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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended January 2, 1994
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 0-5002
SAVANNAH FOODS & INDUSTRIES, INC.
(Exact name of Registrant as specified in its Charter)
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Delaware 58-1089367
- ------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 339, Savannah, Georgia 31402
- ---------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (912) 234-1261
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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
------ ------
As of January 2, 1994, there were 26,238,196 shares of common stock of Savannah
Foods & Industries, Inc. outstanding.
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SAVANNAH FOODS & INDUSTRIES, INC.
INDEX
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Part I. FINANCIAL INFORMATION: Page
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Item 1. Financial Statements:
Consolidated Balance Sheets at
January 2, 1994 and October 3, 1993 3
Consolidated Statements of Operations
for the 13 weeks ended January 2, 1994
and the 14 weeks ended January 3, 1993 4
Consolidated Statements of Cash Flows
for the 13 weeks ended January 2, 1994
and the 14 weeks ended January 3, 1993 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of the Company's Financial Position
and Results of Operations 8
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Savannah Foods & Industries, Inc.
Consolidated Balance Sheets
(In thousands except for shares and per share amounts)
(Unaudited)
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January 2, October 3,
1994 1993
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Assets
- ------
Current assets:
Cash and cash equivalents $ 8,064 $ 7,481
Accounts receivable 51,296 87,030
Inventories (net of LIFO reserve of $9,496
in 1994 and $9,011 in 1993) (Note 2) 229,239 145,639
Other current assets 31,903 29,840
-------- --------
Total current assets 320,502 269,990
Property, plant and equipment (net of accumulated
depreciation of $166,047 in 1994 and
$159,111 in 1993) 247,441 249,047
Other assets 48,223 48,815
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$616,166 $567,852
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Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings $ 51,400 $ 26,300
Current portion of long-term debt (Note 3) 2,239 2,421
Trade accounts payable 99,810 106,410
Income taxes accrued 6,877 -
Accrued expenses related to beet operations 21,125 -
Other liabilities and accrued expenses 20,477 19,629
-------- --------
Total current liabilities 201,928 154,760
-------- --------
Long-term debt (Note 3) 141,459 142,078
-------- --------
Deferred income taxes 3,774 3,951
-------- --------
Deferred employee benefits 74,242 72,349
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Stockholders' equity:
Common stock $.25 par value; $.55 stated value;
64,000,000 shares authorized; 31,306,800 shares
issued 17,365 17,365
Capital in excess of stated value 12,190 12,190
Retained earnings 210,490 210,491
Minimum pension liability adjustment (9,453) (9,453)
-------- --------
230,592 230,593
Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275
- Note receivable from employee stock
ownership trust 4,554 4,604
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Total stockholders' equity 194,763 194,714
-------- --------
Commitments and contingencies (Note 7) - -
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$616,166 $567,852
======== ========
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(The accompanying notes are an integral part of the financial statements.)
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Savannah Foods & Industries, Inc.
Consolidated Statements of Operations
(In thousands of dollars except for per share amounts)
(Unaudited)
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For the 13 For the 14
Weeks Ended Weeks Ended
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January 2, January 3,
1994 1993
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Net sales $280,186 $304,773
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Operating expenses:
Cost of sales and
operating expenses 249,207 270,313
Selling, general and
administrative expenses 14,884 13,918
Depreciation and
amortization 7,778 5,766
-------- --------
271,869 289,997
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Income from operations 8,317 14,776
-------- --------
Other income and expenses:
Interest and other
investment income 406 562
Interest expense (3,390) (2,892)
Other 82 895
-------- --------
(2,902) (1,435)
-------- --------
Income before income
taxes and change in
accounting principle 5,415 13,341
Provision for income
taxes (Note 4) (1,874) (3,725)
-------- --------
Income before change in
accounting principle 3,541 9,616
Cumulative effect of
change in accounting
principle (Note 5) - 600
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Net income (loss) $ 3,541 $ 10,216
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Income per weighted
average share
outstanding (Note 6):
Income before change
in accounting
principle $ .13 $ .37
Cumulative effect of
change in
accounting principle - .02
-------- --------
Net income $ .13 $ .39
-------- --------
Dividends $ .135 $ .135
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(The accompanying notes are an integral part of the financial statements.)
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Savannah Foods & Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
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For the 13 For the 14
Weeks Ended Weeks Ended
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January 2, January 3,
1994 1993
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(In thousands of dollars)
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Cash flows from operations:
Net income $ 3,541 $ 10,216
Charges to income not affecting
operating cash flows -
Depreciation and amortization 7,778 5,766
Cumulative effect of change in
accounting principle - (600)
Provision for deferred income taxes (9,176) (9,064)
Other 50 (145)
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Cash provided by operations
before working capital changes 2,193 6,173
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Working capital changes affecting cash
provided by operations -
Accounts receivable 35,734 12,632
Inventories (83,600) (131,622)
Other current assets 7,113 (10,205)
Trade accounts payable (6,600) 62,363
Income taxes accrued 6,877 12,469
Accrued expenses related to beet operations 21,125 23,400
Other liabilities and accrued expenses 848 (1,204)
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(18,503) (32,167)
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Cash used for operations (16,310) (25,994)
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Cash flows from investing activities:
Additions to property, plant and
equipment (5,563) (13,277)
Other 1,650 (3,061)
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Cash used for investing activities (3,913) (16,338)
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Cash flows from financing activities:
Increase in short-term borrowings 25,100 28,000
Increase in long-term debt - 70,300
Payments on long-term debt (801) (50,706)
Dividends paid to stockholders (3,542) (6,962)
Treasury stock repurchases - (977)
Other 49 759
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Cash provided by financing activities 20,806 40,414
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Cash flows for period 583 (1,918)
Cash and cash equivalents, beginning of
period 7,481 9,897
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Cash and cash equivalents, end of
period $ 8,064 $ 7,979
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(The accompanying notes are an integral part of the financial statements.)
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Savannah Foods & Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(1) The information furnished reflects all adjustments
(consisting of only normal recurring accruals) which are, in
the opinion of Management, necessary for a fair statement of
the results for the interim periods. See Note 5 for
discussion of the effect of a change in accounting principle
reflected in the accompanying interim financial statements.
These consolidated financial statements should be read in
conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on
Form 10-K.
(2) A summary of inventories by class is as follows:
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January 2, October 3,
1994 1993
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(In thousands of dollars)
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Raw materials and work-in-process.......... $ 94,984 $ 76,802
Packaging materials, parts and supplies.... 24,776 26,002
Finished goods............................. 109,436 42,835
Costs related to future
inventory purchases...................... 43 -
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$229,239 $145,639
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(3) Long-term debt is summarized as follows:
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January 2, October 3,
1994 1993
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(In thousands of dollars)
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Senior notes - $50,000,000 Series A at
8.35% and $20,000,000 Series B at
7.15% with final maturity 2002........... $ 70,000 $ 70,000
Long-term debt supported by revolving
credit facilities with banks............. 20,000 20,000
Notes payable to bank from 1996 to 1998
related to ESOP trust with interest at
85% or 86% of LIBOR...................... 15,500 15,500
Variable rate industrial revenue bonds..... 28,000 28,000
Present value of non-compete agreements
related to the purchase of King
Packaging, payable monthly from 1993 to
1998, discounted at 5%................... 7,234 7,808
Other long-term debt....................... 2,964 3,191
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143,698 144,499
Less - Current portion..................... (2,239) (2,421)
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$141,459 $142,078
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The Company has entered into "Interest Rate Exchange Agreements," more commonly
called "interest rate swaps," which fixed the rate on $50,000,000 of the
Company's debt for a period of approximately three years at an average fixed
rate of 8.57%. However, in order to take advantage of the current low
short-term interest rate environment, during the first quarter of fiscal 1993,
the Company entered into an interest rate swap agreement on a principal amount
of $50,000,000 whereby the Company will receive a fixed
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rate of 4.54% and pay the counter-parties based on 6-month LIBOR which is
currently 3.375%. Cash interest payments during the first three months of
fiscal 1994 and 1993 amounted to $4,573,000 and $1,933,000, respectively.
(4) Cash tax payments during the first three months of fiscal
1994 and 1993 amounted to $186,000 and $577,000,
respectively.
(5) Change in accounting principle:
The Company prospectively adopted Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes
(FAS 109) effective September 28, 1992, the first day of
the fiscal year ended October 3, 1993. The cumulative
effect of this accounting change was a credit to net
income of $600,000.
(6) Earnings per share for fiscal 1994 are based on weighted
average outstanding shares of 26,238,196 for the 13 weeks
ended January 2, 1994. Earnings per share for fiscal 1993
are based on weighted average outstanding shares of
26,264,689 for the 14 weeks ended January 3, 1993.
(7) Commitments and Contingencies:
The Company has contracted for the purchase of a
substantial portion of its future raw sugar requirements.
Prices to be paid for raw sugar under these contracts are
based in some cases on market prices during the
anticipated delivery month. In other cases prices are
fixed and, in these instances, the Company generally
obtains commitments from its customers to buy the sugar
prior to fixing the price, or enters into futures
transactions to hedge the commitment.
In May 1992, the United States Customs Service (Customs)
issued a bill to the Company for approximately $7,500,000
seeking reimbursement for certain drawback claims filed by
the Company with customs during the period 1984 through
1988. Customs has alleged that drawback claims prepared
by the Company for certain export shipments of sugar
during these years are technically and/or substantively
deficient, and that the Company therefore is not entitled
to monies previously received under these drawback claims.
The Company disputes Customs' findings and intends to
vigorously protest the decision of Customs. While it is
not certain how long the protest (administrative appeal)
process will take, based upon the facts known to the
Company at this time, the ultimate resolution of this
matter is not expected to have a materially adverse effect
on the Company's financial position or results of
operations.
In July of 1991, National Utility Service, Inc. (NUS)
filed a complaint against the Company in the United States
District Court for the District of New Jersey seeking
compensation and damages arising from a contract between
the Company and NUS for energy cost saving
recommendations. Discovery in this case has been
completed, and based upon the information obtained, the
Company has determined that NUS is seeking approximately
$4,000,000 inclusive of prejudgment interest from the
Company. The Company intends to defend the action
vigorously and strongly contends that no amounts are due
to NUS.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S
FINANCIAL POSITION AND RESULTS OF OPERATIONS - JULY 4, 1993
FINANCIAL POSITION:
Stockholders' equity increased during the first three
months of fiscal 1994 from $194,714,000 to $194,763,000. Equity increased as a
result of earnings of $3,541,000 offset by dividends of $3,542,000 and
increased by a $50,000 reduction of the note receivable from the employee stock
ownership trust. Long-term debt decreased since year-end by $619,000 due to
principal repayments. Cash and cash equivalents increased $583,000 and
non-cash working capital increased $16,310,000 since year-end. Cash was used
primarily for capital improvements and payment of dividends. Changes in
working capital include an increase in inventory levels partially offset by
increases in short term notes payable and accrued expenses related to beet
operations.
At the end of the first quarter, the Company had
$145,000,000 in revolving credit facilities of which $20,000,000 was
outstanding as long-term debt and $51,400,000 was outstanding for working
capital requirements and included in short-term borrowing. The remaining
available balance of $73,600,000 is intended to meet working capital
requirements or other short-term borrowing requirements. The revolving credit
facility is committed until September, 1996, with an option to extend to
September, 1998.
Fixed asset additions during the first three months of
1994 were $5,563,000. Of this amount, the Company spent $3,583,000 at the cane
refineries and raw sugar mill including expenditures for improvements in
process equipment, storage facilities, and computer systems; $673,000 on
projects at the beet refineries and the beet molasses desugarization facility;
and $1,229,000 at the Foodservice facilities. Total fixed asset additions in
fiscal 1994 are expected to approximate $26,000,000 with expenditures being
concentrated on cost saving or expansion projects which are expected to benefit
the Company through increased efficiency and expanded operational capabilities.
RESULTS OF OPERATIONS:
Net income for the first three months of fiscal 1994 was
$3,541,000, or $.13 per share, compared to $10,216,000, or $.39 per share, for
the first three months of fiscal 1993. Results of operations for the first
three months of fiscal 1993 reflect the cumulative effect of a change in
accounting principle of $600,000 for the adoption of Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes (FAS 109).
Net sales for the first three months of fiscal 1994 were
$280,186,000 compared to $304,773,000 for the same period of 1993. Sales
dollars were down 8% for the first three months of fiscal 1994 compared to the
same period of 1993. The main reason for the sales decrease was that fiscal
1993 was a 53 week year, with the extra week falling in October of 1992. This
was partially offset by increased raw sugar sales by Raceland Sugars during the
first three months of fiscal 1994. Refined sugar sales volumes and prices were
nearly equal to prior year levels in the first quarter.
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Operating earnings for the three months of fiscal 1994
were lower than in fiscal 1993 in all of our operations except Raceland Sugars,
which was approximately equal to the same quarter in fiscal 1993.
Operating income at the cane refineries is down largely
due to a $.60 per hundredweight increase in average raw sugar prices in the
first quarter of fiscal 1994 versus the first quarter of fiscal 1993, while
sales prices were roughly the same in both periods.
Michigan Sugar operating income is down from fiscal 1993
with increases in production and sales being offset by a reduction in sugar and
by-product sales prices. The price reduction in sugar is largely a result of
deliveries against contracts made earlier in the calendar year when pricing was
pushed downward due to the oversupply of beet sugar which caused the
implementation of marketing allotments.
Dixie Crystals Foodservice reported a 4% increase in
weekly sales volume, which was more than offset by intense competitive pressure
on margins, resulting in lower operating profit in 1994 than in 1993.
Operating income at Raceland Sugars was approximately
equal in the first quarter of 1994 versus 1993. Although Raceland was expected
to improve significantly over last year, sugar content in the cane was lower
than anticipated due to insufficient rain in July and August, resulting in
earnings remaining flat when compared to last year.
Selling, general and administrative expenses increased in
the first quarter of 1994 compared to the prior year primarily because the
prior year expenses were offset by the proceeds from a company owned life
insurance policy.
Competitive conditions in the first several months of
every calendar year are always intense because the beet sugar industry is
producing heavily. Sugar supply is therefore high while sugar consumption is
at a seasonal low. It has been intensified this year by significant
competitive activity among the cane sugar refiners. This activity is going to
adversely affect the second quarter of fiscal 1994. Although we believe that
the last two quarters will report higher income than in 1993, the outlook for
the full year is for earnings to be lower than in 1993.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits, not applicable.
(b) Reports on Form 8-K, not applicable.
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SIGNATURES
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 thereunto duly authorized.
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SAVANNAH FOODS & INDUSTRIES, INC.
BY: /S/John M. Tatum
---------------------------
JOHN M. TATUM
DATE: FEBRUARY 14, 1994 SECRETARY
BY: /S/W. R. Steinhauer
---------------------------
W. R. STEINHAUER
SENIOR VICE PRESIDENT -
DATE: FEBRUARY 14, 1994 FINANCE & ADMINISTRATION
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