U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 2001
Commission File No. 0-18200
ARMANINO FOODS OF DISTINCTION, INC.
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1041418
(State or other jurisdiction (I.R.S. Employer Identification
incorporation or organization) Number)
30588 San Antonio St., Hayward, CA 94544
(Address of principal executive office)(Zip Code)
Issuer's telephone number, including area code: (510) 441-9300
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
There were 1,566,804 shares of the Issuer's Common Stock outstanding as of
March 31, 2001.
Transitional Small Business disclosure Format. Yes [ ] No [X]
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
ASSETS
March 31, 2001 December 31, 2000
-------------- -----------------
Current Assets:
Cash and cash equivalents $2,389,583 $ 2,400,392
Treasury bills held to maturity - 197,882
Accounts receivable 1,351,195 1,177,575
Inventory 1,291,745 1,311,617
Prepaid expenses 190,303 185,252
Current deferred tax asset 139,526 150,000
---------- -----------
Total Current Assets 5,362,352 5,422,718
Property and Equipment, Net 4,044,086 4,181,102
Other Assets:
Deposits 13,000 13,000
Goodwill, net 406,938 417,438
---------- -----------
Total Other Assets 419,938 430,438
---------- -----------
Total Assets $9,826,376 $10,034,258
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable & accrued expenses $ 764,897 $ 1,011,095
Income Taxes Payable 51,600 -
Dividends payable 78,340 79,681
Current portion of capital leases 53,437 52,220
---------- -----------
Total Current Liabilities 948,274 1,142,996
Deferred tax liability 398,000 398,000
Capital lease obligations 28,623 42,447
---------- -----------
Total Liabilities 1,374,897 1,583,443
Stockholders' Equity:
Common stock 7,700,998 7,700,998
Additional paid in capital 22,311 22,311
Retained earnings 728,170 727,506
---------- -----------
Total Stockholders' Equity 8,451,479 8,450,815
---------- -----------
Total Liabilities & Stockholders'
Equity $9,826,376 $10,034,258
========== ===========
The accompanying notes are an integral part of these condensed financial
statements. The balances for December 31, 2000 were taken from the audited
financial statements at that date and condensed.
2
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Condensed Consolidated Statements of Operations
For the Quarter Ended March 31, 2001 and 2000
(Unaudited)
March 31, 2001 March 31, 2000
-------------- --------------
Net Sales $3,134,377 $3,089,179
Cost of Goods Sold 1,942,514 1,951,985
---------- ----------
Gross Profit 1,191,863 1,137,194
Operating Expenses:
General and administrative 374,957 390,035
Salaries and wages 369,391 294,382
Commissions 103,946 99,183
Advertising, demonstrations, promotions,
and slotting allowances 241,445 224,417
---------- ----------
Total Operating Expenses 1,089,739 1,008,017
Income From Operations 102,124 129,177
Other Income 38,954 48,170
---------- ----------
Income From Continuing Operations Before
Income Taxes 141,078 177,347
Current Tax Expense 51,600 53,100
Deferred Tax Expense 10,474 17,839
---------- ----------
Net Income $ 79,004 $ 106,408
========== ==========
Basic Earnings Per Share $ .05 $ .06
========== ==========
Weighted Average Common Shares
Outstanding 1,566,804 1,828,905
========== ==========
Diluted Earnings Per Share $ .05 $ . 06
========== ==========
Weighted Average Common Shares
Outstanding Assuming Dilution 1,566,804 1,884,832
========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
3
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Condensed Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2001 and 2000
(Unaudited)
March 31, 2001 March 31, 2000
-------------- --------------
Cash Flows From Operating Activities:
Net income $ 79,004 $ 106,408
Adjustment to reconcile net income
to net cash provided by operations:
Depreciation and amortization 180,500 170,977
Provision for deferred taxes 10,474 70,939
Changes in assets and liabilities:
(Increase)/Decrease in accounts
receivable (173,620) 329,850
(Increase)/Decrease in inventories 19,872 (57,635)
Decrease in prepaid expenses (5,051) 25,171
Decrease in accounts payable and
accrued expenses (246,198) (50,563)
Increase in income taxes payable 51,600 -
---------- ----------
Total Adjustments (162,423) 488,739
---------- ----------
Net Cash Provided By (Used For)
Operating Activities (83,419) 595,147
Cash Flows From Investing Activities:
Capital expenditures (32,984) (240,094)
Purchase/Reduction of U.S. Treasury
Bills, net 197,882 -
---------- ----------
Net Cash Provided By (Used For)
Investing Activities 164,898 (240,094)
---------- ----------
Cash Flows From Financing Activities:
Dividends paid (79,681) -
Purchased and cancelled common stock - (374,360)
Payments on capital lease obligations (12,607) (11,498)
---------- ----------
Net Cash (Used For) Financing
Activities (92,288) (385,858)
Net (Decrease) In Cash and Cash
Equivalents (10,809) (30,805)
Cash and Cash Equivalents Beginning of
Period 2,400,392 3,142,068
---------- ----------
Cash and Cash Equivalents End of Period $2,389,583 $3,111,263
========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
4
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2001
(Unaudited)
Note 1 - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments, consisting of normal recurring accruals, considered necessary
for a fair presentation have been included. It is suggested that these
condensed consolidated financial statements be read in conjunction with the
December 31, 2000 audited financial statements and notes thereto for Armanino
Foods of Distinction, Inc. The results of operations for the periods ended
March 31, 2001 and 2000 are not necessarily indicative of the operating
results for the full year.
The condensed consolidated financial statements include the accounts of
Armanino Foods of Distinction, Inc. ("Parent") and it's wholly-owned dormant
subsidiary AFDI, Inc.
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments (Treasury Bills) purchased with a maturity of
three months or less to be cash equivalents.
The Company acquired a subsidiary (Alborough, Inc.) during May, 1996.
The Company recorded goodwill in the amount of $609,938 as part of the
purchase. The Company is amortizing the goodwill over 15 years, on a straight
line basis.
Earnings Per Share The Company calculates earnings per share in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share," which requires the Company to present basic and diluted
earnings per share. The computation of basic earnings per share is based on
the weighted average number of shares outstanding during the periods
presented. The computation of diluted earnings per share is based on the
weighted average number of outstanding common shares during the year plus,
when their effect is dilutive, additional shares assuming the exercise of
certain vested and non-vested stock options and warrants, reduced by the
number of shares which could be purchased from the proceeds.
The weighted average common shares and common equivalent shares
outstanding for purposes of calculating earnings per share was as follows:
March 31, 2001 March 31, 2000
-------------- --------------
Weighted average common shares
outstanding used in basic earnings
per share for the three months ending 1,566,804 1,828,905
Effect of dilutive stock options - 55,927
--------- ---------
Weighted average common shares and
potential dilutive common equivalent
shares outstanding used in dilutive
earnings per share 1,566,804 1,884,832
========= =========
5
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Notes to CondenseSd Consolidated Financial Statements
March 31, 2001
(Unaudited)
Note 1 - Continued
For the three months ended March 31, 2001 the Company had 492,800 stock
options that could potentially dilute earnings per share in the future that
were not included in the diluted computation because to do so would have been
antidilutive for the periods presented.
Note 2 - Inventory
Inventory is carried at the lower of cost or market with cost being
determined on the first-in, first-out method and consisted of the following at
March 31, 2001 and December 31, 2000:
March 31, 2001 December 31, 2000
-------------- -----------------
Raw materials & supplies 424,405 357,784
Finished goods 867,340 953,833
---------- ----------
$1,291,745 $1,311,617
========== ==========
Note 3 - Related Party Transactions
The Company incurred $5,145 and $8,631 respectively, for the three months
ended March 31, 2001 and 2000, in accounting and consulting fees to Polly,
Scatena, Gekakis & Co., an accounting firm, the managing partner of which is
also a stockholder and director of the Company. Services provided by the
accounting firm are an extension of the internal accounting functions of the
Company, as well as management, business and systems consulting.
Note 4 - Property and Equipment
Property and equipment consists of the following:
March 31, 2001 December 31, 2000
-------------- -----------------
Furniture & Office Equipment $ 366,966 $ 363,495
Plant Machinery & Equipment 5,196,504 5,191,811
Leasehold Improvements 1,916,476 1,891,656
---------- ----------
7,479,946 7,446,962
Accumulated Depreciation (3,435,860) (3,265,860)
---------- ----------
$4,044,086 $4,181,102
========== ==========
6
PART I - FINANCIAL INFORMATION
ARMANINO FOODS OF DISTINCTION, INC.
Notes to Condensed Consolidated Financial Statements
March 31, 2001
(Unaudited)
Note 5 - Income Taxes
The Company accounts for income taxes in accordance with FASB Statement
109, "Accounting for Income Taxes."
As of March 31, 2001 and December 31, 2000 the net deferred tax assets
and liabilities consisted of the following:
March 31, 2001 December 31, 2000
-------------- -----------------
Current deferred tax asset $ 139,526 $ 150,000
Deferred Tax Liability (398,000) (398,000)
Note 6 - Stockholders' Equity
Stock Options:
As of March 31, 2001, the Company had 492,800 outstanding stock options
to purchase the Company's stock at prices ranging from $4.30 to $5.72 per
share to current and former employees, directors and former consultants,
expiring in March 2001 through February 2010.
Dividends:
On March 31, 2001, the Company declared a cash dividend of $.05 per share
payable to shareholders of record on April 12, 2001. The cash dividend in
the amount of $78,340 will be paid on May 4, 2001.
Note 7 - Subsequent Event
The Company has reached an agreement in principle to acquire the meatball
and breaded chicken production line equipment of Pan Ready Foods, Inc. of
South San Francisco, CA. The purchase and set-up of equipment is scheduled
for completion by October 1, 2001. The Company is presently negotiating with
a manufacturer to establish a long-term supply relationship for the production
of these products to our specifications. The manufacturer would use the
equipment to be acquired from Pan Ready Foods, Inc. for producing the
products.
7
PART I - FINANCIAL INFORMATION
ITEM II: MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
Quarter Ended March 31, 2001 v. Quarter Ended March 31, 2000
Net sales for the quarter ended March 31, 2001 were $3,134,377 compared
to $3,089,179 for the quarter ended March 31, 2000. Increased sales were
experienced primarily in the pesto product line. This increase was mostly
offset by decreases in the meatball and pasta product lines. The increases in
the pesto product line sales were the result of promotional programs
implemented in the last several quarters. The decreases in the meatball
product line were primarily due to decreases in the retail segment of the
business. The pasta line decreases were the result of the loss of a co-pack
customer. The Company continues to focus its efforts on expanding its
customer base for all of its products through promotional programs and an
expanded sales force.
Cost of goods sold as a percentage of net sales decreased slightly from
63.2% for the quarter ended March 31, 2000 to 62% for the quarter ended March
31, 2001. The decrease in this percentage for the three months is due to the
shift in the product mix favoring higher margin products.
Operating expenses as a percentage of net sales were 34.8% for the
quarter ended March 31, 2001 as compared to 32.6% for the quarter ended March
31, 2000. The increase this percentage for the quarter is primarily due to
the hiring of personnel to fill vacant positions and new sales positions
created.
Net income from continuing operations for the quarter ended March 31,
2001 was $79,004 compared to a net income of $106,408 for the quarter ended
March 31, 2000. The decrease in net income was due to relatively flat sales
and higher operating expenses.
Liquidity and Capital Resources
At March 31, 2001, the Company had working capital of $4,414,078, an
increase of $134,356 from December 31, 2000. The increase in working capital
is primarily due to the net income for the quarter and a decrease in accounts
payable. Current assets included $3,740,778 in cash, cash equivalents and
accounts receivable. Management believes that this level of working capital
is adequate to meet anticipated needs for liquidity.
During the three months ended March 31, 2001, cash used by operating
activities of the Company amounted to $83,419.
The Company presently has no material commitments for capital
expenditures.
8
PART II
OTHER INFORMATION
II. Other Information
Item 1. Legal proceedings
None
Item 2. Changes In Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission Of Matters To A Vote Of Security Holders.
None
Item 5. Other Information
None
Item 6. Exhibits and Reports On Form 8-K
A. Exhibit - None
B. Reports on Form 8-K - None
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the
undersigned thereunto duly authorized.
ARMANINO FOODS OF DISTINCTION, INC.
Dated: May 4, 2001 By:/s/ William J. Armanino
William J. Armanino
President
Chief Executive Officer
By:/s/Edmond J. Pera
Edmond J. Pera
Treasurer
Chief Financial Officer