SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1994 Commission File Number 0-13943
------------------ -------
STOKELY USA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0513230
- ---------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1055 Corporate Center Drive, Oconomowoc, WI 53066
- --------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (414) 569-1800
--------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at October 21, 1994
- ------------------------ -------------------------------
Common Stock, 8,324,645 Shares
$.05 par value per share
Page 1 of 16<PAGE>
STOKELY USA, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3-4
September 30, 1994, September 30, 1993
and March 31, 1994
Consolidated Condensed Statements of 5-6
Operations - Three and Six Months Ended
September 30, 1994 and 1993
Consolidated Condensed Statements of 7
Cash Flow - Three and Six Months Ended
September 30, 1994 and 1993
Notes to Consolidated Condensed Financial 8
Statements
Item 2. Management's Discussion and Analysis 9-13
of Financial Condition and Results
of Operations
PART II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Default Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of 14
Security Holders
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Page 2 of 16<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
---------------------------------------
(Dollars in thousands)
September 30, September 30, March 31,
1994 1993 1994
(unaudited) (unaudited) (note)
ASSETS ------------ ------------ ---------
- ------
CURRENT ASSETS:
Cash and cash equivalents $ 1,178 $ 1,413 $ 2,898
Accounts receivable, less
allowance of $372, $531 and $385,
respectively 25,369 25,532 20,817
Refundable income taxes 952 1,979
Inventories: Finished Products 125,229 109,748 50,256
Production Supplies 4,698 4,853 5,000
Prepaid Expenses 1,354 1,480 1,983
--------- --------- --------
Total Current Assets 157,828 143,978 82,933
OTHER ASSETS:
Property held for disposition (net) 2,986 8,951 3,541
Trademarks 799 877 838
Other 3,273 4,842 3,867
--------- --------- --------
Total Other Assets 7,058 14,670 8,246
PROPERTY, PLANT & EQUIPMENT, at cost 101,720 94,675 97,428
Less accumulated depreciation 33,826 27,120 30,072
--------- --------- --------
67,894 67,555 67,356
--------- --------- --------
TOTAL ASSETS $232,780 $226,203 $158,535
========== ========= ========
See accompanying notes to consolidated condensed financial statements
(unaudited).
Note: The balance sheet at March 31, 1994 has been condensed from the
audited financial statements at that date. The balance sheet at
September 30, 1993 has been reclassified for comparative purposes.
Page 3 of 16<PAGE>
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(Dollars in thousands)
September 30, September 30, March 31,
1994 1993 1994
(unaudited) (unaudited) (note)
----------- ----------- ---------
LIABILITIES & STOCKHOLDER'S EQUITY
- ----------------------------------
CURRENT LIABILITIES:
Notes payable $ 35,875 $ 23,985 $ 17,992
Accounts payable 66,701 48,476 13,867
Current maturities on long-
term debt 2,458 1,954 3,868
Other current liabilities 6,737 9,058 5,135
--------- --------- ---------
111,771 83,473 40,862
Additional long-term debt
classified as a current
liability 26,195
--------- --------- ---------
Total Current Liabilities 111,771 109,668 40,862
LONG-TERM LIABILITIES:
Long-term debt, less current
maturities 79,871 80,024 80,438
OTHER LIABILITIES: 4,740 6,995 4,595
STOCKHOLDER'S EQUITY:
Capital stock 422 422 422
Additional paid-in capital 18,665 18,636 18,661
Retained earnings 17,939 11,129 14,181
Treasury stock at cost (628) (671) (624)
--------- --------- ---------
Total Stockholder's Equity 36,398 29,516 32,640
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $232,780 $226,203 $158,535
========= ========= =========
See accompanying notes to consolidated condensed financial statements
(unaudited).
Note: The balance sheet at March 31, 1994 has been condensed from the
audited financial statements at that date. The balance sheet at
September 30, 1993 has been reclassified for comparative purposes.
Page 4 of 16<PAGE>
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Dollars in thousands except per share amounts)
(unaudited)
Three Months Ended
September 30,
1994 1993
---- ----
REVENUE:
Net Sales $ 58,313 $ 71,148
Other 86 4,354
--------- ---------
Total Revenues 58,399 75,502
COSTS AND EXPENSES:
Cost of products sold 43,905 62,440
Selling, general & administrative expenses 7,766 9,713
Interest 2,539 3,215
--------- ---------
Total Costs and Expenses 54,210 75,368
EARNINGS BEFORE INCOME TAXES 4,189 134
INCOME TAXES 838 16
--------- ---------
NET EARNINGS $ 3,351 $ 118
========= =========
NET EARNINGS PER COMMON SHARE $ .40 $ .01
====== =======
WEIGHTED AVERAGE SHARES OUTSTANDING 8,324,645 8,315,981
========= ==========
See accompanying notes to consolidated condensed financial statements
(unaudited).
Page 5 of 16<PAGE>
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Dollars in thousands except per share amounts)
(unaudited)
Six Months Ended
September 30,
1994 1993
---- ----
REVENUE:
Net Sales $ 97,131 $127,505
Other 99 4,600
--------- ---------
Total Revenues 97,230 132,105
COSTS AND EXPENSES:
Cost of products sold 74,148 113,592
Selling, general & administrative expenses 13,464 18,016
Interest 4,914 6,482
--------- ---------
Total Cost and Expenses 92,526 138,090
EARNINGS (LOSS) BEFORE INCOME TAXES (CREDIT) 4,704 (5,985)
INCOME TAXES (CREDIT) 946 ( 718)
--------- ---------
NET EARNINGS (LOSS) $ 3,758 $ (5,267)
========= =========
NET EARNINGS (LOSS) PER COMMON SHARE $ .45 $ (.63)
====== ========
WEIGHTED AVERAGE SHARES OUTSTANDING 8,324,645 8,315,839
========= ==========
See accompanying notes to consolidated condensed financial statements
(unaudited).
Page 6 of 16<PAGE>
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Six Months Ended
September 30,
1994 1993
---- ----
Net cash provided by (used in) operating
activities $(13,523) $ 9,897
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (4,292) (3,957)
Proceeds from disposal of property, plant
and equipment 555 4,846
Increase in other assets - net (366) (224)
------- -------
Net cash provided by (used in) investing
activities (4,103) 665
------- -------
Cash flows from financing activities:
Change in short-term debt - net 17,883 ( 7,273)
Payments of long-term debt (1,977) ( 3,135)
Capital stock transactions - net 8
--------- --------
Net cash provided by (used in) financing
activities 15,906 (10,400)
--------- --------
Net increase (decrease) in cash and
cash equivalents (1,720) 162
Cash and cash equivalents at beginning
of period 2,898 1,251
--------- ---------
Cash and cash equivalents at end of period $ 1,178 $ 1,413
========= =========
See accompanying notes to consolidated financial statements (unaudited).
Page 7 of 16<PAGE>
STOKELY USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. In the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all normal and recurring adjustments
necessary to present fairly Stokely USA, Inc.'s consolidated condensed
balance sheets as of September 30, 1994 and 1993, and March 31, 1994, the
consolidated condensed statements of operations for the three and six month
periods ended September 30, 1994 and 1993, and the consolidated condensed
statements of cash flow for the six months then ended.
The results of operations for the three months and six months ended
September 30, 1994 are not necessarily indicative of the results to be
expected for the full year. For interim reporting purposes, certain
expenses are based on estimates rather than expenses actually incurred.
The unaudited interim consolidated condensed financial statements should be
read in conjunction with the consolidated financial statements and notes
thereto for the fiscal year ended March 31, 1994, included in the Company's
Form 10-K filed with the Securities and Exchange Commission.
The accounting policies followed by the Company are described in Note A of
the financial statements, located on Page 33 of the Company's Form 10-K for
the year ended March 31, 1994.
2. During the fourth quarter of fiscal 1994, the Company changed its
method of valuing inventories from the last-in, first-out (LIFO) method to
the average cost method. Management believes that the average cost method
provides a more meaningful presentation of the Company's financial position
and related financial ratios. In accordance with generally accepted
accounting principles, prior financial statements have been retroactively
adjusted to reflect this change. The effect of the restatement was to
increase inventories and retained earnings by $5,399,000 at September 30,
1993, from the previously reported amounts. The change in accounting
method had no effect on the previously reported net loss for the three
months ended September 30, 1993.
3. Supplemental cash flow disclosures: Cash payments for interest were
$4,420,000 and $7,088,000 for the six months ended September 30, 1994 and
1993, respectively. Net refunds of income taxes were $1,770,000 and
$3,635,000 for the six months ended September 30, 1994 and 1993,
respectively.
Page 8 of 16<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------
The following is management's discussion and analysis of certain
significant factors which have affected the Company's operations during the
periods included in the accompanying (unaudited) consolidated condensed
statements of operations and balance sheets.
RESULTS OF OPERATIONS:
Six Months Ended September 30, 1994 Compared to Six Months Ended
- ----------------------------------------------------------------
September 30, 1993
------------------
Net Sales
- ---------
Net sales decreased $30.4 million, or 23.8%, to $97.1 million for the six
months ended September 30, 1994 compared to $127.5 million for the six
months ended September 30, 1993. The reduction in sales was primarily the
result of lower available canned inventories at the beginning of fiscal
1995 caused by a poor growing season during fiscal 1994 and the elimination
of certain low margin or unprofitable products in both the canned and
frozen divisions.
Total canned vegetable sales decreased $19.7 million, or 22.1% to $69.5
million for the six months ended September 30, 1994 compared to $89.2
million for the six months ended September 30, 1993. The decline in total
canned vegetable sales was the result of a $29.2 million reduction in sales
volume partially offset by a $9.5 million increase in sales due to improved
pricing. Of the net decrease in sales of $19.7 million, $5.9 million was
due to a reduction in sales of discontinued canned products and $13.8
million was due to a decrease in sales of continued products due to lower
available inventories. Sales of private label canned products declined
$13.0 million or 20.8%, to $49.6 million for the six months ended September
30, 1994, compared to $62.6 million for the six months ended September 30,
1993. The decline in private label canned sales was the result of an
approximate $21.7 million reduction in sales volume, partially offset by an
approximate $8.7 million increase in sales due to improved pricing. Sales
of brand label canned products declined $6.7 million, or 25.3% to $19.9
million compared to $26.6 million for the six months ended September 30,
1993. Substantially all the decline in brand sales was due to lower sales
volume primarily due to lower available canned inventories.
Total frozen sales declined $10.7 million, or 27.9% to $27.6 million for
the six months ended September 30, 1994 compared to $38.3 million for the
six months ended September 30, 1993. This reduction in sales was due
primarily to the elimination of certain low margin or unprofitable frozen
products. Sales of discontinued frozen products decreased $8.7 million or
76.3%, to $2.7 million for the six months ended September 30, 1994 compared
to $11.4 million for the six months ended September 30, 1993.
Page 9 of 16<PAGE>
Cost of Products Sold
- ---------------------
Cost of products sold decreased $39.5 million, or 34.8%, to $74.1 million
for the six months ended September 30, 1994 from $113.6 million for the six
months ended September 30, 1993. The decrease in cost of products sold was
due primarily to lower sales volume in both the canned and frozen
divisions. Cost of products sold as a percentage of net sales decreased to
76.3% for the six months ended September 30, 1994 compared to 89.1% for the
six months ended September 30, 1993. Of this 12.8% decrease, 6.3% was due
to non-restructuring-related cost reduction efforts, 4.9% was due to higher
selling prices, 1.3% was due to cost reductions from the Company's
restructuring efforts, and 0.3% was due to the elimination of certain low
margin or unprofitable products.
Selling General and Administrative Expense
- ------------------------------------------
Selling, general and administrative expenses declined by $4.5 million, or
25.0%, to $13.5 million for the six months ended September 30, 1994 from
$18.0 million for the six months ended September 30, 1993. This reduction
was primarily the result of lower variable selling expenses associated with
lower brand label sales volume. Selling, general and administrative
expenses as a percentage of net sales declined to 13.9% for the six months
ended September 30, 1994 from 14.1% for the six months ended September 30,
1993 due to lower variable selling expenses.
Interest Expense
- ----------------
Interest expense decreased $1.6 million or 24.6%, to $4.9 million for the
six months ended September 30, 1994 compared to $6.5 million for the six
months ended September 30, 1993. This reduction was primarily the result
of lower short-term borrowings resulting from lower working capital
requirements and the payment of long-term debt from the proceeds of sales
of closed plants, partially offset by increases in short-term interest
rates and higher financing expenses associated with the June 1993 amendment
of the Revolver.
Income Taxes
- ------------
The effective income tax rate for the six months ended September 30, 1994
was 20% compared to the 12% used for calculating tax credits for the six
months ended September 30, 1993. Each of the effective tax rates differ
from the statutory rates due to recognition of allowable tax benefits from
net operating loss carryforwards.
Net Earnings (Loss)
- -------------------
Net earnings for the six months ended September 30, 1994 were $3.8 million
compared to the net loss of $5.3 million for the six months ended
September 30, 1993.
Page 10 of 16<PAGE>
Three Months Ended September 30, 1994 Compared to Three Months Ended
- --------------------------------------------------------------------
September 30, 1993
------------------
Net Sales
- ---------
Net sales decreased $12.8 million, or 18.0%, to $58.3 million for the
quarter ended September 30, 1994 compared to $71.1 million for the quarter
ended September 30, 1993. The reduction in sales was primarily the result
of lower available canned inventories at the beginning of fiscal 1995
caused by a poor growing season during fiscal 1994 and the elimination of
certain low margin or unprofitable products in both the canned and frozen
divisions.
Total canned vegetable sales decreased $10.4 million, or 20.4%, to $40.7
million for the quarter ended September 30, 1994 from $51.1 million for the
quarter ended September 30, 1993. The decline in total canned vegetable
sales was the result of a $15.1 million reduction in sales volume partially
offset by a $4.7 million increase in sales due to improved pricing. Of the
net decrease in sales of $10.4 million, $2.8 million was due to a reduction
in sales of discontinued canned products, and $7.6 million was due to a
decrease in sales of continued products due to lower available inventories.
Sales of canned private label products declined $9.9 million to $28.1
million for the quarter ended September 30, 1994, compared to $38.0 million
for the quarter ended September 30, 1993. The decline in private label
sales was the result of a $12.9 million reduction in sales due to lower
sales volume, partially offset by a $3.0 million increase in sales due to
improved pricing. Delays in receiving labels from private label customers,
as a result of label changes recently mandated by the Nutrition Labeling
Education Act contributed also to a delay in the Company's ability to fill
customer orders during the three months ended September 30, 1994. Sales of
canned brand products declined approximately $500,000 to $12.6 million for
the quarter ended September 30, 1994 compared to $13.1 million for the
quarter ended September 30, 1993. The decline in brand sales was the
result of a $1.9 million reduction in sales volume, partially offset by a
$1.4 million increase due to improved pricing.
Frozen sales declined $2.4 million, or 12.0%, to $17.6 million from $20.0
million for the quarter ended September 30, 1993. The reduction in frozen
sales was due primarily to the elimination of certain low margin frozen
products as part of the Company's restructuring program. Sales in the
frozen division are now focused primarily on the Industrial and Food
Service markets. Frozen Food Service and Industrial sales increased
$400,000 to $15.6 million for the quarter ended September 30, 1994 from
$15.2 million for the quarter ended September 30, 1993. As a percentage of
total frozen sales, Frozen Food Service and Industrial increased to 88.6%
from 76.0% for the quarter ended September 30, 1993.
Page 11 of 16<PAGE>
Cost of Products Sold
- ---------------------
Cost of products sold decreased $18.5 million, or 29.7%, to $43.9 million
for the quarter ended September 30, 1994 from $62.4 million for the quarter
ended September 30, 1993. The decrease in cost of goods sold was due
primarily to lower sales volume. Cost of products sold as a percent of
sales decreased to 75.3% for the quarter ended September 30, 1994 compared
to 87.8% for the quarter ended September 30, 1993. Of this 12.5% decrease,
6.1% was due to non-restructure related cost reduction programs, 5.3% was
due to higher selling prices, 0.8% was due to restructure related cost
reduction programs and 0.3 % was due to the elimination of low margin or
unprofitable products.
Selling, General and Administrative Expense
- -------------------------------------------
Selling, general and administrative expense declined $1.9 million to $7.8
million for the quarter ended September 30, 1994 from $9.7 million for the
quarter ended September 30, 1993. This reduction was primarily the result
of lower promotional expenses associated with lower brand sales volumes,
combined with a reduction in general and administrative costs resulting
from the effect of the Company's restructuring program over the entire
three month period in fiscal 1995.
Interest Expense
- ----------------
Interest expense decreased $676,000, or 21.0%, to $2.5 million during the
quarter ended September 30, 1994 compared to $3.2 million for the quarter
ended September 30, 1993. This reduction was primarily the result of lower
short term borrowings resulting from lower working capital requirements.
Net Earnings (Loss)
- -------------------
Net income for the quarter ended September 30, 1994 of $3.4 million
represented the fifth consecutive profitable quarter for the Company. The
significant improvement in earnings in the quarter ended September 30, 1994
compared to net income of $118,000 for the quarter ended September 30, 1993
was due primarily to improved margins resulting from higher market pricing,
elimination of marginally profitable product lines, and reduced costs and
expenses.
Page 12 of 16<PAGE>
FINANCIAL CONDITION
Liquidity and Capital Resources
- -------------------------------
General
- -------
Due to the seasonal production nature of the canned and frozen vegetable
processing business, the Company must maintain substantial inventories of
processed vegetables throughout the year. The working capital requirements
associated with producing and maintaining such inventories are financed
primarily through short-term borrowings and deferred payment terms with
major raw product and container suppliers. The Company's Revolver provides
for borrowings up to $100.0 million as revolving credit loans. The
Revolver matures on May 31, 1995. The Company believes that the Revolver
is adequate to meet the Company's seasonal borrowing needs. Borrowings
under the Revolver were $52.9 million at September 30, 1994 and are
projected to peak at less than $60.0 million during fiscal 1995.
Cash Flows from Operating Activities
- ------------------------------------
Cash used in operations during the six months ended September 30, 1994
totaled $13.5 million. Of the total cash used, changes in operating assets
and liabilities used cash of $22.2 million primarily due to an increase in
inventory of $74.7 million and an increase in accounts receivable of $4.5
million, partially offset by an increase of $52.8 million in accounts
payable.
Cash Flows from Investing Activities
- ------------------------------------
Net cash used in investing activities during the six months ended
September 30, 1994 were $4.1 million. Purchase of property, plant and
equipment was $4.3 million during the six months ended September 30, 1994.
Capital expenditures during the six months ended September 30, 1994 were
primarily related to the capacity consolidation at the Waunakee, Wisconsin
facility and investment in product quality control equipment at several
processing plants.
Cash Flows from Financing Activities
- ------------------------------------
During the six months ended September 30, 1994, the Company increased its
borrowings under the Revolver by $17.9 million to $52.9 million. This
increase was due primarily to the use of cash to fund expected seasonal
increases in inventory levels.
Page 13 of 16<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a vote of Security Holders
The Annual Meeting of Shareholders of the Company was
held on August 26, 1994 for the purpose of electing
four directors. Proxies for the meeting were solicited
pursuant to Section 14(a) of the Securities Exchange
Act of 1934, as amended, and there was no solicitation
in opposition to the Board of Directors' solicitation.
All four of the Company's nominees were elected, each
receiving the vote indicated below:
Orren J. Bradley
For 7,169,700
Withheld 63,636
Abstain 0
Broker Non Vote 0
James H. DeWees
For 7,179,785
Withheld 50,651
Abstain 0
Broker Non Vote 0
Carol Ward Knox
For 7,183,386
Withheld 46,950
Abstain 0
Broker Non Vote 0
Thomas H. Mount
For 7,181,476
Withheld 48,860
Abstain 0
Broker Non Vote 0
The terms of office for directors Britt, Fish,
Theobald, and Wiersma expire in 1995, and the terms of
office for directors Carey, Pelisek & Weix expire in
1996.
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
Page 14 of 16<PAGE>
STOKELY USA, INC.
SIGNATURES
----------
Pursuant to the requirement 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.
STOKELY USA, INC.
-------------------------
Registrant
Date October 21, 1994 /s/ Stephen W. Theobald
---------------- -------------------------
Stephen W. Theobald
Vice Chairman
Date October 21, 1994 /s/ Leslie J. Wilson
---------------- -------------------------
Leslie J. Wilson
Vice President - Finance
(Principal Financial Officer)
Page 15 of 16<PAGE>
STOKELY USA, INC.
SIGNATURES
----------
Pursuant to the requirement 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.
STOKELY USA, INC.
-------------------------
Registrant
Date October 21, 1994
---------------- -------------------------
Stephen W. Theobald
Vice Chairman
Date October 21, 1994
---------------- -------------------------
Leslie J. Wilson
Vice President - Finance
(Principal Financial Officer)
Page 16 of 16
