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Financial Report | Page 2    
Results of Operations Total sales of $258 million for F'2005 were $8.0 million or 3.0% lower than prior year sales. In late F'2004, Tree Top lost its bid to continue as a primary vendor of California's Women, Infants, and Children (WIC) program. This significant loss in sales was partially offset by sales of the Cooperative's newly acquired Northwest Naturals business and by sales of apple juice concentrate afforded by larger fruit receiving volumes. Higher fruit receipts in F'2005 and a resulting higher utilization of production capacity enabled the spread of certain overhead costs, which are relatively fixed in the short-term, over a greater number of tons. This improvement in production costs, however, was mostly offset by higher fuel costs and lower yields. Higher oil and natural gas prices have had an impact on Tree Top in two ways: 1) Higher prices paid for natural gas and oil to run evaporative dryers, boilers, and concentrators; and 2) Higher prices paid for plastic bottles which are made from oil and gas products. Higher energy related costs had a more than $4 million impact on the Cooperative in F'2005. Yields on processing apples in F'2005 were lower than normal due to unusually low sugar levels (brix) of the fruit. The lower yields had the impact of causing production costs to be approximately $2 million higher in F'2005 than they would otherwise have been. Total returns per ton for apple in F'2005 were lower than the prior year due to the lower commercial market value of the fruit. Returns for juice fruit were down $24.26 per ton to $46.56. For Golden Peelers, the returns per ton were down $72.96 to $87.12. Returns for Other Peelers were down $33.27 per ton to $83.14. The total returns per ton for pear increased $6.21 to $43.80. Financing the Cooperative A significant impact in F'2005 was an increase in inventory levels by year-end to $81.1 million, a $19.7 million increase over prior year levels. All-time high fruit receiving allowed the Cooperative to bring its finished goods inventories back to normal levels. It also caused an increase in apple concentrate inventory to levels higher than would normally be desired. These inventory levels are by no means unprecedented and will be brought down to normal levels with planned sales during F'2006. As at July 31, 2005, the current portion of long-term debt had increased $12.4 million over prior year, reflecting senior notes due and payable during F'2006. This debt will be replaced with new private placement notes during F'2006 at interest rates favorable to the retiring debt. Tree Top increased members' equity by $3.2 million in F'2005 to $57.5 million. This results in members' equity equal to 27.4% of total assets, providing financial strength and continued financing flexibility for the Cooperative. The key elements of the change in equity were as follows:
Non-member earnings included profits or losses earned on sales of products not containing apples or pears. Non-member earnings also included profits earned on apple and pear tons delivered without market rights. Such tonnage increased from 26,000 tons for F'2004 to 205,000 tons for F'2005. Equity additions include member purchases of market rights required to maintain minimum member funding levels and market rights acquired by members under the Cooperative's equity subscription plan. Equity retirements include amounts paid to retiring members under the seven-year retirement provisions of Tree Top's equity program. Management believes the overall level of equity is sufficient to support the near-term financial needs of the Cooperative. Additional liquidity and financial flexibility are provided by debt financing utilized by the Cooperative and a line of bank credit that provides the ability to borrow up to $50 million on an unsecured basis. At July 31, 2005 there were borrowings of $14.1 million outstanding under that credit line. |
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Chairman's Letter 
CEO's Letter
Financial Report
Board of Directors
Corporate Info
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