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, 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 Incorporation (I.R.S. Employer
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 December 31, 1996 13,155,300
Class B Common Stock December 31, 1996 636,202
<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 . . . . . . . . 7-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 11
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . 12
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
November 30, August 31,
1996 1996
Current assets:
Cash and cash equivalents $ 205 $ 266
Accounts and notes receivable 7,257 2,631
Investments 1,260 1,260
Inventories 20,227 12,414
Other 1,351 922
Deferred income taxes 1,124 1,124
---------- ---------
Total current assets 31,424 18,617
---------- ---------
Property and equipment - at cost 152,263 141,098
Less accumulated depreciation 19,686 18,609
---------- ---------
Net property and equipment 132,577 122,489
Investments 1,317 1,260
Leasehold interests, net 1,158 1,197
Other 2,126 1,922
---------- ---------
Total assets $ 168,602 $ 145,485
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,253 $ 2,593
Accrued liabilities 8,728 5,914
Current portion of long-term
obligations 3,560 3,560
---------- ---------
Total current liabilities 14,541 12,067
Long-term obligations 71,682 56,978
Deferred income taxes 7,334 7,381
---------- ---------
Total liabilities 93,557 76,426
---------- ---------
Shareholders' equity:
Common stock - Class A 131 127
Common stock - Class B 6 6
Additional paid-in capital 65,203 60,184
Retained earnings 9,705 8,742
---------- ---------
Total shareholders' equity 75,045 69,059
---------- ---------
Total liabilities and shareholders'
equity $ 168,602 $ 145,485
========== =========
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,
1996 1995
Revenues $ 10,920 $ 21,703
Cost of sales 4,675 9,290
---------- --------
Gross profit 6,245 12,413
Costs and expenses:
Selling, general and administrative 2,965 981
Interest 795 616
---------- --------
Total costs and expenses 3,760 1,597
---------- --------
Income before income taxes 2,485 10,816
Income taxes 983 4,246
---------- --------
Net income $ 1,502 $ 6,570
========== ========
Net income per common share (based
on 14,196,028 and 13,582,174(2)
weighted average common shares
outstanding, respectively): $ 0.11 $ 0.48(2)
========== ========
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,
1996 1995
Cash flows from operating activities:
Net income $ 1,502 $ 6,570
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 1,146 937
Changes in assets and liabilities:
Receivables and other current
assets (5,055) (18,987)
Inventories (7,813) 1,529
Accounts payable and accrued
liabilities 2,928 2,537
Deferred income taxes 801 4,245
--------- ---------
Net cash provided by
operating activities (6,491) (3,169)
--------- ---------
Investing activities:
Acquisitions of cranberry operations (4,850) --
Property and equipment additions, net (3,305) (2,794)
Investments (57) --
Other (74) (165)
--------- ---------
Net cash used for investing
activities (8,286) (2,959)
--------- ---------
Financing activities:
Increase in debt 14,704 2,458
Dividends paid (539) (462)
Net proceeds from common stock offering -- 4,021
Exercise of stock options 721 --
Other (170) --
--------- ---------
Net cash provided by
financing activities 14,716 6,017
--------- ---------
Net decrease in cash and cash
equivalents (61) (111)
Cash and cash equivalents:
Beginning of period 266 361
-------- --------
End of period $ 205 $ 250
======== ========
Supplemental disclosures of cash
flow information:
Cash paid for:
Interest (net of amount capitalized) $ 269 $ 5
======== ========
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,
1996, and its results of operations and cash flows for the three periods
November 30, 1996 and 1995, respectively. The Company's consolidated
balance sheet as of August 31, 1996 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 will be recognized in operating results if
a permanent diminution in value were to occur.
NOTE 2 STOCK SPLIT
On June 26, 1996, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a 100% stock dividend
distributed on September 3, 1996 to shareholders of record on August 15,
1996. Shareholders' equity has been adjusted by reclassifying from
additional paid-in capital to common stock the par value of the additional
shares arising from the split. In addition, all references in the
financial statements to share and per share amounts for periods prior to
the distribution of the stock dividend have been restated to retroactively
reflect the stock dividend.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In fiscal 1996 and prior years, the Company presold the majority
of its crop under fixed price contracts to cranberry product processors,
resulting in the majority of its annual revenues having been recorded
during the fiscal quarter in which the Company's fall harvest took place.
Historically, the Company's three fiscal quarters after the fall harvest
reflected either net losses or only nominal profits. However, as part of
the Company's pursuit of its "marsh to market" business strategy, during
the first quarter of fiscal 1997 the Company stored the majority of its
fiscal 1997 crop supply in its freezer facility so that it may be utilized
throughout the fiscal year in the manufacture of Northland 100% juice
cranberry blend products or for sale as contracted private label juice,
cranberry concentrate and whole frozen fruit. By controlling the timing
and use of its fruit supply throughout the entire year, the Company
anticipates being positioned to better take advantage of favorable market
conditions as they arise and, as a result, help reduce the extreme
seasonality of its historical interim results and its dependence upon its
annual fall cranberry crop. As a result of this substantially changed
nature of the Company's business, comparisons between fiscal 1997 interim
results and results of the prior year's comparable periods are not
particularly meaningful or informative.
Total revenues for the three months ended November 30, 1996 were
$10.9 million compared to $21.7 million in the prior year's quarter, when
a majority of the Company's crop was presold under fixed price contracts.
Inventories of cranberry supplies at November 30, 1996 to support future
sales were $20.2 million compared to $5.8 million at November 30, 1995. A
majority of the Company's revenues in the first quarter of fiscal 1997
were a result of seasonal fresh fruit sales for the Thanksgiving holiday.
As the Company attempts to continue directing its crop supply into the
most profitable product mix possible, the Company believes that fresh
fruit sales will continue to be less significant to its results of
operations. Sales of the Company's Northland 100% juice cranberry blends
continued to increase during the fiscal 1997 first quarter over the fourth
quarter of fiscal 1996 as the Company continued its regional product roll-
out strategy and also experienced sales growth in certain existing
markets. The Company plans on continuing the geographical scope of its
roll-out throughout the remainder of the fiscal year, with the intention
of being in most metropolitan areas throughout the nation by early-to-mid
fiscal 1998. In addition to increasing the distribution and sale of its
branded juice products and exploring private label sales opportunities,
the Company continually evaluates the current and potential future market
conditions for spot market sales of concentrate and bulk frozen fruit in
order to best maximize the Company's long-term profitability potential.
Depending upon market conditions, this strategy may result in some
unpredictable volatility of revenue and net income between fiscal
quarters, but is not expected to adversely affect the Company's annual
results.
Cost of sales for the first quarter of fiscal 1997 was $4.6
million, or 42.8% of total revenues for the quarter. Cost of sales for
the first quarter of fiscal 1996 was $9.3 million, or 42.8% of total
revenues for the quarter. Although the Company's gross margins were
coincidentally the same between the two quarterly periods, the Company's
inventory costs per barrel were higher in the fiscal 1997 quarter because
of increased deferred crop costs, which were offset by higher revenue per
barrel sold. The Company's gross margins during the remainder of fiscal
1997 will be dependent upon its product mix and then existing market
conditions.
Selling, general and administrative expenses were $3.0 million,
or 27.2 % of total revenues, for the three-month period ended November 30,
1996. For the three months ended November 30, 1995, selling, general and
administrative expenses were $1.0 million, or 4.5% of total revenues for
that quarter. This expected increase in selling, general and
administrative expenses was primarily attributable to costs related to the
ongoing implementation of the Company's "marsh to market" business
strategy, including the continued rollout of its branded juice product
line. As the Company continues its regional roll-out of its juice
products, it is likely that selling, gereral and administrative expenses,
as a percentage of total revenue, will continue to increase. Interest
expense was $795,000 for the three-month period ended November 30, 1996
compared to $616,000 during the same period in fiscal 1996. The increase
in interest expense was due to increased debt levels, which resulted from
funding marsh acquisitions, property and equipment additions and seasonal
operating activities.
The Company reported fiscal 1997 first quarter net income of
$1.5 million, or $0.11 per share. Fiscal 1996 first quarter net income
was $6.6 million, or $0.48 per share (on a post-stock split basis). This
anticipated decrease in net income and per share earnings was a result of
the changing nature of the Company's business, as described above.
FINANCIAL CONDITION
Net cash used for operating activities increased to $6.5 million
in the first three months of fiscal 1997 compared to $3.2 million used for
operating activities in the same period in fiscal 1996. The increase was
principally due to changes in receivables and inventories as a result of
the Company's changing business nature. In fiscal 1996, the Company
presold the majority of its crop under fixed price contracts to cranberry
product processors with resulting increased revenues, increased
receivables and decreased inventories recorded in the fiscal 1996 first
quarter. Under the Company's current marsh to market business strategy,
the Company has stored the majority of its fiscal 1997 crop supply in its
freezer facility to support future sales. This has resulted in increased
inventories and decreased receivables compared to the end of the same
period in the prior fiscal year. As a result, the Company's current ratio
was 2.16 to 1.00 at November 30, 1996 compared to a current ratio of 1.54
to 1.00 at August 31, 1996.
Net cash used for investing activities increased during the
three-month period ended November 30, 1996 to $8.3 million from $3.0
million during the same period in the prior fiscal year. The increase in
fiscal 1997 investing activities was due primarily to the Company's
September 27, 1996 acquisition of a 108-acre cranberry property located in
Northern Wisconsin. The total cost of the acquisition was $4.9 million in
cash and 169,014 shares of the Company's Class A Common Stock. Other
property and equipment additions during the fiscal 1997 first quarter were
$3.3 million compared to property and equipment additions of $2.8 million
in the first quarter of fiscal 1996. On December 30, 1996, the Company
completed the $4.35 million acquisition of a 73-acre cranberry property
located in Central Wisconsin. The total cost of the acquisition was $2.18
million in cash and 100,000 shares of the Company's Class A Common Stock.
Net cash provided by financing activities was $14.7 million in
the three-month period ended November 30, 1996, compared to $6.0 million
during the same period in the prior fiscal year. The increase was
primarily due to a $14.7 million increase in the Company's long-term debt.
The Company's debt increased as a result of financing the $4.9 million
cash portion of its September 1996 marsh acquisition, $3.3 million in
property and equipment additions and $6.5 million for seasonal operating
activities. The Company's total debt (including current portion) was
$75.2 million at November 30, 1996 for a total debt-to-equity ratio of
1.00 to 1 compared to total debt of $60.5 million and a total debt-to-
equity ratio of 0.88 to 1 at August 31, 1996. The Company utilizes its
revolving bank credit facility, together with cash generated from
operations, to fund its working capital requirements throughout its fiscal
year. As of November 30, 1996, the principal amount outstanding under the
Company's revolving credit facility was $25.1 million, with an additional
$19.9 million available under its credit facilities with a syndicate of
regional banks until September 1999. The Company utilized an additional
$2.2 million under its revolving credit facility to fund its December 30,
1996 cranberry property acquisition. 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 1997.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Management's
Discussion and Analysis of Financial Condition and
Results of Operations are "forward-looking statements"
intended to qualify for the safe harbors from
liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because
the context of the statement will include such words
as the Company "believes," "anticipates," "expects,"
or words of similar import. Similarly, statements
that describe the company's future plans, objectives
or goals are also forward-looking statements. Such
forward-looking statements are subject to certain
risks and uncertainties which are described in close
proximity to such statements and which could cause
actual results to differ materially from those
currently anticipated. Shareholders, potential
investors and other readers are urged to consider
these factors carefully in evaluating the forward-
looking statements and are cautioned not to place undo
reliance on such forward-looking statements. The
forward-looking statements made herein are only made
as of the date of this Form 10-Q and the Company
undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent
events or circumstances.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 27 - Financial Data Schedule
b. Form 8-K
No reports on Form 8-K were filed by the Company during the
quarterly period to which this Form 10-Q relates.
<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 Financial Officer thereunto duly authorized.
NORTHLAND CRANBERRIES, INC.
DATE: January 14, 1997 By: /s/ John Pazurek
John Pazurek
Chief Financial 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 3 MONTHS ENDED NOVEMBER 30, 1996 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-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 205
<SECURITIES> 1,260
<RECEIVABLES> 7,257
<ALLOWANCES> 0
<INVENTORY> 20,227
<CURRENT-ASSETS> 31,424
<PP&E> 152,263
<DEPRECIATION> 19,686
<TOTAL-ASSETS> 168,602
<CURRENT-LIABILITIES> 14,541
<BONDS> 71,682
0
0
<COMMON> 137
<OTHER-SE> 65,203
<TOTAL-LIABILITY-AND-EQUITY> 168,602
<SALES> 10,098
<TOTAL-REVENUES> 10,920
<CGS> 4,675
<TOTAL-COSTS> 3,760
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 795
<INCOME-PRETAX> 2,485
<INCOME-TAX> 983
<INCOME-CONTINUING> 1,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,502
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
