-----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, LrUvhC0c6Lz95CI4qj6FfCVIh0QosDN+TMnEWaupLfNivdXATr1cWTz47PAgFBdw kI3LSDLWYYWd8MSgEhPGjQ== 0000102588-98-000002.txt : 19980219 0000102588-98-000002.hdr.sgml : 19980219 ACCESSION NUMBER: 0000102588-98-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980218 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: 98544107 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 FOR THE QUARTER AND SIX MONTHS ENDED 12/31/97 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 December 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 Sec tion 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 February 13, 1998, there were 1,507,374 shares of common stock, no par value, outstanding. Part 1 - FINANCIAL INFORMATION Item 1. Financial Statements VACU-DRY COMPANY CONDENSED STATEMENT OF EARNINGS (UNAUDITED) Six Months Six Months Three Months Three Months Ended Ended Ended Ended 12/31/97 12/31/96 12/31/97 12/31/96 REVENUES: Net sales $13,689,000 $12,339,000 $7,481,000 $6,296,000 Other 225,000 355,000 77,000 207,000 ----------- ----------- ---------- ---------- Total revenue $13,914,000 $12,694,000 $7,558,000 $6,503,000 ----------- ----------- ---------- ---------- COST & EXPENSES: Cost of sales 11,457,000 10,816,000 5,870,000 5,235,000 Selling, general & administrative 1,246,000 1,080,000 685,000 586,000 Interest 124,000 93,000 58,000 49,000 ----------- ----------- ---------- ---------- Total cost & expenses $12,827,000 $11,989,000 $6,613,000 $5,870,000 ----------- ----------- ---------- ---------- EARNINGS BEFORE INCOME TAXES 1,087,000 705,000 945,000 636,000 PROVISION FOR INCOME TAXES 370,000 282,000 323,000 254,000 -------- -------- -------- -------- NET EARNINGS $717,000 $423,000 $622,000 $382,000 ======== ======== ======== ======== EARNINGS PER COMMON SHARE Basic $.44 $.26 $.38 $.23 ==== ==== ==== ==== Diluted $.43 $.26 $.38 $.23 ==== ==== ==== ==== WEIGHTED AVERAGE COMMON SHARES AND EQUIVALENTS Basic 1,643,668 1,655,509 1,644,559 1,635,898 ========= ========= ========= ========= Diluted 1,648,390 1,655,509 1,652,776 1,635,898 ========= ========= ========= ========= See notes to interim financial statements
VACU-DRY COMPANY Balance Sheets (Unaudited) (Dollars in thousands) CURRENT ASSETS: 12/31/97 12/31/96 6/30/97 CURRENT LIABILITIES: 12/31/97 12/31/96 6/30/97 -------- -------- ------- -------- -------- ------- Cash $155 $178 $283 Borrowings under line of credit -0- -0- $1,354 Accounts receivable 2,722 1,670 1,567 Current maturities of long-term debt 595 576 557 Other receivable 70 124 70 Accounts payable 2,904 2,818 490 Inventories 8,170 6,208 5,055 Accrued payroll & related liabilities 719 659 539 Prepaid expenses 56 55 131 Accrued expenses 233 127 173 Current deferred taxes 240 225 239 Income taxes payable 256 209 -0- --- --- --- ------- ------- ------ Total current assets $11,413 $ 8,460 $7,345 Total current liabilities $4,707 $4,389 $3,113 ------ ------ ------ Borrowings under line of credit 1,694 -0- -0- Net property, plant & Long-term debt 1,492 2,065 1,808 ----- ----- ----- equipment 6,867 7,554 7,231 Total long-term debt-net of current 3,186 2,065 1,808 maturities ----- ----- ----- DEFERRED INCOME TAXES 826 843 826 --- --- --- SHAREHOLDERS' EQUITY; Capital stock 3,650 3,617 3,635 Retained earnings 5,911 5,100 5,194 ----- ----- ----- Total shareholders' equity 9,561 8,717 8,829 _______ _______ _______ Total liabilities and _______ _______ _______ Total Assets $18,280 $16,014 $14,576 shareholders' equity $18,280 $16,014 $14,576 ======= ======= ======= ======= ======= ======= See notes to interim financial statements
VACU-DRY COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 AND 1996 CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996 ---- ---- Net earnings $717,000 $423,000 -------- -------- Adjustments to reconcile net earnings to net cash provided by operating activities - Depreciation expense 541,000 525,000 Deferred income tax provision (1,000) 95,000 Changes in certain assets & liabilities (Increase)decrease in receivables (1,155,000) 890,000 (Increase) in inventories (3,115,000) (2,778,000) Decrease in prepaid assets 75,000 61,000 Increase in accounts payable 2,414,000 2,140,000 Increase in accrued expenses 60,000 21,000 Increase in accrued payroll & related liabilities 180,000 183,000 Increase in income taxes payable 256,000 181,000 ---------- ---------- Total adjustments (745,000) 1,318,000 ----------- ---------- Net cash (used for) provided by operating activities (28,000) 1,741,000 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (177,000) (1,165,000) ----------- --------- Net cash (used for)investing activities (177,000) (1,165,000) CASH FLOWS FROM FINANCING ACTIVITIES: Additional borrowings under the line of credit 5,070,000 2,227,000 Payments on line of credit (4,730,000) (3,053,000) Employee purchase of Company stock 15,000 23,000 Repurchase of common stock -0- (407,000) Proceeds from long-term debt -0- 805,000 Principal payments of long-term debt (278,000) (207,000) --------- --------- Net cash provided by (used for) financing activities 77,000 (612,000) --------- --------- NET (DECREASE) IN CASH (128,000) (36,000) CASH AT THE BEGINNING OF THE YEAR 283,000 214,000 -------- -------- TOTAL CASH AT THE END OF THE PERIOD $155,000 $178,000 ========= ======== See notes to interim financial statements VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED DECEMBER 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, 1997. The results of operations for the six month period ended December 31, 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. Inventories at December 31, 1997 and June 30, 1997, consisted of the following: 12/31/97 6/30/97 Finished goods $5,716,000 $4,208,000 Work in progress 519,000 291,000 Raw materials, & containers 1,935,000 556,000 ---------- ---------- $8,170,000 $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 $126,000 $91,000 Income taxes paid $114,000 $128,000 Note 4 - Revolving Line of Credit - The Company entered into a new revolving credit agreement with the Bank during the second quarter ended December 31, 1997, which calls for repayment terms of two years. Accordingly the balance owing to the Bank has been reclassified to long-term. VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED DECEMBER 31, 1997 Note 5 - Income Taxes - The effective income tax rate for the six month period ending December 31, 1997 is 34%, which is comparable to the effective tax rate for the year ended June 30, 1997. Note 6 - EPS Calculation The Company computes earnings per share in accordance with Statement of Financial Accounting Standards Number 128 " Earnings per Share". The following table provides the detail of the basic and diluted earnings per computation for the quarter and six months ended December 31, 1997. For the Quarter Ended 12/31/97 Income Shares Per Share (Numerator) (Denominator) Amount Net Earnings $ 622,000 Basic EPS Income available to common stockholders 622,000 1,644,559 $.38 Effective of Dilutive Options: Additional Shares due to Stock Option 8,217 Diluted EPS Income available to common stockholders plus dilutive options $622,000 1,652,776 $.38 ======== ========= ====
For the Six Month Ended 12/31/97 Income Shares Per Share (Numerator) (Denominator) Amount Net Earnings $717,000 Basic EPS Income available to common stockholders $717,000 1,643,668 $.44 Effective of Dilutive Options: Additional Shares due to Stock Option 4,722 Diluted EPS Income available to common stockholders plus dilutive options $717,000 1,648,390 $.43 ======== ========= ====
VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS SIX MONTHS ENDED DECEMBER 31, 1997 Note 7 - Subsequent Event - Subsequent to December 31, 1997, the Company repurchased 139,100 shares of the Company's common stock from two shareholders in privately negotiated transactions for $6.00 per share. The repurchase price was determined based upon the market price at or about the time of the negotiated transaction. Payment was made by delivery of the Company's subordinated, interest-only notes. The notes bear interest at 8-1/2% per annum payable monthly and are due in full in five years. Payment of principal and interest is subordinated to any of the Company's indebtedness to banks and other financial institutions. The shares were purchased for use in possible future acquisitions, for issuance pursuant to employee stock options and stock purchase plans and for other corporate purposes. While the Company may make additional purchases of its stock from time to time, it does not contemplate making any purchases of such shares in the public market. 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 December 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. 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. The increase in the inventory balance as of December 31, 1997 is a direct result of the change in the normal production period. The production period has been reduced and consequently the current year's inventory levels have increased on a comparative basis with last year. The net working capital as of December 31, 1997 increased by $2,635,000, from $4,071,000 as December 31, 1996 to $6,706,000 as of December 31, 1997. Of this increase, $1,694,000 was a result of the reclassification of the borrowings under the line of credit from current to long-term (See Note 4 to Financial Statements). The remaining increase was primarily a result of the improved earnings of $717,000. The increase in the accounts receivable balance as of December 31, 1997 of $1,052,000 was partially a result of the increased sales for the month of December of $529,000 and an increase in the days outstanding from 32 as of December 31, 1996 to 39 as of December 31, 1997. 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 increased the total limit of its revolving line of credit to $4.5 million in anticipation of higher short-term borrowing requirements as a direct result of the condensed production period and the related increase in the inventory levels. As of December 31, 1997, the Company had $2,806,000 of available borrowings on the line of credit. This compares to $3,500,000 of available funds as of December 31, 1996 on a total limit of $3,500,000. As of December 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. 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. As of January 1998 the Company signed a long-term lease for approximately one-half of the previously vacated portion of this facility. Until this remaining space is leased, the Company's rental income will be approximately $5,000 per month less than in the prior year. The Company is actively looking for a new long-term tenant for the balance of the available space. The Company continues to lease a portion of its operating facility and is in negotiations with the primary tenant to increase its square footage. By approximately April of 1998, the Company should find out if this increase in lease income is probable. The Company has increased its capital expenditure budget from $532,000 to $625,000 for the fiscal year ended June 30, 1998. For the six months ended December 31, 1997, the Company has spent $177,000 of this budget. These funds are being primarily used to purchase new and refurbish existing equipment. The Company anticipates financing these assets through internally generated funds. Subsequent to the end of the quarter ended December 31, 1997, the Company repurchased 139,100 shares of common stock at a cost of $834,600. See Note 7 to the Financial Statements. Results of Operations Quarter Net sales increased $1,185,000 or 19% in the second quarter of fiscal 1997. This increase was entirely from higher unit sales volume as the average sale price declined slightly. The largest increase was from low moisture sales, which increased $982,000. Other revenue decreased $130,000 as a result of a non-recurring contract cancellation charge in 1996 of $50,000 and reimbursement by a vendor for inventory charges of $35,000, also in 1996. In addition rental income decreased $6,000 from 1996 as a result of the loss of a major tenant during the quarter. As discussed above, the Company has secured a long-term tenant to replace approximately one-half of this vacated space. Cost of sales for the quarter ended December 31, 1997 decreased 4.7% from 83.2% to 78.5% of net sales. This decrease was primarily a result of increased production efficiencies in addition to lower raw material costs. Selling, general and administrative expenses increased $99,000 or 17% in the second quarter. This increase is a result of higher expenses in the following areas: strategic planning costs, travel and additional compensation. Interest expense increased $9,000 as a result of our increased average borrowings on the line of credit. Comparative interest expense for the third quarter may increase as a result of the higher inventory level and the related increase in borrowings on the line of credit. Year-to Date Net sales increased $1,350,000 or 11% for the six months ended December 31, 1997. This increase was entirely from higher unit sales volume as the average sale price declined slightly. The largest increase was from drum dried sales which increased $800,000 from last year. Last years drum dried sales were lower partially as a result of the mid-year startup of this new operation. Other revenue decreased $130,000 as a result of a non-recurring contract cancellation charge in 1996 of $50,000 and reimbursement by a vendor for inventory charges of $35,000, also in 1996. In addition rental income remained very comparable between periods. Cost of sales as a percent of net sales decreased from 87.7% as of December 31, 1996 to 83.7% as of December 31, 1997. Although the average sales price dropped slightly, the production efficiencies and the lower apple costs more than offset this decline and resulted in the reduction in cost of sales. Selling, general and administrative expenses increased $166,000 or 15% through the six months ended December 31, 1997. This increase is a result of higher expenses in the following areas: strategic planning and implementation costs, travel and additional compensation. Interest expense increase $31,000 as a result of our higher average borrowings on the line of credit. Interest expense for the third quarter should increase as a result of the higher inventory level and the related increase in borrowings on the line of credit. 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, 1997), 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 139,100 shares of common stock in January 1998. 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 - none (27) Financial Data Schedule (by electronic filing only) b. Reports on Form 8-K - Repurchase of 139,100 shares of Vacu-dry Company common stock, date of report 1/9/98 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: February 13, 1998 /s/ Gary L. Hess ----------------- ----------------------- Gary L. Hess, President Date: February 13, 1998 /s/ Tom Eakin ----------------- ----------------------- Tom Eakin, VP, Finance EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the 10Q for the quarter ended December 31, 1997 and is qualified in its entirety by reference to such financial statements. 6-mos Jun-30-1998 Dec-31-1997 155,000 0 2,785,000 63,000 8,170,000 11,413,000 18,115,000 11,248,000 18,280,000 4,707,000 0 0 0 3,650,000 5,911,000 18,280,000 13,689,000 13,914,000 11,457,000 11,457,000 0 0 124,000 1,047,000 370,000 717,000 0 0 0 717,000 .44 .43 Net of LIFO reserve of $2,179,660
-----END PRIVACY-ENHANCED MESSAGE-----