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Index to Exhibits at page 14
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended August 2, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ ------------------
Commission File Number 0 - 1653
--------
GENESEE CORPORATION
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
STATE OF NEW YORK 16-0445920
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 Powers Bldg., 16 W. Main Street, Rochester, New York 14614
- -------------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (585) 454-1250
----------------
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 of the Exchange Act). Yes No X
----- -----
As of the date of this report, the Registrant had the following shares of common
stock outstanding:
Number of Shares
Class Outstanding
----- ----------------
Class A Common Stock (voting), par
value $.50 per share 209,885
Class B Common Stock (non-voting), par
value $.50 per share 1,464,201
Page 2 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Statement Of Net Assets In Liquidation (Liquidation Basis)
August 2, 2003 and May 3, 2003
(Dollars in thousands, except per share data)
UNAUDITED
August 2, 2003 May 3, 2003
-------------- -----------
ASSETS
- ------
Cash and cash equivalents $ 2,562 $ 6,572
Restricted cash 3,200 3,200
Marketable securities available for sale 2,284 3,010
Notes receivable 2,800 2,800
Other assets 317 353
---------- ----------
Total assets $ 11,163 $ 15,935
========== ==========
LIABILITIES AND NET ASSETS
- --------------------------
Accrued compensation $ 336 $ 525
Accrued expenses and other liabilities 721 874
Estimated net income tax payable 112 4,664
Accrued self-insured workers compensation 1,463 1,495
---------- ----------
Total liabilities 2,632 7,558
---------- ----------
Net assets in liquidation $ 8,531 $ 8,377
========== ==========
Number of common shares outstanding
(Class A - 209,885; Class B - 1,464,201) 1,674,086 1,674,086
Net assets in liquidation per outstanding share $ 5.10 $ 5.00
========== ==========
See accompanying notes to consolidated financial statements.
Page 3 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Statement Of Changes In Net Assets In Liquidation (Liquidation Basis)
For the Thirteen Weeks Ended August 2, 2003 and July 27, 2002
(Dollars in thousands)
UNAUDITED UNAUDITED
2003 2002
--------- ---------
Net assets in liquidation at May 3, 2003 and
April 27, 2002, respectively $8,377 $ 29,622
High Falls subordinated note receivable:
Interest income 140 120
Interest income, net 12 194
Changes in estimated liquidation values of
assets and liabilities 2 (17)
------ --------
Net assets in liquidation at August 2, 2003
and July 27, 2002, respectively $8,531 $ 29,919
====== ========
See accompanying notes to consolidated financial statements.
Page 4 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE (A) Divestiture of the Corporation's Operating Businesses and Other Assets
In October 2000, Genesee Corporation (the "Corporation") shareholders
approved a plan to divest all of the Corporation's operations and then
liquidate and dissolve the Corporation. Since then, as discussed
below, the Corporation has divested all of its operations and
substantially all of its other assets. The proceeds from these
divestitures, net of amounts paid or reserved to discharge all of the
Corporation's obligations and liabilities, are being distributed to
the Corporation's shareholders in a series of liquidating
distributions.
The Corporation sold its brewing business in December 2000 to High
Falls Brewing Company, LLC ("High Falls") for $27.2 million. The
Corporation received $11 million of the sale price in the form of
notes receivable from High Falls, which are more fully described in
Note B.
The Corporation sold a significant portion of its equipment lease
portfolio in December 2000 and received $12.8 million in proceeds. The
Corporation continues to hold a small number of the leases, which it
retained after this sale.
The Corporation sold its Foods Division in October 2001 to Associated
Brands, Inc. ("ABI") for $24.4 million.
On May 31, 2002, the Corporation sold its ten-percent interest in an
office building located in Rochester, New York and a related note
receivable from the building owner for $2.4 million in cash.
On September 16, 2002, the Corporation sold its 50% interests in a
408-unit apartment complex located in Syracuse, New York and a
150-unit apartment complex located in Rochester, New York for a
combined sales price of $4.5 million.
With the sale of its interest in the apartment complexes mentioned
above, the Corporation completed the liquidation phase of its plan of
liquidation and dissolution.
NOTE (B) Liquidation Basis of Accounting
With the sale of its Foods Division, which is described in Note A, the
Corporation adopted the liquidation basis of accounting effective
September 29, 2001. Under the liquidation basis of accounting, assets
are stated at their estimated net realizable values and liabilities
are stated at their estimated settlement amounts, which estimates are
periodically reviewed and adjusted. A Statement of Net Assets and a
Statement of Changes in Net Assets are the two financial statements
presented under the Liquidation Basis of Accounting.
Page 5 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE (B) Liquidation Basis of Accounting (continued)
The valuation of assets at their net realizable value and liabilities
at their anticipated settlement amounts necessarily requires many
estimates and assumptions. In addition, there are substantial risks
and uncertainties associated with carrying out the liquidation and
dissolution of the Corporation. The valuations presented in the
accompanying Statement of Net Assets in Liquidation represent
estimates, based on present facts and circumstances, of the net
realizable values of assets and the costs associated with carrying out
the plan of liquidation and dissolution based on the assumptions set
forth below. The actual values and costs are expected to differ from
the amounts shown herein and could be greater or lesser than the
amounts recorded. In particular, the estimates of the Corporation's
costs will vary with the length of time it operates. In addition, the
estimate of net assets in liquidation per share presented in
accordance with accounting principles generally accepted in the United
States of America (GAAP) in the accompanying Statement of Net Assets
in Liquidation generally does not incorporate a present value discount
to reflect the amount of time that will transpire before the value of
those assets is distributed to shareholders. Accordingly, it is not
possible to predict the aggregate amount that will ultimately be
distributable to shareholders and no assurance can be given that the
amount to be received in liquidation will equal or exceed the estimate
of net assets in liquidation per share presented in the accompanying
Statement of Net Assets in Liquidation or the price or prices at which
the Corporation's common stock has traded or is expected to trade in
the future.
General assumptions used and asset and liability values under the
Liquidation Basis of Accounting
Following are assumptions utilized by management in assessing the fair
value of assets and the expected settlement values of liabilities
included in the Statement of Net Assets in Liquidation as of August 2,
2003.
Cash and cash equivalents and restricted cash - Presented at face
value. The Corporation considers all highly liquid investments with
original maturities of three months or less to be cash equivalents.
The Corporation maintains balances in various operating and money
market accounts in excess of federally insured limits. At August 2,
2003, substantially all cash balances were in excess of federally
insured limits. The Corporation's Board of Directors (the "Board") has
adopted a Contingent Liability Reserve Policy whereby the Corporation
will maintain a cash contingency reserve equal to $2.5 million, or
$1.50 per outstanding share, for unexpected expenses of the
Corporation. The amount of the reserve may be modified in the future
by the Board as deemed necessary. The balance of this reserve is $2.5
million at August 2, 2003; however, it is not classified as restricted
or as a liability in the accompanying Statement of Net Assets in
Liquidation.
Marketable securities available for sale - Presented at quoted market
prices. The Corporation maintains a portfolio that consists
predominantly of high quality corporate bonds which is managed by an
independent third party investment manager. Valuation of the
Corporation's marketable securities is based upon closing prices of
their marketable securities, as provided by the investment manager, at
August 2, 2003.
Page 6 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE (B) Liquidation Basis of Accounting (continued)
Notes receivable - Stated at fair value, which has been discounted
from face value as described below. As partial consideration for the
sale of its brewing business, the Corporation received $11 million in
notes receivable from High Falls. On July 30, 2002 the Corporation
received $5.9 million in satisfaction of the remaining principal
balance due on two bridge notes with original face amounts of $3.5
million and $3 million. This prepayment was in accordance with the
terms of the notes, which required prepayment at such time as the
buyer received proceeds from government backed loans. At August 2,
2003, the amount remaining due to the Corporation from High Falls is
$4 million under a subordinated note receivable with an original face
amount of $4.5 million. The $4 million balance is payable as follows:
$1 million was due on December 15, 2002 and $3 million is due on
December 15, 2003. High Falls did not make the $1 million principal
payment due on December 15, 2002 and is currently in default under the
terms of the remaining High Falls note. The Corporation is currently
in discussions with High Falls regarding the restructuring of this
remaining note in connection with the possible recapitalization of
High Falls Brewing Company. During the second quarter of fiscal 2002
the Corporation adjusted the value of the balance of the remaining
High Falls note on the Statement of Net Assets in Liquidation to $2.8
million to reflect management's estimate of the value of the note,
which is based on the fair market value of publicly traded debt
instruments of similar quality. At August 2, 2003, the note remains
valued at $2.8 million.
Other assets - Valued based on management estimates. At August 2, 2003
the $317,000 balance is primarily comprised of prepaid insurance,
accrued interest receivable, and a note receivable from a former
customer of the Genesee Brewing Company, Inc., that the Corporation
retained after the sale of the brewery to High Falls in December 2000.
Accrued compensation and accrued expenses and other liabilities -
Based on management's estimate. These are the estimated costs to
complete the Corporation's plan of liquidation and dissolution, and
represents the estimated cash costs of operating the Corporation
through April 2004 and for an additional wind-up phase after April
2004. These costs, which include personnel, facilities, professional
fees, and other related costs, are estimated based on various
assumptions regarding the number of employees, the use of outside
professionals (including attorneys and accountants) and other costs.
Given that there is inherent uncertainty in the estimation process,
actual results could be materially different. The table below details
these costs by category as of May 3, 2003 and August 2, 2003 and the
expenditures during the first quarter of fiscal 2004.
May 3, 2003 1st Quarter FY 2004 August 2, 2003
Category Balance Expenditures Balance
------------------------------------------------------------------------------------
Compensation and related costs $ 525,000 $ 189,000 $ 336,000
------------------------------------------------------------------------------------
Office expenses, including rent 54,000 16,000 38,000
------------------------------------------------------------------------------------
Insurance expense 200,000 53,000 147,000
------------------------------------------------------------------------------------
Professional fees 205,000 66,000 139,000
------------------------------------------------------------------------------------
Post April 2004 costs 300,000 0 300,000
------------------------------------------------------------------------------------
Other 115,000 18,000 97,000
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Totals $1,399,000 $ 342,000 $1,057,000
------------------------------------------------------------------------------------
Page 7 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE (B) Liquidation Basis of Accounting (continued)
Estimated income tax payable - Based on management's estimate. Amount
reflects the impact on cash flow under an orderly liquidation
scenario. It is comprised of current taxes on current year income,
adjusting for estimates for future expenditures, the utilization of
tax credits, carryforwards and carrybacks. Certain amounts included in
the estimated income tax payable are subject to audit by both state
and federal taxing authorities. The Corporation has requested
accelerated audits from both state and federal taxing authorities for
the tax years ending April 27, 2002, April 28, 2001, and April 29,
2000. During July 2003, the Corporation paid $4.7 million to the
Internal Revenue Service on account. The remaining net payable is an
estimation of the accumulation of the payments expected in the future.
As tax returns are filed utilizing estimates and management's
reasonable interpretation of applicable rules, the actual results
after a tax audit can be different from amounts initially filed. Based
upon all known facts, management has made an estimation of the range
of probable outcomes after the audits referred to above have been
completed. The tax payable on the Statement of Net Assets is
management's estimate of the most probable point within the range.
Such estimations are often updated as additional information becomes
available.
Due to the numerous significant business dispositions that occurred
during the years which are to be audited, management believes it is
probable that the results of the aforementioned audits may increase or
decrease the amount of estimated income tax payable recorded in the
Statement of Net Assets by up to approximately $400,000. The
Corporation may also incur additional professional fees as a result of
these audits.
Accrued self-insured workers compensation - Based on an independent
actuarial valuation. The Corporation's brewing and foods businesses
were self-insured for workers compensation claims and the Corporation
retained this liability after those businesses were sold. In
connection with this liability, the Corporation is required by the New
York Workers Compensation Board (the "Compensation Board") to maintain
the $3.2 million standby letter of credit, which has been renewed
through August 2004. The issuing bank required the Corporation to
collateralize the letter of credit by maintaining a cash balance of
$3.2 million in a money-market account with the bank.
Contingent liabilities - As with any operating business, the
Corporation may have potential contingent liabilities in addition to
the liabilities recorded in the accompanying consolidated financial
statements. Because no claims for contingent liabilities have been
made or threatened, no amount has been recorded for such liabilities
in the accompanying consolidated financial statements.
NOTE (C) Financial Statement Presentation
Liquidation Basis Financial Statements
The Corporation's Statement of Net Assets in Liquidation as of August
2, 2003 and Statement of Changes in Net Assets in Liquidation for the
thirteen weeks ended August 2, 2003 and July 27, 2002 presented herein
are unaudited. The May 3, 2003 Statement of Net Assets has been
audited. In the opinion of management, these financial statements
reflect all adjustments which are necessary for a fair presentation of
the results for the interim period presented.
Net assets in liquidation per outstanding share, which is reported in
the Statement of Net Assets in Liquidation, is calculated by dividing
net assets in liquidation by the number of common shares outstanding
as of the statement date.
Page 8 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE (C) Financial Statement Presentation (continued)
The accompanying financial statements have been prepared in accordance
with GAAP and Securities and Exchange Commission guidelines applicable
to interim financial information. These statements should be reviewed
in conjunction with the Corporation's annual report on Form 10-K for
the fiscal year ended May 3, 2003. It is the Corporation's policy to
reclassify certain amounts in the prior year consolidated financial
statements to conform to the current year presentation.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This financial review should be read in conjunction with the
accompanying consolidated financial statements and notes. Effective
September 29, 2001 the Corporation adopted the liquidation basis of
accounting which is described in detail in Note B to the accompanying
consolidated financial statements. In the current and prior fiscal
years the Corporation had no operations; therefore, there is no
discussion of operations presented.
LIQUIDITY AND CAPITAL RESOURCES - AUGUST 2, 2003
Liquidating distributions have been paid to shareholders under the
Corporation's plan of liquidation and dissolution as follows:
AMOUNT AMOUNT
DATE PAID DISTRIBUTED PER SHARE
--------- ----------- ---------
March 1, 2001 $12,557,000 $7.50
November 1, 2001 21,763,000 13.00
May 17, 2002 8,370,000 5.00
August 26, 2002 8,370,000 5.00
October 11, 2002 5,023,000 3.00
March 17, 2003 4,185,000 2.50
April 28, 2003 2,511,000 1.50
----------- ------
TOTAL $62,779,000 $37.50
=========== ======
Page 9 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES - AUGUST 2, 2003 (continued)
Subject to amounts that the Corporation may hold to discharge
obligations and potential contingent liabilities (see Contingent
Liability Reserve Policy described below), the Corporation expects to
pay additional liquidating distributions as the Corporation: (a)
receives payment on the remaining promissory note described in Note B
to the accompanying consolidated financial statements which accompany
this report; (b) is allowed to reduce the financial assurance for its
self-insured workers compensation liability described below; (c)
reduces the amount of the Contingent Liability Reserve described
below. The length of time that will be required to wind-up the
Corporation's affairs is uncertain and will impact the value of the
Corporation's net assets in liquidation due to the ongoing expense of
operating the Corporation. While Management has targeted that the
Corporation's plan of liquidation and dissolution will be completed by
April 2004, there will be a further phase required to wind up its
business, necessitated by certain assets and liabilities having a
longer maturity or term. While the duration of this additional phase
is unknown, there will be costs associated with it. The Corporation
has estimated the present value of those costs at $300,000 and this
amount has been recorded as a part of the run-out accrual and
reflected in the accrued expenses and other liabilities line in the
accompanying Statement of Net Assets in Liquidation.
As a result of certain assets and liabilities having a maturity or
term beyond April 2004, the Corporation currently expects that the net
realizable value of certain assets will not be distributed to
shareholders and certain of the Corporation's liabilities, including
the workers compensation liability described below, will not be
discharged by that date. All such assets and liabilities will be
retained by the dissolved Corporation or transferred to a
post-dissolution entity to be held for the benefit of the
Corporation's shareholders and will be distributed to shareholders as
the net realizable values of such retained assets become distributable
after discharging any retained liabilities.
Since it is unknown how long it will be before a final liquidating
distribution is paid to shareholders, the present value of the net
assets in liquidation per outstanding share could be less than is
reported in the accompanying Statement of Net Assets in Liquidation
and the ultimate distributions to shareholders may differ materially
from the Corporation's current estimate.
The Corporation's unrestricted and restricted cash and cash
equivalents are invested in commercial bank money market funds to earn
a market rate of return on those funds and give the Corporation the
security and flexibility required as it completes the liquidation and
dissolution process. These funds are currently yielding approximately
1.0% per annum. The Corporation's Board of Directors (the "Board") has
adopted a Contingent Liability Reserve Policy whereby the Corporation
will maintain a cash contingency reserve equal to $2.5 million, or
$1.50 per outstanding share, for unexpected expenses of the
Corporation. The amount of the reserve may be modified in the future
by the Board as deemed necessary. The balance of this reserve is $2.5
million at August 2, 2003; however, it is not classified as restricted
or as a liability in the accompanying Statement of Net Assets in
Liquidation.
Page 10 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES - AUGUST 2, 2003 (continued)
Restricted cash represents cash which the Corporation is temporarily
unable to access. Restricted cash in the amount of $3.2 million is
being held in a money-market account with a commercial bank as
collateral for a standby letter of credit issued by the bank to
provide statutorily required financial assurance for the Corporation's
self-insured workers compensation liability. The Corporation is
required by the New York Workers Compensation Board (the "Compensation
Board") to maintain the $3.2 million standby letter of credit, which
has been renewed through August 2004. The issuing bank required the
Corporation to collateralize the letter of credit by maintaining a
cash balance of $3.2 million in a money-market account with the bank.
Despite a $1.5 million actuarially based valuation of the
Corporation's workers compensation liability, and the Corporation's
expectation that the valuation of its workers compensation liability
will decline over time as claims are paid, the Compensation Board will
not review the $3.2 million financial security requirement until at
least December 2003 and it is not currently known whether the
Compensation Board will adjust the financial security requirement to
an amount more consistent with the actuarial valuation of workers
compensation liability. It is management's current expectation that
the Compensation Board will require the Corporation to maintain some
amount of financial assurance for the actuarially determined duration
of the self-insured workers compensation liability, which is currently
estimated to be twenty to twenty-five years, and any such amount will
not be available for distribution to shareholders until the
Corporation is relieved of its financial assurance obligation.
The Corporation's marketable securities consist of a bond portfolio
managed by an investment management firm. This portfolio had a fair
market value of $2,284,000 at August 2, 2003. The investments in this
portfolio include $293,000 in U.S. government agency bonds with the
balance of $1,991,000 invested in corporate bonds. The portfolio at
August 2, 2003 has a Moody's dollar weighted average rating of A1. The
portfolio currently has a weighted average duration of approximately
1.09 years. The current weighted average yield to maturity is
approximately 1.78%. The $726,000 decrease in this financial statement
line item from May 3, 2003 to August 2, 2003 is a result of certain
investments being sold with the proceeds remaining in cash and
reflected in the cash and cash equivalents line item. In August 2003,
the portfolio was liquidated and the cash proceeds were invested in
money market funds.
During the first quarter of fiscal 2004, the Corporation received
$121,000 in interest from High Falls on the $4 million note receivable
which is described in Note B to the accompanying consolidated
financial statements. The remaining $4 million note receivable from
High Falls bears interest at the rate of 12% per annum; however,
interest is currently accruing at the default rate of 14% per annum as
a result of the default by High Falls on the December 15, 2002 $1
million principal payment. Interest is payable quarterly. The $4
million balance is payable as follows: $1 million was due on December
15, 2002 and $3 million is due on December 15, 2003. As mentioned
above, High Falls did not make the $1 million principal payment due on
December 15, 2002. As a result of this default, the Corporation is
currently in discussions with High Falls regarding the restructuring
of the note in connection with the possible recapitalization of High
Falls Brewing Company. The December 15, 2003 principal payment can be
extended by High Falls to December 15, 2005 if High Falls does not
achieve 2.5 million barrels of contract brewing volume as measured
from December 15, 2000 through December 15, 2003. High Falls, which is
required to certify its contract volume annually, has certified to the
Corporation that as of December 31, 2002, it has achieved 2,153,946
barrels of contract brewing volume since December 15, 2000.
Page 11 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES - AUGUST 2, 2003 (continued)
The $4 million note is subordinate to High Falls' senior bank debt and
mezzanine financing. Under the terms of the senior debt agreements, in
the event of a default by High Falls, the senior lenders could declare
a standstill, which would prevent the Corporation from receiving
principal and interest payments and enforcing its rights against
collateral pledged by High Falls to secure the $4 million note. If the
senior lenders were to declare a standstill, payments to the
Corporation and the Corporation's rights against collateral pledged to
secure the note could be suspended indefinitely. The terms of the High
Falls seller financing are detailed in exhibits to the Corporation's
report on Form 8-K filed on January 2, 2001.
During the second quarter of fiscal 2003, the Corporation adjusted the
value of the High Falls note on its Statement of Net Assets in
Liquidation to $2.8 million to reflect management's estimate of the
value of the note, which is based on the fair market value of publicly
traded debt instruments of similar quality. At August 2, 2003, the
fair value of this note receivable remains at $2.8 million. This
adjustment had no effect on the estimated income tax payable amount
presented in the Statement of Net Assets in Liquidation.
Accrued compensation and accrued expenses and other liabilities line
items decreased during the first quarter of fiscal 2004 as a result of
expected expenditures occurring.
During the first quarter of fiscal 2004, the Corporation paid $4.7
million to the Internal Revenue Service on account. As a result, the
estimated net income tax payable financial statement line item
decreased accordingly.
Page 12 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Forward-Looking Statements
This report contains forward-looking statements within the meaning of
the federal securities laws. These forward-looking statements include
estimates of the net assets of the Corporation in liquidation,
statements about the amount and timing of the payment of additional
liquidating distributions and statements about the Corporation's
operating costs through final dissolution, including the additional
wind-up phase beyond April 2004, that will vary with the length of
time it operates. The cautionary statements regarding estimates of net
assets in liquidation set forth in Note B to the accompanying
consolidated financial statements that accompany this report are
incorporated herein by reference. The forward-looking statements in
this report are subject to a number of other 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, the amount and timing
of payments to the Corporation by High Falls Brewing Company LLC
("High Falls") under the remaining promissory note described in Note B
to the accompanying consolidated financial statements which accompany
this report; the possible extension of payment or renegotiation of
terms as a result of the default by High Falls under that note;
possible contingent liabilities and post-closing indemnification and
other obligations arising from the sale of the Corporation's operating
businesses and other assets; the risk that federal, state or local
taxing authorities will audit the tax returns filed by the Corporation
to report the sale of its brewing, foods and equipment leasing
businesses and other assets resulting in additional taxes being
assessed against the Corporation; the risk that income, sales, use and
other tax returns filed by the Corporation prior to the divestiture of
its brewing, foods and equipment leasing businesses might be audited
by federal, state or local taxing authorities resulting in additional
taxes being assessed against the Corporation; the risk that the
Corporation may not be able to realize its current estimate of the net
value of its assets; the risk that the Corporation may have
underestimated the settlement expense of its obligations and
liabilities, including without limitation, its estimates of
self-insured workers compensation liability, accrued compensation, and
tax liabilities; 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 and additional run-out expenses, the amount of income
earned during the liquidation period on the Corporation's bond
portfolio and investment in money market funds, risks that the market
value of the Corporation's bond portfolio could decline, risks
associated with investments in bonds and money market funds in the
current low interest rate environment, discharge of contingent
liabilities, and the actual timing of the winding up and dissolution
of the Corporation.
Item 4. Controls and Procedures
In accordance with Securities Exchange Act of 1934 rules, the
Corporation's management, under the supervision of the President and
Chief Financial Officer, conducted an evaluation of the effectiveness
of the design and operation of the Corporation's disclosure controls
and procedures as of the end of the period covered by this quarterly
report. Based on that evaluation, the Corporation concluded that the
design and operation of its disclosure controls and procedures were
effective. There has been no change in the Corporation's internal
control over financial reporting that occurred during the period
covered by this quarterly report, that has materially affected, or is
reasonably likely to affect, the Corporation's internal control over
financial reporting.
Page 13 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
See Exhibit Index at Page 14 of this report.
(b) Reports on Form 8-K. The Corporation filed a report on Form
8-K on June 20, 2003 to report information under Item 5
(Other Events).
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.
GENESEE CORPORATION
Date: 9/10/03 /s/ Stephen B. Ashley
----------- -----------------------------------------
Stephen B. Ashley
President
Date: 9/10/03 /s/ Steven M. Morse
----------- -----------------------------------------
Steven M. Morse
Vice President and Chief Financial Officer
Page 14 of 17
GENESEE CORPORATION
AND SUBSIDIARIES
EXHIBIT INDEX
Exhibit
Number Exhibit Page No.
- --------------------------------------------------------------------------------
31 Officer Certifications as required by Section 302 of
the Sarbanes-Oxley Act of 2002 15
32 Officer Certifications as required by Section 906 of
the Sarbanes-Oxley Act of 2002 17