-----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, H7v8Hxe9g58Lp4LSFgIfWS0Sawufzf9kvYz3rLEWdQeTBfPkLQIgjGwb3WdGU4jb lsj37und7a39ZjfwkcQHBg== 0000102588-98-000004.txt : 19980518 0000102588-98-000004.hdr.sgml : 19980518 ACCESSION NUMBER: 0000102588-98-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98624846 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 NINE MONTHS ENDED 3/31/98 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, 1998 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 12, 1998, there were 1,509,438 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 Ended Ended Ended Ended 3/31/98 3/31/97 3/31/98 3/31/97 REVENUES: Net sales $19,897,000 $18,233,000 $6,208,000 $5,894,000 Other 342,000 531,000 116,000 176,000 ----------- ----------- ---------- ---------- Total revenue $20,239,000 $18,764,000 $6,324,000 $6,070,000 ----------- ----------- ---------- ---------- COST & EXPENSES: Cost of sales 16,465,000 16,208,000 5,007,000 5,392,000 Selling, general & administrative 2,270,000 1,625,000 1,025,000 545,000 Interest 215,000 175,000 90,000 82,000 ----------- ----------- ---------- ---------- Total cost & expenses $18,950,000 $18,008,000 $6,122,000 $6,019,000 ----------- ----------- ---------- ---------- EARNINGS BEFORE INCOME TAXES 1,289,000 756,000 202,000 51,000 PROVISION FOR INCOME TAXES 438,000 306,000 68,000 24,000 -------- -------- -------- -------- NET EARNINGS $851,000 $450,000 $134,000 $27,000 ======== ======== ======== ======= EARNINGS PER COMMON SHARE $.53 $.27 $.09 $.02 ===== ==== ==== ==== WEIGHTED AVERAGE COMMON SHARES 1,604,779 1,650,001 1,525,274 1,638,739 ========== ========= ========= ========= See notes to interim financial statements
VACU-DRY COMPANY Balance Sheets (Unaudited) (Dollars in thousands) CURRENT ASSETS: 3/31/98 3/31/97 6/30/97 CURRENT LIABILITIES: 3/31/98 3/31/97 6/30/97 ------- ------- ------- ------ ------- ------- Cash $194 $250 $283 Borrowings under line of credit $750 $3,428 $1,354 Accounts receivable 2,570 2,306 1,567 Current maturities of long-term debt 595 576 557 Other receivable 16 27 70 Accounts payable 1,369 1,461 490 Inventories 7,853 7,692 5,055 Accrued payroll & related liabilities 761 742 539 Prepaid expenses 17 16 131 Accrued expenses 318 123 173 Current deferred taxes 240 225 239 Income taxes payable 30 -0- -0- -- --- --- ------- ------- ------ Total current assets $10,890 $ 10,516 $7,345 Total current liabilities $3,823 $6,330 $3,113 ------ ------ ------ Borrowings under line of credit 1,850 -0- -0- Long-term debt net of current maturities 2,185 1,927 1,808 ----- ----- ----- Net property, plant & equipment 6,665 7,337 7,231 Total long-term debt 4,035 1,927 1,808 ----- ----- ----- DEFERRED INCOME TAXES 826 843 826 --- --- --- SHAREHOLDERS' EQUITY; Capital stock 2,826 3,626 3,635 Retained earnings 6,045 5,127 5,194 ----- ----- ----- Total shareholders' equity 8,871 8,753 8,829 ______ _______ _______ Total liabilities and _______ _______ _______ Total Assets $17,555 $17,853 $14,576 shareholders' equity $17,555 $17,853 $14,576 ======= ======= ======= ======= ======= ======= See notes to interim financial statements
VACU-DRY COMPANY STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997 CASH FLOWS FROM OPERATING ACTIVITIES: 1998 1997 ---- ---- Net earnings $851,000 $450,000 -------- -------- Adjustments to reconcile net earnings to net cash used for operating activities - Depreciation expense 821,000 787,000 Deferred income tax provision (1,000) 95,000 Changes in certain assets & liabilities (Increase)decrease in receivables (949,000) 351,000 (Increase) in inventories (2,798,000) (4,262,000) Decrease in prepaid assets 114,000 100,000 Increase in accounts payable 879,000 783,000 Increase in accrued expenses 145,000 17,000 Increase in accrued payroll & related liabilities 222,000 266,000 Increase(decrease)in income taxes payable 30,000 (32,000) ---------- ---------- Total adjustments (1,537,000) (1,895,000) ----------- ---------- Net cash used for operating activities (686,000) (1,445,000) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (255,000) (401,000) _________ _________ Net cash (used for) investing activities (255,000) (401,000) CASH FLOWS FROM FINANCING ACTIVITIES: Additional borrowings under the line of credit 8,385,000 6,483,000 Payments on line of credit (7,139,000) (3,881,000) Employee purchase of Company stock 26,000 32,000 Repurchase of common stock -0- (407,000) Principal payments of long-term debt (420,000) (345,000) --------- --------- Net cash provided by financing activities 852,000 1,882,000 --------- --------- NET (DECREASE) IN CASH (89,000) 36,000 CASH AT THE BEGINNING OF THE YEAR 283,000 214,000 -------- -------- TOTAL CASH AT THE END OF THE PERIOD $194,000 $250,000 ========= ======== Supplemental Disclosure of Non-Cash Activities Repurchase of stock through the issuance of notes payable $835,000 $ -0- ========= ===== See notes to interim financial statements VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS NINE MONTHS ENDED MARCH 31, 1998 Note 1 - The accompanying 1998 and 1997 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 nine month period ended March 31, 1998 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 March 31, 1998 and June 30, 1997, consisted of the following: 3/31/98 6/30/97 Finished goods 6,551,000 $4,208,000 Work in progress 597,000 291,000 Raw materials, & containers 705,000 556,000 ---------- ---------- $7,853,000 $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: 1998 1997 ---- ---- Interest paid $210,000 $159,000 Income taxes paid $409,000 $261,000 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. Under this agreement, the Company can borrow at the Bank's prime rate with repayment terms of two years or at LIBOR with a short-term maturity. VACU-DRY COMPANY NOTES TO INTERIM FINANCIAL STATEMENTS NINE MONTHS ENDED MARCH 31, 1998 Note 5 - Income Taxes The effective income tax rate for the nine month period ending March 31, 1998 is 34%, which is comparable to the effective tax rate for the year ended June 30, 1997. Note 6 - Subsequent Event - On April 21, 1998, the Company executed a letter of intent to acquire substantially all of the business and assets of Made In Nature,Inc., a natural foods company headquartered in San Rafael, California. The acquisition, which would be accomplished through a wholly owned subsidiary,is conditioned upon acceptable completion of due diligence, the resolution of certain current obligations on the part of Made In Nature, and board approval of both companies. The letter of intent calls for the Company to acquire the business and its assets free and clear of all liens and liabilities except those specifically assumed. Note 7 - Stock Repurchase - On January 9 and 20, 1998, the Company completed the purchase of two blocks of its Common Stock aggregating 139,100 shares, equal to approximately 8.5% of its outstanding Common Stock. The shares were purchased in two privately negotiated transactions. The purchase price in each transaction was $6.00 per share. Payment was made by delivery of the Company's subordinated, interest-only notes. The notes bear interest at 8.5% per annum and are due in full in five years. 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 March 31, 1998 and 1997, 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 level of inventories are very comparable to March 31,1997 however, we are anticipating that our inventory balances at the end of the current fiscal year will be lower than last year. The net working capital as of March 31, 1998 increased by $2,881,000, from $4,186,000 as March 31, 1997 to $7,067,000 as of March 31, 1998. Of this increase, $1,850,000 was a result of the refinancing of the line of credit to a term of two years (See Note 4 to Financial Statements). The remaining increase was primarily a result of the improved earnings. The Company's operating capital is 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 $4,500,000 in anticipation of higher short-term borrowing requirements as a direct result of a condensed production period and the related increase in the inventory levels. As of March 31, 1998, the Company had $1,900,000 of available borrowings on the line of credit. This compares to $72,000 of available funds as of March 31, 1997 on a total line of $3,500,000. As of March 31, 1998, the Company was in compliance with all of the covenants and restrictions related to its outstanding debt. As of January 1998 the Company signed a long-term lease for approximately one-half of the previously vacated portion of this facility. The Company has secured a new short-term tenant for the balance of the available space. This lease expires January 31, 1999. The Company is in the process of negotiating a long-term lease with a new tenant, beginning February 1, 1999. The Company continues to lease a portion of its operating facility and is in negotiations with the primary tenant on a long-term lease. The current lease was extended and expires on May 31, 1998. The Company has increased its capital expenditure budget from $532,000 to $625,000 for the fiscal year ended June 30, 1998. For the nine months ended March 31, 1998, the Company has spent $255,000 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. On April 21, 1998, the Company executed a letter of intent to acquire substantially all of the business and assets of Made In Nature, Inc., a natural food marketer of organic consumer packaged goods located in San Rafael, California. The letter of intent calls for the Company to acquire the business and its assets free and clear of all liens and liabilities except those specifically assumed. Results of Operations Quarter Net sales increased $314,000 or 5% in the third quarter of fiscal 1998. 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 $976,000 however; lower sales in other product categories partially offset the increase. Other revenue decreased $60,000 as a result of less non-recurring income. Cost of sales for the quarter ended March 31, 1998 decreased from 91.5% to 80.6% of net sales. This decrease was primarily a result of reduced product costs. Selling, general and administrative expenses increased $480,000 or 88% in the third quarter. This increase was a result of costs incurred as a result of exploration of new strategic initiatives, an accrual for the employee incentive plan and Stock Appreciation Rights expense. Interest expense increased $8,000 as a result of our increased average borrowings on the line of credit during the quarter. Year-to Date Net sales increased $1,664,000 or 9.1% for the nine months ended March 31, 1998. This increase was entirely from higher unit sales volume as the average sale price declined slightly. The increase was predominately across all product lines, but particularly in vacuum, drum drying and Zoria Farms sales. Other revenue decreased $189,000 as a result of non-recurring revenue earned in 1997. The Company's real estate income is comparable to last year. Cost of sales as a percent of net sales decreased from 88.9% as of March 31, 1997 to 82.7% as of March 31, 1998. Although the average sales price dropped slightly, the margin increased as a result of lower raw material prices, improved yields and other production efficiencies. Selling, general and administrative expenses increased $645,000 or 39.7% through the nine months ended March 31, 1998. This increase was a result of costs incurred as a result of exploration of new strategic initiatives, an accrual for the employee incentive plan and Stock Appreciation Rights expense. Interest expense increased $40,000 as a result of our higher average 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 There are no material changes in securities. The Company's revolving line of credit agreement with its Bank dated (December 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 the 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 - Filed January 22, 1998, repurchase of two blocks of common stock aggregating 139,100 shares. 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 15, 1998 /s/ Gary L. Hess ------------ ----------------------- Gary L. Hess, President Date: May 15, 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 March 31, 1998 and is qualified in its entirety by reference to such financial statements. 9-mos Jun-30-1998 Mar-31-1998 194,000 0 2,669,000 83,000 7,853,000 10,890,000 18,193,000 11,528,000 17,555,000 3,823,000 0 0 0 2,826,000 6,045,000 17,555,000 19,897,000 20,239,000 16,465,000 16,465,000 0 0 215,000 1,289,000 438,000 851,000 0 0 0 851,000 .53 .53 Net of LIFO reserve of $1,849,660
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