UNITED STATES 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
SECURITES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED NOVEMBER 30, 1996
Commission file number 0-13852
GRIST MILL CO.
Delaware 41-0974681
(State of incorporation) (I.R.S. 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 December 31, 1996 the Company had 6,788,988 shares of common stock
outstanding.
GRIST MILL CO.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED NOVEMBER 30,1996
INDEX
I. FINANCIAL INFORMATION:
Item 1. Financial Statements ( Unaudited) Page
Consolidated Statements of Financial Position............... 3
Consolidated Statements of Earnings......................... 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated 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)
November 30, May 31,
Assets 1996 1996
----------- ---------
(Unaudited)
Current assets:
Cash and cash equivalents .......... $ 21 $ 1,654
Short-term investments
Accounts receivable, less allowances 8,646 9,743
Inventories ........................ 11,315 10,293
Prepaids and other ................. 727 393
-------- --------
20,709 22,083
-------- --------
Property and equipment:
Land and building .................. 11,661 11,647
Machinery and equipment ............ 45,720 41,989
-------- --------
57,381 53,636
Less accumulated depreciation ...... (29,367) (26,897)
-------- --------
28,014 26,739
-------- --------
Deferred charges, less accumulated
amortization ..................... 1,072 1,364
-------- --------
$ 49,795 $ 50,186
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short term borrowings .............. $ 500 $ --
Drafts payable ..................... 1,122 2,342
Accounts payable ................... 3,998 4,002
Accrued compensation and commissions 1,098 1,449
Accrued marketing expenses ......... 1,484 1,214
Other accrued expenses ............. 1,426 1,505
Current maturities of long-term debt 96 793
-------- --------
9,724 11,305
-------- --------
Long-term debt ........................... 2,319 2,371
Deferred income taxes .................... 1,193 1,143
Shareholders' equity:
Common stock ....................... 679 676
Additional paid-in capital ......... 9,583 9,466
Retained earnings .................. 26,297 25,225
-------- --------
36,559 35,367
-------- --------
$ 49,795 $ 50,186
======== ========
See notes to financial statements
<TABLE>
<CAPTION>
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited, in thousands, except per share amounts)
Three Months Ended Six Months Ended
November 30, November 30,
------------------------ ------------------------
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net sales ...................................... $ 27,634 $ 21,539 $ 55,026 $ 44,570
Cost of products sold .......................... 21,570 15,963 42,916 33,022
-------- -------- -------- --------
Gross profit .......................... 6,064 5,576 12,110 11,548
Selling and delivery expenses .................. 4,161 3,240 8,143 6,066
General, administrative and product
development expenses ........................... 1,097 1,092 2,158 2,291
-------- -------- -------- --------
Operating profit ...................... 806 1,244 1,809 3,191
Interest expense ............................... 57 102 128 221
Interest income ................................ (22) (25) (22) (85)
-------- -------- -------- --------
Earnings before income taxes .......... 771 1,167 1,703 3,055
Income tax expense ............................. 286 420 631 1,100
-------- -------- -------- --------
Net earnings .......................... $ 485 $ 747 $ 1,072 $ 1,955
======== ======== ======== ========
Earnings per common and common equivalent share:
Primary and fully diluted ............. $ .07 $ .11 $ .16 $ .28
======== ======== ======== ========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Six Months Ended
November 30,
1996 1995
------- -------
<S> <C> <C>
Cash flows from (for) operating activities:
Net earnings $ 1,072 $ 1,955
Non-cash items included in earnings:
Deprecation and amortization 2,745 2,367
Deferred taxes 50 (80)
Changes in operating assets and liabilities:
Accounts receivable 1,097 (383)
Inventories (1,022) (3,237)
Other assets (278) (77)
Drafts payable (1,220) 656
Accounts payable and other accrued expenses (164) (980)
------- -------
Net cash from operating activities 2,280 221
------- -------
Cash flows from (for) investing activities:
Proceeds from short term investments, net 3,039
Payments for property and equipment (3,745) (3,902)
Payments for packaging design (39) (589)
------- -------
Net cash for investing activities (3,784) (1,452)
Cash flows from (for) financing activities:
Proceeds from short-term borrowings 500
Exercise of stock options 120 193
Payments for long-term debt obligations (749) (837)
------- -------
Net cash for financing activities (129) (644)
------- -------
Decrease in cash and cash equivalents (1,633) (1,875)
Cash and cash equivalents at beginning of period 1,654 3,271
------- -------
Cash and cash equivalents at end of period $ 21 $ 1,396
======= =======
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, 1996. 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 second quarter of fiscal 1997 were $27.6 million, or an
increase of 28% over the same quarter of last year. Earnings for the quarter
were $485,000, or $.07 per share compared with $747,000, or $.11 per share for
the second quarter of last year. Net sales for the first six months of the year
were $55.0 million, or 23% higher than the same period a year ago. Earnings were
$1.1 million or $.16 per share versus $2.0 million, or $.28 per share.
The increased sales for the year were the result of a 44% increase in the
Company's core grocery sales. The Company's ready-to-eat cereal business
increased 67% and wholesome snack bar sales increased 66% over the prior year.
The growth in the ready-to-eat cereal line is primarily attributable to
increases in sales to customers who first purchased products in the same period
of the prior fiscal year. Several customers made their initial purchases of
ready-to-eat cereal during the first half of the last fiscal year, and have
since added more of Grist Mill's ready-to-eat cereal to their store brand
offerings. Increases in wholesome snack bars is similarly attributable to higher
sales of the Company's fruit-filled cereal bars. Additionally, the Company's
crisp rice marshmallow bar, introduced in February, 1996, is gaining wide
acceptance, and, along with increased sales of chewy granola bars, has
contributed to higher volume snack bar sales. The Company recently announced the
introduction of a line of low fat chewy granola bars for its store brand
customers, which should begin shipping in late fiscal 1997.
Fruit snack sales increased 18% over the same period a year ago reflecting
successful promotional programs initiated by the Company with its store brand
customers.
Partially offsetting gains in the core grocery business was an 18% decline in
contract manufacturing sales. The decline represents lower sales demand from the
Company's largest contract customer. Early in fiscal 1997, this customer had
informed the Company of its decision to self-manufacture the products which were
being produced by Grist Mill. However, they have now asked that Grist Mill
continue as the supplier of these products at least through the end of the
current fiscal year. Currently it is not known whether the Company will continue
to manufacture for this customer after the current fiscal year.
The Company's gross profit margin decreased from 25.9% to 22.0%. While the
introduction of new products has driven rapid sales growth, the profitability of
these products is currently below the Company's other grocery products. It is
anticipated that profit margins on these products will gradually improve as
operating efficiencies are obtained. Additionally, the profitability of the
Company's contract manufacturing business declined significantly from the
previous year, reflecting lower pricing on contract products.
Selling and delivery costs were $8.1 million, or 14.8% of net sales for the
first six months of the year, compared to $6.1 million, or 13.6% of net sales in
the first half of last year. Core grocery products comprised a higher percentage
of total sales during the current year, and these products have higher selling
and delivery costs associated with them, such as broker commissions,
transportation and promotion.
General, administrative and product development costs were $2.2 million or 3.9%
of net sales compared to $2.3 million, or 5.1% of net sales for the first six
months of fiscal 1997 and 1996, respectively. The decline is due to lower legal
expenses than in the prior year.
The effective tax rate for the first half of the year was 37%, compared to 36%
for the first half of 1996. Interest from tax-exempt investments reduced the
effective tax rate in the previous year.
LIQUIDITY AND CAPITAL RESOURCES
Since May 31, 1996 the Company's key liquidity ratios have not changed
significantly. The current ratio increased from 2.0 to 2.1 and working capital
increased from $10.8 million to $10.9 million. Net cash from operations was $2.3
million for the first half of the year, compared to $221,000 for the same six
months of the previous year. Operating assets and liabilities have remained
relatively constant during the first six months of the year, and therefore the
Company has not used significant amounts of working capital. In the previous
year, inventory levels grew during the first six months of the year in support
of sales growth.
Net cash used in investing activities was $3.8 million in the current year,
compared to $1.5 million for the same period of last year. Expenditures for
capital equipment were comparable to the same six month period a year ago.
However, short term investments were available to meet cash flow needs in the
prior year. The Company anticipates spending approximately $8.8 million in
expansion of ready-to-eat cereal capacity and an expansion of its Lakeville, MN
office facility during the current fiscal year.
Net cash used by financing activities was $129,000 for the first half of the
year, versus $644,000 in the previous year. The Company borrowed $500,000 on its
line of credit during the second quarter, which offset uses by other financing
activities. The line of credit was not utilized during the previous year.
On December 19, 1996, the Board of Directors of the Company announced
authorization of the repurchase of up to 500,000 shares of its common stock.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
Exhibit 3 - Certificates of Incorporation of Grist Mill Co. as
amended October 4, 1996.
Exhibit 4 - $4,000,000 Revolving credit agreement dated October 31,
1996.
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended November 30,
1996.
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: January 13, 1997 By: /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 NOVEMBER 30, 1996
Exhibit 3 Certificates of Incorporation of Grist Mill Co. as amended
October 4, 1996.
Exhibit 4 $4,000,000 Revolving credit agreement dated October 31, 1996.
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
CERTIFICATE OF INCORPORATION
OF
GRIST MILL CO.
--------------
FIRST: The name of the corporation is
GRIST MILL CO.
SECOND: The address of its registered office in the State of Delaware
is 306 South State Street, in the City of Dover, County of Kent 19901. The name
of its registered agent at such address is United States Corporation Company.
THIRD: The purpose of the corporation is to engage in any lawful
activity for which corporations may be organized under the General Corporation
Law of Delaware.
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is One Million (1,000,000), all of which shares shall be
Common Stock with a par value of $.10 per share.
FIFTH: The name and mailing address of the incorporator is Amos J.
Coffman, Jr., Suite 1100, 104 South Michigan Avenue, Chicago, Illinois 60603.
SIXTH: The Board of Directors is expressly authorized to make, alter,
amend and repeal the by-laws of the corporation.
SEVENTH: The corporation reserves the right to amend, alter, change or
repeal any provision now or hereafter contained in this Certificate of
Incorporation, and to add new provisions, in the manner now or hereafter
prescribed by statute; and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors and officers pursuant to this
Certificate of Incorporation in its present form or as hereafter amended are
granted subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator, for the purpose of
forming a corporation pursuant to the General Corporation Law of the State of
Delaware, does make this certificate hereby declaring and certifying that it is
his act and deed and the facts herein stated are true, and accordingly, has
hereunto set his hand this 19th day of October, 1971.
/s/ Amos J. Coffman, Jr.
----------------------------------
Amos J. Coffman, Jr.
CERTIFICATE OF CHANGE OF REGISTERED AGENT
AND
REGISTERED OFFICE
GRIST MILL CO., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
The present registered agent of the corporation is UNITED
STATES CORPORATION COMPANY and the present registered office of the corporation
is in the County of Kent.
"The Board of Directors of GRIST MILL CO., by the unanimous
written consent of its members, filed with the minutes of the board, duly
adopted the following resolution:"
Resolved, that the registered office of GRIST MILL CO. in the
State of Delaware be and it hereby is changed to No. 100 West Tenth Street, in
the City of Wilmington, County of New Castle, and the authorization of the
present registered agent of this corporation be and the same is hereby
withdrawn, and THE CORPORATION TRUST COMPANY, shall be and is hereby constituted
and appointed the registered agent of this corporation at the address of its
registered office.
IN WITNESS WHEREOF, GRIST MILL CO. has caused this statement
to be signed by Lawrence Russel, its President and attested by Charles Perlman,
its Assistant Secretary this 11th day of January, 1974.
By /s/ Lawrence Russell
-----------------------------------
President
ATTEST:
By /s/ Charles Perlman
--------------------------------
Assistant Secretary
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
GRIST MILL CO., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: That the Board of Directors of GRIST MILL CO., by the unanimous
written consent of its members, filed with the minutes of the Board, duly
adopted resolutions setting forth a proposed amendment to the Certificate of
Incorporation of said corporation, declaring said amendment to be advisable and
calling a meeting of the stockholders of said corporation for consideration
therefor. The resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation be and it
hereby is amended so that Article Fourth is eliminated and the
following Article Fourth is added thereto:
FOURTH: The total number of shares of stock which the corporation shall
have authority to issue is 2,000,000, which shall be designated as
common stock, and shall have a par value of ten cents ($.10) per share.
Any and all such shares issued, and for which the full consideration
has been paid or delivered, shall be deemed full paid stock and the
holder of such shares shall not be liable for any further call or
assessment or any other payment thereon.
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, an annual meeting of the stockholders of said corporation was duly
called and held, upon notice in accordance with Section 222 of the General
Corporation Law of the State of Delaware at which meeting the necessary number
of shares as required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said GRIST MILL CO. has caused this certificate to
be signed by Michael D. Coughlin, its President, and attested by Charles H.
Perlman, its Secretary, this 1st day of October, 1975.
GRIST MILL CO.
By /s/ Michael D. Coughlin
---------------------------------
President
ATTEST:
By /s/ Charles H. Perlman
---------------------------------
Secretary
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
ENRIGHT NATURAL FOOD CO.
INTO
GRIST MILL CO.
* * * * *
Grist Mill Co., a corporation organized and existing under the laws of
the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 3rd day of
December, 1971, pursuant to the General Corporation Law of the State of
Delaware.
SECOND: That this corporation owns all of the outstanding shares of the
stock of Enright Natural Food Co., a corporation incorporated on the 3rd day of
August, 1971, pursuant to the General Corporation Law of the State of Delaware.
THIRD: That this corporation, by the following resolutions of its Board
of Directors, duly adopted on the 28th day of July, 1983, determined to and did
merge into itself said Enright Natural Food Co. by the unanimous written consent
of its members, filed with the minutes of the board.
RESOLVED, that Grist Mill Co. merge, and it hereby does merge
into itself said Enright Natural Food Co., and assumes all of the
obligations of Enright Natural Food Co.; and
FURTHER RESOLVED, that the merger shall be effective upon the
date of filing with the Secretary of State of Delaware.
FURTHER RESOLVED, that the terms and conditions of the merger
are as follows:
The corporate existence of Enright Natural Food Co. shall
cease to exist and as of the effective date of the merger of
all of the assets and liabilities of Enright Natural Food Co.
shall become assets and liabilities of Grist Mill Co.
FURTHER RESOLVED, that the proper officers of this Corporation
be and they hereby are directed to make and execute a Certificate of
Ownership and Merger setting forth a copy of the resolutions to merge
said Enright Natural Food Co. into Grist Mill Co. and assume its
liabilities and obligations, and the date of adoption thereof, and to
cause the same to be filed with the Secretary of State and a certified
copy recorded in the office of the Recorder of Deeds of New Castle
County and to do all acts and things whatsoever, whether within or
without the State of Delaware, which may be necessary or proper to
effectuate said merger.
FOURTH: Anything herein or elsewhere to the contrary notwithstanding
this merger may be terminated and abandoned by the board of directors of Grist
Mill Co. at any time prior to the date of filing the merger with the Secretary
of State.
IN WITNESS WHEREOF, said Grist Mill Co. has caused this certificate to
be signed by Ronald K. Zuckerman, its Chairman of the Board, and attested to by
Charles H. Perlman, its Assistant Secretary, this 28th day of July, 1983.
GRIST MILL CO.
By: /s/ Ronald K. Zuckerman
-----------------------------------
Chairman of the Board
ATTEST:
By: /s/ Charles H. Perlman
---------------------------------
Assistant Secretary
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
GRIST MILL CO., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
FIRST: The Certificate of incorporation of GRIST MILL CO. is
hereby amended by the following resolution which was duly adopted by
the Board of Directors and approved by the Stockholders of the Company,
in accordance with the provisions of Section 141 and 228 of the General
Corporation Law of the State of Delaware (notice having been given
thereof):
RESOLVED, that the Certificate of Incorporation be
and it hereby is amended so that Article Fourth is eliminated
and the following Article Fourth is added thereto:
FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is 12,000,000, which
shall be designated as common stock, and shall have a par
value of ten cents ($.10) per share. Any and all such shares
issued, and for which the full consideration has been paid or
delivered, shall be deemed fully paid stock and the holder of
such shares shall not be liable for any further call or
assessment or any other payment thereon.
SECOND: That said amendment was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said GRIST MILL CO. has caused this
certificate to be signed by Ronald K. Zuckerman, its Chairman of the
Board, and attested to by Charles H. Perlman its Secretary, this 14th
day of March, 1985.
ATTEST: GRIST MILL CO.
By: /s/ Charles H. Perlman By: /s/ Ronald K. Zuckerman
---------------------------- ----------------------------
Secretary Chairman of the Board
CERTIFICATE OF CHANGE OF LOCATION OF
REGISTERED OFFICE AND OF AGENT
OF
GRIST MILL CO.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Adopted in accordance with the Provisions of Section 133 of the
General Corporation Law of the State of Delaware.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
It is hereby certified that:
I. The name of the corporation is
GRIST MILL CO.
II. The registered office of the corporation within the
state of Delaware is hereby changed to 229 South State Street, in the City of
Dover, County of Kent, 19901.
III. The registered agent of the corporation within the State
of Delaware is hereby changed to United States Corporation Company, the business
office of which is identical with the registered office as hereby changed.
IV. The corporation has authorized changes hereinabove set
forth by resolution of its Board of Directors.
IN WITNESS WHEREOF, we have signed this certificate this 12th
day of May, 1986.
/s/ Ronald K. Zuckerman
-----------------------------------
Ronald K. Zuckerman President
Attest:
/s/ Charles H. Perlman
- -------------------------------------
Charles H. Perlman Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
GRIST MILL CO.
Adopted in Accordance with the
Provision of Section 242 of the
General Corporation Law of the
State of Delaware
We, Ronald K. Zuckerman, President and Charles H. Perlman, Secretary of
GRIST MILL CO. (the "Corporation"), a corporation existing under the laws of the
State of Delaware, do hereby certify as follows:
FIRST: That the Certificate of Incorporation of said Corporation has
been amended as follows:
By striking the whole Article Eighth as it now exists and inserting in
lieu and instead of a new Article Eighth reading as follows:
ARTICLE EIGHTH
SECTION 1. Elimination of Certain Liability of Directors. A director of
the Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts of omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
SECTION 2. Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer,
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader indemnification
rights than said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgements, fines, ERISA excise taxes or penalties and amounts paid or to be
paid in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in paragraph (b) hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
was authorized by the board of directors of the Corporation. The right to
indemnification conferred in this Section shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty days after a
written claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any is required, has been tendered to the
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
SECOND: That such amendment has been duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, we have signed this Certificate this 15th day of
October, 1986.
/s/ Ronald K. Zuckerman
-----------------------------------
Ronald K. Zuckerman, President
Attest: /s/ Charles H. Perlman
---------------------------------
Charles H. Perlman Secretary
CERTIFICATE OF AMENDMENT OF
THE CERTIFICATE OF INCORPORATION OF
GRIST MILL CO.
Grist Mill Co., a corporation organized and existing under and by
virtue of the General Corporation Law, as amended, of the State of Delaware,
DOES HEREBY CERTIFY THAT:
1. The Certificate of Incorporation of Grist Mill Co. (the
"Corporation") is hereby amended by the following resolution which was duly
adopted and approved by the Stockholders of the Corporation, in accordance with
the provisions of Section 211(d) of the General Corporation Law, as amended, of
the State of Delaware (notice having been given thereof):
RESOLVED, that the Certificate of Incorporation be and it
hereby is amended so that Article Fourth is eliminated and the
following Article Fourth is added thereto:
"FOURTH: The total number of shares of stock which the
corporation shall have authority to issue is 15,000,000, which shall be
designated as common stock, and shall have a par value of ten cents
($0.10) per share. Any and all such shares issued, and for which the
full consideration has been paid or delivered, shall be deemed fully
paid stock and the holder of such shares shall not be liable for any
further call or assessment or any other payment thereon."
2. That said amendment was duly adopted in accordance with the
provisions of Section 222 and 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Corporation has caused this Certificate of
Amendment to be signed by Charles H. Perlman, its Assistant Secretary, this 4th
day of October, 1996.
Grist Mill Co.
By: /s/ Charles H. Perlman
----------------------------------
Charles H. Perlman
Assistant Secretary
October 31, 1996
Daniel J. Kinsella
Chief Financial Officer
Grist Mill Co.
21340 Hayes Avenue
P.O. Box 430
Lakeville, MN 55044-0430
Dear Dan:
I am pleased to inform you Norwest Bank Minnesota, National Association (the
"Bank") has approved for Grist Mill Co. (the "Company") a $4,000,000.00
conditional revolving credit facility on the following terms and conditions.
Amount: $4,000,000.00
Expiration: October 31, 1997
Option to Terminate: The Bank will make a separate decision each time the
Company requests an advance and is not obligated to
make an advance under the facility. The Bank may
terminate the facility at any time at its own
discretion. However, the Bank must give the Company
90 days written notice of its intent to terminate the
facility in the event any advances are outstanding at
the time the Bank exercises its option to terminate.
Interest Rate: Borrowing rate options include:
(A) Bank's Base Rate less 1/2 percent p.a., or
(B) 3 month CD rate (adjusted for reserves and
other regulatory fees, including FDIC
insurance) plus 1.50 percent p.a., or
(C) 3 month LIBOR (adjusted for reserves and
other regulatory fees, including FDIC
insurance) plus 1.50 percent p.a.
Repayment: Interest on the advances will be payable on the first
day of each month and payment will be made by
debiting the Company's checking account #1094483 on
the day the payment is due.
Financial Covenants: According to GAAP, the Borrower is required to
maintain: 1) a minimum Current Ratio of 1.5 to 1
measured by Current Assets divided by Current
Liabilities; and, 2) a maximum Total Liabilities to
Tangible Net Worth ratio of 1.25 to 1.
Other Conditions: The Company must maintain all its bank accounts with
the Bank. The company agrees to provide financial
information to the Bank as follows:
(a) Within one hundred twenty (120) days following
the end of its fiscal year, the Company will
provide the Bank a copy of its annual audited
report, with the unqualified opinion of an
independent Certified Public Accountant
satisfactory to the Bank.
(b) Within forty-five (45) days following each
quarter end, the Company will provide the Bank a
copy of its interim statement.
(c) Any additional information it may, from time to
time, reasonably request.
(d) Merger and Consolidation. The company is
prohibited from merging or consolidating with any
corporation unless all of the following are met:
1) the surviving entity is a solvent corporation
under the laws of any State of the United States
of America; 2) such corporation expressly assumes
in writing all obligations and liabilities under
this Agreement and Promissory Note, including all
covenants; and, 3) immediately following such
merger or combination, no event of default
exists.
(e) Nature of Business. Refrain from engaging in any
line of business materially different from that
presently engaged in by the Borrower.
(f) Compliance with Laws. Comply in all material
respects with all laws applicable to its business
and the ownership of its property.
(g) Books and Records. Maintain adequate books and
records and refrain from making any material
changes in its accounting procedures whether for
tax purposes or otherwise.
Dan, as always, we are pleased to provide this extension of your facility with
Norwest and look forward to a growing relationship with Grist Mill Co.. Please
sign and return this letter to my attention to signify your agreement with its
terms.
Sincerely,
/s/ Laura S. Oberst
Laura S. Oberst
Vice President
Accepted by /s/ Daniel J. Kinsella this 31st day of October, 1996.
Authorized Signer
Grist Mill Co.
Daniel J. Kinsella
Grist Mill Co.
Vice President
Chief Financial Officer
<TABLE>
<CAPTION>
GRIST MILL CO. AND SUBSIDIARY
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(Unaudited, in thousands except per share data)
Three Months Ended Six Months Ended
November 30, November 30,
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Primary earnings per share:
Net earnings applicable to common stock $ 485 $ 747 $1,072 $1,955
====== ====== ====== ======
Average number of common and common
equivalent shares outstanding:
Average common shares outstanding 6,789 6,695 6,778 6,683
Dilutive effect of stock options 28 208 25 225
------ ------ ------ ------
6,817 6,903 6,803 6,908
====== ====== ====== ======
Primary earnings per share $ .07 $ .11 $ .16 $ .28
====== ====== ====== ======
Fully diluted earnings per share:
Earnings for fully diluted computation $ 485 $ 747 $1,072 $1,955
====== ====== ====== ======
Average number of common and common
shares outstanding:
Average common shares outstanding 6,789 6,695 6,778 6,683
Dilutive effect of stock options 28 208 25 234
------ ------ ------ ------
6,817 6,903 6,803 6,917
====== ====== ====== ======
Fully diluted earnings per share: $ .07 $ .11 $ .16 $ .28
====== ====== ====== ======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-30-1996
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 8,646
<ALLOWANCES> 0
<INVENTORY> 11,315
<CURRENT-ASSETS> 20,709
<PP&E> 57,381
<DEPRECIATION> 29,367
<TOTAL-ASSETS> 49,795
<CURRENT-LIABILITIES> 9,724
<BONDS> 2,319
0
0
<COMMON> 679
<OTHER-SE> 35,880
<TOTAL-LIABILITY-AND-EQUITY> 49,795
<SALES> 27,634
<TOTAL-REVENUES> 27,634
<CGS> 21,570
<TOTAL-COSTS> 21,570
<OTHER-EXPENSES> 5,258
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 771
<INCOME-TAX> 286
<INCOME-CONTINUING> 485
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 485
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
