EXPLANATORY NOTE
This Amendment No. 1 on Form 10-Q/A (this "Amendment") to the Company's
Quarterly Report on Form 10-Q amends Item 1 and Item 6 for the quarterly period
ended March 31, 1998 and is being filed only for the following purposes:
Item 1. Financial Statements
- ------- --------------------
Statements of Operations for the Nine Months Ended March 31, 1998 is
amended to reflect "Net Planters Other Income" of $1.4 million as
income from operations.
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
Add as Exhibit 27 an updated Financial Data Schedule
For purposes of clarity the entire 10-Q is being filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amendment to its report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LINCOLN SNACKS COMPANY
(Registrant)
By: /s/ Hendrik J. Hartong III
--------------------------
Hendrik J. Hartong
President and Chief Executive Officer;
Director
(Principal Executive Officer)
By: /s/ Kristine A. Crabs
-----------------------------
Kristine A. Crabs
Vice President - Chief Financial
Officer, Treasurer and Secretary
(Principal Financial Officer
and Principal Accounting Officer)
Dated: May 21, 1999
<PAGE>
LINCOLN SNACKS COMPANY
INDEX TO FORM 10-Q
PAGE
----
Part I. FINANCIAL INFORMATION
---------------------
Item 1. FINANCIAL STATEMENTS
Balance Sheets as of March 31, 1998
and June 30, 1997 3-4
Statements of Operations for the
three months ended March 31, 1998
and March 31, 1997 5
Statements of Operations for the
nine months ended March 31, 1998
and March 31, 1997 6
Statements of Changes in Stockholders'
Equity for the nine months ended
March 31, 1998 and March 31, 1997 7
Statements of Cash Flows for the
nine months ended March 31, 1998
and March 31, 1997 8
Notes to Financial Statements 9-11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 12-15
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE
ABOUT MARKET RISK 16
Part II. OTHER INFORMATION
-----------------
Item 1. LEGAL PROCEEDINGS 17
Item 2. CHANGES IN SECURITIES 17
Item 3. DEFAULTS UPON SENIOR SECURITIES 17
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 17
Item 5. OTHER INFORMATION 17
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 17
SIGNATURES 18
- 2 -
<PAGE>
LINCOLN SNACKS COMPANY
BALANCE SHEETS
ASSETS
AS OF MARCH 31, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 4,141,233 $ 1,606,357
Accounts receivable (net of allowance
for doubtful accounts and cash discounts
of $331,518 and $237,778 respectively) 1,757,859 1,951,937
Inventories 2,604,786 1,680,253
Prepaid and other current assets 39,331 29,023
------------ ------------
Total current assets 8,543,209 5,267,570
PROPERTY, PLANT AND EQUIPMENT:
Land 370,000 370,000
Building and leasehold improvements 1,780,742 1,526,705
Machinery and equipment 4,881,709 4,800,284
Construction in process 122,030 122,319
------------ ------------
7,154,481 6,819,308
Less: accumulated depreciation
and amortization (2,712,281) (2,263,689)
------------ ------------
4,442,200 4,555,619
INTANGIBLE AND OTHER ASSETS,
net of accumulated amortization of
$777,003 and $667,111 3,956,479 3,466,371
------------ ------------
TOTAL ASSETS $ 16,941,888 $ 13,289,560
============ ============
</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 MARCH 31, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Short term note $ 458,333 $ 0
Accounts payable 1,400,007 1,357,170
Accrued expenses 1,181,779 1,178,601
Accrued trade promotions 1,399,260 675,585
Deferred gain-short term 13,434 13,434
------------ ------------
Total current liabilities 4,452,813 3,224,790
Deferred Gain 106,093 115,784
------------ ------------
TOTAL LIABILITIES 4,558,906 3,340,574
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value,
20,000,000 shares authorized,
6,450,090 shares issued at
March 31, 1998 and June 30, 1997 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 ( 5,666,130) ( 8,100,126)
Less: cost of common stock in
treasury 118,300 shares (26,026) (26,026)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 12,382,982 9,948,986
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 16,941,888 $ 13,289,560
============ ============
</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 MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 4,623,716 $ 4,309,514
COST OF SALES 3,386,474 3,396,964
------------ ------------
Gross profit 1,237,242 912,550
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,632,009 870,563
------------ ------------
Income (loss) from operations (394,767) 41,987
Interest (Income) Expense (51,605) 16,292
Other Income 0 (1,554)
------------ ------------
Income (loss) before provision
for income taxes (343,162) 27,249
PROVISION FOR INCOME TAXES 10,000 10,000
------------ ------------
Net income (loss) $ (353,162) $ 17,249
============ ============
BASIC AND DILUTED
NET INCOME (LOSS) PER SHARE $ (0.06) $ 0.003
============ ============
BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,331,790 6,331,790
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 5 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 17,495,477 $ 18,424,690
COST OF SALES 10,532,280 12,658,925
------------ ------------
Gross profit 6,963,197 5,765,765
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,873,073 4,390,220
NET PLANTERS OTHER INCOME (1,376,000) 0
------------ ------------
Income from operations 2,466,124 1,375,545
Interest (Income) Expense (87,313) 124,786
Other (Income) Expense 19,441 (1,554)
------------ ------------
Income before provision
for income taxes 2,533,996 1,252,313
PROVISION FOR INCOME TAXES 100,000 30,000
------------ ------------
Net income $ 2,433,996 $ 1,222,313
============ ============
BASIC AND DILUTED
NET INCOME PER SHARE $ 0.38 $ 0.19
============ ============
BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 6,331,790 6,331,790
============ ============
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 6 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
(UNAUDITED)
Common Special Paid In Accumulated Treasury
Stock Stock Capital Defici Stock
------- ------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
June 30, 1996 $64,501 $0 $18,010,637 ($9,542,721) ($26,026)
Net income 1,222,313
------- ------- ----------- ----------- --------
March 31, 1997 $64,501 $0 $18,010,637 ($ 8,320,408) ($26,026)
======= ======= =========== ============ ========
June 30, 1997 $64,501 $0 $18,010,637 ($ 8,100,126) ($26,026)
Net income 2,433,996
------- ------- ----------- ------------ --------
March 31, 1998 $64,501 $0 $18,010,637 ($ 5,666,130) ($26,026)
======= ======= =========== ============ ========
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
- 7 -
<PAGE>
LINCOLN SNACKS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 2,433,996 $ 1,222,313
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 558,484 617,584
Allowance for doubtful accounts and
cash discounts, net 48,207 43,740
Changes in Assets and Liabilities:
Decrease in accounts receivable 623,179 370,644
(Increase) decrease in inventories (701,681) 254,732
(Increase) decrease in prepaid and
other current assets (10,308) 35,741
Increase (decrease) in accounts
payable and accrued expenses 759,999 (722,076)
------------ -----------
Net cash provided by
operating activities 3,711,876 1,822,678
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (335,173) (148,071)
Proceeds from sale of land 0 369,218
Acquisition (net of cash) (800,160) 0
------------ -----------
Net cash provided by (used in)
investing activities (1,135,333) 221,147
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings (repayments) under
revolver, net 0 (556,115)
Repayments under term loan 0 (859,703)
Repayments under short term note (41,667) 0
------------ -----------
Net cash used in
financing activities (41,667) (1,415,818)
------------ -----------
Net increase in cash 2,534,876 628,007
CASH, beginning of period 1,606,357 58,538
------------ -----------
CASH, end of period $ 4,141,233 $ 686,545
============ ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Interest paid $ 0 $ 114,941
============ ===========
Income taxes paid $ 80,715 $ 17,751
============ ===========
</TABLE>
- 8 -
<PAGE>
LINCOLN SNACKS COMPANY
-----------------------
NOTES TO FINANCIAL STATEMENTS
------------------------------
MARCH 31, 1998
----------------
(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 March 31, 1998, and the related statements of
operations for the three and nine months ended March 31, 1998 and
March 31, 1997, changes in stockholders' equity and cash flows for the
three and nine months ended March 31, 1998 and March 31, 1997, 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 March 31, 1998 and
March 31, 1997 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, 1997 filed with the
Securities and Exchange Commission on September 15, 1997 (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 and nine months ending March 31, 1998 and March 31, 1997
are not necessarily indicative of the operating results for the full
year.
(3) Acquisition:
------------
On March 17, 1998, the Company acquired certain assets of Iroquois
Popcorn Company ("Iroquois"), a private label manufacturer of
caramelized popcorn, for approximately $1,300,000, of which $800,000
was paid in cash and $500,000 is a non-interest bearing note to be
paid in equal monthly installments over a twelve month period
commencing March 31, 1998. A contingent payment of up to $350,000 may
be paid in the future if the Company maintains 70% of the volume of
Iroquois' largest customer.
The acquisition was accounted for as a purchase with the assets
acquired recorded at their fair values at the date of acquisition.
The excess of purchase price over net assets acquired is being
amortized over a period of 10 years. The purchase price has been
allocated as follows:
Accounts receivable $ 477,000
Inventory 223,000
Excess of purchase price over
net assets acquired 600,000
The following is proforma information as if the Company's acquisition
of Iroquois had occurred at the beginning of the respective fiscal
periods. The incremental revenue reflected below consists primarily
of sales to one customer. These results may not be indicative of what
the actual results would have been or may be in the future.
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
March 31, March 31,
1998 1997
----------- -----------
<S> <C> <C>
Net sales $21,077,411 $21,118,706
Net income 3,251,210 1,616,433
Net income per share $0.51 $0.26
</TABLE>
(4) New Accounting Pronouncement:
------------------------------
As required, during the interim period ended December 31, 1997, the
Company adopted the provisions of Statement of Financial Accounting
Standards No. 128 ("SFAS No. 128"). This statement establishes
standards for computing and presenting basic and diluted earnings per
share.
Options to purchase 662,550 shares of common stock were outstanding at
March 31, 1998 but were not included in the computation of diluted
earnings per share because the options' exercise price was greater
than the average market price of the common shares.
(5) Credit Facility:
----------------
The Company has a revolving credit facility, as amended, which
provides for up to $4.0 million in revolver borrowings. No amounts
were outstanding under the revolver as of March 31, 1998. This
facility is collateralized by substantially all of the Company's
assets. A term loan facility was extinguished upon the Company's
final term loan payment in fiscal 1997.
(6) Inventory:
----------
<TABLE>
<CAPTION>
Inventory consists of the following:
March 31, June 30,
1998 1997
----------- -----------
<S> <C> <C>
Raw materials and supplies $ 1,383,122 $ 1,293,280
Finished goods 1,221,664 386,973
----------- -----------
$ 2,604,786 $ 1,680,253
=========== ===========
</TABLE>
(7) Significant Customer:
---------------------
On July 17, 1995, Planters Company, a unit of Nabisco, Inc.
("Planters"), began exclusively distributing the Company's Fiddle
Faddle and Screaming Yellow Zonkers products (the "Products") pursuant
to a distribution agreement dated June 6, 1995 (the "Distribution
Agreement") for an initial term which was originally scheduled to
expire on June 30, 1997 unless renewed for additional one year
periods. The Distribution Agreement required Planters to purchase an
annual minimum number of equivalent cases of the Products during the
initial term.
On February 28, 1997, the Company and Planters entered into an
amendment to the Distribution Agreement (the "Amendment"), which was
further modified on May 9, 1997 (the "Letter Agreement"), pursuant to
which the exclusive distribution arrangement with respect to the
Company's Fiddle Faddle product was extended for an additional six
month period expiring on December 31, 1997, at which time the
arrangement terminated. Effective January 1, 1998 and May 1, 1997,
Planters ceased, and the Company resumed, marketing and distributing
the Company's Fiddle Faddle and Screaming Yellow Zonkers products,
respectively.
The Amendment and Letter Agreement required Planters to purchase a
specified number of manufactured cases of the Products and for
Planters to compensate the Company for the remaining contract minimums
for the twelve month period ended June 30, 1997. The Amendment and
Letter Agreement required Planters to compensate the Company for
contract minimums for the six month period ended December 31, 1997
(six month minimums). Planters compensated the Company in the six
months ended December 31, 1997 for contract minimums, which were 27%
less than case sales made to Planters for the six month period ended
December 31, 1996.
The Amendment also required Planters to compensate the Company in the
event that certain sales levels were not achieved during the calendar
year ending December 31, 1997. These sales levels were not achieved
during the calendar year ending December 31, 1997 resulting in
Planters compensating the Company $1.88 million which is partially
offset on the Company's Statement of Operations by approximately
$500,000 in non-recurring charges associated with initial efforts to
rebuild the Fiddle Faddle brand ("Net Planters Other Income").
Although the Amendment contains provisions designed to effect a smooth
transfer of the distribution business back to the Company, there can
be no assurance as to the long term effects of the transition.
In July and October, 1997, the Company entered into five year
Trademark License Agreements with Nabisco, Inc. granting the Company,
subject to the terms of the License Agreements, the right to use,
commencing January 1, 1998, the Planters' trademarks in connection
with the sales and marketing of the Company's Fiddle Faddle products
in the United States and Canada.
There were no sales to Planters for the three months ended March 31,
1998. Net sales to Planters were 68% of net sales for the three
months ended March 31, 1997. Net sales to Planters were 12% and 47%
of net sales for the nine months period ended March 31, 1998 and March
31, 1997, respectively. Sales to Planters during the six months
period ended December 31, 1997 represented payments, in lieu of
manufactured cases, at predetermined rates which are lower than the
rates Planters paid for manufactured cases. Sales to Planters during
the quarter and the nine month period ended March 31, 1997 represented
manufactured cases.
- 11 -
<PAGE>
ITEM 2. - 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 July 17, 1995, Planters Company, a unit of Nabisco, Inc.
("Planters"), began exclusively distributing the Company's Fiddle Faddle and
Screaming Yellow Zonkers products (the "Products") pursuant to a
distribution agreement dated June 6, 1995 (the "Distribution Agreement") for
an initial term which was originally scheduled to expire on June 30, 1997
unless renewed for additional one year periods. The Distribution Agreement
required Planters to purchase an annual minimum number of equivalent cases
of the Products during the initial term.
On February 28, 1997, the Company and Planters entered into an
amendment to the Distribution Agreement (the "Amendment"), which was further
modified on May 9, 1997 (the "Letter Agreement"), pursuant to which the
exclusive distribution arrangement with respect to the Company's Fiddle
Faddle product was extended for an additional six month period expiring on
December 31, 1997, at which time the arrangement terminated. Effective
January 1, 1998 and May 1, 1997, Planters ceased, and the Company resumed,
marketing and distributing the Company's Fiddle Faddle and Screaming Yellow
Zonkers products, respectively.
The Amendment and Letter Agreement required Planters to purchase a
specified number of manufactured cases of the Products and for Planters to
compensate the Company for the remaining contract minimums for the twelve
month period ended June 30, 1997. The Amendment and Letter Agreement
required Planters to compensate the Company for contract minimums for the
six month period ended December 31, 1997 (six month minimums). Planters has
compensated the Company for contract minimums, which were 24% and 27% less
than case sales made to Planters for the quarter and the six month period
ended December 31, 1996, respectively.
The Amendment also required Planters to compensate the Company in the
event that certain sales levels were not achieved during the calendar year
ending December 31, 1997. These sales levels were not achieved during the
calendar year ending December 31, 1997 resulting in Planters compensating
the Company $1.88 million which is partially offset on the Company's
Statement of Operations by approximately $500,000 in non-recurring charges
associated with initial efforts to rebuild the Fiddle Faddle brand ("Net
Planters Other Income").
Although the Amendment contains provisions designed to effect a smooth
transfer of the distribution business back to the Company, there can be no
assurance as to the long term effects of the transition.
In July and October, 1997, the Company entered into five year
Trademark License Agreements with Nabisco, Inc. granting the Company,
subject to the terms of the License Agreements, the right to use, commencing
January 1, 1998, the Planters' trademarks in connection with the sales and
marketing of the Company's Fiddle Faddle products in the United States and
Canada.
There were no sales to Planters for the three months ended March 31,
1998. Net sales to Planters were 68% for the three months ended March 31,
1997. Net sales to Planters were 12% and 47% of net sales for the nine
months period ended March 31, 1998 and March 31, 1997, respectively. Sales
to Planters during the six months period ended December 31, 1997
represented payments, in lieu of manufactured cases, at predetermined rates
which are lower than the rates Planters paid for manufactured cases. Sales
to Planters during the quarter and the nine month period ended March 31,
1997 represented manufactured cases.
Under the Agreement, which required Planters to purchase a minimum
number of cases during the fiscal year, the Company sold the Products to
Planters at a selling price which was reduced from the Company's historical
customer selling prices. Planters in turn was responsible for the sales and
distribution of the Products to its customers, therefore, the Company did
not have any selling, marketing or distribution costs associated with these
Products. The financial impact of the Agreement versus historical results
was reflected in reductions in revenue and gross profit which were offset by
reduced selling, marketing and distribution costs.
Three months ended March 31, 1998 versus March 31, 1997
- --------------------------------------------------------
Overall net sales increased 7% or $.31 million to $4.62 million for
the quarter ended March 31, 1998 versus $4.31 million in the corresponding
period of 1997. There were no sales to Planters for the three months ended
March 31, 1998. Net sales to Planters were 68% of net sales for the three
months ended March 31, 1997. The decrease in sales to Planters was offset
by the Company's sales of Fiddle Faddle and newly secured copack and private
label business. The Company resumed distribution of Fiddle Faddle on
January 1, 1998 and made initial efforts during the quarter to reestablish
distribution of Fiddle Faddle. The Company sold approximately half of the
cases of Fiddle Faddle to its customers than the amount of cases sold to
Planters under the Planters Agreement in the corresponding quarter of Fiscal
1997.
Gross profit increased 36% or $.32 million to $1.24 million for the
quarter ended March 31, 1998 versus $.91 million in the corresponding period
of 1997. Gross profit increased due to new copacking business and increased
selling prices to historical levels resulting from the Company resuming
distribution of Fiddle Faddle. These increases were partially offset by
decreased profits relating to the decline in Fiddle Faddle case volume.
Selling, general and administrative expenses increased 87% or $.76
million to $1.63 million in the quarter ended March 31, 1998 versus $.87
million the same period in 1997. These expenses increased as a result of
the Company resuming the marketing and distribution of Fiddle Faddle.
The increase in gross profit was offset by the increase in selling,
general and administrative expenses and resulted in a decrease in net income
of $.37 million to a $.35 million net loss for the quarter ended March 31,
1998 versus a $.02 million net income in the corresponding period in 1997.
Nine months ended March 31, 1998 versus March 31, 1997
- -------------------------------------------------------
Overall net sales decreased 5% or $.93 million to $17.50 million for
the nine months ended March 31, 1998 versus $18.42 million in the
corresponding period of 1997. Sales to Planters, excluding Net
Planters Other Income, represented 12% and 47% of net sales for the nine
months ended March 31, 1998 and 1997, respectively, due to the reduced
minimums for the six month period ended December 31, 1997 and the
termination of the Planters Agreement on December 31, 1997. The decrease in
sales to Planters was partially offset by the Company's sales of Fiddle
Faddle and newly secured copack and private label business. The Company
resumed distribution of Fiddle Faddle on January 1, 1998 and made initial
efforts during the quarter to reestablish distribution of Fiddle Faddle.
The Company sold approximately a third less cases of Fiddle Faddle to its
customers and Planters in the nine months ended March 31, 1998 than the
amount of cases sold to Planters under the Planters Agreement a year ago.
Under the Planters Agreement for the six months ended December 31, 1997,
Planters compensated the Company for lower minimums than the same period a
year ago. Sales to Planters during the six months period ended December 31,
1997 represented payments, in lieu of manufactured cases, at predetermined
rates which are lower than the rates Planters paid for manufactured cases.
Sales to Planters during the six months period ended December 31, 1996
represented manufactured cases.
Gross profit increased 21% or $1.20 million to $6.96 million for the
nine months ended March 31, 1998 versus $5.77 million in the corresponding
period of 1997. Gross profit increased due to new copacking business,
increased selling prices to historical levels resulting from the Company
resuming distribution of Fiddle Faddle and Screaming Yellow Zonkers, and
lower raw material costs. These increases were partially offset by
decreased Planters gross profits resulting from decreased case volume.
Selling, general and administrative expenses increased 34% or $1.48
million to $5.87 million for the nine months ended March 31, 1998 versus
$4.39 million for the same period in 1997. These expenses primarily
increased during this period due to the Company resuming the marketing and
distribution of the Fiddle Faddle and Screaming Yellow Zonkers business. In
addition, expenses increased relating to consumer promotions for the
Company's other branded products.
Net Planters Other Income of $1.38 million represents Planters
compensation of $1.88 million to the Company for failing to achieve certain
sales levels during the calendar year ending December 31, 1997 which was
partially offset by approximately $.50 million in non-recurring charges
associated with initial efforts to rebuild the Fiddle Faddle brand.
The increase in gross profit coupled with Net Planters Other Income
and the decrease in interest expense was partially offset by the increase in
selling, general and administrative expenses and resulted in an increase in
the net income of $1.21 million to $2.43 million for the nine months ended
March 31, 1998 versus $1.22 million in the corresponding period in 1997.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1998, the Company had working capital of $4.09 million
compared to a working capital of $2.04 million at June 30, 1997 (the
Company's fiscal year end), an increase in working capital of $2.05 million.
The increase in working capital is primarily attributable to the Company's
net profit of $2.43 million for the nine months ended March 31, 1998.
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 in future periods.
Although the Amendment contained provisions designed to effect a smooth
transfer of the distribution of the Fiddle Faddle business back to the
Company, there can be no assurance as to the long term effects of the
transition. Management has secured new copack and private label business
which partially offsets the decrease in Fiddle Faddle sales, however, there
can be no assurance that this business will continue.
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.
<TABLE>
<CAPTION>
Nine Months Ended
--------------------------
March 31, March 31,
19 1997
---------- ---------
(in thousands)
<S> <C> <C>
Net cash provided by operating
activities $ 3,712 $ 1,823
Net cash provided by (used in)
investing activities (1,135) 221
Net cash used in financing activities (42) (1,416)
</TABLE>
Net cash provided by operating activities increased to $3.71 million
during the nine months ended March 31, 1998 compared to $1.82 million in
1997. The increase is primarily due to an increase in net income of $1.21
million for the nine months ended March 31, 1998 versus March 31, 1997. The
increase in net cash provided by operating activities also increased due to
decreases in accounts receivables and increases in inventories due to the
timing of sales coupled with an increase in accounts payable due to the
timing of expenses.
Net cash used in investing activities of $1.14 million for the nine
months ended March 31, 1998 is comprised of the $.80 million acquisition of
certain assets of Iroquois and $.33 million in capital expenditures. Net
cash provided by investing activities of $.22 million during the nine months
ended March 31, 1997 represents proceeds from the sale of land and is
partially offset by capital expenditures.
Net cash used in financing activities for the period ended March 31,
1998 represents payments under the short term note. Net cash used in
financing activities for the period ended March 31, 1997 was $1.42 million,
which consisted of revolver repayments under its credit agreement of $.56
million and term loan repayments of $.86 million.
Cautionary Statements
- ---------------------
This Quarterly Report on Form 10-Q contains, in addition to historical
information, certain forward-looking statements regarding future financial
condition and results of operations. The words "expect," "estimate,"
"anticipate," "predict," "believe," and similar expressions are intended to
identify forward-looking statements. Such statements involve certain risks
and uncertainties. Should one or more of these risks or uncertainties
materialize, actual outcomes may vary materially from those indicated.
ITEM 3. - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
- ------- ----------------------------------------------------------
Not Applicable.
- 16 -
<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) (a) Amendment No. 9 dated March 11, 1998 To
Revolving Credit, Term Loan and Security
Agreement (Incorporated by reference to
Exhibit 10(a) filed by the Company with the
Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 1998).
(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
- 17 -
<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.
May 11, 1998 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)
- 18 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Lincoln Snacks Company financial statements
and is qualified in its entirety by reference to such
financial statements.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> APR-04-1998
<CASH> 4,141,233
<SECURITIES> 0
<RECEIVABLES> 2,089,377
<ALLOWANCES> 331,518
<INVENTORY> 2,604,786
<CURRENT-ASSETS> 39,331
<PP&E> 7,154,481
<DEPRECIATION> 2,712,281
<TOTAL-ASSETS> 16,941,888
<CURRENT-LIABILITIES> 4,452,813
<BONDS> 0
0
0
<COMMON> 64,501
<OTHER-SE> 12,318,481
<TOTAL-LIABILITY-AND-EQUITY> 16,941,888
<SALES> 17,495,477
<TOTAL-REVENUES> 17,495,477
<CGS> 10,532,280
<TOTAL-COSTS> 10,532,280
<OTHER-EXPENSES> 4,497,073
<LOSS-PROVISION> 46,000
<INTEREST-EXPENSE> (87,313)
<INCOME-PRETAX> 2,533,996
<INCOME-TAX> 100,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,433,996 <F1>
<EPS-BASIC> .38
<EPS-DILUTED> .38
<FN>
<F1> Net income includes $1,376,000 of Net Planters Other Income, see
financial statements.
</FN>
</TABLE>
