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 September 30, 1996 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 September 30, 1996, there were 1,635,867 shares of common stock, no par
value, outstanding.
<PAGE>
Part I - Financial Information
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
THIS FORM 10-Q CONTAINS FOWARD-LOOKING STATEMENTS WHICH INVOLVE RISK AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM
THE RESULTS DISCUSSED IN THE FOWARD-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, 1996.
The financial statements herein presented for the quarters ended September 30,
1996 and 1995, 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 in a way that changes very little from
year to 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.
Normally during the first quarter of the fiscal year the inventory levels
increase as a result of the beginning of the production season. As of
September 30, 1996, the Company's inventory was at one of the lowest levels
in years. The net working capital decreased from $4,136,000 as of June 30,
1996 to $3,262,000 as of September 30, 1996. The decrease was a result of the
the capital expenditure increase of $679,000 and the repurchase of common
stock of $407,000. This compares to a net working capital balance of
$3,882,000 as of September 30, 1995.
The Company's liquidity resources are 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 has a revolving line
of credit limit of $3,500,000 ($4,000,000 as of September 30, 1995) secured
by inventory and accounts receivable. As of September 30, 1996, the Company
did not have any borrowings outstanding on the line of credit. As of
September 30, 1995 the Company had $2,237,000 of available funds under the
line of credit limit of $4,000,000. As of September 30, 1996, the Company was
in compliance with all of the covenants and restrictions related to its
outstanding debt. The most significant source of internal liquidity is the
Company's net working capital. One possible source of long term liquidity
could be the sale of the idle production facility, although the Company is not
relying on the sale of this facility as a source of liquidity, the Company's
short and long- term liquidity would materially increase upon such a sale.
At this time the Company is not pursuing the sale of this facility. The
Company has been successful in leasing all of the idle facility other than
a portion occupied by Product development. The Company continues to lease
a portion of its operating facility and is in negotiations with the primary
tenant to increase their square footage.
<PAGE>
-2-
The Company has established a capital expenditure budget of approximately
$1,520,000 for the 1996-1997 fiscal year. These funds will primarily be used
to purchase new and refurbish existing equipment. The Company anticipates
financing these assets through internally generated funds and through the use
of debt financing. The Company has a commitment from a financial institution
to fund $850,000 of the 1996 - 1997 capital budget. As of September 30, 1996,
the Company has not borrowed any funds related to this commitment.
During the first quarter ended September 30, 1996, the Company repurchased
80,000 of common stock at a cost of $407,000 to offset the dilution caused by
stock issuances under the Company's stock purchase plan and under outstanding
options. The Company has no present intentions to repurchase any more stock
in the current fiscal year.
Results of Operations
Net sales decreased $436,000 or 7% in the first quarter of fiscal 1996. This
decrease was caused by the loss of the Confoco representation agreement
business which was only partially offset by higher dried apple sales. Other
revenue increased $88,000 as a result of higher rental income and reimbursement
of a product claim.
The loss of the Confoco sales reduced our gross margin on a comparative basis
from 8.4% as of September 1995 to 7.6% as of September 1996. Excluding
the Confoco sales from the comparative figures for September 1995, the
Company's gross margin on an on going basis improved slightly from 7.1% to
7.6%.
Selling, general and administrative expenses increased $57,000 or 13% in the
first quarter. This change is a result of increased travel expenses and
salaries as a result of hiring a regional sales manager.
Interest expense decreased $52,000 as a result of the payoff of the balance
on the line of credit and the interest income from investing the temporary
excess cash.
<PAGE>
-3-
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no legal proceedings pending.
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
b. Reports on Form 8-K - none
<PAGE>
VACU-DRY COMPANY
CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
Three Months Three Months
Ended Ended
9/30/96 9/30/95
------------ ------------
REVENUES:
Net sales $6,043,000 $6,479,000
Other 148,000 60,000
---------- ----------
Total revenue $6,191,000 $6,539,000
---------- ----------
COST & EXPENSES:
Cost of sales 5,584,000 5,934,000
Selling, general &
administration 494,000 437,000
Interest 44,000 96,000
---------- ----------
$6,122,000 $6,467,000
---------- ----------
EARNINGS BEFORE INCOME TAXES 69,000 72,000
PROVISION FOR INCOME TAXES 27,000 29,000
---------- -----------
NET EARNINGS $ 42,000 $ 43,000
========== ===========
EARNINGS PER COMMON SHARE $.03 $.03
==== ====
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS 1,675,120 1,698,072
========= =========
See notes to interim financial statements
<PAGE>
VACU-DRY COMPANY
Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY
<C> <C> <C> <C> <C> <C>
CURRENT ASSETS: 9/30/96 9/30/95 6/30/96 CURRENT LIABILITIES: 9/30/96 9/30/95 6/30/96
Cash $515 $215 $214 Borrowings under line of credit $-0- $1,763 $826
Accounts receivable 1,964 2,769 2,684 Current maturities of long-term debt 415 480 415
Other receivable 16 161 -0- Accounts payable 2,071 2,045 678
Inventories 3,802 5,369 3,430 Accrued payroll & related liabilities 640 621 476
Prepaid expenses 96 264 116 Accrued expenses 72 261 106
Current deferred taxes 225 303 225 Deferred factory overhead 150 -0- -0-
_______ ______ ______
Total current assets $6,618 $9,081 $6,669 Income taxes payable 8 29 32
______ ______ ______
Total current liabilities $3,356 $5,199 $2,533
Net property, plant & ------ ------ ------
equipment 7,335 7,252 6,918
LONG-TERM DEBT - Net of
current maturities 1,525 1,985 1,628
DEFERRED INCOME TAXES 748 912 748
SHAREHOLDERS' EQUITY:
Capital stock 3,605 3,952 4,001
Retained earnings 4,719 4,285 4,677
----- ----- -----
Total shareholders' equity 8,324 8,237 8,678
_______ _______ _______ Total liabilities and ------- ------- -------
Total Assets $13,953 $16,333 $13,587 shareholders' equity $13,953 $16,333 $13,587
======= ======= ======= ======= ======= =======
</TABLE>
See notes to interim financial statements
<PAGE>
VACU-DRY COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
1996 1995
Net earnings $42,000 $43,000
_______ _______
Adjustments to reconcile net earnings to net
cash provided by operating activities -
Depreciation expense 262,000 229,000
Changes in certain assets & liabilities
Decrease (increase) in receivables 704,000 (1,096,000)
Decrease (increase) in inventories (372,000) 45,000
Decrease (increase) in prepaid assets 20,000 (88,000)
Increase in accounts payable 1,393,000 1,652,000
(Decrease) in accrued expenses (34,000) (131,000)
Increase in accrued p/r & liabilities 164,000 97,000
Increase in deferred overhead 150,000 -0-
Increase (decrease) in income taxes payable (24,000) 29,000
_________ _________
Total adjustments 2,263,000 737,000
_________ _________
Net cash provided by(used for)
operating activities 2,305,000 780,000
_________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (679,000) (60,000)
_________ _________
Net cash (used for) investing activities (679,000) (60,000)
_________ _________
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings under line of credit 253,000 2,713,000
Payments on line of credit (1,079,000) (3,301,000)
Issuance of common stock 11,000 16,000
Repurchase of common stock (407,000) -0-
Principal payments of long-term debt (103,000) (120,000)
_________ __________
Net cash provided by(used for)
financing activities (1,325,000) (692,000)
_________ __________
NET INCREASE IN CASH 301,000 28,000
CASH AT THE BEGINNING OF THE YEAR 214,000 187,000
_________ _________
TOTAL CASH AT THE END OF THE PERIOD $515,000 $215,000
========= =========
See notes to interim financial statements
<PAGE>
VACU-DRY COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30, 1996
Note 1 - The Interim Financial Statements herein presented for the
three months ended September 30, 1996, reflect all
adjustments which are in the opinion of management
necessary to a fair statement of the results of operations
for the period then ended. The statements are unaudited and
are not necessarily indicative of results for the full
year.
Note 2 - Inventories -
Inventories are stated at the lower of cost, using the last-
in, first-out (LIFO) method or market.
The excess of current cost of the inventory over LIFO cost
was $2,113,000 at September 30, 1996 and $2,113,000 at
June 30, 1996.
Inventories at September 30, 1996 and June 30, 1996,
consisted of the following:
9/30/96 6/30/96
Finished goods $2,694,000 $2,757,000
Work in progress 201,000 233,000
Raw materials, &
containers 907,000 440,000
__________ __________
$3,802,000 $3,430,000
Note 3 - Statement of Cash Flows -
Interest and income tax payments reflected in the
Consolidated Statement of Cash Flows were as follows:
1996 1995
Interest paid $45,000 $97,000
Income taxes paid $53,000 - 0 -
Note 4 - Income Taxes -
The effective income tax rate for 1996 is 40%, which
compares to 40% for 1995. As of June 30, 1996, the Company
has tax credit carryforwards of $62,000 and $99,000
available to offset future federal and state taxable income.
<PAGE>
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: November 13, 1996 (Gary L. Hess)
_______________________
Gary L. Hess, President
Date: November 13, 1996 (Tom Eakin)
_______________________
Tom Eakin, VP, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 515,000
<SECURITIES> 0
<RECEIVABLES> 2,028,000
<ALLOWANCES> 64,000
<INVENTORY> 3,802,000<F1>
<CURRENT-ASSETS> 6,618,000
<PP&E> 17,244,000
<DEPRECIATION> 10,389,000
<TOTAL-ASSETS> 13,953,000
<CURRENT-LIABILITIES> 3,356,000
<BONDS> 0
0
0
<COMMON> 3,605,000
<OTHER-SE> 4,719,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 13,953,000
<SALES> 6,043,000
<TOTAL-REVENUES> 6,191,000
<CGS> 5,584,000
<TOTAL-COSTS> 5,584,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 44,000
<INCOME-PRETAX> 69,000
<INCOME-TAX> 27,000
<INCOME-CONTINUING> 69,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,000
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
<FN>
<F1>NET OF LIFO RESERVE OF $2,113,000
<F2>RETAINED EARNINGS
</FN>
</TABLE>
