Vermont Pure Holdings Ltd (VPS) filed Quarterly Report for the period ended 2009-04-30.
Vermont Pure Holdings Inc. bottles markets and distributes natural spring water under the `Vermont Pure` and `Hidden Spring` brands to the consumer natural foods and home/office markets. The Company sells to the consumer and natural food markets primarily in the New England Mid-Atlantic and Mid-Western states while it sells to the home/office market primarily in Vermont and parts of Northern New York Massachusetts and New Hampshire. Vermont Pure Holdings Ltd has a market cap of $21.1 million; its shares were traded at around $0.98 with a P/E ratio of 9.8 and P/S ratio of 0.3. Vermont Pure Holdings Ltd had an annual average earning growth of 5.5% over the past 5 years.
Highlight of Business Operations:
Selling, general and administrative (SG&A) expenses of $7,282,000 in the second quarter of 2009 decreased $312,000, or 4%, from $7,594,000 in the comparable period in 2008. Of total SG&A expenses, (1) route distribution costs decreased $45,000, or 1%, as a result of lower fuel and sales-related compensation costs; (2) selling costs increased $74,000, or 11%, as a result of computer software implementation costs; and (3) administration costs decreased $341,000, 10%, primarily as a result of the provision for bad debt expense on a note receivable of $475,000 in the second quarter of 2008 that did not reoccur in 2009 which more than offset a $272,000 charge for a termination arrangement in the second quarter of 2009 . The note, which was due in full in 2011, represented the remaining portion of the sales price that was receivable from the sale of our retail operations in March, 2004. The note was considered fully impaired primarily based on advice from the debtor that it had closed its principal facility and generally ceased its operations due to cash flow problems.
Income before income taxes was $408,000 for the three months ended April 30, 2009 compared to income before income taxes of $796,000 in the corresponding period in 2008, a decrease of $388,000, or 49%. The tax expense for the second quarter of fiscal year 2009 was $176,000 and was based on the expected effective tax rate of 43%. This rate increased from 37% the first quarter of 2009 as a result of an adjustment in the anticipated effective tax rate for the full fiscal year of 2009 of 41%. The adjustment was a reflection of the impact the book-to-tax adjustments have on a smaller taxable income base. We recorded a tax expense of $326,000 related to income from operations in the second quarter of fiscal year 2008 based on an anticipated effective tax rate of 41%.
Selling, general and administrative (SG&A) expenses of $14,093,000 in the first half of 2009 decreased $546,000, or 4%, from $14,639,000 in the comparable period in 2008. Of total SG&A expenses, (1) route distribution costs decreased $189,000, or 3%, as a result of lower fuel and sales-related compensation costs; (2) selling costs increased $70,000, or 5%, as a result of computer software implementation costs; and (3) administration costs decreased $427,000, or 7%, as a result of the provision for bad debt of $475,000 in the first half of 2008 and did not reoccur in 2009 that did not offset a $272,000 charge for a termination arrangement in the first half of 2009. The note, which was due in full in 2011, represented the remaining portion of the sales price that was receivable from the sale of our retail operations in March, 2004. The note was considered fully impaired primarily based on advice from the debtor that it had closed its principal facility and generally ceased its operations due to cash flow problems. In addition outside computer and consulting services declined significantly in the first half of 2009 compared to the same period a year ago.
Income before income taxes was $558,000 for the six months ended April 30, 2009 compared to income before income taxes of $1,561,000 in the corresponding period in 2008, a decrease of $1,003,000. The tax expense for the first half of fiscal year 2009 was $231,000 and was based on the expected effective tax rate of 41%. We recorded a tax expense of $579,000 related to income from operations in the first half of fiscal year 2008 based on an anticipated effective tax rate of 37%. The increase in the effective tax rate was a result an increase in the 2009 rate from the impact that the book-to-tax adjustments have on a smaller taxable income base and a decrease in 2008 rate as a consequence of the affect of tax credits for the installation of solar electricity generating equipment during fiscal year. The decrease in the 2008 rate was partially offset by a valuation allowance set up for the write off of the note referenced above.
As of April 30, 2009, we had working capital of $1,524,000 compared to $3,103,000 as of October 31, 2008, a decrease of $1,579,000. The decrease in working capital was primarily attributable to the reduction of cash generated by operations and cash used for acquisitions during the first six months of fiscal year 2009 even though less cash was used for capital expenditures and acquisitions in the first half of 2009 compared to the first half of 2008. Net cash provided by operating activities increased $406,000 to $2,629,000 in 2009 from $2,223,000 in 2008. The decrease was attributable to an income tax refund that more than offset lower net income, and higher cash usage for inventory and expenses.
During the first six months of fiscal year 2009, we borrowed $2,500,000 from our acquisition line of credit and issued notes to sellers of $540,000 to finance acquisitions. Over the same time, we borrowed $300,000 from our acquisition line of credit to fund capital expenditures and $536,000 from our revolving line of credit to fund seasonal operating cash requirements. As of April 30, 2009 we had outstanding balances of $15,167,000 on our term loan, $3,800,000 on our $10,000,000 acquisition line of credit, and $536,000 on our $6,000,000 revolving line of credit with Bank of America. In addition, there was an outstanding letter of credit for $1,583,000 issued against our revolving line of credit. As of April 30, 2009 there was $6,200,000 and $3,881,000 available on the acquisition and revolving lines of credit, respectively.
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