SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 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 0-23048
LINCOLN SNACKS COMPANY
(exact name of registrant as specified in its charter)
Delaware 47-0758569
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
4 High Ridge Park, Stamford, Connecticut 06905
(Address of principal executive offices) (zip code)
(Registrant's telephone number, including area code) (203) 329-4545
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of the issuer's Common Stock, $.01 par value, outstanding
on November 5, 1996 was 6,331,790 shares.
<PAGE>
LINCOLN SNACKS COMPANY
INDEX TO FORM 10-Q
PAGE
----
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Balance Sheets as of September 30, 1996
and June 30, 1996 3-4
Statements of Operations for the
three months ended September 30, 1996
and September 30, 1995 5
Statements of Changes in Stockholders'
Equity for the three months ended
September 30, 1996 and September 30, 1995 6
Statements of Cash Flows for the
three months ended September 30, 1996
and September 30, 1995 7
Notes to Financial Statements 8-9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10-12
Part II. OTHER INFORMATION
Item 1-4. OTHER INFORMATION 13
Item 5. OTHER INFORMATION 13
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 13
Signatures 14
- 2 -
<PAGE>
LINCOLN SNACKS COMPANY
BALANCE SHEETS
ASSETS
AS OF SEPTEMBER 30, 1996 AND JUNE 30, 1996
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
------------- ------------
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 58,679 $ 58,538
Accounts receivable (net of allowance
for doubtful accounts and cash discounts
of $202,556 and $173,524 respectively) 2,239,629 2,693,875
Inventories 2,986,788 2,083,528
Prepaid and other current assets 23,155 90,336
------------ ------------
Total current assets 5,308,251 4,926,277
PROPERTY, PLANT AND EQUIPMENT:
Land 610,000 610,000
Building and leasehold improvements 1,559,805 1,555,985
Machinery and equipment 5,164,149 5,147,886
Furniture and fixtures 62,291 62,291
Construction in process 4,240 8,161
------------ ------------
7,400,485 7,384,323
Less: accumulated depreciation
and amortization (2,137,440) (1,975,357)
------------ ------------
5,263,045 5,408,966
INTANGIBLE AND OTHER ASSETS,
net of accumulated amortization of
$835,329 and $780,337 3,588,496 3,643,487
------------ ------------
TOTAL ASSETS $ 14,159,792 $ 13,978,730
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
- 3 -
<PAGE>
LINCOLN SNACKS COMPANY
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
AS OF SEPTEMBER 30, 1996 AND JUNE 30, 1996
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Current portion of term loan $ 800,004 $ 800,004
Borrowings under revolving
line of credit 485,393 556,115
Accounts payable 1,739,186 1,830,054
Accrued trade promotions 916,593 860,180
Accrued expenses 1,057,207 1,116,664
------------ ------------
Total current liabilities 4,998,383 5,163,017
Term Loan Payable 109,321 309,322
------------ ------------
TOTAL LIABILITIES 5,107,704 5,472,339
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value,
20,000,000 shares authorized,
6,450,090 shares issued at
September 30, 1996 and June 30, 1996 64,501 64,501
Special stock, $0.01 par value, 300,000
shares authorized, none outstanding 0 0
Additional paid-in capital 18,010,637 18,010,637
Accumulated deficit (8,997,024) ( 9,542,721)
Less: cost of common stock in
treasury 118,300 shares (26,026) (26,026)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 9,052,088 8,506,391
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 14,159,792 $ 13,978,730
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these balance sheets.
- 4 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 6,868,040 $ 6,454,612
COST OF SALES 4,683,284 4,443,715
------------ ------------
Gross profit 2,184,756 2,010,897
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,562,719 1,686,251
------------ ------------
Income from operations 622,037 324,646
INTEREST EXPENSE 66,340 106,770
------------ ------------
Income before provision
for income taxes 555,697 217,876
PROVISION FOR INCOME TAXES 10,000 12,000
------------ ------------
Net income $ 545,697 $ 205,876
============ ============
NET INCOME PER SHARE $ 0.09 $ 0.03
============ ============
Weighted Average Number of
Shares Outstanding 6,331,790 6,340,890
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 5 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Common Special Paid In Accumulated Treasury
Stock Stock Capital Deficit Stock
------- ------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C>
June 30, 1995 $64,501 $0 $17,997,746 ($10,053,530) ($24,024)
Net income 205,876
------- ------- ----------- ------------ --------
September 30,
1995 $64,501 $0 $17,997,746 ($ 9,847,654) ($24,024)
======= ======= =========== ============ ========
June 30, 1996 $64,501 $0 $18,010,637 ($ 9,542,721) ($26,026)
Net income 545,697
------- ------- ----------- ------------ --------
September 30,
1996 $64,501 $0 $18,010,637 ($ 8,997,024) ($26,026)
======= ======= =========== ============ ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 6 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 545,697 $ 205,876
Adjustments to reconcile net income
to cash provided by (used in)
operating activities:
Depreciation and amortization 217,075 208,518
Allowance for doubtful accounts and
cash discounts, net 29,032 26,120
Changes in Assets and Liabilities:
(Increase) decrease in accounts
receivable 425,214 (2,080,693)
Decrease in inventories (903,260) (593,454)
Increase in prepaid and
other current assets 67,179 54,449
Increase (decrease) in accounts
payable and accrued expenses (93,911) 1,417,013
------------ ------------
Net cash provided by (used in)
operating activities 287,026 (762,171)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (16,162) (43,108)
------------ ------------
Net cash used in investing activities (16,162) (43,108)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under
revolver, net (70,722) 966,412
Repayments under term loan (200,001) (200,001)
------------ ------------
Net cash provided by (used in)
financing activities (270,723) 766,411
------------ ------------
Net increase (decrease) in cash 141 (38,868)
CASH, beginning of period 58,538 80,212
------------ ------------
CASH, end of period $ 58,679 $ 41,344
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 69,989 $ 104,015
============ ============
Income taxes paid $ 5,918 $ 8,280
============ ============
</TABLE>
- 7 -
<PAGE>
LINCOLN SNACKS COMPANY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
(1) The Company:
Lincoln Snacks Company ("Lincoln" or the "Company"), formerly Lincoln
Foods Inc., is a Delaware corporation and is a majority-owned subsidiary
of Noel Group, Inc. (the "Parent"). Lincoln is engaged in the
manufacture and marketing of caramelized pre-popped popcorn and glazed
popcorn/nut mixes. Sales of the Company's products are subject to
seasonal trends with a significant portion of sales occurring in the
last four months of the calendar year.
(2) Basis of Presentation:
The balance sheet as of September 30, 1996, and the related statements
of operations for the three months ended September 30, 1996 and
September 30, 1995, changes in stockholders' equity and cash flows for
the three months ended September 30, 1996 and September 30, 1995, have
been prepared by the Company without audit. In the opinion of
management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows at September 30, 1996 and
September 30, 1995 have been made. During the interim periods reported
on, the accounting policies followed are in conformity with generally
accepted accounting principles and are consistent with those applied for
annual periods and described in the Company's Annual Report on Form 10-K
for the twelve months ended June 30, 1996 filed with the Securities and
Exchange Commission on September 24, 1996 (the "Annual Report").
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial
statements included in the Annual Report. The results of operations for
the three months ending September 30, 1996 and September 30, 1995 are
not necessarily indicative of the operating results for the full year.
(3) Credit Facility:
The Company has a revolving credit and term loan facility, as amended,
which provides for up to $5.9 million in revolver borrowings and a $1.9
million term loan ($.5 million was outstanding under the revolver and
$.9 million was outstanding under the term loan, as of September 30,
1996). This facility is collateralized by substantially all of the
Company's assets.
- 8 -
<PAGE>
(4) Inventory:
Inventory consists of the following:
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
------------ ------------
<S> <C> <C>
Raw materials and supplies $ 1,692,937 $ 1,616,673
Finished Goods 1,293,851 466,855
------------ ------------
$ 2,986,788 $ 2,083,528
============ ============
</TABLE>
(5) Significant Customer:
On June 6, 1995, the Company entered into an exclusive distribution
agreement (the "Distribution Agreement") with Planters Company, a
division of Nabisco, Inc. ("Planters"), commencing on July 17, 1995, for
the sale and distribution of Fiddle Faddle and Screaming Yellow Zonkers
(the "Products"). The Distribution Agreement requires Planters to
purchase a minimum number of equivalent cases during each year of the
initial term.
The initial term of the Distribution Agreement expires on June 30, 1997
but is automatically renewable for additional one year periods unless
terminated by either party upon prior written notice. If Planters or
the Company does not renew the Distribution Agreement, the termination
thereof could have a material adverse effect on the Company's financial
condition and results of operations.
Net sales to Planters for the three months ended September 30, 1996 were
greater than the minimum number of equivalent cases required to be
purchased during the quarter as part of the Distribution Agreement.
Sales to Planters represented 50% and 27% of net sales for the quarter
ended September 30, 1996 and 1995, respectively.
- 9 -
<PAGE>
LINCOLN SNACKS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Unaudited)
Results of Operations:
Introduction
The Company's net sales are subject to significant seasonal variation,
consequently, results from operations will fluctuate due to these trends. The
Company's business is seasonal due to customers' buying patterns of Poppycock
and nut products during the traditional holiday season. As a result, third and
fourth calendar quarter sales account for a significant portion of the
Company's annual sales.
On June 6, 1995, the Company entered into an exclusive distribution
agreement ("the Distribution Agreement") with Planters Company, a division of
Nabisco, Inc. ("Planters"), commencing on July 17, 1995, for the sale and
distribution of Fiddle Faddle and Screaming Yellow Zonkers (the "Products").
The Distribution Agreement requires Planters to purchase a minimum number of
equivalent cases during each year of the initial term.
The initial term of the Distribution Agreement expires on June 30, 1997
but is automatically renewable for additional one year periods unless
terminated by either party upon prior written notice. If Planters or the
Company does not renew the Distribution Agreement, the termination thereof
could have a material adverse effect on the Company's financial condition and
results of operations.
Net sales to Planters for the three months ended September 30, 1996 were
greater than the minimum number of equivalent cases required to be purchased
during the quarter as part of the Distribution Agreement. Sales to Planters
represented 50% and 27% of net sales for the quarter ended September 30, 1996
and 1995, respectively.
Three months ended September 30, 1996 versus September 30, 1995
Net sales increased 6% or $.41 million to $6.87 million for the quarter
ended September 30, 1996 versus $6.45 million in the corresponding period of
1995. The increase in net sales is due to increased Planters sales and sales
of Lincoln's other branded product which were consistent with a year ago. That
increase was offset by declines in Nut Division and liquidation sales. Sales
to Planters represented 50% and 27% of net sales for the quarter ended
September 30, 1996 and 1995, respectively.
The increase in net sales resulted in an increase in gross profit of $.17
million to $2.18 million for the quarter ended September 30, 1996 versus $2.01
million in the corresponding period of 1995.
Selling, general and administrative expenses decreased 7% or $.12 million
to $1.56 million in the quarter ended September 30, 1996 versus $1.68 million
the same period in 1995. These expenses decreased during this period primarily
due to cost reductions resulting from the Distribution Agreement.
- 10 -
<PAGE>
The increase in gross profit and the decrease in selling, general and
administrative expenses and interest expense, resulted in an increase in the
net income of $.34 million to $.55 million for the quarter ended September 30,
1996 versus $.21 million in the corresponding period in 1995.
Liquidity and Capital Resources
As of September 30, 1996, the Company had working capital of $.31 million
compared to a working capital deficit of $.24 million at June 30, 1996 (the
Company's fiscal year end), an increase in working capital of $.55 million.
The increase in working capital is primarily attributable to the Company's net
profit of $.55 million for the three months ended September 30, 1996.
The Company currently meets its short-term liquidity needs from its
revolving credit facility which facility is secured by a first priority,
perfected security interest in substantially all of the Company's existing and
after-acquired assets. The Company presently believes that this facility is
adequate to meet its needs for the next twelve months.
Management continues to focus on increasing product distribution and
continues to review all operating costs with the objective of increasing
profitability and ensuring future liquidity. However, there can be no
assurance that any of these objectives will be achieved. The execution of the
Distribution Agreement is intended to be consistent with management's
objectives.
The Company's short term liquidity is affected by seasonal increases in
inventory and accounts receivable levels, payment terms in excess of 60 days
granted in some situations during certain months of the year, and seasonality
of sales. Inventory and accounts receivable levels increase substantially
during the latter part of the third calendar quarter and during the remainder
of the calendar year.
The following chart represents the net funds provided by or used in
operating, financing and investment activities for each period as indicated.
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
September 30, September 30,
1996 1995
------------- -------------
(in thousands)
<S> <C> <C>
Net cash provided by (used in)
operating activities $ 287 $(762)
Net cash used in investing activities ( 16) (43)
Net cash provided by (used in)
financing activities (270) 766
</TABLE>
- 11 -
<PAGE>
Net cash provided by operating activities increased to $.29 million
during the three months ended September 30, 1996 compared to a use of $.8
million in 1995. The increase is primarily due to an increase in cash provided
by accounts receivable due to the timing of sales which is offset by a decrease
in cash provided by accounts payable due to timing of expenses in addition to
the increase in net income of $.34 million for the three months ended September
30, 1996 versus 1995.
Net cash used in investing activities of $.01 million and $.04 million
for the three months ended September 30, 1996 and September 30, 1995,
respectively, represents capital expenditures.
Net cash used in financing activities was $.27 million for the three
months ended September 30, 1996, which consisted of repayments of revolver
borrowings under its credit agreement of $.07 million and term loan repayments
of $.20 million. Net cash provided by financing activities for the period
ended September 30, 1995 was $.77 million, which consisted of revolver
borrowings under its credit agreement of $.97 million which was offset by term
loan repayments of $.20 million.
- 12 -
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Not Applicable
Item 2. Changes in Securities Not Applicable
Item 3. Defaults Upon Senior Securities Not Applicable
Item 4. Submission of Matters
to a Vote of Security Holders Not Applicable
Item 5. Other Information Not Applicable
Item 6. Exhibits and Reports on Form 8-K
a Exhibits
(2) Not Applicable
(3) Articles of Incorporation and By-Laws
(a) Certificate of Incorporation, as amended and as
currently in effect (Incorporated by reference
to Exhibit 3(A), filed by the Company with the
Registration Statement on Form S-1 (33-71432)).
(b) By-Laws as currently in effect (Incorporated by
reference to Exhibit 3(B) filed by the Company
with the Registration Statement on Form S-1 (33-71432)).
(4) Not Applicable
(10) Not Applicable
(11) Statement regarding computation of per share earnings
is not required because the relevant computation can
be determined from the material contained in the
Financial Statements included herein.
(15) Not Applicable
(18) Not Applicable
(19) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
(27) Financial Data Schedule
(99) Not Applicable
b Reports on Form 8-K Not Applicable
- 13 -
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 6, 1996 Lincoln Snacks Company
(Registrant)
By: /s/Karen Brenner
-----------------------------------
Name: Karen Brenner
Title: Chairman of the Board and
Chief Executive Officer; Director
(Principal Executive Officer)
By: /s/Kristine A. Crabs
-----------------------------------
Name: Kristine A. Crabs
Title: Vice President and Chief Financial
Officer, Secretary and Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 58,679
<SECURITIES> 0
<RECEIVABLES> 2,442,185
<ALLOWANCES> 202,556
<INVENTORY> 2,986,788
<CURRENT-ASSETS> 5,308,251
<PP&E> 7,400,485
<DEPRECIATION> 2,137,440
<TOTAL-ASSETS> 14,159,792
<CURRENT-LIABILITIES> 4,998,383
<BONDS> 109,321
0
0
<COMMON> 64,501
<OTHER-SE> 8,987,587
<TOTAL-LIABILITY-AND-EQUITY> 14,159,792
<SALES> 6,868,040
<TOTAL-REVENUES> 6,868,040
<CGS> 4,683,284
<TOTAL-COSTS> 4,683,284
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 13,000
<INTEREST-EXPENSE> 66,340
<INCOME-PRETAX> 555,697
<INCOME-TAX> 10,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 545,697
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
