<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-13260
SILVERADO FOODS, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1369218
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6846 South Canton, Suite 110, Tulsa, Oklahoma 74136
(Address of principal executive offices)
(918) 496-2400
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
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 field such reports), and (2) has been subject to such filing
requirements of the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 30, 1996
----- -----------------------------
Common Stock, $.01 Par Value 6,141,663
<PAGE>
PART I
FINANCIAL
INFORMATION
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
(Unaudited)
CURRENT ASSETS:
Cash $ 75,939 $ 128,401
Accounts receivable, net 2,827,789 3,173,138
Inventories, net 5,169,596 5,005,431
Prepaid expenses and other 466,186 750,077
Deferred tax assets 16,663 16,663
------------- -------------
Total current assets 8,556,173 9,073,710
------------- -------------
PROPERTY, PLANT AND EQUIPMENT, net 2,627,924 2,716,635
GOODWILL AND OTHER INTANGIBLES, net 12,544,979 10,846,661
------------- -------------
Total assets $23,729,076 $22,637,006
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Current maturities of long-term debt $ 3,388,465 $ 1,449,716
Trade accounts payable 5,687,064 5,916,024
Accrued liabilities 1,180,817 1,534,760
Other liabilities 81,349 113,538
-------------- -------------
Total current liabilities 10,337,695 9,014,038
-------------- -------------
LONG-TERM DEBT, less current maturities 8,790,502 8,293,992
-------------- -------------
DEFERRED TAX LIABILITIES 16,663 16,663
-------------- -------------
OTHER 59,325 94,025
-------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 20,000,000 shares authorized 62,187 59,831
Treasury stock (64,652) (64,652)
Warrants 61,563 77,408
Additional paid-in-capital 16,089,184 15,459,850
Accumulated deficit (11,723,391) (10,314,149)
-------------- -------------
Total shareholders' equity 4,424,891 5,218,288
-------------- -------------
Total liabilities and shareholders' equity $23,729,076 $22,637,006
============== =============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1996 1995
---- ----
<S> <C> <C>
NET SALES $ 10,114,001 $ 10,058,628
COST OF SALES 6,621,249 6,588,645
--------------- ---------------
Gross profit 3,492,752 3,469,983
--------------- ---------------
OPERATING EXPENSES:
General and administrative 1,865,952 1,501,485
Selling and marketing 2,181,642 2,186,548
Depreciation 84,136 48,705
Amortization of goodwill and other intangibles 304,826 187,474
--------------- ---------------
4,436,556 3,924,212
--------------- ---------------
OPERATING LOSS (943,804) (454,229)
OTHER INCOME (EXPENSE):
Interest (306,476) (131,655)
Other, net (27,712) 7,418
--------------- ---------------
(334,188) (124,237)
--------------- ---------------
LOSS BEFORE INCOME TAXES (1,277,992) (578,466)
PROVISION FOR INCOME TAXES - -
--------------- ---------------
NET LOSS (1,277,992) (578,466)
Accretion of common stock subject to price
guarantee (131,250) -
--------------- ---------------
LOSS APPLICABLE TO COMMON SHAREHOLDERS $ (1,409,242) $ (578,466)
=============== ===============
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE $ (0.23) $ (0.10)
=============== ===============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
-----------------------------------------------
Common Stock Treasury Stock
-------------- ---------------- Additional
Number Number Paid-in Accumulated
of Shares Amount of Shares Amount Warrants Capital Deficit
--------- ------ --------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 5,983,009 $ 59,831 (26,995) $(64,652) $ 77,408 $15,459,850 $(10,314,149)
Accretion of common stock
to price guarantee - - - - - - (131,250)
Exercise of warrants 35,651 356 - - (15,845) 31,334 -
Issuance of stock in connection
with acquisition 200,000 2,000 - - - 598,000 -
Net loss (unaudited) - - - - - - (1,277,992)
--------- -------- -------- --------- -------- ----------- -------------
Balance, March 31, 1996 6,218,660 $ 62,187 (26,995) $(64,652) $ 61,563 $16,089,184 $(11,723,391)
========= ======== ======== ========= ======== =========== =============
</TABLE>
<TABLE>
<CAPTION>
Total
-----
<S> <C>
Balance, December 31, 1995 $5,218,288
Accretion of common stock
to price guarantee (131,250)
Exercise of warrants 15,845
Issuance of stock in connection
with acquisition 600,000
Net loss (unaudited) (1,277,992)
------------
Balance, March 31, 1996 $4,424,891
============
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,277,992) $ (578,466)
--------------- ---------------
Adjustments to reconcile net loss to cash used in operating activities--
Depreciation and amortization 457,887 293,661
Change in assets and liabilities, net of effect of acquisitions
Decrease in accounts receivable 489,349 743,608
(Increase) decrease in inventory (71,019) 23,798
Decrease in prepaid expenses and other 283,891 (52,226)
Decrease in payables and accrued liabilities (693,092) (290,381)
Increase in intangibles and other (89,207) (175,949)
--------------- ---------------
Total adjustments 377,809 542,511
--------------- ---------------
Cash used in operating activities (900,183) (35,955)
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (59,220) (236,649)
Payments for acquisitions (1,344,152) (379,795)
--------------- ---------------
Cash used in investing activities (1,403,372) (616,444)
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of warrants 15,845 -
Borrowings from long-term debt 2,535,998 457,000
Payments on notes payable (300,750) (108,781)
--------------- ---------------
Cash provided by financing activities 2,251,093 348,219
--------------- ---------------
NET INCREASE (DECREASE) IN CASH (52,462) (304,180)
CASH, beginning of period 128,401 558,210
--------------- ---------------
CASH, end of period $ 75,939 $ 254,030
=============== ===============
Non-cash Financing Activities:
Issuance of stock for acquisition $ 600,000 $ -
SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for-
Interest $ 254,822 $ 133,581
Income taxes - -
</TABLE>
See notes to unaudited consolidated financial statements.
<PAGE>
SILVERADO FOODS, INC. AND SUBSIDIARIES
--------------------------------------
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. GENERAL:
The accompanying consolidated financial statements have been prepared by
Silverado Foods, Inc. (the "Company") without audit and should be read in
conjunction with the Company's consolidated financial statements and the notes
thereto included in the Company's annual report and Form 10-K as of December 31,
1995. The foregoing financial statements include only normal recurring accruals
and all adjustments which the Company considers necessary for a fair
presentation.
2. DETAILS TO CONSOLIDATED BALANCE SHEETS:
Inventories consist primarily of finished goods and packaging supplies which are
stated at the lower of cost (first-in, first-out basis) or market as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Raw Materials $2,050,997 $2,010,577
Finished Goods 3,158,231 3,023,927
---------- ----------
5,209,228 5,034,504
Less: Allowance for excess and
obsolete inventory (39,632) (29,073)
---------- ----------
$5,169,596 $5,005,431
========== ==========
</TABLE>
3. LOSS PER SHARE:
For the three months ended March 31, 1996 and March 31, 1995, the loss per share
calculation includes the weighted average number of shares outstanding for the
period which were 6,105,061 and 5,725,685, respectively.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
----------------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and notes thereto. The
following table presents, as a percentage of net sales, certain selected
financial data for the Company for the periods indicated:
<TABLE>
<CAPTION>
Three Months
Ended
March 31,
--------------------
1996 1995
------------- -----
<S> <C> <C>
Net Sales 100% 100%
Gross Profit 35 35
General and Administrative 18 15
Selling and Marketing 22 22
Depreciation and Amortization of Intangibles 4 2
Operating Loss 9 5
Interest and Other 3 1
</TABLE>
Period to Period Comparisons for the Three Months Ended March 31, 1996 Compared
to the Three Months Ended March 31, 1995
Net Sales. Net sales increased 1% from $10,058,000 to $10,114,000. The
snack tray segment's net sales were $5,844,000 and accounted for 58% of total
company sales for the quarter ending March 31, 1996 compared to 41% or
$4,080,000 for the same period of 1995, an increase of 43%. A portion of this
increase was due to ten acquisitions in the snack tray segment occurring
subsequent to March 31, 1995 which accounted for revenues of $1,298,000. The
remaining sales increase was from the existing snack tray operations. Sales in
the specialty baked goods segment declined from $5,978,000 to $4,274,000, a
decrease of 29%. This decrease was primarily due to lower sales from the New
York Bagel Factory ($906,000) and lower sales from the Company's snack division
($631,000).
Gross Profit. Gross profit for the three months ended March 31, 1996 was
$3,493,000, a slight increase over the comparable period of 1995 of $3,470,000.
Gross profit as a percentage of net sales remained constant at 35% for both
periods. Gross profit in the snack tray segment was $2,373,000, an increase of
$590,000 but decreased as a percentage of net sales from 44% to 41% over the
comparable periods. The lower gross margin was a result of higher sales taxes
and higher product cost when compared to the
<PAGE>
same period of 1995. In the specialty baked goods segment, gross profit
decreased from $1,687,000 to $1,151,000, a decrease of 32%. As a percentage of
net sales, gross profit decreased from 28% to 27%.
General and Administrative. General and administrative expenses increased
from $1,501,000 to $1,866,000, an increase of 24%, and increased as a percentage
of net sales from 15% to 18%. The snack tray segment's general and
administrative expenses increased by $382,000 due to the ten acquisitions
occurring subsequent to March 31, 1995, while the specialty baked goods segment
general and administrative expenses declined by $17,000.
Selling and Marketing. Selling and marketing expenses decreased slightly
from $2,187,000 to $2,182,000 over the comparable period of 1995 and remained
flat as a percentage of net sales at 22% as the Company continues to centralize
its sales and marketing activities.
Depreciation and Amortization of Intangibles. Depreciation and amortization
of goodwill and other intangibles increased from $236,000 to $389,000, an
increase of 65% or $153,000 over the same period of 1995. This increase was due
to depreciation and amortization for the acquisitions in the snack tray segment
that were not included in the results of operations for the first quarter of
1995.
Operating Loss. Operating losses increased from $454,000 to $944,000, an
increase of $490,000. The majority of this increase came from the snack tray
segment while the specialty baked goods segment was flat compared to the
previous period of 1995. The increase in operating losses was due to both higher
operating expenses during the three months ended March 31, 1996, in sales and
marketing and general and administrative expenses discussed above.
Interest and Other. Interest and other expense increased from $124,000 to
$334,000, or 169%. The increase was due to increased debt outstanding due to
acquisitions and funding of working capital requirements.
Net Loss. The Company's net loss increased from $578,000 to $1,278,000, an
increase of $700,000 over the comparable period for 1995.
<PAGE>
Liquidity and Capital Resources
Net cash used in operations was $900,000 for the three months ended March
31, 1996 compared to $36,000 for the three months ended March 31, 1995. Net cash
used in investing activities was $1,403,000 compared to $616,000 for the
comparable period as the Company acquired ten additional snack tray operations
and the acquisition of the assets of The Marveloaf Corporation. Net cash
generated from financing activities during the first three months ended March
31, 1996 totaled $2,251,000 from net borrowings on long term debt.
The Company's revolving credit facility is a $5 million revolving credit
agreement with a bank, of which $5 million was drawn as of March 31, 1996.
Borrowings are based upon 80% of eligible accounts receivable and 50% of
eligible inventories. The term of this revolver is for a period of three years
(due April 1998) with interest at prime payable monthly with principal due at
maturity.
In addition, the Company has a $5 million acquisition line of credit from the
same bank with each funding request subject to review and approval by the
lender. At March 31, 1996, the line was fully drawn at $5 million. The term of
the acquisition line is for a period of not greater than five years (due April
2000) with interest at prime. Payments on this line of credit began in April
1996.
The Company is subject to various covenants associated with its revolving line
of credit and acquisition line of credit, such as limitations on payments of
dividends and on the sale of a substantial portion of assets and on future
indebtedness. Borrowings under this facility are guaranteed as to repayment of
principal and interest by the Company's Chief Executive Officer and his spouse.
During the first quarter of 1996, the Company's borrowings on its revolving
credit facility exceeded the borrowing base of eligible accounts receivable and
inventories. The Company obtained a waiver from the bank effective through
January 1, 1997. In connection with this waiver, the Company is negotiating
with an investor to raise approximately $4 million of new debt financing that
would be used to reduce the working capital line of credit down to an amount
that would be in compliance with the eligible borrowing base, reduce a portion
of accounts payable that are past due, and finance certain capital expenditure
planned for 1996. The Company estimates that this financing transaction will be
closed by May 31, 1996. In the event that this financing transaction does not
close by May 31, 1996, the Company's CEO has agreed to (1) fund any capital
requirement over and above the anticipated $4 million debt financing and (2)
fund any cashflows necessary to meet 1996 estimated expenditures.
The Company also plans to pursue other financing alternatives that will allow it
to continue its acquisition strategy throughout 1996. However, there is no
assurance that such financing will be available on terms satisfactory to the
Company.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 75,939
<SECURITIES> 0
<RECEIVABLES> 2,827,789
<ALLOWANCES> 0
<INVENTORY> 5,169,596
<CURRENT-ASSETS> 8,556,173
<PP&E> 2,627,924
<DEPRECIATION> 0
<TOTAL-ASSETS> 23,729,076
<CURRENT-LIABILITIES> 10,337,695
<BONDS> 0
0
0
<COMMON> 62,187
<OTHER-SE> 4,362,704
<TOTAL-LIABILITY-AND-EQUITY> 23,729,076
<SALES> 10,114,001
<TOTAL-REVENUES> 10,114,001
<CGS> 6,621,249
<TOTAL-COSTS> 11,057,805
<OTHER-EXPENSES> 27,712
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 306,476
<INCOME-PRETAX> (1,277,992)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,277,992)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (131,250)
<NET-INCOME> (1,409,242)
<EPS-PRIMARY> (.23)
<EPS-DILUTED> (.23)
</TABLE>
