SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING
SUBMITTED PURSUANT TO RULE 901(d) OF REGULATION S-T
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1994 Commission File Number 0-13943
---------------- -------
STOKELY USA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0513230
- - ---------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1055 Corporate Center Drive, Oconomowoc, WI 53066
- - --------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (414) 569-1800
--------------
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
------ ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class Outstanding at August 12, 1994
- - ------------------------ -------------------------------
Common Stock, 8,324,645 Shares
$.05 par value per share
Page 1 of 13
STOKELY USA, INC. AND SUBSIDIARIES
INDEX
PAGE NO.
--------
PART I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - 3-4
June 30, 1994, June 30, 1993 and
March 31, 1994
Consolidated Condensed Statements of 5
Operations - Three Months Ended
June 30, 1994 and 1993
Consolidated Condensed Statements of 6
Cash Flow - Three Months Ended
June 30, 1994 and 1993
Notes to Consolidated Condensed Financial 7
Statements
Item 2. Management's Discussion and Analysis 8-10
of Financial Condition and Results
of Operations
PART II. Other Information
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Default Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of 11
Security Holders
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Page 2 of 13
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
---------------------------------------
(Dollars in thousands)
June 30, June 30, March 31,
1994 1993 1994
(unaudited) (unaudited) (note)
ASSETS ------------ ----------- ---------
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ 2,989 $ 1,210 $ 2,898
Accounts receivable, less
allowance of $337, $469 and $385,
respectively 13,218 19,744 20,817
Refundable income taxes 785 873 1,979
Inventories: Finished Products 51,339 80,228 50,256
Raw Materials 6,505 8,263 5,000
Prepaid Expenses 1,039 1,484 1,983
---------- --------- --------
Total Current Assets 75,875 111,802 82,933
OTHER ASSETS:
Property held for disposition (net) 3,541 8,951 3,541
Trademarks 819 898 838
Other 3,558 5,060 3,867
---------- --------- --------
Total Other Assets 7,918 14,909 8,246
PROPERTY, PLANT & EQUIPMENT, at cost 100,000 93,634 97,428
Less accumulated depreciation 31,949 25,749 30,072
---------- --------- --------
68,051 67,885 67,356
---------- --------- --------
TOTAL ASSETS $151,844 $194,596 $158,535
========== ========= ========
See accompanying notes to consolidated condensed financial statements
(unaudited).
Note: The balance sheet at March 31, 1994 has been condensed from the
audited financial statements at that date. The balance sheet at
June 30, 1993 has been reclassified for comparative purposes.
Page 3 of 13
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
(Dollars in thousands)
June 30, June 30, March 31,
1994 1993 1994
(unaudited) (unaudited) (note)
----------- ----------- ---------
LIABILITIES & STOCKHOLDER'S EQUITY
- - ----------------------------------
CURRENT LIABILITIES:
Notes payable $ 5,981 $ 14,101 $ 17,992
Accounts payable 19,312 24,080 13,867
Current maturities on long-
term debt 3,868 2,259 3,868
Other current liabilities 4,585 8,810 5,135
--------- --------- ---------
33,746 49,250 40,862
Additional long-term debt
classified as a current
liability 26,195
--------- --------- ---------
Total Current Liabilities 33,746 75,445 40,862
LONG-TERM LIABILITIES:
Long-term debt, less current
maturities 80,384 82,798 80,438
OTHER LIABILITIES: 4,667 6,959 4,595
STOCKHOLDER'S EQUITY:
Capital stock 422 422 422
Additional paid-in capital 18,665 18,638 18,661
Retained earnings 14,588 11,011 14,181
Treasury stock at cost (628) (677) (624)
--------- --------- ---------
Total Stockholder's Equity 33,047 29,394 32,640
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $151,844 $194,596 $158,535
========= ========= =========
See accompanying notes to consolidated condensed financial statements
(unaudited).
Note: The balance sheet at March 31, 1994 has been condensed from the
audited financial statements at that date. The balance sheet at
June 30, 1993 has been reclassified for comparative purposes.
Page 4 of 13
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
-----------------------------------------------
(Dollars in thousands except per share amounts)
(unaudited)
Three Months Ended
June 30,
1994 1993
---- ----
REVENUE:
- - --------
Net Sales $ 38,818 $ 56,357
Other 13 246
--------- ---------
Total Revenues 38,831 56,603
COST AND EXPENSES:
- - ------------------
Cost of products sold 30,243 51,152
Selling, general & administrative expenses 5,698 8,303
Interest 2,375 3,267
--------- ---------
Total Cost and Expenses 38,316 62,722
EARNINGS (LOSS) BEFORE INCOME TAX (CREDIT) 515 (6,119)
INCOME TAXES (CREDIT) 108 (734)
--------- ---------
NET EARNINGS (LOSS) $ 407 $ (5,385)
========= =========
NET EARNINGS (LOSS) PER COMMON SHARE $ .05 $ (.65)
====== =======
WEIGHTED AVERAGE SHARES OUTSTANDING 8,324,645 8,301,591
========= =========
See accompanying notes to consolidated condensed financial statements
(unaudited).
Page 5 of 13
STOKELY USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Three Months Ended
June 30,
1994 1993
---- ----
Net cash provided by operating activities $ 14,899 $ 18,497
-------- --------
Cash flows from investing activities:
Purchase of property, plant and equipment (2,572) (1,959)
Proceeds from disposal of property, plant
and equipment 710
Increase in other assets - net (171) (78)
------- -------
Net cash used in investing activities (2,743) (1,327)
------- -------
Cash flows from financing activities:
Change in short-term debt - net (12,011) (17,157)
Payments of long-term debt (54) (56)
Capital stock transactions - net 2
--------- --------
Net cash used in financing activities (12,065) (17,211)
--------- --------
Net increase (decrease) in cash and
cash equivalents 91 (41)
Cash and cash equivalents at beginning
of period 2,898 1,251
--------- --------
Cash and cash equivalents at end of period $ 2,989 $ 1,210
========= ========
See accompanying notes to consolidated financial statements (unaudited).
Page 6 of 13
STOKELY USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. In the opinion of management, the accompanying unaudited
consolidated condensed financial statements contain all normal and
recurring adjustments necessary to present fairly Stokely USA, Inc.'s
consolidated condensed balance sheets as of June 30, 1994 and 1993, and
March 31, 1994, the consolidated condensed statements of operations for
the three month periods ended June 30, 1994 and 1993, and the
consolidated condensed statements of cash flow for the three month
periods then ended.
The results of operations for the three months ended June 30, 1994 are
not necessarily indicative of the results to be expected for the full
year. For interim reporting purposes, certain expenses are based on
estimates rather than expenses actually incurred. The unaudited interim
consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
for the fiscal year ended March 31, 1994, included in the Company's Form
10-K filed with the Securities and Exchange Commission.
The accounting policies followed by the Company are described in Note A
of the financial statements, located on Page 33 of the Company's Form
10-K for the year ended March 31, 1994.
2. During the fourth quarter of fiscal year 1994, the Company changed
it's method of valuing it's inventories from the last-in, first-out
(LIFO) method to the average cost method. Management believes that the
average cost method provides a more meaningful presentation of the
Company's financial position and related financial ratios. In
accordance with generally accepted accounting principles, prior
financial statements have been retroactively adjusted to reflect this
change. The effect of the restatement was to increase inventories and
retained earnings by $5,399,000 at June 30, 1993, from the previously
reported amounts. The change in accounting method had no effect on the
previously reported net loss for the quarter ended June 30, 1993.
3. Supplemental cash flow disclosures: Cash payments for interest
were $2,210,000 and $3,854,000 for the three months ended June 30, 1994
and 1993 respectively. Net refunds of income taxes were $1,086,000 and
$3,730,000 for the three months ended June 30, 1994 and 1993
respectively.
Page 7 of 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
---------------------
The following is management's discussion and analysis of certain
significant factors which have affected the Company's operations during
the periods included in the accompanying (unaudited) consolidated
condensed statements of operations and balance sheets.
FINANCIAL CONDITION
Liquidity and Capital Resources
- - -------------------------------
Working capital and current ratio are two financial measurements which
provide an indication of the Company's ability to meet it's short-term
obligations. These measures at June 30, 1994, June 30, 1993, and
March 31, 1994 were as follows:
June 30, June 30, March 31,
1994 1993 1994
-------- --------- ---------
Working Capital $42,129 $36,357 $42,071
Current ratio 2.25 1.48 2.03
Major changes in current asset and liability components included
inventories, accounts receivable and short-term debt. As a result of the
Company's restructuring program and the poor growing season during
fiscal year 1994, finished goods inventories declined by $28,889,000
from $80,228,000 to $51,339,000 at June 30, 1993 and June 30, 1994
respectively. Accounts receivable declined $6,526,000 from $19,744,000
at June 30, 1993 to $13,218,000 at June 30, 1994 due to the lower level
of sales in the first three months of fiscal year 1995 caused primarily
by limited product availability. Cash generated from the current asset
reductions were primarily utilized to reduce accounts payable by
$4,768,000 and notes payable by $26,120,000, including a decrease of
$18,000,000 in revolving credit classified as long-term.
Working capital increased $5,772,000 when comparing June 30, 1993 to
June 30, 1994. The majority of this improvement was due to an
$8,195,000 reduction in short-term debt resulting from a $26,195,000
reclassification of certain Industrial Revenue Bonds from current to
long term, offset by a $18,000,000 reduction in the portion of revolving
credit that was previously classified as long-term. A detailed
discussion of the Company's debt can be found in Note F to the
Consolidated Financial statements dated March 31, 1994 which were filed
with the Securities and Exchange Commission on Form 10-K.
Page 8 of 13
Due to the seasonal production nature of the canned and frozen vegetable
processing business, the Company must maintain substantial inventories
of processed vegetables throughout the year. These working capital
requirements are financed primarily through short-term borrowings and
deferred payment terms with major raw product and container suppliers.
The Company currently has in place a loan and security agreement that
provides a revolving credit facility of up to $100,000,000 for this
purpose. Maximum borrowings under this facility were $35,358,000 and
$68,872,000 for the three months ended June 30, 1994 and June 30, 1993
respectively and are projected to peak at less than $60,000,000 during
fiscal 1995.
Management believes that the completion of the Company's restructuring
program which was initiated in fiscal 1993 will further improve the
Company's financial position and facilitate more profitable operations
in future periods.
RESULTS OF OPERATIONS
Sales
- - -----
The Company began fiscal year 1995 with lower inventories due to lower
canned vegetable production caused by a poor growing season during
fiscal year 1994, combined with a restructuring related inventory
reduction due to discontinuance of certain marginally profitable product
lines in both the canned and frozen divisions. The limited availability
of canned product and the elimination of certain product lines reduced
total sales for the first three months of fiscal 1995 by $17,539,000,
from $56,357,000 for the three months ended June 30, 1993 to $38,818,000
for the three months ended June 30, 1994.
Sales of canned vegetables were down approximately 24% or $9,265,000,
from $38,099,000 for the three months ended June 30, 1993 to $28,834,000
for the three months ended June 30, 1994. Sales of canned private label
products declined approximately $4,678,000 to $21,526,000 (75% of total
canned sales) for the three months ended June 30, 1994, compared to
$26,204,000 (69% of total canned sales) for the three months ended
June 30, 1993. The decline in private label sales was the result of an
approximate $10,100,000 reduction in sales due to lower sales volume,
offset by an approximate $5,422,000 increase in sales due to improved
pricing. Sales of canned brand products declined approximately
$4,587,000 to $7,308,000 (25% of total canned sales) compared to
$11,895,000 (31% of total canned sales) for the three months ended June
30, 1993. Substantially all of the decline in brand sales was due to
lower sales volumes.
Frozen sales declined $8,274,000 from $18,258,000 to $9,984,000 for the
three months ended June 30, 1993 and 1994, respectively. Substantially
all of this decline was the result of a 44% reduction in frozen sales
volume. This reduction in volume was primarily the result of the
elimination of certain low margin frozen products as part of the
Company's restructuring program. Sales in the frozen division are now
focused primarily in the Industrial and Food Service markets.
Page 9 of 13
Frozen Food Service and Industrial sales decreased $4,966,000 to
$7,956,000 from $12,922,000 for the three months ended June 30, 1994 and
1993 respectively due to the elimination of certain marginally
profitable product lines. As a percentage of total frozen sales, Frozen
Food Service and Industrial increased to 80% from 71% for the three
months ended June 30, 1994 and 1993 respectively.
Operating Costs and Expenses
- - ----------------------------
Cost of products sold as a percent of sales decreased to 78% from 91%
when comparing the three months ended June 30, 1994 and 1993
respectively. The decrease in cost of goods sold as a percent of sales
was due to higher selling prices, the elimination of certain low margin
products, and cost reductions resulting from the Company's restructuring
programs. Cost of products sold decreased $20,909,000 from $51,152,000
for the three months ended June 30, 1993 to $30,243,000 for the three
months ended June 30, 1994. The decrease in cost of goods sold was due
primarily to lower sales, offset in part by slightly higher per unit
direct variable costs in the canned division as a result of below normal
production during fiscal 1994.
Selling, general and administrative expense declined by $2,605,000, from
$8,303,000 for the three months ended June 30, 1993 to $5,698,000 for
the three months ended June 30, 1994. This reduction was primarily the
result of lower promotional expenses associated with lower brand sales
volumes, combined with a reduction in certain general and administrative
costs resulting from the Company's restructuring program.
Interest Expense
- - ----------------
Interest expense decreased $892,000 to $2,375,000 during the three
months ended June 30, 1994 compared to $3,267,000 for the same period of
fiscal year 1994. This reduction was primarily the result of lower
short term borrowings resulting from lower working capital requirements.
Net Income (Loss)
- - -----------------
Net income for the three months ended June 30, 1994 of $407,000
represented the fourth consecutive profitable quarter for the Company.
The significant improvement in earnings in the three months ended
June 30, 1994 compared to the net loss of $5,385,000 reported for the
three months ended June 30, 1993 was due primarily to improved margins
resulting from higher market pricing, elimination of marginally
profitable product lines, and reduced costs and expenses.
Page 10 of 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
Page 11 of 13
STOKELY USA, INC.
SIGNATURES
----------
Pursuant to the requirement 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.
STOKELY USA, INC.
-------------------------
Registrant
Date August 12, 1994 /s/ Stephen W. Theobald
--------------- -------------------------
Stephen W. Theobald
Vice Chairman
Date August 12, 1994 /s/ Leslie J. Wilson
--------------- -------------------------
Leslie J. Wilson
Vice President - Finance
(Principal Financial Officer)
Page 12 of 13
STOKELY USA, INC.
SIGNATURES
----------
Pursuant to the requirement 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.
STOKELY USA, INC.
-------------------------
Registrant
Date August 12, 1994
--------------- -------------------------
Stephen W. Theobald
Vice Chairman
Date August 12, 1994
--------------- -------------------------
Leslie J. Wilson
Vice President - Finance
(Principal Financial Officer)
Page 13 of 13