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, 1998
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.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1583759
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(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
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(Address of principal executive offices)
Registrant's telephone number, including area code (715)-424-4444
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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, 1998 19,123,484
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Class B Common Stock December 31, 1998 636,202
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<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 Flows................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
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
November 30, August 31,
1998 1998
--------------- ---------------
Current assets:
Cash and cash equivalents $ 811 $ 633
Accounts and notes receivable 20,881 22,422
Inventories 70,782 43,811
Other 3,094 1,942
Deferred income taxes 2,490 2,490
--------------- ----------------
Total current assets 98,058 71,298
--------------- ----------------
Property and equipment - at cost 184,036 181,994
Less accumulated depreciation 31,549 29,795
--------------- ----------------
Net property and equipment 152,487 152,199
Investments and other assets 2,448 2,151
Goodwill 25,128 25,224
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Total assets $ 278,121 $ 250,872
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,787 $ 9,995
Accrued liabilities 16,384 7,924
Current portion of long-term
obligations 3,892 3,892
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Total current liabilities 35,063 21,811
Long-term obligations 78,642 64,276
Deferred income taxes 10,958 10,915
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Total liabilities 124,663 97,002
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Shareholders' equity:
Common stock - Class A 191 191
Common stock - Class B 6 6
Additional paid-in capital 144,732 144,477
Retained earnings 8,529 9,196
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Total shareholders' equity 153,458 153,870
--------------- ----------------
Total liabilities and shareholders' equity $ 278,121 $ 250,872
=============== ================
See accompanying notes to condensed consolidated financial statements
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<PAGE>
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
For the 3 months
ended November 30,
1998 1997
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Revenues $ 34,236 $ 18,431
Cost of sales 20,357 8,814
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Gross profit 13,879 9,617
Costs and expenses:
Selling, general and administrative 12,364 8,004
Interest 1,303 1,432
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Total costs and expenses 13,667 9,436
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Income before income taxes 212 181
Income taxes 92 79
--------------- ----------------
Net income $ 120 $ 102
=============== ================
Basic income per share $ 0.01 $ 0.01
=============== ================
Diluted income per share $ 0.01 $ 0.01
=============== ================
See accompanying notes to condensed consolidated financial statements
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<PAGE>
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
For the 3 months
ended November 30,
1998 1997
-------- ---------
Cash flows from operating activities:
Net income $ 120 $ 102
Adjustments to reconcile net income to net cash
provided by (used for)operating activities:
Depreciation and amortization 1,991 1,542
Changes in assets and liabilities:
Receivables and other current assets 389 (4,023)
Inventories (26,971) (12,336)
Accounts payable and accrued liabilities 13,252 5,966
Deferred income taxes 84 58
-------- --------
Net cash used for operating
activities (11,135) (8,691)
-------- --------
Investing activities:
Property and equipment additions, net (2,177) (2,555)
Other (303) (80)
-------- --------
Net cash used for investing
activities (2,480) (2,635)
-------- --------
Financing activities:
Increase in debt 14,366 12,104
Dividends paid (787) (551)
Exercise of stock options 214 3
Other 0 (150)
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Net cash provided by financing
activities 13,793 11,406
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Net decrease in cash and cash equivalents 178 80
Cash and cash equivalents:
Beginning of period 633 231
-------- --------
End of period $ 811 $ 311
======== ========
Supplemental disclosures of cash flow
information:
Cash paid for:
Interest (net of amount capitalized) $ 827 $ 997
======== ========
See accompanying notes to condensed consolidated financial statements
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<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, 1998, and its results of
operations and cash flows for the three-month periods ended November 30, 1998
and 1997, respectively. The Company's consolidated balance sheet as of August
31, 1998 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 consolidated
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 ACQUISITIONS
On December 30, 1998, the Company completed the acquisition of the juice
division of Seneca Foods Corporation. The purchase included bottling and
packaging facilities located in New York, North Carolina and Wisconsin;
warehousing in Michigan; and a grape receiving station in New York. The purchase
price for the acquisition was approximately $28.3 million in cash and is subject
to subsequent adjustment based on the value of "net assets" purchased.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Our total revenues for the three months ended November 30, 1998 were
$34.2 million, compared to $18.4 million in the prior year's quarter. This 85.9%
increase was primarily due to private label sales generated by our recently
acquired subsidiary, Minot Food Packers, Inc., and the continuing growth of
Northland brand 100% juice products. Trade industry data for the 12-week period
ended December 6, 1998, shows that our juice products achieved an 12.6% market
share of supermarket shelf-stable cranberry beverages on a national basis, up
from a 8.6% market share for the same period last year. We anticipate that the
Seneca acquisition will also help increase revenues in fiscal 1999. We continue
to experience intense competition in our efforts to develop private label
accounts and sales of concentrate and bulk frozen fruit.
Cost of sales for the first quarter of fiscal 1999 was $20.4 million
compared to $8.8 million for the first quarter of fiscal 1998, resulting in
gross margins of 40.5% and 52.2% in each respective period. The decrease in
gross margin in fiscal 1999 was primarily due to our changing product mix.
Fiscal 1999 revenues included a significant amount of lower margin private label
sales due to the acquisition of Minot Food Packers, Inc. compared to minimal
private label sales in fiscal 1998. Our gross margins during the remainder of
fiscal 1999 will be dependent upon our product mix and existing market
conditions.
Selling, general and administrative expenses were $12.4 million, or 36.1%
of total revenues, for the three-month period ended November 30, 1998. For the
three months ended November 30, 1997, selling, general and administrative
expenses were $8.0 million, or 43.4% 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 brand 100% juice products.
We plan to continue to aggressively promote our juice products throughout the
fiscal year. We also anticipate that selling, general and administrative
expenses will increase in fiscal 1999 as a result of the addition of new branded
products through the Seneca acquisition.
Interest expense was $1.3 million for the three-month period ended
November 30, 1998 compared to $1.4 million during the same period in fiscal
1998. Interest expense will increase in subsequent quarters as a result of
additional borrowings necessary to fund the purchase price for the Seneca
acquisition. Fiscal 1999 first quarter net income and per share earnings were
$120,000 and $0.01 per share, respectively, compared to fiscal 1998 first
quarter net income of $102,000, or $0.01 per share.
FINANCIAL CONDITION
Net cash used for operating activities was $11.1 million in the first
three months of fiscal 1999 compared to $8.7 million used for operating
activities in the same period in fiscal 1998. 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. Inventory
increased $27.0 million due to the fall harvest of the Company's crop, the
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANAL
CONDITION AND RESULTS OF OPERATIONS (CONT.)
purchase of 190,000 barrels of raw cranberries from other independent cranberry
growers and increased raw materials and finished goods inventories to support
increased branded juice sales. Accounts payable increased $13.3 million
primarily due to contract installment payments due independant cranberry growers
for the purchase of their raw cranberries. Working capital increased $13.5
million to $63.0 million at November 30, 1998 compared to working capital of
$49.5 million at August 31, 1998.
Net cash used for investing activities decreased during the three-month
period ended November 30, 1998 to $2.5 million from $2.6 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 1999 property and
equipment additions were $2.2 million compared to total property and equipment
additions of $2.6 million in the first quarter of the prior year.
Net cash provided by financing activities was $13.8 million in the
three-month period ended November 30, 1998, compared to $11.4 million during the
same period in the prior fiscal year. Our debt increased $14.4 million in the
first quarter of fiscal 1999 primarily due to financing a $13.5 million increase
in seasonal and growth working capital and $2.2 million for property and
equipment additions. Working capital was $63.0 million at November 30, 1998
compared to working capital of $38.5 million at August 31, 1998. Our total debt
(including current portion) was $82.5 million at November 30, 1998 for a total
debt-to-equity ratio of 0.54 to 1 compared to total debt of $68.2 million and a
total debt-to-equity ratio of 0.44 to 1 at August 31, 1998. We utilize our
revolving bank credit facility, together with cash generated from operations, to
fund our working capital requirements throughout the fiscal year, and we are
currently negotiating to obtain a new credit facility. As of November 30, 1998,
the principal amount outstanding under our revolving credit facility was $48.3
million, with an additional $46.7 million available under our credit facilities
with a syndicate of regional banks until December 2000. We believe our credit
facilities, together with cash generated from operations, are sufficient to fund
our ongoing operational needs over the remainder of fiscal 1999.
On December 30, 1998, we completed the acquisition of the juice division
of Seneca Foods Corporation. The purchase included bottling and packaging
facilities located in New York, North Carolina and Wisconsin; warehousing in
Michigan; and a grape receiving station in New York. The purchase price for the
acquisition was approximately $28.3 million in cash, subject to adjustment based
on the final value of the "net assets" we acquired. The purchase price was
borrowed under our revolving credit facility. Any adjustment to the purchase
price will also be borrowed under our revolver.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANAL
CONDITION AND RESULTS OF OPERATIONS (CONT.)
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this 10-Q are "forward-looking statements,"
including statements about the Company's future plans, goals and other events
which have not yet occurred. These statements are intended to qualify for the
safe harbors from liability provided by the Private Securities Litigation Reform
Act of 1995. They can generally be identified because the context of such
statements will include words such as "believes," "anticipates," "expects" or
words of similar import. Whether or not these forward-looking statements will be
accurate in the future will depend on certain risks and factors including risks
associated with (i) development, market share growth and continued consumer
acceptance of the Company's branded juice products; (ii) integration of the
operations of Minot Food Packers, Inc., acquired in fiscal 1998, and the juice
division of Seneca Foods Corporation, acquired in fiscal 1999; (iii) strategic
actions of Northland's competitors in pricing, marketing and advertising; (iv)
risks associated with the turning of the year 2000; and (v) agricultural factors
affecting Northland's crop. Readers should consider these risks and factors and
the impact they may have when evaluating these forward-looking statements. These
statements are based only on management's knowledge and expectations on the date
of this Form 10-Q. The Company will not necessarily update these statements or
other information in this Form 10-Q based on future events or circumstances.
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<PAGE>
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. The Company filed a Form 8-K, dated
December 30, 1998, relating to its acquisition of the juice division of Seneca
Foods Corporation, on January 13, 1999.
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<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 13, 1999 By: /s/ John Pazurek
----------------------------
John Pazurek
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
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<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, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1998
<PERIOD-END> NOV-30-1998
<CASH> 811
<SECURITIES> 0
<RECEIVABLES> 20,881
<ALLOWANCES> 0
<INVENTORY> 70,782
<CURRENT-ASSETS> 98,058
<PP&E> 184,036
<DEPRECIATION> 31,549
<TOTAL-ASSETS> 278,121
<CURRENT-LIABILITIES> 35,063
<BONDS> 78,642
0
0
<COMMON> 197
<OTHER-SE> 144,732
<TOTAL-LIABILITY-AND-EQUITY> 278,121
<SALES> 33,832
<TOTAL-REVENUES> 34,236
<CGS> 20,357
<TOTAL-COSTS> 13,667
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,303
<INCOME-PRETAX> 212
<INCOME-TAX> 92
<INCOME-CONTINUING> 120
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
