SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
(X)QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1995
OR
( )TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________
Commission file number 0-8513
CHEFS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 22-2058515
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
62 Broadway, Point Pleasant Beach, NJ 08742
(Address of principal executive offices)
(Registrant's telephone number, including area code) (908) 295-0350
(Former name, former address and former fiscal year, if changes since last
report.)
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 of the past 90 days.
Yes X . No .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes . No .
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practicable date:
Class Outstanding Shares at June 8, 1995
Common Stock, $.01 par value 13,459,576
CHEFS INTERNATIONAL, INC.
I N D E X
PART I FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheet - 1 - 2
April 30, 1995
Consolidated Statements of Operations - 3
Three Months Ended April 30, 1995 and
May 1, 1994
Consolidated Statements of Cash Flows - 4 - 5
Three Months Ended April 30, 1995 and
May 1, 1994
Notes to Consolidated Financial Statements 6
Management's Analysis of Three Months' Income 7 - 8
Statement
PART II OTHER INFORMATION 9
PART I - FINANCIAL INFORMATION
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1995 (UNAUDITED)
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,017,199
Investments 100,000
Accounts Receivable [Net of Allowance of $47,818] 1,405,668
Miscellaneous Receivables 122,527
Inventories 1,973,174
Prepaid Expenses 116,162
Total Current Assets 4,734,730
Property, Plant and Equipment - At Cost 19,440,128
Less: Accumulated Depreciation 6,390,705
Property, Plant and Equipment - Net 13,049,423
Other Assets:
Investments 606,000
Goodwill - Net 3,483,150
Liquor Licenses - Net 770,860
Due from Employees 27,947
Deposits and Other Assets 66,946
Total Other Assets 4,954,903
Total Assets $22,739,056
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $1,770,432
Accrued Expenses 871,253
Notes and Mortgages Payable to Banks 1,893,000
Other Liabilities 200,812
Due to Related Parties 120,000
Capital Lease Obligations - Current 95,438
Total Current Liabilities 4,950,935
Long-Term Debt:
Notes and Mortgages Payable to Banks 100,000
Capital Lease Obligations - Long-Term 249,917
Total Long-Term Debt 349,917
Other Liabilities 82,396
Commitments and Contingencies -
Stockholders' Equity:
Capital Stock - Common, $.01 Par Value, Authorized 50,000,000
Shares; Issued and Outstanding 13,459,576 134,595
Additional Paid-in Capital 32,212,586
Accumulated [Deficit] (14,991,373)
Total Stockholders' Equity 17,355,808
Total Liabilities and Stockholders' Equity $22,739,056
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended
April 30, 1995 May 1, 1994
Sales $ 8,499,726 $ 7,555,507
Cost of Goods Sold 4,073,364 3,715,307
Gross Profit 4,426,362 3,840,200
Operating Expenses [Income]:
Payroll and Related Expenses 1,305,777 1,144,421
Other Operating Expenses 2,009,955 1,960,621
Depreciation and Amortization 332,626 299,989
General and Administrative Expenses 653,589 533,771
Total Operating Expenses 4,301,947 3,938,802
Income [Loss] from Operations 124,415 (98,602)
Other Income [Expense]:
Interest Expense (57,535) (41,153)
Interest Income 23,223 16,953
Total Other [Expense] - Net (34,312) (24,200)
Income [Loss] Before Income Taxes 90,103 (122,802)
Income Tax Expense [Current] - -
Net Income [Loss] 90,103 (122,802)
Net Income [Loss] Per Share .01 (.01)
Weighted Average Shares 13,459,576 13,459,502
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
April 30, 1995 May 1, 1994
Operating Activities:
Net Income [Loss] $ 90,103 $ (122,802)
Adjustments to Reconcile Net Income [Loss] to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 332,626 299,989
Allowance for Doubtful Accounts 43,940 37,199
Change in Assets and Liabilities:
[Increase] Decrease in:
Inventories (211,901) (825,136)
Prepaid Expenses (22,457) (39,453)
Other Assets (32,789) 85,655
Accounts Receivable (1,066,470) (955,545)
Miscellaneous Receivable 6,148 (35,867)
Increase [Decrease] in:
Accounts Payable 299,083 850,149
Accrued Expenses and Other Liabilities 409,124 49,999
Total Adjustments (242,696) (533,010)
Net Cash - Operating Activities (152,593) (655,812)
Investing Activities:
Capital Expenditures (376,093) (422,155)
Sale or Redemption of Investments --- 100,000
Net Cash - Investing Activities (376,093) (322,155)
Financing Activities:
Repayment of Debt (563,072) (170,688)
Proceeds from Debt 700,000 1,531,445
Net Cash - Financing Activities 136,928 1,360,757
Net Increase [Decrease] in Cash and
Cash Equivalents (391,758) 382,790
Cash and Cash Equivalents - Beginning of Years 1,408,957 1,071,461
Cash and Cash Equivalents - End of Quarter $ 1,017,199 $ 1,454,251
Supplemental Disclosures of Cash Flow Information:
Cash paid during the quarter for:
Interest $ 46,876 $ 32,385
Supplemental Disclosures of Non-Cash Investing and Financing Activities:
As of June 30, 1993, the Company acquired all of the outstanding common
stock of Mister Cookie Face for 1,000,000 shares of its common stock in a
business combination accounted for as a purchase. The purchase price of
$3,150,000 exceeded the fair value of the net assets acquired by $3,056,626.
Such amount was recorded as cost in excess of fair value and is being
amortized over 20 years under the straight-line method.
During the year ending January 30, 1994, the Company acquired $139,052 of
equipment which was financed through capital leases.
The accompanying notes are an integral part of these financial statements.
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The financial information included herein is unaudited, however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
statement of results of the interim period.
The results of operations for the three month periods ended April 30,
1995 and May 1, 1994 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2: EARNINGS PER SHARE
Earnings per share have been computed based on the weighted average
of outstanding common shares.
NOTE 3: INCOME TAXES
Effective January 1, 1993, the Company adopted FAS 109 "Accounting
for Income Taxes." The Company has a deferred tax asset of approximately
$4,677,700 arising from net operating loss carry forwards. However, due to
the uncertainty that the Company will generate income in the future
sufficient to fully or partially utilize these carry forwards, an allowance
of $4,677,700 has been established to offset this asset. The effect of
adoption on current and prior financial statements is immaterial.
NOTE 4: ACQUISITION
On July 23, 1993 (as of June 30, 1993), the Company acquired Mister
Cookie Face ["MCF"] for 1,000,000 shares of its common stock in a business
combination accounted for as a purchase. The purchase price of $3,150,000
exceeded the fair value of the net assets acquired by $3,056,626. Such amount
is being amortized over 20 years under the straight-line method.
NOTE 5: PUBLIC OFFERING
The Company is currently in registration for a public offering of
1,000,000 units consisting of two shares of Common Stock and two Warrants.
(An additional 150,000 units have been reserved for issuance pursuant to the
Underwriter's Overallotment Option). The Company's registration statement is
pending before the SEC and is currently the subject of an investigation by
the Staff of the SEC with regard to trading in the Company's Common Stock in
May and June, 1993 and the increase in the market price for the Common Stock
during such period. Management has informed the Staff that it is not aware of
any violations of applicable law or rules with respect to such trading or
increase in market price.
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
MANAGEMENT'S ANALYSIS OF THREE MONTH INCOME STATEMENT
RESULTS OF OPERATIONS
For the quarter ended April 30, 1995, the Company had income of $90,100
compared to a loss of $122,800 for the same period last year. Sales rose 12%
to $8,499,700 primarily due to increased sales at the Company's ice cream
sandwich manufacturing subsidiary, Mister Cookie Face ("MCF"). Segment
operation results are summarized below.
Restaurants
Restaurant operations sustained a loss of $75,200 for the quarter ended
April 30, 1995 compared to income of $24,100 for 1994. Sales for the first
quarter were $4,139,600, an increase of $300,600 or 7.8% over 1994 first
quarter sales of $3,839,000. A majority of the increase resulted from the
addition of the Belmar, New Jersey, Lobster Shanty. The restaurant, opened in
November 1994, had sales of $383,800 for the quarter. Last year's sales
included $124,600 for the Quakerbridge, New Jersey, LaCrepe restaurant, which
was closed in September, 1994. For the eight restaurants that operated
during the comparative periods, sales were $41,400 higher this year. The
addition of Belmar will raise the restaurant division's costs on a percentage
basis due to the higher costs inherent with operating the Company's seafood
restaurants versus the LaCrepe concept. However, the Belmar location will
also contribute a greater sales volume and should have a positive effect on
the restaurant division's overall results.
Gross profit for the first quarter was 66.5% of sales, essentially the same
as 1994's 66.6%. The reason for the slight decrease is that the Belmar
restaurant had a lower gross profit margin than the Quakerbridge LaCrepe
restaurant.
Payroll and related expenses were 31.2% of sales versus 29.8% in 1994. The
Belmar restaurant, because of higher payroll costs attributed to the opening
of this restaurant, was a major factor in the increase. Additionally, higher
workers' compensation premiums and payroll tax costs contributed to the
increase. Other operating costs were 22.1% of sales, a slight increase over
1994 first quarter's 21.6%. Promotional and other opening costs at Belmar
were the main components of the increase. Depreciation and amortization
costs were $14,000 higher during the first quarter this year, primarily as a
result of asset purchases and restaurant improvements. General and
administration expenses were $50,000 higher this year primarily resulting
from higher health insurance and payroll costs.
Interest expense was $3,000 higher during this year's first quarter due to
the three-year $150,000 bank loan used for the Belmar purchase and a higher
prime rate versus 1994. Interest income was $6,000 higher this year due to
higher interest rates available for short-term investments.
Mister Cookie Face ("MCF")
MCF realized income of $165,300 for the first quarter ended April 30, 1995,
compared to a loss of $146,900 in 1994. Sales increased by $643,600 to
$4,360,000 for the first quarter. Promotions in existing markets and expansion
into new markets account for the increase.
Gross profit was 38.4% of sales this year compared to 34.5% last year. A
reduction in raw material costs more than offset higher promotional price
discounts given to supermarket chains resulting in an overall lower cost of
goods sold.
Other operating costs were 25% of sales in 1995 compared to 30.5% in 1994.
The improvement is largely due to the sales volume increase and lower
slotting fees (fees paid to supermarket chains for retail shelf space).
Slotting fees are lower this year due to introduction of fewer new products.
Depreciation and amortization expenses increased by $18,300 due to plant
equipment purchases, plant upgrades incurred in 1994 and equipment purchases and
improvements incurred at the Mister Cookie Face restaurant which opened in
May. General and administrative expenses increased by $69,900 primarily due
to increased payroll and plant utility costs.
Interest expense increased by $18,400 due to borrowings on the two-year
revolving line of credit secured in February 1994 used to fund the planned
MCF expansion in lieu of a public offering which was halted by the SEC in
September of 1993.
Subsequent to April 30, 1995 the first Mister Cookie Face Restaurant opened
for business in a strip mall in Manalapan, New Jersey. Customer feedback has
been positive which is reflected in increasing weekly sales volume.
Liquidity and Capital Resources
The Company's ratio of current assets to current liabilities was .96:1 at
April 30, 1995, compared to 1.45:1 at January 29, 1995. Working capital
decreased by $1,411,300 during the first quarter primarily due to profits
offset by capital expenditures of $376,000 and an increase in short-term debt
of $1,500,000. The largest component of the debt increase is the
reclassification of the two-year, $2,000,000 revolving credit line, which
matures in February 1996, from long-term to short-term. Preliminary
discussions with bank officials have been favorable as to a conversion of
the line to a term loan payable over several years. During the first quarter
of 1994, working capital increased by $1,125,000 primarily as a result of
draws from the $2,000,000 revolving credit line amounting to $1,225,000 and
new capital lease funding of $306,400 offset by capital expenditures totaling
$420,200 and debt repayment of $135,600.
During the first quarter ended April 30, 1995, the Company's $350,000 line
of credit secured by the Toms River, New Jersey restaurant was renewed. At
April 30, 1995, the available balance was $350,000. Additionally,
management secured a six month $500,000 bank note which was used to reduce
the balance of the $2,000,000 revolving credit line. Available funds
remaining under the $2,000,000 revolving credit line were $1,075,000 at April
30, 1995.
Subsequent to the period ending April 30, 1995, an additional $100,000 was
drawn from the $2,000,000 revolving credit line for MCF working capital needs.
Management anticipates that funds from operations and the two lines of
credit will be sufficient to meet obligations throughout the balance of
fiscal 1996, including routine capital expenditures.
Inflation
It is not possible for the Company to predict with any accuracy the effect
of inflation upon the results of its operations in future years. The price
of food is extremely volatile and projections as to its performance in the
future vary and are dependent upon a complex set of factors. The Company is
currently experiencing food cost increases due to higher seafood prices
resulting from fishing quotas in New England and higher produce prices due to
Midwest floods.
PART II - OTHER INFORMATION - none
SIGNATURE
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.
CHEFS INTERNATIONAL, INC.
/s/Anthony C. Papalia
ANTHONY C. PAPALIA
Principal Financial Officer
DATED: June 14, 1995
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CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENTS OF OPERATIONS
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