-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CCdtLeN0T23T0BMB/HNmxLHxKlizv3YPLs4aese5OyFWM+8L6m05f5izdS1/T5my g8StNK07ub0NFFweufqlsw== 0000102588-96-000013.txt : 19960517 0000102588-96-000013.hdr.sgml : 19960517 ACCESSION NUMBER: 0000102588-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: VACU DRY CO CENTRAL INDEX KEY: 0000102588 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 941069729 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01912 FILM NUMBER: 96567753 BUSINESS ADDRESS: STREET 1: 7765 HEALDSBURG AVE STREET 2: P O BOX 2418 CITY: SEBASTOPOL STATE: CA ZIP: 95473-2418 BUSINESS PHONE: 7078294600 MAIL ADDRESS: STREET 1: P O BOX 2418 STREET 2: 7765 HEALDSBURG AVENUE CITY: SEBASTOPOL STATE: CA ZIP: 95473-2418 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15(d) X of the Securities Exchange Act of 1934. For the quarterly period ended March 31, 1996 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 01912 VACU-DRY COMPANY (Exact name of registrant as specified in its charter) California 94-1069729 (State of incorporation) (IRS Employer Identification #) 7765 Healdsburg Ave., Sebastopol, California 95472 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 707/829-4600 Not-Applicable ___________________________________________________________________________ (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES: __X__ NO:____ As of May 13, 1996, there were 1,709,599 shares of common stock, no par value, outstanding. -1- PART I FINANCIAL INFORMATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The financial statements herein presented for the quarter and nine months ended March 31, 1996 and 1995, reflect all the adjustments that in the opinion of management are necessary for the fair presentation of the financial position and results of operations for the period then ended. All adjustments during the periods presented, are of a normal recurring nature. Liquidity and Capital Resources Because the Company's operations are seasonal in nature, the Company's liquid resources fluctuate during the year in a way that changes very little from year to year. To assist in analyzing the seasonal impact on the balance sheet, we have included comparative figures as of March 31, 1996 and 1995 in addition to the prior fiscal year end. Inventory and accounts payable balances are normally at their lowest level as of the end of the fiscal year and their highest level as of the end of the second quarter. This seasonal increase in the accounts payable balance results in a temporary increase in the Debt to Equity ratio. Adverse weather conditions earlier this year resulted in a poor apple crop and has required purchasing more tonnage from out of state than in normal years. Inventory levels as of March 31, 1996 in comparison with March 31, 1995 are significantly lower as a result of the smaller California apple crop and an increase in the LIFO reserve of $634,000. Net working capital increased from $3,775,000 as of June 30, 1995 to $4,428,000 as of March 31, 1996. This increase was predominantly a result of the net earnings for the period. The increase in net working capital of $991,000 from the March 31, 1995 balance of $3,437,000, is a result of the decrease in borrowings under the line of credit. Accounts receivable were higher as a result of the increased sales and extended payment terms. The Company's liquid resources are provided by both external and internal sources. The Company's largest external source is a revolving line of credit provided by a bank at the Bank's prime rate. The Company's credit limit of $3,500,000 ($4,000,000 as of June 30, 1995 and March 31, 1995) is secured by inventory and accounts receivable. As of March 31, 1996, the Company had $2,025,000 of available funds under this revolving line of credit. This compares with $1,075,000 of available funds (on a $4,000,000 limit) as of March 31, 1995. As of March 31, 1996, the Company was in compliance with all of the covenants and restrictions related to its outstanding debt. The most significant source of internal liquidity is the Company's net working capital. One potential source of long term liquidity, not currently being considered, is the sale of the idle production facility. This facility is being leased on a short-term basis except for a small area occupied by Product Development. -2- The Company has established a capital expenditure budget of approximately $537,000 for the 1995-1996 fiscal year. Through March 31, 1996, the Company has expended $199,000 of this budget. We anticipate the balance will be expended during the fourth quarter of fiscal 1996. The Company anticipates financing these assets through internally generated funds. The capital expenditure budget will be used to refurbish existing equipment. Results of Operations Quarter Net sales increased $2,522,000 or 56% in the third quarter of fiscal 1996. Of the net sales for the quarter ended March 31, 1996, 22% came from a single customer whom we anticipate will not be ordering at such a high level in the fourth quarter. Although the sales increase was primarily a function of higher volume, we also experienced higher prices as a result of the apple shortage. Other revenue increased $157,000 or 187% compared to the same quarter last year, primarily as a result of the receipt of reimbursement from the State of California for expenses previously incurred by the Company to remove two under- ground storage tanks and monitor the surrounding ground water. This revenue will be non-recurring. Rental income also increased $25,000. Cost of sales as a percentage of net sales decreased from 102% in 1995 to 90% in 1996. LIFO materially affected the comparative results for the quarters. In 1996 LIFO resulted in a charge against earnings of $384,000 while in 1995 LIFO increased earnings by $25,000. Higher apple prices are the predominant reason for the current years LIFO charge against earnings. The Company anticipates a smaller unfavorable LIFO impact on earnings during the fourth quarter. Selling, general and administrative expenses increased $96,000 or 19% compared to the same quarter last year. The increase was a result of hiring a new National Sales Manager, increased professional fees and other expenses. Interest expense decreased $37,000 as a result of lower borrowings on the line of credit during the third quarter of 1996 . -3- Year-To-Date Net sales increased $3,599,000 or 22% during the nine months ended March 31, 1996 compared to the same period last year. Of this sales increase, 85% was a result of volume and 15% price. Of the net sales for the nine months ended March 31, 1996, one customer accounted for 12%. Other revenue increased $349,000 primarily from the refund of the reserve related to amounts owed to the State of California of $110,000, the receipt of Superfund monies from the State of California of $132,000 and increased rental income. The first two of these items are non-recurring. Cost of sales as a percentage of net sales was 90% for both the nine month period ended March 31, 1995 and 1996. As discussed above, LIFO had a significant effect on cost of sales for the current period. During the nine months ended March 31, 1996, the Company incurred a LIFO charge against earnings of $634,000. During the comparative period ending March 31, 1995, LIFO increased earnings by $278,000. Although our processed tonnage is down slightly as a result of the smaller apple crop, our factory overhead has decreased proportionately. Selling, general and administrative expenses decreased $108,000 or 7% during the nine months ended March 1996. This decrease is a result of numerous factors, including: the effects of the downsizing, lower legal fees as a result of settlement of litigation(in the prior fiscal year), decreased expenses related to the SAR plan and other miscellaneous expense reductions. Interest expense decreased $22,000 between comparative periods as a result of lower average borrowing on the line of credit. -4- PART II -- OTHER INFORMATION Item 1. Legal Proceedings There are no legal proceedings pending. Item 2. Changes in Securities The Company's Line of Credit agreement (dated November 1, 1995) with its Bank, includes a covenant which prohibits the declaring or paying of any dividend or distribution in either cash, stock or any other property on the Company's stock now or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire shares of any class of the Company's stock now or hereafter outstanding. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the period covered by this report. Item 5. Other Information Confoco Representation Agreement Effective July 1, 1996, the representation agreement with Confoco, Inc., for the sale of low moisture banana and pumpkin flakes will terminate. Confoco, Inc., has decided to consolidate the sales and marketing of its products internally. From July 1, 1995 through March 31, 1996 the Company recorded sales of $1,974,000 of Confoco products with a gross profit of $296,000. The Company estimates its sales of Confoco products for the entire 1996 Fiscal Year to be approximately $2,500,000 with $375,000 of related gross profit. For the 1995 Fiscal Year the Company recorded sales of $3,452,000 of Confoco products with a gross profit of $532,000. The Company intends to put significant effort into replacing these lost sales. However, there is no assurance that such sales can be replaced, or if they can be replaced, the same gross profit will be realized. If these sales and related gross profit are not replaced, the resulting decline will have a material negative impact on the Company's earnings. Under the Company's agreement with Confoco, for two years from the date of termination the Company is prohibited from distributing in the United States, Canada and Mexico, banana products similar to those currently being sold. Leased Properties The Company recently finalized a lease with Fantastic Foods for the balance of Plant #1( Idle Production Facility) for a term of two years. Combined with the other tenants, the Company is currently leasing properties at Plant #1 and #2 with annualized gross revenues of approximately $500,000. The tenants at these locations include Fantastic Foods, Inc., Benziger Family Winery, P&L Specialties and a few other smaller companies. New President & CEO Effective May 1, 1996, the Company has appointed Gary L. Hess as President & CEO. Mr. Hess was formerly Senior Vice President of Dole Food Company North America. He succeeds Donal Sugrue who will be retiring. Mr. Sugrue will continue as a consultant to the Company through the end of the fiscal year. He will also continue to serve as a member of the Board of Directors. Item 6. Exhibits & Reports on Form 8-K (a) Exhibits - (27.) Financial Data Schedule (by electronic filing only) (b) Reports on Form 8-K - none VACU-DRY COMPANY CONDENSED STATEMENT OF EARNINGS (UNAUDITED) Nine Months Nine Months Three MonthsThree Months Ended Ended Ended Ended 3/31/96 3/31/95 3/31/96 3/31/95 REVENUES: Net sales $20,304,000 $16,705,000 $7,053,000 $4,531,000 Other 584,000 235,000 241,000 84,000 ___________ ___________ __________ __________ Total revenue $20,888,000 $16,940,000 $7,294,000 $4,615,000 COST & EXPENSES: Cost of sales 18,306,000 14,984,000 6,379,000 4,629,000 Selling, general & administrative 1,521,000 1,629,000 596,000 500,000 Interest 248,000 270,000 79,000 116,000 ___________ ___________ __________ __________ Total cost & expenses $20,075,000 $16,883,000 $7,054,000 $5,245,000 EARNINGS(LOSS) BEFORE INCOME TAXES 813,000 57,000 240,000 (630,000) PROVISION(BENEFIT) FOR INCOME TAXES 331,000 20,000 96,000 (255,000) ________ ________ ________ ________ NET (LOSS) EARNINGS $482,000 $ 37,000 $144,000 $(375,000) EARNINGS (LOSS) PER COMMON SHARE $.28 $.02 $.08 $(.22) AVERAGE COMMON SHARES OUTSTANDING 1,702,091 1,701,510 1,706,289 1,702,300 See notes to interim financial statements
VACU-DRY COMPANY Balance Sheets (Unaudited) (Dollars in thousands) CURRENT ASSETS: 3/31/96 3/31/95 6/30/95 CURRENT LIABILITIES: 3/31/96 3/31/95 6/30/95 Cash $271 $195 $187 Borrowings under line of credit $1,475 $2,925 $2,351 Accounts receivable 2,744 1,489 1,679 Current maturities of L/T debt 415 475 480 Other receivable 18 235 155 Accounts payable 1,591 1,417 393 Inventories 5,995 7,166 5,414 Accrued p/r & related 644 677 524 Prepaid expenses 152 140 176 Accrued expenses 144 351 391 Current deferred taxes 303 451 303 Deferred factory overhead 600 394 -0- _______ _______ ______ Total current assets $ 9,483 $ 9,676 $7,914 Income taxes payable 186 -0- -0- _____ ______ _____ Total current liabilities $5,055 $6,239 $4,139 Net property, plant & equipment 6,919 7,632 7,421 LONG-TERM DEBT - Net of current maturities 1,732 2,229 2,105 DEFERRED INCOME TAXES 905 810 912 SHAREHOLDERS' EQUITY: Capital stock 3,985 3,945 3,936 Retained earnings 4,725 4,085 4,243 Total shareholders' equity 8,710 8,030 8,179 _______ _______ _______ Total liabilities and ______ _______ _______ Total Assets $16,402 $17,308 $15,335 shareholders' equity $16,402 $17,308 $15,335
See notes to interim financial statements VACU-DRY COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995 CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 Net earnings $482,000 $ 37,000 ________ ________ Adjustments to reconcile net earnings to net cash provided by operating activities - Refund of reserve related to debt owing to the State of California (110,000) -0- Depreciation expense 701,000 641,000 Changes in certain assets & liabilities - (Increase) in receivables (928,000) (50,000) (Increase) in inventories (581,000) (2,389,000) Decrease (increase) in prepaid assets 24,000 (36,000) Increase in accounts payable 1,198,000 702,000 (Decrease) in accrued expenses (247,000) (888,000) Increase in acc p/r & related liab. 120,000 81,000 Increase in deferred overhead 600,000 394,000 Increase in income taxes payable 186,000 -0- Increase (decrease) in deferred taxes (7,000) 51,000 ________ __________ Total adjustments 956,000 (1,494,000) ________ __________ Net cash provided by (used for) operating activities 1,438,000 (1,457,000) __________ __________ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (199,000) (813,000) _________ _________ Net cash (used for) investing activities (199,000) (813,000) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Additional borrowings on line of credit 8,736,000 9,688,000 Payments on line of credit (9,612,000) (7,043,000) Quarterly dividend of $0.05 per share -0- (255,000) Employee purchase of Company stock 49,000 81,000 Stock buy back of Company shares -0- (69,000) Principal payments of long-term debt (328,000) (356,000) _________ _________ Net cash provided by (used for) financing activities (1,155,000) 2,046,000 _________ _________ NET INCREASE (DECREASE) IN CASH 84,000 (224,000) CASH AT THE BEGINNING OF THE YEAR 187,000 419,000 ________ ________ TOTAL CASH AT THE END OF THE PERIOD $271,000 $195,000 See notes to interim financial statements VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS NINE MONTHS ENDED MARCH 31, 1996 Note 1 - The Interim Financial Statements herein presented for the quarter and nine months ended March 31, 1996, reflect all adjustments which are in the opinion of management, necessary to a fair presentation of the financial position and the results of operations for the periods then ended. The statements are unaudited and are not necessarily indicative of results for the full year. Note 2 - Inventories - Inventories are stated at the lower of cost, using the last-in, first-out (LIFO) method or market. The excess of current cost of the inventory over LIFO cost was $1,968,000 at March 31, 1996 and $1,334,000 at June 30, 1995. Inventories at March 31, 1996 and June 30, 1995, consisted of the following: 3/31/96 6/30/95 Finished goods $5,043,000 $4,926,000 Work in progress 264,000 239,000 Raw materials & containers 688,000 249,000 --------- --------- $5,995,000 $5,414,000 Note 3 - Borrowings Under Line of Credit - The Company renewed its line of credit with the bank on November 1, 1995. The maximum amount available under the line of credit was reduced from $4,000,000 to $3,500,000. The interest rate and security were not changed. Note 4 - Statement of Cash Flows - Interest and income tax payments reflected in the Statement of Cash Flows were as follows: 1996 1995 Interest paid $252,000 $281,000 Income taxes paid $130,000 $158,000 Note 5 - Income Taxes - The effective income tax rate for 1996 is 41%, which compares to 35% for 1995. There were no federal or state tax operating loss carryforwards for book or tax purposes at March 31, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VACU-DRY COMPANY (Gary L. Hess) Date: May 14, 1996 ____________________________ Gary L. Hess, President (Tom Eakin) Date: May 14, 1996 ____________________________ Tom Eakin, VP, Finance EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10Q FOR THE QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMTENTS. 9-MOS JUN-30-1995 MAR-31-1996 271,000 0 2,788,000 44,000 5,995,000 9,483,000 17,005,000 10,086,000 16,402,000 5,055,000 0 0 0 3,985,000 4,725,000 16,402,000 20,304,000 20,888,000 18,306,000 18,306,000 0 0 248,000 813,000 331,000 482,000 0 0 0 482,000 .28 .28 NET OF LIFO RESERVE OF $1,968,000 RETAINED EARNINGS
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