-----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, PcfHYGL4CmWtImwi0pA2/M/YYTDWqgLHx0/ut3O6jmWzEWf205q6fnDSQXIi/yjD 9p8Tk19X+ErREi27FMnWYA== 0000927016-99-001932.txt : 19990513 0000927016-99-001932.hdr.sgml : 19990513 ACCESSION NUMBER: 0000927016-99-001932 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990512 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: 99618128 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, 1999 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 April 30, 1999, the registrant had 11,123,779 shares of common stock outstanding. OPTA FOOD INGREDIENTS, INC. FORM 10-Q - -------------------------------------------------------------------------------- Quarter Ended March 31, 1999 Table of Contents
Page Number ------ Part I - Financial Information - ------------------------------ Item 1 - Financial Statements Condensed Balance Sheet March 31, 1999 (Unaudited) and December 31, 1998 3 Condensed Statement of Operations (Unaudited) for the Three Months Ended March 31, 1999 and 1998 4 Condensed Statement of Cash Flows (Unaudited) for the Three Months Ended March 31, 1999 and 1998 5 Notes to Condensed Unaudited Financial Statements 6 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Part II - Other Information - --------------------------- Item 1 through Item 6 11 Signatures 12
OPTA FOOD INGREDIENTS, INC. CONDENSED BALANCE SHEET (in thousands) - ----------------------------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, 1999 1998 -------------- ----------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 28,486 $ 30,315 Accounts receivable, net 2,346 1,950 Inventories (Note 2) 2,558 2,071 Prepaid expenses and other current assets 359 384 --------------- ----------------- Total current assets 33,749 34,720 Fixed assets, net 12,320 12,473 Patents and trademarks, net 618 626 Other assets 67 69 --------------- ----------------- $ 46,754 $ 47,888 =============== ================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long term debt $ 430 $ 426 Accounts payable 1,052 1,003 Accrued expenses 768 1,256 --------------- ----------------- Total current liabilities 2,250 2,685 Long term debt 3,042 3,126 Stockholders' equity: Common stock 111 111 Additional paid-in capital 79,754 79,747 Accumulated deficit (38,403) (37,781) --------------- ----------------- Total stockholders' equity 41,462 42,077 --------------- ----------------- $ 46,754 $ 47,888 =============== =================
3
OPTA FOOD INGREDIENTS, INC. CONDENSED STATEMENT OF OPERATIONS (in thousands, except per share data) - -------------------------------------------------------------------------------- (Unaudited) FOR THE THREE MONTHS ENDED MARCH 31, -------------------------- 1999 1998 ----------- ---------- Product revenue $ 4,065 $ 2,429 Cost and expenses: Cost of revenue 2,810 1,803 Selling, general and administrative 999 909 Research and development 823 880 Restructuring costs (Note 3) 350 - ----------- ---------- 4,982 3,592 ----------- ---------- Loss from operations (917) (1,163) Other income (expense): Interest income 347 435 Interest expense (68) (80) Other income (expense) 16 (25) ----------- ---------- Net loss ($ 622) ($ 833) =========== ========== Basic and diluted net loss per share ($ .06) ($ .08) =========== ========== Weighted average shares outstanding 11,106 11,080 =========== ==========
4 OPTA FOOD INGREDIENTS, INC. CONDENSED STATEMENT OF CASH FLOWS (in thousands) - -------------------------------------------------------------------------------- (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, ----------------------------------------- 1999 1998 -------------- --------------- Cash flows from operating activities: Net loss ($ 622) ($ 833) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 383 349 Forgiveness of notes receivable - 20 Change in assets and liabilities: Increase in accounts receivable, net (396) (69) Increase in inventories, net (487) (473) (Increase) decrease in other assets 26 (35) Increase (decrease) in accounts payable 49 (714) Decrease in accrued expenses (488) (129) ------------- -------------- Total adjustments (913) (1,051) ------------- -------------- Net cash used in operating activities (1,535) (1,884) Cash flows from investing activities: Purchase of fixed assets, net (170) (41) Increase in patents and trademarks (52) (17) ------------- -------------- Net cash used in investing activities (222) (58) Cash flows from financing activities: Proceeds from issuance of common stock, net 7 - Principal payments on long term debt (79) (376) ------------- -------------- Net cash used in financing activities (72) (376) ------------- -------------- Net decrease in cash and cash equivalents (1,829) (2,318) Cash and cash equivalents at beginning of period 30,315 33,689 ------------- -------------- Cash and cash equivalents at end of period $28,486 $31,731 ============= ==============
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" or "Opta") 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, 1999 and December 31, 1998 and the results of operations for the three months ended March 31, 1999 and 1998, 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, 1998, 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. INVENTORIES (Unaudited) Inventories consist of the following (in thousands):
MARCH 31, DECEMBER 31, 1999 1998 ------------------ ---------------- Raw materials $ 688 $ 420 Finished goods 1,870 1,651 ------------------ ---------------- $2,558 $2,071 ================== ================
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 $197,000 at March 31, 1999 and $80,000 at December 31, 1998. 3. RESTRUCTURING COSTS 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. 4. 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 ant-dilutive. 6 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. The Company began shipping its first product, EverFresh(R), in November 1991, acquired an oat fiber business in June 1992 and launched Opta(R) Oat Fibers in September 1992, began shipping OptaGrade(R) in the fourth quarter of 1993, commercialized CrystaLean(R) and OptaFil(R) in 1994, introduced OptaMist(TM), Optex(R) and OptaGlaze(R) in June 1996 and launched Opta Baking Gloss in May 1998. The Company currently derives substantially all of its revenue from its Opta Oat Fibers, OptaGrade, OptaMist and CrystaLean products. The Company has not been profitable since inception and expects to incur additional losses. This discussion should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and the accompanying unaudited condensed financial statements and notes for the three months ended March 31, 1999 and 1998, 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. 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; potential Year 2000 problems; and general economic conditions. 7 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998: Revenue. Revenue for the three months ended March 31, 1999 was $4.1 million, representing an increase of $1.6 million or 67% in comparison to $2.4 million for the comparable 1998 quarter. The increase in 1999 first quarter revenue was largely the result of increased demand from two of the Company's major customers, one of which was not a major customer in the comparable 1998 quarter. Cost of Revenue. Cost of revenue for the three months ended March 31, 1999 was $2.8 million, representing an increase of $1.0 million or 56% in comparison to $1.8 million for the comparable 1998 quarter. Cost of revenue as a percentage of revenue decreased to 69% for the first quarter of 1999 as compared to 74% in the first quarter of 1998. This percentage decrease was largely the result of certain improvements in Opta Oat Fibers' margins resulting from operating efficiencies as well as a reduction in manufacturing costs. Opta is attempting to further reduce its cost of revenue as a percentage of revenue during 1999 through manufacturing efficiencies gained from increased production volume, although there is no assurance that such reductions will be realized. Selling, General and Administrative Expenses. Selling, general and administrative ("SG&A") expenses for the three months ended March 31, 1999 were $999,000 representing an increase of $90,000 or 10% in comparison to $909,000 for the comparable 1998 quarter. The increase in SG&A expenses was principally due to an increase in legal and consulting costs. Research and Development Expenses. Research and development ("R&D") expenses for the three months ended March 31, 1999 were $823,000 representing a decrease of $57,000 or 6% in comparison to $880,000 for the comparable 1998 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. Restructuring Costs. The Company recorded a restructuring charge of $350,000 which is included in operating expenses for the three months ended March 31, 1999. 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, 1999 was $295,000, representing a decrease of $35,000 or 11% in comparison to $330,000 for the comparable 1998 quarter. The decrease was due to decreased interest income on reduced amounts of cash and cash equivalents offset in part by decreased interest expense on lower levels of debt during the first quarter of 1999 as compared to the comparable 1998 quarter. 8 OPTA FOOD INGREDIENTS, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- LIQUIDITY AND CAPITAL RESOURCES: At March 31, 1999, the Company had $28.5 million in cash and cash equivalents and $31.5 million of working capital. The Company used approximately $1.5 million of cash in operations during the three months ended March 31, 1999, compared with approximately $1.9 million used in the comparable 1998 quarter. The Company expects to incur significant operating losses as it continues to increase its investment in the development, production and marketing of its new and existing products. The Company intends to fund its operating losses principally through product sales, existing cash and cash equivalents, short term investments, and long and short term debt. Capital expenditures were $170,000 and $41,000 for the three months ended March 31, 1999 and 1998, 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 which was started during the fourth quarter of 1998 to increase the Company's capacity to produce oat fiber. 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, 1999. The Company believes that continued expenditure of funds will be necessary to support its anticipated growth. 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 1999. 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. YEAR 2000 COMPLIANCE The Year 2000 issue concerns the inability of certain computerized information systems to properly recognize date sensitive information such as a date using "00" as the year 2000 rather than the year 1900. This could cause systems to fail or miscalculate, causing a disruption of operations. The Company may be at risk both with respect to its own Year 2000 compliance and the Year 2000 compliance of third parties, particularly suppliers of materials and services as well as customers. 9 The Company relies on computer-based technology and utilizes a variety of third party hardware and software extensively for financial and administrative functions, such as accounting and management information. Based on a recent internal assessment of Year 2000 issues, the Company has identified and verified that its internal information technology ("IT") systems are deemed to be Year 2000 compliant, including accounting/financial reporting, manufacturing/production and sales/invoicing systems. The Company has retained a consultant to review the Year 2000 compliance of its non-IT systems which include equipment or processes used in its manufacturing facilities that may contain embedded technology. The Company expects to receive the consultant's report and assessment of its Year 2000 compliance by the end of the second quarter of 1999. In addition, the Company is currently evaluating all other non-IT systems including research and development, telecommunications and general office equipment for Year 2000 compliance utilizing internal resources. The Company expects to complete this evaluation by the end of the second quarter of 1999. Management believes that the most significant risk to the Company of Year 2000 compliance issues is the effect such issues may have on its suppliers and customers. The Company is taking steps including contacting its significant suppliers and major customers in 1999 to assess the Year 2000 readiness of its such suppliers and customers. Upon completion of this assessment, which will be concluded by the third quarter of 1999, the Company will undertake an evaluation of the potential effects on its operations of any such third-party non- compliance on the Company's operations. Based on such evaluation, the Company will determine the most reasonably likely worst case scenarios arising from Year 2000 non-compliance and contingency plans to respond to such scenarios. The costs related to Year 2000 activities have not been and are not anticipated to be material and management does not believe that the financial impact of the Year 2000 issues discussed above will have a material adverse effect on the Company's financial condition or results of operations; however, it is uncertain to what extent the Company may be affected by third party Year 2000 compliance issues. 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, 1999 due to the short maturities of these instruments. 10 OPTA FOOD INGREDIENTS, INC. PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- Items 1, 2, 3, 4, 5 and 6(b) - 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, -------------------------------- 1999 1998 ------------- -------------- Net loss ($ 622) ($ 833) ============= ============== Weighted average shares outstanding 11,106 11,080 ============= ============== Basic and diluted net loss per share ($.06) ($.08) ============= ==============
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 11 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 7, 1999 BY: /s/ Lewis C. Paine, III ------------------------------ Lewis C. Paine, III Chairman of the Board, President and Chief Executive Officer (principal executive officer) DATE: May 7, 1999 BY: /s/ Scott A. Kumf ------------------------------ Scott A. Kumf Chief Financial Officer, Vice President Administration and Treasurer (principal financial and accounting officer) 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 28,486,000 0 2,346,000 0 2,558,000 33,749,000 17,574,000 5,254,000 46,754,000 2,250,000 0 0 0 111,000 41,351,000 46,754,000 4,065,000 4,065,000 2,810,000 2,810,000 2,172,000 0 68,000 (622,000) 0 (622,000) 0 0 0 (622,000) (0.06) (0.06)
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