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 November 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 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 December 31, 1995 6,310,613
Class B Common Stock December 31, 1995 318,101
<PAGE>
NORTHLAND CRANBERRIES, INC.
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets . . . . . . . . . . 3
Condensed Consolidated Statements of Operations . . . . . 4
Condensed Consolidated Statements of Cash Flow . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 7-9
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 10
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
NOVEMBER 30, MARCH 31,
1995 1995
Current assets:
Cash and cash equivalents $ 250 $ 223
Accounts and notes receivable 19,563 1,855
Investments 1,260 1,260
Inventories 5,751 853
Other 720 1,249
Deferred income taxes 1,585 1,306
--------- ---------
Total current assets 29,129 6,746
--------- ---------
Property and equipment - at cost 121,794 108,649
Less accumulated depreciation 15,742 13,458
--------- ---------
Net property and equipment 106,052 95,191
Investments 2,519 2,519
Leasehold interests, net 1,316 1,421
Other 2,140 1,868
--------- ---------
Total assets $ 141,156 $ 107,745
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,603 $ 1,982
Accrued liabilities 5,464 2,384
Current portion of long-term obligations 6,021 5,802
--------- ---------
Total current liabilities 13,088 10,168
Long-term obligations 48,028 55,793
Deferred income taxes 10,798 7,157
--------- ---------
Total liabilities 71,914 73,118
--------- ---------
Shareholders' equity:
Common stock - Class A 63 40
Common stock - Class B 3 3
Additional paid-in capital 59,307 28,908
Retained earnings 9,869 5,676
--------- ---------
Total shareholders' equity 69,242 34,627
--------- ---------
Total liabilities and shareholder's equity $ 141,156 $ 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 November 30,
1995 1994
Revenues $ 21,703 $ 18,417
Cost of sales 9,534 8,162
-------- --------
Gross profit 12,169 10,255
Costs and expenses:
Selling, general and administrative 737 432
Interest 616 987
-------- --------
Total costs and expenses 1,353 1,419
-------- --------
Income before income taxes 10,816 8,836
Income taxes 4,246 3,473
-------- --------
Net income $ 6,570 $ 5,363
======== ========
Net income per common share (based on
6,791,087 and 4,481,135 weighted
average common shares outstanding,
respectively: $ 0.97 $ 1.20
======== ========
See accompanying notes to condensed consolidated financial statements
<PAGE>
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
For the 3 months
ended November 30,
1995 1994
Cash flows from operating activities:
Net income $ 6,570 $ 5,363
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 937 814
Changes in assets and liabilities: (18,987) (15,552)
Receivables and other current
assets
Inventories 1,529 2,127
Accounts payable and accrued 2,537 2,766
liabilities
Deferred income taxes 4,245 3,509
------- ------
Net cash used for operating
activities (3,169) (973)
------- ------
Investing activities:
Acquisitions of cranberry operations -- (5,000)
Property and equipment additions, net (2,794) (2,032)
Investments -- (84)
Other (11) 96
------- ------
Net cash used for investing (2,805) (7,020)
activities ------- ------
Financing activities:
Increase in debt 2,458 7,966
Dividends paid (462) (296)
Net proceeds from common stock offering 4,021 --
Other (154) (154)
------- ------
Net cash provided by financing 5,863 7,516
activities ------- ------
Net decrease in cash and cash (111) (477)
equivalents
Cash and cash equivalents:
Beginning of period 361 518
------- ------
End of period $ 250 $ 41
======= =======
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 November 30,
1995, and its results of operations and cash flows for the three-month
period ended November 30, 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 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 three months ended November 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 income by $1,052,000 or $0.23 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 first quarter ending on November 30, 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. As a result, the Company is reporting its results of
operations and financial condition for its fiscal 1996 first quarter ended
November 30, 1995. 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 three-month
period ended November 30, 1995 compared to the same period in the prior
year are summarized below:
Three Months Ended
November 30,
1995 1994
Cranberry sales $20,840,000 $17,290,000
Crop insurance claims 730,000 977,000
Other income 133,000 150,000
----------- -----------
Total revenues $21,703,000 $18,417,000
=========== ===========
The $3.3 million, or 18%, increase in revenues for the three
months ended November 30, 1995 compared to the same prior year period was
due to a $3.6 million, or 21%, increase in cranberry sales. The increase
in cranberry sales was due to a 13% increase in barrels harvested in
fiscal 1996 and increased sales volume of higher margin fresh cranberries.
In fiscal 1996, the Company harvested 287,000 barrels of cranberries
compared to 254,000 barrels in fiscal 1995. The increased harvest results
were due to a 31% increase in crop production at the Company's 17
Wisconsin marshes. While Wisconsin experienced favorable growing
conditions through most of the state in fiscal 1996, an abnormally dry
growing season in Massachusetts resulted in severely reduced yields for
most growers throughout the state. The crop production for the Company's
four properties in Massachusetts was down approximately 38% from fiscal
1995 production. As partial compensation for the impact of adverse
weather conditions, the Company recognized crop insurance claims of
$730,000 for the fiscal 1996 three-month period.
During the three months ended November 30, 1995, cost of sales
increased $1.4 million, or 17%, to $9.5 million from $8.2 million during
the same period in the prior year. 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.
Fiscal 1996 first quarter selling, general and administrative
expenses were $737,000 compared to $432,000 during the same period 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 $616,000 for the three-month period ended November 30, 1995 compared
to $987,000 during the same period in fiscal 1995. The decrease in
interest expense was due to decreased debt levels which resulted from
proceeds generated by the Company's August 1995 public offering and sale
of 2,300,000 Class A common shares of stock.
For the three-month period ended November 30, 1995 the Company
reported net income of $6.6 million, or $0.97 per share. During the same
period last year the Company recognized net income of $5.4 million, or
$1.20 per share. Net income increased by 23% in fiscal 1996 and earnings
per share between periods decreased 19%. As fully anticipated, the effect
of the Company's change in accounting method adopted during its five-month
transition period ended August 31, 1995 impacted reported fiscal 1996 first
quarter net income and earnings per share. 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. Had the Company retroactively adjusted net income and
earnings per share for the accounting change, net income and earnings per
share, on a pro forma basis for the three months ended November 30, 1994,
would have been $3.6 million and $0.83, respectively. Also reducing
fiscal 1996 earnings per share was the 52% increase in weighted average
common shares outstanding due to the Company's public offering and
sale of 2,300,000 Class A shares on August 14, 1995.
Historically, most of the Company's annual revenues was
recorded during this three-month period, 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 expects to generate
additional revenues in subsequent quarters with the continuing initial
rollout of its Northland brand 100% juice products. In order to support
the year-round processing of its branded juice product line, the Company
has increased its inventory of frozen fruit to a level in excess of $4
million largely through purchases from other independent growers.
FINANCIAL CONDITION
The Company's current ratio was 2.23 to 1 at November 30, 1995,
compared to 0.67 to 1 at March 31, 1995. The increase in the Company's
current ratio was primarily due to accounts receivable generated through
the sale of its fiscal 1996 cranberry crop. The Company has historically
recorded virtually all of its revenue and resulting accounts receivable in
the fall of the year when its harvested crop was sold under its supply
contracts with independent processors. Under such contracts, which expire
after payment for this year's crop, the Company received full payment for
its harvested crop prior to the following March 31. The resulting cash
received from such payments is 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 November 30, 1995, the principal amount outstanding
under the Company's revolving credit facility was $11.6 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) $9.4 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). The Company believes its credit facilities, together with
cash generated from operations, are sufficient to fund its ongoing
operational needs.
Net cash used for operating activities increased to $3.2
million in the fiscal 1996 first quarter from $1.0 million in the same
period in fiscal 1995, reflecting a net change of $3.4 million in
receivables and other current assets, offset by a $1.2 million increase in
net income. The change in receivables and other current assets was due
principally to the harvest and sale of the Company's fiscal 1996 cranberry
crop.
Net cash used for investing activities decreased during the
three-month period ended November 30, 1995 to $2.8 million from $7.0
million during the same period in the prior fiscal year. Fiscal 1996
investing activities included $2.8 million for property and equipment
additions, compared to $2.0 million for property and equipment additions
and $5.0 million for the acquisition of cranberry operations during the
comparable period in fiscal 1995. Property and equipment additions during
the five-month interim transitional period included (i) $846,000 for fixed
asset additions and upgrades; (ii) $588,000 to cultivate and maintain 390
pre-productive acres; (iii) $401,000 to improve the Company's fresh fruit
handling facilities; and (iv) $965,000 for 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. The Company has entered into an agreement in
principle to acquire a 55 acre cranberry property located in Central
Wisconsin. The Company expects to finance the approximate purchase price
of $3 million for the acquisition by utilizing its bank credit facility.
Net cash provided by financing activities decreased in the
three-month period ended November 30, 1995 to $5.9 million from $7.5
million during the same period in the prior fiscal year. The Company's
total debt (including current portion) was $54.1 million at November 30,
1995 for a total debt-to-equity ratio of 0.78 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 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 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: January 13, 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 NOVEMBER 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-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> NOV-30-1995
<CASH> 250
<SECURITIES> 1,260
<RECEIVABLES> 19,563
<ALLOWANCES> 0
<INVENTORY> 5,751
<CURRENT-ASSETS> 29,129
<PP&E> 121,794
<DEPRECIATION> 15,742
<TOTAL-ASSETS> 141,156
<CURRENT-LIABILITIES> 13,088
<BONDS> 48,028
0
0
<COMMON> 66
<OTHER-SE> 59,307
<TOTAL-LIABILITY-AND-EQUITY> 141,156
<SALES> 20,840
<TOTAL-REVENUES> 21,703
<CGS> 9,534
<TOTAL-COSTS> 737
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 616
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<INCOME-TAX> 4,246
<INCOME-CONTINUING> 6,570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 6,570
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
