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 March 31, 1997 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: ____ NO:__X__
As of May 12, 1997, there were 1,640,845 shares of common stock, no par value,
outstanding.
<PAGE>
Part 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
VACU-DRY COMPANY
CONDENSED STATEMENT OF EARNINGS
(UNAUDITED)
<TABLE>
<C>Nine Months <C>Nine Months <C>Three Months <C>Three Months
3/31/97 3/31/96 3/31/97 3/31/96
REVENUES:
Net sales $18,233,000 $20,304,000 $5,894,000 $7,053,000
Other 531,000 584,000 176,000 241,000
___________ ___________ __________ __________
Total revenue $18,764,000 $20,888,000 $6,070,000 $7,294,000
COST & EXPENSES:
Cost of sales 16,208,000 18,306,000 5,392,000 6,379,000
Selling, general &
administrative 1,625,000 1,521,000 545,000 596,000
Interest 175,000 248,000 82,000 79,000
___________ ___________ __________ __________
Total cost & expenses $18,008,000 $20,075,000 $6,019,000 $7,054,000
EARNINGS BEFORE INCOME TAXES 756,000 813,000 51,000 240,000
PROVISION FOR INCOME TAXES 306,000 331,000 24,000 96,000
________ ________ ________ ________
NET EARNINGS $450,000 $482,000 $27,000 $144,000
======== ======== ======= ========
EARNINGS PER COMMON SHARE $.27 $.28 $.02 $.08
==== ==== ==== ====
WEIGHTED AVERAGE COMMON SHARES
AND EQUIVALENTS 1,650,001 1,702,091 1,638,739 1,706,289
See notes to interim financial statements
</TABLE>
VACU-DRY COMPANY
Balance Sheets
(Unaudited)
(Dollars in thousands)
<TABLE>
CURRENT ASSETS: <C>3/31/97 <C>3/31/96<C>6/30/96 CURRENT LIABILITIES: <C>3/31/97 <C>3/31/96 <C>6/30/96
Cash $250 $271 $214 Borrowings under line of credit $3,428 $1,475 $826
Accounts receivable 2,306 2,744 2,684 Current maturities of long-term debt 576 415 415
Other receivable 27 18 -0- Accounts payable 1,461 1,591 678
Inventories 7,692 5,395 3,430 Accrued payroll & related liabilities 742 644 476
Prepaid expenses 16 152 116 Accrued expenses 123 144 106
Current deferred taxes 225 303 225 Income taxes payable -0- 186 32
_______ _______ ______ ______ ______ ______
Total current assets $10,516 $ 8,883 $6,669 Total current liabilities $6,330 $4,455 $2,533
Net property, plant & LONG-TERM DEBT - Net of
equipment 7,337 6,919 6,918 current maturities 1,927 1,732 1,628
DEFERRED INCOME TAXES 843 905 748
SHAREHOLDERS' EQUITY;
Capital stock 3,626 3,985 4,001
Retained earnings 5,127 4,725 4,677
_____ _____ _____
Total shareholders' equity 8,753 8,710 8,678
_______ _______ _______ Total liabilities and _______ _______ ______
Total Asset $17,853 $15,802 $13,587 shareholders' equity $17,853 $15,802 $13,587
======= ======= ======= ======= ======= =======
See notes to interim financial statements
</TABLE>
VACU-DRY COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
Net earnings $450,000 $482,000
________ ________
Adjustments to reconcile net earnings to net
cash provided by(used for)operating activities -
Refund of reserve related to debt owing to the
State of California -0- (110,000)
Depreciation expense 787,000 701,000
Deferred income tax provision 95,000 (7,000)
Changes in certain assets & liabilities
(Increase) decrease in receivables 351,000 (928,000)
(Increase) decrease in inventories (4,262,000) 19,000
Decrease in prepaid assets 100,000 24,000
Increase in accounts payable 783,000 1,198,000
(Decrease) increase in accrued expenses 17,000 (247,000)
Increase in accrued payroll & related liab 266,000 120,000
Increase (decrease) in income taxes payable (32,000) 186,000
__________ __________
Total adjustments (1,895,000) 956,000
___________ __________
Net cash provided by operating activities (1,445,000) 1,438,000
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (401,000) (199,000)
___________ _________
Net cash (used for) investing activities (401,000) (199,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings under the line of credit 6,483,000 8,736,000
Payments on line of credit (3,881,000) (9,612,000)
Employee purchase of Company stock 32,000 49,000
Repurchase of common stock (407,000) -0-
Principal payments of long-term debt (345,000) (328,000)
_________ _________
Net cash used by financing activities 1,882,000 (1,155,000)
_________ _________
NET INCREASE (DECREASE) IN CASH 36,000 84,000
CASH AT THE BEGINNING OF THE YEAR 214,000 187,000
________ ________
TOTAL CASH AT THE END OF THE PERIOD $250,000 $271,000
======== ========
See notes to interim financial statements
VACU-DRY COMPANY
NOTES TO INTERIM FINANCIAL STATEMENTS
NINE MONTHS ENDED MARCH 31, 1997
Note 1 - The accompanying 1997 and 1996 unaudited interim financial
statements have been prepared pursuant to the rules of the
Securities and Exchange Commission. Certain information and
disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations although the Company believes these
disclosures are adequate to make the information not
misleading. In the opinion of management, all adjustments
necessary for a fair presentation for the period presented have
been reflected and are of a normal recurring nature. These
interim financial statements should be read in conjunction with
the financial statements and notes thereto for each of the
three years in the period ended June 30, 1996. The results of
operations for the nine month period ended March 31, 1997 are
not indicative of the results that may be achieved for the
entire year ending June 30, 1997.
Reclassifications - Certain 1996 amounts were
reclassified to conform to the 1997 presentation.
Note 2 - Inventories -
Inventories are stated at the lower of cost, using the
last-in, first-out (LIFO) method or market.
Inventories at March 31, 1997 and June 30, 1996,
consisted of the following:
3/31/97 6/30/96
------- -------
Finished goods $5,845,000 $2,757,000
Work in progress 473,000 233,000
Raw materials, &
containers 1,374,000 440,000
__________ __________
$7,692,000 $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:
1997 1996
Interest paid $159,000 $252,000
Income taxes paid $376,000 $130,000
Supplemental disclosure of cash flow information:
1997 1996
Non-cash investing and financing activities:
Liabilities assumed in the
acquisition of equipment $805,000 $ -0-
Note 4 - Income Taxes -
The effective income tax rate for 1997 is 40%, which
compares to 41% for 1996
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
THIS FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISK AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN THE FORWARD-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 March 31,
1997 and 1996, 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.
This year, as a result of certain processing efficiencies and a change in our
sales mix (resulting in larger carryover inventory balances), our inventories
will be at their highest level as of the current quarter. At this time we are
anticipating that our inventory balances at the end of the current fiscal year
will be higher than last year as result of these changes. The net working
capital as of March 31, 1997, 1996 and June 30, 1996 are very comparable. The
largest increase in working capital is a result of the higher inventory
balance which has been funded by the increase in the borrowings under the line
of credit. The Company increased its long-term debt by $805,000 as of the end
of December 1996.
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 secured by inventory and accounts receivable. As
of March 31, 1997, the Company had $72,000 of available funds on the line of
credit. As of March 31, 1996 the Company had $2,025,000 of available funds
under the line of credit. The increase in the inventory balance between March
31, 1997 and 1996, resulted in the decrease in the available funds under the
line of credit. We are estimating that this will be the lowest level of
available funds during the current fiscal year. As of March 31, 1997, 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 additional possible source of long term
liquidity could be the sale of the idle production facility, which is presently
being leased to third parties. Although the Company is not relying on or
pursuing 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. In
regard to this facility, there is some indication that in the latter part of
calendar 1997 certain leases may not be renewed. Advance planning to locate
new tenants is already underway. The Company continues to lease a portion of
its operating facility and is in negotiations with the primary tenant to
increase its square footage.
<PAGE>
The Company has established a capital expenditure budget of approximately
$1,813,000 for the fifteen month period April 1, 1996 through June 30, 1997.
To date, capital expenditures of $1,477,000 have been made. These funds are
being primarily 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. During the current fiscal year, the
Company borrowed $805,000 of long-term debt to finance a portion of the
$1,813,000 capital budget. The note for $805,000 is dated December 31, 1996
with a term of 60 months, at a variable interest rate equal to the average
weekly yield of 30 day Commercial Paper, plus 2.10% and is secured by specific
machinery and equipment.
During the first quarter ended September 30, 1996, the Company repurchased
80,000 shares of common stock at a cost of $407,000. This repurchase was to
offset the dilution caused by stock issuances under the Company's stock
purchase plan and under outstanding options. The Company received approval
from the Bank prior to the repurchase of 80,000 shares of common stock during
the current fiscal year. The Company has no present intentions to repurchase
more stock in the current fiscal year.
Results of Operations
Quarter
Net sales decreased $1,159,000 or 16% in the third quarter of fiscal 1997 as
compared to the third quarter of fiscal 1996. In the third quarter of fiscal
1996 sales increased $2,522,000 or 56%, 22% of this increase was a result of
increased sales from a single customer. This increase in sales did not
continue in the fourth quarter of fiscal 1996 nor did this volume to one
customer recur in the third quarter of fiscal 1997. The loss of the Confoco
business only accounted for $252,000 of lost net sales between quarters. Most
of the adverse sales impact of the lost Confoco business incurred in the first
two quarters of fiscal 1997. Other revenue decreased $65,000 as a result of a
non-recurring refund in 1996 of $132,000 from the State of California
Superfund for the clean-up of underground storage tanks.
Cost of sales for the quarter ended March 31, 1997 increased from 90.4% to
91.5% of net sales. The overall margins for the third quarter of fiscal 1997
were slightly lower than the third quarter of fiscal 1996 as a result of
decreases in overall prices due to the change in the sales mix. Overall
prices were lower in fiscal 1997, but the margins between years remained
comparable as a result of the higher overhead absorption due to the increased
production in the third quarter of fiscal 1997.
Selling, general and administrative expenses decreased $51,000 or 9% in the
third quarter of fiscal 1997. This change is a composite of a decrease in
expenses as a result of not incurring the costs related to the Storm Damage in
fiscal 1996 and increases in travel expenses and consulting fees related to
the strategic planning process which was incurred in fiscal 1997.
Interest expense was very comparable between quarters. Interest expense for
the fourth quarter should be higher than fiscal 1996 as a result of the long-
term debt borrowing of $805,000 and increased borrowings on the line of credit
as a result of the higher inventory levels.
Year-to Date
Net sales decreased $2,071,000 or 10% in the nine months ended March 31, 1997.
The loss of the sales of Confoco products accounted for $1,974,000 of this net
sales decline. Other income decreased $53,000 during the comparative nine
month period as a result of the net change between periods of non-recurring
income.
Cost of sales as a percent of net sales decreased from 90% as of March 31,
1996 to 88.9% as of March 31, 1997. The increase in the comparative margins
is a result of the increased production volume and the related overhead
absorption during the nine months ended March 31, 1997.
Selling, general and administrative expenses increased $104,000 or 7% in the
nine months ended March 31, 1997. This increase is a result of higher
expenses in the following areas: consultants for our strategic plan, travel
expenses and increased salaries(new regional sales manager).
Interest expense decreased $73,000 as a result of our lower average borrowings
on the line of credit during the nine months ended March 31, 1997. Interest
expense for the fourth quarter should increase as a result of the long-term
debt borrowing of $805,000 and increased borrowings on the line of credit as a
result of the higher inventory levels.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings pending.
Item 2. Changes in Securities
The Company's revolving line of credit agreement with its Bank
dated( November 1, 1996), includes a covenant which prohibits the
declaring or paying of any dividend or distribution in either
cash, stock or any other property on the Company's stock now or
hereafter outstanding, nor redeem, retire, repurchase or otherwise
acquire shares of any class of the Company's stock now or
hereafter outstanding, without the prior approval by the Bank. The
Company received approval from the Bank prior to the repurchase of
80,000 shares of common stock during the current fiscal year.
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 5. Other Information
Confoco Representation Agreement
Effective July 1, 1996, the representation agreement with Confoco,
Inc., for the sale of low moisture banana and pumpkin flakes
terminated. Confoco, Inc., has consolidated the sales and
marketing of its products internally. From July 1, 1995 through
March 31, 1996 the Company recorded sales of $1,974,000 of Confoco
products with a gross profit of $294,000. Under the Company's
agreement with Confoco, for the two years from the date of
termination the Company is prohibited from distributing in the
United States, Canada and Mexico, banana products similar to
those currently being sold.
Item 6. Exhibits & Reports on Form 8-K
a. Exhibits - none
(27) Financial Data Schedule (by electronic filing only)
b. Reports on Form 8-K - none
<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: May 13, 1997 (Gary L. Hess)
_______________________
Gary L. Hess, President
Date: May 13, 1997 (Tom Eakin)
_______________________
Tom Eakin, VP, Finance
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10Q FOR
THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMTENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 250,000
<SECURITIES> 0
<RECEIVABLES> 2,369,000
<ALLOWANCES> 63,000
<INVENTORY> 7,692,000<F1>
<CURRENT-ASSETS> 10,516,000
<PP&E> 18,267,000
<DEPRECIATION> 10,930,000
<TOTAL-ASSETS> 17,853,000
<CURRENT-LIABILITIES> 6,330,000
<BONDS> 0
0
0
<COMMON> 3,626,000
<OTHER-SE> 5,127,000<F2>
<TOTAL-LIABILITY-AND-EQUITY> 17,853,000
<SALES> 18,233,000
<TOTAL-REVENUES> 18,764,000
<CGS> 16,208,000
<TOTAL-COSTS> 16,208,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 175,000
<INCOME-PRETAX> 756,000
<INCOME-TAX> 306,000
<INCOME-CONTINUING> 450,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 450,000
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
<FN>
<F1>NET OF LIFO RESERVE OF $2,113,000
<F2>RETAINED EARNINGS
</FN>
</TABLE>
