10-K 1 l02339ae10vk.txt GENESEE CORPORATION 10-K Index to Exhibits at Page 48 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: May 3, 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) 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 ------------------- Securities Registered Pursuant to Section 12(b) of the Act NONE Securities Registered Pursuant to Section 12(g) of the Act: Class B Common Stock, par value $.50 per share 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 and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [x] The aggregate market value of voting common stock (Class A) held by non-affiliates, based on the price for Class B Common Stock at the close of trading on October 25, 2002, the last business day of the fiscal 2003 second quarter, was $778,411. Page 2 of 95 The number of shares outstanding of each of the registrant's classes of common stock as of July 11, 2003 was:

Page 3 of 95 PART I Item 1. Description of Business General. Genesee Corporation (the "Corporation") was incorporated in 1932 under the laws of the State of New York. Until 1986, the Corporation was known as The Genesee Brewing Company, Inc. and was engaged solely in the production and sale of malt beverages. In 1986, the Corporation implemented a strategy to diversify its business operations beyond its traditional brewing business. The Corporation subsequently restructured to become a holding company, changed its name and expanded its business to include subsidiaries conducting dry food processing and packaging, equipment leasing and real estate investment. On October 19, 2000, the Corporation's shareholders approved a plan to liquidate and dissolve the Corporation. Pursuant to this plan, the Corporation has now liquidated all of its operating businesses and its real estate investments, as follows: On December 15, 2000, the Corporation sold substantially all of the assets and certain liabilities of its brewing business to High Falls Brewing Company, LLC ("High Falls") for $27.2 million, of which $16.2 million was paid in cash and $11.0 million by notes receivable from High Falls. At May 3, 2003, the amount remaining due the Corporation from High Falls is $4 million under a subordinated note receivable with an original face amount of $4.5 million. This note is currently in default as High Falls failed to make a $1 million principal payment to the Corporation on December 15, 2002. 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. For further information on the Corporation's estimate of this note's fair value see item 7. On December 28, 2000, the Corporation's equipment leasing subsidiary, Cheyenne Leasing Company ("Cheyenne") sold a significant portion of its lease portfolio for $15.3 million, generating net cash proceeds to the Corporation of $12.8 million. Cheyenne retained a small portion of its lease portfolio which it will continue to manage for the duration of the respective lease terms. As of July 11, 2003, there were approximately 10 leases remaining in Cheyenne's portfolio. On October 10, 2001, the Corporation sold all of the outstanding stock of its Ontario Foods, Incorporated, subsidiary, which constituted its Foods Division, to Associated Brands, Inc. ("ABI") for $27 million. Net of purchase price adjustments, the Corporation received $22.1 million in cash. The Corporation also took back a $2.25 million note and mortgage. The note and mortgage, together with $178,000 in cash paid by ABI, were placed in escrow for a period of eighteen months to cover any contingent liabilities or post-closing obligations of the Corporation. On April 5, 2002 ABI paid in full the $2.25 million note and mortgage with the proceeds being placed in the escrow account. On April 9, 2003 all but $25,000 of the escrow account, which was retained for claims presented by ABI against the escrow, was released to the Corporation. In May 2003, the escrow account was closed with $10,277 paid to ABI and the balance paid to the Corporation. On May 31, 2002, the Corporation sold its ten-percent interest in an office building in Rochester, New York and a related note receivable from the building owner for $2.4 million in cash. In connection with this transaction, the purchasers have agreed to indemnify the Corporation for any liability arising from the Corporation's guaranty of half of a $5.5 million senior subordinated loan on the building. Page 4 of 95 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. Under the plan of liquidation and dissolution, the Corporation has paid to Class A and Class B shareholders seven liquidating distributions totaling $62.8 million, or $37.50 per share. With the sale of the Foods Division, 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 will be periodically reviewed and adjusted. Employees. As of May 3, 2003, the Corporation employed 3 people. Item 2. Properties None Item 3. Legal Proceedings None. Item 4. Submission of Matters to a Vote of Security Holders There were no matters submitted to a vote of security holders during the fiscal quarter ended May 3, 2003. Page 5 of 95 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Corporation's Class B Common Stock trades on the NASDAQ National Market tier of the NASDAQ Stock Market under the symbol GENBB. As of July 11, 2003, the number of holders of record of Class A (voting) Common Stock and Class B (non-voting) Common Stock were 87 and 810, respectively. There is no established public trading market for the Corporation's Class A stock, which has generally traded within the same range as Class B stock. The price for the Class B stock as reported by NASDAQ and the liquidating distributions paid per share on Class A and B stock for each quarter for the past two years are shown below:

After paying a regular quarterly dividend of $.35 per share on June 1, 2000, the Board of Directors suspended the payment of quarterly dividends, choosing instead to make liquidating distributions as and when feasible under the plan of liquidation and dissolution approved by shareholders. Page 6 of 95 Item 6. Selected Financial Data The selected historical financial data included in the table below as of May 3, 2003, April 27, 2002, the twenty two weeks ended September 29, 2001 and for the three fiscal years ended April 28, 2001 is derived from the consolidated financial statements of the Corporation and should be read in conjunction herewith. As described in Note 1 to the accompanying consolidated financial statements, the Corporation adopted the liquidation basis of accounting effective September 29, 2001. Therefore, information in the May 3, 2003, April 27, 2002 and September 29, 2001 columns below follow this basis of accounting. The information for the three years ended April 28, 2001 follows the going-concern basis of accounting.

(Dollars in thousands, except per share data) Page 7 of 95 Item 7. 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. Effective September 29, 2001 the Corporation adopted the liquidation basis of accounting which is described in detail in Note 1 to the accompanying consolidated financial statements. LIQUIDITY AND CAPITAL RESOURCES - MAY 3, 2003 Liquidating distributions have been paid to Class A and Class B shareholders under the Corporation's plan of liquidation and dissolution as follows:

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 1 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 has recorded this amount in the accompanying Statement of Net Assets in Liquidation at May 3, 2003. 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. Page 8 of 95 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) 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 1.1% 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 May 3, 2003; however, it is not classified as restricted or as a liability in the accompanying Statement of Net Assets in Liquidation. Restricted cash represents cash which the Corporation is temporarily unable to access. During April 2003 the Corporation received $2.4 million upon the expiration of an escrow account established in connection with the sale of its Foods Division in October 2001. A balance of $25,000 remained in escrow at May 3, 2003 for claims presented by the buyer of the Foods Division against the escrow. These claims were resolved in May 2003 and the escrow account was closed with the proceeds distributed accordingly. As a result, the restricted cash reflected on the accompanying Statement of Net Assets in Liquidation was reduced accordingly. 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 is in effect through August 2003. The Corporation expects to renew this letter of credit or obtain a replacement standby letter of credit in a like amount from another commercial bank if the current letter of credit is not renewed. 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 actuarial valuation of the Corporation's workers compensation liability as of May 3, 2003 and the Corporation's expectation that the actuarial 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 $3,010,000 at May 3, 2003. The investments in this portfolio include $311,000 in U.S. government agency bonds with the balance of $2,699,000 invested in corporate bonds. The portfolio at May 3, 2003 has a Moody's dollar weighted average rating of A1. The portfolio currently has a weighted average duration of approximately 1.22 years. The current weighted average yield to maturity is approximately 1.91%. Page 9 of 95 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) During fiscal 2003, the Corporation received $6.1 million in principal payments from High Falls in full satisfaction of two High Falls bridge notes described in Note 1 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 this remaining 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 brewing 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. 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 current estimate of the value of the note, which is based on the fair market value of publicly traded debt instruments of similar quality. At May 3, 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. Investment in and notes receivable from unconsolidated real estate partnerships decreased by $6,351,000 to $0 at fiscal year end. In the first quarter of fiscal 2003, the Corporation received $2.4 million in proceeds from the sale of its ten percent interest in, and note receivable from, Clinton Square, which is described in Note 7 of the accompanying consolidated financial statements. This receipt of funds reduced the investment in and notes receivable from unconsolidated real estate partnerships line item in the Statement of Net Assets accordingly. In the second quarter of fiscal 2003, the Corporation sold its two real estate investments that are described in Note 7 to the accompanying consolidated financial statements for $4.5 million. As a result of obtaining this $4.5 million sales price, the value of these real estate investments was increased in the first quarter of fiscal 2003 by approximately $500,000, pre-tax. This receipt of funds reduced the investment in and notes receivable from unconsolidated real estate partnerships line item in the Statement of Net Assets accordingly. Also, as a result of these sales the estimated income tax receivable line item in the Statement of Net Assets was decreased by $200,000. Other assets decreased during fiscal 2003 primarily as a result of prepaid insurance amortization, the receipt of $168,000 in insurance refunds, and the collection of $167,000 from certain officers on outstanding loans, which have now been completely repaid. Page 10 of 95 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) Combined accrued compensation and accrued expenses and other liabilities as presented in the Statement of Net Assets in Liquidation decreased from its April 27, 2002 balance by $867,000. This decrease is a result of the payment of compensation related costs and operating costs of approximately $2.0 million and an increase in the run-out and additional winding-up phase accruals in the second, third and fourth quarters by $450,000, $200,000 and $539,000 respectively. During fiscal 2003, the estimated net income tax receivable of $994,000 at April 27, 2002 became an estimated net income tax payable of $4.7 million at fiscal year end. This change from asset to liability resulted from approximately $5.5 million of tax refunds being received by the Corporation during the year and from the $200,000 reduction related to the real estate investment sales noted above. The $4.7 million net income tax payable is an estimation of the accumulation of the payments and refunds expected in the future and reflect the estimated impact on cash flow under an orderly liquidation scenario. The accrued self-insured workers compensation liability decreased by $107,000 during fiscal 2003 as a result of regular and expected payments on claims of $357,000 and a $250,000 increase in the liability as a result of an independent actuarial valuation prepared at fiscal year end. SUMMARY OF CONTINUING AND DISCONTINUED OPERATIONS - GOING CONCERN BASIS As a result of the sale of the Corporation's Foods Division in October 2001 (which is described in Item 1 and in Note 7 to the consolidated financial statements which accompany this report), the operations of the Foods Division have been classified as discontinued operations for all periods presented leaving only corporate expenses and investment related income in continuing operations. Comparison of 22 weeks ended September 29, 2001 to 52 weeks ended April 28, 2001 On a consolidated basis, the Corporation reported net earnings from continuing operations of $142,000, or $.08 basic and diluted earnings per share, for the twenty-two weeks ended September 29, 2001, compared to a net loss from continuing operations of $1.1 million, or $.69 basic and diluted loss per share, for fiscal 2001. The increase in net earnings from continuing operations for the twenty-two weeks ended September 29, 2001 is primarily attributable to $1.4 million in compensation expense related to the exercise of stock options during fiscal 2001. Also, corporate expenses for the current period were less since it covers only twenty-two weeks whereas the comparative period covers a full year. The Corporation reported a net loss from discontinued operations of $22.5 million, or $13.43 basic and diluted loss per share, for the twenty-two weeks ended September 29, 2001, compared to a net loss from discontinued operations of $1.3 million, or $.79 basic and diluted loss per share, for fiscal 2001. This unfavorable variance is primarily related to the $21.8 million Foods Division impairment charge that was reported in the first quarter of fiscal 2002 and the loss on the sale of the Foods Division reported in the second quarter of fiscal 2002. Page 11 of 95 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued) RECENTLY ISSUED ACCOUNTING STANDARDS In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" which, among other technical amendments, no longer requires financial statement presentations to include gains and losses from the early extinguishment as an extraordinary item. SFAS No. 145 is effective for all fiscal years beginning after May 15, 2002. As a result of implementing SFAS No. 145, the loss on early extinguishment of debt that was previously classified as extraordinary has been reclassified and included as a component of discontinued operations. 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 1 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 1 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 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable. Page 12 of 95 Item 8. Financial Statements and Supplementary Data (a) Selected Quarterly Financial Data (Unaudited)

(Dollars in thousands, except per share data)

Page 13 of 95 Item 8. Financial Statements and Supplementary Data (b) Index to Financial Statements

Page 14 of 95 REPORT OF INDEPENDENT AUDITORS To the Stockholders of Genesee Corporation We have audited the statements of net assets in liquidation of Genesee Corporation as of May 3, 2003 and April 27, 2002, and the related statements of changes in net assets in liquidation for the year ended May 3, 2003 and the period from September 30, 2001 to April 27, 2002. In addition, we have audited the consolidated statements of loss and comprehensive loss, shareholders' equity, and cash flows for the period from April 29, 2001 to September 29, 2001 and the year ended April 28, 2001. These financial statements are the responsibility of the Corporation management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. As more fully described in Note 1, the Corporation is currently being liquidated. As a result, the Corporation has changed its basis of accounting for periods subsequent to September 29, 2001 from the going-concern basis to a liquidation basis. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Genesee Corporation as of May 3, 2003 and April 27, 2002, the changes in its net assets in liquidation for the year ended May 3, 2003 and the period from September 30, 2001 to April 27, 2002, the results of its operations and its cash flows for the period from April 29, 2001 to September 29, 2001 and the year ended April 28, 2001, in conformity with accounting principles generally accepted in the United States of America applied on the bases described in the preceding paragraph. As described in Note 1, the financial statements for periods subsequent to September 29, 2001 have been prepared on the liquidation basis of accounting, which requires management to make significant assumptions and estimates regarding the fair value of assets and the estimate of liquidating costs to be incurred. Because of the inherent uncertainty related to these estimates and assumptions, there will likely be differences between these estimates and the actual results and those differences may be material. /s/ PricewaterhouseCoopers LLP Rochester, New York June 11, 2003 Page 15 of 95 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Net Assets In Liquidation (Liquidation Basis) May 3, 2003 and April 27, 2002 (Dollars in thousands, except per share data)

See accompanying notes to consolidated financial statements. Page 16 of 95 GENESEE CORPORATION AND SUBSIDIARIES Statement Of Changes In Net Assets In Liquidation (Liquidation Basis) For the Year ended May 3, 2003 and the Thirty Weeks Ended April 27, 2002 (Dollars in thousands)

See accompanying notes to consolidated financial statements. Page 17 of 95 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Loss and Comprehensive Loss (Going-Concern Basis) For the Twenty Two Weeks Ended September 29, 2001 and the Year Ended April 28, 2001 (Dollars in thousands, except per share data)

See accompanying notes to consolidated financial statements. Page 18 of 95 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity (Going-Concern Basis) (Dollars in thousands, except per share data)

See accompanying notes to consolidated financial statements Page 19 of 95 GENESEE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Going-Concern Basis) For the Twenty Two Weeks Ended September 29, 2001 and the Year ended April 28, 2001 (Dollars in thousands)

See accompanying notes to consolidated financial statements. Page 20 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements May 3, 2003, April 27, 2002, September 29, 2001 and April 28, 2001 (1) Liquidation Basis Note LIQUIDATION BASIS FINANCIAL STATEMENTS With the sale of its Foods Division, which is described Note 7, Genesee Corporation and Subsidiaries (the Corporation) adopted the liquidation basis of accounting effective September 29, 2001. Upon adopting the liquidation basis of accounting, adjustments were made to the Corporation's recorded assets and liabilities, details of which are included below. 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 will be 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. 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. Adjustments from Going-Concern to Liquidation Basis of Accounting (Dollars in Thousands): Shareholders' Equity at September 29, 2001 ( Going-Concern Basis) $ 47,159 To adjust assets to net realizable values 2,001 To adjust liabilities to anticipated settlement amounts 9,926 Net Assets in Liquidation at September 29, 2001 (Liquidation Basis) $ 59,086

Page 21 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) Assumptions used when converting to the Liquidation Basis of Accounting at September 29, 2001 Management estimated that the aggregate fair value of the Corporation's investment in and notes receivable from unconsolidated real estate partnerships exceeded cost by approximately $500,000 and that the estimated fair value of property, plant and equipment exceeded cost by approximately $30,000. Management also estimated that the fair value of income taxes receivable was approximately $1.1 million greater than the net amount of tax accounts previously included on the Corporation's September 29, 2001 balance sheet under going-concern accounting. This increase is predominantly attributable to the realization of tax credits resulting from the decision to liquidate the Corporation. These amounts are included in the $2 million adjustment to net realizable values shown above, the difference being $411,000 of officer loans reclassified from shareholders' equity to assets for purposes of liquidation basis accounting and reporting. Management estimated that the Corporation would spend approximately $2 million in operating costs through final dissolution. This amount was accrued at September 29, 2001 in accordance with liquidation accounting and is reflected in the $9.9 million adjustment to anticipated settlement amounts shown above, which is net of the $11.9 million deferred gain on the sale of the brewing business that no longer exists under liquidation accounting. 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 May 3, 2003. Cash and cash equivalents - 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 May 3, 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 May 3, 2003; however, it is not classified as restricted or as a liability in the accompanying Statement of Net Assets in Liquidation. Page 22 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) 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 May 3, 2003. The fair value of the Corporation's portfolio can be summarized as follows (dollars in thousands): Fixed Income Securities Debt securities issued by the U.S. Government $ 311 Corporate debt Securities 2,460 ------- 2,771 Other 239 ------- Marketable Securities $ 3,010 -------

The fair value of fixed income securities, by contractual maturity, are as follows (dollars in thousands): Contractual maturity Less than one year $ 673 After one year, but within five years 2,049 After five years 49 ------- Total fixed income securities $ 2,771 -------

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 May 3, 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. The Corporation has adjusted the value of the remaining balance of the High Falls note on the Statement of Net Assets in Liquidation to $2.8 million to reflect management's current estimate of the value of the note, which is based on the fair market value of publicly traded debt instruments of similar quality. Investment in direct financing and leveraged leases - Presented at the present value of future lease payments of leases under renewal and the fair value of all equipment under renewed and month-to-month leases. Page 23 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) Other assets - Valued based on management estimates. At May 3, 2003 the $346,000 balance is primarily comprised of prepaid insurance 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, 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 its expected termination date which is 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 April 27, 2002.

Liquidating Distribution Payable - Exists when the Corporation has declared a partial liquidating distribution prior to the date of the statement of net assets in liquidation with such distribution to be paid subsequent to the statement date. This amount is calculated by multiplying the number of outstanding Class A and Class B shares by the declared dollar per share amount. 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. The net payable is an estimation of the accumulation of the payments expected in the future. Because 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, Page 24 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) 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. During the first quarter of fiscal 2003, the then estimated income tax receivable was reduced by $200,000 related to the Corporation's sale of its investment in the two apartment complexes mentioned in Note 7. The following table depicts the receivable and payable components of the estimated net income tax payable and receivable as of May 3, 2003 and April 27, 2002, respectively, reported on the accompanying Statement of Net Assets in Liquidation.

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. 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. 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 combined total of Class A and Class B shares outstanding at May 3, 2003. Changes to asset and liability values under the Liquidation Basis of Accounting from April 27, 2002 to May 3, 2003. Page 25 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) During the second quarter of fiscal 2003, the value of the High Falls note receivable was reduced by $1.2 million to $2.8 million. See explanation above in this note. The value of the Corporation's investment in and notes receivable from unconsolidated real estate partnerships was increased by approximately $500,000 in the first quarter of fiscal 2003 based on a negotiated sales price of the Corporation's investment in two apartment complexes that were subsequently sold in the second quarter of fiscal 2003 for $4.5 million. The Corporation's estimate of remaining operating costs through final dissolution, compensation and other accrued expenses, was increased by $450,000, $200,000, and $539,000 in the second, third and fourth quarters of fiscal 2003, respectively. As of May 3, 2003, the Corporation has $1,399,000 recorded for these run-out costs. $525,000 is allocated to compensation-type costs while the remaining $874,000 covers all other general and administrative costs such as professional fees, office related costs, insurance expense, and other miscellaneous costs expected to be incurred during the run-out period, which is targeted to be April 2004, plus an additional phase of unknown term to wind up the Corporation's business. The Corporation's cash operating expenses, which reduced the run-out accrual discussed above from April 27, 2002 through May 3, 2003, were as follows: Compensation and related costs $ 804,000 Office expenses including rent 71,000 Insurance and workers compensation State assessment expense 382,000 New York Sales tax and related expense 413,000 Professional Fees 350,000 Other 36,000 ----------- $ 2,056,000 ===========

The accrued self-insured workers compensation liability was increased during the fourth quarter by $250,000 based on an independent actuarial valuation of open claims. Changes to asset and liability values under the Liquidation Basis of Accounting from September 29, 2001 to April 27, 2002. The value of the Corporation's investment in and notes receivable from unconsolidated real estate partnerships was increased by $250,000 in the third quarter of fiscal 2002 based on an updated independent appraisal and management's estimate. This line item was further increased by Page 26 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) $290,000 in the fourth quarter based on the sales price realized in May 2002 on the sale of the Corporation's 10% investment in entities that own an office building in downtown Rochester, New York and a related note receivable. The value of the Corporation's investment in a food service equipment and supplies business was reduced by $355,000 to $0 in the last half of fiscal 2002. This investment had previously been included in other assets in the statement of net assets in liquidation. The Corporation's estimate of remaining operating costs through final dissolution was increased by $900,000 in the third quarter of fiscal 2002. As of April 27, 2002, the Corporation has approximately $2.0 million recorded for these run-out costs. $1.2 million is allocated to compensation-type costs while the remaining $800,000 covers all other general and administrative costs such as professional fees, office related costs, insurance expense, and other miscellaneous costs expected to be incurred during the run-out period. The Corporation's cash operating expenses, which reduced the run-out accrual discussed above from September 29, 2001 through April 27, 2002, were as follows: Compensation and related costs $ 780,000 Office expenses including rent 38,000 Insurance expense 115,000 Professional Fees 243,000 Other 33,000 ----------- $ 1,209,000 ===========

Partial Liquidating Distributions Under its plan of liquidation and dissolution the Corporation has paid the following partial liquidating distributions to its Class A and Class B shareholders.

Page 27 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (1) Liquidation Basis Note (continued) Fiscal Year The Corporation's fiscal year ends on the Saturday closest to April 30. The fiscal year for the financial statements included herein is for the 53 week and 52 week periods ending May 3, 2003 and April 27, 2002, respectively. (2) Summary of Significant Accounting Policies - Going-Concern Basis GOING-CONCERN BASIS FINANCIAL STATEMENTS Prior to September 29, 2001, the date at which the liquidation basis of accounting was adopted, the Corporation followed the going-concern basis of accounting. Following are notes to the consolidated financial statements prepared under the going-concern basis of accounting. The going-concern basis financial statements consist of the Consolidated Statement of Loss and Comprehensive Loss for the twenty-two weeks ended September 29, 2001 and the year ended April 28, 2001, the Consolidated Statements of Cash Flows for the twenty-two weeks ended September 29, 2001 and the year ended April 28, 2001, and the Consolidated Statements of Shareholders' Equity for the twenty-two weeks ended September 29, 2001 and the year ended April 28, 2001. Principles of Consolidation and Nature of Operations The consolidated financial statements of the Corporation include for continuing operations, the Corporation's corporate segment. The corporate segment retains the Corporation's cash, investments in marketable securities, and significant notes receivable, which in turn generates investment income which is then used in support of corporate costs. (See Note 7 for information related to the Corporation's discontinued segments.) All significant inter-company balances and transactions have been eliminated in consolidation. Recently Issued Accounting Standards In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" which, among other technical amendments, no longer requires financial statement presentations to include gains and losses from the early extinguishment as an extraordinary item. SFAS No. 145 is effective for all fiscal years beginning after May 15, 2002. As a result of implementing SFAS No. 145, the loss on early extinguishment of debt that was previously classified as extraordinary has been reclassified and included as a component of discontinued operations. Page 28 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) Summary of Significant Accounting Policies - Going Concern Basis (continued) Comprehensive Loss The Corporation reports comprehensive income or loss in accordance with the provisions of SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for reporting and display of comprehensive income or loss and its components (revenues, expenses, gains, losses, and other comprehensive income) in a set of financial statements in order to report a measure of all changes in equity of an enterprise. Other comprehensive income or loss refers to revenues, expenses, gains and, losses that are included in comprehensive income or loss but excluded from net earnings or loss. The amount of income tax expense allocated to other comprehensive income for the twenty-two weeks ended September 29, 2001 and fiscal 2001 was approximately $105,000 and $118,000, respectively. Income Taxes The provision for income taxes is based upon pre-tax earnings, with deferred income taxes arising from the permanent and temporary differences between the financial reporting basis and the tax basis of the Corporation's assets and liabilities. Stock-Based Compensation The Corporation measures compensation cost for its stock-based compensation plans under the provisions of Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," disclosure of compensation costs on the basis of fair value is presented in Note 10 - Stock Option and Bonus Plans. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Earnings Per Share The Corporation presents basic earnings per share, which is computed by dividing the income available to common shareholders by the weighted average number of common shares outstanding for the period, and diluted earnings per share, which reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. At September 29, 2001 and at April 28, 2001, 9,500 and 27,500 shares of potential common stock, respectively, are considered anti-dilutive and are excluded from the calculation of diluted earnings per share. Page 29 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (2) Summary of Significant Accounting Policies - Going Concern Basis (continued) Reclassifications It is the Corporation's policy to reclassify certain amounts in the prior year consolidated financial statements to conform with the current year presentation. Fiscal Year The Corporation's fiscal year ends on the Saturday closest to April 30. The fiscal year for the financial statements included herein are for the 52 week period ending April 28, 2001. (3) Income Taxes - Going Concern Basis Components of income tax (benefit) expense from continuing operations for the twenty-two weeks ended September 29, 2001 and for the fiscal year ended April 28, 2001 are as follows:

(Dollars in thousands) Page 30 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (3) Income Taxes - Going Concern Basis (continued) The actual tax expense reflected in the consolidated statements of earnings differs from the expected tax expense, computed by applying the U.S. federal corporate tax rate to earnings before income taxes as follows for the twenty-two weeks ended September 29, 2001 and for the fiscal year ended April 28, 2001:

(4) Segment Reporting - Going Concern Basis As stated in Note 2, the Corporation's corporate segment is the only reporting segment for continuing operations. The corporate segment retains the Corporation's investments in marketable securities, significant notes receivable, generating investment income as well as supporting corporate costs. (See Note 7 for information related to the Corporation's discontinued segments.) (5) Supplemental Cash Flow Information - Going Concern Basis Cash (refunded) paid for taxes was approximately $(11,000) and $ 8,894,000 for the twenty-two weeks ended September 29, 2001 and fiscal 2001, respectively; cash paid for interest was approximately $134,000 and $422,000 for the twenty-two weeks ended September 29, 2001 and fiscal 2001, respectively. No interest was capitalized during the twenty-two weeks ended September 29, 2001 or in fiscal 2001. (6) Stock Option and Bonus Plans - Going Concern Basis Under the Corporation's 1992 Stock Plan, as amended (the "Stock Plan"), officers and other key employees may, at the discretion of the Management Continuity Committee of the Board of Directors, be granted options that allow for the purchase of shares of the Corporation's Class A and Class B common stock. These options may be exercised any time from the award date to a specified date not more than ten years from the award date or five years in the case of 10% or more shareholders. Under the Stock Plan, outside directors are granted options to purchase shares of Class B common stock. Outside director options may be exercised at any time from the option award date until five years after the award date. Page 31 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) Stock Option and Bonus Plans - Going Concern Basis (continued) The Corporation has adopted a Stock Bonus Incentive Program under the Stock Plan (the "Bonus Program"). The Bonus Program authorizes the Board of Directors to award shares of Class B common stock to officers and other key employees. These shares are issued from treasury shares in five equal annual installments commencing in the year in which the award takes place. Changes in stock options are as follows:

Common stock reserved for options and employee awards totaled 9,500 and 27,500 shares as of September 29, 2001 and April 28, 2001, respectively. The Corporation adopted the disclosure-only provisions of SFAS No. 123, and continues to apply the provisions of APB Opinion No. 25 for plan accounting. If compensation cost for the Corporation's stock-based plans had been determined based on the fair value at the grant dates in accordance with SFAS No. 123, the Corporation's net earnings and basic and diluted earnings per share for the fiscal year ended April 28, 2001 would have been reduced to the pro forma amounts indicated below. During the twenty-two weeks ended September 29, 2001 no options were granted; therefore there is no related disclosure for this twenty-two week period.

(Dollars in thousands, except per share data) Page 32 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (6) Stock Option and Bonus Plans - Going Concern Basis (continued) For purposes of this disclosure, the fair value of each option was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: expected option term of 5 years, expected volatility of 39.3% in fiscal 2001, expected dividend yield of 0%, and risk-free interest rate of 5.69% in fiscal 2001. The weighted average fair value of stock options granted was $16.64 in fiscal 2001. The following table summarizes information about stock options outstanding and exercisable at September 29, 2001:

(7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis In October 2000, the Corporation's shareholders approved a plan to liquidate and dissolve the Corporation. The Corporation is liquidating by selling or otherwise disposing of its assets and winding up its affairs. The proceeds from the liquidation, net of amounts paid or reserved to discharge all of the Corporation's obligations and liabilities, is being distributed to the Corporation's shareholders in a series of liquidating distributions, after which the Corporation will be dissolved. 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 more fully described in Note 1. The Corporation sold a significant portion of its equipment lease portfolio in December 2000 and received $12.8 million in proceeds. The Corporation retained a small portion of its lease portfolio which it continues to manage. On October 10, 2001, the Corporation sold all of the outstanding stock of its Foods Division to Associated Brands, Inc. ("ABI") for $27 million. The sale was completed in accordance with the terms of a Purchase Agreement. Net of closing date adjustments, the Corporation received $22.1 million in cash at closing. In addition, a $2.25 million note and mortgage and $178,000 in cash were received by the Corporation and placed in escrow for eighteen months. The mortgage note has since been paid and the $2.4 million cash escrow has been released except for $25,000 which remains in the escrow account for claims presented by ABI. These minor final claims have been settled with the remaining account balance distributed accordingly. Page 33 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) On May 31, 2002, the Corporation sold its ten-percent interest in an office building in Rochester, New York and a related note receivable from the building owner for $2.4 million in cash. In connection with this transaction, the purchasers have agreed to indemnify the Corporation for any liability arising from the Corporation's guaranty of half of a $5.5 million senior subordinated loan on the building. 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. Page 34 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) The results of operations for the discontinued brewing, foods, equipment leasing and real estate investment businesses were as follows:

Page 35 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) The Corporation's previous investment in a real estate limited partnership in which it has less than a majority interest was accounted for by the equity method. The Corporation's proportionate share of the results of operations of this unconsolidated limited partnership was recorded net of tax in discontinued operations. Revenue Recognition Revenue from the Corporation's lease portfolio is recognized on a level yield method. Concentration of Credit Risk The Corporation's lease receivable balances are from a diversity of lessees in various industries and businesses. This diversity, in addition to security interests in the leased equipment, allows the Corporation to minimize its credit risk on lease receivables. Substantially all of the accounts receivable balances are from food retailers. Property, Plant and Equipment The Corporation regularly assesses all of its long-lived assets for impairment and recognizes a loss when the carrying value of an asset exceeds its expected future cash flows. The Corporation determined that no impairment loss needed to be recognized for applicable assets in fiscal 2001. In the first quarter of fiscal 2002, the Corporation recorded a $21.8 million impairment charge related to the Foods Division. This charge is included as a part of the first quarter's operating loss with an equivalent reduction in goodwill. Goodwill and Other Intangibles Goodwill and other intangibles are amortized on a straight-line basis ranging from 3 to 25 years. The carrying value of goodwill and other intangibles are assessed periodically based on the expected future cash flows of the assets associated with the goodwill and other intangibles. As noted above, goodwill was reduced by $21.8 million in the first quarter of fiscal 2002 related to an impairment charge. Leasing Activities The Corporation's leasing activity is conducted by Cheyenne Leasing Company, a wholly owned subsidiary of Genesee Ventures, Inc. On October 31, 2000, Genesee Ventures, Inc. bought out the 15% minority interest in Cheyenne Leasing Company from its joint venture partner to obtain this wholly owned status. Page 36 of 95 GENESEE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements (7) Divestiture of the Corporation's Operating Businesses - Discontinued Operations/Going Concern Basis (continued) Postretirement Benefits The Corporation previously provided certain health care and life insurance benefits to eligible retired employees and spouses under a welfare benefit plan (the Plan) covering substantially all retirees and employees of Genesee Brewing Company. Effective with the sale of its brewing business on December 15, 2000, the Corporation was relieved of its liability and responsibility for these postretirement benefits. However, the Corporation implemented a phase-out plan whereby retiree postretirement benefits continued at decreasing levels through the end of calendar 2001 at which time benefits were discontinued. Even though the Corporation's health insurance premium subsidy concluded at December 31, 2001, the Corporation continues to administer the retiree group's health insurance arrangement. This administrative support is scheduled to cease on December 31, 2003. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. Page 37 of 95 GENESEE CORPORATION AND SUBSIDIARIES PART III Item 10. Directors and Executive Officers of the Registrant (a) Directors: The table below lists the directors of the Corporation and sets forth their ages, their other positions with the Corporation and its subsidiaries, the principal occupations of those directors who do not hold other positions with the Corporation or its subsidiaries, and the expiration of their terms in office. The term in office of each director expires at the annual meeting of shareholders of the Class A Common Stock held in the year specified.

(1) See Note (1) to Item 10(b). (2) Mr. Buckingham retired in 1996 as Executive Vice President of First Empire State Corporation, a publicly held bank holding company, and Manufacturers and Traders Trust Company, a New York State chartered bank. (3) Mr. Clement retired as a partner of the law firm of Nixon Peabody LLP in 2000, a position he had held for more than five years. Mr. Clement previously served as a director of the Corporation from 1970 to 1999. (4) Mr. Leunig was elected to the Corporation's Board of Directors and appointed Secretary of the Corporation on April 28, 2003. Mr. Leunig was elected Senior Vice President, Chief Administrative Officer and Secretary of the Corporation in December 2000, and held that position until March 31, 2003. Prior to that, he was Vice President, Secretary and General Counsel of the Corporation, positions he held for more than five years. Page 38 of 95 (5) Mr. Sassano was elected President and Chief Executive Officer of Transcat, Inc. in April 2002. Mr. Sassano is also a director of Transcat, Inc. From 2000 to 2002 he served as a private business consultant. From 1999 to 2000 Mr. Sassano served as President and Chief Operating Officer of Bausch & Lomb, Inc., a global vision and health care products manufacturer. From 1996 to 1999 Mr. Sassano served as President - Global Vision Care of Bausch & Lomb, Inc. (6) See Note (2) to Item 10(b). (b) Executive Officers: The table below lists the executive officers of the Corporation and its subsidiaries and sets forth their ages, the dates they became officers and the offices held. Officers of the Corporation and its subsidiaries serve for a term of one year beginning with the first meeting of the Board of Directors occurring after the annual meeting of the holders of Class A Common Stock of the Corporation.

(1) Mr. Ashley was elected President of the Corporation in December 2000. Since July 1996 Mr. Ashley has been Chairman and Chief Executive Officer of The Ashley Group, an affiliated group of privately owned real estate management and investment companies. Mr. Ashley is also a Director of Federal National Mortgage Association, Exeter Fund, Inc. and Exeter Insurance Fund, Inc. (2) Mr. Wehle was elected Chairman of the Board of Directors in March 2000. He retired as Senior Vice President of the Corporation and President of Genesee Brewing Company in May 2000. He had served as Senior Vice President of the Corporation for more than five years and as President of Genesee Brewing Company since October 1996. (3) Mr. Leunig was elected to the Corporation's Board of Directors and appointed Secretary of the Corporation on April 28, 2003. Mr. Leunig was elected Senior Vice President, Chief Administrative Officer and Secretary of the Corporation in December 2000, and held that position until March 31, 2003. Prior to that, he was Vice President, Secretary and General Counsel of the Corporation, positions he held for more than five years. Page 39 of 95 (4) Mr. Morse was elected Vice President, Chief Financial Officer and Treasurer of the Corporation on December 13, 2001. He was elected Vice President and Treasurer in December 2000. From 1999 to 2000, Mr. Morse served as the Corporation's Corporate Consolidations Manager. From 1996 to 1999, he served as an Audit Manager at the public accounting firm of Deloitte & Touche, LLP. Mr. Morse is a certified public accountant. (c) Compliance with Section 16(a) of Securities Exchange Act of 1934: To the Corporation's knowledge, based solely on review of copies of reports of initial ownership and changes of ownership furnished to the Corporation by its directors, executive officers and persons who own more than ten percent of the Corporation's Class B Common Stock, and written representations to the Corporation by such persons that no other reports were required, there were no failures by such persons to comply with the reporting requirements under Section 16(a) of the Securities Exchange Act of 1934 during the Corporation's fiscal year ended May 3, 2003. (d) Financial Code of Ethics: See Exhibit 14 for the Corporation's Financial Code of Ethics, which is incorporated herein by reference thereto. (e) Audit Committee Financial Expert: On behalf of the Corporation's Board of Directors, the Audit Committee is responsible for providing an independent, objective review of the Corporation's auditing, accounting and financial reporting process, public reports and disclosures and system of internal controls regarding financial accounting. The Audit Committee is comprised solely of independent Directors as defined in the Marketplace Rules of the Nasdaq Stock Market, and is governed by a written charter adopted by the Board of Directors. The composition of the Audit Committee, the attributes of its members and the responsibilities of the Committee, as reflected in the Audit Committee Charter ( Charter ), are intended to be in accordance with applicable requirements for corporate audit committees. The Committee Chair, William A. Buckingham, meets the independence requirements set forth under Nasdaq 4200(a)14, and financial expert qualifications as set forth in Section 407 of the Sarbanes-Oxley Act of 2002. Page 40 of 95 Item 11. Executive Compensation (a) Summary of Executive Compensation. The table below sets forth a summary of compensation paid during the past three fiscal years for all services rendered to the Corporation and its subsidiaries by the President of the Corporation (who is acting in the capacity of the chief executive officer), the former Senior Vice President and Chief Administrative Officer, and the Vice President and Chief Financial Officer of the Corporation, all of whose total annual salary and bonus for the fiscal year ended May 3, 2003 exceeded $100,000. SUMMARY COMPENSATION TABLE

(1) Amount paid upon exercise of stock appreciation rights. (2) Amount reflects $63,749 retirement payment under employment agreement with the Corporation, $4,876 paid upon termination of Rabbi Trust under the Corporation's Benefit Restoration Plan (which amount was reported under Item 11(a) in Form 10-K's previously filed by the Corporation), $2,975 payment in lieu of flexible spending account benefit under employment agreement with the Corporation, and $522 in premiums paid by the Corporation on life insurance policies. (3) Amount reflects the dollar value of stock appreciation rights granted in fiscal 2001. (4) Amount reflects $81,080 of above-market value stock appreciation rights held at April 27, 2002, $19,143 retirement payment under employment agreement with the Corporation, $2,975 payment in lieu of flexible spending account benefit under employment agreement with the Corporation, and $130 in premiums paid by the Corporation on life insurance policies. Page 41 of 95 (5) Amount reflects a $41,040 retirement payment under employment agreement with the Corporation, $1,613 payment in lieu of flexible spending account benefit under employment agreement with the Corporation, $1,578 in premiums paid by the Corporation on life insurance policies, and a $263,925 severance payment under employment agreement with the Corporation. (6) Amount reflects a $37,000 retirement payment under employment agreement with Corporation, $1,613 payment in lieu of flexible spending account benefit under employment agreement with the Corporation, and $704 in premiums paid by the Corporation on life insurance policies. (b) Grant of Options or Stock Appreciation Rights. The Corporation did not grant any options or stock appreciation rights to the executive officers identified in Item 11(a) during the Corporation's fiscal year ended May 3, 2003. (c) Exercise of Options by Executive Officers. The table below sets forth information about the aggregate number of shares received and the value realized by the named executive officer upon exercise of options exercised during the Corporation's fiscal year ended May 3, 2003; and the aggregate number and value of options held by the named executive officer at the end of the fiscal year: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

(d) Director Compensation. Directors who are employees of the Corporation do not receive directors' fees or other compensation for their services as directors. Directors, other than the Chair of the Audit Committee and the Secretary, who are not employees receive an annual fee of $7,000 plus $500 for each Board and Committee meeting they attend. William A. Buckingham as Chair of the Audit Committee receives an annual fee of $10,000 plus $500 for each Board and Committee meeting he attends. Mark W. Leunig as Secretary of the Corporation receives $700 annually in addition to his regular Director fee. Charles S. Wehle receives an additional annual fee of $10,000 as Chairman of the Board of Directors. (e) Agreements With Named Executive Officers. (1) The Corporation has an employment agreement with Mr. Morse which provides that if Mr. Morse's employment is terminated without "Cause" (as that term is defined in the agreement), as a result of death, or disability, the Corporation must pay to Mr. Morse a lump sum payment equal to his annual salary. Under the agreement, Mr. Morse is eligible to receive an annual bonus of up to 35% of his annual salary at the discretion of the Management Continuity Committee of the Board of Directors. Also, under the agreement, the Corporation: (a) granted to Mr. Morse the stock appreciation rights Page 42 of 95 identified in Item 11(b) of the Corporation's report on Form 10-K for the fiscal year ended April 28, 2001 which is incorporated herein by reference; (b) is required to pay to Mr. Morse a retirement payment equal to 16.67% of Mr. Morse's annual gross income; and (c) is required to continue, for stated periods subsequent to termination of employment, coverage for Mr. Morse under certain medical insurance and other employee benefit plans. (2) Under an agreement with the Corporation, Stephen B. Ashley is expected to devote approximately 400 hours per year to his duties as President of the Corporation and is paid a salary of $5,000 per month. (f) Compensation Committee Interlocks and Insider Participation. Stephen B. Ashley served during the fiscal year ended May 3, 2003 as a member of the Management Continuity Committee of the Corporation's Board of Directors which functions as the Board's Compensation Committee. Page 43 of 95 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. (a) Security Ownership of Certain Beneficial Owners. The Corporation's only class of voting securities is its Class A Common Stock. As of July 11, 2003, persons who owned of record or were known by the Corporation to own beneficially more than 5% of the outstanding Class A Common Stock were:

(1) The power to vote and otherwise act with respect to these shares is vested in Charles S. Wehle while a trustee. In the event of his death, resignation or incapacity, such power would pass to Henry S. Wehle. (2) Excludes shares owned by trusts described elsewhere in this table and notes. Includes 31,443 shares held by Trust under Will of John L. Wehle, 8,595 shares owned individually by the Estate of John L. Wehle, Jr., 1,890 shares owned individually by Charles S. Wehle and 29 shares owned individually by Henry S. Wehle. Pursuant to a Shareholder Agreement and Irrevocable Proxy dated June 22, 1988 (the "Shareholder Agreement") among John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle (the "Shareholders"), Charles S. Wehle is appointed proxy to vote all voting securities of the Corporation then owned or thereafter acquired by the Shareholders. Under the Shareholder Agreement, Henry S. Wehle would succeed Charles S. Wehle as proxy in the event of the death, incapacity or resignation of Charles S. Wehle. The Shareholder Agreement will continue in effect until terminated in writing signed by all of the surviving Shareholders. As of July 11, 2003, 41,957 Class A shares, constituting 20% of the Class A shares outstanding, are subject to the Shareholder Agreement. (3) The power to vote and otherwise act with respect to these shares is vested in Charles S. Wehle while a trustee. In the event of his death, resignation or incapacity, such power would pass to Henry S. Wehle. Except as otherwise described above, to the Corporation's knowledge the persons listed above have sole voting and sole investment power with respect to all Class A shares listed. (b) Security Ownership of Management. The number of and percentage of outstanding shares of Class A and Class B Common Stock of the Corporation beneficially owned (as determined in Page 44 of 95 accordance with Rule 13d-3 under the Securities Exchange Act of 1934) as of July 11, 2003 by each director and by all directors and executive officers as a group are set forth in the following table:

(1) See Table under Item 12(a) and Notes (1), (2) and (3) thereto. (2) Includes 40,633 shares held as trustee under the will of Louis A. Wehle (see Note (1) to table set forth in Item 12(a) above); 37,090 shares held as trustee under Elizabeth R. Wehle irrevocable trust dated January 12, 1950, the power to act with respect which is vested in Mr. Wehle as a trustees; and 2,450 shares owned individually (3) Includes 896 shares owned individually and 1,000 shares which may be acquired pursuant to presently exercisable stock options. (4) Mr. Buckingham and Mr. Clement serve as trustees of Genesee Country Museum, which holds 20,338 Class B shares, none of which are included in the table above. (5) Includes 723 shares owned individually and 1,000 shares which may be acquired pursuant to presently exercisable stock options. (6) Amount of shares owned does not exceed one-percent of shares outstanding. (c) Change of Control Arrangements. A Shareholder Agreement and Irrevocable Proxy among John L. Wehle, John L. Wehle, Jr., Charles S. Wehle and Henry S. Wehle dated June 22, 1988 may at a subsequent date result in a change in control of the Corporation, which agreement is more fully described in Note (2) to Item 12(a). Page 45 of 95 Item 13. Certain Relationships and Related Transactions. (a) Related Transactions. The Corporation subleases approximately 1,200 square feet of office space from S.B. Ashley Management Corporation. Stephen B. Ashley, a director and President of the Corporation, is an officer, director and majority owner of S.B. Ashley Management Corporation. During the fiscal year ending May 3, 2003, the Corporation paid $24,000 to S.B. Ashley Management Corporation for rent, utilities, taxes and ancillary services under the sublease with S.B. Ashley Management Corporation. Page 46 of 95 PART IV Item 14. 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 within 90 days of the filing date of this annual report. Based on that evaluation, the Corporation concluded that the design and operation of its disclosure controls and procedures were effective. There have been no significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of such evaluation. Item 15. Principal Accountant Fees and Services

The Corporation's Audit Committee has reviewed the fees noted above for non-audit services and believes they are compatible with the independent accountants' independence. Item 16. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (a) The following documents are filed as part of this report: 1. Financial Statement Schedules: All schedules have been omitted because they are either not applicable or not required, or the required information is given in the consolidated financial statements or the notes thereto. 2. Exhibits: See Exhibit Index at Page 49 of this report. (b) Reports on Form 8-K. The Corporation filed reports on Form 8-K on February 21, 2003, March 10, 2003, April 9, 2003, and April 29, 2003 to report information under Item 5 (Other Events). Page 47 of 95 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. GENESEE CORPORATION July 29, 2003 By: /s/ Stephen B. Ashley ------------------- ----------------------------------------- (Date) Stephen B. Ashley, President July 29, 2003 By: /s/ Steven M. Morse ------------------- ----------------------------------------- (Date) Steven M. Morse, Vice President and Chief Financial Officer Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Stephen B. Ashley July 29, 2003 Director ---------------------------------- ------------------ Stephen B. Ashley (Date) /s/ William A. Buckingham July 29, 2003 Director ---------------------------------- ------------------ William A. Buckingham (Date) /s/ Charles S. Wehle July 29, 2003 Director ---------------------------------- ------------------ Charles S. Wehle (Date) /s/ Thomas E. Clement July 29, 2003 Director ---------------------------------- ------------------ Thomas E. Clement (Date) /s/ Carl E. Sassano July 29, 2003 Director ---------------------------------- ------------------ Carl E. Sassano (Date) /s/ Mark W. Leunig July 29, 2003 Director ---------------------------------- ------------------ Mark W. Leunig (Date) Page 48 of 95 EXHIBIT INDEX

Page 49 of 95

Page 50 of 95

GENESEE CORP 10-K