-----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, BT/oNx5oXlsMhpPH9887dEZ7rvxGlsRRkVLUAqOKTo6A2xpiz3wXXiQEAZlSWRrv p9CGx6EmcnbMpop3SVL3ng== 0000927016-00-001698.txt : 20000510 0000927016-00-001698.hdr.sgml : 20000510 ACCESSION NUMBER: 0000927016-00-001698 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000509 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPTA FOOD INGREDIENTS INC /DE CENTRAL INDEX KEY: 0000883326 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 043117634 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19811 FILM NUMBER: 623322 BUSINESS ADDRESS: STREET 1: 25 WIGGINS AVE CITY: BEDFORD STATE: MA ZIP: 01730 BUSINESS PHONE: 6172765100 MAIL ADDRESS: STREET 1: 25 WIGGINS AVENUE CITY: BEDFORD STATE: MA ZIP: 01730 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 FOR THE QUARTER ENDED MARCH 31, 2000 COMMISSION FILE NO. 0-19811 ------- OPTA FOOD INGREDIENTS, INC. (Exact Name of Registrant as Specified in its Charter) DELAWARE 04-3117634 -------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) 25 WIGGINS AVENUE, BEDFORD, MA 01730 ------------------------------ ----- (Address of Principal Executive Offices) (Zip Code) (781) 276-5100 -------------- Registrant's Telephone No., Including Area Code: 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 1, 2000, the registrant had 10,897,864 shares of common stock outstanding. OPTA FOOD INGREDIENTS, INC. FORM 10-Q - ------------------------------------------------------------------------------- Quarter Ended March 31, 2000 Table of Contents Page Number ------ Part I - Financial Information - ------------------------------ Item 1 - Financial Statements Condensed Balance Sheet March 31, 2000 (Unaudited) and December 31, 1999 (Audited) 3 Condensed Statement of Operations for the Three Months Ended March 31, 2000 and 1999 (Unaudited) 4 Condensed Statement of Cash Flows for the Three Months Ended March 31, 2000 and 1999 (Unaudited) 5 Notes to Condensed Unaudited Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3 - Quantitative and Qualitative Disclosure About Market Risk 11 Part II - Other Information - --------------------------- Item 1 through Item 6 12 Signatures 13 2 OPTA FOOD INGREDIENTS, INC. CONDENSED BALANCE SHEET (in thousands) - -------------------------------------------------------------------------------
MARCH 31, DECEMBER 31, 2000 1999 ------------------ ------------------- (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 3,953 $ 2,578 Short term investments 7,380 10,004 Accounts receivable, net 3,665 3,927 Inventories (Note 3) 5,098 4,678 Prepaid expenses and other current assets 506 546 ------------------ ------------------- Total current assets 20,602 21,733 Fixed assets, net 23,275 23,820 Patents and trademarks, net 543 592 Goodwill 1,508 1,549 Other assets 180 121 ------------------ ------------------- $ 46,108 $ 47,815 ================== =================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 377 $ 394 Accounts payable 961 1,872 Accrued expenses 1,487 1,280 ------------------ ------------------- Total current liabilities 2,825 3,546 Long term debt 2,603 2,733 Stockholders' equity: Common stock 111 111 Additional paid-in capital 79,807 79,807 Treasury stock, at cost (737) (444) Accumulated deficit (38,501) (37,938) ------------------ ------------------- Total stockholders' equity 40,680 41,536 ------------------ ------------------- $ 46,108 $ 47,815 ================== ===================
3 OPTA FOOD INGREDIENTS, INC. CONDENSED STATEMENT OF OPERATIONS (in thousands, except per share data) - ------------------------------------------------------------------------------- (Unaudited) FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------------ 2000 1999 ---------------- --------------- Product revenue $ 6,364 $ 4,065 Cost and expenses: Cost of revenue 4,337 2,810 Selling, general and administrative 1,678 999 Research and development 752 823 Restructuring costs (Note 4) 300 350 ---------------- --------------- 7,067 4,982 ---------------- --------------- Loss from operations (703) (917) Other income (expense): Interest income 176 347 Interest expense (62) (68) Other income (expense) 26 16 ---------------- --------------- 140 295 ---------------- --------------- Net loss ($ 563) ($ 622) ================ =============== Basic and diluted net loss per share (Note 5) ($ .05) ($ .06) ================ =============== Weighted average shares outstanding 10,903 11,106 ================ =============== 4 OPTA FOOD INGREDIENTS, INC. CONDENSED STATEMENT OF CASH FLOWS (in thousands) - ------------------------------------------------------------------------------- (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, --------------------------------------------- 2000 1999 ------------------ ------------------- Cash flows from operating activities: Net loss ($ 563) ($ 622) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 780 383 Change in assets and liabilities: (Increase) decrease in accounts receivable, net 262 (396) Increase in inventories, net (420) (487) (Increase) decrease in other assets (17) 26 Increase (decrease) in accounts payable (911) 49 Increase (decrease) in accrued expenses 207 (488) ------------------ ------------------- Total adjustments (99) (913) ------------------ ------------------- Net cash used in operating activities (662) (1,535) Cash flows from investing activities: Purchase of short term investments (8,826) - Maturity of short term investments 11,449 - Purchase of fixed assets, net (130) (170) Increase in patents and trademarks (16) (52) ------------------ ------------------- Net cash provided by (used in) investing activities 2,477 (222) Cash flows from financing activities: Proceeds from issuance of common stock, net - 7 Principal payments on long term debt (147) (79) Purchase of treasury stock (293) - ------------------ ------------------- Net cash used in financing activities (440) (72) ------------------ ------------------- Net increase (decrease) in cash and cash equivalents 1,375 (1,829) Cash and cash equivalents at beginning of period 2,578 30,315 ------------------ ------------------- Cash and cash equivalents at end of period $ 3,953 $28,486 ================== ===================
5 OPTA FOOD INGREDIENTS, INC. NOTES TO CONDENSED UNAUDITED FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION The condensed financial statements of Opta Food Ingredients, Inc. (the "Company") include, in the opinion of management, all adjustments (consisting of normal and recurring adjustments) necessary for a fair statement of the Company's financial position at March 31, 2000 and December 31, 1999 and the results of operations for the three months ended March 31, 2000 and 1999, respectively. The results of operations are not necessarily indicative of results for a full year. These financial statements should be read in conjunction with the financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission pursuant to Section 13 of the Securities Exchange Act of 1934. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. 2. RECENT PRONOUNCEMENTS In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 summarizes the SEC's views in applying generally accepted accounting principles to selected revenue recognition issues. The Company is required to adopt SAB 101 in the first quarter of fiscal 2000. The impact of SAB 101 is considered to be immaterial on the Company's financial statements. 3. INVENTORIES, NET Inventories consist of the following (in thousands): MARCH 31, DECEMBER 31, 2000 1999 ------------------- ------------------ Raw materials $ 881 $ 919 Finished goods 4,217 3,759 ------------------- ------------------ $5,098 $4,678 =================== ================== Inventories are stated at the lower of cost or market, cost being determined using the first-in, first-out method. Inventories are reflected net of reserves of $243,000 and $250,000 at March 31, 2000 and December 31, 1999, respectively. 6 4. RESTRUCTURING COSTS During the first quarter 2000, the Company made the decision to consolidate the Company's starch-based operations and relocate Stabilized Products to its Galesburg, Illinois production facility. As a result, the results for the three months ended March 31, 2000 reflect a restructuring charge of $300,000, comprised of the following: severance costs of $170,000 related to the termination of 6 employees in general and administrative and manufacturing functions; and $130,000 in non-cash expenses resulting primarily from fixed asset write-downs related to building improvements on the leased facility. For the three months ended March 31, 2000, no severance payments had been made. On February 18, 1999, the Company announced a restructuring program which included a reduction in headcount at its corporate headquarters as a result of discontinuing research on its protein coatings and encapsulation technology platform. As a result, the Company recorded a restructuring charge of $350,000 which is included in operating expenses for the three months ended March 31, 1999. The restructuring charge was primarily related to severance costs associated with the termination of 6 employees in applications and research & development functions which were paid out over a six month period ending July 1999. 5. Net Loss Per Share Basic net loss per share is determined by dividing the net loss by the weighted average number of common shares outstanding during the period. All common stock equivalents have been excluded from weighted average shares outstanding for calculating diluted net loss per share because such equivalents are anti-dilutive. 6. STOCK REPURCHASE PLAN In April 1999, the Company's Board of Directors approved a stock repurchase plan under which the Company is authorized to purchase shares subject to certain business and market restrictions. During 1999, the Company purchased 150,000 shares of common stock at an aggregate cost of $443,750 which was recorded as treasury stock as of December 31, 1999. In January 2000, the Company purchased an additional 100,000 shares of common stock at an aggregate cost of $293,750 which was recorded as treasury stock at March 31, 2000. 7. ACQUISITIONS On June 30, 1999, the Company acquired the assets of Stabilized Products, Inc. ("SPI") for approximately $2.4 million in cash. The acquisition of SPI was accounted for as a purchase and the excess of the purchase price over the fair value of the net assets acquired was $1.6 million and has been recorded as goodwill, which is being amortized on a straight-line basis over 10 years. The purchase price was allocated based on the fair values of the assets purchased as follows (in thousands): Accounts receivable $ 426 Inventories 276 Machinery and equipment 76 Other assets 4 Goodwill 1,630 7 On December 31, 1999, the Company acquired substantially all the assets of Canadian Harvest located in Cambridge, Minnesota and all of the outstanding shares of common stock of Canadian Harvest Process Ltd. located in St. Thomas, Ontario, Canada for $12 million in cash, with an additional $1.6 million paid for net working capital. The acquisition of Canadian Harvest was accounted for as a purchase and the purchase price has been tentatively allocated based on estimated fair values of the assets purchased as follows (in thousands): Property, plant and equipment $11,790 Intangibles 110 Accounts receivable 1,029 Inventories 934 Other assets 76 Accounts payable 263 Accrued expenses 83 8 PART I ITEM 2 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- INTRODUCTION: Opta Food Ingredients, Inc. ("Opta" or the "Company") is a fully integrated developer, manufacturer and marketer of proprietary food ingredients used by consumer food companies to improve the nutritional content, healthfulness and taste of a wide variety of foods. The Company modifies inexpensive raw materials and produces natural food ingredients that can be considered Generally Recognized as Safe ("GRAS") under current U.S. Food and Drug Administration ("FDA") regulations. This discussion should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and the accompanying unaudited condensed financial statements and notes for the three months ended March 31, 2000 and 1999, respectively. The following Discussion and Analysis of the Company's Financial Condition and Results of Operations may contain forward-looking statements that involve risks and uncertainties. The Company's actual results could differ significantly from historical results or the Company's expectations as expressed in such forward- looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause the actual results of the Company to be materially different from the historical results or from any results expressed or implied by such forward-looking statements. Factors which could cause actual results to differ from these expectations include the size and timing of significant orders, as well as deferral of orders, over which the Company has no control; the extended product testing cycles of the Company's potential customers; the variation in the Company's sales cycles from customer to customer; increased competition posed by food ingredient manufacturers; changes in pricing policies by the Company and its competitors; the adequacy of existing, or the need to secure or build additional manufacturing capacity in order to meet the demand for the Company's products; the Company's success in expanding its sales and marketing programs and its ability to gain increased market acceptance for its existing product lines; the Company's ability to timely develop and successfully introduce new products in its pipeline at acceptable costs; the ability to scale up and successfully produce its products; the potential for significant quarterly variations in the mix of sales among the Company's products; the gain or loss of significant customers; shortages in the availability of raw materials from the Company's suppliers; the impact of new government regulations on food products; the challenges of integrating the operations of acquired businesses; and general economic conditions. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999: Revenue. Revenue for the three months ended March 31, 2000 was $6.4 million, representing an increase of $2.3 million or 57% in comparison to $4.1 million for the comparable 1999 quarter. A majority of the increase in 2000 first quarter revenue was attributable to the recently acquired Stabilized Products and Canadian Harvest divisions. In addition, revenue for quarter was impacted by an operational change on the part of a major customer that resulted in reduced demand for a certain fiber product. The Company anticipates sales to this customer to be lower this year than in 1999. 9 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- Cost of Revenue. Cost of revenue for the three months ended March 31, 2000 was $4.3 million, representing an increase of $1.5 million or 54% in comparison to $2.8 million for the comparable 1999 quarter. Cost of revenue as a percentage of revenue decreased to 68% for the first quarter of 2000 as compared to 69% in the first quarter of 1999. This percentage decrease was largely the result of certain improvements in fiber-based product margins resulting from operating efficiencies as well as a reduction in manufacturing costs. Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 2000 were $1.7 million representing an increase of $679,000 or 68% in comparison to $999,000 for the comparable 1999 quarter. A majority of the increase in SG&A expenses was due to additional expenses attributable to the recently acquired Stabilized Products and Canadian Harvest divisions as well as the Company recorded a charge of $350,000 related to severance costs attributable to the recent departure of its former Chief Executive Officer and President, Lewis C. Paine, III. Research and Development Expenses. Research and development ("R&D") expenses for the three months ended March 31, 2000 were $752,000 representing a decrease of $71,000 or 9% in comparison to $823,000 for the comparable 1999 quarter. The decrease in R&D expenses was the result of the reduction in personnel costs related to the Company's restructuring program which discontinued research on its protein coatings and encapsulation technology platform in February 1999. Restructuring Costs. The results for the three months ended March 31, 2000 reflect a restructuring charge of $300,000 related to the decision to consolidate the Company's starch-based operations and relocate Stabilized Products to its Galesburg, Illinois production facility. For the three months ended March 31, 1999, the Company recorded a restructuring charge of $350,000 which is included in operating expenses. This charge was the result of a cost reduction program which included a reduction in headcount at its corporate headquarters as a result of discontinuing research on its protein coatings and encapsulation technology platform. Other Income. Other income for the three months ended March 31, 2000 was $140,000, representing a decrease of $155,000 or 53% in comparison to $295,000 for the comparable 1999 quarter. The decrease was due to decreased interest income on reduced amounts of cash and cash equivalents during the first quarter of 2000 as compared to the comparable 1999 quarter. LIQUIDITY AND CAPITAL RESOURCES: At March 31, 2000, the Company had $11.3 million in cash and cash equivalents and $17.8 million of working capital. The Company used approximately $662,000 of cash in operations during the three months ended March 31, 2000, compared with approximately $1.5 million used in the comparable 1999 quarter. Capital expenditures were $130,000 and $170,000 for the three months ended March 31, 2000 and 1999, respectively. The higher level of capital expenditures for the first quarter of 1999 was related to the completion of the expansion of the Louisville production facility to increase the Company's capacity to produce oat fiber products. 10 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ------------------------------------------------------------------------------- In addition, the Company used approximately $293,000 of cash during the three months ended March 31, 2000 to purchase 100,000 of treasury stock under the stock repurchase program announced in April 1999. The Company's various debt agreements contain covenants that restrict the Company's ability to participate in merger discussions, pay dividends, limit annual capital expenditures, invest in certain types of securities and obtain additional debt financing without bank approval. The Company was in compliance with respect to all covenants and restrictions in its loan agreements at March 31, 2000. The Company believes that its existing cash and cash equivalents, short term investments, long and short term debt and product sales will be adequate to fund its planned operations, capital requirements and expansion needs through at least 2000. However, the Company may require additional capital in the long term, which it may seek through equity or debt financing, equipment lease financing or funds from other sources. No assurance can be given that these funds will be available to the Company on acceptable terms, if at all. In addition, because of the Company's need for funds to support future operations, it may seek to obtain capital when conditions are favorable, even if it does not have an immediate need for additional capital at such time. REVENUE RECOGNITION In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition in Financial Statements." SAB 101 summarizes the SEC's views in applying generally accepted accounting principles to selected revenue recognition issues. The Company is required to adopt SAB 101 in the first quarter of fiscal 2000. The impact of SAB 101 is considered to be immaterial on the Company's financial statements. PART I ITEM 3 Quantitative and Qualitative Disclosure about Market Risk - --------------------------------------------------------- In January 1997, the Securities and Exchange Commission issued Financial Reporting Release No. 48, which expands the disclosure requirements for certain derivatives and other financial instruments. The Company does not utilize derivative financial instruments. The carrying amounts reflected in the condensed balance sheet of cash and cash equivalents, trade receivables and trade payables approximates fair value at March 31, 2000 due to the short maturities of these instruments. 11 OPTA FOOD INGREDIENTS, INC. PART II - OTHER INFORMATION - ------------------------------------------------------------------------------- Items 1, 2, 3, 4, and 5 - Not Applicable. ITEM 6 (a) EXHIBITS (11) Basic and diluted net loss per share computation (in thousands, except per share data): FOR THE THREE MONTHS ENDED MARCH 31, ------------------------------------ 2000 1999 ------------- ----------------- Net loss ($563) ($622) ============= ================= Weighted average shares outstanding 10,903 11,106 ============= ================= Basic and diluted net loss per share ($.05) ($.06) ============= ================= All common stock equivalents have been excluded from weighted average shares outstanding for calculating diluted net loss per share because such equivalents are anti-dilutive. (27) Financial data schedule ITEM 6 (b) REPORTS ON FORM 8-K On January 8, 2000, the Company filed a report on Form 8-K in connection with its purchase of the assets of Canadian Harvest and the stock of Canadian Harvest Process Ltd. On March 30, 2000, the Compnay filed an amendment report on Form 8-K/A which included the financial statements of Canandian Harvest. 12 OPTA FOOD INGREDIENTS, INC. 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. Opta Food Ingredients, Inc. --------------------------- (Registrant) DATE: May 8, 2000 BY: /s/ Arthur J. McEvily, Ph.D. ---------------------------- Arthur J. McEvily, Ph.D. President and Chief Executive Officer (principal executive officer) DATE: May 8, 2000 BY: /s/ Scott A. Kumf ----------------- Scott A. Kumf Chief Financial Officer, Vice President Administration and Treasurer (principal financial and accounting officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 3,953,000 7,380,000 3,770,000 105,000 5,098,000 20,602,000 30,168,000 6,893,000 46,108,000 2,825,000 0 0 0 111,000 40,569,000 46,108,000 6,364,000 6,364,000 4,337,000 4,337,000 2,730,000 0 62,000 (563,000) 0 (563,000) 0 0 0 (563,000) (0.05) (0.05)
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