SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 10-Q
AMENDED
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 29, 1997 Commission 0-15696
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PIEMONTE FOODS, INC.
(Exact name of registrant as specified in its charter)
South Carolina 57-0626121
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(State or other jurisdiction of I.R.S. Employer
incorporation of organization) Identification
400 Augusta Street, Greenville, South Carolina 29601
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(Address of principal executive offices)
Registrant's telephone number, including area code: (864) 242-0424
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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
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The number of shares of common stock outstanding as of November
29, 1997 was 1,558,574.
PIEMONTE FOODS, INC.
INDEX TO FORM 10-Q
Part I Financial Information
Item 1. Amended Financial Statements, unaudited
Amended Consolidated Balance Sheets - November 29,
1997, and May 31, 1997
Amended Consolidated Statements of Operations for
the three and six months ended November 29, 1997,
and November 30, 1996.
Amended Consolidated Statements of Cash Flows for
the three and six months ended November 29, 1997,
and November 30, 1996.
Amended Notes to Consolidated Financial Statements
Item 2. Amended Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Part II Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27. Amended Financial data schedule
PIEMONTE FOODS, INC.
CONSOLIDATED BALANCE SHEETS
As Amended
ASSETS Nov. 29, 1997 May 31, 1997
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CURRENT ASSETS
Cash & cash equivalents $912,935 $591,153
Accounts receivable, net 1,612,736 1,930,050
Inventories 1,003,749 855,121
Refundable income taxes 0 415,572
Prepaid expenses 141,594 123,320
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TOTAL CURRENT ASSETS 3,671,014 3,915,216
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PROPERTY, PLANT & EQUIPMENT, NET 4,427,795 4,744,761
DEFERRED CHARGES, INTANGIBLE AND OTHER ASSETS
Excess of cost over fair value of net assets acquired 720,930 737,406
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TOTAL OTHER ASSETS 720,930 737,406
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TOTAL ASSETS $8,819,739 $9,397,383
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LIABILITIES AND STOCKHOLDER'S EQUITY
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CURRENT LIABILITIES
Current portion of long-term debt $376,851 $373,009
Prepayment of long-term debt subsequent to May 31, 1997 $0 $1,000,000
Accounts payable, trade 1,893,131 748,793
Accrued expenses 427,606 588,405
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TOTAL CURRENT LIABILITIES 2,697,588 2,710,207
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LONG-TERM DEBT 1,935,530 2,124,134
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TOTAL LIABILITIES 4,633,118 4,834,341
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STOCKHOLDER'S EQUITY
Common Stock 15,444 15,444
Capital in excess of stated value of common stock 2,868,360 2,868,360
Retained earnings 1,302,817 1,679,238
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TOTAL STOCKHOLDER'S EQUITY 4,186,621 4,563,042
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TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $8,819,739 $9,397,383
==================================================================================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended November 29, 1997 and November 30, 1996
Three Months Six Months
As Amended As Amended
FY98 FY97 FY98 FY97
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NET SALES $5,261,010 $6,034,329 $9,937,977 $12,015,731
Operating Expenses
Cost of Goods Sold 4,142,451 5,074,139 7,811,012 10,218,156
Selling, general and administrative 1,251,115 1,514,501 2,446,034 2,880,362
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Total Operating Expenses 5,393,566 6,588,640 10,257,046 13,098,518
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OPERATING INCOME/(LOSS) (132,556) (554,311) (319,069) (1,082,787)
Other Expenses
Interest expense (net) 42,615 60,730 86,466 107,903
(Gain)/Loss on disposal of assets (638) 0 (5,638) 0
Equity in loss on European joint venture 0 119,014 0 268,914
Other income (5,329) (7,766) (11,969) (13,258)
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Total Other Expenses 36,648 171,978 68,859 363,559
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Income/(Loss) Before Income Taxes (169,204) (726,289) (387,927) (1,446,346)
Income Tax Benefit 11,507 231,000 11,507 447,000
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NET INCOME/(LOSS) ($157,697) ($495,289) ($376,421) ($999,346)
===================================================================================================================================
Average Number of Shares Outstanding 1,558,145 1,497,936 1,558,145 1,497,936
NET LOSS PER SHARE ($0.10) ($0.33) ($0.24) ($0.67)
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PIEMONTE FOODS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three and Six Months Ended November 29, 1997 and November 30, 1996
Three Months Six Months
As Amended As Amended
FY98 FY97 FY98 FY97
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(Loss) ($ 157,697) ($ 495,289) ($ 376,421) ($ 999,346)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 180,778 151,468 351,097 355,403
Non-Cash Director's Fees 8,750 0 15,500 0
Decrease (increase) in:
Receivables (79,595) (185,166) 317,314 178,888
Inventories 190,949 (17,312) (148,628) (371,065)
Prepaid expenses 125 (182,459) (18,274) (187,612)
Income Tax Refund 415,572 0 415,572 0
Other assets 976 7,383 976 16,809
Equity in loss on European joint venture 0 119,014 0 268,914
Increase (decrease) in:
Accounts payable 17,539 435,935 1,144,338 488,680
Accrued liabilities (62,769) 281,319 (160,799) (67,564)
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Net cash used in operating activities 514,628 114,893 1,540,675 (316,893)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property, plant and equipment (39,769) (91,692) (39,769) (259,613)
Proceeds from the sale of property, plant and equipment (3,042) 0 5,638 0
Investment in European joint venture 0 (1,234) 0 (228,826)
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Net cash used in investing activities (42,811) (92,926) (34,131) (488,439)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 0 2,639 0 2,632
Repayment of long-term debt (85,714) (125,715) (1,184,762) (251,429)
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Net cash provided by financing activities (85,714) (123,076) (1,184,762) (248,797)
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NET INCREASE/(DECREASE) IN CASH 386,103 (101,109) 321,782 (1,054,129)
Cash, beginning of period 526,832 705,494 591,153 1,658,514
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Cash, end of period 912,935 604,385 912,935 604,385
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
PIEMONTE FOODS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 29, 1997
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 November 29, 1997 and the
related statements of operations and cash flows for the six
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.
PIEMONTE FOODS, INC.
Notes to Consolidated Financial Statements
For the Three and Six Months Ended November 29, 1997 and November 30, 1996
NOTE 2 - RESTATEMENT OF FINANCIAL STATEMENTS
The accompanying financial statements for the second quarter and first six
months of fiscal year 1998 have been restated to reflect the correction of an
inventory error that was subsequently discovered during a physical inventory
taken during the third quarter. To insure that this does not occur again,
management has initiated a policy of taking physical inventories every quarter.
Although not material in nature, minor adjustments were also booked in Net Sales
and SG&A.
Effect of changes on Income Statement Three Months Six-Months
1998 1998
Net Sales (4,112) (4,112)
Cost of Goods Sold 221,784 221,784
SG&A 9,000 9,000
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Operating Income (234,896) (234,896)
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Per Share (0.15) (0.15)
Effect of changes on Balance Sheet Three Months Six-Months
- ---------------------------------- 1998 1998
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Inventories (205,058) (205,058)
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Total Assets (205,058) (205,058)
Accounts Payable 20,838 20,838
Accrued Expenses 9,000 9,000
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Total Liabilities 29,838 29,838
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Retained Earnings (234,896) (234,896)
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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 Second Quarter was $973,426.
Versus year-end, working capital decreased $231,583, primarily
the result of the operating losses experienced in both the
first and second quarters. Receivables were reduced by $317,314
since the beginning of the fiscal year, which includes an
increase in the second quarter of $79,595 due to increased
sales.
The reduction in receivables was partially offset by an
increase in inventories of $148,628 during the first half of
the year. However, inventories did drop by $190,949 in the
second quarter. The anticipated Federal Tax Refund was received
during the second quarter, clearing the $415,572 receivable on
the books and improving the Company's cash flow.
Compared to year-end, payables have increased by $1,144,338.
This occurred primarily during the first quarter of 1998.
Payables increased slightly by $17,539 in the second quarter.
Although the Company is not in default in payment to its
principal lender with respect to its long-term debt, it is
currently in default of certain covenants associated with its
Loan Agreement, including covenants relating to the maintenance
of net worth, working capital and debt coverage. The Company is
negotiating with its lender to obtain a waiver of these
technical defaults respecting loan covenants. Thus far, the
lender has indicated a willingness to work with the Company.
The Company has recently been unable to meet its obligations to
creditors in a normal timely basis and has commenced
negotiations with its creditors to reach agreements with
respect to either discounting the obligations due creditors
and/or delaying payment of such obligations. There can be no
assurance that these negotiations will be successful and, if
not, the Company would have to obtain additional capital or
take other steps to continue its operations on a normal basis
in light of its current shortage of working capital.
RESULTS OF OPERATIONS
Quarter Ended November 29, 1997 Compared to
Quarter Ended November 30, 1996
Revenues for the Second Quarter were $5,261,010 which were 13%
lower than the same period last year. Lower revenues were the
combined result of the fourth quarter 1997 exit from the
Company's cake business in Nashville, with a negative impact of
10% on overall sales, and and lower sales in Deli and
Foodservice. Second quarter sales showed improvement of
$584,043 or 12.5% over the first quarter of fiscal year 1998.
As a result of re-focusing our core business, reducing the cost
structure, and successful price increases, the Company improved
its gross margins during the second quarter of this year. On
lower sales, gross margin dollars improved by $158,369 from
$960,190 in the second quarter of last year to $1,118,559 in
the second quarter of this year. Gross margin percents improved
from the same quarter a year ago from 16% to 21%.
The loss from operations in the second quarter of fiscal year
1998 was ($132,556), compared to a loss of ($554,311) in the
second quarter of 1997.
Selling, general, and administrative expenses were $263,386
less in the second quarter of this year versus the same quarter
a year ago, as the company continued its efforts to lower
operating costs.
Overall, net loss for the quarter was ($157,697), an
improvement over the net loss of ($337,592) in the same quarter
last year. On a per share basis, earnings were ($.10) versus
($.33) in 1997.
Six Months Ended November 29, 1997 Compared to
Six Months Ended November 30, 1996
Sales were $9,937,977 or $2,077,754 lower than the same period
sales last year. Lower sales are primarily due to exiting of
the Cake business, 56% of the reduction, and lower sales in
Deli/Retail.
Gross Margin improved to 21.4% in the first half of this year
versus 15% in the same period a year ago, an improvement of
$329,390, on lower sales. The improvement can be attributed to
specific actions taken to increase pricing and to reduce
operating costs.
SG&A costs for the first six months were $2,446,034 or $434,328
lower than for the same period last year, a 15% reduction.
Through the first six months the Company has incurred a net
loss of ($376,421) compared to a net loss of ($622,925) in the
comparable period last year. This reflects a per share loss of
($0.24) compared to ($0.67) a year ago.
Part II Item 4 Submission of Matters to a Vote of Security Holders.
At the Annual Meeting of Shareholders on 10-29-97, the
following proposals were approved:
1. To elect two Class One Directors (T. Patrick Costello and
Richard J. Stoner) to a term of three (3) years.
Votes for 1,315,477 against 15 abstentions 3,237.
2. To ratify the appointment of Ernst and Young LLP as the
Company's independent auditors for the fiscal year ending 1998.
Votes for 1,315,634 against 668 abstentions 2,427.
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
None
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 03/13/98 /s/ W. Edward Cathey
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W. Edward Cathey
Treasurer and CFO