-----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, T2uOXKUeKwNXKirvrXgpSRLgYdvgoePd2m5JZ7n5JZc6q7I1CiEuVGuWUM/Vn0nj 9IGFDRwx2sy+PWcwQaGlIQ== 0000102588-97-000016.txt : 19971117 0000102588-97-000016.hdr.sgml : 19971117 ACCESSION NUMBER: 0000102588-97-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-01912 FILM NUMBER: 97721853 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 REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 1997 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 September 30, 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: __X__ NO:____ As of November 12, 1997, there were 1,644,538 shares of common stock, no par value, outstanding. 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, 1997. The financial statements herein presented for the quarters ended September 30, 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, the Company's liquid resources normally 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. Normally during the first quarter of the fiscal year the inventory levels increase as a result of the beginning of the production season. During the current fiscal year, the Company is changing its normal production period. The Company anticipates this will increase comparative inventories during the first six months of fiscal 1998. The Company has arranged with its Bank to finance this increase if needed with an increase in the revolving line of credit. As a result of this increase in production volume in the first quarter, inventories were significantly higher than a year ago. This difference was partially due to the fact the inventory level at September 30, 1996, was one of the lowest levels in years. Net working capital remained relatively constant at $4,332,000 as compared to the June 30, 1997 level of $4,232,000. The increase in the accounts receivable and inventory balances were funded by the increase in accounts payable. With the increased profits and reduced capital expenditures, the Company's excess cash was used to paydown $486,000 on the line of credit. 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 most significant source of internal liquidity is the Company's net working capital. The Company has a revolving line of credit limit of $3,500,000 secured by inventory and accounts receivable. As of September 30, 1997, the Company had $2,632,000 of available funds under the line of credit. As of September 30, 1996 the Company did not have any borrowings outstanding on the line of credit. As of September 30, 1997, the Company was in compliance with all of the covenants and restrictions related to its outstanding debt. The Company's loan agreement with its bank includes a negative covenant regarding the declaring or paying of a dividend in cash, stock or any other property without the prior approval by the bank. The Company has established a capital expenditure budget of approximately $532,000 for the 1997-1998 fiscal year. These funds will primarily be 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. Until recently, the Company has been successful in leasing all of its idle production facility other than a portion occupied by Product Development. A major tenant, that accounted for 38 percent of rental income in fiscal 1997, has informed the Company, they will not renew their lease which expires in November of 1997. The Company is actively pursuing a replacement tenant without the loss of income. The Company will lose $17,000 per month in lease revenue, until a replacement tenant is found. The Company continues to lease a portion of its operating facility and is in negotiations with the primary tenant to increase their square footage. The Company anticipates that profitable operations and debt financing will satisfy the Company's future liquidity and capital needs. However, the Company will utilize future private or public financing if interest rates rise or if the Company's growth prospects require additional funds for operations. Results of Operations Net sales increased $165,000 or 2.7% in the first quarter of fiscal 1998. This increase was all a result of higher unit sales. Average unit prices dropped slightly. Other revenue increased slightly from last year. Other revenue is comprised primarily of net rental income. If a replacement tenant is not found for the lease expiration described above, other revenue will be reduced by $17,000 per month beginning in November 1997. Cost of sales as a percent of net sales decreased from 92% as of September 1996 to 90% as of September 1997. The decrease is a result of lower raw material costs. In addition the comparative net overhead expenses between quarters was lower in the current year. Selling, general and administrative expenses increased $72,000 or 14.6% in the first quarter. This change is a result of increased travel, brokerage and professional fees. Interest expense increased $21,000 as a result higher average short term borrowings and increased average long-term debt. The effective income tax rate for the first quarter ended September 30, 1997 of 33%, is comparable to the effective tax rate for the year ended June 30, 1997. As of June 30, 1997, the Company has state tax credit carryforwards of $99,000 to offset future taxable income. -3- PART II OTHER INFORMATION Item 1. Legal Proceedings There are no 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. 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 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 STATEMENTS OF EARNINGS (UNAUDITED) Three Months Three Months Ended Ended 9/30/97 9/30/96 REVENUES: Net sales $6,208,000 $6,043,000 Other 153,000 148,000 ---------- ---------- Total revenue $6,361,000 $6,191,000 ---------- --------- COST & EXPENSES Cost of sales 5,588,000 5,584,000 Selling, general & administration 566,000 494,000 Interest 65,000 44,000 --------- --------- $6,219,000 $6,122,000 --------- --------- EARNINGS BEFORE INCOME TAXES 142,000 69,000 PROVISION FOR INCOME TAXES 47,000 27,000 ------- ------ NET EARNINGS $95,000 $42,000 ======= ======= EARNINGS PER COMMON SHARE $.06 $.03 ==== ==== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 1,642,776 1,675,120 ========= ========= See notes to interim financial statements
VACU-DRY COMPANY Balance Sheets (Unaudited) (Dollars in thousands) CURRENT ASSETS: 9/30/97 9/30/96 6/30/97 CURRENT LIABILITIES: 9/30/97 9/30/96 6/30/97 ------- ------- ------- ------- ------- ------- Cash $232 $515 $283 Borrowings under line of credit $868 $ -0- $1,354 Accounts receivable 2,567 1,964 1,567 Current maturities of long-term debt 595 415 557 Other receivable 70 16 70 Accounts payable 2,886 2,071 490 Inventories 6,284 3,652 5,055 Accrued payroll & related liabilities 581 640 539 Prepaid expenses 92 96 131 Accrued expenses 175 72 173 Current deferred taxes 239 225 239 Income taxes payable 47 8 -0- ------- ------ ------ ----- ------ ------ Total current assets $9,484 $6,468 $7,345 Total current liabilities $5,152 $3,206 $3,113 ------ ------ ------ Net property, plant & LONG-TERM DEBT - Net of equipment 7,055 7,335 7,231 current maturities 1,631 1,525 1,808 ----- ----- ----- DEFERRED INCOME TAXES 826 748 826 --- --- --- SHAREHOLDERS' EQUITY: Capital stock 3,641 3,605 3,635 Retained earnings 5,289 4,719 5,194 ----- ----- ----- Total shareholders' equity 8,930 8,324 8,829 _______ _______ _______ Total liabilities and ______ _______ _______ Total Assets $16,539 $13,803 $14,576 shareholders' equity $16,539 $13,803 $14,576 ======= ======= ======= ======= ======= ======= See notes to interim financial statements
VACU-DRY COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 ---- ---- Net earnings $95,000 $42,000 ------- ------- Adjustments to reconcile net earnings to net cash provided by operating activities - Depreciation expense 269,000 262,000 Changes in certain assets & liabilities Receivables (1,000,000) 704,000 Inventories (1,229,000) (222,000) Prepaid expenses 39,000 20,000 Accounts payable 2,396,000 1,393,000 Accrued expenses 2,000 (34,000) Accrued payroll & related liabilities 42,000 164,000 Income taxes payable 47,000 (24,000) --------- --------- Total adjustments 566,000 2,263,000 --------- --------- Net cash provided by operating activities 661,000 2,305,000 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (93,000) (679,000) --------- --------- Net cash (used for) investing activities (93,000) (679,000) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Additional borrowings under the line of credit 2,221,000 253,000 Payments on line of credit (2,707,000) (1,079,000) Issuance of common stock 6,000 11,000 Repurchase of common stock -0- (407,000) Principal payments of long-term debt (139,000) (103,000) --------- ---------- Net cash (used for)financing activities (619,000) (1,325,000) -------- ---------- NET INCREASE (DECREASE)IN CASH (51,000) 301,000 CASH AT THE BEGINNING OF THE YEAR 283,000 214,000 -------- --------- TOTAL CASH AT THE END OF THE PERIOD $232,000 $515,000 ======== ======== See notes to interim financial statements VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS THREE MONTHS ENDED SEPTEMBER 30, 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, 1997. The results of operations for the three month period ended September 30, 1997 are not indicative of the results that may be achieved for the entire year ending June 30, 1998. Reclassification - 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. The excess of current cost of the inventory over LIFO cost was $2,180,000 at September 30, 1997 and $2,180,000 at June 30, 1997. Inventories at September 30, 1997 and June 30, 1997, consisted of the following: 9/30/97 6/30/97 Finished goods $4,429,000 $4,208,000 Work in progress 404,000 291,000 Raw materials & containers 1,451,000 556,000 ---------- ---------- $6,284,000 $5,055,000 ========== ========== 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 $71,000 $45,000 Income taxes paid $83,000 $53,000 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: November 14, 1997 /s/ Gary L. Hess ----------------- ----------------------- Gary L. Hess, President Date: November 14, 1997 /s/ Tom Eakin ----------------- ----------------------- Tom Eakin, VP, Finance EX-27 2 FDS FOR THE QUARTER ENDED SEPTEMBER 30, 1997
5 (This schedule contains summary financial information extracted from the 10Q for the quarter ended September 30, 1997 and is qualified in its entirety by reference to such financial statements) 3-MOS JUN-30-1998 JUL-1-1997 Sep-30-1997 232,000 0 2,631,000 63,000 6,284,000 9,484,000 18,033,000 10,978,000 16,539,000 5,152,000 0 0 0 3,641,000 5,289,000 16,539,000 6,208,000 6,361,000 5,588,000 5,588,000 0 0 65,000 142,000 47,000 95,000 0 0 0 95,000 .06 .06
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