-----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, LHrAtBUjp19j3LFHFZHFLT1zRSIougz49IO7Hqso0USa0PCxaC7C6gC8zhLyg8KN 1oxJOD5F2heGbXXdex14Jg== 0000102588-97-000008.txt : 19970520 0000102588-97-000008.hdr.sgml : 19970520 ACCESSION NUMBER: 0000102588-97-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97608065 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, 1997 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: ____ NO:__X__ As of May 12, 1997, there were 1,640,845 shares of common stock, no par value, outstanding. Part 1 - FINANCIAL INFORMATION Item 1. Financial Statements VACU-DRY COMPANY CONDENSED STATEMENT OF EARNINGS (UNAUDITED) Nine Months Nine Months Three Months Three Months 3/31/97 3/31/96 3/31/97 3/31/96 REVENUES: Net sales $18,233,000 $20,304,000 $5,894,000 $7,053,000 Other 531,000 584,000 176,000 241,000 ___________ ___________ __________ __________ Total revenue $18,764,000 $20,888,000 $6,070,000 $7,294,000 COST & EXPENSES: Cost of sales 16,208,000 18,306,000 5,392,000 6,379,000 Selling, general & administrative 1,625,000 1,521,000 545,000 596,000 Interest 175,000 248,000 82,000 79,000 ___________ ___________ __________ __________ Total cost & expenses $18,008,000 $20,075,000 $6,019,000 $7,054,000 EARNINGS BEFORE INCOME TAXES 756,000 813,000 51,000 240,000 PROVISION FOR INCOME TAXES 306,000 331,000 24,000 96,000 ________ ________ ________ ________ NET EARNINGS $450,000 $482,000 $27,000 $144,000 ======== ======== ======= ======== EARNINGS PER COMMON SHARE $.27 $.28 $.02 $.08 ==== ==== ==== ==== WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENTS 1,650,001 1,702,091 1,638,739 1,706,289 See notes to interim financial statements
VACU-DRY COMPANY Balance Sheets (Unaudited) (Dollars in thousands) CURRENT ASSETS: 3/31/97 3/31/966/30/96 CURRENT LIABILITIES: 3/31/97 3/31/96 6/30/96 Cash $250 $271 $214 Borrowings under line of credit $3,428 $1,475 $826 Accounts receivable 2,306 2,744 2,684 Current maturities of long-term debt 576 415 415 Other receivable 27 18 -0- Accounts payable 1,461 1,591 678 Inventories 7,692 5,395 3,430 Accrued payroll & related liabilities 742 644 476 Prepaid expenses 16 152 116 Accrued expenses 123 144 106 Current deferred taxes 225 303 225 Income taxes payable -0- 186 32 _______ _______ ______ ______ ______ ______ Total current assets $10,516 $ 8,883 $6,669 Total current liabilities $6,330 $4,455 $2,533 Net property, plant & LONG-TERM DEBT - Net of equipment 7,337 6,919 6,918 current maturities 1,927 1,732 1,628 DEFERRED INCOME TAXES 843 905 748 SHAREHOLDERS' EQUITY; Capital stock 3,626 3,985 4,001 Retained earnings 5,127 4,725 4,677 _____ _____ _____ Total shareholders' equity 8,753 8,710 8,678 _______ _______ _______ Total liabilities and _______ _______ ______ Total Asset $17,853 $15,802 $13,587 shareholders' equity $17,853 $15,802 $13,587 ======= ======= ======= ======= ======= ======= See notes to interim financial statements
VACU-DRY COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996 CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 Net earnings $450,000 $482,000 ________ ________ Adjustments to reconcile net earnings to net cash provided by(used for)operating activities - Refund of reserve related to debt owing to the State of California -0- (110,000) Depreciation expense 787,000 701,000 Deferred income tax provision 95,000 (7,000) Changes in certain assets & liabilities (Increase) decrease in receivables 351,000 (928,000) (Increase) decrease in inventories (4,262,000) 19,000 Decrease in prepaid assets 100,000 24,000 Increase in accounts payable 783,000 1,198,000 (Decrease) increase in accrued expenses 17,000 (247,000) Increase in accrued payroll & related liab 266,000 120,000 Increase (decrease) in income taxes payable (32,000) 186,000 __________ __________ Total adjustments (1,895,000) 956,000 ___________ __________ Net cash provided by operating activities (1,445,000) 1,438,000 __________ __________ CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (401,000) (199,000) ___________ _________ Net cash (used for) investing activities (401,000) (199,000) CASH FLOWS FROM FINANCING ACTIVITIES: Additional borrowings under the line of credit 6,483,000 8,736,000 Payments on line of credit (3,881,000) (9,612,000) Employee purchase of Company stock 32,000 49,000 Repurchase of common stock (407,000) -0- Principal payments of long-term debt (345,000) (328,000) _________ _________ Net cash used by financing activities 1,882,000 (1,155,000) _________ _________ NET INCREASE (DECREASE) IN CASH 36,000 84,000 CASH AT THE BEGINNING OF THE YEAR 214,000 187,000 ________ ________ TOTAL CASH AT THE END OF THE PERIOD $250,000 $271,000 ======== ======== See notes to interim financial statements VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS NINE MONTHS ENDED MARCH 31, 1997 Note 1 - The accompanying 1997 and 1996 unaudited interim financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations although the Company believes these disclosures are adequate to make the information not misleading. In the opinion of management, all adjustments necessary for a fair presentation for the period presented have been reflected and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements and notes thereto for each of the three years in the period ended June 30, 1996. The results of operations for the nine month period ended March 31, 1997 are not indicative of the results that may be achieved for the entire year ending June 30, 1997. Reclassifications - Certain 1996 amounts were reclassified to conform to the 1997 presentation. Note 2 - Inventories - Inventories are stated at the lower of cost, using the last-in, first-out (LIFO) method or market. Inventories at March 31, 1997 and June 30, 1996, consisted of the following: 3/31/97 6/30/96 ------- ------- Finished goods $5,845,000 $2,757,000 Work in progress 473,000 233,000 Raw materials, & containers 1,374,000 440,000 __________ __________ $7,692,000 $3,430,000 ========== ========== Note 3 - Statement of Cash Flows - Interest and income tax payments reflected in the Consolidated Statement of Cash Flows were as follows: 1997 1996 Interest paid $159,000 $252,000 Income taxes paid $376,000 $130,000 Supplemental disclosure of cash flow information: 1997 1996 Non-cash investing and financing activities: Liabilities assumed in the acquisition of equipment $805,000 $ -0- Note 4 - Income Taxes - The effective income tax rate for 1997 is 40%, which compares to 41% for 1996 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISK AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN OF THE FACTORS SET FORTH IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1996. The financial statements herein presented for the quarters ended March 31, 1997 and 1996, 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. The 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. This year, as a result of certain processing efficiencies and a change in our sales mix (resulting in larger carryover inventory balances), our inventories will be at their highest level as of the current quarter. At this time we are anticipating that our inventory balances at the end of the current fiscal year will be higher than last year as result of these changes. The net working capital as of March 31, 1997, 1996 and June 30, 1996 are very comparable. The largest increase in working capital is a result of the higher inventory balance which has been funded by the increase in the borrowings under the line of credit. The Company increased its long-term debt by $805,000 as of the end of December 1996. The Company's liquidity resources are obtained from 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 has a revolving line of credit limit of $3,500,000 secured by inventory and accounts receivable. As of March 31, 1997, the Company had $72,000 of available funds on the line of credit. As of March 31, 1996 the Company had $2,025,000 of available funds under the line of credit. The increase in the inventory balance between March 31, 1997 and 1996, resulted in the decrease in the available funds under the line of credit. We are estimating that this will be the lowest level of available funds during the current fiscal year. As of March 31, 1997, 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 additional possible source of long term liquidity could be the sale of the idle production facility, which is presently being leased to third parties. Although the Company is not relying on or pursuing the sale of this facility as a source of liquidity, the Company's short and long-term liquidity would materially increase upon such a sale. In regard to this facility, there is some indication that in the latter part of calendar 1997 certain leases may not be renewed. Advance planning to locate new tenants is already underway. The Company continues to lease a portion of its operating facility and is in negotiations with the primary tenant to increase its square footage. The Company has established a capital expenditure budget of approximately $1,813,000 for the fifteen month period April 1, 1996 through June 30, 1997. To date, capital expenditures of $1,477,000 have been made. These funds are being primarily used to purchase new and refurbish existing equipment. The Company anticipates financing these assets through internally generated funds and through the use of debt financing. During the current fiscal year, the Company borrowed $805,000 of long-term debt to finance a portion of the $1,813,000 capital budget. The note for $805,000 is dated December 31, 1996 with a term of 60 months, at a variable interest rate equal to the average weekly yield of 30 day Commercial Paper, plus 2.10% and is secured by specific machinery and equipment. During the first quarter ended September 30, 1996, the Company repurchased 80,000 shares of common stock at a cost of $407,000. This repurchase was to offset the dilution caused by stock issuances under the Company's stock purchase plan and under outstanding options. The Company received approval from the Bank prior to the repurchase of 80,000 shares of common stock during the current fiscal year. The Company has no present intentions to repurchase more stock in the current fiscal year. Results of Operations Quarter Net sales decreased $1,159,000 or 16% in the third quarter of fiscal 1997 as compared to the third quarter of fiscal 1996. In the third quarter of fiscal 1996 sales increased $2,522,000 or 56%, 22% of this increase was a result of increased sales from a single customer. This increase in sales did not continue in the fourth quarter of fiscal 1996 nor did this volume to one customer recur in the third quarter of fiscal 1997. The loss of the Confoco business only accounted for $252,000 of lost net sales between quarters. Most of the adverse sales impact of the lost Confoco business incurred in the first two quarters of fiscal 1997. Other revenue decreased $65,000 as a result of a non-recurring refund in 1996 of $132,000 from the State of California Superfund for the clean-up of underground storage tanks. Cost of sales for the quarter ended March 31, 1997 increased from 90.4% to 91.5% of net sales. The overall margins for the third quarter of fiscal 1997 were slightly lower than the third quarter of fiscal 1996 as a result of decreases in overall prices due to the change in the sales mix. Overall prices were lower in fiscal 1997, but the margins between years remained comparable as a result of the higher overhead absorption due to the increased production in the third quarter of fiscal 1997. Selling, general and administrative expenses decreased $51,000 or 9% in the third quarter of fiscal 1997. This change is a composite of a decrease in expenses as a result of not incurring the costs related to the Storm Damage in fiscal 1996 and increases in travel expenses and consulting fees related to the strategic planning process which was incurred in fiscal 1997. Interest expense was very comparable between quarters. Interest expense for the fourth quarter should be higher than fiscal 1996 as a result of the long- term debt borrowing of $805,000 and increased borrowings on the line of credit as a result of the higher inventory levels. Year-to Date Net sales decreased $2,071,000 or 10% in the nine months ended March 31, 1997. The loss of the sales of Confoco products accounted for $1,974,000 of this net sales decline. Other income decreased $53,000 during the comparative nine month period as a result of the net change between periods of non-recurring income. Cost of sales as a percent of net sales decreased from 90% as of March 31, 1996 to 88.9% as of March 31, 1997. The increase in the comparative margins is a result of the increased production volume and the related overhead absorption during the nine months ended March 31, 1997. Selling, general and administrative expenses increased $104,000 or 7% in the nine months ended March 31, 1997. This increase is a result of higher expenses in the following areas: consultants for our strategic plan, travel expenses and increased salaries(new regional sales manager). Interest expense decreased $73,000 as a result of our lower average borrowings on the line of credit during the nine months ended March 31, 1997. Interest expense for the fourth quarter should increase as a result of the long-term debt borrowing of $805,000 and increased borrowings on the line of credit as a result of the higher inventory levels. PART II OTHER INFORMATION Item 1. Legal Proceedings There are no material legal proceedings pending. Item 2. Changes in Securities The Company's revolving line of credit agreement with its Bank dated( November 1, 1996), 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, without the prior approval by the Bank. The Company received approval from the Bank prior to the repurchase of 80,000 shares of common stock during the current fiscal year. 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 terminated. Confoco, Inc., has consolidated 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 $294,000. Under the Company's agreement with Confoco, for the 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. Item 6. Exhibits & Reports on Form 8-K a. Exhibits - none (27) Financial Data Schedule (by electronic filing only) b. Reports on Form 8-K - none 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 Date: May 13, 1997 (Gary L. Hess) _______________________ Gary L. Hess, President Date: May 13, 1997 (Tom Eakin) _______________________ Tom Eakin, VP, Finance EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10Q FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMTENTS. 9-MOS JUN-30-1997 MAR-31-1997 250,000 0 2,369,000 63,000 7,692,000 10,516,000 18,267,000 10,930,000 17,853,000 6,330,000 0 0 0 3,626,000 5,127,000 17,853,000 18,233,000 18,764,000 16,208,000 16,208,000 0 0 175,000 756,000 306,000 450,000 0 0 0 450,000 .27 .27 NET OF LIFO RESERVE OF $2,113,000 RETAINED EARNINGS
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