<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 APRIL 5, 1997
-----------------
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 May 16, 1997.
<TABLE>
<CAPTION>
COMMON STOCK 0.01 PAR VALUE NUMBER OF SHARES
--------------------------- ----------------
<S> <C>
CLASS A 13,822,543
CLASS B NONE
</TABLE>
1
<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.
2
<PAGE> 3
VIE de FRANCE CORPORATION
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------
April 5, June 29,
1997 1996
-------------- ---------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 848,000 $ 6,862,000
Investments, current 1,080,000 2,658,000
Accounts receivable, trade 1,655,000 1,486,000
Inventory 1,886,000 2,119,000
Prepaid expenses 242,000 137,000
Current portion of notes receivable, related party
including accrued interests 2,353,000 10,000
Other current assets 561,000 292,000
-------------- ---------------
TOTAL CURRENT ASSETS 8,625,000 13,564,000
Investments, noncurrent 10,463,000 5,598,000
Fixed assets, net 4,553,000 5,313,000
Note receivable, related party, including accrued interest,
less current portion 2,000,000 2,178,000
Other assets 330,000 382,000
-------------- ---------------
TOTAL ASSETS $ 25,971,000 $ 27,035,000
============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 1,041,000 $ 948,000
Accrued payroll and related liabilities 561,000 577,000
Current portion of long-term debt 178,000 153,000
Accrued store closings 132,000 287,000
Other accrued taxes 130,000 141,000
-------------- ---------------
Total current liabilities 2,042,000 2,106,000
Long-term debt, less current portion 1,874,000 2,147,000
-------------- ---------------
Total liabilities 3,916,000 4,253,000
-------------- ---------------
Stockholders' equity
Common stock (class A) - $.01 par value, 20,000,000 shares
authorized, 14,078,620 and 14,078,620 shares issued and
13,822,543 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 2,236,000 2,789,000
Treasury stock, at cost (256,077 shares) (1,440,000) (1,440,000)
Unrealized losses on debt and equity investments (235,000) (110,000)
Cumulative translation adjustment 1,000 50,000
-------------- ---------------
Total stockholders' equity 22,055,000 22,782,000
-------------- ---------------
Commitments and contingencies
-------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 25,971,000 $ 27,035,000
============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRD QUARTER YEAR TO DATE
---------------------------------- ----------------------------------
SIXTEEN WEEKS ENDED FORTY WEEKS ENDED
------------------------------------ ----------------------------------
April, 5 March, 30 April, 5 March, 30
1997 1996 1997 1996
----------------- ---------------- ----------------- --------------
<S> <C> <C>
NET SALES $4,020,000 $4,219,000 $10,478,000 $12,295,000
COST OF GOODS SOLD 3,716,000 3,798,000 9,138,000 10,857,000
---------------------------------- ----------------------------------
GROSS MARGIN 304,000 421,000 1,340,000 1,438,000
SELLING AND ADMINISTRATION 1,187,000 1,043,000 2,908,000 2,827,000
DEPRECIATION AND AMORTIZATION 28,000 31,000 77,000 80,000
OTHER INCOME (14,000) (64,000) (46,000) (70,000)
---------------------------------- ----------------------------------
LOSS FROM OPERATIONS (897,000) (589,000) (1,599,000) (1,399,000)
---------------------------------- ----------------------------------
NONOPERATING INCOME:
INVESTMENT INCOME 339,000 365,000 833,000 879,000
INTEREST EXPENSE, NET (5,000) (130,000) (85,000) (249,000)
OTHER INCOME, NET 1,000 1,000 - 12,000
---------------------------------- ----------------------------------
TOTAL NONOPERATING INCOME 335,000 236,000 748,000 642,000
---------------------------------- ----------------------------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES, DISCONTINUED OPERATIONS, AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (562,000) (353,000) (851,000) (757,000)
PROVISION FOR INCOME TAX BENEFIT - - - 110,000
---------------------------------- ----------------------------------
LOSS FROM CONTINUING OPERATIONS BEFORE
DISCONTINUED OPERATIONS AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (562,000) (353,000) (851,000) (647,000)
GAIN FROM SALE OF DISCONTINUED OPERATIONS,
NET OF TAXES - - 298,000 172,000
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE, NET OF TAXES - - 197,000
---------------------------------- ----------------------------------
NET LOSS $ (562,000) $ (353,000) $ (553,000) $ (279,000)
================================== ==================================
NET INCOME (LOSS) PER COMMON SHARE:
CONTINUING OPERATIONS BEFORE DISCONTINUED
OPERATIONS AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE $ (0.04) $ (0.03) $ (0.06) $ (0.05)
DISCONTINUED OPERATIONS $ - $ - $ 0.02 $ 0.01
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE $ - $ - $ - $ 0.02
---------------------------------- ----------------------------------
NET LOSS PER COMMON SHARE $ (0.04) $ (0.03) $ (0.04) $ (0.02)
================================== ==================================
WEIGHTED AVERAGE SHARES OUTSTANDING 13,822,543 13,819,293 13,822,543 13,800,043
================================== ==================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
VIE de FRANCE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
-----------------------------------
Year-to-date
Forty weeks ended
April, 5 March 30,
1997 1996
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (553,000) $ (279,000)
Adjustments to reconcile net income to
net cash used by operating activities
Gain from sale of discontinued operations (90,000) (97,000)
Depreciation and amortization 958,000 794,000
Loss on disposal of fixed assets 5,000 -
Change in cumulative translation adjustment (49,000) 3,000
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:
Increase (decrease) in accounts receivable trade, net (169,000) 104,000
Decrease in inventory 233,000 198,000
Increase in prepaid expenses (105,000) (93,000)
Increase in accrued interests on notes receivable,
related party (165,000) (91,000)
(Increase) decrease in other assets (236,000) 40,000
Increase (decrease) in accounts payable
and accrued expenses 93,000 (463,000)
Decrease in accrued payroll and related liabilities (16,000) (107,000)
(Decrease) increase in accrued store closing costs (65,000) 117,000
Decrease in other accrued taxes (11,000) (74,000)
Decrease in income taxes payable - (91,000)
---------------- ----------------
Net cash used by operating activities (170,000) (346,000)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale of investments 7,000,000 1,001,000
Purchase of investments (10,412,000) (1,612,000)
Loans to majority shareholder, related party (2,000,000) -
Investments in common stock - (510,000)
Capital expenditures (184,000) (480,000)
---------------- ----------------
Net cash used provided by investing activities (5,596,000) (1,601,000)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Reductions of debt $ (248,000) $ (61,000)
Additions to debt $ - $ 15,000
Proceeds from issuance of stock $ - 83,000
---------------- ----------------
Net cash (used) provided by financing activities (248,000) 37,000
---------------- ----------------
Net decrease in cash and cash equivalents (6,014,000) (1,910,000)
Cash and cash equivalents, beginning of period 6,862,000 5,314,000
---------------- ----------------
CASH and CASH EQUIVALENTS, END OF PERIOD $ 848,000 $ 3,404,000
================ ================
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
VIE de FRANCE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
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) Fiscal Periods
The Company utilizes a 52/53 week fiscal year which ends on the last
Saturday in June. The first, second and fourth quarters, of fiscal years 1997
and 1996 contain 12 weeks, and the third quarter contains 16.
3) Inventory
The inventories are valued at the lower of cost, determined by the
first-in, first-out method, or market. Included in inventory costs are raw
materials, labor and manufacturing overhead.
Inventory consist of:
<TABLE>
<CAPTION>
APR 5, JUN 29,
1997 1996
<S> <C> <C>
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . $558,000 $ 529,000
Frozen product & other finished goods . . . . . . . . . . . . . . 983,000 1,448,000
Packing materials & supplies . . . . . . . . . . . . . . . . . . 393,000 193,000
------- --------
1,934,000 2,170,000
Less obsolescence reserve . . . . . . . . . . . . . . . . . . . . (48,000) (51,000)
-------- -------
$ 1,886,000 $2,119,000
========= =========
</TABLE>
4) Dividends - None.
5) Committments and Contingencies
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
6
<PAGE> 7
reason thereof will have a material effect on the Company's financial position
or results of operations.
6) Transaction with Related Party
During the third quarter of fiscal year 1997 the Company issued a
collateralized loan to its majority shareholder, Food Research Corporation to
fund the operations of one of its wholly-owned subsidiaries. The loan of
approximately $2,000,000, bears interest at 8.25% and is secured by shares of
the Company's stock. This loan is scheduled to be paid in three years, with
quarterly interest payments.
7) Discontinued Operations
The Company recognized $204,000 of income tax benefit in the second
quarter of fiscal year 1997. This income tax benefit was derived from
amendment of tax returns for the fiscal year 1994. During the second quarter of
fiscal year 1996 the Company reduced its accrual relating to the sale of the
former Restaurant Division by $97,000.
8) New Accounting Pronouncements
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
are required to date.
In October 1995, the Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 123, Accounting for 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.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share
("Statement 128"), and No. 129, Disclosure of Information About Capital
Structure ("Statement 129"). Statement 128 was issued to simplify the
computations of earnings per share and to make the U.S. standard more
compatible with the standards of other countries and that of the International
Accounting Standards Committee. Statement 128 replaces primary and
7
<PAGE> 8
fully diluted earnings per share with basic earnings and diluted earnings per
share. Statement 129 will change some of the required disclosures about
capital structure. It is not expected that these statement will have a
material effect on the Company's financial statements. The Statements are
effective for the year ended June 27, 1998.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 (the "Act") was
recently passed by Congress. The Company desires to take advantage of the new
"safe harbor" provisions of the Act. Therefore, the Company wishes to caution
readers that various factors have affected, and in the future could affect, the
Company's actual results and could cause the Company's actual results for 1997
and beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company.
RESULTS OF OPERATIONS
Vie de France Corporation reported a net loss of $562,000 for third
quarter 1997, and $553,000 for the year to date. The net loss for the 1997
third quarter resulted from low sales volumes and an increase in marketing
investments to support the Company's new strategic focus on service to banquet
providers, including airlines. The Company's cost containment program, begun
in fiscal year 1996, helped to reduce operating costs for both US and Norwegian
facilities.
During the third quarter, the Company announced its new marketing focus
on the banquet business, which consists of the lodging and transportation
segments. The lodging segment consists of hotels, convention centers, casinos
and similar facilities. The transportation segment consists airlines,
railroads, cruise ships and other similar facilities.
Although the Company's primary focus is to increase US domestic sales,
its intention under its new marketing focus is to serve customers
internationally. It may do so through its existing facilities, through
additional foreign operations or by purchasing products of the same quality
from suppliers worldwide.
The Company's old retail segment has been reconstituted as part of the
new business development segment, including sales to restaurants, military
installations, and home meal replacement and other retail customers.
SIXTEEN WEEKS ENDED APRIL 5, 1997 COMPARED TO SIXTEEN WEEKS ENDED MARCH 30,
1996
NET SALES
Third quarter 1997 sales totaled $4,020,000, down 5% from third
quarter 1996 sales of $4,219,000. Lodging sales fell $856,000, or 38%, because
of lower volume for banquets and other special events. Sales to transportation
customers increased by $115,000, or 9%, while new business development sales
increased $252,000, or 41%, primarily because of sales to the military and two
new restaurant customers. International sales increased by $31,000, or 310% ,
from the third quarter 1996, primarily because of shipments to one company in
Asia. European sales of fish packed by the Company's
9
<PAGE> 10
Norwegian plant totaled $307,000 during the third quarter of fiscal 1997,
compared with $48,000 in the year-ago quarter, primarily due to shipments to a
new airline customer.
During the fiscal 1997 third quarter, sales to hotels and other
lodging customers, transportation, new business development, international and
Norway customers represented 34%, 36%, 21%, 1% and 8%, respectively compared to
53%, 32%, 14%, 0% and 1%, respectively a year ago.
Operating costs for the fiscal year 1997 third quarter totaled
$3,716,000, down 2% from $3,798,000 during the same quarter in fiscal 1996.
Inventories decreased to $1,886,000 from $2,119,000 at the end of fiscal year
1996.
A comparison of net sales, gross margin percentages and losses from
operations follows:
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------
APR. 5, MAR. 30,
1997 1996
---- ----
(dollars in thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,020 $ 4,219
Gross margin percentage . . . . . . . . . . . . . . . . . . . . . . . . . . 8% 10%
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (897) (589)
</TABLE>
Fiscal year 1997's third quarter sales decreased by 5% from the fiscal
year 1996 quarter to $4,020,000 from $4,219,000.
Third quarter 1997 gross margin as a percentage of total net sales decreased
to 8% from 10% in the year-ago quarter. The decrease in gross margin for third
quarter fiscal year 1997 primarily results from lower production and sales
volumes, and higher one-time costs to ship products to a new Norwegian
customer.
SELLING AND ADMINISTRATIVE EXPENSES
A comparison of selling and general administrative costs follows:
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------
APR. 5, MAR. 30,
1997 1996
---- ----
(dollars in thousands)
<S> <C> <C>
Selling and administrative costs . . . . . . . . . . . $ 1,187 $1,043
</TABLE>
Selling and administrative costs increased 14% during the fiscal 1997
third quarter, to $1,187,000 from $1,043,000 in same quarter of fiscal 1996.
The increase resulted from marketing investments at the corporate facility, of
$162,000. Selling and
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<PAGE> 11
administrative costs constituted 30% of net sales during the quarter due to low
sales volumes, compared with 25% during the fiscal 1996 third quarter.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased $3,000 to $28,000 for the
third quarter of fiscal year 1997, compared with $31,000 for the same period a
year ago.
NONOPERATING INCOME AND EXPENSE
Investment income decreased in third quarter fiscal 1997 due to
withdrawals to fund the Company's operations. 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 available
cash reserves. The investment approach remains conservative, focusing on
preservation of capital and consistency of total returns.
During the third quarter of fiscal year 1997 the Company issued a
collateralized loan to its majority shareholder, Food Research Corporation to
fund the operations of one of its wholly-owned subsidiaries. The loan of
approximately $2,000,000, bears interest at 8.25% and is secured by shares of
the Company's stock. This loan is scheduled to be paid in three years, with
quarterly interest payments.
Interest expense relates to the borrowings, including a capital lease,
associated with the Company's Norwegian subsidiary. At April 5, 1997, the
Company, through its Norwegian subsidiary, had borrowings of approximately $2.1
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.
FORTY WEEKS ENDED APRIL 5, 1997 COMPARED TO FORTY WEEKS ENDED MARCH 30, 1996
NET SALES
Third quarter year to date sales total $10,478,000, down 15% from a
year ago sales of $12,295,000. Lodging sales fell $2,218,000, or 36%, because
of lower volume for banquets and other special events. Sales to transportation
customers increased by $349,000, or 10%, while new business development sales
fell $67,000, or 3%, primarily because sales of the Company's "Dinner for 4"
meals to Sam's Clubs were discontinued in January 1996. International sales
declined $266,000, or 76%, primarily because of comparisons with a large
one-time sale to Japan during fiscal year 1996. European sales of fish packed
by the Company's Norwegian plant totaled $582,000 during the first three
quarters of fiscal year 1997, compared with $197,000 a year-ago.
11
<PAGE> 12
Year to date 1997 sales to hotels and other lodging customers,
transportation, new business development, international and Norway customers
represented 38%, 36%, 19%, 1% and 6%, respectively compared with 51%, 28%, 17%,
3% and 1%, respectively a year ago.
The Company's focus on cost containment and operating efficiency
produced positive benefits in fiscal year 1997. Operating costs for the fiscal
1997 totaled $9,138,000, down 16% from $10,857,000 a year ago. Inventories
decreased to $1,886,000 from $2,119,000 at the end of fiscal year 1996.
A comparison of net sales, gross margin percentages and losses from operations
follows:
<TABLE>
<CAPTION>
YEAR TO DATE
---------------------
APR. 5, MAR. 30,
1997 1996
---- ----
(dollars in thousands)
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . $ 10,478 $ 12,295
Gross margin percentage . . . . . . . . . . . . . 13% 12%
Loss from operations . . . . . . . . . . . . . . $ (1,599) (1,399)
</TABLE>
Fiscal year 1997's year to date sales decreased by 15% from the fiscal
year 1996 year to date to $10,478,000 from $12,295,000.
Fiscal year to date 1997 gross margin as a percentage of total net sales
increased to 13% from 12% in the year-ago quarter. The increase in gross margin
for fiscal year to date 1997 results from reduction of operating costs at both
the Company's US and Norwegian operations, offset by lower sales volumes.
SELLING AND ADMINISTRATIVE EXPENSES
A comparison of selling and general administrative costs follows:
<TABLE>
<CAPTION>
YEAR TO DATE
---------------------
APR. 5, MAR. 30,
1997 1996
---- ----
(dollars in thousands)
<S> <C> <C>
Selling and administrative costs . . . . . . . . . . . . . . . $ 2,908 $ 2,827
</TABLE>
Selling and administrative costs increased 3% during the 1997 fiscal
year, to $2,908,000 from $2,827,000 a year ago. The increase resulted from
increased marketing investments of $276,000 during fiscal year 1997. Selling
and administrative costs constituted 28% of net sales during fiscal year 1997
due to low sales volumes, compared with 23% during the year ago period.
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<PAGE> 13
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased $3,000 to $77,000 for year to
date fiscal year 1997, compared with $80,000 for the same period a year ago.
NONOPERATING INCOME AND EXPENSE
Investment income decreased in third quarter fiscal 1997 due to
withdrawals to fund the Company's operations. 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 available
cash reserves. The investment approach remains conservative, focusing on
preservation of capital and consistency of total returns.
During the third quarter of fiscal year 1997 the Company issued a
collateralized loan to its majority shareholder, Food Research Corporation to
fund the operations of one of its wholly-owned subsidiaries. The loan of
approximately $2,000,000, bears interest at 8.25% and is secured by shares of
the Company's stock. This loan is scheduled to be paid in three years, with
quarterly interest payments.
Interest expense relates to the borrowings, including a capital lease,
associated with the Company's Norwegian subsidiary. At April 5, 1997, the
Company, through its Norwegian subsidiary, had borrowings of approximately $2.1
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 fiscal year 1997 the Company does not expect to recognize
any income tax benefit from continuing operations.
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
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<PAGE> 14
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
are required to date.
In October 1995, the Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123, Accounting for 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.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share
("Statement 128"), and No. 129, Disclosure of Information About Capital
Structure ("Statement 129"). Statement 128 was issued to simplify the
computation of earnings per share and to make the U.S. standard more compatible
with the standards of other countries and that of the International Accounting
Standards Committee. Statement 128 replaces primary and fully diluted earnings
per share with basic earnings and diluted earnings per share. Statement 129
will change some of the required disclosures about capital structure. It is
not expected that these statement will have a material effect on the Company's
financial statements. The Statements are effective for the year ended June 27,
1998.
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.
14
<PAGE> 15
LIQUIDITY AND CAPITAL RESOURCES
At April 5, 1997, the Company's combined total of cash and short-term
investment balances was $1,928,000, compared with $9,520,000 at June 29, 1996.
Additionally, the Company held investments of $10,463,000 and $5,598,000 at
April 5, 1997, and June 29, 1996, respectively, with maturities greater than
one year. This decrease in liquidity is a direct result of the increased
working capital requirements for the Company and the loan to its majority
shareholder, Food Research Corporation.
Net cash used by operations amounted to $170,000 and $346,000 for the
first three quarters of 1997 and 1996, respectively. Cash in the amount of
$5,596,000 was used by investing activities to finance the loan of $2,000,000
to Food Research Corporation, and purchases of $3,412,000 of investments with
maturities greater than one year, and $184,000 of capital expenditures. Cash
in the amount of $248,000 was used 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. The Company is also
pursuing a lease for a production facility in Europe to support its strategic
intent to be the leading banquet solution company in the world. The European
plant which is built under European quality standards, will give the company
immediate access to that market.
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 April 5, 1997, $230,000 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 banquet customers, including hotels,
casinos, convention centers and airlines. The Company will also devote sales
and marketing attention to achieving increased European sales.
15
<PAGE> 16
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 13th annual meeting of shareholders was held on November
7, 1996. The following individuals were re-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.
The Company's amendment to increase the number shares in its 1992 stock option
plan from 300,000 to 1,300,000 was also approved.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits -
None
(b) Reports on Form 8-K -
None
16
<PAGE> 17
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 20, 1997 By: /s/Stanislas Vilgrain
-------------------- ---------------------
Stanislas Vilgrain
President and CEO
By:/s/Carl M. Youngman
-------------------
Carl M. Youngman
Chief Financial Officer
and Treasurer
By: /s/Leara L. Dory
----------------
Leara L. Dory
Controller of Finance and
Accounting
(Financial Officer - Secretary)
17
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<FISCAL-YEAR-END> JAN-28-1997
<PERIOD-START> JAN-30-1996
<PERIOD-END> APR-05-1997
<CASH> 848,000
<SECURITIES> 11,543,000
<RECEIVABLES> 1,655,000
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0
<COMMON> 141,000
<OTHER-SE> 23,788,000
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