SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 29, 1997 Commission File No. 0-15696
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PIEMONTE FOODS, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0626121
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(State or other jurisdiction of IRS Employer
incorporation of organization) Identification
400 Augusta Street, Greenville, South Carolina 29601
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(Address of principal executive offices)
Registrant's telephone number, including area code: (864) 242-0424
--------------
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
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The number of shares of common stock outstanding as of November 29, 1997 was
1,558,574.
<PAGE>
PIEMONTE FOODS, INC.
INDEX TO FORM 10-Q
Part I Financial Information
Item 1. Financial Statements, unaudited
Consolidated Balance Sheets - November 29, 1997,
and May 31, 1997
Consolidated Statements of Operations for the three and six
months ended November 29, 1997, and November 30, 1996.
Consolidated Statements of Cash Flows for the three and six
months ended November 29, 1997, and November 30, 1996.
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27. Financial data schedule
<PAGE>
PIEMONTE FOODS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets November 29, 1997 May 31, 1997
- --------------------------------------------------------------------------------------------------------------
Current Assets
<S> <C> <C>
Cash & cash equivalents $912,935 $591,153
Accounts receivable, net 1,612,736 1,930,050
Inventories 1,208,807 855,121
Refundable income taxes 0 415,572
Prepaid expenses 141,594 123,320
- --------------------------------------------------------------------------------------------------------------
Total Current Assets 3,876,072 3,915,216
- --------------------------------------------------------------------------------------------------------------
Property, Plant & Equipment, Net 4,427,795 4,744,761
Deferred Charges, Intangible and Other Assets
Excess of cost over fair value of net assets acquired 720,930 737,406
- --------------------------------------------------------------------------------------------------------------
Total Other Assets 720,930 737,406
- --------------------------------------------------------------------------------------------------------------
Total Assets $9,024,797 $9,397,383
==============================================================================================================
Liabilities and Stockholder's Equity
- --------------------------------------------------------------------------------------------------------------
Current Liabilities
Current portion of long-term debt $376,851 $373,009
Prepayment of long-term debt subsequent to May 31, 1997 $0 $1,000,000
Accounts payable, trade 1,872,293 748,793
Accrued expenses 418,606 588,405
- --------------------------------------------------------------------------------------------------------------
Total Current Liabilities 2,667,750 2,710,207
- --------------------------------------------------------------------------------------------------------------
Long-Term Debt 1,935,530 2,124,134
- --------------------------------------------------------------------------------------------------------------
Total Liabilities 4,603,280 4,834,341
- --------------------------------------------------------------------------------------------------------------
Stockholder's Equity
Common Stock 15,444 15,444
Capital in excess of stated value of common stock 2,868,360 2,868,360
Retained earnings 1,537,713 1,679,238
- --------------------------------------------------------------------------------------------------------------
Total Stockholder's Equity 4,421,517 4,563,042
- --------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholder's Equity $9,024,797 $9,397,383
==============================================================================================================
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
<TABLE>
<CAPTION>
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended November 29, 1997 and November 30, 1996
Three Months Six Months
FY98 FY97 FY98
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $5,265,122 $6,034,329 $9,942,089
Operating Expenses
Cost of Goods Sold 3,920,667 5,074,139 7,589,228
Selling, general and administrative 1,242,115 1,514,501 2,437,034
- ------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 5,162,782 6,588,640 10,026,262
- ------------------------------------------------------------------------------------------------------------------------
Operating Income/(Loss) 102,340 (554,311) (84,173)
Other Expenses
Interest expense (net) 42,615 60,730 86,466
(Gain)/Loss on disposal of assets (638) 0 (5,638)
Equity in loss on European joint venture 0 119,014 0
Other income (5,329) (7,766) (11,969)
- ------------------------------------------------------------------------------------------------------------------------
Total Other Expenses 36,648 171,978 68,859
- ------------------------------------------------------------------------------------------------------------------------
Income/(Loss) Before Income Taxes 65,692 (726,289) (153,031)
Income Tax Benefit 11,507 231,000 11,507
- ------------------------------------------------------------------------------------------------------------------------
Net Income/(Loss) $77,199 ($495,289) ($141,525)
========================================================================================================================
Average Number of Shares Outstanding 1,558,145 1,497,936 1,558,145
Net Loss Per Share $0.05 ($0.33) ($0.09)
========================================================================================================================
<CAPTION>
Six Months
FY97
------------
<S> <C>
Net Sales $12,015,731
Operating Expenses
Cost of Goods Sold 10,218,156
Selling, general and administrative 2,880,362
- ------------------------------------------- ------------
Total Operating Expenses 13,098,518
- ------------------------------------------- ------------
Operating Income/(Loss) (1,082,787)
Other Expenses
Interest expense (net) 107,903
(Gain)/Loss on disposal of assets 0
Equity in loss on European joint venture 268,914
Other income (13,258)
- ------------------------------------------- ------------
Total Other Expenses 363,559
- ------------------------------------------- ------------
Income/(Loss) Before Income Taxes (1,446,346)
Income Tax Benefit 447,000
- ------------------------------------------- ------------
Net Income/(Loss) ($999,346)
=========================================== ============
Average Number of Shares Outstanding 1,497,936
Net Loss Per Share ($0.67)
=========================================== ============
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Six Months Ended November 29, 1997 and November 30, 1996
<TABLE>
<CAPTION>
Three Months Six Months
FY98 FY97 FY98 FY97
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities
<S> <C> <C> <C> <C>
Net Income/(Loss) $77,199 ($495,289) ($141,525) ($999,346)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 164,302 151,468 334,621 355,403
Non-Cash Director's Fees 8,750 0 15,500 0
Decrease (increase) in:
Receivables (79,595) (185,166) 317,314 178,888
Inventories (14,109) (17,312) (353,686) (371,065)
Prepaid expenses 125 (182,459) (18,274) (187,612)
Income Tax Refund 415,572 0 415,572 0
Other assets 771 7,383 771 16,809
Equity in loss on European joint venture 0 119,014 0 268,914
Increase (decrease) in:
Accounts payable (3,299) 435,935 1,123,500 488,680
Accrued liabilities (87,269) 281,319 (185,299) (67,564)
- -----------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities 482,447 114,893 1,508,494 (316,893)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchases of property, plant and equipment (7,588) (91,692) (7,588) (259,613)
Proceeds from the sale of property, plant and equipment (3,042) 0 5,638 0
Investment in European joint venture 0 (1,234) 0 (228,826)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (10,630) (92,926) (1,950) (488,439)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Proceeds from issuance of common stock 0 2,639 0 2,632
Repayment of long-term debt (85,714) (125,715) (1,184,762) (251,429)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities (85,714) (123,076) (1,184,762) (248,797)
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase/(decrease) in cash 386,103 (101,109) 321,782 (1,054,129)
Cash, beginning of period 526,832 705,494 591,153 1,658,514
- ------------------------------------------------------------------------------------------------------------------------------------
Cash, end of period 912,935 604,385 912,935 604,385
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
<PAGE>
PIEMONTE FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 29, 1997
Note 1 Principles of Consolidation
The accompanying financial statements include the accounts of
Piemonte Foods, Inc. and its wholly-owned subsidiaries,
Piemonte Foods of Indiana, Inc. and Origena, Inc. The
consolidated balance sheet as of November 29, 1997 and the
related statements of operations and cash flows for the six
month period then ended are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation
of such financial statements have been included. Such
adjustments consisted only of normal recurring items.
The financial statements and notes are presented as permitted by Form
10-Q, and do not contain certain information included in the company's
annual financial statements and notes.
<PAGE>
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the Second Quarter was $1,208,322.
Versus year-end, working capital remained stable, increasing $3,313
including an increase of $145,928 in the second quarter. Receivables
were reduced by $317,314 since the beginning of the fiscal year, which
includes an increase in the second quarter of $79,595 due to increased
sales activity.
The anticipated Federal Tax Refund was received during the second
quarter, clearing the $415,572 receivable on the books and improving
our cash flow.
The reduction in receivables was offset by an increase in inventories
of $353,686 for the first six months, with $14,109 occurring in the
second half. This was primarily due to gearing up for increased sales
volumes.
Compared to year-end, payables have increased by $1,123,500. This
occurred primarily during the first quarter of 1998 and was primarily
timing related. Payables decreased slightly by $3,299 in the second
quarter.
As was highlighted in our last 10-K as well as our first quarter 10-Q,
a $1 million payment on long-term debt was made during the first
period of the fiscal year. We are in full compliance with all bank
covenants.
RESULTS OF OPERATIONS
Quarter Ended November 29, 1997 Compared to
Quarter Ended November 30, 1996
Revenues for the Second Quarter were $5,265,122 which were 13% lower
than last year. Lower revenues were the combined result of the fourth
quarter 1997 exit from our cake business in Nashville (impact of 10%
on overall sales), and lower sales in Deli and Foodservice. Second
Quarter sales showed an improvement of 13% over the first quarter of
fiscal year 1998.
As a result of re-focusing our core business, reducing the cost
structure, and successful price increases; we saw improvement in our
gross margins during the second quarter of this year. On lower sales,
gross margin dollars improved by $384,265 from $960,190 in FY97 to
$1,344,455 in FY98. Gross margin percents improved from the same
quarter a year ago at 16% to 26% in FY98.
Positive Operating Income of $102,340 was reported during the second
quarter of FY98, compared to a loss of $554,311 in the second quarter
1997. This is a turn around of $656,651.
Selling, general, and administrative expenses were lowered $272,386 in
the second quarter 1998 versus the same quarter a year ago as the
company continues its proactive measures to minimize operating costs.
Overall, Net Income for the quarter was $77,199, an improvement over
the prior year second quarter of $572,488. On a per share basis,
earnings were a positive $.05 versus a ($.33) loss.
<PAGE>
Six Months Ended November 29, 1997 Compared to
Six Months Ended November 30, 1996
Sales were $9,942,089 or $2,073,642 lower than last year. Sales losses
are primarily due to the exiting of the Cake business (56% of
reduction), and lower sales in Deli/Retail.
Gross Margin improved to 24% in the first half of fiscal year 1998
versus 15% in the same period a year ago. This translates into an
improvement of $555,286 on lower sales. The improvement can be
attributed to specific actions taken to increase pricing and to reduce
operating costs.
SG&A costs for the first six months were $2,437,034 or $443,328 lower
than last year. This reflects a 15% reduction.
On a YTD basis, we have a net loss of $141,525, an improvement of
$857,821 over the prior year, and reflects a per share loss of ($0.09)
compared with ($0.67) a year ago.
As stated by management in the first quarter 10-Q, our objective was
to return to profitability in the second quarter. This was achieved.
The goal during the next quarter will be to continue to strengthen the
bottom line and to become profitable on a year-to-date basis.
<PAGE>
Part II Item 4 Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Shareholders on 10-29-97, the
following proposals were approved:
1. To elect two Class One Directors (T. Patrick Costello and Richard
J. Stoner) to a term of three (3) years.
Votes for 1,315,477 against 15 abstentions 3,237.
2. To ratify the appointment of Ernst and Young LLP as the Company's
independent auditors for the fiscal year ending 1998.
Votes for 1,315,634 against 668 abstentions 2,427.
Item 6 Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Regulation S-K
None
b) Reports on Form 8-K
None
Exhibit 27. Financial data schedule
SIGNATURES
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 hereunto duly authorized.
PIEMONTE FOODS, INC.
Date
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Virgil L. Clark
Chairman and CEO
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> NOV-29-1997
<CASH> 912,935
<SECURITIES> 0
<RECEIVABLES> 1,695,930
<ALLOWANCES> (83,194)
<INVENTORY> 1,208,807
<CURRENT-ASSETS> 3,876,072
<PP&E> 4,427,795
<DEPRECIATION> 334,621
<TOTAL-ASSETS> 9,024,797
<CURRENT-LIABILITIES> 2,667,750
<BONDS> 1,935,530
0
0
<COMMON> 15,444
<OTHER-SE> 2,868,360
<TOTAL-LIABILITY-AND-EQUITY> 9,024,797
<SALES> 9,942,089
<TOTAL-REVENUES> 9,942,089
<CGS> 7,589,228
<TOTAL-COSTS> 10,026,262
<OTHER-EXPENSES> (17,607)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 86,466
<INCOME-PRETAX> (153,031)
<INCOME-TAX> (11,507)
<INCOME-CONTINUING> (141,525)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (141,525)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
