SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT PURSUANT
TO SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 26, 1998
---------------
VACU-DRY COMPANY
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
California
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation
01912 94-1069729
- ------------------------ ------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
7765 Healdsburg Avenue, Sebastopol, California 95472
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(707) 829-4600
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Not Applicable
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
The Registrant submits this Form 8-K/A in order to supply the financial
statements and schedules with respect to the Registrant's acquisition of
substantially all of the assets of Made In Nature, Inc. (Made In Nature) on June
11, 1998. Such assets consisted principally of inventory, accounts receivable,
trademarks and contract rights. The consideration for the purchase consisted of
cash of $336,000, the assumption of certain liabilities in an amount yet to be
determined and the issuance of five year warrants to purchase 112,000 shares of
the Registrant's common stock at $8.00 per share. The cash required to
consummate the transaction was provided pursaunt to a credit facility from Wells
Fargo Bank, N.A. The information should be read in conjunction with the
Registrant's Form 8-K filed with the Commission on June 22, 1998.
ITEM 7. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements of Made In Nature, Inc.
Report of Independent Auditors
Balance Sheets at December 31, 1997 and 1996
Statements of Revenues and Expenses for the Year ended December 31, 1997
and for the periods from April 8, 1996 to December 31, 1996 and from
January 1, 1996 to April 7, 1996.
Statements of Changes in Shareholders' Deficit for the Year Ended
December 31, 1997 and for the periods from April 8, 1996 to December
31, 1996 and from January 1, 1996 to April 7, 1996
Statements of Cash Flows for the Years Ended December 31, 1997 and for the
periods from April 8, 1996 to December 31, 1996 and from January 1,
1996 to April 7, 1996.
Notes to Financial Statements
(b) Unaudited Pro Forma Financial data for Vacu-dry Company and Subsidiary
Unaudited Pro Forma Financial Data
Unaudited Balance Sheet - March 31, 1998
Unaudited Pro Forma Consolidated Statement of Operations for the Nine
Months Ended March 31, 1998
Unaudited Pro Forma Consolidated Statement of Operations
Notes to Pro Forma Statements
(c) Exhibits
EXHIBIT 7.1 Consent of Independent Accountant
<PAGE>
(a) FINANCIAL STATEMENTS OF MADE IN NATURE, INC.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Made In Nature, Inc.:
We have audited the accompanying balance sheets of Made in Nature, Inc. (a
California corporation) as of December 31, 1997 and 1996, and the related
statements of revenues and expenses, changes in shareholders' deficit and cash
flows for the year ended December 31, 1997 and for the periods from April 8,
1996 to December 31, 1996 for the successor company and from January 1, 1996 to
April 7, 1996 for the predecessor company. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Made in Nature, Inc. as of
December 31, 1997 and 1996, and the results of its operations and its cash flows
for the year ended December 31, 1997 and for the periods from April 8, 1996
to December 31, 1996 for the successor company and from January 1, 1996
to April 7, 1996 for the predecessor company in conformity with generally
accepted accounting principles.
San Francisco, California,
July 28, 1998
<PAGE>
MADE IN NATURE, INC.
BALANCE SHEETS--DECEMBER 31, 1997 AND 1996
1997 1996
----------------- ----------------
ASSETS
CURRENT ASSETS:
Cash $ 13,590 $ 894
Accounts receivable, less allowances for 396,063 295,679
uncollectible accounts of $10,000 and
$24,600 in 1997 and 1996, respectively
Inventories 585,723 2,382,696
Prepaid expenses 71,142 20,015
----------------- ----------------
Total current assets 1,066,518 2,699,284
PROPERTY AND EQUIPMENT, net 79,081 65,282
GOODWILL, less accumulated
amortization of $31,814 and $13,319
in 1997 and 1996, respectively 240,872 259,367
================= ================
Total assets $ 1,386,471 $ 3,023,933
================= ================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 295,108 $ 0
Accounts payable 1,617,368 1,811,611
Accrued payroll and related liabilities 27,207 15,617
Accrued interest 100,993 0
Customer deposits 1,048,063 929,840
----------------- ----------------
Total current liabilities 3,088,739 2,757,068
----------------- ----------------
LONG-TERM DEBT, net of current maturities 1,327,986 1,593,170
----------------- ----------------
SHAREHOLDERS' DEFICIT:
Common stock, no par value:
Authorized shares--1,000
Issued and outstanding shares--1,000 0 0
Retained deficit (3,030,254) (1,326,305)
----------------- ----------------
Total shareholders' deficit (3,030,254) (1,326,305)
----------------- ----------------
Total liabilities and shareholders'
deficit $ 1,386,471 $ 3,023,933
================= ================
The accompanying notes are an integral part of these statements.
<PAGE>
MADE IN NATURE, INC.
STATEMENTS OF REVENUES AND EXPENSES
Successor Predecessor
----------------------------------- -----------------
Period from
Year Ended Period from January 1,
December 31, April 8, 1996, to 1996, to
1997 December 31, 1996 April 7, 1996
--------------- ------------------- -----------------
NET SALES $ 5,058,767 $ 3,319,141 $2,514,428
COST OF SALES 4,952,584 3,267,689 2,249,733
--------------- ------------------- -----------------
Gross margin 106,183 51,452 264,695
SELLING, GENERAL,AND
ADMINISTRATIVE EXPENSES 1,660,297 1,279,917 524,421
--------------- ------------------- -----------------
Operating loss (1,554,114) (1,228,465) (259,726)
INTEREST EXPENSE 149,035 97,040 0
--------------- ------------------- -----------------
Loss before provision
for income taxes (1,703,149) (1,325,505) (259,726)
PROVISION FOR INCOME
TAXES 800 800 0
=============== =================== =================
Net loss $(1,703,949) $(1,326,305) $ (259,726)
=============== =================== =================
The accompanying notes are an integral part of these statements.
<PAGE>
MADE IN NATURE, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
<TABLE>
<S> <C> <C> <C> <C> <C>
Common Stock Total
------------------------------------------------------------------------
Additional
Number Paid-In Retained Shareholders'
of Shares Amount Capital Earnings Equity
(Deficit) (Deficit)
------------ ----------- ------------ ----------------- ----------------
PREDECESSOR BALANCE,
JANUARY 1, 1996 1,000 $1,000 $ 3,648,556 $(1,680,782) $1,968,774
Net loss 0 0 0 ( 259,726) (259,726)
------------------------------------------------------------------------
PREDECESSOR BALANCE,
APRIL 7, 1996 1,000 1,000 3,648,556 (1,940,508) 1,709,048
Eliminate predecessor'S
deficit 0 (1,000) (3,648,556) 1,940,508 (1,709,048)
------------------------------------------------------------------------
BALANCE, APRIL 8,
1996 1,000 0 0 0 0
Net loss 0 0 0 (1,326,305) (1,326,305)
------------------------------------------------------------------------
BALANCE,
DECEMBER 31, 1996 1,000 0 0 (1,326,305) (1,326,305)
Net loss 0 0 0 (1,703,949) (1,703,949)
========================================================================
BALANCE,
DECEMBER 31, 1997 1,000 $ 0 $ 0 $(3,030,254) $(3,030,254)
========================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MADE IN NATURE, INC.
STATEMENTS OF CASH FLOWS
Successor Predecessor
----------------------------------------------------
Year Ended Period from Period from
December 31, April 8, 1996, to January 1, 1996,
1997 December 31, 1996 to April 7, 1996
----------------------------------------------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss
$(1,703,949) $ (1,326,305) $(259,726)
Adjustments to reconcile
net loss to net cash
provided by (used for)
operating activities:
Depreciation and
amortization expense 35,232 24,336 17,149
Changes in assets and
liabilities:
Decrease (increase) in
accounts receivable, net (100,384) 631,127 55,555
Decrease (increase)in
inventories 1,796,973 (1,598,615) 122,904
Increase in prepaid
expenses (51,127) (10,171) (2,093)
Increase (decrease) in
accounts payable (194,243) 1,235,703 268,163
Increase (decrease)
accrued payroll and
related liabilities 11,590 (640) 124
Increase in accrued
interest 100,993 0 0
----------------------------------------------------
Net cash provided by
(used for) operating
activities (104,915) (1,044,565) 202,076
----------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures (30,536) (28,643) 0
----------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Increase in customer
deposits, net 118,223 929,840 0
Borrowings on notes
payable 29,924 93,170 0
(Decrease) in payable to
related parties 0 0 (90,478)
----------------------------------------------------
Net cash provided by
(used for)financing
activities 148,147 1,023,010 (90,478)
----------------------------------------------------
NET INCREASE (DECREASE)
IN CASH 12,696 (50,198) 111,598
CASH (OVERDRAFT) AT
BEGINNING OF PERIOD 894 51,092 (60,506)
====================================================
CASH AT END OF PERIOD $ 13,590 $ 894 $ 51,092
====================================================
SUPPLEMENTAL DATA:
Cash paid for interest $ 48,042 $ 0 $ 0
Cash paid for income taxes 800 0 0
Supplemental disclosure of
non-cash activities
Liabilities assumed and
debt issued in connection
with acquisition 0 2,106,290 0
The accompanying notes are an integral part of these statements.
<PAGE>
MADE IN NATURE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. NATURE OF OPERATIONS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES:
The accompanying financial statements have been prepared assuming that Made in
Nature, Inc. (the Company or the Successor Company) will continue as a going
concern due to the acquisition of the Company subsequent to year-end.
The Company is engaged in the business of marketing certified organic, dried
packaged foods, and organic beverages under its proprietary registered trademark
"Made in Nature" brand through direct marketing and licensing agreements. The
predecessor Company, which operated as a Dole Foods subsidiary (Dole Foods or
the Predecessor Company) and was acquired by the current owners on April 8,
1996, in exchange for debt.
The acquisition of the Company from Dole Foods was accounted for as a purchase.
The excess of purchase price over the estimated fair market value of net assets
acquired was allocated to goodwill.
The financial statements include the results of the Predecessor Company from
January 1, 1996, to April 7, 1996. The financial results of the Successor
Company are presented for the period from April 8, 1996, to December 31,
1996, and for calendar year 1997.
The Company competes in a single industry segment within the food industry. The
organic food industry in the United States is comparatively small, with only a
few organizations engaged in the marketing of organic dried fruits and juices.
Concentration of Customers and Suppliers
During 1997, the Company had three major customers that accounted for 51 percent
of total sales. From April 8, 1996, to December 31, 1996, one of these customers
accounted for 15 percent of total sales.
Three vendors accounted for 50 percent of purchases for the period from April 8,
1996 to December 31, 1996. No vendor accounted for more than 10 percent of
purchaes during the year ended December 31, 1997.
Inventories
The Company's inventories consist of organic juice and dried fruit products and
packaging and supplies. Inventories are valued at the lower of cost (first-in,
first-out method) or market. For the period from April 8, 1996 to December 31,
1996, provisions of $461,000 have been made to reduce excess and obsolete
inventories to their net realizable value.
Property and Equipment
Property and equipment acquired on April 8, 1996, were recorded at
estimated fair value as of that date. Subsequent additions are recorded at cost.
These assets are depreciated on a straight-line basis over a the following
estimated useful lives:
Packaging equipment 5 years
Furniture and fixtures 5 years
Income Taxes
The Company provides for income taxes in accordance with Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109
requires the asset and liability method of accounting for income taxes. Under
this method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying the statutory tax rate to the difference
between the financial statement carrying amounts and the tax basis of existing
assets and liabilities (see Note 5).
<PAGE>
Deferred taxes are recorded based upon differences between the financial
statement and tax bases of assets and liabilities and available tax credit
carryforwards.
Goodwill
The Company amortizes goodwill on a straight-line basis over 15 years. The
Predecessor Company amortized goodwill on a straight-line basis over 40 years.
Amortization expense for the year ended December 31, 1997, for the period from
April 8, 1996, to December 31, 1996, and for the period from January 1,
1996, to April 7, 1996, was $18,495, $13,319 and $16,270, respectively.
Revenue
The Company recognizes revenue upon shipment of the product.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. ACQUISITION OF MADE IN NATURE, INC.:
On April 8, 1996, Made In Nature, Inc. was acquired from Dole Foods in exchange
for a $1,500,000 note payable to Dole Foods. The acquisition was accounted for
as a purchase. The excess of the purchase price over the estimated fair value of
assets assumed of $268,000 was recorded as goodwill and is amortized on a
straight-line basis over 15 years. The estimated fair value of assets acquired
and liabilities assumed is summarized as follows:
Assets:
Current assets $1,819,000
Property and equipment 14,000
Other assets 5,000
----------
Total assets 1,838,000
Liabilities: other current liabilities 606,000
----------
Net assets acquired 1,232,000
==========
Goodwill is calculated as follows:
Payable to Dole $1,500,000
Less: Net assets acquired 1,232,000
----------
Goodwill $ 268,000
==========
3. PROPERTY EQUIPMENT:
Property and equipment consist of the following:
1997 1996
------------- -------------
Packaging equipment $ 100,799 $ 70,263
Furniture and fixtures 6,038 6,038
------------- -------------
Total property and equipment 106,837 76,301
Accumulated depreciation (27,756) (11,019)
------------- -------------
Property and equipment, net $ 79,081 $ 65,282
============= =============
Depreciation expense for the year ended December 31, 1997, for the period from
April 8, 1996, to December 31, 1996, and for the period from January 1, 1996,
to April 7, 1996, was $16,737, $11,019, and $4,107, respectively.
4. LONG-TERM DEBT:
Long-term debt consists of the following:
1997 1996
--------------- ---------------
Note payable to Dole Foods: interest at 8.0 percent; interest through March 31,
1997, added to principal; subsequent interest due quarterly commencing July 1,
1997, with principal due in semiannual installments of $147,554 from April 1,
1998 to 2003, secured by the Company
brand name $ 1,623,094 $ 1,593,170
Less: Current maturities (295,108) 0
--------------- ---------------
Long-term debt $ 1,327,986 $ 1,593,170
=============== ================
Maturities of long-term debt are as follows:
Year Ending
December 31
-----------
1998 $ 295,108
1999 295,108
2000 295,108
2001 295,108
2002 295,108
Thereafter 147,554
-------------
Total $ 1,623,094
=============
5. INCOME TAXES:
Under SFAS No. 109, deferred taxes are recorded for differences in the timing of
the recognition of revenues and expenses for financial reporting and income tax
purposes. Deferred taxes result primarily from the accounting for depreciation
and reserves for accounts receivable and inventories.
Provision for income taxes for the year ended December 31, 1997 and for the
period from April 8, 1996 to December 31, 1996 consist of California minimum
taxes.
Due to the subsequent sale of the Company, no tax benefit was allocated to the
Company from Dole Foods during the period from January 1, 1996 to April 7, 1996.
Accordingly, provision for income taxes is zero during this period.
The Company has U.S. federal and California net operating loss carryforwards
available at December 31, 1997, of approximately $3,200,000 and $1,600,000,
respectively, that expire in 2011 and 2012.
A deferred tax asset is recognized for all deductible temporary differences and
operating loss and tax credit carryforwards. A valuation allowance is recognized
if it is more likely than not that some portion or all of the deferred tax asset
will not be recognized.
Deferred tax assets consist of the following as of December 31, 1997 and 1996:
1997 1996
---------------- --------------
Deferred tax assets:
Inventory reserves $ 141,000 $ 321,000
Allowance for uncollectible accounts 4,000 10,000
Net operating loss carryforwards 1,186,000 376,000
---------------- --------------
1,331,000 707,000
Less: Valuation allowance (1,331,000) (707,000)
================ ==============
Net deferred tax asset $ 0 $ 0
================ ==============
6. COMMITMENTS:
The Company has purchase agreements with certain growers and processors to
provide the Company with products and services to be used in its normal
operations. The aggregate purchase commitment as of December 31, 1997, under
these agreements was approximately $4,879,000. Most of the agreements provide
for multiple-year future purchases at fixed prices.
The Company has pledged its accounts receivable, inventory, and cash to a
customer to secure the advance customer deposit payments made to the Company.
Customer deposits have been presented on the balance sheets equivalent to the
cash received less any reductions in liability for shipments made to the
customer. All unapplied amounts bear interest at 3 percent annually.
The Company leases office space on a month-to-month basis and various other
equipment under operating lease agreements. Minimum future rental commitments
under equipment operating leases with terms greater than one year at December
31, 1997, are as follows:
Year Ending
December 31
------------
1998 $2,808
1999 2,808
------
Total $5,616
======
Rental expense under operating leases for the year ended December 31, 1997, for
the period from April 8, 1996, to December 31, 1996, and for the period from
January 1, 1996 to April 7, 1996, was $43,032, $32,976, and $19,655,
respectively.
7. SUBSEQUENT EVENTS AND TRANSACTIONS:
On June 11, 1998, the Company entered into an agreement to sell all of the
Company's assets and certain liabilities to a dried-fruit processor for $336,000
in cash plus warrants to purchase 112,000 shares of the acquirer's common stock
over the next five years. The exercise price of the warrants was equal to the
acquirer's stock price on the acquisition date. In addition, prior to this
transaction, the Company negotiated or is in process of finalizing negotiations
for certain reductions of approximately $410,000 in accounts payable as well as
a reduction in the note payable to Dole Foods and accrued interest thereon to
$500,000. Also, in connection with this transaction, the customer that the
Company owed $1,048,000 for customer deposits as of December 31, 1997 forgave a
portion of this liability and converted the remaining $517,000 into a 15 percent
equity interest in the new company. This transaction was completed on June 11,
1998.
<PAGE>
(b) PRO FORMA FINANCIAL STATEMENTS FOR VACU-DRY COMPANY
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated balance sheet as of March 31,
1998, gives effect to the Made In Nature, Inc. (Made In Nature) acquisition as
if the acquisition occurred on March 31, 1998. The following unaudited pro forma
consolidated statements of operations for the nine months ended March 31, 1998,
and for the year ended June 30, 1997, give effect to the Made In Nature
acquisition as if the acquisition occurred on July 1, 1996.
Made In Nature operates on a calendar year-end. The unaudited pro forma
consolidated statement of operations for the nine months ended March 31, 1998,
and for the year ended June 30, 1997, include the accounts of Made In Nature for
the nine months ended March 31, 1998, and for the year ended March 31, 1997,
respectively. Due to the differences in year-ends, the accounts of Made In
Nature for the three months ended June 30, 1997, have not been incorporated into
the pro forma statements of operations. Sales and net income (loss) for the
three months ended June 30, 1997, were $937,000 and $(277,000), respectively.
The unaudited pro forma financial data are based on the unaudited historical
financial statements for Vacu-dry Company (Vacu-dry) and Made In Nature and
the assumptions and adjustments described in the accompanying notes. The
unaudited pro forma financial statements referred to above do not purport to
represent what the Company's results of operations actually would have been if
the events described above had occurred as of the dates indicated or what such
results will be for any future period. The pro forma adjustments are based on
currently available information and upon certain assumptions that management
believes are reasonable under the circumstances.
<PAGE>
VACU-DRY COMPANY AND SUBSIDIARY
UNAUDITED BALANCE SHEET-MARCH 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
Unaudited
---------------------------------------------------------------------
Made In Pro Forma Pro Forma
Vacu-dry Nature Adjustments Consolidated
---------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 194,000 $ 59,000 $ 0 $ 253,000
Accounts receivable, net 2,570,000 685,000 0 3,255,000
Other receivables 16,000 0 0 16,000
Inventories, net 7,853,000 594,000 0 8,447,000
Prepaid expenses 17,000 89,000 0 106,000
Current deferred taxes 240,000 0 109,000 (a) 349,000
---------------------------------------------------------------------
Total current assets 10,890,000 1,427,000 109,000 12,426,000
LONG-TERM ASSETS:
Net property, plant, and equipment 6,665,000 80,000 0 6,745,000
Intangibles, net 0 342,000 2,225,000 (g) 2,567,000
=====================================================================
Total assets $ 17,555,000 $ 1,849,000 $ 2,334,000 $ 21,738,000
=====================================================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings under line of credit $ 750,000 $ 0 $ 0 $ 750,000
Current maturities of long-term debt 595,000 0 0 595,000
Accounts payable 1,369,000 1,741,000 (410,000) (b) 2,700,000
Accrued payroll and related liabilities 761,000 41,000 0 802,000
Accrued interest 0 255,000 (255,000) (c) 0
Accrued expenses 318,000 214,000 100,000 (d) 632,000
Payable to related party 0 1,303,000 (1,303,000) (e) 0
Payable to seller 0 0 336,000 (f) 336,000
Income taxes payable 30,000 0 0 30,000
---------------------------------------------------------------------
Total current liabilities 3,823,000 3,554,000 (1,532,000) 5,845,000
---------------------------------------------------------------------
LONG-TERM LIABILITIES:
Borrowings under line of credit 1,850,000 0 0 1,850,000
Long-term debt net of current maturities 2,185,000 1,500,000 (1,000,000) (c) 2,685,000
---------------------------------------------------------------------
Total long-term liabilities 4,035,000 1,500,000 (1,000,000) 4,535,000
---------------------------------------------------------------------
Deferred income taxes 826,000 0 0 826,000
---------------------------------------------------------------------
Minority interest 0 0 517,000 (e) 517,000
---------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
Capital stock 2,826,000 0 0 2,826,000
Paid in capital: warrants 0 0 446,000 (f) 446,000
Retained earnings 6,045,000 (3,205,000) 3,903,000 6,743,000
---------------------------------------------------------------------
Total shareholders' equity 8,871,000 (3,205,000) 4,349,000 10,015,000
---------------------------------------------------------------------
Total liabilities and
shareholders' equity $ 17,555,000 $ 1,849,000 $ 2,334,000 $ 21,738,000
=====================================================================
</TABLE>
<PAGE>
VACU-DRY COMPANY AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Unaudited
------------------------------------------------------------------------------------------
Consolidated
before Pro Forma Pro Forma Pro Forma
Vacu-dry Made In Nature Adjustments Adjustments Consolidated
------------------------------------------------------------------------------------------
REVENUES:
Net sales $19,897,000 $ 3,980,000 $ 23,877,000 $ 0 $ 23,877,000
Other 342,000 0 342,000 0 342,000
------------------------------------------------------------------------------------------
Total revenues 20,239,000 3,980,000 24,219,000 0 24,219,000
------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 16,465,000 3,822,000 20,287,000 0 20,287,000
Selling, general, and
administrative 2,270,000 1,420,000 3,690,000 96,000 (h) 3,786,000
Interest 215,000 54,000 269,000 0 269,000
------------------------------------------------------------------------------------------
Total costs and
expenses 18,950,000 5,296,000 24,246,000 96,000 24,342,000
------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE
PROVISION FOR INCOME TAXES
1,289,000 (1,316,000) (27,000) (96,000) (123,000)
Provision (benefit) for
income taxes 438,000 1,000 439,000 (479,000) (i) (40,000)
==========================================================================================
Net earning (loss)
$ 851,000 $(1,317,000) $ (466,000) $ 383,000 $ (83,000)
==========================================================================================
</TABLE>
<PAGE>
VACU-DRY COMPANY AND SUBSIDIARY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<S> <C> <C> <C> <C> <C>
Unaudited
---------------------------------------------------------------------------
Made In Nature Consolidated for Pro Forma
Vacu-dry for for the Period the Twelve Months Consolidated
the Twelve from April 8, Ended March 31, for the Twelve
Months Ended 1996, to 1997, before Pro Pro Forma Months Ended
June 30, 1997 March 31, 1997 Forma Adjustments Adjustments June 30, 1997
--------------------------------------------------------------------------------------------
REVENUES:
Net sales $23,798,000 $ 4,899,000 $ 28,697,000 $ 0 $ 28,697,000
Other 635,000 0 635,000 0 635,000
--------------------------------------------------------------------------------------------
Total revenues 24,433,000 4,899,000 29,332,000 0 29,332,000
--------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of sales 21,258,000 4,814,000 26,072,000 0 26,072,000
Selling, general, and
administrative 2,154,000 1,593,000 3,747,000 128,000 (h) 3,875,000
Interest 272,000 222,000 494,000 0 494,000
--------------------------------------------------------------------------------------------
Total costs and
expenses 23,684,000 6,629,000 30,313,000 128,000 30,441,000
--------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE
PROVISION FOR INCOME
TAXES 749,000 (1,730,000) (981,000) (128,000) (1,109,000)
Provision (benefit)
for income taxes 232,000 1,000 233,000 (575,000) (i) (342,000)
============================================================================================
Net earning
(loss)
$ 517,000 $(1,731,000) $ (1,214,000) $ 447,000 $ (767,000)
============================================================================================
</TABLE>
<PAGE>
NOTES TO PRO FORMA STATEMENTS
(a) Adjustment of $109,000 to reflect deferred tax assets resulting from
inventory and accounts receivable reserves that are not deductible for
tax purposes until realized. Prior to the acquisition of Made In Nature,
a valuation allowance was recorded against the deferred tax asset due to
uncertainties regarding realization.
(b) Reflects actual and estimated reductions in accounts payable that have
occurred or are under negotiation with vendors. These amounts will be
revised as additional information is obtained.
(c) Reflects the forgiveness of notes payable from a related party.
(d) Reflects accrual for acquisition costs.
(e) Reflects the forgiveness of a portion of a Made In Nature creditor's
customer deposits and other payables and conversion of the remaining
balance into 15 percent equity in Made In Nature.
(f) Reflects the cash payment due to the seller and 112,000 warrants issued
for the acquisition of Made In Nature.
(g) Adjustment of $2,225,000 to reflect excess of purchase price over
estimated fair value of the net assets acquired.
(h) Adjustment to reflect goodwill amortization. The Company amortizes
goodwill on a straight-line basis over its estimated useful life of 20
years.
(i) Adjustment to record benefit for income taxes. Prior to the acquisition
of Made In Nature, a valuation allowance was recorded against all tax
assets due to uncertainties regarding realization. After the acquisition,
Vacu-dry and Made In Nature will file consolidated tax returns. If the
acquisition had taken place on July 1, 1996, losses incurred by Made In
Nature could have been offset against income of Vacu-dry and Vacu-dry's
available tax carrybacks. Accordingly, a tax benefit has been recognized
in the unaudited pro forma consolidated statements of operations for the
nine months ended March 31, 1998, and for the year ended July 30, 1997.
<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 hereunto duly authorized.
VACU-DRY COMPANY
By: /s/ Thomas R. Eakin
--------------------------------------
Date: August 26, 1998 Thomas R. Eakin
Its: Vice President - Finance and Chief
Financial Officer
<PAGE>
(c) EXHIBITS
EXHIBIT 7.1
CONSENT OF INDEPENDENT ACCOUNTANT
As independent public accountants, we hereby consent to the incorporation in
this form 8-K/A of our report on Made In Nature, Inc. dated July 28, 1998
included in this filing under Commission file No. 01912. It should be noted that
we have not audited any financial statements subsequent to December 31, 1997.
ARTHUR ANDERSEN LLP
AUGUST 25, 1998
