Tootie Pie Company Facilities
Tootie
Pie Company, Inc. Facilities
Tootie Pie Company leased a 5,000 square foot
facility in an industrial park in Boerne,
Texas, and commenced operations in that location
in November 2005. This facility consists of
a retail store, administrative offices, their
manufacturing facility and a loading dock
with room for expansion. Tootie Pie closed
the Medina facility in May 2006.
Their current location provides commercial
trucking access and has available land to
expand, as well as a willing and agreeable
landlord. The site also has the required large
truck loading docks and provides easy access
to IH 10, one of the largest commercial trucking
highways in the US.
Tootie
Pie Well Capitalized and Expanding from Local
to Regional
Tootie
Pie Company began as a local company which
has grown into a regional company in conjunction
with its move to its new location. Tootie
Pie Company is based in the populous and high
growth area of South Central Texas located
between Austin and San Antonio, Texas.
First and foremost this company’s most
outstanding features are its core competency
-- which is distinguished by a highly specialized
and functional manufacturing process with
a high end premium pie result and its solid
capitalization.
Solid Capitalization and Attractive
Multiples
Tootie Pie Company was capitalized with approximately
$1.3 million in private equity and brought
public via the filing of an SB-2 registration
with the US Securities Exchange Commission,
without relying on reverse mergers –
the Company has only one class of common stock
held by all shareholders (including management).
With a current float of approximately four
million shares and utilizing a cash valuation
calculation, TOOT could be very attractive,
from an acquisition standpoint.
Business
Model Supports Positive Cash Flow
Business
Model for Facilitates Growth and Cash Flow
Tootie Pie Company’s business model
is built around its two core competencies:
-
Making the best pies possible with its “focus
on quality first” approach to baking;
and
-
Marketing these pies through a sophisticated,
brand oriented marketing strategy.
Its solid capitalization provides a firm foundation
from which Tootie Pie Company can execute these
core competencies and expand their production
facilities.
Expansion Plans In Place
Expansion plans are enhanced by existing leased
facilities which can accommodate expansion or
provide for other nearby growth alternatives.
The Company’s business model embraces
a stair step growth strategy, which targets
growth opportunities and avoids “growth
for growths sake”.
Cash Flow Maximization Built Into Business
Model
In terms of cash flow, the Tootie Pie Company
is able to make and sell their pies before obligations
are due for ingredients, which maximizes cash
flow. Sales to their wholesale distributors
provides a positive cash flow cycle for payment
and Tootie Pie invoices their wholesale distributors
when they pick up the pies at Tootie Pie’s
docks; with typical terms being net amount due
in fourteen days.
Tootie Pie Company management has demonstrated
a solid commitment to their business plan; which
focuses on providing a superior product through
three basic sales channels: retail, corporate
and wholesale. The Company has been successful
at generating impressive sales through successful
wholesale foodservice companies in a high growth
region of the United States by offering superior
products, backed by an equally impressive marketing
strategy. This strategy helps the end user recognize
the “value added” benefit of providing
their customers
with a superior desert, coupled with a solid
brand and marketing materials.
Twelve
Pie Menu Provides Good Variety for Customer
and Manageable Inventory for Tootie
Tootie Pie Company chooses to offer a
finite menu, so that they can focus on
providing high quality pies for their
customers, coupled with an equally high
quality focused marketing plan. These
pies fall into the category of both a
luxury desert and comfort food. The pies
are fully baked and quick frozen, providing
up to a six month frozen shelf life and
a one week, post frozen, refrigerated
shelf life.
Their current menu of twelve pies provides
the Company the opportunity to offer sufficient
variety and superior quality, while providing
their growing range of customers their
choice of pie which meets their customers’
desires, while providing compelling food
profit margins as well. The twelve pie
variety is manageable, both from their
current growth stage, as well as in the
manufacturing process. A fairly limited
menu affords the Tootie Pie Company the
greatest opportunity to expand profit
margins by focusing on a select group
of choices.
Their menu includes:
-
- Peach
Pie
- Cherry
Pie
- Blackberry
Pie
- Blueberry
Pie
- Coconut
Supreme Pie
- Lemon
Velvet Pie
- Pecan
Pie
- Chocolate
Pecan Pie
- Buttermilk
Pie
- Tootie's
Heavenly Chocolate Pie
- Pumkin
Pie
Their
current baking facility is located in a high
growth area and has onsite capabilities for
expansion, should the Company be able to negotiate
agreeable terms. However, their current lease
terms provide flexibility in the event the
Company elects to move to larger facilities
elsewhere.
Tootie Pie is investigating the incremental
expansion steps it may choose to increase
productivity, cuts costs and provide for ongoing
consistency.
Company
Overview & Importance of Regional Size
As the footprint of Tootie Pie Company’s
Foodservice distributors continues to expand,
so do the opportunities for Tootie Pie Company.
The Company’s superior pies have already
demonstrated distribution “channel opening”
capabilities, thereby providing their foodservice
wholesale partners with products that can
help them, and their customers, differentiate
themselves in the ever competitive food service
business. This makes this a very mutually
beneficial business relationship.
Size Affords Nimble Response to Market
Demands
Tootie Pie Company offers the personal customized
service that is the strength of the small
independent bakery, especially for its retail
and corporate customer, while still providing
these customers with complete quality. Its
small management team affords Tootie Pie Company
the opportunity to make significant product
related decisions that are reflected in its
premium pies, while assessing the regional
differences in demand as it continues its
expansion beyond the state of Texas. One of
the ways the Company assesses these regional
differences is through the ordering habits
of its existing customers, who literally cover
the entire US market.
The Tootie Pie Company management team is
small enough to make important decisions,
while at the same time offers experience that
is able to recognize and act on particular
regional trends. The Company is large enough
and sufficiently capitalized to meet the existing
market demands of rapidly expanding customer
base.
Management has already identified the need
to expand its existing capabilities and has
initiated the planning phase for establishing
a new baking facility to allow it to meet
the needs of its growing customer base.
Industry Trends Closely Monitored
Tootie Pie Company is flexible in its management
and able to stay on top of and in many instances
get ahead of food industry trends. A good
example is the trans fat issue. The Company
has already implemented the necessary steps
to make its pies trans fat free, recognizing
this health conscious trend and acting on
it.
Tootie Pie Company’s very existence
is attributable to a recognition of the opportunity
for a premium pie distributed through well
established and expanding wholesale foodservice
distributors.
Outstanding Employee Relations a Priority
The Tootie Pie Company also believes in making
its employees part of its success. Each employee,
after minimal length of service requirements,
is made a shareholder of the Company. In employee
training, each employee is educated on the
history of “Tootie” and the value
of the products they make. The Company believes
strongly that good customer relations starts
with good employee relations and therefore
strives to provide a family atmosphere that
values each employee. Many of its employees
are high school students, moms and local residents,
who are valued members of the Tootie Team,
as well as the local community.
Dessert
Trends & Restaurant Trends
Brand
Building and Attention to Detail
The Company seems to “get it”
with the smaller details as well. For example,
when customers call, it is “Tootie’s”
voice that answers the phone. The Company
believes in the value of “Tootie”,
both in terms of brand building but also in
terms of value building. The Company respects
this lady who created the secret pie recipes
and it shows in the way they honor her in
their marketing materials. This makes customers
feel good about the Company, whose products
they are enjoying. They call this the “Tootie”
experience.
Tootie Pie Company competes with national
companies but by delivering a high quality
product it is the superior quality and consistency
which creates brand loyalty.
Desserts in general are enjoying a resurgence
of popularity in the foodservice market. Comfort
food remains strong. Dataseential, with its
Menu Trends Direct publication, determined
that pies hold 35% of the dessert restaurant
market.
Restaurants are promoting the concept of “take-out”
desserts coupled with “take-home”
desserts. Have your meal and take your dessert
home for later is a trend that is gaining
in popularity.
American culture has historically revered
the pie and many restaurants find them to
be an indispensable part of their standard
menu. Restaurant patrons’ expectations
for an enhanced assortment of high-quality
desserts has expanded. Restaurants find this
to be a desirable item for purchase rather
than in house preparation because kitchen
space is often limited, and labor rates are
at a premium. Tootie Pies are one menu item
that can be purchased with quality control
for freshness and quality and are supported
by an extended shelf life. They are purchased
frozen and have a thawed refrigerated shelf
life of one week.
Barrier
to Pie Baking Entry
American restaurants are more inclined to
purchase a pie as a prepared dessert over
virtually all other options due to its high
quality after being frozen, relatively long
term shelf life over other desserts in terms
of both a frozen commodity and unfrozen dessert,
resurgent customer demand for comfort food,
the overall lack of expertise in pie baking,
and the space, equipment and labor involved
in pie baking.
Barriers to Entry for Pie Baking
There are significant barriers to entry for
restaurants, in terms of equipment, labor,
and kitchen floor space. For these reasons,
restaurants find purchasing high quality pies
preferable to baking them in house.
Purchasing the pies allows the restaurants
to focus on their niche of success, while
continuing to offer their patrons a high quality
dessert.
For a foodservice operation to bake items
such as cakes and pies from scratch on-premise,
a wide variety of equipment and supplies is
required, as is a high level of expertise.
Wholesale distributors are anxious to provide
a fully baked, ready to serve alternative;
which allows the restaurant to serve a high
quality dessert, while remaining focused on
their particular area of expertise.
Pie making requires training and specialized
knowledge. Specific equipment, such as a good
convection (rack) oven or a good deck are
required; and while some restaurants may have
some of the necessary equipment, it may not
be available to dedicate this equipment to
making pies.
The mixer of choice for dessert production
is the vertical mixer which contains different
agitators for thorough mixing: the wire whip
and the paddle or beater. Dough or pie presses
are required for pie production, as are reach-in
refrigerators and freezers. Equipment and
supplies for pie production is somewhat specialized
and this can serve as a bar to entry for a
restaurant. Tootie Pie provides a viable option
for a restaurant dessert.
Restaurant
Trends
Decline
in Casual Dining Balanced by High End Dining
Stability And Popularity of Comfort Food Desserts
There exists a definitive decline in the casual
dining sector, which is experiencing continued
margin pressure from rising food costs and
persistently softening sales. Many economic
forces, such as rising gas prices and uncertainties
in the housing sector, coupled with an excess
in retail and restaurant capacity, have all
resulted in additional pressures on the restaurant
business, specifically in the mid-market,
casual dining sector.
There is evidence that the stronger performance
of many fast-food companies, despite the slowing
growth in U.S. consumer spending, has also
applied pressure on the higher-priced sitdown
chains end of the restaurant sector as well.
"Fast-food restaurants are thriving right
now while the casual dining restaurants are
struggling," noted Morningstar restaurant
analyst John Owens. Analysts have indicated
that the restaurant industry may be more negatively
impacted by the lagging housing sector than
cost associated with fuel costs. Higher debt-service
levels and sluggish housing prices could cause
consumers to be even more demanding, forcing
restaurants to either lower prices, which
adds to their margin pressure, or find means
to differentiate themselves from their competition
to retain existing customers, as well as attract
new ones.
Upscale dining has not evidenced these trends
and continues to be an excellent target for
Tootie Pie Company, Inc. with a quality comfort
food dessert.
Offsetting
Restaurant Trends with Geographical Growth
Retail
Sales
The retail segment serves individual consumers
through in-store sales at their Boerne storefront,
orders via telephone and internet orders
on their website. The Company utilizes many
website marketing strategies, such as pay
for click campaigns and medi-tags, in order
to not only drive customers to their website,
but to also track their purchasing practices.
Corporate Sales
Tootie Pie’s corporate segment serves
businesses that purchase their pies for
gifts, events and/or personal use. Their
corporate sales program provides businesses
a convenient and cost effective way to promote
their company through customer and employee
appreciation programs. Their corporate customers
range in size from small businesses to large
corporations, nationwide.
Tootie Pie believes this segment will play
a key role in their future growth because
their current corporate customers send their
pies to their contacts and employees. Tootie
Pie believes that once those end-recipients
sample the quality of their pies, they may
become their future customers.
Tootie Pie Company currently has in excess
of one hundred corporate clients to whom
they ship thousands of pies nationwide each
year. Tootie Pie Company plans to continue
a heavy focus on this market especially
on the larger corporations who have the
potential to become year-round partners.
Currently, a large percentage of Tootie
Pie’s corporate sales are currently
in Texas, Tootie Pie has initiated a relationships
with large businesses ranging from California,
Iowa and New York. The organic growth in
this market is extremely opportunistic with
high levels of growth multiples considering
the opportunity for repeat business.
Corporate and Retail Sales are distributed
nationally through third party carriers
including Fed Ex and UPS.
Offsetting
Restaurant Trends with Geographical Growth
Wholesale
Sales
Wholesale customers are made up of regional
and national broad-line foodservice distributors
who purchase their products and then resell
them to their customers.
The primary distributors are Ben E. Keith
Foodservices and Sysco Foodservices. For
the nine month period ending December 31,
2006, Ben E. Keith Food Services of San
Antonio and Dallas/Fort Worth and Sysco
Foodservices of San Antonio and Austin,
combined for 33% of their overall sales,
18% and 15% respectively. The Company recently
added U.S. Foodservice in Austin, Texas,
as a new distributor as well.
Tootie Pie’s relationships with its
wholesale food distributors has expanded
from Ben E. Keith in San Antonio and the
Dallas Fort Worth Area into three additional
Ben E. Keith Warehouses including: Amarillo,
Texas, Oklahoma City, Oklahoma, and Albuquerque,
New Mexico. This places Tootie Pie Company
in five of six Ben E Keith warehouses with
plans to move into the Little Rock, Arkansas,
warehouse in the future. Tootie Pie Company
also expanded to the Sysco Houston market
in the spring of 2007, opening up their
third Sysco market with high growth potential
in a large restaurant market.
While the most recent sales information
does indicate a 33% wholesale distribution,
that quarter includes the holiday season
and an expanded retail demand. The prior
quarter indicated a 42% wholesale distribution
with only two of the now three wholesale
distributors represented.
The distributors purchase their products
in volume and then sell and deliver their
products to their customers. The distributor
customers are referred to as “end-users”
and consist of restaurants, hotels, hospitals,
schools, convention centers, and caterers.
The size of their customers varies and range
from local, regional, and national companies.
Through the December 2006 public filings,
the Company reported that these distributors
have primarily sold to the central and south
Texas markets. In its most recent press
releases, the Company has announced the
expansion of these distributors into other
markets in Texas, as well as the surrounding
states.
Both Ben E. Keith and Sysco Food Services
are in an expansion and growth mode. Their
growth serves as a benefit to Tootie Pie
Company. U.S. Foodservice of Austin, Texas,
has a large national presence and is expected
to contribute equally to Tootie Pie’s
margins.
Sales
to Restaurants Through Wholesalers
Tootie Pie Company expects to continue to generate
a large percentage of their business in the
highend pie market to come from restaurant sales
through wholesale food distributors. While the
outlook for the restaurant industry in general
was optimistic, as evidenced in the National
Restaurant Association's comprehensive index
of restaurant activity, which posted a solid
increase in overall sales gains. We have also
noted the pressures that the casual dining sectors
are suffering, which should be taken into account.
This reality may impede some growth in some
segments for the Tootie Pie Company; it should
not serve to impede their overall growth in
restaurants seeking “differentiation”
as an alternative to these industry pressures.
We think the Company’s existing sales
regions, those serviced by their wholesale food
distributors, is illustrative of the successes
the Company has achieved and that the market
definitely exists for the high end desert category.
Ben
E. Keith
Ben
E. Keith Food Services was a customer in their
Ben E. Keith Food Services of San Antonio and
Ben E. Keith Food Services of Dallas/Fort Worth
locations. Ben E. Keith Foodservices of San
Antonio and Dallas/Fort Worth are part of Ben
E. Keith Foodservices, a multi- state foodservice
distributor. Ben E. Keith Foodservices of Dallas/Fort
Worth sells to customers located in West Texas,
North Texas, East Texas, and stretching into
parts of northern Louisiana. Ben E. Keith Foodservices
of San Antonio and Dallas/Fort Worth both service
the Houston, Texas market.
Ben E. Keith has recently expanded its West
Texas Division with a new $40 million warehouse
east of Amarillo which will bolster the company's
ability to ship its products throughout the
state and region.
Sysco
Food Services
 |
Sysco Foodservices of San Antonio and Austin
are part of Sysco Corporation, a national
foodservice distributor. Sysco Food Services
has recently expanded into East Texas with
a new fold-out complex that is under construction
in Longview, Texas, and is expected to be
completed during the second calendar quarter
of 2008. The facility will hold about 360,000
square feet of warehouse space and offices
and will serve restaurants, schools, hospitals
and hotels in parts of Texas, Louisiana, Arkansas
and Oklahoma.
U.S. Foodservice
 |
U.S.
Foodservice is in transition in terms of ownership
and was sold for $7.1 billion. This transition
is expected to enhance U.S. Foodservice’s
national footprint through restructuring and
strengthening its capabilities and restoring
profitability. U.S. Foodservice is the second-largest
food-service distributor in the U.S. with
2006 net sales of $19.2 billion.
It distributes food and related products to
250,000 food-service customers, including
restaurants, hospitals, hotels, schools, the
government and other establishments where
food is prepared away from home.
Restaurant
Growth Compatible with Tootie Pie Growth
The outlook by the Association's Restaurant
Performance Index (RPI)--a monthly composite
index that tracks the health of and outlook
for the U.S. restaurant industry--stood at
101.9 in March, up 1.1 percent from February,
and its strongest gain in 17 months continues
to be a positive indicator for lower end restaurants
and the higher end restaurants which Tootie
Pie does serve. And while casual dining is
experiencing a slump, it is far from becoming
extinct.
The Restaurant Performance Index remained
above 100 for the 47th consecutive month,
which represents expansion in the Association's
composite index of eight key industry indicators.
Growth in the RPI to a 12-month high was fueled
by broad-based gains in March, with seven
out of eight indicators registering improvements
from their February levels. Trends in the
current situation indicators were particularly
encouraging, with operators reporting solid
improvements over the softer performances
in the first two months of the year.
The RPI consists of two components--the Current
Situation Index and the Expectations Index.
The March increase in the RPI was driven by
a solid increase in the current situation
component of the index. The Current Situation
Index, which measures current trends in four
industry indicators (same-store sales, traffic,
labor and capital expenditures), stood at
101.1 in March, up a strong 2.1 percent from
its February level.
Fifty-five percent of restaurant operators
reported a same-store sales gain between March
2006 and March 2007, up from 38 percent who
reported sales gains in January and February.
Twenty-eight percent of operators reported
a same-store sales decline in March, down
from 47 percent who reported similarly in
February.
Customer traffic counts also improved sharply
in March, with 45 percent of restaurant operators
reporting an increase in customer traffic
between March 2006 and March 2007, up from
32 percent who reported a traffic gain in
February. Thirty-two percent of operators
reported a traffic decline in March, down
from 48 percent who reported similarly in
February.
The Expectations Index, which measures restaurant
operators' six-month outlook for four industry
indicators (same-store sales, employees, capital
expenditures and business conditions), stood
at 102.6 in March, up 0.2 percent from February
and its strongest level in 12 months.
Restaurant operators are increasingly optimistic
about sales growth in the coming months. Fifty-five
percent of restaurant operators expect to
have higher sales in six months (compared
to the same period in the previous year),
up from 51 percent who reported similarly
last month.
Seasonal
Sales Impact on Revenue
Tootie
Pie’s revenues are principally derived
from selling their pies to individuals, corporations,
and distributors. Due to the seasonal nature
of their business Tootie Pie Company expects
there will be large fluctuations in the percentage
breakdown between the categories of their business
reported at the various reporting periods.
Their retail and corporate customers buy throughout
the year, however, the vast majority of their
revenue from their retail and corporate customers
comes during the period between October through
December, or the Company’s third quarter.
Sales to their wholesale customers do not experience
quite the same level of seasonal fluctuations
as retail and corporate do, although those sales
show a good spike during the fall weather months
as well. Tootie Pie anticipates the strongest
sales periods for their wholesale business to
be from April through December, or their first,
second and third quarters.
Since its inception on June 16, 2005, Tootie
Pie Company spent the first four months, June
through October, on fundraising and tenant finish
to their manufacturing facility in Boerne, Texas.
Limited operations commenced in September 2005
in the original Medina facility and in November
2005 in their main facility in Boerne.
Therefore, the short period ending December
31, 2005 is provided for information purposes
and does not necessarily provide a true picture
of accepted comparable periods. The increases
from the prior year periods were primarily attributable
to the increase in revenues generated from pie
sales to their existing and new retail, corporate
and distributor customers, as well as increased
transaction volume resulting from opening new
distributor territories.
Take
Out for Holidays Booming
With
its ever growing restaurant business, the Tootie
Pie Company is developing a presence as a take
out item for the holiday seasons. The National
Restaurant Association has also indicated that
increasing activity-driven, time-starved lifestyles
are prompting more people to turn to restaurants
to help simplify items for holidays and family
gatherings; and so take home meals are playing
and increasingly larger role in celebrations
and gatherings, such as Thanksgiving Day. The
presence and availability of a premium pie is
particularly fundamental to this season of the
year.
While one in ten consumers dines out on Thanksgiving
Day, 53 percent use restaurantprepared takeout
items for all or part of their holiday meals
including deserts and pies.
The nation's 925,000 restaurants are an essential
part of the lifestyle of more than half of all
Americans on Thanksgiving Day. This option allows
time-starved Americans more time to enjoy the
holiday without cooking or cleaning.
The National Restaurant Association indicated
that for 2006 fifty-three percent of Americans
will rely on food prepared away from home for
part or all of their Thanksgiving dinners by
utilizing restaurant takeout options, according
to the research. Eleven percent of Americans
have their Thanksgiving Day meal at a restaurant.
Consumers living in smaller households and households
without children are more likely to dine out
on Thanksgiving Day. Males are more likely than
females to eat at a restaurant during the holiday
period. Generally, younger adults are more likely
to use restaurant takeout items as part of their
Thanksgiving meal at home, the research found.
Marketing
& Sales
Tootie
Pie Company recognizes the trends in restaurants,
and the potential that exists in that industry.
Their sales are skewed toward wholesale food
services. There are no specific numbers available
from the Company illustrating the distinction
between margins for retail and internet sales,
as compared to wholesale foodservice sales.
The Company considers this information proprietary
but acknowledges that retail margins are better
than wholesale.
Sales Force. Tootie Pie Company’s
stair step business model currently consists
of a small sales force, with plans for expansion
over the upcoming months. Tootie Pie has targeted
national accounts that represent multiple units
in multi-state regions on a select basis. Their
current focus is on building regional chain
accounts running on average of 10-20 units.
Food Service Broker. Tootie
Pie Company also utilizes the services of a
food service brokerage company, whose services
include sales support and ongoing assistance
in managing key distributor relationships.
Distributor Representatives.
Distributor sales representatives are utilized
as a primary contact point between the end-user
and the Company. Tootie Pie Company has developed
a marketing presentation for in-house distributor
sales meetings and district sales meetings.
For personalized support, the Company conducts
ride-alongs with the individual distributor
sales representatives to assist in the selling
process and maintain client contact for needs
awareness and product feedback.
Email Campaigns for Database. Tootie
Pie Company engages in regular, generally event
driven, email campaigns to their existing customer
database; promoting their pies and offering
specials. The Company’s growing database
serves as a cost-effective and productive sales
tool, providing the Company with consistent
trends, ordering patterns, and percentages for
future marketing efforts.
Enhanced Web Presence. The
Company’s web site is a growing source
of sales as well and they intend to continue
to utilize various e-commerce sales methods,
such as pay for clicks, to enhance search engine
optimization rankings. It is their intention
to modify their website to facilitate e-commerce
sales transactions from point of sale through
accounting and contact management software.
Food Shows. Tootie Pie Company
regularly attends wholesale food shows, sponsored
by each of their distributors. These shows provide
the greatest opportunity for Company representatives
to personally preview and market Tootie Pie’s
to end users; oftentimes resulting in on the
spot sales.
Tootie Pie Company also participates in regional
and local high-end events like Wine & Food
Festivals. These events are typically very high
profile, highly publicized events, where customers
come from all over to sample some of the area’s
finest handmade foods and wines. Tootie Pie
Company is already mapping out a national attendance
calendar for similar events outside its existing
region. They are carefully choosing select high
profile events in certain target markets, such
as the National Pie Championship in Celebration,
Florida.
High
Quality Reflected in Award
The
high quality of Tootie Pie’s was validated
recently by winning First Place at the 2007
APC/ Crisco National Pie Championship, Commercial
Division, held recently in Orlando, Florida.
The National Pie Championship is conducted annually
by the American Pie Council. Contestants compete
in several categories, including Amateur, Professional,
and Commercial.
Tootie
Pie Company Financials
For
Period Ending December 31, 2006:
Tootie Pie Company does not believe that 2006
revenues are indicative of 2007 revenues. 2007
results will be a better reflection of the success
of their sales efforts through their two primary
food service distributors, who were just coming
online in 2006. These two distributors are themselves
in significant sales expansion mode, as noted
elsewhere in this report. This should benefit
the sales of Tootie Pie’s as well, as
their pies are added from one distributor market
to another. The Company also envisions added
sales with the addition of other distributors
in key markets as well.
Gross Margin Fluctuation Steady Increase:
Gross margin after depreciation was 63.6% of
net sales for the quarter ended December 31,
2006 compared to 22.5% for the quarter ended
December 31, 2005. Gross margin after depreciation
was 50.4% of net sales for the nine months ended
December 31, 2006 compared to 16.9% for the
short period ended December 31, 2005. The 41.1
percentage point improvement for the quarter
ended December 31, 2006 and the 33.5 percentage
point improvement for the nine months ended
December 31, 2006 in their gross margin are
attributable to fixed cost of manufacturing
being spread over an increased number of units
sold and improvements in manufacturing efficiencies
which reduced overall unit cost. The result
is higher gross profits for each unit sold.
Tootie Pie expects continued gross margin improvements
as Tootie Pie refines their manufacturing process.
Selling, General and Administrative
Expenses:
Selling, general and administrative expenses
increased to $238,026 for the quarter ended
December 31, 2006, from $147,565 for the quarter
ended December 31, 2005. Selling, general and
administrative expenses for the nine months
ended December 31, 2006 increased to $507,104
from $172,424 for the short period ended December
31, 2005. The increase from the prior year quarter
and period were principally due to the effects
of moving from the “start-up” phase
of operations, coupled with a short reporting
period, to full scale operations and corresponding
full reporting periods. During its first full
year of operations, the Company was able to
enjoy some of the benefits derived from managing
unit sales growth, opening new market territories,
employing some basic manufacturing techniques,
as well as some basic customer support capabilities,
thereby enhancing results on a full year basis.
Net Loss:
Net loss decreased to $20,525 for the quarter
ended December 31, 2006 from $124,211 for the
quarter ended December 31, 2005 and increased
to a net loss of $244,382 for the nine months
ended December 31, 2006 from a loss of $152,394
for the short period ended December 31, 2005.
The net loss decrease for the quarter ended
December 31, 2006 is a result of their successful
marketing efforts to grow their sales during
their peak holiday season, November and December.
The net loss increase for the nine months ended
December 31, 2006 is attributable to moving
from their initial short “start up”
reporting period, to a nine month reporting
period.
For periods reported below customers were in
the following categories:
| Category |
Three
month period ended Dec. 31, 2006 |
Three
month period ended Dec. 31, 2005 |
Nine
month period ended Dec. 31, 2006 |
Inception,
June 16, 2005 to Dec. 31, 2005 |
| Retail |
39% |
72% |
33% |
75% |
| Corporate |
37% |
23% |
25% |
21% |
| Wholesale |
24% |
05% |
42% |
04% |
| Totals |
100% |
100% |
100% |
100% |
Expanding
gross margin are attributable to fixed cost
of manufacturing being spread over an increased
number of units sold, as well as some improvements
in manufacturing efficiencies; thereby reducing
overall unit cost. The result is higher gross
profits for each unit sold. While the gross
margin percentage will continue to fluctuate
as the manufacturing process is refined it will
clearly continue to support higher margins as
sales increase.
The net loss decrease for the quarter ended
December 31, 2006 is a result of the Company’s
successful marketing efforts to grow our sales
during their peak holiday season, from October
through December. The net loss increase for
the nine months ended December 31, 2006 is attributable
to moving from an initial short “start
up” reporting eriod, to a nine month reporting
period.
Legal
Proceedings
Tootie
Pie currently is not aware of, or a party to,
any legal proceedings. Additionally, their officers
and directors, in their capacity as such, are
not a party to any litigation.
Stock
Based Compensation Plans
Tootie
Pie does not have a stock-based compensation
plan; however Tootie Pie has issued stock to
employees and non-employees from time to time
as compensation for services rendered. The expense
recorded for the services rendered was based
on market value of the underlying common stock
on the date the shares were issued. The market
value was determined to be the per share cash
price paid by willing investors near the time
the stock was issued.
Tootie Pie has also granted options to their
directors and officers.
Conclusion
Sales
growth, particularly in the wholesale food service
sector, will continue to grow exponentially
for the foreseeable future, with sales anticipated
to at least double to in excess of $1 million
in the current fiscal year. We envision sales
to continue to grow dramatically as the Company’s
distributors begin selling their pies into new
territories and using them to open new distribution.
Growth is expected to continue on a six figured
percentage basis from year to year and year
over year; as well as from quarter to quarter
and quarter over quarter. As a result of expanding
revenues, and a continual improvement in manufacturing
capabilities, Tootie Pie Company envisions continued
improvement in Gross Profit Margins, which will
impact bottom line results in most favorable
terms.
Tootie Pie Company’s products have clearly
demonstrated their “channel opening”
capabilities, evidenced by partnerships with
well established national and regional food
distributors, which will continue to fuel dramatic
sales growth. The fact that so many end users
carry the pies by the brand name, the Tootie
Pie Company is also adding to shareholder value
in the building of its brand.
Tootie Pie Company “TOOT” is considered
to be a VERY ATTRACTIVE growth stock. We consider
this stock a “BUY” and we have a
target price of $3.37 per share near term.
Management
Don Merrill, President & CEO
Mr. Merrill (47) has over twenty years experience
in the capital markets, with an emphasis on
early stage companies and venture capital. He
began his career at Merrill Lynch, a respected
financial services company, where he had over
$200 million under management. Mr. Merrill has
established a successful track record of recognizing
and assisting early stage companies whose business
opportunities represented significant potential
for growth.
Mr. Merrill has provided his expertise to companies
in many business sectors; including specialty
retail, retail distribution, telecommunications,
and high tech communications. Mr. Merrill has
evaluated many young companies and assisted
in raising tens of millions of dollars in both
public and private equity.
Mr. Merrill has been married for over twenty
years to his wife, Cathy. They have three children;
Matt, (18) and Emily and Liz (15). They live
in Boerne, a small community just outside San
Antonio, Texas.
 |
David
Patterson, Treasurer & CFO
As a Certified Public Accountant, Mr. Patterson
has twenty plus years experience in a variety
of industries including public accounting, oil
and gas, commercial banking (including extensive
loan workouts and asset management), not-for-profit,
foodservice brokerage, and other related experience
including consulting in industries ranging from
insurance to oil & gas.
He has succeeded in all sizes and types of organizations
and positions from being an auditor for Touche
Ross, an international CPA firm, to serving
as an accounting supervisor for Tesoro Petroleum;
from serving as a senior loan and asset manager
for Gill Savings in San Antonio to being a senior
loan workout officer and head of the commercial
real estate department for Fleet Bank-New Hampshire;
from being an owner and operator of a start-up
foodservice brokerage company to having his
own Consulting/CPA practice providing services
on merger and acquisitions and contract CFO/Controller
to serving as a team leader for a Sarbanes Oxley
compliance project for Baker Hughes, a large
international oil & gas services company
based in Houston, TX.
Mr. Patterson has been married for thirty two
years to his wife, Denine. They have two boys
Aaron (26) and Ragan (23). They reside in San
Antonio, Texas. His hobbies include golf, singing
and home renovation.
 |
Jeff
Bailey, Vice President of Corporate Development
Jeff joined JPMorgan Chase Bank following his
graduation from Texas A&M University in
May of 2001. Upon joining the bank, Jeff participated
in the Middle Market Analyst Training Program
in New York City. The training program included
the study of market dynamics, financial accounting,
corporate finance and credit underwriting.
Upon completion of his training, Jeff joined
the San Antonio Middle Market banking group
in January of 2002. As an Analyst and then an
Associate, Jeff was involved in underwriting
and extending credit to companies in numerous
industries ranging from $10 million to $1 billion
in revenues. His roles involved research, financial
analysis and presentation skills coupled with
client support and marketing efforts. With these
responsibilities, Jeff assisted companies in
securing financing for capital improvements,
acquisitions and working capital needs.
 |
Bobbie
Keese, Vice President of Baking Operations
Bobbie is the daughter of Tootie Feagan and
has been involved in baking pies with her
mom, off and on, for many years. She worked
and held numerous responsibilities for the
Medina ISD from 1974 to 1982. Following her
work in the school district, she pursued the
personal travel industry, joining with Chaparral
Travel in 1982. In 1987, she and three partners
started a new travel agency in Kerrville,
Texas named dventure Travel, which is consistently
voted the best travel agency in the hill country
each year. Bobbie worked full-time at the
agency through 1998 and maintains her partner
status to date.
In 2001, Bobbie went back to Medina to take
over the full operation of the Tootie Pie
Company while her mother, Tootie, underwent
hip surgery and recovery. She handled all
facets of the business on a daily basis for
one year until Tootie’s return. In addition
to the above she has held positions at Billing
Concepts as an account manager, and as an
insurance agent for USAA in San Antonio. In
September of 2005, Bobbie joined Tootie Pie
Co. to oversee all baking operations and quality
control.
 |
Kimberly
Lee, Sales Director
Kimberly Lee (48) has over twenty years experience
in sales and management with a very diverse
background. Entering the field of Interior
Design and then as a business owner in the
late 80’s, she worked with many prestigious
builders in the San Antonio
and South Texas area.
She then spent a few years at home raising
4 boys: Kody (24), Travis (22), Austin (17),
and Carson (15). While at home, she ran a
child care facility where she kept infant
to toddler aged children.
This lead to home schooling her children over
the next 8 years. Kimberly then had a very
successful home-based business with Pampered
Chef where she earned top sales and recruiting
achievement in the company for 7 consecutive
years. She shared this business opportunity
with others and built a team of over 100 consultants,
while helping them to develop their own businesses
through training and programs.
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