<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 9, 1995
---------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number 0-12800
----------------------------------
VIE DE FRANCE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 52-0948383
------------- ------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
</TABLE>
85 S BRAGG STREET, SUITE 600, ALEXANDRIA, VA 22312
--------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (703) 750-9600
-----------------
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of December 31, 1995.
<TABLE>
<CAPTION>
COMMON STOCK 0.01 PAR VALUE NUMBER OF SHARES
--------------------------- ----------------
<S> <C>
NO CLASS 13,780,793
CLASS B NONE
</TABLE>
Page 1 of 14
<PAGE> 2
VIE DE FRANCE CORPORATION
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited consolidated financial statements have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company, all adjustments necessary
for the fair presentation of the Company's results of operations, financial
position and changes therein for the periods presented have been included.
Page 2 of 14
<PAGE> 3
VIE de FRANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
DEC. 9, JUNE 24,
ASSETS 1995 1995
- ------ ------------ ------------
<S> <C> <C>
Current assets
Cash and cash equivalents........................................ $4,926,738 $5,314,380
Short-term investment, related party............................. 4,900,000 4,900,000
Investments, current............................................. 3,999,899 3,995,298
Accounts receivable-trade, less allowance for doubtful accounts.. 1,746,315 1,645,741
Inventory........................................................ 3,366,184 2,349,798
Prepaid expenses................................................. 357,458 118,990
Current portion of notes receivable, related party............... 1,603,849 1,551,438
Other current assets............................................. 537,824 688,646
------------ ------------
Total current assets......................................... 21,438,267 20,564,291
Investments........................................................ 502,142 2,025,258
Note receivable, related party .................................... 516,646 516,646
Fixed assets, net.................................................. 5,699,183 5,970,945
Other assets....................................................... 1,318,409 834,371
------------ ------------
Total assets..................................................... $29,474,647 $29,911,511
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Accounts payable and accrued expenses............................ $878,145 $1,486,035
Accrued payroll and related liabilities.......................... 441,927 517,773
Reserves for store closings...................................... 323,953 194,900
Other accrued taxes.............................................. 200,000 147,838
Income taxes payable............................................. 101,989
Current portion of long-term debt................................ 798,508 734,368
Total current liabilities.................................... ------------ ------------
2,642,533 3,182,903
Long-term debt..................................................... 2,181,231 2,247,048
------------ ------------
Total liabilities............................................ 4,823,764 5,429,951
------------ ------------
Stockholders' equity
Common stock - $.01 par value, 20,000,000 shares authorized,
14,040,120 and 14,034,620 shares issued, and 13,780,793 and
13,778,543 shares outstanding.................................... 140,401 140,346
Class B stock - $.01 par value, 175,000 authorized, none issued..
Additional paid-in capital....................................... 21,284,597 21,269,214
Retained earnings................................................ 4,617,302 4,502,775
Less cost of 256,077 shares held in treasury..................... (1,439,844) (1,439,844)
Translation adjustment........................................... 48,427 9,069
------------ ------------
Total stockholders' equity................................... 24,650,883 24,481,560
------------ ------------
Commitments and contingencies......................................
------------ ------------
Total liabilities and stockholder's equity....................... $29,474,647 $29,911,511
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3 of 14
<PAGE> 4
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SECOND QUARTER YEAR-TO-DATE
----------------------------- ----------------------------------
TWELVE WEEKS ENDED TWENTY FOUR WEEKS ENDED
----------------------------- ----------------------------------
DECEMBER 9, DECEMBER 10, DECEMBER 9, DECEMBER 10,
1995 1994 1995 1994
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net sales............................................... $4,214,475 $3,979,515 $8,076,657 $7,209,235
Cost of sales .......................................... 3,532,927 2,749,156 7,018,689 5,191,687
------------ ------------ ----------- ------------
Gross margin........................................ 681,548 1,230,359 1,057,968 2,017,548
Selling and administrative expenses..................... 857,032 1,249,517 1,784,071 2,237,230
Depreciation and amortization........................... 23,107 234,474 49,541 419,649
Other income, net....................................... (1,117) (1,970) (5,878) (3,897)
------------ ------------ ----------- ------------
Loss from operations................................ (197,474) (251,662) (769,766) (635,434)
------------ ------------ ----------- ------------
Nonoperating income
Investment income..................................... 257,457 276,243 514,574 566,581
Interest expense...................................... (53,573) (8,139) (119,283) (9,322)
Foreign exchange (loss) income, net................... (28,339) (4,127) 10,974 (4,127)
------------ ------------ ----------- ------------
Net nonoperating income ............................ 175,545 263,977 406,267 553,132
------------ ------------ ----------- ------------
(Loss) income from continuing operations before income
taxes, discontinued, and cumulative effect of
change of accounting principle........................ (21,929) 12,315 (363,501) (82,302)
Income tax (expense) benefit............................ (4,926) 109,575 32,846
------------ ------------ ----------- ------------
(Loss) income from continuing operations before
discontinued operations & cumulative effect of
change in accounting principle........................ (21,929) 7,389 (253,926) (49,456)
Discontinued operations, net of taxes
Gain on sale of discontinued operations................ 96,500 171,500
Cumulative effect of change in
accounting principle.................................. 196,953
------------ ------------ ----------- ------------
Net Income (loss) $74,571 $7,389 $114,527 ($49,456)
============ ============ =========== ============
Earnings per common share:
Continuing operations................................. $0.00 $0.00 ($0.02) $0.00
Discontinued operations............................... $0.01 $0.00 $0.01 $0.00
Cumulative effect of change in accounting principle... $0.00 $0.00 $0.02 $0.00
------------ ------------ ----------- ------------
Earnings per common share............................... $0.01 $0.00 $0.01 $0.00
============ ============ =========== ============
Weighted average shares outstanding..................... 13,780,338 13,764,847 13,780,793 13,760,817
</TABLE>
See accompanying notes to consolidated financial statements.
4 of 14
<PAGE> 5
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR-TO-DATE
---------------------------------------
TWENTY FOUR WEEKS ENDED
---------------------------------------
DECEMBER 9, DECEMBER 10,
1995 1994
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................. $114,527 ($49,456)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization..................................... 554,532 419,649
Change in translation adjustment.................................. 39,358 35,006
Gain on discontinued operations................................... (96,500)
Changes in assets and liabilities:
(Increase) in receivables................................. (100,574) (70,701)
Increase in notes receivable, related party............... (52,411) (1,478,244)
Increase in inventory..................................... (1,016,386) (380,903)
Decrease (increase) in prepaid expenses................... (238,468) 34,484
(Decrease) increase in accounts payable and accrued
expenses .............................................. (607,890) 40,144
Decrease in accrued payroll and payroll taxes............. (75,846) (187,507)
Increase in reserve for store closings 225,553
Increase (Decrease) in other accrued taxes................ 52,162 (128,308)
Change in income taxes, net............................... (101,989) (3,312,774)
Change in other assets, net............................... 156,169 (15,440)
----------- ------------
Net cash used by operating activities..................... (1,147,763) (5,094,050)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in investments, net...................................... 1,518,515 1,071,187
Investment in common stock........................................ (500,000)
Capital expenditures.............................................. (272,155) (877,370)
Restaurant dispositions, net of proceeds.......................... (365,000)
----------- ------------
Net cash used by investing activities..................... 746,360 (171,183)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock under stock option plans.......... 15,438 26,795
Additions to debt................................................. 367,646
Reductions of debt................................................ (1,677)
----------- ------------
Net cash provided by financing activities................. 13,761 394,441
----------- ------------
Net decrease in cash and cash equivalents............................ (387,642) (4,870,792)
Cash and cash equivalents, beginning or period....................... 5,314,380 8,931,476
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,926,738 $4,060,684
=========== ============
</TABLE>
5 of 14
<PAGE> 6
VIE de FRANCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1) Fiscal Periods
The Company utilizes a 52/53 week fiscal year which ends on
the last Saturday in June. The third quarter of each year contains
16 weeks while the other three quarters contain 12 weeks each.
2) Dividends - None.
3) Contingency - None.
Page 6 of 14
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Results during the second quarter of fiscal year 1996 reflect moderate
sales increases to the Company's hotel, airline and healthcare customers, as
well as improved sales to customers in Asia. Large marketing expenses
associated with retail startups, and losses from Norwegian operations, were
offset by investment income and expiration of a restaurant reserve, producing
net income for the period.
SALES AND GROSS MARGINS
The Company's sales of high-quality frozen foods have historically been
primarily to hotels, airlines and other food service providers who order
through their distributor networks. During the fiscal 1996 second quarter,
sales to hotels amounted to 46% of net sales, compared with 53% during the
second quarter of fiscal 1995. Second quarter sales to airlines constituted
29% of net sales, compared with 25% of net sales in the 1995 second quarter.
Six major airlines purchase the Company's products. Sales by the Company's
Norwegian subsidiary, excluding intercompany sales, totaled $119,000 during the
second quarter, compared with $32,000 in the first quarter of fiscal 1996.
The Company began sales to the healthcare segment of the food service
market late in fiscal 1995. Healthcare sales represented 2% of net sales
during the second quarter, compared with 1% during the fiscal 1996 first
quarter. Healthcare-related sales are expected to grow to represent a
significant component of total volume during the next several years.
Sales to retail stores remained steady during the second quarter. Almost
all retail sales are generated from Sam's Club, a division of Wal-Mart Stores,
Inc. Because results at Sam's have been below expectations from a revenue and
gross margin perspective, the Company has discontinued its "Dinner for 4" and
"Assemblage Culinaire" business there. The possibility of providing a
different product line to Sam's is currently under review. Although results at
Sam's have been disappointing, exposure of the Company's products on retail
shelves nationwide has led to new sales opportunities and added significantly
to the Company's marketing knowledge.
The Company continues to believe that there is great potential for its
products in a retail environment. Sales of its products at a new,
high-quality, frozen-food convenience store format, have exceeded expectations.
Among other things, the Company is in detailed discussions as a potential
supplier to a marketer of high-quality, private-label foods for the retail
grocery stores. In addition, the Company expects to enter the Canadian retail
marketplace during the second half of calendar 1996 through sales to an
operator of frozen food convenience stores there.
Page 7 of 14
<PAGE> 8
A comparison of net sales, gross margin percentages and losses from
operations follows:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------
DEC. 9, DEC. 10,
1995 1994
---- ----
(dollars in thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . $ 4,214 $ 3,980
Gross margin percentage . . . . . . . . . . . . . . . 16% 31%
Loss from operations . . . . . . . . . . . . . . . . $ (197) (252)
</TABLE>
Fiscal year 1996's second quarter sales increased by 6% over the 1995
quarter to $4,214,000 from $3,980,000. Much of the increase is attributable
to improvements in sales to airlines and to Asian customers.
Gross margin as a percentage of total net sales show a decrease to 16%
from 31% in the second quarter fiscal year 1996 versus fiscal year 1995.
However, gross margin of 16% for second quarter fiscal year 1996 is based on
the accounting change to full absorption in first quarter 1996. The accounting
change to full absorption reclassified costs such as distribution, procurement,
depreciation, general and adminstrative as a part of gross margin calculations.
These costs were not included in gross margins in fiscal year 1995 and prior.
These costs represent 13% of the total costs for second quarter fiscal 1996.
Therefore, if these costs were removed from calculating gross margins for 1996,
gross margins slightly improved in fiscal year 1996 compared to fiscal year
1995.
A detailed discussion of the reason and the effects of this change is found
below.
SELLING AND ADMINISTRATIVE EXPENSES
A comparison of selling and general administrative costs follows:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------
DEC. 9, DEC. 10,
1995 1994
---- ----
(dollars in thousands)
<S> <C> <C>
Selling and administrative costs . . . . . . . . . . $ 857 $ 1,250
</TABLE>
Page 8 of 14
<PAGE> 9
Selling and administrative costs decreased 31% during the fiscal
1996 second quarter, to $857,000 from $1,250,000 in same quarter of fiscal
1995. Selling and administrative costs constituted 20% of net sales during the
quarter, compared with 31% during the fiscal 1995 second quarter. The decrease
was caused by the reclassification of a portion of these fiscal 1996 costs to
cost of goods sold, reflecting the change to full absorption accounting.
Included in the quarter's selling expenses is approximately $144,000 in costs
associated with the retail market.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased by $211,000 to $23,000
for the second quarter of fiscal year 1996 versus $234,000 for the same period
a year ago. This decrease is due to the reclassification of approximately
$200,000 in second quarter fiscal 1996 costs from this expense category to cost
of goods sold, stemming from the change in accounting principle, as highlighted
below.
NONOPERATING INCOME AND EXPENSE
Investment income consists of returns earned on funds received
from the sale of the Restaurant Division together with interest income
associated with a $4.9 million collateralized European bank deposit, which
earns interest at a rate which the Company believes to be in excess of the
prevailing short-term interest rates in the United States.
Interest expense relates to the borrowings, including a capital
lease, associated with the Company's Norwegian subsidiary. At December 9,
1995, the Company, through its Norwegian subsidiary, had borrowings of
approximately $2.6 million, bearing interest at rates ranging from 7.25% to
10.0%. It is anticipated that these borrowings will remain outstanding during
the upcoming fiscal year.
PROVISION FOR TAXES
The income tax benefit for fiscal year to date 1996 relates
primarily to the taxes recoverable from prior year payments at the Company's
effective tax rate of 40%.
CHANGE IN ACCOUNTING
Effective June 25, 1995, the Company changed its overhead
absorption policy with regard to finished goods inventories. Prior to this
change, the Company had valued its inventories using partial absorption of
certain-plant level indirect manufacturing overhead costs as they related to
the capacity and utilization of the plant facilities.
Page 9 of 14
<PAGE> 10
DISCONTINUED OPERATIONS
The company reduced reserves related to the sale of its
Restaurant Division, producing income from discontinued operations of $96,500,
following the expiration of the lease for its former location at Ala Moana,
California. Certain amounts from prior years have been reclassified for
comparative purposes.
IMPACT OF INFLATION AND THE ECONOMY
Inflation has from time to time had a material impact on the
Company's expenses. Inflation in labor and ingredient costs can significantly
affect the Company's operations. Many of the Company's employees are paid
hourly rates related to, but generally higher than the federal minimum rates.
The Company's sales pricing structure allows for the fluctuation
of raw material prices. As a result, market price variations do not
significantly affect the gross margin realized on product sales. Customer
sensitivity to price changes can influence the overall sales of individual
products.
LIQUIDITY AND CAPITAL RESOURCES
The Company has experienced a decline in its liquidity since the
end of last fiscal year. The combined total of the cash and short-term
investment balances was $13,827,000 and $14,210,000 at December 9, 1995 and
June 24, 1995, respectively. Cash and investments at the end of second quarter
1996 were $13,450,000. Additionally, the Company held investments of $502,000
and $2,025,000 at December 9, 1995 and June 24, 1995, respectively, with
maturities greater than one year. In addition, the Company held one common
stock investment of $1,000,000 and $500,000 at December 9, 1995 and June 24,
1995, respectively. This decrease in liquidity is a direct result of the
increased working capital requirements for the Company.
Year-to-date cash used by operations amounted to $1,148,000 and
$5,094,000 for fiscal years 1996 and 1995 respectively. Year-to-date cash used
was affected by an increase in receivables and inventories, along with a
decrease in trade payables and income taxes. The inventory increase was
primarily attributable to an increase in salmon stocks in Norway and
requirements for Sam's Club. Cash in the amount of $746,000 was used for
investments, representing a decrease in investments needed to finance capital
expenditures of $272,000, increases in inventories and receivables, along with
the Company's second $500,000 common stock investment. It is the intent of the
Company to search for, pursue and find similar investment opportunities. Cash
in the amount of $14,000 was provided by financing activities.
The Company is evaluating the possibility of replacing its
existing U.S. production facility to increase efficiency and to provide modern
space for future growth. The company is also considering locating one or more
plants for sous vide products closer to the source of supply to maintain
product quality, lower shipping costs and as a method of entering new markets..
The cost of such facilities ranges from approximately $1,000,000 to
$5,000,000, depending upon the
Page 10 of 14
<PAGE> 11
nature of the product and the production volume desired. Local governments may
provide subsidies and other assistance in connection with such facilities. It
is possible that the Company may use some of its cash resources to fund these
efforts.
Page 11 of 14
<PAGE> 12
The Company's Norwegian subsidiary has secured a working capital
commitment for its liquidity needs in Norway in the form of an overdraft
facility. As of December 9, 1995 and June 24, 1995, $603,000 was outstanding
under this overdraft facility. The subsidiary can borrow up to $600,000 under
this commitment.
The Company has on deposit $4.9 million with a European bank.
This deposit is denominated in U.S. dollars and earns a rate of return in
excess of the prevailing short-term rates in the United States. This deposit
has been pledged as collateral to the bank so that the bank may loan funds to a
French subsidiary of Setucaf S.A., a French company which is 21% owned by Food
Research Corporation, the majority stockholder of the Company. This deposit is
redeemable on thirty days notice without penalty. The Company believes no
material risk to principal is associated with this deposit.
FUTURE PROSPECTS
The Company is moving aggressively to increase sales in a number
of important markets and potential markets for its products. Although its U.S.
operations generate operating profit on a stand-alone basis, Norwegian losses -
although lower that in previous quarters - continue to undermine the Company's
overall results. Increased management attention will be devoted to
establishing relationships with European distributors, and prospects will be
reviewed during the fiscal third quarter. A full range of alternatives for
Norwegian operations will be considered during this period.
Page 12 of 14
<PAGE> 13
VIE DE FRANCE CORPORATION
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is engaged in ordinary and routine litigation
incidental to its business. Management does not anticipate that any amounts
which it may be required to pay by reason thereof will have a material effect
on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's annual meeting of shareholders was held on October 25,
1995. The following individuals were elected to serve as Directors for a
period of one year and until their successors are elected and qualify:
Jean-Louis Vilgrain (Chairman), Stanislas Vilgrain (President & CEO), Bruno
Goussault, Alexandre Vilgrain, George Naddaff, Carl Youngman and James Hackney.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits -
None
(b) Reports on Form 8-K -
None
Page 13 of 14
<PAGE> 14
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.
VIE DE FRANCE CORPORATION
-------------------------------
Date: January 19, 1995 By: /s/ STANISLAS VILGRAIN
-------------------- --------------------------
Stanislas Vilgrain
President and CEO
By: /s/ CARL M. YOUNGMAN
--------------------------
Carl M. Youngman
Acting Chief Finanical
Officer
By: /s/ LEARA L. DORY
--------------------------
Leara L. Dory
Controller of Finance and
Accounting
(Financial Officer - Secretary)
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-END> DEC-09-1996
<CASH> 4,926,738
<SECURITIES> 9,402,041
<RECEIVABLES> 6,080,501
<ALLOWANCES> 0
<INVENTORY> 3,366,184
<CURRENT-ASSETS> 23,775,464
<PP&E> 9,993,506
<DEPRECIATION> (4,294,323)
<TOTAL-ASSETS> 29,474,647
<CURRENT-LIABILITIES> 2,642,533
<BONDS> 2,181,231
0
0
<COMMON> 140,401
<OTHER-SE> 24,510,482
<TOTAL-LIABILITY-AND-EQUITY> 29,474,947
<SALES> 4,214,475
<TOTAL-REVENUES> 4,214,475
<CGS> 3,532,927
<TOTAL-COSTS> 879,019
<OTHER-EXPENSES> (229,115)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,573
<INCOME-PRETAX> (21,929)
<INCOME-TAX> 0
<INCOME-CONTINUING> (21,929)
<DISCONTINUED> 96,500
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 74,571
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
