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 SECURITIES EXCHANGE ACT OF 1934
For the quarter ended August 31, 1997
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 August 31, 1997, the Company had 6,733,650 shares of common stock
outstanding.
<PAGE>
GRIST MILL CO.
REPORT ON FORM 10-Q FOR THE QUARTER ENDED AUGUST 31, 1997
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........................ 8
Signatures............................................... 9
Index of Exhibits........................................ 10
Exhibits................................................. 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
August 31, May 31,
Assets 1997 1997
-------- --------
(Unaudited)
Current assets:
Cash and cash equivalents .......... $ 4,166 $ 2,631
Accounts receivable, less allowances 10,124 9,772
Inventories ........................ 11,630 11,646
Prepaids and other ................. 647 520
-------- --------
Total current assets ............... 26,567 24,569
-------- --------
Property and equipment:
Land and building .................. 13,265 13,265
Machinery and equipment ............ 50,759 48,879
-------- --------
64,024 62,144
Less accumulated depreciation ...... (32,911) (31,612)
-------- --------
31,113 30,532
-------- --------
Deferred charges, less accumulated
amortization ....................... 745 853
-------- --------
$ 58,425 $ 55,954
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Drafts payable ..................... $ 1,780 $ 1,785
Accounts payable ................... 4,165 4,379
Accrued compensation and commissions 1,379 1,551
Accrued marketing expenses ......... 2,191 1,894
Other accrued expenses ............. 2,382 1,564
Current maturities of long-term debt 187 200
-------- --------
Total current liabilities .......... 12,084 11,373
-------- --------
Long-term debt ........................... 5,666 5,700
Deferred income taxes .................... 1,391 1,391
Shareholders' equity:
Common stock ....................... 673 665
Additional paid-in capital ......... 9,262 8,767
Retained earnings .................. 29,349 28,058
-------- --------
Total shareholders' equity ......... 39,284 37,490
-------- --------
$ 58,425 $ 55,954
======== ========
See notes to financial statements
<PAGE>
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF EARNINGS
(Unaudited, in thousands, except per share amounts)
Three Months Ended
August 31,
--------------------
1997 1996
-------- --------
Net sales ...................................... $ 28,820 $ 27,392
Cost of products sold .......................... 21,039 21,346
-------- --------
Gross profit .......................... 7,781 6,046
Selling and delivery expenses .................. 4,538 3,982
General, administrative and product
development expenses ........................... 1,129 1,061
-------- --------
Operating profit ...................... 2,114 1,003
Interest expense ............................... (129) (71)
Interest income ................................ 77
-------- --------
Earnings before income taxes .......... 2,062 932
Income tax expense ............................. 771 345
-------- --------
Net earnings .......................... $ 1,291 $ 587
======== ========
Earnings per common and common equivalent share:
Primary and fully diluted ............. $ .19 $ .09
======== ========
See notes to financial statements
<PAGE>
GRIST MILL CO. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
Three Months Ended
August 31
------------------
1997 1996
------- -------
Cash flows from operating activities:
Net earnings $ 1,291 $ 587
Non-cash items included in earnings:
Deprecation 1,299 1,286
Amortization 124 139
Deferred taxes (50)
Changes in operating assets and liabilities:
Accounts receivable (352) (296)
Inventories 16 (26)
Other assets (128) (138)
Drafts payable (5) 199
Accounts payable and other accrued expenses 664 896
------- -------
Net cash from operating activities 2,909 2,597
------- -------
Cash flows for investing activities:
Payments for property and equipment (1,831) (938)
------- -------
Net cash used for investing activities (1,831) (938)
------- -------
Cash flows from (for) financing activities:
Proceeds from exercise of stock options 504 120
Payments for long-term debt obligations (47) (24)
------- -------
Net cash from financing activities 457 96
------- -------
Increase in cash and cash equivalents 1,535 1,755
Cash and cash equivalents at beginning of period 2,631 1,654
------- -------
Cash and cash equivalents at end of period $ 4,166 $ 3,409
======= =======
See notes to financial statements
<PAGE>
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, 1997. 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.
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales for the first quarter of fiscal 1998 were $28.8 million, an increase
of 5.2% over the first quarter of last year. Earnings for the quarter were
$1,291,000, or $.19 per share compared with $587,000, or $.09 per share for the
same quarter of last year.
The increased sales for the year were the result of a 6% increase in the
Company's grocery products sales. The Company's snack bar sales have increased
15% over the prior year, as a result of more customers stocking the Company's
new store brand low fat chewy granola bars and crisp rice marshmallow bars.
Ready-to-eat cereal sales increased at a more modest rate than in the previous
quarters, growing 5% over the first quarter of last year. The impact of
increased competition in the store brand ready-to-eat cereal market and lower
pricing from large branded competitors has slowed the Company's ready-to-eat
cereal sales growth.
The Company's contract sales of $5.6 million were approximately equal to the
same quarter a year ago. During its second quarter, the Company expects contract
manufacturing sales to decline significantly. The Company's volume is dependent
on sales from one major contract manufacturing customer and future sales will be
dependent upon consumer demand for this customer's product line.
Gross profit margin for the quarter was 27%, up from 22.1% for the first quarter
of last year. The dramatic increase reflects improved manufacturing efficiencies
primarily in the Company's new snack bar and ready-to-eat cereal products.
Selling and delivery costs were $4.5 million, or 15.7% of net sales for the
first quarter compared to $4.0 million, or 14.5% of sales last year. Core
grocery products comprised a higher percentage of total sales during the current
year. These products have higher selling and delivery costs, such as broker
commissions, transportation and promotion.
General, administrative and product development costs were $1.1 million, or 3.9%
of net sales in fiscal 1998, the same as in the first quarter of 1997.
The effective tax rate for the quarter was 37.4% compared to 37% for the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital increased from $13.2 million at May 31, 1997, to $14.5
million at the end of the current quarter as a result of increased cash. Cash
increased $1.5 million as a result of strong earnings while inventories levels
were unchanged and receivables increased slightly as a result of higher sales.
The Company's current ratio of 2.2 did not change during the quarter.
Net cash provided by operating activities during the quarter was $2.9 million,
versus $2.6 million in the first quarter of last year. The slight improvement
over last year was the result of increased earnings.
Net cash used in investing activities was $1.8 million for the first quarter
compared to $938,000 last year. Expenditures for equipment during the current
quarter exceeded the previous year, as the Company purchased new equipment for
ready-to-eat cereal production.
Net cash provided by financing activities increased to $457,000 compared to
$96,000 for the first quarter of last year. The increase was attributable to
cash received from the exercise of stock options.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
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 August 31,
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 thereunto duly authorized.
GRIST MILL CO.
Registrant
Date: October 9, 1997 By: /s/Daniel J. Kinsella
----------------------------
Daniel J. Kinsella
Vice President and
Chief Financial Officer
<PAGE>
GRIST MILL CO.
INDEX OF EXHIBITS TO QUARTERLY REPORT ON FORM 10-Q
FOR QUARTER ENDED AUGUST 31, 1997
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
GRIST MILL CO. AND SUBSIDIARY
EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE
(Unaudited, in thousands except per share data)
Three Months Ended
August 31,
---------------
1997 1996
------ ------
Primary earnings per share:
Net earnings applicable to common stock $1,291 $ 587
====== ======
Average number of common and common equivalent
shares outstanding:
Average common shares outstanding 6,714 6,767
Dilutive effect of stock options 75 12
------ ------
6,789 6,779
====== ======
Primary earnings per share $ .19 $ .09
====== ======
Fully diluted earnings per share:
Earnings for fully diluted computation $1,291 $ 587
====== ======
Average number of common and common shares outstanding:
Average common shares outstanding 6,714 6,767
Dilutive effect of stock options 75 12
------ ------
6,789 6,779
====== ======
Fully diluted earnings per share: $ .19 $ .09
====== ======
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 4,166
<SECURITIES> 0
<RECEIVABLES> 10,124
<ALLOWANCES> 0
<INVENTORY> 11,630
<CURRENT-ASSETS> 26,567
<PP&E> 64,024
<DEPRECIATION> 32,911
<TOTAL-ASSETS> 58,425
<CURRENT-LIABILITIES> 12,084
<BONDS> 0
<COMMON> 673
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 58,425
<SALES> 28,820
<TOTAL-REVENUES> 28,820
<CGS> 21,039
<TOTAL-COSTS> 21,039
<OTHER-EXPENSES> 5,667
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52
<INCOME-PRETAX> 2,062
<INCOME-TAX> 771
<INCOME-CONTINUING> 1,291
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,291
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
