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 1, 1997 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 March 1, 1997 was
1,512,258.
PIEMONTE FOODS, INC.
INDEX TO FORM 10-Q
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 1, 1997, and June
1, 1996.
Consolidated Statements of Operations for the three
and nine months ended March 1, 1997, and March 2,
1996.
Consolidated Statements of Cash Flows for the three
and nine months ended March 1, 1997, and March 2,
1996.
Notes to Consolidated Financial Statements -
March 1, 1997.
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
Signatures
Exhibit 27. Financial data schedule
PIEMONTE FOODS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS March 1, 1997 June 1, 1996
CURRENT ASSETS
Cash and cash equivalents $ 282,949 $ 1,658,514
Accounts receivable, net 2,124,161 2,265,873
Inventories 1,214,404 1,210,154
Prepaid expenses 667,249 518,796
TOTAL CURRENT ASSETS 4,288,763 5,653,337
PROPERTY, PLANT AND EQUIPMENT, NET 4,935,969 5,044,217
DEFERRED CHARGES, INTANGIBLE AND OTHER ASSETS
Excess of cost over fair value of net
assets acquired 745,644 770,358
Investment in joint venture 676,679 794,913
Other assets 67,819 98,195
Total 1,490,142 1,663,466
TOTAL ASSETS $ 10,714,874 $ 12,361,020
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $ 502,857 $ 502,857
Accounts payable, trade 1,539,404 1,091,045
Accrued promotional allowances 103,128 76,163
Accrued compensation and payroll taxes 138,657 143,084
Accrued property taxes 23,000 70,075
Other accrued expenses 159,953 273,199
TOTAL CURRENT LIABILITIES 2,466,999 2,156,423
LONG-TERM DEBT 2,994,286 3,329,524
DEFERRED INCOME TAXES 437,095 437,095
STOCKHOLDERS' EQUITY
Common stock 15,123 14,770
Capital in excess of stated value of
common stock 2,846,221 2,800,305
Retained earnings 1,955,150 3,622,903
TOTAL STOCKHOLDERS' EQUITY 4,816,494 6,437,978
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,714,874 $ 12,361,020
See accompanying notes to Financial Statements
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended March 1, 1997 and March 2, 1996
Three Months Ended Nine Months Ended
March 1, 1997 March 2, 1996 March 1, 1997 March 2, 1996
Net sales $ 6,054,141 $ 8,877,774 $ 18,069,872 $ 23,503,987
Operating expenses
Cost of goods sold 5,148,576 6,892,456 15,366,732 18,520,614
Selling, general and
administrative 1,397,774 1,707,663 4,278,136 4,904,688
6,546,350 8,600,119 19,644,868 23,425,302
Operating (loss) income (492,209) 277,655 (1,574,996) 78,685
Other (income) expenses
Interest expense 63,671 45,996 206,650 130,563
Loss on disposal of assets 500 0 500 4,781
Equity in loss on joint
venture 139,631 0 408,545 0
Interest income (21,782) (6,403) (56,858) (25,843)
Other income (5,822) (4,572) (19,080) (19,880)
176,198 35,021 539,757 89,621
(Loss) income before income
taxes (668,407) 242,634 (2,114,753) (10,936)
Income tax benefit (expense) 0 (92,200) 447,000 4,156
Net (loss) income $ (668,407)$ 150,434 $ (1,667,753)$ (6,780)
Average number of shares
outstanding 1,508,478 1,510,530 1,508,478 1,515,048
Net Income (loss) per share (0.44)$ 0.10 $ (1.11)$ (0.00)
See accompanying notes to Financial Statements.
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Nine Months Ended March 1, 1997 and March 2, 1996
Three Months Ended Nine Months Ended
March 1, 1997 March 2, 1996 March 1, 1997 March 2, 1996
Cash Flows From Operating Activities
Net (loss) income $ (668,407)$ 150,434 $ (1,667,753)$ (6,780)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 171,417 185,141 526,822 558,421
Equity in loss on joint venture 139,631 0 408,545 0
(Increase) Decrease in:
Receivables (37,176) (655,202) 141,712 (1,178,126)
Inventories 366,815 474,917 (4,250) 351,612
Prepaid expenses 39,159 208,519 (148,453) 151,991
Other assets 13,567 (109,695) 30,376 (146,116)
(Decrease) increase in:
Accounts payable (40,321) (527,128) 448,359 (4,097)
Accrued liabilities (70,219) 37,210 (137,783) (25,019)
Net cash used in operating activities (85,534) (235,804) (402,425) (298,114)
Cash Flows from Investing Activities
Purchases of property, plant and
equipment (134,245) (41,151) (393,860) (406,791)
Investment in European joint venture (61,485) (700,000) (290,311) (1,008,532)
Net cash used in investing activities (195,730) (741,151) (684,171) (1,415,323)
Cash Flows From Financing Activities
Proceeds from issuance of common stock 43,637 49,535 46,269 57,443
Advances on credit line 0 (500,000) 0 0
Addition (repayment) of long-term debt (83,809) 2,296,306 (335,238) 1,991,740
Net cash (used in) provided by
financing activities (40,172) 1,845,841 (288,969) 2,049,183
Net (decrease) increase in cash (321,436) 868,886 (1,375,565) 335,746
Cash, beginning of period 604,385 352,827 1,658,514 885,967
Cash, end of period $ 282,949 $ 1,221,713 $ 282,949 $ 1,221,713
See accompanying Notes to Financial Statements
PIEMONTE FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 1, 1997
Note 1 Notes to Condensed Consolidated Financial Statements (unaudited)
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 1, 1997, and the related statements of operations 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 Swaps
On October 15, 1996, the Company exercised an interest rate swap
agreement with a notional amount of $2.1 million that it uses to
convert the variable interest rate of its commercial paper borrowings
to intermediate-term fixed interest rates. The swap agreement was
entered into to reduce the risk to the Company of rising interest
rates. In accordance with the terms of the swap agreement, the Company
pays 7.98 percent interest and receives LIBOR plus 1 1/2 percent,
calculated on the notional amount. Net receipts or payments under the
agreement are recognized as an adjustment to interest expense. The swap
agreement expires in 2000. As LIBOR decreases, interest payments
received and the market value of the swap position decrease.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the Third Quarter was
$1,821,764. Versus year-end, the reduction in working capital
of $1,675,150 is primarily due to lower cash $1,375,565 and an
increase in payables of $448,359. During the Third Quarter,
working capital was lowered $579,694. This is attributed
primarily to our cash posture lower by $321,436 driven by the
operational losses, but also our reduced inventory levels
$366,815 directed by stronger management attention.
During the Quarter, $194,245 was invested in Company assets
and our Joint Venture. Investments in Nashville totaled
$71,157 primarily for the freezer and modifications
necessitated by local ordinances and $59,089 in Frankfort for
an additional pizza line and building upgrades. An incremental
$60,000 was invested in our Joint Venture in Holland bringing
our total gross investment in Holland to $1,338,826.
We are not in violation of our bank covenants.
RESULTS OF OPERATIONS
Quarter Ended March 1, 1997
Compared to March 2, 1996
Sales for the Third Quarter were $6,054,141 versus $8,877,774
last year. This is a reduction in sales of $2,823,633 or 32%.
Industrial and Foodservice volume at $5,167,922 is $1,459,826
or 28% lower than last year because several of our customers
had lower sales themselves in addition to our joint venture
partner being included in last year's results. The Deli
channel at $1,605,921 is lower $606,837 or 27%. We lost a
major customer at the same time we gained one; however the
timing was such that a lag occurred. Fundraising at $168,715
is $576,573 or 77% lower than prior year. Fundraising
continues to face competition, but is being rebuilt.
Cost of Goods at 85.0% is again higher than the Quarter in the
prior year, 77.6%. This is driven primarily by overheads
spread over lower volumes. Despite proactive measures that
have been taken, the current period volume shortfall accounts
for 6.8% or 92% of the 7.4% difference between years.
SG&A is $309,889 lower in the Quarter than in the prior year.
This 18% reduction is indicative of management's attention to
controllable costs.
Overall, U.S. losses for the Quarter were $528,776 versus
$150,434 income in the previous year. On a per share basis,
U.S. earnings were a loss of $0.35/share versus $0.10/share
prior year.
The Company's share of our Joint Venture's loss in Holland
during the Third Quarter was $139,631, which was 50% of the
total loss of $279,262. Having not been in production last
year, current Quarter results are both actuals and the net
difference between years. Sales for the Third Quarter
increased 27% over the previous Quarter. The joint venture is
still not at a break-even either on a book or cash flow basis.
Nine Months Ended March 1, 1997 Compared to
Nine Months Ended March 2, 1996
Sales for the nine months totaled $18,069,872 or $5,434,115
lower than the same period last year. The reduction in volume
continues to be primarily in Industrial, $5,443,314, a
reduction of $2,559,885; and Fundraising, $501,353, a
reduction of $1,696,992. Deli sales at $5,720,662 were
$727,068 lower than the prior year.
Cost of Goods at 85% continues to reflect overhead costs
spread on the reduced volumes as well as early year cost
increases not fully reflected in pricing.
Cost controls reflected in SG&A continue to track favorably
versus prior year. Total SG&A for the nine month period was
$4,278,136, versus a reported $4,904,688 in the prior year.
The Corporate YTD net loss was $1,667,753 or $1.11/share. This
reflected a reduction in income of $1,660,973 versus the prior
year, or $1.11/share lower. The U. S. losses were $1,259,208,
or $1,252,428 lower than the nine months in the previous year;
on a per share basis, this loss represented $0.84/share versus
a loss of $0.00/share last year. The loss in the joint venture
on a YTD basis was $408,545, or $0.27/share.
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K
None
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