SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 2, 1996 Commission File No. 0-15696
PIEMONTE FOODS, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0626121
(State of other jurisdiction of I.R.S. Employer
incorporation of organization) Identification
400 Augusta Street, Greenville, South Carolina 29604
(Address of principal executive offices)
Registrant's telephone number, including area code: (803) 242-0424
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 of common stock outstanding as of March 31, 1996
was 1,476,465.
PIEMONTE FOODS, INC.
INDEX TO FORM 10-Q
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - March 2, 1996 and June 3, 1995.
Consolidated Statements of Income for the third quarters
ended March 2, 1996 and February 25, 1995 and the nine
months then ended.
Consolidated Statements of Cash Flows for the third
quarters ended March 2, 1996 and February 25, 1995 and
the nine months then ended.
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
PIEMONTE FOODS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS March 2, 1996 June 3, 1995
CURRENT ASSETS
Cash & cash equivalents 1,221,713 885,967
Accounts receivable, net 2,956,899 1,778,773
Inventories 1,557,492 1,909,104
Prepaid expenses 147,068 299,059
TOTAL CURRENT ASSETS 5,883,172 4,872,903
PROPERTY, PLANT & EQUIPMENT 5,222,262 5,373,892
DEFERRED CHARGES, INTANGIBLE AND OTHER ASSETS
Excess of cost over fair value of net assets acquired 778,596 803,310
Investment in joint venture 50,000 50,000
Loan to joint venture 1,008,532 0
Other assets 296,948 126,118
Total 2,134,076 979,428
TOTAL ASSETS 13,239,510 11,226,223
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt 502,857 609,131
Short term borrowings 0 0
Accounts payable, trade 1,374,991 1,379,088
Accrued promotional allowances 136,437 78,069
Accrued compensation and payroll taxes 188,666 184,842
Accrued property taxes 73,925 76,762
Other accrued Expenses 15,084 99,458
TOTAL CURRENT LIABILITIES 2,291,960 2,427,350
LONG-TERM DEBT 3,455,238 1,357,224
DEFERRED INCOME TAXES 420,728 420,728
STOCKHOLDER'S EQUITY
Common stock 14,756 14,481
Capital in excess of stated value of common stock 2,802,106 2,744,938
Retained earnings 4,254,722 4,261,502
TOTAL STOCKHOLDER'S EQUITY 7,071,584 7,020,921
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 13,239,510 11,226,223
See accompanying notes to Financial Statements
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three and nine months ended March 2, 1996 and February 25, 1995
Three Months Nine Months
1996 1995 1996 1995
Net Sales 8,877,774 7,331,584 23,503,987 22,433,355
Operating Expenses
Cost of Goods Sold 6,892,456 5,187,391 18,520,614 16,520,501
Selling, general and administrative 1,707,663 2,031,839 4,904,688 5,525,139
8,600,119 7,219,230 23,425,302 22,045,640
Operating Income 277,655 112,354 78,685 387,715
Other Expenses
Interest expense 45,996 36,828 130,563 104,912
Other expense (income) (4,572) (20,182) (19,880) (51,713)
Sale of assets 0 0 4,781 0
Interest income (6,403) (11,379) (25,843) (26,191)
35,021 5,267 89,621 27,008
Income Before Income Taxes 242,634 107,087 (10,936) 360,707
Provision for Income Taxes 92,200 52,473 (4,156) 176,747
Net Income (Loss) 150,434 54,614 (6,780) 183,960
Average Number of Shares Outstanding 1,510,530 1,529,429 1,515,048 1,539,022
Net Income Per Share 0.10 0.04 (0.00) 0.12
See accompanying notes to Financial Statements.
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three and nine months ended March 2, 1996 and February 25, 1995
Three Months Nine Months
1996 1995 1996 1995
Cash Flows From Operating Activities
Net income 150,434 54,614 (6,780) 183,960
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 185,141 244,124 558,421 603,071
Decrease (increase) in:
Receivables (655,202) (201,340) (1,178,126) (224,990)
Inventories 474,917 109,189 351,612 (298,660)
Prepaid expenses 208,519 (37,486) 151,991 (65,236)
Other assets (109,695) (72,244) (146,116) (36,324)
Investment in joint venture 0 0 0 (50,000)
Increase (decrease) in:
Accounts payable (527,128) 89,276 (4,097) 441,389
Accrued liabilities 37,210 (8,913) (25,019) (83,343)
Net cash provided by operating activities (235,804) 177,220 (298,114) 469,867
Cash Flows from Investing Activities
Purchases of property, plant and equipment (41,151) (156,496) (406,791) (974,189)
Loan to joint venture (700,000) 0 (1,008,532) 0
Net cash used in investing activities (741,151) (156,496) (1,415,323) (974,189)
Cash Flows From Financing Activities
Proceeds from issuance of common stock 49,535 14,856 57,443 43,545
Advances (repayments) of credit line (500,000) (750,000) 0 (500,000)
Addition (Repayment) of long-term debt 2,296,306 1,006,348 1,991,740 783,568
Net cash used in financing activities 1,845,841 271,204 2,049,183 327,113
Net increase (decrease) in cash 868,886 291,928 335,746 (177,209)
Cash, beginning of period 352,827 561,846 885,967 1,030,983
Cash, end of period 1,221,713 853,774 1,221,713 853,774
See accompanying Notes to Financial Statements
PIEMONTE FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 2, 1996
Note 1 Principles of Consolidation
The accompanying financial statements include the accounts of Piemonte
Foods, Inc. and its wholly-owned subsidiaries, Piemonte Foods of
Indiana, Inc. and Origena, Inc. The consolidated balance sheet as of
March 2, 1996 and the related statements of income and cash flows for
the nine month period then ended are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only
of normal recurring items.
The financial statements and notes are presented as permitted by Form
10-Q, and do not contain certain information included in the company's
annual financial statements and notes.
Note 2 Reclassification
Sales related costs assigned to cost of goods sold have been reclassified to
selling, general, and administrative. The impact is:
3Q YTD
96 N/A $478K
95 $241K $654K
Note 3 Restatement of Financial Statements
Restatements as detailed in the amended 10-K for June 3, 1995 impacted
this quarter as well as its previous year's quarter as follows:
3Q YTD 3Q YTD
Net income increase (decrease) 96 1996 1995 1995
Expensing previously capitalized costs N/A 122,044 65,150 170,942
Origena acquisition - purchase versus pooling (36,832) (18,416) (55,248)
Net income tax of (32,381) (17,759) (40,963)
Net income 52,831 28,975 71,730
Net income per share 0.04 0.02 0.05
Note 4 Note Payable - Line of credit
A $500,000 line of credit has been initiated and extended to the
Company. The $500,000 line is collateralized by property, plant
equipment, accounts receivables, and inventory and is guaranteed by the
Company and its subsidiaries. The interest charged is 30 day LIBOR base
rate plus 150 basis points. The line expires October 31, 196. It is
renewable annually.
The lines of credit and bank loans are cross collateralized and cross
defaulted with other loans as well as the indebtedness of the
Piemonte/Sabatasso European Project joint venture.
Note 5 Long-term Debt and Debt Covenant Restrictions
Long term debt has been restructured to include:
$1,600,000 Payments are $13,333 plus interest monthly.
$2,400,000 Payments are $28,571 plus interest monthly
Bank loans are collateralized by all property, plant and equipment, by
all accounts receivable and inventories. Payments are due monthly plus
accrued interest at 30 day LIBOR plus 150 basis points. A "call"
provision exists as of October 31, 2000.
The covenants restrict additional outside borrowing without the bank's
consent. The debt agreements also include restrictive covenants which,
among other things, require that the Company maintain a minimum level of
working capital, meet certain financial ratios, and limits investment in
its joint venture funding.
The lines of credit and bank loans are cross collaterized and cross
defaulted.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the Third Quarter was $2.9 million, an
increase of $0.6 million versus prior quarter. This was sourced from
long term financing which was used to retire current debt plus fund our
joint venture project in Holland. This reduction was largely driven
versus prior period by a reduction in payables to the 1995 level.
Additionally, short term borrowings were rolled into long term debt.
In Breda, Holland, Piemonte Foods has a joint venture (50/50) called
Piemonte Beheer MIJ B.V. with Sabatasso Pizza Products. Sabatasso is an
established pizza topper with sales throughout Europe. The joint venture
will produce crusts for Sabatasso as well as other European toppers. Our
loan was incremented in this quarter for $700,000 above a previous loan
of $308,532 and an investment of $50,000; monies committed by Piemonte
Foods are matched by Sabatasso. Additionally, the joint venture entered
into a $3.5 million loan as outlined in FY 95' s 10-K. The facility
continues to be scheduled for operation in this coming quarter. Due to
the wording of the subordinated loan, no receivable is currently
recognized.
Capital expenditures in the Third Quarter were $41 thousand for capital
improvements and $700 thousand for the Holland joint venture, totalling
$741 thousand. YTD capital is $1,415 thousand, including $1,008
thousand for Holland; this is $441 thousand higher than prior year YTD.
The company is in compliance with all restrictive covenants imposed by
its lender. There are no restrictions on declaration of dividends.
RESULTS OF OPERATIONS
Quarter Ended March 2, 1996 Compared to
Quarter Ended February 25, 1995
Net income of $150 thousand represented an increase of $96 thousand
versus prior year. This is primarily attributable to higher volumes and
pricing, partially offset by raw material costs. A non-recurring
contractual severance commitment of $207K is incorporated in the 1996
results; quarterly operating income without this recognition is $278
thousand.
Net sales for the third quarter were $8.9 million or $1.5 million
higher than last year. The strong sales are attributable to a very
strong quarter in Industrial sales as well as the continuing expansion
of Cake icing. Additionally, price increases to offset raw material cost
increases were passed on.
Cost of goods are continuing to climb, particularly in flour and, to a
lesser extent, cheese. As a percent of sales, this is represented in an
increase from 74.4% to 78.4%.
SG&A expenses, however, were reduced $324 thousand from prior year to
$1,708 thousand;this is $1,497 thousand prior to the contractual
commitment noted above.
Nine Months Ended March 2, 1996 Compared to
Nine Months Ended February 25, 1995
Net income for the nine months ending March 2, 1996 is a loss of $7
thousand or $190 thousand lower than last year; with the exclusion of
the unusual adjustment noted above, YTD income is $124 thousand or $60
thousand lower than the prior year.
Sales revenues are $23,504 thousand, or $983 thousand higher than last
year. Revenue increases are primarily attributable to the cake icing
business growth as well as strong increases in both industrial and deli,
partially offset by Foodservice; Foodservice had lost two key customers
in February, 1995.
The raw material cost increases in flour, cheese, and packaging were not
fully offset throughout the year, resulting in the cost of goods sold
increasing from 74% to 79%. The Company believes this lag in cost
recovery is being dampened.
SG&A at $4,905 thousand is $620 thousand lower than prior year. As noted
in the discussion above, 1996 SG&A included a one time effect of $207
thousand.
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
None
b) Reports on Form 8-K
No reports on Form 8-K were filed by the
Company during the quarter ended March 2, 1996.
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 hereunto duly authorized.
PIEMONTE FOODS, INC.
Date By __________________________________
Virgil L. Clark
President and CEO
__________________________________
Roy E. Gogel
Vice President/CFO
__________________________________
T. Patrick Costello
Executive Vice President