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
For the quarterly period ended June 30, 1995
OR
/_/ TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16130
NORTHLAND CRANBERRIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1583759
(State or other jurisdiction of I.R.S. Employer
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 July 31, 1995 4,010,613
Class B Common Stock July 31, 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
Condensed Consolidated Statements of Cash Flows . . . . 5
Notes to Condensed Consolidated Financial Statements . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 10
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
JUNE 30, 1995 MARCH 31, 1995
Current assets:
Cash and cash equivalents $ 174 $ 223
Accounts and notes
receivable 1,510 1,855
Investments 1,260 1,260
Inventories 834 853
Deferred costs of growing
crop 4,854 --
Other 662 1,249
Deferred income taxes 1,306 1,306
-------- --------
Total current assets $ 10,600 6,746
-------- --------
Property and equipment - at cost 116,439 108,649
Less accumulated
depreciation 14,234 13,458
--------- --------
Net property and
equipment 102,205 95,191
Investments 2,519 2,519
Leasehold interests, net 1,381 1,421
Other 2,210 1,868
--------- --------
Total assets $ 118,915 $ 107,745
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,599 $ 1,982
Accrued liabilities 3,045 2,384
Current portion of long-term
obligations 24,037 5,802
--------- --------
Total current
liabilities 28,681 10,168
Long-term obligations 48,867 55,793
Deferred income taxes 7,205 7,157
-------- --------
Total liabilities 84,753 73,118
-------- --------
Shareholders' equity:
Common stock - Class A 40 40
Common stock - Class B 3 3
Additional paid-in capital 28,908 28,908
Retained earnings 5,211 5,676
--------- ---------
Total shareholders'
equity 34,162 34,627
--------- ---------
Total liabilities and
shareholders' equity $ 118,915 $ 107,745
========== ===========
See accompanying notes to condensed consolidated financial
statements
<PAGE>
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
For the 3 months ended JUNE 30,
1995 1994
Revenues $ 683 $ 1,120
Cost of sales 668 1,059
-------- ---------
Gross profit 15 61
Cost and expenses:
Selling, general and
administrative 929 732
Interest 1,041 681
--------- ---------
Total costs and
expenses 1,970 1,413
--------- ---------
Loss before income taxes and
cumulative effect of
change in accounting
method (1,955) (1,352)
Income taxes (758) (527)
------- --------
Loss before cumulative effect
of change in accounting
method (1,197) (825)
Cumulative effect of change in
accounting method (net of
taxes of $806,000) 1,249 --
--------- ---------
Net income (loss) $ 52 $ (825)
========= ========
Net loss per common share
(based on 4,462,977 and
4,425,027 weighted
average common shares
outstanding,
respectively):
Loss before cumulative
effect of change in
accounting method (0.27) $ (0.19)
Cumulative effect of
change in accounting
method 0.28 --
------ --------
Net income (loss) per common
share $ 0.01 $ (0.19)
------- --------
See accompanying notes to condensed consolidated financial
statements
<PAGE>
<PAGE>
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
For the 3 months ended JUNE 30,
1995 1994
Cash flows from operating
activities:
Net income (loss) $ 52 $ (825)
Cumulative effect of change in
accounting method (1,249) --
Adjustments to reconcile net income
to net cash provided by (used
for) operating activities:
Depreciation and amortization 806 663
Changes in assets and
liabilities:
Receivables and other current
assets 932 (267)
Inventories 19 (78)
Accounts payable and accrued
liabilities 62 1,004
Deferred income tax benefit 48 (588)
Deferred costs of growing crop (3,605) (1,577)
--------- ---------
Net cash provided by (used for)
operating activities (2,935) (1,668)
--------- --------
Investing activities:
Acquisitions of cranberry
operations (4,440) --
Property and equipment additions,
net (3,311) (2,421)
Other (47) (1)
--------- --------
Net cash used for investing
activities (7,798) (2,422)
--------- --------
Financing activities:
Increase in debt 11,309 3,869
Dividends paid (301) (296)
Exercise of stock options -- 43
Other (324) --
---------- --------
Net cash provided by financing
activities 10,684 3,616
---------- --------
Net decrease in cash and cash
equivalents (49) (474)
Cash and cash equivalents:
Beginning of period 223 650
--------- ---------
End of period $ 174 $ 176
========= =========
Supplemental disclosures of cash
flow information:
Cash paid for:
Interest (net of amount
capitalized) $ 794 $ 87
========= =========
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 June 30, 1995,
and its results of operations and its cash flows for the three months
ended June 30, 1995 and 1994. The consolidated balance sheet as of March
31, 1995 has been taken from the audited financial statements of that
date.
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 previously been 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 three months ended June 30,
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 three months ended June 30, 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 $291,000 or $0.07 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 is changing
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 cost 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 changing fiscal year end, the Company
will report 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. After August 31, 1995, 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 fiscal year ending on August 31.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The Company is in the process of changing 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 interim transitional quarter
ended June 30, 1995. The Company will next report its results of
operations and financial condition for its five-month transitional period
ending on August 31, 1995. Consistent with the extreme seasonality of the
Company's current business, the Company expects to report a net loss from
operations for such transitional period. After August 31, 1995, 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 three-month period ended June 30, 1995 compared to the same
period in the prior fiscal year are summarized below:
Three months ended June 30,
1995 1994
Vine sales . . . . . . $ 92,000 $ 712,000
Fertilizer and chemical
sales . . . . . . 527,000 250,000
Other income . . . . . 64,000 158,000
-------- ---------
Total revenues . $ 683,000 $1,120,000
======== =========
The $437,000, or 39%, decrease in revenues for the three months
ended June 30, 1995 was due to the anticipated reduced volume in vine
sales caused principally by current regulatory restrictions on the further
development of wetlands for cranberry cultivation. The increase in
fertilizer and chemical sales did not impact the Company's net loss for
the interim transitional period. The Company does not expect fertilizer
and chemical sales in future periods to substantially exceed the sales
levels recognized in the prior year's comparable period.
Cost of sales decreased $391,000, or 37%, to $668,000 in the
three months ended June 30, 1995 from $1,059,000 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.
Selling, general and administrative expense was $929,000 in the
three-month interim transitional period, a 27% increase from $732,000
during the same period in the prior fiscal year. The increase was due
primarily to costs associated with the Company's growth in productive
acreage and the Company's preparation to enter the branded juice market.
Interim transitional period interest expense was $1,041,000, a 53%
increase over interest expense of $681,000 during the same three-month
period in fiscal 1995. The significant increase in interest expense was
due to increased debt levels primarily as a result of financing the
Company's September 1994 cranberry marsh acquisitions and the June 1995
purchase of the previously leased Hanson marshes.
For the three-month period ended June 30, 1995, the Company
recognized net income of $52,000, or $0.01 per share, after the cumulative
effect of a 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 harvested in
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 the accounting method, the Company
reported a net loss for the period of $1.2 million, or $0.27 per share.
During the comparable period last year, the Company reported a loss of
$825,000, or $0.19 per share. Due to the highly seasonal nature of the
Company's current business, the Company has always recognized a net loss
during this quarter 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 0.37 to 1 at June 30, 1995,
compared to 0.67 to 1 at March 31, 1995. The lower comparative current
ratio at June 30, 1995 was due to $18 million of short-term borrowing then
outstanding which was incurred to fund the Company's September 1994 Yellow
River marsh acquisitions and the Company's June 7, 1995 exercise of its
option to purchase its leased Hanson Division marsh. The Company has
retired the $18 million in short-term borrowing with part of the $26.5
million in net proceeds from its public stock offering which closed on
August 14, 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 June 30, 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 each year when its crop is harvested and received full
payment for its harvested crop prior to the following March 31, with
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.
The Company's total debt (including current portion) was $72.9
million at June 30, 1995 for a total debt-to-equity ratio of 2.1 to 1
compared to total debt of $61.6 million and a total debt-to-equity ratio
of 1.8 to 1 at March 31, 1995. The $11.3 million increase in debt was the
result of financing $4.4 million for the Company's June 7, 1995 exercise
of its option to purchase its leased Hanson Division marsh, financing $3.3
million for property and equipment additions, and funding operating
activities during the quarter. 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 $26.5 million. As indicated above, $18 million
of such net proceeds were used to repay the principal and accrued interest
outstanding under the Company's acquisition credit facility. The
remainder of the net proceeds was used to reduce outstanding amounts under
the Company's revolving line of credit facility. Giving effect to
completion of the stock offering and the application of the net proceeds
thereof, the Company's debt-to-equity ratio at June 30, 1995 would have
been 0.8 to 1. The underwriters for the Company's stock offering have a
30-day option to purchase up to 300,000 additional Class A shares at
$13.465 per share to cover over-allotments, if any. If the over-allotment
option is exercised in full, the Company would receive additional net
proceeds of approximately $4 million. Any such additional net proceeds
would be used to reduce outstanding amounts under the Company's line of
credit facility.
First quarter property and equipment additions included (i) $1.9
million for fixed asset additions and upgrades; (ii) $608,000 to cultivate
and maintain 390 pre-productive acres; (iii) $509,000 to improve the
Company's fresh fruit handling facilities; and (iv) $277,000 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 three-month
period ended June 30, 1995, the Company entered into multi-year contracts
to purchase up to approximately 50,000-75,000 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 Northland stock, with the remainder in cash.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
Exhibit 27 - Financial Data Schedule
b. Reports on Form 8-K.
On June 30, 1995, the Company filed a Form 8-K report, dated
June 21, 1995, with the Securities and Exchange Commission to
report under Item 8 of such report the Company's change in
fiscal year.
<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: August 14, 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 THREE MONTHS ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 174
<SECURITIES> 1,260
<RECEIVABLES> 1,510
<ALLOWANCES> 0
<INVENTORY> 834
<CURRENT-ASSETS> 10,600
<PP&E> 116,439
<DEPRECIATION> 14,234
<TOTAL-ASSETS> 118,915
<CURRENT-LIABILITIES> 28,681
<BONDS> 48,867
<COMMON> 43
0
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<OTHER-SE> 34,119
<TOTAL-LIABILITY-AND-EQUITY> 118,915
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<INCOME-PRETAX> (1,955)
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