SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended January 31, 2004
Commission File No. 000-31797
VERMONT PURE HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 03-0366218
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
67 Holly Court, Williston VT 05495
(Address of principal executive offices) (Zip Code)
(802) 860-1126
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class March 10, 2004
Common Stock, $.001 Par Value 21,474,399
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
INDEX
Page Number
-----------
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of January 31, 2004
(unaudited) and October 31, 2003 3
Condensed Consolidated Statements of Operations for the Three
Months ended January 31, 2004 and 2003 (unaudited) 4
Condensed Consolidated Statements of Cash Flows for the Three
Months ended January 31, 2004 and 2003 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6-11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 12-18
Item 3. Quantitative and Qualitative Disclosures About Market Risk 19-20
Item 4. Controls and Procedures 20
Part II - Other Information 21-26
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures and Exhibit Index 27-28
2
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, October 31,
2004 2003
------------- -------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ - $ 1,170,321
Accounts receivable - net 8,124,112 8,129,111
Inventories 3,225,118 2,965,454
Current portion of deferred tax asset 1,093,000 1,093,000
Other current assets 1,554,608 1,761,617
Unrealized gain on derivatives 2,964 -
------------- -------------
TOTAL CURRENT ASSETS 13,999,802 15,119,504
------------- -------------
PROPERTY AND EQUIPMENT - net of accumulated depreciation 20,126,301 20,625,533
------------- -------------
OTHER ASSETS:
Goodwill 72,909,930 72,899,355
Other intangible assets - net of accumulated amortization 1,174,540 1,247,994
Deferred tax asset 1,171,259 1,156,000
Other assets 271,224 285,678
------------- -------------
TOTAL OTHER ASSETS 75,526,953 75,589,027
------------- -------------
TOTAL ASSETS $ 109,653,056 $ 111,334,064
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long term debt $ 3,386,369 $ 3,148,274
Accounts payable 3,352,508 3,954,619
Accrued expenses 2,418,133 2,750,202
Current portion of customer deposits 171,750 169,504
Unrealized loss on derivatives - 35,504
------------- -------------
TOTAL CURRENT LIABILITIES 9,328,761 10,058,103
Long term debt, less current portion 47,387,381 48,273,782
Customer deposits 2,690,753 2,655,560
------------- -------------
TOTAL LIABILITIES 59,406,895 60,987,445
------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - $.001 par value, 500,000
authorized shares, none issued and outstanding - -
Common stock - $.001 par value, 50,000,000 authorized shares,
21,402,850 issued and 21,331,300 outstanding shares as of
January 31, 2004 and 21,359,437 shares issued and
21,287,887 outstanding as of October 31, 2003 21,474 21,431
Additional paid in capital 57,652,770 57,535,069
Treasury stock, at cost, 71,550 shares (264,735) (264,735)
Accumulated deficit (7,166,313) (6,909,642)
Accumulated other comprehensive income (loss) 2,964 (35,504)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 50,246,161 50,346,619
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 109,653,056 $ 111,334,064
============= =============
The attached notes are an integral part of these
consolidated financial statements.
3
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended January 31,
------------------------------
2004 2003
------------- -------------
(unaudited)
NET SALES $ 16,895,027 $ 15,077,433
COST OF GOODS SOLD 9,117,648 7,398,280
------------- -------------
GROSS PROFIT 7,777,379 7,679,153
------------- -------------
OPERATING EXPENSES:
Selling, general and administrative expenses 6,639,796 6,037,961
Advertising expenses 309,550 299,765
Amortization 73,455 35,933
Other compensation 18,951 38,997
------------- -------------
TOTAL OPERATING EXPENSES 7,041,752 6,412,656
------------- -------------
INCOME FROM OPERATIONS 735,627 1,266,497
------------- -------------
OTHER (EXPENSE) INCOME:
Interest, net (1,014,214) (1,087,174)
Miscellaneous (2,135) 3,810
------------- -------------
TOTAL OTHER (EXPENSE) INCOME (1,016,349) (1,083,364)
------------- -------------
(LOSS) INCOME BEFORE INCOME TAXES (280,722) 183,133
INCOME TAX (BENEFIT) EXPENSE (24,051) 76,176
------------- -------------
NET (LOSS) INCOME $ (256,671) $ 106,957
============= =============
NET (LOSS) INCOME PER SHARE - BASIC $ (0.01) $ 0.01
============= =============
NET (LOSS) PER SHARE - DILUTED $ (0.01) $ 0.00
============= =============
WEIGHTED AVERAGE SHARES USED IN COMPUTATION - BASIC 21,445,458 21,247,797
============= =============
WEIGHTED AVERAGE SHARES USED IN COMPUTATION - DILUTED 21,445,458 21,972,722
============= =============
The attached notes are an integral part of these consolidated financial
statements.
4
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended January 31,
------------------------------
2004 2003
------------- -------------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (256,671) $ 106,957
Adjustments to reconcile net (loss) income to net cash provided by operating
activities:
Depreciation 1,387,026 1,238,913
Amortization 73,455 35,933
Deferred tax asset (benefit) provision (15,259) 64,000
Loss (gain) on disposal of property and equipment 2,135 (3,535)
Non cash compensation 18,951 38,997
Changes in assets and liabilities (net of effect of acquisitions):
Accounts receivable 4,999 71,939
Inventories (259,664) 502,484
Other current assets 207,009 229,364
Other assets 3,879 (140,251)
Accounts payable (602,111) (1,028,530)
Accrued expenses (332,069) (344,483)
Customer deposits 37,439 (36,639)
------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 269,119 735,149
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (905,482) (691,017)
Proceeds from sale of property and equipment 15,554 3,535
Cash used for acquisitions - net of cash acquired - (120,625)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (889,928) (808,107)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit borrowings 203,918 1,800,000
Principal payments of debt (852,224) (2,270,246)
Proceeds from sale of common stock 98,794 89,729
------------- -------------
NET CASH USED IN FINANCING ACTIVITIES (549,512) (380,517)
------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,170,321) (453,475)
CASH AND CASH EQUIVALENTS - beginning of period 1,170,321 652,204
------------- -------------
CASH AND CASH EQUIVALENTS - end of period $ - $ 198,729
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 1,041,301 $ 1,089,597
============= =============
Cash paid for taxes $ 42,863 $ 76,126
============= =============
The attached notes are an integral part of these consolidated financial
statements.
5
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with Form 10-Q instructions and in the
opinion of management contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the condensed
consolidated financial position, results of operations, and cash flows
for the periods presented. The results have been determined on the
basis of generally accepted accounting principles and practices of the
United States of America ("GAAP"), applied consistently with the Annual
Report on Form 10-K of Vermont Pure Holdings, Ltd. (the "Company") for
the year ended October 31, 2003.
On March 2, 2004 the Company completed the sale of the two retail
segments of its business. It has accounted for this transaction on the
basis of GAAP and its accounting policies and procedures. See Note 11
for more information.
Certain information and footnote disclosures normally included in
audited consolidated financial statements presented in accordance with
accounting principles generally accepted in the United States of
America have been condensed or omitted. The accompanying condensed
consolidated financial statements should be read in conjunction with
the condensed consolidated financial statements and notes thereto
incorporated by reference in the Company's Annual Report on Form 10-K
for the year ended October 31, 2003. The results of operations for the
interim periods are not necessarily indicative of the results to be
expected for the full year.
2. STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees." Pro-forma
information regarding net (loss) income and net (loss) income per share
is presented below as if the Company had accounted for its employee
stock options under the fair value method using SFAS No. 123, net of
tax is as follows:
6
Three Months Ended
---------------------------
January 31,
---------------------------
2004 2003
---------- ------------
Net (Loss) Income - As Reported $ (256,671) $ 106,957
Deduct: Effect of compensation expense
determined using fair value, net of income tax 52,221 46,016
---------- ------------
Pro Forma Net (Loss) Income $ (308,892) $ 60,909
========== ============
Basic Net (Loss) Income Per Share:
As Reported $ (.01) $ .01
========== ============
Pro Forma $ (.01) $ .00
========== ============
Diluted Net (Loss) Income Per Share:
As Reported $ (.01) $ .00
========== ============
Pro Forma $ (.01) $ .00
========== ============
There were 65,000 options granted in each of the three month periods
ended January 31, 2004 and 2003. The weighted average fair value of the
options granted for the respective three month periods, using the
Black-Scholes option pricing model, was $1.27 and $1.70, respectively.
Assumptions used for estimating the fair value of the option on the
date of grant under the Black-Scholes option pricing model are as
follows for the three month periods ended January 31:
2004 2003
--------- ---------
Expected Dividend Yield 0% 0%
Expected Life 5 Years 5 Years
Risk free Interest Rate 3.0% 5.7%
Volatility 39% 36%
3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
On April 2, 2001, the Company entered into a swap agreement with
Webster Bank to fix an additional $4,000,000 of our long term debt at
8.53% interest for three years. On July 24, 2001, we entered into a
swap agreement with Webster Bank to fix an additional $4,000,000 of our
long term debt at 7.25% interest for three years. On June 11, 2003, we
entered into an interest rate swap agreement with Webster Bank for $10
million. The agreement fixes the interest rate for that portion of our
senior debt for three years at 3.74%. The swaps are fixed at these
rates based on the current applicable margin of 2% under our loan and
security agreement with Webster Bank. Under the agreement, the
applicable margin can range, based on our financial performance, from
1.25% to 2.25%. The swap rates are based on the floating 30-day LIBOR
rate and are structured such that if the loan rate for the period
exceeds the fixed rate of the swap then the bank pays the Company to
lower the effective interest rate
7
and if the rate is lower than the fixed rate, the Company pays the bank
additional interest.
Based on the floating rate for the three months ended January 31, 2004,
the Company paid $102,000 more in interest than it would have without
the swaps. The Company accounts for changes in the fair value of the
swap agreements by reporting the change in fair value as an unrealized
gain or loss for the purposes of calculating comprehensive (loss)
income (see Note 5).
4. SEGMENTS
The Company prepares detailed information to evaluate its operations on
a segment basis. It accounts for the business in three separate
segments, "Retail", "Retail-Gallons" and "Home and Office".
The segments are identifiable based on the types of products and their
distribution channels.
Retail - Characterized by the sale of water in small, portable
containers that are constructed from clear polyethylene terephthalate
PET plastic. Bottle sizes range from 8 oz. to 1.5 L. These products are
sold to wholesale beverage distributors, supermarkets and convenience
stores.
Retail - Gallons - Characterized by the sale of water in medium-sized,
portable containers that are constructed from HDPE plastic. Bottle
sizes range from one-gallon to 2.5 gallons. These products are sold to
supermarket chains. The Company has this product packed by other
companies and there is a different distribution pattern from other
retail products as well as a distinct retail customer base.
Home and Office - Characterized by the sale of five-gallon reusable
bottles of water and rental of water coolers delivered by the Company's
trucks and employees, and other products that are sold through this
distribution channel which are ancillary to the primary product, such
as office refreshments.
The Company allocates costs directly when possible and uses various
applicable allocation methods to allocate shared costs. There are no
inter-segment revenues for the periods reported.
8
For the three months ended January 31,
Home and Office Retail Retail - Gallons Total
-------------------- -------------------- -------------------- --------------------
(000's $) 2004 2003 2004 2003 2004 2003 2004 2003
- -------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Net Sales $ 11,996 $ 11,518 $ 4,031 $ 3,194 $ 868 $ 365 $ 16,895 $ 15,077
Cost of Goods Sold 5,360 4,824 2,985 2,302 773 272 9,118 7,398
-------- -------- -------- -------- -------- -------- -------- --------
Gross Profit 6,636 6,694 1,046 892 95 93 7,777 7,679
Operating Expenses 5,755 5,232 1,173 1,111 114 70 7,042 6,413
-------- -------- -------- -------- -------- -------- -------- --------
Operating (Loss) Income 881 1,462 (127) (219) (19) 23 735 1,266
Interest Expense (952) (1,012) (51) (61) (11) (14) (1,014) (1,087)
Other (Expense) Income (1) 4 (1) (2) 4
-------- -------- -------- -------- -------- -------- -------- --------
Income (Loss) Before Taxes $ (72) $ 454 $ (179) $ (280) $ (30) $ 9 $ (281) $ 183
======== ======== ======== ======== ======== ======== ======== ========
As a result of the information disclosed in Note 11 we will not be
disclosing financial results by segment in future periods.
5. COMPREHENSIVE (LOSS) INCOME
The following table summarizes comprehensive income for the respective
first quarters:
Three Months Ended
January 31,
----------------------
2004 2003
--------- ---------
Net (Loss) Income $(256,671) $ 106,957
Comprehensive (Loss) Income:
Change in unrealized gain on derivatives
designated as cash flow hedges - net of tax 38,468 96,312
--------- ---------
Comprehensive (Loss) Income $(218,203) $ 203,269
========= =========
6. STOCK
Stock Issued to Directors
The Company issued 5,430 and 9,285 of its common shares to Directors in
lieu of cash for board fees in the first three months of fiscal years
2004 and 2003, respectively. Expense of $19,000 and $39,000 for the
respective quarters was based on the market price on the date of
issuance.
Employee Stock Purchase Plan
On June 15, 1999 the Company's stockholders approved the Vermont Pure
Holdings, Ltd. 1999 Employee Stock Purchase Plan. On January 1, 2001,
employees commenced participation in the plan. The total number of
common shares issued under this plan during the three months ended
January 31, 2004 was 37,983 for proceeds of $98,794. For the three
9
months ended January 31, 2003, 26,235 common shares were issued under
the plan for proceeds of $89,729.
7. INVENTORIES
Inventories consisted of the following at:
January 31, October 31,
2004 2003
------------ ------------
Raw Materials $ 1,021,773 $ 1,131,588
Finished Goods 2,203,345 1,833,866
------------ ------------
Total Inventories $ 3,225,118 $ 2,965,454
============ ============
8. SHIPPING AND HANDLING COSTS
The Company classifies shipping and handling costs as a component of
selling, general and administrative expenses. Shipping and handling
costs were approximately $483,000 and $319,000 for the three months
ended January 31, 2004 and 2003, respectively. The Company does not
charge these costs to its customers.
9. EARNINGS PER SHARE AND WEIGHTED AVERAGE SHARES
The Company considers outstanding in-the-money stock options as
potential common stock in its calculation of diluted earnings per share
and uses the treasury stock method to calculate the applicable number
of shares. The following calculation provides the reconciliation of the
denominators used in the calculation of basic and fully diluted
earnings per share:
Three Months Ended
January 31,
----------------------------
2004 2003
------------ ------------
Net (Loss) Income $ (256,671) $ 106,957
Denominator:
Basic Weighted Average Shares Outstanding 21,445,458 21,247,797
Dilutive effect of Stock Options 0 724,925
------------ ------------
Diluted Weighted Average Shares Outstanding 21,445,458 21,972,722
------------ ------------
Basic (Loss) Earnings Per Share $ (.01) $ .01
============ ============
Diluted (Loss) Per Share $ (.01) $ .00
============ ============
For the three month period ended January 31, 2004 no options were
considered common stock equivalents since, as a result of the net loss
for the quarter, to do so would have been anti-dilutive. There were
2,543,821 options outstanding as of January 31, 2004.
For the three month period ended January 31, 2003, in addition to the
options used to
10
calculate the effect of dilution, there were 30,000 additional options
outstanding. These options were not included in the dilution
calculation because the options' exercise price exceeded the market
price of the underlying common shares.
10. LITIGATION SETTLEMENT
In January 2003, the Company settled a suit alleging that a vendor did
not adequately perform the services rendered in connection with
approximately $500,000 of unpaid billings. In settling the suit, the
Company agreed to pay $50,000 to the vendor in full settlement of the
litigation. In conjunction with the settlement, the parties released
each other from any further liability in the case. A gain of $150,000
was recognized in the first quarter of 2003 since the Company had set
up a reserve for settlement of the suit that exceeded the final amount
paid. The gain has been included as a reduction of selling, general and
administrative expenses.
11. SUBSEQUENT EVENT
On March 2, 2004 the Company completed the sale of substantially all of
the assets related to its Retail and Retail - Gallons segments. The
sale was consummated in conjunction with the signing of this agreement.
Consequently, as of that date, the Company's operations include only
the Home and Office segment of business.
The assets and liabilities sold are as follows, including their
approximate carrying values as of January 31, 2004:
Accounts receivable $ 1,615,000
Inventories 1,989,000
Fixed Assets 7,206,000
Accounts payable 1,469,000
Accrued Expenses 735,000
The sales price was $10,595,000 and consisted of $10,095,000 in cash
and a $500,000 subordinated note from the seller. The price is subject
to adjustment based on the calculation of working capital up to 52 days
after the closing date.
11
PART I - Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto as filed in our Annual Report on Form
10-K for the year ended October 31, 2003 as well as the condensed consolidated
financial statements and notes contained herein.
Forward-Looking Statements
When used in the Form 10-Q and in our future filings with the Securities and
Exchange Commission, the words or phrases "will likely result," "we expect,"
"will continue," "is anticipated," "estimated," "project," "outlook," or similar
expressions are intended to identify "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. We caution
readers not to place undue reliance on any such forward-looking statements, each
of which speaks only as of the date made. Such statements are subject to certain
risks and uncertainties that could cause actual results to differ materially
from historical earnings and those presently anticipated or projected. Among
these risks are water supply and bottling capacity constraints in the face of
significant growth, dependence on outside distributors, and reliance on
commodity price fluctuations as they influence raw material pricing. We have no
obligation to publicly release the result of any revisions which may be made to
any forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
Results of Operations
Business Overview
Throughout our history, we have marketed our bottled water through two major
channels - retail distribution and delivery to home and offices. In the retail
channel, we sell our products to distributors. We have characterized these sales
in two segments - the products we bottle in clear, PET plastic containers and
the products that we buy to resell in larger gallon-size bottles. We bottle and
directly deliver products in three and five gallon bottles to our customers in
homes and offices. In addition, we also deliver ancillary products such as water
coolers and coffee at the same time.
Cost of sales represents the raw materials, labor, and overhead required to
bottle our products. In addition, we incur costs buying products for resale such
as gallons, coolers, and coffee as mentioned above.
Distributing and promoting our products along with the administration of the
business primarily comprise our operating costs. For the retail segments,
distribution costs are expenses incurred for outside services for warehousing
and freight and promotion costs consist of expenses charged directly by
customers and other outside entities for brand recognition. For the home and
office delivery segment, distribution costs consist of personnel and fleet costs
to sell and deliver products while promotional costs consist of advertising.
General and administrative costs are primarily for
12
personnel related to management as well as costs for legal and auditing
services.
On March 2, 2004 we completed the sale of our assets and certain liabilities
related to the retail segments described above. A description of this
transaction can be found in Part II, Item 5 of this filing as well as the
accompanying exhibit. The reader should note that, after the sale, our business
will be made up of what is now the home and office delivery segment only. In
noting this, however, the reader should be cautioned not to rely on segment
disclosure completely for evaluating the company after the sale for two reasons.
First, segment information for Retail and Retail-Gallons includes a portion of
our corporate overhead and interest expense that we allocated to these two
segments that would be absorbed by the Home & Office segment after the sale. At
the same time, with the proceeds from this sale, we will pay down a significant
amount of our corporate debt, which, other things being equal, should reduce the
amount of remaining interest expense that must be carried by the Home & Office
segment. In future periods, we will not report our financial results by segment.
Sales
Sales for the first three months of 2004 were $16,895,000 compared to
$15,077,000 for the first three months of 2003, an increase of $1,818,000 or
12%.
Sales through our Home & Office distribution channel increased to $11,996,000 in
the first three months of 2004 from $11,518,000 for the same period last year,
an increase of $478,000 or 4%. The increase was the result of acquisitions. Net
of acquisitions, sales were down 3%, primarily due to lower sales prices and
lower demand for products in this segment.
The comparative breakdown of sales of the product lines within the segment for
the first three months of 2004 and 2003 is as follows:
2004 2003 Difference
Product Line (in 000's $) (in 000's $) (in 000's $) % Diff.
- ------------------------- ------------ ------------ ------------ -------
Water $ 5,507 $ 5,448 $ 59 1%
Coffee and Other Products 4,298 3,923 375 10%
Equipment Rental 2,191 2,147 44 2%
------------ ------------ ------------ -------
Total $ 11,996 $ 11,518 $ 478 4%
============ ============ ============ =======
Water - Net of acquisitions, water sales decreased 7%. Average sales price per
bottle decreased 1% as a result of competitive pressure while volume decreased
3% as a result of lower market demand. In addition, sales decreased 3% because
of the loss of a distributor.
Coffee and Other Products - The acquisition of a large office coffee distributor
during the second half of fiscal year 2003 accounted for $342,000 of the
increase in sales for the first quarter of 2004 compared to the first quarter of
2003. Sales of single-serve coffee packages are the highest growth item in the
category.
Equipment Rental - Net of acquisitions, equipment rental income was down 4%.
Water cooler rental was down as a result of the lower market demand referred to
above and competition from retail
13
outlets selling units. Placements were down 1% and average price was down 3%.
Brewer rentals increased slightly as a result of demand for single serve units.
Sales of our consumer retail products increased to $4,031,000 in the first three
months of 2004 from $3,194,000 in the first three months of 2003, an increase of
$837,000, or 26%. Total case volume in the first quarter increased 87% from the
comparable quarter in 2003. However, as a result of competitive pressure,
average selling price decreased 21%.
The comparative breakdown of sales by product line for this segment is as
follows:
2004 2003 Difference
Brand (in 000's $) (in 000's $) (in 000's $) % Diff.
- ---------------- ------------ ------------ ------------ --------
Private Label $ 3,092 $ 2,250 $ 842 37%
Vermont Pure(R) 455 518 (63) (12%)
Hidden Spring(R) 484 426 58 14%
------------ ------------ ------------ --------
Total $ 4,031 $ 3,194 $ 837 26%
============ ============ ============ ========
Private Label - The increase in sales of private label products is attributable
to the acquisition of new customers and continued growth of market demand. Sales
volume increased 115% while average selling price fell 24% in the first quarter
of 2004 compared to the first quarter of 2003 due to the competitive environment
and product sales mix.
Vermont Pure(R) & Hidden Spring(R) - Sales of branded products continued to
decline as a result of competition. Volume decreased 2% and average selling
price decreased 6%.
Sales of water in the one-gallon size more than doubled in the first three
months of fiscal year 2004 to $868,000 from $365,000 in the first three months
fiscal year 2003. The increase is a combination of a 288% increase in volume and
a 40% decrease in price. The significant changes in volume and price are a
result of changes in the customer base for this category. Gallons are only sold
to accommodate customers whose consumer retail packages we bottle.
Gross Profit/Cost of Goods Sold
Gross profit increased $98,000, or 1%, to $7,777,000 for the first three months
2004 from $7,679,000 for the first three months of 2003. As a percentage of
sales, gross profit decreased to 46% of sales from 51% for the respective
periods. The decrease in gross profit, as a percentage of sales, was
attributable to lower average selling prices, higher costs, and higher
percentage of sales in the retail segments.
Gross profit for the Home & Office segment decreased to $6,636,000, or 55% of
sales, in the first three months of 2004 from $6,694,000, or 58% of sales in the
first three months of 2003. The decrease in gross profit was due to lower sales
volume and average selling prices, particularly for our higher margin
water-related products. In addition, increased cost of sales lowered margins.
The increase in cost of sales is attributable to higher costs of production as a
result of higher costs of materials for bottles and labor, and higher service
costs as a result of lower sales volume per customer.
14
Gross profit for the consumer retail segment increased to $1,046,000, for the
first three months of 2003 from $892,000 for the first three months of 2003. As
a percentage of sales, gross profit decreased to 26% of sales from 28% for the
respective periods. The increase in gross profit was attributable to higher
sales volume while the decrease in gross profit as a percentage of sales is a
consequence of lower average selling prices. Lower average selling prices are a
result of competitive pressures, especially affecting single-serve sizes, as
well as a change in product mix from branded to private label. In the first
quarter of 2004, production costs decreased 10% as compared to the first quarter
of 2003 primarily as a result of higher volume. However, lower costs did not
offset the decrease in average selling prices.
Gross profit for the retail gallon segment remained stable despite a substantial
increase in sales. Gross profit was $95,000, or 11% of sales, in the first three
months of 2004 compared to $93,000, or 25% of sales in the first three months of
2003. The decrease in gross profit as a percentage of sales is a result of lower
average selling prices.
Income from Operations/Operating Expenses
Total operating expenses increased to $7,042,000 in the first three months of
2004 from $6,413,000 in the first three months of 2003, an increase of $629,000,
or 10%. Operating expenses in the Home & Office and retail gallon segment
increased $523,000, or 10% and $44,000, or 63%, respectively. Operating expenses
in the retail segment decreased $62,000, or 6%.
Selling, general and administrative (SG&A) expenses were $6,640,000 and
$6,038,000 for the first quarters of 2004 and 2003, respectively, an increase of
$602,000, or 10%. For the Home & Office segment, SG&A expenses increased to
$5,455,000 for the first quarter of 2004 from $4,964,000 in the first quarter of
2003, an increase of $491,000, or 10%. This increase was attributable to
personnel and vehicle costs related to product delivery, in part as a result of
the increased route sales. In addition, settlement of a law suit in the first
quarter of 2003 resulted in a cost savings of $150,000 that did not reoccur in
the first quarter of 2004. SG&A expenses in the retail segments increased 11% to
$1,072,000 for the first three months of 2004 from $967,000 during the
comparable period last year. The increase of $105,000 was primarily attributable
to higher transportation, storage, and administrative costs associated with
higher sales volume. SG&A expenses increased for the retail gallon segment to
$113,000 in the first quarter of 2004 from $107,000 in the first quarter of
2003. The slight increase is due to higher freight as a result of higher volume,
and lower warehousing and administrative costs.
Advertising expenses were $310,000 in the first quarter of 2004 compared to
$300,000 in the first quarter of 2003, an increase of $10,000, or 3%. For the
Home & Office segment, advertising increased 11% to $215,000 in 2004 from
$194,000 in 2003. The increase is reflective of a slightly increased advertising
effort but the sales strategy remains focused more on direct sales than
advertising. Advertising for the retail segment totaled $95,000 in 2004 compared
to $106,000 in 2003, a decrease of 12%. For the retail segments, as private
label products make up a larger part of our sales mix, less promotional support
is required.
15
Amortization increased to $73,000 in the first three months of 2004 from $36,000
in the first three months of 2003 as a result of intangible assets that were
acquired as part of several acquisitions in fiscal year 2003. All amortization
is accounted for in the Home & Office segment.
Other compensation in the first three months of 2004 totaled $19,000 compared to
$39,000 in the first three months of 2003. This expense relates to compensation
paid to directors in company stock in lieu of cash for board fees.
Income from operations for the first quarter of 2004 was $736,000 compared to
$1,266,000 in the first quarter of 2003, a decrease of $530,000, or 42%. The
decrease was a result of lower pricing in the retail segment and lower market
demand resulting in increased competition and lower pricing in the Home & Office
segment. In addition, higher distribution costs have further eroded operating
margins.
Interest, Taxes, and Other Expenses
Net interest expense was $1,014,000 for the first three months of 2004 compared
to $1,087,000 in the first three months of 2003, a decrease of $73,000. This was
reflective of lower market interest rates on the variable portion of our senior
debt and operating line of credit. In addition, a large, high priced swap
matured at the beginning of the quarter converting a large portion of our fixed
rate debt to a lower variable rate.
The loss before income tax expense was $281,000 for the first three months of
2004 compared to income before taxes of $183,000 in the first three months of
2003. The loss resulted in a net tax benefit of $24,000 for the first quarter of
2004 compared to tax expense of $76,000 for the same period a year ago. The
effective tax benefit rate of 9% is considerably lower than the 38% effective
tax expense rate for the fiscal year ended October 31, 2003. The reason for the
lower effective rate in the first quarter of fiscal year 2004 is that certain
state taxes are not income based and require minimum payments so we have not
accrued the full benefit based on our annual effective tax rate and our net loss
for the quarter.
Net Income
Lower interest and taxes did not offset lower prices and higher costs mentioned
earlier. The result was a net loss of $257,000 in the first three months of 2004
compared to net income of $107,000 for the first three months of 2003, a
decrease of $363,000.
Based on the weighted average number of shares of common stock outstanding of
21,445,458 as of January 31, 2004, the net loss per share was $.01 per share -
basic and diluted in the first quarter of 2004. This compares to net income of
$.01 per share, basic, and no earnings or loss per share, diluted, in the first
quarter of 2003.
Trends
During the last 18 to 24 months the stagnant economic environment in our core
markets has continued to have a negative effect on sales in the Home & Office
segment. Net of acquisitions, these conditions have resulted in lower volume
through loss of customers, reduced business with
16
continuing customers, and increased competition causing lower average selling
prices. In addition, those products that reflect increased sales are lower
margin products. Though we have seen some abatement to these trends in the last
couple of months, a reversing trend has not developed. The prospect of other
costs such as fuel and insurance remains uncertain. We believe that variable
external factors such as economic conditions and commodity pricing will not
change current trends in the near term but we are positioning our business for
the long term.
We expect to be profitable for the year and continue to generate positive cash
flow. This will allow us to proceed with our strategic direction - increasing
market share by building density in our core markets though internal growth and
acquisitions. By continuing to build density our intent is to become more
efficient and position our business so that cyclical improvements in economic
conditions will be more likely to produce growth and improve our profitability.
Liquidity and Capital Resources
As of January, 31 2004 we had working capital of $4,671,000 compared to
$5,062,000 on October 31, 2003, a decrease of $391,000. The decrease in working
capital was primarily a result of using cash for capital expenditures and
repayment of debt in the first quarter of 2004. Capital expenditures consisted
of bottling equipment, and coolers, brewers, bottles and racks related to home
and office distribution. During the quarter, we paid $648,000 for regularly
scheduled debt repayments on our senior credit facility.
We borrowed and repaid $204,000 on our working capital line of credit during the
quarter and we had borrowed $1,600,000 on our acquisition line of credit as of
the end of the quarter. There is $921,000 committed for letters of credit on the
working capital line.
On November 3, 2003 our largest swap agreement matured. To date, we have not
entered into any additional agreements so the notional amount of $8,000,000 is
accruing at a lower variable rate. In addition, two more of our swap agreements
will be maturing over the next two quarters. Currently, the fixed interest rates
pursuant to these agreements are substantially higher than market rates. For a
schedule and further explanation of our fixed debt instruments, see Item 3.
As our swap agreements mature, lower fixed or market interest rates may lower
our debt service and provide more cash in future periods. We expect that cash on
hand and the cash generated from future operations combined with the operating
line of credit with Webster Bank will provide sufficient cash flow for routine
operations and growth in the foreseeable future. However, no assurance can be
given that this will be the case and that adequate financing at reasonable
interest rates will be secured if more cash is needed. We are in compliance with
the financial covenants of our financing agreements as of January 31, 2004.
In addition to our senior and subordinated debt commitments, we have significant
future cash commitments, primarily in the form of operating leases that are not
reported on the balance sheet. The following table sets forth our commitments as
of January 31, 2004:
17
Coffee Purchase
Fiscal Year Debt Operating Leases Commitments Total
- ----------- ------------ ---------------- --------------- -------------
2004 $ 2,498,000 $ 1,468,000 $ 630,000 $ 4,596,000
2005 3,822,000 1,758,000 167,000 5,747,000
2006 4,005,000 1,521,000 5,526,000
2007 4,195,000 1,314,000 5,509,000
2008 36,254,000 1,148,000 37,402,000
Thereafter 0 1,825,000 1,825,000
------------ ---------------- --------------- -------------
Total $ 50,774,000 $ 9,034,000 $ 797,000 $ 60,605,000
============ ================ =============== =============
As of the date of this report, we have no other material contractual obligations
or commitments.
On March 2, 2004 we completed the sale of assets and certain liabilities related
to our retail operations. In conjunction with the sale of these assets, we
received cash proceeds of $10,095,000 and a promissory note from the buyer for
$500,000. The assets consisted of accounts receivable, inventory and fixed
assets. The buyer also assumed accounts payable. We will use the proceeds, net
of some of the transaction costs, to reduce our debt.
For more information concerning the sale see Part II, item 5.
18
PART I - Item 3
QUANTITIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks relating to our operations result primarily from changes in
interest rates and commodity prices.
INTEREST RATE RISKS
At January 31, 2004, we had approximately $10,000,000 of long term debt subject
to variable interest rates. Under the loan and security agreement with Webster
Bank, we currently pay interest at a rate of LIBOR plus a margin of 2.25%. A
hypothetical 100 basis point increase in the LIBOR rate would result in an
additional $100,000 of interest expense on an annualized basis. Conversely, a
decrease would result in a proportionate interest cost savings.
We use interest rate "swap" agreements to curtail interest rate risk. The
following table summarizes our current agreements:
Notional Amount Fixed Interest Rate Maturity Date
$4,000,000 8.78% April 2, 2004
$4,000,000 7.50% July 24, 2004
$10,000,000 3.99% June 11, 2006
In aggregate, we have fixed the interest rate on this $18,000,000 of debt at
5.83% until July 2004. Currently, we believe that this is above market rates but
we expect our cumulative interest rates to be at or below market after July. We
will continue to evaluate swap rates as agreements mature. They serve to
stabilize our cash flow and expenses but ultimately may cost more or less in
interest than if we had carried all of our debt at a variable rate over the swap
term. Our strategy is to keep the fixed and variable portions of our senior debt
approximately equal to offset and minimize the respective risk of rising and
falling interest rates. Future low rates may compel us to fix a higher portion
to further stabilize cash flow and expenses as we monitor short and long term
rates and debt balances.
COMMODITY PRICE RISKS
Coffee
The cost of our coffee purchases are dictated by commodity prices. We enter into
contracts to mitigate market fluctuation of these costs by fixing the price for
certain periods. Currently we have fixed the price of our anticipated supply
through December 2004 at "green" prices ranging from $.61-$.74 per pound. We are
not insulated from price fluctuations beyond that date. At our existing sales
levels, an increase in pricing of $.10 per pound would increase our total cost
for coffee $75,000. In this case, competitors that had fixed pricing might have
a competitive advantage.
19
Diesel Fuel
We own and operate vehicles to deliver product to customers. The cost of fuel to
operate these vehicles fluctuates over time. We estimate that a $0.10 increase
per gallon in fuel cost would result in an increase to operating costs of
approximately $60,000.
PART I - Item 4.
CONTROLS AND PROCEDURES
Our Chairman and Chief Executive Officer, our Chief Financial Officer, and other
members of our senior management team have evaluated the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)). Based on such evaluation, our Chairman and Chief Executive
Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures, as of the end of the period covered by this report, were
adequate and effective to provide reasonable assurance that information required
to be disclosed by the Company, including our consolidated subsidiaries, in
reports that we file or submit under the Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the Commission's
rules and forms.
The effectiveness of a system of disclosure controls and procedures is subject
to various inherent limitations, including cost limitations, judgments used in
decision making, assumptions about the likelihood of future events, the
soundness of internal controls, and fraud. Due to such inherent limitations,
there can be no assurance that any system of disclosure controls and procedures
will be successful in preventing all errors or fraud, or in making all material
information known in a timely manner to the appropriate levels of management.
20
PART II - Other Information
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
(a) None.
(b) None.
(c) None.
Item 3 - Defaults upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
On March 2, 2004 we completed the sale of our retail PET business to
Micropack Bottled Water, a company based in Natick, Massachusetts.
Specifically, we sold the assets of Vermont Pure Springs, Inc. that we
used in the processing, bottling, marketing, production, distribution
and sale of spring water to retail channels of distribution in PET
packages of 1 gallon or smaller. This included our retail consumer
business under our own brands, as well as the private label business
that we packed for others. The sale includes the springs, the
manufacturing facility, the inventory, and the related machinery and
equipment located in Randolph Center, Vermont.
We will retain the Vermont Pure(R) trademark and continue to distribute
water under that brand throughout our Home & Office distribution area,
while licensing it to Micropack for use in the bottling and
distribution of retail products. Micropack has acquired our Hidden
Spring(R) trademark and will license it back to us for Home & Office
distribution. We will relocate our five gallon Home & Office bottling
operations from Randolph to another location in Vermont, and source our
spring water under an existing water supply agreement. We will relocate
our corporate headquarters to our Williston, Vermont facility. The sale
of our retail PET business should make our financial results somewhat
less subject to seasonal effects, although we expect that some
seasonality will remain.
The purchase price consisted of cash in the amount of $10,095,000, plus
a two-year 5% subordinated note in the principal amount of $500,000
from Micropack, with no principal
21
payments until maturity. This consideration was based on the underlying
market value of the assets and liabilities transferred at the date of
the transaction. In conjunction with the transaction, we have paid down
$10,195,000 in debt.
Pro forma financial information is included in Exhibit 99.1 in the form
of statement of operations for the fiscal year ending October 31, 2003
and the three months ending January 31, 2004 as well as a balance sheet
as of January 31, 2004. The information is presented as though the
transaction occurred at the beginning of the 2003 fiscal year and pro
forma adjustments are described in the exhibit and referenced to the
financials.
For the pro forma periods, sales are substantially less than actual as
a result of the loss of retail and retail-gallon sales. However, gross
margin as a percentage of sales increases significantly from an actual
of 46% in the first three months of 2004 to a pro forma of 55% and an
actual of 46% in fiscal year 2003 to a pro forma of 58%. In addition,
interest costs decrease significantly as a result of the pay down of
debt. Corporate overhead allocated to the retail segments would not
disappear but there will be about a 10% decrease in overhead costs as a
result of the transaction. The increased profit margin combined with
lower interest costs would result in an improvement in net income
(loss) on a pro forma basis when compared to actual. For fiscal year
2003, net income would have been $1,608,000, or $.08 per share on a pro
forma basis compared to actual net income of $1,353,000, or $.06 a
share. For the first three months of fiscal year 2004, the net loss
would have been $119,000, or $(.01) per share on a pro forma basis
compared to actual net income of $257,000, or $(.01) a share.
Consequently, we feel that the disposal of these assets have not
compromised our earnings. Moreover, we believe we are in a better
position to use our resources to continue to grow our Home & Office
business and to improve our balance sheet. To that end, we intend to
continue our strategy of making acquisitions of other Home & Office
companies when we perceive the fit with our business to be
advantageous.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
3.1 Certificate of Incorporation of the Company. (Incorporated
by reference to Exhibit B to Appendix A to the Proxy
Statement included in the S-4 Registration Statement filed
by Vermont Pure Holdings, Ltd., f/k/a VP Merger Parent,
Inc., File No. 333-45226, on September 6, 2000 (the "S-4
Registration Statement").)
3.2 Certificate of Amendment of Certificate of Incorporation
of the Company filed October 5, 2000. (Incorporated by
reference to Exhibit 4.2 of the
22
Report on Form 8-K filed by the Company on October 19,
2000 (the "Merger 8-K").)
3.3 By-laws of the Company. (Incorporated by reference from
Exhibit 3.3 to Form 10-Q for the Quarter ended July 31,
2001.)
4.1 Registration Rights Agreement among the Company, Peter K.
Baker, Henry E. Baker, John B. Baker and Ross Rapaport.
(Incorporated by reference to Exhibit 4.6 of the Merger
8-K.)
10.1* 1993 Performance Equity Plan. (Incorporated by reference
from Exhibit 10.9 of Registration Statement 33-72940.)
10.2* 1998 Incentive and Non-Statutory Stock Option Plan, as
amended. (Incorporated by reference to Appendix A to the
Definitive Proxy Statement dated March 10, 2003.)
10.3* 1999 Employee Stock Purchase Plan. (Incorporated by
reference to Exhibit A of the 1999 Definitive Proxy
Statement.)
10.4* Employment Agreement between the Company and Timothy G.
Fallon. (Incorporated by reference to Exhibit 10.13 of the
S-4 Registration Statement.)
10.5* Employment Agreement between the Company and Bruce S.
MacDonald. (Incorporated by reference to Exhibit 10.14 of
the S-4 Registration Statement.)
10.6* Employment Agreement between the Company and Peter K.
Baker. (Incorporated by reference to Exhibit 10.15 of the
S-4 Registration Statement.)
10.7* Employment Agreement between the Company and John B.
Baker. (Incorporated by reference to Exhibit 10.16 of the
S-4 Registration Statement.)
10.8* Employment Agreement between the Company and Henry E.
Baker. (Incorporated by reference to Exhibit 10.17 of the
S-4 Registration Statement.)
10.9 Lease of Buildings and Grounds in Watertown, Connecticut
from the Baker's Grandchildren Trust. (Incorporated by
reference to Exhibit 10.22 of the S-4 Registration
Statement.)
23
10.10 Lease of Grounds in Stamford, Connecticut from Henry E.
Baker. (Incorporated by reference to Exhibit 10.24 of the
S-4 Registration Statement.)
10.11 Lease of Building in Stamford, Connecticut from Henry E.
Baker. (Incorporated by reference to Exhibit 10.23 of the
S-4 Registration Statement.)
10.12 Loan and Security Agreement between the Company and
Webster Bank, M &T Bank, Banknorth Group, and Rabobank
dated March 5, 2003. (Incorporated by reference to Exhibit
10.12 of Form 10-Q for the quarter ended January 31,
2003.)
10.13 Form of Term Note from the Company to Webster Bank and
participants dated March 5, 2003. (Incorporated by
reference to Exhibit 10.12 of Form 10-Q for the quarter
ended January 31, 2003.)
10.14 Amended and Restated Subordinated Promissory Note from the
Company to Henry E. Baker dated March 5, 2003.
(Incorporated by reference to Exhibit 10.12 of Form 10-Q
for the quarter ended January 31, 2003.)
10.15 Amended and Restated Subordinated Promissory Note from the
Company to Joan Baker dated March 5, 2003. (Incorporated
by reference to Exhibit 10.12 of Form 10-Q for the quarter
ended January 31, 2003.)
10.16 Amended and Restated Subordinated Promissory Note from the
Company to John B. Baker dated March 5, 2003.
(Incorporated by reference to Exhibit 10.12 of Form 10-Q
for the quarter ended January 31, 2003.)
10.17 Amended and Restated Subordinated Promissory Note from the
Company to Peter K. Baker dated March 5, 2003.
(Incorporated by reference to Exhibit 10.12 of Form 10-Q
for the quarter ended January 31, 2003.)
10.18 Amended and Restated Subordinated Promissory Note from the
Company to Ross S. Rapaport, Trustee, dated March 5, 2003.
(Incorporated by reference to Exhibit 10.12 of Form 10-Q
for the quarter ended January 31, 2003.)
10.19 Subordination and Pledge Agreement from Henry E. Baker to
Webster Bank dated March 5, 2003. (Incorporated by
reference to Exhibit 10.12 of Form 10-Q for the quarter
ended January 31, 2003.)
10.20 Subordination and Pledge Agreement from Joan Baker to
Webster Bank dated March 5, 2003. (Incorporated by
reference to Exhibit 10.12 of Form 10-Q for the quarter
ended January 31, 2003.)
24
10.21 Subordination and Pledge Agreement from John B. Baker to
Webster Bank dated November 1, 2001. (Incorporated by
reference to Exhibit 10.12 of Form 10-Q for the quarter
ended January 31, 2003.)
10.22 Subordination and Pledge Agreement from Peter K. Baker to
Webster Bank dated March 5, 2003. (Incorporated by
reference to Exhibit 10.12 of Form 10-Q for the quarter
ended January 31, 2003.)
10.23 Subordination and Pledge Agreement from Ross S. Rapaport,
Trustee, to Webster Bank dated March 5, 2003.
(Incorporated by reference to Exhibit 10.12 of Form 10-Q
for the quarter ended January 31, 2003.)
10.24 Form of Acquisition/Capital Line of Credit Note from the
Company to Webster Bank and participants dated March 5,
2003. (Incorporated by reference to Exhibit 10.12 of Form
10-Q for the quarter ended January 31, 2003.)
10.25 Form of Revolving Line of Credit Note from the Company to
Webster Bank and participants dated March 5, 2003.
(Incorporated by reference to Exhibit 10.12 of Form 10-Q
for the quarter ended January 31, 2003.)
10.26** Form of Indemnification Agreements, dated November 1,
2002, between the Company and the following Directors and
Officers:
Henry E. Baker
John B. Baker
Peter K. Baker
Phillip Davidowitz
Timothy G. Fallon
Robert C. Getchell
David Jurasek
Carol R. Lintz
Bruce S. MacDonald
David R. Preston
Ross S. Rapaport
Norman E. Rickard
Beat Schlagenhauf
(Incorporated by reference to Exhibit 10.27 of Form 10-K
for the year ended October 31, 2002.)
10.27 Purchase and Sale Agreement among Vermont Pure Springs,
Inc., Vermont Pure Holdings, Ltd. and Micropack
Corporation dated as of March 1, 2004
25
10.28 Trademark License Agreement between Vermont Pure Holdings
Ltd. and MicroPack Corporation dated March 1, 2004
10.29 Supply and Sublicense Agreement between Vermont Pure
Holdings Ltd. and MicroPack Corporation dated March 1,
2004
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley act of 2002.
99.1 Vermont Pure Holdings, Ltd. Pro Forma Statement of
Operations for the fiscal year ended October 31, 2003 and
three months ended January 31, 2004 and Pro Forma Balance
Sheet as of January 31, 2004.
* Relates to compensation
** The form contains all material information concerning the
agreement and the only differences are the name and the
contact information of the director or officer who is party to
the agreement.
(b) Reports on Form 8-K
A Report on Form 8-K was filed on March 9, 2004 in conjunction
with the press release announcing our financial results for
fiscal year 2003.
26
SIGNATURE
Pursuant to the requirements of Section 13 or 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.
Dated: March 16, 2004
Williston, Vermont
VERMONT PURE HOLDINGS, LTD.
By: /s/ Bruce S. MacDonald
---------------------------------------
Bruce S. MacDonald
Vice President, Chief Financial Officer
(Principal Accounting Officer and
Principal Financial Officer)
27
Vermont Pure Holdings, Ltd.
Quarterly Report on Form 10-Q
for the Quarter Ended January 31, 2003
Exhibits Filed Herewith
Exhibit
Number Description
10.27 Purchase and Sale Agreement among Vermont Pure Springs,
Inc., Vermont Pure Holdings, Ltd. and Micropack
Corporation dated as of March 1, 2004
10.28 Trademark License Agreement between Vermont Pure Holdings
Ltd. and MicroPack Corporation dated March 1, 2004
10.29 Supply and Sublicense Agreement between Vermont Pure
Holdings Ltd. and MicroPack Corporation dated March 1,
2004
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley act of 2002.
99.1 Vermont Pure Holdings, Ltd. Pro Forma Statement of
Operations for the fiscal year ended October 31, 2003 and
three months ended January 31, 2004 and Pro Forma Balance
Sheet as of January 31, 2004.
28