SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
OR
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from April 1, 1995 to August 31, 1995
Commission file number 0-16130
NORTHLAND CRANBERRIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1583759
(State or other jurisdiction (I.R.S. Employer
of Incorporation or organization) Identification No.)
800 First Avenue South
P.O. Box 8020
Wisconsin Rapids, Wisconsin, 54495-8020
(Address of principal executive offices)
Registrant's telephone number, including
area code (715) 424-4444
Former name, former address and former fiscal year, if
changed since last report.
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the
latest practicable date:
Class A Common Stock September 30, 1995 6,310,613
Class B Common Stock September 30, 1995 318,101
<PAGE>
NORTHLAND CRANBERRIES, INC.
FORM 10-Q INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets . . 3
Condensed Consolidated Statements of
Operations . . . . . . . . . . . . . . . 4-5
Condensed Consolidated Statements of
Cash Flows . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . 9-12
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . 13
Item 5. Other Events. . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K. . . . . 14
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
AUGUST 31, MARCH 31,
1995 1995
---------- -----------
Current assets:
Cash and cash equivalents $ 361 $ 223
Accounts and notes receivable 710 1,855
Investments 1,260 1,260
Inventories 654 853
Deferred costs of growing crop 6,626 --
Other 586 1,249
Deferred income taxes 1,543 1,306
---------- ----------
Total current assets 11,740 6,746
----------- ----------
Property and equipment - at cost 118,988 108,649
Less accumulated depreciation 14,879 13,458
----------- -----------
Net property and equipment 104,109 95,191
Investments 2,519 2,519
Leasehold interests, net 1,355 1,421
Other 2,022 1,868
----------- ----------
Total assets $ 121,745 $ 107,745
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,118 $ 1,982
Accrued liabilities 2,412 2,384
Current portion of long-term obligations 6,053 5,802
---------- ----------
Total current liabilities 10,583 10,168
Long-term obligations 45,538 55,793
Deferred income taxes 6,511 7,157
---------- ---------
Total liabilities 62,632 73,118
---------- ---------
Shareholders' equity:
Common stock - Class A 60 40
Common stock - Class B 3 3
Additional paid-in capital 55,289 28,908
Retained earnings 3,761 5,676
---------- ---------
Total shareholders' equity 59,113 34,627
---------- ---------
Total liabilities and shareholders' equity $ 121,745 $ 107,745
========== ==========
See accompanying notes to condensed consolidated financial statements
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
For the 2 months
ended AUGUST 31,
1995 1994
---------- ----------
Revenues $ 207 $ 443
Cost of sales 732 924
--------- ---------
Gross profit (loss) (525) (481)
Costs and expenses:
Selling, general and administrative 978 612
Interest 878 475
--------- ---------
Total costs and expenses 1,856 1,087
--------- ---------
Loss before income taxes (2,381) (1,568)
Income taxes (931) (613)
--------- ---------
Net loss $ (1,450) $ (955)
========= =========
Net loss per common share (based on 5,039,949
and 4,420,390 weighted average common
shares outstanding, respectively) $ (0.29) $ (0.22)
========= =========
See accompanying notes to condensed consolidated financial statements
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
For the 5 months
ended AUGUST 31,
1995 1994
Revenues $ 890 $ 1,563
Cost of sales 1,400 1,983
--------- ---------
Gross profit (loss) (510) (420)
Costs and expenses:
Selling, general and administrative 1,907 1,344
Interest 1,920 1,156
--------- ---------
Total costs and expenses 3,827 2,500
--------- ---------
Loss before income taxes and cumulative
effect of change in accounting method (4,337) (2,920)
Income taxes (1,689) (1,140)
--------- ---------
Loss before cumulative effect of change
in accounting method (2,648) (1,780)
Cumulative effect of change in accounting
method (net of taxes of $806,000) 1,249 --
--------- ---------
Net loss $ (1,399) $ (1,780)
========= =========
Net loss per common share (based on 4,696,828
and 4,423,180 weighted average common
shares outstanding, respectively):
Loss before cumulative effect of
change in accounting method $ (0.56) $ (0.40)
Cumulative effect of change in
accounting method 0.26 --
--------- ----------
Net loss per common share $ (0.30) $ (0.40)
========== ==========
See accompanying notes to condensed consolidated financial statements
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
For the 5 months
ended AUGUST 31,
1995 1994
Cash flows from operating activities:
Net loss $ (1,399) $ (1,780)
Cumulative effect of change in
accounting method (1,249) --
Adjustments to reconcile net loss to
net cash provided by (used for)
operating activities:
Depreciation and amortization 1,481 1,176
Changes in assets and liabilities:
Receivables and other current assets 1,808 (645)
Inventories 199 115
Accounts payable and accrued liabilities 164 (127)
Deferred income taxes (883) (1,256)
Deferred costs of growing crop (5,377) (2,613)
---------- ---------
Net cash provided by (used for)
operating activities (5,256) (5,130)
---------- ---------
Investing activities:
Acquisitions of cranberry operations (4,485) --
Property and equipment additions, net (5,783) (4,568)
Other (65) 27
---------- --------
Net cash used for investing
activities (10,333) (4,541)
--------- --------
Financing activities:
Increase (decrease) in debt (10,004) 9,785
Dividends paid (516) (296)
Net proceeds from common stock offering 26,401 --
Exercise of stock options -- 50
Other (154) --
---------- --------
Net cash provided by
financing activities 15,727 9,539
--------- -------
Net decrease in cash and
cash equivalents 138 (132)
Cash and cash equivalents:
Beginning of period 223 650
--------- --------
End of period $ 361 $ 518
========= ========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amount capitalized) $ 2,445 $ 1,453
========= ========
See accompanying notes to condensed consolidated financial statements
<PAGE>
NORTHLAND CRANBERRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
the Company, the foregoing statements contain all adjustments necessary to
present fairly the financial position of the Company as of August 31,
1995, and its results of operations and its cash flows for the two- and
five-month periods ended August 31, 1995 and 1994, respectively. The
Company's consolidated balance sheet as of March 31, 1995 included herein
has been taken from the Company's audited financial statements of that
date included in the Company's latest annual report.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is
suggested that these condensed financial statements be read in conjunction
with the financial statements and the notes thereto included in the
Company's latest annual report.
NOTE 2. CHANGE IN ACCOUNTING METHOD
Effective April 1, 1995, the Company changed its method of
deferring crop growing costs to conform with the provisions of Statement
of Position 85-3 "Accounting by Agricultural Producers and Agricultural
Cooperatives" which had not been previously adopted by the Company. This
change was made to defer crop growing costs based on a November 1 to
October 31 crop year which management of the Company believes is its
natural crop year. Historically, the Company had deferred certain crop
costs based on a crop year of April 1 through October 31. This change
resulted in an increase in net income for the five months ended August 31,
1995 of $1,249,000 (net of income taxes of $806,000) reflecting the
cumulative effect of this change for periods prior to April 1, 1995. The
pro forma effects for the five months ended August 31, 1994, assuming the
change had been in effect prior to and throughout such period and without
taking into account the cumulative effect of such change, would have been
to reduce the reported net loss by $536,000 or $0.12 per share.
NOTE 3. CHANGE IN FISCAL YEAR
In view of the Company's strategy to begin marketing and selling
value-added processed consumer cranberry products, the Company has changed
its fiscal year end from March 31 to August 31 in order to correspond the
Company's fiscal year with the anticipated new annual business cycle
expected to result from the implementation of its strategy. Also, the
change in fiscal year end should best match the costs and expenses
associated with growing each year's crop with the expected revenues to be
generated from the anticipated sales of the consumer products produced
from such crop. As a result of the changed fiscal year end, the Company
is reporting its results of operations and financial condition for its
interim quarter ending on June 30, 1995 and for the five-month interim
transitional period ending on August 31, 1995. In the future, the Company
will report its results of operations and financial condition for the
fiscal quarters ending on November 30, February 28, or 29 and May 31 of
each fiscal year, and for its fourth fiscal quarter and fiscal year ending
on August 31.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The Company has changed its fiscal year end from March 31 to
August 31 in order to correspond the Company's fiscal year with the
expected new annual business cycle resulting from the implementation of
its current business strategy of beginning to market and sell value-added
cranberry juice, sauce and other processed consumer cranberry products.
As a result, the Company is reporting its results of operations and
financial condition for its five-month interim transitional period ended
August 31, 1995. Consistent with the extreme seasonality of the Company's
current business, the Company is reporting a net loss from operations for
such transitional period. In the future, the Company will report its
results of operations and financial condition for the respective fiscal
quarters ending on November 30, February 28 or 29 and May 31 of each
fiscal year, and for its fourth fiscal quarter and fiscal year end ending
on August 31.
The components of the Company's revenues for the interim
transitional two- and five-month periods ended August 31, 1995 compared to
the same periods in the prior fiscal year are summarized below:
Two Months Ended Five Months Ended
August 31 August 31
1995 1994 1995 1994
Vine sales $ -- $ -- $ 92,000 $712,000
Fertilizer and
Chemical Sales 162,000 388,000 688,000 638,000
Other income 45,000 55,000 110,000 213,000
-------- -------- -------- --------
Total revenues $207,000 $443,000 $890,000 $1,563,000
======== ======== ======== ==========
The $673,000, or 43%, decrease in revenues for the five months
ended August 31, 1995 compared to the same prior year period was primarily
due to the anticipated reduced volume in vine sales caused principally by
current regulatory restrictions on the further domestic development of
wetlands for cranberry cultivation. The level of fertilizer and chemical
sales for the two- and five-month transitional periods did not impact the
Company's net loss for such interim transitional periods. The Company
does not expect fertilizer and chemical sales in future periods to
substantially exceed current sales levels.
During the two months ended August 31, 1995, cost of sales
decreased $192,000, or 21%, to $732,000 from $924,000 during the same
period in fiscal 1995. For the five-month transitional period, cost of
sales decreased $583,000, or 29%, to $1.4 million from $2.0 million during
the same period in fiscal 1995. As a result of the Company's change in
accounting method, as described below, this comparison is not considered
particularly meaningful or informative. See Note 2 of Notes to Condensed
Consolidated Financial Statements contained herein.
Selling, general and administrative expenses were $978,000 and
$1.9 million in the two- and five-month interim transitional periods,
respectively, compared to $612,000 and $1.3 million during the same
periods in the prior fiscal year. The increases were due primarily to
additional costs associated with the Company's growth in productive
acreage and the Company's preparation to enter the branded juice market.
Interest expense was $878,000 and $1.9 million for the two- and five-month
periods ended August 31, 1995, respectively, compared to $475,000 and $1.2
million during the same periods in fiscal 1995. The significant increase
in interest expense was due to increased debt levels which resulted
primarily from financing the Company's September 1994 cranberry marsh
acquisitions and the June 1995 purchase of the previously leased Hanson
marshes.
For the five-month period ended August 31, 1995, the Company
reported a net loss of $1.4 million, or $0.30 per share, after the
cumulative effect of the Company's change in accounting method. The
accounting method change reflects the Company's deferral of costs related
to the growing of its crop until the end of the fiscal year and the
inclusion of those deferred costs as part of the inventory cost of the
cranberries to be harvested in September, October and November. This
method is intended to best reflect the actual cost of the Company's
inventory of grown and harvested cranberries. As anticipated, prior to
the change in accounting method, the Company reported a net loss for the
period of $2.6 million, or $0.56 per share. During the comparable period
last year, the Company reported a net loss of $1.8 million, or $0.40 per
share. During the two-month period ended August 31, 1995, the Company
reported a net loss of $1.5 million, or $0.29 per share. During the
comparable period last year, the Company reported a loss of $1.0 million,
or $0.22 per share. Due to the highly seasonal nature of the Company's
current business, the Company has always recognized a net loss during
these time periods because operating costs and other expenses are incurred
without significant offsetting revenues from the sale of its fruit.
Virtually all of the Company's income has historically been recognized in
the quarter following the harvest of its crop.
Financial Condition
The Company's current ratio was 1.11 to 1 at August 31, 1995,
compared to 0.67 to 1 at March 31, 1995. As a result of the extreme
seasonality of its current business, the Company does not believe that its
current ratio or its underlying stated working capital at August 31, 1995
is a meaningful indication of the Company's liquidity. The Company has
historically recorded virtually all of its revenue and resulting accounts
receivable in the fall of the year when its crop is harvested and received
full payment for its harvested crop prior to the following March 31. The
resulting cash received from such payments used to reduce indebtedness.
The Company utilizes its revolving bank credit facility, together with
cash generated from operations, to fund its working capital requirements
through its growing season. As of August 31, 1995, the principal amount
outstanding under the Company's revolving credit facility was $8.7
million. The Company currently has an additional $26.3 million available
under its credit facilities with a syndicate of regional banks until
August 1997 as follows: (i) $12.3 million available under the Company's
revolving credit facility; (ii) $10.0 million available under the
Company's acquisition credit facility; and (iii) $4.0 million available
under a term credit facility. Under these credit facilities, interest is
payable at the Company's option at the bank's domestic rate, the banks
offered rate, or an adjusted LIBOR rate, plus applicable rate margin
(1.25% for the revolving credit facility and 2.0% for the acquisition
credit and term facilities).
Net cash used for operating activities increased to $5.3 million
in the five-month transitional period from $5.1 million in the same period
in fiscal 1995, reflecting a net change of $2.4 million in receivables and
other current assets offset by a $2.8 million increase in deferred crop
costs. The change in receivables and other current assets was due
principally to payments received from Ocean Spray for 1994 crop deliveries
and prepaid expenses associated with the Hanson Division marsh lease. The
increase in deferred crop costs was due to the Company's increase in
productive acres and the change in accounting method. See Note 2 of Notes
to Condensed Consolidated Financial Statements contained herein.
Net cash used for investing activities increased during the
five-month period ended August 31, 1995 to $10.3 million from $4.5 million
during the same period in the prior fiscal year. The increase was
primarily due to financing $4.5 for the Company's June 7, 1995 exercise of
its option to purchase its leased Hanson Division marsh and other property
and equipment additions. Property and equipment additions during the
five-month interim transitional period included (i) $2.6 million for fixed
asset additions and upgrades; (ii) $1.1 million to cultivate and maintain
390 pre-productive acres; (iii) $1.1 million to improve the Company's
fresh fruit handling facilities; and (iv) $1.0 million to begin
construction of the Company's concentrate manufacturing facility. Total
cost of the concentrate manufacturing facility is estimated at $4.5
million, with completion scheduled for May 1996. During the five-month
period ended August 31, 1995, the Company entered into multi-year
contracts to purchase up to approximately 50,000 to 75,000 barrels of
cranberries annually from other independent growers, beginning in the fall
of 1995. The Company is attempting to enter into additional crop purchase
contracts. Ten dollars of the per barrel purchase price under such
contracts will be payable in the Company's stock, with the remainder in
cash expected to be funded by working capital generated from operations or
borrowings under the Company's line of credit facility.
Net cash provided by financing activities increased in the five-
month period ended August 31, 1995 to $15.7 million from $9.5 million
during the same period in the prior fiscal year. The Company's total debt
(including current portion) was $51.6 million at August 31, 1995 for a
total debt-to-equity ratio of 0.87 to 1 compared to total debt of $61.6
million and a total debt-to-equity ratio of 1.78 to 1 at March 31, 1995.
The Company closed its public offering and sale of 2,000,000 Class A
shares on August 14, 1995 and received net proceeds of approximately $26.4
million. The Company used $18 million of such net proceeds to repay the
principal and accrued interest then outstanding under the Company's
acquisition credit facility. The remainder of the net proceeds was used
to reduce then outstanding amounts under the Company's revolving line of
credit facility. On September 1, 1995 (after the period ended), the
underwriters for the Company's stock offering exercised their option to
purchase 300,000 additional Class A shares at $13.465 per share (net of
the underwriting discount) to cover over-allotments. The Company received
additional net proceeds of approximately $4 million. Such net proceeds
were used to reduce further then outstanding amounts under the Company's
line of credit facility.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company's 1995 annual meeting of shareholders was held on
Friday, August 18, 1995. At the meeting, the shareholders re-elected John
Swendrowski, LeRoy J. Miles, Robert E. Hawk, Patrick F. Brennan, Jeffrey
J. Jones, John C. Seramur and Jerold D. Kaminski to the Company's Board of
Directors for one-year terms to expire at the Company's 1996 annual
meeting of shareholders and until their successors are duly qualified and
elected. The shareholders also approved an amendment to the Company's
Articles of Incorporation and approved the Northland Cranberries, Inc.
1995 Stock Option Plan. As of the June 29, 1995 record date for the
annual meeting, 4,010,613 shares of Class A Common Stock and 318,101
shares of Class B Common Stock were outstanding and eligible to vote, with
the Class A Common Stock entitled to one vote per share and the Class B
Common Stock entitled to three votes per share.
Of the 4,643,826 votes represented by shares of Class A Common
Stock and Class B Common Stock voted at the meeting in person or by proxy,
the following votes were recorded for each nominee:
NAME FOR WITHHELD
Votes Percentage Votes Percentage
John Swendrowski 4,630,821 99.72% 13,005 0.28%
LeRoy J. Miles 4,633,121 99.77% 10,705 0.23%
Robert E. Hawk 4,632,921 99.77% 10,905 0.23%
Patrick F. Brennan 4,633,121 99.77% 10,705 0.23%
Jeffrey J. Jones 4,632,921 99.77% 10,905 0.23%
John C. Seramur 4,633,121 99.77% 10,705 0.23%
Jerold D. Kaminski 4,630,521 99.77% 13,305 0.29%
The tabulation of votes for the election of directors resulted
in no broker non-votes or abstentions.
The amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of Class A Common Stock, $.01 par
value, from 10,000,000 to 20,000,000 was approved with 4,440,911 votes
for, 185,418 votes against and 17,497 votes abstaining. The tabulation of
votes for the amendment to the Company's Articles of Incorporation
resulted in no broker nonvotes.
The Northland Cranberries, Inc. 1995 Stock Option Plan was
approved with 3,293,697 votes for, 534,073 votes against, 58,923 votes
abstaining and 757,183 broker nonvotes.
ITEM 5. OTHER EVENTS
Effective on October 2, 1995, the Company changed its transfer
agent and dividend dispensing agent from First Bank Milwaukee, N.A. to
Harris Trust and Savings Bank, 111 West Monroe, P.O. Box 755, Chicago, IL
60690.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits.
Exhibit 27 - Financial Data Schedule
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned Chief Accounting Officer thereunto duly authorized.
NORTHLAND CRANBERRIES, INC.
DATE: October 13, 1995 By: /s/ John Pazurek
John Pazurek
Vice President -
Finance, Treasurer, and
Chief Accounting Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF NORTHLAND CRANBERRIES, INC. AS OF AND FOR
THE 5 MONTHS ENDED AUGUST 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 361
<SECURITIES> 1,260
<RECEIVABLES> 710
<ALLOWANCES> 0
<INVENTORY> 654
<CURRENT-ASSETS> 11,740
<PP&E> 118,988
<DEPRECIATION> 14,879
<TOTAL-ASSETS> 121,745
<CURRENT-LIABILITIES> 10,583
<BONDS> 45,538
<COMMON> 63
0
0
<OTHER-SE> 59,050
<TOTAL-LIABILITY-AND-EQUITY> 121,745
<SALES> 781
<TOTAL-REVENUES> 890
<CGS> 1,400
<TOTAL-COSTS> 1,907
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,920
<INCOME-PRETAX> (4,337)
<INCOME-TAX> (1,689)
<INCOME-CONTINUING> (2,648)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,249
<NET-INCOME> (1,399)
<EPS-PRIMARY> (0.56)
<EPS-DILUTED> (0.30)
</TABLE>
