<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 June 30, 1996
----------------------------
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.
- --------------------------------------------------------------------------------
(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
-----------------------------
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
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As of June 30, 1996 there were 26,238,196 shares of common stock of Savannah
Foods & Industries, Inc. outstanding.
The exhibit index is located on page 14 of this filing.
Page 1
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SAVANNAH FOODS & INDUSTRIES, INC.
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION: Page
----
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets at
June 30, 1996 and October 1, 1995 3
Consolidated Statements of Operations
for the quarter and the three quarters
ended June 30, 1996 and July 2, 1995 4
Consolidated Statements of Cash Flows
for the three quarters ended June 30, 1996
and July 2, 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of the Company's Financial Position
and Results of Operations 9
Part II. OTHER INFORMATION:
Item 5. Other Information - Statement on
Business Risks and Forward-Looking
Information 13
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
Page 2
<PAGE> 3
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>
June 30, October 1,
1996 1995
---------- ----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 19,766 $ 11,574
Accounts receivable 74,397 66,991
Inventories (net of LIFO reserve of $7,932 in 1996 and
$10,460 in 1995) (Note 2) 145,344 103,121
Other current assets 10,380 16,116
---------- ----------
Total current assets 249,887 197,802
Property, plant and equipment (net of accumulated
depreciation of $214,680 in 1996 and $206,100 in 1995) 201,045 230,891
Other assets 27,904 47,814
---------- ----------
$ 478,836 $ 476,507
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 21,349 $ 22,300
Current portion of long-term debt (Note 3) 20,079 6,300
Trade accounts payable 73,242 63,259
Dividends payable 656 656
Accrued expenses related to beet operations 15,815 -
Other liabilities and accrued expenses 18,659 22,225
---------- ----------
Total current liabilities 149,800 114,740
---------- ----------
Long-term debt (Note 3) 70,178 106,864
---------- ----------
Deferred employee benefits 85,727 85,254
---------- ----------
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 (Note 4) 28,952 12,190
Retained earnings 193,736 190,176
Treasury stock, at cost (2,568,604 shares in 1996 and
5,068,604 shares in 1995) (Note 4) (15,849) (31,275)
Minimum pension liability adjustment (14,842) (14,842)
Note receivable from employee stock ownership plan (3,540) (3,540)
Stock held by benefit trust, at market (2,500,000 shares
in 1996)(Note 4) (32,188) -
Cumulative translation adjustment (503) (425)
---------- ----------
Total stockholders' equity 173,131 169,649
---------- ----------
Commitments and contingencies (Note 7) - -
---------- ----------
$ 478,836 $ 476,507
========== ==========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
Page 3
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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
For the Quarter Ended Three Quarters Ended
------------------------ ------------------------
June 30, July 2, June 30, July 2,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net sales $ 287,462 $ 275,554 $ 842,675 $ 811,408
---------- ---------- ---------- ----------
Operating expenses:
Cost of sales and operating expenses 256,311 255,082 758,636 741,181
Selling, general and
administrative expenses 13,475 12,896 41,026 39,444
Depreciation and amortization 6,745 7,359 21,074 21,769
Other costs (Note 5) 25 18 1,871 88
---------- ---------- ---------- ----------
276,556 275,355 822,607 802,482
---------- ---------- ---------- ----------
Income from operations 10,906 199 20,068 8,926
---------- ---------- ---------- ----------
Other income and (expenses):
Interest and other investment income 163 290 575 1,178
Interest expense (3,013) (3,827) (9,678) (11,218)
Other income (expense) (481) (245) (1,082) (87)
---------- ---------- ---------- ----------
(3,331) (3,782) (10,185) (10,127)
---------- ---------- ---------- ----------
Income (loss) before income taxes
and extraordinary item 7,575 (3,583) 9,883 (1,201)
(Provision for) benefit from
income taxes (2,849) 1,155 (3,657) 464
---------- ---------- ---------- ----------
Income (loss) before extraordinary
item 4,726 (2,428) 6,226 (737)
Extraordinary item, net of tax (Note 3) (698) - (698) -
---------- ---------- ---------- ----------
Net income (loss) $ 4,028 $ (2,428) $ 5,528 $ (737)
========== ========== ========== ==========
Per share:
Income (loss) before
extraordinary item $ 0.18 $ (0.10) $ 0.24 $ (0.03)
Extraordinary item (Note 3) (0.03) - (0.03) -
---------- ---------- ---------- ----------
Net income (loss) $ 0.15 $ (0.10) $ 0.21 $ (0.03)
========== ========== ========== ==========
Dividends $ 0.025 $ 0.025 $ 0.075 $ 0.295
========== ========== ========== ==========
</TABLE>
(The accompanying notes are an integral part of the consolidated financial
statements.)
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Savannah Foods & Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the Three Quarters Ended
----------------------------
June 30, July 2,
1996 1995
---------- -----------
(In thousands of dollars)
<S> <C> <C>
Cash flows from operations:
Net income (loss) $ 5,528 $ (737)
Adjustments to reconcile net income to
net cash provided by operations -
Depreciation and amortization 21,074 21,769
Extraordinary item, net of tax (Note 3) 698 -
Provision for deferred income taxes - (863)
Net loss on disposal of assets 1,871 88
Changes in balance sheet accounts -
Accounts receivable (7,406) 10,494
Inventories (40,850) (83,425)
Other current assets 5,652 (4,270)
Trade accounts payable 9,983 34,754
Accrued expenses related to beet operations 15,815 13,138
Other liabilities and accrued expenses (3,806) 1,007
Other 673 1,499
---------- ----------
Cash provided by (used for) operations 9,232 (6,546)
---------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment (5,412) (11,909)
Proceeds from sale of property, plant and
equipment 2,458 233
Liquidation (acquisition) of investments 13,869 (1,161)
Liquidation (acquisition) of business (Note 5) 12,500 (7,050)
Use of escrow balances related to industrial
revenue bonds for additions to property,
plant and equipment 2,862 -
Other (381) (2,506)
---------- ----------
Cash provided by (used for) investing activities 25,896 (22,393)
---------- ----------
Cash flows from financing activities:
(Decrease) increase in short-term borrowings (951) 44,200
Payments of long-term debt (22,907) (28,201)
Liquidation of unused industrial revenue
bond escrow balances - 5,662
Dividends paid (1,968) (10,625)
Other (1,110) 230
---------- ----------
Cash (used for) provided by financing activities (26,936) 11,266
---------- ----------
Cash flows for period 8,192 (17,673)
Cash and cash equivalents, beginning of period 11,574 28,436
---------- ----------
Cash and cash equivalents, end of period $ 19,766 $ 10,763
========== ==========
</TABLE>
(The accompanying notes are an integral part of the consolidated 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, except as discussed in Note 5) 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 the current year
presentation.
(2) A summary of inventories by class is as follows:
<TABLE>
<CAPTION>
June 30, October 1,
1996 1995
-------- ----------
(In thousands of dollars)
<S> <C> <C>
Raw materials and work-in-process $ 56,059 $ 46,533
Packaging materials, parts and supplies 22,825 26,245
Finished goods 66,460 30,343
-------- --------
$145,344 $103,121
======== ========
</TABLE>
(3) Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
June 30, October 1,
1996 1995
-------- ----------
(In thousands of dollars)
<S> <C> <C>
Senior notes - Series A at 8.35%
($39,881 in 1996 and $47,857 in 1995)
and Series B at 7.15% ($10,119 in
1996 and $12,143 in 1995) $50,000 $ 60,000
Long-term debt supported by revolving
credit facilities with banks - 10,000
Notes payable to banks related to
the ESOP 12,619 14,100
Industrial revenue bonds 22,500 22,500
Other long-term debt 5,138 6,564
------- --------
90,257 113,164
Less - Current portion (20,079) (6,300)
------- --------
$70,178 $106,864
======= ========
</TABLE>
Effective April 1, 1996, the Company entered into a new $120,000,000
revolving credit facility which expires on January 1, 2000, and
automatically extends by one year at each anniversary date of the
agreement.
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<PAGE> 7
The Company elected, and gave notices, to repay the following amounts of
the Senior Notes ahead of scheduled maturities:
<TABLE>
<CAPTION>
Amount of Early Payment Month of Payment
----------------------- ----------------
<S> <C>
$ 5,000,000 May 1996
$ 5,000,000 June 1996
$ 5,000,000 July 1996
$10,000,000 July 1996
</TABLE>
Accordingly, $15,000,000 is included in the current portion of long-term
debt at June 30, 1996. In connection with the prepayments, the Company
incurred $698,000 (net of $410,000 income tax benefit), or ($.03) per
share, of prepayment penalties which are reflected as an extraordinary
item in the accompanying Consolidated Statement of Operations.
The Company has a Standby Letter of Credit (SLC) in favor of the Senior
Note lenders drawn under the revolving credit agreement. The SLC is
maintained at 105% of the Senior Notes outstanding and was $52,500,000 at
June 30, 1996.
(4) During March 1996, the Company established a Benefit Trust (the "Trust")
with 2,500,000 shares of treasury stock. The Trust will enhance the
Company's financial flexibility to provide funds to satisfy its
obligations under various employee benefit plans and agreements. The
shares may be sold at the Company's discretion, until March 31, 2011.
However, these shares do not have to be sold. Proceeds from the sales, if
any, will be used to fund eligible employee benefits. The employee
benefits payable from the Trust are primarily included in the $85,727,000
"Deferred employee benefits" liability. Shares held by the Trust are not
considered outstanding for earnings per share calculations until they are
sold, but are considered outstanding for voting purposes. The shares are
voted based upon the voting results of the shares held in the Company's
Employee Stock Ownership Plan.
To record this transaction, the Company reduced "Treasury stock" by the
average cost of these shares to the Company, or $15,426,000, and the fair
market value of the stock was recorded as "Stock held by benefit trust".
"Capital in excess of stated value" was increased for the difference of
$11,449,000 between the cost of the shares and their fair value. Each
quarter, "Stock held by benefit trust" is adjusted to the fair market value
of the shares held in the Trust, and an adjustment for the same amount is
made to "Capital in excess of stated value". Total stockholders' equity
will increase as the shares are sold from the Trust.
(5) On April 19, 1996, the Company sold the property, plant and equipment and
certain other assets of Raceland Sugars, Inc., its raw sugar mill
subsidiary, for $12,500,000 in cash. The Company retained the raw sugar
and by-product inventories and the related accounts receivable, accounts
payable and short-term borrowings.
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<PAGE> 8
These assets and liabilities are being liquidated in the normal course
of business during the remainder of fiscal 1996. As a result of the
sale, certain expenses accrued for plant repairs will not be paid by the
Company and have been reversed. The book values of the assets sold are as
follows (in thousands of dollars):
<TABLE>
<S> <C>
Inventories $ 1,502
Other current assets 696
Property, plant & equipment 15,534
Other assets 1,538
-------
Assets sold 19,270
Reversal of expenses accrued for
plant repairs (2,970)
-------
$16,300
=======
</TABLE>
During the quarter ended March 1996, the Company accrued an estimated loss
on the sale of $3,800,000. This amount is included in the caption "Other
costs". Also included in this line is a $1,929,000 net gain from disposal
of other assets.
(6) Earnings per share for all periods presented are based on weighted
average outstanding shares of 26,238,196.
(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 swap agreements 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 of June 30, 1996, approximately $2,500,000 of a claim by the United
States Customs Service (Customs) remains unresolved. Customs has alleged
that drawback claims prepared by the Company for certain export shipments
of sugar during the years 1984 to 1988 are technically and/or
substantively deficient and that the Company, therefore, is not entitled
to amounts previously received under these drawback claims. The Company
disputes Customs' findings and has been vigorously protesting this matter
with Customs. 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 8
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Item 2. Management's Discussion and Analysis of the Company's
Financial Position and Results of Operations.
Liquidity
For the first nine months of fiscal 1996, net income, after adjustments
for depreciation and amortization and net loss on disposal of assets, generated
$28,473,000 of cash. This cash was used primarily to pay dividends and to fund
seasonal increases in inventories (net of trade payables and accrued beet
expenses) and accounts receivable.
The Company maintains revolving credit facilities to provide liquidity for
short-term operating needs. The Company has $120,000,000 in revolving credit
facilities with banks which are committed through January 1, 2000. These
facilities, in general, enable the Company to borrow funds at LIBOR plus 1/2%
to 3/4%, depending upon achievement of specified fixed charge coverage targets.
Under these facilities, a Standby Letter of Credit (SLC) is drawn in favor of
the Senior Note lenders. The SLC is maintained at 105% of the balance of the
Senior Notes and is reduced as the Senior Notes are repaid. The remaining
balance of revolving credit facilities is available to the Company as needed.
At June 30, 1996, the balance of the SLC was $52,500,000.
The Company has access to short-term borrowings from the Commodity Credit
Corporation (CCC) which it can use to finance seasonal increases in beet sugar
inventory. At June 30, 1996, all of the Company's $21,349,000 short-term
borrowings were outstanding from the CCC. The Company also has available a
$10,000,000 discretionary line of credit with a bank.
These sources of short-term funds, along with cash generated by the
Company's operations, provide ample liquidity to meet the Company's operating
cash requirements.
Capital Resources
The Company has made two significant asset disposals during fiscal 1996.
On April 19, 1996, the Company sold the property, plant and equipment and
certain other assets of Raceland Sugars, Inc., its raw sugar mill subsidiary,
for $12,500,000. The Company retained the raw sugar and by-product inventories
and the related accounts receivable, accounts payable and short-term
borrowings. These assets and liabilities are being liquidated in the normal
course of business during the remainder of fiscal 1996. After liquidation of
these amounts, the Company expects to achieve a net cash flow of approximately
$15,000,000 on the sale of Raceland. During the second quarter of fiscal 1996,
the Company recognized an estimated loss on the sale of $3,800,000. This amount
is included in the caption "Other costs" in the accompanying Consolidated
Statement of Operations.
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The Company also received $13,869,000 of the cash surrender value of
certain Company owned life insurance policies which were surrendered during
fiscal 1996. These assets were included in "Other assets" at October 1, 1995.
The sale of Raceland and the liquidation of life insurance policies result from
the fact that these assets had returns below the Company's cost of capital.
The Company used the proceeds from these asset dispositions to temporarily
reduce long-term debt.
Payments on total long-term debt were $22,907,000 since October 1, 1995,
and were funded by the asset disposals discussed above. Of these payments,
$10,000,000 was paid on the Senior Notes during the third quarter, and, as of
June 30, 1996, the Company had given notice to the Senior Note lenders that an
additional $15,000,000 would be paid during July 1996. The Company decided to
pay down the Senior Notes ahead of scheduled maturities to reduce interest
expense and improve its long-term borrowing flexibility. As a result of these
prepayments, an extraordinary charge of $698,000 (net of an income tax benefit
of $410,000), or $.03 per share, was recorded, and $15,000,000 of debt was
reclassified to current at June 30, 1996.
At June 30, 1996, stockholders' equity was $173,131,000 compared to equity
at October 1, 1995, of $169,649,000. Equity increased by earnings of
$5,528,000 and decreased primarily by dividends of $1,968,000. The changes in
debt and equity since October 1, 1995, resulted in a decrease in the ratio of
long-term debt to total capital from 39% to 29%.
During the second quarter of fiscal 1996, the Company established a
Benefit Trust (the "Trust") with 2,500,000 shares of treasury stock. The Trust
will enhance the Company's financial flexibility to provide funds to satisfy
its obligations under various employee benefit plans and agreements. The
shares may be sold at the Company's discretion, until March 31, 2011. However,
these shares do not have to be sold. Proceeds from the sales, if any, will be
used to fund eligible employee benefits. The employee benefits payable from
the Trust are primarily included in the $85,727,000 "Deferred employee
benefits" liability. Shares held by the Trust are not considered outstanding
for earnings per share calculations until they are sold, but are considered
outstanding for voting purposes. The shares are voted based upon the voting
results of the shares held in the Company's Employee Stock Ownership Plan.
To record this transaction, the Company reduced "Treasury stock" by the
average cost of these shares to the Company, or $15,426,000, and the fair
market value of the stock was recorded as "Stock held by benefit trust".
"Capital in excess of stated value" was increased for the difference of
$11,449,000 between the cost of the shares and their fair value. Each quarter,
"Stock held by benefit trust" is adjusted to the fair market value of the
shares, and an adjustment for the same amount is made to "Capital in excess of
stated value". Total stockholders' equity will increase as the shares are sold
from the Trust.
Page 10
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Fixed asset additions during the nine months ended June 30, 1996 were
$5,412,000 compared to depreciation for the same period of $19,304,000. These
capital expenditures were funded through escrow balances related to industrial
revenue bonds and proceeds from fixed asset sales. The additions were
primarily made to upgrade and install packaging and production equipment and
are expected to benefit the Company through increased efficiency, improved
quality control and expanded operational capabilities. The Company expects that
fixed asset additions (exclusive of any acquisitions) will not exceed
$10,000,000 in fiscal 1996.
Results of Operations
The Company's net income for the nine months ended June 30, 1996 was
$5,528,000, or $.21 per share, compared to a net loss of ($737,000), or ($.03)
per share, for the nine months ended July 2, 1995. Net income for the third
quarter of fiscal 1996 was $4,028,000, or $.15 per share, compared to a net
loss of ($2,428,000), or ($.10) per share, for the same quarter of fiscal 1995.
Net income for the nine months and the quarter ended June 30, 1996 includes an
after-tax extraordinary charge of ($698,000), or ($.03) per share, for
prepayment penalties incurred on the Company's Senior Notes.
Income from operations for both the quarter and the nine-month period
improved significantly from the prior year as increased operating profits in the
cane sugar division more than offset decreased operating profits in the beet
sugar division. Volumes and margins for cane refiners have been favorably
impacted by reduced national beet sugar production. At approximately 3.9
million tons, production from the 1995 beet crop is down about 600,000 tons, or
13%, from the previous year's record production. With less beet sugar on the
market, cane sugar volume has expanded to meet the overall demand for refined
sugar, which continues to rise slightly each year. Refined sugar selling prices
have risen as a result of the tightened supply. Since average raw sugar spot
prices, compared to the prior year, have decreased for the quarter and remained
about level for the nine months, increases in selling prices have resulted in
higher cane sugar margins for the same periods.
The increased operating profits in the cane sugar division reflect higher
domestic volumes and higher selling prices due to these industry factors.
Quarterly and year-to-date volumes for domestic industrial, retail and
foodservice sugar sales all increased from the prior year periods. Margins on
industrial and retail sugar sales improved for the quarter and year-to-date
periods due to sales price increases. Foodservice sugar sales prices increased
slightly for the quarter and year-to-date periods.
Operating profits in the Company's beet sugar division were significantly
lower for the quarter and nine months ended June 30, 1996 compared to the same
periods last year as the effects of the poor 1995 beet crop continued to
depress earnings. Total sugar produced by
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<PAGE> 12
the beet division was lower than the prior year due to reduced sugar
beet yields and sugar content. As a result, beet sugar sales volumes for the
quarter and the nine month periods were down considerably from the prior year.
Although sugar sales prices for both the quarter and the nine months were up
from the prior year periods, the effect of these increases was not enough to
offset the effect of the reduced volumes, and thus net revenues declined. The
lower sugar content resulted in higher manufacturing cost per cwt. of refined
sugar. Operating profits decreased as a result.
Other costs for the first nine months of fiscal 1996 includes the
$3,800,000 loss on the sale of Raceland offset by a $1,929,000 gain on the sale
of other assets.
Interest expense is down for the quarter and the nine months ended June
30, 1996 compared to the prior year due to lower interest rates and lower
average outstanding debt.
The profit outlook for the last quarter of fiscal 1996 is good. The
Company should continue to realize the benefits of both higher volumes and
profitable margins in the cane sugar division. Although operating profit in
the beet sugar division will remain depressed due to lower volumes, the
Company's overall earnings for the quarter should be good.
Based upon production and consumption estimates currently available, the
outlook for the cane sugar division for fiscal 1997 appears favorable. National
beet sugar production is expected to be around 4 million tons, close to this
year's level, while refined sugar consumption is forecast to increase about 2%,
or 180,000 tons. Assuming that the U.S. Department of Agriculture maintains
import quota levels consistent with the current year, cane refiners should again
experience good volumes and selling prices.
The Company's beet sugar division, however, is expected to have a poor
year due to further reduced volumes. Sugar beet acreage planted by the
Company's contracted growers is down about 25% from fiscal 1996. Acreage is
down because many growers elected to plant alternative crops, such as corn and
wheat, which were commanding high prices. As a consequence of the reduced
acreage, the Company will not process beets at its Fremont, Ohio plant during
fiscal 1997. Additionally, poor spring planting conditions have affected the
crop, and sugar production is expected to be down significantly from fiscal
1996. As noted above, refined sugar selling prices should remain strong in
fiscal 1997, but the benefits of this are not expected to offset the effect of
decreased volumes in the beet division.
Despite these difficulties, improved profitability in the cane refining
division, which represents about 85% of the Company's business, should exceed
reduced profitability in the beet division.
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PART II. OTHER INFORMATION
Item 5. Other Information - Statement on Business Risks and
Forward-Looking Information
Savannah Foods & Industries, Inc. generally does not make specific
projections about future income or provide other specific forward-looking
information. However, due to changes brought about by the Private Securities
Litigation Reform Act of 1995, we believe it is appropriate to outline several
key factors which impact our Company's future performance.
All phases of the Company's business are very competitive with the primary
competitors being other sugar cane refiners and beet sugar processors. Because
sugar is a commodity, competition is based primarily upon price, but is also
based upon product quality and customer service. Our Company is diversified
into all marketing and production (i.e. cane and beet) phases of the refined
sugar industry, but the majority of our capacity, approximately 85%, is cane
sugar, with the remaining 15% being beet sugar. Thus, our operating results
are influenced mostly by factors which affect the cane sugar industry.
Cane sugar refiners operate on large volumes and small margins.
Consequently, a small percentage change in sales prices or in the cost of our
raw materials or manufacturing costs can result in a large percentage change in
our income from operations.
In today's market, the primary driver of refined sugar sales prices is the
amount of beet sugar produced. A large amount of beet sugar generally means
lower prices as beet producers sell their larger production by undercutting the
prices of cane sugar refiners. The amount of beet sugar produced not only
affects selling prices, but also affects the per unit manufacturing costs of
the sugar industry. Many of the costs in the manufacturing process, whether
beet or cane, are fixed and must be divided among the actual production. As
volume increases or decreases, per unit manufacturing costs decrease or
increase, respectively. Thus, forecasting the amount of beet sugar which will
be produced is an essential element in predicting our income.
In addition to sales prices and per unit manufacturing costs, the other
primary factor in determining operating income is the cost of raw sugar, which
is by far the largest single cost of producing refined cane sugar. Raw sugar
is a commodity, and while we purchase it using many different pricing methods,
the price is always based in some manner on the market price of raw sugar as
determined by the commodities market. Thus, its price is subject to the
numerous variables that affect the price of any commodity. In general,
however, its price is supported at an artificially high level through the sugar
program portion of the U.S. Government's Farm Bill.
Forward looking information affecting the sugar industry should be
considered within this context.
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<PAGE> 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
27-1 Financial Data Schedule (for SEC use only)
</TABLE>
(b) Reports on Form 8-K, not applicable.
Page 14
<PAGE> 15
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 8, 1996 Secretary
By: /S/ Gregory H. Smith
------------------------------
Gregory H. Smith
Senior Vice President
Chief Financial Officer
Date: August 7, 1996 and Treasurer
Page 15
<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
JUNE 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-START> OCT-02-1995
<PERIOD-END> JUN-30-1996
<CASH> 19,766
<SECURITIES> 0
<RECEIVABLES> 74,397
<ALLOWANCES> 0
<INVENTORY> 145,344
<CURRENT-ASSETS> 249,887
<PP&E> 415,725
<DEPRECIATION> 214,680
<TOTAL-ASSETS> 478,836
<CURRENT-LIABILITIES> 149,800
<BONDS> 70,178
0
0
<COMMON> 17,365
<OTHER-SE> 155,766
<TOTAL-LIABILITY-AND-EQUITY> 478,836
<SALES> 842,675
<TOTAL-REVENUES> 842,675
<CGS> 758,636
<TOTAL-COSTS> 758,636
<OTHER-EXPENSES> 22,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,678
<INCOME-PRETAX> 9,883
<INCOME-TAX> 3,657
<INCOME-CONTINUING> 6,226
<DISCONTINUED> 0
<EXTRAORDINARY> (698)
<CHANGES> 0
<NET-INCOME> 5,528
<EPS-PRIMARY> .21
<EPS-DILUTED> 0
</TABLE>
