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, 1997
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 December 31, 1997 13,155,300
Class B Common Stock December 31, 1997 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 . . . . . . . . 7-9
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 SHEET
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
November 30, August 31,
1997 1997
Current assets:
Cash and cash equivalents $ 311 $ 231
Accounts and notes receivable 10,607 6,996
Investments 1,260 1,260
Inventories 38,790 26,454
Other 2,127 1,715
Deferred income taxes 3,035 3,035
--------- ---------
Total current assets 56,130 39,691
--------- ---------
Property and equipment - at cost 164,413 161,865
Less accumulated depreciation 25,028 23,592
--------- ---------
Net property and equipment 139,385 138,273
Leasehold interests, net 1,000 1,039
Other 2,099 1,929
-------- ---------
Total assets $ 198,614 $ 180,932
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,829 $ 3,806
Accrued liabilities 9,035 4,092
Current portion of long-term obligations 3,797 3,647
--------- ---------
Total current liabilities 17,661 11,545
Long-term obligations 95,084 83,130
Deferred income taxes 9,504 9,446
--------- ---------
Total liabilities 122,249 104,121
--------- ---------
Shareholders' equity:
Common stock - Class A 132 132
Common stock - Class B 6 6
Additional paid-in capital 67,893 67,889
Retained earnings 8,334 8,784
--------- ---------
Total shareholders' equity 76,365 76,811
--------- ---------
Total liabilities and shareholders' equity $ 198,614 $ 180,932
========= =========
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,
1997 1996
Revenues $ 18,431 $10,920
Cost of sales 8,814 4,675
--------- ---------
Gross profit 9,617 6,245
Costs and expenses:
Selling, general and administrative 8,004 2,965
Interest 1,432 795
--------- ---------
Total costs and expenses 9,436 3,760
--------- ---------
Income before income taxes 181 2,485
Income taxes 79 983
--------- ---------
Net income $ 102 $ 1,502
========= =========
Net income per common share (based on
14,357,702 and 14,196,028 weighted average
common shares outstanding, respectively): $ 0.01 $ 0.11
========= =========
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,
1997 1996
Cash flows from operating activities:
Net income $ 102 $ 1,502
Adjustments to reconcile net income
to net cash provided by (used for)
operating activities:
Depreciation and amortization 1,542 1,146
Changes in assets and liabilities:
Receivables and other current
assets (4,023) (5,055)
Inventories (12,336) (7,813)
Accounts payable and
accrued liabilities 5,966 2,928
Deferred income taxes 58 801
--------- ---------
Net cash used for operating
activities (8,691) (6,491)
--------- ---------
Investing activities:
Acquisitions of cranberry operations 0 (4,850)
Property and equipment additions, net (2,555) (3,305)
Other (80) (131)
--------- ---------
Net cash used for investing
activities (2,635) (8,286)
--------- ---------
Financing activities:
Increase in debt 12,104 14,704
Dividends paid (551) (539)
Exercise of stock options 3 721
Other (150) (170)
--------- ---------
Net cash provided by financing
activities 11,406 14,716
--------- ---------
Net decrease in cash and cash equivalents 80 (61)
Cash and cash equivalents:
Beginning of period 231 266
--------- ---------
End of period $ 311 $ 205
========= =========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amount capitalized) $ 997 $ 269
========= =========
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,
1997, and its results of operations and cash flows for the three-month
periods ended November 30, 1997 and 1996, respectively. The Company's
consolidated balance sheet as of August 31, 1997 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total revenues for the three months ended November 30, 1997 were
$18.4 million, compared to $10.9 million in the prior year's quarter. The
68.8% increase in first quarter revenues was wholly attributable to
increased sales of Northland branded 100% juice products. Trade industry
data for the most recent 12-week period ended December 7, 1997, indicated
Northland juice products achieved an 8.6% market share of supermarket
shelf-stable cranberry beverages on a national basis, up from a 5.8%
market share for the previous 12-week period ended September 14, 1997.
The Company believes its increased revenues and resulting increased market
share were primarily due to its aggressive marketing campaign, which
included over $5 million in media and trade spending during the quarter.
The Company plans to continue to aggressively market its juice products
throughout the fiscal year. First quarter revenues also included seasonal
fresh fruit sales for the Thanksgiving holiday. The Company continues to
experience intense competition in its efforts to develop initial private
label accounts and sales of concentrate and bulk frozen fruit.
Cost of sales for the first quarter of fiscal 1998 was $8.8
million compared to $4.7 million for the first quarter of fiscal 1997,
resulting in gross margins of 52.2% and 57.2%, in each respective period.
The decrease in gross margin in fiscal 1998 was primarily due to the
Company's changing product mix, with fiscal 1997 revenues more heavily
weighted toward higher margin fresh fruit sales as compared to the
majority of fiscal 1998 revenues being generated by the Company's branded
juice sales. The Company's gross margins during the remainder of fiscal
1998 will be dependent upon its product mix and existing market
conditions.
Selling, general and administrative expenses were $8.0 million,
or 43.4% of total revenues, for the three-month period ended November 30,
1997. For the three months ended November 30, 1996, selling, general and
administrative expenses were $3.0 million, or 27.2% of total revenues for
that quarter. This planned increase in selling, general and
administrative expenses was primarily attributable to costs related to the
Company's aggressive marketing campaign to support the development and
growth of its Northland branded 100% juice products. The Company plans to
continue to aggressively promote its juice products throughout the fiscal
year.
Interest expense was $1.4 million for the three-month period
ended November 30, 1997 compared to $795,000 during the same period in
fiscal 1997. 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.
As expected, fiscal 1998 first quarter net income and per share
earnings decreased to $102,000 and $0.01 per share respectively from
fiscal 1997 first quarter net income of $1.5 million, or $0.11 per share.
FINANCIAL CONDITION
Net cash used for operating activities was $8.7 million in the
first three months of fiscal 1998 compared to $6.5 million used for
operating activities in the same period in fiscal 1997. First quarter net
cash used for operating activities was the result of increases in current
assets and liabilities in the ordinary course of business during the
period. Accounts receivable increased $4.0 million as a result of
seasonal fresh fruit sales for the Thanksgiving holiday and increased
branded juice sales. Inventory increased $12.3 million due to the fall
harvest of the Company's crop, the purchase of 104,000 barrels of fruit
from other independent cranberry growers and increased raw materials and
finished goods inventories to support increased branded juice sales.
Accounts payable increased $6.0 million primarily due to contract
installment payments due independent cranberry growers for the purchase of
their fruit. Working capital increased $10.3 million to $38.5 million at
November 30, 1997 compared to working capital of $28.1 million at August
31, 1997.
Net cash used for investing activities decreased during the
three-month period ended November 30, 1997 to $2.6 million from $8.3
million during the same period in the prior fiscal year. The decrease was
principally the result of reduced property and equipment additions. First
quarter fiscal 1998 property and equipment additions were $2.6 million
compared to total property and equipment additions of $8.2 million in the
first quarter of the prior year. Fiscal 1997 first quarter property and
equipment additions included the $4.9 million acquisition of a 108-acre
cranberry property.
Net cash provided by financing activities was $11.4 million in
the three-month period ended November 30, 1997, compared to $14.7 million
during the same period in the prior fiscal year. The Company's debt
increased $12.1 million in the first quarter of fiscal 1998 primarily due
to financing a $10.3 million increase in seasonal and growth working
capital and $2.6 million for property and equipment additions. Working
capital was $38.5 million at November 30, 1997 compared to working capital
of $28.1 million at August 31, 1997. The Company's total debt (including
current portion) was $98.9 million at November 30, 1997 for a total debt-
to-equity ratio of 1.29 to 1 compared to total debt of $86.8 million and a
total debt-to-equity ratio of 1.13 to 1 at August 31, 1997. 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, 1997, the principal amount outstanding
under the Company's revolving credit facility was $60.8 million, with an
additional $14.2 million available under its credit facilities with a
syndicate of regional banks until December 2000. 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 1998.
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
registrant 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 13, 1998 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, 1997 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-31-1997
<PERIOD-START> SEP-01-1997
<PERIOD-END> NOV-30-1997
<CASH> 311
<SECURITIES> 1,260
<RECEIVABLES> 10,607
<ALLOWANCES> 0
<INVENTORY> 38,790
<CURRENT-ASSETS> 55,099
<PP&E> 164,413
<DEPRECIATION> 25,028
<TOTAL-ASSETS> 198,614
<CURRENT-LIABILITIES> 17,661
<BONDS> 95,084
0
0
<COMMON> 138
<OTHER-SE> 67,893
<TOTAL-LIABILITY-AND-EQUITY> 198,614
<SALES> 18,356
<TOTAL-REVENUES> 18,431
<CGS> 9,008
<TOTAL-COSTS> 9,242
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 1,432
<INCOME-PRETAX> 181
<INCOME-TAX> 79
<INCOME-CONTINUING> 102
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</TABLE>
