FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
Commission File Number 2-5916
CHASE GENERAL CORPORATION
(Exact name of registrant as specified in its Charter)
Missouri 36-2667734
State incorporation I.R.S. Employer Identification Number
3600 Leonard Road, St. Joseph, Missouri 64503
(Address of principal executive offices) (Zip Code)
(816) 279-1625
(Registrant's telephone number, including area code)
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,
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
Number of shares outstanding of the issuer's Common Stock as of
the latest practicable date: 969,834 shares of the Company's
common stock ($1.00 par value) were outstanding.
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CHASE GENERAL CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - March 31, 1998
(Unaudited) and June 30, 1997 3
Consolidated Condensed Statements of Operations -
Nine months ended March 31, 1998 and 1997
(Unaudited) 5
Consolidated Condensed Statements of Operations -
Three months ended March 31, 1998 and 1997
(Unaudited) 6
Consolidated Condensed Statements of Cash Flows -
Nine months ended March 31, 1998 and 1997
(Unaudited) 7
Notes to Consolidated Condensed Financial
Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities 12
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, 1998 and June 30, 1997
MARCH 31, JUNE 30,
1998 1997
(UNAUDITED)
CURRENT ASSETS
Cash $249,299 $141,657
Receivables, net of
allowance 78,793 83,579
Inventories:
Finished goods 39,520 89,725
Goods in process 9,509 3,560
Raw materials 78,464 92,975
Packaging materials 77,884 115,251
Prepaid expense 20,728 39,791
Prepaid income taxes 4,404 5,996
Total current assets 558,601 572,534
PROPERTY AND EQUIPMENT - AT COST 1,003,814 985,397
Less accumulated
depreciation (758,580) 721,060
Total property and
equipment 245,234 264,337
TOTAL ASSETS $ 803,835 $ 836,871
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LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, JUNE 30,
1998 1997
(UNAUDITED)
CURRENT LIABILITIES
Accounts payable $ 32,874 $ 59,162
Notes payable, Series B
current maturities - 6,294
Accrued expense 34,752 38,683
Total current
liabilities 67,626 104,139
LONG-TERM LIABILITIES
Notes payable, Series B,
less current maturities
above 185,305 207,659
Total liabilities 252,931 311,798
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred
stock, $5 par value:
Series A (liquidation
preference $1,177,500
and $1,155,000
respectively) 500,000 500,000
Series B (liquidation
preference $1,132,500
and $1,110,000
respectively) 500,000 500,000
Cumulative preferred stock,
$20 par value:
Series A (liquidation
preference $2,838,850
and $2,794,951
respectively) 1,170,660 1,170,660
Series B (liquidation
preference $462,642
and $455,487
respectively) 190,780 190,780
Common stock, $1 par value 969,834 969,834
Paid-in capital in
excess of par 3,134,722 3,134,722
Retained earnings
(deficit) (5,915,092) (5,940,923)
Total stockholders'
equity 550,904 525,073
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 803,835 $ 836,871
See notes to consolidated condensed financial statements.
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CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31
1998 1997
NET SALES $1,773,026 $2,054,847
COST OF SALES 1,389,744 1,531,856
Gross profit on sales 383,282 522,991
OPERATING EXPENSES
Selling expense 214,364 243,333
General and administrative
expense 129,437 119,489
Total operating expenses 343,801 362,822
Net income from operations 39,481 160,169
OTHER INCOME (EXPENSE) (7,218) (9,009)
Net income before
income taxes 32,263 151,160
PROVISION FOR INCOME TAXES 6,432 47,222
NET INCOME $ 25,831 $ 103,938
EARNINGS (LOSS) PER SHARE $ (.07) $ .01
See notes to consolidated condensed financial statements.
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CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
1998 1997
NET SALES $240,116 $258,894
COST OF SALES 240,739 253,526
Gross profit (loss) on sales (623) 5,368
OPERATING EXPENSES
Selling expense 43,850 43,525
General and administrative expense 40,855 41,556
Total operating expenses 84,705 85,081
Net loss from operations (85,328) (79,713)
OTHER INCOME (EXPENSE) (2,274) (2,812)
Net loss before income taxes (87,602) (82,525)
PROVISION (CREDIT) FOR INCOME TAXES (30,316) (34,748)
NET LOSS $(57,286) $(47,777)
LOSS PER SHARE $ (.09) $ (.08)
See notes to consolidated condensed financial statements.
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CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
]
NINE MONTHS ENDED
MARCH 31
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 25,831 $103,938
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization 46,955 39,658
Provision for bad debts 4,815 4,815
Effects of changes in
operating assets and
liabilities:
Accounts receivables (29) 1,343
Accounts payable (26,288) 23,498
Inventories 96,134 (65,568)
Prepaid expenses 20,655 15,409
Accrued expense (3,931) (12,763)
Estimated liability for
income taxes - 31,892
Net cash provided by
operating activities 164,142 142,222
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (27,852) (30,301)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (28,648) (38,703)
NET INCREASE IN CASH 107,642 73,218
CASH, BEGINNING OF PERIOD 141,657 236,316
CASH, END OF PERIOD $ 249,299 $309,534
SUPPLEMENTAL DISCLOSURES
Interest paid $ 14,098 $ 16,214
Income taxes paid $ 4,840 $ 17,494
See notes to consolidated condensed financial statements.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. Interim results are not necessary indicative of
results for a full year.
A summary of the company's significant accounting policies is
presented on page 8 (not shown) of its 1997 Annual Report to
Shareholders. Users of financial information produced for
interim periods are encouraged to refer to the footnotes
contained in the Annual Report to Shareholders when reviewing
interim financial results. There has been no material change in
the accounting policies followed by the Company during fiscal
1997.
In the opinion of management, the accompanying interim
consolidated condensed financial statements contain all
adjustments necessary to present fairly Chase General
Corporation's financial position as of March 31, 1998 and June
30, 1997, the results of its operations for the nine months and
three months ended March 31, 1998 and 1997, and its cash flows
for the nine months ended March 31, 1998 and 1997.
<PAGE>
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - EARNINGS (LOSS) PER SHARE
The earnings (loss) per share was computed on the weighted
average of outstanding common shares during the years as
follows:
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31 MARCH 31
1998 1997 1998 1997
Net income (loss) $25,831 $103,938 $(57,286) $(47,777)
Preferred dividend
requirements:
6% Prior Cumulative
Preferred,
$5 par value 45,000 45,000 15,000 15,000
5% Convertible Cumulative
Preferred,
$20 par value 51,054 51,054 17,018 17,018
Total dividend
requirements 96,054 96,054 32,018 32,018
NET INCOME (LOSS) COMMON
STOCKHOLDERS $(70,223) $ 7,884 $(89,304) $(79,795)
WEIGHTED AVERAGE OF OUTSTANDING
COMMON SHARES 969,834 969,834 969,834 969,834
EARNINGS (LOSS) PER SHARE $ (.07) $ .01 $ (.09) $ (.08)
No computation was made on common stock equivalents outstanding
because earnings (loss) per share would be anti-dilutive.
<PAGE>
ITEM 2
CHASE GENERAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Chase General and its wholly-owned subsidiary are engaged in the
manufacture of confectionery products which are sold primarily
to wholesale houses, grocery accounts, vendors, and repackers.
RESULTS OF OPERATIONS
Nine Months ended March 31, 1998 and 1997
Sales:
The Company had no unusual transactions for the nine months
ended March 31, 1998. The Company realized a gross profit
margin of 21.62% for the nine months ended March 31, 1998 as
compared to 25.45% for the same period ended a year ago. Net
sales decreased 14% over the same period a year ago as a result
of non-recurring sales to customers. However, no major
customers have been lost during this nine month period. The
reduced gross profit margin is due to increased depreciation and
indirect labor costs.
Expenses:
Selling expenses as a percentage of sales were consistent for
both periods. General and administrative expenses were 8%
higher than the same period a year ago due to increased office
salaries and professional fees. Interest expense continues to
decrease because of debt retirement.
Inventories at March 31, 1998 were $96,000 lower than at June
30, 1997 due to decreased finished goods on hand. Accounts
payable are $26,300 lower than at June 30, 1997 as a result of
decreased inventory on hand at March 31, 1998.
Three Months Ended March 31, 1998 and 1997
Sales:
Net sales decreased 7% over the same period a year ago. This
three month period is normally the Company's slowest season.
Due to the reduced volume of production, the labor force was
used to perform plant maintenance which caused a negative gross
margin of $623 as compared to a positive gross margin of $5,368
for the same period a year ago.
(Continued)
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ITEM 2
CHASE GENERAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Expenses:
Selling expenses remained constant compared with the same period
a year ago, while general and administrative expenses decreased
2% compared with the same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company has no commitments for
capitalized expenditures. Cash increased $107,642 during the
current nine month period as a result of controlling overhead
costs. Working capital also increased approximately $23,000 for
the current nine month period.
The officers of the corporation and legal counsel continue to
discuss liquidity and capital resource options to resolve the $5
million cumulative preferred stock dividends in arrears.
<PAGE>
PART II. OTHER INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
Item 3. DEFAULTS UPON SENIOR SECURITIES
a. None
b. The total cumulative preferred stock dividends in
arrears at March 31, 1998 is $5,611,492
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits - None
b. Reports on Form 8-K: There were no reports on
Form 8-K filed by the Company during the quarter
ended March 31, 1998.
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, thereunto duly authorized.
CHASE GENERAL CORPORATION
Registrant
May 12, 1998 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial
Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 249,299
<SECURITIES> 0
<RECEIVABLES> 96,322
<ALLOWANCES> 17,529
<INVENTORY> 205,377
<CURRENT-ASSETS> 558,601
<PP&E> 1,003,814
<DEPRECIATION> 758,580
<TOTAL-ASSETS> 803,835
<CURRENT-LIABILITIES> 67,626
<BONDS> 185,305
0
2,361,440
<COMMON> 969,834
<OTHER-SE> (2,780,370)
<TOTAL-LIABILITY-AND-EQUITY> 803,835
<SALES> 1,773,026
<TOTAL-REVENUES> 1,775,436
<CGS> 1,389,744
<TOTAL-COSTS> 338,986
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,815
<INTEREST-EXPENSE> 9,628
<INCOME-PRETAX> 32,263
<INCOME-TAX> 6,432
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,831
<EPS-PRIMARY> (.07)
<EPS-DILUTED> 0
</TABLE>
