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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 1, 1995
-------------------
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
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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
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(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 January 1, 1995, there were 26,238,196 shares of common stock of Savannah
Foods & Industries, Inc. outstanding.
The exhibit index is located on page 10 of this filing.
Page 1 of 12 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
January 1, 1995 and October 2, 1994 3
Consolidated Statements of Operations
for the 13 weeks ended January 1, 1995
and January 2, 1994 4
Consolidated Statements of Cash Flows
for the 13 weeks ended January 1, 1995
and January 2, 1994 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 10
Signatures 11
Exhibit 27-1 Financial Data Schedule 12
</TABLE>
Page 2 of 12 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>
January 1, October 2,
1995 1994
---------- ----------
<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 8,132 $ 28,436
Accounts receivable 66,486 75,776
Inventories (net of LIFO reserve of $8,632
in 1995 and $8,889 in 1994) (Note 2) 221,259 85,340
Other current assets 17,545 9,328
-------- --------
Total current assets 313,422 198,880
Property, plant and equipment (net of accumulated
depreciation of $187,211 in 1995 and
$180,810 in 1994) 240,438 241,885
Other assets 46,039 45,362
-------- --------
$599,899 $486,127
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings $ 49,068 $ -
Current portion of long-term debt (Note 3) 1,657 1,643
Trade accounts payable 108,046 56,953
Dividends payable - 3,542
Income taxes accrued 11,785 -
Accrued expenses related to beet operations 21,400 -
Other liabilities and accrued expenses 26,178 23,002
-------- --------
Total current liabilities 218,134 85,140
-------- --------
Long-term debt (Note 3) 119,762 140,224
-------- --------
Deferred employee benefits 73,753 72,589
-------- --------
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 202,141 202,065
Minimum pension liability adjustment (8,210) (8,210)
-------- --------
223,486 223,410
Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275
- Note receivable from employee stock
ownership trust 3,961 3,961
-------- --------
Total stockholders' equity 188,250 188,174
-------- --------
Commitments and contingencies (Note 6) - -
-------- --------
$599,899 $486,127
======== ========
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
Page 3 of 12 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 13 Weeks Ended
----------------------
January 1, January 2,
1995 1994
---------- ----------
<S> <C> <C>
Net sales $282,477 $280,186
-------- --------
Operating expenses:
Cost of sales and
operating expenses 253,629 249,207
Selling, general and
administrative expenses 13,494 14,884
Depreciation and
amortization 6,894 7,778
-------- --------
274,017 271,869
-------- --------
Income from operations 8,460 8,317
-------- --------
Other income and expenses:
Interest and other
investment income 527 406
Interest expense (3,572) (3,390)
Other 101 82
-------- --------
(2,944) (2,902)
-------- --------
Income before income taxes 5,516 5,415
Provision for income taxes (Note 4) (1,898) (1,874)
-------- --------
Net income $ 3,618 $ 3,541
======== ========
Per share:
Net income (Note 5) $ .14 $ .13
======== ========
Dividends $ .135 $ .135
======== ========
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
Page 4 of 12 pages
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Savannah Foods & Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the 13 Weeks Ended
--------------------------
January 1, January 2,
1995 1994
---------- ----------
(In thousands of dollars)
<S> <C> <C>
Cash flows from operations:
Net income $ 3,618 $ 3,541
Adjustments to reconcile net income to net
cash provided by operations -
Depreciation and amortization 6,894 7,778
Provision for deferred income taxes (10,273) (9,176)
Other 32 34
Changes in balance sheet accounts -
Accounts receivable 9,290 35,734
Inventories (135,919) (83,600)
Other current assets 1,198 2,613
Trade accounts payable 51,093 (6,600)
Income taxes accrued 11,785 6,877
Accrued expenses related to beet operations 21,400 21,125
Other liabilities and accrued expenses 3,176 848
Other 977 1,667
-------- --------
Cash used for operations (36,729) (19,159)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (5,186) (5,563)
Proceeds from sale of property, plant and
equipment 182 152
Liquidation of short-term investments
included in "Other current assets" - 4,500
Changes in escrow balances related to
industrial revenue bonds (21) (33)
Other (62) (120)
-------- --------
Cash used for investing activities (5,087) (1,064)
-------- --------
Cash flows from financing activities:
Increase in short-term borrowings 49,068 25,100
Payments of long-term debt (20,448) (801)
Dividends declared to stockholders (3,542) (3,542)
Decrease in dividends payable (3,542) -
Other (24) 49
-------- --------
Cash provided by financing activities 21,512 20,806
-------- --------
Cash flows for period (20,304) 583
Cash and cash equivalents, beginning of period 28,436 7,481
-------- --------
Cash and cash equivalents, end of period $ 8,132 $ 8,064
======== ========
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
Page 5 of 12 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.
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. Certain prior year amounts have been
reclassified to conform to current year presentation.
(2) A summary of inventories by class is as follows:
<TABLE>
<CAPTION>
January 1, October 2,
1995 1994
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(In thousands of dollars)
<S> <C> <C>
Raw materials and work-in-process.......... $ 84,903 $26,924
Packaging materials, parts and supplies.... 26,574 27,115
Finished goods............................. 110,829 31,301
Costs related to future
inventory purchases...................... (1,047) -
-------- -------
$221,259 $85,340
======== =======
</TABLE>
(3) Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
January 1, October 2,
1995 1994
---------- ----------
(In thousands of dollars)
<S> <C> <C>
Senior notes - $50,000 Series A at 8.35%
and $20,000 Series B at 7.15%
payable through 2002..................... $ 70,000 $ 70,000
Long-term debt supported by revolving
credit facilities with banks............. - 20,000
Notes payable to banks from 1996 to 1998
related to the ESOP...................... 15,500 15,500
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%................... 5,921 6,314
Other long-term debt....................... 1,998 2,053
-------- --------
121,419 141,867
Less - Current portion..................... (1,657) (1,643)
-------- --------
$119,762 $140,224
======== ========
</TABLE>
Cash interest payments during the first three months of fiscal 1995 and 1994
amounted to $4,529,000 and $4,573,000, respectively.
(4) Cash tax payments during the first three months of fiscal 1995 and 1994
amounted to $67,000 and $186,000, respectively.
Page 6 of 12 pages
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(5) Earnings per share for fiscal 1995 and 1994 are based on weighted average
outstanding shares of 26,238,196 for the 13 weeks ended January 1, 1995 and
January 2, 1994.
(6) 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.
The Company uses interest rate exchange agreements, more commonly called
interest rate swaps, to manage its interest rate exposure. The Company is
exposed to loss in the event of non-performance by the other party to these
swaps. However, the Company does not anticipate non-performance by the
counter-parties to the transactions.
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 is vigorously protesting 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 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. On September
12, 1994, summary judgment was entered against the Company in the amount of
$2,973,000 in this case. On December 19, 1994, the judgment was amended
to add $1,343,000 prejudgment interest. The Company has appealed the
judgment to the United States Court of Appeals for the Third Circuit. The
Company intends to pursue the appeal vigorously and strongly contends that
no amounts are due to NUS.
Page 7 of 12 pages
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S
FINANCIAL POSITION AND RESULTS OF OPERATIONS.
Liquidity
Operating working capital increased $47,392,000 from the end of fiscal
1994. Inventory, net of trade payables and accrued beet expenses, increased
because of seasonal factors from October 2, 1994 and was funded by short-term
borrowings. Cash and cash equivalents for the quarter decreased $20,304,000 as
a result of long-term debt reductions of $20,448,000. This reduction resulted
from working capital reductions at the end of fiscal 1993-94. The Company is
committed to continuing its working capital reduction program to deploy these
assets to realize a greater return for our stockholders.
Capital Resources
Long-term debt excluding the current portion, decreased $20,462,000.
Changes in debt and equity resulted in a decrease from 43% to 39% in the ratio
of long-term debt to total capital. At January 1, 1995, the Company had
$145,000,000 in revolving credit facilities with banks, of which $40,000,000
was outstanding as short-term debt. The remaining available balance of
$105,000,000 is intended to meet working capital and other cash needs as they
arise. All of the $145,000,000 of available facilities are committed through
September 30, 1996. The revolving credit facilities, in general, enable the
Company to borrow at the banks' cost of funds plus approximately 1/2%.
Additionally, at January 1, 1995, Raceland Sugars, Inc. had $9,068,000 in
short-term borrowings from the Commodity Credit Corporation.
At January 1, 1995, stockholders' equity was $188,250,000 compared to
equity at October 2, 1994, of $188,174,000. Equity increased as a result of
earnings of $3,618,000, during the quarter ended January 1, 1995, and dividends
decreased equity by $3,542,000.
Fixed asset additions during the quarter ended January 1, 1995 were
$5,186,000. The capital expenditures were primarily concentrated on cost
saving projects and our expansion into Mexico. The Company expects that net
fixed assets additions (exclusive of any acquisitions) will approximate
$17,000,000 in fiscal 1995. These expenditures are expected to benefit the
Company through increased efficiency and expanded operational capabilities.
Results of Operations
The Company's net income for the quarter ended January 1, 1995 was
$3,618,000, or $.14 per share, compared to income of $3,541,000, or $.13 per
share, for the quarter ended January 2, 1994. Sugar sales volume increased 1%
over the same quarter last year while sugar sales prices were flat.
The U. S. Department of Agriculture imposed marketing allotments effective
October 1, 1994 for the 1994-95 crop year. These allotments will limit the
amount of beet sugar marketed to 4.35 million short tons raw value. This
compares with estimated beet sugar production of 4.70
Page 8 of 12 pages
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million short tons raw value. As a result of allotments, refined sugar prices
have strengthened somewhat. However, raw sugar costs have increased by about
$1.20 per cwt since October 1, 1994.
Sales volume increased at the cane refineries over the same quarter last
year. Cane refining margins have shown improvement since the last quarter of
1993-94 but are still below margins achieved in the first quarter of last year.
Income is down at the cane refineries compared to the same quarter last year.
Our beet operations, which include Michigan Sugar and our beet molasses
desugarization facility, had lower sales volume compared to the previous year
due to the marketing allotments. However, higher sugar content on beets
processed in Michigan and Ohio compensated for the allotments, and income was
flat with last year.
Dixie Crystals(R) Foodservice sales volume decreased slightly from the same
quarter last year, but income was up sharply as the Company benefited from
concentrating its efforts on increasing sales of higher margin products.
Raceland Sugars, Inc. showed an increase in income as a result of a
successful processing campaign which produced more sugar than last year at a
slightly lower cost per unit.
Selling, general and administrative expenses decreased 9%, or $1,390,000,
due to lower sales volume at Michigan Sugar and travel cost reductions
resulting from a conscious effort to reduce overhead costs.
The Company continues to be confident that earnings will increase
significantly in fiscal 1995. Successful processing campaigns at Michigan
Sugar and Raceland Sugars, improved sales mix at Dixie Crystals(R) Foodservice
and increased sales volume (largely exported sugar) at the cane refineries
should all contribute to improved profitability in 1995. The margins on
exporting refined sugar to the world market have improved to the point that it
is profitable to export sugar again. As a result, we will be operating all
three cane refineries near capacity for the balance of the year. This will add
to profits and reduce unit costs compared to last year.
Our Mexican joint venture continues to look promising despite the recent
devaluation of the peso and economic turmoil. We are shipping sugar to
customers, and we expect to show a profit this fiscal year. Longer term, NAFTA
will be fully implemented 14 years from now, and sugar will be allowed to flow
freely across the border. We feel that it is strategically important to have a
presence on both sides of the border.
The sugar industry is actively working toward developing a sugar program
for inclusion in the 1995 Farm Bill. No consensus has been developed so far,
and it is too soon to predict what form the proposal might take. We are
working with the rest of the industry to ensure that the new Farm Bill will be
good for all segments of the industry.
Page 9 of 12 pages
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Page Exhibit
No. Number Description
--- ------ -----------
<S> <C> <C>
12 27-1 Financial Data Schedules (for SEC use only)
</TABLE>
(b) Reports on Form 8-K, not applicable.
Page 10 of 12 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: FEBRUARY 14, 1995 SECRETARY
BY: /S/W. R. Steinhauer
---------------------------
W. R. STEINHAUER
SENIOR VICE PRESIDENT -
DATE: FEBRUARY 14, 1995 FINANCE & ADMINISTRATION
Page 11 of 12 pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SAVANNAH FOODS & INDUSTRIES, INC. FOR THE PERIOD ENDED
JANUARY 1, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-END> JAN-01-1995
<CASH> 8,132
<SECURITIES> 0
<RECEIVABLES> 66,486
<ALLOWANCES> 0
<INVENTORY> 221,259
<CURRENT-ASSETS> 313,422
<PP&E> 240,438
<DEPRECIATION> 187,211
<TOTAL-ASSETS> 599,899
<CURRENT-LIABILITIES> 218,134
<BONDS> 119,762
<COMMON> 17,365
0
0
<OTHER-SE> 170,885
<TOTAL-LIABILITY-AND-EQUITY> 599,899
<SALES> 282,477
<TOTAL-REVENUES> 282,477
<CGS> 253,629
<TOTAL-COSTS> 253,629
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,572
<INCOME-PRETAX> 5,516
<INCOME-TAX> 1,898
<INCOME-CONTINUING> 3,618
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,618
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
