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 March 31, 2000
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 April 7, 2000 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 March 31, 2000
and June 30, 1999 3-4
Statements of Operations for the
three months ended March 31, 2000
and March 31, 1999 5
Statements of Operations for the
nine months ended March 31, 2000
and March 31, 1999 6
Statements of Changes in Stockholders'
Equity for the nine months ended
March 31, 2000 and March 31, 1999 7
Statements of Cash Flows for the
nine months ended March 31, 2000
and March 31, 1999 8
Notes to Financial Statements 9-12
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 13-16
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, 2000 AND JUNE 30, 1999
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ ------------
ASSETS (Unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 9,571,035 $ 6,781,556
Accounts receivable (net of allowance
for doubtful accounts and cash discounts
of $393,236 and $384,875 respectively) 2,064,997 3,304,003
Inventories 2,314,475 2,682,434
Prepaid and other current assets 20,385 13,696
------------ ------------
Total current assets 13,970,892 12,781,689
PROPERTY, PLANT AND EQUIPMENT:
Land 370,000 370,000
Building and leasehold improvements 1,792,352 1,789,809
Machinery and equipment 4,484,890 4,714,683
Construction in process 605,283 100,044
------------ ------------
7,252,525 6,974,536
Less: accumulated depreciation
and amortization (3,639,907) (3,349,176)
------------ ------------
3,612,618 3,625,360
INTANGIBLE AND OTHER ASSETS,
net of accumulated amortization of
$1,081,123 and $937,123 3,377,359 3,346,359
------------ ------------
TOTAL ASSETS $ 20,960,869 $ 19,753,408
============ ============
</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, 2000 AND JUNE 30, 1999
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 694,394 $ 674,388
Accrued expenses 1,707,046 1,677,855
Accrued trade promotions 2,283,215 2,059,854
Deferred gain-short term 13,434 13,434
------------ ------------
Total current liabilities 4,698,089 4,425,531
LONG TERM DEBT 5,000,000 5,000,000
Deferred Gain 80,249 89,941
------------ ------------
TOTAL LIABILITIES 9,778,338 9,515,472
------------ ------------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $0.01 par value,
20,000,000 shares authorized,
6,450,090 shares issued at
March 31, 2000 and June 30, 1999 64,501 64,501
Special stock, $0.01 par value, 300,000
shares authorized, none outstanding --- ---
Additional paid-in capital 18,010,637 18,010,637
Accumulated deficit ( 6,866,581) ( 7,811,176)
Less: cost of common stock in
treasury 118,300 shares (26,026) (26,026)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,182,531 10,237,936
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 20,960,869 $ 19,753,408
============ ============
</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, 2000 AND MARCH 31, 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 6,601,455 $ 4,758,471
COST OF SALES 4,245,112 3,316,723
------------ ------------
Gross profit 2,356,343 1,441,748
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,092,587 2,071,425
NON-RECURRING CHARGE --- 59,633
------------ ------------
Income (loss) from operations 263,756 (689,310)
Interest income (expense), net 31,145 28,912
------------ ------------
Income (loss) before provision
for income taxes 294,901 (660,398)
PROVISION FOR INCOME TAXES 30,000 10,000
------------ ------------
Net income (loss) $ 264,901 $ (670,398)
============ ============
BASIC NET INCOME (LOSS) PER SHARE $ .04 $ (0.11)
============ ============
DILUTED NET INCOME (LOSS) PER SHARE $ .03 $ (0.11)
============ ============
Weighted Average Number of
Shares Outstanding
Basic 6,331,790 6,331,790
============ ============
Diluted 9,981,724 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, 2000 AND MARCH 31, 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET SALES $ 23,729,487 $ 20,180,460
COST OF SALES 14,701,410 13,742,304
------------ ------------
Gross profit 9,028,077 6,438,156
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 8,065,044 7,340,980
NON-RECURRING CHARGE --- 286,633
NUT DIVISION WRITE-DOWN --- 590,459
------------ ------------
Income (loss) from operations 963,033 (1,779,916)
Interest income (expense), net 49,184 79,177
Other expenses (17,622) ---
------------ ------------
Income (loss) before provision
for income taxes 994,595 (1,700,739)
PROVISION FOR INCOME TAXES 50,000 34,000
------------ ------------
Net income (loss) $ 944,595 $ (1,734,739)
============ ============
BASIC NET INCOME (LOSS) PER SHARE $ .15 $ (0.27)
============ ============
DILUTED NET INCOME (LOSS) PER SHARE $ .12 $ (0.27)
============ ============
Weighted Average Number of
Shares Outstanding
Basic 6,331,790 6,331,790
============ ============
Diluted 9,987,836 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, 2000 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Common Special Paid In Accumulated Treasury
Stock Stock Capital Deficit Stock
======= ======== =========== ============ =========
<S> <C> <C> <C> <C> <C>
June 30, 1998 $64,501 $ --- $18,010,637 $( 6,433,288) $ (26,026)
Net loss --- --- --- ( 1,734,739) ---
======= ======== =========== ============ =========
March 31, 1999 $64,501 $ --- $18,010,637 $( 8,168,027) $ (26,026)
======= ======== =========== ============ =========
June 30, 1999 $64,501 --- $18,010,637 $( 7,811,176) $ (26,026)
Net income --- --- --- 944,595 ---
======= ======== =========== ============ =========
March 31, 2000 $64,501 $ --- $18,010,637 $( 6,866,581) $( 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, 2000 AND MARCH 31, 1999
<TABLE>
<CAPTION>
2000 1999
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 944,595 $ (1,734,738)
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 608,640 628,705
Allowance for doubtful accounts and
cash discounts, net 8,361 39,467
Nut division write-down --- 590,459
Gain/loss on sale of fixed assets 17,622 ---
Changes in Assets and Liabilities:
(Increase) decrease in accounts
receivable 1,230,645 (811,094)
(Increase) decrease in inventories 367,959 (189,342)
(Increase) decrease in prepaid and
other current assets (6,689) 9,729
Increase (decrease) in accounts
payable and accrued expenses 262,866 152,661
------------ -----------
Net cash provided by (used in)
operating activities 3,433,999 (1,314,153)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition payment (175,000) ---
Capital expenditures (469,520) (76,832)
------------ -----------
Net cash used in investing activities (644,520) (76,832)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments under short term note --- (333,333)
------------ -----------
Net cash used in financing activities --- (333,333)
------------ -----------
Net increase (decrease) in cash 2,789,479 (1,724,318)
CASH, beginning of period 6,781,556 3,726,400
------------ -----------
CASH, end of period $ 9,571,035 $ 2,002,082
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 226,88 $ 5,003
============ ===========
Income taxes paid $ 33,307 $ 54,260
============ ===========
</TABLE>
- 8 -
<PAGE>
LINCOLN SNACKS COMPANY
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2000
(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 Brynwood Partners III L.P. (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, 2000, and the related statements of
operations, changes in stockholders' equity and cash flows for the three
and nine months ended March 31, 2000 and March 31, 1999, 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 and for periods ended March 31,
2000 and March 31, 1999 have been made. During the interim periods
presented, 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, 1999 filed with the
Securities and Exchange Commission on September 21, 1999 (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 and nine months ended March 31, 2000 and March 31, 1999
are not necessarily indicative of the operating results for the full
year.
(3) Net income (loss) per share:
----------------------------
The Company follows 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.
Below is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share computations:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
----------------------------
March 31, March 31,
2000 1999
------------ -------------
<S> <C> <C>
Basic earnings per share weighted
average number of shares outstanding 6,331,790 6,331,790
Dilutive effect:
Stock options --- ---
Convertible debt 3,649,934 ---
------------ ------------
Diluted earnings per share weighted
average number of shares outstanding 9,981,724 6,331,790
============ ============
Net income (loss) $ 264,901 $ (670,398)
Effect of assumed conversion
of convertible debt 72,000 ---
------------ ------------
Net income (loss) plus assumed
conversion of convertible debt $ 336,901 $ (670,398)
============ ============
Basic earnings (loss) per share $ 0.04 $ (0.11)
============ ============
Diluted earnings (loss) per share $ 0.03 $ (0.11)
============ ============
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
March 31, March 31,
2000 1999
------------ -------------
<S> <C> <C>
Basic earnings per share weighted
average number of shares outstanding 6,331,790 6,331,790
Dilutive effect:
Stock options 6,411 ---
Convertible debt 3,649,635 ---
------------ ------------
Diluted earnings per share weighted
average number of shares outstanding 9,987,836 6,331,790
============ ============
Net income (loss) $ 944,595 $ (1,734,739)
Effect of assumed conversion
of convertible debt 216,000 ---
------------ ------------
Net income (loss) plus assumed
conversion of convertible debt $ 1,160,587 $ (1,734,739)
============ ============
Basic earnings (loss) per share $ 0.15 $ (0.27)
============ ============
Diluted earnings (loss) per share $ 0.12 $ (0.27)
============ ============
</TABLE>
Options to purchase 13,000 shares of common stock were outstanding at
March 31, 2000 and included in the computation of diluted earnings per
share for the three and nine months ended March 31, 2000. Additional
options to purchase approximately 754,611 shares of common stock 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. In addition, diluted earnings per share reflect the
issuance of 3,649,635 shares upon the assumed conversion of the Brynwood
debenture (see Note 5).
Options to purchase approximately 509,750 shares of common stock were
outstanding at March 31, 1999 but were not included in the computation
of diluted earnings per share as the effect would be anti-dilutive for
the three months ended March 31, 1999.
An amendment to the Company's 1993 Stock Option Plan was approved at the
Company's 1999 Annual Meeting of Stockholders to increase the number of
share of common stock reserved for issuance thereunder from 550,000
shares to 1,050,000 shares.
(4) Debt Facility:
--------------
The Company terminated the $4 million revolving credit facility that it
maintained with a financial institution on August 6, 1999. There were
no outstanding borrowings at that time. At the time of termination, the
Company was in breach of certain covenants set forth in the revolving
credit agreement, including the EBITDA covenants as of June 30, 1999 and
the requirement of obtaining the bank's consent relative to the Brynwood
Debenture.
The Company is in the process of obtaining a new revolving credit
facility with another financial institution in the future; however,
there can be no assurance that the Company will be able to obtain such
a facility. The Company presently believes that its cash will be
adequate to meet its needs for the next twelve months.
(5) Brynwood Convertible Subordinated Debenture:
--------------------------------------------
On April 1, 1999, the Company executed and delivered a Convertible
Subordinated Debenture (the "Brynwood Debenture") in favor of Brynwood,
in the principal amount of $5,000,000. The Brynwood Debenture bears
interest at the rate of 6% per annum, matures on December 31, 2001 and
is convertible, at the option of Brynwood III, for shares of common
stock of the Company at any time after a Convertability Event (as
defined in the Brynwood Debenture). The note is convertible at $1.37
per share into shares of common stock. Interest is payable quarterly.
The Company's breach of its bank covenants (see Note 4) resulted in a
default of the Brynwood Debenture. Brynwood has waived its right to
demand payment of the debenture until January 2001 by reason of current
defaults existing under the bank agreement.
<PAGE>
(6) Inventory:
----------
Inventory consists of the following:
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
------------- ------------
<S> <C> <C>
Raw materials and supplies $ 1,921,309 $ 1,828,542
Finished Goods 393,166 853,892
------------ ------------
$ 2,314,475 $ 2,682,434
============ ============
</TABLE>
(7) Acquisition:
------------
In 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. Additionally there are two
contingent payments of $175,000 to be paid on December 31, 1999 and
December 31, 2000. The payments are to be paid if the Company maintains
70% of the sales volume to Iroquois' largest customer during each twelve
month period respectively. The Company paid the first contingent
payment of $175,000 in December, 1999. The payment was accounted for as
an addition to the excess of purchase price over net assets acquired and
is being amortized over 8 years, the remaining life of the asset.
- 12 -
<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,
with results from operations fluctuating due to these trends. This seasonality
is due principally to customers' buying patterns of Poppycock 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.
Three months ended March 31, 2000 versus March 31, 1999
- -------------------------------------------------------
Overall net sales increased 39% or $1.84 million to $6.60 million for the
three months ended March 31, 2000 versus $4.76 million in the corresponding
period of 1999. Branded sales increased to 69% of net sales versus 68% a year
ago and private label sales increased to 31% of net sales versus 29% the same
period last year. The Company has terminated its contract manufacturing
business, and as a result, copack sales represent 0% of net sales versus 3% the
same period last year.
Gross profit increased $.91 million to $2.36 million for the three months
ended March 31, 2000 versus $1.44 million in the corresponding period of 1999.
The improvement in gross profit is due to an increase in overall net sales.
Selling, general and administrative expenses increased 1% or $.02 million
to $2.09 million for the three months ended March 31, 2000 versus $2.07 million
for the same period in 1999. The increase is primarily due to variable selling
costs associated with increases in branded sales and slotting fees for new
distribution of branded products.
In 1999, the non-recurring charge of $59 thousand represents severance
payments made to former employees of the Company in the quarter.
Provision for income taxes represents estimated taxes due after giving
effect to the utilization of the Company's NOL carryforwards.
The quarter net income of $.26 million versus a net loss of $.67 million
in the same period in 1999 represents an increase in earnings of $.94 million.
The improvement in earnings is attributable to increases in branded and private
label sales which were partially offset by higher marketing costs.
Nine months ended March 31, 2000 versus March 31, 1999
- ------------------------------------------------------
Overall net sales increased 18% or $3.55 million to $23.73 million for
the nine months ended March 31, 2000 versus $20.18 million in the corresponding
period of 1999. Branded sales increased to 76% of net sales versus 67% a year
ago and private label sales increased to 23% of net sales versus 18% the same
period last year. The Company has terminated its contract manufacturing
business, and as a result, copack sales represent 0% of net sales versus 15%
the same period last year.
Gross profit increased $2.59 million to $9.03 million for the nine months
ended March 31, 2000 versus $6.44 million in the corresponding period of 1999.
The improvement in gross profits is due to increases in branded and private
label sales which have higher gross margins than copack sales.
Selling, general and administrative expenses increased 10% or $.72
million to $8.07 million for the nine months ended March 31, 2000 versus $7.34
million for the same period in 1999. The increase is primarily due to variable
selling costs associated with increases in branded sales, increases in consumer
marketing programs and slotting fees for new distribution of branded products.
In fiscal 1999, the non-recurring charge of $.29 million represents $.18
million of severance related to the Company's former President and Chief
Operating Officer, $.05 million costs incurred during the relocation of the
Company's new Chief Executive Officer and $.06 million of severance related to
former employees of the Company.
In fiscal 1999, management discontinued its nut product line which
consisted of honey roasted and dry roasted peanuts in canisters. Goodwill of
$.37 million relating to the nut product lines was written off. The
manufacturing equipment relating to the discontinued nut products was written
down to the expected liquidation value which resulted in a $.22 million charge.
Provision for income taxes represents estimated taxes due after giving
effect to the utilization of the Company's NOL carryforwards.
The year to date net income of $.94 million versus a net loss of $1.73
million in the same period in 1999 represents an increase in earnings of $2.68
million. The improvement in earnings is attributable to increases in branded
and private label sales, which were partially offset by higher marketing costs.
Additionally, the non-recurring charge and the nut division write-down
contributed to the loss in 1999.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 2000, the Company had working capital of $9.27 million
compared to a working capital of $8.36 million at June 30, 1999 (the Company's
fiscal year end), an increase in working capital of $.91 million. The increase
in working capital is primarily attributable to the Company's net income of
$.94 million.
On April 1, 1999, the Company executed and delivered a Convertible
Subordinated Debenture (the "Debenture") in favor of Brynwood Partners III
L.P., ("Brynwood III"), in the principal amount of $5,000,000. The Debenture
bears interest at the rate of 6% per annum, matures on December 31, 2001 and
is convertible, at the option of Brynwood III, into shares of Common Stock of
the Company at any time after a Convertability Event (as defined in the
Debenture). The note is convertible at $1.37 per share into shares of common
stock.
The Company terminated the $4 million revolving credit facility that it
maintained with a financial institution on August 6, 1999. There were no
outstanding borrowings at that time. At the time of termination, the Company
was in breach of certain covenants set forth in the revolving credit agreement,
including the EBITDA covenants as of June 30, 1999 and the requirement of
obtaining the bank's consent relative to the Brynwood Debenture.
The Company is in the process of obtaining a new revolving credit
facility with another financial institution in the future, however, there can
be no assurance that the Company will be able to obtain such a facility. The
Company presently believes that its cash will be 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.
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 Company has approximately $3.3 million in NOL carryforwards. A
valuation allowance has been recorded due to the uncertainty of realizing
certain loss carryforwards and other deferred tax assets because of the
Company's brief operating history and recent losses.
<TABLE>
<CAPTION>
Nine Months Ended
------------------------------
March 31, March 31,
2000 1999
-------------- -------------
(in thousands)
<S> <C> <C>
Net cash provided by (used in)
operating activities $ 3,434 $ (1,314)
Net cash used in investing activities (644) (77)
Net cash used in financing activities --- (333)
</TABLE>
Net cash provided by operating activities increased $4.75 million to cash
provided of $3.43 million during the nine months ended March 31, 2000 compared
to a use of $1.31 million in 1999. The increase in cash provided by operating
activities is primarily due to an increase in net income of $2.68 million for
the nine months ended March 31, 2000 versus March 31, 1999 coupled with the
timing of accounts receivable, accounts payable and accrued expenses.
Net cash used in investing activities of $.64 million for the nine months
ended March 31, 2000 represents $.47 million in capital expenditures and $.17
million in a contingent payment relating to the 1998 Iroquois acquisition. A
contingent payment of up to $175,000 may be paid in the future if the Company
maintains 70% of the sales volume to Iroquois' largest customer. Net cash used
in investing activities of $.08 million for the nine months ended March 31,
1999 represents capital expenditures.
Net cash used in financing activities of $.33 million for the nine months
ended March 31, 1999, consisted of payments under the short term note relating
to the Iroquois acquisition.
Year 2000 Disclosure
- --------------------
The Company implemented a formal plan to address issues associated with
the Year 2000 as it related to its critical management information systems
hardware and software, as well as its other systems that are dependent on
microprocessor components. Additionally, the Company implemented a formal
program to address such issues with respect to its suppliers, customers and
other business partners. The Company experienced no significant problems as
January 1, 2000 passed, and is not aware of any problems experienced by such
third parties. The total cost for achieving compliance including hardware and
software updates was not material.
Although the transition to the Year 2000 did not have any significant
impact on the Company or its reporting systems and operations, the Company will
continue to assess the impact of the Year 2000 transition on its systems and
those of its suppliers, customers and other business partners.
Forward Looking Statement
- -------------------------
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) Convertible Subordinated Debenture by the Company in
favor of Brynwood Partners III, L.P. (Incorporated
by reference to Exhibit 4.1 of the Company's current
report on Form 8-K filed on April 4, 1999.)
(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
- 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.
April 17, 2000 Lincoln Snacks Company
(Registrant)
By: /s/Hendrik J. Hartong III
-----------------------------------
Name: Hendrik J. Hartong III
Title: President 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-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 9,571,035
<SECURITIES> 0
<RECEIVABLES> 2,458,233
<ALLOWANCES> 393,236
<INVENTORY> 2,314,475
<CURRENT-ASSETS> 20,385
<PP&E> 7,252,525
<DEPRECIATION> 3,639,907
<TOTAL-ASSETS> 20,960,869
<CURRENT-LIABILITIES> 4,698,089
<BONDS> 5,000,000
0
0
<COMMON> 64,501
<OTHER-SE> 11,118,030
<TOTAL-LIABILITY-AND-EQUITY> 20,960,869
<SALES> 23,729,487
<TOTAL-REVENUES> 23,729,487
<CGS> 14,701,410
<TOTAL-COSTS> 14,701,410
<OTHER-EXPENSES> 8,065,044
<LOSS-PROVISION> 39,000
<INTEREST-EXPENSE> 49,184
<INCOME-PRETAX> 994,595
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 944,595
<EPS-BASIC> .15
<EPS-DILUTED> .12
</TABLE>
