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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
Commission File Number 1-12599
VITA FOOD PRODUCTS, INC.
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(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA #36-3171548
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2222 WEST LAKE STREET
CHICAGO, ILLINOIS 60612 (312) 738-4500
------------------------ --------------------------
(Address of principal Issuer's telephone number
executive offices)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
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Number of shares outstanding of Issuer's common stock, par value $.01 per share,
as of August 9, 2000 is 3,715,906.
Transitional Small Business Disclosure Format: Yes No X
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VITA FOOD PRODUCTS, INC.
REPORT ON FORM 10-QSB FOR THE THREE MONTHS ENDED JUNE 30, 2000
INDEX
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<S> <C>
I. FINANCIAL INFORMATION:
Item 1. Financial Statements (unaudited)
Balance Sheets............................................................ 3
Statements of Operations.................................................. 4
Statements of Shareholders' Equity........................................ 4
Statements of Cash Flows.................................................. 5
Note to Financial Statements ............................................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................. 6
II. OTHER INFORMATION................................................................. 8
</TABLE>
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BALANCE SHEETS VITA FOOD PRODUCTS, INC.
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<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
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<S> <C> <C>
ASSETS
Current Assets
Cash $ 37,548 $ 52,548
Accounts receivable-trade, net of allowance for discounts, returns, and doubtful
accounts of $233,000 in 2000 and in 1999 1,827,345 3,470,998
Inventories
Raw material and supplies 1,095,300 1,880,744
Work in process 37,066 96,156
Finished goods 2,063,210 1,625,364
Prepaid expenses and other current assets 335,039 371,706
Deferred income taxes 273,984 200,000
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Total Current Assets 5,669,492 7,697,516
Property, Plant and Equipment
Land 35,000 35,000
Building and Improvements 1,777,550 1,747,147
Machinery and Office Equipment 5,501,055 5,292,751
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7,313,605 7,074,898
Less accumulated depreciation and amortization (4,508,880) (4,309,753)
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Net Property Plant & Equipment 2,804,725 2,765,145
Other Assets 126,819 134,280
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Total Assets $ 8,601,036 $ 10,596,941
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term obligations $ 358,804 $ 526,095
Accounts payable 1,468,110 2,105,711
Accrued other expenses 703,718 1,058,483
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Total Current Liabilities 2,530,632 3,690,289
Long-term Obligations, Less Current Maturities 3,601,638 4,375,754
Commitments and Contingencies
Shareholders' Equity
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued
Common stock, $.01 par value; authorized 10,000,000 shares; issued and
outstanding 3,715,906 shares in 2000 and 3,712,471 shares in 1999 37,158 37,124
Additional paid in capital 3,364,148 3,359,800
Retained Earnings (932,540) (866,026)
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Total Shareholders' Equity 2,468,766 2,530,898
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Total Liabilities and Shareholders' Equity $ 8,601,036 $ 10,596,941
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</TABLE>
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STATEMENTS OF OPERATIONS VITA FOOD PRODUCTS, INC.
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<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED FOR SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
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<S> <C> <C> <C> <C>
Net Sales $ 4,757,217 $ 4,200,431 $ 10,975,620 $ 9,580,681
Cost of Goods Sold 3,496,719 2,978,803 8,016,578 6,902,666
------------ ------------ ------------ ------------
Gross Margin 1,260,498 1,221,628 2,959,042 2,678,015
Selling and Administrative Expenses
Selling, Marketing & Distribution 900,711 900,474 1,956,781 1,831,974
Administrative 433,147 473,416 952,626 983,121
------------ ------------ ------------ ------------
Total 1,333,858 1,373,890 2,909,407 2,815,095
------------ ------------ ------------ ------------
Operating Profit (Loss) (73,360) (152,262) 49,635 (137,080)
Interest 89,026 74,082 190,133 156,967
------------ ------------ ------------ ------------
Loss before Income Tax benefit (162,386) (226,344) (140,498) (294,047)
Income Tax Benefit (51,984) (83,747) (73,984) (108,797)
------------ ------------ ------------ ------------
Net Loss $ (110,402) $ (142,597) $ (66,514) $ (185,250)
Basic and Diluted Loss Per Share $ (0.03) $ (0.04) $ (0.02) $ (0.05)
Weighted Average Common Shares Outstanding 3,712,471 3,704,724 3,712,471 3,704,724
</TABLE>
STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) VITA FOOD PRODUCTS, INC.
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<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
-------------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
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<S> <C> <C> <C> <C> <C>
Balance, at January 1, 1999 3,704,724 $ 37,047 $ 3,353,583 $(1,176,395) $ 2,214,235
Proceeds from stock purchase
and stock option plans 2,753 $ 27 $ 2,021 $ 2,048
Net income (loss) $ (185,250) $ (185,250)
---------- ----------- ----------- ----------- -----------
Balance, at June 30, 1999 3,707,477 $ 37,074 $ 3,355,604 $(1,361,645) $ 2,031,033
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Balance, at January 1, 2000 3,712,471 $ 37,124 $ 3,359,800 $(866,026) $ 2,530,898
Proceeds from stock purchase
and stock option plans 3,435 $ 34 $ 4,348 $4,382
Net income (loss) $(66,514) $ (66,514)
---------- ----------- ----------- ----------- -----------
Balance, at June 30, 2000 3,715,906 $ 37,158 $ 3,364,148 $(932,540) $ 2,468,766
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</TABLE>
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STATEMENTS OF CASH FLOWS VITA FOOD PRODUCTS, INC.
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<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30
2000 1999
(UNAUDITED) (UNAUDITED)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (66,514) (185,250)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities
Depreciation and amortization 200,108 170,308
Changes in assets and liabilities:
Decrease in accounts receivable 1,643,653 1,265,691
(Increase) in deferred income taxes (73,984) (108,797)
Decrease in inventories 406,688 828,358
Decrease in prepaid expenses and other
current assets 36,667 1,192
(Decrease) in accounts payable (637,601) (281,498)
(Decrease) in accrued expenses (354,765) (295,798)
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Net cash provided by operating activities 1,154,252 1,394,206
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (238,707) (203,454)
Other assets 6,480 (43,442)
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Net cash used in investing activities (232,227) (246,896)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock purchase and stock option plans 4,382 2,048
Net payments under revolving loan facility (567,624) (1,027,733)
Payments on term loan facility (102,686) (123,224)
Net borrowings (payments) under capital lease obligations 9,653 (40,063)
Payments of other debt obligations (280,750) 0
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Net cash used in financing activities (937,025) (1,188,972)
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Net decrease in cash (15,000) (41,662)
Cash, at beginning of period 52,548 78,488
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Cash, at end of period 37,548 36,826
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</TABLE>
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VITA FOOD PRODUCTS, INC.
NOTE TO FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared in
accordance with the instructions for Form 10-QSB and do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements and should be read in conjunction with the
financial statements and related notes included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1999. In the opinion of
management, all adjustments necessary for a fair presentation of such interim
financial statements have been included. All such adjustments are of a normal
recurring nature.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2000 AND THE THREE MONTHS ENDED
JUNE 30, 1999
REVENUES. Net sales for the three months ended June 30, 2000 were $4,757,000
compared to $4,200,000 for the same period in 1999, an increase of $557,000 or
13%. This increase was in large part attributable to an increase in sales to
warehouse clubs. The increase was a combination of a 29% increase in sales of
herring products and a 3% increase in sales of salmon products, offset by an 18%
decrease in sales of other specialty products. The increase in herring sales was
attributable in large part to expanded distribution. The salmon increase was
attributable to sales of the Company's newer marinated salmon products
introduced in the second half of 1999. The decrease in other specialty products
was due to lower sales of the Company's shrimp cocktail products.
GROSS MARGIN. Gross margin for the three months ended June 30, 2000 was
$1,260,000 compared to $1,222,000 for the same period in 1999, an increase of
$38,000 or 3%. As a percentage of net sales, gross margin decreased to 26.5% in
the three months from 29.1% in the same period in 1999. The decrease in the
gross margin percentage was attributable to increased costs for both herring and
salmon, as well as increased costs for other materials and labor, without
corresponding increases in the sales prices of the Company's products.
OPERATING EXPENSES. Selling, marketing and administrative expenses for the three
months ended June 30, 2000 were $1,334,000 compared to $1,374,000 for the same
period in 1999, a decrease of $40,000 or 3%. As a percentage of net sales,
selling, marketing and administrative expenses decreased to 28.0% from 32.7% for
the same period in 1999. The decrease in the selling, marketing and
administrative expense margin was attributable in large part to relatively fixed
selling, marketing and administrative costs that did not increase as a result of
the 13% sales increase.
INTEREST EXPENSE. Interest and other expense, net, for the three months ended
June 30, 2000 was $89,000 compared to $74,000 for the same period in 1999, an
increase of $15,000 or 20%. This increase was attributable to higher interest
rates that the Company pays on its bank credit facilities, partially offset by a
decrease in the margin over the prime lending rate charged under its credit
facilities. As a result, the average interest rate the Company paid on its bank
credit facilities increased from less than 8% to over 9% per annum, an increase
of over 1% point.
INCOME TAXES. The Company provided for an income tax benefit of $52,000 for the
three months ended June 30, 2000, compared to an income tax benefit of $84,000
for the same period in 1999. As a percent to pretax loss, the income tax benefit
was 32% in 2000 and 37% in 1999. The income tax benefits for each period
represent anticipated utilization of these tax benefits during the respective
fiscal years.
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NET INCOME AND LOSS. As a result of the increases and decreases discussed above,
net loss for the three months ended June 30, 2000 was $110,000 or $0.03 per
share compared to net loss of $143,000 or $0.04 per share for the same period in
1999, a decrease in net loss of $33,000 or $0.01 per share.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2000 AND THE SIX MONTHS ENDED JUNE
30, 1999
REVENUES. Net sales for the six months ended June 30, 2000 were $10,976,000
compared to $9,581,000 for the same period in 1999, an increase of $1,395,000 or
15%. The increase was a combination of a 17% increase in sales of herring
products and a 14% increase in sales of salmon products, offset by a 9% decrease
in sales of other specialty products. The increase in sales was attributable in
part to strong warehouse club sales and sales of newer marinated salmon products
introduced in the second half of 1999.
GROSS MARGIN. Gross margin for the six months ended June 30, 2000 was $2,959,000
compared to $2,678,000 for the same period in 1999, an increase of $281,000 or
10%. As a percentage of net sales, gross margin was 27.0% in the six months
versus 28.0% in the same period in 1999. The decrease in the gross margin
percentage was attributable to increased prices for both herring and salmon, as
well as increased costs for other materials and labor, without corresponding
increases in the sales prices of the Company's products. The decrease in the
gross margin percentage was offset by favorable overhead variances and a change
in the sales mix from lower margin salmon products to higher margin herring
products.
OPERATING EXPENSES. Selling, marketing and administrative expenses for the six
months ended June 30, 2000 were $2,909,000 compared to $2,815,000 for the same
period in 1999, an increase of $94,000 or 3%. As a percentage of net sales,
selling, marketing and administrative expenses decreased to 26.5% from 29.4% for
the same period in 1999. The decrease in the selling, marketing and
administrative expense margin was attributable in large part to relatively fixed
selling and administrative costs that did not increase as a result of the 15%
sales increase, as well as lower bad debt expenses and professional fees.
INTEREST EXPENSE. Interest and other expense, net, for the six months ended June
30, 2000 was $190,000 compared to $157,000 for the same period in 1999, an
increase of $33,000 or 21%. This increase was attributable to higher interest
rates that the Company pays on its bank credit facilities. The average interest
rate the Company paid on its bank credit facilities increased from less than 8%
to over 9% per annum, an increase of over 1% point.
INCOME TAXES. The Company provided for an income tax benefit of $74,000 for the
six months ended June 30, 2000, compared to an income tax benefit of $109,000
for the same period in 1999. As a percent to pretax loss, the income tax benefit
was 53% in 2000 and 37% in 1999. The income tax benefits for each period
represent anticipated utilization of these tax benefits. The higher tax benefit
as a percentage of pretax loss in 2000 was primarily due to higher expected
utilization of its net operating loss carryforward.
NET INCOME AND LOSS. As a result of the increases and decreases discussed above,
net loss for the six months ended June 30, 2000 was $67,000 or $0.02 per share
compared to net loss of $185,000 or $0.05 per share for the same period in 1999,
a decrease in net loss of $118,000 or $0.03 per share.
FINANCIAL CONDITION
At June 30, 2000, the Company had $3,139,000 in working capital, compared to
$4,007,000 at December 31, 1999, a decrease of $868,000 or 22%. The decrease was
primarily attributable to the Company's typical seasonal cycle. Accounts
receivable and inventories are substantially higher at the end of the fiscal
year due to the seasonably higher sales and production activity in the fourth
quarter.
At June 30, 2000, the Company had $38,000 in cash and a revolving credit
facility of $5,250,000 and a term facility of $1,500,000 with its lender, each
of which expire April 30, 2001. Amounts outstanding under the revolving facility
and the term facility at June 30, 2000 were $3,209,000 and $390,000,
respectively. The rate of interest offered on both facilities was the prime
lending rate or LIBOR plus 2.45%. The facilities contain customary
representations,
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warranties, and covenants. At June 30, 2000, the Company was in compliance with
the covenants under its credit agreement.
Since December 31, 1999, the Company's current ratio increased to 2.2 from 2.1.
The ratio of long-term debt to total capitalization decreased to 59% from 63%,
primarily as a result of the improved profitability in 2000 and the lower
working capital requirements at mid-year. The Company believes its financial
resources are adequate to fund its needs for the next twelve months.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash provided by operating activities
was $1,154,000 for the six months ended June 30, 2000, compared to $1,394,000
for the same period in 1999. The decrease was primarily attributable to lower
reductions in inventories and higher payments on accounts payable, offset by
higher collections of accounts receivable during this period as compared to the
prior year period. The lower reduction in inventories was primarily due to
relatively higher expected sales volume in months following the end of the
second quarter. The higher payments on accounts payable and higher collections
on accounts receivable were primarily due to the higher respective balances at
the beginning of the current fiscal year than the prior fiscal year.
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities,
primarily related to capital expenditures, was $232,000 for the six months ended
June 30, 2000, compared to $247,000 for the same period in 1999, a decrease of
$15,000 or 6%.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash used in financing activities was
$937,000 for the six months ended June 30, 2000, compared to $1,189,000 for the
same period in 1999. The decrease in net cash used in financing activities was
primarily attributable to the changes outlined above which generated cash to pay
down the Company's revolving line of credit, term debt, and other debt
obligations.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The date of the Company's Annual Meeting of Stockholders was May 24,
2000.
(b), (c) At the Annual Meeting of Stockholders, the following matters were
submitted to a vote of the stockholders with the stated results:
(1) The election of the following persons as directors of the Company:
Director Votes For Votes Withheld
--------- --------- --------------
Stephen D. Rubin 3,576,826 15,800
Clark L. Feldman 3,576,826 15,800
Jeffrey C. Rubenstein 3,576,826 15,800
Neal Jansen 3,576,826 15,800
Michael Horn 3,576,826 15,800
Steven A. Rothstein 3,576,826 15,800
John Seramur 3,576,826 15,800
Joel Spungin 3,576,826 15,800
(2) The ratification of the appointment of BDO Seidman, LLP as the
Company's independent accountants for the year ending December 31,
2000.
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
3,582,359 6,767 3,500
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(3) The approval of the Amended and Restated 1996 Stock Option Plan for
Non-Employee Directors.
Votes For Votes Against Votes Abstained
--------- ------------- ---------------
3,539,705 49,921 3,000
There were no broker non-votes with respect to any of such matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER EXHIBIT TITLE
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27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VITA FOOD PRODUCTS, INC.
Date: August 9, 2000 By: /s/ Stephen D. Rubin
------------------------------
Stephen D. Rubin
President
Date: August 9, 2000 By: /s/ Jay H. Dembsky
------------------------------
Jay H. Dembsky
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
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