<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 MARCH 30, 1996
---------------------------
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)
DELAWARE 52-0948383
------------- ------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
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 March 31, 1996.
COMMON STOCK 0.01 PAR VALUE NUMBER OF SHARES
--------------------------- ----------------
NO CLASS 13,819,293
CLASS B NONE
Page 1 of 13
<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 13
<PAGE> 3
VIE de FRANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
Mar. 30, June 24,
ASSETS 1996 1995
- ------ --------------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents............................................. $4,626,140 $5,314,380
Short-term investment, related party.................................. $4,900,000 4,900,000
Investments, current.................................................. $4,352,034 3,995,298
Accounts receivable-trade, less allowance for doubtful accounts....... $1,541,507 1,645,741
Inventory............................................................. $2,151,803 2,349,798
Prepaid expenses...................................................... $211,819 118,990
Current portion of notes receivable, related party.................... 1,642,235 1,551,438
Other current assets.................................................. 648,771 688,646
------------- ------------
Total current assets.............................................. 20,074,309 20,564,291
Investments............................................................. 1,057,730 2,025,258
Note receivable, related party ......................................... 516,646 516,646
Fixed assets, net....................................................... 5,361,058 5,970,945
Other assets............................................................ 1,810,651 834,371
------------- ------------
Total assets.......................................................... $28,820,394 $29,911,511
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Accounts payable and accrued expenses................................. $714,765 $1,486,035
Accrued payroll and related liabilities............................... 410,622 517,773
Reserves for store closings........................................... 311,827 194,900
Other accrued taxes................................................... 73,469 147,838
Income taxes payable.................................................. 11,352 101,989
Current portion of long-term debt .................................... 697,512 734,368
------------- ------------
Total current liabilities......................................... 2,219,547 3,182,903
Long-term debt.......................................................... 2,238,006 2,247,048
------------- ------------
Total liabilities................................................. 4,457,553 5,429,951
Stockholders' equity
Common stock - $.01 par value, 20,000,000 shares authorized,
14,078,600 and 14,034,620 shares issued, and 13,819,293 and
13,778,513 shares outstanding......................................... 140,786 140,346
Class B stock - $.01 par value, 175,000 authorized, none issued.......
Additional paid-in capital............................................ 21,352,134 21,269,214
Retained earnings..................................................... 4,297,417 4,502,775
Less cost of 256,077 shares held in treasury.......................... (1,439,844) (1,439,844)
Translation adjustment................................................ 12,348 9,069
------------- ------------
Total stockholders' equity........................................ 24,362,841 24,481,560
------------- ------------
Commitments and contingencies...........................................
------------- ------------
Total liabilities and stockholders' equity............................ $28,820,394 $29,911,511
============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 13
<PAGE> 4
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Third quarter Third quarter
------------------------------- ----------------------------
Sixteen weeks ended Forty weeks ended
------------------------------- ----------------------------
March 30, April 1, March 30, April 1,
1996 1995 1996 1995
--------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Net sales................................................. $4,218,702 $4,387,090 $12,295,358 $11,596,326
Cost of goods sold ....................................... 3,797,861 2,976,263 10,856,506 8,167,950
------------ ------------- ------------ -------------
Gross margin.......................................... 420,841 1,410,827 1,438,852 3,428,376
Selling and administration................................ 1,043,311 1,604,365 2,827,381 3,841,595
Depreciation and amortization............................. 30,886 330,412 80,427 750,061
Other income ............................................. (63,716) (167,273) (69,594) (171,170)
------------ ------------- ------------ -------------
Loss from operations.................................. (589,640) (356,677) (1,399,362) (992,110)
------------ ------------- ------------ -------------
Nonoperating income
Investment income....................................... 364,786 388,413 879,260 954,994
Interest expense........................................ (130,001) (123,938) (249,183) (133,260)
Foreign exchange income ................................ 1,375 30,868 12,349 26,740
------------ ------------- ------------ -------------
Net nonoperating income .............................. 236,160 295,343 642,426 848,474
------------ ------------- ------------ -------------
Income (loss) from continuing operations before income
taxes, disc ops, and change in acctg principle.......... (353,480) (61,334) (756,936) (143,636)
Income tax benefit........................................ (131,000) 109,575 (98,154)
------------ ------------- ------------ -------------
Income (loss) from continuing operations before
discontinued ops & cum effect of acctg change........... (353,480) (192,334) (647,361) (241,790)
Discontinued operations
Gain from Bakery/Restaurant div......................... 213,000 171,500 213,000
Cum effect of change in accounting principle............ 196,953
------------ ------------- ------------ -------------
Net income (loss) ($353,480) $20,666 ($278,909) ($28,790)
============ ============= ============ =============
Earnings per common share:
Continuing operations................................... ($0.03) ($0.01) ($0.05) ($0.02)
Discontinued operations................................. $0.00 $0.02 $0.01 $0.02
Cum effect of change in accounting principle... $0.00 $0.00 $0.01 $0.00
------------ ------------- ------------ -------------
Earnings per common share................................. ($0.03) $0.00 ($0.02) ($0.00)
============ ============= ============ =============
Weighted average shares outstanding....................... 13,819,293 13,770,387 13,800,043 13,764,645
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 13
<PAGE> 5
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Third quarter
----------------------------
Twenty Four weeks ended
----------------------------
March 30, April 1,
1996 1995
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................................... ($278,909) ($28,790)
Adjustments to reconcile net income (loss) to net cash
used by operating activities:
Depreciation and amortization....................................... 793,753 750,061
Change in translation adjustment.................................... 3,369 (74,154)
Gain on discontinued operations..................................... (96,500) (213,000)
(Increase) decrease in assets:
Accounts receivables........................................ 104,234 (36,828)
Notes receivable, related party............................. (90,797) (1,516,630)
Inventories................................................. 197,995 (695,080)
Prepaid expenses............................................ (92,828) (16,399)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses....................... (771,270) 352,991
Accrued payroll and payroll taxes........................... (107,151) (242,338)
Reserve for store closings 116,927
Other accrued taxes......................................... (74,369) (128,308)
Change in income taxes, net................................. (90,637) (3,227,566)
Change in other, net........................................ 39,875 (44,654)
----------- ------------
Net cash used by operating activities....................... (346,308) (5,120,695)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in investments, net........................................ 610,792 579,176
Investment in common stock.......................................... (509,945)
Capital expenditures................................................ (480,241) (1,212,326)
Restaurant dispositions, net of proceeds (365,000)
----------- ------------
Net cash used by investing activities....................... (379,394) (998,150)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of stock under stock option plans............ 83,360 50,060
Additions to debt................................................... 1,477,224
Reductions of debt.................................................. (45,898)
----------- ------------
Net cash provided by financing activities................... 37,462 1,527,284
----------- ------------
Net decrease in cash and cash equivalents.............................. (688,240) (4,591,561)
Cash and cash equivalents, beginning of period......................... 5,314,380 8,931,476
----------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,626,140 $4,339,915
=========== ============
</TABLE>
Page 5 of 13
<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 13
<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 $353,000 for
third quarter 1996 due primarily to low sales volumes in both the United States
and Norwegian operations. Losses from operations were offset by investment
income of $236,000.
The results from operations for third quarter were influenced by
difficult weather this winter on the east coast, coupled with government
shutdowns which affected our foodservice customers. Management is very pleased
with the future prospects for the company, and we expect to recover in the
fourth quarter. The company has focused heavily on improving its balance sheet
during FY96. These improvements have resulted in reductions to inventory
through sales and operations planning in the US plant by $1 million, from
fiscal year end 1995, and continual strong cash management. Continued focus on
reducing operating expenses at all levels of the company, and improved
manufacturing efficiency, are main objectives of the company.
NET SALES
In third quarter 1996 the company reported revenue of $4.2
million, a decrease of 3.8% from third quarter 1996 of $4.4 million. The
decline for the quarter in revenue and increase of net operating loss is
primarily due to low sales volumes during the quarter for both its operations.
Sales by the company's US and Norwegian operations represent 99% ($4.2 million)
of which, 36% and 25% represent poultry and Norwegian salmon products,
respectively. Sales by the Norwegian operations other than its US affiliate
company represent 1% ($49,000), respectively, and were to customers in Europe
and Asia.
Despite the low sales volumes in fiscal 1996 third quarter,
year to date 1996 the company reported revenue of $12.3 million, an increase of
6% from fiscal year to date 1995 sales of $11.6 million. This reflects
moderate sales increases to the Company's hotel, airline and healthcare
customers, as well as sales to customers in Asia. The company continues to
expand its customer base into restaurant chains and retail outlets.
During the fiscal 1996 third quarter, sales to hotels and other
foodservice customers, airlines, and retail represented 63%, 25% and 7%,
respectively. Sales to retail stores reflected final sales to Sam's Club.
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 heavily on the
retail segment which brings products directly to the home through various
outlets. Our previous experience in retail has opened the doors for more
opportunity in this arena. The company has begun testing products in a number
of retail supermarket chains on the east coast to respond to the home meal
replacement market, and is working with a major food supplier to produce and
co-package products under their private label. The results are very
encouraging, and the list of potential retail customer continues to grow. The
home meal
Page 7 of 13
<PAGE> 8
replacement market is expected to be a significant area for growth. The company
has entered the Canadian retail market, and has gained approval from Canadian
authorities to ship products into Canada. Management has strategies in place
to prioritize and focus on those sales and marketing opportunities which are
most advantageous for the company.
A comparison of net sales, gross margin percentages and losses
from operations follows:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
MAR. 30, APR. 1,
1996 1995
---- ----
(dollars in thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . $ 4,218 $ 4,387
Gross margin percentage . . . . . . . . . . . . . . . . 10% 32%
Loss from operations . . . . . . . . . . . . . . . . $ (590) (357)
</TABLE>
Fiscal year 1996's third quarter sales decreased by 3.8% over the
1995 quarter to $4,218,000 from $4,387,000.
Gross margin as a percentage of total net sales show a decrease to
10% from 32% in the third quarter fiscal year 1996 versus fiscal year 1995.
Gross margin for third quarter fiscal 1996 also decreased from second quarter
1996 gross margins of 16%. The gross margin of 10% for third quarter fiscal
year 1996 is based on low sales volumes and the accounting change to full
absorption in first quarter 1996. During the first and second quarter average
sales amounted to $1.3 million per period, versus third quarter periodic sales
of $1.1 million. This equates to a decline of $800,000 in sales in third
quarter fiscal 1996, or a 6% gross margin decrease. The accounting change to
full absorption reclassified costs such as distribution, procurement,
depreciation, general and administrative as a part of gross margin
calculations. These costs were not included in gross margins in fiscal year
1995 and prior. These costs represent 14% of the total costs for third quarter
fiscal 1996. 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
----------------------
MAR. 30, APR. 1,
1996 1995
---- ----
(dollars in thousands)
<S> <C> <C>
Selling and administrative costs . . . . . . . . . . $ 1,043 $ 1,604
</TABLE>
Page 8 of 13
<PAGE> 9
Selling and administrative costs decreased 35% during the fiscal
1996 third quarter, to $1,043,000 from $1,604,000 in same quarter of fiscal
1995. Selling and administrative costs constituted 25% of net sales during the
quarter, compared with 37% during the fiscal 1995 third 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 are approximately $165,000 in costs
associated with the retail market.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased $91,000 to $239,000 for
the third quarter of fiscal year 1996 versus $330,000 for the same period a
year ago. This decrease is due to the reclassification of approximately
$90,000 in third 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. The company
recently switched its investment management firm managing the free cash
reserves the company has. 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 March 30, 1996,
the Company, through its Norwegian subsidiary, had borrowings of approximately
$2.3 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 13
<PAGE> 10
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 $13,878,000 and $14,210,000 at March 30, 1996 and June
24, 1995, respectively. Cash and investments at the end of second quarter 1996
were $13,827,000. Additionally, the Company held investments of $1,057,000 and
$2,025,000 at March 30, 1996, and June 24, 1995, respectively, with maturities
greater than one year. In addition, the Company held two common stock
investments of $1,516,000 and $500,000 at March 30, 1996 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 $346,000 and
$5,094,000 for fiscal years 1996 and 1995 respectively. Cash generated by the
US plant decreased the total cash used in third quarter 1996, from
year-to-date second quarter 1996 by $802,000. Cash in the amount of $510,000
was used for investments which includes the third common stock investment of
$500,000 in the home meal replacement market, and $480,000 was used for
capital expenditures. It is the intent of the company to search for, pursue
and find similar investment opportunities. Cash in the amount of $37,000 was
provided by financing activities.
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.
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 March 30, 1996 and June 24, 1995, $603,000 was outstanding
under this overdraft facility. The subsidiary can borrow up to $600,000 under
this commitment.
Page 10 of 13
<PAGE> 11
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. The company has
initiated conversation with Food Research Corporation to return these funds to
the United States.
FUTURE PROSPECTS
The Company always strive to aggressively increase sales in a
number of important markets and potential markets for its products. Increased
management attention was devoted during the third quarter to establish
relationships with European distributors for its Norwegian operations, with
much success. As a consequence, the company signed an exclusive agreement
with one of the largest distributors in France. First shipments are expected in
fourth quarter. In addition, US distributors of Norwegian salmon began
receiving products direct from Norway. This should help increase volumes and
reduce overhead costs. Management looks forward to sales growth from its US
and Norwegian operations.
Page 11 of 13
<PAGE> 12
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.
<TABLE>
<S> <C>
(a) Exhibits -
18 - Letter from Price Waterhouse LLP None
(b) Reports on Form 8-K -
None
</TABLE>
Page 12 of 13
<PAGE> 13
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: May 13, 1996 By: /s/Stanislas Vilgrain
-------------------- -------------------------------
Stanislas Vilgrain
President and CEO
By: /s/Carl M. Youngman
-------------------------------
Carl M. Youngman
Acting Chief Financial Officer
By: /s/Leara L. Dory
-------------------------------
Leara L. Dory
Controller of Finance and Accounting
(Financial Officer - Secretary)
Page 13 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-29-1996
<PERIOD-START> DEC-10-1996
<PERIOD-END> MAR-30-1996
<CASH> 4,626,140
<SECURITIES> 9,252,034
<RECEIVABLES> 7,429,359
<ALLOWANCES> 0
<INVENTORY> 2,151,803
<CURRENT-ASSETS> 20,074,309
<PP&E> 10,076,851
<DEPRECIATION> 4,715,793
<TOTAL-ASSETS> 28,820,394
<CURRENT-LIABILITIES> 2,219,547
<BONDS> 2,238,006
0
0
<COMMON> 140,786
<OTHER-SE> 24,222,055
<TOTAL-LIABILITY-AND-EQUITY> 28,820,394
<SALES> 4,218,702
<TOTAL-REVENUES> 4,218,702
<CGS> 3,797,861
<TOTAL-COSTS> 3,797,861
<OTHER-EXPENSES> 644,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 130,001
<INCOME-PRETAX> (353,480)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (353,480)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
