UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2002
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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
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NORTHLAND CRANBERRIES, INC.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1583759
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
2930 Industrial Street
P.O. Box 8020
Wisconsin Rapids, Wisconsin 54495-8020
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(Address of Principal Executive Offices)
Registrant's telephone number, including area code (715) 424-4444
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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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes____No____
APPLICABLE ONLY TO CORPORATE ISSUERS: 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 January 14, 2003 91,548,580
1
NORTHLAND CRANBERRIES, INC.
FORM 10-Q INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements....................................... 3
Condensed Consolidated Balance Sheets...................... 3
Condensed Consolidated Statements of Operations............ 4
Condensed Consolidated Statements of Cash Flows............ 5
Condensed Consolidated Statement of Shareholders' Equity... 6
Notes to Condensed Consolidated Financial Statements...... 7-14
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 15-19
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 and Use of Proceeds.................. 20
Item 3. Defaults Upon Senior Securities............................ 21
Item 4. Submission of Matters to a Vote of Security Holders........ 21
Item 6. Exhibits and Reports on Form 8-K........................... 21
SIGNATURE.................................................. 21
Certifications........................................... 22-23
Exhibit Index.............................................. 24
2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
November 30, August 31,
2002 2002
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,227 $ 264
Accounts receivable - net 6,796 7,498
Current portion of note receivable and
accounts receivable - other 10,110 10,190
Inventories 25,595 18,273
Prepaid expenses and other current assets 698 606
Assets held for sale 2,540 3,100
-------- ---------
Total current assets 46,966 39,931
Note receivable, less current portion 17,250 18,500
Property and equipment - net 63,003 63,836
Other assets 872 825
Debt issuance cost - net 3,421 3,793
-------- ---------
Total assets $131,512 $ 126,885
======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving line of credit facility $ 3,739 $ 560
Accounts payable 14,216 7,905
Accrued liabilities 8,273 9,028
Current maturities of long-term debt 14,007 15,568
-------- ---------
Total current liabilities 40,235 33,061
Long-term debt, less current maturities 50,971 54,532
-------- ---------
Total liabilities 91,206 87,593
-------- ---------
Shareholders' equity:
Common stock - Class A, $.01 par value,
91,548,580 and 91,548,580 shares
issued and outstanding, respectively 915 915
Redeemable preferred stock - Series B,
$.01 par value, 100 and 100 shares
issued and outstanding, respectively 0 0
Additional paid-in capital 154,902 154,902
Accumulated deficit (115,511) (116,525)
-------- ---------
Total shareholders' equity 40,306 39,292
-------- ---------
Total liabilities and shareholders' equity $131,512 $ 126,885
======== =========
See notes to condensed consolidated financial statements.
3
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
(Unaudited)
Three months ended
November 30, November 30,
2002 2001
Net revenues $ 21,739 $ 30,316
Cost of sales (15,165) (20,733)
--------- ----------
Gross profit 6,574 9,583
Selling, general and administrative expenses (6,594) (5,921)
Other income (Note 4) 1,500 0
-------- ---------
Income from operations 1,480 3,662
Interest expense (1,040) (3,090)
Interest income 574 650
Gain on forgiveness of indebtedness 0 83,299
-------- ---------
Income before income taxes 1,014 84,521
Income tax expense 0 (32,800)
-------- ---------
Net income $ 1,014 $ 51,721
======== =========
Net income per common share:
Basic: $ 0.01 $ 3.06
Diluted: $ 0.01 $ 1.70
Shares used in computing net income per share:
Basic 91,548,580 16,884,777
Diluted 101,126,227 30,492,464
See notes to condensed consolidated financial statements.
4
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(Unaudited)
Three months ended
November 30, November 30,
2002 2001
------------ ------------
Operating activities:
Net income $ 1,014 $ 51,721
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization of property and equipment 893 1,028
Amortization of debt issuance costs and debt discount 438 156
Gain on forgiveness of indebtedness (net of income taxes 0 (50,499)
of $32,800)
Changes in assets and liabilities:
Receivables, prepaid expenses and other current assets 873 (837)
Inventories (7,322) 1,344
Accounts payable and accrued liabilities 5,455 2,396
-------- --------
Net cash provided by operating activities 1,351 5,309
-------- --------
Investing activities:
Collections on note receivable 1,000 500
Property and equipment purchases (196) (6)
Proceeds from disposals of assets held for sale and of
property and equipment 715 79
-------- --------
Net cash provided by investing activities 1,519 573
-------- --------
Financing activities:
Net increase in borrowings under revolving line of credit
facility 3,179 8,327
Proceeds from issuance of long-term debt 0 20,000
Payments on long-term debt and other obligations (5,086) (1,231)
Net payment in settlement of revolving credit facility 0 (38,388)
Payments for debt issuance costs 0 (1,259)
Proceeds from issuance of preferred stock 0 2,942
Proceeds from issuance of common stock 0 2,618
-------- --------
Net cash used in financing activities (1,907) (6,991)
-------- --------
Net increase (decrease) in cash and cash equivalents 963 (1,109)
Cash and cash equivalents, beginning of period 264 1,487
-------- --------
Cash and cash equivalents, end of period $ 1,227 $ 378
======== ========
See notes to condensed consolidated financial statements.
5
NORTHLAND CRANBERRIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED NOVEMBER 30, 2002
(DOLLARS IN THOUSANDS)
(Unaudited)
Common Additional Total
Stock - Paid-in Accumulated Shareholders'
Class A Capital Deficit Equity
BALANCE, AUGUST 31, 2002 $ 915 $154,902 $(116,525) $39,292
Net income - - 1,014 1,014
----- -------- --------- -------
BALANCE, NOVEMBER 30, 2002 $ 915 $154,902 $ (115,511) $40,306
===== ======== =========== =======
See notes to condensed consolidated financial statements.
6
NORTHLAND CRANBERRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 November 30,
2002 and August 31, 2002 and its related results of operations and cash
flows for the three months ended November 30, 2002 and 2001. 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, 2002 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 latest Annual Report on Form 10-K.
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. The Company currently operates in a
marketplace that has experienced aggressive selling activities as the
industry responds to the excess cranberry supply levels.
On November 6, 2001, as described in Note 2, the Company completed a debt
and equity restructuring. Management believes, as a result of the
restructuring, the Company's debt facilities and expected cash flows from
operations will be sufficient to support the Company's liquidity
requirements for the remainder of the year ending August 31, 2003, and the
forseeable future.
Net Income Per Common Share - Net income per common share is calculated in
accordance with Statement of Financial Accounting Standard ("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 based on the
treasury stock method.
The weighted average shares outstanding used in calculating net income per
common share for the three months ended November 30, 2002 and 2001
consisted of the following:
7
November 30, 2002 November 30, 2002
Basic:
Shares outstanding at beginning
of period 91,548,580 5,084,606
Issuance of fractional shares
due to reverse stock split 167
Issuance of new shares 11,800,004
----------------- -----------------
Total 91,548,580 16,884,777
Effect of dilution:
Convertible preferred stock - 11,003,637
Warrants 5,032,525 1,335,266
Options 4,545,122 1,268,784
----------------- -----------------
Diluted 101,126,227 30,492,464
----------------- -----------------
The shares outstanding used to compute the diluted earnings per share for
November 30, 2002 exclude outstanding options to purchase 645,525 shares of
Class A Common Stock. The 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.
New Accounting Standards - Effective in the first quarter of fiscal 2003
the Company adopted the following Statements of Financial Accounting
Standards ("SFAS"): (i) SFAS No. 143, "Accounting For Asset Retirement
Obligations," (ii) SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets," and (iii) SFAS No. 145, "Rescission of Financial
Accounting Standards Board ("FASB") Statements No. 4, 44 and 64, Amendment
of FASB Statement No. 13 and Technical Corrections."
SFAS No. 143 addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. It applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) the normal operation of a
long-lived asset, except for certain obligations of lessees. SFAS No. 143
requires entities to record the fair value of a liability for an asset
retirement obligation in the period the asset was acquired. When the
liability is initially recorded, the entity capitalizes a cost by
increasing the carrying amount of the related long-lived asset. Over time,
the liability is accreted to its present value each period and the
capitalized cost is depreciated over the estimated useful life of the
related asset. Upon settlement of the liability, an entity either settles
the obligation for its recorded amount or incurs a gain or loss upon
settlement. The adoption of SFAS No. 143 did not have a material impact on
the consolidated financial statements.
SFAS No. 144 was issued in October 2001 and supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transaction." SFAS No. 144 also amends Accounting Research Bulletin No. 51,
"Consolidated Financial Statements," to eliminate the exception to
consolidation for a subsidiary for which control is likely to be temporary.
SFAS No. 144 requires that one accounting model be used for long-lived
assets to be disposed of by sale, whether previously held and used or newly
acquired. SFAS No. 144 also broadens the presentation of discontinued
operations to include more disposal transactions. The adoption of SFAS No.
144 did not have a material impact on the consolidated financial
statements.
8
SFAS No. 145 requires that gains and losses from the early extinguishment
of debt are now classified as an extraordinary item only if they meet the
"unusual and infrequent" criteria contained in Accounting Principles Board
Opinion ("APBO") No. 30. In addition, upon adoption of SFAS No. 145, all
gains and losses from early extinguishment of debt that had previously been
classified as an extraordinary item are to be reassessed to determine if
they would have met the "unusual and infrequent" criteria of APBO No. 30;
any such gain or loss that would not have met the APBO No. 30 criteria are
retroactively reclassified and reported as a component of income before
extraordinary item. The Company, in adopting this standard, has now
classified the gain on debt forgiveness in fiscal 2002 as a component of
income before income taxes.
On November 25, 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others," which elaborates on the disclosures
to be made by a guarantor about its obligations under certain guarantees
issued. It also clarifies that a guarantor is required to recognize, at the
inception of a guarantee, a liability for the fair value of the obligation
undertaken in issuing the guarantee. The Interpretation expands on the
accounting guidance of SFAS No. 5, "Accounting for Contingencies," SFAS No.
57, "Related-Party Disclosures," and SFAS No. 107, "Disclosures about Fair
Value of Financial Instruments." The Interpretation also incorporates,
without change, the provisions of FASB Interpretation No. 34, "Disclosure
of Indirect Guarantees of Indebtedness of Others," which it supersedes. The
Interpretation does identify several situations where the recognition of a
liability at inception for a guarantor's obligation is not required. The
initial recognition and measurement provisions of Interpretation 45 apply
on a prospective basis to guarantees issued or modified after December 31,
2002, regardless of the guarantor's fiscal year end. The disclosures are
effective for financial statements of interim or annual periods ending
after December 15, 2002. The Company does not anticipate the adoption of
FASB Interpretation No. 45 will have a material impact on the consolidated
financial statements.
Reclassifications - Certain amounts previously reported have been
reclassified to conform to the current presentation.
2. DEBT AND EQUITY RESTRUCTURING
On November 6, 2001 (during the first quarter of fiscal 2002), the Company
completed a debt and equity restructuring. The debt restructuring was
accomplished through the exchange by the participants of the Company's then
current bank group of approximately $153,754,000 of total outstanding
revolving credit agreement indebtedness for an aggregate cash payment of
$38,388,000, as well as by the Company's issuance of revised debt
obligations with an aggregate stated principal amount of $25,714,000 and
7,618,987 shares of newly-issued Class A Common Stock which represented
approximately 7.5% of the Company's then fully-diluted common shares to
certain bank group members which decided to continue as lenders to the
Company. The debt restructuring occurred pursuant to an agreement for the
assignment and assumption by Sun Northland, LLC ("Sun Northland"), an
affiliate of Sun Capital Partners Inc., of the Company's bank group
indebtedness. Sun Northland then invested approximately $7,000,000 of
equity capital into the Company together with the assignment of Sun
Northland's rights to the Company's bank debt (of which approximately
$81,219,000 was forgiven for financial reporting purposes) in exchange for
37,122,695 shares of newly-issued Class A Common Stock, 1,668,885 shares of
newly-created, convertible Series A Preferred Stock, and 100 shares of
newly created
9
Series B Preferred Stock, which together represented approximately 77.5% of
the Company's then fully-diluted common shares. The 1,668,885 shares of the
Series A Preferred Stock were subsequently converted into 41,722,125 shares
of Class A Common Stock of the Company. The 100 shares of Series B
Preferred Stock were subsequently transferred by Sun Northland, LLC for
nominal consideration to a limited liability company whose managing member
is the Company's Chief Executive Officer and whose members include among
others certain officers of the Company.
In addition, on November 6, 2001, the Company restructured and modified the
terms of approximately $20,680,000 in outstanding borrowings under two term
loans with an insurance company.
Additionally, as part of the restructuring, the Company entered into a
management services agreement with Sun Capital Partners Management, LLC, an
affiliate of Sun Capital Partners, Inc., pursuant to which Sun Capital
Partners Management, LLC will provide various financial and management
consulting services to the Company in exchange for an annual fee (which is
to be paid in quarterly installments) equal to the greater of $400,000 or
6% of EBITDA (as defined therein), provided that the fee may not exceed
$1,000,000 per year unless approved by a majority of the Company's
directors who are not affiliates of Sun Capital Partners Management, LLC.
In fiscal 2002, the Company paid approximately $460,000 under this
agreement, which terminates on the earlier of November 6, 2008 or the date
on which Sun Northland and its affiliates no longer own at least 50% of the
Company's voting power.
Financing for the debt restructuring, and for additional working capital,
was provided by Foothill Capital Corporation ("Foothill") and Ableco
Finance LLC ("Ableco"). Foothill and Ableco provided the Company with $20
million in term loan financing and a new $30 million revolving credit
facility. As part of the consideration to Foothill and Ableco to provide
the new credit facilities to the Company, Foothill and Ableco received
warrants to purchase a total of 5,086,106 shares of Class A Common Stock,
or approximately 5% of the Company's then fully-diluted common shares, at
an exercise price of $0.01 per share. The warrants expire on November 6,
2011. The Company also issued non-interest bearing fee notes to Foothill
and Ableco in the aggregate amount of $5,000,000, which are payable in full
on November 6, 2006. The fee notes have been discounted for financial
reporting purposes and interest expense is recognized over the terms of the
related debt.
3 LEGAL PROCEEDINGS
On March 8, 2000, the Company sold the net assets of its private label
juice business to Cliffstar Corporation ("Cliffstar"), pursuant to an asset
purchase agreement ("Asset Purchase Agreement"), dated January 4, 2000. The
private label juice business assets sold consisted primarily of finished
goods and work-in-process inventories, raw materials inventories consisting
of labels and ingredients that relate to customers of the private label
juice business (other than cranberry juice and cranberry juice
concentrates), certain trademarks and goodwill, contracts relating to the
purchase of raw materials inventory and the sale of products, and 135,000
gallons of cranberry juice concentrate. No plants or equipment were
included in the sale. Cliffstar also assumed certain obligations under
purchased contracts. In connection with the sale, the Company received from
Cliffstar an unsecured, subordinated promissory note for $28,000,000
10
(non-cash investing activity) which is to be collected over six years and
which bears interest at a rate of 10% per annum, as well as approximately
$6,800,000 in cash (subject to potential post-closing adjustments) related
to inventory transferred to Cliffstar on the closing date. The Company
recognized a pre-tax gain of approximately $2,100,000 in connection with
the sale of the net assets.
Additionally, Cliffstar is contractually obligated to make certain annual
earn-out payments to the Company for a period of six years from the closing
date based generally on operating profit from Cliffstar's sale of cranberry
juice products. The Company also entered into certain related agreements
with Cliffstar, including among them, a co-packing agreement pursuant to
which Cliffstar contracted for specified quantities of Cliffstar juice
products to be packed by the Company.
The private label juice business had revenues of approximately $23,600,000
for the year ended August 31, 2000. The Company recognized gross profit of
approximately $3,700,000 on such revenues during the year ended August 31,
2000. Information with respect to selling, general and administrative
expenses with respect to the private label juice business is not available,
as the Company's accounting system did not segregate such expenses by type
of product.
On July 7, 2000, Cliffstar filed suit against the Company in the United
States District Court, Western District of New York, alleging, among other
things, that the Company breached certain representations and warranties in
the Asset Purchase Agreement. That lawsuit was subsequently dismissed, and
on July 31, 2000, the Company filed a lawsuit against Cliffstar in the
Northern District of Illinois. The Company claims that (1) Cliffstar
breached the Asset Purchase Agreement by failing to make required payments
under the Asset Purchase Agreement and by failing to negotiate in good
faith concerning a cranberry sauce purchase agreement between the parties;
(2) Cliffstar breached an interim cranberry sauce purchase agreement
between the two companies by failing to adequately perform and to pay the
Company the required amounts due under it; (3) Cliffstar breached its
fiduciary duty to the Company based on the same (or similar) conduct; (4)
Cliffstar breached the promissory note issued by it in the transaction by
failing to make its payments in a timely manner and failing to pay all of
the interest due; (5) Cliffstar breached a co-packing agreement entered
into in connection with the sale by failing to make required payments
thereunder and other misconduct; and (6) Cliffstar breached the Asset
Purchase Agreement's arbitration provision, which provides that any
disagreements over the valuation of finished goods, work-in-process and raw
material inventory purchased by Cliffstar shall be submitted to arbitration
for resolution. On April 10, 2001, the Court granted the Company's Petition
to Compel Arbitration. Accordingly, the price dispute over finished goods,
work-in-process and raw material inventory is currently in arbitration.
Cliffstar asserted counterclaims against the Company, alleging that (1) the
Company fraudulently induced Cliffstar to enter into the Asset Purchase
Agreement; (2) the Company has breached the Asset Purchase Agreement by
failing to negotiate in good faith a cranberry sauce purchase agreement, by
failing to provide Cliffstar with sufficient quantities of cranberry
concentrate meeting Cliffstar's "specifications," by selling inventory that
did not have a commercial value at least equal to the Company's carrying
value, by failing to notify Cliffstar that the Company intended to
write-down its cranberry inventory, by not providing Cliffstar its selling
prices, by decreasing its level of service to customers after the parties
signed the Asset Purchase Agreement, and by refusing to turn over certain
labels, films and plates relating to the private
11
label juice business to Cliffstar; (3) the Company breached the co-packing
agreement by prematurely terminating that agreement; (4) the Company
converted the labels, films and plates relating to the private label juice
business; (5) the Company intentionally interfered with Cliffstar's
contractual relations, or reasonable expectations of entering into business
relations, with the printers who hold the labels, films and plates; and (6)
the Company breached the Transition Agreement by failing to remit to
Cliffstar the excess of Cliffstar's interim payment for work-in-process and
raw material inventory, by withholding a portion of the work-in-process and
raw material inventory from Cliffstar, and by artificially building up its
work-in-process and raw material inventory before and after the sale of the
private label juice business to Cliffstar. The Company has denied the
allegations of Cliffstar's counterclaims in all material respects.
On June 7, 2002, the court granted the Company's motion for summary
judgment and dismissed Cliffstar's fraud claim. On October 23, 2002, after
a trial to a jury on the remaining claims, the District Court entered
judgment in favor of the Company and against Cliffstar in the amount of
$6,674,450 (this includes outstanding accounts receivable aggregating
$3,414,000 due from Cliffstar as of August 31, 2002). Final judgment in the
amount of $7,732,057 (which includes an additional award to the Company for
prejudgment interest following post-verdict motions) was entered by the
court on December 23, 2002 and is subject to appeal. It is the opinion of
the Company's management, after consulting with outside legal counsel, that
the judgment will be affirmed if appealed. However, the resolution of the
legal proceedings cannot be predicted with certainty at this time.
Accordingly, no amounts have been recorded with respect to the judgment.
The jury found that Cliffstar breached its payment obligations under the
note by failing to timely make the required $250,000 principal and related
accrued interest payment that was due on May 31, 2000. Thus, the note is in
default with future interest accruing at the default rate of 12%. The
Company has received all scheduled principal payments, together with
accrued interest at 10%. The Company has recognized interest income on the
note receivable at a rate of 10% for financial reporting purposes, pending
resolution of this matter.
Although the note is in default, the Company has classified the balance
outstanding in the accompanying consolidated balance sheets in accordance
with the scheduled payment dates provided for in the note, as this is how
the Company anticipates payments will be received pending final resolution
of this matter.
On May 13, 2002, the Company received Cliffstar's earn-out calculation for
2000. The Company believes that Cliffstar's earn-out calculation was not
prepared in accordance with the Asset Purchase Agreement. On December 13,
2002, the Company received an estimate of the earn-out calculation from
Cliffstar for 2001 in the amount of $1,177,621. To date, however, Cliffstar
has not provided the Company with an audited earn-out calculation for 2001
in accordance with the Asset Purchase Agreement. The Company believes that
the estimate provided by Cliffstar significantly understates the earn-out
payment due under the Asset Purchase Agreement.
On June 7, 2002, the Company filed a separate suit against Cliffstar in the
United States District Court, Northern District of Illinois, seeking access
to all relevant books and records of Cliffstar relating to the earn-out
calculations and claiming Cliffstar breached the Asset Purchase Agreement
by failing to pay the Company earn-out payments for the years 2000 and
2001. The Company seeks compensatory damages in an amount in excess of
$1,000,000, plus attorneys'
12
fees. The legal proceeding is in its early stages and the resolution cannot
be predicted with certainty.
On November 11, 2002, the Company together with Clermont, Inc, filed an
antitrust lawsuit against Ocean Spray Cranberries, Inc. ("Ocean Spray").
The lawsuit, which was filed in the United Stated District Court for the
District of Columbia, alleges that Ocean Spray has engaged in
anticompetitive tactics and unlawfully monopolized the cranberry products
industry to the detriment of its competitors and customers. As the
proceeding is in the preliminary stages, management is unable to predict
the outcome of this matter with certainty. However, management does not
believe that the resolution of this matter will have an adverse effect on
the Company's financial condition or results of operations.
4. OTHER INCOME
During fiscal 2002, inventory held at one of the Company's third party
storage facilities was handled improperly by the third party following
delivery to the facility. This resulted in a damage claim being made by the
Company. The Company and the owner of the facility have entered into a
settlement and release agreement with respect to the Company's claims.
Under the terms of the settlement and release agreement, the Company
received cash proceeds in the amount of $1,500,000, as well as $200,000 in
credits toward storage fees over the next four years. Based on the terms of
the settlement and release agreement, the Company has recognized income of
$1,500,000 for the three months ended November 30, 2002.
5. INVENTORIES
Inventories as of November 30, 2002 and August 31, 2002 consisted of the
following (in thousands):
November 30, 2002 August 31, 2002
Raw materials $ 22,110 $ 8,396
Finished goods 3,485 3,189
Deferred crop costs 0 6,688
-------- ---------
Total inventories $ 25,595 $ 18,273
======== =========
6. LONG-TERM DEBT
Long-term debt as of November 30, 2002 and August 31, 2002 consisted of the
following (in thousands):
13
November 30, August 31,
2002 2002
Term loans payable $ 13,103 $ 15,461
Fee note payable 3,804 3,738
Bank notes 25,998 28,297
Insurance company note 19,364 19,689
Other obligations 2,709 2,915
--------- ---------
Total 64,978 70,100
Less current maturities
of long-term debt 14,007 15,568
--------- ---------
Long-term debt $ 50,971 $ 54,532
========= =========
As of November 30, 2002 and August 31, 2002 the Company was in compliance
with its various financial covenants contained in its agreements covering
its long-term debt obligations.
The restructuring of the Company's debt on November 6, 2001 (see Note 2)
resulted in a gain of $83,299,046 during fiscal 2002.
7. INCOME TAXES
The Company accounts for income taxes using an asset and liability approach
which generally requires the recognition of deferred income tax assets and
liabilities based on the expected future income tax consequences of events
that have previously been recognized in the Company's financial statements
or tax returns. In addition, a valuation allowance is recognized if it is
more likely than not that some or all of the deferred income tax assets
will not be realized.
There was no income tax expense recognized, for financial reporting
purposes, for the three months ended November 30, 2002 due to the
utilization of certain net operating loss carryforwards for which no
benefit had been previously provided.
As described in Note 2, the Company completed a debt and equity
restructuring on November 6, 2001. This restructuring resulted in a gain on
the forgiveness of indebtedness of differing amounts for financial and
income tax reporting purposes that will reduce the available net operating
loss carryforwards. The income tax effect of this gain resulted in the
recognition of an income tax benefit of approximately $32,800,000 for
financial reporting purposes as of August 31, 2001 and a charge to income
taxes of a like amount for the three month period ended November 30, 2001.
The "change of ownership" provisions of the Tax Reform Act of 1986
significantly restrict the utilization for income tax reporting purposes of
all net operating losses and tax credit carryforwards remaining after the
debt and equity restructuring.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Early in fiscal 2002, primarily as a result of losses suffered in the
previous two fiscal years, we reached the point where we felt it was
imperative to reach an agreement with our then-current bank group and to
refinance our bank debt. To do otherwise, we believed, we would be faced
with liquidating or reorganizing the company in a bankruptcy proceeding in
which our creditors would have likely received substantially less value
than we felt they could receive in a restructuring transaction and our
shareholders would have likely been left holding shares with no value.
On November 6, 2001, we consummated the transactions that we refer to as
the Restructuring. Generally speaking, in the Restructuring, Sun Northland
entered into certain Assignment, Assumption and Release Agreements with
members of our then-current bank group which gave Sun Northland, or its
assignee, the right to acquire our indebtedness held by members of our
then-current bank group in exchange for a total of approximately $38.4
million in cash, as well as our issuance of a promissory note in the
principal amount of approximately $25.7 million and 7,618,987 Class A
shares to certain bank group members which decided to continue as our
lenders after the Restructuring. Sun Northland did not provide the
foregoing consideration to our former bank group; instead, Sun Northland
entered into the Purchase Agreement with us, pursuant to which Sun
Northland assigned its rights to those Assignment, Assumption and Release
Agreements to us and gave us $7.0 million in cash, in exchange for (i)
37,122,695 Class A shares, (ii) 1,668,885 Series A Preferred shares (each
of which was automatically converted into 25 Class A shares upon adoption
of an amendment to our articles of incorporation on February 4, 2002
increasing our authorized Class A shares), and (iii) 100 shares of our
newly created Series B Preferred Stock, which were subsequently transferred
to a limited liability company controlled by our Chief Executive Officer.
Using funding provided by our new secured lenders and Sun Northland, we
acquired a substantial portion of our outstanding indebtedness from the
members of our then-current bank group (under the terms of the Assignment,
Assumption and Release Agreements that were assigned to us by Sun
Northland) in exchange for the consideration noted above, which resulted in
the forgiveness of approximately $81.2 million (for financial reporting
purposes) of our outstanding indebtedness (or approximately $89.0 million
of the aggregate principal and interest due the then-current bank group as
of the date of the Restructuring). We also issued warrants to acquire an
aggregate of 5,086,106 Class A shares to Foothill Capital Corporation and
Ableco Finance LLC which are immediately exercisable and have an exercise
price of $.01 per share.
See Note 2 of Notes to Condensed Financial Statements for a further
discussion of the Restructuring.
With the equity capital we received in the Restructuring, combined with the
associated debt forgiveness, we were once again able to market our
Northland and Seneca brand products for the
15
remainder of fiscal 2002 and build on the operational improvements and cost
reduction measures we began in the prior fiscal year.
During the first quarter of fiscal 2003 we focused our efforts on regaining
market share, through a balanced marketing approach of advertising, trade
spending, slotting and consumer coupons.
Critical Accounting Policies
We prepare our financial statements in accordance with generally accepted
accounting principles which, through the application of certain critical
accounting policies, require management to make judgments, estimates and
assumptions regarding matters which are inherently uncertain. We have
stated our inventory carrying value at the lower of cost (using the
first-in, first-out costing method) or estimated market values, based upon
management's best estimates of future product selling prices and costs for
the periods during which the cranberries are grown and the cranberries and
cranberry related products are expected to be sold. The market estimates
are dependent upon several factors including, but not limited to, price,
product mix, demand, costs and the period of time it takes to sell the
inventory. Such factors are all subject to significant fluctuations. We
also use estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of net
revenues and expenses during the reporting period. On an ongoing basis,
management reviews these estimates, including those related to allowances
for doubtful accounts, product returns, trade discounts and incentives,
valuation of inventories, future cash flows associated with assets held for
sale and long-lived assets, useful lives for depreciation and amortization,
valuation allowances for deferred income tax assets, litigation,
environmental liabilities and contracts, based on currently available
information. Changes in facts and circumstances or the use of different
assumptions may result in revised estimates and actual results could differ
from those estimates.
RESULTS OF OPERATIONS
Total net revenues for the three months ended November 30, 2002 were $21.7
million, a decrease of 28.3% from net revenues of $30.3 million in the
prior year's first quarter. The decrease resulted primarily from (i)
reduced sales of cranberry concentrate; and (ii) reduced co-packing
revenue. These revenue decreases were offset by increased sales of
Northland 100% juice products. Trade industry data for the 12-week period
ended December 1, 2002 showed that our Northland brand 100% juice products
achieved a 5.4% market share of the supermarket shelf-stable cranberry
beverage category on a national basis, up from a 5.1% market share for the
12-week period ended December 2, 2001. The market share of Seneca branded
cranberry juice products decreased from 0.1% to less than 0.1%, resulting
in a total combined market share of supermarket shelf-stable cranberry
beverages for our Northland and Seneca branded product lines of 5.4% for
the 12-week period ended December 1, 2002 compared to 5.2% for the 12-week
period ended December 2, 2001.
Cost of sales for the first quarter of fiscal 2003 was $15.2 million
compared to $20.7 million for the first quarter of fiscal 2002, resulting
in gross margins of 30.2% and 31.7% in each respective period. The decline
in gross margins in the first quarter of fiscal 2003 was primarily the
result of increased costs of cranberries and cranberry concentrate.
16
Selling, general and administrative expenses were $6.6 million, or 30.3% of
net revenues, for the first quarter of fiscal 2003 compared to $5.9
million, or 19.5% of net revenues, in the prior year's first fiscal
quarter. The increase in selling, general and administrative expenses in
fiscal 2003 was primarily the result of a $2.8 million increase in media
advertising spending, from $0.7 million in the first quarter of fiscal 2002
compared with $3.5 million in the first quarter of fiscal 2003. This
increase was partially offset by a decline in wages, consulting expenses
and depreciation. Included in the fiscal 2002 amount were approximately
$1.3 million of charges relating to our restructuring. Excluding these
restructuring charges, selling, general and administrative expenses were
approximately $4.6 million, or 15.2% of net revenues.
During fiscal 2002, inventory held at one of our third party storage
facilities was handled improperly by the third party following delivery to
the facility. We entered into a settlement and release agreement with the
third party pursuant to which we received cash proceeds in the amount of
$1,500,000, as well as $200,000 in credits toward storage fees over the
next four years. Based on the terms of the settlement and release
agreement, we recognized other income of $1,500,000 for the three months
ended November 30, 2002.
Interest expense was $1.0 million in the first quarter of fiscal 2003
compared to $3.1 million during the same period of fiscal 2002. The
decrease resulted primarily from reduced debt levels and lower interest
rates following our restructuring.
Interest income of $0.6 million in the first quarter of fiscal 2003 and
$0.7 million in the comparable period of fiscal 2002 is associated with an
unsecured, subordinated promissory note receivable from Cliffstar
Corporation.
In the first quarter of fiscal 2002, we realized a gain on forgiveness of
indebtedness in connection with the restructuring of approximately $83.3
million, net of legal fees and other direct costs incurred and the
estimated fair value of the shares of Class A Common Stock issued to the
participating banks. This gain was further reduced by $32.8 million of
income taxes resulting in a net gain on forgiveness of indebtedness of
$50.5 million, or $2.99 and $1.66 per basic and diluted share,
respectively.
In the first quarter of fiscal 2003 there were no income taxes on operating
income due to the utilization of certain net operating loss carryforwards
for which no benefit had been previously provided.
FINANCIAL CONDITION
Net cash provided by operating activities was $1.4 million in the first
quarter of fiscal 2003 compared to net cash provided of $5.3 million in the
same period of fiscal 2002. Net income plus depreciation and amortization
was $2.3 million in the first quarter of fiscal 2003 compared to $2.4
million (before gain on forgiveness of indebtedness net of income taxes) in
the comparable period of fiscal 2002. Receivables, prepaid expenses and
other current assets decreased $0.9 million in the first quarter of fiscal
2003 compared to an increase of $0.8 million in the first quarter of fiscal
2002. Increases in accounts payable and accrued liabilities provided cash
of $5.5 million in the first quarter of fiscal 2003 compared to $2.4
million in the first quarter of fiscal 2002. Inventories increased $7.3
million in the first quarter of fiscal 2003, primarily as a
17
result of the fall 2002 cranberry harvest and the purchase of cranberries
from our contract growers.
Working capital was $6.7 million at November 30, 2002 compared to $6.9
million at August 31, 2002. Our current ratio was 1.2 to 1.0 at August 31,
2002, compared to 1.2 to 1.0 at November 30, 2002.
Net cash provided by investing activities was $1.5 million in the first
quarter of fiscal 2003 compared to $0.6 million in the similar quarter of
fiscal 2002. Collections on our note receivable from Cliffstar Corporation
contributed toward the positive cash flow in both quarters. In fiscal 2003,
proceeds from disposals of property and equipment provided $0.7 million In
fiscal 2002, proceeds from disposals of property and equipment provided
$0.1 million. Purchases of property and equipment were $0.2 million in
fiscal 2003 and $0.01 million in fiscal 2002.
Our net cash used in financing activities was $1.9 million in the first
quarter of fiscal 2003 compared to $7.0 million in the first quarter of the
prior year. In fiscal 2002 in order to accomplish the restructuring, we
obtained proceeds from our new revolving credit facility and two term
loans, along with proceeds, net of legal and other costs, from the issuance
of Class A Common Stock and Series A Preferred Stock. These proceeds were
used to pay various banks in settlement of our previous revolving credit
facility (see "General" and Note 2 of Notes to Condensed Consolidated
Financial Statements) and to pay various debt issuance costs. Also, we made
payments on long-term debt and other obligations of $5.1 million in the
first quarter of fiscal 2003 and $1.2 million in the first quarter of
fiscal 2002. In both quarters monthly principal payments were made on other
obligations, and in the first quarter of fiscal 2003 additional payments
were made as required under our restructured debt agreements.
The following schedule sets forth our contractual long-term debt
obligations as of November 30, 2002 (in thousands):
Payments Due by Period
----------------------
After 5
Total 0-1 year 2-3 years 4-5 years years
----- -------- --------- --------- -------
Long-Term Debt $64,978 $14,007 $14,777 $17,722 $18,472
As of November 30, 2002, we had outstanding borrowings of $3.8 million
under our $30.0 million revolving credit facility with Foothill and Ableco.
As of November 30, 2002, we had approximately $7.2 million of unused
borrowing availability under the facility. We believe that we will be able
to fund our ongoing operational needs for fiscal 2003 through (i) cash
generated from operations; and (ii) financing available under our revolving
credit facility with Foothill and Ableco. We do not have any significant
capital expenditure commitments and continue to review our capital
requirements in an effort to match expenditures with revenues.
As of November 30, 2002, we were in compliance with all of our debt
arrangements.
18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
-------------------------------------------------
We make certain "forward-looking statements" in this Form 10-Q, such as
statements about our future plans, goals and other events which have not
yet occurred. We intend that these statements will qualify for the safe
harbors from liability provided by the Private Securities Litigation Reform
Act of 1995. You can generally identify these forward-looking statements
because we use words such as we "believe," "anticipate," "expect" or
similar words when we make them. Forward-looking statements include, among
others, statements about actions by our competitors, sufficiency of our
working capital, potential operational improvements and our efforts to
improve profitability, sales and marketing strategies, expected levels of
trade and marketing spending, anticipated market share and sales of our
branded products, cranberry concentrates and other products, and
disposition of significant litigation. These forward-looking statements
involve risks and uncertainties and the actual results could differ
materially from those discussed in the forward-looking statements. These
risks and uncertainties include, without limitation, risks associated with
(i) our ability to reinvigorate our Northland and Seneca brand names,
regain lost distribution capabilities and branded products market share and
generate increased levels of branded product sales; (ii) the level of
cranberry inventory held by industry participants; (iii) the development,
market share growth and consumer acceptance of our branded juice products;
(iv) the resolution of certain litigation related to the sale of the net
assets of our private label juice business and claims asserted by us
against our principal competitor regarding what we believe to be
anticompetitve tactics and unlawful monopolization within the cranberry
products industry; (v) agricultural factors affecting our crop and the crop
of other North American growers; and (vi) our ability to comply with the
terms and conditions of, and to satisfy our responsibilities under, our
credit facilities and other debt agreements. You should consider these
risks and factors and the impact they may have when you evaluate our
forward-looking statements. We make these statements based only on our
knowledge and expectations on the date of this Form 10-Q. We disclaim any
duty to update these statements or other information in this Form 10-Q
based on future events or circumstances. Please read this entire Form 10-Q
to better understand our business and the risks associated with our
operations. Specifically, please see "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for a discussion of our
current financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not enter into any material futures, forwards, swaps, options or
other derivative financial instruments for trading or other purposes. Our
primary exposure to market risk is related to changes in interest rates and
the effects those changes may have on our earnings as a result of our
long-term financing arrangements. We manage our exposure to this market
risk by monitoring interest rates and possible alternative means of
financing. Our earnings may be affected by changes in short-term interest
rates under our revolving line of credit facility and certain term loans,
pursuant to which our borrowings bear interest at a variable rate, subject
to minimum interest rates payable on certain loans. Based upon the debt
outstanding under our revolving line of credit facility and certain term
loans as of November 30, 2002, an increase of 1.0% in market interest rates
would increase annual interest expense by approximately $0.2 million.
19
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures. In accordance
with Rule 13a-15(b) of the Securities Exchange Act of 1934 (the "Exchange
Act"), within 90 days prior to the filing date of this Quarterly Report on
Form 10-Q, an evaluation was carried out under the supervision and with the
participation of our management, including our Chief Executive Officer and
Vice President-Finance, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rule 13a-14(c) under
the Exchange Act). Based upon their evaluation of these disclosure controls
and procedures, the Chief Executive Officer and Vice President-Finance
concluded that the disclosure controls and procedures were effective as of
the date of such evaluation to ensure that material information relating to
us, including our consolidated subsidiaries, was made known to them by
others within those entities, particularly during the period in which this
Quarterly Report on Form 10-Q was being prepared.
(b) Changes in internal controls. There were no significant changes in
our internal controls or other factors that could significantly affect
those controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On October 23, 2002, after a trial to a jury, the District Court entered
judgment in our favor and against Cliffstar Corporation in the amount of
$6,674,450 with respect to litigation related to the March 8, 2000 sale of
the net assets of our private label juice business to Cliffstar. Final
judgment in the amount of $7,732,057 (which includes an additional award to
us for prejudgment interest following post-verdict motions) was entered by
the court on December 23, 2002 and is subject to appeal. It is our opinion,
after consulting with outside legal counsel, that the judgment will be
affirmed if appealed.
Further, on November 11, 2002, we filed together with Clermont, Inc. an
antitrust lawsuit against Ocean Spray Cranberries, Inc. The lawsuit, which
was filed in the United Stated District Court for the District of Columbia,
alleges that Ocean Spray has engaged in anticompetitive tactics and
unlawfully monopolized the cranberry products industry to the detriment of
its competitors and customers. As the proceeding is in the preliminary
stages, we are unable to predict the outcome of this matter with certainty.
However, we do not believe that the resolution of this matter will have an
adverse effect on our financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits
Exhibits filed with this Form 10-Q report are incorporated herein by
reference to the Exhibit Index accompanying this report.
B. Form 8-K
We did not file any Current Reports on Form 8-K during the first quarter of
fiscal 2003.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORTHLAND CRANBERRIES, INC.
DATE: January 14, 2003 By: /s/ Nigel J. Cooper
---------------------------------
Nigel J. Cooper
Vice President - Finance
21
CERTIFICATIONS
I, John Swendrowski, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Northland
Cranberries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date January 14, 2003
--------------------------------------
/s/ John Swendrowski
--------------------------------------
John Swendrowski
Chairman of the Board,
Chief Executive Officer and Director
22
I, Nigel Cooper, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Northland
Cranberries, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) deficiencies in the design or operation of internal controls which
could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls;
and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date January 14, 2003
--------------------------------------
/s/ Nigel Cooper
--------------------------------------
Nigel Cooper
Vice President - Finance
23
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
99.1 Certification of John Swendrowski, Chairman and Chief Executive Officer of
Northland Cranberries, Inc., pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Nigel Cooper, Vice President - Finance of Northland
Cranberries, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes-Oxley Act of 2002.
24