VERMONT PURE HOLDINGS, LTD.
AND SUBSIDIARY
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the condensed consolidated financial
position, results of operations, and cash flows for the periods
presented. The results have been determined on the basis of generally
accepted accounting principles and practices of the United States of America
(“GAAP”), applied consistently with the Annual Report on Form 10-K of Vermont
Pure Holdings, Ltd. (the “Company”) for the year ended October 31,
2008.
Certain
information and footnote disclosures normally included in audited consolidated
financial statements presented in accordance with GAAP have been condensed or
omitted. The accompanying condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended October
31, 2008. The results of operations for the interim periods are not
necessarily indicative of the results to be expected for the full
year.
The
financial statements herewith reflect the consolidated operations and financial
condition of Vermont Pure Holdings Ltd. and its wholly owned subsidiary Crystal
Rock, LLC.
In
April 2008, the FASB issued FSP FAS 142-3, “
Determination of the Useful Life of
Intangible Assets
.” This FSP amends the factors that should be considered
in developing renewal or extension assumptions used to determine the useful life
of a recognized intangible asset under FASB Statement No. 142 (“SFAS 142”),
“
Goodwill and Other Intangible
Assets
.” The intent of this FSP is to improve the consistency between the
useful life of a recognized intangible asset under SFAS 142 and the period of
expected cash flows used to measure the fair value of the asset under FASB
Statement No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations,”
and other GAAP. This Statement is effective for fiscal years beginning on or
after December 15, 2008, and interim periods within those years. Early
application is not permitted. The Company has not yet determined the impact of
the adoption of FSP FAS 142-3 to the Company’s statement of financial position
or results of operations.
Effective
November 1, 2005, the Company adopted the provisions of SFAS No. 123R,
“Share-Based Payments (revised 2004)” (SFAS No. 123R). SFAS No.
123R requires companies to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant date fair value
of the award. That cost will be recognized over the period during which an
employee is required to provide services in exchange for the award, the
requisite service period (usually the vesting period). Under SFAS No.
123R the Company provides an estimate of forfeitures at the initial date of
grant.
The
Company has several stock-based compensation plans under which incentive and
non-qualified stock options and restricted shares are granted. In
April 1998, the Company’s stockholders approved the 1998 Incentive and
Non-Statutory Stock Option Plan. In April 2003, the Company’s
stockholders approved an increase in the authorized number of shares to be
issued under its 1998 Incentive and Non-Statutory Stock Option Plan from
1,500,000 to 2,000,000. This plan provides for issuances of options
to purchase the Company’s common stock under the administration of the
compensation committee of the Board of Directors. The intent of the
plan is to reward options to officers, employees, directors, and other
individuals providing services to the Company.
In April
2004, the Company’s stockholders approved the 2004 Stock Incentive
Plan. The plan provides for issuances of awards of up to 250,000
restricted or unrestricted shares of the Company’s common stock, or incentive or
non-statutory stock options to purchase such common stock. Of the total amount
of shares authorized under this plan, 149,000 option shares are outstanding,
26,000 restricted shares have been granted, and 75,000 shares are available for
grant at January 31, 2009.
The
options issued under the plans generally vest in periods up to five years based
on the continuous service of the recipient and have 10 year contractual
terms. Share awards generally vest over one year. Option
and share awards provide for accelerated vesting if there is a change in control
of the Company (as defined in the plan).
There was
an option for 5,000 shares of stock that expired in the first quarter of fiscal
2009. Other than the expiration, there was no activity related to
stock options and outstanding stock option balances or other equity based
compensation during the three month periods ended January 31, 2009 and
2008. The Company did not grant any equity based compensation during
the three months ended January 31, 2009 and 2008.
The
following table summarizes information pertaining to outstanding stock options,
all of which are exercisable, as of January 31, 2009:
|
Exercise
Price
Range
|
|
|
Outstanding
Options
(Shares)
|
|
|
Weighted
Average Remaining
Contractual
Life
|
|
|
Weighted
Average
Exercise Price
|
|
|
Intrinsic
Value
as
of
January
31, 2009
|
|
|
$
|
1.80
- $2.60
|
|
|
|
234,500
|
|
|
|
5.96
|
|
|
$
|
2.32
|
|
|
$
|
-
|
|
|
$
|
2.81
- $3.38
|
|
|
|
308,200
|
|
|
|
1.83
|
|
|
|
3.22
|
|
|
|
-
|
|
|
$
|
3.50
- $4.25
|
|
|
|
40,000
|
|
|
|
3.00
|
|
|
|
3.80
|
|
|
|
-
|
|
|
$
|
4.28
- $4.98
|
|
|
|
5,000
|
|
|
|
2.92
|
|
|
|
4.98
|
|
|
|
-
|
|
|
|
|
|
|
|
587,700
|
|
|
|
3.57
|
|
|
$
|
2.91
|
|
|
$
|
-
|
|
Outstanding
options were granted with lives of 10 years and provide for vesting over a term
of 0-5 years. Since all outstanding stock options were fully vested
as of January 31, 2009 there was no unrecognized share based compensation
related to unvested options as of that date. All incentive and
non-qualified stock option grants had an exercise price equal to the market
value of the underlying common stock on the date of grant.
Employee
Stock Purchase Plan
On June
15, 1999, the Company’s stockholders approved the Vermont Pure Holdings, Ltd.
1999 Employee Stock Purchase Plan (“ESPP”). On January 1, 2001,
employees commenced participation in the plan. The total number of
shares of common stock issued under this plan during the three months ended
January 31, 2009 and 2008 was 57,739 and 28,588 for proceeds of $38,397 and
$44,812, respectively.
On March
29, 2007, the Company’s stockholders approved an increase in the number of
shares available under the plan from 500,000 to 650,000
shares. Effective January 1, 2006, ESPP shares are granted at 95% of
the fair market value at the last day of the offering period. Prior to that,
ESPP shares were granted at 85% of the fair market value at the lower of the
first or last day of the offering period. As of January 31, 2009
there are 39,762 shares remaining to be purchased under the plan.
4.
INTEREST RATE SWAP
AGREEMENTS
The
Company uses interest rate swaps to fix certain long term interest rates. The
swap rates are based on the floating 30-day LIBOR rate and are structured such
that if the loan rate for the period exceeds the fixed rate of the swap, then
the bank pays the Company to lower the effective interest
rate. Conversely, if the loan rate is lower than the fixed rate, the
Company pays the bank additional interest.
On
October 5, 2007, the Company entered into an interest rate hedge swap agreement
in conjunction with an amendment to its facility with Bank of
America. The intent of the instrument is to fix the interest rate on
75% of the outstanding balance on the Term Loan with Bank of America as required
by the facility. The swap fixes the interest rate for the swapped
amount at 6.62% (4.87% plus the applicable margin, 1.75%).
As of
January 31, 2009, the total notional amount committed to the swap agreement was
$12 million. On that date, the variable rate on the remaining 25% of
the term debt was 2.13%. Based on the floating rate for respective
three month periods ended January 31, 2009 and 2008, the Company paid $103,000
more and $1,000 less in interest, respectively, than it would have without the
swaps.
These
swaps are considered cash flow hedges under SFAS No. 133 because they are
intended to hedge, and are effective as a hedge, against variable cash
flows. As a result, the changes in the fair values of the
derivatives, net of tax, are recognized as comprehensive income or loss until
the hedged item is recognized in earnings.
5.
COMPREHENSIVE
INCOME
The
following table summarizes comprehensive income for the respective
periods:
|
|
|
Three
Months Ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net
income
|
|
$
|
94,525
|
|
|
$
|
512,222
|
|
|
Other
comprehensive income (loss):
Unrealized
(loss) on derivatives designated as cash flow hedges – net of
tax
|
|
|
(227,958
|
)
|
|
|
(341,747
|
)
|
|
Comprehensive
(loss) income
|
|
$
|
(133,433
|
)
|
|
$
|
170,475
|
|
6.
INVENTORIES
Inventories
consisted of the following at:
|
|
|
January 31,
2009
|
|
|
October 31,
2008
|
|
|
|
|
|
|
|
|
|
|
Finished
Goods
|
|
$
|
1,993,318
|
|
|
$
|
1,557,914
|
|
|
Raw
Materials
|
|
|
92,624
|
|
|
|
112,035
|
|
|
Total
Inventories
|
|
$
|
2,085,942
|
|
|
$
|
1,669,949
|
|
7.
INCOME PER SHARE AND
WEIGHTED AVERAGE SHARES
The
Company considers outstanding in-the-money stock options as potential common
stock in its calculation of diluted earnings per share, unless the effect would
be anti-dilutive, and uses the treasury stock method to calculate the applicable
number of shares. The following calculation provides the
reconciliation of the denominators used in the calculation of basic and fully
diluted earnings per share:
|
|
|
Three
Months Ended
January
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Net
Income
|
|
$
|
94,525
|
|
|
$
|
512,222
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Basic
Weighted Average Shares Outstanding
|
|
|
21,502,483
|
|
|
|
21,614,040
|
|
|
Dilutive
effect of Stock Options
|
|
|
-
|
|
|
|
-
|
|
|
Diluted
Weighted Average Shares Outstanding
|
|
|
21,502,483
|
|
|
|
21,614,040
|
|
|
Basic
Income Per Share
|
|
$
|
.00
|
|
|
$
|
.02
|
|
|
Diluted
Income Per Share
|
|
$
|
.00
|
|
|
$
|
.02
|
|
There
were 587,700 and 677,700 options outstanding as of January 31, 2009 and 2008,
respectively. For the three month period ended January 31, 2009 and
2008 there were no options used to calculate the effect of dilution because all
of the outstanding options’ exercise prices exceeded the market price of the
underlying common shares.
8.
DEBT
As of
January 31, 2009 the Company had outstanding balances of $15,979,167 on its term
loan and $1,300,000 on its $10,000,000 acquisition line of credit with Bank of
America. In addition, there was an outstanding letter of credit for
$1,485,000 issued against the $6,000,000 revolving line of credit’s
availability. As of January 31, 2009 there was $8,700,000 and
$4,515,000 available on the acquisition and revolving lines of credit,
respectively.
As of
January 31, 2009, the Company had approximately $5.3 million of debt subject to
variable interest rates. Under the senior credit agreement with Bank
of America, interest is paid at a rate of LIBOR plus a margin of 1.75% on term
debt and 1.50% on the acquisition line of credit resulting in variable interest
rates of 2.13% and 1.88%, respectively at January 31, 2009.
The
Company’s credit facility requires the Company to be in compliance with certain
financial covenants at the end of each fiscal quarter. The covenants
include senior debt service coverage as defined of greater than 1.25 to 1, total
debt service coverage as defined of greater than 1 to 1, and senior debt to
EBITDA of greater than 2.50 to 1. As of January 31, 2009, the Company
was in compliance with these covenants.
As of
January 31, 2009, the Company had $14,000,000 of subordinated debt outstanding
bearing an interest rate of 12% and $117,071 due on term debt related to
acquisitions and capital improvements.
9.
GOODWILL AND OTHER
INTANGIBLE ASSETS
Major
components of intangible assets at January 31, 2009 and October 31, 2008
consisted of:
|
|
|
January 31, 2009
|
|
|
October 31, 2008
|
|
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Gross
Carrying
Amount
|
|
|
Accumulated
Amortization
|
|
|
Amortizable
Intangible Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer
Lists and Covenants Not to Compete
|
|
$
|
6,116,944
|
|
|
$
|
4,313,450
|
|
|
$
|
5,866,981
|
|
|
$
|
4,113,807
|
|
|
Other
Identifiable Intangibles
|
|
|
508,347
|
|
|
|
197,657
|
|
|
|
528,254
|
|
|
|
196,886
|
|
|
Total
|
|
$
|
6,625,291
|
|
|
$
|
4,511,107
|
|
|
$
|
6,395,235
|
|
|
$
|
4,310,693
|
|
|
|
Amortization
expense for the three month periods ending January 31, 2009 and 2008 was
$200,413 and $225,175,
respectively.
|
There
were no changes in the carrying amount of goodwill for the three month period
ending January 31, 2009.
10.
SUBSEQUENT
EVENT
On
February 6, 2009 the Company entered into a Severance and Release Agreement with
an employee that has worked for the Company 59 years. Under the
agreement the Company is obligated to pay the employee, or his estate, $68,000 a
year for the next 4 years. On the date of the agreement the Company
recognized the expense related to this special termination benefit.
Item
2.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
The
following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto as filed in our Annual
Report on Form 10-K for the year ended October 31, 2008 as well as the condensed
consolidated financial statements and notes contained herein.
Forward-Looking
Statements
When used
in the Form 10-Q and in our future filings with the Securities and Exchange
Commission, the words or phrases “will likely result,” “we expect,” “will
continue,” “is anticipated,” “estimated,” “project,” “outlook,” or similar
expressions are intended to identify “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995. We
caution readers not to place undue reliance on any such forward-looking
statements, each of which speaks only as of the date made. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from historical earnings and those presently
anticipated or projected. Among these risks are water supply and
reliance on commodity price fluctuations. We have no obligation to
publicly release the result of any revisions which may be made to any
forward-looking statements to reflect anticipated or unanticipated events or
circumstances occurring after the date of such statements.
Results of
Operations
Overview and
Trends
Our
business was less profitable in the first quarter of fiscal year 2009 than in
the same period a year ago. We believe that the financial performance
for the period in large measure reflected the overall softening of the economy
which started to affect our business in the fourth quarter of fiscal year
2008. If, as many observers expect, the national and regional economy
remains in a recession in 2009, we are likely to experience lower profitability
going forward.
The
recessionary economic environment has affected the sales of our more profitable
products, water and cooler rentals, the most. Our single serve coffee
business grew for the period over last year but these products are less
profitable than our traditional products. In order to offset the
decrease in profitability, we have taken action to reduce our labor, product,
selling and administration costs. We will continue to explore new and
existing distribution channels in an effort to identify sales
opportunities.
Despite
reduced profitability, we continue to invest in our business and service
debt. As of January 31, 2009, we were in compliance with our bank
covenants and had substantial borrowing capacity available in our operating and
acquisition lines of credit.
Results of Operations for
the Three Months Ended January 31, 2009 (First Quarter) Compared to the Three
Months Ended January 31, 2008
Sales
Sales for
the three months ended January 31, 2009 were $15,552,000 compared to $16,385,000
for the corresponding period in 2008, a decrease of $833,000 or
5%. The decrease was primarily the result of lower water sales and
lower fees that were charged to offset energy costs for delivery and freight,
raw materials, and bottling operations. Sales as a result of
acquisitions had no material impact on total sales for the first
quarter.
The
comparative breakdown of sales of the product lines for the respective
three-month periods ended January 31, 2009 and 2008 is as follows:
|
Product Line
|
|
|
2009
|
|
|
2008
|
|
|
Difference
|
|
|
% Diff.
|
|
|
(000’s
$)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Water
|
|
|
$
|
6,217
|
|
|
$
|
6,621
|
|
|
$
|
(404
|
)
|
|
|
(6
|
%)
|
|
Coffee
and Related
|
|
|
|
5,499
|
|
|
|
5,352
|
|
|
|
147
|
|
|
|
3
|
%
|
|
Equipment
Rental
|
|
|
|
2,142
|
|
|
|
2,243
|
|
|
|
(101
|
)
|
|
|
(4
|
%)
|
|
Other
|
|
|
|
1,694
|
|
|
|
2,169
|
|
|
|
(475
|
)
|
|
|
(22
|
%)
|
|
Total
|
|
|
$
|
15,552
|
|
|
$
|
16,385
|
|
|
$
|
(833
|
)
|
|
|
(5
|
%)
|
Water
– Sales of
water decreased compared to the same period in the prior year primarily because
volume in the first quarter of 2009 decreased 8% from the first quarter of
2008. The decrease in volume more than offset a 2% increase in
pricing for the first quarter of 2009 compared to the same period a year
ago. We believe the decrease in the amount of water sold was
attributable to the weaker economy.
Coffee and Related
Products
– The increase in sales in the first quarter of 2009 compared to
the comparable period in 2008 was attributable to the growth of single serve
coffee, which grew 11%, to $2,594,000 in the first quarter of 2008 compared to
$2,328,000 in the same period in fiscal year 2008. Other products in
this category declined 4% in the first quarter compared to the same quarter a
year ago.
Equipment Rental
–
Equipment rental revenue decreased in the first quarter of 2009 compared to the
comparable period in 2008 as a result of a decrease in average rental prices and
placements of equipment. Sales were 2% lower in the first quarter of
2009 due to decreased equipment placements and 2% lower as a result of lower
prices as compared to the first quarter of 2008.
Other
– The
substantial decrease in other revenue is reflective of fees that are charged to
offset energy costs for delivery and freight, raw materials, and bottling
operations. These charges decreased 37% to $427,000 in the first
quarter of 2009 from $683,000 in the same period in 2008. Sales
of other products such as single-serve drinks, cups, and vending items, in
aggregate, decreased 5% from the first quarter last year to the first quarter of
2009.
Gross
Profit/Cost of Goods Sold
– For the three months ended January 31, 2009,
gross profit was $8,120,000 compared to $9,148,000 for the comparable
period in 2007. As a percentage of sales, gross profit decreased to
52% in the first quarter of 2009 from 56% in the first quarter of 2008. The
decrease in gross profit of $1,028,000, or 11%, was primarily due to lower sales
of higher margin products and significant reduction in the fees that are charged
to offset energy costs.
Cost of
goods sold includes all costs to bottle water, costs of purchasing and receiving
products for resale, including freight, as well as costs associated with product
quality, warehousing and handling costs, internal transfers, and the repair and
service of rental equipment, but does not include the costs of distributing our
product to our customers. We include distribution costs in selling,
general, and administrative expense, and the amount is reported
below. The reader should be aware that other companies may include
distribution costs in their cost of goods sold, in which case, on a comparative
basis, such other companies may have a lower gross margin as a
result.
Operating Expenses and
Income from Operations
Total
operating expenses decreased to $7,287,000 in the first quarter of 2009 from
$7,602,000 in the comparable period in 2008, a decrease of $315,000, or
4%.
Selling,
general and administrative (SG&A) expenses of $6,810,000 in the first
quarter of 2009 decreased $235,000, or 3%, from $7,045,000 in the comparable
period in 2008. Of total SG&A expenses, route distribution costs
decreased $145,000, or 4%, as a result of lower fuel and sales-related
compensation costs; selling costs decreased $4,000, or 1% as a result of lower
sales-related compensation costs; and administration costs decreased $86,000 as
a result of lower professional fees.
Advertising
expenses were $283,000 in the first quarter of 2009 compared to $341,000 in the
first quarter of 2008, a decrease of $58,000, or 17%. The decrease in
advertising costs is primarily related to a decrease in yellow page advertising
and other traditional promotional activity that more than offset an increase in
internet advertising.
Amortization
decreased to $200,000 in the first quarter of 2009 from $225,000 in the
comparable quarter in 2008. Amortization is attributable to
intangible assets that were acquired as part of acquisitions in recent
years.
Income
from operations for the three months ended January 31, 2009 was $833,000
compared to $1,546,000 in the comparable period in 2008, a decrease of $713,000,
or 46%. The decrease was a result of lower sales and product margins
despite lower operating costs.
Interest, Taxes, and Other
Expenses – Income from Continuing Operations
Interest
expense was $683,000 for the three months ended January 31, 2009 compared to
$781,000 in the three months ended January 31, 2008, a decrease of
$98,000. The decrease is attributable to lower outstanding debt and
lower interest rates.
Income
before income taxes was $150,000 for the three months ended January 31, 2009
compared to income before income taxes of $765,000 in the corresponding period
in 2008, a decrease of $615,000. The tax expense for the first quarter of fiscal
year 2009 was $56,000 and was based on the expected effective tax rate of
37%. We recorded a tax expense of $253,000 related to income from
operations in the first quarter of fiscal year 2008 based on an effective tax
rate of 33%. The lower effective tax rate in 2008 was primarily a
result of the affect of tax credits for the installation of solar electricity
generating equipment during fiscal year 2008.
Net
Income
Net
income decreased $418,000 to $94,000 for the three months ended January 31, 2009
from net income of $512,000 in the corresponding period in 2008. The
decrease is attributable to lower sales and product margins despite lower
operating and interest expenses for the first quarter of 2009 as compared to the
same period in fiscal year 2008.
Liquidity and Capital
Resources
As of
January 31, 2009, we had working capital of $2,862,000 compared to $3,103,000 as
of October 31, 2008, a decrease of $241,000. The decrease in working
capital was primarily attributable to the reduction of cash generated by
operation during the first three months of fiscal year 2009 even though less
cash was used for capital expenditures and acquisitions in the first quarter of
2009 compared to the first quarter of 2008. Net cash provided by
operating activities decreased $873,000 to $258,000 in 2009 from $1,131,000 in
2008. The decrease was attributable to lower net income, and higher cash usage
for inventory and expenses.
As
mentioned above, we use cash provided by operations to repay debt and fund
capital expenditures. In the first three months of fiscal year 2009,
we used $834,000 for scheduled repayments of our term debt. In addition, we used
$191,000 for capital expenditures. Capital expenditures were substantially
higher last year for the same period last year because of $706,000 expended on
our solar electricity generation project. We spent less for coolers,
brewers, bottles and racks related to home and office distribution in the first
quarter of 2009 compared to the respective period in 2008 as a result of lower
demand for rental units.
As of
January 31, 2009 we had outstanding balances of $15,979,167 on our term loan and
$1,300,000 on our $10,000,000 acquisition line of credit with Bank of
America. In addition, there was an outstanding letter of credit for
$1,485,000 issued against our $6,000,000 revolving line of credit. As
of January 31, 2009 there was $8,700,000 and $4,515,000 available on the
acquisition and revolving lines of credit, respectively.
Our
credit facility requires that we be in compliance with certain financial
covenants at the end of each fiscal quarter. The covenants include
senior debt service coverage as defined of greater than 1.25 to 1, total debt
service coverage as defined of greater than 1 to 1, and senior debt to EBITDA as
defined of no greater than 2.5 to 1. As of January 31, 2009, we were
in compliance with all of the financial covenants of our credit
facility.
As of
January 31, 2009, we had an interest rate swap agreement with Bank of America in
effect. The intent of the instrument is to fix the interest rate on
75% of the outstanding balance on the Term Loan as required by the credit
facility. The swap fixes the interest rate for the swapped amount at
6.62% (4.87% plus the applicable margin, 1.75%).
The net
deferred tax liability at January 31, 2009 represents temporary timing
differences, primarily attributable to depreciation and amortization, between
book and tax calculations.
We have used all of our
federal net operating loss carryforwards and will have to fund our tax
liabilities with cash in the current fiscal year and in the future.
In
addition to our senior and subordinated debt commitments, we have significant
future cash commitments, primarily in the form of operating leases that are not
reported on the balance sheet. The following table sets forth our contractual
commitments in future fiscal years:
|
|
|
Payment due by fiscal year
|
|
|
Contractual Obligations (1)
|
|
Total
|
|
|
Remainder
of 2009
|
|
|
|
2010-2011
|
|
|
|
2012-2013
|
|
|
After 2013
|
|
|
Debt
|
|
$
|
31,396,000
|
|
|
$
|
2,534,000
|
|
|
$
|
7,040,000
|
|
|
$
|
7,020,000
|
|
|
$
|
14,802,000
|
|
|
Interest
on Debt (2)
|
|
|
12,880,000
|
|
|
|
2,639,000
|
|
|
|
4,690,000
|
|
|
|
3,852,000
|
|
|
|
1,699,000
|
|
|
Operating
Leases
|
|
|
11,888,000
|
|
|
|
2,441,000
|
|
|
|
4,990,000
|
|
|
|
2,880,000
|
|
|
|
1,577,000
|
|
|
Total
|
|
$
|
56,164,000
|
|
|
$
|
7,614,000
|
|
|
$
|
16,720,000
|
|
|
$
|
13,752,000
|
|
|
$
|
18,078,000
|
|
(1)
Customer deposits have been excluded from the table. Deposit balances vary
from period to period with water sales but future increases and decreases in the
balances are not accurately predictable. Deposits are excluded
because, net of periodic additions and reductions, it is probable that a
customer deposit balance will always be outstanding as long as the business
operates.
(2)
Interest based on 75% of outstanding senior debt at the hedged interest rate
discussed above, 25% of outstanding senior debt at a variable rate of 4.21%, and
subordinated debt at a rate of 12%.
We have
no other material contractual obligations or commitments.
Inflation
has had no material impact on our performance.
Item
3.
Quantitati
ve and Qualitative Disclosures
a
bout Market
Risks
.
Pursuant
to Regulation S-K, Item 305(e), smaller reporting companies are not
required to provide this information.
Our Chief
Executive Officer and our Chief Financial Officer, and other members of our
senior management team have evaluated the effectiveness of our disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)). Based on such evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures, as of the end of the period covered by this report, were adequate
and effective to provide reasonable assurance that information required to be
disclosed by us, including our consolidated subsidiary, in reports that we file
or submit under the Exchange Act, is recorded, processed, summarized and
reported, within the time periods specified in the Commission’s rules and
forms. Our Chief Executive Officer and Chief Financial Officer also
concluded that our disclosure controls and procedures were effective to insure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act is accumulated and communicated to management,
including our Chief Executive Officer and Chief Financial Officer, or other
persons performing similar functions, as appropriate to allow timely decisions
regarding required disclosure. Our disclosure controls and procedures
are designed to provide reasonable assurance that the controls and procedures
will meet their objectives.
The
effectiveness of a system of disclosure controls and procedures is subject to
various inherent limitations, including cost limitations, judgments used in
decision making, assumptions about the likelihood of future events, the
soundness of internal controls, and fraud. Due to such inherent
limitations, there can be no assurance that any system of disclosure controls
and procedures will be successful in preventing all errors or fraud, or in
making all material information known in a timely manner to the appropriate
levels of management.
Changes
in Internal Control over Financial Reporting.
During
the three months ended January 31, 2009, there were no changes in our internal
control over financial reporting that materially affected, or were reasonably
likely to materially affect, our internal control over financial
reporting.
PART II
– OTHER INFORMATION
Item
1.
Legal Proceedings.
There
have been no material developments in our legal proceedings since they were
disclosed in our Annual Report on Form 10-K for the period ending October 31,
2008.
Item
1A
.
Risk Factors.
There was
no change during the three months ended January 31, 2009 from the Risk Factors
reported in our Annual Report on Form 10-K for the year ended October 31,
2008.
Item
2.
Unregistered Sales of Equity Securities and Use of Proceeds.
(c) The
following table summarizes the stock repurchases, by month, that were made
during the three months ended January 31, 2009.
|
Issuer
Purchases of Equity Securities
|
|
|
|
|
Total
Number of
Shares
Purchased
|
|
|
Average
Price
Paid per Share
|
|
|
Total
Number of Shares Purchased as Part of a Publicly Announced
Program (1)
|
|
|
Maximum
Number of Shares that May Yet be Purchased Under the
Program (1)
|
|
|
November
1-30
|
|
|
5,298
|
|
|
$
|
1.05
|
|
|
|
5,298
|
|
|
|
193,002
|
|
|
December
1-31
|
|
|
1,200
|
|
|
|
.66
|
|
|
|
1,200
|
|
|
|
191,802
|
|
|
January
1-31
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
191,802
|
|
|
Total
|
|
|
6,498
|
|
|
$
|
.98
|
|
|
|
6,498
|
|
|
|
|
|
|
(1)
|
On
June 16, 2006, we announced a program to repurchase up to 250,000 shares
of our common stock at the discretion of management. We
completed the repurchase of 250,000 shares in June 2008. On
July 16, 2008 we announced that we would continue to repurchase shares up
to an additional 250,000 shares. There is no expiration date
for the plan to repurchase additional shares and the share limit may not
be reached.
|
Item
3
. Defaults
Upon Senior Securities.
None.
Item
4
. Submission
of Matters to a Vote of Security Holders.
None.
Item
5.
Other
Information.
None.
Item
6
. Exhibits.
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
3.1
|
|
Certificate
of Incorporation (Incorporated by reference to Exhibit B to Appendix A to
our registration statement on Form S-4, File No. 333-45226, filed with the
SEC on September 6, 2000)
|
|
|
|
|
|
3.2
|
|
Certificate
of Amendment of Certificate of Incorporation (Incorporated by reference to
Exhibit 4.2 of our current report on Form 8-K, filed with the SEC on
October 19, 2000)
|
|
|
|
|
|
3.3
|
|
By-laws,
as amended (Incorporated by reference to Exhibit 3.3 to our quarterly
report on Form 10-Q, filed with the SEC on September 14,
2001)
|
|
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
|
|
VERMONT
PURE HOLDINGS, LTD.
|
|
|
|
|
|
|
|
March
17, 2009
|
By:
|
/s/ Bruce
S. MacDonald
|
|
|
|
|
Bruce
S. MacDonald
|
|
|
|
|
Vice
President, Chief Financial Officer
|
|
|
|
|
(Principal
Accounting Officer and Principal Financial Officer)
|
|
Exhibits
Filed Herewith
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
|
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
20