Genesee Corporation (Nasdaq: GENBB) yesterday announced results for the first fiscal quarter ended July 28, 2001.
The Corporation is currently operating under a plan of liquidation and dissolution that was approved by shareholders in October 2000. Pursuant to this plan, the Corporation sold its brewing business and a substantial portion of its equipment leasing business in December 2000. As a result of these transactions, the Corporation’s brewing and equipment leasing businesses are reported as discontinued operations.
Results for the Corporation’s continuing operations reflect only its Foods Division and corporate segment. The Corporation continues to operate the Foods Division as it works with J.H. Chapman Group to evaluate strategic alternatives for the divestiture of the Foods Division.
In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, the Corporation recorded a $21.8 million impairment charge related to the Foods Division in the first quarter of fiscal 2002. Management has evaluated projected future cash flows from its Foods Division during the remainder of the Corporation’s liquidation and dissolution phase and determined that an impairment has occurred under SFAS No. 121. This impairment charge is included as a part of the fiscal 2002 first quarter operating loss on the consolidated statement of earnings and comprehensive loss with an equivalent reduction in goodwill on the Corporation’s July 28, 2001 consolidated balance sheet.
As a result of the Foods Division impairment charge, the Corporation recorded a net loss from continuing operations of $21.6 million, or $12.90 basic and diluted loss per share, in the first quarter ended July 28, 2001, compared to a net loss from continuing operations of $529,000, or $.33 basic and diluted loss per share, in the first quarter last year. In the first quarter ended July 28, 2001, the Corporation recorded net earnings from discontinued operations of $508,000, or $.30 basic and diluted earnings per share, compared to net earnings from discontinued operations of $520,000, or $.32 basic and diluted earnings per share in the first quarter last year.
Net revenues for the Corporation’s Foods Division were $11.0 million in the first quarter, compared to $11.1 million in the prior year period. Excluding the impairment charge mentioned above, the Foods Division recorded a $1.3 million improvement in operating performance. This improvement is primarily due to a pre-tax charge of $900,000 that was recorded in the first quarter of fiscal 2001 to cover potential costs associated with a product quality problem, as well as the reversal of $200,000 of this charge in the first quarter of fiscal 2002 reflecting the success of efforts to reduce the financial impact of this quality problem. The aggressive profit improvement and cost reduction initiatives that were implemented by the Foods Division in the second half of fiscal 2001 also contributed to the improvement in operating performance in the first quarter of fiscal 2002. However, as a result of the $21.8 million impairment charge, the Foods Division recorded an operating loss in the first quarter of fiscal 2002 of $21.4 million, compared to an operating loss of $895,000 in the prior year period.
NOTE: The Corporation paid a partial liquidating distribution of $7.50 per share on March 1, 2001 under the plan of liquidation and dissolution adopted by the Corporation’s shareholders in October 2000. The amount and timing of subsequent liquidating distributions are subject to a number of factors, including without limitation, the amount and timing of payments to the Corporation by the purchaser of the Corporation’s brewing business under promissory notes held by the Corporation; the risk of default by the purchaser of the Corporation’s brewing business on its payment and other obligations under such notes; risks associated with continued ownership and operation of the Corporation’s Foods Division; the amount that will ultimately be realized from, and the timing of, the sale of the Foods Division and other assets of the Corporation; the possibility of delay in finding buyers for and completing the sale of the Foods Division and other remaining assets of the Corporation; possible contingent liabilities and post-closing indemnification and other obligations arising from the sale of the Corporation’s brewing, equipment leasing and other businesses; and risks associated with the liquidation and dissolution of the Corporation, including without limitation, settlement of the Corporation’s liabilities and obligations, costs incurred in connection with carrying out the plan of liquidation and dissolution, the amount of income earned on the Corporation’s cash equivalents and short-term investments during the liquidation period and the actual timing of liquidating distributions.
Statements made in this news release about the projected cash flows and prospects for the Corporation’s Foods Division are forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to a number of significant risks and uncertainties, and there can be no assurance that the expectations reflected in those statements will be realized or achieved. Such risks and uncertainties include, without limitation, uncertainties regarding industry trends and conditions that may affect the performance and financial condition of the Foods Division and risks associated with continued ownership and operation of the Foods Division while the Corporation is seeking to divest it.
Comparative Statement of (Loss) Earnings
THIRTEEN WEEKS THIRTEEN WEEKS
JULY 28, 2001 JULY 29, 2000
Net Revenues $11,009,000 $11,074,000
Loss From Continuing
Operations Before Income Taxes (21,274,000) (705,000)
Less: Income Tax Expense (Benefit) 317,000 (176,000)
Loss From Continuing Operations (21,591,000) (529,000)
Earnings From Discontinued Operations,
Net Of Income Tax Expense 508,000 520,000
Net Loss (21,083,000) (9,000)
Basic & Diluted Loss Per Share
From Continuing Operations (12.90) (.33)
Basic & Diluted Earnings
Per Share From Discontinued Operations .30 .32
Basic & Diluted Net Loss Per Share (12.60) (.01)
Weighted Average Common Shares Outstanding 1,674,086 1,620,643
Weighted Average and
Common Equivalent Shares 1,674,086 1,620,643