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 April 2, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-11420
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SAVANNAH FOODS & INDUSTRIES, INC.
- - --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Delaware 58-1089367
- - ------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 339, Savannah, Georgia 31402
- - --------------------------------------------------------------------------------
(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
----- -----
As of April 2, 1995, there were 26,238,196 shares of common stock of Savannah
Foods & Industries, Inc. outstanding.
The exhibit index is located on page 10 of this filing.
Page 1 of 25 pages
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SAVANNAH FOODS & INDUSTRIES, INC.
INDEX
Part I. FINANCIAL INFORMATION: Page
----
Item 1. Financial Statements:
Consolidated Balance Sheets at
April 2, 1995 and October 2, 1994 3
Consolidated Statements of Operations
for the 13 weeks ended April 2, 1995
and April 3, 1994 and the 26 weeks ended
April 2, 1995 and April 3, 1994 4
Consolidated Statements of Cash Flows
for the 26 weeks ended April 2, 1995
and April 3, 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis
of the Company's Financial Position
and Results of Operations 8
Part II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of
Securities Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
Exhibit 3-1 By-Laws, as amended 12
Exhibit 27-1 Financial Data Schedule 25
(for SEC use only)
Page 2 of 25 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)
April 2, October 2,
1995 1994
-------- ----------
Assets
- - ------
Current assets:
Cash and cash equivalents $ 10,500 $ 28,436
Accounts receivable 56,489 75,776
Inventories (net of LIFO reserve of $8,661
in 1995 and $8,889 in 1994) (Note 3) 190,494 85,340
Other current assets 21,970 9,328
-------- --------
Total current assets 279,453 198,880
Property, plant and equipment (net of accumulated
depreciation of $194,217 in 1995 and
$180,810 in 1994) 238,600 241,885
Other assets 48,661 45,362
-------- --------
$566,714 $486,127
======== ========
Liabilities and Stockholders' Equity
- - ------------------------------------
Current liabilities:
Short-term borrowings $ 45,000 $ -
Current portion of long-term debt (Note 4) 7,177 1,643
Trade accounts payable 91,010 56,953
Dividends payable 3,542 3,542
Income taxes accrued 3,792 -
Accrued expenses related to beet operations 20,864 -
Other liabilities and accrued expenses 25,182 23,002
-------- --------
Total current liabilities 196,567 85,140
-------- --------
Long-term debt (Note 4) 112,441 140,224
-------- --------
Deferred employee benefits 74,504 72,589
-------- --------
Stockholders' equity:
Common stock $.25 par value; $.55 stated value;
64,000,000 shares authorized; 31,306,800 shares
issued 17,365 17,365
Capital in excess of stated value 12,190 12,190
Retained earnings 196,672 202,065
Minimum pension liability adjustment (8,210) (8,210)
-------- --------
218,017 223,410
Less - Treasury stock, at cost (5,068,604 shares) 31,275 31,275
- Note receivable from employee stock
ownership trust 3,540 3,961
-------- --------
Total stockholders' equity 183,202 188,174
-------- --------
Commitments and contingencies (Note 7) - -
-------- --------
$566,714 $486,127
======== ========
(The accompanying notes are an integral part of the financial statements.)
Page 3 of 25 pages
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Savannah Foods & Industries, Inc.
Consolidated Statements of Operations
(In thousands of dollars except for per share amounts)
(Unaudited)
For the 13 Weeks Ended For the 26 Weeks Ended
---------------------- ----------------------
April 2, April 3, April 2, April 3,
1995 1994 1995 1994
-------- -------- -------- --------
Net sales $253,377 $247,005 $535,854 $527,191
-------- -------- -------- --------
Operating expenses:
Cost of sales and
operating expenses 232,470 224,697 486,099 473,904
Selling, general and
administrative expenses 13,054 13,639 26,548 28,523
Depreciation and
amortization 7,516 7,056 14,410 14,834
-------- -------- -------- --------
253,040 245,392 527,057 517,261
-------- -------- -------- --------
Income from operations 337 1,613 8,797 9,930
-------- -------- -------- --------
Other income and expenses:
Interest and other
investment income 361 1,035 888 1,441
Interest expense (Note 4) (3,819) (3,361) (7,391) (6,751)
Other (13) 158 88 240
-------- -------- -------- --------
(3,471) (2,168) (6,415) (5,070)
-------- -------- -------- --------
Income (loss) before income
taxes (3,134) (555) 2,382 4,860
(Provision for) benefit from
income taxes (Note 5) 1,207 284 (691) (1,590)
-------- -------- -------- --------
Net income (loss) $ (1,927) $ (271) $ 1,691 $ 3,270
======== ======== ======== ========
Per share:
Net income (loss) (Note 6) $ (.07) $ (.01) $ .07 $ .12
======== ======== ======== ========
Dividends $ .135 $ .135 $ .27 $ .27
======== ======== ======== ========
(The accompanying notes are an integral part of the financial statements.)
Page 4 of 25 pages
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Savannah Foods & Industries, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
For the 26 Weeks Ended
-----------------------
April 2, April 3,
1995 1994
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(In thousands of dollars)
Cash flows from operations:
Net income $ 1,691 $ 3,270
Adjustments to reconcile net income to net
cash provided by operations -
Depreciation and amortization 14,410 14,834
Provision for deferred income taxes (9,398) (9,230)
Other 70 (93)
Changes in balance sheet accounts -
Accounts receivable 19,287 33,466
Inventories (105,154) (66,375)
Other current assets (4,107) 4,051
Trade accounts payable 34,057 (10,713)
Income taxes accrued 3,792 929
Accrued expenses related to beet operations 20,864 23,494
Other liabilities and accrued expenses 2,180 445
Other 1,570 1,928
--------- --------
Cash used for operations (20,738) (3,994)
--------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (9,423) (13,193)
Proceeds from sale of property, plant and
equipment 202 247
Acquisition of business (Note 2) (7,050) -
Liquidation of short-term investments
included in "Other current assets" - 19,226
Changes in escrow balances related to
industrial revenue bonds 5,464 3,743
Other (2,388) (2,425)
--------- --------
Cash (used) provided by investing activities (13,195) 7,598
--------- --------
Cash flows from financing activities:
Increase in short-term borrowings 45,000 6,600
Payments of long-term debt (22,249) (1,209)
Collection of note receivable from
employee stock ownership trust 500 -
Dividends declared to stockholders (7,084) (7,084)
Other (170) 43
--------- --------
Cash provided (used) by financing activities 15,997 (1,650)
--------- --------
Cash flows for period (17,936) 1,954
Cash and cash equivalents, beginning of period 28,436 7,481
--------- --------
Cash and cash equivalents, end of period $ 10,500 $ 9,435
========= ========
(The accompanying notes are an integral part of the financial statements.)
Page 5 of 25 pages
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Savannah Foods & Industries, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(1) The information furnished reflects all adjustments (consisting of only
normal recurring accruals) which are, in the opinion of Management,
necessary for a fair statement of the results for the interim periods.
These consolidated financial statements should be read in conjunction with
the financial statements and the notes thereto included in the Company's
latest annual report on Form 10-K. Certain prior year amounts have been
reclassified to conform to current year presentation.
(2) On January 31, 1995, the Company acquired certain assets of Reckitt and
Colman, Inc., which are used in the manufacture, sale and distribution of
filled plastic salt and pepper shakers for $7,050,000 in cash. The
transaction was accounted for using the purchase method and resulted in
$6,050,000 of goodwill, which represents the excess of the purchase price
over the fair market value of the assets acquired.
(3) A summary of inventories by class is as follows:
April 2, October 2,
1995 1994
-------- ----------
(In thousands of dollars)
Raw materials and work-in-process.......... $ 52,456 $26,924
Packaging materials, parts and supplies.... 27,609 27,115
Finished goods............................. 110,447 31,301
Costs related to future
inventory purchases...................... (18) -
-------- -------
$190,494 $85,340
======== =======
(4) Long-term debt is summarized as follows:
April 2, October 2,
1995 1994
-------- ----------
(In thousands of dollars)
Senior notes - $50,000 Series A at 8.35%
and $20,000 Series B at 7.15%
payable through 2002..................... $ 70,000 $ 70,000
Long-term debt supported by revolving
credit facilities with banks............. - 20,000
Notes payable to banks from 1996 to 1998
related to the ESOP...................... 14,100 15,500
Industrial revenue bonds................... 28,000 28,000
Present value of non-compete agreements
related to the purchase of King
Packaging, payable monthly from 1993 to
1998, discounted at 5%................... 5,529 6,314
Other long-term debt....................... 1,989 2,053
-------- --------
119,618 141,867
Less - Current portion..................... (7,177) (1,643)
-------- --------
$112,441 $140,224
======== ========
Page 6 of 25 pages
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Cash interest payments during the first six months of fiscal 1995 and 1994
amounted to $7,045,000 and $6,671,000, respectively.
(5) Cash tax payments during the first six months of fiscal 1995 and 1994
amounted to $6,211,000 and $6,376,000, respectively.
(6) Earnings per share for fiscal 1995 and 1994 are based on weighted average
outstanding shares of 26,238,196 for the 13 weeks and the 26 weeks ended
April 2, 1995 and April 3, 1994.
(7) Commitments and Contingencies:
The Company has contracted for the purchase of a substantial portion of its
future raw sugar requirements. Prices to be paid for raw sugar under these
contracts are based in some cases on market prices during the anticipated
delivery month. In other cases prices are fixed and, in these instances,
the Company generally obtains commitments from its customers to buy the
sugar prior to fixing the price, or enters into futures transactions to
hedge the commitment.
The Company uses interest rate exchange agreements, more commonly called
interest rate swaps, to manage its interest rate exposure. The Company is
exposed to loss in the event of non-performance by the other party to these
swaps. However, the Company does not anticipate non-performance by the
counter-parties to the transactions.
In May 1992, the United States Customs Service (Customs) issued a bill to
the Company for approximately $7,500,000 seeking reimbursement for certain
drawback claims filed by the Company with customs during the period 1984
through 1988. Customs has alleged that drawback claims prepared by the
Company for certain export shipments of sugar during these years 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 is vigorously
protesting the decision of Customs. We have recently received assurances
from the Customs Service that this administrative appeal is nearing a
conclusion. As an indication, on March 31, 1995, the Company received
notice that one of its three protests had been resolved in its favor. This
favorable ruling resulted in the reduction of the total claim by $2,434,000
and the waiver of interest on this amount from August, 1992. Based upon
the facts known to the Company at this time, the ultimate resolution of
this matter is not expected to have a materially adverse effect on the
Company's financial position or results of operations.
In July 1991, National Utility Service, Inc. (NUS) filed a complaint
against the Company in the United States District Court for the District of
New Jersey seeking compensation and damages arising from a contract between
the Company and NUS for energy cost saving recommendations. On September
12, 1994, summary judgment was entered against the Company in the amount of
$2,973,000 in this case. On December 19, 1994, the judgment was amended to
add $1,343,000 prejudgment interest. The Company has appealed the judgment
to the United States Court of Appeals for the Third Circuit. The Company
intends to pursue the appeal vigorously and strongly contends that no
amounts are due to NUS.
Page 7 of 25 pages
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE COMPANY'S
FINANCIAL POSITION AND RESULTS OF OPERATIONS.
Liquidity
Non-cash working capital decreased $12,918,000 from the end of fiscal 1994.
Inventory, net of trade payables and accrued beet expenses, increased from
October 2, 1994 and was funded by short-term borrowings. Cash and cash
equivalents for the six months decreased $17,936,000 primarily as a result of
long-term debt repayments of $22,249,000. This repayment was funded primarily
by cash generated through working capital reductions at the end of fiscal
1993-94. The Company is committed to continuing its working capital reduction
program to deploy these assets to realize a greater return for our
stockholders.
Capital Resources
Long-term debt excluding the current portion, decreased $27,783,000. The
Company paid $20,000,000 of long-term revolving credit debt in its first fiscal
1995 quarter with cash generated from working capital reductions in fiscal
1994. Additionally, the Company retired, subsequent to the end of its second
quarter, $5,500,000 of industrial revenue bonds due in the year 2017. These
bonds were paid from escrow accounts held by the Company containing the
original proceeds from the issuance of the bonds. Accordingly, $5,500,000 of
the escrow account has been reclassified from other assets (long-term) to other
current assets. Also, $5,500,000 of the industrial revenue bonds have been
reclassified to the current portion of long-term debt. Changes in debt and
equity resulted in a decrease from 43% to 38% in the ratio of long-term debt to
total capital.
At April 2, 1995, the Company had $145,000,000 in revolving credit
facilities, of which $45,000,000 was outstanding as short-term debt. The
remaining available balance of $100,000,000 is intended to meet working capital
and other cash needs as they arise. All of the $145,000,000 of available
facilities are committed through September 30, 1996. The revolving credit
facilities, in general, enable the Company to borrow at the bank's cost of
funds plus approximately 1/2%.
At April 2, 1995, stockholders' equity was $183,202,000 compared to equity
at October 2, 1994, of $188,174,000. Equity changed primarily as a result of
earnings of $1,691,000 and as a result of dividends of $7,084,000.
On April 20, 1995 the Company announced that it was reducing the dividend
from an annual rate of $.54 per share to $.10 per share. The Board of
Directors declared a regular dividend of $.025 per share payable July 1, 1995
to stockholders of record at the close of business June 6, 1995.
The Company has been earning less than the dividend and this has reduced
stockholders' equity. The Company decided to reduce the dividend to a level
that would allow it to take advantage of future business opportunities and to
strengthen the Company's financial position.
On January 31, 1995, the Company acquired certain assets of Reckitt &
Colman, Inc., which are used in the manufacture, sale and distribution
Page 8 of 25 pages
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of filled plastic salt and pepper shakers for $7,050,000 in cash. The
transaction was accounted for using the purchase method and is expected to be
funded primarily through the sale of non-operating assets.
Fixed asset additions during the first six months of fiscal 1995, excluding
the Reckitt & Colman acquisition, were $9,423,000. The capital expenditures
were primarily concentrated on cost saving projects. The Company expects that
expenditures for fixed assets (exclusive of any acquisitions) will approximate
$17,000,000 in fiscal 1995. These expenditures are expected to benefit the
Company through increased efficiency and expanded operational capabilities.
Results of Operations
The Company's net income for the first six months of fiscal 1995 was
$1,691,000, or $.07 per share, compared to income of $3,270,000, or $.12 per
share, for the first six months of fiscal 1994. Net loss for the second
quarter of fiscal 1995 was ($1,927,000), or ($.07) per share, compared to
($271,000), or ($.01) per share, for the second quarter of fiscal 1994. Sugar
sales volumes and prices were flat with the same quarter and six months of last
year.
Sales volume at the cane refineries increased over the same quarter and six
months of last year. Cane refining margins have decreased compared to last
year due to the combination of increased raw sugar prices and downward pressure
on refined sugar prices caused by beet and cane competition. Income is down at
the cane refineries compared to the same quarter and six months of last year.
Our beet operations, which include Michigan Sugar and our beet molasses
desugarization facility, had lower sales volume compared to the previous year
quarter and six months due to the marketing allotments imposed October 1, 1994
for the 1994-95 crop year. Income at the beet operations was down for the
quarter and six months primarily due to higher operating costs at the beet
molasses desugarization facility.
The Company's foodservice sugar sales volume decreased from the same
quarter and six months last year while non-sugar sales volume increased
moderately. Income for the quarter was down due to higher sugar and packaging
costs, but income for the six months is higher than last year.
Raceland Sugars, Inc. showed an increase in income for the quarter and six
months as a result of a successful processing campaign which produced more
sugar than last year at the same cost per unit.
Selling, general and administrative expenses decreased 7%, or $1,975,000,
for the six months of fiscal 1995 compared to 1994 primarily due to lower sales
volume at Michigan Sugar and reductions resulting from a conscious effort to
reduce overhead costs.
The Company's strategy for the future is two-pronged. First, it is to
expand outside of the United States, as we are doing in Mexico. Secondly, it
is to expand into non-sugar related products that fit with existing customer
relationships and distribution channels. Examples of the latter are the
acquisition of King Packaging and the acquisition of Reckitt & Colman's salt
and pepper shaker business. We are continuing to investigate growth of the
business in areas that are not dependent on the Farm Bill.
Page 9 of 25 pages
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
At the Annual Meeting of Stockholders held on February 16, 1995 in
Savannah, Georgia, 23,887,057 shares, representing 91.0% of the 26,238,196
total eligible shares outstanding, were voted in person or by proxy. The
Directors proposed in the proxy material were elected to serve three-year terms
by the vote shown below:
Outstanding Shares Voted For Abstain
---------------------------- ------------------------
Number % of Eligible Number % of Eligible
of Votes Votes of Votes Votes
-------- ------------- -------- -------------
Dale C. Critz 23,654,005 90.15 233,052 .89
Arthur M. Gignilliat, Jr. 23,673,592 90.23 213,465 .81
Robert S. Jepson, Jr. 23,689,421 90.29 197,636 .75
Arnold Tenenbaum 23,662,940 90.19 224,117 .85
Other Directors whose term of office continued after the meeting were W.
Waldo Bradley, John D. Carswell, F. Sprague Exley, William W. Sprague, III,
Hugh M. Tarbutton, R. Eugene Cartledge, Lee B. Durham, Jr., Ernest Flegenheimer
and Robert L. Harrison.
The amendment of the By-laws to increase the maximum number of Directors to
fifteen was approved. The vote was as follows:
Outstanding Shares Voted For Against Abstain
---------------------------- ----------------------- -----------------------
Number % of Eligible Number % of Eligible Number % of Eligible
of Votes Votes of Votes Votes of Votes Votes
-------- ------------- -------- ------------- -------- -------------
23,078,542 87.96 604,248 2.30 204,267 .78
The appointment of Price Waterhouse LLP as independent public accountants
was approved. The vote was as follows:
Outstanding Shares Voted For Against Abstain
---------------------------- ----------------------- -----------------------
Number % of Eligible Number % of Eligible Number % of Eligible
of Votes Votes of Votes Votes of Votes Votes
-------- ------------- -------- ------------- -------- -------------
23,611,229 89.99 167,390 .64 108,438 .41
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Page Exhibit
No. Number Description
--- ------ -----------
12 3-1 By-Laws, as amended
25 27-1 Financial Data Schedules (for SEC use only)
(b) Reports on Form 8-K, not applicable.
Page 10 of 25 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: MAY 11, 1995 SECRETARY
BY: /s/ W. R. Steinhauer
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W. R. STEINHAUER
SENIOR VICE PRESIDENT -
DATE: MAY 12, 1995 FINANCE & ADMINISTRATION
Page 11 of 25 pages