<PAGE> 1
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 April 3, 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 1-11420
SAVANNAH FOODS & INDUSTRIES, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
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
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 April 3, 1994, there were 26,238,196 shares of common stock of Savannah
Foods & Industries, Inc. outstanding.
Page 1 of 11 pages
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SAVANNAH FOODS & INDUSTRIES, INC.
INDEX
<TABLE>
<S> <C> <C>
Part I. FINANCIAL INFORMATION: Page
----
Item 1. Financial Statements:
Consolidated Balance Sheets at
April 3, 1994 and October 3, 1993 3
Consolidated Statements of Operations
for the 13 weeks ended April 3, 1994 and
April 4, 1993, the 26 weeks ended
April 3, 1994 and the 27 weeks ended
April 4, 1993 4
Consolidated Statements of Cash Flows
for the 26 weeks ended April 3, 1994
and the 27 weeks ended April 4, 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 4. Submission of Matters to a Vote
of Securities Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
Page 2 of 11 pages
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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)
<TABLE>
<CAPTION>
April 3, October 3,
1994 1993
-------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 9,435 $ 7,481
Accounts receivable 53,564 87,030
Inventories (net of LIFO reserve of $9,437
in 1994 and $9,011 in 1993) (Note 2) 212,014 145,639
Other current assets 16,436 29,840
-------- --------
Total current assets 291,449 269,990
Property, plant and equipment (net of accumulated
depreciation of $171,989 in 1994 and
$159,111 in 1993) 248,758 249,047
Other assets 45,991 48,815
-------- --------
$586,198 $567,852
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 32,900 $ 26,300
Current portion of long-term debt (Note 3) 2,031 2,421
Trade accounts payable 95,697 106,410
Income taxes accrued 929 -
Accrued expenses related to beet operations 23,494 -
Other liabilities and accrued expenses 20,074 19,629
-------- --------
Total current liabilities 175,125 154,760
-------- --------
Long-term debt (Note 3) 141,259 142,078
-------- --------
Deferred income taxes 3,574 3,951
-------- --------
Deferred employee benefits 74,697 72,349
-------- --------
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 206,677 210,491
Minimum pension liability adjustment (9,453) (9,453)
-------- --------
226,779 230,593
Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275
- Note receivable from employee stock
ownership trust 3,961 4,604
-------- --------
Total stockholders' equity 191,543 194,714
-------- --------
Commitments and contingencies (Note 7) - -
-------- --------
$586,198 $567,852
======== ========
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
Page 3 of 11 pages
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Savannah Foods & Industries, Inc.
Consolidated Statements of Operations
(In thousands of dollars except for per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
For the 26 For the 27
For the 13 Weeks Ended Weeks Ended Weeks Ended
---------------------- ----------- -----------
April 3, April 4, April 3, April 4,
1994 1993 1994 1993
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $247,005 $255,015 $527,191 $559,788
-------- -------- -------- --------
Operating expenses:
Cost of sales and
operating expenses 224,697 229,508 473,904 499,821
Selling, general and
administrative expenses 13,639 12,876 28,523 26,794
Depreciation and
amortization 7,056 6,555 14,834 12,321
-------- -------- -------- --------
245,392 248,939 517,261 538,936
-------- -------- -------- --------
Income from operations 1,613 6,076 9,930 20,852
-------- -------- -------- --------
Other income and expenses:
Interest and other
investment income 1,035 725 1,441 1,287
Interest expense (3,361) (3,438) (6,751) (6,330)
Other 158 744 240 1,639
-------- -------- -------- --------
(2,168) (1,969) (5,070) (3,404)
-------- -------- -------- --------
Income (loss) before income
taxes and change in
accounting principle (555) 4,107 4,860 17,448
(Provision for) benefit from
income taxes (Note 4) 284 (1,453) (1,590) (5,178)
-------- -------- -------- --------
Income (loss) before change
in accounting principle (271) 2,654 3,270 12,270
Cumulative effect of
change in accounting
principle (Note 5) - - - 600
-------- -------- -------- --------
Net income (loss) $ (271) $ 2,654 $ 3,270 $ 12,870
======== ======== ======== ========
Income (loss) per
weighted average share
outstanding (Note 6):
Income (loss) before
change in accounting
principle ($ .01) $ .10 $ .12 $ .47
Cumulative effect of
change in
accounting principle - - - .02
-------- -------- -------- --------
Net income (loss) ($ .01) $ .10 $ .12 $ .49
======== ======== ======== ========
Dividends $ .135 $ .135 $ .27 $ .27
======== ======== ======== ========
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
Page 4 of 11 pages
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Savannah Foods & Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the 26 For the 27
Weeks Ended Weeks Ended
----------- -----------
April 3, April 4,
1994 1993
----------- -----------
(In thousands of dollars)
<S> <C> <C>
Cash flows from operations:
Net income $ 3,270 $12,870
Adjustments to reconcile net income to net
cash provided by operations -
Depreciation and amortization 14,834 12,396
Cumulative effect of change in
accounting principle - (600)
Provision for deferred income taxes (9,230) (6,088)
Other - 205
Working capital changes affecting cash
provided by operations -
Accounts receivable 33,066 14,787
Inventories (66,375) (79,678)
Other current assets 22,634 (13,048)
Trade accounts payable (10,713) 9,955
Income taxes accrued 929 (48)
Accrued expenses related to beet operations 23,494 17,784
Other liabilities and accrued expenses 1,488 (3,093)
------- -------
Cash provided by (used for) operations 13,397 (34,558)
------- -------
Cash flows from investing activities:
Additions to property, plant and
equipment (13,193) (20,878)
Decrease in investments of unexpended IDB
funds included in other assets 3,743 -
Acquisition of long-term investments - (5,457)
Other (343) (471)
------- -------
Cash used for investing activities (9,793) (26,806)
------- -------
Cash flows from financing activities:
Increase in short-term borrowings 6,600 51,400
Increase in long-term debt - 70,300
Payments on long-term debt (1,209) (50,912)
Dividends paid to stockholders (7,084) (10,504)
Treasury stock repurchases - (977)
Other 43 849
------- -------
Cash provided by (used for) financing activities (1,650) 60,156
------- -------
Cash flows for period 1,954 (1,208)
Cash and cash equivalents, beginning of
period 7,481 9,897
------- -------
Cash and cash equivalents, end of
period $ 9,435 $ 8,689
======= =======
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
Page 5 of 11 pages
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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:
<TABLE>
<CAPTION>
April 3, October 3,
1994 1993
---------- ----------
(In thousands of dollars)
<S> <C> <C>
Raw materials and work-in-process.......... $ 80,811 $ 76,802
Packaging materials, parts and supplies.... 24,133 26,002
Finished goods............................. 107,171 42,835
Costs related to future
inventory purchases...................... (101) -
-------- --------
$212,014 $145,639
======== ========
</TABLE>
(3) Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
April 3, October 3,
1994 1993
---------- ----------
(In thousands of dollars)
<S> <C> <C>
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%................... 7,061 7,808
Other long-term debt....................... 2,729 3,191
-------- --------
143,290 144,499
Less - Current portion..................... (2,031) (2,421)
-------- --------
$141,259 $142,078
======== ========
</TABLE>
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%. The Company has also entered into an interest
rate swap agreement on a principal amount of $50,000,000 whereby the
Company receives a fixed rate and pays the counter-parties a floating rate
based on 6-month LIBOR. The remaining maturity on this swap is
approximately 1 1/2 years. The purpose of this transaction was to achieve
a lower
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effective interest rate on the Company's senior notes. Cash interest
payments during the first six months of fiscal 1994 and 1993 amounted to
$6,671,000 and $4,296,000, respectively.
(4) Cash tax payments during the first six months of fiscal 1994 and 1993
amounted to $6,376,000 and $11,743,000 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 and the 26 weeks ended
April 3, 1994. Earnings per share for fiscal 1993 are based on weighted
average outstanding shares of 26,238,196 for the 13 weeks ended April 4,
1993 and 26,251,933 for the 27 weeks then ended.
(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.
Page 7 of 11 pages
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S
FINANCIAL POSITION AND RESULTS OF OPERATIONS - APRIL 3, 1994
FINANCIAL POSITION:
Stockholders' equity decreased during the first six months of fiscal
1994 from $194,714,000 to $191,543,000. Equity decreased as a result of
earnings of $3,270,000 offset by dividends of $7,084,000 and increased by a
$643,000 reduction of the note receivable from the employee stock ownership
trust. Long-term debt decreased since year-end by $819,000 due to principal
repayments. Cash and cash equivalents increased $1,954,000 for the first six
months of this year compared to a decrease of cash and cash equivalents of
$1,208,000 for the related period last year. Non-cash working capital decreased
$860,000 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 income taxes accrued and other
accrued expenses, and a decrease in accounts receivable.
The Company's investment in working capital at the end of the second
quarter of fiscal 1994 is 13% lower than at the end of the second quarter in the
prior fiscal year. This reduction is the result of an aggressive program aimed
at minimizing the Company's investment in working capital. Inventories at the
cane refineries are down 10% from the same period last year. Inventories at all
other subsidiaries increased, largely as a result of the acquisition of King
Packaging Company in July, 1993.
At the end of the second quarter, the Company had $145,000,000 in
revolving credit facilities of which $20,000,000 was outstanding as long-term
debt and $32,900,000 was outstanding for working capital requirements and
included in short-term borrowings. The remaining available balance of
$92,100,000 is intended to meet working capital requirements. These facilities
are committed until September, 1996, with an option to extend the agreement
through September, 1998.
Fixed asset additions during the first six months of 1994 were
$13,193,000. Of this amount, the Company spent $8,221,000 at the cane
refineries and raw sugar mill including expenditures for improvements in process
equipment, storage facilities, and computer systems; $2,399,000 on projects at
the beet refineries and the beet molasses desugarization facility; and
$2,573,000 at the Foodservice facilities. Total fixed asset additions in fiscal
1994 are expected to approximate $20,000,000 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 six months of fiscal 1994 was $3,270,000, or
$.12 per share, compared to $12,870,000, or $.49 per share, for the first six
months of fiscal 1993. Net income (loss) for the second quarter of fiscal 1994
was ($271,000), or ($.01) per share compared to $2,654,000 or $.10 per share for
the second quarter of fiscal 1993. Income before change in accounting principle
for the first six months of fiscal 1993 was $12,270,000, or $.47 per share.
Results of operations for the first six months of fiscal 1993 reflect the
cumulative effect of change in accounting principle of $600,000 for the
adoption of Statement of Financial Accounting Standards No. 109 - Accounting
for Income Taxes.
Page 8 of 11 pages
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Net sales for the first six months of fiscal 1994 were $527,191,000
compared to $559,788,000 for the same period of fiscal 1993. Sales dollars were
down 6% for the first six months of fiscal 1994 compared to the same period of
fiscal 1993 and were down 3% in the second quarter of fiscal 1994 compared to
the same quarter of fiscal 1993. The main reason for the sales decrease was
lower average sugar sales prices. Refined sugar sales volumes were nearly equal
to prior year levels in the second quarter.
Operating earnings for the six months of fiscal 1994 were lower than in
fiscal 1993 in all operations except for Raceland Sugars, which was flat.
Compared to the second quarter of fiscal 1993, average sugar sales prices
decreased 4% and raw sugar prices increased 4% causing the loss in this quarter.
The principal reason for the large decline in earnings was several years
of large or record national beet sugar crops. The effect of this much
additional refined sugar on the market last year was refined beet sugar selling
at approximately the same price as raw cane sugar. Much of this sugar was
contracted forward into this year, so last year's low levels are continuing to
impact profitability negatively, particularly at the cane refineries.
Last year, marketing allocations were imposed in the third calendar
quarter. This reduced the supply of beet sugar, and spot refined prices rose.
However, marketing allocations were not continued in the fourth calendar
quarter, so the excess beet sugar rolled into this year and has been depressing
prices this year and, thus, profits. If this continues, we feel that several
beet sugar companies may forfeit sugar under government loan. Congress, in the
1990 Farm Bill, mandated that the U.S. Department of Agriculture (USDA) run a
no-cost sugar support program. In order to do this, it is likely that the USDA
will have to impose marketing allotments in order to raise the price enough to
avoid forfeitures, thus returning sugar prices to more normal levels.
Michigan Sugar completed an excellent processing campaign in Michigan in
fiscal 1994, but the Great Lakes facility in Ohio had a very short processing
campaign because a drought caused the crop to be sharply lower than in prior
years. Profits at Michigan Sugar are down 29% in the first six months of this
year from last year because of lower sugar prices, lower by-product prices, and
lower profits at Great Lakes.
Dixie Crystals(R) Foodservice had a good quarter in several respects,
but it reported 32% lower profits in the first six months of this year from last
year because of lower sugar sales prices and higher sugar cost. However,
manufacturing costs decreased as a result of a cost reduction program, and King
Packaging reported strong profits for the quarter.
Selling, general and administrative expenses increased 6% in the first
half of 1994 compared to the prior year partially because the prior year
expenses were offset by the proceeds of 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 in
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<PAGE> 10
full production at that time. Sugar supply is therefore high while sugar
consumption is at a seasonal low. Coupled with the increasing size of the beet
sugar crops, this activity has negatively impacted profits. If the USDA is
required to impose marketing restrictions, as anticipated, the outlook for the
remaining quarters is for improved profitability as sugar prices return to more
normal levels.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the Annual Meeting of Stockholders held on February 17, 1994 in
Savannah, Georgia, 23,172,072 shares, representing 88.31% of the 26,238,196
total eligible shares outstanding, were voted in person or by proxy. The
Directors proposed in the proxy material were elected to serve three-year terms
by the vote shown below:
<TABLE>
<CAPTION>
Outstanding Shares Voted For Abstain
---------------------------- -------------------------
Number % of Eligible Number % of Eligible
of Votes Votes of Votes Votes
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
Lee B. Durham, Jr. 23,008,728 87.69 163,344 .62
George Fawcett 22,992,515 87.63 179,557 .68
Ernest Flegenheimer 22,993,811 87.63 178,261 .68
Robert L. Harrison 22,973,944 87.56 198,128 .76
</TABLE>
Other Directors whose term of office continued after the meeting were
Dale C. Critz, Arthur M. Gignilliat, Jr., William W. Sprague, Jr., Arnold
Tenenbaum, W. Waldo Bradley, John D. Carswell, F. Sprague Exley, William W.
Sprague, III, and Hugh M. Tarbutton.
The appointment of Price Waterhouse as independent public accountants
was approved. The vote was as follows:
<TABLE>
<CAPTION>
Outstanding Shares Voted For Against Abstain
---------------------------- ----------------------- -----------------------
Number % of Eligible Number % of Eligible Number % of Eligible
of Votes Votes of Votes Votes of Votes Votes
-------- ------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
22,107,006 84.26 986,679 3.76 78,387 .30
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits, not applicable.
(b) Reports on Form 8-K, not applicable.
Page 10 of 11 pages
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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.
SAVANNAH FOODS & INDUSTRIES, INC.
BY: /S/ John M. Tatum
-----------------------------
JOHN M. TATUM
DATE: MAY 16, 1994 SECRETARY
BY: /S/ W. R. Steinhauer
-----------------------------
W. R. STEINHAUER
SENIOR VICE PRESIDENT -
DATE: MAY 12, 1994 FINANCE & ADMINISTRATION
Page 11 of 11 pages
