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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 December 31, 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
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As of December 31, 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>
<CAPTION>
Part I. FINANCIAL INFORMATION: Page
----
<S> <C> <C>
Item 1. Financial Statements:
Consolidated Balance Sheets at
December 31, 1995 and October 1, 1995 3
Consolidated Statements of Operations
for the 13 weeks ended December 31, 1995
and January 1, 1995 4
Consolidated Statements of Cash Flows
for the 13 weeks ended December 31, 1995
and January 1, 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 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>
December 31, October 1,
1995 1995
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<S> <C> <C>
Assets
- ------
Current assets:
Cash and cash equivalents $ 8,542 $ 11,574
Accounts receivable 61,604 66,991
Inventories (net of LIFO reserve of $6,452
at December 31, 1995 and $10,460
at October 1, 1995 (Note 2) 213,755 103,121
Other current assets 12,628 16,116
-------- --------
Total current assets 296,529 197,802
Property, plant and equipment (net of accumulated
depreciation of $207,786 at December 31, 1995
and $206,100 at October 1, 1995) 225,920 230,891
Other assets 44,318 47,814
-------- --------
$566,767 $476,507
======== ========
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Short-term borrowings $ 45,070 $ 22,300
Current portion of long-term debt (Note 3) 6,321 6,300
Trade accounts payable 103,833 63,259
Dividends payable - 656
Accrued expenses related to beet operations 23,850 -
Other liabilities and accrued expenses 22,770 22,225
-------- --------
Total current liabilities 201,844 114,740
-------- --------
Long-term debt (Note 3) 106,240 106,864
-------- --------
Deferred employee benefits 86,228 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 12,190 12,190
Retained earnings 193,063 190,176
Treasury stock, at cost (5,068,604 shares) (31,275) (31,275)
Minimum pension liability adjustment (14,842) (14,842)
Note receivable from employee stock
ownership plan (3,540) (3,540)
Cumulative translation adjustment (506) (425)
-------- --------
Total stockholders' equity 172,455 169,649
-------- --------
Commitments and contingencies (Note 5) - -
-------- --------
$566,767 $476,507
======== ========
</TABLE>
(The accompanying notes are an integral part of the consolidated 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
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December 31, January 1,
1995 1995
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<S> <C> <C>
Net sales $304,409 $282,578
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Operating expenses:
Cost of sales and
operating expenses 276,472 253,629
Selling, general and
administrative expenses 13,785 13,595
Depreciation and
amortization 7,116 6,894
-------- --------
297,373 274,118
-------- --------
Income from operations 7,036 8,460
-------- --------
Other income and expenses:
Interest and other
investment income 236 527
Interest expense (3,359) (3,572)
Other 1,537 101
-------- --------
(1,586) (2,944)
-------- --------
Income before income taxes 5,450 5,516
Provision for income taxes (1,907) (1,898)
-------- --------
Net income $ 3,543 $ 3,618
======== ========
Per share:
Net income (Note 4) $ .14 $ .14
======== ========
Dividends $ .025 $ .135
======== ========
</TABLE>
(The accompanying notes are an integral part of the consolidated 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
-------------------------
December 31, January 1,
1995 1995
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(In thousands of dollars)
<S> <C> <C>
Cash flows from operations:
Net income $ 3,543 $ 3,618
Adjustments to reconcile net income to net
cash provided by operations -
Depreciation and amortization 7,116 6,894
Provision for deferred income taxes - (858)
Net (gain) loss on disposal of assets (1,536) 32
Changes in balance sheet accounts -
Accounts receivable 5,387 9,290
Inventories (110,634) (134,180)
Other current assets 3,488 1,198
Trade accounts payable 40,574 49,354
Income taxes accrued - 2,370
Accrued expenses related to beet operations 23,850 21,400
Other liabilities and accrued expenses 545 3,176
Other 879 977
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Cash used for operations (26,788) (36,729)
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Cash flows from investing activities:
Additions to property, plant and equipment (2,014) (4,185)
Proceeds from sale of property, plant and
equipment 2,417 182
Acquisition of investments - (1,001)
Change in escrow balances related to
industrial revenue bonds 2,862 (21)
Other (247) (62)
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Cash provided by (used for) investing activities 3,018 (5,087)
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Cash flows from financing activities:
Increase in short-term borrowings 22,770 49,068
Payments of long-term debt (603) (20,448)
Dividends paid (1,312) (7,084)
Other (117) (24)
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Cash provided by financing activities 20,738 21,512
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Cash flows for period (3,032) (20,304)
Cash and cash equivalents, beginning of period 11,574 28,436
------- -------
Cash and cash equivalents, end of period $ 8,542 $ 8,132
======= =======
</TABLE>
(The accompanying notes are an integral part of the consolidated 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>
December 31, October 1,
1995 1995
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(In thousands of dollars)
<S> <C> <C>
Raw materials and work-in-process......... $ 86,384 $ 46,533
Packaging materials, parts and supplies... 23,443 26,245
Finished goods............................ 103,928 30,343
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$213,755 $103,121
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</TABLE>
(3) Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31, October 1,
1995 1995
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(In thousands of dollars)
<S> <C> <C>
Senior notes - $47,857 Series A at 8.35%
and $12,143 Series B at 7.15%........... $ 60,000 $ 60,000
Long-term debt supported by revolving
credit facilities with banks............ 10,000 10,000
Notes payable to banks related to the ESOP 14,100 14,100
Industrial revenue bonds.................. 22,500 22,500
Other long-term debt...................... 5,961 6,564
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112,561 113,164
Less - Current portion.................... (6,321) (6,300)
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$106,240 $106,864
======== ========
</TABLE>
The Company's most restrictive loan covenants are included in its
Senior Notes and require maintenance of a minimum net worth and a minimum
income level in relation to interest expense. At December 31, 1995, the
Company was not in compliance with these covenants, but has obtained
amendments which allow the Company to comply with the amended terms of the
agreement. Discussions between the Company and the Senior Note lenders are
occurring and the Company expects to amend the terms of this debt. Under
the terms of the Company's revolving credit facilities, the Company has
the ability to refinance the Senior Notes if it is in compliance with the
covenants contained in the revolving credit agreements. The Company was
in compliance with the terms of the revolving credit facilities as of
December 31, 1995. In the event that the Company is not in compliance with
the terms of the covenants in its revolving credit facilities, the Company
believes it will be able to obtain the appropriate waivers. In the event
that waivers are not obtained related to the revolving credit facilities,
the agreements would likely be modified. If not modified, the agreements
also provide an option to the revolving credit lenders to accelerate the
repayment of this indebtedness.
Page 6 of 12 pages
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(4) Earnings per share for fiscal 1996 and 1995 are based on weighted average
outstanding shares of 26,238,196 for the 13 weeks ended December 31, 1995
and January 1, 1995.
(5) 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 December 31, 1995, 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 monies
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.
During the fourth quarter of fiscal 1995, the Company paid $4,550,000
to National Utility Services, Inc. (NUS) as a result of a ruling by the
United States District Court for the District of New Jersey. The Company
pursued an appeal of this decision to the U.S. Supreme Court but during
January 1996 was denied a petition for appeal. The matter is therefore
fully resolved.
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, defined as non-cash assets and non-interest
bearing liabilities excluding dividends payable, increased $36,790,000 from the
end of fiscal 1995. Inventory, net of trade payables and accrued beet
expenses, increased $46,210,000 from October 1, 1995 as a result of seasonal
factors at Michigan Sugar and Raceland Sugars. Short-term borrowings increased
$22,770,000 and were used to fund a portion of the increased investment in
inventory.
The Company maintains revolving credit facilities to provide liquidity for
short-term operating needs. The Company also has the ability to fund seasonal
increases in inventory through borrowings from the Commodity Credit
Corporation. These two sources of short-term funds provide ample liquidity to
the Company to meet its operating cash requirements.
Capital Resources
Long-term debt payments were $603,000 since October 1, 1995. Changes in
debt and equity resulted in a decrease in the ratio of long-term debt to total
capital from 39% to 38%. At December 31, 1995, the Company had $140,000,000 in
revolving credit facilities with banks, of which $10,000,000 was outstanding as
long-term debt. The remaining available balance of $130,000,000 is intended to
meet working capital and other cash needs as they arise. All of the
$140,000,000 of available facilities are committed through January 1, 1999.
The revolving credit facilities, in general, enable the Company to borrow funds
at LIBOR plus 1/2%. Additionally, at December 31, 1995, Raceland Sugars and
Michigan Sugar had outstanding borrowings from the Commodity Credit Corporation
of $45,070,000.
The Company is in the process of liquidating approximately $13,000,000 of
the cash surrender value of Company owned life insurance policies. This asset
is included in "Other Assets". By the end of fiscal 1996, the Company expects
to use the proceeds from these policies, plus other sources of funds, to reduce
long-term debt. These payments, plus payments of long-term debt due in 1996 of
$6,300,000, should reduce total long-term debt to less than $95,000,000 by the
end of this fiscal year.
The Company's most restrictive loan covenants are included in its Senior
Notes as discussed in Note 3 to the consolidated financial statements. These
covenants require maintenance of a minimum net worth and a minimum income level
in relation to interest expense. At December 31, 1995, the Company was not in
compliance with these covenants, but has obtained amendments which allow the
Company to comply with the amended terms of the agreement. Discussions between
the Company and the Senior Note lenders are occurring and the Company expects
to amend the terms of this debt. Under the terms of the Company's revolving
credit facilities, the Company has the ability to refinance the Senior Notes if
it is in compliance with the covenants contained in the revolving credit
Page 8 of 12 pages
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agreements. The Company was in compliance with the terms of the revolving
credit facilities as of December 31, 1995. In the event that the Company is
not in compliance with the terms of the revolving credit facilities, the
Company believes it will be able to obtain the appropriate waivers. In the
event that waivers are not obtained related to the revolving credit facilities,
the agreements would likely be modified. If not modified, the agreements also
provide an option to the revolving credit lenders to accelerate the repayment
of this indebtedness.
Stockholders' equity was $172,455,000 at December 31, 1995 compared to
$169,649,000 at October 1, 1995. Equity increased as a result of earnings of
$3,543,000 and decreased primarily as a result of dividends of $656,000.
Fixed asset additions during the quarter ended December 31, 1995 were
$2,014,000 compared to depreciation for the same period of $6,531,000. The
capital expenditures were primarily made to upgrade and install packaging and
production equipment. These expenditures 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 quarter ended December 31, 1995 was
$3,543,000, or $.14 per share, compared to income of $3,618,000, or $.14 per
share, for the quarter ended January 1, 1995. Income from operations decreased
$1,424,000 from the same quarter last year. This decrease was primarily at
Michigan Sugar as insect damage and a summer drought have reduced sugar beet
yields and sugar content significantly from the same period last year. Other
income is up $1,436,000 when compared to last year resulting from a gain on
assets disposed of in conjunction with cost reductions the Company is making.
Savannah Foods Industrial, which includes our cane refineries and industrial
products division, reported lower income from operations as sales margins were
down from the same period last year. Sugar sales volume was up slightly
compared to last year while manufacturing costs per cwt. were down as a result
of an ongoing cost reduction program.
Michigan Sugar had significantly lower operating income as manufacturing
costs per cwt. increased due to reduced sugar beet yields and sugar content.
Sugar sales volume was up 11% from the prior year while sugar sales prices were
level with last year.
Dixie Crystals(R) Brands, our foodservice and retail sales division, showed
a slight decrease in operating income compared to the same quarter last year.
Retail sugar sales volumes and prices increased over the previous year while
foodservice sugar sales volumes were equal to last year. Higher raw sugar
costs compared to the same quarter last year somewhat offset the higher sales
prices. Foodservice and retail non-sugar sales volumes increased as these
product lines continue to expand.
Page 9 of 12 pages
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Raceland Sugars, our raw cane sugar mill, showed a increase in operating
income as both volume and selling prices are up from last year. Raceland's
processing campaign was completed during the quarter with an increase in raw
sugar production and cane tonnage over last year.
Selling, general and administrative expenses increased 1%, or $190,000, due
to higher sales volume at Michigan Sugar offset by reductions in administrative
expenses resulting from the Company's cost cutting program.
The outcome of the 1995 Farm Bill remains uncertain. The Farm Bill is
currently part of the Budget Reconciliation Act which is still being debated in
Washington. If the negotiations on the Budget Reconciliation Act break down,
the Farm Bill could be brought up separately later in the spring. Another
possibility is that the current Farm Bill could be extended. At this time, the
Company is unable to predict the final outcome of the Farm Bill and the impact
it will have on the future results of operations and the financial condition of
the Company.
Statements regarding future market prices and other statements above which
are not historical facts are forward- looking statements that involve risks and
uncertainties, including, but not limited to, market factors, the effect of
weather and economic conditions, farm and trade policy, the available supply of
sugar and other factors not controlled by the Company.
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 12, 1996 SECRETARY
BY: /S/Gregory H. Smith
---------------------------
GREGORY H. SMITH
SENIOR VICE PRESIDENT
CHIEF FINANCIAL OFFICER
DATE: FEBRUARY 13, 1996 AND TREASURER
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
DECEMBER 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-END> DEC-31-1995
<CASH> 8,542
<SECURITIES> 0
<RECEIVABLES> 61,604
<ALLOWANCES> 0
<INVENTORY> 213,755
<CURRENT-ASSETS> 296,529
<PP&E> 433,706
<DEPRECIATION> 207,786
<TOTAL-ASSETS> 566,767
<CURRENT-LIABILITIES> 201,844
<BONDS> 106,240
0
0
<COMMON> 17,365
<OTHER-SE> 155,090
<TOTAL-LIABILITY-AND-EQUITY> 566,767
<SALES> 304,409
<TOTAL-REVENUES> 304,409
<CGS> 276,472
<TOTAL-COSTS> 276,472
<OTHER-EXPENSES> 7,116
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,359
<INCOME-PRETAX> 5,450
<INCOME-TAX> 1,907
<INCOME-CONTINUING> 3,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,543
<EPS-PRIMARY> .14
<EPS-DILUTED> 0
</TABLE>
