<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 SEPTEMBER 21, 1996
-----------------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-12800
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VIE DE FRANCE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 52-0948383
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
85 S BRAGG STREET, SUITE 600, ALEXANDRIA, VA 22312
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(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 September 21, 1996.
COMMON STOCK 0.01 PAR VALUE NUMBER OF SHARES
--------------------------- ----------------
NO CLASS 13,822,543
CLASS B NONE
1
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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.
2
<PAGE> 3
VIE DE FRANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
----------------------------------------------
Sep 21, June 29,
1996 1996
---------------- ------------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 6,808,000 $ 6,862,000
Short-term investment, related party - -
Investments, current 2,537,000 2,658,000
Accounts receivable, trade 1,252,000 1,486,000
Inventory 2,022,000 2,119,000
Prepaid expenses 196,000 137,000
Current portion of notes receivable, related party 10,000 10,000
Other current assets 328,000 292,000
--------------- ------------------
TOTAL CURRENT ASSETS 13,153,000 13,564,000
Investments, noncurrent 5,675,000 5,598,000
Fixed assets, net 5,164,000 5,313,000
Note receivable, related party, including accrued interest,
less current portion 2,289,000 2,178,000
Other assets 377,000 382,000
--------------- ------------------
TOTAL ASSETS $ 26,658,000 $ 27,035,000
=============== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 897,000 $ 948,000
Accrued payroll and related liabilities 459,000 577,000
Current portion of long-term debt 491,000 153,000
Accrued store closings 197,000 287,000
Other accrued taxes 141,000 141,000
Income taxes payable - -
--------------- ------------------
Total current liabilities 2,185,000 2,106,000
Long-term debt, less current portion 2,110,000 2,147,000
--------------- ------------------
Total liabilities 4,295,000 4,253,000
--------------- ------------------
Stockholders' equity
Common stock - $.01 par value, 20,000,000 shares
authorized, 14,078,620 and 14,034,620 shares issued and
13,822,543 and 13,778,543 shares outstanding 141,000 141,000
Class B Stock - $.01 par value, 175,000 shares authorized,
none issued - -
Additional paid-in capital 21,352,000 21,352,000
Retained earnings 2,488,000 2,789,000
Treasury stock, at cost (256,077 shares) (1,440,000) (1,440,000)
Unrealized losses on debt and equity investments (128,000) (110,000)
Cumulative translation adjustment (50,000) 50,000
--------------- ------------------
Total stockholders' equity 22,363,000 22,782,000
--------------- ------------------
Commitments and contingencies
--------------- ------------------
Total liabilities and stockholders' equity $ 26,658,000 $ 27,035,000
=============== ==================
</TABLE>
See accompanying notes to consolidated financial statements.
3
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VIE DE FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------
FIRST QUARTER
-----------------------------
TWELVE WEEKS ENDED
-----------------------------
Sep 21, Sep 16,
1996 1995
------------- ------------
<S> <C> <C>
NET SALES $ 2,782,000 $ 3,862,000
COST OF GOODS SOLD 2,538,000 3,486,000
-----------------------------
GROSS MARGIN 244,000 376,000
SELLING AND ADMINISTRATION 795,000 927,000
DEPRECIATION AND AMORTIZATION 24,000 26,000
OTHER INCOME (7,000) (5,000)
LOSS ON EQUITY METHOD INVESTMENT 0 0
-----------------------------
LOSS FROM OPERATIONS (568,000) (572,000)
-----------------------------
NONOPERATING INCOME (EXPENSE)
INVESTMENT INCOME 222,000 257,000
INTEREST EXPENSE (43,000) (66,000)
OTHER INCOME (EXPENSE) (2,000) 39,000
-----------------------------
TOTAL NONOPERATING INCOME 177,000 230,000
-----------------------------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES, DISCONTINUED OPERATIONS, AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (391,000) (342,000)
PROVISION FOR INCOME TAX (EXPENSE) BENEFIT - 110,000
-----------------------------
LOSS FROM CONTINUING OPERATIONS BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAXES (391,000) (232,000)
LOSS FROM DISCONTINUED OPERATIONS, NET OF TAXES - -
GAIN FROM SALE OF DISCONTINUED OPERATIONS, NET OF TAXES 90,000 75,000
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAXES 0 197,000
-----------------------------
NET INCOME (LOSS) $ (301,000) $ 40,000
=============================
NET INCOME (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS AFTER INCOME TAXES, BEFORE
DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE, NET OF TAXES $ (0.03) $ (0.02)
DISCONTINUED OPERATIONS $ 0.01 $ 0.01
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ - $ 0.01
-----------------------------
NET INCOME (LOSS) PER COMMON SHARE $ (0.02) $ 0.00
=============================
WEIGHTED AVERAGE SHARES OUTSTANDING 13,822,543 13,780,338
=============================
</TABLE>
See accompanying notes to consolidated financial statements.
4
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VIE DE FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
------------------------------------
Year-to-date
Twelve weeks ended
Sep 21, Sep 16,
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (301,000) $ 40,000
Adjustments to reconcile net income (loss) to
net cash (used) provided by operating activities
Gain from sale of discontinued operations (90,000) (75,000)
Loss on equity method investment (19,000) -
Depreciation and amortization, including
discontinued operations 196,000 277,000
Gain on disposal of fixed assets - -
Change in cumulative translation adjustment (100,000) 8,000
Cumulative effect of change in accounting principle, net - (197,000)
Income tax benefit - (110,000)
Changes in assets and liabilities, net of
effects of discontinued operations and non-cash transactions:
Decrease (increase) in accounts receivable trade, net 235,000 (244,000)
Decrease (increase) in inventory 97,000 (854,000)
(Increase) decrease in prepaid expenses (59,000) 11,000
(Increase) decrease in notes receivable, related party (110,000) (26,000)
(Increase) decrease in other assets (37,000) 174,000
(Decrease) increase in accounts payable
and accrued expenses (51,000) (539,000)
Increase (decrease) in accrued payroll and related liabilities (117,000) 41,000
Decrease in accrued store closing costs - 224,000
(Decrease) increase in other accrued taxes - -
Decrease in income taxes payable - (18,000)
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Net cash (used) provided by operating activities (356,000) (1,288,000)
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CASH FLOWS FROM INVESTING ACTIVITIES
Sale (purchase) of investments, net 44,000 2,004,000
Investments in common stock - (500,000)
Proceeds from sale of discontinued operations,
net of transaction costs - -
Restaurant Dispositions - -
Proceeds on disposal of fixed assets - -
Capital expenditures (42,000) (215,000)
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Net cash provided by investing activities 2,000 1,289,000
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CASH FLOWS FROM FINANCING ACTIVITIES
Additions to debt - -
Increase borrowings and reduction of debt 300,000 (283,000)
Proceeds from issuance of stock - 4,000
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Net cash provided (used) by financing activities 300,000 (279,000)
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Net increase (decrease) in cash and cash equivalents (54,000) (278,000)
Cash and cash equivalents, beginning of period 6,862,000 5,314,000
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CASH AND CASH EQUIVALENTS, END OF PERIOD $6,808,000 $ 5,036,000
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements
5
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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 first, second and fourth quarter of fiscal year 1997
contains 12 weeks, and the third quarter contains 16.
2) Dividends - None.
3) Contingency - None.
6
<PAGE> 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
GENERAL
Vie de France Corporation reported a net loss of $301,000 for first
quarter 1997 due primarily to lower U.S. sales volumes. Sales to food service,
transportation and retail customers fell.
NET SALES
First quarter 1997 sales totaled $2,782,000, down 28% from first
quarter 1996 sales of $3,862,000. Food service sales fell $560,000, or 29%,
because of lower volume for banquets and other special events. Sales to
airline customers declined by $134,000, or 11%, while retail sales fell
$270,000, or 79%, primarily because sales of the Company's "Dinner for 4" meals
to Sam's Clubs were discontinued in January, 1996. International sales
declined $180,000, or 85%, from the first quarter 1996, primarily because of
comparisons with a large one-time sale to Japan in the year-ago period.
European sales of fish packed by the Company's Norwegian plant totaled $84,000
during the first quarter of fiscal 1997, compared with $32,000 in the year-ago
quarter
During the fiscal 1997 first quarter, sales to hotels and other
foodservice customers, airlines, retail and international customers represented
54%, 39%, 7 for all others, respectively.
The Company focused on cost containment and improved operating
efficiency during much of fiscal 1996. The benefits of these initiatives to
contain inventory, reduce labor costs and reduce other expenses were apparent
in first quarter 1997 results. First quarter 1997 fixed costs were $1,453,000,
down 12% from $1,642,000 in the first quarter of 1996. The Company decreased
inventories by 37% in the first quarter, to $2,022,000 from $3,205,000 in the
1996 period, without loss of service or food quality to customers.
The Company's sales of high-quality frozen foods have historically
been primarily to hotels, airlines and other food service providers who order
through distribution networks. The Company is also focusing on the retail
segment and has begun tests of its products with a number of supermarket
chains, primarily in the Eastern U.S. Although results have been encouraging,
it is too early to determine whether these tests, which focus on the so-called
"home-meal replacement" market, will lead to significant sales volumes.
A comparison of net sales, gross margin percentages and losses from
operations follows:
7
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<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------
SEP. 21, SEP. 16,
1996 1995
---- ----
(dollars in thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,782 $ 3,862
Gross margin percentage . . . . . . . . . . . . . . . . . . . . . . . . . 9% 10%
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (568) (572)
</TABLE>
Fiscal year 1997's first quarter sales decreased by 28% from the fiscal
year 1996 quarter to $2,782,000 from $3,862,000.
First quarter 1997 gross margin as a percentage of total net sales
decreased to 9% from 10% in the year-ago quarter. The gross margin of 9% for
first quarter fiscal year 1997 results from lower sales volumes.
SELLING AND ADMINISTRATIVE EXPENSES
A comparison of selling and general administrative costs follows:
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------
SEP. 21, SEP. 16,
1996 1995
---- ----
(dollars in thousands)
<S> <C> <C>
Selling and administrative costs . . . . . . . . . . . . . . . . . . . . . $ 795 $ 927
</TABLE>
Selling and administrative costs decreased 14% during the fiscal 1997
first quarter, to $795,000 from $927,000 in same quarter of fiscal 1996. The
decrease resulted from cost containment measures implemented during fiscal year
1996, which were in place for the first quarter fiscal year 1997. Selling and
administrative costs constituted 29% of net sales during the quarter due to low
sales volumes, compared with 24% during the fiscal 1996 first quarter.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased $2,000 to $24,000 for the
first quarter of fiscal year 1997, compared with $26,000 for the same period a
year ago.
8
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NONOPERATING INCOME AND EXPENSE
Investment income decreased in first quarter fiscal 1997 due to lower
level of interest rates. Investment income consists of returns earned on
funds received from the sale of the Restaurant Division, together with interest
income associated with the return of the 4,900,000 loan from the collateralized
European deposit at the end of fiscal year 1996. In fiscal year 1996 the
Company engaged the services of a new investment management firm, Cypress
Capital Management, to manage all of its free cash reserves. The investment
approach remains conservative, focusing on preservation of capital and
consistency of total returns.
Interest expense relates to the borrowings, including a capital lease,
associated with the Company's Norwegian subsidiary. At September 21, 1997, 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
During the first quarter of fiscal 1997 the company recognizes no
income tax benefit.
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. Additional costs, such as
material handling, purchasing and receiving, plant administration and factory
and equipment depreciation, were expensed as period costs. These costs will
now be treated as product costs under the method adopted by the Company in
order to better match costs with related revenues and to better conform to
prevailing manufacturing industry practice.
NEW ACCOUNTING STANDARDS
In June 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-lived Assets and or Long-lived Assets to Be Disposed of ("SFAS No. 121).
SFAS No. 121 requires companies to review long-lived assets and certain
identifiable intangibles to be held, used or disposed of, for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The Company has implemented this standard
and determined that no adjustments to the carrying value of long-lived assets
is required during this quarter.
9
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In October 1995, the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123, Account Stock-Based Compensation
("Statement 123"). Statement 123 recommends, but does not require, the
adoption of a fair value method of accounting for stock-based compensation to
employees including common stock options, and stock-based compensation to
individuals other than employees. The Company currently intends to continue
recording stock-based compensation to employees under the intrinsic value
method and does not intend to adopt the fair value method of accounting for
stock-based compensation to employees as permitted by Statement 123.
IMPACT OF INFLATION AND THE ECONOMY
Variations 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
At September 21, 1996 the Company's combined total of the cash and
short-term investment balances was $9,345,000 compared to $9,520,000 at June
29, 1996. Additionally, the Company held investments of $5,675,000 and
$5,598,000 at September 21, 1996, and June 29, 1996, respectively, with
maturities greater than one year. In addition, the Company held one common
stock investment of $14,000 at September 21, 1996 and June 29, 1996. This
decrease in liquidity is a direct result of the increased working capital
requirements for the Company.
Net cash used by operations amounted to $356,000 and $1,288,000 for
first quarters 1997 and 1996, respectively. Cash used by the U.S. plant
decreased by $932,000 in the first quarter 1997, from first quarter 1996.
Cash in the amount of $2,000 was provided by investing activities. Cash in the
amount of $300,000 was provided by financing activities, against the overdraft
facility established for the Norwegian operations.
The Company continues to evaluate 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 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 and/or acquisitions.
10
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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 September 21, 1996, $335,000 was outstanding under this
overdraft facility. The subsidiary can borrow up to $800,000 under this
commitment.
FUTURE PROSPECTS
The Company's top priority for the balance of fiscal 1997 and for
fiscal 1998 will be to increase sales. The focus of U.S. sales and marketing
efforts will be on increased sales to transportation, hotel and catering
customers, on the food service side of the business, and to retail customers
for home-meal replacement and other products. The Company will also devote
sales and marketing attention to achieving increased European sales.
11
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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
12
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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: November 1, 1996 By: /s/Stanislas Vilgrain
------------------------ ---------------------
Stanislas Vilgrain
President and CEO
By: /s/Carl M. Youngman
-------------------
Carl M. Youngman
Acting Chief Financial Officer
and Treasurer
By: /s/Leara L. Dory
----------------
Leara L. Dory
Controller of Finance and
Accounting
(Financial Officer - Secretary)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> SEP-21-1996
<CASH> 6,808,000
<SECURITIES> 8,212,000
<RECEIVABLES> 3,551,000
<ALLOWANCES> 0
<INVENTORY> 2,022,000
<CURRENT-ASSETS> 13,153,000
<PP&E> 10,064,000
<DEPRECIATION> 4,900,000
<TOTAL-ASSETS> 26,658,000
<CURRENT-LIABILITIES> 2,185,000
<BONDS> 2,110,000
0
0
<COMMON> 141,000
<OTHER-SE> 22,222,000
<TOTAL-LIABILITY-AND-EQUITY> 22,363,000
<SALES> 2,782,000
<TOTAL-REVENUES> 2,782,000
<CGS> 2,538,000
<TOTAL-COSTS> 2,538,000
<OTHER-EXPENSES> 812,000
<LOSS-PROVISION> (568,000)
<INTEREST-EXPENSE> 177,000
<INCOME-PRETAX> (391,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (391,000)
<DISCONTINUED> 90,000
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (301,000)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
