USA: Northland Cranberries, Inc. Restructures Its Operations; Will Close or Sell Bridgeton Plant; Expects to Recognize Substantial Fourth Quarter Charge
Robert E. Hawk has been named President and Chief Operating Officer of the company. As a part of Hawk's direct responsibilities, he will lead the Branded Division sales and marketing effort in place of prior Branded President Scott Corriveau, who has left the company to pursue other opportunities. Under Hawk's direction, the company will reorganize its sales and marketing infrastructure and eliminate approximately 20 positions nationally. Northland is also negotiating a partnering and outsourcing agreement with CROSSMARK, Inc. of Dallas, Texas to represent the Northland and Seneca brands in over 90% of the country. CROSSMARK will provide sales and marketing support to Northland, in addition to traditional brokerage services.
"The agreement will allow us to utilize CROSSMARK's 10,000 plus employees on a national basis and to access their state of the art management systems to promote and grow our Northland and Seneca brands," said Hawk regarding the agreement.
"We believe that by restructuring our sales and marketing infrastructure and outsourcing many of these activities with CROSSMARK, we hope to save about $1 million a year in sales, general and administrative expenses," said Hawk.
Northland also announced that it intends to sell or close its Bridgeton, N.J. bottling operations as soon as possible. The company is providing proper legal notices to employees and governmental agencies regarding the intended sale or closure.
"After the sale of our private label business and the lack of anticipated co-packing volume from the acquirer of the business, we simply have far too much under utilized bottling capacity. Unfortunately, in order to reduce this over-capacity and excess overhead, we must sell or close at least one of our bottling plants. We chose the Bridgeton plant based on an analysis of the long-term capital investment needs of the facility compared to our other bottling plants and the loss of the co-packing business at Bridgeton," said John Swendrowski, Chairman and CEO.
The company also announced that, in conjunction with its August 31, year-end closing, it anticipates recognizing various significant, largely non-cash, charges and inventory write-downs associated with the company's operational restructuring plan, reducing the cranberry inventory and 2000 growing crop to current net realizable value, and the closing or sale of the Bridgeton plant. The amount of these charges and write-downs has not been finalized, but is preliminarily expected to approximate as much as between $35 million and $50 million.
"We are taking some necessary steps to reorganize our operations and reduce our ongoing expenses to allow us to more effectively compete against Ocean Spray and others. Market conditions in the cranberry industry continued to deteriorate dramatically during the second half of the fiscal year, leading to another write-down in the carrying value of our inventory. Excessive industry-wide cranberry inventories, the impact of the 2000 Federal marketing order restrictions and the continued aggressive market spending used by our major competitor to attack our brands, despite the implications to its grower-shareholders, have forced us to take these actions at this time," said Swendrowski.
As a part of its ongoing analysis of strategic alternatives through its investment bankers, Banc of America Securities LLC and U.S. Bancorp Piper Jaffray, Inc., the company is continuing to analyze additional options to enhance shareholder value, including continued efforts to explore the sale of some or all of the company's stock or assets, the infusion of additional equity capital, obtaining alternative financing arrangements to improve the company's working capital, and exploring other restructuring and financing alternatives. Additionally, the company is actively holding discussions with several lenders to replace its current bank group credit facility and believes it may be able to secure a new replacement credit facility.
Northland also has retained Arthur Andersen LLP's restructuring group to analyze the company's ongoing operations, financial condition and prospects and to assist in concluding a new credit agreement and a near-term bridge financing facility. Although the company is in technical default of its tangible net worth covenant with its current lenders, the company believes it will either be able to obtain a waiver of the default and amend its current credit agreement or replace its lenders within 120 days.
Northland is a vertically integrated grower, handler, processor and marketer of cranberries and value-added cranberry products. The company processes and sells Northland brand 100% juice cranberry blends, Seneca brand juice products, Northland brand fresh cranberries and other cranberry products through retail supermarkets and other distribution channels. Northland also sells cranberry and other fruit concentrates to industrial customers who manufacture and distribute consumer juice products. With 25 growing properties in Wisconsin and Massachusetts, Northland is the world's largest cranberry grower. It is the only publicly-owned, regularly-traded cranberry company in the United States, with shares traded on the Nasdaq Stock Market under the listing symbol CBRYA.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this press release are "forward-looking statements," including statements about the Company's future plans, goals and other events, which have not yet occurred. These statements are intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. They can generally be identified because the context of such statements will include words such as "believes," "anticipates," "expects," or words of similar import. Whether or not these forward-looking statements will be accurate in the future will depend on certain risks and factors including risks associated with (i) development, market share growth, and continued consumer acceptance of the Company's branded juice products; (ii) strategic actions of the Company's competitors in pricing, marketing, and advertising; (iii) aggressive spending to support the Company's branded products; (iv) the results of the sale of the Company's private label business; (v) the adoption and implementation of the marketing order of the Cranberry Marketing Committee of the United States Department of Agriculture; (vi) agricultural factors affecting the Company's crop and the crop of other North American growers and (vii) the Company's ability to comply with the terms and conditions of, and to satisfy its responsibilities under, the Company's amended credit facility. Readers should consider these risks and factors and the impact they have when evaluating these forward-looking statements. These statements are based only on management's knowledge and expectations on the date of this press release. The Company will not necessarily update these statements or other information in this press release based on future events or circumstances.
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