . . $ 7,630 $ 1,668 $ 5,962
Grove Management Division . . . . (344) (430) 86
-------- -------- -------
Total . . . . . . . . . . . . . . $ 7,286 $ 1,238 $ 6,048
======== ======== ========
Other costs and expenses, net:
Selling, general and administrative . . . . . . . . . . . (252)
Gain on disposition of property and equipment . . . . . . (136)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Interest . . . . . . . . . . . . . . . . . . . . . . . . . (115)
--------
Income before income taxes . . . . . . . . . . . . . . . . 5,559
Income tax expense . . . . . . . . . . . . . . . . . . . . (2,024)
--------
Net income . . . . . . . . . . . . . . . . . . . . . . . . $ 3,535
========
</TABLE>
SALES
Sales for the three month period ended December 31, 1998
increased approximately $7,286,000 compared to the same period in
the prior year. The Beverage Division accounted for the principal
increase for the current period with increased sales of
approximately $7,630,000. Grove Management Division sales decreased
approximately $344,000 for the current period compared to the same
period in the prior year.
BEVERAGE DIVISION The increase in Beverage Division sales of
approximately $7,630,000 during the current three month period
compared to the same period in the prior year, resulted from
numerous increases and decreases in sales volume, prices, or
combinations thereof.
The principal component of this increase resulted from an
increase in the sale of the Company's bulk citrus juice products of
approximately $5,424,000. This increase in bulk citrus juice
products resulted principally from higher prices for these products
of approximately $7,459,000 during the current period compared to
the same period in the prior year. As the Company entered the 1998-
99 season, the United States Department of Agriculture (USDA)
announced in October 1998 an estimated Florida orange crop of
approximately 190,000,000 boxes of round oranges.
-9-
This estimate, if true, represents a significant decrease from the
1997-98 actual crop of 244,000,000 boxes of round oranges and the
1996-97 actual crop of 226,200,000 boxes. The anticipation of a
significant decrease in the crop has had the effect of increasing
prices throughout the first quarter of fiscal 1999.
Partially offsetting the increase in sales from higher prices was
a decrease of approximately $2,035,000 from decreased volumes of
bulk citrus juices sold in the current three month period compared
to the same period in the prior year. This decrease in sales volume
was due primarily to unusually higher shipments of bulk citrus
products in the first three months of the prior year.
Sales of the Company's packaged citrus juice products sold
increased approximately $2,246,000 compared to the same period in
the prior year. Of this increase approximately $2,878,000 was a result
of higher volumes compared to the same period in the prior year.
Lower prices for these products resulted in a partially offsetting
decrease of approximately $632,000.
The Company's non-orange packaged juices and drink base products
sales decreased approximately $41,000 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 $174,000. Price decreases resulted in an
offsetting decrease in revenues of approximately $215,000 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
$70,000 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.
Storage, handling, processing citrus for customers under
contract, and other revenues increased approximately $71,000 during
the current period compared to the same period in the prior year.
This increase was due primarily to an increase in the volume of
services performed during the current three month period.
GROVE MANAGEMENT DIVISION Grove Management Division sales decreased
approximately $344,000 in the current three month period compared to
the same period in the prior year. The principal decrease of
approximately $360,000 resulted from a decrease in harvesting
activities due to a later start of the harvesting season.
Additionally, revenues from caretaking activities decreased
approximately $62,000 during the current three month period compared
to the same period in the prior year. Partially offsetting these
decreases was an increase of approximately $78,000 in revenues from
the sale of fruit to third party packers and processors.
GROSS PROFIT
Gross profit for the three month period ended December 31, 1998
increased approximately $6,048,000 compared to the same period in
the prior year. The principal increase of approximately $5,962,000
occurred in the Beverage Division. Additionally, there was a
increase in gross profit of approximately $86,000 in the Grove
Management Division during the current period compared to the same
period in the prior year.
BEVERAGE DIVISION The increase in gross profit of the Company's
Beverage Division of approximately $5,962,000 during the current
period compared to the same period in the prior year as a result of
numerous offsetting increases and decreases in volumes, prices,
costs of production, and combinations thereof. The effects of these
changes are quantified as follows.
The principal component was an increase in gross profit of
approximately $6,769,000 which resulted from an increase from the
sale of bulk citrus juice products during the current period compared
to the same period in the prior year.
-10-
Of this increase approximately $7,459,000 resulted from higher prices
for the Company's bulk citrus juice products. This increase was the
result of depressed prices during the first three months of the prior
year due to the announcement in October 1997 of an historically large
Florida crop of round oranges. The anticipation of this record
crop had a deflating effect on prices throughout the first quarter
of fiscal 1998 and beyond.
Partially offsetting this increase was a decrease in gross profit
of approximately $690,000 due to higher 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.
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, are reflected in sales
or in the cost of inventories and flow through the Consolidated
Statements of Operations as the associated products are sold. As of
December 31, 1998 the Company held contracts for FCOJ futures with
unrealized losses of approximately $502,000 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 or purchase
the FCOJ.
The table below provides information about the Company's FCOJ
futures contracts, that are sensitive to changes in commodity
prices, specifically FCOJ prices. The table presents the total
dollar contract amount by expected maturity dates. Contract amounts
are used to calculate the contractual payments of FCOJ to be
exchanged under the futures contracts. Contractual cash flows from
these derivative financial instruments, if executed at maturity,
would be as follows at December 31, 1998:
Contractual
Cash Flows
Inflows/(Outflows) Maturity Date
FCOJ Futures (Net long) $(11,584,000) January-March 1999
The contractual cash flows from the derivatives are based upon
the execution of the underlying futures contracts and do not
necessarily represent actual cash flows when the futures contract
mature or otherwise terminate.
Gross profit on the sales of packaged citrus juice products
decreased approximately $881,000 during the current three month
period compared to the same period in the prior year. Of this
decrease approximately $632,000 resulted from decreased prices.
Additionally, gross profit decreased approximately $249,000 as a
result of a higher cost of inventory in the current period.
Gross profit from the sale of the Company's non-orange packaged
juices and drink base products increased approximately $268,000
during the current period compared to the same period in the prior
year. This increase was primarily a result of lower cost of
ingredients and conversion cost in the current period of
approximately $483,000. This increase was partially offset by
decreased prices during the current three month period compared to
the same period in the prior year of approximately $215,000.
Gross profit from citrus by-products, including feed, pulp cells,
and citrus oils, increased approximately $71,000 during the current
period compared to the same period in the prior year. The principal
reason for this increase was a decrease in the cost of production of
approximately $291,000 compared to the same period in the prior
year. Decreased prices of approximately $220,000 during the current
three month period resulted in partially offsetting the reduction of
gross profit.
-11-
Gross profit from storage, handling, and other activities
increased by approximately $85,000 during the current period due
principally to an increase in the volume of these services provided
compared to the same period in the prior year.
During the current three month period gross profit decreased by
approximately $350,000 principally as a result of the partial
settlement of an insurance claim related to the recovery of operating
expenses in the first quarter of the prior year which were 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. There was no comparable payment in the
current period.
GROVE MANAGEMENT DIVISION Grove Management Division gross profit
increased approximately $86,000 during the current three month
period compared to the same period in the prior year. The principal
increase of approximately $161,000 resulted primarily from increased
prices for fruit sold to third party packers and processors. Gross
profit from caretaking activities decreased approximately $57,000
during the current three month period. Additionally, gross profit
from harvesting activities decreased approximately $18,000 due
principally to seasonal fluctuations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased
approximately $252,000 for the current three month period compared
to the same period in the prior year. Of this increase
approximately $92,000 resulted from an increase in salary and
benefit costs while approximately $160,000 resulted from an increase
in other costs.
GAIN ON DISPOSITION OF PROPERTY AND EQUIPMENT
The gain on the disposition of property and equipment decreased
approximately $136,000 for the current three month period as
compared to the same period in the prior year. This decrease
resulted from the gain from insurance proceeds for business interruption,
related to a product storage warehouse during the prior year, previously
mentioned. There was no comparable event in the same period in the
current year.
INTEREST EXPENSE
Interest expense increased approximately $115,000 during the
current three month period compared to the same period in the prior
year. The primary increase of approximately $338,000 was due to an
increase in the average outstanding debt. Offsetting this increase
was a decrease of approximately $247,000 that resulted from a
decrease in interest rates. Additionally, an increase of
approximately $24,000 was due to a decrease in interest income and
an increase in other related interest charges.
-12-
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
1998-99 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,
1998 was approximately $30,293,000 and approximately $9,120,000 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, 1998, the Company had a $10
million short-term capital revolving credit facility. As of
December 31, 1998, there was no outstanding balance on this
facility. The interest rate on this facility is variable based upon
the financial institution's cost of funds plus a margin.
Current assets increased approximately $8,959,000 as of December
31, 1998 compared to the fiscal year ended September 30, 1998. The
principal component of this was an increase in inventories of
approximately $6,530,000 in the current three month period due
principally to the accumulation of bulk inventory as the 1998-99
processing season began. The Company's accounts receivable balance
increased approximately $2,337,000 during the current period as a
result of increased sales in the current quarter compared to the
fourth quarter of fiscal 1998. There was also a decrease in cash
and cash equivalents of approximately $362,000. Advances on fruit
purchases increased approximately $76,000. Also, there was an
increase of approximately $403,000 in prepaid expenses and other
current assets and a decrease of approximately $25,000 in deferred
tax assets.
Current liabilities increased approximately $1,876,000 during the
current three month period compared to the fiscal year ended
September 30, 1998. There was an increase of approximately
$1,899,000 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 $23,000.
At December 31, 1998 the Company's outstanding long-term debt was
approximately $60,232,000 including the working capital facility of
approximately $30,293,000. In addition, current installments of
long-term debt were approximately $3,730,000 with the remaining
amounts due on various dates over the subsequent ten years. The
Company anticipates that the amounts due over the next twelve months
will be paid out of working capital. At December 31, 1998, the
Company was in compliance with all of its loan covenants.
Management believes its relationships with its lenders are good.
During the first quarter of the current fiscal year, capital
expenditures of approximately $51,000 were made for the installation
of new irrigation systems on 2,145 acres of Company-owned groves.
Also, cost of caring for newly planted citrus trees in the amount of
approximately $284,000 were capitalized. Additional expenditures of
approximately $670,000 were made during the current period primarily
for the purpose of improving the efficiency and capacity of the Bartow
-13-
processing facility and approximately $22,000 to support the
Company's juice and coffee dispenser programs. Also during the
current period expenditures of approximately $442,000 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.
OTHER SIGNIFICANT EVENTS
In October 1998 the United States Department of Agriculture
("USDA") announced a Florida crop of approximately 190,000,000 boxes
of round oranges for the 1998-99 season, which, if true, would be a
significant decrease from the 1997-98 Florida crop of 244,000,000.
The 1998-99 crop estimate was updated by the USDA to 194,000,000
boxes on February 10, 1999.
The inability of computers, software and other equipment
utilizing microprocessors to recognize and properly process date
fields containing a two-digit year is commonly referred to as the
Year 2000 Compliance issue. As the year 2000 approaches, such
systems may be unable to accurately process certain date-based
information.
During the past four fiscal years, the Company has been making
capital expenditures to improve and update its computer systems to
enhance the efficiency of its production, processing, marketing,
sales and management systems. It has concurrently addressed the
"Year 2000" issue. Management believes that the new systems will be
completed in mid fiscal 1999 and that the Company's systems will
then also be in compliance with "Year 2000" issues. While the Company
is communicating with certain key suppliers and customers to determine
their Year 2000 readiness, there can be no assurance that the
failure of such third parties to adequately address their respective
Year 2000 issues will not have a material adverse effect on the
Company's business, financial condition and results of operations.
The total cost to the Company of these Year 2000 Compliance
activities has not been estimated since they have been addressed
concurrently with the computer updating effort which has been in process
for four years. It is, therefore, not considered to be material to
the Company's financial position or results of operations in any
given year. These costs and the date on which the Company plans to
complete the Year 2000 modification and testing processes are
based on management's best estimates, which were derived utilizing
numerous assumptions of future events, including the continued
availability of certain resources, third-party modification plans
and other factors. However, there can be no guarantee that these
estimates will be achieved, and actual results could differ from
those plans.
-14-
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibit EXHIBIT Page
No. No.
27 Financial Data Schedule (Electronic Filing Only)
B. Reports on Form 8-K: None
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 15, 1999 By:/s/ Gene Mooney
-----------------------
Gene Mooney
President and
Chief Operating Officer
Date: February 15, 1999 By:/s/ Dale A. Bruwelheide
-----------------------
Dale A. Bruwelheide
Vice President,
Chief Financial Officer, and
Principal Accounting Officer
-15-
<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-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 479
<SECURITIES> 0
<RECEIVABLES> 11,715
<ALLOWANCES> 757
<INVENTORY> 57,012
<CURRENT-ASSETS> 72,315
<PP&E> 178,629
<DEPRECIATION> 51,988
<TOTAL-ASSETS> 217,561
<CURRENT-LIABILITIES> 23,016
<BONDS> 0
0
0
<COMMON> 76,218
<OTHER-SE> 33,047
<TOTAL-LIABILITY-AND-EQUITY> 109,265
<SALES> 32,996
<TOTAL-REVENUES> 32,996
<CGS> 27,983
<TOTAL-COSTS> 27,983
<OTHER-EXPENSES> 1,603
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 846
<INCOME-PRETAX> 2,564
<INCOME-TAX> 989
<INCOME-CONTINUING> 1,575
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,575
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
