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 February 29, 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 March 31, 1996 6,348,836
Class B Common Stock March 31, 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)
FEBRUARY 29, MARCH 31,
1996 1995
Current assets:
Cash and cash equivalents $ 200 $ 223
Accounts and notes receivable 16,818 1,855
Investments 1,260 1,260
Inventories 4,302 853
Deferred costs of growing crop 2,776 --
Other 1,924 1,249
Deferred income taxes 1,585 1,306
-------- -------
Total current assets 28,865 6,746
-------- -------
Property and equipment - at cost 125,322 108,649
Less accumulated depreciation 16,649 13,458
-------- -------
Net property and equipment 108,673 95,191
Investments 1,260 2,519
Leasehold interests, net 1,276 1,421
Other 2,217 1,868
-------- -------
Total assets $142,291 $107,745
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 887 $ 1,982
Accrued liabilities 3,784 2,384
Current portion of long-term obligations 5,931 5,802
-------- -------
Total current liabilities 10,602 10,168
Long-term obligations 51,393 55,793
Deferred income taxes 10,862 7,157
-------- -------
Total liabilities 72,857 73,118
-------- -------
Shareholders' equity:
Common stock - Class A 63 40
Common stock - Class B 3 3
Additional paid-in capital 59,815 28,908
Retained earnings 9,553 5,676
-------- -------
Total shareholders' equity 69,434 34,627
-------- -------
Total liabilities and
shareholders's equity $142,291 $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 FEBRUARY 29,
1996 1995
Revenues $ 3,984 $1,665
Cost of sales 1,901 2,128
------ ------
Gross profit (loss) 2,083 (463)
Costs and expenses:
Selling, general and administrative 1,107 667
Interest 722 1,081
------ ------
Total costs and expenses 1,829 1,748
------ ------
Income (loss) before income taxes 254 (2,211)
Income taxes 105 (863)
------ ------
Net income (loss) $ 149 $(1,348)
====== ======
Net income (loss) per common share
(based on 6,838,606 and 4,436,843
weighted average common shares
outstanding, respectively): $ 0.02 $ (0.30)
====== =======
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 6 months
ended FEBRUARY 29,
1996 1995
Revenues $ 25,684 $ 20,082
Cost of sales 11,188 10,368
------ ------
Gross profit 14,496 9,714
Costs and expenses:
Selling, general and administrative 2,088 1,020
Interest 1,338 2,068
------ ------
Total costs and expenses 3,426 3,088
------ ------
Income before income taxes 11,070 6,626
Income taxes 4,351 2,610
------ ------
Net income $ 6,719 $ 4,016
======== ========
Net income per common share
(based on 6,814,846 and 4,457,984
weighted average common shares
outstanding, respectively): $ 0.99 $ 0.90
======== ========
See accompanying notes to condensed consolidated financial statements
<PAGE>
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
For the 6 months
Ended FEBRUARY 29,
1996 1995
Cash flows from operating activities:
Net income $ 6,719 $ 4,016
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 1,905 1,655
Changes in assets and liabilities:
Receivables and other current assets (17,446) (11,616)
Inventories 202 2,277
Accounts payable and accrued liabilities 141 1,125
Deferred income taxes 4,309 2,693
------ ------
Net cash used for operating activities (4,170) 150
------ ------
Investing activities:
Acquisitions of cranberry operations -- (5,046)
Property and equipment additions, net (6,298) (3,333)
Investments 1,259 1,260
Other (288) (161)
------ ------
Net cash used for investing activities (5,327) (7,280)
------ ------
Financing activities:
Increase in debt 5,733 7,298
Dividends paid (926) (597)
Net proceeds from common stock offering 4,021 --
Other 508 (18)
------ ------
Net cash provided by financing activities 9,336 6,683
------ ------
Net decrease in cash and cash equivalents (161) (447)
Cash and cash equivalents:
Beginning of period 361 518
------ ------
End of period $ 200 $ 71
======= =======
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amount capitalized) $ 1,290 $ 1,555
======= =======
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 February 29,
1996, and its results of operations and cash flows for the three and six-
month periods ended February 29, 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 six months ended February 28, 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 reported net income by $707,000 or $0.16 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 second quarter ending on February 29, 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 six-month periods
ended February 29, 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,
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
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 second quarter were
$4.0 million, a $2.3 million increase from $1.7 million in total revenues
during the same period in the prior fiscal year. Total revenues for the
six months ended February 29, 1996 were $25.7 million, a $5.6 million
increase from $20.1 million in total revenues for the six month period
ended February 28, 1995. The increased revenues for fiscal 1996 were
primarily due to increased cranberry sales. The increase in second
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 poor 1995 fall cranberry
harvest and seasonal industry scarcity. The Company's continuing initial
rollout of its Northland brand 100% juice products also contributed to the
second quarter revenue increase. Revenues for the six months ended
February 29, 1996 increased due to the second 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 six-month
period also benefited from the introductory sales of the Company's juice
products.
For the three- and six-month periods ended February 29, 1996
cost of sales were $1.9 million and $11.2 million, respectively. Cost of
sales for the three- and six-month periods ended February 28, 1995 were
$2.1 million and $10.4 million, respectively. As a result of the
Company's changing nature and change in accounting method, as described
above, comparison between periods is not particularly meaningful or
informative.
Selling, general and administrative expenses were $1.1 million
and $2.1 million for the three and six-month periods ended February 29,
1996, compared to $667,000 and $1.0 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 $722,000 and $1.3 million for the three and six-month periods ended
February 29, 1996 compared to $1.1 million and $2.1 million during the
same periods 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 second quarter of fiscal 1996, the Company reported net
income of $149,000, or $0.02 per share compared to a net loss of $1.3
million, or $0.30 per share during the same period last year. For the
first six months of fiscal 1996, the Company reported net income of $6.7
million, or $0.99 per share compared to net income of $4.0 million, or
$0.90 per share during the same prior year period.
FINANCIAL CONDITION
The Company's current ratio was 2.72 to 1 at February 29, 1996,
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. Such contracts expired in March
1996 when the Company received $14.2 million in full payment for its
harvested crop. The resulting cash received from such payments was 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 February
29, 1996, the principal amount outstanding under the Company's revolving
credit facility was $16.0 million. The Company currently has an
additional $19.0 million available under its credit facilities with a
syndicate of regional banks until August 1997 as follows: (i) $5.0 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 over the
remainder of fiscal 1996.
Net cash used for operating activities increased to $4.2 million
in the first six months of fiscal 1996 compared to $150,000 provided by
operating activities in the same period in fiscal 1995. This reflected a
net change of $5.8 million in receivables and other current assets, offset
by a $2.7 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 six-
month period ended February 29, 1996 to $5.3 million from $7.3 million
during the same period in the prior fiscal year. The decrease in fiscal
1996 investing activities was due to a $2.9 million increase in property
and equipment additions in fiscal 1996 partially offset by the fiscal 1995
$5.0 million acquisition of cranberry operations. Fiscal 1996 property
and equipment additions were $6.3 million compared to property and
equipment additions of $3.4 million in fiscal 1995. Property and
equipment additions in fiscal 1996 included (i) $1.6 million for fixed
asset additions and upgrades; (ii) $1.1 million to cultivate and maintain
329 pre-productive acres; (iii) $700,000 to improve the Company's fresh
fruit handling facilities; and (iv) $2.9 million 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. On March 15, 1996, the Company
completed the $3.05 million acquisition of a 55-acre cranberry property
located in Central Wisconsin.
Net cash provided by financing activities increased to $9.3
million in the six-month period ended February 29, 1996, from $6.7 million
during the same period in the prior fiscal year. The Company's total debt
(including current portion) was $57.3 million at February 29, 1996 for a
total debt-to-equity ratio of 0.83 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.
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: April 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 FEBRUARY 29, 1996
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 200
<SECURITIES> 1,260
<RECEIVABLES> 16,818
<ALLOWANCES> 0
<INVENTORY> 4,302
<CURRENT-ASSETS> 28,865
<PP&E> 125,322
<DEPRECIATION> 16,649
<TOTAL-ASSETS> 142,291
<CURRENT-LIABILITIES> 10,602
<BONDS> 51,393
0
0
<COMMON> 66
<OTHER-SE> 59,815
<TOTAL-LIABILITY-AND-EQUITY> 142,291
<SALES> 24,714
<TOTAL-REVENUES> 25,684
<CGS> 11,188
<TOTAL-COSTS> 2,088
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,338
<INCOME-PRETAX> 11,070
<INCOME-TAX> 4,351
<INCOME-CONTINUING> 6,719
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,719
<EPS-PRIMARY> .99
<EPS-DILUTED> .99
</TABLE>
