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, 2000.
[ ] 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
YOCREAM INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Oregon 91-0989395
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
5858 N.E. 87th Avenue
Portland, Oregon 97220
(Address of Principal Executive (Zip Code)
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, 2000: 2,293,393 shares
YOCREAM INTERNATIONAL, INC.
CONTENTS
Page
PART I FINANCIAL INFORMATION:
Item 1. Financial Statements 3 - 7
Balance Sheets as of January 31, 2000, 3
(unaudited) and October 31, 1999
Statements of Income for the 4
Three Months ended January 31, 2000
and 1999 (all unaudited)
Statements of Cash Flows for the 5
Three Months ended January 31, 2000
and 1999 (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
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
YOCREAM INTERNATIONAL, INC.
BALANCE SHEETS
January 31, October 31,
2000 1999
ASSETS (unaudited)
Current assets
Cash and cash equivalents $ 392,927 $ 737,408
Accounts receivable, net 722,610 1,061,618
Inventories 2,397,152 2,626,162
Other current assets 312,386 212,116
Total current assets 3,825,075 4,637,304
Fixed assets, net 2,026,787 1,983,669
Deferred tax asset 419,600 467,000
Intangible and other long-term assets, net 273,045 268,942
$6,544,507 $7,356,915
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Note payable to bank $ - $ -
Current portion of long-term debt 94,225 96,227
Current obligations under capital lease 9,581 16,383
Accounts payable 827,448 1,529,732
Other accrued liabilities 79,386 161,605
Total current liabilities 1,010,640 1,803,947
Long-term debt, less current portion 179,704 201,238
Total liabilities 1,190,344 2,005,185
Shareholders' equity
Common stock, nor par value,
30,000,000 shares authorized;
2,293,393 shares issued 5,035,107 5,108,697
Retained earnings 319,056 243,033
Net shareholders' equity 5,354,163 5,351,730
$6,544,507 $7,356,915
The accompanying notes are an integral part of the financial statements.
YOCREAM INTERNATIONAL, INC.
STATEMENTS OF INCOME
(unaudited)
For the three months ended January 31, 2000 and 1999
2000 1999
Sales $2,838,025 $2,177,866
Cost of sales 1,965,761 1,527,360
Gross profit 872,264 650,506
Selling and marketing expenses 336,934 283,624
General and administrative expenses 411,425 276,135
Income from operations 123,905 90,747
Other income (expenses):
Interest income 5,651 2,753
Interest expense (7,342) ( 24,997)
Other, net 1,209 -
Income before income taxes 123,423 68,503
Income tax provision 47,400 19,000
Net income $ 76,023 $ 49,503
Earnings per common share - basic $ .03 $ .02
Earnings per common share - diluted $ .03 $ .02
Shares used in basic earnings per share 2,298,391 2,318,908
Shares used in diluted earnings per share 2,336,411 2,384,456
The accompanying notes are an integral part of the financial statements.
YOCREAM INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
For the three months ended January 31, 2000 and 1999
(Unaudited)
2000 1999
Cash flows from operating activities:
Net income $ 76,023 $ 49,503
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation 85,503 84,837
Deferred income taxes 47,400 19,000
Change in assets and liabilities
Accounts receivable 339,008 165,670
Inventories 229,010 (129,770)
Other assets (104,372) (18,524)
Accounts payable (702,284) (193,393)
Other accrued liabilities (82,221) (16,332)
Net cash used in (111,933) (39,009)
operating activities
Cash flows from investing activities:
Expenditures for plant and equipment (128,620) (13,119)
Net cash used in investing activities (128,620) (13,119)
Cash flows from financing activities:
Net increase in line of credit - 104,000
Principal payments on long term debt
and capital leases (30,338) (21,160)
Repurchase of common stock (73,590) (25,509)
Net cash provided by (used in)
financing activities (103,928) 57,331
Net increase (decrease) in
cash and equivalents (344,481) 5,203
Cash and equivalents, beginning of period 737,408 277,246
Cash and equivalents, end of period $ 392,927 $ 282,449
The accompanying notes are an integral part of the financial statement.
YOCREAM INTERNATIONAL, INC.
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, 2000 are not necessarily
indicative of the results that may be expected for the year ending October 31,
2000. 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, 1999.
Note B - Inventories
January 31, October 31,
2000 1999
Inventories consist of
Finished goods $1,416,699 $1,454,866
Raw materials 749,378 988,219
Packaging materials and supplies 231,075 183,077
$2,397,152 $2,626,162
Note C - Note Payable to Bank
The Company has an uncollateralized bank line of credit which permits borrowing
of up to $2,000,000. The line bears interest at the bank's commercial lending
rate. There were no borrowings outstanding at January 31, 2000, or October 31,
1999.
NOTES TO FINANCIAL STATEMENTS - Continued
Note D - Earnings per share
Earnings per share are calculated as follows for the three months ended
January 31, 2000 and 1999:
Three Months Ended January 31, 2000
Net Earnings Shares Per-Share
(Numerator) (Denominator) Amount
Basic earnings per share:
Net earnings $76,023 2,298,391 $ .03
Effect of dilutive securities - 38,020 -
Diluted earnings per share $76,023 2,336,411 $ .03
Three Months Ended January 31, 1999
Net Earnings Shares Per-Share
(Numerator) (Denominator) Amount
Basic earnings per share:
Net earnings $49,503 2,318,908 $ .02
Effect of dilutive securities - 65,548 -
Diluted earnings per share $49,503 2,384,456 $ .02
Item 2. Management's Discussion and Analysis of Financial Condition and
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.
Results of Operations
Sales
The Company's sales for the first fiscal quarter ending January 31, 2000 were
$2,838,025, up 30.3% compared to the corresponding quarter in 1999.
This was the seventh consecutive quarter of increased sales due primarily to the
higher demand for the Company's smoothie and yogurt products. Smoothie sales
have accounted for most of the sales growth since the introduction in mid 1998.
Yogurt sales are also up over a broad range of distributors, even though the
first quarter covers the winter months. Management believes that this is
primarily attributable to gains in market share as a result of the quality of
its products.
Management expects that the Company's existing smoothie and frozen yogurt
products will continue to gain market share. In addition, the Company plans to
introduce two new products with the next six months that will further expand its
product line in both wholesale and retail markets. The Company is also
increasing its presence in the international market and anticipates making its
initial product shipment to a customer in Great Britain during the second
quarter of fiscal 2000.
Gross Profit
The Company's gross profit margin improved from 29.9% of sales in the 1999 first
quarter to 30.7% of sales in the current quarter. The improvement is primarily
due to a change in sales mix for the quarter, from copacking activity to higher
margin product sales; and to the ongoing benefits of a cost reduction program
initiated in fiscal 1999.
Selling and Marketing Expenses
Selling and marketing expenses in the first quarter decreased from 13% to 11.9%
of sales for the quarter. Such expenses increased slightly over the same period
last year, but decreased as a percentage of sales, primarily due to the growth
in sales.
General and Administrative Expenses
General and administrative expenses increased, as a percentage of sales, from
12.7% to 14.5% of sales for the quarter. Approximately 60% of the increase
relates to increases in personnel related costs. The remainder of the increase
is due to general increases in various expenses. The increase in personnel
related costs, which were partially initiated late in fiscal 1999, were
necessitated by both the recent and expected growth in the business. The
Company remains committed to its practice of controlling expenses.
Income from Operations
Income from operations increased 36.5% over the same quarter last year, and as a
percent of sales was 4.4% in the current quarter, compared to 4.2% in the
comparable quarter last year. The growth over last year resulted primarily from
the increase in sales and the improvement in gross profit margin, with only a
slight increase in expenses as a percentage of sales.
Provision for Income Taxes
The provision for income taxes primarily represents a reduction in the deferred
tax asset. Such asset relates to the remaining tax benefit of net operating
losses generated prior to 1995. Currently the net operating losses are
available to offset taxes which would otherwise be payable. However, the
Company expects that by the end of fiscal 2000 such losses will be fully
utilized.
Net Income
Net income for the quarter increased 53.6% to $76,023 compared with $49,503 in
the comparable quarter last year. For the last two years, the Company has
achieved significant increases in first quarter results due to the growth in
sales from the Company's smoothie drink products and yogurt sales to convenience
stores. Net income as a percentage of sales was 2.7% of sales in the current
quarter, compared with 2.3% for the same period last year. These results are
below the annual return of approximately 7% for the last two fiscal years since
the first quarter covers the winter months when frozen desserts and snack sales
are seasonally lower.
Liquidity and Capital Resources.
In recent years, the Company has financed its operations and expansion from bank
loans, operating leases, capital leases, stock sales, and internally generated
funds.
As of January 31, 2000, there were no borrowings under the Company's bank line
of credit. The amount borrowed at January 31, 1999 was $886,800. As a result
of the growth in business, the line was repaid during the third quarter of last
fiscal year. The uncollateralized bank line remains in place and permits
borrowings of up to $2,000,000 subject to the Company being in compliance with
certain ratios and negative covenants. Interest would be charged at the bank's
basic commercial lending rate. The line is subject to renewal in July 2001.
Accounts receivable at January 31, 2000 and October 31, 1999 were $722,610 and
$1,061,618, respectively. This decrease of 32% is primarily attributable to the
seasonally lower sales of the first quarter. The current level is slightly
lower than the January 31, 1999 total of $742,079, even though sales have
increased, primarily due to favorable changes in certain billing arrangements.
Inventories at January 31, 2000 and October 31, 1999 were $2,397,152 and
$2,626,162 respectively. This decrease of 8.7% is primarily due to planned
reductions in raw materials inventories. The current dollar level is higher
than the January 31, 1999 total of $2,046,895, primarily due to an increase in
raw materials necessitated by the growth in YOCREAM fruit smoothie sales.
At January 31, 2000 the Company had working capital of approximately $2,814,000
compared with $2,833,000 at October 31, 1999, and $1,501,000 at January 31,
1999. The improvement is primarily due to the increase in cash provided from
operating activities over the last year, and has resulted in the reduction in
bank borrowings.
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
During the quarter ended January 31, 2000 the Company repurchased 15,900 shares
of its common stock according to authorization from its board of directors. The
Company expects to continue its practice of repurchasing shares of its common
stock depending on market conditions and the availability of funds.
The Company is currently in the process of arranging lease financing for
approximately $500,000 of production equipment. In addition, the Company is
also in the process of formulating plans for reconfiguring its production
facilities. The modifications are expected to increase production capacity by
approximately 50%. The specific plans and related costs have not been
determined at this time.
During 1998 and 1999, the Company assessed its Year 2000 issues, and appropriate
steps were taken to avoid any adverse consequences. Subsequent to January 1,
2000, the Company has not experienced any problems related to the rollover.
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
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:
YOCREAM INTERNATIONAL, INC.
Date: March 16, 2000 By: /s/ John N. Hanna
John N. Hanna, Chairman of the
Board, and Chief Executive
Officer
Date: March 16, 2000 By: /s/ W. Douglas Caudell
W. Douglas Caudell, Chief
Financial Officer
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