-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MrLwmJK1wUo3RYPHv1JKxKxwSdO+XD39UTowbGP18mJYJoh319IuraWB5boLdVFd RnTjTL2l+Qi6nJS3OMoNCA== 0000950133-96-002011.txt : 19960930 0000950133-96-002011.hdr.sgml : 19960930 ACCESSION NUMBER: 0000950133-96-002011 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960629 FILED AS OF DATE: 19960927 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIE DE FRANCE CORP CENTRAL INDEX KEY: 0000737602 STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030] IRS NUMBER: 520948383 STATE OF INCORPORATION: DE FISCAL YEAR END: 0629 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-12800 FILM NUMBER: 96635689 BUSINESS ADDRESS: STREET 1: 85 SOUTH BRAGG STREET STREET 2: SUITE 600 CITY: ALEXANDRIA STATE: VA ZIP: 22312 BUSINESS PHONE: 7034429600 MAIL ADDRESS: STREET 1: 85 SOUTH BRAGG ST STREET 2: SUITE 600 CITY: ALEXANDRIA STATE: VA ZIP: 22312 10-K/A 1 AMENDMENT TO FROM 10-K (6/29/96) 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-K/A (MARK ONE) XX ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED: June 29, 1996 ------------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES - --- EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM TO ---------------- --------------------- COMMISSION FILE NUMBER: 0-12800 ------- VIE DE FRANCE CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 52-0948383 -------- ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 85 South Bragg Street, Suite 600, Alexandria, VA 22312 --------------------------------------------------------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)(ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 750-9600 -------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EACH EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED ------------------- ----------------------- None None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Common Stock, par value $.01 per Share ---------------------------------------- (TITLE 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. /_/ The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing sale price of the Common Stock on August 31, 1996 as reported on the NASDAQ National Market System, was approximately $18,422,086. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. As of August 31, 1996, there were 13,822,543 shares outstanding of the ---------- Registrant's Common Stock. DOCUMENTS INCORPORATED BY REFERENCE Parts of the following document are incorporated by reference in Parts III and IV of this Form 10-K Report: Proxy Statement for Registrant's 1996 Annual Meeting of Stockholders to be filed - Items 10, 11, 12 and 13. 2 Exhibit Index is located on page 18. 2 3 PART I ITEM 1. BUSINESS FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS The Company is currently engaged in only one industry segment as of June 29, 1996. Accordingly, no segment data is included in the Consolidated Financial Statements for the fiscal year ending June 29, 1996. GENERAL The Company develops, produces and markets high-quality frozen entrees, side dishes and sauces for the foodservice and retail markets. The Company maintains manufacturing facilities in the United States and Norway, and sells its product in Asia, North America and Europe. Its customers include among others, hotels, catering companies, restaurants, airlines, military facilities, healthcare facilities and retail stores. The Company opened a USDA-approved food processing plant in Alexandria, Virginia in May 1990 and began operating another plant in Hjemeland, Norway in August 1994. The Company uses an advanced system of food preparation, developed in France, which cooks meats, seafood, poultry, sauces and vegetables over time using low heat. Before the cooking process begins, the product is vacuum-sealed in special plastic pouches that better maintain the food's flavor and moisture in comparison to other methods of cooking. Following the completion of the cooking process, the product can be either frozen or refrigerated for distribution. Currently, all of the Company's products are frozen. The Company also works with equipment manufacturers to provide efficient computer controlled reheating equipment to its food service providers who effectively convert their kitchen operations and improve customer satisfaction through better and consistent product quality, while realizing reductions in their food and labor costs as a result of this technology. Vie de France was incorporated in the State of Delaware in 1974. Its principal executive offices are located at 85 South Bragg Street, Suite 600, Alexandria, VA 22312 and its telephone number at that location is (703) 750-9600. 3 4 BACKGROUND The Company commenced operations in 1972 as a wholesale producer of French bread for daily delivery to the Washington, DC area. The Company expanded its markets throughout the 1970s. In fiscal year 1979, the Company began offering its product through Company-owned retail bakeries where the products could be freshly baked throughout the day. During the 1980s, the Company expanded its frozen dough product line and developed processes to facilitate the baking of these products at the point-of-sale. As of May 1994, the Company owned and operated 31 retail units. The Company sold the Bakery Division and the Restaurant Division to Vie de France Bakery Yamazaki, Inc. in 1991 and 1994, respectively. The Company began development of the Culinary division business in 1987, in conjunction with research performed previously by Nouvelle Carte France, a French Company. As a result of the growth in the application of high quality frozen products in Europe, the Board authorized the establishment of the Vie de France Culinary Corporation for the express purpose of the research into and development of high quality frozen products for the U.S. market. This Company was formed in 1987, and was later merged into Vie de France Corporation. In 1989, construction began on a 30,000 square foot plant in Alexandria, Virginia designed to manufacture its sous vide product line under the trade name Vie de France Culinary. The Culinary plant began operations in May 1990, and expanded into a 50,000 square feet building. During fiscal years 1991 through 1996, the Culinary Division successfully built its sales volume from zero to over $2.0 million in fiscal year 1991, $4.6 million in fiscal year 1992, $8.2 million in fiscal year 1993, $12.8 million in fiscal year 1994, $15.7 million in fiscal year 1995 and $16.0 million in fiscal year 1996. In 1992, the Company started a national direct sales organization to continue to increase sales. The Company is focusing its sales efforts on wholesale customers in the hotel industry and national/regional restaurant chains, as well as large-volume food providers such as the airline, transportation industries, retail segment and military. In late 1996 the Company began signing contracts with brokers in the United States as another means to distribute products and increase sales. In order to reduce costs, increase quality and increase production capacity, the Company is pursuing the development and construction of single product production plants for its high quality entrees located adjacent to, or in the proximity of suppliers of raw materials. One such plant, located in Norway, began production in August 1994. The Company currently has capacity in its plants to support near term sales growth. All new production plants will be designed to meet International Standards of Operations and European Community standards. 4 5 PRODUCTS The Company offers a wide range of high quality frozen entrees, side dishes, and sauces. The entree items consist of a variety of seafood, pork, beef and poultry items. Side dishes and sauces range from vegetables and rice to cream or tomato-based sauces. The products are sealed in either single or multi-serving packaging and then case-packed. Single-pack items offer the greatest flexibility to the customer, while multi-pack packaging provides increased efficiency and economy for large-volume banquets. During fiscal year 1995, the Company began research on the preparation of its products for retail consumption. The Company has experimented with distribution through wholesale clubs and private-labeled products for other retailers. The Company intends to continue to pursue alternatives in this market. DISTRIBUTION The Company distributes its products in a frozen state to customers nationwide and internationally primarily to Asian markets. The Company expanded distribution into the European markets in fiscal year 1995 in conjunction with the opening of the Norwegian production facility in 1995. Its products are stored in a number of regional frozen warehouses as well as at the Alexandria, Virginia plant. The Company improved its distribution of Norwegian Salmon to US customers by offering "direct ship" capabilities from the Norwegian plant directly to the customer. The Company intends to adopt alternative distribution means as their customers need them. Export products are transported in frozen containers via ship. RAW MATERIAL STATUS The Company buys its raw materials from a number of suppliers at market prices. While these prices may fluctuate during the year, the Company does not believe that availability poses a material risk to its business. The majority of product sales are subject to price revision to reflect shifts in the price of raw materials. PATENTS AND TRADEMARKS AND OTHER ITEMS IMPORTANT TO OPERATING SEGMENTS The Company believes that its Vie de France trademark is important to its business success. Accordingly, it takes the necessary steps to protect it. The Company and Vie de France Bakery Yamazaki, Inc. entered into a Trademark and Service Mark License Agreement in 1991 and, in conjunction with the sale of the Restaurant Division, amended and restated this agreement. In fiscal year 1996 the Company secured a new packaging trademark called MicroRoast(TM). This new packaging is designed for use in microwave ovens and imparts a roasted quality to our value-added entrees. The Company holds no patents that are essential for its continued operations. 5 6 CUSTOMER DEPENDENCY Food service distributors continued to be the leading market segment for the Company with fiscal year 1996 sales representing approximately 58% of total net sales. In fiscal year 1996, sales to food service distributors representing hotels chains and restaurants accounted for 42% and 11% of total net sales, respectively. Sales to the airline industry in fiscal year 1996 represented 31% of total net sales. Sales to the retail, healthcare and Norwegian European and Asian customers accounted for 7.5%, 2% and 1.5%, respectively. In fiscal years 1996, 1995 and 1994, sales to food service distributors representing the Marriott hotel chain amounted to 11%, 21% and 55% of total net sales. In fiscal year 1996, 1995 and 1994, sales to food service distributors representing the Hyatt hotel chain amounted to 31%, 32% and 16% of total net sales. Sales to distributors serving the airline industry represented 31%, 29% and 17% of total net sales in fiscal year 1996, 1995 and 1994, respectively. The loss of any of the above customers could have an effect on the Company's results of operations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Sales and Gross Margins." SEASONALITY Culinary sales are seasonally impacted by the hotel banquet industry, which peaks in September through December and March through June. COMPETITION The Company considers itself to be a leader in the sous vide segment of the food service industry. At present, limited competition exists within the frozen wholesale component of this segment. Other firms exist within the retail and refrigerated components of the sous vide segment or cooked food. As such, the Company primarily competes for sales against the traditional forms of food preparation, rather than against other sous vide suppliers. The Company offers value-added products, but must offer these products in a price range that makes it economically advantageous for its users to convert from other methods of food preparation. The Company believes its products can compete against these other methods in price and product performance, as well as convenience. The Company also offers implementation and menu development services, as well as equipment, to its customers as another means of building sales. The Company depends upon its pricing structure, menu items, and customer service programs as a means of maintaining its leadership position within the sous vide industry. RESEARCH & DEVELOPMENT For continuing operations, the Company invested $139,000, $94,000 and $95,000 in research and development activities in fiscal years 1996, 1995 and 1994, respectively. The Company invests in development on an ongoing basis in order to maintain the vitality of its product lines and to build sales. 6 7 REGULATION The Company is subject to various Federal, state and local laws affecting its business, including health, sanitation and safety regulations. The Culinary-U.S. plant operates under USDA supervision over the handling and labeling of its products. The Company believes its operations comply in all material respects with applicable laws and regulations. The Company's Norwegian plant meets European Community standards and regulations. The Norwegian product, along with certain raw materials, are subject to import regulations. EMPLOYEES The Company employs approximately 80 people including full-time and part-time workers and corporate staff. GEOGRAPHIC SALES The Company's sales are primarily focused in the United States, with sales representing 96%, 99% and 100% of total sales for fiscal years 1996, 1995 and 1994, respectively. ITEM 2. PROPERTIES The Company leases its offices and its two manufacturing facilities. The Culinary-U.S. plant, located in Alexandria, Virginia, is approximately 50,000 square feet. The Culinary-Norway plant, located in Hjelmeland, Norway, is approximately 20,000 square feet. The Company's Norway plant is structured as a twenty-year capital lease whereby the Company will own the facility at the end of the lease term. The Company owns substantially all of the equipment used in its facilities. Lease commitments and future minimum lease payments are shown in Note 8 to the Consolidated Financial Statements, which is included in this Form 10-K. ITEM 3. LEGAL PROCEEDINGS The Company is engaged in ordinary and routine litigation incidental to its business, but management does not believe that any amounts it may be required to pay by reason thereof will have a material effect on the Company's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 7 8 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS COMMON STOCK The Company's capital stock is divided into two classes: Common Stock and Class B Stock. The Class B Stock, which is reserved for issuance to employees under stock options plans, is identical in all respects to the Common Stock except that the holders thereof have no voting rights unless otherwise required by law. The Company's Common Stock is traded in the over-the-counter market on the NASD National Market System under the symbol VDEF or Viedefr. The following table sets forth for the quarters indicating the high and low sales prices per share as reported on the National Market System:
Year ended June 29, 1996 High Low First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.500 $ 2.625 Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.750 2.625 Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.063 1.875 Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.125 1.875 Year ended June 24, 1995 First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4.500 $ 3.375 Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.250 3.000 Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.375 3.000 Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.125 2.875
As of September 15, 1996 there were 771 holders of record of the Company's Common Stock. No dividends were paid during fiscal year 1996, 1995 and 1994. 8 9 ITEM 6. SELECTED FINANCIAL DATA FIVE YEAR SUMMARY (in thousands, except per share amounts)
1996 1995 1994 1993 1992 Net sales . . . . . . . . . . . . . . . . . . . . . . $16,078 $15,707 $12,786 $ 9,377 $ 6,147 Loss from continuing operations (4) . . . . . . . . . (2,224) (706) (476) (341) (1,982) Net income (loss) (1); (2); (3); (4) . . . . . . . . (1,714) 24 7,934 261 (2,105) Loss from continuing operations per share . . . . . . (.16) (.05) (.03) (.03) (.15) Net income (loss) per share . . . . . . . . . . . . . (.13) .00 .58 .02 (.16) Total assets . . . . . . . . . . . . . . . . . . . . 27,035 29,911 30,964 19,862 20,855 Long term debt, including current portion . . . . . 2,300 2,981 - - - Stockholders' equity . . . . . . . . . . . . . . . . 22,782 24,481 24,431 16,016 15,755 Dividends per share . . . . . . . . . . . . . . . . . -- -- -- -- 0.12
(1) Includes benefit from cumulative effect of change in accounting principle of $197 in 1996. (2) Includes (loss) income from discontinued operations of ($813), $479 and $17 in 1994, 1993 and 1992, respectively. (3) Includes gain from sale of discontinued operations of $313, $730, and $9,233 in 1996, 1995 and 1994, respectively. (4) Includes loss on equity method investment of $1,500 in 1996. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Private Securities Litigation Reform Act of 1995 (the "Act") was recently passed by Congress. The Company desires to take advantage of the new "safe harbor" provisions of the Act. Therefore, the Company wishes to caution readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company's actual results and could cause the Company's actual results for 1997 and beyond to differ materially from those expressed in any forward-looking statements made by, or on behalf of the Company. RESULTS OF OPERATIONS Fiscal year 1996 was a year of strategy formulation and focus on cost containment and productivity issues. The Company formulated a Sales and Operations Planning team which was successful in reducing inventory levels by $537,000, after consideration for change in accounting principle, with no interruptions to customer shipment schedules. The Company also implemented other costs reductions efforts which will be recognized in fiscal year 1997. The current year results reflect moderate growth in sales of 2.4% from fiscal year 1995 for its United States and Norwegian operations. Operations for fiscal year 1996 resulted in a loss for the Company. During 1996, the Company determined that its investment of $1,500,000 in Stockwell's Home Meal Market(TM), (Stockwell's) was impaired. The fiscal year 1996 consolidated financial statements reflect the Company's share of losses of $405,000 and the additional write-off of the 9 10 investment $1,095,000 which are reported as loss on equity method investment. During portions of the year the President and Chief Financial Officer served on the Board of Directors of Stockwell's. SALES AND GROSS MARGINS Historically, the Company's sales of high-quality frozen foods have been to hotels, airlines and other food service providers who order through their distributor networks. In fiscal year 1996 total sales were comprised of; total food service sales -58%, airlines -31%, retail -7.5%, healthcare -2.0% and Norwegian customers, exclusive of intercompany sales -1.5%. A comparison of net sales, gross margin percentages and losses from operations are as follows:
Year Ended June 29, June 24, June 25, 1996 1995 1994 ---- ---- ---- Net Sales $16,078,000 $15,707,000 $12,786,000 Gross margin percentage 12% 30% 23% Loss from operations $(3,353,000) $(1,447,000) $(1,204,000)
Fiscal year 1996 sales increased by 2.4% or $371,000 over fiscal year 1995 to $16,078,000 from $15,707,000. This moderate increase is attributed to $210,000 for the United States operations and $161,000 for Norway. Fiscal year 1995 sales increased by 23% over fiscal year 1994 to $15,707,000 from $12,786,000. This increase is attributable to substantial growth within the airline segment. Gross margin as a percentage of total net sales decreased to 12% from 30% in fiscal year 1995. The decrease is primarily attributed to the accounting change under which certain costs such as material handling, purchasing and receiving, plant administration, factory and equipment depreciation were treated as product costs instead of period costs. This change in accounting principle is reflected through a cumulative adjustment on the consolidated statements of operations. Gross margin as a percentage of sales for fiscal year 1995 and 1994 would be 11.2% and 5.5%, respectively, had the Company used the same inventory cost method that was used during fiscal year 1996. Gross margin as a percentage of total sales increased in fiscal year 1995 versus fiscal year 1994 due primarily to lower material costs during the year along with increased labor productivity, offset somewhat due to the start-up effects of the Norway plant. SELLING, DISTRIBUTION AND ADMINISTRATION EXPENSES: A comparison of selling, distribution and general administrative costs are as follows: 10 11
Year Ended June 29, June 24, June 26, 1996 1995 1994 ------ ----- ----- Selling and distribution costs . . . . . . . . . . . . . . . . . . $2,077,000 $2,183,000 $1,344,000 General administratvive costs . . . . . . . . . . . . . . . . . . . 1,671,000 3,038,000 2,235,000 --------- --------- --------- $3,748,000 $5,221,000 $3,579,000
In fiscal year 1996, selling, distribution and administrative costs decreased as a percentage of net sales to 23% from 33%. This decrease is partly related to the accounting change under which distribution and the portion of general administration costs related directly to the plant are now treated as product costs. For fiscal year 1995, these costs increased by 46% as compared to the prior year, to $5,221,000 from $3,579,000. This increase is due to the selling expenses associated with Norway where operations begin in August, 1994, for which there were few outside sales, additional sales personnel in the United States who are just beginning to generate sales, and residual corporate costs that were present within the Company, but were primarily allocable to the former Restaurant Division in prior years. These costs decreased as a percentage of sales from 33% to 28% in fiscal year 1994 compared to fiscal year 1993, as the rate of sales growth offset the rate of real dollar growth in this expense category. DEPRECIATION AND AMORTIZATION The Company's change in accounting principle resulted in the inclusion of production equipment depreciation as part of product costs instead of as period costs. Actual depreciation and amortization costs increased by $141,000 over fiscal year 1995 to $1,194,000 for fiscal year 1996, a large portion of which is included in product and period costs, versus $1,053,000 for fiscal year 1995. This increase is attributable to the depreciation associated with the United States plant. For fiscal year 1995 as compared to fiscal year 1994, depreciation and amortization increased by $356,000 from 1994's level of $697,000, which is attributed to the depreciation associated with the Norway plant. NONOPERATING INCOME AND EXPENSE Investment income consists of returns earned on funds received from the sale of the Restaurant Division, interest income associated with a $4,900,000 collateralized European bank deposit, and interest income of $162,000 earned on a related party loan to Food Research Corporation of $1,966,000. 11 12 Interest expense relates to the borrowings, including a capital lease, associated with the Company's Norwegian subsidiary. At June 29, 1996, the Company, through its Norwegian subsidiary, had borrowings of approximately $2,300,000, bearing interest at rates ranging from 4.85% to 10.0%. It is anticipated that these borrowings will remain outstanding during the upcoming fiscal year. CHANGE IN ACCOUNTING Effective June 25, 1995, the Company changed its overhead absorption policy with regard to finished goods inventories. Prior to this change, the Company had valued its inventories using partial absorption of certain plant level indirect manufacturing overhead costs. Additional costs, such as material handling, purchasing and receiving, plant administration and factory and equipment depreciation, were expensed as period costs. These costs are treated as product costs in order to better match costs with related revenues and to better conform to prevailing manufacturing industry practice. The cumulative effect of this change was an increase to income of $197,000, shown net of tax expense of $110,000 in fiscal year 1996. DISCONTINUED OPERATIONS The gain from sale of discontinued operations for fiscal year 1996 relates to the increase of reserves for the former Restaurant Division offset by the decrease in reserves for the Bakery Division, and income tax refunds received during 1996 of $335,000. Gain from discontinued operations for fiscal year 1995 relates to the reduction of reserves previously established for the former Restaurant Division, due to the expiration of certain contingent liabilities. Gain on the sale of the Restaurant Division in fiscal year 1994 is net of income taxes of $4,400,000. Net proceeds on the sale amounted to $17,600,000, after transaction and related direct disposal costs of approximately $2,800,000. In addition, Yamazaki assumed certain outstanding liabilities of the Division. Loss from discontinued operations in fiscal year 1994 reflects the operating results attributable to the operations of the former Restaurant Division, net of income tax effects. 12 13 IMPACT OF INFLATION AND THE ECONOMY Inflation has from time to time had a material impact on the Company's expenses. Inflation in labor and ingredient costs can significantly affect the Company's operations. Many of the Company's employees are paid hourly rates related to, but generally higher than the federal minimum rates. The Company's sales pricing structure allows for the fluctuation of raw material prices. As a result, market price variations do not significantly affect the gross margin realized on product sales. Customer sensitivity to price changes can influence the overall sales of individual products. LIQUIDITY AND CAPITAL RESOURCES The Company has experienced a decline in its liquidity over the past year. The combined total of the cash and short-term investment balances was $9,520,000 and $14,209,000 at June 29, 1996 and June 24, 1995, respectively. Additionally, the Company held investments of $5,598,000 and $2,025,000 at June 29, 1996 and June 24, 1995, respectively, with maturities greater than one year. In addition to the $500,000 common stock investment in Stockwell's held at June 24, 1995, an additional investment of $1,000,000 was made during fiscal year 1996. This total investment of $1,500,000, considered an equity method investment, was written off in fiscal year 1996 due to the closure of Stockwell's two retail locations. The decrease in liquidity is also related to the increased working capital requirements primarily for the Norway plant. Cash provided by operations in fiscal year 1996 amounted to $1,095,000, as compared to cash used in fiscal year 1995 and 1994 of $6,056,000 and $989,000, respectively. The cash provided in fiscal year 1996 relates to the strong emphasis on reduction of inventory and improved cash collections in these areas. The use of cash in fiscal year 1995 resulted primarily from the payment of income taxes related to the sale of the former Restaurant Division, along with increases in inventory and receivables. The use of cash in fiscal year 1994 resulted primarily from increases in inventory and receivables relating to increased sales volumes, as well as income tax payments. Cash in the amount of $1,050,000 was provided by investing activities in fiscal year 1996, representing the return of the deposit of $4,900,000 from the European bank. This deposit was offset by cash used by investing activities for financing of capital expenditures of $509,000, net purchases of other debt and equity securities of $2,344,000, and an investment in Stockwell's of $1,000,000. Cash in the amount of $1,095,000 was provided by investing activities in fiscal year 1995, representing proceeds from the sale of investments of $3,085,000 offset by a $500,000 investment in Stockwells and capital expenditures of $1,490,000. Fiscal year 1995's investments in capital projects included, approximately $400,000 for the Norway plant and approximately $700,000 for the Alexandria, Virginia facility. Cash in the amount of $7,486,000 was generated by investing activities in fiscal year 1994, including $17,626,000 of cash generated from the sale of the Restaurant Division, which was partially offset by capital expenditures totaling $3,117,000 for property additions for both continuing and discontinuing operations. Also, approximately $7,100,000 of the sales proceeds were used to purchase investments. In fiscal year 1996 cash in the amount of $597,000 was used by financing activities which included $585,000 to pay off the line of credit established for Norway, $96,000 relating to other 13 14 debt service, offset by $84,000 generated through the exercise of stock options. In fiscal year 1995 cash in the amount of $1,344,000 was generated by financing activities, representing the debt acquired by the Norway subsidiary, offset by $890,000 in debt repayments, and $50,000 generated through the exercise of stock options. Cash in the amount of $448,000 was generated through the exercise of stock options during fiscal year 1994. The Company continues to evaluate the possibility of establishing additional production facilities in order to increase efficiencies. One such way would be to produce sous vide products closer to the source of supply and as a means to enter new markets. The cost of such facilities ranges from approximately $1,000,000 to $5,000,000, depending upon the nature of the product and the production volume desired. Local governments may provide subsidies and other assistance in connection with such facilities. It is possible that the Company may use some of its cash resources to fund these and other related efforts. The Company's Norwegian subsidiary has secured a working capital commitment for its liquidity needs in Norway in the form of an overdraft facility. As of June 29, 1996 $153,000 was outstanding under this overdraft facility. Subsequent to year-end, the subsidiary increased its overdraft facility balance, and can borrow up to $800,000 under this commitment. The Company returned to the United States its deposit of $4,900,000 and all accrued interest with a European bank during fiscal year 1996. This deposit was denominated in U.S. dollars and earned a rate of return in excess of the prevailing short-term rates in the United States. This loan was pledged as collateral to the bank so that the bank may loan funds to a French subsidiary of Setucaf S.A., a French Company which is 21% owned by Food Research Corporation, the majority stockholder of the Company. The return of this deposit was transferred to the United States Investment account at the end of fiscal year 1996 and earns interest at the market prevailing rate of the securities for which it is held. FUTURE PROSPECTS In fiscal 1997 the Company intends to build upon the broader sales base established in fiscal 1996. While modest growth is expected in sales to the hotel industry, the Company believes sales growth is evident within the airline industry, and anticipates sales gains in its emerging markets. The Company will continue to explore and develop its emerging markets and formats that show promise of generating significant sous vide sales. Although the course of the European business is difficult to forecast, it is management's expectation that its Norwegian operations will continue to reduce its losses in fiscal 1997. NEW ACCOUNTING STANDARDS In June 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets and or Long-lived Assets to Be Disposed of ("SFAS No. 121"). SFAS No. 121 requires companies to review long-lived assets and certain identifiable intangibles to be held, used or disposed of, for impairment whenever events or changes in circumstances indicate that the carrying amount of an 14 15 asset may not be recoverable. The Company has not yet determined the impact of this Statement on its financial statements. The Company is required to adopt this statement in fiscal year 1997. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("Statement 123"). Statement 123 recommends, but does not require, the adoption of a fair value method of accounting for stock-based compensation to employees including common stock options, and stock-based compensation to individuals other than employees. The Company currently intends to continue recording stock-based compensation to employees under the intrinsic value method and does not intend to adopt the fair value method of accounting for stock-based compensation to employees as permitted by Statement 123. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item 8 is included at Item 14(a)(1) and (2). ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The Company dismissed its former principal accountants, Price Waterhouse LLP of Falls Church, Virginia and engaged KPMG Peat Marwick LLP, of Washington, DC, as its principal accountants. The change was made effective May 13, 1996. During the two most recent fiscal years of the registrant and each subsequent interim period preceding May 13, 1996 there were no disagreements with the former accountants on any matter of accounting principle or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of the former accountants would have caused them to make reference in connection with their report to the subject matter of the disagreements. The reports of the former principal accountants on the financial statements of the registrant for either of the past two years contained no adverse opinion or disclaimer of opinion, nor was either qualified or modified as to uncertainty, audit scope, or accounting principles. The decision to change auditors was approved by the Board or Directors of the Company. Price Waterhouse LLP, the former auditors confirmed their agreement with the statements presented above, as noted in Exhibit 14 (b). 15 16 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required under this Item 10 is shown in the Proxy Statement to be filed under Regulation 14A, under the caption "Election of Directors", and such information is incorporated herein by reference. EXECUTIVE OFFICERS The following list and narrative sets forth the name and age of each present executive officer of the Company who is not also a director or director nominee, all positions held by the person with the Company, the year in which the person first became an officer, and the principal occupations of each person named since 1988.
NAME AGE OFFICE HELD WITH COMPANY SINCE - ---- --- ------------------------ ----- Arthur J. Stouffs 52 Vice President, Culinary Sales. 1990 Leara L. Dory 35 Controller, Secretary and Treasurer 1996
Mr. Stouffs has served in the capacity of Vice President of Culinary Sales since 1990, and was appointed an officer of the Company in 1994. Previously Mr. Stouffs held various positions in the Company's former Bakery Division including Director of Operations and Director of Sales - National Accounts from 1980 through 1990. Mrs. Dory was appointed to the position of Controller, Secretary and Treasurer in February, 1996. She came to the Company in November, 1995 as the Controller. Prior to joining the Company, Mrs. Dory was a Controller/Director of Finance for Thomas Enterprises and Assistant Controller for Telecommunications Technique Corporation from 1989 through 1995. Mrs. Dory has over 13 years of experience in the manufacturing industry. Mrs. Dory is a Certified Public Accountant and holds a BS degree in Accounting. ITEM 11. EXECUTIVE COMPENSATION The information required under this Item 11 is shown in the Proxy Statement to be filed under Regulation 14A, under the caption "Executive Compensation", and such information, except for the information required by Item 402(k) and Item 402(l) of Regulation S-K, is incorporated herein by reference. 16 17 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required under this Item 12 is shown in the Proxy Statement to be filed under Regulation 14A, under the caption "Voting Securities and Principal Holders Thereof", and such information is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required under this Item 13 is shown in the Proxy Statement to be filed under Regulation 14A, under the caption "Certain Transactions", and such information is incorporated herein by reference. 17 18 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 10-K (a) Index to Financial Statements
Page ---- (1) Financial Statements: Reports of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . KPMG Peat Marwick LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1 PRICE WATERHOUSE LLP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2 Consolidated Balance Sheets - June 29, 1996 and June 24, 1995. . . . . . . . . . . . . . F-3 Consolidated Statements of Operations - Fiscal Years Ended June 29, 1996, June 24, 1995, and June 25, 1994 . . . . . . . . . . . . . . . . . . . F-4 Consolidated Statements of Changes in Stockholders' Equity - Fiscal Years Ended June 29, 1996, June 24, 1995, and June 25, 1994 . . . . . . . . . . . . . F-5 Consolidated Statements of Cash Flows - Fiscal Years Ended June 29, 1996, June 24, 1995 and June 25, 1994 . . . . . . . . . . . . . . . . . . . F-6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-7 (2) Financial Statement Schedule: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Schedule II--Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . F-21
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 18 19 (3) Exhibits: The following exhibits are incorporated in this report by reference from identically numbered exhibits to the Company's Amendment to its Annual Report for the year ended June 27, 1992 on Form 8 dated February 26, 1993:
Exhibit No. Description of Exhibit ------ ---------------------- 3-A The Certificate of Incorporation of the Company, as amended to date. 3-B The By-Laws of the Company, as amended to date.
The following exhibits are incorporated in this report by reference from an identically numbered exhibit to the Company's Annual Report on Form 10-K for the year ended June 29, 1991: 10.46 The Company's Proxy Statement for a Special Meeting of Stockholders, dated June 7, 1991, together with a conformed copy of the Asset Purchase Agreement between Vie de France Corporation and Vie de France Bakery Yamazaki, Inc. dated May 7, 1991. The following exhibits are incorporated in this report by reference from the Company's two Registration Statements on Form S-8, dated April 5, 1993: 10.52 The Company's 1986 Stock Option Plan, as amended. 10.53 The Company's 1992 Stock Option Plan. The following exhibits are filed as exhibits to this report in the indicated sections. 10.54 The Company's Proxy Statement for a Special Meeting of Stockholders, dated April 28, 1994, together with a conformed copy of the Asset Purchase Agreement between Vie de France Corporation and Vie de France Bakery Yamazaki, Inc. dated March 4, 1994. 10.55 Lease dated March 30, 1989 and as amended, between the Company and Duke-Shirley Industrial Development, LP, with respect to the lease of property at 4106 Wheeler Avenue, Alexandria VA. 10.56 Management contract between the Company and Food Investors Corporation dated July 31, 1995, with respect to payment in reimbursement of expenses and other costs incurred by Food Investors Corporation on the behalf of the Company. 24 Consent of Independent Accountants. 19 20 (b) Reports on Form 8-K: Change of former principal accountants Price Waterhouse LLP, and engagement of new auditors KPMG Peat Marwick LLP effective May 13, 1996. (c) Exhibits: Exhibits required to be filed in response to this paragraph of Item 14 are listed above in subparagraph (a)(3). (d) Financial Statement Schedule: Schedules and reports thereon by independent accountants required to be filed in response to this paragraph of Item 14 are listed in Item 14(a)(2). 20 21 SIGNATURES 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. VIE de FRANCE CORPORATION (Registrant) By: /s/ Stanislas Vilgrain ------------------------------ Stanislas Vilgrain President and Chief Executive Officer (Principal Executive Officer) 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.
Signature Title Date - ---------------------------------- ------------------------------- -------------------------- /s/ Jean-Louis Vilgrain Chairman of the Board September 27, 1996 - ---------------------------------- --------------------- Jean-Louis Vilgrain /s/ Stanislas Vilgrain President, September 27, 1996 - ---------------------------------- Chief Executive Officer --------------------- Stanislas Vilgrain /s/ Carl Youngman Director September 27, 1996 - ---------------------------------- Chief Financial Officer --------------------- Carl M. Youngman /s/ Bruno Goussault Director September 27, 1996 - ---------------------------------- --------------------- Bruno Goussault /s/ Alexandre Vilgrain Director September 27, 1996 - ---------------------------------- --------------------- Alexandre Vilgrain /s/ George Nadaff Director September 27, 1996 - ---------------------------------- --------------------- George Nadaff /s/ James Hackney Director September 27, 1996 - ---------------------------------- --------------------- James Hackney /s/ Leara Dory Controller September 27,1996 - ---------------------------------- --------------------- Leara Dory (Principal Financial and Accounting Official)
21 22 Independent Auditors' Report The Board of Directors and Stockholders Vie de France Corporation: We have audited the accompanying consolidated balance sheet of Vie de France Corporation and its subsidiary as of June 29, 1996, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for the year then ended. In connection with our audit of the consolidated financial statements we also have audited the financial statement schedule for the year ended June 29, 1996, as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vie de France Corporation and its subsidiary as of June 29, 1996, and the results of their operations and their cash flows for the year then ended, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule for the year ended June 29, 1996, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. As discussed in Note 1 to the consolidated financial statements, effective June 25, 1995, the Company changed its accounting method for certain inventory costs. KPMG PEAT MARWICK LLP Washington, D.C. September 13, 1996 F-1 23 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders Vie de France Corporation In our opinion, the consolidated financial statements listed in the index appearing under items 14(a)(1) and (2) present fairly, in all material respects, the financial position of Vie de France Corporation and its subsidiaries at June 24, 1995, and the results of their operations and their cash flows for each of the two years in the period ended June 24, 1995, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of Vie de France Corporation and its subsidiaries for any period subsequent to June 24, 1995. PRICE WATERHOUSE LLP Washington, D.C. August 25, 1995 F-2 24 VIE de FRANCE CORPORATION CONSOLIDATED BALANCE SHEETS
-------------------------------------- June 29, June 24, 1996 1995 --------------- ------------------ ASSETS Current Assets Cash and cash equivalents $ 6,862,000 $ 5,314,000 Short-term investment, related party - 4,900,000 Investments, current 2,658,000 3,995,000 Accounts receivable, trade 1,486,000 1,646,000 Inventory 2,119,000 2,350,000 Prepaid expenses 137,000 119,000 Current portion of notes receivable, related party 10,000 1,551,000 Other current assets 292,000 689,000 --------------- ------------------ TOTAL CURRENT ASSETS 13,564,000 20,564,000 Investments, noncurrent 5,598,000 2,025,000 Fixed assets, net 5,313,000 5,971,000 Note receivable, related party, including accrued interest, less current portion 2,178,000 517,000 Other assets 382,000 834,000 --------------- ------------------ TOTAL ASSETS $ 27,035,000 $ 29,911,000 =============== ================== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued expenses $ 948,000 $ 1,314,000 Accrued payroll and related liabilities 577,000 518,000 Current portion of long-term debt 153,000 734,000 Accrued store closings 287,000 367,000 Other accrued taxes 141,000 148,000 Income taxes payable - 102,000 --------------- ------------------ Total current liabilities 2,106,000 3,183,000 Long-term debt, less current portion 2,147,000 2,247,000 --------------- ------------------ Total liabilities 4,253,000 5,430,000 --------------- ------------------ Stockholders' equity Common stock - $.01 par value, 20,000,000 shares authorized, 14,078,620 and 14,034,620 shares issued and 13,822,543 and 13,778,543 shares outstanding 141,000 140,000 Class B Stock - $.01 par value, 175,000 shares authorized, none issued - - Additional paid-in capital 21,352,000 21,269,000 Retained earnings 2,789,000 4,503,000 Treasury stock, at cost (256,077 shares) (1,440,000) (1,440,000) Unrealized losses on debt and equity investments (110,000) - Cumulative translation adjustment 50,000 9,000 --------------- ------------------ Total stockholders' equity 22,782,000 24,481,000 --------------- ------------------ Commitments and contingencies --------------- ------------------ Total liabilities and stockholders' equity $ 27,035,000 $ 29,911,000 =============== ==================
See accompanying notes to consolidated financial statements. F-3 25 VIE de FRANCE CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended ---------------------------------------------------- June 29, June 24, June 25, 1996 1995 1994 --------------- --------------- ---------------- Net sales $ 16,078,000 $ 15,707,000 $ 12,786,000 Cost of goods sold 14,084,000 11,046,000 9,830,000 --------------- --------------- ---------------- Gross margin 1,994,000 4,661,000 2,956,000 Selling and administration 3,748,000 5,221,000 3,579,000 Depreciation and amortization 107,000 1,053,000 697,000 Other income (8,000) (166,000) (116,000) Loss on equity method investment 1,500,000 - - --------------- --------------- ---------------- Loss from operations (3,353,000) (1,447,000) (1,204,000) --------------- --------------- ---------------- Nonoperating income (expense) Investment income 1,234,000 1,256,000 615,000 Interest expense (229,000) (192,000) (3,000) Other income (expense) 14,000 (16,000) - --------------- --------------- ---------------- Total nonoperating income 1,019,000 1,048,000 612,000 --------------- --------------- ---------------- Income (loss) from continuing operations before income taxes, discontinued operations, and cumulative effect of change in accounting principle (2,334,000) (399,000) (592,000) Provision for income tax (expense) benefit 110,000 (307,000) 116,000 --------------- --------------- ---------------- Loss from continuing operations before discontinued operations and cumulative effect of change in accounting principle, net of taxes (2,224,000) (706,000) (476,000) Loss from discontinued operations, net of taxes - - (813,000) Gain from sale of discontinued operations, net of taxes 313,000 730,000 9,223,000 Cumulative effect of change in accounting principle, net of taxes 197,000 - - --------------- --------------- ---------------- Net income (loss) $(1,714,000) $ 24,000 $ 7,934,000 =============== =============== ================ Net income (loss) per common share: Continuing operations after income taxes, before discontinued operations and cumulative effect of change in accounting principle, net of taxes $ (0.16) $ (0.05) $ (.03) Discontinued operations $ 0.02 $ 0.05 $ 0.61 Cumulative effect of change in accounting principle $ 0.01 $ - $ - --------------- --------------- ---------------- Net income (loss) per common share $ (0.13) $ - $ 0.58 =============== =============== ================ Weighted average shares outstanding 13,797,492 13,767,852 13,676,762 =============== =============== ================
See accompanying notes to consolidated financial statements. F-4 26 VIE de FRANCE CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Additional Retained Cumulative Common Paid-In Earnings Translation Stock Capital (Deficit) Adjustment ------------ ------------------- ----------------- ------------- Balance June 26, 1993 $138,000 $ 20,773,000 $ (3,455,000) $ - Stock options exercised 2,000 446,000 - - 1994 net income - - 7,934,000 - Translation adjustment - - - 33,000 ------------ ------------------------------------------------------------------ Balance, June 25, 1994 140,000 21,219,000 4,479,000 33,000 Stock options exercised - 50,000 - - 1995 net income - - 24,000 - Translation adjustment - - - (24,000) ------------ ------------------------------------------------------------------ Balance, June 24, 1995 140,000 21,269,000 4,503,000 9,000 Stock options exercised $ 1,000 83,000 - - 1996 net loss - - (1,714,000) - Unrealized losses on debt and equity investments - - - - Translation Adjustment - - - 41,000 ------------ ------------------- ----------------- ------------- Balance, June 29,1996 $141,000 $ 21,352,000 $ 2,789,000 $ 50,000 ============ =================== ================= ============= Unrealized Losses on Debt Total and Equity Treasury Stockholders' Investments Stock Equity ---------------- ------------------ ------------- Balance June 26, 1993 $ - $ (1,440,000) $16,016,000 Stock options exercised - - 448,000 1994 net income - - 7,934,000 Translation adjustment - - 33,000 -------------------------------------------------------------------- Balance, June 25, 1994 - (1,440,000) 24,431,000 Stock options exercised - - 50,000 1995 net income - - 24,000 Translation adjustment - - (24,000) -------------------------------------------------------------------- Balance, June 24, 1995 - (1,440,000) 24,481,000 Stock options exercised - - 84,000 1996 net loss - - (1,714,000) Unrealized losses on debt and equity investments (110,000) - (110,000) Translation Adjustment - - 41,000 ------------- ----------------------------------------- Balance, June 29,1996 $(110,000) $(1,440,000) $22,782,000 ============= =========================================
See accompanying notes to consolidated financial statements. F-5 27 VIE de FRANCE CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended ----------------------------------------------------------- June 29, June 24, June 25, 1996 1995 1994 ---------------- ------------------ ----------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ (1,714,000) $ 24,000 $ 7,934,000 Adjustments to reconcile net income (loss) to net cash (used) provided by operating activities Gain from sale of discontinued operations (176,000) (730,000) (9,717,000) Loss on equity method investment 1,500,000 - - Depreciation and amortization, including discontinued operations 1,194,000 1,053,000 1,738,000 Gain on disposal of fixed assets - - (9,000) Change in cumulative translation adjustment 41,000 (24,000) 33,000 Cumulative effect of change in accounting principle, net (197,000) - - Income tax benefit (110,000) - - Changes in assets and liabilities, net of effects of discontinued operations and non-cash transactions: Decrease (increase) in accounts receivable trade, net 160,000 (232,000) (687,000) Decrease (increase) in inventory 537,000 (947,000) (355,000) (Increase) decrease in prepaid expenses (18,000) 62,000 132,000 (Increase) decrease in notes receivable, related party (120,000) (1,543,000) 323,0 (Increase) decrease in other assets 317,000 (365,000) (155,000) (Decrease) increase in accounts payable and accrued expenses (366,000) 362,000 39,000 Increase (decrease) in accrued payroll and related liabilities 59,000 (44,000) (213,000) Decrease in accrued store closing costs (12,000) (307,000) - (Decrease) increase in other accrued taxes - (237,000) 317,000 Decrease in income taxes payable - (3,128,000) (369,000) ---------------- ------------------ ----------------- Net cash (used) provided by operating activities 1,095,000 (6,056,000) (989,000) ---------------- ------------------ ----------------- CASH FLOWS FROM INVESTING ACTIVITIES Sale (purchase) of investments, net 2,556,000 3,085,000 (7,106,000) Investments in common stock (1,000,000) (500,000) - Proceeds from sale of discontinued operations, net of transaction costs - - 17,626,000 Restaurant Dispositions - - 64,000 Proceeds on disposal of fixed assets 3,000 - 19,000 Capital expenditures (509,000) (1,490,000) (3,117,000) ---------------- ------------------ ----------------- Net cash provided by investing activities 1,050,000 1,095,000 7,486,000 ---------------- ------------------ ----------------- CASH FLOWS FROM FINANCING ACTIVITIES Additions to debt - 2,184,000 - Reductions of debt (681,000) (890,000) - Proceeds from issuance of stock 84,000 50,000 448,000 ---------------- ------------------ ----------------- Net cash provided (used) by financing activities (597,000) 1,344,000 448,000 ---------------- ------------------ ----------------- Net increase (decrease) in cash and cash equivalents 1,548,000 (3,617,000) 6,945,000 Cash and cash equivalents, beginning of period 5,314,000 8,931,000 1,986,000 ---------------- ------------------ ----------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,862,000 $ 5,314,000 $ 8,931,000 ================ ================== ================= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 241,000 $ 153,000 $ - Income taxes, net $ - 3,486,000 318,000 ================ ================== ================= Non-cash activities: Facility purchased under capital lease $ - $ 1,688,000 $ - Unrealized losses on debt and equity investments $ 110,000 $ - $ - ================ ================== =================
See accompanying notes to consolidated financial statements F-6 28 VIE DE FRANCE CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS The Company develops, produces and markets high-quality frozen entrees, side dishes and sauces for the foodservice and retail markets. PRINCIPLES OF CONSOLIDATION The financial statements include the consolidated accounts of Vie de France Corporation and its subsidiary (collectively "the Company"). All significant intercompany transactions have been eliminated in the financial statements. FISCAL YEAR The Company utilizes a 52/53 week fiscal year which ends on the last Saturday in June. Fiscal year 1996 contained 53 weeks, and fiscal years 1995 and 1994 contained 52 weeks. FINANCIAL STATEMENT RECLASSIFICATIONS Certain items in prior year financial statements have been reclassified to conform to the current year financial statement presentation. ACCOUNTING CHANGE Effective June 25, 1995, the Company changed its overhead absorption policy with regard to finished goods inventories. Prior to this change, the Company had valued its inventories using partial absorption of certain-plant level indirect manufacturing overhead costs. Additional costs, such as material handling, purchasing and receiving, plant administration and factory and equipment depreciation, were expensed as period costs. These costs will now be treated as product costs under the method adopted by the Company in order to better match costs with related revenues and to better conform to prevailing manufacturing industry practice. Under this method approximately $1,087,000 of depreciation and amortization costs and $1,848,000 of general and administrative expenses, have been reclassified as product costs during 1996. The effect of this change on prior year accounts would be immaterial. F-7 29 USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. REVENUE RECOGNITION The Company recognizes revenue at the time products are shipped to customers. CASH AND CASH EQUIVALENTS Cash equivalents consist of highly liquid investments with an original maturity of three months or less. INVESTMENTS Effective June 25, 1994, the Company adopted Statement of Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for Certain Investments in Debt and Equity Securities," which expands the use of fair value accounting for those securities, but retains the use of the amortized cost method for investments in debt securities which management has the positive intent and ability to hold to maturity. The Company has recorded its investments into the following category: AVAILABLE- FOR-SALE Securities available for sale include securities which could be sold in response to changes in interest rates or general liquidity needs. Such securities are carried at estimated fair value with unrealized gains or losses recorded as a separate component of equity. Investments in affiliates in which the Company has an ownership position providing it with significant influence over the investee, are accounted for by the equity method. Equity method investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' income or losses after date of investment, and additional contributions made. F-8 30 INVENTORY Inventories are valued at the lower of cost, determined by the first-in, first-out method, or market. Included in inventory costs are raw materials, labor and manufacturing overhead. General and administrative costs related to the manufacturing facility approximated $1,848,000, during fiscal year 1996. The portion of general and administrative costs included in the ending inventory balance at June 29, 1996 approximated $278,000. Prior to the accounting change in fiscal year 1996, general and adminstrative costs were recorded as period costs, not product costs. Inventory consisted of:
JUNE 29, JUNE 24, 1996 1995 ----------------- ----------------- Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 529,000 $ 193,000 Frozen product & other finished goods . . . . . . . . . . . . . . . . . 1,448,000 1,975,000 Packing materials & supplies . . . . . . . . . . . . . . . . . . . . . 193,000 227,000 ---------------- ---------------- 2,170,000 2,395,000 Less obsolescence reserve . . . . . . . . . . . . . . . . . . . . . . . (51,000) (45,000) ---------------- ---------------- $ 2,119,000 $ 2,350,000 ================ ================
FIXED ASSETS Machinery, equipment, furniture and fixtures are depreciated using the straight-line method over estimated useful lives which range from two to eight years. Leasehold improvements are amortized using the straight-line method over the shorter of terms of the leases which range from four to twenty years, or the estimated useful life of the improvement. Expenditures for maintenance and repairs are charged to expense, and significant improvements are capitalized. For continuing operations, maintenance and repairs charged to expense approximated $381,000 in 1996, $373,000 in 1995 and $313,000 in 1994. F-9 31 The components of fixed assets were as follows:
JUNE 29, JUNE 24, 1996 1995 ----------------- ----------------- Machinery & equipment . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,280,000 $ 5,276,000 Furniture & fixtures . . . . . . . . . . . . . . . . . . . . . . . . . 528,000 181,000 Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . 2,313,000 2,211,000 Building under capital lease . . . . . . . . . . . . . . . . . . . . . 1,764,000 1,691,000 Construction in progress . . . . . . . . . . . . . . . . . . . . . . . - 82,000 --------------- ----------- 9,885,000 9,441,000 Less accumulated depreciation and amortization . . . . . . . . . . . . (4,572,000) (3,470,000) --------------- ---------------- $ 5,313,000 $ 5,971,000 =============== ===============
INCOME AND OTHER TAXES The Company computes income taxes using the asset and liability method whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. NEW ACCOUNTING STANDARDS In June 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets and or Long-lived Assets to Be Disposed of ("SFAS No. 121"). SFAS No. 121 requires companies to review long-lived assets and certain identifiable intangibles to be held, used or disposed of, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has not yet determined the impact of this Statement on its financial statements. The Company is required to adopt this statement in fiscal year 1997. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation ("Statement 123"). Statement 123 recommends, but does not require, the adoption of a fair value method of accounting for stock-based compensation to employees including common stock options, and stock-based compensation to individuals other than employees. The Company currently intends to continue recording stock-based compensation to employees under the intrinsic value method and does not intend to adopt the fair value method of accounting for stock-based compensation to employees as permitted by Statement 123. F-10 32 EARNINGS PER SHARE Net income (loss) per share is computed on the basis of the weighted average number of shares of stock and dilutive stock options outstanding during each period. FOREIGN CURRENCY TRANSLATION The statement of operations of the Company's Norwegian subsidiary (the "Subsidiary") has been translated to U.S. dollars using the average currency exchange rates in effect during the year. The Subsidiary's balance sheet has been translated using the currency exchange rate as of the end of the fiscal year. The impact of currency exchange rate changes on the translation of the Subsidiary's balance sheet is charged directly to stockholders' equity. NOTE 2 - INVESTMENTS The Company's investments are classified as available-for-sale. These securities are carried at fair value and unrealized gains and losses are reported in a separate component of stockholders' equity. The following is a summary of the Company's investments at June 29, 1996, classified as available-for-sale securities pursuant to SFAS 115:
Estimated Unrealized Fair Cost Gains Losses Value ---------------------------------------------------------------------- U.S. Government and agencies Current $1,113,000 $ - $ (6,000) $1,107,000 Non-current 3,972,000 - (57,000) 3,915,000 Corporate debt Current 1,549,000 2,000 - 1,551,000 Non-current 1,732,000 - (49,000) 1,683,000 ---------------------------------------------------------------------- Total investments $8,366,000 $2,000 $(112,000) $8,256,000 ========= ===== ========= =========
The net adjustment to unrealized losses on available-for-sale securities reduced stockholders' equity by $110,000 in 1996. The following is a summary of the Company's investments at June 24, 1995, classified as held-to-maturity securities pursuant to SFAS 115: F-11 33
Cost Fair Value ---- ---------- European bank deposit $ 4,900,000 $ 4,900,000 U.S. Government and agencies 4,025,000 4,027,000 Corporate debt 1,995,000 1,998,000 --------- --------- Total investments 10,920,000 10,925,000 Less noncurrent portion 2,025,000 2,030,000 --------- --------- Current portion $ 8,895,000 $ 8,895,000 ========= =========
The Company's European bank deposit, which was pledged as collateral in connection with a loan made to a related party, was returned during the last quarter of fiscal year 1996 and is recorded as cash equivalents at June 29, 1996. During 1995, the Company made a $500,000 investment in Stockwell's Home Meal Market(TM) (Stockwell's), a start-up entity devoted to the development of a chain of frozen food retail outlets, for a 10 percent ownership interest, which is included in other assets in the accompanying "Consolidated Balance Sheets," at June 24, 1995. During 1996, the Company made additional investments in Stockwell's totaling $1,000,000, increasing its ownership percentage to 30 percent. During 1996, Stockwell's incurred substantial losses and decided to close its two stores in July and August, 1996, respectively. The Company determined that is was not likely that the investment would be recovered, therefore the remaining investment balance was written off during the fourth quarter of 1996. The fiscal year 1996 financial statements reflect the Company's share of losses of $405,000 and the additional write-off of the investment of $1,095,000, which are included in loss on equity method investment in the accompanying Consolidated Statements of Operations. During portions of 1996, the Chief Financial Officer and President of the Company also served on the Board of Directors' of Stockwell's. NOTE 3 - INCOME TAXES The composition of the provision for income tax expense (benefit) attributable to continuing operations was:
YEAR ENDED ----------------------------------------------------- JUNE 29,1996 JUNE 24, 1995 JUNE 25, 1994 ----------------------------------------------------- Current: Federal $ -- $285,000 $ (99,000) State -- 22,000 (17,000) -------------- -------- --------- Total current provision for income tax expense (benefit) $ -- $307,000 $(116,000) ============= ======= =========
The deferred tax benefit for the year ended June 29, 1996 was $110,000. F-12 34 The provision (benefit) for income taxes for fiscal years 1996, 1995 and 1994 has been presented in the consolidated statements of income as continuing operations, discontinued operations and cumulative effect of change in accounting principle as follows:
JUNE 29, JUNE 24, JUNE 25, 1996 1995 1994 ---------------------------------------- Tax Provision (benefit) allocated to: Continuing operations $(110,000) $307,000 $ (116,000) --------- ------- ---------- Discontinued operations: Loss from discontinued operations - - (687,000) Gain from sale of discontinued operations (335,000) - 4,438,000 --------- ------- ---------- (335,000) - 3,751,000 Cumulative effect of change in accounting principle 110,000 - - --------- ------- ---------- Total provision for income tax expense (benefit) $(335,000) $307,000 $3,635,000 ========= ======= ==========
The taxable gain recorded in fiscal year 1994 on the sale of discontinued operations was reduced by the Company's available operating loss carryforwards by $2,349,000. As a result, as of June 25, 1994 the Company had no available unused net operating loss carryforwards. The differences between amounts computed by applying the statutory federal income tax rates to income from continuing operations and the total income tax provision applicable to continuing operations were as follows:
YEAR ENDED ----------------------------------------------- JUNE 29, JUNE 24, JUNE 25, 1996 1995 1994 ----------- ------------ ----------- Federal tax benefit at statutory rates $(793,000) $(136,000) $(201,000) Loss from foreign operations 231,000 252,000 69,000 Non-deductible items 5,000 5,000 20,000 Period effect of U.S. valuation allowance 497,000 156,000 - State income taxes, net (12,000) 38,000 7,000 Other, net (38,000) (8,000) (11,000) ----------- ------------ ----------- Total provision for income tax expense (benefit) applicable to continuing operations $(110,000) $ 307,000 $(116,000) =========== ============ ===========
F-13 35 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The deferred tax assets at June 29, 1996 and June 24, 1995 are fully offset by a valuation allowance of approximately $1,378,000 and $891,000, respectively, due to uncertainties surrounding the ultimate realizability of the assets. The significant components of deferred tax assets are were as follows:
June 29, June 24, 1996 1995 Deferred tax assets: ---- ---- Net foreign operating loss carryforwards $ 495,000 $ 289,000 Accrued losses on discontinued operations 112,000 264,000 Inventory adjustment 163,000 228,000 Accrued losses on equity method investment 585,000 - Other 76,000 110,000 ----------- ------- Total deferred tax assets 1,431,000 891,000 Less valuation allowance (1,378,000) (891,000) ----------- ---------- Net deferred tax asset $ 53,000 $ - ----------- ---------- Deferred tax liabilities: Property and equipment 53,000 - ----------- ---------- Net deferred income taxes $ - $ - =========== ==========
The valuation allowance for deferred tax assets as of June 25, 1994 was $714,000. The net changes in total valuation allowance for the years ended June 29, 1996 and June 24, 1995 were increases of $487,000 and $177,000, respectively. The net operating loss carryforward can only be used to offset taxable income in the country where the carryforward was generated. These operating loss carryforwards expire as follows: Fiscal Year 2004 $219,000 Fiscal Year 2005 832,000 Fiscal Year 2006 716,000 NOTE 4 - DISCONTINUED OPERATIONS The gain from sale of discontinued operations for fiscal year 1996 relates to reversal of certain accruals related to the former Restaurant Division, and income tax refunds received during 1996 of $335,000. During fiscal year 1996, the Company completed Internal Revenue Service audits relating to the disposition of the Bakery division in fiscal year 1991 and 1992. The audit resulted in an increase in tax for alternative minimum tax purposes of $353,000, which is treated as a credit against tax in future years. Based on the combination of the alternative minimum taxes and F-14 36 credits previously paid, the Company had an alternative minimum tax carryforward refund of $640,000. As a result of this, during 1996 the Company received a federal income tax refund of $404,000, of which $280,000 is included in the gain on discontinued operations, the remaining offset accruals established in previous years. The Company also received state income tax refunds of $58,000 which are included in the gain on discontinued operations. As a result of the disposition of the bakery and restaurant division, several state income tax audits are in process. The Company has provided an accrual of $141,000 for these audits at the end of fiscal year 1996. During the third and fourth quarters of fiscal year 1995, the Company reduced its accruals related to the sale of the former Restaurant Division. This reduction was possible due to the expiration of certain contingent liabilities. In March 1994, the Board of Directors of the Company approved the sale of substantially all of the net assets of the Restaurant Division pursuant to an asset purchase agreement entered into with Vie de France Bakery Yamazaki, Inc., a subsidiary of Yamazaki Baking Company, Ltd., a Japanese Company. Effective May 25, 1994, the Company completed the sale for approximately $20,400,000 in cash, which resulted in a gain of approximately $9,200,000, net of income taxes of $4,400,000. The gain on sale of discontinued operations is stated net of operating pre-tax losses from March 4, 1994 to the sale date of May 25, 1994 of approximately $469,000. Operating results of the Restaurant Division for fiscal year 1994 up to the measurement date of March 4, 1994 consisted of a pre-tax loss of approximately $1,250,000 which is reported in the Consolidated Statements of Operations under the caption "(Loss) income from discontinued operations." Also reported under the caption "(Loss) income from discontinued operations" are $250,000 in additional expenses associated with a claim made in 1994 by the U.S. Environmental Protection Agency relating to an ammonia leak at one of the Company's former bakery locations which was reported as a discontinued operation in 1991.
YEAR ENDED ------------------------------------------------ JUNE 29, JUNE 24, JUNE 25, 1996 1995 1994 ------------ ----------- ------------ Net sales - Restaurant Division $ - $ - $24,604,000 ============ =========== ============ Income (loss) from discontinued operations, before income taxes $ (22,000) $ 730,000 $ 7,723,000 Tax benefit 335,000 - 687,000 ------------ ----------- ------------ Total $ 313,000 $ 730,000 $ 8,410,000 ============ =========== ============
F-15 37 NOTE 5 - LONG-TERM DEBT Long-term debt, net of current maturities, at June 29, 1996 and June 24, 1995 was as follows:
1996 1995 Principal Principal Lender Description Maturity Outstanding Outstanding - ------ ----------- -------- ----------- ----------- Overdraft Six months, $ - $ 603,000 Den norske Bank Facility renewable Den norske Bank Term Loan February 28, 2000 297,000 378,000 SND Term Loan February 1, 2004 321,000 312,000 Hjelmeland Kommune Capital Lease June 1, 2014 1,682,000 1,688,000 ---------------- ------------ Total $ 2,300,000 $ 2,981,000 Less-current portion 153,000 734,000 ---------------- ------------ Non-current portion $ 2,147,000 $ 2,247,000 ================ ============
Borrowings under the Den norske Bank ("DnB") Overdraft Facility are limited to a percentage of the Subsidiary's inventories and receivables, up to a maximum of $1,000,000 with a floating interest rate equal to the prevailing Norwegian overnight funds rate plus two percentage points. The Den norske Bank Overdraft Facility interest rate at June 29, 1996 and June 24, 1995 was 4.85% and 5.68%, respectively. The term loan from DnB has a stated interest rate of 7.25% and will be repaid through ten semi-annual payments of principal and interest beginning August 30, 1995 and ending February 28, 2000. Statens Narings-OgDistriktutvikiingsfond ("SND"), a governmental development agency in Norway, issued to the Subsidiary an eight-year term loan whose terms require the establishment of a working plant facility. The loan has a variable interest rate which at June 29, 1996 was 10.0%, and will be repaid through sixteen semi-annual payments of principal and interest beginning August 1, 1996 and ending February 1, 2004. The Subsidiary entered into a twenty-year capital lease obligation with an initial principal amount of $1,691,000 and with quarterly payments of $49,000, including principal and interest. The interest rate on the lease is 7.27%. At the end of the lease term, ownership of the facility will transfer to the Subsidiary. The Company has issued no guarantees with respect to this lease. During fiscal year 1995, the Subsidiary was not in compliance with certain of the covenants set forth by DnB. In 1996, DnB agreed to temporarily waive such covenants in exchange for certain guarantees on the part of the Company. These included a guaranty in the form of a renewable six-month stand-by letter of credit issued by the Company in the amount of $600,000, along with the subordination of a $300,000 loan from the Company to the Subsidiary. F-16 38 Subsequent to year-end, the stand-by letter of credit was increased to $800,000. Accordingly, DnB has agreed to maintain the overdraft facility and waive its covenant requirements for as long as the stand-by letter of credit is in effect, but has limited borrowings up to the amount of the guaranty of $800,000. Maturities for the renewable overdraft facility, of the two term loans and the capital lease during the next five fiscal years on an aggregate basis at June 29, 1996 were as follows: 1997 - $153,000; 1998 - $177,000; 1999 - $180,000; 2000 - $138,000; 2001 - $103,000 and $1,549,000 thereafter. The maturities for 1997 of $153,000 do not include any amounts borrowed under the overdraft facility which Company paid in full at the end of fiscal year 1996. NOTE 6 - STOCKHOLDERS' EQUITY The Company's capital stock is divided into two classes: Common Stock and Class B Stock. The Class B Stock, which is reserved for issuance to employees under certain stock option plans, is identical in all respects to the Common Stock except that the holders thereof have no voting rights unless otherwise required by law. NOTE 7 - EMPLOYEE BENEFITS The Company sponsors a qualified employee savings plan under which employees who meet certain minimum age and service requirements are eligible to participate. The Company matches one-third of the first 6% of eligible employees' voluntary contributions to the plan. The Company expensed, as a component of continuing operations, $13,000, $11,000 and $16,000 in fiscal years 1996, 1995 and 1994, respectively, for contributions to the savings and profit sharing plan. In fiscal year 1994, the Company implemented a non-qualified employee savings plan under which senior management employees are eligible to participate. The Company matches one-third of the first 6% of eligible employees' voluntary contributions to the plan. The Company's matching contribution is limited to 6% of the combined contributions into both the qualified and the non-qualified plan. The Company expensed, as a component of continuing operations, $13,000 for fiscal year 1996 and $14,000 in both fiscal years 1995 and 1994 for this plan. The Company expensed $37,000 for a separate retirement for the President of the Company in fiscal year 1996. F-17 39 During fiscal year 1993, the Company established, upon stockholder approval, the 1992 Stock Option Plan which provides for up to 300,000 shares of the Company's Common Stock to be made available to employees at various prices as established by the Board of Directors at the date of grant. Upon the adoption of the 1992 Stock Option Plan, two previous plans, the 1986 Stock Option Plan and the 1982 Stock Option Plan, were terminated except with respect to 373,000 options issued and outstanding under these plans. During fiscal year 1996, the Company granted 82,250 options under the 1992 Stock Option Plan. The outstanding options expire through fiscal year 2005. Changes in outstanding options were as follows:
Number of Price Range Options ----------- ------- Outstanding at June 26, 1993 $1.63-$2.75 446,000 Options granted 3.88- 4.00 131,000 Options exercised 1.63- 3.88 (184,500) Options canceled 1.63- 3.88 (13,375) ----------- Outstanding at June 25, 1994 1.63- 4.00 379,125 Options granted 3.50 77,000 Options exercised 1.94- 3.88 (26,250) Options canceled 1.94- 3.88 (58,875) ----------- Outstanding at June 24, 1995 1.63- 4.00 371,000 Options granted 2.13- 3.13 82,250 Options exercised 1.63- 2.38 (44,000) Options canceled 1.63- 4.00 (330,750) ----------- Outstanding at June 29, 1996 1.63- 4.00 330,750 ===========
As of June 29, 1996, options to purchase 230,688 shares of common stock were currently exercisable at prices ranging from $1.63 to $4.00 per share. The exercise prices equal the fair market value of the stock at the date of grant. F-18 40 NOTE 8 - COMMITMENTS The Company leases office and plant space under operating leases which expire on various dates through 1999. Certain leases provide for escalations in rent based upon increases in the lessor's annual operating costs or the consumer price index. Future minimum lease payments under these agreements at June 29, 1996 were as follows:
Fiscal Year ----------- 1997 . . . . . . . . . . . . . . . . . . . . . . . . . $ 410,000 1998 . . . . . . . . . . . . . . . . . . . . . . . . . 380,000 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 331,000 -------- Total . . . . . . . . . . . . . . . . . . . . . . . $ 1,121,000 ===============
Rent expense for continuing operations approximated $405,000, $371,000 and $458,000 for fiscal years 1996, 1995 and 1994, respectively. NOTE 9 - TRANSACTIONS WITH RELATED PARTIES During fiscal year 1996 the Company received the deposit and all accrued interest it had with a European bank of $4,900,000 at June 24, 1995. This deposit had been pledged as collateral to the Bank with respect to funds loaned to a party affiliated with the principal stockholder of the Company. The Company incurred no costs as a result of the collateralization. These funds are included as a cash equivalent at June 29, 1996. At June 29, 1996 and June 24, 1995, loans outstanding to the principal stockholder of the Company amounted to $2,188,000 and $2,068,000, which includes accrued interest of $222,000 and $101,000 respectively. The loans have maturity dates of up to two years and at June 29, 1996 and June 24, 1995, carried a weighted-average interest rate of 8.0%. In addition to this loan, two related party loans in the amount of $36,000 and $62,000 were outstanding at the end of fiscal year 1996. The Board of Directors agreed to pay one of its Directors a $15,000 annual fee less the amount of consulting fees paid to the member during the fiscal year for services provided on behalf of the Company's Technology Committee. The board member provides engineering consulting services to the Company through the member's own Company at his normal billing rates. At June 29, 1996 and June 24, 1995, the Company has an employee loan outstanding in the amount of $56,000, which bears no interest through April, 1997. Effective May, 1997 this loan will begin to bear interest at the rate of 1% over the published prime rate, and shall be paid quarterly. This loan was established as a part of the employee's employment contract. The principal is payable one year following termination of employment, or the sale of employee's F-19 41 residence whichever occurs first. A second employee loan was outstanding in the amount of $20,000 which bears no interest, and is expected to be paid by the end of the first quarter fiscal 1997. NOTE 10 - SALES TO MAJOR CUSTOMERS Food service distributors continued to be the leading market segment for the Company with fiscal year 1996 sales representing approximately 58% of total net sales. In fiscal year 1996, sales to food service distributors representing hotels chains and restaurants accounted for 42% and 11% of total net sales, respectively. Sales to the airline industry in fiscal year 1996 represented 31% of total net sales. Sales to the retail, healthcare and Norwegian European and Asian customers accounted for 7.5%, 2% and 1.5%, respectively. In fiscal years 1996, 1995 and 1994, sales to food service distributors representing the Marriott Hotel chain amounted to 11%, 21% and 55% of total net sales. In fiscal year 1996, 1995 and 1994, sales to food service distributors representing the Hyatt Hotel chain amounted to 31%, 32% and 16% of total net sales. Sales to distributors serving the airline industry represented 31%, 29% and 17% of total net sales in fiscal year 1996, 1995 and 1994, respectively. The loss of any of the above customers could have an effect on the Company's results of operations. NOTE 11 - LITIGATION The Company is engaged in ordinary and routine litigation incidental to its business. Management does not anticipate that any amounts which it may be required to pay by reason thereof will have a material effect on the Company's financial position or results of operations. F-20 42 SCHEDULE II VIE de FRANCE CORPORATION VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Additions --------------------------- Balance at Charged to Charged to Balance Beginning Costs and Other at End of Period Expenses Accounts Deductions of Period ------------ ----------- -------- ------------- --------- Year ended June 25, 1994 Allowance for doubtful accounts $ 18,429 $ - $ (16,552)(1) $ 1,877 ========== ========= ========= ========== Provision for losses on unit closings 475,938 323,835 (265,941)(2) 533,832 ========== ========= ========= ========== Allowance for obsolete inventory 26,500 87,774 (17,116) 97,158 ========== ========= ========= ========== Tax Valuation allowance - 714,000 - 714,000 ========== ========= ========= ========== Year ended June 24, 1995 Allowance for doubtful accounts $ 1,877 $ 3,543 $ (219)(1) $ 5,201 ========== ========= ========= ========== Provision for losses on unit closings 533,832 - (167,050)(3) 366,782 ========== ========= ========= ========== Allowance for obsolete inventory 97,158 - (51,924) 45,234 ========== ========= ========= ========== Tax Valuation allowance 714,000 177,000 891,000 ========== ========= ========= ========== Year ended June 29, 1996 Allowance for doubtful accounts $ 5,201 $ - $ (5,201)(1) $ - ========== ========= ========= ========== Provision for losses on unit closings 366,782 91,737 (171,500)(3,4) 287,019 ========== ========= ========= ========== Allowance for obsolete inventory 45,234 5,876 - 51,110 ========== ========= ========= ========== Tax Valuation allowance 891,000 487,000 - 1,378,000 ========== ========= ========= ==========
(1) Write-off of uncollectible customer accounts, net of recoveries. (2) Write-off of assets of closed units and related closing costs associated with the former Restaurant Division. (3) Lease termination costs associated with the former Restaurant Division. (4) Recovery of reserves associated with the former Bakery Division. F-21 43 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Vie de France Corporation: We consent to the incorporation by reference in the registration statements, (Nos. 33-60614 and 33-60616) on Form S-8 of Vie de France Corporation of our report dated September 13, 1996, relating to the consolidated balance sheet of Vie de France Corporation and subsidiary as of June 29, 1996, and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the fiscal year ended June 29, 1996, and related schedule, which report appears in the June 29, 1996 annual report on Form 10-K of Vie de France Corporation. KPMG Peat Marwick LLP Washington, D.C. September 27, 1996 F-22 44 CONSENT OF INDEPENDENT ACCOUNTANTS The Board of Directors Vie de France Corporation: We hereby consent to the incorporation by reference in the registration statements on form S-8 (Nos. 33-60614 and 33-60616) of Vie de France Corporation of our report dated August 25, 1995 appearing on page F-2 of this Form 10-K Price Waterhouse LLP Washington, D.C. September 27, 1996 F-23 EX-27 2 FINANCIAL DATA SCHEDULE
5 YEAR JUN-29-1996 JUN-29-1996 6,862,000 2,658,000 1,486,000 0 2,119,000 13,564,000 9,885,000 (4,572,000) 27,035,000 2,106,000 2,300,000 0 0 141,000 26,894,000 27,035,000 16,078,000 16,078,000 14,084,000 14,084,000 5,347,000 0 1,019,000 (2,334,000) 110,000 (2,224,000) 313,000 0 197,000 (1,714,000) (.13) 0
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