SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X|QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
|_|TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended February 28, 1995
Commission file number 0-13852
GRIST MILL CO.
Delaware 41-0974681
(State of incorporation) (IRS Employer ID No.)
21340 Hayes Avenue, Lakeville, MN 55044-0430
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (612) 469-4981
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 February 28, 1995 the Company had 6,584,404 shares of common stock
outstanding.
GRIST MILL CO.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED FEBRUARY 28, 1995
INDEX
I. FINANCIAL INFOMRATION
Item 1. Financial Statement (Unaudited) Page
Consolidated Statements of Financial Position 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Consolidated Notes to Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 7
II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
Index of Exhibits 11
Exhibits 12
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
February 28, May 31,
1995 1994
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,730 $ 3,310
Short-term investments 3,993 9,299
Accounts receivable, less allowances 8,174 4,804
Inventories 6,751 5,204
Other 702 506
21,350 23,123
Property and equipment:
Land and building 11,154 10,770
Machinery and equipment 34,338 29,455
45,492 40,225
Less accumulated depreciation (21,484) (18,550)
24,008 21,675
Deferred charges, less accumulated
amortization 954 802
$ 46,312 $ 45,600
Liabilities and Shareholders' Equity
Current Liabilities:
Drafts payable $ 1,613 $ 807
Accounts payable 3,638 2,219
Accrued compensation and commissions 1,405 972
Accrued marketing expenses 837 849
Other accrued expenses 1,617 1,664
Current maturities of long-term debt 1,672 1,678
10,782 8,189
Long-term debt 3,972 6,355
Deferred income taxes 1,741 1,675
Shareholders' equity:
Common stock 658 705
Additional paid-in capital 8,681 11,405
Retained earnings 20,478 17,271
29,817 29,381
$ 46,312 $ 45,600
See notes to financial statements
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $ 21,112 $ 14,035 $ 56,253 $ 41,411
Cost of products sold 15,772 10,400 40,412 29,613
Gross profit 5,340 3,635 15,841 11,798
Selling and delivery expenses 2,149 2,384 7,175 7,341
General, administrative and product
development expenses 1,028 821 3,333 2,624
Operating profit 2,163 430 5,333 1,833
Interest expense 143 226 510 760
Interest income (40) (62) (172) (254)
Earnings before income taxes 2,060 266 4,995 1,327
Income tax expense 746 96 1,788 477
Net earnings $ 1,314 $ 170 $ 3,207 $ 850
Earnings per common and common equivalent share:
Primary and fully diluted $ .19 $ .02 $ .47 $ .11
See notes to financial statements
</TABLE>
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
February 28
1995 1994
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings $ 3,206 $ 850
Non-cash items included in earnings:
Deprecition and amortization 3,262 2,928
Deferred income taxes 66 (92)
Changes in operating assets and liabilities:
Accounts receivable (3,370) 1,382
Inventories (1,547) 1,765
Other assets (676) (441)
Accounts payable and other
accrued expenses 1,793 (152)
Net Cash Provided By Operating
Activities 2,734 6,240
Cash Flows From Financing Activities:
Proceeds from:
Drafts payable 806 204
Exercise of stock options, net 50 114
Payments for:
Long-term debt obligations (2,389) (897)
Purchase and retirement of treasury stock (2,820)
Net Cash Used in Financing Activities (4,353) (579)
Cash Flows From Investing Activities:
Proceeds from:
Short term investments, net 5,306
Payments for:
Short-term investments, net (3,913)
Property and equipment (5,267) (2,061)
Net Cash Provided by (Used In)
Investing Activities 39 (5,974)
Decrease in Cash and Cash Equivalents (1,580) (313)
Cash and equivalents at Beginning of Period 3,310 6,505
Cash and equivalents at End of Period 1,730 $ 6,192
See notes to financial statements
</TABLE>
GRIST MILL CO. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. Condensed Consolidated Financial Statements
The accompanying unaudited interim financial statements have been
prepared in accordance with the instructions for Form 10-Q 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 consolidated financial
statements and related notes included in the Company's Annual Report
on Form 10-K for the year ended May 31, 1994. In the opinion of
management, all adjustments necessary for a fair presentation of such
interim consolidated 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
Net sales for the third quarter of fiscal 1995 were $21.1 million, an
increase of 50% compared to sales of $14.0 million for the same
quarter a year ago. Net earnings for the quarter were $1.3 million,
or $.19 per share versus $170,000, or $.02 per share a year ago.
Sales for the first nine months of the year are up 36% to $56.3
million, compared to $40.4 million for the nine month period a year
ago. Earnings for the same time period increased from $850,000 in
fiscal 1994 to $3.2 million in fiscal 1995.
The Company experienced growth in sales of each of its core grocery
product categories. Sales of ready to eat cereals grew as the Company
continued to add new customers and expand distribution. The Company
now has a total of 14 ready to eat cereal product offerings, of which
seven have been introduced during the last six months. The Company's
new fruit-filled cereal bar products have been widely accepted by the
Company's store brand customers. A number of additional customers are
in the packaging development stage and are expected to begin placing
orders in the near future. Chewy granola bar sales have been strong,
reflecting new distribution and increased consumer interest in
wholesome snack bar products.
Sales of products manufactured for the Company's largest contract
customer have increased significantly during the year. While
management expects sales to this customer to continue into the
future, volume from contract manufacturing is difficult to predict,
and there are no contractual agreements which guarantee that the
current sales levels will continue in the future.
The gross profit margin was 28.2% for the nine months ended February
28, 1995 compared to 28.5% for the same nine months of the previous
year. The gross margin in the current quarter was 25.5% reflecting a
sales mix more heavily weighted with contract manufacturing products.
While contract manufacturing products have a lower gross profit
margin than grocery products, the additional volume more fully
utilizes the Company's manufacturing facilities. Year to date net
profit margin is 5.5% versus 2.1% for the same period a year ago.
Selling and delivery expenses totaled $7.2 million, or 12.8% of net
sales for the first nine months of the year, compared to $7.3
million, or 17.7% for the same period a year ago. Selling expenses
have decreased as a percentage of net sales because contract
manufacturing does not have the marketing and transportation costs
associated with it that the core grocery business requires.
General, administrative and product development expenses were $3.3
million during the first nine months of the year versus $2.5 million
for the first nine months of fiscal 1994. The Company's emphasis on
developing new store brand items requires a higher level of
expenditures in this area than was experienced last year. In
addition, incentive compensation expense is higher due to increased
levels of earnings for the year.
Net interest expense for the quarter was $103,000 compared to
$164,000 for the same quarter of the previous year. Year to date net
interest expense is $338,000, or a decrease of 33% from the previous
year's expense levels. Early retirement of debt in the fourth quarter
of fiscal 1994 and the first quarter of fiscal 1995, along with
scheduled payments on the Company's unsecured senior notes resulted
in lower average levels of debt for the year when compared to a year
ago. Interest income is lower than in the previous periods because
investments have been liquidated to make debt payments, purchase
equipment and to repurchase Company stock.
The effective tax rate for the year is 36%, which approximates the
effective tax rate for the previous year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital has decreased from $14.9 million to $10.6 million
since May 31, 1994 and the current ratio has decreased from 2.8 to
2.0. The decrease in these two liquidity ratios occurred as the
result of the Company's stock repurchase program, early retirement of
debt and equipment additions.
Net cash provided by operations was $2.7 million for the first nine
months of the year, compared to $6.2 million for the same period last
year. The growth experienced in sales has resulted in greater working
capital needs than in the previous years as accounts receivable and
inventory balances have increased. These needs offset the increased
cash flow from higher net earnings during the period.
The Company used $4.4 million for financing activities during the
first three quarters of fiscal 1995, compared to $579,000 for the
nine months of the preceding year. In June, 1994, the Company
completed a stock repurchase program by purchasing 473,500 shares of
common stock at a cost of $2.8 million. Under this program, 672,500
shares representing nearly 10% of total shares outstanding were
repurchased at a cost of $4.0 million. Additionally, cash was used
for the early retirement of long term debt.
Cash provided by investing activities was $39,000 compared to cash
used in the prior year of $6.0 million. Cash needs during the first
nine months of the year required the liquidation of short term
investments. In the prior fiscal year, the Company made a net
investment in short term instruments. Additionally, the Company spent
$5.3 million on new production equipment related primarily to expand
production capacity and capabilities on ready to eat cereal products.
Besides remaining cash and investments, the Company has a line of
credit for $4.0 million which was not being utilized at the end of
the quarter.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K
Exhibit 27 - Financial Data Schedule - for SEC use only
No reports on Form 8-K were filed during the quarter ended February
28, 1995.
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.
GRIST MILL CO.
Registrant
Date: April 13, 1995 By:
/s/ Daniel J. Kinsella
Daniel J. Kinsella
Vice President and
Chief Financial Officer
GRIST MILL CO.
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED FEBRUARY 28, 1995
Exhibit 11 - Computation of Earnings Per Share
Filed herewith.
EXHIBIT 11
GRIST MILL CO.
EXHIBIT 11--COMPUTATION OF EARNINGS PER SHARE
(Unaudited, in thousands except per share data)
Three Months Ended Nine Months Ended
February 28, February 28,
1995 1994 1995 1994
Primary earnings per share:
Net earnings applicable
to common stock $1,314 $ 170 $3,207 $ 850
Average number of common
and common equivalent
shares outstanding:
Average common shares
outstanding 6,714 7,242 6,625 7,241
Dilutive effect of stock
options 131 102 220 141
6,845 7,344 6,845 7,382
Primary earnings per share $ .19 $ .02 $ .47 $ .11
Fully diluted earnings per share:
Earnings for fully diluted
computation $1,314 $ 170 $3,207 $ 850
Average number of common
and common equivalent
shares outstanding:
Average common shares
outstanding 6,714 7,242 6,625 7,241
Dilutive effect of stock
options 189 102 262 141
6,903 7,344 6,887 7,382
Fully diluted earnings
per share: $ .19 $ .02 $ .47 $ .11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> FEB-28-1995
<CASH> 1,730,000
<SECURITIES> 3,993,000
<RECEIVABLES> 8,174,000
<ALLOWANCES> 0
<INVENTORY> 6,751,000
<CURRENT-ASSETS> 21,350,000
<PP&E> 45,492,000
<DEPRECIATION> 21,484,000
<TOTAL-ASSETS> 46,312,000
<CURRENT-LIABILITIES> 10,782,000
<BONDS> 3,972,000
<COMMON> 658,000
0
0
<OTHER-SE> 29,159,000
<TOTAL-LIABILITY-AND-EQUITY> 46,312,000
<SALES> 56,253,000
<TOTAL-REVENUES> 56,253,000
<CGS> 40,412,000
<TOTAL-COSTS> 40,412,000
<OTHER-EXPENSES> 10,508,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338,000
<INCOME-PRETAX> 4,995,000
<INCOME-TAX> 1,788,000
<INCOME-CONTINUING> 3,207,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,207,000
<EPS-PRIMARY> .47
<EPS-DILUTED> .47
</TABLE>
