SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-16130
NORTHLAND CRANBERRIES, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1583759
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
800 First Avenue South
P.O. Box 8020
Wisconsin Rapids, Wisconsin 54495-8020
(Address of principal executive offices)
Registrant's telephone number, including area code (715)-424-4444
Former name, former address and former fiscal year, if changed since last
report.
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15 (d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the
latest practicable date:
Class A Common Stock March 31, 1997 13,155,300
Class B Common Stock March 31, 1997 636,202
NORTHLAND CRANBERRIES, INC.
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets . . . . . . . . . . 3
Condensed Consolidated Statements of Operations . . . . 4-5
Condensed Consolidated Statements of Cash Flow . . . . . . 6
Notes to Condensed Consolidated
Financial Statements . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 11
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . 12
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
(Unaudited)
February 28, August 31,
1997 1996
Current assets:
Cash and cash equivalents $ 1,481 $ 266
Accounts and notes receivable 8,883 2,631
Investments 1,260 1,260
Inventories 19,547 12,414
Other 829 922
Deferred income taxes 1,124 1,124
------- -------
Total current assets 33,124 18,617
------- -------
Property and equipment - at cost 158,337 141,098
Less accumulated depreciation 20,912 18,609
------- -------
Net property and equipment 137,425 122,489
Investments 58 1,260
Leasehold interests, net 1,118 1,197
Other 2,764 1,922
------- -------
Total assets $174,489 $145,485
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,950 $ 2,593
Accrued liabilities 7,328 5,914
Current portion of long-term obligations 3,603 3,560
------- -------
Total current liabilities 12,881 12,067
Long-term obligations 75,265 56,978
Deferred income taxes 8,134 7,381
------- -------
Total liabilities 96,280 76,426
------- -------
Shareholders' equity:
Common stock - Class A 132 127
Common stock - Class B 6 6
Additional paid-in capital 67,390 60,184
Retained earnings 10,681 8,742
------- -------
Total shareholders' equity 78,209 69,059
------- -------
Total liabilities and shareholders' equity $174,489 $145,485
======== ========
See accompanying notes to condensed consolidated financial statements.
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
For the 6 months
ended February 28,
1997 1996
Revenues $24,433 $25,684
Cost of sales 11,173 11,103
------- -------
Gross profit 13,260 14,581
Costs and expenses:
Selling, general and administrative 6,334 2,173
Interest 1,910 1,338
------- -------
Total costs and expenses 8,244 3,511
------- -------
Income before income taxes 5,016 11,070
Income taxes 1,988 4,351
------- -------
Net income $ 3,028 $ 6,719
======= =======
Net income per common share (based on
14,298,491 and 13,629,692 weighted average
common shares outstanding, respectively): $ 0.21 $ 0.49
======= =======
See accompanying notes to condensed consolidated financial statements.
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(Unaudited)
For the 3 months
ended February 28,
1997 1996
Revenues $13,513 $ 3,980
Cost of sales 6,498 1,812
------- -------
Gross profit 7,015 2,168
Costs and expenses:
Selling, general and administrative 3,369 1,192
Interest 1,115 722
------- -------
Total costs and expenses 4,484 1,914
------- -------
Income before income taxes 2,531 254
Income taxes 1,005 105
------- -------
Net income $ 1,526 $ 149
======= =======
Net income per common share (based on
14,402,266 and 13,677,212 weighted average
common shares outstanding, respectively): $ 0.11 $ 0.01
======= =======
See accompanying notes to condensed consolidated financial statements.
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
For the 6 months
ended February 28,
1997 1996
Cash flows from operating activities:
Net income $ 3,028 $ 6,719
Adjustments to reconcile net income to net cash
provided by (used for)operating activities:
Depreciation and amortization 2,445 1,905
Changes in assets and liabilities:
Receivables and other current assets (6,159) (17,446)
Inventories (7,133) 202
Accounts payable and accrued liabilities 1,227 141
Deferred income taxes 1,601 4,309
______ ______
Net cash used for operating
activities (4,991) (4,170)
______ ______
Investing activities:
Acquisitions of cranberry operations (7,025) --
Property and equipment additions, net (5,012) (6,298)
Investments 1,202 1,259
Other (762) (288)
______ ______
Net cash used for investing
activities (11,597) (5,327)
______ ______
Financing activities:
Increase in debt 18,330 5,733
Dividends paid (1,089) (926)
Net proceeds from common stock offering -- 4,021
Exercise of stock options 732 --
Other (170) 508
______ ______
Net cash provided by financing
activities 17,803 9,336
______ ______
Net decrease in cash and cash equivalents 1,215 (161)
Cash and cash equivalents:
Beginning of period 266 361
______ ______
End of period $ 1,481 $ 200
======= ======
Supplemental disclosures of cash flow information:
Cash paid for:
Interest (net of amount capitalized) $ 1,919 $1,290
======= ======
See accompanying notes to condensed consolidated financial statements.
NORTHLAND CRANBERRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The condensed consolidated financial statements included herein
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
the Company, the foregoing statements contain all adjustments necessary to
present fairly the financial position of the Company as of February 28,
1997, and its results of operations and cash flows for the three-month
periods ended February 28, 1997 and 1996, respectively. The Company's
consolidated balance sheet as of August 31, 1996 included herein has been
taken from the Company's audited financial statements of that date
included in the Company's latest annual report.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. It is
suggested that these condensed financial statements can be read in
conjunction with the financial statements and the notes thereto included
in the Company's latest annual report.
The Company periodically reviews long-lived assets to assess
recoverability and impairments will be recognized in operating results if
a permanent diminution in value were to occur.
NOTE 2 STOCK SPLIT
On June 26, 1996, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a 100% stock dividend
distributed on September 3, 1996 to shareholders of record on August 15,
1996. Shareholders' equity has been adjusted by reclassifying from
additional paid-in capital to common stock the par value of the additional
shares arising from the split. In addition, all references in the
financial statements to share and per share amounts for periods prior to
the distribution of the stock dividend have been restated to retroactively
reflect the stock dividend.
NOTE 3 ACQUISITIONS
On September 27, 1996 the Company acquired a 108-acre cranberry
property located in Northern Wisconsin. The total cost of the acquisition
was $4.9 million in cash and 169,014 shares of the Company's Class A
Common Stock. On December 30, 1996, the Company acquired a 73-acre
cranberry property located in Central Wisconsin. The total cost of the
acquisition was $2.2 million in cash and 100,000 shares of the Company's
Class A Common Stock.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In fiscal 1996 and prior years, the Company presold the majority
of its crop under fixed price contracts to cranberry product processors,
resulting in the majority of its annual revenues having been recorded
during the fiscal quarter in which the Company's fall harvest took place.
Historically, the Company's three fiscal quarters after the fall harvest
reflected either net losses or only nominal profits. However, as part of
the Company's pursuit of its "marsh to market" business strategy, during
the first quarter of fiscal 1997 the Company stored the majority of its
fiscal 1997 crop supply in its freezer facility so that it may be utilized
throughout the fiscal year in the manufacture of Northland 100% juice
cranberry blend products or for sale as contracted private label juice,
cranberry concentrate and whole frozen fruit. By controlling the timing
and use of its fruit supply throughout the entire year, the Company
anticipates being positioned to better take advantage of favorable market
conditions as they arise. As a result of this substantially changed
nature of the Company's business, comparisons between fiscal 1997 interim
results and results of the prior year's comparable periods are not
particularly meaningful or informative.
Total revenues for the three months ended February 28, 1997 were
$13.5 million compared to $4.0 million in the prior year's quarter. Total
revenues for the six months ended February 28, 1997 were $24.4 million
compared to $25.7 million during the same period in the prior fiscal year.
Sales of the Company's Northland 100% juice cranberry blends continued to
increase during the fiscal 1997 second quarter as the Company continued
its regional product roll-out strategy and also experienced sales growth
in existing markets. Due to favorable results in its current markets, the
Company has accelerated the geographic rollout of its branded juice line
to a national basis. The Company had previously planned to complete its
national rollout with its entry into the Northeast sector of the United
States in early to mid fiscal 1998. In addition to increasing the
distribution and sale of its branded juice products and exploring private
label sales opportunities, the Company continually evaluates the current
and potential future market conditions for spot market sales of
concentrate and bulk frozen fruit in order to best maximize the Company's
long-term profitability potential. Depending upon market conditions, this
strategy may result in some unpredictable volatility of revenue and net
income between fiscal quarters.
For the three- and six-month periods ended February 28, 1997,
cost of sales were $6.5 million and $11.2 million, respectively, or 48.1%
and 45.7% of total revenues for each respective period. During the same
periods in fiscal 1996, cost of sales were $1.8 million and $11.1 million,
respectively, or 45.5% and 43.2% of total revenues for each respective
period.
For the three- and six-month periods ended February 28, 1997,
selling, general and administrative expenses were $3.4 million and $6.3
million, respectively, or 24.9% and 25.9% of total revenues for each
respective period. During the same three- and six-month periods in fiscal
1996, selling, general and administrative expenses were $1.2 million and
$2.2 million, respectively, or 29.9% and 8.5% of total revenues for each
respective period. This expected increase between years in selling,
general and administrative expenses was primarily attributable to costs
related to the ongoing implementation of the Company's "marsh to market"
business strategy, including the continued rollout of its branded juice
product line. As the Company continues its national roll-out of its juice
products, it is likely that selling, general and administrative expenses,
as a percentage of total revenue, will increase. Interest expense was
$1.1 million for the three-month period ended February 28, 1997 compared
to $722,000 during the same period in fiscal 1996. For the six months
ended February 28, 1997, interest expense was $1.9 million compared to
$1.3 million during the same period in fiscal 1996. The increase in
interest expense was due to increased debt levels, which resulted from
funding marsh acquisitions, property and equipment additions and seasonal
operating activities.
The Company reported fiscal 1997 second quarter net income of
$1.5 million, or $0.11 per share . Fiscal 1996 second quarter net income
was $149,000, or $0.01 per share (on a post-stock split basis). For the
six-months ended February 28, 1997, the Company reported net income of
$3.0 million, or $0.21 per share. Fiscal 1996 net income was $6.7
million, or $0.49 per share. This anticipated increase in second quarter
net income and per share earnings and decrease in net income and per share
earnings for the six-month period were the result of the changing nature
of the Company's business, as described above.
FINANCIAL CONDITION
Net cash used for operating activities increased to $5.0 million
in the first six months of fiscal 1997 compared to $4.2 million used for
operating activities in the same period in fiscal 1996. The cash used for
operating activities was principally due to changes in receivables and
inventories as a result of the Company's changing business nature. In
fiscal 1996, the Company presold the majority of its crop under fixed
price contracts to cranberry product processors with resulting increased
revenues, increased receivables and decreased inventories recorded in the
fiscal 1996 first and second quarters. Under the Company's current marsh
to market business strategy, the Company has stored the majority of its
fiscal 1997 crop supply in its freezer facility to support future sales.
This has resulted in increased inventories and decreased receivables
compared to the end of the same period in the prior fiscal year. The
Company's current ratio was 2.57 to 1.00 at November 30, 1996 compared to
a current ratio of 1.54 to 1.00 at August 31, 1996.
Net cash used for investing activities increased during the six-
month period ended February 28, 1997 to $11.6 million from $5.3 million
during the same period in the prior fiscal year. The increase in fiscal
1997 investing activities was due primarily to the Company's acquisition
of two cranberry properties during the six-month period ended February 28,
1997. On September 27, 1996 the Company acquired a 108-acre cranberry
property located in Northern Wisconsin. The total cost of the acquisition
was $4.9 million in cash and 169,014 shares of the Company's Class A
Common Stock. On December 30, 1996, the Company acquired a 73-acre
cranberry property located in Central Wisconsin. The total cost of the
acquisition was $2.2 million in cash and 100,000 shares of the Company's
Class A Common Stock. Other fiscal 1997 property and equipment additions
were $5.0 million compared to property and equipment additions of $6.3
million in fiscal 1996.
Net cash provided by financing activities was $17.8 million in
the six-month period ended February 28, 1997, compared to $9.3 million
during the same period in the prior fiscal year. The increase was
primarily due to an $18.3 million increase in the Company's long-term
debt. The Company's debt increased as a result of financing the $7.1
million cash portion of its fiscal 1997 cranberry marsh acquisitions,
$5.0 million in property and equipment additions and $6.2 million for
seasonal operating activities. The Company's total debt (including
current portion) was $78.9 million at February 28, 1997 for a total debt-
to-equity ratio of 1.01 to 1 compared to total debt of $60.5 million and a
total debt-to-equity ratio of 0.88 to 1 at August 31, 1996. The Company
utilizes its revolving bank credit facility, together with cash generated
from operations, to fund its working capital requirements throughout its
fiscal year. As of February 28, 1997, the principal amount outstanding
under the Company's revolving credit facility was $29.8 million, with an
additional $15.2 million available under its credit facilities with a
syndicate of regional banks until September 1999. The Company believes
its credit facilities, together with cash generated from operations, are
sufficient to fund its ongoing operational needs over the remainder of
fiscal 1997.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Management's
Discussion and Analysis of Financial Condition and
Results of Operations are "forward-looking statements"
intended to qualify for the safe harbors from
liability established by the Private Securities
Litigation Reform Act of 1995. These forward-looking
statements can generally be identified as such because
the context of the statement will include such words
as the Company "believes," "anticipates," "expects,"
or words of similar import. Similarly, statements
that describe the company's future plans, objectives
or goals are also forward-looking statements. Such
forward-looking statements are subject to certain
risks and uncertainties which are described in close
proximity to such statements and which could cause
actual results to differ materially from those
currently anticipated. Shareholders, potential
investors and other readers are urged to consider
these factors carefully in evaluating the forward-
looking statements and are cautioned not to place undo
reliance on such forward-looking statements. The
forward-looking statements made herein are only made
as of the date of this Form 10-Q and the Company
undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent
events or circumstances.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 27 - Financial Data Schedule
b. Form 8-K
No reports on Form 8-K were filed by the Company during the
quarterly period to which this Form 10-Q relates.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned Chief Financial Officer thereunto duly authorized.
NORTHLAND CRANBERRIES, INC.
DATE: April 9, 1997 By: /s/ John Pazurek
John Pazurek
Chief Financial Officer
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule