SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly period ended July 31, 1996.
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
Commission File Number: 0-16787
INTERNATIONAL YOGURT COMPANY
(Exact name of registrant as specified in its charter)
Oregon 91-0989395
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5858 N.E. 87th Avenue
Portland, Oregon 97220
(Address of Principal (Zip Code)
Executive Office)
(503) 256-3754
(Registrant's telephone number, including area code.)
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
The number of shares outstanding of the registrant's common stock, as of
the latest practicable date is:
Class: Common stock outstanding at
July 31, 1996: 2,188,043 shares
<PAGE>
INTERNATIONAL YOGURT COMPANY
CONTENTS
Page
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements 3 - 7
Balance Sheet as of July 31, 1996, 3
(unaudited) and October 31, 1995
Statements of Operations for the 4
Three Months ended July 31, 1996 and 1995
Nine Months ended July 31, 1996 and 1995
(all unaudited)
Statements of Cash Flows for the 5
Nine Months ended July 31, 1996
and 1995 (all unaudited)
Notes to Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of 8 - 9
Financial Condition and Results of
Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to a Vote of 10
Security Holders
Item 5. Other Information 10
SIGNATURES 11
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL YOGURT COMPANY
BALANCE SHEETS
July 31, October 31,
1996 1995
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 340,438 $ 318,535
Accounts receivable, net 1,051,682 873,191
Inventories 1,480,227 1,554,625
Equipment held for resale, net 26,783 28,220
Other current assets 144,698 102,012
Total current assets 3,043,828 2,876,583
Fixed assets, net 1,865,633 1,839,860
Deferred tax asset 125,000 125,000
Intangible and other long-term assets, net 193,990 195,273
$ 5,228,451 $ 5,036,716
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable to bank $ 1,187,929 $ 1,089,920
Current portion of long-term debt 74,117 68,879
Current obligations under capital lease 31,421 30,715
Accounts payable 888,928 813,309
Other accrued liabilities 128,284 75,952
Total current liabilities 2,310,679 2,078,775
Long-term debt payable to related parties
and others, less current portion 128,542 144,385
Long term obligations under
capital lease 111,022 134,113
Total liabilities 2,550,243 2,357,273
Shareholders' equity
Common stock, nor par value,
30,000,000 shares authorized;
2,188,043 and 2,192,043 shares
issued and outstanding;
52,750 shares subscribed 4,683,254 4,597,498
Accumulated deficit (2,005,046) (1,918,055)
Net shareholders' equity 2,678,208 2,679,443
$ 5,228,451 $ 5,036,716
The accompanying notes are an integral part of the financial statements.<PAGE>
INTERNATIONAL YOGURT COMPANY
STATEMENTS OF OPERATIONS
(unaudited)
Three months ended Nine months ended
July 31, July 31,
1996 1995 1996 1995
Yogurt sales $2,521,312 $2,482,930 $5,776,679 $5,708,405
Cost of yogurt sales
Manufacturing 1,517,784 1,289,297 3,183,589 2,983,477
Transportation and
warehousing 433,861 316,303 979,103 885,363
Gross profit 569,667 877,330 1,613,987 1,839,565
Selling and marketing
expenses 285,067 310,018 801,258 730,641
General and administrative
expenses 254,512 344,421 703,969 851,667
Unusual expenses - - 114,527 -
Income (loss)
from operations 30,088 222,891 (5,767) 257,257
Other income (expenses)
Interest income 3,278 2,096 9,065 6,479
Interest expense (35,308) (37,708) (99,458) (105,356)
Other, net 9,169 (2,898) 9,169 (2,898)
Income (loss) before taxes 7,227 184,381 (86,991) 155,482
Provision for income taxes - - - -
Net income (loss) $ 7,227 $ 184,381 $ (86,991) $ 155,482
Net income (loss) per share$ - $ .08 $ (.04) $ .07
Weighted average number
of sharesoutstanding 2,191,011 2,167,043 2,189,977 2,167,043
The accompanying notes are an integral part of the financial statements.
<PAGE>
INTERNATIONAL YOGURT COMPANY
STATEMENTS OF CASH FLOWS
For the nine months ended July 31, 1996 and 1995
(Unaudited)
1996 1995
Cash flows from operating activities:
Net income (loss) $ (86,991) $ 155,482
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation 177,239 199,618
Loss (gain) on sale of equipment (9,169) 2,898
Changes in current assets and liabilities, net (16,107) (221,776)
Net cash provided by operating activities 64,972 136,222
Cash flows from investing activities:
Proceeds from sale of equipment 9,169 1,530
Expenditures for plant and equipment (203,013) (169,582)
Net cash used in investing activities (193,844) (168,052)
Cash flows from financing activities:
Net increase (decrease) in line of credit 98,009 (52,677)
Proceeds from bank equipment financing 45,983 -
Net proceeds from stock subscriptions 93,975 -
Payments for treasury stock purchases (8,219) -
Principal payments on long term debt
and capital leases (78,973) (65,099)
Net cash provided by (used in)
financing activities 150,775 (117,776)
Net increase (decrease) in cash and equivalents 21,903 (149,606)
Cash and equivalents, beginning of period 318,535 336,894
Cash and equivalents, end of period $ 340,438 $ 187,288
The accompanying notes are an integral part of the financial statement.
INTERNATIONAL YOGURT COMPANY
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments, which consist of normal recurring
accruals, considered necessary for a fair presentation have been included.
Operating results for the quarter and nine months ended July 31, 1996 are not
necessarily indicative of the results that may be expected for the year ending
October 31, 1996. For further information, refer to the financial statements,
and footnotes thereto, included in the Corporation's annual report on Form
10-K for the year ended October 31, 1995.
Certain expenses have been reclassified to conform to the current year's
presentation.
Note B - Inventories
Inventories consist of July 31, October 31,
1996 1995
Finished Goods $1,054,116 $1,169,073
Raw Materials 156,830 149,823
Packaging Materials & Supplies 269,281 235,729
$1,480,227 $1,554,625
Note C - Dividends
None.
Note D - Common Stock
During the first quarter of 1996, the Company purchased 4,000 shares of common
stock on the open market.
During the third quarter of 1996, the Company received $105,500 from
subscriptions for 52,750 shares of unregistered common stock through a private
placement. The related expenses were $11,525.
<PAGE>
Note D - Unusual Expenses
During the second quarter of 1996, the Company made a provision for certain
unusual expenses. The provision was primarily for a reserve against receivables
recognized in prior years for recovery of certain marketing costs, and a
reserve for disputed packaging and freight costs related to prior years. The
provision has been reported separately as an other expense in order to avoid
distorting normal operating results. The provision reduced net earnings by
$114,527, or $.05 per share for the nine months ended July 31, 1996.
Note E - Earnings per share
Earnings per share are based on the weighted average number of shares of common
stock outstanding during the period presented.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations.
The Company's revenues from yogurt sales increased 1.5% to $2,521,312 for the
third quarter, and increased 1.2% to $5,776,679 for the nine months ended July
31, 1996. The increased revenues during 1996 were primarily the result of
increased co-packing and private label business, as well as increased
international sales. Early in the fiscal year, revenues were adversely impacted
by the unusually severe weather conditions experienced throughout most of the
United States resulting in a temporary decrease in demand for frozen yogurt
products.
The company's gross profit margin on yogurt sales decreased to 22.6% during the
third quarter compared to 35.3% in 1995. The gross margin for the nine months
ended July 31, 1996 was 27.9% compared to 32.2% for the same period in 1995.
The reductions in the profit margin have been due to several factors. At the
beginning of the year, the Company began an aggressive program to increase its
market share. Management considered this strategic because of a realignment
occurring in the industry and the related opportunities that were presented.
Certain areas of the United States were targeted and pricing strategies resulted
in lower margins. In addition the Company has incurred additional costs
associated with introducing new products and expanding its business activity in
Canada. Since the end of the quarter, the Company has experienced a growth in
sales, including increased revenues from certain new products as well as in its
Canadian sales.
Other major factors effecting gross margins were the significant increases in
ingredients, transportation, and warehousing costs experienced during the year.
Milk shortages especially impacted ingredient costs. As a result of the
Company's analysis of both market conditions and its costs, the Company has
recently increased prices in the food service and certain other segments of
its business. This is expected to improve future operating results.
Selling and marketing expenses in the third quarter decreased from 12.5% to
11.3% of revenues. For the nine months ended July 31, 1996, these expenses
increased slightly from 12.8% to 13.9% of revenues. This reflects the Company's
expanded marketing and sales activity. As a result, for example, the Company in
June was approved by the SYSCO Corporation of Houston, Texas to begin producing
single serve four ounce cups of non-fat frozen yogurt, and non-dairy sorbet
products under SYSCO's "Cool N' Classy" label. These products in five flavors
are available through SYSCO nationwide. The arrangement does not commit SYSCO
to specific quantities. International Yogurt Company began making shipments to
SYSCO late in the third quarter.
<PAGE>
General and administrative expenses decreased from 13.9% to 10.1% of revenues
for the quarter, and decreased from 14.9% to 12.2% of revenues for the nine
months, reflecting management's efforts to control such expenses.
During the second quarter of 1996, the Company made a provision for certain
unusual expenses. The provision was primarily for a reserve against receivables
recognized in prior years for recovery of certain marketing costs, and a reserve
for disputed packaging and freight costs related to prior years. The provision
has been reported separately as an other expense in order to avoid distorting
normal operating results. The provision reduced net earnings by $114,527, or
$.05 per share in the nine months ended July 31, 1996.
Income from operations decreased during the third quarter due to the pressure
to hold sales prices down, aggressive pricing to gain market share, and the
increase in certain costs described above. An additional factor impacting the
nine month results was the provision for unusual expenses described above.
Liquidity and Capital Resources.
The Company has financed its operations and expansion from bank loans, capital
leases, capital investment by its founders, private and public securities
offerings and internally generated funds.
During the third quarter of 1996, the Company received $105,500 from
subscriptions for 52,750 shares of unregistered common stock through a private
placement. The related expenses were $11,525.
As of July 31, 1996, the Company's total borrowings under its bank line of
credit were $1,187,929 at an interest rate of 1% over the bank's basic
commercial lending rate. On October 31, 1995, total borrowings were $1,089,920.
Borrowings under this line are payable upon demand and limited to 65 percent of
eligible accounts receivable and 30 percent of eligible inventory up to an
aggregate maximum of $1,500,000. The line was renewed in August 1996, and
matures February 1, 1997. The bank also approved a $200,000 credit facility
for equipment financing.
Accounts receivable at April 30, 1996 were $1,051,682, a 20.4% increase over
accounts receivable at October 31, 1995. The increase is primarily attributable
to the higher level of sales in July 1996, as compared to October 1995.
Inventory decreased to $1,480,227 at July 31, 1996, from $1,554,625 at October
31, 1995. This 4.8% decrease is primarily due to management's efforts to reduce
consigned and warehouse goods in face of the rising freight and warehousing
costs.
<PAGE>
The Company believes its existing assets, bank lines, and revenues from
operations will be sufficient to fund the Company's operations for at least the
next twelve months. above. The Company expects its bank line to be renewed or
replaced at maturity. In the event that the Company's bank lines were not
renewed or replaced, the Company would need to curtail operations substantially,
seek additional capital, or both. <PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not involved in any material pending legal proceedings, other
than non-material legal proceedings occurring in the ordinary course of
business.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None
<PAGE>
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 thereunto duly authorized.
Registrant:
INTERNATIONAL YOGURT COMPANY
Date: September 16, 1996 By /s/ John N. Hanna
John N. Hanna, Chairman of the
Board, and Chief Executive Officer
Date: September 16, 1996 By: /s/ W. Douglas Caudell
W. Douglas Caudell, Chief Financial
Officer
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] OCT-31-1996
[PERIOD-END] JUL-31-1996
[CASH] 340,438
[SECURITIES] 0
[RECEIVABLES] 1,051,682
[ALLOWANCES] 0
[INVENTORY] 1,480,227
[CURRENT-ASSETS] 3,043,828
[PP&E] 1,865,633
[DEPRECIATION] 0
[TOTAL-ASSETS] 5,228,451
[CURRENT-LIABILITIES] 2,310,679
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 0
[COMMON] 4,683,254
[OTHER-SE] 0
[TOTAL-LIABILITY-AND-EQUITY] 5,228,451
[SALES] 5,776,679
[TOTAL-REVENUES] 5,776,679
[CGS] 3,183,589
[TOTAL-COSTS] 5,782,446
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 81,224
[INCOME-PRETAX] (86,991)
[INCOME-TAX] 0
[INCOME-CONTINUING] (86,991)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (86,991)
[EPS-PRIMARY] (0.04)
[EPS-DILUTED] 0
</TABLE>
