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 May 31, 1996
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 Identification No.)
Incorporation or organization)
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 10, 1996 6,367,143
Class B Common Stock July 10, 1996 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 Flow. . . 6
Notes to Condensed Consolidated Financial
Statements. . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 11
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
MAY 31, MARCH 31,
1996 1995
Current assets:
Cash and cash equivalents $ 182 $ 223
Accounts and notes receivable 3,736 1,855
Investments 1,260 1,260
Inventories 4,085 853
Deferred costs of growing crop 5,744 --
Other 642 1,249
Deferred income taxes 4,198 1,306
--------- ---------
Total current assets 19,847 6,746
--------- ---------
Property and equipment - at cost 131,925 108,649
Less accumulated depreciation 17,572 13,458
--------- ---------
Net property and equipment 114,353 95,191
Investments 1,260 2,519
Leasehold interests, net 1,237 1,421
Other 2,213 1,868
--------- ---------
Total assets $ 138,910 $ 107,745
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,959 $ 1,982
Accrued liabilities 4,244 2,384
Current portion of long-term obligations 9,108 5,802
--------- ---------
Total current liabilities 15,311 10,168
Long-term obligations 41,685 55,793
Deferred income taxes 12,054 7,157
--------- ---------
Total liabilities 69,050 73,118
--------- ---------
Shareholders' equity:
Common stock - Class A 64 40
Common stock - Class B 3 3
Additional paid-in capital 59,850 28,908
Retained earnings 9,943 5,676
--------- ---------
Total shareholders' equity 69,860 34,627
--------- ---------
Total liabilities and shareholders's equity $ 138,910 $ 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 MAY 31,
1996 1995
Revenues $ 6,675 $ 652
Cost of sales 2,772 1,244
-------- -------
Gross profit (loss) 3,903 (592)
Costs and expenses:
Selling, general and administrative 1,808 668
Interest 660 1,083
-------- -------
Total costs and expenses 2,468 1,751
-------- -------
Income (loss) before income taxes 1,435 (2,343)
Income taxes 580 (910)
-------- -------
Net income (loss) before cumulative
effect of change in accounting method 855 (1,433)
Cumulative effect of change in
accounting method -- 1,249
-------- -------
Net income (loss) $ 855 $ (184)
======== =======
Net income (loss) per common share
(based on 6,896,078 and 4,466,317
weighted average common shares
outstanding, respectively):
Income (loss) before cumulative effect
of change in accounting method $ 0.12 $ (0.32)
Cumulative effect of change in
accounting method -- 0.28
-------- -------
Net income (loss) per common share $ 0.12 $ (0.04)
======== =======
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 9 months
ended MAY 31,
1996 1995
Revenues $ 32,359 $ 20,734
Cost of sales 13,748 11,602
-------- --------
Gross profit 18,611 9,132
Costs and expenses:
Selling, general and administrative 4,108 1,698
Interest 1,998 3,152
-------- --------
Total costs and expenses 6,106 4,850
-------- --------
Income before income taxes 12,505 4,282
Income taxes 4,931 1,700
-------- --------
Net income before cumulative effect
of change in accounting method 7,574 2,582
Cumulative effect of change in
accounting method -- 1,249
-------- --------
Net income $ 7,574 $ 3,831
======== ========
Net income per common share (based
on 6,876,704 and 4,460,769 weighted
average common shares outstanding,
respectively):
Income before cumulative effect of
change in accounting method $ 1.10 $ 0.58
Cumulative effect of change in
accounting method -- 0.28
-------- --------
Net income per common share 1.10 $ 0.86
======== ========
See accompanying notes to condensed consolidated financial statements
<PAGE>
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
For the 9 months
ended MAY 31,
1996 1995
Cash flows from operating activities:
Net income $ 7,574 $ 3,831
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 2,942 2,489
Changes in assets and liabilities:
Receivables and other current assets (3,082) (460)
Inventories (2,549) (626)
Accounts payable and accrued liabilities 1,673 1,643
Deferred income taxes 2,888 2,482
-------- -------
Net cash provided by operating
activities 9,446 8,110
-------- -------
Investing activities:
Acquisitions of cranberry operations (2,050) (5,046)
Property and equipment additions, net (9,863) (6,052)
Investments 1,259 1,260
Other 332) 148)
-------- -------
Net cash used for investing
activities (10,986) (9,986)
-------- -------
Financing activities:
Increase (decrease) in debt (1,798) 2,417
Dividends paid (1,391) (897)
Net proceeds from common stock offering 4,016 --
Other 534 (23)
-------- -------
Net cash provided by financing
activities 1,361 1,497
-------- -------
Net decrease in cash and cash equivalents (179) (379)
Cash and cash equivalents:
Beginning of period 361 518
-------- -------
End of period $ 82 $ 139
======== =======
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amount capilatized) $ 1,548 $ 2,568
======== =======
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 May 31, 1996,
and its results of operations and cash flows for the three and nine-month
periods ended May 31, 1996 and 1995, 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 can be read in
conjunction with the financial statements and the notes thereto included
in the Company's latest annual report.
The Company periodically reviews long-lived assets to assess
recoverability and impairments would be recognized in operating results if
a permanent diminution in value were to occur.
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. The pro forma
effects for the nine months ended May 31, 1995, 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 Company's reported net income for such period by $1.7 million or $0.40
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
fiscal 1996 third quarter ending on May 31, 1996. 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. As a result, the Company is reporting its results of
operations and financial condition for the three-and nine-month periods
ended May 31, 1996. 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.
Historically, most of the Company's annual revenues have been
recorded during the fiscal quarter in which the fall harvest took place,
with such revenues having been derived primarily from seasonal fresh fruit
sales and the contracted sale of processed fruit to major independent
processors of private label cranberry products. While the Company will
still recognize the majority of its revenues for the current fiscal year
during this period, it has generated additional revenues in subsequent
quarters through the sale of frozen raw cranberries and the continuing
initial rollout of its Northland brand 100% juice products. As a result
of the changing nature of the Company's business from the ongoing
implementation of its "marsh to market" vertical integration strategy
together with the impact of its change in accounting method and change in
fiscal year end and fiscal quarterly periods (see Notes 2 and 3,
respectively, of Notes to Condensed Consolidated Financial Statements)
comparisons between fiscal 1996 interim results and results of the prior
year's comparable periods are not particularly meaningful or informative.
Total revenues for the Company's fiscal 1996 third quarter were
$6.7 million, a $6.0 million increase from $652,000 in total revenues
during the same period in the prior fiscal year. Total revenues for the
nine months ended May 31, 1996 were $32.4 million, a $11.7 million
increase from $20.7 million in total revenues for the nine-month period
ended May 31, 1995. The increased revenues for fiscal 1996 were primarily
due to increased cranberry sales. The increase in third quarter revenues
was primarily due to the Company's sales of frozen raw cranberries to
institutional customers. Prices for bulk sales of fruit have increased
for fiscal 1996 as a result of the industry's poor 1995 fall cranberry
harvest as well as normal seasonal industry scarcity during the period.
The Company's continuing initial rollout of its Northland brand 100% juice
products also contributed to the third quarter revenue increase. As of
May 31, 1996, the Company had only limited additional cranberry
inventories available for subsequent sale on the spot-market for raw
cranberries. As a result of this circumstance, and the continuing
expenses of introducing the Company's juice products, the Company expects
to incur a net loss for the fourth quarter of fiscal 1996. Revenues for
the nine months ended May 31, 1996 increased due to the third quarter
sales of frozen raw cranberries and a 13% increase in barrels harvested in
the first quarter of fiscal 1996 resulting in increased sales of processed
fruit under its supply agreements with two independent processers and
increased sales volume of higher margin fresh cranberries. Revenues
during this nine-month period also benefited from the introductory sales
of the Company's juice products.
For the three-and nine-month periods ended May 31, 1996, cost of
sales was $2.8 million and $13.7 million, respectively. Cost of sales for
the three-and nine-month periods ended May 31, 1995 was $1.2 million and
$11.6 million, respectively. As a result of the Company's changing nature
and change in accounting method, as described above, comparisons between
periods are not particularly meaningful or informative.
Selling, general and administrative expenses were $1.8 million
and $4.1 million for the three-and nine-month periods ended May 31, 1996,
compared to $668,000 and $1.7 million during the same periods in the prior
fiscal year. The increase was due primarily to additional costs
associated with increased compensation and related expenses partially
attributable to the Company's growth in productive acreage and the
Company's preparation to enter the branded juice market. Interest expense
was $660,000 and $2.0 million for the three-and nine-month periods ended
May 31, 1996 compared to $1.1 million and $3.2 million during the same
periods in fiscal 1995. The decrease in interest expense was due to
decreased debt levels which resulted from the application of proceeds
generated by the Company's August 1995 public offering and sale of
2,300,000 Class A common shares of stock.
For the third quarter of fiscal 1996, the Company reported net
income of $855,000, or $0.12 per share, compared to a net loss of
$184,000, or $0.04 per share, during the same period last year. For the
first nine months of fiscal 1996, the Company reported net income of $7.6
million, or $1.10 per share, compared to net income of $3.8 million, or
$0.86 per share, during the same prior year period.
FINANCIAL CONDITION
Net cash provided by operating activities increased to $9.4
million in the first nine months of fiscal 1996 compared to $8.1 million
provided by operating activities in the same period in fiscal 1995. The
increase principally was the result of changes in cash flows related to
increased net income partially offset by an increase in accounts
receivable. The increase in accounts receivable is the result of the
changing nature of the Company's business and is primarily due to sales of
frozen raw cranberries and sales of the Company's branded 100% juice
products in the latter part of the third quarter.
Net cash used for investing activities increased during the
nine-month period ended May 31, 1996 to $11.0 million from $10.0 million
during the same period in the prior fiscal year. The increase in fiscal
1996 investing activities was due primarily to a $3.8 million increase in
property and equipment additions in fiscal 1996 partially offset by $3.0
million decrease in the acquisitions of cranberry operations. Fiscal 1996
property and equipment additions were $9.9 million compared to property
and equipment additions of $6.1 million in fiscal 1995. Property and
equipment additions in fiscal 1996 included: (i) $2.7 million for fixed
asset additions and upgrades; (ii) $1.8 million to cultivate and maintain
329 pre-productive acres; (iii) $1.6 million to improve the Company's
fruit handling facilities; and (iv) $3.8 million for construction of the
Company's concentrate manufacturing facility. On March 15, 1996, the
Company completed the $3.05 million acquisition of a 55-acre cranberry
property located in Central Wisconsin. The acquisition was financed with
$2.05 million in cash and $1.0 million in a seller financed demand note at
7% interest. On July 8, 1996, the Company completed the acquisition of a
74-acre cranberry property located in Northern Wisconsin. The total cost
of the acquistion was $4.4 million in cash and 16,807 shares of the
Company's Class A Common Stock.
Net cash provided by financing activities was $1.4 million in
the nine-month period ended May 31, 1996, compared to $1.5 million during
the same period in the prior fiscal year. The Company's total debt
(including current portion) was $50.8 million at May 31, 1996 for a total
debt-to-equity ratio of 0.73 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 used the $30.4 million of net proceeds from its public sale of
2,300,000 Class A shares in August and September of 1995 to repay the
principal and accrued interest then outstanding under the Company's credit
facilities. The Company utilizes its revolving bank credit facility,
together with cash generated from operations, to fund its working capital
requirements throughout its growing season. As of May 31, 1996, the
principal amount outstanding under the Company's revolving credit facility
was $6.7 million, with an additional $23.1 million available under its
credit facilities with a syndicate of regional banks until August 1997 as
follows: (i) $14.3 million available under the Company's revolving credit
facility; (ii) $4.8 million available under the Company's acquisition
credit facility; and (iii) $4.0 million available under a term credit
facility. The Company utilized an additional $4.4 million under its
acquisition credit facility to fund the July 8, 1996 acquisition of a
74-acre cranberry property. 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). The Company believes its credit facilities,
together with cash generated from operations, are sufficient to fund its
ongoing operational needs over the remainder of fiscal 1996.
PART II - OTHER INFORMATION
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: July 15, 1996 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 PERIOD ENDED MAY 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 182
<SECURITIES> 1,260
<RECEIVABLES> 3,736
<ALLOWANCES> 0
<INVENTORY> 9,829
<CURRENT-ASSETS> 19,143
<PP&E> 131,925
<DEPRECIATION> 17,572
<TOTAL-ASSETS> 138,910
<CURRENT-LIABILITIES> 15,311
<BONDS> 41,685
0
0
<COMMON> 67
<OTHER-SE> 59,850
<TOTAL-LIABILITY-AND-EQUITY> 138,910
<SALES> 31,299
<TOTAL-REVENUES> 32,359
<CGS> 13,748
<TOTAL-COSTS> 4,108
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,998
<INCOME-PRETAX> 12,505
<INCOME-TAX> 4,931
<INCOME-CONTINUING> 7,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,574
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
