<PAGE>
FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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 0-2246
___________________________________
VESTRO NATURAL FOODS INC.
______________________________________________________
(Exact name of Registrant as specified in its charter)
Delaware 11-1676942
_______________________________ _____________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1065 East Walnut Street, Carson, California 90746
_________________________________________________________
(Address of principal executive offices) (Zip code)
(310) 886-8200
_______________________________
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all
reports 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
_____ ______
As of August 1, 1995, 5,950,588 shares of the Registrant's Common
Stock, par value $.01 were issued and outstanding.
Page 1 of 11
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 710,000 $ 1,489,000
Accounts receivable trade - net 2,076,000 1,776,000
Inventories 2,699,000 2,547,000
Prepaid expenses and other 678,000 526,000
----------- -----------
Total current assets 6,163,000 6,338,000
----------- -----------
Properties, at cost:
Machinery and equipment 549,000 506,000
Leasehold improvements 12,000 9,000
----------- -----------
561,000 515,000
Less accumulated depreciation 384,000 349,000
----------- -----------
177,000 166,000
Excess of cost over net assets of
businesses acquired - net 7,014,000 7,120,000
Other assets 613,000 652,000
----------- -----------
Total assets $13,967,000 $14,276,000
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------- -----------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,801,000 $ 2,972,000
Notes Payable-current portion 615,000 549,000
Accrued liabilities 532,000 644,000
----------- -----------
Total current liabilities 3,948,000 4,165,000
Notes Payable 3,061,000 3,402,000
----------- -----------
Total liabilities 7,009,000 7,567,000
Commitments and contingencies (Note 3)
Common stock, $.01 par value, 30,000,000
shares authorized: 5,950,588
shares issued and outstanding 60,000 60,000
Additional paid-in capital 16,758,000 16,758,000
Accumulated deficit (9,860,000) (10,109,000)
----------- -----------
6,958,000 6,709,000
----------- -----------
Total liabilities and shareholders' equity $13,967,000 $14,276,000
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
--------------------
1995 1994
----------- ----------
<S> <C> <C>
Net sales $6,261,000 $6,124,000
Cost of sales 4,541,000 4,355,000
---------- ----------
Gross profit 1,720,000 1,769,000
Selling, general and
administrative expense 1,620,000 1,314,000
---------- ----------
Operating income 100,000 455,000
Interest & other income 20,000 119,000
---------- ----------
Net income before income taxes 120,000 574,000
Income tax provision 2,000 11,000
---------- ----------
Net income $ 118,000 $ 563,000
EARNINGS PER COMMON SHARE
Net income $ .02 $ .09
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------------
1995 1994
----------- -----------
<S> <C> <C>
Net sales $12,271,000 $11,766,000
Cost of sales 8,921,000 8,398,000
----------- -----------
Gross profit 3,350,000 3,368,000
Selling, general and
administrative expense 3,056,000 2,511,000
----------- -----------
Operating income 294,000 857,000
Interest & other income (expense) (41,000) 59,000
----------- -----------
Income before income taxes 253,000 916,000
Income tax provision 4,000 18,000
----------- -----------
Net income $ 249,000 $ 898,000
EARNINGS PER COMMON SHARE
Net income $ .04 $ .15
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 249,000 $ 898,000
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 141,000 142,000
Provision for doubtful accounts 18,000 18,000
Change in assets and liabilities,
net of effect of business acquisitions:
(Increase) decrease in accounts receivable (318,000) (424,000)
(Increase) decrease in inventories (152,000) (319,000)
(Increase) decrease in prepaid
expenses and other (236,000) 26,000
Increase (decrease) in accounts payable (171,000) 425,000
Increase (decrease) in other accrued
liabilities (112,000) (271,000)
---------- ----------
Total adjustments (830,000) (403,000)
---------- ----------
Net cash provided (used) by
operating activities (581,000) 495,000
---------- ----------
Cash flows from investing activities:
Expenditures for equipment (46,000) (12,000)
Deferred proceeds from sale of net assets 84,000 213,000
(Increase) in other assets 39,000 (28,000)
---------- ----------
Net cash (used) in investing activities 77,000 173,000
---------- ----------
Cash flows from financing activities
Issuance of Common Stock - 131,000
Dividends paid - (94,000)
Net borrowings (payments) of
long-term obligations (275,000) (211,000)
---------- ----------
Net cash provided (used) by
financing activities (275,000) (174,000)
---------- ----------
Increase (decrease) in cash (779,000) 494,000
Cash and cash equivalents, beginning
of period 1,489,000 761,000
---------- ----------
Cash and cash equivalents, end of period $ 710,000 $1,255,000
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1995, and the
consolidated statements of operations and cash flows for the three
months and six months ended June 30, 1995 and June 30, 1994 have been
prepared by the Company, without audit. In the opinion of management,
all adjustments necessary to present fairly the financial position,
results of operations and changes in financial position at June 30,
1995 and for all periods presented have been made. Such adjustments
consisted only of normal recurring items.
Certain information and footnote disclosures normally included in
annual financial statements have been condensed or omitted. It is
suggested that these consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the year ended December
31, 1994. The results of operations for the periods ended June 30,
1995 and June 30, 1994 are not necessarily indicative of the operating
results for the full years.
NOTE 1. PROVISION FOR INCOME TAXES
Effective January 1, 1993, the Company adopted SFAS No. 109 for
accounting for income taxes. The adoption of SFAS No. 109 did not have
a material effect on the Company's net income for the first quarter of
1995.
For Federal and California tax purposes, the Company has tax basis net
operating loss carryforwards of $4,900,000 and $300,000, respectively,
expiring through 2009. During the three months and six months ended
June 30, 1995, the income tax provision reflects the utilization of
available operating loss carryforwards in lieu of income taxes that
would have been incurred. Utilization of the remaining carryforwards
is dependent on future taxable income.
NOTE 2. EARNINGS (LOSS) PER SHARE
Earnings (loss) per share amounts are based on the weighted average
number of shares outstanding -
For the three months ended June 30, 1994 6,426,755
For the six months ended June 30, 1994 6,159,400
For the three months ended June 30, 1995 6,051,823
For the six months ended June 30, 1995 6,040,856
Assumed exercise of outstanding options have been considered in the
computation of per share data to the extent they caused dilution.
7
<PAGE>
NOTE 3. CONTINGENCIES
Management has considered information furnished by legal counsel of the
current status of all outstanding legal proceedings and the development
of these matters to date. Based upon this review, it is the opinion of
management that adequate provision has been made for all reasonable
estimable costs and that the ultimate aggregate liability, if any,
should not materially affect the consolidated financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995
Net sales for the quarter ended June 30, 1995 were $6,261,000 compared
to $6,124,000 in the prior year's period, or an increase of 2%. The
increased sales were largely attributable to the Company's introduction
of its Chocolate Chip Classics and Cookie Jar Classics Cookies earlier
in this year.
Gross profit of the Company was $1,720,000 or 27.5% of sales for the
quarter ended June 30, 1995 compared to $1,769,000 or 28.9% of sales in
1994. The gross margin decrease of 1.4% was due to higher allowances
to customers, primarily on new products and increased costs of
purchases from certain suppliers.
Selling, general and administrative expenses were $1,620,000 or 25.9%
of sales for the quarter ended June 30, 1995 compared to $1,314,000 or
21.5% of sales in 1994. The increase was due largely to marketing and
promotional expenditures to increase the visibility of the Company's
products to the marketplace.
The Company had net interest and other income of $20,000 in the current
quarter compared to $119,000 in the prior year. The Company recognized
$83,000 of income upon the collection of the final payment on a note
receivable from the purchase of the Company's fine baked goods
operation in the current period. During the second quarter of 1994,
$167,000 of income was realized from the adjustment of the valuation
reserve against that receivable. The Company recorded $2,000 of income
tax expense, representing the alternative minimum tax, in the quarter
ended June 30, 1995.
As a result of the above, the Company recorded net income of $118,000
or $.02 per share for the quarter ended June 30, 1995, while in the
quarter ended June 30, 1994, the Company recorded net income of
$563,000, or $.09 per share.
8
<PAGE>
SIX MONTHS ENDED JUNE 30, 1995
Net sales for the six months ended June 30, 1995 were $12,271,000
compared to $11,766,000 in the prior year's period, or an increase of
4%. The increased sales were largely attributable to the Company's
introduction of its Chocolate Chip Classics and Cookie Jar Classics
Cookies during this period.
Gross profit of the Company was $3,350,000 or 27.3% of sales for the
six months ended June 30, 1995 compared to $3,368,000 or 28.6% of sales
in 1994. The gross margin decrease of 1.3% was due to higher
allowances to customers, primarily on product introductions during the
period and increased costs of purchases from certain suppliers.
Selling, general and administrative expenses were $3,056,000 or 24.9%
of sales for the six months ended June 30, 1995 compared to $2,511,000
or 21.3% of sales in 1994. The increase was due largely to marketing
and promotional expenditures to increase the visibility of the
Company's products to the marketplace.
The Company had net interest and other expense of $41,000 in the
current period compared to net interest and other income of $58,000 in
the prior year. The Company recorded $4,000 of income tax expense,
representing the alternative minimum tax, in the six months ended June
30, 1995.
As a result of the above, the Company recorded net income of $249,000
or $.04 per share for the six months ended June 30, 1995, while in the
six months ended June 30, 1994, the Company recorded net income of
$898,000, or $.15 per share.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company had $710,000 of cash. The Company has a
line of credit with a bank to provide up to $4,000,000 of financing
based upon certain percentages of the Company's accounts receivable and
inventory. At June 30, 1995, the Company had $2,000,000 of borrowing
capacity.
The Company has outstanding $3,676,000 of Subordinated Notes. The
Subordinated Notes call for monthly principal and interest payments.
During the 12 months ending December 31, 1995, the Company is obligated
to pay $549,000 of principal and $295,000 of interest on these notes.
During the second quarter of 1995, the Company received the final
deferred payment of $166,000 for the purchase of the Company's former
fine baked products operation.
9
<PAGE>
The Company projects that cash flow from operations together with its
current cash balance and the availability under its credit line should
be sufficient to support its operating needs for at least the current
fiscal year.
Part II - OTHER INFORMATION
None.
10
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
VESTRO NATURAL FOODS INC.
Date: August 11, 1995 By: /s/B. Allen Lay
______________________ ____________________________
B. Allen Lay
President and Chief Executive
Officer
Date: August 11, 1995 By: /s/Stephen Schorr
______________________ ____________________________
Stephen I. Schorr
Vice President, Finance
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 710,000
<SECURITIES> 0
<RECEIVABLES> 2,076,000
<ALLOWANCES> 0
<INVENTORY> 2,528,000
<CURRENT-ASSETS> 6,163,000
<PP&E> 549,000
<DEPRECIATION> 12,000
<TOTAL-ASSETS> 13,967,000
<CURRENT-LIABILITIES> 3,948,000
<BONDS> 3,061,000
<COMMON> 60,000
0
0
<OTHER-SE> 6,898,000
<TOTAL-LIABILITY-AND-EQUITY> 13,967,000
<SALES> 12,271,000
<TOTAL-REVENUES> 12,271,000
<CGS> 8,921,000
<TOTAL-COSTS> 11,977,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,000
<INCOME-PRETAX> 253,000
<INCOME-TAX> 4,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 249,000
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
