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 April 30, 1997.
[ ] 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
April 30, 2,229,793 shares
<PAGE>
INTERNATIONAL YOGURT COMPANY
CONTENTS
Page
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements 3 - 6
Balance Sheet as of April 30, 1997, 3
(unaudited) and October 31, 1996
Statements of Operations for the 4
Three Months ended April 30, 1997 and 1996
Six Months ended April 30, 1997 and 1996
(all unaudited)
Statements of Cash Flows for the 5
Six Months ended April 30, 1997 and 1996
(all unaudited)
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of 7 - 8
Financial Condition and Results of
Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote of 9
Security Holders
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL YOGURT COMPANY
BALANCE SHEETS
April 30, October 31,
1997 1996
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 394,309 $ 511,787
Accounts receivable, net 824,795 748,683
Inventories 1,839,452 1,569,273
Equipment held for resale, net 28,083 28,083
Other current assets 251,333 209,918
Total current assets 3,337,972 3,067,744
Fixed assets, net 1,931,445 1,970,558
Deferred tax asset 125,000 125,000
Intangible and other long-term assets, net 202,291 190,320
$5,596,708 $5,353,622
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable to bank $1,270,000 $ 939,000
Current portion of long-term debt 82,144 108,717
Current obligations under capital lease 33,825 33,825
Accounts payable 944,258 1,095,399
Other accrued liabilities 122,803 131,228
Total current liabilities 2,453,030 2,308,169
Long-term debt payable to related parties
and others, less current portion 183,192 186,104
Long term obligations under
capital lease, less current portion 83,892 100,377
Total liabilities 2,720,114 2,594,650
Shareholders' equity
Common stock, nor par value,
30,000,000 shares authorized;
2,247,793 shares issued 4,695,450 4,695,450
Accumulated deficit (1,781,660) (1,911,282)
Less common stock in treasury, 18,000 shares (37,196) (25,196)
Net shareholders' equity 2,876,594 2,758,972
$5,596,708 $5,353,622
The accompanying notes are an integral part of the financial statements.
INTERNATIONAL YOGURT COMPANY
STATEMENTS OF OPERATIONS
(unaudited)
Three months ended Six months ended
April 30, April 30,
1997 1996 1997 1996
Sales $2,276,813 $1,831,745 $3,784,926 $3,255,367
Cost of sales 1,432,596 1,207,236 2,533,159 2,218,940
Gross profit 844,217 624,509 1,251,767 1,036,427
Selling and marketing
expenses 327,887 268,099 559,862 516,189
General and administrative
expenses 253,741 215,764 496,967 441,566
Unusual expenses - 114,527 - 114,527
Income (loss) from
operations 262,589 26,119 194,938 (35,855)
Other income (expenses)
Interest income 3,766 2,489 7,964 5,787
Interest expense (38,089) (33,222) (73,289) (64,150)
Other, net (34,323) (30,733) (65,325) (58,363)
Income (loss)
before taxes 228,266 (4,614) 129,613 (94,218)
Provision for
income taxes - - - -
Net income (loss) $ 228,266 $ (4,614) $ 129,613 $ (94,218)
Net income (loss)
per share $.10 $0.00 $.06 $(.04)
Weighted average
number of shares
outstanding 2,242,729 2,188,043 2,246,196 2,189,709
The accompanying notes are an integral part of the financial statements.
INTERNATIONAL YOGURT COMPANY
STATEMENTS OF CASH FLOWS
For the six months ended April 30, 1997 and 1996
(Unaudited)
1997 1996
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net income (loss) $ 129,622 $ (94,218)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Depreciation 142,990 117,617
Change in assets and liabilities
Accounts receivable (76,112) 79,230
Inventories (270,179) 71,426
Other current assets (41,415) (36,877)
Other assets (11,971) (1,288)
Accounts payable (151,141) (178,287)
Other accrued liabilities (8,425) 13,205
Net cash used by operating activities (286,631) (29,192)
Cash flows from investing activities:
Expenditures for plant and equipment (103,877) (73,474)
Net cash used in investing activities (103,877) (73,474)
Cash flows from financing activities:
Net increase in line of credit 331,000 52,724
Proceeds from bank equipment financing 15,000 -
Payments for treasury stock purchases (12,000) (8,219)
Principal payments on long term debt
and capital leases (60,970) (54,135)
Net cash provided by (used in)
financing activities 273,030 (9,630)
Net decrease in cash and equivalents (117,478) (112,296)
Cash and equivalents, beginning of period 511,787 318,535
Cash and equivalents, end of period $ 394,309 $ 206,239
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 six
months ended April 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending October 31, 1997. 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, 1996.
Certain expenses have been reclassified to conform to the current year's
presentation.
Note B - Inventories
Inventories consist of April 30, October 31,
1997 1996
Finished goods $1,474,301 $1,175,303
Raw materials 199,639 168,334
Packaging materials and supplies 165,512 225,636
$1,839,452 $1,569,273
Note C - Income per share
Earnings per share are based on the weighted average number of shares of
common stock outstanding, including common stock equivalents, 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 sales increased 24.3% to $2,276,813 for the second quarter, and
increased 16.3% to $3,784,926 for the six months ended April 30, 1997,
compared to the corresponding periods in 1996. The increased sales during
1997 were primarily the result of broad sales gains in all segments,
consisting of warehouse clubs, international, custom co-packing, and also in
its food service segment which reversed a five year decline for that segment.
The sales gains in the second quarter continued the trend from the fourth
quarter of fiscal 1996 where sales increased 26.4%.
The gains were primarily due to increased demand as a result of the
outstanding quality of the Company's main line products, as well as the
positive response to the introduction of a number of new products. New
products include SOFT SCOOP(registered trademark) ...by YO CREAM(registered
trademark) a 4 oz. single serve cup of high quality frozen yogurt or sorbet
specifically developed in fiscal 1996 to facilitate national distribution.
This product can be stored at zero degrees compared to minus 20 degrees for
most frozen dairy dessert products.
The Company is committed to remaining on the cutting edge of new product
development. Therefore, at the recent National Restaurant Association Food
Show, the Company introduced two categories of new products. YO CREAM PURE,
is the Company's new line of nonfat soft serve frozen yogurt and low fat ice
cream cups made from 100% organic milk. Pure Pleasure, Pure Food, Pure
Environment!(trademark) describes the positioning of YO CREAM PURE developed
in response to today's increasingly health and environmentally conscious
consumer. The Company also introduced a number of fruit smoothie receipes to
address this rapidly growing new product category. These receipes utilize
either YO CREAM nonfat frozen yogurt, Sorbet by YO CREAM, or YO CREAM PURE.
The Company's gross profit margin for the second quarter increased to 37.1%,
compared to 34.1% in the corresponding quarter in 1996, and the gross profit
margin for the six months increased to 33.1%, compared to 31.8% in the
corresponding period in 1996. The improvement in gross profit was primarily
due to an increase in sales, a change in the sales mix to higher margin
products and economies from increased production. Since this time last year,
the Company has also implemented two price increases to respond to increases
in certain operating costs.
Selling and marketing expenses in the second quarter remained at
approximately 14.6% of sales. These expenses for the six months decreased
slightly from 15.9% to 14.8% of sales. Such expenses were up in total due to
the increase in sales and continued expansion of the Company's product
specialist program, which has contributed to the increase in sales.
General and administrative expenses in the second quarter decreased slightly
from 11.8% to 11.1% of sales. Expenses for the six months remained at
approximately 13.1% of sales. Such expenses increased over the corresponding
quarter in 1996 primarily due to increases in various expenses. General
and administrative expenses are relatively fixed due to 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 for both the quarter and the six
months ended April 30, 1996.
The increased income from operations in fiscal 1997 primarily relates to the
increase in sales, and improved margins. The Company's business is seasonal,
with the greatest demand for frozen dessert products occurring during the
summer months. Therefore, based on the significant sales gains already
realized during the "slower" season of the year, and the prospects for its
new products, management expects a major expansion in sales volume for the
fiscal year. Accordingly, management is preparing for this growth by
increasing its plant freezing and storage capacity. The facility
improvements are expected to improve productivity and reduce outside storage
costs. The estimated cost of this project and certain other plant
improvements is $300,000 with financing to be provided by an operating
lease.
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.
As of April 30, 1997, the Company's total borrowings under its bank line of
credit were $1,270,000, against a collateral base of approximately
$1,559,000. At April 30, 1997 the Company had cash funds available
aggregating $394,309 which were available to reduce bank borrowings. The
current level of borrowings is consistent with the season of the year and
compares with $1,190,000 at April 30, 1996. Interest is at 1% over the
bank's basic commercial lending rate. Total borrowings under this line are
payable upon demand and limited to 65% of eligible accounts receivable and
30% of eligible inventory, plus loan insurance provided by a governmental
agency, up to an aggregate maximum of $1,700,000. The bank recently renewed
the line which matures March 1, 1998. The new financing with the bank
includes a $200,000 increase in the line of credit and a $300,000 credit
facility for equipment financing.
Accounts receivable at April 30, 1997 were $824,795, compared to $819,481 at
April 30, 1996, and $748,683 at October 31, 1996. The increase in
receivables relates to the growth in sales.
Inventories at April 30, 1997 were $1,839,452, compared to $1,483,199 at
April 30, 1996, and $1,569,273 at October 31, 1996. The higher level of
inventories in 1997, compared to the same time last year, primarily relates
to an increase in finished goods inventory necessitated by the increase in
customer demand for product.
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.
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
At the Annual Meeting of Shareholders which was held on April 9, 1997, the
shareholders reelected John Hanna, Dave Hanna, James Hanna, Bill Rush, and
Carl Behnke as directors. Each of the five nominees received not less than
2,013,878 votes, or 98.7% of the shares in person or by proxy and voting.
The terms for each director is one year, or until their successor shall have
been elected and qualified.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
Exhibit 27 - Financial Data Schedule is filed herewith
B. Reports on Form 8-K - not applicable
<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: June 6, 1997 By /s/ John N. Hanna
John N. Hanna, Chairman of the
Board, and Chief Executive Officer
Date: June 6, 1997 By: /s/ W. Douglas Caudell
W. Douglas Caudell, Chief Financial
Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<CASH> 394,309
<SECURITIES> 0
<RECEIVABLES> 824,795
<ALLOWANCES> 0
<INVENTORY> 1,839,452
<CURRENT-ASSETS> 3,337,972
<PP&E> 1,931,445
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,596,708
<CURRENT-LIABILITIES> 2,453,030
<BONDS> 0
0
0
<COMMON> 4,695,450
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,596,708
<SALES> 3,784,926
<TOTAL-REVENUES> 3,784,926
<CGS> 2,533,159
<TOTAL-COSTS> 1,056,829
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,289
<INCOME-PRETAX> 129,613
<INCOME-TAX> 0
<INCOME-CONTINUING> 129,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 129,613
<EPS-PRIMARY> 0.06
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