<PAGE> 1
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 September 30, 2000
Commission File Number 1-12599
VITA FOOD PRODUCTS, INC.
------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
NEVADA #36-3171548
------------------------------- -------------
(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)
Number of shares outstanding of Issuer's common stock, par value $.01 per share,
as of November 10, 2000 is 3,722,906.
Transitional Small Business Disclosure Format: Yes No X
----- -----
<PAGE> 2
VITA FOOD PRODUCTS, INC.
REPORT ON FORM 10-QSB FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
INDEX
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
Notes to Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results Balance Sheets of Operations..... 6
II. OTHER INFORMATION............................................... 8
2
<PAGE> 3
<TABLE>
<CAPTION>
BALANCE SHEETS VITA FOOD PRODUCTS, INC.
=============================================================================================================
SEPTEMBER 30, DECEMBER 31,
2000 1999
(UNAUDITED) (AUDITED)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 19,441 $ 52,548
Accounts receivable-trade, net of allowance for discounts,
returns, and doubtful accounts of $265,000 in 2000 and
$282,000 in 1999 2,194,325 3,470,998
Inventories
Raw material and supplies 1,764,631 1,880,744
Work in process 133,695 96,156
Finished goods 2,006,301 1,625,364
Prepaid expenses and other current assets 273,217 371,706
Deferred income taxes 326,418 200,000
------------ ------------
Total Current Assets 6,718,028 7,697,516
Property, Plant and Equipment
Land 35,000 35,000
Building and Improvements 1,865,103 1,747,147
Machinery and Office Equipment 5,612,889 5,292,751
------------ ------------
7,512,992 7,074,898
Less accumulated depreciation and amortization (4,605,155) (4,309,753)
------------ ------------
Net Property Plant & Equipment 2,907,837 2,765,145
Other Assets 129,130 134,280
------------ ------------
Total Assets $ 9,754,995 $ 10,596,941
-------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term obligations $ 360,923 $ 526,095
Accounts payable 2,261,493 2,105,711
Accrued other expenses 839,143 1,058,483
------------ ------------
Total Current Liabilities 3,461,559 3,690,289
Long-term Obligations, Less Current Maturities 3,906,763 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 3,722,906 shares in 2000 and 3,712,471 shares in 1999 37,228 37,124
Additional paid in capital 3,371,265 3,359,800
Retained Earnings (1,021,820) (866,026)
------------ ------------
Total Shareholders' Equity 2,386,673 2,530,898
------------ ------------
Total Liabilities and Shareholders' Equity $ 9,754,995 $ 10,596,941
-------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS VITA FOOD PRODUCTS, INC.
======================================================================================================================
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales $5,433,755 $5,257,156 $16,409,374 $14,837,838
Cost of Goods Sold 4,095,004 3,799,511 12,111,582 $10,702,179
---------- ---------- ----------- -----------
Gross Margin 1,338,751 1,457,645 4,297,792 4,135,659
Selling and Administrative Expenses
Selling, Marketing & Distribution 948,266 888,193 2,905,047 $2,720,167
Administrative 438,302 363,645 1,390,929 $1,346,766
---------- ---------- ----------- -----------
Total 1,386,568 1,251,838 4,295,976 4,066,933
---------- ---------- ----------- -----------
Operating Profit (Loss) (47,817) 205,807 1,816 68,726
Interest 93,896 85,672 284,028 242,639
---------- ---------- ----------- -----------
Income (loss) before Income Tax Expense (Benefit) (141,713) 120,135 (282,212) (173,913)
Income Tax Expense (Benefit) (52,434) 44,449 (126,418) (64,348)
---------- ---------- ----------- -----------
Net Income (Loss) ($89,279) $75,686 ($155,794) ($109,565)
Basic Earnings (Loss) Per Share ($0.02) $0.02 ($0.04) ($0.03)
Weighted Average Common Shares Outstanding 3,719,330 3,707,477 3,714,774 3,705,652
Diluted Earnings (Loss) Per Share (0.02) 0.02 (0.04) (0.03)
Weighted Average Common Shares Outstanding 3,719,330 3,730,681 3,714,774 3,705,652
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED) VITA FOOD PRODUCTS, INC.
======================================================================================================================
COMMON STOCK ADDITIONAL
---------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
----------------------------------------------------------------------------------------------------------------------
<S> <C> <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) ($109,565) ($109,565)
--------- ------- ---------- ------------ -----------
Balance, at September 30, 1999 3,707,477 $37,074 $3,355,604 ($1,285,960) $2,106,718
----------------------------------------------------------------------------------------------------------------------
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 10,435 $104 $11,465 $11,569
Net income (loss) ($155,794) ($155,794)
--------- ------- ---------- ------------ -----------
Balance, at September 30, 2000 3,722,906 $37,228 $3,371,265 ($1,021,820) $2,386,673
----------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS VITA FOOD PRODUCTS, INC.
===================================================================================================================
FOR THE NINE MONTHS
ENDED SEPTEMBER 30
2000 1999
(UNAUDITED) (UNAUDITED)
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (155,794) (109,565)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization 296,875 266,936
Changes in assets and liabilities:
Decrease in accounts receivable 1,276,673 1,032,004
(Increase) in deferred income taxes (126,418) (64,348)
(Increase) decrease in inventories (302,363) 360,384
(Increase) decrease in prepaid expenses and other current assets 98,489 (202,411)
Increase (decrease) in accounts payable 155,782 (73,869)
(Decrease) in accrued expenses (219,340) (226,580)
---------- ----------
Net cash provided by operating activities 1,023,904 982,551
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (438,094) (595,800)
Other assets 3,677 (45,733)
---------- ----------
Net cash used in investing activities (434,417) (641,533)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from stock purchase and stock option plans 11,569 2,048
Net payments under revolving loan facility (171,456) (91,909)
Payments on term loan facility (164,298) (184,835)
Net payments under capital lease obligations (17,659) (61,083)
Payments of other debt obligations (280,750)
---------- ----------
Net cash used in financing activities (622,594) (335,779)
---------- ----------
Net decrease in cash (33,107) 5,239
Cash, at beginning of period 52,548 78,488
---------- ----------
Cash, at end of period 19,441 83,727
===================================================================================================================
</TABLE>
5
<PAGE> 6
VITA FOOD PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
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 SEPTEMBER 30, 2000 AND THE THREE MONTHS
ENDED SEPTEMBER 30, 1999
REVENUES. Net sales for the three months ended September 30, 2000 were
$5,434,000 compared to $5,257,000 for the same period in 1999, an increase of
$177,000 or 3%. The increase was a combination of no increase or decrease in
sales of herring products, a 10% increase in sales of salmon products, and a 12%
decrease in sales of other specialty products. The salmon increase was
attributable to sales of the Company's newer marinated salmon products
introduced in the second half of 1999 as well as core sliced smoked items. The
decrease in other specialty products was primarily due to lower sales of shrimp
cocktail and hommus items.
GROSS MARGIN. Gross margin for the three months ended September 30, 2000 was
$1,339,000 compared to $1,458,000 for the same period in 1999, a decrease of
$119,000 or 8%. As a percentage of net sales, gross margin was 24.6% in the
three months versus 27.7% in the same period in 1999. The decrease in the gross
margin percentage was attributable in part 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. The
decrease in gross margin percentage was also attributable to unfavorable
overhead variances resulting from reduced herring production. Herring production
was lower this quarter than in the prior year because the Company shut down
production from the beginning of the quarter through mid-August to make
improvements to the herring production floor.
OPERATING EXPENSES. Selling, marketing and administrative expenses for the three
months ended September 30, 2000 were $1,387,000 compared to $1,252,000 for the
same period in 1999, an increase of $135,000 or 11%. As a percentage of net
sales, selling, marketing and administrative expenses increased to 25.5% from
23.8% for the same period in 1999. The increase in the selling, marketing and
administrative expense margin was attributable in large part to 1999
administrative costs that were lower by $70,000. The lower 1999 costs were the
result of a one-time reclassification of certain professional fees to plant
overhead expenses and the capitalization of acquisition expenses incurred during
the first nine months of 1999.
INTEREST EXPENSE. Interest and other expense, net, for the three months ended
September 30, 2000 was $94,000 compared to $86,000 for the same period in 1999,
an increase of $8,000 or 9%. This increase was primarily attributable to higher
interest rates that the Company pays on its bank credit facilities. These higher
rates resulted from higher market rates, partially offset by a decrease in the
margin over benchmark rates charged under the Company's credit facilities.
6
<PAGE> 7
INCOME TAXES. The Company provided for an income tax benefit of $52,000 for the
three months ended September 30, 2000, compared to an income tax expense of
$44,000 for the same period in 1999. As a percent to pretax income (loss), the
income tax expense (benefit) was 37% in 2000 and 1999. The income tax benefits
for each period represent anticipated utilization of these tax benefits during
the respective fiscal years.
NET INCOME AND LOSS. As a result of the increases and decreases discussed above,
net loss for the three months ended September 30, 2000 was $89,000 or $0.02 per
share compared to net income of $76,000 or $0.02 per share for the same period
in 1999, a decrease in net income of $165,000 or $0.04 per share.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND THE NINE MONTHS ENDED
SEPTEMBER 30, 1999
REVENUES. Net sales for the nine months ended September 30, 2000 were
$16,409,000 compared to $14,838,000 for the same period in 1999, an increase of
$1,571,000 or 11%. The increase was a combination of a 11% increase in sales of
herring products, a 13% increase in sales of salmon products, and a 10% decrease
in sales of other specialty products. The overall increase in sales was
attributable in part to sales to two new large customers, strong warehouse club
sales, and sales from newer marinated salmon products introduced in the second
half of 1999.
GROSS MARGIN. Gross margin for the nine months ended September 30, 2000 was
$4,298,000 compared to $4,136,000 for the same period in 1999, an increase of
$162,000 or 4%. As a percentage of net sales, gross margin was 26.2% in the nine
months versus 27.9% 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 nine
months ended September 30, 2000 were $4,296,000 compared to $4,067,000 for the
same period in 1999, an increase of $229,000 or 6%. As a percentage of net
sales, selling, marketing and administrative expenses decreased to 26.2% from
27.4% for the same period in 1999. The decrease in the selling, marketing and
administrative expense margin was attributable in large part to relatively lower
promotional costs, lower bad debt expenses, and other relatively fixed
administrative costs that did not increase in step with the 11% sales increase.
INTEREST EXPENSE. Interest and other expense, net, for the nine months ended
September 30, 2000 was $284,000 compared to $243,000 for the same period in
1999, an increase of $41,000 or 17%. This increase was primarily attributable to
higher interest rates that the Company pays on its bank credit facilities. These
higher rates resulted from higher market rates, partially offset by a decrease
in the margin over benchmark rates charged under the Company's credit
facilities.
INCOME TAXES. The Company provided for an income tax benefit of $126,000 for the
nine months ended September 30, 2000, compared to an income tax benefit of
$64,000 for the same period in 1999. As a percent to pretax loss, the income tax
benefit was 45% 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 nine months ended September 30, 2000 was $156,000 or $0.04 per
share compared to net loss of $110,000 or $0.03 per share for the same period in
1999, an increase in net loss of $46,000 or $0.01 per share.
FINANCIAL CONDITION
At September 30, 2000, the Company had $3,256,000 in working capital, compared
to $4,007,000 at December 31, 1999, a decrease of $751,000 or 19%. The decrease
was primarily attributable to the Company's typical seasonal cycle following the
busiest quarter (the fourth quarter) of the year. Accounts receivable are
substantially higher at the end of the fiscal year due to the seasonably higher
sales activity in the fourth quarter as compared to the third quarter.
7
<PAGE> 8
At September 30, 2000, the Company had $19,000 in cash and a revolving credit
facility of $5,250,000 and 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 September 30, 2000 were $3,605,000 and $328,000,
respectively. The rate of interest offered on both facilities was the prime
lending rate or LIBOR plus 2.45%. The facilities contain customary
representations, warranties, and covenants. At September 30, 2000, the Company
was in compliance with the covenants under its credit agreement.
Since December 31, 1999, the Company's current ratio decreased to 1.9 from 2.1.
The ratio of long-term debt to total capitalization decreased slightly to 62%
from 63%. The Company believes its financial resources are adequate to fund its
needs for the next twelve months.
On October 6, 2000, the Metropolitan Water Reclamation District of Greater
Chicago (the "District") filed liens on the Company's operating facility in
Chicago in connection with unpaid user charges assessed by the District. The
Company is contesting the amount of user charges assessed by the District for
1994 - 1997 and 1999. The Company believes that the eventual liability will not
materially exceed its presently established accruals.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash provided by operating activities
was $1,024,000 for the nine months ended September 30, 2000, compared to
$983,000 for the same period in 1999. The increase was primarily attributable to
increased collections of accounts receivable, a relative decrease in prepaid
expenses, and an increase in accounts payable, offset by a relative increase in
inventories during this period as compared to the prior year period. The
relative decrease in prepaid expenses was due to the acquisition costs expended
and capitalized in 1999, which were subsequently written off. The relative
increases in inventories and accounts payable were primarily due to relatively
higher expected sales volume in months following the end of the third quarter.
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities was
$434,000 for the nine months ended September 30, 2000, compared to $642,000 for
the same period in 1999, a decrease of $208,000 or 32%.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash used in financing activities was
$623,000 for the nine months ended September 30, 2000, compared to $336,000 for
the same period in 1999. The increase in net cash used in financing activities
was primarily attributable to the changes outlined above in this section which
generated greater cash to pay down the Company's revolving line of credit and
other debt obligations.
Certain balances for 1999 were reclassified in order to make the presentation
consistent with that in 2000.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER EXHIBIT TITLE
------ -------------
27.1 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
8
<PAGE> 9
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: November 10, 2000 By: //Stephen D. Rubin//
-------------------------------------
Stephen D. Rubin
President
Date: November 10, 2000 By: //Jay H. Dembsky//
--------------------------------------
Jay H. Dembsky
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
9
