<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 January 31, 1997
----------------------
[ ] 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: 3,656,258 shares as of February 28,
1997.
Page 1 of 11
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INDEX
UNCLE B'S BAKERY, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets - January 31, 1997 and July 31, 1996
Condensed Statements of Operations - Three months ended January 31, 1997 and
1996; Six months ended January 31, 1997 and 1996.
Condensed Statements of Cash Flows - Six months ended January 31, 1997
and 1996
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
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
- ------------------------------
UNCLE B'S BAKERY, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JANUARY 31 JULY 31
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 322,858 $ 65,565
Accounts receivable 1,796,704 1,690,319
Inventories-Note 2 684,616 478,162
Prepaid expenses 111,029 88,307
----------- -----------
Total current assets 2,915,207 2,322,353
Property, plant and equipment 16,630,521 14,952,831
Less accumulated depreciation 3,358,203 2,854,472
----------- -----------
Net property, plant and equipment 13,272,318 12,098,359
Other assets:
Construction fund balance 467,706 952,773
Intangible assets and deferred costs, net 493,781 509,453
----------- -----------
Total other assets 961,487 1,462,226
Total assets $17,149,012 $15,882,938
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,530,263 $ 2,291,329
Accrued expenses 1,139,898 864,357
Long-term debt due within one year 472,500 110,000
----------- -----------
Total current liabilities 4,142,661 3,265,686
Long-term debt due after one year 11,312,258 11,456,483
Stockholders' equity-Note 5
Common stock, $.01 par value: 40,000,000
shares authorized, 3,656,258 shares
issued and outstanding at January 31, 1997
(1996-3,545,147) 36,563 35,451
Additional paid-in capital 7,987,701 7,738,813
Deficit (6,330,171) (6,613,495)
----------- -----------
Total stockholders' equity 1,694,093 1,160,769
----------- -----------
Total liabilities and stockholders' equity $17,149,012 $15,882,938
=========== ===========
</TABLE>
Note: The balance sheet at July 31, 1996 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
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UNCLE B'S BAKERY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JANUARY 31 JANUARY 31
1997 1996 1997 1996
------------------- ----------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales $5,589,613 $4,540,774 $11,970,892 $ 8,575,755
Cost of goods sold-Note 4 3,565,080 2,476,367 7,500,899 4,487,239
---------- ---------- ----------- -----------
Gross profit 2,024,533 2,064,407 4,469,993 4,088,516
Distribution expense 367,016 386,996 928,606 740,962
Selling, general and
administrative expense-Note 4 1,519,303 1,994,106 3,009,787 3,385,142
---------- ---------- ----------- -----------
1,886,319 2,381,102 3,938,393 4,126,104
---------- ---------- ----------- -----------
Income (loss) from operations 138,214 (316,695) 531,600 (37,588)
Other income (expense):
Interest expense (134,916) (124,636) (258,554) (256,832)
Other 12,032 3,591 10,278 6,873
---------- ---------- ----------- -----------
(122,884) (121,045) (248,276) (249,959)
---------- ---------- ----------- -----------
Income (loss) before income taxes
and cumulative effect of
accounting change 15,330 (437,740) 283,324 (287,547)
Income taxes - - - -
---------- ---------- ----------- -----------
Income (loss) before cumulative
effect of accounting change 15,330 (437,740) 283,324 (287,547)
Cumulative effect to July 31 1995
of accounting change-Note 3 - - - (1,406,050)
---------- ---------- ----------- -----------
Net income (loss) $ 15,330 $ (437,740) $ 283,324 $(1,693,597)
========== ========== =========== ===========
Earnings per share:
Income (loss) before cumulative
effect of accounting change 0.00 (0.12) 0.08 (0.08)
Cumulative effect of accounting
change - - - (0.40)
Net income (loss) 0.00 (0.12) 0.08 (0.48)
Weighted average number of common
and common equivalent
shares outstanding 3,670,605 3,545,147 3,644,987 3,545,147
========== ========== =========== ===========
</TABLE>
See notes to condensed financial statements
Page 4 of 11
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UNCLE B'S BAKERY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JANUARY 31
-----------------------------
1997 1996
------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 283,324 $(1,693,597)
Cumulative effect of accounting change - 1,406,050
Depreciation and amortization 544,048 461,673
Loss on sale of equipment 14,441 -
Change in operating assets and liabilities 190,400 (54,092)
----------- -----------
Net cash provided by
operating activities 1,032,213 120,034
INVESTING ACTIVITIES
Net additions of property, plant
and equipment (1,745,655) (3,316,842)
Proceeds from sale of equipment 32,165 -
Payments for other assets (14,772) (6,184)
----------- -----------
Net cash used by investing activities (1,728,262) (3,323,026)
FINANCING ACTIVITIES
Proceeds from revolving note payable 50,000 -
Proceeds from long-term debt 250,000 3,466,802
Decrease in construction fund balance 485,067 -
Payments of long-term debt (81,725) (137,657)
Proceeds from sale of common stock 250,000 -
----------- -----------
Net cash provided by
financing activities 953,342 3,329,145
----------- -----------
Net increase in cash
and cash equivalents 257,293 126,153
Cash and cash equivalents at beginning
of period 65,565 164,060
----------- -----------
Cash and cash equivalents at end
of period $ 322,858 $ 290,213
=========== ===========
</TABLE>
See notes to condensed financial statements
Page 5 of 11
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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 six month periods ended
January 31, 1997 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1997. 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, 1996.
<TABLE>
<CAPTION>
NOTE 2 - INVENTORIES
<S> <C> <C>
Inventories consist of the following:
January 31 July 31
1997 1996
---------- --------
Raw ingredients and packaging $575,413 $410,341
Finished goods 109,203 67,821
-------- --------
Total inventories $684,616 $478,162
======== ========
</TABLE>
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 six months ended January 31, 1996.
NOTE 4 - ECONOMIC DEVELOPMENT AND TRAINING INCENTIVES
In fiscal 1996, the Company received economic development and training
incentives from certain governmental agencies. Incentives totaling $375,000 were
recorded in income for the first quarter ended October 31, 1995 as a reduction
to cost of goods sold ($275,000) and selling, general and administrative expense
($100,000). Training incentives of $50,000 were earned in the second quarter
ended January 31, 1996 and recorded as a reduction to cost of goods sold.
Page 6 of 11
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NOTE 5 - ADDITIONAL CAPITAL FUNDING
The Company signed an agreement on November 15, 1996 increasing the availability
under its term loan by an additional $250,000. In connection with this
additional funding, an affiliate of the lender purchased 111,111 shares of
common stock for $2.25 per share, and another affiliate of the lender received
warrants to purchase 205,000 shares of preferred stock and/or common stock at an
exercise price of $2.25 per share.
Page 7 of 11
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UNCLE B'S BAKERY, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS:
- ------- -------------------------------------
RESULTS OF OPERATIONS
Net sales increased 23.1% in the second quarter ended January 31, 1997 to
$5,589,613, an increase of $1,048,839 over the same period of the prior year.
The primary factor in the growth of the Company's net sales is due to the bake
off product which was introduced in the fourth quarter of last year. Year to
date net sales for the first six months were $11,970,892, an increase of 39.6%
over the same period of the prior year.
Gross profit in the second quarter decreased 1.9% to $2,024,533 from $2,064,407
for the same period of the prior year. Gross profit as a percent of net sales in
the second quarter was 36.2% versus 45.5% in the same period of the prior year.
The decrease reflects the lower margin for the bake off product which comprised
38.2% of net sales during the quarter ended January 31, 1997, along with
production efficiencies that were affected by approximately seven days of
downtime due to installation of new equipment and severe winter weather in
January. Gross profit for the first half was $4,469,993 or 37.3% of net sales
versus 47.7% for the same period of the prior year. Excluding the favorable
impact of an economic development incentive on gross profit for the six months
ended January 31, 1996, gross profit would have increased 18.8% in the first
half of 1997.
For the second quarter ended January 31, 1997, distribution expense totaled
$367,016 or 6.6% of net sales versus 8.5% in the prior year. The decrease is due
to the bake off product shipping costs being absorbed by the customer.
Distribution expenses for the six months ended January 31, 1997 was 7.8% of net
sales versus 8.6% for the same period of the prior year.
Selling, general and administrative expenses in the second quarter of 1997 were
$1,519,303, a decrease of $474,803 or 23.8%. Selling, general and administrative
expenses as a percentage of net sales were 27.2% versus 43.9% for the same
period of the prior year. The primary reason for the decrease in this percentage
is the addition of the bake off sales (38.2% of net sales) which has minimal
selling, general and administrative expenses compared to the Company's branded
products. Advertising, trade allowances, promotion and slotting expenses
decreased to $879,375 from $1,253,833 for the same period of the prior year. The
Company has instituted a program of selective advertising and promotional
spending that focuses on profitability by supporting the Company's more
profitable supermarket customers. First half selling, general and administrative
expenses were $3,099,787, a decrease of $375,355 from the same period of the
prior year.
As a result of the factors described above, net income for the second quarter
ended January 31, 1997 was $15,330 compared to a net loss of $437,740 for the
same period of the prior year. The net income for the first six months was
$283,324 compared to a loss before cumulative effect of accounting change of
$287,547 for the same period of the prior year.
Page 8 of 11
<PAGE>
LIQUIDITY AND SOURCES OF CAPITAL
Cash provided by operations was $1,032,213 for the six months ended January 31,
1997, an increase of $912,179 from the prior year. The improvement in income
before cumulative effect of accounting change and working capital, accounts for
this change.
Cash used by investing activities was $1,728,262 for the six months ended
January 31, 1997, a decrease of $1,594,764 over the same period of the prior
year. The primary uses of investment funds were equipment acquisitions and
installation related to the plant expansion program which began in the first
quarter of fiscal year 1996.
Cash provided by financing activities was $953,342 for the six months ended
January 31, 1997, which was due to the decrease in the construction fund
balance, and proceeds from debt and sale of stock. In November 1996, the Company
received additional loan proceeds and equity financing totaling $500,000, as
described in Note 5 to the Condensed Financial Statements.
The Company believes that its anticipated cash flow from operations together
with its existing credit facilities will provide it with adequate resources for
its liquidity and capital expenditure needs during fiscal 1997.
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:
- ------- ------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
- ------- ---------------------------------
(a) The following exhibits are included herein:
11 Statement re: computation of earnings per share
27 Financial Data Schedule (included in electronic filing only)
(b) The Company did not file any reports on Form 8-K during the six
months ended January 31, 1997.
Page 10 of 11
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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 March 12, 1997 /s/ Wm. Howard McClennan, Jr.
-------------------- -----------------------------------
Wm. Howard McClennan, Jr.
Chief Financial Officer
Date March 12, 1997 /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 SIX MONTHS ENDED
JANUARY 31 JANUARY 31
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Average shares outstanding 3,639,350 3,545,147 3,592,248 3,545,147
Net effect of dilutive common stock
equivalents - based on treasury
stock method (A) 31,255 --- 52,739 ---
---------- ---------- ---------- -----------
Total weighted average number
of common and common
equivalent shares outstanding 3,670,605 3,545,147 3,644,987 3,545,147
========== ========== ========== ===========
Net income (loss) $ 15,330 $ (437,740) $ 283,324 $(1,693,597)
========== ========== ========== ===========
Per share amount $ 0.00 $ (0.12) $ 0.08 $ (0.48)
========== ========== ========== ===========
</TABLE>
(A) Common stock equivalents are excluded in January 1996 periods due to anti
dilutive effect.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Second Quarter 1997 Financial Statement and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 322,858
<SECURITIES> 0
<RECEIVABLES> 1,796,704
<ALLOWANCES> 0
<INVENTORY> 684,616
<CURRENT-ASSETS> 2,915,207
<PP&E> 16,630,521
<DEPRECIATION> 3,358,203
<TOTAL-ASSETS> 17,149,012
<CURRENT-LIABILITIES> 4,142,661
<BONDS> 11,312,258
<COMMON> 36,563
0
0
<OTHER-SE> 1,657,530
<TOTAL-LIABILITY-AND-EQUITY> 17,149,012
<SALES> 5,589,613
<TOTAL-REVENUES> 5,589,613
<CGS> 3,565,080
<TOTAL-COSTS> 3,565,080
<OTHER-EXPENSES> 367,016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 134,916
<INCOME-PRETAX> 15,330
<INCOME-TAX> 0
<INCOME-CONTINUING> 15,330
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,330
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
