<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 July 2, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11420
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SAVANNAH FOODS & INDUSTRIES, INC.
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(Exact name of Registrant as specified in its Charter)
Delaware 58-1089367
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(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
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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 July 2, 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
July 2, 1995 and October 2, 1994 3
Consolidated Statements of Operations
for the 13 weeks ended July 2, 1995
and July 3, 1994 and the 39 weeks ended
July 2, 1995 and July 3, 1994 4
Consolidated Statements of Cash Flows
for the 39 weeks ended July 2, 1995
and July 3, 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>
July 2, October 2,
1995 1994
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<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 10,763 $ 28,436
Accounts receivable 65,282 75,776
Inventories (net of LIFO reserve of $12,382
in 1995 and $8,889 in 1994) (Note 3) 168,765 85,340
Other current assets 13,598 9,328
-------- --------
Total current assets 258,408 198,880
Property, plant and equipment (net of accumulated
depreciation of $200,833 in 1995 and
$180,810 in 1994) 235,457 241,885
Other assets 48,522 45,362
-------- --------
$542,387 $486,127
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Short-term borrowings $ 44,200 $ -
Current portion of long-term debt (Note 4) 1,690 1,643
Trade accounts payable 91,707 56,953
Dividends payable 656 3,542
Income taxes accrued - -
Accrued expenses related to beet operations 13,138 -
Other liabilities and accrued expenses 24,009 23,002
-------- --------
Total current liabilities 175,400 85,140
-------- --------
Long-term debt (Note 4) 111,976 140,224
-------- --------
Deferred employee benefits 74,892 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 193,589 202,065
Minimum pension liability adjustment (8,210) (8,210)
-------- --------
214,934 223,410
Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275
- Note receivable from employee stock
ownership trust 3,540 3,961
-------- --------
Total stockholders' equity 180,119 188,174
-------- --------
Commitments and contingencies (Note 7) - -
-------- --------
$542,387 $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 For the 39 Weeks Ended
---------------------- ----------------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $275,554 $272,891 $811,408 $800,082
-------- -------- -------- --------
Operating expenses:
Cost of sales and
operating expenses 255,082 249,764 741,181 723,668
Selling, general and
administrative expenses 12,896 12,471 39,444 40,994
Depreciation and
amortization 7,359 7,459 21,769 22,293
-------- -------- -------- --------
275,337 269,694 802,394 786,955
-------- -------- -------- --------
Income from operations 217 3,197 9,014 13,127
-------- -------- -------- --------
Other income and expenses:
Interest and other
investment income 290 330 1,178 1,771
Interest expense (Note 4) (3,827) (3,289) (11,218) (10,040)
Other (263) 141 (175) 381
-------- -------- -------- --------
(3,800) (2,818) (10,215) (7,888)
-------- -------- -------- --------
Income (loss) before income
taxes (3,583) 379 (1,201) 5,239
(Provision for) benefit from
income taxes (Note 5) 1,155 (146) 464 (1,736)
-------- -------- -------- --------
Net income (loss) $ (2,428) $ 233 $ (737) $ 3,503
======== ======== ======== ========
Per share:
Net income (loss) (Note 6) $ (.10) $ .01 $ (.03) $ .13
======== ======== ======== ========
Dividends $ .025 $ .135 $ .295 $ .405
======== ======== ======== ========
</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 39 Weeks Ended
----------------------
July 2, July 3,
1995 1994
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(In thousands of dollars)
<S> <C> <C>
Cash flows from operations:
Net income (loss) $ (737) $ 3,503
Adjustments to reconcile net income to net
cash provided by operations -
Depreciation and amortization 21,769 22,293
Provision for deferred income taxes (6,301) (4,881)
Other 88 180
Changes in balance sheet accounts -
Accounts receivable 10,494 23,054
Inventories (83,425) (28,792)
Other current assets 1,168 1,540
Trade accounts payable 34,754 (9,960)
Accrued expenses related to beet operations 13,138 13,817
Other liabilities and accrued expenses 1,007 (434)
Other 1,847 2,369
------- -------
Cash (used) provided by operations (6,198) 22,689
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (13,070) (17,314)
Proceeds from sale of property, plant and
equipment 233 1,949
Acquisition of business (Note 2) (7,050) -
Liquidation of short-term investments
included in "Other current assets" - 19,700
Use of escrow balances related to
industrial revenue bonds for additions to
property, plant and equipment - 3,681
Other (2,854) (3,531)
------- -------
Cash (used) provided by investing activities (22,741) 4,485
------- -------
Cash flows from financing activities:
Increase (decrease) in short-term borrowings 44,200 (11,300)
Payments of long-term debt (28,201) (2,164)
Liquidation of unused industrial revenue
bond escrow balances 5,662 -
Collection of note receivable from
employee stock ownership trust 500 -
Dividends declared to stockholders (7,739) (10,626)
Decrease in dividends payable (2,886) -
Other (270) 27
------- -------
Cash provided (used) by financing activities 11,266 (24,063)
------- -------
Cash flows for period (17,673) 3,111
Cash and cash equivalents, beginning of period 28,436 7,481
------- -------
Cash and cash equivalents, end of period $10,763 $10,592
======= =======
</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) On January 31, 1995, the Company acquired certain assets of Reckitt and
Colman, Inc., which are used in the manufacture, sale and distribution
of filled plastic salt and pepper shakers for $7,050,000 in cash. The
transaction was accounted for using the purchase method and resulted in
$6,050,000 of goodwill, which represents the excess of the purchase
price over the fair market value of the assets acquired.
(3) A summary of inventories by class is as follows:
<TABLE>
<CAPTION>
July 2, October 2,
1995 1994
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(In thousands of dollars)
<S> <C> <C>
Raw materials and work-in-process......... $ 66,373 $26,924
Packaging materials, parts and supplies... 27,189 27,115
Finished goods............................ 75,203 31,301
-------- -------
$168,765 $85,340
======== =======
</TABLE>
(4) Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
July 2, 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 1997 to 2004
related to the ESOP..................... 14,100 15,500
Industrial revenue bonds.................. 22,500 28,000
Present value of non-compete agreements
related to the purchase of King
Packaging, payable monthly from 1993 to
1998, discounted at 5%.................. 5,136 6,314
Other long-term debt...................... 1,930 2,053
-------- --------
113,666 141,867
Less - Current portion.................... (1,690) (1,643)
-------- --------
$111,976 $140,224
======== ========
</TABLE>
During June, 1995, the Company entered additional interest rate exchange
agreements which, together with the senior notes, fix the interest rate
on
Page 6 of 12 pages
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approximately $80.0 million of the Company's long-term debt from fiscal
1998 through 2004. The average fixed interest rate on such indebtedness is
projected to approximate 7.5% per annum for fiscal 1998 through fiscal
2004. These hedges were completed with the anticipation that scheduled
repayments of fixed rate debt through 2004 would be replaced with variable
rate borrowings. The Company's existing variable rate indebtedness has a
maximum contractual rate of approximately the bank's cost of funds plus
1/2%.
Cash interest payments during the first nine months of fiscal 1995 and 1994
amounted to $12,179,000 and $11,255,000, respectively.
(5) Cash tax payments during the first nine months of fiscal 1995 and 1994
amounted to $6,571,000 and $6,582,000, respectively.
(6) Earnings per share for fiscal 1995 and 1994 are based on weighted average
outstanding shares of 26,238,196 for the 13 weeks and the 39 weeks ended
July 2, 1995 and July 3, 1994.
(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.
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 as the counter-parties are large
world-wide commercial banks.
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. The Company disputes Customs' findings and is vigorously
protesting the decision of Customs. As of July 1995, approximately
$5,000,000 of the claim has been dismissed. 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 United States Court of Appeals
for the Third Circuit has affirmed the judgment subject to an insignificant
reduction in the prejudgment interest. The Company is considering an
appeal to the Supreme Court. Reserves were established for this claim in
previous fiscal years, and 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.
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
Non-interest bearing working capital increased due to seasonal business
activity by $31,141,000 from the end of fiscal 1994 and was funded by
short-term borrowings. Cash and cash equivalents for the nine months decreased
$17,673,000 due to long-term debt repayments.
Capital Resources
Long-term debt excluding the current portion, decreased $28,248,000. The
Company paid $20,000,000 of long-term revolving credit debt in its first fiscal
1995 quarter with cash generated from working capital reductions in fiscal
1994. Additionally, the Company retired $5,500,000 of industrial revenue bonds
in the third fiscal quarter. These bonds were paid from escrow accounts held
by the Company containing the original proceeds from the issuance of the bonds.
Changes in debt and equity resulted in a decrease from 43% to 38% in the ratio
of long-term debt to total capital.
At July 2, 1995, the Company had $145,000,000 in revolving credit
facilities, of which $44,200,000 was outstanding as short-term debt. The
remaining available balance of $100,800,000 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 bank's cost of
funds plus approximately 1/2%.
During June, 1995, the Company entered into additional interest rate
exchange agreements which, together with the senior notes and existing interest
rate exchange agreements, fix the interest rate on approximately $80.0 million
of the Company's long-term debt from 1998 through 2004. The average fixed
interest rate for such indebtedness is expected to approximate 7.5% per year
for fiscal 1998 through fiscal 2004.
At July 2, 1995, stockholders' equity was $180,119,000 compared to equity at
October 2, 1994, of $188,174,000. Equity changed primarily as a result of flat
earnings and dividends of $7,739,000. The Company reduced its dividends from
$.54 per share to $.10 per share effective for the third quarter of fiscal
1995. Dividends would have been approximately $5.8 million less for fiscal
1995 if dividends had been at the $.10 per share level for the full year.
Fixed asset additions during the first nine months of fiscal 1995, excluding
the Reckitt & Colman acquisition, were $13,070,000. The capital expenditures
were primarily concentrated on cost saving projects. The Company expects that
expenditures for fixed assets (exclusive of any acquisitions) will approximate
$17,000,000 in fiscal 1995.
Results of Operations
The Company's net loss for the first nine months of fiscal 1995 was
($737,000), or ($.03) per share, compared to income of $3,503,000, or $.13 per
share, for the first nine months of fiscal 1994. Net loss for
Page 8 of 12 pages
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the third quarter of fiscal 1995 was ($2,428,000), or ($.10) per share,
compared to income of $233,000, or $.01 per share, for the third quarter of
fiscal 1994. Sugar sales volumes were flat as compared with the same quarter
and nine months of last year. Raw sugar spot prices are up $1.21 per cwt. for
the third quarter of 1995 compared to the third quarter of 1994. Raw sugar
spot prices are up $.54 per cwt. for the nine months this year versus last
year. Sugar sales prices are up for the quarter and nine months of 1995
compared to last year; however the increase in sales prices has been
significantly less than the increase in raw sugar costs.
Sales volume at the cane refineries increased over the same quarter and nine
months of last year. Cane refining margins have decreased compared to last
year due to higher raw sugar prices and intense competition which has limited
sales price increases to minimal levels. The higher raw sugar prices have
significantly increased cost of sales for the quarter and nine months of 1995
as compared with the same periods of 1994. The Company uses the LIFO method to
determine cost of sales and to value inventory of sugar. This method, on an
annual basis, results in the most recent inventory purchases being charged to
cost of sales.
During interim periods the Company estimates the expected year-end value of
sugar to determine both its cost of sales and inventory value for interim
periods. At the end of the third quarter the price of raw sugar increased by
over $2.50 per cwt. as compared with the price at the end of the March 1995
quarter. As a result of this increase, the Company revised its estimates of
year-end inventory values. This caused an increase to cost of sales in the
third quarter of approximately $3,000,000. Accordingly, income is down at the
cane refineries compared to the same quarter and nine months of last year.
Our beet operations, which include Michigan Sugar and our beet molasses
desugarization facility, had lower sales volume compared to the previous year
quarter and nine months due to the marketing allotments imposed October 1, 1994
for the 1994-95 crop year. Income at the beet operations was up slightly for
the quarter when compared to last year. For the nine months of 1995 income is
down compared to 1994 primarily due to higher operating costs at the beet
molasses desugarization facility.
The Company's foodservice sugar sales volume decreased from the same quarter
and nine months last year while non-sugar sales volume increased moderately.
Income for the quarter and nine months is up from last year as a result of an
improved product mix and lower operating expenses.
Raceland Sugars, Inc. showed a slight decrease in income for the quarter
compared to last year. Income is up for the nine months of 1995 compared to
1994 as a result of a successful processing campaign which produced more sugar
than last year at the same cost per unit.
Selling, general and administrative expenses decreased 4%, or $1,550,000,
for the nine months of fiscal 1995 compared to 1994 primarily due to lower
selling costs resulting from lower sales volume at Michigan Sugar and
reductions resulting from reduced overhead costs.
One of the more significant factors that will affect the Company's future
profitability is the 1995 Farm Bill currently being debated in
Page 9 of 12 pages
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Congress. One thing that seems clear is that the situation will not remain as
it is. The 1995 Farm Bill, in whatever form it takes, may dramatically change
the structure of the sugar industry in the United States. Management believes
that the Company's low cost structure, efficient manufacturing operations and
proven marketing skills will enable the Company to capitalize on these changes.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Page Exhibit
No. Number Description
--- ------ -----------
12 27-1 Financial Data Schedule (for SEC use only)
(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: AUGUST 14, 1995 SECRETARY
BY: /S/W. R. Steinhauer
---------------------------
W. R. STEINHAUER
SENIOR VICE PRESIDENT -
DATE: AUGUST 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
JULY 2, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-END> JUL-02-1995
<CASH> 10,763
<SECURITIES> 0
<RECEIVABLES> 65,282
<ALLOWANCES> 0
<INVENTORY> 168,765
<CURRENT-ASSETS> 258,408
<PP&E> 436,290
<DEPRECIATION> 200,833
<TOTAL-ASSETS> 542,387
<CURRENT-LIABILITIES> 175,400
<BONDS> 111,976
<COMMON> 17,365
0
0
<OTHER-SE> 162,754
<TOTAL-LIABILITY-AND-EQUITY> 542,387
<SALES> 811,408
<TOTAL-REVENUES> 811,408
<CGS> 741,181
<TOTAL-COSTS> 741,181
<OTHER-EXPENSES> 21,769
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,218
<INCOME-PRETAX> (1,201)
<INCOME-TAX> (464)
<INCOME-CONTINUING> (737)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (737)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
