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 June 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 July 29, 1995, there
were 5,028,687 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 June 30, 1995
(unaudited) and December 31, 1994 3
Consolidated Statements of Earnings for the Three
Months and Six Months Ended June 30, 1995
and 1994 (unaudited) 5
Consolidated Statements of Cash Flows for the Six
Months Ended June 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 4. Submission of Matters to a Vote of
Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1995 Dec. 31, 1994
(unaudited)
ASSETS (substantially pledged)
Cash and cash equivalents $ 11,672 $ 438,414
Accounts receivable, net of
allowance for bad debt 10,217,284 16,228,784
Inventories 6,614,608 5,447,502
Prepaid expenses and deposits 379,292 502,004
Advances to suppliers 300,000 300,000
Total current assets 17,522,856 22,916,704
Property, plant and equipment
Land, buildings and improvements 323,137 346,000
Equipment under capital leases 998,243 1,052,544
Leasehold improvements 75,293 45,914
Furniture, fixtures and equipment 1,696,185 1,541,200
3,082,858 2,985,658
Less accumulated depreciation
and amortization 1,217,887 1,057,075
1,864,971 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
$787,704 in 1995 and $709,802 in 1994 1,636,637 1,709,451
Notes receivable 23,422 30,420
Other 660,722 409,609
3,996,729 3,825,428
$23,384,556 $28,936,515
The accompanying notes are an integral part of these statements.
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1995 Dec. 31, 1994
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of note payable $ --- $ 1,385,846
Accounts payable 9,879,561 14,610,852
Accrued expenses 1,964,375 2,565,802
Income taxes 234,373 10,450
Current maturities of obligation under
capital leases 134,338 178,815
Total current liabilities 12,212,647 18,751,765
Long term obligations, less current maturities
Notes payable 6,799,927 9,547,581
Obligation under capital leases 492,165 592,121
Other long-term liability 329,446 576,531
7,621,538 10,716,233
Stockholders' equity
Preferred stock, par value $.01 per share;
authorized 1,000,000 shares;
issued and outstanding 45,000 at
June 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 5,022,687 at June 30, 1995
and 5,012,419 at December 31, 1994 50,227 50,124
Additional paid-in capital 2,767,378 3,129,888
Retained earnings (deficit) (1,517,234) (3,711,495)
3,550,371 (531,483)
$23,384,556 $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 Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net sales $33,998,678 $31,138,077 $66,444,997 $62,145,628
Cost of goods sold 24,641,816 22,912,905 48,320,711 46,593,613
Gross profit 9,356,862 8,225,172 18,124,286 15,552,015
Operating expenses
Selling 6,495,263 6,541,602 12,844,217 12,461,417
Administrative 1,257,316 1,128,828 2,346,956 2,151,256
7,752,579 7,670,430 15,191,173 14,612,673
Operating profit 1,604,283 554,742 2,933,113 939,342
Other income (expense) 38,098 (32,569) 28,735 72,030
Interest expense - net (259,298) (388,191) (588,029) (789,249)
Earnings before
income taxes and
extraordinary item 1,383,083 133,982 2,373,819 222,123
Income taxes 179,801 --- 246,180 ---
Earnings before
extraordinary item 1,203,282 133,982 2,127,639 222,123
Extraordinary Item:
Gain from extinguishment
of debt, net of income
taxes of $7,451 --- --- 103,760 ---
Net earnings 1,203,282 133,982 2,231,399 222,123
Preferred Stock Dividends 39,844 --- 39,844 ---
Net earnings applicable
to common shareholders $ 1,163,438 $ 133,982 $ 2,191,555 $ 222,123
Earnings per share of
common stock
Earnings before
extraorindary item $ .22 $ .03 $ .40 $ .04
Extraordinary item .00 .00 .02 .00
Net earnings per share
of common stock $ .22 $ .03 $ .42 $ .04
Weighted average number
of common and common
equivalent shares
outstanding 5,299,278 5,066,541 5,247,605 5,055,898
The accompanying notes are an integral part of these statements.
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from operating activities
Net earnings $2,231,399 $ 222,123
Adjustments to reconcile net earnings
to net cash used in operating activities
Depreciation and amortization 278,461 419,078
Extraordinary gain from extinguishment
of debt, net of income taxes (103,760) ---
Provisions for losses on accounts
receivable 25,989 24,000
(Gain) on sale of fixed assets (20,738) ---
Change in assets and liabilities
(Increase) in marketable securities --- (33,192)
Decrease in accounts receivable 5,985,511 2,146,264
(Increase) Decrease in inventory (1,167,106) 989,456
(Increase) Decrease in prepaid
expenses 122,712 (103,760)
Decrease in refundable
income taxes --- 930,567
(Increase) in trade receivables,
net-due from Mountain Farms, Inc. --- (1,749,100)
Decrease in notes receivable 6,998 6,279
(Increase) Decrease in other assets (286,016) 58,250
Decrease in accounts
payable (4,731,291) (3,955,031)
Increase (Decrease) in accrued
expenses (601,427) 268,659
Increase (Decrease) in income
taxes 216,472 (40,880)
Decrease in other long-term
liabilities (247,085) ---
(521,280) (1,039,410)
Net cash provided by (used in)
operating activities $1,710,119 $(817,287)
The accompanying notes are an integral part of these statements.
<PAGE>
ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows from investing activities
Additions to property, plant and equipment $ (193,014) $ (234,771)
Payments for trademarks and trade names (5,087) (34,417)
Changes in investments in and advances
to MFI-principally sales proceeds --- 3,617,130
Proceeds from sale of fixed assets 342,604 ---
Net cash provided by investing
activities 144,503 3,347,942
Cash flows from financing activities
Net (payments) from obligation
under capital lease (144,433) (37,205)
Net (payments) under long-term
agreements (4,197,017) (2,653,748)
Payment of dividends to preferred
shareholders (39,844) ---
Net proceeds from preferred stock issued 2,052,648 ---
Proceeds from employee stock option
exercise 47,282 ---
Net cash (used) in financing
activities (2,281,364) (2,690,953)
Net (decrease) in cash and cash
equivalents (426,742) (160,298)
Cash and cash equivalents at beginning
of year 438,414 238,937
Cash and cash equivalents at end of
six months $ 11,672 $ 78,639
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 617,978 $ 810,907
Income taxes $ 31,455 $ 22,800
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 June 30, 1995
and December 31, 1994, the results of its operations for the three
months and six months ended June 30, 1995 and 1994 and the changes in
its cash position for the six months ended June 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 six months ended June 30, 1995 are
not necessarily indicative of the results to be expected for the
entire fiscal year.
3. Inventories are summarized as follows:
June 30, 1995 December 31, 1994
Finished goods $6,096,571 $4,986,691
Raw materials &
Packaging supplies 518,037 460,811
$6,614,608 $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 10.4% for the six months ended
June 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 $2,100,000. 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.
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 second quarter (April 1, 1995 -
June 30,1995) of the current fiscal year ("1995") with the second
quarter (April 1, 1994 - June 30, 1994) of the last fiscal year
("1994").
Net sales for the second quarter ending June 30, 1995 were
$33,998,678 as compared to $31,138,077 in the same period of 1994.
The Alpine Lace Branded Division had increased sales of $1,901,502 for
the second quarter ending June 30, 1995 going from $25,912,846 in 1994
to $27,814,348 in the same period of 1995 due to increased unit volume.
Sales for the Company's cheese and dairy products trading business
increased by 18.5% or $966,873 to $6,185,716 from $5,218,843 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 27.5% in the second
quarter of 1995 from 26.4% in the comparable period of 1994. Gross
profit increased by $1,131,690 in the quarter ending June 30, 1995
going from $8,225,172 in 1994 to $9,356,862 in 1995. This increase was
the result of the lower cost to purchase cheese resulting from lower
commodity prices and continuing manufacturing efficiencies.
Selling and administrative expenses increased from $7,670,430 in the
second quarter of 1994 to $7,752,579 in the same period of 1995. As a
percentage of sales, selling and administrative expenses decreased
from 24.6% in the second quarter of 1994 to 22.8% in the comparable
period of 1995.
The Company's operating profit increased by $1,049,541 from $554,742 in
the second quarter of 1994 to $1,604,283 in the comparable period of
1995. Operating profit as a percent of net sales increased to 4.7% in
the second quarter of 1995 compared to 1.8% in the second quarter of
1994 due to the higher gross profit, offset slightly by higher selling
and administrative expenses previously discussed.
Net interest expense in the second quarter of 1995 was $259,298, a
decrease of $128,893 for 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% or $179,801 in the second
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 second 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 June 30, 1995 was
$1,203,282 compared to $133,982 for the same period of 1994 for the
reasons discussed previously.
b. Results of Operations.
Comparisons of the Registrant's first six months (January 1, 1995 -
June 30, 1995) of the current fiscal year ("1995") with the first
six months (January 1, 1994 - June 30, 1994) of the last fiscal year
("1994").
Net sales for the six months ending June 30, 1995 were $66,444,997 as
compared to $62,145,628 in the same period of 1994. The Alpine Lace
Branded Division had increased sales of $4,154,368 for the first six
months ending June 30, 1995 going from $48,996,279 in 1994 to
$53,150,647 in the same period of 1995 due to increased unit volume.
Sales for the Company's cheese and dairy products trading business
increased by 1.2% or $156,034 to $13,288,452 from $13,132,418 for the
comparative period of 1994.
As a percentage of sales, gross profit increased to 27.3% in the
first six months of 1995 from 25.0% in the comparable period of 1994.
Gross profit increased by $2,572,271 in the six months ending
June 30, 1995 going from $15,552,015 in 1994 to $18,124,286
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
decreased from 23.5% in the first six months of 1994 to 22.9% in
the comparable period of 1995. Selling and administrative expenses
increased from $14,612,673 in the first six months of 1994 to
$15,191,173 in the same period of 1995. The major contributors
to this increase were for co-op advertising and slotting fees which
supported the 8.5% increase in branded sales.
The Company's operating profit increased by $1,993,771 from $939,342
in the first six months of 1994 to $2,933,113 in the comparable
period of 1995. Operating profit as a percent of net sales
increased to 4.4% in the first six months of 1995 compared to 1.5%
in the first six months of 1994 due to the higher gross profit,
offset slightly by higher selling and administrative expenses
previously discussed.
Net interest expense in the first six months of 1995 was $588,029 a
decrease of $201,220 for 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 10.4% or $246,180 in the first
six months 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 six 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 six months ending June 30, 1995
was $2,231,399 compared to $222,123 for the same period of 1994 for
the reasons discussed above.
Financial Condition
The major sources of cash for the six months ended June 30, 1995 came
from net earnings and the decrease in accounts receivable. The major
uses of cash for the six months ended June 30, 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 August 2, 1995, the Company had approximately
$4,500,000 available on its revolving credit facility and $3,500,000
available on its equipment credit facility.
<PAGE>
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
On May 17, 1995, the Company held its Annual Meeting of Stockholders
(the "Meeting"), whereby the stockholders elected Directors, adopted an
amendment to the Company's 1987 Stock Option Plan and approved a proposal
to ratify the appointment of Grant Thornton as the Company's independent
auditors for the year ending December 31, 1995. The vote on such matters
was as follows:
1. Election of Directors:
For Withhold
Carl T. Wolf 4,226,252 41,550
Marion F. Wolf 4,225,277 42,525
Richard Cheney 4,225,552 42,250
Richard S. Hickok 4,226,952 40,850
Howard M. Lorber 4,223,252 44,550
Joseph R. Rosetti 4,226,952 40,850
Stephen Sadove 4,225,552 42,250
Marvin Schiller 4,226,352 41,450
2. RATIFICATION OF AMENDMENT TO 1987 STOCK OPTION PLAN: To consider and
vote upon an amendment to the Company's 1987 Stock Option Plan to
increase the number of shares of common stock issuable thereunder
from 500,000 to 1,000,000.
For Against Abstain
2,579,783 234,872 25,260
3. RATIFICATION OF APPOINTMENT OF AUDITORS: To ratify the appointment
of Grant Thornton as the independent auditors of the Company for the
year ending December 31, 1995.
For Against Abstain
4,245,217 13,275 9,310
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 June 30, 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: August 9, 1995
By: /s/ Arthur Karmel
Arthur Karmel, Vice President-Finance (Chief Accounting Officer)
Dated: August 9, 1995
<PAGE>
Exhibit 11.
ALPINE LACE BRANDS, INC.
Computation of Earnings Per Share of Common Stock
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net Earnings for the Period $1,203,282 $133,982 $2,231,399 $222,123
Preferred Stock Dividends 39,844 --- 39,844 ---
Net Earnings for Computation
of Earnings Per Share (1) 1,163,438(A) 133,982(A) 2,191,555(A) 222,123(A)
Weighted Average
Number of Common
Shares Outstanding:
Weighted Average
Number of Issued
and Outstanding
Common Shares (2) 5,022,687 5,012,419 5,022,687 5,012,419
Incremental Shares
Attributable to
Assumed Exercise
of Stock Options
and Warrants (3) 276,591 54,122 224,918 43,479
Weighted Average
Number of Common
Shares (2) + (3) 5,299,278(B) 5,066,541(B) 5,247,605(B) 5,055,898(B)
Earnings Per
Common and Common
Equivalent Share $ .22 $ .03 $ .42 $ .04
(A)/(B) (A)/(B) (A)/(B) (A)/(B)
<TABLE> <S> <C>
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 11,672
<SECURITIES> 0
<RECEIVABLES> 10,240,706
<ALLOWANCES> 0
<INVENTORY> 6,614,608
<CURRENT-ASSETS> 17,522,856
<PP&E> 3,082,858
<DEPRECIATION> 1,217,887
<TOTAL-ASSETS> 23,384,556
<CURRENT-LIABILITIES> 12,212,647
<BONDS> 7,621,538
<COMMON> 50,227
0
2,250,000
<OTHER-SE> 1,250,144
<TOTAL-LIABILITY-AND-EQUITY> 23,384,556
<SALES> 66,444,997
<TOTAL-REVENUES> 66,444,997
<CGS> 48,320,711
<TOTAL-COSTS> 61,164,928
<OTHER-EXPENSES> 2,346,956
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 588,029
<INCOME-PRETAX> 2,373,819
<INCOME-TAX> 246,180
<INCOME-CONTINUING> 2,127,639
<DISCONTINUED> 0
<EXTRAORDINARY> 103,760
<CHANGES> 0
<NET-INCOME> 2,231,399
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
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