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 January 31, 1998.
[ ] 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
January 31, 1998: 2,251,793 shares
INTERNATIONAL YOGURT COMPANY
CONTENTS
Page
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements 3 - 7
Balance Sheet as of January 31, 1998, 3
(unaudited) and October 31, 1997
Statements of Operations for the 4
Three Months ended January 31, 1998 and 1997
(all unaudited)
Statements of Cash Flows for the 5
Three Months ended January 31, 1998 and 1997
(all unaudited)
Notes to Financial Statements 6-7
Item 2. Management's Discussion and Analysis of 8-10
Financial Condition and Results of
Operations
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of 11
Security Holders
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
INTERNATIONAL YOGURT COMPANY
BALANCE SHEETS
January 31, October 31,
1998 1997
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 378,138 $ 414,194
Accounts receivable, net 604,162 828,860
Inventories 1,933,289 1,808,201
Equipment held for resale, net 23,083 23,083
Other current assets 319,001 306,269
Total current assets 3,257,673 3,380,607
Fixed assets, net 1,944,787 1,918,956
Deferred tax asset 284,000 284,000
Intangible and other long-term assets, net 231,099 227,030
$ 5,717,559 $ 5,810,593
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable to bank $ 1,321,000 $ 1,337,000
Current portion of long-term debt 45,097 38,329
Current obligations under capital lease 36,862 36,862
Accounts payable 842,988 928,942
Other accrued liabilities 60,470 60,567
Total current liabilities 2,306,417 2,401,700
Long-term debt payable to related parties
and others, less current portion 185,378 159,549
Long term obligations under
capital lease, less current portion 55,022 63,426
Total liabilities 2,546,817 2,624,675
Shareholders' equity
Common stock, nor par value,
30,000,000 shares authorized;
2,273,793 shares issued 4,750,100 4,710,850
Accumulated deficit (1,532,162) (1,477,736)
Less common stock in treasury, 22,000 shares (47,196) (47,196)
Net shareholders' equity 3,170,742 3,185,918
$ 5,717,559 $ 5,810,593
The accompanying notes are an integral part of the financial statements.
INTERNATIONAL YOGURT COMPANY
STATEMENTS OF OPERATIONS
(unaudited)
For the three months ended January 31, 1998 and 1997
1998 1997
Sales $1,613,935 $1,508,113
Cost of sales 1,118,913 1,100,560
Gross profit 495,022 407,553
Selling and marketing expenses 271,557 231,971
General and administrative expenses 252,796 243,226
Loss from operations (29,331) (67,644)
Other income (expenses):
Interest income 4,473 4,198
Interest expense (37,598) (35,200)
Other, net 8,028 -
Loss before income taxes (54,428) (98,646)
Provision for income taxes - -
Net loss $ (54,428) $(98,646)
Basic net loss per share $ (.02) $ (.04)
Diluted net loss per share $ (.02) $ (.04)
The accompanying notes are an integral part of the financial statements.
INTERNATIONAL YOGURT COMPANY
STATEMENTS OF CASH FLOWS
For the three months ended January 31, 1998 and 1997
(Unaudited)
1998 1997
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
Net loss $ (54,428) $ (98,646)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation 64,208 74,209
Gain on sale of equipment (8,028) -
Change in assets and liabilities
Accounts receivable 224,698 143,728
Inventories (125,088) 157,079
Other assets (16,801) (73,937)
Accounts payable (85,954) (477,248)
Other accrued liabilities ( 95) (39,965)
Net cash (used) provided by (1,488) (314,780)
operating activities
Cash flows from investing activities:
Expenditures for plant and equipment (82,011) (33,538)
Net cash used in investing activities (82,011) (33,538)
Cash flows from financing activities:
Net increase (decrease) in line of credit (16,000) 251,000
Proceeds from bank equipment financing 42,179 15,000
Proceeds from issuance of stock 39,250 -
Principal payments on long term debt
and capital leases (17,986) (29,111)
Net cash provided by (used in) 47,443 236,889
financing activities
Net decrease in cash and equivalents (36,056) (111,429)
Cash and equivalents, beginning of period 414,194 511,787
Cash and equivalents, end of period $ 378,138 $400,358
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 ended January 31, 1998 are not necessarily indicative of the
results that may be expected for the year ending October 31, 1998. 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, 1997.
Note B - Inventories
Inventories consist of January 31, October 31,
1998 1997
Finished goods $1,563,839 $1,451,729
Raw materials 186,963 171,893
Packaging materials and supplies 182,487 184,579
$1,933,289 $1,808,201
Note C - Earnings per share
Earnings per share are calculated as follows for the three months ended
January 31, 1998 and 1997:
Three Months Ended January 31, 1998
Net Loss Shares Per-Share
(Numerator) (Denominator) Amount
Basic (loss) per share:
Net loss ($54,428) 2,241,499 ($.02)
Effect of dilutive securities - - -
Diluted (loss) per share ($54,428) 2,241,499 ($.02)
Options to purchase 131,000 shares at prices from $1.71 to $2.31 were
excluded from the diluted loss per share calculation, even though the
average price for the quarter was higher than the exercise prices, because
the effect would have been antidilutive.
NOTES TO FINANCIAL STATEMENTS - Continued
Three Months Ended January 31, 1997
Net Loss Shares Per-Share
(Numerator) (Denominator) Amount
Basic (loss) per share:
Net loss ($98,646) 2,233,793 ($.04)
Effect of dilutive securities - - -
Diluted (loss) per share ($98,646) 2,233,793 ($.04)
Options to purchase 128,000 shares at prices from $1.54 to $2.12 were
excluded from the diluted loss per share calculation, even though the average
price for the quarter was higher than the exercise prices, because the effect
would have been antidilutive.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations.
The following discussion includes forward-looking statements within the
meaning of the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are based on the beliefs
of the Company's management and on assumptions made by and information
currently available to management. All statements other than statements of
historical fact, regarding the Company's financial position, business
strategy and plans and objectives of management for future operations of the
Company are forward-looking statements. When used herein, the words
"anticipate," "believe," "estimate," "expect," and "intend" and words or
phrases of similar meaning, as they relate to the Company or management, are
intended to identify forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
have been correct. Forward-looking statements are subject to certain risks
and uncertainties, which could cause actual results to differ materially from
those indicated by the forward-looking statements. These risks and
uncertainties include the Company's ability to maintain or expand its
distribution abilities, including the risk of disruptions in the
transportation system and relationships with brokers and distributors.
Further, actual results may be affected by the Company's ability to compete
on price and other factors with other manufacturers and distributors of
frozen dessert products; customer acceptance of new products; general trends
in the food business as they relate to customer preferences for the Company's
products; and the Company's ability to obtain raw materials and produce
finished products in a timely manner, as well as its ability to develop and
maintain its co-packing relationships and strategic alliances. In addition,
there are risks inherent in dependence on key customers, the loss of which
could materially adversely affect the Company's operations. The reader is
advised that this list of risks is not exhaustive and should not be construed
as any prediction by the Company as to which risks would cause actual results
to differ materially from those indicated by the forward-looking statements.
The Company's sales for the first fiscal quarter ending January 31, 1998 were
$1,613,935, up 7.1% compared to the corresponding quarter in 1997. The
increased sales during 1998 were primarily the result of increases in
warehouse clubs, food service and international business.
The Company historically incurs a loss during the winter months. This year's
first quarter loss of $54,428 represented a 45% improvement compared with
$98,646 in 1997. The improved results in the first quarter reflect a
continuation of the favorable upward trends for the Company.
The driving forces behind the favorable trends continue to be the outstanding
quality of the Company's products, new product development capabilities, the
business relationships with its brokers and distributors, and the Company's
manufacturing and distribution systems. The strategy implemented late last
year to have the Company's own regional sales managers has enabled the
Company to better support its brokers and distributors, and pave the way for
introducing new products. This has contributed to the turnaround in food
service sales trends and the improved results for the quarter.
The Company has recently developed a line of fruit smoothies which are
expected to contribute to future sales. In March, the Company's fruit
smoothies will be introduced throughout the Coffee People chain. Coffee
People and YOCREAM personnel collaborated on unique recipes for this
healthy and zestful beverage that is being used by consumers as a breakfast
or lunch substitute.
YOCREAM line of fruit smoothies, which are adaptable to both blender and
dispenser operation, are also being test marketed by other national food
operators.
The Company's gross profit margin increased to 30.7% during the quarter,
compared to 27.1% in the corresponding quarter in 1997. The improved results
are consistent with recent trends.
Selling and marketing expenses in the first quarter increased from 15.4% to
16.9% of sales. The increase in such expenses in 1998 primarily related to
payroll and travel costs related to the addition of regional sales managers,
and increased sales activity.
General and administrative expenses decreased, as a percentage of sales,
from 16.2% to 15.7% of sales for the quarter. General and administrative
expenses have remained relatively fixed due to management's efforts to
control such expenses.
The loss from operations decreased from approximately 4.5% to 1.9% of sales.
An operating loss for the first quarter has been normal due to the seasonal
nature of the Company's business, and is not an indicator of the expected
results for the year.
Liquidity and Capital Resources.
The company has financed its operations and expansion from bank loans,
operating leases, capital leases, capital investment by its founders, private
and public securities offerings and internally generated funds.
As of January 31, 1998, the Company's total borrowings under its bank line of
credit were $1,321,000, against a collateral base of approximately
$1,329,600. At January 31, 1998 the Company had cash funds available
aggregating $378,138 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 January 31, 1997. 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 is currently in
the process of renewing the line which matures May 1, 1998. The new line is
expected to provide for an increase in borrowing limits and provide a
$300,000 credit facility for equipment financing.
Accounts receivable at January 31, 1998 were $604,162, which reflects a 27.1%
decrease compared to October 31, 1997. The decrease is primarily
attributable to the seasonal decline in sales compared to October 1997. The
current level compares with $604,955 at January 31, 1997.
Inventory increased to $1,933,289 at January 31, 1998. This 7% increase is
primarily due to a higher level of finished goods inventory.
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. 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
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: March 17, 1998 By /s/ John N. Hanna
John N. Hanna, Chairman of the
Board, and Chief Executive Officer
Date: March 17, 1998 By: /s/ W. Douglas Caudell
W. Douglas Caudell, Chief
Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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