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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended May 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 0-23036
ODWALLA, INC.
(Exact name of registrant as specified in its charter)
California 77-0096788
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
120 Stone Pine Road, Half Moon Bay, CA 94019
(Address and zip code of principal executive offices)
(415) 726-1888
(Registrant's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check X 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 issuer's classes of
common stock, as of the latest practicable date:
Common Stock, no par value 4,941,436 shares
-------------------------- ----------------
(Class) (Outstanding at July 1, 1996)
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ODWALLA, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1996
INDEX
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PAGE
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Part I. Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheets as of August 31, 1995 and May 31, 1996............. 3
Consolidated Statements of Operations for the three-month and
nine-month periods ended May 31, 1995 and 1996................................. 5
Consolidated Statements of Cash Flows for the three-month and
nine-month periods ended May 31, 1995 and 1996................................. 6
Notes to Consolidated Financial Statements..................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................... 8
PART II. OTHER INFORMATION
Item 6. Exhibits....................................................................... 16
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
- --------------------------------------------------------------------------------
August 31, MAY 31,
1995 1996
- --------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT
Cash and cash equivalents $11,786 $ 7,706
Trading securities 6,710 6,710
Trade accounts receivable, less allowance for
doubtful accounts of $166 and $205 3,478 5,542
Inventories 1,586 2,175
Prepaid expenses and other 573 372
Deferred tax asset 31 105
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TOTAL CURRENT ASSETS 24,164 22,610
PLANT, PROPERTY AND EQUIPMENT, net (Note 2) 8,283 11,721
OTHER ASSETS
Officer and shareholder loans 84 84
Excess of cost over net assets acquired 1,549 1,468
Covenants not to compete 1,011 909
Other noncurrent 390 524
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TOTAL ASSETS $35,481 $37,316
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,360 $ 5,011
Accrued payroll and related items 998 1,811
Income taxes payable 410 277
Other accruals 112 129
Current maturities of long-term debt 124 123
Current maturities of capital lease obligations 242 282
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TOTAL CURRENT LIABILITIES 6,246 7,633
LONG-TERM DEBT, less current maturities 88 75
CAPITAL LEASE OBLIGATIONS, less current maturities 600 464
OTHER 48 29
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TOTAL LIABILITIES 6,982 8,201
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CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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August 31, MAY 31,
1995 1996
- --------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
SHAREHOLDERS' EQUITY
Common stock, no par value, shares authorized,
15,000,000; issued and outstanding, 4,890,860 and
4,935,481 shares, respectively 28,371 28,654
Retained earnings 128 461
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TOTAL SHAREHOLDERS' EQUITY 28,499 29,115
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $35,481 $37,316
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CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Three Months Ended Nine months Ended
May 31, May 31,
1995 1996 1995 1996
--------- --------- --------- --------
- -----------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 10,528 $ 16,532 $ 24,417 $ 42,505
COST OF SALES 5,400 8,017 12,323 22,048
-------- -------- -------- --------
GROSS MARGIN 5,128 8,515 12,094 20,457
-------- -------- -------- --------
OPERATING EXPENSES
Sales and distribution 3,267 5,436 7,640 14,569
Marketing 219 659 663 1,590
General and administrative 939 1,636 2,651 4,062
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 4,425 7,731 10,954 20,221
INCOME FROM OPERATIONS 703 784 1,140 236
OTHER INCOME (EXPENSE), net (2) (23) 45 (55)
INTEREST INCOME (EXPENSE), net (47) 81 (115) 356
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 654 842 1,070 537
INCOME TAX BENEFIT (EXPENSE) (230) (320) (385) (204)
-------- -------- -------- --------
NET INCOME $ 424 $ 522 $ 685 $ 333
======== ======== ======== ========
NET INCOME PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $ .10 $ .10 $ .16 $ .06
-------- -------- -------- --------
WEIGHTED AVERAGE COMMON EQUIVALENT AND
COMMON EQUIVALENT SHARES OUTSTANDING 4,404 5,442 4,153 5,408
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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Nine months ended
May 31,
1995 1996
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(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 685 $ 333
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation & amortization 842 1,040
Deferred income taxes (37) (74)
Changes in assets and liabilities:
Trade accounts receivable (1,380) (2,064)
Inventories (397) (589)
Prepaid expenses and other current assets (68) 201
Other noncurrent assets (91) (134)
Accounts payable 1,615 651
Accrued payroll and related items 105 813
Other accruals and other liabilities 241 (4)
Income taxes payable 369 (133)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 1,884 40
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES
Purchase of J.S. Grant's business assets, net (2,508) --
Capital expenditures (941) (4,295)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (3,449) (4,295)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of long-term debt -- 225
Principal payments under long-term debt (57) (239)
Payments of obligations under capital leases (162) (94)
Sale of common stock 17,520 283
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NET CASH PROVIDED BY FINANCING ACTIVITIES 17,301 175
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,736 (4,080)
CASH AND CASH EQUIVALENTS, beginning of period 2,137 11,786
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 17,873 $ 7,706
======== ========
CASH PAID DURING THE PERIOD FOR:
Interest $ 117 $ 76
Income taxes 29 $ 410
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NONCASH INVESTING AND FINANCING ACTIVITIES - During the nine months ended May
31, 1995, the Company assumed approximately $135,000 of capital lease
obligations in connection with the acquisition of J.S. Grant's, Inc.
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ODWALLA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF The accompanying consolidated balance sheet as of May 31,
PRESENTATION AND 1996 and the consolidated statements of operations and
PRINCIPLES OF cash flows for each of the three-month and nine-month
CONSOLIDATION periods ended May 31, 1995 and 1996 have not been audited.
However, in the opinion of management, they include all
adjustments necessary for a fair presentation of the
financial position and the results of operations for the
periods presented. For further information, refer to the
audited financial statements for the year ended August
31, 1995 for details of accounting policies and accounts.
In January 1996, the Company formed a wholly-owned
subsidiary, Odwalla Canada, Inc. (Odwalla Canada), under
the laws of British Columbia. The accompanying
consolidated financial statements include the accounts of
the Company and Odwalla Canada. All significant
transactions have been eliminated in consolidation.
2. PLANT, Plant, property and equipment consist of the following
PROPERTY AND (in thousands):
EQUIPMENT
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August 31, MAY 31,
1995 1996
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Land $ 100 $ 411
Buildings and building
improvements 2,943 5,322
Leasehold improvements 1,785 1,925
Machinery and equipment 4,675 5,808
Vehicles 1,134 1,199
Other 1,440 1,707
-------- --------
12,077 16,372
Less accumulated depreciation and
amortization (3,794) (4,651)
-------- --------
$ 8,283 $ 11,721
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements that are
subject to certain risks and uncertainties. The Company's actual results could
differ materially from those anticipated in these forward-looking statements as
a result of certain factors, including without limitation, those described in
this section, in the Company's Annual Report on Form 10-KSB for the year ended
August 31, 1995, and in other documents the Company files from time to time with
the Securities and Exchange Commission.
The Company's net sales are generated by sales to supermarkets,
specialty retail stores, natural food stores, warehouse outlets and
institutional food service customers, primarily restaurants. Net sales are net
of product returns and allowances. The Company sells products to most of its
customers on a guaranteed basis and takes back expiring or expired product for
credit. The growth in net sales has come predominantly from continued
penetration in existing markets, expansion into new markets, and sales of new
products. The Company believes that its sales have been positively affected by
customer acceptance of new products, higher recognition of the Company's brand
and products, better placement on store shelves, increased placement of the
Company's in-store coolers and increased support for route sales persons.
A significant portion of the Company's cost of sales is the cost of raw
materials. Although a portion of the cost of certain purees and other raw
materials is fixed on an annual basis, the majority of the Company's fresh fruit
and vegetable purchases are made on the open market. Consequently, the Company
is subject to wide fluctuations in prices for the fruits and vegetables it
purchases.
The Company distributes its products primarily through its
direct-store-delivery system using leased delivery trucks. This distribution
system, although more expensive than using independent distributors, allows the
Company to control the quality of service and product mix, in-store stocking of
the Company's coolers or shelf space, and freshness of products.
The Company has experienced significant quarterly fluctuations in
operating results and anticipates that these fluctuations will continue in
future periods. Most of these fluctuations have been the result of changes in
the prices of fruits and vegetables due to seasonality and other factors, new
product introductions, start-up costs associated with new facilities, expansion
into new markets, sales promotions and competition. Future operating results may
fluctuate as a result of these and other factors, including increased energy
costs, the introduction of new products by the Company's competitors, changes in
the Company's customer mix and overall trends in the economy. The Company's
business is also significantly affected by weather patterns, and unseasonably
cool or rainy weather can adversely impact the Company's sales. A significant
portion of the Company's expense levels is relatively fixed, and the timing of
increases in expense levels is based in large part on the Company's forecasts of
future sales. If sales are below expectations in any given period, the adverse
impact on results of operations may be magnified by the Company's inability to
adjust spending quickly enough to compensate for the sales shortfall. The
Company also may choose to reduce prices or increase spending in response to
competition, which may have an adverse effect on the Company's results of
operations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the accompanying
consolidated financial statements and notes thereto and the Company's financial
statements and notes thereto contained in the Company's Annual Report on Form
10-KSB for the year ended August 31, 1995.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales, certain
consolidated statements of operations data for the three-month and nine-month
periods ended May 31, 1995 and 1996. These operating results are not necessarily
indicative of the results for any future period.
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Three Months Ended May 31, Nine months Ended May 31,
1995 1996 1995 1996
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<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 51.3 48.5 50.5 51.9
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Gross margin 48.7 51.5 49.5 48.1
----- ----- ----- -----
Operating expenses
Sales and distribution 31.0 32.9 31.3 34.3
Marketing 2.1 4.0 2.7 3.7
General and administrative 8.9 9.9 10.9 9.5
----- ----- ----- -----
Income from operations 6.7 4.7 4.7 0.6
Interest income (expense), net (0.4) 0.4 (0.3) 0.7
Income tax benefit (expense) (2.2) (1.9) (1.6) (0.5)
----- ----- ----- -----
Net income 4.0% 3.2% 2.8% 0.8%
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
THREE MONTHS ENDED MAY 31, 1996 COMPARED TO THE THREE MONTHS ENDED MAY 31, 1995
NET SALES. Net sales for the third quarter of fiscal 1996 increased 57%
to $16.5 million compared to $10.5 million for the same period during fiscal
1995. Net sales growth for the third quarter of fiscal 1996 was attributable
primarily to (a) increased sales volume in existing markets, (b) increased sales
volume in new markets entered and (c) sales of new products.
COST OF SALES. Cost of sales increased 48% to $8.0 million in the third
quarter of fiscal 1996 compared to $5.4 million for the same period during
fiscal 1995. Gross margin as a percentage of net sales was 51.5% in the third
quarter of fiscal 1996, an increase from 48.7% during the third quarter of
fiscal 1995. Gross margin increased primarily due to (a) labor
costs reduction as a percentage of net sales due to higher sales volumes and (b)
decreases in packaging costs. Fruit and freight costs were consistent from
quarter to quarter as a percentage of net sales.
SALES AND DISTRIBUTION. Sales and distribution expenses increased 66%
to $5.4 million in the third quarter of fiscal 1996 compared to $3.3 million for
the same period during fiscal 1995, and increased as a percentage of net sales.
This increase is attributable to an increase in direct route costs and support
expenses. Direct route costs increased 84% compared to the same period in fiscal
1995 and support expenses increased 45% compared to the same period in fiscal
1995. These increases were primarily due to accelerated infrastructure
investment to support continuing growth and service levels in existing and new
markets. The Company does not expect sales and distribution expenses to change
significantly for the remainder of the year as a percentage of net sales as the
Company will continue investing in its existing markets in order to continue its
strong growth from these markets.
MARKETING. Marketing expenses increased 201% to $659,000 in the third
quarter of fiscal 1996 compared to $219,000 in the third quarter of fiscal 1995,
and increased as a percentage of net sales. Marketing expenses increased as the
Company expanded its efforts to enhance stakeholder awareness by hiring
additional personnel and incurred professional services related to new product
development and communications. The Company expects marketing expenses to
continue to increase in absolute dollars and to increase as a percentage of net
sales for the foreseeable future.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased 74% to $1.6 million in the third quarter of fiscal 1996 from $939,000
in the third quarter of fiscal 1995, and increased as a percentage of net sales.
General and administrative expenses increased in absolute dollars primarily as a
result of additions to the Company's management and administrative staff,
expanded communications systems and MIS support, and increased staff and
management training. The Company plans to increase its spending in the general
and administrative infrastructure for at least the remainder of fiscal 1996,
including the establishment of a new market expansion team. As a result, the
Company expects general and administrative expenses to continue to increase in
absolute dollars and as a percentage of net sales.
INTEREST. Odwalla had net interest income of $81,000 in the third
quarter of fiscal 1996 compared to net interest expense of $47,000 in the third
quarter of fiscal 1995. Gross interest income of $108,000 in the third quarter
of fiscal 1996 resulted primarily from the Company's investment of the proceeds
of its public offering in May 1995. Gross interest expense of $27,000 in the
third quarter of fiscal 1996 resulted from interest on capital leases and other
term debt. Interest expense of $47,000 in the third quarter of fiscal 1995
resulted primarily from interest on capital leases and other term debt. See
"Liquidity and Capital Resources."
INCOME TAXES. Income tax expense of $320,000 for the third quarter of
fiscal 1996 and $230,000 for the third quarter of fiscal 1995 was calculated by
applying the estimated corporate federal and state tax rates to the income for
the quarter. The 38% effective tax rate for the third quarter of both fiscal
1996 and fiscal 1995 varied from the federal statutory tax rate primarily due to
California and other state income taxes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
NINE MONTHS ENDED MAY 31, 1996 COMPARED TO THE NINE MONTHS ENDED MAY 31, 1995
NET SALES. Net sales for the first nine months of fiscal 1996 increased
74% to $42.5 million compared to $24.4 million for the same period during fiscal
1995. Net sales growth for the first nine months of fiscal 1996 was attributable
primarily to (a) increased sales volume in existing markets, (b) increased sales
volume in new markets through acquisitions and growth and (c) sales of new
products.
COST OF SALES. Cost of sales increased 79% to $22.0 million in the
first nine months of fiscal 1996 compared to $12.3 million for the same period
during fiscal 1995. Gross margin as a percentage of net sales was 48.1% in the
first nine months of fiscal 1996, a decrease from 49.5% during the first nine
months of fiscal 1995. The gross margin decreased primarily due to increases in
fruit costs, especially oranges and apples. The fruit cost increase was
partially offset by decreases in production-related expenses as a percentage of
net sales, primarily packaging and labor costs, due to production costs being
spread over higher sales volumes.
SALES AND DISTRIBUTION. Sales and distribution expenses increased 91%
to $14.6 million in the first nine months of fiscal 1996 compared to $7.6
million for the same period during fiscal 1995, and increased as a percentage of
net sales. This increase is attributable to an increase in direct route costs
and support expenses. Direct route costs increased 87% compared to the same
period in fiscal 1995 primarily due to increased sales. Support expenses also
increased 87% compared to the same period in fiscal 1995 due to increased sales
and higher expenses, as a percentage of net sales, in less established regions.
These increases, particularly in the third quarter of fiscal 1996, were
primarily due to accelerated infrastructure investment to support continuing
growth and service levels in existing and new markets. The Company does not
expect sales and distribution expenses to change significantly for the remainder
of the year as a percentage of net sales as the Company will continue investing
in existing markets in order to continue strong growth from these markets.
MARKETING. Marketing expenses increased 140% to $1.6 million in the
first nine months of fiscal 1996 compared to $663,000 in the first nine months
of fiscal 1995, and increased as a percentage of net sales. Marketing expenses
increased as the Company expanded its efforts to enhance stakeholder awareness
by hiring additional personnel and incurred professional services related to new
product development and communications. The Company expects marketing expenses
to continue to increase in absolute dollars and to increase as a percentage of
net sales for the foreseeable future.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased 53% to $4.1 million in the first nine months of fiscal 1996 from $2.6
million in the first nine months of fiscal 1995, but decreased as a percentage
of net sales. General and administrative expenses increased in absolute dollars
primarily as a result of additions to the Company's management and
administrative staff, and expanded communications systems and MIS support. The
decrease in general and administrative expenses as a percentage of net sales in
the first nine months of fiscal 1996 was due to the increase in the Company's
sales for this period. The Company plans to increase its spending in the general
and administrative infrastructure for at least the remainder of fiscal 1996,
including the establishment of a new market expansion team. As a result, the
Company expects general and administrative expenses to increase in absolute
dollars and as a percentage of net sales.
INTEREST. Odwalla had net interest income of $356,000 in the first nine
months of fiscal 1996 compared to net interest expense of $115,000 in the first
nine months of fiscal 1995. Gross interest income of $432,000 in the first nine
months of fiscal 1996 resulted primarily from the Company's investment of the
proceeds of its public offering in May 1995. Gross interest expense of $76,000
in the first nine months of fiscal 1996 resulted from interest on capital leases
and other term debt. Interest expense of $115,000 in the first nine months of
fiscal 1995 resulted primarily from interest on capital leases and other term
debt. See "Liquidity and Capital Resources."
INCOME TAXES. Income tax expense of $204,000 for the first nine months
of fiscal 1996 and $385,000 for the first nine months of fiscal 1995 was
calculated by applying the estimated corporate federal and state tax rates to
the income for the nine-month period. The effective tax rate of 38% for the
first nine months of fiscal 1996 and 36% for the first nine months of fiscal
1995 varied from the federal statutory tax rate primarily due to California and
other state income taxes.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations through three primary sources:
the private and public sales of equity securities, bank debt and capital lease
financing. At May 31, 1996, the Company had working capital of $15.0 million
compared to working capital of $17.9 million at August 31, 1995. At May 31,
1996, the Company had cash, cash equivalents and trading securities of $14.4
million compared to $18.5 million at August 31, 1995. These decreases resulted
primarily from capital expenditures for the Dinuba production facility and
leasehold improvements at the Company's new administrative offices, offset
partially by the Company's receipt of net proceeds of $283,000 from the exercise
of outstanding common stock options.
Net cash provided by operating activities for the nine months ended May
31, 1996 was $40,000, consisting primarily of net income, an increase in
accounts receivable related to increased sales volume, an increase in inventory
levels primarily due to an increase in raw materials, payment of fiscal 1995
income taxes, offset in part by an increase in accrued payroll and other
expense, due primarily to timing of payments, an increase in accounts payable
and by depreciation and amortization. Net cash used in investing activities for
the nine months ended May 31, 1996 was $4.3 million, consisting primarily of
cash used for the Dinuba production facility and leasehold improvements at the
Company's Half Moon Bay administrative offices. Net cash provided by financing
activities for the nine months ended May 31, 1996, was $175,000, consisting
primarily of payments on existing term debt agreements and capital leases offset
by long-term financing of the Dinuba land purchase and the net proceeds from the
exercise of outstanding common stock options.
In May 1995, the Company completed a public offering, selling one
million shares of Common Stock for $19.00 per share. The Company received net
proceeds of $17.5 million after payment of legal, accounting, printing and other
expenses associated with the offering. The Company granted the underwriters a
30-day option to purchase up to 150,000 additional shares of Common Stock to
cover over-allotments, and in June 1995, the underwriters purchased an
additional 65,000 shares pursuant to such options, resulting in an additional
$1.1 million of proceeds to the Company. Proceeds from the public offering,
after repaying $1.1 million borrowed in connection with the J. S. Grant's, Inc.
acquisition in January 1995, have been invested in The 231 Prime Funds,
government funds and tax-free municipal bonds. The invested funds are being used
for the Dinuba plant expansion and for other corporate needs.
At May 31, 1996, the Company had approximately $747,000 outstanding in
capital lease obligations, primarily related to the leasing of production
equipment, delivery vehicles and in-store coolers. The Company has used, and
expects to continue to use, capital lease financing as necessary to obtain
needed production assets, primarily equipment.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
In late fiscal 1995, the Company entered into a contract to expand its
present fresh juice production and cold storage capabilities in Dinuba. This
addition, which was placed in service in May 1996, is expected to meet the
Company's needs through fiscal 1997. The approximately $3.0 million contract was
paid from the proceeds of the May 1995 public offering, primarily during the
first three quarters of fiscal 1996. In October 1995, the Company purchased 20
acres of land adjacent to the Dinuba facility for $300,000. This purchase
required a down payment totaling $75,000 and annual principal payments of
$75,000 from January 1996 through January 1998, plus interest at 5%. In April
1996, the Company entered into an agreement to purchase an additional 10 acres
of land adjacent to the Dinuba facility. The purchase is expected to close in
September 1996 at a cost of $215,000. The Company intends to obtain long-term
financing for this purchase. There can be no assurance that such financing can
be obtained on terms favorable to the Company, if at all. In May 1996, the
Company entered into an agreement to purchase vacant land adjacent to its Half
Moon Bay administrative facility. This purchase is contingent upon obtaining
certain approvals from the City of Half Moon Bay. The $475,000 purchase price
will be financed primarily by assumption of existing debt obligations.
The Company entered into a Loan and Security Agreement (the
"Agreement") with a bank in January 1995. The Agreement provided the Company
with a $3.0 million line of credit, including the ability to issue letters of
credit up to $500,000 as part of the total committed balance, and was
collateralized by virtually all of the Company's assets. Interest was at the
bank's prime rate plus 0.5%. All amounts outstanding under the Agreement were
due March 10, 1996. The Company had no balance outstanding when the Agreement
expired on March 10, 1996. The Company is currently negotiating a new agreement.
The Company believes that its current working capital, anticipated
credit facility with a bank and capital lease financing will be sufficient to
fund its operations through May 1997.
RECENT DEVELOPMENTS
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has not determined the impact, if any, that this
Statement may have on the Company's financial reporting.
In June 1996 the Company filed a Form 8-K stating that it had dismissed
BDO Seidman LLP as the Company's independent accountants and retained Price
Waterhouse LLP as the Company's new independent accountants.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS
Exhibit 11.1 - Statement of Computation of Per Share Earnings
B. REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the
quarter ended May 31, 1996.
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SIGNATURE
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
ODWALLA, INC.
-------------
(Registrant)
Date: July 11, 1996 By: /s/ D. STEPHEN C. WILLIAMSON
--------------------------------------
D. Stephen C. Williamson
Chief Executive Officer and Chief
Financial Officer
(duly authorized Officer and Principal
Financial and Accounting Officer)
17
<PAGE> 18
EXHIBIT 11.1
ODWALLA, INC.
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Ended Nine months Ended
-------------------------- -------------------------
May 31, May 31,
1995 1996 1995 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average shares of
common stock outstanding
for the period 3,896,000 4,930,000 3,807,000 4,914,000
Weighted average common
share equivalents 508,000 512,000 346,000 494,000
--------- --------- --------- ---------
Shares used in computing
net earnings per share 4,404,000 5,442,000 4,153,000 5,408,000
========= ========= ========= =========
</TABLE>
18
