(Mark One)
| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended May 31, 2004
OR
| [_] | TRANSITION REPORT PURSUANT TO SECTION 13 AND 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 Incorporation or organization) | (I.R.S. Employer Identification No.) |
| 2930 Industrial Street |
| 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
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2). Yes No X
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 | July 15, 2004 | 94,091,633 |
1
| PART I. | FINANCIAL INFORMATION | PAGE |
Item 1. |
Financial Statements | 3 |
| Condensed Consolidated Balance Sheets | 3 | |
| Condensed Consolidated Statements of Net Income | 4 | |
| Condensed Consolidated Statements of Cash Flows | 5 | |
| Condensed Consolidated Statement of Shareholders' Equity | 6 | |
| Notes to Condensed Consolidated Financial Statements | 7 - 11 | |
Item 2. |
Management's Discussion and Analysis of Financial | |
| Condition and Results of Operations | 12 - 18 | |
Item 3. |
Quantitative and Qualitative Disclosure About | |
| Market Risk | 19 | |
Item 4. |
Controls and Procedures | 20 |
PART II. |
OTHER INFORMATION | |
Item 1. |
Legal Proceedings | 20 |
Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of | |
| Equity Securities | 20 | |
Item 3. |
Defaults Upon Senior Securities | 20 |
Item 4. |
Submission of Matters to a Vote of Security Holders | 20 |
Item 6. |
Exhibits and Reports on Form 8-K | 20 - 21 |
| SIGNATURE | 22 | |
| Exhibit Index | 23 |
2
ITEM 1. FINANCIAL STATEMENTS
| May 31, 2004 |
August 31, 2003 | |||||||
| ASSETS | ||||||||
Current assets: | ||||||||
| Cash and cash equivalents | $ | 2,301 | $ | 9,058 | ||||
| Accounts receivable - net | 5,688 | 8,500 | ||||||
| Inventories | 25,522 | 16,240 | ||||||
| Prepaid expenses and other current assets | 801 | 1,155 | ||||||
| Assets held for sale | 219 | 2,241 | ||||||
| Total current assets | 34,531 | 37,194 | ||||||
| Property and equipment - net | 55,789 | 60,814 | ||||||
| Other assets | 61 | 60 | ||||||
| Note receivable | 800 | 0 | ||||||
| Debt issuance cost - net | 2,005 | 2,628 | ||||||
Total assets | $ | 93,186 | $ | 100,696 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
| Revolving line of credit facility | $ | 1,438 | $ | 0 | ||||
| Accounts payable | 9,295 | 6,484 | ||||||
| Accrued liabilities | 2,811 | 6,267 | ||||||
| Current maturities of long-term debt: | ||||||||
| Outstanding principal payments | 3,772 | 7,372 | ||||||
| Future interest payments from debt restructuring | 250 | 700 | ||||||
| Current maturities of long-term debt | 4,022 | 8,072 | ||||||
| Total current liabilities | 17,566 | 20,823 | ||||||
| Long-term debt: | ||||||||
| Outstanding principal payments | 18,936 | 28,182 | ||||||
| Future interest payments from debt restructuring | 1,174 | 5,837 | ||||||
| Long-term debt | 20,110 | 34,019 | ||||||
| Total liabilities | 37,676 | 54,842 | ||||||
Shareholders' equity: | ||||||||
| Common stock - Class A, $.01 par value, 94,091,633 and 91,548,580 shares | ||||||||
| issued and outstanding, respectively | 941 | 915 | ||||||
| Redeemable preferred stock - Series B, $.01 par value, 100 shares issued | ||||||||
| and outstanding | 0 | 0 | ||||||
| Additional paid-in capital | 154,902 | 154,902 | ||||||
| Accumulated deficit | (100,333 | ) | (109,963 | ) | ||||
| Total shareholders' equity | 55,510 | 45,854 | ||||||
| Total liabilities and shareholders' equity | $ | 93,186 | $ | 100,696 | ||||
See notes to condensed consolidated financial statements.
3
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||
| May 31, 2004 |
May 31, 2003 |
May 31, 2004 |
May 31, 2003 | |||||||||||
Net revenues |
$ | 18,380 | $ | 22,649 | $ | 57,461 | $ | 69,234 | ||||||
| Cost of sales | (12,533 | ) | (15,977 | ) | (38,832 | ) | (47,692 | ) | ||||||
Gross profit | 5,847 | 6,672 | 18,629 | 21,542 | ||||||||||
Selling, general and administrative expenses | (4,489 | ) | (5,089 | ) | (14,595 | ) | (19,148 | ) | ||||||
| (Loss)/gain on disposal of property & equipment | (64 | ) | 17 | (390 | ) | 17 | ||||||||
| Write down of assets held for sale | 0 | 0 | (558 | ) | 0 | |||||||||
| Other income (Note 3) | 0 | 89 | 3,000 | 1,589 | ||||||||||
Income from operations | 1,294 | 1,689 | 6,086 | 4,000 | ||||||||||
Interest expense | (543 | ) | (944 | ) | (1,799 | ) | (3,020 | ) | ||||||
| Gain on debt extinguishment | 0 | 0 | 5,339 | 0 | ||||||||||
| Interest income | 11 | 490 | 37 | 1,606 | ||||||||||
Income before taxes | 762 | 1,235 | 9,663 | 2,586 | ||||||||||
Income tax expense | (13 | ) | 0 | (33 | ) | 0 | ||||||||
Net income | $ | 749 | $ | 1,235 | $ | 9,630 | $ | 2,586 | ||||||
Net income per common share: | ||||||||||||||
| Basic: | $ | 0.01 | $ | 0.01 | $ | 0.10 | $ | 0.03 | ||||||
| Diluted: | $ | 0.01 | $ | 0.01 | $ | 0.10 | $ | 0.03 | ||||||
Shares used in computing net income per share: | ||||||||||||||
| Basic | 94,091,633 | 91,548,580 | 93,172,793 | 91,548,580 | ||||||||||
| Diluted | 101,131,514 | 101,020,905 | 100,946,257 | 101,065,728 | ||||||||||
See notes to condensed consolidated financial statements.
4
| For the Nine Months Ended | ||||||||
| May 31, 2004 |
May 31, 2003 | |||||||
| Operating activities: | ||||||||
| Net income | $ | 9,630 | $ | 2,586 | ||||
| Adjustments to reconcile net income to net cash | ||||||||
| provided by operating activities: | ||||||||
| Depreciation and amortization of property and equipment | 2,559 | 2,693 | ||||||
| Amortization of debt issuance costs and debt discount | 837 | 1,244 | ||||||
| Gain on debt extinguishment | (5,339 | ) | 0 | |||||
| Provision for writedown of assets held for sale | 558 | 0 | ||||||
| Loss/(gain) on disposal of property and equipment | 390 | (17 | ) | |||||
| Changes in assets and liabilities: | ||||||||
| Receivables, prepaid expenses and other current assets | 3,385 | 7,033 | ||||||
| Inventories | (9,282 | ) | (1,826 | ) | ||||
| Accounts payable and accrued liabilities | (216 | ) | (2,300 | ) | ||||
| Net cash provided by operating activities | 2,522 | 9,413 | ||||||
| Investing activities: | ||||||||
| Collections on note receivable | 0 | 23,000 | ||||||
| Issuance of note receivable | (800 | ) | 0 | |||||
| Property and equipment purchases | (912 | ) | (550 | ) | ||||
| Proceeds from disposals of assets held for sale and of | ||||||||
| property and equipment | 4,233 | 767 | ||||||
| Net cash provided by investing activities | 2,521 | 23,217 | ||||||
Financing activities: | ||||||||
| Net borrowings/(payments) under revolving line of credit facility | 1,437 | (560 | ) | |||||
| Payments on long-term debt | (13,263 | ) | (25,085 | ) | ||||
| Proceeds from issuance of common stock | 26 | 0 | ||||||
Net cash used in financing activities | (11,800 | ) | (25,645 | ) | ||||
Net (decrease) increase in cash and cash equivalents | (6,757 | ) | 6,985 | |||||
| Cash and cash equivalents, beginning of period | 9,058 | 264 | ||||||
Cash and cash equivalents, end of period | $ | 2,301 | $ | 7,249 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION- | ||||||||
| Cash paid during the nine months for: | ||||||||
| Interest | $ | 1,802 | $ | 1,842 | ||||
See notes to condensed consolidated financial statements.
5
| Common Stock - Class A |
Additional Paid-in Capital |
Accumulated Deficit |
Total Shareholders' Equity | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Balance, August 31, 2003 |
$ | 915 | $ | 154,902 | $ | (109,963 | ) | $ | 45,854 | |||||
| Stock warrants exercised | ||||||||||||||
| (2,543,053 shares) | 26 | 0 | 0 | 26 | ||||||||||
Net income | 0 | 0 | 9,630 | 9,630 | ||||||||||
Balance, May 31, 2004 | $ | 941 | $ | 154,902 | $ | (100,333 | ) | $ | 55,510 | |||||
See notes to condensed consolidated financial statements.
6
| 1. | BASIS OF PRESENTATION |
| The accompanying condensed consolidated financial statements have been prepared by Northland Cranberries, Inc. (collectively with its subsidiaries, the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission and reflect normal and recurring adjustments, which are, in the opinion of the Company, considered necessary to present fairly the financial position of the Company as of May 31, 2004 and August 31, 2003, its related results of operations for the three and nine months ended May 31, 2004 and 2003, respectively, and its cash flows for the nine months ended May 31, 2004 and 2003, respectively. As permitted by these regulations, these condensed consolidated financial statements do not include all information required by accounting principles generally accepted in the United States of America to be included in an annual set of financial statements, however, the Company believes that the disclosures are adequate to make the information presented not misleading. The Company’s condensed consolidated balance sheet as of August 31, 2003 was derived from the Company’s latest audited consolidated financial statements. It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the latest audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended August 31, 2003. |
| Business Risks — Prices paid to growers for raw cranberries are effectively determined by Ocean Spray, the industry leader, which controls the bulk of the cranberry supply in North America. |
| Net Income Per Common Share – Net income per common share is calculated in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, “Earnings Per Share.” Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding. Diluted net income per common share is computed by dividing net income by the weighted average number of common shares outstanding increased by the number of dilutive potential common shares using the treasury stock method. |
| The weighted average shares outstanding used in calculating net income per common share for the three and nine months ended May 31, 2004 and 2003 consisted of the following: |
| Three Months Ended | Nine Months Ended | |||||||||||||
| May 31, 2004 |
May 31, 2003 |
May 31, 2004 |
May 31, 2003 | |||||||||||
| Basic: | ||||||||||||||
| Shares outstanding | ||||||||||||||
| beginning of period | 94,091,633 | 91,548,580 | 91,548,580 | 91,548,580 | ||||||||||
| Issuance of new shares | -- | -- | 1,624,213 | -- | ||||||||||
| Total | 94,091,633 | 91,548,580 | 93,172,793 | 91,548,580 | ||||||||||
Effect of dilution: | ||||||||||||||
| Warrants | 2,511,018 | 5,021,725 | 3,339,649 | 5,026,321 | ||||||||||
| Options | 4,528,863 | 4,450,600 | 4,433,815 | 4,490,827 | ||||||||||
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| Diluted | 101,131,514 | 101,020,905 | 100,946,257 | 101,065,728 | ||||||||||
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7
| The shares outstanding used to compute the diluted earnings per share for the three and nine months ended May 31, 2004 and 2003 exclude outstanding options to purchase 598,825 and 613,575 shares of Class A Common Stock, respectively. Those options were excluded because their weighted average exercise prices were greater than the average market price of the common shares and their inclusion would have been antidilutive. |
| Accounting for Stock Options — The Company accounts for stock-based compensation in accordance with Accounting Principle Board Opinion No. 25, “Accounting for Stock Issued to Employees,” as allowed by SFAS No. 123, “Accounting for Stock-Based Compensation.” Stock options are granted at prices equal to the fair market value of the Company’s common stock on the grant dates; therefore no compensation expense is recognized in connection with stock options granted to employees. The following table illustrates the effect on net income and net income per share as if the fair value-based method provided by SFAS No. 123 had been applied for all outstanding and unvested awards in each period: |