SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OR 1934
For the fiscal year ended May 30, 1998
Commission File No. 0-15696
PIEMONTE FOODS, INC.
--------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0626121
-------------- ----------
(State of other jurisdiction of I. R. S. Employer
incorporation of Organization) Identification
400 Augusta Street, Greenville, South Carolina 29604
----------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (864) 242-0424
Securities registered pursuant to Section 12(b) of the Act:
Common Stock
------------
(Title of Class)
NASDAQ (Small Cap)
------------------
Name of exchange on which registered
Securities registered pursuant to Section 12 (g) of the Act:
NONE
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 [ ]
Aggregate market value of the voting stock (which consist solely of shares
of Common Stock) held by non-affiliates of the registrant as of May 30, 1998,
computed by reference to the closing price of the registrant's Common Stock:
$2,122,029.
The number of shares of common stock outstanding as of May 30, 1998 was
1,543,294.
<PAGE>
PART I
ITEM 1. BUSINESS
Piemonte Foods, Inc. is a South Carolina Corporation with its principal
offices located at 400 Augusta Street, Greenville, South Carolina. As used
herein, the terms "Company" and "Piemonte" include Piemonte Foods, Inc. and its
wholly owned subsidiaries, Piemonte Foods of Indiana, Inc. and Origena, Inc.
Piemonte Foods, Inc. develops, produces and markets pizza-related food
products. The product line consists of a wide variety of manufactured pre-baked
pizza crusts, specialty meat toppings and completed pizza. The Company also
distributes pizza sauces, pizza cheeses, vegetable pizza toppings and related
packaging material under the "Piemonte" brand name.
The Company's products are sold in the wholesale food market to
supermarket delicatessens, foodservice distributors and national accounts.
The Company's products are sold through its own sales force as well as a
network of regional food brokers and sales agents.
In 1993 the company initiated a very aggressive growth and expansion
program, changing its selling focus from the foodservice and industrial markets
to the retail market, specifically selling directly to supermarket
delicatessens. Major investment spending incurred with (1) the retail and
consumer introduction of Piemonte brand Focaccia Italian Flatbread and (2) the
expansion of Piemonte's retail component deli pizza program. Piemonte also
acquired Origena, Inc., built a cake commissary, entered a joint venture in
Europe and upgraded its Indiana production facility. In FY'96 (the record year
in sales) Piemonte began experiencing operating losses, which continued through
FY'98.
The losses were the result of (1) lack of strategic focus, which led to
loss of foodservice customers, (2) overspending on expansion, (3)unsustainable
growth in retail deli and Focaccia markets due to weak sales and marketing
support and changes in the market place and (4) a lack of investment spending to
improve operation efficiencies.
During FY'98 Piemonte implemented a major reorganization and restructuring
plan. The plan is designed to return Piemonte to profitability by (1) returning
its focus to its core products and markets, (2) rebuilding and upgrading the
foodservice sales organization, (3) exiting the direct sales and distribution of
fundraising products, (4) reducing the number of employees and upgrading quality
of personnel and (5) investment spending on productivity. These initiatives have
been substantially completed and the Company anticipates achieving tangible
benefits from them during Fiscal '99.
<PAGE>
BUSINESS OPERATIONS
WHOLESALE FOOD SALES
Foodservice/National Accounts
The Company sells its total line of pizza related products through
national and regional distributors that maintain central warehouses,
institutional and industrial customers, convenience stores and certain
governmental agencies. The Company produces Piemonte brand products and private
label products from confidential recipes for large national accounts. Sales to
the Foodservice/National accounts market accounted for approximately 54%, 58%
and 76% of the Company's revenues during 1996, 1997, and 1998.
Supermarkets
The company sells two types of products through the supermarket
delicatessens; (1) a branded Italian flat bread under the Piemonte Focaccia
label, packed to be shelf-stable for an extended period of time and designed to
be used as either a base for gourmet pizza or a bread product and (2) a complete
line of Piemonte pizza components which are used by supermarket personnel to
prepare a fresh, completed pizza to be displayed in the delicatessen
refrigerated display cases.
Supermarket pizza related sales accounted for 28%, 30% and 20% of the
Company's revenues during 1996, 1997, and 1998.
The cake decorating business was sold on May 31, 1997. Supermarket cake
sales accounted for 8% and 10% of the Company's revenues during 1996 and 1997.
<PAGE>
FUNDRAISING PROGRAM
The Company did supply pizza products to schools and other organizations
for fundraising purposes. Piemonte provided pre-packaged pizza kits which could
be sold by schools or sponsored organizations. The Company exited the direct
sale and distribution of these products on June 1, 1998.
Sales of the Company's products to various fundraising programs accounted
for approximately 10%, 3% and 4% of the Company's revenues in 1996, 1997 and
1998.
The Distribution Network
The Company distributes Piemonte brand and private label products to its
wholesale customers from its manufacturing facilities. Shipments are made
promptly by the Company after receipt and acceptance of orders; therefore, there
is no significant backlog of unfilled orders.
MAJOR CUSTOMERS
The Company's business is not dependent on any single customer, but one
customer accounted for approximately 19% and 11% of total sales in 1996 and
1997, respectively. In 1998, two customers each accounted for approximately 10%
of sales.
SOURCES AND AVAILABILTY OF RAW MATERIALS
Flour, oils, meat, tomatoes, cheese, packaging materials and other related
products are essential to the business of the Company. The Company has not
experienced any shortages of these items essential to its operations. The
Company currently has several sources of supply. Flour, meat, cheese, and other
products used in production or for resale are subject to price fluctuations
related to the commodities market. Because of its current financial condition, a
supplier has placed the Company on a C.O.D. basis.
The Company has not experienced any adverse effect on its operations as a
result of energy and fuel shortages. However, severe shortages of either in the
future could have an adverse effect on the Company's business.
<PAGE>
PATENTS, TRADEMARKS
The name "Piemonte" is a registered trademark. The Company believes that
the brand name enjoys a significant amount of brand equity among not only trade
customers but consumers as well.
SEASONAL AND CYCLICAL NATURE OF BUSINESS
As a result of a number of factors, the pizza business, and therefore, the
business of the Company, experiences a period of lower activity in the summer
months. The Company's operations are geared to the expectation of this annual
seasonal decline.
COMPETITIVE CONDITIONS
All segments of the pizza business are extremely competitive. Primary
competition in the wholesale pre-baked pizza crust business includes Virga, TNT,
Crestar and a number of small regional processors. Competition for supermarket
deli sales includes Crestar Foods, Gilardi's and a number of regional pizza
processors. In the specialty meat topping market, competition includes Doskocil
Sausage Co., Capitol Wholesale Meats, H & M Meats, Arco Meats and many other
national and regional packers. The Company's most important goal is to produce
products that are superior in taste to our competition, and then support its
customers through merchandising, marketing, service, and value.
REGULATIONS
The Company is subject to various Federal, State and local laws affecting
its business, including various health, environmental, sanitation and safety
regulations. The Frankfort, Indiana facility operates under the United States
Department of Agriculture (USDA) supervision. The Company believes its
operations comply in all material respects with applicable laws and regulations.
EMPLOYEES
The Company has 172 full and part-time employees.
<PAGE>
ITEM 2. PROPERTIES
The following table sets forth information concerning the Company's
facilities:
Date
Leased Exp. Of Approx.
or Lease Square
Location Acquired Description Term Footage
- -------- -------- ----------- ---- -------
Corporate Headquarters,
Bakery,
Greenville, SC 1974 Distribution 1998 67,000
Chicago, IL 1990 Bakery & Distribution 1999 30,000
USDA Meat Production and
Frankfort, IN 1988 Regional Distribution Owned 55,000
Vacant, available for
Nashville, TN 1996 sub-lease 2001 26,000
The Company's manufacturing facilities were designed specifically for the
operations they support. The facilities are adequate for current production and
distribution needs.
ITEM 3. LEGAL PROCEEDINGS
1. VIRGIL L. CLARK V. PIEMONTE FOODS, INC: On July 9, 1998, the Company's former
CEO, Virgil L. Clark, claimed that the Company terminated his Employment
Agreement without cause and consequently owes him $498,076, consisting of
$370,000 severance and twelve weeks' salary ($42,692) trebled, plus interest
and attorneys' fees. The Company is investigating Mr. Clark's claims. No
lawsuit has been filed and the Company intends to contest the claim
vigorously.
2. PIEMONTE FOODS, INC. V. ILAPAK, INC.: On April 21, 1998, the Company filed
suit against Ilapak, Inc. for revocation of acceptance and breach of
warranties concerning a packaging machine it sold to the Company. The Company
seeks to recover $203,485 paid to Ilapak for the machine, plus incidental and
consequential damages caused by the machine. If necessary, the Company
intends to pursue the claim vigorously. It is too early for the Company to
evaluate the probability of a favorable or unfavorable outcome or to estimate
the amount or range of a potential gain.
3. USL CAPITAL CORPORATION V. PIEMONTE FOODS, INC.: On March 12, 1998, USL
Capital demanded payment from the Company of $174,270 for the packaging
machine purchased from Ilapak, Inc. and leased-financed by USL Capital. No
lawsuit has been filed. USL Capital is voluntarily forbearing pending
resolution of the Company's claims against Ilapak, Inc., supra.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Matters subject to a vote at the regularly scheduled meeting are addressed in
the Proxy mailed to all security holders.
<PAGE>
PART II
ITEM 5. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF STOCK
The Company's common stock trades on the NASDAQ Small-cap under the symbol
PIFI. The shares have been traded since 1969. The prices shown below represent
high and low bid prices exclusive of commissions and may not represent actual
transactions.
1997 High Low
---- ---- ---
1st $5.125 $2.50
2nd $2.626 $0.875
3rd $1.50 $1.00
4th $3.25 $0.5625
1998 High Low
---- ---- ---
1st $3.25 $1.25
2nd $4.00 $2.50
3rd $3.25 $2.188
4th $2.8125 $1.25
The principal market makers of the Company's shares are Carr Securities
Corp.; Sherwood Securities and Herzog, Heine, Geduld, Inc.
APPROXIMATE NUMBER OF EQUITY SECURITIES HOLDERS
Approximate Number of Record Holders as of May 30, 1998
Common Stock, No Par Value 400
DIVIDEND HISTORY
There were no cash dividends per share paid during fiscal years 1996, 1997
and 1998, and the Company does not anticipate paying any dividends in the
foreseeable future.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
<S> <C>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Net Sales 18,295,132 23,943,328 31,148,458 30,483,161 29,874,548
(Loss) Income
from continuing
operations (3,785,234) (1,943,665) (638,599) 105,719 449,422
(Loss) Income
from continuing
operations per
common share (2.45) (1.30) (.42) 0.07 0.32
Total Assets 5,737,129 9,397,383 12,360,925 11,226,223 10,817,273
Long Term
Liabilities (2) 2,124,134 3,329,524 1,357,224 889,510
Dividends per
Share None None None None (1)
</TABLE>
(1) 5% Stock Dividend (August 1994)
(2) The Company is in default on its debt covenants and payment, and
long-term debt has been reclassified as current.
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On May 30, 1998, working capital was a negative $2,900,000 versus
$1,205,000 for the end of fiscal year 1997. The $4,105,000 working capital
reduction reflects the reclassifying of long-term debt of $1,754,000 as current
because the Company is in violation of debt covenants and current maturities of
its notes payable as well as operating cash losses.
The Company has recently been unable to meet its obligations to creditors
in a normal timely basis and is continuing negotiations with its creditors to
reach agreements with respect to either discounting the obligations due
creditors and/or delaying payment of such obligations. There can be no assurance
that these negotiations will be successful and, if not, the Company would have
to obtain additional capital or take steps to continue its operations on a
normal basis in light of its current shortage of working capital.
Over the past year Piemonte eliminated certain unprofitable business lines
and modified and corrected accounts that were unprofitable. The product line was
simplified and the marketing of the core product lines was emphasized. The
employees were reduced and personnel upgraded, including recruiting three new
directors to the Board, each with specific expertise in marketing, sales and
operations. Piemonte is now in a position to grow real unit volume of its core
products through marketing and selling activity, new product introductions and
strategically repositioning key products in the current product line. The losses
of the last two years, however, have eroded capital. The last and critical step
in the reformation process is to restore a level of capital sufficient to
sustain operations. Management has before it certain preliminary plans involving
outside investment in the company or mergers with others. Management believes
such a transaction would benefit the company and its shareholders and is
necessary for the Company to continue in business.
<PAGE>
RESULTS OF OPERATIONS
1998 compared to 1997
Revenues for 1998 were $18.3 million, a decrease of $5.6 million versus
the previous year. The reduction was primarily the result of eliminating certain
unprofitable business lines ($2.4 million) and the loss of a major customer
($2.6 million).
Gross margin declined $467 thousand, including certain non-recurring
expenses ($200 thousand). Gross margin as a percent of sales increased from
14.8% to 16.8%. The improvement is attributed to the reorganization and
restructuring plan.
Selling, general and administrative expenses were $5.7 million, a
reduction of $200 thousand. Included in the $5.7 million were approximately $644
thousand of non-recurring expenses.
The operating loss was $3.6 million, an increase of $1.2 million over the
previous year. Losing a major customer, as mentioned above, contributed to the
loss. Included in the loss was $1.8 million of non-recurring items.
Approximately half ($947 thousand) represented asset impairment losses on the
Nashville and Indiana facilities. Management's evaluation of those assets
indicated that the undiscounted future cash flow from those facilities, or their
appraised value, was less than the carrying value of those assets. The other
half consisted of non-recurring expenses for restructuring the workforce,
warehouse and freight system ($300 thousand), writing off the old computer
system ($130 thousand), legal and professional fees associated with Mr. Clark's
departure ($200 thousand) and a provision for run out of the current
self-insurance medical plan ($190 thousand).
Management has taken several actions to improve the business and to return
the Company to profitability. These actions include a reduction in the
workforce, both hourly and salary, and a refocusing on our product line. While
there is no assurance these actions will prove successful, the Company believes
they should result in improved long-term growth in both revenue and profit.
<PAGE>
RESULTS OF OPERATIONS
1997 compared to 1996
Revenues for 1997 were $23.9 million, a decrease of $7.20 million versus
the previous year. The losses were spread across all three business units, due
to the loss of three major customers, the transfer of production to Holland,
demphasizing cake sales and the establishment of a competitive fundraising
business.
Gross margin declined to $3.5 million or 14.8% of sales as a result of
lower volume, partially offset by a stable raw material market and an aggressive
second half cost reduction program.
Selling, general, and administrative expenses were $5.9 million or a
reduction of $800,000. This is due to volume, offset in part by the investment
of a new computer system.
In 1997 management made major changes in all areas of the business to
restore the Company to profitability: (1) the sale of low and unprofitable
business units, (2) refocusing on our base pizza business and (3) a
re-organization and upgrade of the company workforce. The re-organization of the
workforce will net a $2 million annual savings.
IMPACT OF INFLATION
The Company does not believe that inflation has had a material effect on
revenues or expenses for the previous three years. Inflation in raw material and
labor costs would, however, shrink company margins.
YEAR 2000 COMPLIANCE
Subsequent to year-end, the Company changed software packages and the new
software package was also Year 2000 compliant. The Company has not communicated
with its critical external relationships to determine the extent to which the
Company may be vulnerable to such parties' failure to resolve their own Year
2000 issues. Where practicable, the Company will assess and attempt to mitigate
its risks with respect to the failure of these entities to be Year 2000 ready.
The effect, if any, on the Company's results of operations from the failure of
such parties to be Year 2000 ready is not readily estimable.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The response to this item is submitted in a separate section of this
report.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
<PAGE>
PART III
A definitive proxy statement, which will be filed with the Securities and
Exchange Commission pursuant to regulation 14A of the Securities Exchange Act of
1934 within 120 days of the end of the registrant's fiscal year ended May 30,
1998 is incorporated herein by reference.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of names and ages of all the executive officers of
the registrant, indicating all positions and offices with the Company held by
each such person and each such person's principal occupation or employment
during the past five years.
Name Title Age
---- ----- ---
T. Patrick Costello President and CEO/Director 55
John Matthews Vice President/Sales 45
David B. Ward Secretary 56
W. Edward Cathey CFO/Treasurer 44
T. Patrick Costello has served as Director since 1994. He was elected
Chief Executive officer in January, 1998. He was the sole shareholder of
Origena, Inc. since its founding in 1990. Origena was acquired by Piemonte in
October, 1993. Mr. Costello previously was employed with Sara Lee Bakery, most
recently as Senior Vice-President and General Manager of two divisions.
David B. Ward was elected Secretary in September, 1985. Mr. Ward is a
practicing attorney with Horton, Drawdy, Ward & Johnson, P. A. in Greenville,
South Carolina.
W. Edward Cathey was elected Treasurer and Chief Financial Officer in
January, 1998. Prior to that he was the Controller. Before joining the Company
he was Controller of McKechnie Vehicle Components in Louisville, Kentucky. Mr.
Cathey has resigned his position effective August 31, 1998.
John Matthews was elected Vice President/Sales in March 1997. Prior to
that he was a Division Sales Manager with Sara Lee Bakery in Chicago, Illinois.
Such information as required by the Securities and Exchange Commission in
Regulation S-K is contained in the Company's definitive Proxy Statement in
connection with its Annual Meeting to be held October 28, 1998.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information with respect to executive compensation and transactions is
hereby incorporated by reference from the Company's definitive proxy statement
to be filed with the Securities and Exchange Commission pursuant to Regulation
14A of the Securities Exchange Act of 1934.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information with respect to security ownership of certain beneficial
owners and management is hereby incorporated by reference from the Company's
definitive proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A of the Securities and Exchange Act of
1934.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
NONE
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, REPORTS ON 8-K
(a) (1) and (2) Financial Statements
The response to this portion of Item 14 is submitted as a separate
section of this report - See Page F-2.
(a) (3) EXHIBITS
The Exhibits listed on the accompanying index to Exhibits are filed
as a part of this report.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
fiscal year ended May 30, 1998.
<PAGE>
ANNUAL REPORT ON FORM 10-K
ITEM 8, 14(a)(1) AND (2), (c) AND (d)
LIST OF FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CERTAIN EXHIBITS
YEAR ENDED MAY 30, 1998
PIEMONTE FOODS, INC. AND SUBSIDIARIES
GREENVILLE, SOUTH CAROLINA
F-1
<PAGE>
Form 10-K - Item 14(a)(1) and (2)
Piemonte Foods, Inc. and Subsidiaries
Index of Financial Statements
The following financial statements of Piemonte Foods, Inc. and Subsidiaries
are included in Item 8:
Report of Independent Auditors
Consolidated Balance Sheet - May 30, 1998 and May 31, 1997
Consolidated Statements of Operations - Years ended May 30, 1998, May
31, 1997 and June 1, 1996
Consolidated Statements of Stockholders' Equity - Years ended May
30, 1998, May 31, 1997 and June 1, 1996
Consolidated Statements of Cash Flows - Years ended May 30, 1998, May
31, 1997 and June 1, 1996
Notes to Consolidated Financial Statements - May 30, 1998
The following consolidated financial statement schedule of Piemonte Foods,
Inc. and subsidiaries are included in Item 14(d):
Schedule II - Valuation and qualifying accounts
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
F-2
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors
Piemonte Foods, Inc.
We have audited the accompanying consolidated balance sheets of Piemonte Foods,
Inc. as of May 30, 1998 and May 31, 1997, and the related consolidated statement
of operations, stockholders' equity and cash flows for the years then ended. Our
audit also included the financial statement schedule listed in the index at Item
14(a) for the years ended May 30, 1998 and May 31, 1997. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audit.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Piemonte Foods,
Inc. at May 30, 1998 and May 31, 1997, and the consolidated results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule for the year ended May 30, 1998 and May 31, 1997,
when considered in relation to the basic financial statements taken as a whole
presents fairly, in all material respects, the information set forth therein.
The accompanying financial statements have been prepared assuming that Piemonte
Foods, Inc. will continue as a going concern. As more fully described in Note 1,
the Company has incurred recurring operating losses, has a working capital
deficiency and is in default on its debt with the bank. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.
/s/ ERNST & YOUNG LLP
Greenville, South Carolina
July 31, 1998
F-3
<PAGE>
Independent Auditors' Report
The Board of Directors
Piemonte Foods, Inc.
Greenville, South Carolina
We have audited the accompanying consolidated statements of operations,
stockholders' equity and cash flows of Piemonte Foods, Inc. and Subsidiaries for
the year ended June 1, 1996. 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 audit.
We conducted our audit in accordance with general accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement 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 financial statements referred to above present fairly, in
all material respects, the consolidated results of its operations and cash flows
of Piemonte Foods, Inc. and Subsidiaries for the year ended June 1, 1996 in
conformity with generally accepted accounting principles.
Pope, Smith, Brown & King
Certified Public Accountants
Greenville, South Carolina
July 26, 1996
F-4
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Consolidated Balance Sheets
MAY 30, MAY 31,
1998 1997
--------------------------
ASSETS
Current assets:
Cash $ 184,009 $ 591,153
Accounts receivable, less allowance for doubtful
accounts
of $20,000 (1998) and $97,000 (1997) (NOTE 7) 1,058,340 1,930,050
Inventories (NOTES 4 AND 7) 662,904 855,121
Refundable income taxes (NOTE 8) - 415,572
Prepaid expenses and other current assets 121,135 123,320
--------------------------
Total current assets 2,026,388 3,915,216
Property, plant and equipment, net (NOTES 3, 5 AND 7) 3,650,726 4,744,761
Excess of cost over fair value of net assets
acquired, net
of accumulated amortization of $13,776 (1998) and
$355,119 (1997) (NOTE 3) 60,015 737,406
--------------------------
$5,737,129 $9,397,383
==========================
F-5
<PAGE>
MAY 30, MAY 31,
1998 1997
--------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt in default
(NOTE 7) $ 2,131,291 $ 373,009
Prepayment of long-term debt subsequent to
May 30, 1997 (NOTE 7) - 1,000,000
Accounts payable 2,127,017 748,793
Accrued expenses (NOTE 6) 667,274 588,405
--------------------------
Total current liabilities 4,925,582 2,710,207
Long-term debt, less current portion (NOTE 7) - 2,124,134
Stockholders' equity (NOTE 11):
Common stock, no par value - authorized 5,000,000
shares, issued and outstanding 1,543,294 (1988)
and 1,544,428 ( 1997) 15,433 15,444
Capital in excess of stated value of common stock 2,902,110 2,868,360
(Deficit) retained earnings (2,105,996) 1,679,238
--------------------------
Total stockholders' equity 811,547 4,563,042
--------------------------
Total liabilities and stockholders' equity $ 5,737,129 $9,397,383
==========================
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Consolidated Statements of Operations
YEARS ENDED
---------------------------------------
MAY 30, MAY 31, JUNE 1,
1998 1997 1996
---------------------------------------
(52 weeks) (52 weeks) (52 weeks)
Net sales $18,295,132 $23,943,328 $31,148,458
Operating expenses:
Cost of sales 15,218,632 20,399,788 24,771,803
Selling, general and administrative
expenses 5,707,896 5,911,436 6,676,123
Asset impairment loss 946,995 - -
---------------------------------------
21,873,523 26,311,224 31,447,926
---------------------------------------
Operating loss (3,578,391) (2,367,896) (299,468)
Other income (expense):
Interest expense (183,944) (285,730) (200,451)
Loss on disposal of property, plant
and equipment (88,477) (27,766) (182,807)
Equity in loss on investment in
European
joint venture - (408,545) (261,016)
Gain on sale of investment in
European
joint venture - 190,784 -
Interest income 20,258 58,842 45,724
Other income 45,320 79,646 33,419
---------------------------------------
(206,843) (392,769) (565,131)
---------------------------------------
Loss before income taxes (3,785,234) (2,760,665) (864,599)
Credit for income taxes (NOTE 8) - (817,000) (226,000)
---------------------------------------
Net loss $ (3,785,234)$ (1,943,665)$ (638,599)
=======================================
Basic and diluted loss per common share $(2.45) $(1.30) $(0.42)
=======================================
SEE ACCOMPANYING NOTES.
F-7
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
CAPITAL IN
EXCESS OF RETAINED
COMMON STATED EARNINGS
STOCK VALUE (DEFICIT) TOTAL
-------------------------------------------------
Balance at June 3, 1995 $14,481 $2,744,938 $ 4,261,502 $ 7,020,921
Common stock issued 289 55,367 - 55,656
Net loss - - (638,599) (638,599)
-------------------------------------------------
Balance at June 1, 1996 14,770 2,800,305 3,622,903 6,437,978
Common stock issued 674 68,055 - 68,729
Net loss - - (1,943,665) (1,943,665)
-------------------------------------------------
Balance at May 31, 1997 15,444 2,868,360 1,679,238 4,563,042
Common stock issued 385 74,720 - 75,105
Retirement of common stock (396) (40,970) - (41,366)
Net loss - - (3,785,234) (3,785,234)
-------------------------------------------------
Balance at May 30, 1998 $15,433 $2,902,110 $(2,105,996)$ 811,547
=================================================
SEE ACCOMPANYING NOTES.
F-8
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
YEARS ENDED
-------------------------------------
MAY 30, MAY 31, JUNE 1,
1998 1997 1996
-------------------------------------
(52 weeks) (52 weeks) (52 weeks)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,785,234 $(1,943,665)$ (638,599)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation 715,763 743,433 709,688
Amortization 32,952 32,952 32,952
Asset impairment loss 946,995 - -
Equity in loss on investment in
European
joint venture - 408,545 261,016
Gain on sale of investment in European
joint venture - (190,784) -
Deferred income taxes - (401,000) (80,000)
Loss on disposal of property, plant and
equipment 88,477 27,766 182,807
Changes in operating assets and
liabilities:
Accounts receivable 871,710 335,823 (487,100)
Refundable income taxes 415,572 (126,675) (288,897)
Prepaid expenses and other assets 2,185 123,444 193,450
Inventories 192,217 355,033 698,950
Accounts payable 1,378,224 (342,252) (288,043)
Accrued liabilities 78,869 25,884 123,390
-------------------------------------
Net cash provided by (used in) operating
activities 937,730 (951,496) 419,614
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (12,761) (443,033) (572,820)
Proceeds from the sale of property, plant
and equipment - 16,525 10,000
Investment in European joint venture - (288,000) (1,005,929)
Cash proceeds from sale of investment in
European joint venture - 865,152 -
-------------------------------------
Net cash (used in) provided by investing
activities (12,761) 150,644 (1,568,749)
F-9
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
<S> <C>
YEARS ENDED
------------ ----------- ------------
MAY 30, MAY 31, JUNE 1,
1998 1997 1996
------------ ----------- ------------
(52 weeks) (52 weeks) (52 weeks)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt $ - $ - $ 4,000,000
Proceeds from issuance of common stock 75,105 68,729 55,656
Payments to reacquire common stock (41,366) - -
Principal payments on long-term debt (1,365,852) (335,238) (2,133,974)
------------ ----------- ------------
Net cash (used in) provided by financing (266,509)
activities (1,332,113) 1,921,682
------------ ----------- ------------
Net (decrease) increase in cash (407,144) (1,067,361) 772,547
Cash at beginning of year 591,153 1,658,514 885,967
------------ ----------- ------------
Cash at end of year $ 184,009 $ 591,153 $ 1,658,514
============ =========== ============
SUPPLEMENTAL INFORMATION
Interest payments $ 163,944 $ 285,730 $ 200,451
Income tax payments (refunds) (415,572) (307,264) 48,292
</TABLE>
SEE ACCOMPANYING NOTES.
F-10
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
May 30, 1998
1. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. The Company has sustained substantial operating
losses in recent years. In addition, at May 30, 1998, current liabilities exceed
current assets by approximately $2,899,000 and as described in Note 7, the
Company is in default on its notes payable. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.
Management is continuing to seek out any areas of potential cost reductions and
is actively seeking to refinance the Company's debt and obtain additional
available credit and/or equity investments. Management is presently discussing
additional credit or investments with various parties. However, there can be no
assurance that the Company will be successful and will have sufficient funds to
finance its operations through the year ending May 29, 1999.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result should the Company be unable
to continue as a going concern.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE COMPANY
Piemonte Foods, Inc. develops, produces and markets pizza-related foods,
primarily pre-baked pizza crusts and specialty meat toppings. The Company's
products are sold to pre-made and frozen pizza makers, distributors and
supermarket delicatessens.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Piemonte Foods,
Inc. (the "Company"), and its two wholly-owned subsidiaries, Piemonte Foods
of Indiana, Inc. and Origena, Inc. All significant intercompany accounts and
balances have been eliminated.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
F-11
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
RECLASSIFICATIONS
For comparative purposes, certain amounts in the 1997 and 1996 financial
statements have been reclassified to conform with the 1998 presentation.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. The Company incurred
advertising costs of approximately $451,000, $213,000, and $238,000 for fiscal
years 1998, 1997, and 1996, respectively.
ACCOUNTING PERIOD
The Company's fiscal year ends on the Saturday nearest to May 31. Fiscal years
1998, 1997 and 1996 ended on May 30, 1998, May 31, 1997, June 1, 1996,
respectively and included 52 weeks.
CONCENTRATION OF CREDIT RISK
The amount of cash on deposit at certain banks exceeded the limit on insured
deposits. Amounts in excess of insured limits were $65,000 and $467,000 at May
30, 1998 and May 31, 1997, respectively.
Substantially all of the Company's accounts receivable are due from companies
located in the eastern United States. The Company performs periodic credit
evaluations of its customers financial condition and generally does not require
collateral. In 1998, two customers each accounted for approximately 10% of total
sales. In 1997 and 1996, one customer accounted for approximately 11% and 19% of
total sales, respectively.
F-12
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORIES
Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Maintenance and repairs are
charged to expense as incurred. Depreciation of property, plant and equipment is
computed using the straight-line method over the estimated useful lives of the
property.
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
Excess of cost over fair value of net assets acquired arises from the
acquisition of Piemonte Foods of Indiana, Inc. in 1984 and Origena, Inc. in
1993. The amounts are amortized on the straight-line method over an estimated
useful life of 40 years for Piemonte Foods of Indiana, Inc. and 25 years for
Origena, Inc. During 1998, the Company determined that there was no remaining
value for the excess of cost over fair value of net assets acquired for Piemonte
Foods of Indiana, Inc. and expensed the remaining value (Note 1).
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of all of the Company's financial instruments approximate
their fair values. Fair value of the Company's long-term debt and interest rate
swap agreement was estimated using a discounted cash flow analysis considering
interest rates at those dates for issuance of financial instruments with similar
terms and remaining maturities.
NET LOSS PER COMMON SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share." Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options. Diluted earnings per share is very similar to the
previously reported primary earnings per share. All loss per share amounts for
all periods have been presented, and where appropriate, restated to conform to
the Statement 128 requirements. There was no effect on loss per share from the
adoption of Statement 128.
F-13
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. ASSET IMPAIRMENT LOSS
As required by Statement of Financial Accounting Standards No. 121, the Company
recorded an impairment loss on the long-lived assets of its Nashville and
Indiana facilities. Management's evaluation of these assets indicated that the
undiscounted future cash flows from these facilities or appraised value would be
less than the carrying value of the assets. Accordingly, the Company recognized
an asset impairment loss of approximately $250,000 on the equipment at the
Nashville facility and $53,000 on the equipment and $644,000 on related goodwill
at the Indiana facility.
4. INVENTORIES
Inventories at May 30, 1998 and May 31, 1997 include the following:
1998 1997
--------------------------
Raw materials $351,840 $371,423
Finished goods 311,064 483,698
--------------------------
$662,904 $855,121
==========================
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment include the following:
MAY 30, MAY 31,
1998 1997
--------------------------
Land $ 25,000 $ 25,000
Buildings 1,433,497 1,433,497
Equipment 7,627,312 8,287,280
Vehicles 188,862 188,862
Furniture and fixtures 331,313 331,313
Leaseholds 121,550 552,781
Construction in progress 14,261 14,261
--------------------------
Total 9,741,795 10,832,994
Less accumulated depreciation and amortization 6,091,069 6,088,233
--------------------------
Net property, plant and equipment $3,650,726 $4,744,761
==========================
F-14
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. ACCRUED EXPENSES
Accrued expenses include the following:
MAY 30, MAY 31,
1998 1997
-------------------------
Promotional allowance $ 58,241 $ 61,078
Compensation and payroll taxes 139,826 265,487
Employee healthcare benefits 165,061 -
Property taxes 41,604 74,108
Other 262,542 187,732
-------------------------
$667,274 $588,405
=========================
7. LONG-TERM DEBT
The Company has the following notes payable under its loan agreement with a
bank:
1998 1997
-------------------------
Note payable to bank in monthly installments
of $28,571 plus interest at LIBOR
plus 2.25% (7.95% at May 30, 1998) through
October 2000 $1,728,144 $2,057,143
Note payable to bank in monthly installments of
$13,333 plus interest at LIBOR plus 2.25%
(7.95% at May 30, 1998) through October 2000 403,147 1,440,000
-------------------------
2,131,291 3,497,143
Less current portion of long-term debt,
including amount in default at May 30,
1998 and prepayment of long-term debt
subsequent to May 30, 1998 2,131,291 1,373,009
-------------------------
$ - $2,124,134
=========================
At May 30, 1998, the Company is in violation of debt covenants on its notes
payable. The Company has not made any principal payments on the notes payable
subsequent to year-end. Accordingly, the Company is in default of the notes
payable agreement and the notes payable have been classified as current in the
accompanying financial statements.
F-15
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
7. LONG-TERM DEBT (CONTINUED)
The notes payable are collateralized by the accounts receivable, inventory and
property, plant and equipment of the Company. Under the loan agreement, the
notes payable are cross collateralized and cross defaulted.
The Company has an interest rate swap agreement with its bank to manage interest
rate risks. The agreement provides a fixed interest rate of 7.98% on a notional
amount of $2.1 million. The notional amount declines ratably through October 31,
2000.
8. INCOME TAXES
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. Significant components of
the Company's deferred tax assets and liabilities are as follows:
1998 1997
-------------------------
Deferred tax assets:
Allowance for doubtful accounts $ 8,000 $ 35,000
Accrued vacation 25,000 44,000
Product development costs 60,000 102,000
Other 8,000 9,000
Net operating loss and AMT credit carryforwards 1,818,000 580,000
-------------------------
Total deferred tax assets 1,919,000 770,000
Valuation allowance for deferred tax assets (1,437,000) (136,000)
-------------------------
Net deferred tax assets 482,000 634,000
Deferred tax liability:
Tax over book depreciation (482,000) (634,000)
-------------------------
$ - $ -
=========================
Federal and state net operating loss carryforwards available at May 30, 1998
total approximately $4,471,000 and expire in 2011 and 2012. The Company has AMT
credit carryforwards of approximately $43,000 available for carryover to reduce
future regular Federal income taxes. Under the current income tax code, the AMT
credits have no expiration date.
F-16
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
8. INCOME TAXES (CONTINUED)
The valuation allowance increased by $1,301,000 in 1998 and decreased by
$7,000 in 1997.
Significant components of the provision (credit) for income taxes attributable
to continuing operations are as follows:
1998 1997 1996
-------------------------------------
Current
Federal $ - $(416,000) $(167,000)
State - - 21,000
-------------------------------------
Total current provision - (416,000) (146,000)
Deferred - (401,000) (80,000)
-------------------------------------
Provision (benefit) for income taxes $ - $(817,000) $(226,000)
=====================================
The reconciliation of income tax attributable to continuing operations computed
at the U.S. Federal statutory tax rates to income tax expense is:
1998 1997 1996
--------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
--------------------------------------------------------
Tax at U.S. statutory
rates $(1,260,000) 34.0% $(939,000) 34.0% $(294,000) 34.0%
State income taxes,
net of Federal tax
benefit (148,000) 4.0% (110,000) 4.0% 14,000 (1.6)%
Valuation allowance
for deferred tax
assets 1,301,000 (30.9)% (7,000) .3% 16,000 (1.9)%
Other, net 107,000 (7.1)% 239,000 (8.7)% 38,000 (4.4)%
--------------------------------------------------------
$ - 0.0% $(817,000) 29.6% $(226,000) 26.1%
========================================================
Refundable income taxes result from the carryback to prior taxable years of a
portion of net operating loss incurred in 1997 and all of the net operating loss
incurred in 1996.
F-17
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
9. OPERATING LEASES
The Company leases certain facilities and equipment under arrangements accounted
for as operating leases. Such leases expire at various times over the next seven
fiscal years. The approximate minimum annual commitments under these leases are
as follows:
YEAR ENDING
- -----------------
1999 $201,184
2000 172,232
2001 150,867
2002 96,000
2003 100,500
Thereafter 48,500
Rent expense for operating leases totaled approximately $595,000, $930,000 and
$862,000 in 1998, 1997 and 1996, respectively.
10. EMPLOYEES' SAVINGS PLAN 401(K)
The Company has adopted a 401(k) savings plan covering substantially all
employees. Full-time employees with at least one year of service may elect to
contribute up to 10% of annual compensation to the plan. The Company contributes
50% of such employee contributions up to 6% of current compensation. Company
contributions totaled approximately $69,000, $68,000, and $68,000 in 1998, 1997
and 1996, respectively.
11. STOCK OPTIONS
On June 1, 1996, the Company adopted the provisions of Financial Accounting
Standards Board Statement No. 123, "Accounting for Stock-Based Compensation
("FAS 123"). This standard applies to all transactions in which an entity
acquires goods and services by issuing equity instruments, such as stock
options, to employees or others. Under FAS 123, the Company has a choice in the
method of accounting used for stock-based compensation. The method chosen can be
either the intrinsic value based method currently used by the Company within the
scope of Accounting Principles Board (APB) Opinion 25, or the fair value method
introduced by SFAS No. 123 that might involve the recognition of compensation
expense. The Company has elected to account for the Company's stock option plan
under APB Opinion 25. If compensation cost for the Company's stock option plan
had been determined based on the provisions of SFAS 123, using the Black-Scholes
method, there would be no effect on net loss.
F-18
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
11. STOCK OPTIONS (CONTINUED)
The Company's 1994 Stock Option Plan authorized the grant of options to
management personnel for up to 450,000 shares of the Company's common stock.
In accordance with the 1994 Stock Option Plan, the Board of Directors canceled
all outstanding options under the Plan in February 1997 and authorized the grant
of 120,000 options to management at an exercise price of $1.25 per share. The
options vest in three equal tiers when the market price of the Company's common
stock reaches certain levels. The options expire at the end of 10 years.
A summary of the Company's stock option activity and related information for the
years ended May 30, 1998, May 31, 1997, and June 1, 1996 follows:
1998 1997 1996
-------------------------------------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE
(000) PRICE (000) PRICE (000) PRICE
-------------------------------------------------------
Outstanding at
beginning
of year 142 $2.67 253 $4.99 231 $4.92
Canceled (63) 1.69 (134) 6.43 - -
Granted 18 1.25 91 1.28 33 4.45
Exercised - - - - (11) 2.04
Forfeited - - (68) 2.04 - -
---------- ---------- ----------
Outstanding at end of
year 97 $3.04 142 $2.67 253 $4.99
========== ========== ==========
Exercisable at end of
year 75 $3.56 51 $5.15 194 $4.80
Weighted average fair
value of options
granted during year $2.40 $ 1.28 $4.45
Exercise prices for options outstanding as of May 30, 1998 ranged from $1.25 to
$8.33. The weighted average remaining contractual life of those options is 8.1
years.
12. OTHER COMMENT
In 1998, the aggregate effect of year-end adjustments increased the fourth
quarter net loss by approximately $1,535,000 or $.99 per share.
F-19
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
13. LOSS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
1998 1997 1996
------------ ------------ -------------
Numerator:
Net loss $(3,785,234) $(1,943,665) $ (638,599)
Denominator:
Denominator for basic and diluted
loss per share - weighted average
shares 1,544,278 1,495,127 1,520,474
Basic and diluted loss per share (2.44) (1.30) (0.42)
14. OTHER MATTERS
The Company is a defendant in certain legal actions arising in the ordinary
course of business. In addition, a former officer of the Company has brought a
claim against the Company for approximately $500,000 under an employment
agreement. No legal action has been taken to date involving this claim; however,
legal action is threatened in the claim if the claim is not settled. It is the
opinion of management that the outcome of these actions will have no material
adverse effect on the financial position of the Company.
F-20
<PAGE>
Piemonte Foods, Inc. and Subsidiaries
Schedule II - Valuation and Qualifying Accounts
COL A COL B COL C COL D COL E
- --------------------------------------------------------------------------------
ADDITIONS
-----------------------
BALANCE
AT CHARGED TO CHARGED TO BALANCE
DESCRIPTION BEGINNING COST AND OTHER AT END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- --------------------------------------------------------------------------------
YEAR ENDED MAY 30, 1998
Allowance for doubtful
accounts $ 97,000 $104,000 $ - $181,000 $ 20,000
Valuation account-deferred
tax assets 136,000 - 1,301,000 - 1,437,000
YEAR ENDED MAY 31, 1997
Allowance for doubtful
accounts 170,000 100,000 - 173,000 97,000
Valuation account-deferred
tax assets 143,000 - - 7,000 136,000
YEAR ENDED JUNE 1, 1996
Allowance for doubtful
accounts 160,000 76,000 - 66,000 170,000
Valuation account-deferred
tax assets 127,000 - 16,000 - 143,000
F-21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PIEMONTE FOODS, INC.
(Registrant)
By /s/ T. Patrick Costello
-------------------------
President and CEO
Date September 9, 1998
------------------
Pursuant to the requirement 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 date indicated.
/s/ T. Patrick Costello September 10, 1998
------------------------------ ------------------
T. Patrick Costello,President, Date
CEO and Director
/s/ Virgil L. Clark
------------------------------ ------------------
Virgil L. Clark, Director Date
/s/ Steven R. DeGrave September 10, 1998
------------------------------ ------------------
Steven R. DeGrave, Director Date
/s/ Ronald T. Huth September 10, 1998
------------------------------ ------------------
Ronald T. Huth, Director Date
/s/ Myron R. Lyskanycz September 10, 1998
------------------------------ ------------------
Myron R. Lyskanycz, Date
Director
/s/ Earl Ritchie September 10, 1998
------------------------------ ------------------
Earl Ritchie, Chairman Date
Director
/s/ A. C. Strip September 10, 1998
------------------------------ ------------------
A. C. Strip, Director Date
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Descriptions
- ----------- ------------
3 (a) Articles of incorporation of Piemonte, as amended, which was
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended May 30, 1987, is hereby incorporated by reference.
(b) By-Laws of Piemonte, which were filed as an exhibit to the
Company's Form 10-K for the fiscal year ended May 30, 1987,
are hereby incorporated by reference.
4 The Company agrees to furnish to the Securities and Exchange
Commission upon its request a copy of any instrument which
defines the rights of holders of long-term debt of the Company
and its consolidated subsidiaries. No such instrument
authorizes a total amount of securities in excess of 10% of
the total assets of the Company and its subsidiaries on a
consolidated basis.
10 (c) The Lease Agreement dated October 28, 1983, between Bakery
Realty of Greenville, Inc. and the Company, which was filed as
an exhibit to the Company's Form 10-K for the fiscal year
ended May 30, 1987, is hereby incorporated by reference.
(e) The Lease Agreement dated March 1, 1983, between Garrett &
Garrett Warehouses and Garrett & Garrett, SC Partnerships and
the Company, which was filed as an exhibit to the Company's
Form 10-K for the fiscal year ended May 30, 1987, is hereby
incorporated by reference.
(g) The Incentive Stock Option Plan, which was filed as an exhibit
to the Company's Form 10-K for the fiscal year ended May 30,
1987, is hereby incorporated by reference.
(l) The Loan and Security Agreement dated April 27, 1989, between
First Union National Bank of South Carolina and the Company,
which was filed as an exhibit to the Company's 10-K for the
fiscal year ended June 3, 1989, is hereby incorporated by
reference.
(q) The Employment Agreement dated as of April 22, 1994, between
the Company and Virgil L. Clark, which was filed as an exhibit
to the Company's Form 10-K for the fiscal year ended June 3,
1995, is hereby incorporated by reference.
(r) The Loan Agreement dated January 4, 1996, between First Union
National Bank of South Carolina and the Company, which was
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended June 1, 1996, is hereby incorporated by reference.
(s) The Amendment to the Loan Agreement, dated July 18, 1996,
relating to the Loan Agreement dated January 4, 1996, between
First Union National Bank of South Carolina and the Company,
which was filed as an exhibit to the Company's Form 10-K for
the fiscal year ended June 1, 1996, is hereby incorporated by
reference.
<PAGE>
(t) The Amendment to the Loan Agreement, dated August 23, 1996,
relating to the Loan Agreement dated January 4, 1996, between
First Union National Bank of South Carolina and the Company,
which was filed as an exhibit to the Company's Form 10-K for
the fiscal year ended June 1, 1996, is hereby incorporated by
reference.
(u) The Lease Agreement dated as of March 26, 1996, between
Nashville International Airport and the Company, which was
filed as an exhibit to the Company's Form 10-K for the fiscal
year ended June 1, 1996, is hereby incorporated by reference.
21 Subsidiaries of the registrant
27 Financial data schedule
EXHIBIT NO. 21
SUBSIDIARIES OF THE REGISTRANT
Piemonte Foods of Indiana, Inc.
Frankfort, Indiana
Carolina Pizza Products, Inc.
Greenville, South Carolina
(Inactive)
Origena, Inc.
Chicago, Illinois
