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 August 31, 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 September 30, 1995 the Company had 6,697,200 shares of common stock
outstanding.
GRIST MILL CO.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED AUGUST 31,1995
INDEX
I. FINANCIAL INFORMATION:
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)
August 31, May 31,
1995 1995
Assets (Unaudited)
Current assets:
Cash and cash equivalents .......... $ 2,098 $ 3,271
Short-term investments ............. 3,041 3,539
Accounts receivable, less allowances 8,317 6,045
Inventories ........................ 7,398 6,877
Prepaids and Other ................. 608 458
21,462 20,190
Property and equipment:
Land and building .................. 11,220 11,145
Machinery and equipment ............ 38,773 36,245
49,993 47,390
Less accumulated depreciation ...... (23,383) (22,371)
26,610 25,019
Deferred charges, less accumulated
amortization ....................... 1,141 1,050
$ 49,213 $ 46,259
Liabilities and Shareholders' Equity
Current Liabilities:
Drafts payable ..................... $ 641 $ 984
Accounts payable ................... 5,249 3,701
Accrued compensation and commissions 1,412 1,863
Accrued marketing expenses ......... 1,019 796
Other accrued expenses ............. 1,828 1,144
Current maturities of long-term debt 1,665 1,708
11,814 10,196
Long-term debt ........................... 3,147 3,171
Deferred income taxes .................... 1,358 1,370
Shareholders' equity:
Common stock ....................... 670 666
Additional paid-in capital ......... 9,182 9,022
Retained earnings .................. 23,042 21,834
32,894 31,522
$ 49,213 $ 46,259
See notes to financial statements
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited, in thousands, except per share amounts)
Three Months Ended
August 31
1995 1994
Net sales ...................................... $ 23,031 $ 17,547
Cost of products sold .......................... 17,059 12,034
Gross profit ................................ 5,972 5,513
Selling and delivery expenses .................. 2,826 2,508
General, administrative and product
development .................................. 1,199 1,127
Operating profit ............................ 1,947 1,878
Interest expense ............................... 119 209
Interest income ................................ (60) (68)
Earnings before income taxes ................ 1,888 1,737
Income tax expense ............................. 680 619
Net earnings ................................ $ 1,208 $ 1,118
Earnings per common and common equivalent share:
Primary and fully diluted ................... $ .17 $ .16
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended
August 31
1995 1994
Cash Flows From Operating Activities:
Net earnings ................................. $ 1,208 $ 1,118
Non-cash items included in earnings:
Depreciation and amortization ............. 1,143 1,095
Deferred taxes ............................ (12) (24)
Changes in operating assets and liabilities:
Accounts receivable ....................... (2,272) (1,538)
Inventories ............................... (521) (2,273)
Other assets .............................. (372) (353)
Accounts payable and other accrued expenses 2,004 2,345
Net Cash Provided By Operating
Activities ................................ 1,178 370
Cash Flows From Investing Activities:
Proceeds from short term investments, net .... 498 4,295
Payments for:
Property and equipment .................... (2,603) (1,524)
Net Cash Provided by (Used In)
Investing Activities ...................... (2,105) 2,771
Cash Flows From Financing Activities:
Proceeds from:
Drafts payable ............................ 47
Exercise of stock options ................. 164
Payments for:
Drafts payable ............................ (343)
Long-term debt obligations ................ (67) (1,562)
Purchase and retirement of treasury stock . (2,815)
Cash Used In Financing Activities ............ (246) (4,330)
Decrease in Cash and Cash Equivalents ................ (1,173) (1,189)
Cash and Cash Equivalents at Beginning
of Period .......................................... 3,271 3,310
Cash and Cash Equivalents at End of Period ........... $ 2,098 $ 2,121
See notes to financial statements
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, 1995. 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
The Company achieved record sales levels in the first quarter of fiscal 1996.
First quarter sales were $23.0 million compared to $17.5 million in the first
quarter of 1995. This represents an increase of 31% from year to year. Earnings
for the first quarter were $1.2 million, or $.17 per share, compared to $1.1
million, or $.16 per share.
Growth in the Company's grocery business was generated by the ready-to-eat
cereal and wholesome snack bar product groups. Over the past year, the Company
has added several new ready-to-eat cereal customers. The number of product
offerings has also increased over the last year, allowing existing customers to
purchase more of their store brand ready-to-eat cereal offerings from the
Company. Additionally, the Company's low fat granola product has gained a
broader customer acceptance over the last year. In the wholesome snack bar
category, the Company has built a broad customer base for its fruit-filled
cereal bar that was introduced in the first quarter of the previous fiscal year.
Contract manufacturing sales for the quarter were up substantially from a year
ago. In the first quarter of the previous year, the Company was in the early
phase of manufacturing a product for another large food company. Sales in the
first quarter of this year were higher than sales of a year ago, but were at
levels similar to recent quarters. There are no guaranteed minimum production
requirements associated with manufacturing for this customer, however the
Company expects that it will have significant sales to this customer in the
coming quarters.
The gross profit margin for the quarter was 25.9% compared to the first quarter
of last fiscal year, when the gross profit margin was 31.4%. Sales during the
first quarter of the year were more heavily weighted toward contract
manufacturing products, which have lower gross profit margins associated with
them than grocery products. Additionally, new ready-to-eat cereal items and
equipment were in various stages of product start up, leading to higher
production costs.
Selling and delivery expenses were $2.8 million, or 12.3% of sales, in the first
quarter of the fiscal year, compared to $2.5 million, or 14.3% of sales, in the
same quarter of last year. This is attributable to contract manufactured
products which have low delivery costs associated with them.
General, administrative, and product development expenses were $1.2 million, or
5.2% of sales, during the current quarter compared to $1.1 million, or 6.4% of
sales, for the same quarter of the previous year. Lower levels of new product
development expenses were offset by increased litigation costs.
Net interest expense for the current quarter was $59,000 compared to $141,000
for the first quarter of fiscal 1995. The Company prepaid a portion of its
long-term debt in the first quarter of last fiscal year. The early debt
repayment, coupled with scheduled debt repayments, have resulted in lower
interest expense. Interest income has remained flat in comparison with last
year, as rising interest rates have offset the effect of lower levels of
invested cash.
The effective tax rate for the quarter was 36%, which remains constant with the
effective rate for fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Working capital decreased from $10.0 million at May 31, 1995 to $9.6 million at
the end of the first quarter of fiscal 1996, and the current ratio declined from
2.0 to 1.8 during the same time. The changes in these ratios reflect the
Company's investment in expanding and upgrading production capabilities.
Net cash provided by operating activities for the quarter ended August 1995 was
$1.2 million, versus $370,000 for the first quarter of last fiscal year.
Net cash used in investing activities was $2.1 million, compared to cash
provided by investing activities totaling $2.8 million during the first quarter
of fiscal 1995. In the first quarter of 1995, short term investments of $4.3
million were liquidated to meet the Company's cash needs, resulting in a
positive cash flow from investing activities. During the current quarter, the
Company met most of its cash needs from operating cash flows. Capital equipment
acquisitions during the current quarter totaled $2.6 million, including
equipment to expand ready-to-eat cereal production and the upgrading and
expansion of a snack bar line.
Cash used in financing activities during the first quarter was $246,000,
compared to cash used in the previous year of $4.3 million. In the first quarter
of the previous fiscal year, the Company made a prepayment on long-term debt and
completed a capital stock acquisition program.
Besides 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
Exhibit 27 - Financial Data Schedule for SEC use
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended August 31, 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: October 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 AUGUST 31, 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
August 31
1995 1994
Primary earnings per share:
Net earnings applicable
to common stock ..................... $1,208 $1.118
Average number of common and
common equivalent shares outstanding:
Average common shares
outstanding .......................... 6,670 6,725
Dilutive effect of stock
options .............................. 256 131
6,926 6,856
Primary earnings per share ............ $ .17 $ .16
Fully diluted earnings per share:
Earnings for fully diluted
computation .......................... $1,208 $1,118
Average number of common and
common equivalent shares outstanding:
Average common shares
outstanding: ......................... 6,670 6,725
Dilutive effect of stock
options .............................. 272 189
6,942 6,914
Fully diluted earnings
per share ............................ $ .17 $ .16
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