<PAGE>
FORM 10Q
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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 March 31, 1995
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Commission file number 0-2246
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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
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As of May 1, 1995, 5,950,588 shares of the Registrant's Common Stock, par value
$.01 were issued and outstanding.
Page 1 of 9
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VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 829,000 $ 1,489,000
Accounts receivable trade - net 2,248,000 1,776,000
Inventories 2,528,000 2,547,000
Prepaid expenses and other 715,000 526,000
------------ ------------
Total current assets 6,320,000 6,338,000
------------ ------------
Properties, at cost:
Machinery and equipment 520,000 506,000
Leasehold improvements 9,000 9,000
------------ ------------
529,000 515,000
Less accumulated depreciation 367,000 349,000
------------ ------------
162,000 166,000
Excess of cost over net assets of
businesses acquired - net 7,067,000 7,120,000
Other Assets 615,000 652,000
------------ ------------
Total assets $14,164,000 $14,276,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
Current liabilities:
<S> <C> <C>
Accounts payable $ 2,919,000 $ 2,972,000
Notes Payable-current portion 582,000 549,000
Accrued liabilities 592,000 644,000
------------ ------------
Total current liabilities 4,093,000 4,165,000
Notes Payable 3,231,000 3,402,000
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Total Liabilities 7,324,000 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 ( 9,978,000) (10,109,000)
------------ ------------
6,840,000 6,709,000
------------ ------------
Total liabilities and shareholders' equity $14,164,000 $14,276,000
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
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VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net sales $ 6,010,000 $ 5,642,000
Cost of sales 4,380,000 4,043,000
------------ ------------
Gross profit 1,630,000 1,599,000
Selling, general and
administrative expense 1,436,000 1,197,000
------------ ------------
Operating income 194,000 402,000
Interest & other income (expense) (61,000) (60,000)
------------ ------------
Net Income before income taxes 133,000 342,000
Income tax provision 2,000 7,000
------------ ------------
Net Income $ 131,000 $ 335,000
Earnings per common share
Net income $ .02 $ .06
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
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VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
1995 1994
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 131,000 $ 335,000
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 71,000 71,000
Provision for doubtful accounts 9,000 9,000
Change in assets and liabilities,
net of effect of business acquisitions:
(Increase) decrease in accounts receivable (481,000) ( 91,000)
(Increase) decrease in inventories 19,000 (806,000)
(Increase) decrease in prepaid
expenses and other (190,000) 292,000
Increase (decrease) in accounts payable ( 53,000) 529,000
Increase (decrease) in other accrued
liabilities ( 11,000) (127,000)
------------- -------------
Total adjustments (636,000) (123,000)
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Net cash provided (used) by
operating activities 505,000 212,000
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Cash flows from investing activities:
Expenditures for equipment ( 14,000) ( 5,000)
(Increase) in other assets ( 3,000) 8,000
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Net cash (used) in investing activities ( 17,000) 3,000
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Cash flows from financing activities
Issuance of Common Stock - 92,000
Dividends paid - (94,000)
Net borrowings (payments) of
long-term obligations (138,000) (106,000)
Net cash provided (used) by
financing activities (138,000) (108,000)
------------- -------------
Increase (decrease) in cash (660,000) 107,000
Cash and cash equivalents, beginning
of period 1,489,000 761,000
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Cash and cash equivalents, end of period $ 829,000 $ 868,000
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
VESTRO NATURAL FOODS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 1995, and the consolidated
statements of operations and cash flows for the three months ended March 31,
1995 and March 31, 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
March 31, 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 March 31, 1995 and March 31, 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 $5,000,000 and $500,000, respectively, expiring through
2009. During the first quarter of 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 - 6,029,889 in 1995 and 5,886,352 in 1994. Assumed exercise
of outstanding warrants and options have been considered in the computation of
per share data to the extent they caused dilution.
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
6
<PAGE>
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
Net sales for the quarter ended March 31, 1995 were $6,010,000 compared to
$5,642,000 in the prior year's period, or an increase of 6%. The increased
sales were largely attributable to the Company's introduction of its new
Chocolate Chip Classics and Cookie Jar Classics during this period.
Gross profit of the Company was $1,630,000 or 27.1% of sales for the quarter
ended March 31, 1995 compared to $1,599,000 or 28.3% of sales in 1994. The
gross margin decrease of 1.2% was due to higher allowances to customer,
primarily on product introductions during the period and increased costs of
purchases from certain suppliers.
Selling, general and administrative expenses were $1,436,000 or 23.9% of sales
for the quarter ended March 31, 1995 compared to $1,197,000 or 21.2% 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 $61,000 in the current quarter
compared to net interest and other expense of $60,000 in the prior year. The
Company recorded $2,000 of income tax expense, representing the alternative
minimum tax, in the quarter ended March 31, 1995. As a result of the above, the
Company recorded net income of $335,000 or $.02 per share for the first quarter
ended March 31, 1995, while in the quarter ended March 31, 1994, the Company
recorded net income of $335,000, or $.06 per share.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, the Company had $829,000 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 March 31,
1995, the Company had $2,000,000 of borrowing capacity.
The Company has outstanding $3,813,000 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.
7
<PAGE>
Upon the resignation of Mr. Dalfen as Chief Executive Officer, the Company
reacquired 263,900 shares of its Common Stock, purchased by Mr. Dalfen in 1993.
The face amount of the related note due was reduced by $340,000 for the shares
reacquired.
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.
8
<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: May 12, 1995 By:/s/ B. Allen Lay
------------------------- ----------------------------
B. Allen Lay
President and Chief Executive
Officer
Date: May 12, 1995 By:/s/ Stephen Schorr
------------------------- -------------------------
Stephen I. Schorr
Vice President, Finance
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 829,000
<SECURITIES> 0
<RECEIVABLES> 2,248,000
<ALLOWANCES> 0
<INVENTORY> 2,528,000
<CURRENT-ASSETS> 715,000
<PP&E> 529,000
<DEPRECIATION> 367,000
<TOTAL-ASSETS> 14,164,000
<CURRENT-LIABILITIES> 4,093,000
<BONDS> 3,231,000
<COMMON> 60,000
0
0
<OTHER-SE> 6,780,000
<TOTAL-LIABILITY-AND-EQUITY> 14,164,000
<SALES> 6,010,000
<TOTAL-REVENUES> 6,010,000
<CGS> 4,380,000
<TOTAL-COSTS> 1,436,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,000
<INCOME-PRETAX> 133,000
<INCOME-TAX> 2,000
<INCOME-CONTINUING> 131,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
