<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ODWALLA LOGO]
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended November 27, 1999
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)
<TABLE>
<S> <C>
California 77-0096788
- --------------------------------------------------------- ------------------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
</TABLE>
120 Stone Pine Road, Half Moon Bay, CA 94019
(Address and zip code of principal executive offices)
(650) 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 5,125,761 shares
-------------------------- --------------------------------
(Class) (Outstanding at January 6, 2000)
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ODWALLA, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED NOVEMBER 27, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of August 28, 1999
and November 27, 1999............................................... 3
Consolidated Statements of Operations for the thirteen weeks
ended November 28, 1998 and November 27, 1999....................... 4
Consolidated Statements of Cash Flows for the thirteen weeks
ended November 28, 1998 and November 27, 1999....................... 5
Notes to Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk.......... 18
Part II. Other Information
Item 1. Legal Proceedings................................................... 19
Item 6. Exhibits and Reports on Form 8-K.................................... 20
</TABLE>
2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ODWALLA, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
AUGUST 28, NOVEMBER 27,
1999 1999
---------- ------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 2,581 $ 281
Short-term investments 4,788 4,337
Trade accounts receivable, less allowance for doubtful
accounts of $631 and $700 6,072 5,955
Inventories 3,718 3,868
Prepaid expenses and other current assets 1,530 1,688
Deferred tax asset, current 1,358 1,430
-------- --------
Total current assets 20,047 17,559
-------- --------
Plant, property and equipment, net 12,877 13,948
-------- --------
Other assets
Goodwill, net 1,117 1,090
Covenants not to compete, net 497 470
Deferred tax asset, non-current 520 579
Other noncurrent assets 247 127
-------- --------
Total other assets 2,381 2,266
-------- --------
$ 35,305 $ 33,773
======== ========
Current liabilities
Accounts payable $ 6,876 $ 7,181
Accrued payroll and related items 1,142 1,468
Line of credit 2,319 1,500
Other accruals 2,126 1,600
Current maturities of capital lease obligations 28 22
Current maturities of long-term debt 172 180
-------- --------
Total current liabilities 12,663 11,951
Capital lease obligations, less current maturities 15 11
Long-term debt, less current maturities 673 581
-------- --------
Total liabilities 13,351 12,543
-------- --------
Mandatorily redeemable and convertible preferred stock
Series A, no par value, shares authorized, 5,000,000; shares issued and
outstanding, 1,033,333 in both periods. Liquidation preference minimum,
$8,600,000 at August 28, 1999 and November 27, 1999 7,505 7,718
Shareholders' equity
Common stock, no par value, shares authorized, 15,000,000; shares
issued and outstanding, 5,125,000 and 5,126,000 29,750 29,751
Additional paid-in capital 62 62
Accumulated deficit (15,363) (16,301)
-------- --------
Total shareholders' equity 14,449 13,512
-------- --------
$ 35,305 $ 33,773
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
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ODWALLA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
NOVEMBER 28, NOVEMBER 27,
1998 1999
------------ ------------
<S> <C> <C>
Net sales $ 15,332 $ 16,769
Cost of sales 7,636 8,956
-------- --------
Gross profit 7,696 7,813
-------- --------
Operating expenses
Sales and distribution 5,613 6,227
Marketing 796 543
General and administrative 1,777 1,884
-------- --------
Total operating expenses 8,186 8,654
-------- --------
Loss from operations (490) (841)
Other income (expense)
Interest expense, net (69) (12)
Other (4) -
-------- --------
Loss before income taxes (563) (853)
Income tax benefit 84 128
-------- --------
Net loss (479) (725)
Preferred stock dividend - (213)
-------- --------
Net loss applicable to common shareholders $ (479) $ (938)
======== ========
Basic net loss applicable to common shareholders per share $ (0.09) $ (0.18)
======== ========
Shares used in per share amounts 5,062 5,125
======== ========
Diluted net loss applicable to common shareholders per share $ (.09) $ (.18)
======== ========
Shares used in per share amounts 5,062 5,125
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
4
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ODWALLA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------
NOVEMBER 28, NOVEMBER 27,
1998 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities
Net loss $ (479) $ (725)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 579 586
Deferred taxes (86) (131)
Gain (loss) from disposal of assets 83 -
Changes in assets and liabilities:
Trade accounts receivable 106 117
Inventories (145) (150)
Prepaid expenses and other current assets (104) (158)
Other noncurrent assets 13 133
Accounts payable 254 305
Accrued payroll and related items 351 326
Other accrued liabilities (420) (526)
------- -------
Net cash provided by (used in) operating activities 152 (223)
------- -------
Cash flows from investing activities
Capital expenditures (378) (1,616)
Proceeds from sale of short-term investments - 451
------- -------
Net cash used in investing activities (378) (1,165)
------- -------
Cash flows from financing activities
Principal payments under long-term debt (115) (84)
Net borrowings (payments) under line of credit (58) (819)
Payments of obligations under capital leases (54) (10)
Issuance of common stock - 1
------- -------
Net cash used in financing activities (227) (912)
------- -------
Net decrease in cash and cash equivalents (453) (2,300)
Cash and cash equivalents, beginning of period 3,191 2,581
------- -------
Cash and cash equivalents, end of period $ 2,738 $ 281
======= =======
</TABLE>
See accompanying notes to consolidated financial statements
5
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ODWALLA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES AND BASIS OF PRESENTATION
Basis of Presentation. The accompanying consolidated balance sheet of
Odwalla, Inc. and its subsidiary ("Odwalla" or "Company") at November 27, 1999
and the related consolidated statements of operations and of cash flows for the
thirteen week periods ended for each of November 28, 1998 and November 27, 1999
have not been audited by independent accountants. However, in management's
opinion, they include all adjustments (which include only normal recurring
adjustments) necessary for a fair presentation of the financial position and the
results of operations for the periods presented. The statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosure normally
included in financial statements prepared in conformity with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. The operating results for the interim periods are not necessarily
indicative of results to be expected for an entire year. The aforementioned
statements should be read in conjunction with the consolidated financial
statements for the year ended August 28, 1999 appearing in Odwalla's 1999 Annual
Report on Form 10-K.
2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
We consider all investments with an initial maturity of three months or
less at the date of purchase to be cash equivalents. Both cash equivalents and
short term investments are considered available-for-sale securities and are
reported at amortized cost, which approximates fair value. The following
schedule summarizes the estimated fair value of our cash, cash equivalents and
short-term investments (in thousands):
<TABLE>
<CAPTION>
August 28, November 27,
1999 1999
---------- ------------
<S> <C> <C>
Cash and cash equivalents:
Cash $ 249 $ 65
Cash equivalents 2,332 216
------ ------
$2,581 $ 281
====== ======
Short-term investments
U.S. Government and Agency securities $ 794 $1,020
Corporate obligations 3,994 3,317
------ ------
$4,788 $4,337
====== ======
</TABLE>
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
August 28, November 27,
1999 1999
------ ------
<S> <C> <C>
Raw materials $2,433 $2,140
Packaging supplies and other 629 921
Finished product 656 807
------ ------
$3,718 $3,868
====== ======
</TABLE>
6
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ODWALLA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
August 28, November 27,
1999 1999
-------- --------
<S> <C> <C>
Land $ 618 $ 618
Buildings and building improvements 7,220 7,220
Leasehold improvements 1,397 1,401
Machinery and equipment 7,485 7,977
Vehicles 625 797
Data processing equipment 2,294 2,406
Other 1,986 2,822
-------- --------
21,625 23,241
Less accumulated depreciation and amortization (8,748) (9,293)
-------- --------
Plant, property and equipment, net $ 12,877 $ 13,948
======== ========
</TABLE>
5. EARNINGS PER COMMON SHARE AND PREFERRED STOCK DIVIDEND
Basic earnings per share is computed using the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Common equivalent shares
consist of the shares issuable upon the exercise of stock options and warrants
under the treasury stock method.
The following table shows the computation of basic and diluted earnings
per share, in thousands except per share data:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
NOV. 28, NOV. 27,
1998 1999
-------- --------
<S> <C> <C>
Basic:
Weighted average common shares outstanding 5,062 5,125
Net loss $ (479) $ (725)
Net loss attributable to common shareholders $ (479) $ (938)
Per share amount, attributable to common shareholders $ (0.09) $ (0.18)
Diluted:
Weighted average common shares outstanding 5,062 5,125
Shares used in per share amounts 5,062 5,125
Net loss $ (479) $ (725)
Net loss attributable to common shareholders $ (479) $ (938)
Per share amount, attributable to common shareholders $ (0.09) $ (0.18)
</TABLE>
We had no dilutive common equivalent shares during either period due to
the reported net loss.
Holders of Series A Preferred Stock ("Series A Stock") are entitled to
a receive an 8% annual dividend which is payable in either cash or additional
Series A Stock, at our election. The dividend is payable semi-annually. At
November 27, 1999, we increased our net loss by $213,000 as part of the next
semi-annual dividend. In December 1999, Odwalla's Board of Directors chose to
pay the semi-annual dividend to the Series A Stock holders by issuing 41,333
shares of Series A Stock payable on December 31, 1999. The amount of the
dividend represents the difference between net loss and net loss attributable to
common shareholders.
7
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ODWALLA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. RECLASSIFICATION
To conform with new classifications in our fiscal 2000 financial
statement presentation, we reclassified certain fiscal 1999 expenses. The
reclassification was an increase ($50,000 for the period ended November 28,
1998) in fiscal 1999 sales and distribution costs and a corresponding decrease
in general and administrative expenses.
7. LINE OF CREDIT
The terms of our Revolving Credit Agreement ("Credit Agreement")
contain certain covenants, including maintenance of certain financial, leverage,
and debt service coverage ratios, and certain tangible net worth. As of November
27, 1999, we were not in compliance with covenants requiring certain leverage
and debt service coverage ratios. We requested our lender to waive the specific
November 27, 1999 covenant violations and, in January 2000, the lender granted
the requested waiver.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking" statements about future
financial results, future business changes and other events that haven't yet
occurred. For example, statements like we "expect," we "anticipate" or we
"believe" are forward-looking statements. Investors should be aware that actual
results may differ materially from our expressed expectations. We will not
necessarily update the information in this Form 10-Q if any forward-looking
statement later turns out to be inaccurate. Details about risks that could
affect various aspects of our business are discussed throughout this Form 10-Q.
Investors should read all of these risks carefully. Investors should also refer
to Odwalla's Form 10-K for the year ended August 28, 1999, including our
financial statements and related notes included in that Form 10-K, and other
documents that we file from time to time with the Securities and Exchange
Commission in conjunction with the following discussion and analysis.
OVERVIEW
Odwalla's business is to provide easy access to great tasting
nourishment. We are the leading branded all-natural, super-premium refrigerated
juice company in the country, serving selected markets in the Western, Midwest,
Mid-Atlantic and Southeastern regions of the United States. Odwalla's complete
product line consists of more than 25 fresh-squeezed and nutritionally fortified
juices and smoothies (including single-flavor and blended fruit and vegetable
based juice products), all-natural meal replacement and dairy-free shakes,
natural spring water and all-natural food bars. We believe our beverage product
line appeals to many consumers because of its superior taste of fresh and
minimally processed beverages and greater nutritional value compared to juice
from concentrate or with artificial flavors.
We want to be the leading nourishment company in our existing and
future markets. We seek to achieve this objective by leading the industry in
beverage and other food knowledge, optimizing quality through sourcing and
production, controlling product access and distribution from production through
retail, artful presentation, growing through geographic and product line
expansion, leveraging our information systems, interacting with consumers and
living our vision.
Through the end of the first quarter of fiscal 2000, we offered both
fresh and flash-pasteurized single strength citrus products as discussed further
in Government Regulations on page 17. As of December 1999, all of our single
strength citrus beverages are flash-pasteurized. Although we have not
experienced any negative sales impact from this change to date, this change may
result in the loss of some trade partners and consumers who choose to purchase
fresh citrus products. However, we believe that heightened food safety concerns
expressed by trade partners and consumers, on-going government regulatory
processing and labeling changes (see Government Regulations, page 17), and our
ability to produce super-premium minimally processed products will offset
potential sales declines over a period of time.
Odwalla products are currently sold in Arizona, California, Colorado,
Georgia, Illinois, Louisiana, Maryland, Michigan, Minnesota, Nevada, New Jersey,
New Mexico, North Carolina, Oregon, Pennsylvania, Texas, Utah, Virginia,
Washington state, Washington, D.C. area, and Wisconsin.
Odwalla's sourcing procedures and production methods enable us to
create products with high nutritional and flavor quality. The distribution of
our products through both our own and other direct-store-delivery ("DSD")
systems allows us to control product quality and presentation, as well as to
develop relationships with trade partners. Odwalla sells and distributes our
products to over 3,800 retail locations, including supermarkets, specialty
retailers, natural food stores, warehouse outlets, convenience stores and food
service operators through our DSD system.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
Odwalla is committed to certain values -- nourishing consumers,
shareholders and other stakeholder groups; environmental awareness; and support
for the communities we serve. We believe that our products reflect these values.
RESULTS OF OPERATIONS
The following table presents, as a percentage of net sales, certain
statements of operations data for the thirteen week periods ended for each of
November 28, 1998 and November 27, 1999. These operating results are not
necessarily indicative of the results for any future period.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------
NOVEMBER 28, NOVEMBER 27,
1998 1999
------------ ------------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of sales 49.8 53.4
----- -----
Gross margin 50.2 46.6
Operating expenses
Sales and distribution 36.6 37.1
Marketing 5.2 3.3
General and administrative 11.6 11.2
----- -----
Loss from operations (3.2) (5.0)
Interest and other income (expense), net (0.5) (0.1)
Income tax benefit 0.6 0.8
----- -----
Net loss (3.1)% (4.3)%
===== =====
</TABLE>
THIRTEEN WEEKS ENDED NOVEMBER 27, 1999 AND NOVEMBER 28, 1998
NET SALES. Net beverage and bar sales for the first quarter of fiscal
2000 increased 10.7% to $16.7 million compared to $15.1 million in the first
quarter of fiscal 1999. By-product sales were approximately $30,000 in fiscal
2000 compared to $209,000 for the first quarter of fiscal 1999. The decrease in
by-product sales resulted from our sale of the small by-product operation in
late fiscal 1999. Total net sales for the first quarter of fiscal 2000 increased
9.4% to $16.8 million compared to $15.3 million for the same period last year.
Our sales growth rate this quarter was about the same for both our DSD and our
distributor business. Total sales in our newest markets, which include the
Midwest, Mid-Atlantic and Atlanta markets, were about 8% of total sales and
represent a significant percentage increase from the first quarter of fiscal
1999 as we had just begun selling in some of the newer markets at that time.
Because we sell product to distributors at a wholesale price lower than the
price to retail trade partners, our increased use of distributors will not
produce the same net sales growth that would occur if the same number of
products were sold to retail trade partners. Our food bar business was also an
important factor this quarter. Bar sales rose 27% from the same quarter of last
year, although food bar sales represented less than 5% of our net sales.
On September 1, 1999, we introduced new branded, custom-designed 450
milliliter and 325 milliliter bottles made from recyclable, HDPE plastic. Our
new bottle retains fresh fruit flavor notes better than our previous bottle and
better than the bottles commonly used by our competitors. It also has a
tamper-resistant, screw-on cap, which allows consumers to easily reseal their
beverage while drinking Odwalla on-the-go. The characteristics of the new bottle
also extends the shelf life of our products. At the same time, we began using a
new bottling line designed to accommodate our new bottles. During the quarter,
we experienced problems in producing beverage products to meet sales orders
during the initial introduction period. We also experienced unexpected issues
that caused some products to ferment and, ultimately, caused some bottles to
bloat. These issues disrupted a consistent flow of product during the first part
of the quarter. We believe that these issues negatively impacted sales in the
quarter.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
COST OF SALES. Cost of sales increased to $9.0 million in the first
quarter of fiscal 2000 compared to $7.6 million for the same period during
fiscal 1999. Gross margin as a percentage of net sales was 46.6% in the first
quarter of fiscal 2000, a decrease from 50.2% in the first quarter of fiscal
1999.
In late December of 1998, the San Joaquin Valley in central California
experienced a citrus freeze that seriously damaged the navel orange crop. Other
parts of California were also affected, but to a significantly lesser extent.
The freeze also impacted the California Valencia orange crop and other citrus.
The immediate affect of the freeze was to increase the price of the fresh citrus
we purchase. We also experienced poorer citrus yields and some delay in fruit
maturity. We were also more reliant on citrus sources farther from our
production facility than in prior years, which caused an increase in freight
cost. Gross margin decreased primarily due to (a) unfavorable pricing and yield
for ingredients, primarily citrus, and (b) increases in labor, due to poorer
yields, and co-packing costs.
As a result of the citrus freeze, we have become more dependent upon
alternative and more expensive sources of fresh supply than in prior years. We
continue to use our extensive network of grower contacts to continually try to
maintain our supply of fresh ingredients. The effect on orange and other
ingredient costs to Odwalla beyond the impact of the citrus freeze is not yet
fully determined, but we expect to continue to experience higher orange costs
until the new crop is available in the second quarter 2000. The cost and quality
of the new crop is not yet determined and could differ from current prices,
although we continue to experience higher than normal citrus costs in the second
quarter of fiscal 2000.
We also incurred additional costs due to the issues involved with our
new bottle introduction, as noted above. The issues increased labor and
operating costs during the quarter as we worked through the production
challenges.
SALES AND DISTRIBUTION. Sales and distribution expenses increased to
$6.2 million in the first quarter of fiscal 2000 compared to $5.6 million in the
first quarter of fiscal 1999, and increased as a percentage of net sales to
37.1% from 36.6% last year. The increase, in absolute dollars and as a
percentage of net sales, is due to increased national and regional labor costs
and the increased costs of utilizing a DSD system in some of our newer markets
that were previously serviced with third party distributors. Future decisions
regarding growth and expansion consistent with long-term strategic objectives
may increase sales and distribution costs as a percentage of net sales. We
continue to look for efficiencies in this part of our business. However,
expansion into markets serviced by our DSD system will require an investment for
some initial period.
Expenses will also be affected as we seek to find the proper mix
between third party distributors and our own DSD system in a given market. The
perishable nature of most of our products and our stringent service standards
can make it difficult to find appropriate distributors in some markets.
MARKETING. Marketing expenses decreased to $543,000 in the first
quarter of fiscal 2000 compared to $796,000 in the first quarter of fiscal 1999.
Most of the change from last year results from a change in marketing strategy
which resulted in fewer employees, decreased product tastings as we move to more
strategic tastings, both in retail locations and at community events, and less
advertising. However, we expect marketing expenses to increase in both dollars
and as a percentage of net sales later in fiscal 2000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased to $1.9 million in the first quarter of fiscal 2000 from $1.8 million
in the first quarter of fiscal 1999, and decreased as a percentage of net sales
to 11.2% from 11.6% last year. The change was primarily due to an increase in
employee recruitment fees and costs, and an increase in consulting fees. We
don't expect general and administrative costs for the remainder of fiscal 2000
to increase significantly in absolute dollars when compared to the prior year.
However, there can be no assurance that general and administrative costs will
not increase significantly in absolute dollars. We will continue to invest in
infrastructure, particularly in information systems and research and
development, to allow for sustainable growth.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
INTEREST AND OTHER EXPENSE. Odwalla had net interest and other expense
of $12,000 in the first quarter of fiscal 2000 compared to $73,000 in the first
quarter last year. The net interest expense resulted primarily from borrowings
under the line of credit and other existing debt for each quarter. Although
we've invested the net proceeds of the Series A Stock offering funded in
February 1999, we continue to incur interest expense primarily from borrowings
under our existing line of credit agreement and the imputed interest impact of
the fiscal 1998 settlement with the U.S. Government.
INCOME TAX BENEFIT. The $128,000 income tax benefit for the first
quarter of 2000 resulted from the tax benefit associated reported net losses. In
the first quarter of fiscal 1999, we recorded a $84,000 income tax benefit. The
15% effective tax rate in both 2000 and 1999 varies from the federal statutory
tax rate primarily due to the effect of establishing a deferred tax asset
valuation allowance. We recorded a valuation allowance for a portion of the net
deferred tax asset due to uncertainty as to the ultimate realization of such
assets. We will continue to assess the valuation allowance as additional
information regarding our future profitability is available.
LIQUIDITY AND CAPITAL RESOURCES
At November 28, 1999, we had working capital of $5.6 million compared
to working capital of $7.4 million at August 28, 1999. The decrease resulted
primarily from cash used for capital asset purchases and to reduce our line of
credit. At November 28, 1999, we had cash and cash equivalents and short-term
investments of $4.6 million, compared to $7.4 million at August 28, 1999.
Net cash used in operating activities in the first thirteen weeks of
fiscal 2000 was $223,000. This consisted of the net loss plus depreciation and
amortization and the increase in accounts payable and accrued payroll and
related items, offset by an increase in inventories and prepaid expenses and a
decrease in other accrued liabilities. Net cash used in investing activities in
the first thirteen weeks of fiscal 2000 was $1.2 million, consisting primarily
of capital expenditures for production equipment at the Dinuba plant, display
coolers and, to a lesser extent, computer equipment. The expenditures were
partially offset by the sale of short-term investments. Net cash used in
financing activities in the first thirteen weeks of fiscal 2000 was $912,000,
consisting primarily of the reduction on our outstanding line of credit.
We've used, and expect to continue to use, both operating and capital
lease financing to obtain coolers used in selling our products, computer and
communication equipment, and production assets, primarily equipment. We are
currently discussing additional lease lines with several companies, although we
haven't completed a transaction with a leasing company and there can be no
assurance that we will finalize the proposed transaction. If we don't obtain
adequate lease or other financing, our ability to obtain needed equipment may
negatively affect our operations.
In September 1999, we entered into a Revolving Credit Agreement
("Credit Agreement") with a new lender and paid the balance then outstanding
under our prior line of credit arrangement. The Credit Agreement provides a
revolving credit facility up to $5.0 million. The first $2.0 million of
borrowings do not require separate borrowing base reporting. Borrowings over
$2.0 million and up to $5.0 million are limited to 80% of eligible accounts
receivable. The Credit Agreement defines eligible accounts receivable which
generally represents all trade accounts receivable less delinquent balances.
Interest is payable monthly at either the prime interest rate plus 1% or the
Eurodollar rate plus 3.5%. The interest rate to be incurred is selected by
Odwalla at the inception of each loan and may be changed during the period in
which the borrowed amount is outstanding in accordance with provisions included
in the Credit Agreement. The initial term of the Credit Agreement is for three
years.
12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
All of our assets are pledged as collateral under the Credit Agreement.
We are also required to meet certain covenants, including maintenance of certain
financial, leverage, and debt service coverage ratios, and certain tangible net
worth. The Credit Agreement also contains certain business restrictions,
including the ability to borrow additional funds, limitations on capital
expenditures in excess of certain amounts, restrictions on the payment of cash
dividends, sale or purchase of Company stock, ability to encumber or sell
Company assets, and limitations on other business transactions without prior
approval from the lender. As of November 27, 1999, we were not in compliance
with covenants requiring certain leverage and debt service coverage ratios. We
requested our lender to waive the specific November 27, 1999 covenant violations
and, in January 2000, the lender granted the requested waiver.
Based upon information currently available, we believe that our
existing cash and cash equivalents and our current and anticipated borrowing
capability will be adequate to meet our obligations as they become due in the
next twelve months.
YEAR 2000
Many existing computer systems use only the last two digits to identify
a year. Consequently, as the year 2000 approaches, many systems do not yet
recognize the difference in a year that begins with "20" instead of "19." This,
as well as other date related processing issues, may cause systems to fail or
malfunction unless corrected.
We began taking steps to identify and address our internal Year 2000
issues in 1998. Our internal team, with executive sponsorship, consisted of both
internal and external personnel. We reviewed certain systems, including
information systems, handheld computer systems, production systems and
non-information systems including phones and we modified certain systems as we
believed necessary. We addressed the readiness of key third parties with which
we have relationships, including suppliers and distributors. Our Year 2000 team
completed its work and, through early January 2000, we have not experienced any
significant Year 2000 issues.
Year 2000 costs incurred to date have not been material. We don't
believe that additional costs will be material. We believe we dedicated adequate
resources toward attaining Year 2000 readiness, but there is no assurance that
we will be successful in our efforts to address all Year 2000 issues. As with
all companies, we also rely on other more widely used entities including
government agencies, public utilities and other external forces common to
business and industry. Consequently, if such entities were to experience Year
2000 failures, this could disrupt our ability to conduct ongoing operations.
We have not developed a contingency plan in the event we experience
potential failures and do not currently intend to develop such a plan.
The above discussion regarding costs, risks and estimated completion
dates for the Year 2000 is based on our best estimates given information that is
currently available, and is subject to change. As we continue to study this
issue, we may discover that actual results will differ materially from the
estimates noted above.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
OTHER FACTORS AFFECTING ODWALLA'S BUSINESS
PRODUCTS, DISTRIBUTION AND TRADE PARTNERS. Our current product line
consists of single-flavor and blended fruit- and vegetable-based juice products,
dairy-free shakes, wholesome food bars and natural spring water. As of December
1999, all of our juices are minimally processed (some produced on a seasonal
basis). Our policy is to have all products removed from trade partners' shelves
on or before their Odwalla-established expiration date. In addition, because of
our "day of production" quality standards, products reflect the seasonal changes
in fruit varieties in color and taste. Our production methods are designed to
minimize the effect of processing on the fruit juice extracted. Our entire
product line varies due to a significant component of seasonal ingredients,
seasonal product usage, and the addition and deletion of products.
Our products are sold and distributed primarily through our DSD system,
which is serviced by route sales people who deliver and merchandise products to
our trade partners. This DSD system is designed to allow us to optimally manage
delivery schedules, efficiently control product mix, keep store shelves or our
own coolers stocked with fresh products and have a greater influence on
determining in-store location and merchandising of our products. At most DSD
accounts, we are responsible to stock, order and merchandise our products at the
point of sale, and we issue credits to the trade partner for unsold product.
This full service relationship allows us to avoid paying slotting fees for shelf
space as well as other handling fees and to maintain control over our product
merchandising at the point of sale. We provide a lesser degree of service to
certain trade partners who are responsible for stocking, ordering and
merchandising Odwalla products. These trade partners don't receive credit for
unsold products. Consumers can purchase our products at supermarkets, specialty
retail stores, natural food stores, convenience stores, warehouse outlets and
institutional food service trade partners. We also distribute our products
through third party distributors. This distribution channel, with merchandising
support provided by the distributors' employees and/or our employees, provides
an opportunity to expand product distribution in selected markets and still
maintain relationships with trade partners. We sell directly to the third party
distributors and they generally don't receive credit for unsold product.
RAW MATERIALS. Producing and selling our minimally processed products
entails special requirements in ingredient sourcing, production, distribution
and sales in order to preserve and maximize the freshness and flavor quality of
the products. We source and select fruits and vegetables to meet a variety of
established criteria, including overall quality, flavor profile, variety,
ripeness and other factors. Processing of the fruit and vegetables is performed
in a manner to capture and preserve various qualities of fresh flavors and
consistency. Odwalla has focused on each of these elements in an effort to
achieve our goal of providing the safest, best tasting and most nutritious
beverage and other products for consumers.
Odwalla buys ingredients according to stringent specifications. Fruits
and vegetables, in particular, are purchased year-round or seasonally depending
on the type of produce. Because various types of fruit and vegetable crops are
harvested at different times of the year, we obtain and produce different juices
on a seasonal basis. Most of our fruits and vegetables are purchased in the open
market on a negotiated basis. Historically, oranges, apples, carrots and
tangerines are the largest volume commodities we purchase. We have developed an
extensive network of ingredient sourcing relationships over the years and rely
on this network and new sources for the ingredients we need. We also farm a
small orange ranch in a part of California to have access to local fresh fruit
in the early winter months. We also purchase organic oats as a significant
ingredient in our food bars. All of these key ingredients are subject to
volatility in supply, price and quality that could seriously harm our business
and results of operations. We are subject to the same issues with our other
ingredients as well. We also source a number of fruits, including tropical
fruits, from foreign suppliers in the form of frozen fruit puree.
As with most agricultural products, the supply and price of raw
materials we use can be affected by a number of factors beyond our control,
including frost, drought, flood, hurricane and other natural disasters. Weather
conditions, economic factors affecting growing decisions, various plant diseases
and pests will affect the condition and size of the crop. For example, the heavy
rains and flooding that occurred in California in the
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
first and second quarters of fiscal 1995 resulted in higher costs of fruit and
lower yields from the California orange crop in the last quarter of fiscal 1995
and the first quarter of fiscal 1996. We understand that the El Nino conditions
and other weather patterns in the winter of 1997-1998 caused temporary shortages
of certain tropical products. Additionally, significant events including the
devastation caused by hurricanes in Honduras, Nicaragua and neighboring
countries in 1998 negatively impacted the supply and pricing of certain
ingredients. In December 1998, a freeze damaged citrus crops in the San Joaquin
Valley and other portions of California. This had a significant negative impact
on the cost and yield of fresh citrus products we have used since the freeze.
See Management's Discussion and Analysis of Financial Conditions and Results of
Operations beginning on page 9 for more information. All of these adverse
weather conditions could negatively affect our business and results of
operations.
RISKS ASSOCIATED WITH PERISHABLE PRODUCTS. Except for natural spring
water and food bars, Odwalla's products are flash pasteurized and heat treated
and don't contain any preservatives. They have a limited shelf life because of
this. In order to maintain our "day-of-production" quality standards, we further
restrict the shelf life of products through early expiration dates. The
restricted shelf life means that we don't have any significant finished goods
inventory and our operating results are highly dependent on our ability to
accurately forecast near term sales in order to adjust fresh fruit and vegetable
sourcing and production. In addition, our products are subject to issues such as
the fermentation and subsequent bottle bloating experienced in the first quarter
of fiscal 2000 due to natural organisms in ingredients.
We've historically experienced difficulties in accurately forecasting
product demands and expect that challenge to continue. When we don't accurately
forecast product demand, we are either unable to meet higher than anticipated
demand or we produce excess inventory that cannot be profitably sold. In
addition, most of our trade partners have the right to return any products that
are not sold by their expiration date. Our inability to meet higher than
anticipated demand or excess production or significant amounts of product
returns on any of our products could harm our business and results of
operations.
COST SENSITIVITY. Our profitability is highly sensitive to increases in
raw materials, labor and other operating costs. Unfavorable trends or
developments concerning factors including inflation, raw material supply, labor
and employee benefit costs, including increases in hourly wage and minimum
unemployment tax rates, rent increases resulting from the rent escalation
provisions in our leases, and the availability of hourly employees may also
adversely affect our results. We've benefited in prior years from relatively
favorable inflation rates and part-time labor supplies in our principal market
areas. However, there is no assurance that these conditions will continue or
that we will have the ability to control costs in the future. In fiscal 1999,
for example, the cost for citrus products increased significantly due to the
citrus crop freeze in California as discussed above.
DEPENDENCE ON ONE OR A FEW MAJOR TRADE PARTNERS. Safeway, Inc.
("Safeway") is our largest single account and accounted for 13% of our fiscal
1999 sales. We spend considerable time to maintain a good relationship with
Safeway and other significant accounts, but we can't offer any assurance that
sales to significant accounts will not decrease or that these trade partners
will not choose to replace our products with those of competitors. The loss of
Safeway or other significant accounts or any significant decrease in the volume
of products purchased by their customers in the future would seriously harm our
business and results of operations. Continuity of trade partner relationships is
important, and events that impact our trade partners, including labor disputes,
may have an adverse impact on our results of operations.
COMPETITION. In a broad sense, our beverages compete with all beverages
available to consumers and our food bars compete with all food bars currently
available. The natural foods market is highly competitive. It includes national,
regional and local producers and distributors; many of them have greater
resources than we do, and many of them have shelf stable products that can be
distributed with significantly less cost. We believe our niche is easily
accessed nourishing beverages in the refrigerated super premium juice, emerging
dairy-free beverages, all-natural food bar and bottled water categories. We
believe our direct
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
competition in this market niche is currently from nationally, regionally and
locally focused juice producers, certain of which are owned by major beverage
producers, nationally branded meal replacement beverage producers, food and
energy bar companies and premium bottled waters. Our direct competitors in the
juice business are national brands including Just Squeezed, Tropicana, Minute
Maid and Nantucket Nectars. Our juice products compete with regional brands
including Naked Juice (owned by a large international company, Chiquita Brands
International, Inc. ("Chiquita")) in Southern California and Colorado, Fresh
Samantha's in the Northeast, Mid-Atlantic and Southeast sections of the United
States and Fantasia in the Chicago and other Midwest market areas. Juice and
smoothie bars including Jamba Juice are also competitors. In addition, a number
of major supermarkets and other retail outlets squeeze and market their own
brand of fresh juices that compete with the Company's products. A decision by
Chiquita or any other large company to focus on Odwalla's existing markets or
target markets could have a material adverse effect on our business and results
of operations. Our food bar products, which have been on the market since August
1998, compete with several more established companies, including PowerBar,
Balance Bar and Clif Bar. While we believe that we compete favorably with our
competitors on factors including quality, nutritional integrity, food safety,
merchandising, service, sales and distribution, multiple flavor categories,
brand name recognition and loyalty, our products are typically sold at prices
higher than most other competing beverage and bar products. Significant
competitive pressure from these or other companies could negatively impact our
sales and results of operations.
PRODUCT LIABILITY. Our beverage products are highly perishable and
contain certain naturally occurring microorganisms. In addition to the recall
(see "Part 2. Item 1. Legal Proceedings" on page 19) associated with the E. coli
O157:H7 bacteria in 1996, from time to time we receive complaints from consumers
regarding ill effects allegedly caused by our products. These past claims
haven't resulted in any material liability to date, but there can be no
assurance that we won't have future claims or that any claims associated with
the recall in 1996 will not result in adverse publicity or monetary damages,
either of which could seriously harm our business and results of operations. We
currently maintain $52,000,000 in product liability insurance, which may not be
sufficient to cover the cost of defense or related damages in the event of a
significant product liability claim.
ORCHARD PRODUCTION. Historically, we've depended upon the fruit
produced from the trees of large orchards. These trees may become damaged,
diseased or destroyed as a result of windstorms, pests or fungal disease.
Additionally, there are types of controllable fungal diseases that can affect
fruit production although not fatal to the trees themselves. These types of
fungal diseases are generally controllable with fungicides. However, we can't be
sure that such control measures will continue to be effective. Any decrease in
the supply of fresh fruit as a result of windstorms, pests or fungal disease
could have a material adverse effect on our business and results of operations.
GEOGRAPHIC CONCENTRATION. Our wholesale accounts and retail trade
partners have their largest concentration in Northern California, with most
located in the metropolitan areas surrounding the San Francisco Bay. Due to this
concentration, natural disasters, including earthquakes, economic downturns and
other conditions affecting Northern California may adversely affect our business
and results of operations.
CONCENTRATION OF PRODUCTION CAPACITY. Virtually all of our juice
production capacity is located at our Dinuba, California facility. Because we
maintain minimal finished goods inventory as part of our "day-of-production"
production system, we could be unable to continue to produce beverages in the
event that production at or transportation from Dinuba were interrupted by fire,
earthquakes, floods or other natural disasters, work stoppages, regulatory
actions or other causes. Such an interruption would seriously harm our business
and results of operations. Separate companies produce our dairy-free shakes,
natural spring water and food bars.
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
LACK OF DIVERSIFICATION. Odwalla's business is vertically integrated
and centered around essentially one product, all-natural super-premium
beverages, sold primarily through our DSD system. Although we've added
dairy-free shakes, meal replacement beverages, spring water and food bars, and
are using more third party distributors, the risks associated with focus on
essentially one product are exemplified by the material adverse effect on our
business and results of operations that resulted from the recall in October 1996
and from the impact of the California citrus freeze in December 1998. Any
significant decrease in the consumption of beverages generally or specifically
with respect to our products would have an adverse effect on our business and
results of operations.
RISKS RELATED TO EXPANSION. Continued growth depends in part upon our
ability to expand into new geographic areas, either through internal growth or
by acquisition. Following the 1996 recall, management plans for expansion, for
the most part, were postponed until fiscal 1998. Due to the extent of our
operating losses in recent years, we currently anticipate limited expansion in
fiscal 2000 beyond existing markets. There can be no assurance that we will
expand into new geographic areas or continue to invest in newer markets or if
such expansion or investment is undertaken that it will be successful or that
such expansion can be accomplished on a profitable basis. Demands on management
and working capital costs associated with the recall as well as the
perishability of our products and current reliance on the personnel-intensive
direct-store-delivery system may limit the ability, or increase the cost of,
expansion into new regions. Furthermore, consumer tastes vary by region and
there can be no assurance that consumers located in other regions will be
receptive to our products.
We've expanded into certain markets, including the Pacific Northwest
and Colorado several years ago, through acquisitions of local juice
manufacturers. Acquisitions involve a number of special risks, including the
diversion of management's resources, issues related to the assimilation of the
operations and personnel of the acquired businesses, potential adverse effects
on operating results and amortization of acquired intangible assets. In
addition, gross margins may be negatively impacted to the extent that gross
margins on acquired product lines are lower than Odwalla's average gross
margins. If we seek and find attractive acquisition candidates, we may not be
able to complete the transaction on acceptable terms, to successfully integrate
the acquisition into our operations, or to assure that the acquisition won't
have an adverse impact on our operations.
Any plans to invest in new markets or to consider acquisitions may
cause us to seek additional financing that may be dilutive to current investors
or result in a higher debt-to-equity ratio than would otherwise be the case. Any
financing we obtain may not be on terms favorable to us, even if it is
available.
GOVERNMENT REGULATIONS. The production and sales of beverages are
subject to the rules and regulations of various federal, state and local food
and health agencies, including the U.S. Food and Drug Administration ("FDA") and
California State Food and Drug. On September 8, 1998, the FDA regulations for
fresh apple juice went into effect. The regulations for fresh-squeezed citrus
juices were enacted in July 1999. The FDA's ruling for citrus was to require all
fresh juice processors to show a 5-log reduction in potential pathogens, 99.999%
barrier, supported by a Hazard Analysis Critical Control Point ("HACCP") plan.
All fresh juice processors which could not demonstrate a 5-log reduction were
expected to label their product with a warning label on the bottle to alert
consumers of the presence of unprocessed product. Because all products produced
in our Dinuba, California production facility are manufactured under a HACCP
plan with validated critical control points, we are already in compliance with
the FDA regulations for fresh apple juice and the proposed FDA regulations for
citrus juices, and will not need to use warning labels on unpasteurized juice
products.
However, due to an outbreak of Salmonellosis in another company's
orange juice in 1999, the FDA has reconsidered the effectiveness of the proposed
ruling. Regulators, industry representatives and scientists held a meeting
during the summer of 1999 to discuss what regulation should become final. FDA
officials emphasized their preference for a 5-log reduction in fresh juice from
the time it is extracted until
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, continued:
bottled. A validated HACCP plan currently does not have to include this
requirement. The most effective way presented to meet the newly discussed 5-log
reduction in commercial production is flash pasteurization. In November 1999,
this same processor of fresh-squeezed, non-pasteurized orange juice enacted a
recall due to Salmonellosis concerns. Based upon discussions with members of the
scientific community and informal discussions with FDA officials, we anticipate
that flash pasteurization will be required.
Odwalla has been performing flash pasteurization for nearly three
years. All fresh-squeezed citrus used in our products blended with other
ingredients (e.g., in our smoothie and nutritional product lines) has been flash
pasteurized. During fiscal 1999, we began flash pasteurizing fresh-squeezed
citrus products that are not further blended (e.g., grapefruit juice and our
quencher products). We began offering flash pasteurized orange juice during the
summer of 1999, partially at the request of trade partners, and the response has
been favorable from both trade partners and consumers. In December 1999, we
flash pasteurize all of our products. Odwalla is ready for the anticipated FDA
regulations and we don't anticipate significant additional costs to comply with
current FDA regulations.
VOLATILITY OF STOCK PRICE. Odwalla's common stock price has, at certain
times, experienced significant price volatility. Announcements of developments
related to our business, fluctuations in operating results, failure to meet
securities analysts' expectations, general conditions in the fruit and vegetable
industries and the worldwide economy, announcements of innovations, new products
or product enhancements by us or our competitors, fluctuations in the level of
cooperative development funding, acquisitions, changes in governmental
regulations, developments in patents or other intellectual property rights and
changes in our relationships with trade partners and suppliers could cause the
price of our common stock to fluctuate substantially. In addition, in recent
years the stock market in general, and the market for small capitalization
stocks in particular, has experienced extreme price fluctuations which have
often been unrelated to the operating performance of affected companies. Such
fluctuations could adversely affect the market price of our common stock.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK. It is our policy not to enter into derivative
financial instruments. We do not currently have any significant foreign currency
exposure since we do not transact business in foreign currencies. Due to this,
we did not have significant overall currency exposure at November 27, 1999.
FOREIGN CURRENCY RATE RISK. As almost all of our sales and expenses are
denominated in U.S. dollars, we have experienced only insignificant foreign
exchange gains and losses to date, and we do not expect to incur significant
gains and losses. We do not engage in foreign currency hedging activities.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The following personal injury claims and legal proceedings seek
monetary damages and other relief relating to the recall in 1996, as discussed
in Item 2 "Management's Discussion and Analysis of Financial Condition and
Results of Operations":
1. The McGregor Case: A personal injury lawsuit filed in Santa Clara
County Superior Court, San Jose, California on June 2, 1997 and served on June
16, 1997. There is no trial date set.
2. The Nixon Case: A personal injury lawsuit filed in Sacramento County
Municipal Court, Sacramento, California on August 15, 1997. There is no trial
date set.
3. The Scott Case: A personal injury action lawsuit filed in King
County Superior Court, Seattle, Washington, on October 14, 1999. The case is set
for trial on March 5, 2001.
The Company has two additional proceedings allegedly arising out of
product consumption prior to the recall in 1996:
1. The Lane Case: A personal injury lawsuit filed in King County
Superior Court, Seattle, Washington, and served on or about April 26, 1999. The
case was removed to the United States District Court in Seattle on May 25, 1999.
The case is set for trial on July 11, 2000.
2. The Shields Case: A personal injury lawsuit filed in King County
Superior Court, Seattle, Washington, and served on or about July 1, 1999. The
case is set for trial on January 16, 2001.
We maintained commercial general liability insurance totaling
$27,000,000 during the period for which the above claims are filed, including
the recall. We have notified our insurance carrier of these events. At this
time, we are unable to determine the potential liability from the remaining
legal proceedings and claims. The recall related legal proceedings settled to
date were covered under our commercial general liability insurance policy and
did not result in any additional costs to us.
On May 21, 1999, Odwalla filed a lawsuit in United States District
Court for the Eastern District of California in Fresno, California, against New
Hampshire Insurance Company to seek recovery on our business interruption
insurance claim filed as a result of the recall. The case does not have a trial
date set.
We are subject to other legal proceedings and claims that arise in the
course of our business. We currently believe that the ultimate amount of
liability, if any, for any pending actions (either alone or combined) will not
materially affect our financial position, results of operations or liquidity.
However, the ultimate outcome of any litigation is uncertain, and unfavorable
outcomes could have a material negative impact on our results of operations and
financial condition.
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
b. REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter
ended November 27, 1999.
20
<PAGE> 21
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: January 10, 2000 By: /s/ D. STEPHEN C. WILLIAMSON
-------------------------------
D. Stephen C. Williamson
Chief Executive Officer
(Principal Executive Officer)
Date: January 10, 2000 By: /s/ JAMES R. STEICHEN
------------------------
James R. Steichen
Chief Financial Officer
(Principal Financial and
Accounting Officer)
21
<PAGE> 22
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ODWALLA,
INC.'S FINANCIAL STATEMENTS FOR THE THIRTEEN WEEKS ENDED NOVEMBER 27, 1999 AS
FILED ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FILINGS
ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-02-2000
<PERIOD-START> AUG-29-1999
<PERIOD-END> NOV-27-1999
<CASH> 281
<SECURITIES> 4,337
<RECEIVABLES> 6,655
<ALLOWANCES> 700
<INVENTORY> 3,868
<CURRENT-ASSETS> 17,559
<PP&E> 23,241
<DEPRECIATION> 9,293
<TOTAL-ASSETS> 33,773
<CURRENT-LIABILITIES> 11,951
<BONDS> 592
7,718
0
<COMMON> 29,751
<OTHER-SE> (16,239)
<TOTAL-LIABILITY-AND-EQUITY> 33,773
<SALES> 16,769
<TOTAL-REVENUES> 16,769
<CGS> 8,956
<TOTAL-COSTS> 8,956
<OTHER-EXPENSES> 8,654
<LOSS-PROVISION> 95
<INTEREST-EXPENSE> 72
<INCOME-PRETAX> (853)
<INCOME-TAX> (128)
<INCOME-CONTINUING> (725)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (725)
<EPS-BASIC> (.18)
<EPS-DILUTED> (.18)
</TABLE>
