SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 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
April 28, 1995, there were 5,018,769 shares of Common Stock, $.01
par value outstanding.
<PAGE>
ALPINE LACE BRANDS, INC.
INDEX Page Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1995
(unaudited) and December 31, 1994 3
Consolidated Statements of Earnings for the Three
Months Ended March 31, 1995 and 1994 (unaudited) 5
Consolidated Statements of Cash Flows
for the Three Months Ended
March 31, 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 11
Signature 12
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1995 December 31, 1994
(unaudited)
ASSETS (substantially pledged)
Cash and cash equivalents $ 71,418 $ 438,414
Accounts receivable, net of
allowance for bad debt 11,882,112 16,228,784
Inventories 6,566,334 5,447,502
Prepaid expenses and deposits 353,324 502,004
Advances to suppliers 300,000 300,000
---------- ----------
Total current assets 19,173,188 22,916,704
Property, plant and equipment
Land, building and improvements 346,000 346,000
Equipment under capital lease 1,052,544 1,052,544
Leasehold improvements 45,914 45,914
Furniture, fixtures and equipment 1,601,918 1,541,200
---------- ----------
3,046,376 2,985,658
Less accumulated depreciation and
amortization 1,148,798 1,057,075
---------- ----------
1,897,578 1,928,583
Assets Held For Sale 265,800 265,800
OTHER ASSETS
Investment in and advances to
Mountain Farms, Inc. 1,675,948 1,675,948
Trademarks, tradenames and
technology, less accumulated
amortization of $748,742 in
1995 and $709,802 in 1994 1,688,797 1,709,451
Notes receivable 26,969 30,420
Other 354,533 409,609
---------- ----------
3,746,247 3,825,428
---------- ----------
$25,082,813 $28,936,515
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1995 December 31, 1994
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current maturities of note payable $ 92,702 $ 1,385,846
Accounts payable 10,412,419 14,610,852
Accrued expenses 2,018,379 2,565,802
Income taxes 69,287 10,450
Current maturities of obligation
under capital leases 178,815 178,815
---------- ----------
Total current liabilities 12,771,602 18,751,765
Long term obligation, less current maturities
Notes payable 8,900,562 9,547,581
Obligation under capital leases 544,862 592,121
Other long-term liability 452,989 576,531
---------- ----------
9,898,413 10,716,233
Stockholders' equity
Preferred stock, par value
$.01 per share;
authorized 1,000,000 shares;
issued and outstanding 45,000
at March 31, 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 5,015,419
at March 31, 1995 and 5,012,419
at December 31, 1994 50,154 50,124
Additional paid-in capital 2,796,022 3,129,888
Retained earnings (deficit) (2,683,378) (3,711,495)
----------- -----------
2,412,798 (531,483)
----------- -----------
$25,082,813 $28,936,515
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended
March 31,
1995 1994
Net Sales $32,446,320 $31,007,551
Cost of goods sold 23,678,896 23,680,708
---------- ----------
Gross profit 8,767,424 7,326,843
Operating expenses
Selling 6,348,954 5,919,815
Administrative 1,102,117 1,022,428
---------- ----------
7,451,071 6,942,243
---------- ----------
Operating profit 1,316,353 384,600
Other Income 3,114 104,599
Interest expense - net (328,731) (401,058)
---------- ----------
Earnings before income taxes and
extraordinary item 990,736 88,141
Income taxes 66,379 -
---------- ----------
Earnings before extraordinary item 924,357 88,141
Extraordinary Item:
Gain from extinguishment of
debt, net of income taxes
of $7,451 103,760 -
---------- ----------
Net earnings $ 1,028,117 $ 88,141
========== ==========
Earnings per share of common stock
Earnings before extraordinary item $ .18 $ .02
Extraordinary item .02 .00
---------- ----------
Net earnings per share of common stock $ .20 $ .02
---------- ----------
Weighted average number of common and
common equivalent shares outstanding 5,195,932 5,045,255
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities
Net earnings $ 1,028,117 $ 88,141
--------- ------
Adjustments to reconcile net earnings
to net cash used in operating activities
Depreciation and amortization 130,662 207,027
Extraordinary gain from extinguishment
of debt, net of income taxes (103,760) -
Provisions for losses on accounts
receivable 19,073 10,500
Change in assets and liabilities
Decrease in accounts receivable 4,327,599 1,312,161
(Increase) Decrease in inventory (1,118,832) 1,265,580
(Increase) Decrease in prepaid expenses 148,680 (210,527)
Decrease in refundable income taxes - 45,897
Decrease in other assets 17,468 25,782
(Increase) in trade receivables,
net-due from Mountain Farms, Inc. - (1,069,117)
Decrease in notes receivable 3,451 3,097
Decrease in accounts payable (4,198,433) (2,292,335)
Increase (Decrease) in accrued expenses (547,423) 112,756
Increase (Decrease) in income taxes 51,386 (10,599)
Decrease in other long-term liabilities (123,542) -
---------- ----------
(1,393,671) (599,778)
---------- ----------
Net cash used in operating activities $ (365,554) $ (511,637)
---------- ----------
The accompanying notes are an integral part of these statements.
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
Three Months Ended
March 31,
1995 1994
Cash flow from investing activities
Additions to property, plant and equipment $ (60,718) $ (72,149)
Payments for trademarks and trade names (18,285) (5,428)
Changes in investments in and advances
to MFI-principally sales proceeds - 3,617,130
--------- ----------
Net cash (used) provided by
investing activities (79,003) 3,539,553
--------- ----------
Cash flows from financing activities
Net payments from obligation under
capital lease (47,259) (27,018)
Net payments under long-term obligations (2,003,680) (3,050,653)
Net proceeds from preferred stock issued 2,115,000 -
Proceeds from employee stock option
exercise 13,500 -
--------- ----------
Net cash (used) provided by financing
activities 77,561 (3,077,671)
--------- ----------
Net (decrease) in cash and cash
equivalents (366,996) (49,755)
Cash and cash equivalents at
beginning of year 438,414 238,937
--------- ----------
Cash and cash equivalents at
end of quarter $ 71,418 $ 189,182
========= ==========
Supplemental disclosures of
cash flow information:
Cash paid during the year for
Interest $ 389,598 $ 437,063
========= ==========
Income taxes $ 15,346 $ 10,600
========= ==========
The accompanying notes are an integral part of these statements.
<PAGE>
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 March 31, 1995 and December 31, 1994, the results
of its operations for the three months ended March 31, 1995
and 1994 and the changes in its cash position for the three
months ended March 31, 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 three months ended March 31,
1995 are not necessarily indicative of the results to be
expected for the entire fiscal year.
3. Inventories are summarized as follows:
March 31, 1995 December 31, 1994
Finished goods $ 6,162,160 $ 4,986,691
Raw materials & packaging supplies 404,174 460,811
------------ --------------
$ 6,566,334 $ 5,447,502
------------ --------------
4. Earnings per share of common stock was computed by dividing
net earnings 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 6.7% for the three months ended March 31, 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 $2,100,000.
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, the Company is required to make an offer
to purchase the convertible preferred stock.
<PAGE>
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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
a. Results of Operations.
Comparison of the Registrant's first quarter (January 1,
1995 - March 31, 1995) of the current fiscal year ("1995")
with the first quarter (January 1, 1994 - March 31, 1994)
of the last fiscal year ("1994").
Net sales for the first quarter ending March 31, 1995 were
$32,446,320 as compared to $31,007,551 in the same period
of 1994. The Alpine Lace Branded Division had increased
sales of $2,252,865 for the first quarter ending March 31,
1995 going from $23,083,434 in 1994 to $25,336,299 in the
same period of 1995. Sales for the Company's cheese and
dairy products trading business decreased by 10.2% or
810,839 to $7,102,736 from $7,913,575 for the comparative
period of 1994.
As a percentage of sales, gross profit increased to 27.0%
in the first quarter of 1995 from 23.6% in the comparable
period of 1994. Gross profit increased by $1,440,581 in
the quarter ending March 31, 1995 going from $7,326,843 in
1994 to $8,767,424 in 1995. This increase was the result
of the lower cost to purchase cheese resulting from lower
commodity prices and continuing manufacturing efficiencies.
As a percentage of sales, selling and administrative
expenses increased from 22.4% in the first quarter of 1994
to 23.0% in the comparable period of 1995. Selling and
administrative expenses increased from 6,942,243 in the
first quarter of 1994 to $7,451,071 in the same period of
1995. The major contributors to this increase were for co-
op advertising and advertising which supported the 9.7%
increase in branded sales.
The Company's operating profit increased by $931,753 from
$384,600 in the first quarter of 1994 to $1,316,353 in the
comparable period of 1995. Operating profit as a percent
of net sales increased to 4.1% in the first quarter of 1995
compared to 1.2% in the first quarter of 1994 due to the
higher gross profit offset slightly by higher selling and
administrative expenses previously discussed.
Net interest expense in the first quarter of 1995 was
$328,731, a decrease of $72,327 for the comparable period
of 1994, as a result of the company's decreased use of its
working capital credit line, partially offset by higher
interest rates.
The Company's effective tax rate of 6.7% or $66,379 in the
first quarter of 1995 includes the utilization of the
Company's net operating loss carry-forwards generated in
prior years. The Company did not accrue for income taxes
in the first 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 March 31,
1995 was $1,028,117 compared to $88,141 for the same period
of 1994 for the reasons discussed previously.
<PAGE>
b. Financial Condition
The major sources of cash for the quarter ending March 31,
1995 came from first quarter net earnings and the decrease
in accounts receivable. The major uses of cash for the
quarter ending March 31, 1995 were to fund decreases in
accounts payable and increases in inventory. 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 $2,100,000. As
of May 8, 1995, the Company had approximately $4,200,000
available on its revolving credit facility and $ 3,500,000
available on its equipment credit facility.
PART II. Other Information
Item 2. Changes in Securities.
On March 22, 1995 the Company issued and sold in a
private placement transaction 45,000 shares of its
Series A 7.50% Cumulative Convertible Preferred Stock
(the "Series A Preferred Stock"). The Series A
Preferred Stock ranks, with respect to dividend rights
and rights upon liquidation, winding up and
dissolution, senior to all classes of common stock of
the Company, including the common stock, par value
$.01 per share, of the Company (the "Common Stock).
Consequently, so long as any shares of Series A
Preferred Stock are outstanding, the Company shall
not, among other things, declare or pay dividends on
Common Stock or make any other payments or
distribution with respect to such Common Stock if all
dividends on the Series A Preferred Stock have not
been paid in full. Similarly, upon the liquidation of
the Company, before any distribution is made to the
holders of any Common Stock, the holders of Series A
Preferred Stock are entitled to be paid out of the
assets of the Company an amount equal to $50 per share
for each share of Series A Preferred Stock
outstanding.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
Exhibit 10.3(f) Employment Agreement, as of January 1, 1995
between the Company and Kenneth E. Meyers.
Exhibit 10.5(c) Lease Modification, dated March 23, 1995,
between Dunnell Associates and Alpine Lace Brands, Inc.
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 March 31, 1995.
<PAGE>
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: May 10, 1995
By: /s/ Arthur Karmel
Arthur Karmel, Vice President - Finance
(Chief Accounting Officer)
Dated: May 10, 1995
<PAGE>
Exhibit 11.
ALPINE LACE BRANDS, INC.
Computation of Earnings Per Share of Common Stock
Three Months Ended
March 31,
1995 1994
Net earnings for the Period (1) $1,028,117 (A) $88,141 (A)
Weighted Average Number of Issued and
Outstanding Common Shares (2) 5,015,419 5,012,419
Incremental Shares Attributable to
Assumed Exercise of Warrants
and Stock Options (3) 180,513 32,836
Weighted Average Number of Common
Shares (2) + (3) 5,195,932 (B) 5,045,255 (B)
Earnings Per Common and Common
Equivalent Share $.20 (A)/(B) $.02 (A)/(B)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 71,418
<SECURITIES> 0
<RECEIVABLES> 11,909,081
<ALLOWANCES> 0
<INVENTORY> 6,566,334
<CURRENT-ASSETS> 19,173,188
<PP&E> 3,312,176
<DEPRECIATION> 1,148,798
<TOTAL-ASSETS> 25,082,813
<CURRENT-LIABILITIES> 12,771,602
<BONDS> 9,898,413
<COMMON> 50,154
0
2,250,000
<OTHER-SE> 112,644
<TOTAL-LIABILITY-AND-EQUITY> 25,082,813
<SALES> 32,446,320
<TOTAL-REVENUES> 32,446,320
<CGS> 23,678,896
<TOTAL-COSTS> 30,027,850
<OTHER-EXPENSES> 1,102,117
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 328,731
<INCOME-PRETAX> 990,736
<INCOME-TAX> 66,379
<INCOME-CONTINUING> 924,357
<DISCONTINUED> 0
<EXTRAORDINARY> 103,760
<CHANGES> 0
<NET-INCOME> 1,028,117
<EPS-PRIMARY> .20
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