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 March 31, 1996
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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 March 31, 1996 there were 26,238,196 shares of common stock of Savannah
Foods & Industries, Inc. outstanding.
The exhibit index is located on page 16 of this filing.
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2
SAVANNAH FOODS & INDUSTRIES, INC.
INDEX
Part I. FINANCIAL INFORMATION: Page
------
Item 1. Financial Statements:
Consolidated Balance Sheets at
March 31, 1996 and October 1, 1995 3
Consolidated Statements of Operations
for the quarter and the two quarters
ended March 31, 1996 and April 2, 1995 4
Consolidated Statements of Cash Flows
for the two quarters ended March 31, 1996
and April 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 4. Submission of Matters to a Vote of
Securities Holders 13
Item 5. Other Information - Statement on
Business Risks and Forward-Looking
Information 14
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
Page 2
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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)
March 31, October 1,
1996 1995
Assets ---------- ----------
Current assets:
Cash and cash equivalents $ 10,178 $ 11,574
Accounts receivable 60,713 66,991
Inventories (net of LIFO reserve of $6,207
in 1996 and $10,460 in 1995 (Note 2) 195,721 103,121
Other current assets 13,755 16,116
-------- --------
Total current assets 280,367 197,802
Property, plant and equipment (net of accumulated
depreciation of $214,297 in 1996 and
$206,100 in 1995) 220,868 230,891
Other assets 34,645 47,814
-------- --------
$535,880 $476,507
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowing $ 41,250 $ 22,300
Current portion of long-term debt (Note 3) 10,057 6,300
Trade accounts payable 92,152 63,259
Dividends payable 656 656
Accrued expenses related to beet operations 20,750 -
Other liabilities and accrued expenses 23,456 22,225
-------- --------
Total current liabilities 188,321 114,740
-------- --------
Long-term debt (Note 3) 90,611 106,864
-------- --------
Deferred employee benefits 87,185 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) 23,952 12,190
Retained earnings 190,365 190,176
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) (27,188) -
Cumulative translation adjustment (500) (425)
-------- --------
Total stockholders' equity 169,763 169,649
Commitments and contingencies (Note 7) - -
-------- --------
$535,880 $476,507
======== ========
(The accompanying notes are an integral part of the consolidated financial
statements.)
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Savannah Foods & Industries, Inc.
Consolidated Statements of Operations
(In thousands of dollars except for per share amounts)
(Unaudited)
For the
For the Quarter Ended Two Quarters Ended
-------------------- --------------------
March 31, April 2, March 31, April 2,
1996 1995 1996 1995
-------- -------- -------- --------
Net sales $250,804 $253,377 $555,213 $535,854
-------- -------- -------- --------
Operating expenses:
Cost of sales and
operating expenses 225,853 232,470 502,325 486,099
Selling, general and
administrative expenses 13,766 13,054 27,551 26,548
Depreciation and
amortization 7,213 7,516 14,329 14,410
Other costs (Note 5) 3,810 38 1,846 70
-------- -------- -------- --------
250,642 253,078 546,051 527,127
-------- -------- -------- --------
Income from operations 162 299 9,162 8,727
-------- -------- -------- --------
Other income and expenses:
Interest and other
investment income 176 361 412 888
Interest expense (3,306) (3,819) (6,665) (7,391)
Other (174) 25 (601) 158
-------- -------- -------- --------
(3,304) (3,433) (6,854) (6,345)
-------- -------- -------- --------
(Loss) income before income
taxes (3,142) (3,134) 2,308 2,382
Benefit from (provision for)
income taxes 1,099 1,207 (808) (691)
-------- -------- -------- --------
Net (loss) income $ (2,043) $ (1,927) $ 1,500 $ 1,691
======== ======== ======== ========
Per share:
Net (loss) income (Note 6) $ (.08) $ (.07) $ .06 $ .07
======== ======== ======== ========
Dividends $ .025 $ .135 $ .05 $ .27
======== ======== ======== ========
(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)
For the Two Quarters Ended
--------------------------
March 31, April 2,
1996 1995
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(In thousands of dollars)
Cash flows from operations:
Net income $ 1,500 $ 1,691
Adjustments to reconcile net income to
net cash provided by operations -
Depreciation and amortization 14,329 14,410
Provision for deferred income taxes - (863)
Net loss on disposal of assets 1,846 70
Changes in balance sheet accounts -
Accounts receivable 6,278 19,287
Inventories (92,600) (105,154)
Other current assets 2,361 (8,850)
Trade accounts payable 28,893 34,057
Accrued expenses related to beet
operations 20,750 20,864
Other liabilities and accrued expenses (2,569) 2,180
Other 2,198 1,292
------- -------
Cash used for operations (17,014) (21,016)
------- -------
Cash flows from investing activities:
Additions to property, plant and equipment (3,632) (8,403)
Proceeds from sale of property, plant and
equipment 2,471 202
Liquidation (acquisition) of investments 8,848 (1,020)
Acquisition of business - (7,050)
Use of escrow balances related to industrial
revenue bonds for additions to property,
plant and equipment 2,862 -
Other 186 (2,125)
------- -------
Cash provided by (used for) investing activities 10,735 (18,396)
------- -------
Cash flows from financing activities:
Increase in short-term borrowings 18,950 45,000
Payments of long-term debt (12,496) (22,249)
Liquidation of unused industrial revenue
bond escrow balances - 5,464
Dividends paid (1,312) (7,084)
Other (259) 345
------- -------
Cash provided by financing activities 4,883 21,476
------- -------
Cash flows for period (1,396) (17,936)
Cash and cash equivalents, beginning of period 11,574 28,436
------- -------
Cash and cash equivalents, end of period $10,178 $10,500
======= ========
(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 current year
presentation.
(2) A summary of inventories by class is as follows:
March 31, October 1,
1996 1995
--------- ---------
(In thousands of dollars)
Raw materials and work-in-process $ 79,767 $ 46,533
Packaging materials, parts and supplies 23,537 26,245
Finished goods 92,417 30,343
-------- --------
$195,721 $103,121
======== ========
(3) Long-term debt is summarized as follows:
March 31, October 1,
1996 1995
-------- --------
(In thousands of dollars)
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
Notes payable to banks related to
the ESOP 12,619 14,100
Industrial revenue bonds 22,500 22,500
Other long-term debt 5,549 6,564
-------- --------
100,668 113,164
Less - Current portion (10,057) (6,300)
-------- --------
$ 90,611 $106,864
======== ========
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. The Company has a $62,500,000 Standby Letter of Credit in
favor of the Senior Note lenders outstanding under the revolving credit
agreement. In connection with the execution of this agreement, the
Senior Note agreement was amended to remove all of the financial ratio
covenants. As of March 31, 1996 and the date of this report, the Company
was in compliance with all of its debt covenants.
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The Company has given notice to repay $5,000,000 of the Senior Notes
ahead of scheduled maturities. Accordingly, such amount is now included
in the current portion of long-term debt.
(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
Company is in the process of obtaining Securities and Exchange Commission
approval for the sale of the shares from the Trust. Once approved, 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 $87,185,000
"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".
The difference of $11,762,000 between the cost of the shares and their
fair value is included in "Capital in excess of stated value". Each
quarter, "Stock held by benefit trust" will be adjusted to the fair market
value of the shares held in the Trust, and an adjustment for the same
amount will be 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. These assets and liabilities will be
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
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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):
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
=======
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 $1,964,000 net gain from
disposal of assets in the first quarter.
(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 March 31, 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 moneys 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.
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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 $33,087,000 from the
end of fiscal 1995. Inventory, net of trade payables and accrued beet
expenses, increased $42,957,000 from October 1, 1995 primarily as a result of
seasonal factors at Michigan Sugar and Raceland Sugars, and short-term
borrowings increased $18,950,000.
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 sources of short-term funds provide ample liquidity to the
Company to meet its operating cash requirements.
Capital Resources
Effective April 1, 1996, the Company had $120,000,000 in revolving credit
facilities with banks. Under these facilities, there is a Standby Letter of
Credit in the amount of $62,500,000 drawn in favor of the Senior Note lenders.
Such amount will be reduced from time to time as the Senior Notes are repaid.
The remaining available balance is intended to meet working capital and other
cash needs as they arise. All of the $120,000,000 of available facilities are
committed through January 1, 2000. The revolving credit facilities, in
general, enable the Company to borrow funds at LIBOR plus 1/2% to 3/4%,
depending on achievement of specified fixed charge coverage targets. Also,
effective April 22, 1996, the Company established a $10,000,000 uncommitted
line of credit with a bank. At March 31, 1996, the Company had short-term
debt of $1,000,000 outstanding under its prior revolving credit facilities and
$40,250,000 outstanding from the Commodity Credit Corporation.
In connection with the Standby Letter of Credit drawn under the revolving
facilities, the Senior Note agreement was amended to remove all of the
financial ratio covenants. As of March 31, 1996, and the date of this report,
the Company was in compliance with all of its debt covenants.
Payments on total long-term debt were $12,496,000 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 35%. During the 2nd quarter of fiscal 1996,
the Company liquidated $8,848,000 of the cash surrender value of Company owned
life insurance policies and used the proceeds to reduce long-term debt. By the
end of fiscal 1996, the Company expects to liquidate an additional $5,000,000
in cash surrender values which will also be used to reduce long-term debt.
These assets are included in "Other assets".
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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 will be 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 March 1996, the Company accrued an
estimated loss on the sale of ($3,800,000). This amount is included in the
caption "Other costs" in the accompanying income statement.
The sale of Raceland and the liquidation of certain Company owned life
insurance policies result from the fact that these assets had returns below the
Company's cost of capital. The Company is using proceeds from these asset
dispositions to temporarily reduce long-term debt. Ultimately, it expects to
deploy these proceeds in operations which have returns in excess of the
Company's cost of capital.
At March 31, 1996, stockholders' equity was $169,763,000 compared to
equity at October 1, 1995, of $169,649,000. Equity increased as a result of
earnings of $1,500,000 during the six months ended March 31, 1996 and decreased
primarily as a result of dividends of $1,312,000.
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 Company is in the process of
obtaining Securities and Exchange Commission approval for the sale of the
shares from the Trust. Once approved, 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 $87,185,000 "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". The
difference of $11,762,000 between the cost of the shares and their fair value
is included in "Capital in excess of stated value". Each quarter, "Stock held
by benefit trust" will be adjusted to the fair market value of the shares held
in the Trust and an adjustment for the same amount will be made to "Capital in
excess of stated value". Total stockholders' equity will increase as the
shares are sold from the Trust.
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Fixed asset additions during the six months ended March 31, 1996 were
$3,632,000 compared to depreciation for the same period of $13,140,000. 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 six months ended March 31, 1996 was
$1,500,000, or $.06 per share, compared to income of $1,691,000, or $.07 per
share, for the six months ended April 2, 1995. The net loss for the second
quarter of fiscal 1996 was ($2,043,000), or ($.08) per share, compared to a
loss of ($1,927,000), or ($.07) per share, for the same quarter of fiscal 1995.
As discussed above, "Income from operations" for the quarter ended March
31, 1996, includes a ($3,800,000) loss on the sale of the operating assets of
Raceland Sugars. For the six months, this loss was partially offset by a
$1,964,000 first quarter gain on assets sold in conjunction with cost
reductions the Company is making. Excluding the effects of these asset
dispositions, income from operations for both the six-month period and the
quarter increased. This improvement reflects an increase in the margins from
our cane refining operations. Margins are higher because the 1995 beet crop
was smaller than the previous year's record beet crop. As a result, pricing
pressures this fiscal year are much less than last year when the Company was
sometimes selling refined sugar below cost to maintain market share.
Our cane sugar division showed a large increase in operating income for
the quarter and six months ended March 31, 1996 compared to the same periods
last year primarily because retail sugar sales volume and margins increased for
each period. Domestic industrial volume was up for both the quarter and six
months, but overall industrial volume was down for both periods due to
decreased low-margin export sales. For the six months, domestic industrial
margins were down, but they were up for the quarter as sales prices are
beginning to reflect the smaller amount of beet sugar available for sale. Both
sugar sales volume and sales prices to the food service industry were up
slightly from the prior year quarter and six months. Non-sugar sales volume
and prices were also higher for the quarter and the six months than they were
in the comparable periods last year as these product lines continue to expand.
Our beet sugar division reported significantly lower operating income for
the quarter and six months ended March 31, 1996 compared to the same periods
last year as the effects of the poor 1995 beet crop continue to depress
earnings. Total sugar produced from the crop was lower than last year's crop
due to reduced sugar beet yields and sugar content. As a result, manufacturing
costs per cwt. were significantly
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higher than in the prior year. Sugar sales prices for both the quarter and the
six months were down slightly from the prior year periods. Sales volume for
the six months was also down slightly from the prior year six months, but sales
volume for the quarter was down considerably from the prior year quarter.
Sales volume over the remaining six months of the year will be much lower than
the same period last year due to the lower production.
Congress passed the Farm Bill on February 29, 1996. It is essentially a
continuation of the current Farm Bill except that the U.S. Department of
Agriculture will not restrict the sale of beet sugar when annual sugar
production is high. In such cases, it is possible that the combination of
large supplies of domestic beet sugar and raw cane sugar, plus raw cane sugar
imports, will result in sugar supplies in excess of the demand for sugar. This
could lower raw sugar prices and possibly result in a benefit to the Company.
The national beet crop, which has now been completely processed, is down
about 11% from the prior year. Michigan Sugar's 1995 beet crop is also smaller
than normal as has been previously reported. This shortfall in national beet
production will be replaced by refined cane sugar throughout the second half of
fiscal 1996. Consequently, with less beet sugar supply, the Company will
realize the benefits of both higher volumes and profitable margins during the
second half of the year. As a result, the profit outlook for the remainder of
fiscal 1996 is good.
Based upon information available at this time, the outlook for fiscal 1997
is also good. Nationally, total beet acreage is expected to be down because
some farmers are taking advantage of higher prices for competing grain crops
and are planting less sugar beets. The initial forecast is that next year's
production of beet sugar will approximate that of this year. Thus, we expect
our cane divisions to have profitable margins and reasonable volumes in fiscal
1997. Michigan's acreage for next year will be reduced, but assuming that
yield per acre and sugar content return to normal, it should be a reasonably
profitable year.
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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 15, 1996 in
Savannah, Georgia, 22,960,289 shares, representing 87.5% 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
----------------------------------- -------------------------
W. Waldo Bradley 22,655,989 86.35 304,300 1.16
John D. Carswell 22,647,799 86.32 312,490 1.19
F. Sprague Exley 22,653,635 86.34 306,654 1.17
William W. Sprague, III 22,653,887 86.34 306,402 1.17
Hugh M. Tarbutton 22,643,174 86.30 317,115 1.21
Other Directors whose term of office continued after the meeting were R.
Eugene Cartledge, Lee B. Durham, Jr., Robert L. Harrison, Dale C. Critz, Arthur
M. Gignilliat, Jr., Robert S. Jepson, Jr. and Arnold Tenenbaum.
The appointment of Price Waterhouse LLP as independent public accountants
was approved. The vote was as follows:
Caption>
Outstanding Shares Voted For Against Abstain
- ----------------------------------------------------------------------------------------
Number % of Eligible Number % of Eligible Number % of Eligible
of Votes Votes of Votes Votes of Votes Votes
- --------- ------------- -------- ------------- -------- ---------------
22,749,452 86.70 133,320 .51 77,517 .30
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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. Costs
typically represent over 90% of the selling price of our products.
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.
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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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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit
Number Description
------- -----------
4-1 Credit Agreement, dated as of April 1,
1996, among Savannah Foods & Industries, Inc., as borrower,
the banks listed therein, and Wachovia Bank of Georgia,
N.A., as agent.
4-2 Third Amendment to Note Agreements, dated
as of March 29, 1996, by and among Savannah Foods &
Industries, Inc., as borrower, and the lenders named
therein, consisting of $50,000,000 8.35% Series A Senior
Notes due November 1, 2002 and $20,000,000 7.15% Series B
Senior Notes due November 1, 2002.
27-1 Financial Data Schedule
(b) Reports on Form 8-K, not applicable.
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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
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John M. Tatum
Date: May 15, 1996 Secretary
BY: /s/Gregory H. Smith
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Gregory H. Smith
Senior Vice President
Chief Financial Officer
DATE: May 15, 1996 and Treasurer