ITEM 1. BUSINESS
OVERVIEW
Orange-co, Inc. and subsidiaries (the "Company") is an integrated citrus company primarily engaged in growing and processing citrus products as well as packaging and marketing these products and other beverages. As of November 30, 1997, the Company owned and managed approximately 16,635 acres of Florida citrus groves and the fruit harvested therefrom. The production from these groves is principally used in the Company's citrus processing operations in Bartow, Florida (the "Bartow Plant"). This processing facility has concentrate, blending, single strength not from concentrate ("NFC") juice, by-products, packaging and storage operations providing the versatility to make many citrus and related beverage products for sale in a variety of markets. The Company also packages and sells non-citrus beverages to complement the citrus related products supplied to its customers in the foodservice business. Additionally, the Company offers a line of formulated citrus and non-citrus beverage bases for reconstitution by industrial and retail packers. The Company entered the formulated beverage base business in August 1993 with the purchase of all of the capital stock of International Fruit, Inc.
The Company's processed juice production has typically varied from season to season depending on the size of the Florida crop, the Company's crop and other conditions in the industry. The Florida citrus industry experiences fluctuations, which can be wide ranging, in the size of the citrus crop harvested from season to season causing fluctuations in citrus juice prices and therefore presenting significant variations in industry economic conditions and opportunities. The Company's fruit production from its groves has fluctuated in a manner similar to the Florida citrus industry. It is anticipated that the continuing rehabilitation of the Company's groves, located in DeSoto, Charlotte and Polk Counties, Florida, which began in 1992, will provide relatively more fruit from the Company's groves in the coming years as these efforts take effect. As the Company enters the 1997-98 season, the United States Department of Agriculture ("USDA") has announced an anticipated Florida crop of approximately 254,000,000 boxes of round oranges. It is uncertain what the effect of this size crop will be on the Company's results for the 1997-98 fiscal year. The 1996-97 crop was determined to be 226,200,000 boxes of round oranges.
In May 1992, Stoneridge Resources, Inc. ("Stoneridge"), which then owned approximately 52% of the Company's outstanding common shares, sold those shares to Ben Hill Griffin, Inc. and an affiliate, who collectively and beneficially held approximately 50.4% of those shares as of September 30, 1997. Ben Hill Griffin, Inc. is a privately owned agribusiness corporation located in Frostproof, Florida.
During fiscal 1996, the Company sold the remaining assets of its Mexican subsidiary OrancoMex S.A. de C.V. This subsidiary last operated in 1992. The assets of the subsidiary represented less than 1/2 of 1% of the Company's assets at time of the final sale. In September of 1997, the Company dissolved OrancoMex S.A. de C.V.
SALES BY PRODUCT LINE
BEVERAGE DIVISION
The Company produces bulk frozen concentrated orange juice ("FCOJ") and frozen concentrated grapefruit juice ("FCGJ") (collectively, "concentrate"), NFC orange and grapefruit juice, reconstituted juices and several citrus by-products at its Bartow Plant. The production of concentrate principally involves extracting the juice from the fruit, evaporating most of the water from the juice and then refrigerating the juice concentrate at the proper storage temperature. The Bartow Plant's current production capacity is estimated to be approximately 11,000,000 boxes of fruit annually.
The increased processing activity over the past five years resulted from a combination of increased production of the Company's owned and managed groves and an increased amount of fruit from sources in addition to the Company's groves through purchase contracts and participation agreements. In addition, the Company has increased the capacity of its Bartow processing facility.
In fiscal 1994, the Company expanded its bulk concentrate storage capacity by approximately 3.8 million gallons providing a total storage capacity of approximately 7.5 million gallons of bulk frozen concentrated juices.
The Company packages a portion of the processed concentrate in various containers for sale to major food service companies for ultimate distribution to restaurants, hotels, hospitals and other food service customers. The remainder of the concentrate is sold in bulk to dairies and other industrial users. Additionally, a portion of the fruit is processed into NFC juice products. The Company does from time to time, depending upon conditions then existing in the citrus industry, decide to vary its sales mix.
Within the food service market, the Company also provides a full line of beverage products to supplement its traditional emphasis on orange juice. The Company's product line also includes several types of juices, including; orange, grapefruit, non-citrus beverages such as grape, apple, cranberry, fruit punch and lemonade, a variety of 10% to 50% juice base drinks, and liquid concentrated tea.
In July 1996 the Company purchased the Birds Eye(R) and Gold 'N' Rich(R) foodservice frozen concentrated juice products business for the foodservice business in the United States, its territories, Puerto Rico and the U.S. Military. Included in this purchase was a partial assignment of the rights to use the Birds Eye(R) trademark in the territories previously mentioned.
In August 1993 the Company expanded its drink base products to include a line of citrus and non-citrus formulated frozen concentrated drink bases sold to dairies and other industrial and retail packers. This expansion took place through the purchase of all of the outstanding stock of International Fruit, Inc., an established producer and marketer of these products.
The sales prices for bulk citrus juice sold by the Company are determined by market prices which in the past have been subject to fluctuations which are expected to continue. The Company has, from time to time, used the frozen concentrate orange juice futures market to hedge fruit, FCOJ inventory, and purchase and sales commitments against such fluctuations.
The Bartow Plant also produces several citrus by-products. One process extracts d'limonene oil (a chemical additive for products such as paint thinner, cleansers and cosmetics) and other citrus oils from orange peel and processes the remaining peel and pulp for sale as cattle feed. A secondary extraction process is also performed in which juice is extracted from the fruit pulp separated from the juice during the concentrate operation. This product is used in the production of an orange pulp wash concentrate (an ingredient used in beverages consisting of less than 10% natural juices) and is sold in bulk to various customers. The Bartow Plant also produces a by-product known as pulp cells, which is sold to manufacturers for use as a filler and flavor ingredient in citrus juice products.
The Company operates a cold storage facility at Bartow, Florida, which is certified by the United States Customs Service for duty deferred customs storage and by the New York Cotton Exchange as a delivery point for FCOJ futures contracts. As previously mentioned the Company expanded this facility in February, 1994 by 3.8 million gallons to a total capacity of 7.5 million gallons of concentrate.
THE GROVES
As of November 30, 1997, the Company owned approximately 13,721 acres of citrus groves and also managed approximately 2,914 acres of citrus groves owned by other growers (collectively, the "Groves"). The Groves constitute approximately 1.9% of Florida's total grove acreage which is reported to be 857,687 acres. The following table lists the locations of the Groves by county and the approximate number of acres of groves owned by the Company or managed by the Company for other growers in Florida as of November 30, 1997.
(1)Calculated by dividing total production by total number of productive grove acres owned and managed as of September 30, 1993, 1994, 1995, 1996 and 1997.
As previously mentioned, the USDA has announced an anticipated Florida orange crop of approximately 254,000,000 boxes of round oranges for the 1997-98 season.
In addition to productive grove acreage, as of November 30, 1997 the Company owned approximately 5,735 acres of land, much of it in the vicinity of the Groves, of which approximately 2,112 acres are prepared for citrus planting, approximately 1,295 acres are suitable for cultivation and 2,328 acres are used as water retention areas, roadways and similar ancillary uses or are unusable.
The Company's plan calls for, among other actions, the continued rehabilitation of its citrus acreage thereby increasing productivity, cash flow and market values. During fiscal 1992 through fiscal 1997, the Company accelerated its rehabilitation of the Groves by planting approximately 719,000 trees and installing improved irrigation systems covering approximately 9,086 acres.
During the past five seasons, substantially all of the fruit harvested from the Groves was used in the Company's processing plant. Most of the 1997-98 crop from the Groves is expected to be used in the Company's processing plant.
GROVE MANAGEMENT
In addition to caring for its own groves, the Company provides grove care, harvesting and marketing services for groves owned by others. The Company's grove care services include periodic application of fertilizers, herbicides and pesticides, monitoring for diseases and pests, liaison with local water control districts as to irrigation and drainage requirements and monitoring rainfall and temperature information. In addition to performing these services as part of a standard-care contract, the Company also performs other custom-care services,
including trimming, topping, application of soil conditioners, reshaping of beds and replacement of damaged or dead trees on an "as needed" basis. As of November 30, 1997, the Company managed 2,271 acres on a standard-care basis and 643 acres on a custom-care basis.
Grove care contracts generally provide for services at the Company's cost plus a negotiated fee, usually expressed as a percentage of cost. Grove care charges are payable monthly. The Company's grove care contracts are generally short-term in nature or terminable upon short notice.
The Company enters into marketing contracts with growers ("participation contracts"), whereby the Company purchases the fruit for a price to be determined by the proceeds ultimately received by the Company for the products sold from that season's fruit less production and overhead costs, industry assessments and a service fee. These contracts are generally renewable annually and are terminable upon short notice. The Company's remaining fruit purchases are either made under annual contracts that provide for purchase based upon market prices prevailing at the time of the agreement or are made on a "spot" basis.
PETROLEUM PRODUCTS AND RELATED BUSINESSES
Prior to fiscal 1995, the Company was engaged in the wholesale and retail sale of petroleum products through a subsidiary, Frank Carroll Oil Company ("Carroll Oil"). The Company completed the sale of 100% of Carroll Oil stock effective September 30, 1994 for total proceeds of approximately $966,000 in cash and notes and accordingly is no longer engaged in the sale and distribution of petroleum products.
EMPLOYEES
As of November 30, 1997 the Company employed approximately 250 full-time, non-seasonal employees in production-related activities, including its operations at the Bartow Plant and its grove management operations. The Company also employs approximately 90 administrative personnel. The number of employees increases to approximately 500 during the Company's peak period of operations. Management believes that relations between the Company and its employees are good.
GENERAL INFORMATION REGARDING CITRUS OPERATIONS
AGRICULTURAL CONDITIONS The citrus industry is subject to various factors over which growers and processors have limited or no control, including weather conditions, disease, pestilence and water supply. Although the subtropical Florida climate generally favors cultivation of citrus fruit, no citrus- producing area of Florida is immune from weather conditions which can damage citrus trees and fruit. In the past, damaging frosts or freezes have occurred throughout Florida. A freeze can adversely affect the productivity of groves for the year in which it occurs and for several years thereafter by causing tree damage or destruction. Other weather conditions which could adversely affect the groves and grove production include, but are not limited to, drought, excessive moisture, hurricanes, wind and hail. The Company does maintain limited crop insurance. The Company, however, does not maintain insurance on its trees.
MARKET PRICE FLUCTUATIONS Market prices for processed citrus juice are subject to fluctuations. The variation in the size of the citrus crop as previously mentioned has in the past resulted in large changes in the price of FCOJ, FCGJ and related products. Market prices are highly sensitive to crop sizes as well as other factors such as weather and competition from foreign crops.
The Company has from time to time used the FCOJ futures market to hedge fruit and FCOJ inventory to reduce price risk. Under this program the Company may enter into sales contracts on the FCOJ futures market in relation to its current and future orange juice concentrate inventories to offset anticipated fluctuations in concentrate prices, thereby protecting margins in advance of actual sale
and delivery. Additionally, the Company may enter into purchase contracts for FCOJ on the futures market to reduce the price risk and assure an adequate supply of purchased FCOJ. The Company maintains accounts with brokers which have deposit maintenance requirements that can fluctuate as a result of changes in the price of FCOJ futures, which can affect liquidity.
GOVERNMENTAL REGULATIONS Fresh citrus fruit and processed juice are produced and marketed under strict federal and state regulations and supervision. The Company has experienced no difficulties in complying with these regulations.
All property in the State of Florida is subject to the jurisdiction of water management districts which manage water to maximize its supply, quality and flood protection. Currently all necessary water permits have been obtained for the Groves. In the event of a water shortage, the water management districts have the authority to restrict water usage in the Groves which could have a material adverse effect upon the Groves and their production of fruit. Certain of the Groves are also located within local water management districts which are established either by the Florida Department of Environmental Protection or by the landowners themselves. The water management districts primarily regulate the drainage and irrigation of the lands within each district and make annual assessments on the landowners for the costs of related improvements, maintenance and operations.
Certain provisions of the Immigration Reform and Control Act of 1986 could limit the availability of seasonal labor necessary to harvest the Company's crops. The Company has not experienced a shortage of seasonal labor to date and does not anticipate a shortage during the 1997-98 season.
During fiscal 1997 and 1996, the Company spent approximately $133,000 and $505,000 respectively, on its spray field system for disposing of waste water at the Bartow facility and on other environmental matters none of which was capitalized during fiscal 1997. The Company anticipates the expenditure of approximately an additional $100,000 during fiscal 1998 on the new system and other environmental matters.
SEASONALITY AND WORKING CAPITAL The citrus industry is seasonal, with the Company harvesting fruit and processing it into juice from November through June. The juice is stored and sold throughout the year and revenue levels are sometimes affected by seasonal price movements. In contrast, the value-added food service business has relatively small seasonal variations.
Inventories of processed juice are accumulated during each season to enable the Company to cover sales and deliveries through the beginning of the production cycle in the next season. This cyclical peaking of processed juice inventories generally results in a need for larger amounts of working capital during certain times of the year. The Company principally uses a line of credit to finance inventories. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."
COMPETITION The Company competes with numerous growers and processors, some of which are larger than the Company. Price, quality and marketing are the principal competitive factors in selling processed juices. The Company believes that its production capacity and efficiencies, when fully utilized, enhance its ability to compete. Because of the size of the domestic citrus industry, no individual grower or processor can exercise appreciable influence over the selling price of the Company's bulk citrus products nor the price of its fruit. However, the market for the Company's value-added beverage products sold to food service customers is characterized by fewer producers, some of which are significantly larger than the Company and can influence the market price for these products. Although the Company accounted for approximately 5.0% of Florida FCOJ production during the 1996-97 season, several other producers accounted for greater percentages. Foreign processors of concentrate, particularly Brazilian, are believed to produce concentrate at a lower cost than that produced in the United States. Brazilian processors may also receive subsidies from the Brazilian
government for which there are no comparable benefits received by domestic processors. The effect of these cost advantages is partially diminished by a United States import tariff. Nevertheless, because of the volume of their exports to the United States and other countries and their lower cost of production, Brazilian producers may affect the selling prices for concentrate, and Brazilian exports of concentrate have been viewed by many in the industry as a competitive threat to domestic processors. Even so, the Company considers Brazilian exports to be a potential source of supply during periods when domestic citrus products are unavailable or in short supply. The Company believes that the continued development of markets for concentrate, such as Japan and Europe, may offset to some extent the impact of Brazilian competition.
The North American Free Trade Agreement ("NAFTA") with Mexico and Canada, which was implemented in January 1994, provides for the elimination of United States tariffs on citrus products imported into the United States from Mexico over a 15 year period which could increase competition for domestic suppliers.
The Company has several registered trademarks which are not currently in use. As previously mentioned, the Company obtained the rights to use the Birds Eye(R) and the Gold 'N' Rich(R) trademarks for use in the foodservice juice business.
FOREIGN AND DOMESTIC OPERATIONS The Company derived approximately 9.5%, 8.3% and 13.6%, of its revenue from foreign sales during fiscal 1997, 1996, and 1995 respectively. All of the Company's foreign sales are from its Florida operations.
Substantially all of the Company's assets are located in the state of Florida.
BUSINESS SEGMENTS During fiscal 1997 and 1996 the Company's gross sales, net income and assets were wholly attributable to the citrus business. The Company has two customers that accounted for 22.3% and 14.1% of revenue for fiscal 1997. Relationships between the Company and these two customers are currently good and are expected to remain so. All other customers individually accounted for less than 10% of total sales for fiscal 1997. For further information on significant customers over 10% of total Company sales see Note 1 of the Notes to Consolidated Financial Statements "Summary of Significant Accounting Policies".
ITEM 2.
ITEM 2. PROPERTIES
(1)Portions of these properties are encumbered by certain mortgages.
Management believes that the Company's Bartow plant and related storage facilities are in good operating condition and are adequate to support its current operations.
The Company has a program to consolidate certain of its grove holdings into more contiguous and efficient parcels and has begun the rehabilitation of selected parcels through the installation of more effective irrigation systems and significant replanting of citrus trees. The Company has also committed to certain other improvements including those to its Bartow citrus processing facility (see Management's Discussion and Analysis of Financial Condition and Results of Operations: Liquidity and Capital Resources).
A portion of the Company's properties are subject to mortgages securing long-term debt or are covered by negative pledges restricting mortgages or pledges of such properties. (See Notes 4 and 7 of the Notes to Consolidated Financial Statements "Property and Equipment" and "Notes Payable to Banks and Long-term Debt".)
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
There are no reportable legal proceedings under this item.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange under the symbol "OJ". The following table sets forth the range of high and low closing prices per share for each full quarterly period within the two most recent fiscal years.
On November 30, 1997, there were approximately 4,378 named holders of record of the Company's common stock.
On February 3, 1997 the Company paid a dividend of $.10 per common share for shareholders of record as of January 20, 1997. On February 1, 1996 the Company paid a dividend of $.10 per common share. Prior to 1996 the Company had previously last paid a dividend of $.02 per share on its common stock in November 1988. Any payment of cash dividends in the future will be dependent upon the Company's financial condition, loan covenants, capital requirements, earnings, and other factors that the Company deems relevant.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
(1)Not covered by accountant's report.
On February 3, 1997 the Company paid a dividend of $.10 per common share for shareholders of record as of January 20, 1997. On February 1, 1996 the Company paid a dividend of $.10 per common share. Prior to 1996 the Company had previously last paid a dividend of $.02 per share on its common stock in November 1988.
ITEM 7:
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 1997 VERSUS FISCAL 1996
The discussion that follows is based on the Consolidated Statements of Operations and compares the results of the Company's continuing operations for the year ended September 30, 1997 to the Company's continuing operations for the year ended September 30, 1996.
SALES
Total net sales from operations decreased approximately $9,793,000 or 8.2% for the fiscal year ended September 30, 1997 compared to the prior year ended September 30, 1996. The principal decrease of approximately $9,555,000 occurred in the Beverage Division. The Grove Management Division sales decreased approximately $238,000 compared to the prior year.
BEVERAGE DIVISION The Beverage Division sales decreased approximately $9,555,000 during fiscal 1997 compared to the prior year. A principal component of this reduction was a decrease of approximately $14,783,000 in revenues as a result of lower prices for bulk citrus juice products sold compared to the prior year. Partially offsetting this price decrease was an increase of approximately $4,088,000 from the Company's bulk citrus juice products due to higher volumes of these products sold. The increase in volumes was due primarily to an expanding sales program for bulk citrus juice products. In October 1996, the USDA announced a Florida crop estimate of approximately 220,000,000 boxes of round oranges for the 1996-97 season. This represented a significant increase from the 1995-96 actual of approximately 203,300,000 boxes of round oranges. The anticipation of this significant increase had a deflating effect on prices throughout fiscal 1997 compared to the prior year. The actual final crop for the 1996-97 season was approximately 226,200,000 boxes of round oranges. As we entered the 1997-98 season, the USDA has estimated a Florida orange crop of approximately 254,000,000 boxes of round oranges.
Sales of the Company's packaged citrus juices increased approximately $576,000 during fiscal 1997 compared to the prior year. Of this increase, the sales increase of approximately $2,315,000 was due to increased volumes compared to the prior year principally as a result of the purchase of the Birds Eye(R) foodservice juice business in July 1996. Partially offsetting this increase was a decrease of approximately $1,739,000 as a result of lower prices for packaged citrus juice products compared to the prior year.
The Company's non-orange and packaged juices and drink base sales increased approximately $2,219,000 during fiscal 1997 compared to the prior year. The principal component of this increase of approximately $1,786,000 resulted from increased prices for these products. Additionally, volume increases for these products accounted for an increase of approximately $433,000 compared to the prior year.
Storage, handling, processing citrus for customers under contract, and other revenues decreased approximately $1,078,000 during fiscal 1997 compared to the prior year principally as a result of a decrease in the volume of these services being performed.
Additionally, revenues from the sale of citrus by-products, including feed, pulp cells, and citrus oils, decreased approximately $577,000 during fiscal 1997 compared to the prior year principally as a result of decreased prices for these products in the current year.
GROVE MANAGEMENT DIVISION Grove Management Division revenues decreased approximately $238,000 during fiscal 1997 compared to the prior year. The principal decrease during fiscal 1997 of approximately $390,000 was due to a reduction in the volume of fruit sold to third party packers and processors. Revenues from grove caretaking also decreased during fiscal 1997 by approximately $15,000. Partially offsetting these decreases were increases in harvesting revenues of approximately $167,000 due to a higher volume of boxes harvested.
GROSS PROFIT
Gross profit for fiscal 1997 decreased approximately $12,338,000 or 56.7% compared to the prior year. The Beverage Division accounted for the principal decrease with a decrease in gross profit of approximately $12,106,000 while the Grove Management Division gross profit decreased approximately $232,000.
BEVERAGE DIVISION The decrease in gross profit of approximately $12,106,000 in the Beverage Division resulted from numerous increases and decreases. However, the principal decrease in gross profit of approximately $14,783,000 resulted from decreased prices for the Company's bulk citrus juice products during fiscal 1997 compared to the prior year. This decrease was partially offset by an increase in gross profit of approximately $2,043,000 as a combined result of higher volumes of citrus juice products sold and lower costs of raw fruit and purchased concentrate used in the production of these products during fiscal 1997 compared to the prior year.
The Company has in the past utilized and may in the future utilize the FCOJ futures market to hedge fruit inventory, anticipated requirements and sales commitments of FCOJ. The effects of this hedging activity, if any, are reflected in sales or in the cost of inventories and flow through in the Consolidated Statements of Operations as the associated products are sold. As of September 30, 1997 the Company held contracts for FCOJ futures with unrealized gains of approximately $267,000 which would have been realized if said positions had been prematurely liquidated on that date. These unrealized gains are based upon the closing market price of the equivalent futures obligations and do not necessarily represent prices at which the Company expects to sell the FCOJ.
Gross profit from the sale of the Company's packaged citrus juice products increased approximately $470,000 during fiscal 1997 compared to the prior year. The principal increase of approximately $1,415,000 resulted from an increase in volumes of packaged citrus juice products sold. Additionally, gross profit increased approximately $794,000 as a result of lower costs of production resulting principally from lower costs of raw fruit and purchased solids utilized in the production of these products during fiscal 1997. Partially offsetting these increases was a decrease in gross profit of approximately $1,739,000 as a result of lower prices for these products being sold compared to the prior year.
Gross profit from the sale of the Company's non-orange packaged juices and drink base products increased approximately $616,000 during fiscal 1997 compared to the prior year. The principal increase of approximately $1,786,000 was the result of increased prices compared to the prior year primarily due to the change in product mix resulting from the purchase of the Birds Eye(R) foodservice juice business in July 1996. Additionally there was an increase in volumes of these products of approximately $293,000. These increases were partially offset by a decrease in gross profit of approximately $1,463,000 as a result of higher cost of production for these products.
The sale of the Company's by-products decreased gross profit approximately $1,119,000 during fiscal 1997 compared to the prior year. The principal decrease of approximately $577,000 was primarily the result of decreased prices. Additionally cost of sales increased approximately $542,000 compared to the prior year.
Gross profit from storage, handling and other activities increased by approximately $667,000 during fiscal 1997 compared to the same period in the prior year. The primary increase of approximately $917,000 resulted from a reduction in operating costs. Additionally, gross profit increased by approximately $389,000 as a result of an increase in service fees collected. Partially offsetting this increase was a decrease in gross profit of approximately $639,000 resulting from a reduction in the volume of citrus processed for customers under contract and related storage and handling activities.
GROVE MANAGEMENT DIVISION Grove Management Division gross profit decreased by approximately $232,000 during fiscal 1997 compared to the prior year. Gross profit decreased approximately $236,000 as a result of a decrease in the volume of fruit sold to third party packers and processors. Additionally, gross profit from caretaking activities decreased by approximately $77,000. Partially offsetting these decreases was an increase in gross profit from harvesting activities of approximately $81,000 due to a higher volume of boxes harvested.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased approximately $117,000 or 2.3% for fiscal 1997 compared to the prior year. Of this increase approximately $705,000 resulted from an increase in salary and benefit costs compared to the prior year principally as a result of increased staffing. Partially offsetting this increase was a decrease in other costs of approximately $588,000 compared to the prior year.
GAIN/(LOSS) ON DISPOSITION OF PROPERTY AND EQUIPMENT
The gain on the disposition of property and equipment increased approximately $416,000 for fiscal 1997 compared to the prior year. The principal reason for this increase was a gain of approximately $438,000 on the disposition of certain commercial properties for which there was no comparable activity for fiscal 1996.
OTHER
Other income increased approximately $49,000 in fiscal 1997 compared to the prior year primarily as a result of a reclassification of expenses and an increase in miscellaneous income.
INTEREST EXPENSE
Interest expense increased by approximately $664,000 or 32.2% in fiscal 1997 compared to the prior year. The primary increase of approximately $596,000 was due to an increase in the average outstanding debt. Additionally, an increase of approximately $144,000 was due to an increase in interest rates. Partially offsetting these increases were an increase in capitalized interest of approximately $57,000 and a decrease in other related interest charges of approximately $19,000.
OTHER SIGNIFICANT EVENTS
As previously mentioned, the USDA has announced an anticipated Florida orange crop of approximately 254,000,000 boxes of round oranges for the 1997-98 season.
The Company's sales or costs were not impacted significantly by the effects of general price level inflation during fiscal 1997.
FISCAL 1996 VERSUS FISCAL 1995
The discussion that follows is based on the Consolidated Statements of Operations and compares the results of the Company's continuing operations for the year ended September 30, 1996 to the Company's continuing operations for the year ended September 30, 1995.
SALES
Total net sales from operations increased approximately $7,805,000 or 7.0% for the fiscal year ended September 30, 1996 compared to the prior year ended September 30, 1995. The principal increase of approximately $7,141,000 occurred in the Beverage Division. The Grove Management Division sales increased approximately $664,000 compared to the prior year.
BEVERAGE DIVISION The Beverage Division sales increased approximately $7,141,000 during fiscal 1996 compared to the prior year. A principal component of this increase was an increase of approximately $7,373,000 as a result of higher prices for bulk citrus juice products sold compared to the prior year. Additionally, there was an increase of approximately $2,857,000 in the revenues from the Company's bulk citrus juice products due to higher volumes of products sold. The increases in volumes were due primarily to an improving sales program for the bulk citrus juice products. In October 1995 the USDA announced a Florida crop estimate of approximately 204,000,000 boxes of round oranges for the 1995-96 season which was approximately the same as the 1994-95 crop of 205,500,000 boxes of round oranges. The 1995-96 estimate by the USDA was revised at the end of the season to 203,300,000 boxes of round oranges which is the third largest Florida crop in history. As we entered the 1996-97 season, the USDA has estimated this crop at 220,000,000 boxes which, if true, would have been the highest Florida orange crop in history and have a significant impact on the prices for bulk orange concentrated juices for fiscal 1996-97. The final crop as reported by the USDA was 226,200,000 boxes of round oranges.
Sales of the Company's packaged citrus juices increased approximately $1,138,000 during fiscal 1996 compared to the prior year. Higher prices accounted for an increase in revenues of approximately $592,000 during fiscal 1996. Additionally, an increase in revenues of approximately $546,000 compared to the prior year resulted from higher volumes of these products being sold.
The Company's non-orange packaged juices and drink base sales increased approximately $4,798,000 during fiscal 1996 compared to the prior year. Increases in the volume of sales of these products accounted for increases of approximately $3,268,000. The principal increase in volume of these products resulted from the purchase of the Birds Eye(R) food service juice business in July 1996. Additionally, increased prices of these products accounted for approximately $1,530,000 in increased sales.
Partially offsetting these increases were decreases in revenues from the sale of the Company's citrus by-products, including feed, pulp cells, and citrus oils of approximately $5,239,000 during fiscal 1996 compared to the prior year. The principal component of this decrease in sales of approximately $4,556,000 resulted from a decrease in volume of sales. Additionally, sales of these products decreased approximately $683,000 as a result of decreased prices during fiscal 1996 compared to the prior year. During fiscal 1996 the market for these by-products weakened significantly due to higher production in the industry.
Storage, handling, processing citrus for customers under contract, and other revenues decreased approximately $3,786,000 during fiscal 1996 as a result of a decrease in the volume of these services performed compared to the prior year.
GROVE MANAGEMENT DIVISION Grove Management Division revenues increased approximately $664,000 or 15.0% during fiscal 1996 compared to the prior year. The principal increase during fiscal 1996 of approximately $442,000 was due to an increase in caretaking revenues. Additionally, revenues from the sale of fruit to third parties increased by approximately $268,000 during fiscal 1996 compared to the prior year. Partially offsetting these increases was a decrease of approximately $46,000 in harvesting revenues.
GROSS PROFIT
Gross profit for fiscal 1996 increased approximately $1,642,000 or 8.2% compared to the prior year. The Beverage Division provided an increase in gross profit of approximately $1,488,000 and the Grove Management Division gross profit increased approximately $154,000 compared to the prior year.
BEVERAGE DIVISION Gross profit of the Beverage Division increased as a result of multiple increases and decreases. A principal component of this increase was an increase in gross profit of approximately $5,968,000 resulted from the sales of bulk citrus juice products. Of this increase approximately $7,373,000 resulted primarily from higher prices compared to the same period in the prior year. Additionally, the increase in the volume of sales of bulk citrus products previously mentioned provided an increase in gross profit of approximately $596,000. Partially offsetting these increases was a decrease in gross profit of approximately $2,001,000 as a result of higher costs of raw fruit and purchased concentrate used in the production of bulk citrus products during fiscal 1996 compared to the prior year.
The Company has in the past utilized and may in the future utilize the FCOJ futures market to hedge fruit inventory, anticipated requirements and sales commitments of FCOJ. The effects of this hedging activity, if any, are reflected in sales or in the cost of inventories and flow through in the Consolidated Statements of Operations as the associated products are sold. As of September 30, 1996 the Company held contracts for FCOJ futures with unrealized gains of approximately $37,000 which would have been realized if said positions had been prematurely liquidated on that date. These unrealized gains are based upon the closing market price of equivalent futures obligations and do not necessarily represent prices at which the Company expects to sell the FCOJ.
Gross profit from the sale of the Company's packaged citrus juice products increased approximately $387,000 during fiscal 1996 compared to the prior year. Increases in prices of these products sold accounted for an increase in gross profit of approximately $592,000. This increase was reduced approximately $205,000 principally as a result of higher costs.
Gross profit from the sale of the Company's non-orange packaged juices and drink base products increased approximately $104,000 as a combined result of increased price offset by higher cost of production on higher volumes.
The sale of the Company's by-products provided a decrease in gross profit of approximately $4,311,000 during fiscal 1996 compared to the prior year. The principal decrease of approximately $3,394,000 resulted from decreased volumes of these by-products sold. Additionally, gross profit on these by-products decreased approximately $917,000 as a combined result of lower prices and higher production costs compared to the prior year.
Gross profit from storage, handling and other activities decreased by approximately $660,000 principally due to decreases in volume of these activities.
GROVE MANAGEMENT DIVISION Grove Management gross profit increased approximately $154,000 during fiscal 1996 compared to the prior year. The increase was primarily due to increased sales of fruit to third parties and grove caretaking activity.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased approximately $596,000 or 13.0% for fiscal 1996 compared to the prior year. Of this increase approximately $332,000 resulted from an increase in salary and benefit costs compared to the prior year. Additionally there was an increase in other costs of approximately $264,000 compared to the prior year.
GAIN/(LOSS) ON DISPOSITION OF PROPERTY AND EQUIPMENT
The gain on the disposition of property and equipment decreased approximately $1,004,000 for the fiscal year ended September 30, 1996 compared to the prior year. The principal reasons for this decrease were a gain of approximately $453,000 on the involuntary conversion of certain assets in fiscal 1995, (see Note 8 "Nonrecurring Gains and Losses" of the Notes to the Consolidated Financial Statements) and a gain of approximately $385,000 on the disposition of certain commercial properties for which there was no comparable activity for the year ended September 30, 1996.
OTHER
Other costs decreased approximately $112,000 in fiscal 1996 compared to the prior year as a result of a charge for a valuation adjustment of certain idle properties of approximately $591,000 in fiscal 1995 for which there was no comparable activity in fiscal 1996. This charge was partially offset by business interruption insurance proceeds received of approximately $450,000 for losses incurred from the previously mentioned involuntary conversion during the prior year. (See Note 8 "Nonrecurring Gains" of the Notes to the Consolidated Financial Statements.)
INTEREST EXPENSE
Interest expense increased by approximately $443,000 or 27.4% in fiscal year 1996 compared to the prior year. The primary reason for this increase of approximately $644,000 was due to an increase in the average outstanding debt. Additionally, an increase of approximately $19,000 was due to an increase in capitalized interest of approximately $177,000 and a decrease in amortization of deferred loan costs and other related expenses of approximately $43,000 during fiscal 1996 compared to the prior year.
OTHER SIGNIFICANT EVENTS
As previously mentioned, the USDA has announced an anticipated Florida orange crop of approximately 220,000,000 boxes of round oranges for the 1996-97 season. The final crop for the 1996-97 season reported by the USDA was 226,200,000 boxes of round oranges.
The Company's sales or costs were not impacted significantly by the effects of general price level inflation during fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's Bartow processing plant normally operates from early November through late May or June. While the plant is in operation, the inventory of processed juice increases to a level which will cover anticipated deliveries until the following November when the plant begins operation again. The Company's working capital credit facility is generally utilized to finance these inventories. Borrowings under this credit facility normally peak in late May or June. The Company began processing activities for the 1996-97 season in late October and completed processing of fruit in May.
The Company's ability to generate cash adequate to meet its needs, including the refinancing of its inventories and trade receivables, has been supported primarily by cash flow from operations and periodic borrowings under its $45 million credit facility. This facility is secured principally by most of the Company's current assets. The outstanding balance at September 30, 1997 was approximately $28,380,000 and approximately $266,000 of additional borrowings were available under this facility. The interest rate is variable based upon the financial institution's cost of funds plus a margin. The terms of this agreement call for repayment of the principal amount in April 1999; accordingly, it is classified as long-term. Management anticipates that this facility will continue to be renewed as long term each year. As of November 30, 1997, the Company's outstanding balance was approximately $22,643,000, and approximately $3,441,000 of additional borrowings were available under this facility. The Company anticipates that the working capital facility will be adequately serviced with cash proceeds from operations.
Additionally, as of September 30, 1997 the Company had another $10 million short-term credit facility. As of September 30, 1997, there was no outstanding balance on this facility. The interest rate on this facility is variable based upon the financial institution's cost of funds plus a margin. As of November 30, 1997, the Company's outstanding balance on this facility was $4,000,000.
Current assets decreased approximately $391,000 as of September 30, 1997 compared to September 30, 1996. The principal component of this was a decrease in accounts receivable of approximately $6,464,000 in the current year due principally to lower fourth quarter sales in fiscal 1997. There was a decrease in cash and short-term cash investments of approximately $499,000 and advances on fruit purchases decreased approximately $266,000. The Company's inventory increased approximately $4,941,000 compared to the prior fiscal year. Additionally, there was an increase of approximately $1,232,000 in current deferred income taxes compared to the prior year.
Current liabilities decreased approximately $602,000 during fiscal 1997 compared to the fiscal year ended September 30, 1996. The principal component of this decrease was a $4,223,000 decrease in accounts payable and accrued liabilities. There was an increase of approximately $3,621,000 in current installments on long term debt primarily as a result of a $4,370,000 balance on a mortgage note payable becoming current.
At September 30, 1997 the Company's outstanding long-term debt was approximately $46,764,000 including the working capital facility of approximately $28,380,000. In addition, current installments of long-term debt were approximately $7,276,000 with the remaining amounts due on various dates over the subsequent eleven years. The Company anticipates that amounts due over the next twelve months will be paid out of working capital or from additional funds provided from refinancing the $4,370,000 currently payable note previously mentioned existing mortgages. At September 30, 1997, the Company was in compliance with its loan covenants.
The Company completed the installation of new irrigation systems for 2,642 acres of Company-owned Joshua, Polk County, and Bermont groves during fiscal 1997 at a cost of approximately $1,808,000. New irrigation systems for an additional 1,941 acres and other projects are currently under construction for which approximately $883,000 has been expended to date. In addition, citrus groves
costing approximately $341,000 were purchased during fiscal 1997, and costs of caring for newly planted trees in the amount of approximately $2,891,000 were capitalized. Additional expenditures of approximately $3,544,000 were made during the current year primarily for the purpose of improving the efficiency and capacity of the Bartow processing facility. Also during fiscal 1997, expenditures of approximately $217,000 were made for grove operations equipment other than for irrigation. The Company anticipates that these improvements will be financed principally from working capital or by securing additional funds under existing mortgages.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX PAGES (1) Financial Statements.
The Company's Financial Statements included in Item 8 hereof, as required at September 30, 1997, 1996 and 1995.
Report of Independent Certified Public Accountants 24
Consolidated Balance Sheets 25
Consolidated Statements of Operations 26
Consolidated Statements of Cash Flows 27
Consolidated Statements of Stockholders' Equity 28
Notes to Consolidated Financial Statements 29-38
(2) Financial Statement Schedule. Financial Statement Schedule of the Company appended hereto, as required at September 30, 1997, 1996 and 1995.
Schedule VIII-Allowance for Doubtful Accounts 39
(3) All other schedules to the Consolidated Financial Statements required by Article 12 of Regulation S-X are not required under the related instruction or are inapplicable and therefore have been omitted.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders Orange-co, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Orange-co, Inc. and subsidiaries as of September 30, 1997, and 1996, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended September 30, 1997. In connection with our audit of the consolidated financial statements, we have also audited the financial statement schedule as listed in Item 8 (2) herein. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Orange-co, Inc. and subsidiaries as of September 30, 1997 and 1996, and results of their operations and their cash flows for each of the years in the three-year period ended September 30, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
/s/KPMG Peat Marwick LLP - ------------------------ KPMG Peat Marwick LLP
Orlando, Florida December 4, 1997
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
The accompanying notes are an integral part of the financial statements.
ORANGE-CO, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF OPERATIONS - Orange-co, Inc. and Subsidiaries (the "Company"), a 50.4% beneficially owned subsidiary of Ben Hill Griffin, Inc. and an affiliate, is principally engaged in growing and processing citrus products as well as packaging and marketing these products and other beverages.
During the year ended September 30, 1997, the Company had two customers who accounted for approximately 22.3% and 14.1% of sales. During the year ended September 30, 1996, the Company had two customers who individually accounted for approximately 20.5% and 17.6% of sales. During the year ended September 30, 1995, the Company had two customers who individually accounted for approximately 21.0% and 14.9% of sales.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements of the Company include the accounts of Orange-co, Inc. and its subsidiaries after elimination of all material intercompany accounts and transactions.
USE OF ESTIMATES - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. These estimates also affect the reported revenues and expenses during the period. Actual results could differ from the estimated amounts.
INVENTORIES - Inventories are stated at the lower of cost or market. The cost of inventories is principally determined on the average cost method. Costs of growing fruit are accounted for as fruit-on-tree inventory.
The Company has in the past utilized and may in the future utilize the frozen concentrated orange juice ("FCOJ") futures market to hedge inventories, anticipated inventory requirements, and sales commitments. The results of these transactions, designated and effective as hedges, if any, are reflected in sales or in the cost of inventories and flow through in the Consolidated Statements of Operations as the associated products are sold.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are recognized principally using the straight-line method in amounts adequate to depreciate and amortize cost over the estimated useful lives of the applicable assets.
Costs pertaining to planting and caretaking of citrus trees are initially capitalized and then, after the trees reach fruit-producing age, depreciated over the estimated life of the trees.
Maintenance, repairs and minor renewals are charged to expense as incurred while major renewals and improvements that extend useful lives are capitalized. The cost and related allowance for depreciation or amortization of assets sold or otherwise disposed of are removed from the related accounts, and the resulting gains or losses are reflected in the results of operations.
Interest is capitalized in connection with the construction of major facilities and to young trees planted prior to their productive stage. The interest is amortized over the related asset's useful life through depreciation.
EXCESS OF COST OVER NET ASSETS OF ACQUIRED COMPANIES - The excess of the aggregate purchase price over the fair value of net assets acquired is recorded at cost less accumulated amortization of approximately $4,051,000 as of September 30, 1997 and $3,674,000 as of September 30, 1996. Amortization is
recognized over a 40-year period using the straight-line method. Management has evaluated the Company's excess of cost over net assets of its acquired companies and has determined that no adjustment is necessary as no material impairment has occurred in the opinion of the Company. In making this assessment the Company employs various methods including comparing the carrying value of associated assets to their net realizable value and analysis of anticipated profitability depending upon the facts and circumstances.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist principally of cash, time deposits and interest bearing investments with maturities of three months or less. For purposes of the Consolidated Statements of Cash Flows, all highly liquid investments are considered to be cash equivalents.
EARNINGS PER SHARE - Net income per share is computed by dividing net income by the weighted average number of common and common stock equivalents issued and outstanding during the period.
RECLASSIFICATIONS - Certain accounts may have been reclassified in the 1996 and 1995 financial statements to conform to the 1997 financial statement presentation.
INCOME TAXES - The Company uses the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
APPLICATION OF ACCOUNTING STANDARDS - In March 1995, the Financial Accounting Standards Board ("FASB") issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of," effective for financial statements for fiscal years beginning after December 15, 1995. Among other provisions, SFAS 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicated that the carrying amount of an asset may not be recoverable. The Company has reviewed its long-lived assets for impairment and has determined that no adjustment to the carrying value of long-lived assets is required.
In October 1995, the FASB issued SFAS 123, "Accounting for Stock-Based Compensation", effective for financial statements for fiscal years beginning after December 15, 1995. Among other provisions, SFAS 123 establishes a new, alternative method based on fair values for accounting for stock-based compensation arrangements with employees. In addition, if any entity does not adopt the new alternative method, the statement requires disclosure in the footnotes of proforma net income and earnings per share as if the fair value method had been adopted. For the fiscal year ending September 30, 1997 and interim periods, the Company adopted SFAS 123. The adoption of SFAS 123 resulted in no adjustments or additional required disclosures because the Company did not grant any options after December 15, 1995.
Effective for interim and annual financial statements for fiscal year ending after December 15, 1997, the FASB has issued SFAS 128 "Earnings per Share" which changes the requirements for the calculation and disclosure of earnings per share in the financial statements. The Company will adopt SFAS 128 for its interim and annual reporting periods beginning in its 1998 fiscal year. It is anticipated that its adoption will have no material effect on the financial statements.
FINANCIAL INSTRUMENTS FAIR VALUE, CREDIT RISKS, AND OFF-BALANCE SHEET RISK - The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximates fair value due to the short-term maturity of these financial instruments. The fair value of notes receivable is not considered practical to estimate due to the nature of the accounts, the lack of a market available to approximate their fair value and their immateriality. The carrying value of the variable rate long-term debt approximates fair value due to frequent repricing. The fair value of the fixed rate long-term debt is estimated using discounted cash flows based upon the incremental borrowing rates currently available to the Company for mortgage loans with similar remaining terms and maturity.
As of September 30, 1997, the Company was subjected to a concentration of credit risk as a result of 18.2% of its trade accounts receivable being due from companies affiliated with a common ownership. No collateral is required on these trade receivables due to collection experience and trade practices. Additionally, the Company's accounts receivable are concentrated generally in the beverage and foodservice industries. Management believes the allowance for doubtful accounts is adequate under the circumstances.
As of September 30, 1997 the Company held contracts for FCOJ futures positions and net options totaling approximately $9,265,000 and $167,000 with unrealized gains of approximately $267,000 and $343,000, respectively. Exposure to off-balance sheet risk related to these positions results from market fluctuations of FCOJ future prices relative to the Company's open positions. Cash deposit requirements with brokers as of September 30, 1997 totaled $412,000 and will vary with market price fluctuations.
2. RECEIVABLES
3. INVENTORIES
4. PROPERTY AND EQUIPMENT
Rent expense charged to operations amounted to approximately $2,003,000 for the year ended September 30, 1997, $1,880,000 for the year ended September 30, 1996, and $1,160,000 for the year ended September 30, 1995.
5. ACCRUED LIABILITIES
The major components of accrued liabilities as of September 30, 1997 and 1996 are summarized as follows (in thousands):
6. INCOME TAXES
The valuation allowance for deferred tax assets as of September 30, 1995 was $3,054,000. The net change in the total valuation allowance for the years ended September 30, 1996 and 1997 was a decrease of $1,284,000 and a decrease of $1,096,000, respectively. The decrease in 1997 was principally as a result of investment tax credits expiring unutilized and unreserved. The Company utilized all of the net operating loss carryforward as of September 30, 1997. Additionally, previously fully reserved net capital loss with a tax benefit of $1,196,000 was utilized during fiscal 1997.
Income taxes paid, net of refunds applied for, amounted to approximately $820,000, $4,256,000, and $3,460,000 for the years ended September 30, 1997, 1996 and 1995 respectively.
For tax reporting purposes as of September 30, 1997, the Company had unused net capital loss carryforwards of approximately $1,565,000 and investment tax credit carryforwards of approximately $507,000 which expire in varying amounts through the year 2002. In addition, the Company has alternative minimum tax credit carryforwards of approximately $974,000 which are available to reduce future federal regular income taxes, if any, over an indefinite period. Management believes that the net deferred tax assets of $3,453,000 are materially recoverable.
7. NOTES PAYABLE TO BANKS AND LONG-TERM DEBT
As of September 30, 1997 the Company had a $45 million working capital facility with an outstanding balance of $28,380,000 with additional available borrowings of approximately $266,000. As of September 30, 1997, the Company also had additional available short-term borrowings of $10,000,000 under its revolving line of credit.
Interest paid net of amounts capitalized was approximately $2,737,000, $1,949,000, and $1,670,000, for the years ended September 30, 1997, 1996, and 1995, respectively. Interest capitalized was approximately $799,000, $742,000, and $661,000, for the years ended September 30, 1997, 1996, and 1995, respectively.
8. NONRECURRING GAINS AND LOSSES
The Company incurred property damage as a result of a fire during the third quarter of fiscal 1995 which destroyed certain equipment at the Bartow processing facility. This event did not materially affect the continuing operations of the Company. The Company maintains insurance for both property damage at replacement value and business interruption applicable to its production facilities. As a result the Company was awarded approximately $903,000, including $453,000 in excess of book value for property damage during the third quarter of fiscal 1995 which is included in "Gain on disposition of property and equipment" and $450,000 during the fourth quarter of fiscal 1995 for business interruption which is included in "Other" income on the Consolidated Statement of Operations. Additionally, the Company provided an additional charge of $591,000 during the fourth quarter of fiscal 1995 in "Other" expense as a valuation allowance against certain properties and equipment. In July of fiscal 1997 a storm with heavy winds and rain severely damaged one of the Company's product storage freezers, which as of September 30, 1997 was in the process of being replaced. The Company has adequate replacement cost insurance to cover the loss and experienced no material disruption in operations as a result of the damages.
9. 401K PLAN
The Company has a retirement plan (the "Plan") which meets the qualifications under Section 401(k) of the Internal Revenue Code (the "Code"). Employees who have completed the required service (as defined) are eligible to make tax-deferred contributions and to participate in an employer matching contribution. The Company contributed approximately $66,000, $61,000, and $54,000, under the Plan for the years ended September 30, 1997, 1996, and 1995, respectively. The Company also accrued approximately $60,000 during fiscal 1997 for contributions to the Plan for the 1997 Plan year. In December 1990, the assets of the Employees Stock Ownership Trust ("ESOT") were merged into the Plan. At September 30, 1997 the Plan held approximately .45% of the outstanding common stock of the Company.
10. PROFIT SHARING PLAN
Effective January 1, 1993, the Company established a Profit Sharing Retirement Plan ("Profit Sharing Plan") which meets the qualifications of Section 401(c) of the Code. All employees begin participation on the later of January 1, 1993 or date of employment. Vesting is governed by a seven year graduated vesting schedule including credit for continuous service with the Company prior to the effective date. The Company's discretionary contribution is determined annually and is allocated among eligible participants' accounts in the proportion that each participant's compensation bears to the total qualified compensation of all eligible employees during the year. The Company contributed approximately $694,000 and $698,000 to the Profit Sharing Plan during fiscal 1997 and 1996, respectively, which represented discretionary contributions for the 1996 and 1995 Profit Sharing Plan years, respectively. In addition, the Company accrued approximately $250,000 during fiscal 1997 to be contributed to the Profit Sharing Plan for the 1997 Plan year.
11. OTHER RETIREMENT BENEFITS
Certain officers and employees have employment contracts for additional retirement benefits, the cost of which is being accrued on a present value basis over the remaining term of the employment agreements. The lives of the officers and employees have been insured as a means of funding such benefits. These
contracts became effective for fiscal 1994 and thereafter. The accrued liability for these additional retirement benefits at September 30, 1997 was approximately $576,000.
12. STOCK OPTIONS
In April 1987, the Company adopted an Employee Stock Option Plan (the 1987 Plan) under which a committee of the Board of Directors may grant either incentive stock options ("ISOs") or non-qualified stock options. The 1987 Plan provides that ISOs and non-qualified options may be granted for a period of ten years to purchase up to an aggregate of 750,000 shares of common stock. The option price of all common stock issued or to be issued under the 1987 Plan is at least 100% of the fair market value on the date of grant. The options granted to purchase shares generally become exercisable on a cumulative basis at 33-1/3% each year, commencing with the second year. The 1987 Plan expired during fiscal 1997 and no further options can be granted. There are options on 19,325 shares issued and outstanding as of September 30, 1997.
Options granted under the 1987 Plan expire at various dates through August 2001.
13. RELATED PARTY TRANSACTIONS
Ben Hill Griffin, Inc. and an affiliate collectively and beneficially held approximately 50.4% majority ownership of Orange-co, Inc. as of September 30, 1997. Ben Hill Griffin, Inc. is a privately owned agribusiness corporation located in Frostproof, Florida.
During the fiscal year ended September 30, 1997 the Company had incurred an estimated $9,224,000 in fruit participation cost from fruit purchased from its parent, Ben Hill Griffin, Inc. Of that amount approximately $6,085,000 was paid as of September 30, 1997 with the accrued balance of $3,139,000 to be paid by March 1, 1998. Final payment amounts under the Company's fruit participation program are based upon returns from the ultimate disposition of the fruit received. For the fiscal year ended September 30, 1996 the Company incurred a total of $6,323,000 in fruit participation cost from fruit purchased from its parent, Ben Hill Griffin, Inc. As of September 30, 1996 a total of $3,212,000
had been paid against this amount and an estimated balance of $3,111,000 was accrued to be paid on March 1, 1997. Fruit purchases made from the parent company under the Company's participation program are under terms equivalent to fruit purchased from other grower participants. For the fiscal year ended September 30, 1996 the Company also incurred $392,000 for fruit purchased from Ben Hill Griffin, Inc. under a spot fruit purchase contract. Additionally, the Company paid approximately $2,539,000, $2,862,000, and $2,451,000 to Ben Hill Griffin, Inc. for other goods and services, principally the purchase of fertilizer and citrus trees at prices approximating market, during fiscal 1997, 1996 and 1995, respectively.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 will be set forth in the Company's 1998 Proxy Statement under the caption "Nominees For Election As Directors" and is incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 will be set forth in the Company's 1998 Proxy Statement under the caption "Executive Officers and Compensation" and is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 will be set forth in the Company's 1998 Proxy Statement under the caption "Security Ownership of Certain Beneficial Owners", "Nominees for Election as Directors" and "Stock Ownership of Executive Officers", and is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 will be set forth in the Company's 1998 Proxy Statement under the caption "Transactions With Management And Others" and is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The financial statements required to be filed as part of this Report, and the report thereon by KPMG Peat Marwick LLP, are set forth under Item 8 and listed on Page 23 herein.
(2) The financial statement schedule required to be filed herewith are listed on Page 23 herein.
(3) The exhibits required to be filed herewith are listed on the "Exhibit Index" commencing at Page 44 herein.
(b) During the last quarter of the period covered by this Report the Company filed no reports on Form 8-K.
(c) The exhibits required to be filed herewith are listed on the "Exhibit Index" commencing on Page 44 herein and incorporated herein by reference.
(d) The financial statements required to be filed as part of the Report and the report thereon by KPMG Peat Marwick LLP are set forth under Item 8 and are listed on Page 23 herein and are incorporated herein by reference.
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.
ORANGE-CO, INC. (REGISTRANT)
Date: December 19, 1997 By:/s/ Gene Mooney --------------- Gene Mooney President and Chief Operating Officer
Date: December 19, 1997 By:/s/ Dale A. Bruwelheide ----------------------- Dale A. Bruwelheide Vice President and Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.
Date: December 19, 1997 /s/ B. H. Griffin, III ------------------------------ B. H. Griffin, III Chairman, CEO and Director
Date: December 19, 1997 /s/ John R. Alexander ------------------------------ John R. Alexander Director
Date: December 19, 1997 /s/ Richard A. Coonrod ------------------------------ Richard A. Coonrod Director
Date: December 19, 1997 /s/ Paul E. Coury, MD ------------------------------ Paul E. Coury, MD Director
Date: December 19, 1997 /s/ George W. Harris, Jr. ------------------------------ George W. Harris, Jr. Director
Date: December 19, 1997 /s/ Dr. W. Bernard Lester ------------------------------ Dr. W. Bernard Lester Director
Date: December 19, 1997 /s/ Gene Mooney ------------------------------ Gene Mooney Director
Date: December 19, 1997 /s/ C. B. Myers, Jr. ------------------------------ C. B. Myers, Jr. Director
Date: December 19, 1997 /s/ Thomas H. Taylor, Sr. ------------------------------ Thomas H. Taylor, Sr. Director
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C.
For the fiscal year Commission File ended September 30, 1997 Number 1-6442
FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
ORANGE-CO, INC. (Exact name of registrant is specified in its charter)
EXHIBITS
INDEX
EXHIBITS INDEX SEQUENTIAL EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NO.
3.1 Restated Articles of Incorporation of the company, as amended, filed as Exhibits 3.1 to Stoneridge Resources, Inc.'s Registration Statement No. 33-24085 on Form S-1 and incorporated herein by reference.
3.2 By-laws of the Company, as amended filed as Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended September 30, 1992 and incorporated herein by reference.
10.1 Orange-co, Inc. Management Incentive Plan filed as Exhibit 10m to Stoneridge Resources, Inc.'s Registration Statement No. 33-24085 on Form S-1 and incorporated herein by reference.
10.4 Orange-co, Inc. 1984 Incentive Stock Option Plan, as amended filed as Exhibit 10.10 to the Company's Registration Statement No. 33-16935, as amended, on Form S-1 and incorporated herein by reference.
10.5 Orange-co, Inc. 1987 Employee Stock Option Plan, as amended filed as Exhibit 10.5 to the Company Annual Report on Form 10-K for the year ended September 30, 1992 and incorporated herein by reference.
10.8 Orange-co of Florida, Inc. Deferred Compensation Plan effective December 1, 1988 originally filed as Exhibit 10.11 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31,1989 as amended through December 15, 1994. and incorporated herein by reference.
10.11 Stock Purchase Agreement between Stoneridge Resources Inc., Ben Hill Griffin, Inc. and Ben Hill Griffin, III, dated as of April 9, 1992 filed as Exhibit (2) to the Company's Form 8-K filed May 28, 1992 and incorporated herein by reference.
10.12 Loan Agreement between Orange-co, Inc. Orange-co of Florida, Inc. and Farm Credit of Southwest Florida, ACA, dated April 10, 1993 and filed as Exhibit 10.12 on Form 10-Q for the fiscal quarter ended March 31, 1993 and incorporated herein by reference.
EXHIBITS INDEX SEQUENTIAL EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NO.
10.13 Amended and Restated Florida Mortgage Security Agreement and Spreader Agreement between Orange-co of Florida, Inc. and John Hancock Mutual Life Insurance Company, dated April 21, 1993; Renewal Note between Orange-co of Florida, Inc. and John Hancock Mutual Life Insurance Company dated April 21, 1993 filed as Exhibit 10.13 on Form 10-Q for the fiscal quarter ended March 31, 1993 and incorporated herein by reference.
10.14 Loan Agreement By and Among Orange-co, Inc. and Orange-co of Florida, Inc. and Sun Bank National Association for a Revolving Line of Credit in the amount of $20,000,000 dated June 16, 1993 and filed as Exhibit 10.14 on Form 10-Q for the fiscal quarter ended June 30, 1993 and incorporated herein by reference.
10.15 Thermal Energy Sales Agreement By and Between Orange- co of Florida, Inc. and AP Cogen Ltd., dated May 27, 1993 and filed as Exhibit 10.15 on Form 10-Q for the fiscal quarter ended June 30, 1993 and incorporated herein by reference.
10.16 Stock Purchase Agreement By and Between W. Eugene Hays and George M. Nagel Jr. and Orange-co of Florida, Inc. for the purchase of the stock of International Fruit, Inc., dated August 2, 1993 and filed as Exhibit 10.16 on Form 10-Q for the fiscal quarter ended June 30, 1993 and incorporated herein by reference.
10.17 Orange-co of Florida, Inc. Management Security Plan effective October 1, 1993 filed as Exhibit 10.17 on Form 10-Q for the fiscal quarter ended December 31, 1993 and incorporated herein by reference.
10.18 The First Amendment to the Loan Agreement By and Among Orange-co, Inc. and SunBank, National Association for a Revolving Line of Credit dated April 1, 1994 and filed as Exhibit 10.18 on Form 10-Q for the fiscal quarter ended June 30, 1994 and incorporated herein by reference.
10.19 The Second Amendment to the Loan Agreement By and Among Orange-co, Inc., and SunBank National Association for a Revolving Line of Credit dated April 1, 1994 and filed as Exhibit 10.19 on Form 10-Q for the fiscal quarter ended June 30, 1994 and incorporated herein by reference.
EXHIBITS INDEX SEQUENTIAL EXHIBIT NO. DESCRIPTION OF EXHIBITS PAGE NO.
10.20 Stock Acquisition Agreement Between Orange-co, Inc. and Childs Oil Company, Inc. dated September 9, 1994 for the sale of Frank Carroll Oil Company Stock and incorporated herein by reference.
10.21 The Third Amendment to the Loan Agreement By and Among Orange-co, Inc. Orange-co of Florida, Inc. and SunBank, National Association for a Revolving Line of Credit dated January 27, 1995 and filed as Exhibit 10.21 on Form 10-Q for the fiscal quarter ended December 31, 1994 and incorporated herein by reference.
10.22 The Fourth Amendment to the Loan Agreement By and Among Orange-co, Inc., Orange-co of Florida, Inc. and SunTrust Bank, Central Florida, National Association F/K/A SunBank, National Association for a Revolving Line of Credit dated January 23, 1996 and filed as Exhibit 10.22 on Form 10-Q for the fiscal quarter ended December 31, 1995 and incorporated herein by reference.
10.23 The Fifth Amendment to the Loan Agreement By and Among Orange-co, Inc., Orange-co of Florida, Inc. and SunTrust Bank, Central Florida, National Association dated April 5, 1996 and filed as Exhibit 10.23 on Form 10-Q for the fiscal quarter ended March 31, 1996 and incorporated herein by reference.
10.24 Second Amendment to the Loan Agreement between Orange- co, Inc. and Farm Credit of Southwest Florida, ACA dated May 16, 1996 and filed as Exhibit 10.24 on Form 10-Q for the fiscal quarter ended June 30, 1996 and incorporated herein by reference.
10.25 Asset Purchase Agreement between Kraft Foods, Inc. and Orange-co, Inc. and filed as Exhibit 10.25 on Form 10- Q for the quarter ended June 30, 1996 and incorporated herein by reference.
10.26 Consolidated Amended and Restated Florida Mortgage and Security Agreement between John Hancock Mutual Life Insurance Company and Orange-co of Florida, Inc. dated August 13, 1996 and filed as Exhibit 10.26 on Form 10-K for the fiscal year ended September 30, 1996 and incorporated herein by reference.
10.27 The Sixth Amendment to the Loan Agreement By and Among Orange-co, Inc., Orange-co of Florida, Inc., and SunTrust Bank, Central Florida, National Association, dated April 25, 1997 and filed as Exhibit 10.27 on Form 10-Q for the fiscal quarter ended March 31, 1997 and incorporated herein by reference.
16 Change in Accountants from Coopers & Lybrand to KPMG Peat Marwick as filed on the Company's Form 8K on August 4, 1992 and incorporated herein by reference.
21 Subsidiaries of the Company. 49
EXHIBITS INDEX SEQUENTIAL PAGE NO. EXHIBIT NO. DESCRIPTION OF EXHIBITS
24.1 Consent letter from KPMG Peat Marwick LLP. 50
27 Financial Data Schedule (Electronic Filing Only)
99.1 Orange-co of Florida, Inc. Profit Sharing Plan and Trust Agreement effective January 1, 1987, as amended and restated on January 1, 1989, including amendments through October 14, 1993 filed as Exhibit 99.1 on Form 10K for the fiscal year 1993 and incorporated herein by reference.
99.2 First Amendment to Orange-co of Florida, Inc. 401(k) Salary Deferral Plan effective December 15, 1994 and incorporated herein by reference.
99.3 Profit Sharing Plan and Trust for Employees of Orange- co of Florida, Inc. effective January 1, 1993 and incorporated herein by reference.