SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
X of the Securities Exchange Act of 1934.
For the fiscal year ended June 30, 1995.
Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934.
For the transition period from_______ to _______.
VACU-DRY COMPANY
(Exact name of registrant as specified in its charter)
Commission File Number 01912
California 94-1069729
(State of incorporation) (IRS Employer
Identification
7765 Healdsburg Ave., Sebastopol, California 95472
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 707/829-4600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of Class)
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:
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )
On August 25, 1995, nonaffiliates of the Registrant held voting stock with an
aggregate market value of $8,596,277 based upon the average of the high and
low prices of the Company's stock.
As of August 25, 1995, there were 1,698,030 shares of common stock, no par
value, outstanding.
The Proxy Statement for the 1995 Annual Meeting of Shareholders is
incorporated by reference into Part III of this report.
Part I
Item I. Business
(a) Vacu-dry Company (the Company), incorporated in California in 1946, is
engaged in the business of the development, production and marketing of
fruit products. The Company's products include low moisture and
evaporated fruits, bulk apple juice, apple juice concentrate, private
label drink mixes and low moisture food for the food storage market.
The Company has been engaged in the production of low moisture fruits
since 1933. Through drying processes, the moisture in apples is reduced
from original levels of 85%-90% to as low as 2%. In addition the Company
purchases other fruits such as apricots, dates, peaches, prunes and
other varieties of fruit which have been partially dried and further
reduces the moisture in these fruits to levels of approximately 3%. The
resultant low moisture products are much lighter in weight and less
bulky than their raw, canned or frozen counterparts. Because of their
extreme dryness, low moisture fruit products require no refrigeration or
other special storage conditions. Other advantages include consistent
product quality, economical packaging and convenience in handling and
use.
The Company has a representation agreement to sell fruit products
produced in Ecuador for a company based in the United States. This
agreement automatically renews at the end of each three year term unless
either party notifies the other six months in advance of the end of the
term. In the current fiscal year the Company entered into a similar
representation agreement to sell dried fruit products produced by a
California company. This agreement automatically renews at the end of
each three year term unless either party notifies the other six months
in advance of the end of the term. These products will be sold primarily
as ingredients to the major food processors.
(b) The Company competes in a single industry segment within the food
industry; all assets held are supportive of efforts to compete in that
segment. Selective financial information relating to the industry
segment is as follows:
1994 1994 1993
Net sales $21,438,000 $27,773,000 $26,770,000
Earnings before
income taxes $ 287,000 $ 1,887,000 $ 1,791,000
Identifiable assets $15,335,000 $14,929,000 $13,210,000
(c) The low moisture food industry in the United States is comparatively
small. There are only a few organizations engaged in the dehydration of
fruits to low moisture levels (2% to 5% moisture).
The Company has two major direct competitors in the low moisture and
evaporated business. One is a Washington-based agricultural cooperative
and the other is a Washington-based privately owned processor. Numerous
processors compete in the business of producing bulk apple juice and
concentrate.
The Company's products are sold directly and through brokers, to the
bakery, food storage and food service markets, to major food processors
(most of which use the products as ingredients), and to federal and
state institutions.
In terms of volume, apples represent the major fruit handled by the
Company. The sources of raw material supply are individual apple
growers and in emergencies by dried apple processors in Washington. The
majority of the Company's raw apple supply comes from California. In
some years, due to crop conditions, the percentage of fruit purchased
from out-of-state sources may increase. In those years, the Company
incurs increased costs due to additional freight. The Company strives
to reflect such cost increases in selling price adjustments but, if
unsuccessful, will absorb such costs.
Other important fruits, including peaches, apricots and prunes, are
obtained principally from dried fruit packing houses in California.
Supplies of fruit are expected to be sufficient to meet the needs of
regular customers. For other supplies, including cans and packaging
materials, the Company draws from a number of vendors and expects that
adequate supplies will be available.
The business of producing evaporated apples, bulk apple juice and
concentrate is seasonal, beginning in late July and usually ending in
March or April.
Inventories of fresh and dried apples, packaging materials and finished
goods as of June 30, 1995, were approximately 25% of annual net sales.
The Company's three largest customers accounted for approximately 21% of
gross sales in 1995. The loss of any one or more of these customers
could have a material adverse effect on the Company.
The dollar amount of order backlog believed to be firm as of June 30,
1995, June 30, 1994 and June 30, 1993 was $10,029,000, $9,931,000 and
$10,790,000, respectively. The backlog of orders at June 30, 1995 is
expected to be filled within the current fiscal year. The dollar value
of backlog varies during the year, with the peak occurring during the
September through December period.
The Company holds the following trademarks: Vacu-dry, Appella, Apple
Munchies, Noah's Ark, Fruit Galaxy, Perma-Pak and Pantri Reserve.
Trademark sales account for the majority of the Company's total sales.
Vacu-dry and Perma-Pak are the predominant trademarks listed above.
For information on research and development expenditures, see Note 11 to
the Financial Statements.
The Company has completed the consolidation of its two production
operations ,with only the product development department remaining to
complete the consolidation of the two facilities. Product development
will remain at the idle production facility until the related portion of
the facility is leased. As of June 30, 1995, the land and buildings of
the idle production facility remain on the market for sale or lease by
the Company. The Company has leased a significant portion of the
facility and is conducting negotiations with other potential tenants.
The Company has complied with all governmental regulations regarding
protection of the environment. No material capital expenditures are
anticipated for environmental control facilities during the next fiscal
year.
The Company employs an average of approximately 250 persons. This
number varies throughout each year and increases during periods of high
production. Of the 250 employees, approximately 200 are represented by
the General Truck Drivers, Warehousemen and Helpers Union, Local #624.
The Company is presently in contract negotiations with the Union.
(d) The Company's export sales can vary greatly between years, depending
upon foreign crop conditions and relative exchange rates. The amount of
the Company's export sales for 1995, 1994 and 1993 were $1,480,000,
$1,267,000 and $971,000 respectively.
Item 2. Properties
The principal administrative offices are located in Sebastopol,
California. Approximately 3,710 square feet of office space are leased
through February 1996. The lease may be extended for one year.
The Company owns 15 acres of land and approximately 90,000 square feet
under roof at 1365 Gravenstein Hwy So., Sebastopol, California. This
facility (formerly described as Plant #1) was used for the dehydration
of fruits to low moisture, prior to the consolidation of this operation
into the main processing plant (formerly described as Plant #2), located
at 2064 Gravenstein Hwy No., Sebastopol, California. As of June 30,
1995, the land and buildings of the idle production facility (Plant #1)
remain on the market for sale or lease. Management believes that
leasing the facility is currently the most likely alternative. The
Company has leased a portion of the facility and is conducting
negotiations with other potential tenants. The Company has no debt
associated with this facility.
The Company owns 64 acres of land and approximately 282,000 square feet
under roof at 2064 Gravenstein Hwy. No., Sebastopol, California. As of
June 30, 1995, this facility is the Company's only active processing
plant. The buildings include facilities to process fresh apples into
dried products, bulk apple juice and concentrate, in addition to
dehydrating by continuous air drying and vacuum drying of apples and
other fruits; warehouse space; cold storage, and office accommodations.
The Company has leased approximately 35,000 square feet of excess
warehouse space through April 1995. The lease may be extended for one
year.
The consolidated production operations functioned at approximately 114%
of the single shift capacity.
Item 3. Legal Proceedings
The Company has no material legal proceedings pending.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the last
quarter of the year ended June 30, 1995.
Part II
Item 5. Market for the Registrant's Common Stock and Related Security-holder
matters
The quarterly high and low prices for the last two fiscal years were as
follows:
First Quarter Low Bid High Bid
9/30/93 9 10-1/2
12/31/93 8-1/2 11-1/4
3/31/94 8-1/4 9
6/30/94 8-1/4 10-1/2
9/30/94 8-1/2 11
12/31/94 7-3/4 10-3/4
3/31/95 5-1/2 8-1/2
6/30/95 4-1/4 6-1/2
The above quotations were obtained from the Nasdaq monthly statistical
reports. The Company's Nasdaq symbol is VDRY.
On August 25, 1995, the approximate number of holders of common stock
was 1,021. On that date, the average of the high and low price per share
of the Company's stock was $5.0625. This price does not include dealer
mark-ups, mark-downs or commissions.
Item 6. Selected Financial Data
YEAR ENDED
June 30, June 30, June 30, June 30, June 30,
1995 1994 1993 1992 1991
(In thousands except per share amounts)
Net sales $21,438 $27,773 $26,770 $24,307 $19,450
Earnings before
income taxes $ 287 $ 1,887 $ 1,791 $ 1,353 $ 1,152
Net earnings $ 195 $ 1,174 $ 1,075 $ 833 $ 671
Earnings per
common share $ .11 $.70 $.65 $.50 $.40
Weighted average common
shares outstanding 1,701 1,669 1,664 1,664 1,667
Total Assets $15,335 $14,929 $13,210 $10,760 $10,256
Long-term debt $ 2,105 $ 2,585 $ 2,404 $ 1,272 $ 378
Cash dividends per
common share $ .15 $ .05 $ -- $ -- $ --
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
Vacu-dry Company's financial condition declined slightly during
Fiscal 1995 as a result of the lower net earnings. The Company's
liquidity decreased during 1995 as it's net working capital
decreased 9%. During the same period, the Company's equity position
remained level with last year.
Because the Company's operations are subject to seasonality, the
Company's liquid resources fluctuate annually in a manner which
changes very little from year to year. The Company experiences a
normal seasonal decrease in production in April. Inventories and
related short term borrowing are usually at their peak at this
time. The slowdown in production normally extends through July and
corresponds to the availability of raw fruit on an affordable
basis. The Company's inventory ordinarily decreases during the
period beginning in April and ending in October, which creates a
corresponding increase in liquidity.
The Company's largest external source of liquidity is a $4,000,000
revolving line of credit provided by a bank at the Bank's prime
lending rate. As of June 30, 1995, the Company had $1,649,000 of
available funds on the $4,000,000 revolving line of credit. This
compares with $2,720,000 of available funds on the $3,000,000
revolving line of credit as of June 30, 1994. As of June 30, 1995,
the Company was in compliance with all covenants and restrictions
related to its outstanding debt.
The Company has established a capital expenditure budget of
approximately $537,000 for the 1995-1996 fiscal year. The Company
anticipates financing these expenditures through internally
generated funds and possibly the use of debt financing.
The most significant internal source of liquidity is the Company's
net working capital. The Company believes that sustained
profitability will lessen the impact of seasonal liquidity
fluctuations. The Company has also leased a significant portion of
its idle facility and is aggressively trying to the lease the
remaining square footage. At this time the Company is not pursuing
the sale of this facility.
The Company's net working capital decreased from $4,167,000 in 1994
to $3,775,000 in 1995 as a result of using the line of credit to
finance the current year's capital expenditures. The debt to equity
ratio remained flat between years. The Company believes its
existing working capital line of credit is sufficient to meet its
commitments.
The Company anticipates that profitable operations and debt
financing will satisfy the Company's future liquidity and capital
needs. However, the Company will utilize future private or public
financing if interest rates rise or if the Company's growth
prospects require additional funds for operations.
On April 28, 1994, the Board of Directors established a regular
dividend policy of $.05 per share per quarter. As a result of the
lower sales and earnings, the Board of Directors, on April 27, 1995
suspended the payment of this quarterly cash dividend.
On July 28, 1994, the Board of Directors approved a plan to
repurchase up to 40,000 shares of the Company's stock from time to
time in the open market or in privately negotiated transactions.
During the current fiscal year, the Company repurchased 15,200
shares of stock under this plan at an average price per share of
$6.27. On April 27, 1995 the Board of Directors suspended the
repurchase of stock under this plan.
RESULTS OF OPERATIONS
The Company's sales are dictated by the competitive environment,
customer demands and consumer preferences. Sales volume between
years can be affected by one or more of these factors. In fiscal
1995 the Company's net sales decreased $6,335,00 or 23%. The sales
declined as a result of substantially lower sales to one of the
Company's major customers in addition to lower sales volume to
other significant customers. The competitive environment
contributed to the sales decline in fiscal 1995. The Company
anticipates the competitive environment to continue into the next
fiscal year and may affect the sales for fiscal 1996. The net sales
for 1994 increased $1,003,000 or 4%. This increase was a result of
sales of banana products. Apple sales for the 1994 fiscal year
decreased $850,000 as a result of the competitive environment.
Sales in 1994 (predominantly in the first and second quarters) were
favorably impacted by substantial purchases by one of its major
customers. In fiscal 1993, the Company's net sales increased
$2,463,000 or 10%. Increases during 1993 were attributable to
increases in volume and in unit price.
Cost of sales as a percentage of net sales increased during fiscal
years 1995 (90%), 1994 (85%) and 1993 (84%), respectively. In
fiscal 1995, the increase in the cost of sales percentage was
predominantly due to the lower production volume as a result of the
decreased sales volume and the resultant decrease in overhead
absorption. Cost of sales increased slightly in fiscal year 1994
due to slightly lower margins, along with inefficiencies incurred
during the start-up phase of the consolidation of operations. The
decrease in 1993, was a result of the increased production volume
and slightly improved profitability.
Selling, general and administrative expenses decreased $621,000 in
1995. This decrease was due to multiple factors, including; the
receipt of two workers compensation dividends from two different
policy years totally $257,000, a $96,000 credit from the reduction
in the SAR liability (as result of the lower stock price) and a
decrease of $346,000 between years in the bonus and profit sharing
expense. Selling, general and administrative expenses decreased
$24,000 in 1994, due to the receipt of a workers compensation
dividend. In 1993, selling, general and administrative expenses
increased $186,000 or 8%. This increase was due primarily to higher
brokerage on the increased sales, increased incentive expense
generated by the Company's higher earnings and increased marketing
expenses incurred to promote the Company's existing product line.
Interest expense increased $144,000 in fiscal 1995 as a result of
the increased level of borrowing on the line of credit. In 1994
interest expense increased $31,000, as a result of the increase in
the prime lending rate by the Company's bank and the larger balance
owing to the bank on the consolidation related financing during
fiscal 1994 versus 1993. Interest expense increased $77,000 in
1993, as a result of an increase in long-term borrowing.
Item 8. Consolidated Financial Statements and Supplementary Data
See Index at Item 14 for information required by this item.
Item 9. Disagreements on Accounting and Financial Disclosure
None
Part III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to this item is contained in the Registrant's
1995 Proxy Statement under the heading "Election of Directors," which
information is incorporated herein by reference.
Executive Officers of the Registrant
The following table sets forth certain information concerning the
executive officers of the Company as of August 25, 1995:
Name Age Position
Donal Sugrue 64 President and Chief
Executive Officer
Esther K. Castain 57 Secretary and Manager
of Employee Relations
Thomas R. Eakin 41 Vice President, Finance
Ralph A. Sceales 57 Vice President, Operations
Mr. Sugrue joined the Company in 1962. He has been President and Chief
Executive Officer since August 1990. Prior thereto he was Executive
Vice President and Secretary.
Ms. Castain joined the Company in 1976. She has been Secretary of the
Company since 1990. Prior thereto she was Manager of Employee
Relations.
Mr. Eakin joined the Company in 1983. For more than the past eight
years he has been Vice President, Finance, and Chief Financial Officer.
Mr. Sceales joined the Company in 1975. He has been Vice President,
Operations, since August 1990. For more than six years prior thereto he
was Director of Operations of the Company.
Item 11. Executive Compensation
Information with respect to this item is contained in the Registrant's
1995 Proxy Statement under the heading "Executive Compensation," which
information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information with respect to this item is contained in the Registrant's
1995 Proxy Statement in the table under the heading "Security Ownership of
Certain Beneficial Owners and Management," which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information with respect to this item is contained in the Registrant's
1995 Proxy Statement in the table under the heading "Executive
Compensation," which information is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K
(a)
1. Financial Statements:
Reports of Independent Public Accountants.
Statements of Earnings for the Years Ended June 30, 1995,
June 30, 1994 and June 30, 1993.
Balance Sheets -- June 30, 1995 and June 30, 1994.
Statements of Changes in Shareholders Equity for the
Years Ended June 30, 1995, June 30, 1994 & June 30, 1993.
Statements of Cash Flows for the Years Ended June 30, 1995,
June 30, 1994 and June 30, 1993.
Notes to Financial Statements.
Financial statements and schedules not included herein have been
omitted because of the absence of conditions under which they are
required or because the required information, where material, is
shown in the financial statements or notes thereto.
3. Exhibits:
Exhibit No.
3. a. Articles of Incorporation (2)
c. By-laws of Vacu-dry Company (4)
10. c. February 8, 1983 Donal Sugrue Consultant Agreement (1)
d. February 8, 1983 Donal Sugrue Employment Agreement (1)
j. Stock Appreciation Plan (4)
20. Proxy Statement Information (5)
These exhibits are incorporated by reference to the Registrant's
Annual Report, filed pursuant to Section 13 of the Securities
Exchange Act of 1934:
(1) On Form 10-K for the year ended June 30, 1984.
(2) On Form 10-K for the year ended June 30, 1988.
(4) On Form 10-K for the year ended June 30, 1992.
(5) On Form 10-K for the year ended June 30, 1995.
(b) No reports on Form 8-K were filed during the last quarter
of the year ended June 30, 1995.
ARTHUR ANDERSON LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Vacu-dry Company:
We have audited the accompanying balance sheets of Vacu-dry Company
(a California corporation) as of June 30, 1995 and 1994, and the related
statements of earnings, changes in shareholders' equity and cash flows for each
of the three years in the period ended June 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vacu-dry Company as of
June 30, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended June 30, 1995, in conformity
with generally accepted accounting principles.
(ARTHUR ANDERSON LLP)
San Francisco, California,
August 11, 1995
VACU-DRY COMPANY
BALANCE SHEETS--JUNE 30, 1995 AND 1994
1995 1994
ASSETS
CURRENT ASSETS:
Cash $ 187,000 $ 419,000
Accounts receivable, less allowances for
uncollectible accounts of $45,000 and $35,000
in 1995 and 1994, respectively 1,679,000 1,670,000
Inventories, less LIFO reserves of $1,334,000 and
$1,511,000 in 1995 and 1994, respectively 5,414,000 4,777,000
Income tax refund receivable 155,000 38,000
Prepaid expenses 176,000 66,000
Current deferred income taxes 303,000 502,000
----------- -----------
Total current assets 7,914,000 7,472,000
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land 227,000 227,000
Buildings and improvements 6,416,000 6,285,000
Machinery and equipment 10,135,000 9,417,000
Construction in progress 32,000 138,000
----------- -----------
Total property, plant and equipment 16,810,000 16,067,000
Accumulated depreciation (9,389,000) (8,610,000)
----------- -----------
Net property, plant and equipment 7,421,000 7,457,000
----------- -----------
Total assets $15,335,000 $14,929,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Borrowings under line of credit $ 2,351,000 $ 280,000
Current maturities of long-term debt 480,000 475,000
Accounts payable 393,000 1,160,000
Accrued payroll and related liabilities 524,000 596,000
Accrued expenses 317,000 745,000
Accrued insurance payable 58,000 47,000
Accrued interest 16,000 2,000
----------- -----------
Total current liabilities 4,139,000 3,305,000
----------- -----------
LONG-TERM DEBT, net of current maturities 2,105,000 2,585,000
----------- -----------
DEFERRED INCOME TAXES 912,000 803,000
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred stock- 2,500,000 shares authorized; no
shares outstanding - -
Capital stock- common stock, 5,000,000 shares
authorized, no par; 1,698,030 and 1,699,572 shares
outstanding in 1995 and 1994, respectively 3,936,000 3,933,000
Retained earnings 4,243,000 4,303,000
----------- -----------
Total shareholders' equity 8,179,000 8,236,000
----------- -----------
Total liabilities and shareholders' equity $15,335,000 $14,929,000
=========== ===========
The accompanying notes are an integral part of these statements.
VACU-DRY COMPANY
STATEMENTS OF EARNINGS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
1995 1994 1993
REVENUE:
Net sales $21,438,000 $27,773,000 $26,770,000
Other 255,000 248,000 300,000
----------- ----------- -----------
Total revenue 21,693,000 28,021,000 27,070,000
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of sales 19,270,000 23,521,000 22,582,000
Selling, general and
administrative 1,751,000 2,372,000 2,396,000
Interest, net 385,000 241,000 210,000
Consolidation expenses - - 91,000
----------- ----------- -----------
Total costs and expenses 21,406,000 26,134,000 25,279,000
----------- ----------- -----------
Earnings before provision
for income taxes 287,000 1,887,000 1,791,000
PROVISION FOR INCOME TAXES 92,000 713,000 716,000
----------- ----------- -----------
Net earnings $ 195,000 $ 1,174,000 $ 1,075,000
=========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 1,700,912 1,669,122 1,664,029
========= ========= =========
EARNINGS PER COMMON SHARE $.11 $.70 $.65
==== ==== ====
The accompanying notes are an integral part of these statements.
VACU-DRY COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
Common Stock
----------------------
Total
Number Retained Shareholders
of Shares Amount Earnings Equity
BALANCE, JUNE 30, 1992 1,664,029 $3,615,000 $2,137,000 $5,752,000
Net earnings - - 1,075,000 1,075,000
--------- ---------- ---------- ----------
BALANCE, JUNE 30, 1993 1,664,029 3,615,000 3,212,000 6,827,000
Net earnings - - 1,174,000 1,174,000
Dividends - - (83,000) (83,000)
Issuance of common stock 35,543 318,000 - 318,000
--------- ---------- ---------- ----------
BALANCE, JUNE 30, 1994 1,699,572 3,933,000 4,303,000 8,236,000
Net earnings - - 195,000 195,000
Dividends - - (255,000) (255,000)
Issuance of common stock 13,658 99,000 - 99,000
Repurchase of common stock (15,200) (96,000) - (96,000)
--------- ---------- ---------- ----------
BALANCE, JUNE 30, 1995 1,698,030 $3,936,000 $4,243,000 $8,179,000
========= ========== ========== ==========
The accompanying notes are an integral part of these statements.
VACU-DRY COMPANY
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1995,1994 AND 1993
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 195,000 $ 1,174,000 $ 1,075,000
------------ ----------- ------------
Adjustments to reconcile net earnings to
net cash provided by (used for) operating
activities-
Depreciation expense 884,000 777,000 859,000
Loss (gain) on sale of assets 6,000 9,000 (10,000)
Deferred taxes 308,000 16,000 131,000
Changes in certain assets and
liabilities-
Decrease (increase) in accounts
receivable, net (9,000) 148,000 (315,000)
Increase in inventories (637,000) (1,376,000) (357,000)
Decrease in other receivables - - 95,000
Decrease (increase) in prepaid
expenses (110,000) (83,000) 84,000
Decrease (increase) in income tax
refund receivable (117,000) 431,000 (469,000)
Decrease in other assets - - 30,000
Increase (decrease) in accounts
payable (767,000) 394,000 (64,000)
Increase (decrease) in accrued
liabilities (475,000) 74,000 288,000
Decrease in income taxes payable - - (70,000)
------------ ----------- ------------
Total adjustments (917,000) 390,000 202,000
------------ ----------- ------------
Net cash provided by (used for)
operating activities (722,000) 1,564,000 1,277,000
------------ ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (867,000) (1,111,000) (2,277,000)
Proceeds from the sale of assets 13,000 - 30,000
------------ ----------- ------------
Net cash used for investing
activities (854,000) (1,111,000) (2,247,000)
------------ ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings under the line of
credit 11,324,000 8,974,000 15,074,000
Payments on line of credit (9,253,000) (9,876,000) (15,460,000)
Borrowings under consolidation term
loan - 640,000 1,482,000
Principal payments of long-term debt (475,000) (334,000) (86,000)
Dividends paid (255,000) (83,000) -
Repurchase of common stock (96,000) - -
Issuance of common stock 99,000 318,000 -
------------ ----------- ------------
Net cash provided by (used for)
financing activities 1,344,000 (361,000) 1,010,000
------------ ----------- ------------
NET INCREASE (DECREASE) IN CASH (232,000) 92,000 40,000
CASH AT BEGINNING OF YEAR 419,000 327,000 287,000
------------ ----------- ------------
CASH AT END OF YEAR $ 187,000 $ 419,000 $ 327,000
============ =========== ============
SUPPLEMENTAL DATA:
Cash paid for-
Interest $ 371,000 $ 238,000 $ 171,000
Income taxes 158,000 581,000 969,000
The accompanying notes are an integral part of these statements.
VACU-DRY COMPANY
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Vacu-dry Company (the Company) is engaged in the business of the development,
production and marketing of fruit products. The Company's products include
low-moisture fruits, bulk apple juice, apple juice concentrate, private label
drink mixes and low-moisture food.
Inventories
Inventories are stated at the lower of cost, using the last-in, first-out
(LIFO) method or market (Note 2).
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is computed by
the straight-line method based upon the estimated useful lives of the assets
as follows:
Buildings and improvements 10 to 40 years
Machinery and equipment 3 to 15 years
Improvements that extend the life of the asset are capitalized; other
maintenance and repairs are expensed. The cost of maintenance and repairs
was $982,000 in 1995, $909,000 in 1994 and $1,013,000 in 1993.
Income Taxes
Income taxes include provisions for timing differences between income
reported for financial statement and income tax purposes.
Earnings per Common Share
Earnings per common share are computed by dividing net earnings by the
weighted average number of shares of common stock outstanding during the
period.
Common Stock
The Company has no par value common stock. The financial statements reflect
no par value.
Reclassifications
Certain 1994 and 1993 amounts were reclassified to conform to the 1995
presentation.
2. INVENTORIES:
Inventories at June 30, 1995 and 1994, consist of the following (LIFO cost):
1995 1994
Finished goods $4,926,000 $4,276,000
Work in process 239,000 192,000
Raw material and containers 249,000 309,000
---------- ----------
Total $5,414,000 $4,777,000
========== ==========
3. BORROWINGS UNDER LINE OF CREDIT:
Borrowings under the line of credit are secured by inventory and accounts
receivable and interest accrues monthly at the prime lending rate. The line
of credit is renewed annually on November 1.
1995 1994
Balance at June 30 $2,351,000 $ 280,000
Maximum amount available under
the line of credit 4,000,000 3,000,000
Weighted average borrowings 1,459,000 273,000
Maximum borrowings 2,996,000 867,000
Interest rate at June 30 9.00% 8.00%
Weighted average interest rate 8.60% 7.00%
Per the covenants of the revolving line of credit note with the Company's
bank, the Company will not, without prior written consent of the bank,
declare or pay any dividend or distribution either in cash, stock or any
other property on the Company's stock now or hereafter outstanding with the
exception of a $0.05 per share quarterly dividend declared in fiscal 1994 and
paid in fiscal 1994 and 1995.
Among the restrictions under the line of credit are provisions that require
the Company to maintain certain financial ratios. The Company was in
compliance with these financial restrictions.
4. LONG-TERM DEBT:
Long-term debt consists of the following:
1995 1994
Note payable- five-year consolidation note,
interest at prime (9.0 percent at June 30, 1995)
plus 0.375 percent, interest and principal due
monthly, maturing in September 1998, secured by
accounts receivable, inventory, equipment and
fixtures $ 667,000 867,000
Note payable- seven-year consolidation note,
interest at prime (9.0 percent at June 30, 1995)
plus 0.375 percent, interest and principal due
monthly, maturing in September 2000, secured by
accounts receivable, inventory, equipment and
fixtures
1,792,000 2,006,000
Industrial revenue bonds, interest at a weighted
average rate (5.25 percent) and payable in
installments through 1997
126,000 187,000
---------- ----------
Total 2,585,000 3,060,000
Less- Current maturities (480,000) (475,000)
---------- ----------
Long-term debt $2,105,000 $2,585,000
========== ==========
Maturities of long-term debt are as follows:
1996 $ 480,000
1997 477,000
1998 415,000
1999 282,000
2000 215,000
Thereafter 716,000
-------
Total $2,585,000
==========
5. INCOME TAXES:
In the first quarter of fiscal year 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
(SFAS 109). SFAS 109 requires the Company to compute deferred taxes
based upon the amount of taxes payable in future years after considering
changes in tax rates and other statutory provisions that will be in effect in
those years. The implementation of SFAS 109 did not have a material effect
on the financial position or results of operations of the Company.
The following is a summary of the Company's provision for income taxes:
1995 1994 1993
Current-
Federal $(155,000) $530,000 $449,000
State - 161,000 136,000
Deferred 247,000 22,000 131,000
--------- -------- --------
Provision $ 92,000 $713,000 $716,000
========= ======== ========
A reconciliation of the income tax provision to the expected provision at the
federal statutory income tax rate is as follows:
1995 % 1994 % 1993 %
Provision at federal
statutory rate $98,000 34% $642,000 34% $609,000 34%
State taxes, less federal
tax benefit 17,000 6 113,000 6 110,000 6
Research and development
tax credits (23,000) (8) (27,000) (1) (3,000) -
Other - - (15,000) (1) - -
-------- -- -------- -- -------- --
Total provision $92,000 32% $713,000 38% $716,000 40%
======= == ======== == ======== ==
Deferred taxes are recorded based upon differences between the financial
statement and tax bases of assets and liabilities and available tax credit
carryforwards. Temporary differences that gave rise to a significant portion
of deferred taxes and liabilities for 1995 and 1994 were as follows:
1995 1994
Depreciation $(880,000) $(803,000)
Employee benefit accruals 155,000 219,000
Unicap and inventory reserves 119,000 119,000
Contingency reserves - 80,000
State income taxes 2,000 34,000
Property taxes (46,000) -
Other 41,000 50,000
--------- ---------
$(609,000) $(301,000)
========= =========
6. STOCK APPRECIATION RIGHTS PLAN:
The Company has a stock appreciation rights (SAR) plan as an incentive for
key employees. Under the SAR plan, key employees are granted rights
entitling them to market price increases in the Company's stock. At
June 30, 1995 and 1994, 100,000 SARs were authorized. A summary of the
outstanding SARs is as follows:
Rights Outstanding at June 30
Price ------------------
per Right 1995 1994
--------- ---- ----
$ 3.75 1,600 1,900
5.63 200 200
2.69 5,750 7,750
4.31 1,500 1,500
4.63 18,400 18,900
5.25 - 2,500
11.88 - 1,000
9.63 3,000 3,000
10.88 2,500 2,500
8.88 5,500 -
------ ------
38,450 39,250
====== ======
The individual rights vest from the grant date as follows:
Year 1 0% Year 4 60%
2 20 5 80
3 40 6 100
All rights are granted at fair market value at the date of grant. Rights
generally vest over a period from the second to the sixth anniversary date
of the grant. The SAR liability is recorded based on the market price of the
Company's stock as of the balance sheet date. In 1995, the Company decreased
selling, general and administrative expenses by $96,000 in order to reflect
the lower SAR liability. In 1994 and 1993, the Company increased selling,
general and administrative expenses by $26,000 and $161,000, respectively, in
order to reflect the higher SAR liability.
7. EMPLOYEE STOCK PURCHASE PLAN:
The Employee Stock Purchase Plan enables substantially all employees to
purchase shares of the Company's common stock at 85 percent of the market
value on the first or last business day of the quarterly offering period,
whichever is lower. A maximum of 100,000 shares are authorized for issuance
over the ten-year term of the plan. The plan term began on January 1, 1994.
Under the Plan, 13,658 shares were issued during the fiscal year ended
June 30, 1995, at an average price of $7.248, and 4,774 shares were issued
from January 1, 1994, through June 30, 1994, at an average price of $7.438.
8. MAJOR CUSTOMERS:
The five largest customers accounted for approximately 31.6 percent of
gross sales in 1995.
9. OPERATING LEASES:
The Company leases office space and equipment. At June 30, 1995, future
minimum rental payments are as follows:
1996 $215,000
Thereafter -
--------
Total $215,000
========
Rental expense under these leases was $235,000 in 1995, $233,000 in 1994 and
$223,000 in 1993.
The Company has been leasing excess warehouse space, generating revenues of
$292,000 in 1995 and $195,000 in 1994 and 1993. These revenues are
classified as other income in the statements of earnings.
10. RETIREMENT PLANS:
The Company has a contributory retirement savings and profit sharing plan
covering nonunion employees. The Company contributes one and one-half times
the first 3 percent of employee contributions to the retirement savings plan.
Profit sharing contributions are derived based upon a specific formula of
Company earnings. Company contributions to the retirement savings and profit
sharing plan were approximately $107,000 in 1995, $148,000 in 1994 and
$183,000 in 1993 and are funded currently. The employer's contributions for
any fiscal year may not exceed the amount lawfully deductible by the Company
under the provisions of the Internal Revenue Code.
The Company contributes to a defined contribution plan for employees covered by
collective bargaining agreements. These contributions, funded currently,
were $306,000 in 1995, $356,000 in 1994 and $275,000 in 1993.
11. RESEARCH AND DEVELOPMENT:
The Company sponsors research activities relating to the development of new
products and the improvement of existing products. The cost of such
activities was $347,000 in 1995, $308,000 in 1994 and $258,000 in 1993.
12. QUARTERLY RESULTS (Unaudited):
For the Year Ended June 30, 1995
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
Net sales $6,224,000 $5,950,000 $4,531,000 $4,733,000 $21,438,000
Earnings (loss)
before income
taxes 347,000 340,000 (630,000) 230,000 287,000
Net earnings (loss) 208,000 204,000 (375,000) 158,000 195,000
Earnings per common
share $.12 $.12 $(.22) $.09 $.11
For the Year Ended June 30, 1994
-----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
Net sales $7,712,000 $7,326,000 $6,847,000 $5,888,000 $27,773,000
Earnings before
income taxes 433,000 870,000 509,000 75,000 1,887,000
Net earnings 260,000 522,000 310,000 82,000 1,174,000
Earnings per common
share $.16 $.31 $.19 $.04 $.70
Form 10-K
Copies of the Company's Form 10-K on file with the Securities and Exchange
Commission may be obtained by writing to:
Esther K. Castain
Vacu-dry Company
P.O. Box 2418
Sebastopol, California 95473-2418
SIGNATURES
----------
Pursuant to the requirements of Section 14 of 15(d) 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.
VACU-DRY COMPANY
----------------
(Registrant)
Date: September 26, 1995 By: (Donal Sugrue)
-----------------------------
Donal Sugrue, President & CEO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
(a) Principal Executive Officer
(Donal Sugrue) President & CEO September 26, 1995
---------------
Donal Sugrue
(b) Directors:
(D.P. Boothe Jr.) September 26, 1995
-------------------
D.P. Boothe Jr.
(Kenneth P. Gill) September 26, 1995
------------------
Kenneth P. Gill
(Ed Koplovsky) September 26, 1995
----------------
Ed Koplovsky
(Roger Mertz) September 26, 1995
----------------
Roger Mertz
(Craig Stapleton) September 26, 1995
------------------
Craig Stapleton
(Joseph Tonascia) September 26, 1995
-------------------
Joseph Tonascia
(c) Principal Financial Officer and
Accounting Manager
(Thomas Eakin) September 26, 1995
----------------
Thomas Eakin Chief Financial Officer
(Susan Medeiros) September 26, 1995
------------------
Susan Medeiros Accounting Manager