SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1995 Commission File Number 0-15584
Alpine Lace Brands, Inc.
(Exact name of registrant as specified in its charter)
Delaware 22-2717823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Dunnell Road, Maplewood, New Jersey 07040
(Address of Principal Executive Offices)
(Registrant's telephone number, including area code): 201-378-8600
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 issuers classes of
common stock, as of the latest practicable date: As of October 31, 1995, there
were 5,041,187 shares of Common Stock, $.01 par value, outstanding.
1
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ALPINE LACE BRANDS, INC.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1995
(unaudited) and December 31, 1994 3
Consolidated Statements of Earnings for the Three
Months and Nine Months Ended September 30, 1995
and 1994 (unaudited) 5
Consolidated Statements of Cash Flows for the Nine
Months Ended September 30, 1995 and 1994 (unaudited) 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1995 Dec. 31, 1994
(unaudited)
ASSETS (substantially pledged)
Cash and cash equivalents $ 166,059 $ 438,414
Accounts receivable, net of
allowance for bad debt 12,417,875 16,228,784
Inventories 5,309,239 5,447,502
Prepaid expenses and deposits 368,561 502,004
Advances to suppliers 300,000 300,000
Total current assets 18,561,734 22,916,704
Property, plant and equipment
Land, buildings and improvements 220,549 346,000
Equipment under capital leases 973,795 1,052,544
Leasehold improvements 104,837 45,914
Furniture, fixtures and equipment 1,782,762 1,541,200
3,081,943 2,985,658
Less accumulated depreciation
and amortization 1,303,225 1,057,075
1,778,718 1,928,583
ASSETS HELD FOR SALE --- 265,800
OTHER ASSETS
Investment in and advances to
Mountain Farms, Inc. 1,675,948 1,675,948
Trademarks, tradenames and
technology, less accumulated
amortization of $826,392 in
1995 and $709,802 in 1994 1,594,909 1,709,451
Notes receivable 19,779 30,420
Other 826,774 409,609
4,117,410 3,825,428
$24,457,862 $28,936,515
The accompanying notes are an integral part of these statements.
3
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ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 1995 Dec. 31, 1994
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of note payable $ --- $ 1,385,846
Accounts payable 9,366,494 14,610,852
Accrued expenses 2,328,818 2,565,802
Income taxes 444,174 10,450
Current maturities of obligation under
capital leases 134,338 178,815
Total current liabilities 12,273,824 18,751,765
Long term obligations, less current maturities
Notes payable 6,966,899 9,547,581
Obligation under capital leases 456,982 592,121
Other long-term liability 205,904 576,531
7,629,785 10,716,233
Stockholders' equity
Preferred stock, par value $.01 per share;
authorized 1,000,000 shares;
issued and outstanding 45,000 at
September 30, 1995 liquidation amount
$50.00 per share 2,250,000 ---
Common stock, par value $.01 per share,
authorized 10,000,000 shares; issued
and outstanding 5,040,287 at
September 30, 1995 and 5,012,419 at
December 31, 1994 50,403 50,124
Additional paid-in capital 2,811,295 3,129,888
Retained earnings (deficit) (557,445) (3,711,495)
4,554,253 (531,483)
$24,457,862 $28,936,515
The accompanying notes are an integral part of these statements.
4
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ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Net sales $37,240,549 $32,202,223 $103,685,546 $94,347,851
Cost of goods sold 27,897,283 23,886,340 76,217,994 70,479,953
Gross profit 9,343,266 8,315,883 27,467,552 23,867,898
Operating expenses
Selling 6,730,938 6,330,348 19,575,155 18,791,765
Administrative 1,165,588 1,180,859 3,512,543 3,332,115
7,896,526 7,511,207 23,087,698 22,123,880
Operating profit 1,446,740 804,676 4,379,854 1,744,018
Other income (expense) 3,811 13,016 32,545 85,046
Interest expense - net (228,628) (422,747) (816,657) (1,211,996)
Earnings before
income taxes and
extraordinary item 1,221,923 394,945 3,595,742 617,068
Income taxes 219,946 38,000 466,126 38,000
Earnings before
extraordinary item 1,001,977 356,945 3,129,616 579,068
Extraordinary Item:
Gain from extinguishment
of debt, net of income
taxes of $7,451 --- --- 103,760 ---
Net earnings 1,001,977 356,945 3,233,376 579,068
Preferred Stock Dividends 42,188 --- 82,031 ---
Net earnings applicable
to common shareholders $ 959,789 $ 356,945 $ 3,151,345 $ 579,068
Earnings per share of
common stock
Earnings before
extraordinary item $ .18 $ .07 $ .58 $ .11
Extraordinary item .00 .00 .02 .00
Net earnings per share of
common stock $ .18 $ .07 $ .60 $ .11
Weighted average number of
common and common
equivalent shares
outstanding 5,363,140 5,029,078 5,286,117 5,046,958
The accompanying notes are an integral part of these statements.
5
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ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities
Net earnings $3,233,376 $ 579,068
Adjustments to reconcile net earnings
to net cash used in operating activities
Depreciation and amortization 430,830 645,842
Extraordinary gain from extinguishment
of debt, net of income taxes (103,760) ---
Provisions for losses on accounts
receivable 119,706 97,500
(Gain) on sale of fixed assets (23,624) ---
Change in assets and liabilities
(Increase) in marketable securities --- (33,192)
Decrease in accounts receivable 3,691,203 3,176,978
Decrease in inventory 138,263 1,502,483
Decrease in prepaid expenses 133,443 149,924
Decrease in refundable
income taxes --- 959,097
(Increase) in trade receivables,
net-due from Mountain Farms, Inc. --- (1,129,805)
Decrease in notes receivable 10,641 9,548
(Increase) Decrease in other assets (452,067) 221,456
Decrease in accounts payable (5,244,358) (5,190,724)
Decrease in accrued expenses (236,984) (84,179)
Increase (Decrease) in income
taxes 426,273 (40,880)
Decrease in other long-term
liabilities (370,627) ---
(1,481,061) 284,048
Net cash provided by operating
activities $1,752,315 $ 863,116
The accompanying notes are an integral part of these statements.
6
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ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from investing activities
Additions to property, plant and equipment $ (327,941) $ (271,085)
Payments for trademarks and trade names (2,047) (37,789)
Changes in investments in and advances
to MFI-principally sales proceeds --- 3,617,130
Proceeds from sale of fixed assets 452,812 ---
Net cash provided by investing
activities 122,824 3,308,256
Cash flows from financing activities
Net (payments) from obligation
under capital lease (179,616) (86,805)
Net (payments) under long-term
agreements (4,033,808) (4,228,113)
Payment of dividends to preferred
shareholders (82,031) ---
Net proceeds from preferred stock issued 2,016,741 ---
Proceeds from employee stock option
exercise 131,220 ---
Net cash (used) in financing
activities (2,147,494) (4,314,918)
Net (decrease) in cash and cash
equivalents (272,355) (143,546)
Cash and cash equivalents at beginning
of year 438,414 238,937
Cash and cash equivalents at end of
nine months $ 166,059 $ 95,391
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 881,253 $ 1,220,857
Income taxes $ 44,588 $ 43,464
The accompanying notes are an integral part of these statements.
7
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ALPINE LACE BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the
financial position of Alpine Lace Brands, Inc. as of September 30, 1995
and December 31, 1994, the results of its operations for the three
months and nine months ended September 30, 1995 and 1994 and the
changes in its cash position for the nine months ended September 30,
1995 and 1994. All material intercompany accounts and transactions
have been eliminated.
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted pursuant
to the rules and regulations of the Securities and Exchange Commission,
although the registrant believes that the disclosures are adequate to
make the information presented not misleading. It is suggested that
these financial statements be read in conjunction with the year-end
financial statements and notes thereto included in the registrant's
Annual Report on Form 10-K as filed.
The accounting policies followed by the Company are set forth in the
notes to the Company's consolidated financial statements as set
forth in its Annual Report on Form 10-K filed with the Securities
Exchange Commission.
2. The results of operations for the nine months ended September 30, 1995
are not necessarily indicative of the results to be expected for the
entire fiscal year.
3. Inventories are summarized as follows:
September 30, 1995 December 31, 1994
Finished goods $4,880,936 $4,986,691
Raw materials &
Packaging supplies 428,303 460,811
$5,309,239 $5,447,502
4. Earnings per share of common stock was computed by dividing net earnings,
after deducting preferred dividend requirements, by the weighted average
number of common equivalent shares outstanding during the period, including
the incremental shares from the dilutive effect of warrants and stock
options, if applicable.
5. The Company's operations consist of two segments: (1) the branded cheese
business which develops, markets, converts, packages and distributes
branded cheeses; and (2) the Company's cheese and dairy products trading
business.
6. As of December 31, 1994, the Company had available net operating loss
carry-forwards of approximately $1,015,000 which expire in 2009. The
Company also had at December 31, 1994, approximately $2,000,000 of tax
deductible temporary differences available for future use. The Company's
effective income tax rate of 13.0% for the nine months ended September 30,
1995 includes the utilization of the Company's net operating loss carry-
forwards and the utilization of temporary differences.
7. On March 22, 1995 the Company completed a private placement of $2,250,000
of 7.5% cumulative preferred stock, resulting in net proceeds to the
Company of approximately $2,000,000. The securities are convertible into
common stock at a conversion price of $7 3/8 for five years at which time
the Company must either force a conversion at market price of the common
stock or redeem the preferred stock. In the event of a change of control,
8
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the Company is required to make an offer to purchase the convertible
preferred stock.
8. On March 27, 1995, the Company redeemed its $3,000,000 subordinated note
payable and common stock purchase warrants for $3,000,150 plus accrued
interest of $42,750. The redemption resulted in an extraordinary gain of
$103,760 to the Company.
9
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
a. Results of Operations.
Comparison of the Registrant's third quarter (July 1, 1995 - September 30,
1995) of the current fiscal year ("1995") with the third quarter (July 1,
1994 - September 30, 1994) of the last fiscal year ("1994").
Net sales for the third quarter ending September 30, 1995 were
$37,240,549 as compared to $32,202,223 in the same period of 1994. The
Alpine Lace Branded Division had increased sales of $1,930,753 for the
third quarter ending September 30, 1995 going from $26,305,177 in 1994 to
$28,235,930 in the same period of 1995 due to increased unit volume.
Sales for the Company's cheese and dairy products trading business
increased by 52.8% or $3,110,873 to $9,004,177 from $5,893,304 for the
comparative period of 1994, primarily due to increased sales on the Green
Bay, Wisconsin cheese exchange.
As a percentage of sales, gross profit decreased to 25.1% in the third
quarter of 1995 from 25.8% in the comparable period of 1994. Gross profit
increased by $1,027,383 in the quarter ending September 30, 1995 going
from $8,315,883 in 1994 to $9,343,266 in 1995. This increase was the
result of the 7.3% sales increase in the Alpine Lace Branded Division,
partially offset by the higher cost to purchase cheese resulting from
higher commodity prices.
Selling and administrative expenses increased from $7,511,207 in the third
quarter of 1994 to $7,896,526 in the same period of 1995. As a percentage
of sales, selling and administrative expenses decreased from 23.3% in the
third quarter of 1994 to 21.2% in the comparable period of 1995.
The Company's operating profit increased by $642,064 from $804,676 in the
third quarter of 1994 to $1,446,740 in the comparable period of 1995.
Operating profit as a percent of net sales increased to 3.9% in the third
quarter of 1995 compared to 2.5% in the third quarter of 1994 due to the
higher gross profit, offset slightly by higher selling and administrative
expenses previously discussed.
Net interest expense in the third quarter of 1995 was $228,628, a decrease
of $194,119 from the comparable period of 1994, as a result of the
Company's decreased use of its working capital credit line and the
redemption of the Company's subordinated note payable, partially offset by
higher interest rates.
The Company's effective tax rate of 18.0% resulting in a tax of $219,946
in the third quarter of 1995 includes the utilization of the Company's net
operating loss carry-forwards generated in prior years. The Company
accrued $38,000 at an effective tax rate of 9.6% for income taxes in the
third quarter of 1994 as a result of the use of tax loss carry-forwards
generated from the 1993 loss of $4,040,254.
The Company's net earnings for the quarter ending September 30, 1995 was
$1,001,977 compared to $356,945 for the same period of 1994 for the
reasons discussed previously.
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b. Results of Operations. Comparisons of the Registrant's first nine
months (January 1, 1995 - September 30, 1995) of the current fiscal
year ("1995") with the first nine months (January 1, 1994 -
September 30, 1994) of the last fiscal year ("1994").
Net sales for the nine months ending September 30, 1995 were
$103,685,546 as compared to $94,347,851 in the same period of 1994.
The Alpine Lace Branded Division had increased sales of $6,085,121
for the first nine months ending September 30, 1995 going from
$75,301,456 in 1994 to $81,386,577 in the same period of 1995 due to
increased unit volume. Sales for the Company's cheese and dairy
products trading business increased by 17.2% or $3,266,907 to
$22,292,629 from $19,025,722 for the comparative period of 1994,
primarily due to increased sales on the Green Bay, Wisconsin cheese
exchange.
As a percentage of sales, gross profit increased to 26.5% in the first
nine months of 1995 from 25.3% in the comparable period of 1994.
Gross profit increased by $3,599,654 in the nine months ending
September 30, 1995 going from $23,867,898 in 1994 to $27,467,552 in
1995. This increase was the result of the 9.9% increase in sales,
along with the lower cost to purchase cheese resulting from lower
commodity prices and continuing manufacturing efficiencies.
As a percentage of sales, selling and administrative expenses decreased
from 23.4% in the first nine months of 1994 to 22.3% in the
comparable period of 1995. Selling and administrative expenses
increased from $22,123,880 in the first nine months of 1994 to
$23,087,698 in the same period of 1995. The major contributors to
this increase were for advertising and promotions which supported
the 8.1% increase in branded sales.
The Company's operating profit increased by $2,635,836 from
$1,744,018 in the first nine months of 1994 to $4,379,854 in the
comparable period of 1995. Operating profit as a percent of net
sales increased to 4.2% in the first nine months of 1995 compared to
1.8% in the first nine months of 1994 due to the higher gross
profit, offset partially by higher selling and administrative
expenses previously discussed.
Net interest expense in the first nine months of 1995 was
$816,657 a decrease of $395,339 from the comparable period of 1994,
as a result of the Company's decreased use of its working capital
credit line and the redemption of the Company's subordinated note
payable, partially offset by higher interest rates.
The Company's effective tax rate of 13.0% resulting in a
tax of $466,126 in the first nine months of 1995 includes the
utilization of the Company's net operating loss carry-forwards
generated in prior years. The Company accrued $38,000 at an
effective tax rate of 6.2% for income taxes in the first nine
months of 1994 as a result of tax loss carry-forwards
generated from the 1993 loss of $4,040,254.
The Company's net earnings for the nine months
ending September 30, 1995 was $3,233,376 compared to
$579,068 for the same period of 1994 for the reasons
discussed above.
Financial Condition
The major sources of cash for the nine months ended September 30, 1995
came from net earnings and the decrease in accounts receivable. The
major uses of cash for the nine months ended September 30, 1995 was
to fund the decrease in accounts payable. On March 27, 1995, the
Company redeemed its subordinated note payable and common stock
purchase warrants for $3,000,150 and accrued interest of $42,750.
The majority of the funds for the redemption came from the issuance
of $2,250,000 of 7.5% cumulative preferred stock on March 22, 1995,
which resulted in net proceeds of approximately $2,000,000. As of
November 2, 1995, the Company had approximately $7,400,000 available
on its revolving credit facility and $3,500,000 available on its
equipment credit facility.
11
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PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibit.
Exhibit 11 Computation of Earnings per Share of Common Stock
b. Form 8-K Reports.
There were no current reports on Form 8-K filed by the registrant
during the quarter ended September 30, 1995.
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 thereunto duly authorized.
ALPINE LACE BRANDS, INC.
By: /s/ Carl T. Wolf
Carl T. Wolf, President and Chairman of the Board
(Principal Executive Officer)
Dated: November 8, 1995
By: /s/ Arthur Karmel
Arthur Karmel, Vice President-Finance (Chief Accounting Officer)
Dated: November 8, 1995
13
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Exhibit 11.
ALPINE LACE BRANDS, INC.
Computation of Earnings Per Share of Common Stock
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Net Earnings for
the Period $1,001,977 $356,945 $3,233,376 $579,068
Preferred Stock Dividends 42,188 --- 82,031 ---
Net Earnings for Computation
of Earnings Per Share (1) 959,789(A) 356,945(A) 3,151,345(A) 579,068(A)
Weighted Average
Number of Common
Shares Outstanding:
Weighted Average
Number of Issued
and Outstanding
Common Shares (2) 5,040,287 5,012,419 5,040,287 5,012,419
Incremental Shares
Attributable to
Assumed Exercise
of Stock Options
and Warrants (3) 322,853 16,659 245,830 34,539
Weighted Average
Number of Common
Shares (2) + (3) 5,363,140(B) 5,029,078(B) 5,286,117(B) 5,046,958(B)
Earnings Per
Common and Common
Equivalent Share $.18(A)/(B) $.07(A)/(B) $.60(A)/(B) $.11(A)/(B)
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 166,059
<SECURITIES> 0
<RECEIVABLES> 12,718,537
<ALLOWANCES> 300,662
<INVENTORY> 5,309,239
<CURRENT-ASSETS> 18,561,734
<PP&E> 3,081,943
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<CURRENT-LIABILITIES> 12,273,824
<BONDS> 7,629,785
<COMMON> 50,403
0
2,250,000
<OTHER-SE> 2,253,850
<TOTAL-LIABILITY-AND-EQUITY> 24,457,862
<SALES> 103,685,546
<TOTAL-REVENUES> 103,685,546
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