<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB - QUARTERLY OR TRANSITIONAL REPORT
(Added by Rel. No. 34-30968, eff. 8/13/92, as amended)
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended April 30, 1996
----------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period From ____________to_______________________
Commission file number 0-22556
----------------------
Uncle B's Bakery, Inc.
- - --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Iowa 42-1267239
- - ------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
441 Dubuque Street, Ellsworth, Iowa 50075
- - --------------------------------------------------------------------------------
(Address of principal executive offices)
(515) 836-4000
- - --------------------------------------------------------------------------------
(Issuer's telephone number)
- - --------------------------------------------------------------------------------
(Former name, former address & former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by the court. Yes No
-------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date: 3,545,147 shares as of May 31, 1996.
Page 1 of 11
<PAGE>
INDEX
UNCLE B'S BAKERY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets - April 30, 1996 and July 31, 1995
Condensed Statements of Operations - Three months ended April 30, 1996
and 1995; Nine months ended April 30, 1996 and 1995.
Condensed Statements of Cash Flows - Nine months ended April 30, 1996
and 1995.
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Page 2 of 11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
- - ------------------------------
UNCLE B'S BAKERY, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30 JULY 31
1996 1995
----------- -----------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 91,138 $ 164,060
Accounts receivable 1,483,532 1,043,440
Inventories-Note 2 569,241 614,148
Prepaid expenses 74,442 140,240
----------- -----------
Total current assets 2,218,353 1,961,888
Property, plant and equipment 13,716,902 9,612,233
Less accumulated depreciation 2,620,123 1,977,338
----------- -----------
Net property, plant and equipment 11,096,779 7,634,895
Intangible assets and deferred costs, net-
Note 3 495,059 1,938,498
----------- -----------
Total assets $13,810,191 $11,535,281
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,674,935 $ 1,545,108
Accrued expenses 310,133 307,854
Long-term debt due within one year 105,000 100,000
----------- -----------
Total current liabilities 2,090,068 1,952,962
Long-term debt due after one year 8,765,073 4,844,220
Stockholders' equity
Common stock, $.01 par value: 40,000,000
shares authorized, 3,545,147 shares
issued and outstanding 35,451 35,451
Additional paid-in capital 7,738,813 7,738,813
Deficit (4,819,214) (3,036,165)
----------- -----------
Total stockholders' equity 2,955,050 4,738,099
----------- -----------
Total liabilities and stockholders' equity $13,810,191 $11,535,281
=========== ===========
</TABLE>
Note: The balance sheet at July 31, 1995 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See notes to condensed financial statements
Page 3 of 11
<PAGE>
UNCLE B'S BAKERY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30 APRIL 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $4,513,563 $4,023,180 $13,089,318 $11,181,350
Cost of goods sold-Note 4 2,308,266 2,148,156 6,795,505 5,977,412
---------- ---------- ----------- -----------
Gross profit 2,205,297 1,875,024 6,293,813 5,203,938
Distribution expense 386,137 343,158 1,127,099 961,172
Selling, general and
administrative expense-Note 4 1,793,390 1,396,051 5,178,532 3,820,536
---------- ---------- ----------- -----------
2,179,527 1,739,209 6,305,631 4,781,708
---------- ---------- ----------- -----------
Income (loss) from operations 25,770 135,815 (11,818) 422,230
Other income (expense):
Interest expense (121,899) (85,496) (378,731) (233,387)
Other 6,679 7,477 13,552 28,217
---------- ---------- ----------- -----------
(115,220) (78,019) (365,179) (205,170)
---------- ---------- ----------- -----------
Income (loss) before income taxes
and cumulative effect of
accounting change (89,450) 57,796 (376,997) 217,060
Income taxes - - - -
---------- ---------- ----------- -----------
Income (loss) before cumulative
effect of accounting change (89,450) 57,796 (376,997) 217,060
Cumulative effect to July 31, 1995
of accounting change-Note 3 - - (1,406,050) -
---------- ---------- ----------- -----------
Net income (loss) $ (89,450) $ 57,796 $(1,783,047) $ 217,060
========== ========== =========== ===========
Earnings per share:
Income (loss) before cumulative
effect of accounting change (0.03) 0.02 (0.10) 0.06
Cumulative effect of accounting
change - - (0.40) -
Net income (loss) (0.03) 0.02 (0.50) 0.06
Pro forma amounts, assuming the new
accounting method is applied
retroactively:
Net income (loss) $ (89,450) $ 27,999 $ (376,997) $ (14,225)
========== ========== =========== ===========
Net income (loss) per share $ (0.03) $ 0.01 $ (0.10) $ (0.00)
Weighted average number of common
and common equivalent
shares outstanding 3,545,147 3,545,249 3,545,147 3,579,741
========== ========== =========== ===========
</TABLE>
See notes to condensed financial statements
Page 4 of 11
<PAGE>
UNCLE B'S BAKERY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED APRIL 30
---------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(1,783,047) $ 217,060
Cumulative effect of accounting change 1,406,050 -
Depreciation and amortization 705,330 963,466
Gain on sale of equipment (2,000) -
Change in operating assets and liabilities (197,283) (573,010)
----------- -----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 129,050 607,516
INVESTING ACTIVITIES
Net additions of property, plant
and equipment (4,123,585) (701,543)
Proceeds from sale of equipment 2,000 -
Payments for other assets (6,240) (701,938)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES (4,127,825) (1,403,481)
FINANCING ACTIVITIES
Proceeds from revolving note payable - 808,594
Payments of revolving note payable - (8,594)
Proceeds from long-term debt 4,077,304 -
Payments of long-term debt (151,451) (242,667)
----------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 3,925,853 557,333
----------- -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS (72,922) (238,632)
Cash and cash equivalents at beginning
of period 164,060 344,373
----------- -----------
Cash and cash equivalents at end
of period $ 91,138 $ 105,741
=========== ===========
</TABLE>
See notes to condensed financial statements
Page 5 of 11
<PAGE>
UNCLE B'S BAKERY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310 of Regulation
S-B. 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 (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month and nine month periods ended
April 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1996. For further information, refer to
the financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended July 31, 1995.
NOTE 2 - INVENTORIES
Inventories consist of the following:
April 30 July 31
1996 1995
-------- --------
Raw ingredients and packaging $411,212 $445,614
Finished goods 158,029 168,534
-------- --------
Total inventories $569,241 $614,148
======== ========
NOTE 3 - CHANGE IN ACCOUNTING METHOD
Effective August 1, 1995, the Company changed its method of accounting for new
account allowances (fees paid to customers to obtain retail shelf or warehouse
space) from the capitalization method (with amortization over 12-36 months) to
expensing the costs as incurred. The change was made to conform with
predominant industry practice and because the new method is more practical to
account for and will reflect more conservative accounting. The change has been
applied retroactively to costs paid in prior years and results in a cumulative
effect adjustment of $1,406,050 (no income tax effect) which is included in the
net loss for the first quarter ended October 31, 1995. The effect of the change
was to decrease the net loss for the three months ended April 30, 1996 by
approximately $340,000 ($0.10 per share); the effect on the nine months ended
April 30, 1996 was to decrease the loss before cumulative effect of accounting
change by approximately $833,000 ($0.23 per share) and to increase the net loss
by approximately $573,000 ($0.16 per share). The pro forma amounts reflect the
effect of the retroactive application of the change in the three months and nine
months ended April 30, 1995, had the new method been in effect during those
periods.
Page 6 of 11
<PAGE>
NOTE 4 - ECONOMIC DEVELOPMENT AND TRAINING INCENTIVES
In October 1995, the Company received economic development incentives from
certain governmental agencies totaling $500,000 in cash, including a $375,000
incentive and a $125,000 forgivable loan. The $375,000 was recorded in income
for the three months ended October 31, 1995 as a reduction to cost of goods sold
($275,000) and selling, general and administrative expense ($100,000). The
$125,000 loan was recorded as long-term debt, and may be forgiven if certain
additional employment levels are met in the future. In connection with these
incentive awards, the Company is contingently liable to repay a portion of the
incentive if its employment level declines below a specified number prior to
January 1998.
In January 1996, the Company was also awarded a new jobs training incentive
totaling up to $150,000. In the third quarter ended April 30, 1996 and second
quarter ended January 31, 1996, $37,000 and $50,000, respectively, of the
incentive had been earned and was recorded as a reduction of cost of goods sold.
Page 7 of 11
<PAGE>
UNCLE B'S BAKERY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS:
- - ---------------------------------------------
RESULTS OF OPERATIONS
Net sales increased 12.2% in the third quarter ended April 30, 1996 to
$4,513,600, an increase of $490,400 over the same period of the prior year.
Year to date net sales for the first nine months were $13,089,300, an increase
of 17.1% over the same period of the prior year. The revenue growth for both
the three and nine month periods represents both unit sales volume growth and
increased sales prices. This growth reflects continuing demand for the
Company's products, acquisition of additional customers, and the Company's
emphasis on quality and innovation.
Gross profit in the third quarter increased 17.6% to $2,205,300 from $1,875,000
for the same period of the prior year. Gross profit as a percent of net sales
in the third quarter was 48.9% versus 46.6% in the same period of the prior
year. The increase reflects the favorable impact of an increase in sales prices
during the quarter along with state and local economic development and training
incentives which reduced cost of goods sold. Gross profit for the nine months
was $6,293,800 or 48.1% of net sales versus 46.5% for the same period of the
prior year. This improvement reflects state and local economic development and
training incentives which reduced cost of goods sold by $375,700. Excluding the
effect of these incentives, gross profit would have been 45.2% of net sales for
the first nine months of the 1996 fiscal year.
For the third quarter ended April 30, 1996, distribution expense totaled
$386,100 or 8.6% of net sales versus 8.5% in the prior year. Distribution
expenses for the nine months ended April 30, 1996 and 1995 was 8.6% of net sales
for both periods.
Selling, general and administrative expenses in the third quarter were
$1,793,400, an increase of $397,300. Selling, general and administrative
expenses as a percentage of net sales were 39.7% versus 34.7% for the same
period of the prior year. The principal reasons for the higher third quarter
expenses were an increase of $239,300 in advertising, trade allowances,
promotion and slotting. In the first nine months selling, general and
administrative expenses were $5,178,500, an increase of $1,358,000 over the
same period of the prior year. Advertising expenditures and product promotion
(which includes new account allowances) accounted for approximately $954,900 of
the increase which reflects the Company's continued support of the Uncle B's
branded products throughout the United States. These expenditures were also
affected by the change in the accounting method discussed in Note 3 to the
Condensed Financial Statements.
Interest expense in the third quarter increased 42.6% to $121,899 from $85,496
for the same period of the prior year. For the first nine months interest
expense was $378,731, an increase of $145,344 over the same period of the prior
year. The increase is a result of the Industrial Development Revenue Bond
interest rate increasing 1% as per the agreement and the working capital line of
credit used to support the Company's growth.
As a result of the factors described above, the net loss for the third quarter
was $89,500 compared to $57,800 net income for the same period of the prior
year. The net loss before cumulative effect of the accounting change for the
first nine months was $377,000 compared to a net income of $217,000 for the same
period of the prior year.
Page 8 of 11
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
Cash provided by operations was $129,000 for the nine months ended April 30,
1996, a decrease of $478,500 from the prior year. The reduction in operating
income described above, along with a lower increase in working capital, accounts
for this change.
Cash used by investing activities was $4,127,800 for the nine months ended
April 30, 1996, an increase of $2,724,300 over the same period of the prior
year. The primary uses of investment funds were equipment acquisitions and
installation to support increased demand for bagels and the plant expansion
program to double plant capacity.
Cash provided by financing activities was $3,925,900 for the nine months ended
April 30, 1996, primarily due to draws on the Company's term note to fund the
equipment purchases and building improvements with regards to the plant
expansion.
The Company believes that its anticipated cash flow from operations together
with the established bank loans will provide it adequate resources for its
liquidity and capital expenditure needs during fiscal 1996. The Company
believes that recent increases in the cost of flour will not be fully offset by
increased selling prices during the fourth quarter because of lead times
required in passing through cost increases to its customers. After considering
competitive pressures in its market place, the Company would attempt to offset
the cost impact through increased sales prices.
Page 9 of 11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
- - -------------------------
None
ITEM 2. CHANGES IN SECURITIES:
- - -----------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
- - ---------------------------------------
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
- - -----------------------------------------------------------
None
ITEM 5. OTHER INFORMATION:
- - --------------------------
The Company has entered into a Co-Packaging Agreement (the "Agreement")
with Heinz Bakery Products, Inc. ("Heinz"), dated March 22, 1996, pursuant to
which the Company agreed to produce, package and label uncooked bagels according
to specifications. The price to be paid for the products is established in the
Agreement, subject to adjustment quarterly based on the Company's prices for raw
materials and subject to earlier review and adjustment in the event the
Company's flour supply contracts expire before the end of a quarter. No minimum
order quantities were required by the Agreement in its original form.
This Agreement was amended on May 10, 1996 to provide that Heinz will
order and the company will produce not less than 900,000 cases of bagels (96
bagels per case) during the 18 months beginning June 1, 1996. Heinz will order
a minimum of 11,500 cases per week, and the Company is required to be prepared
to produce a minimum of 21,000 cases per week, commencing July 1, 1996. The
Company estimates that the Agreement will result in sales for the fiscal year
ending July 31, 1997 increasing by approximately 50% over the $19 to $20 million
in sales the Company estimates for fiscal year 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
- - ----------------------------------------
The following exhibits are included herein:
(11) Statement re: computation of earnings per share
The Company did not file any reports on Form 8-K during the three months
ended April 30, 1996.
Page 10 of 11
<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.
Uncle B's Bakery, Inc.
----------------------------------------
(Registrant)
Date June 14, 1996 /s/Wm. Howard McClennan, Jr.
------------------------- ----------------------------------------
Wm. Howard McClennan, Jr.
Chief Financial Officer
Date June 14, 1996 /s/William T. Rose, Jr.
------------------------- ----------------------------------------
William T. Rose, Jr.
Chairman and CEO
Page 11 of 11
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30 APRIL 30
1996 1995 1996 1995
------------------ ----------------- ------------ ----------
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 3,545,147 3,545,147 3,545,147 3,545,147
Net effect of dilutive common stock
equivalents - based on treasury
stock method (A) --- 102 --- 34,594
---------- ---------- ----------- ---------
Total weighted average number
of common and common
equivalent shares outstanding 3,545,147 3,545,249 3,545,147 3,579,741
========== ========== =========== ==========
Net income (loss) $ (89,450) $ 57,796 $(1,783,047) $ 217,060
========== ========== =========== ==========
Per share amount $ (0.03) $ 0.02 $ (0.50) $ 0.06
========== ========== =========== ==========
</TABLE>
(A) Common stock equivalents are excluded in April 1996 periods due to
antidilutive effect.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Third Quarter 1996 Financial Statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-START> AUG-01-1995
<PERIOD-END> APR-30-1996
<CASH> 91,138
<SECURITIES> 0
<RECEIVABLES> 1,483,532
<ALLOWANCES> 0
<INVENTORY> 569,241
<CURRENT-ASSETS> 2,218,353
<PP&E> 13,716,902
<DEPRECIATION> 2,620,123
<TOTAL-ASSETS> 13,810,191
<CURRENT-LIABILITIES> 2,090,068
<BONDS> 8,765,073
<COMMON> 35,451
0
0
<OTHER-SE> 2,919,599
<TOTAL-LIABILITY-AND-EQUITY> 13,810,191
<SALES> 13,089,318
<TOTAL-REVENUES> 13,089,318
<CGS> 6,795,505
<TOTAL-COSTS> 6,795,505
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,731
<INCOME-PRETAX> (376,997)
<INCOME-TAX> 0
<INCOME-CONTINUING> (376,997)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,406,050)<F1>
<NET-INCOME> (1,783,047)
<EPS-PRIMARY> (0.50)
<EPS-DILUTED> (0.50)
<FN>
<F1> Effective August 1, 1995, the Company changed its method
of accounting for new account allowances from the
capitalization method to expensing the cost as incurred.
The change has been applied retroactively and results in a
cumulative effect adjustment.
</FN>
</TABLE>
