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, 1997 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 May 1, 1997, there were
5,124,305 shares of Common Stock, $.01 par value outstanding.
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ALPINE LACE BRANDS, INC.
INDEX
Page
Number
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997
(unaudited) and December 31, 1996 3
Consolidated Statements of Earnings for the Three
Months Ended March 31, 1997 and 1996 (unaudited) 5
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 (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
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PART 1.
FINANCIAL INFORMATION
Item 1. Financial Statements
ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1997 December 31, 1996
(unaudited)
ASSETS (substantially pledged)
Cash and cash equivalents $ 31,581 $ 393,173
Accounts receivable, net of
allowance for bad debts 11,994,285 13,431,641
Inventories 9,203,058 8,502,197
Prepaid expenses and deposits 311,398 389,385
Advances to suppliers 300,000 300,000
Deferred tax asset 29,583 29,583
Total current assets 21,869,905 23,045,979
Property, plant and equipment
Land, building and improvements 314,418 314,418
Equipment under capital lease 973,795 973,795
Leasehold improvements 121,115 121,115
Furniture, fixtures and equipment 2,826,007 2,731,754
4,235,335 4,141,082
Less accumulated depreciation and
amortization 2,003,703 1,890,996
2,231,632 2,250,086
OTHER ASSETS
Note Receivable - Mountain Farms, Inc. 1,675,948 1,675,948
Trademarks, tradenames and technology, less
accumulated amortization of $1,058,515 in
1997 and $1,019,739 in 1996 1,384,137 1,421,882
Other 234,435 177,440
3,294,520 3,275,270
$ 27,396,057 $28,571,335
The accompanying notes are an integral part of these statements.
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ALPINE LACE BRANDS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 1997 December 31, 1996
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 8,020,416 $11,685,587
Accrued expenses 1,621,619 1,328,328
Income taxes 604,894 206,273
Current maturities of obligations under
capital leases 146,572 147,519
Total current liabilities 10,393,501 13,368,157
Long term obligations, less current maturities
Long-term debt 8,639,916 7,521,566
Obligations under capital leases 246,316 281,847
Deferred tax liability 100,465 100,465
8,986,697 7,903,878
Stockholders' equity
Preferred stock, par value $.01 per share;
authorized 1,000,000 shares;
issued and outstanding 45,000 shares at
liquidation amount of $50.00 per share 2,250,000 2,250,000
Common stock, par value $.01 per share;
authorized 10,000,000 shares; issued and
outstanding 5,177,405 at March 31, 1997
and 5,176,636 at December 31, 1996 51,774 51,767
Additional paid-in capital 3,604,475 3,602,141
Retained earnings 2,633,593 1,916,034
8,539,842 7,819,942
Less
Common stock in treasury-at cost 408,926 387,290
Unearned compensation 115,057 133,352
8,015,859 7,299,300
$27,396,057 $28,571,335
The accompanying notes are an integral part of these statements.
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ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(unaudited)
Three Months Ended
March 31,
1997 1996
Net Sales $ 33,739,303 $ 32,550,994
Cost of goods sold 23,890,496 24,903,429
Gross profit 9,848,807 7,647,565
Operating expenses
Selling 7,173,877 5,781,395
Administrative 1,265,022 1,040,180
8,438,899 6,821,575
Operating profit 1,409,908 825,990
Interest expense - net 243,664 187,366
Earnings before income taxes 1,166,244 638,624
Income taxes 406,497 242,677
Net earnings 759,747 395,947
Preferred stock dividends 42,188 42,188
MCT Dairies, Inc. option 4,877 -
Net earnings applicable to common shareholders $ 712,682 $ 353,759
Net earnings per share of common stock $ .14 $ .07
Weighted average number of common and
common equivalent shares outstanding 5,183,922 5,334,813
The accompanying notes are an integral part of these statements.
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ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities
Net earnings $ 759,747 $ 395,947
Adjustments to reconcile net earnings
to net cash used in operating activities:
Depreciation and amortization 151,483 149,360
Provision for losses on accounts
receivable 10,570 9,000
Other 18,295 -
Change in assets and liabilities:
Decrease in accounts receivable 1,426,786 3,600,253
(Increase) Decrease in inventory (700,861) 134,279
(Increase) Decrease in prepaid expenses 77,987 (7,910)
(Increase) Decrease in other assets (56,995) 4,364
Decrease in notes receivable - 3,847
Decrease in accounts payable (3,665,171) (6,329,615)
Increase (Decrease) in accrued expenses 293,291 (364,128)
Increase (Decrease) in income taxes 398,171 (27,133)
Decrease in other long-term liabilities - (41,181)
(2,046,444) (2,868,864)
Net cash used in operating activities $(1,286,697) $ (2,472,917)
The accompanying notes are an integral part of these statements.
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ALPINE LACE BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(unaudited)
Three Months Ended
March 31,
1997 1996
Cash flows from investing activities:
Additions to property, plant and equipment $ (94,253) $ (124,548)
Payments for trademarks and tradenames and
technology (1,031) -
Net cash used by investing activities (95,284) (124,548)
Cash flows from financing activities:
Net payments from obligation under capital lease (36,478) (35,685)
Net proceeds under long-term obligations 1,118,350 1,735,005
Purchase of treasury stock (21,636) -
Net proceeds from stock option exercises 2,341 594,302
Payment of dividends to preferred shareholders (42,188) (42,188)
Net cash provided by financing activities 1,020,389 2,251,434
Net (decrease) in cash and cash equivalents (361,592) (346,031)
Cash and cash equivalents at beginning of year 393,173 459,610
Cash and cash equivalents at end of quarter $ 31,581 $ 113,579
Supplemental disclosures of cash flow information:
Cash paid during the year for
Interest $ 234,864 $ 192,667
Income taxes $ 8,126 $ 269,811
The accompanying notes are an integral part of these statements.
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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 March 31, 1997 and December 31, 1996
and the results of its operations and cash flows for the three months ended
March 31, 1997 and 1996. 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 Company
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 Company's Annual Report on Form 10-K, as amended, filed with the Securities
Exchange Commission.
The accounting policies followed by the Company are set forth in the notes to
the Company's consolidated financial statements contained in its Annual Report
on Form 10-K.
2. The results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results to be expected for the entire fiscal year.
3. Inventories are summarized as follows:
March 31, 1997 December 31, 1996
Cheese inventory $ 8,663,533 $ 7,977,847
Packaging supplies 539,525 524,350
$ 9,203,058 $ 8,502,197
4. Earnings per share of common stock was computed by dividing net earnings,
after deducting preferred dividend requirements and earnings applicable to MCT
Dairies, Inc. option, 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. New Accounting Pronouncement - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128,
Earnings Per Share, which is effective for financial statements for both interim
and annual periods ending after December 15, 1997. The new standard eliminates
primary and fully diluted earnings per share and requires presentation of basic
and if applicable diluted earnings per share. Basic earnings per share is
computed by dividing income available to common shareholders by the
weighted-average common shares outstanding for the period. Diluted earnings per
share reflects the weighted-average common shares outstanding and dilutive
potential common shares such as stock options. The adoption of this new standard
is not expected to have a material impact on the disclosure of earnings per
share in the financial statements.
6. The Company's operations consist of two segments: (1) the branded cheese
business which develops, markets, converts, packages and distributes branded
cheeses and deli meats; and (2) the Company's cheese and dairy products trading
business.
7. In an action brought by the Company in 1995 in the United States District
Court for the District of New Jersey against Kraft Foods, Inc., Borden, Inc.,
Beatrice Cheese, Inc. and Schreiber Foods, Inc. alleging infringement of the
Company's patent for the manufacture of low fat cheese, summary judgment was
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granted in favor of Kraft in March 1996 and partial summary judgments were
granted in favor of Borden and Schreiber in September 1996 and April 1997. The
first two summary judgments have been appealed to the United States Court of
Appeals for the Federal Circuit and the appeals have been consolidated. Motions
filed in the District Court by Kraft and jointly by Borden and Schreiber to have
the case declared exceptional under Section 285 of the Patent Statute were
denied in April 1997. The case will continue in the District Court as to
defendant Beatrice and as to certain claims against Borden and Schreiber.
During 1996, the Company was joined as a defendant in two separate class actions
pending in the United States District Court for the Eastern District of
Wisconsin. The complaints in these two actions are nearly identical, were filed
by the same plaintiffs' lawyers, and were brought on behalf of the same class.
Both complaints allege conspiracy among the Company, Kraft Food, Inc., Borden,
Inc. and the National Cheese Exchange, Inc. to, among other things, manipulate
cheese prices and unreasonably restrain trade in violation of the Sherman Act.
Both cases also assert state law claims for fraud and misrepresentation and
breach of contract. Both complaints seek unspecified actual and punitive damages
and injunctive relief. In December 1996, a motion for class certification was
denied in the first of these cases, and that case will proceed on behalf of the
named plaintiffs only. On May 2, 1997, the Court dismissed the second case,
without prejudice, but with costs to be paid by the plaintiffs.
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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 Company's first quarter (January 1,
1997 - March 31, 1997) of the current fiscal year ("1997") with the first
quarter (January 1, 1996 - March 31, 1996) of the last fiscal year ("1996").
Net sales for the quarter ending March 31, 1997 were $33,739,303 as compared to
$32,550,994 in the same period of 1996. The Company's Branded Division had
decreased sales of $1,014,699 for the quarter ending March 31, 1997 going from
$26,056,572 in 1996 to $25,041,873 in the same period of 1997. The Company's
Branded division sales decrease was due to lower commodity cheese sales. The
Company's Branded division sales excluding commodity sales increased $487,465 or
2.0% from 24,309,225 in 1996 to $24,796,690 in 1997 as a result of a 6.5%
increase in sales price per unit partially offset by a 3.7% decrease in unit
volume. Sales for the Company's cheese and dairy products trading business
increased by 33.9% or $2,203,008 to $8,697,430 from $6,494,422 for the
comparative period of 1996, due to greater unit volume sales partially offset by
lower sales price per unit.
As a percentage of sales, gross profit increased to 29.2% in the first quarter
of 1997 from 23.5% in the comparable period of 1996. Gross profit increased by
$2,201,242 in the quarter ending March 31, 1997 going from $7,647,565 in 1996 to
$9,848,807 in 1997. The increase in both gross profit as a percent of sales and
total gross profit are the result of the lower cost to purchase cheese,
resulting from lower commodity prices.
As a percentage of sales, selling and administrative expenses increased from
21.0% in the first quarter of 1996 to 25.0% in the comparable period of 1997.
Selling and administrative expenses increased from $6,821,575 in the first
quarter of 1996 to $8,438,899 in the same period of 1997. The major contributors
to this increase were from promotional expenses and advertising.
The Company's operating profit increased by $583,918 from $825,990 in the first
quarter of 1996 to $1,409,908 in the comparable period of 1997. Operating profit
as a percent of net sales increased to 4.2% in the first quarter of 1997
compared to 2.5% in the first quarter of 1996 due to the higher gross profit,
partially offset by higher selling and administrative expenses previously
discussed.
Net interest expense in the first quarter of 1997 was $243,664, an increase of
$56,298 from the comparable period of 1996, as a result of the company's
increased use of its working capital credit line, partially offset by lower
interest rates.
The Company's income tax provision for the first quarter of 1997 was 34.9% or
$406,497 due to a tax benefit carryover from 1996. The Company's income tax
provision for the first quarter of 1996 was 38.0% or $242,677.
The Company's net earnings for the quarter ending March 31, 1997 was $759,747
compared to $395,947 for the same period of 1996 for the reasons discussed
above.
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b. Financial Condition
The major sources of cash for the quarter ending March 31, 1997 came from
decreased accounts receivable and first quarter net earnings. The major uses of
cash for the quarter ending March 31, 1997 were to fund decreases in accounts
payable. As of May 1, 1997, the Company had approximately $8,000,000 available
on its revolving credit facility.
PART II.
Other Information
Item 1. Legal Proceedings
In an action brought by the Company on March 7, 1995 in the United States
District Court for the District of New Jersey against Kraft Foods, Inc., Borden,
Inc., Beatrice Cheese, Inc. and Schreiber Foods, Inc. alleging infringement of
the Company's patent for the manufacture of low fat cheese, summary judgment was
granted in favor of Kraft in March 1996 and partial summary judgments were
granted in favor of Borden and Schreiber in September 1996 and April 1997. The
first two summary judgments have been appealed to the United States Court of
Appeals for the Federal Circuit and the appeals have been consolidated. Motions
filed in the District Court by Kraft and jointly by Borden and Schrieber to have
the case declared exceptional under Section 285 of the Patent Statute were
denied in April 1997. The case will continue in the District Court as to
defendant Beatrice and as to certain claims against Borden and Schreiber.
During 1996, the Company was joined as a defendant in two separate class actions
pending in the United States District Court for the Eastern District of
Wisconsin. The complaints in these two actions are nearly identical, were filed
by the same plaintiffs' lawyers, and were brought on behalf of the same class.
Both complaints allege conspiracy among the Company, Kraft Food, Inc., Borden,
Inc. and the National Cheese Exchange, Inc. to, among other things, manipulate
cheese prices and unreasonably restrain trade in violation of the Sherman Act.
Both cases also assert state law claims for fraud and misrepresentation and
breach of contract. Both complaints seek unspecified actual and punitive damages
and injunctive relief. In December 1996, a motion for class certification was
denied in the first of these cases, and that case will proceed on behalf of the
named plaintiffs only. On May 2, 1997, the Court dismissed the second case,
without prejudice, but with costs to be paid by the plaintiffs.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits.
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, 1997.
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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: May 8, 1997
By: /s/ Arthur Karmel
Arthur Karmel, Vice President - Finance
(Chief Accounting Officer)
Dated: May 8, 1997
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Exhibit 11.
ALPINE LACE BRANDS, INC.
Computation of Earnings Per Share of Common Stock
Three Months Ended
March 31,
1997 1996
Net earnings for the Period $ 759,747 $ 395,947
Preferred Stock Dividends 42,188 42,188
MCT Dairies, Inc. option 4,877 -
Net Earnings for Computation
of Earnings Per Share (1) 712,682 (A) 353,759 (A)
Weighted Average Number
of Common Shares Outstanding:
Weighted Average Number of Issued and
Outstanding Common Shares (2) 5,103,193 5,176,302
Incremental Shares Attributable to
Assumed Exercise of Stock Options
and Warrants (3) 80,729 158,511
Weighted Average Number of Common
Shares (2) + (3) 5,183,922 (B) 5,334,813 (B)
Earnings Per Common and Common
Equivalent Share $.14 (A)/(B) $.07 (A)/(B)
</TABLE>
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 31,581
<SECURITIES> 0
<RECEIVABLES> 11,959,392
<ALLOWANCES> 34,893
<INVENTORY> 9,203,058
<CURRENT-ASSETS> 21,869,905
<PP&E> 4,235,335
<DEPRECIATION> 2,003,703
<TOTAL-ASSETS> 27,396,057
<CURRENT-LIABILITIES> 10,393,501
<BONDS> 8,986,697
<COMMON> 51,774
0
2,250,000
<OTHER-SE> 5,714,085
<TOTAL-LIABILITY-AND-EQUITY> 27,396,057
<SALES> 33,739,303
<TOTAL-REVENUES> 33,739,303
<CGS> 23,890,496
<TOTAL-COSTS> 32,329,395
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 243,664
<INCOME-PRETAX> 1,166,244
<INCOME-TAX> 406,497
<INCOME-CONTINUING> 759,747
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 759,747
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
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