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 August 31, 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: (864) 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 September 30, 1996 was
1,476,683.
PIEMONTE FOODS, INC.
INDEX TO FORM 10-Q
Part I. Financial Information
Item 1. Financial Statements, unaudited
Consolidated Balance Sheets - August 31, 1996, and
June 1, 1996.
Consolidated Statements of Operations for the First
Quarter ended August 31, 1996, and September 2, 1995.
Consolidated Statements of Cash Flows for the First
Quarter ended August 31, 1996, and September 2, 1995.
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
Exhibit 27. Financial data schedule
PIEMONTE FOODS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS August 31, 1996 June 1, 1996
Cash & cash equivalents 705,494 1,658,514
Accounts receivable, net 1,901,819 2,265,873
Inventories 1,563,907 1,210,154
Prepaid expenses 523,949 518,796
TOTAL CURRENT ASSETS 4,695,169 5,653,337
PROPERTY, PLANT & EQUIPMENT, NET 5,016,440 5,044,217
DEFERRED CHARGES, INTANGIBLE AND OTHER ASSETS
Excess of cost over fair value of net assets
acquired 762,120 770,358
Investment in joint venture 872,605 794,913
Other assets 88,769 98,195
Total 1,723,494 1,663,466
TOTAL ASSETS 11,435,103 12,361,020
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current portion of long-term debt 502,857 502,857
Accounts payable, trade 1,143,790 1,091,045
Accrued promotional allowances 41,892 76,163
Accrued compensation and payroll taxes 96,967 143,084
Accrued property taxes 39,626 70,075
Other accrued expenses 35,153 273,199
TOTAL CURRENT LIABILITIES 1,860,285 2,156,423
LONG-TERM DEBT 3,203,810 3,329,524
DEFERRED INCOME TAXES 437,095 437,095
STOCKHOLDER'S EQUITY
Common stock 14,762 14,770
Capital in excess of stated value of common
stock 2,800,306 2,800,305
Retained earnings 3,118,845 3,622,903
TOTAL STOCKHOLDER'S EQUITY 5,933,913 6,437,978
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 11,435,103 12,361,020
See accompanying notes to Financial Statements
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended August 31, 1996 and September 2, 1995
Three Months
FY97 FY96
Net Sales 5,981,402 6,641,954
Operating Expenses
Cost of Goods Sold 5,144,017 5,476,049
Selling, general and administrative 1,365,861 1,504,251
6,509,878 6,980,300
Operating Loss (528,476) (338,346)
Other Expenses
Interest expense 67,149 39,210
Loss on disposal of assets 0 3,757
Equity in loss on European joint venture 149,900 0
Interest income (19,976) (11,125)
Other income (5,492) (1,550)
191,581 30,292
Loss Before Income Taxes (720,057) (368,638)
Income Tax Benefit 216,000 140,082
Net Loss (504,057) (228,556)
Average Number of Shares Outstanding 1,518,220 1,525,160
Net Loss Per Share (0.33) (0.15)
See accompanying notes to Financial Statements.
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 31, 1996 and September 2, 1995
Three Months
FY97 FY96
Cash Flows From Operating Activities
Net loss (504,057) (228,556)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 203,935 193,568
Decrease (increase) in:
Receivables 364,054 (160,891)
Inventories (353,753) 123,308
Prepaid expenses (5,153) (248,061)
Other assets 9,426 3,753
Equity in loss on European joint venture 149,900 0
Increase (decrease) in:
Accounts payable 52,745 293,058
Accrued liabilities (348,883) (21,016)
Net cash used in operating activities (431,786) (44,837)
Cash Flows from Investing Activities
Purchases of property, plant and equipment (167,921) (203,119)
Investment in European joint venture (227,592) (308,532)
Net cash used in investing activities (395,513) (511,651)
Cash Flows From Financing Activities
Proceeds from issuance of common stock (7) 11,659
Advances on credit line 0 500,000
Repayment of long-term debt (125,714) (152,283)
Net cash provided by financing activities (125,721) 359,376
Net decrease in cash (953,020) (197,112)
Cash, beginning of period 1,658,514 885,967
Cash, end of period 705,494 688,855
See accompanying Notes to Financial Statements
PIEMONTE FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
August 31, 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
August 31, 1996 and the related statements of operations and cash flows
for the three 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.
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 First Quarter was $2.8
million. Receivables were drawn down during the period while
payables were held relatively constant. Inventories increased
$354 thousand; this was caused by both a year-end focus on
lowering inventories and a conscious decision to build
inventories at the end of the quarter anticipating price
increases in commodities such as cheese.
During the quarter $168 thousand was spent on capital
improvements and $228 thousand was advanced to the joint
venture in Holland; both were funded through
long-term debt. The company is in compliance with all
restrictive covenants imposed by its lender.
RESULTS OF OPERATIONS
Quarter Ended August 31, 1996 Compared to
Quarter Ended September 2, 1995
Revenues for the First Quarter were $6.0 million which were
$0.7 million or 10% lower than last year. Lower revenues were
primarily in the Industrial trade channel in which the loss of
a significant reduction in volume by several customers
accounted for the preponderance of the loss. Cost of goods
sold increased from 82.4% of sales last year to 86.0% this
year. The increase reflects both higher materials and overhead
costs. Material cost increases outstripped our customers'
abilities to absorb price increases in a methodical manner,
particularly in the first portion of the Quarter. Overheads
were reduced 4% versus prior year through aggressive review;
however, the gross margin percentage was reduced due to lower
sales revenues. Combined, this resulted in an operating loss
of $528 thousand, which was $190 thousand unfavorable versus
the prior year.
Selling, general, and administrative expenses were lowered
$138 thousand or 9% as the company continues its proactive
measures to minimize losses.
Overall U. S. losses for the Quarter were $354 thousand, $126
thousand or 55% unfavorable versus the loss reported last
summer. On a per share basis, U. S. earnings were ($.23/share)
versus ($.15/share) PY.
The Company's share of Holland's losses in the First Quarter
was $150 thousand; total joint venture losses were $300
thousand. This negatively impacted reported earnings
($.10/share). Baking pans required for 40% of the projected
business were unsatisfactory and new U. S. manufactured pans
were not received until after the close of the Quarter.
Additionally, July's fixed costs during low production due to
European vacations further hampered their profitability. The
joint venture should break-even financially during the
subsequent quarter and begin a profitable ascent.
Part II Item 6. Exhibits and Reports on Form 8-K
a) Exhibits required by Item 601 of Regulation S-K
None
b) Reports on Form 8-K
Form 8-K was filed July 18, 1996, to
announce the Board's decision, selecting
Ernst and Young as the Certified Accountant.
Form 8-K-A1 was filed September 4, 1996,
announcing the conclusion of Pope, Smith,
Brown, & King's work as part of the
transition to Ernst & Young. Form 8-K-A2 was
filed September 18, 1996, to include the
time period from July 18 through August 30,
1996, as encompassed within the past two
years.
Exhibit 27. Financial data schedule
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____________________ _________________________
Virgil L. Clark
President/CEO
-------------------------
Roy E. Gogel
Vice Pres/CFO