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 OCTOBER 29, 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 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 December 8, 1995
Common Stock, $.01 par value 13,459,615
CHEFS INTERNATIONAL, INC.
I N D E X
PART I FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheet - 1 - 2
October 29 , 1995
Consolidated Statements of Operations - 3
Nine Months Ended October 29, 1995 and
October 30, 1994
Consolidated Statements of Cash Flows - 4 - 5
Nine Months Ended October 29, 1995 and
October 30, 1994
Notes to Consolidated Financial Statements 6
Management's Analysis of Nine Months' Income 7 - 9
Statement
PART II OTHER INFORMATION 10
PART I - FINANCIAL INFORMATION
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF OCTOBER 29, 1995 (UNAUDITED)
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,581,326
Investments 100,000
Accounts Receivable [Net of Allowance of $61,059] 618,203
Miscellaneous Receivables 105,547
Inventories 2,090,331
Prepaid Expenses 147,004
Total Current Assets $ 4,642,411
Property, Plant and Equipment - At Cost $19,716,741
Less: Accumulated Depreciation 6,976,021
Property, Plant and Equipment - Net $12,740,720
Other Assets:
Investments $ 606,000
Goodwill - Net 3,391,734
Liquor Licenses - Net 758,518
Due from Employees 21,944
Deposits and Other Assets 79,721
Total Other Assets $ 4,857,917
Total Assets $22,241,048
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 1,048,376
Accrued Expenses 1,182,189
Notes and Mortgages Payable to Banks 1,356,500
Other Liabilities 161,090
Due to Related Parties 120,000
Capital Lease Obligations - Current 91,219
Total Current Liabilities $ 3,959,374
Long-Term Debt:
Notes and Mortgages Payable to Banks $ 50,000
Capital Lease Obligations - Long-Term 207,618
Total Long-Term Debt $ 257,618
Other Liabilities $ 82,396
Commitments and Contingencies ---
Stockholders' Equity:
Capital Stock - Common, $.01 Par Value, Authorized 50,000,000
Shares; Issued and Outstanding 13,459,615 $ 134,595
Additional Paid-in Capital 32,212,586
Accumulated [Deficit] (14,405,521)
Total Stockholders' Equity $17,941,660
Total Liabilities and Stockholders' Equity $22,241,048
The accompanying notes are an integral part of these financial statements.
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended Three Months Ended
Oct 29, 1995 Oct 30, 1994 Oct 29, 1995 Oct 30, 1994
<S> <C> <C> <C> <C>
Sales $26,686,422 $27,078,605 $ 7,775,326 $ 7,881,783
Cost of Goods Sold 12,846,745 13,655,787 3,651,471 3,793,335
Gross Profit $13,839,677 $13,422,818 $ 4,123,855 $ 4,088,448
Operating Expenses[Income]:
Payroll and Related Expenses $ 4,104,830 $ 3,663,759 $ 1,317,638 $ 1,201,721
Other Operating Expenses 5,999,648 6,387,329 1,862,137 2,039,579
Depreciation and Amortization 1,025,108 920,175 347,375 310,304
General and Administrative
Expenses 1,940,152 1,753,094 646,571 630,808
Gain on Sale of Assets --- (77,024) --- (77,024)
Total Operating Expenses $13,069,738 $12,647,333 $ 4,173,721 $ 4,105,388
Income from Operations $ 769,939 $ 775,485 $ (49,866) $ (16,940)
Other Income [Expense]:
Interest Expense $ (164,381) $ (154,073) $ (48,172) $ (55,578)
Interest Income 70,397 52,861 24,628 20,050
Total Other [Expense] - Net $ (93,984) $ (101,212) $ (23,544) $ (35,528)
Income[Loss] Before
Income Taxes $ 675,955 $ 674,273 $ (73,410) $ (52,468)
Income Tax Expense [Current] --- --- --- ---
Net Income[Loss] $ 675,955 $ 674,273 $ (73,410) $ (52,468)
Net Income[Loss] Per Share $ .05 $ .05 $ (.01) $ ---
Weighted Average Shares 13,459,615 13,459,502 13,459,615 13,459,502
</TABLE>
The accompanying notes are an integral part of these financial statements.
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
October 29, 1995 October 30, 1994
Operating Activities:
Net Income $ 675,955 $ 674,273
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization $ 1,025,108 $ 920,175
Allowance for Doubtful Accounts 57,181 (8,750)
(Gain) on Sale of Assets --- (77,024)
Change in Assets and Liabilities:
[Increase] Decrease in:
Inventories (329,058) (638,329)
Prepaid Expenses ( 53,299) ( 3,704)
Other Assets ( 39,561) 29,733
Accounts Receivable (292,246) (376,376)
Miscellaneous Receivable 23,128 6,621
Increase [Decrease] in:
Accounts Payable (422,973) (398,568)
Accrued Expenses and
Other Liabilities 680,338 259,988
Total Adjustments $ 648,618 $ 286,234
Net Cash - Operating Activities $ 1,324,573 $ 388,039
Investing Activities:
Capital Expenditures $ (656,114) $ (735,520)
Restaurant Acquisition --- (250,000)
Proceeds from Sale of Assets --- 211,273
Sale or Redemption of Investments --- 147,000
Net Cash - Investing Activities $ (656,114) $ (627,247)
Financing Activities:
Repayment of Debt $(1,396,090) $(1,583,401)
Proceeds from Debt 900,000 2,600,618
Net Cash - Financing Activities $ (496,090) $ 1,017,217
Net Increase [Decrease] in Cash and
Cash Equivalents $ 172,369 $ 778,009
Cash and Cash Equivalents -
Beginning of Years $ 1,408,957 $ 1,071,461
Cash and Cash Equivalents -
End of Quarter $ 1,581,326 $ 1,849,470
Supplemental Disclosures of Cash Flow Information:
Cash paid during the quarter for:
Interest $ 155,715 $ 145,013
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 nine month periods ended October 29,
1995 and October 30, 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 $4,474,900
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 $4,474,900 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
In August 1993, the Company filed a registration statement for a public
offering of 1,000,000 units consisting of two shares of Common Stock and two
Warrants. (An additional 150,000 units were reserved for issuance pursuant to
the Underwriter's Overallotment Option). The Company's registration statement is
currently the subject of an investigation by the Staff of the SEC with regard
to, among other matters, 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 NINE MONTH INCOME STATEMENT
RESULTS OF OPERATIONS
For the nine months ended October 29, 1995, the Company had sales of
$26,686,400 a decrease of $392,200 versus the same period in 1994. For the
quarter ended October 29, 1995, sales were $7,775,300, $106,500 less than last
year. The Company realized a profit of $676,000 for the nine month period
compared to a profit of $674,300 in 1994. For the quarter ended October 29,
1995, the Company had a loss of $73,400 compared to a quarterly loss of $52,500
in 1994. Segment operating results are summarized below.
Restaurants
Restaurant sales were $13,807,700 for the nine months and $4,558,900 for the
third quarter compared to $12,947,000 and $4,242,500 for the comparable periods
in 1994. The Company operated nine restaurants during the comparable periods.
However, 1995 sales included the Belmar, New Jersey, Lobster Shanty restaurant
which opened in November 1994, while 1994 sales included the Quakerbridge, New
Jersey, LaCrepe, which was sold in September 1994. The Belmar restaurant had
sales of $1,342,900 for nine months and $419,800 for the quarter ended October
29, 1995 while the Quakerbridge restaurant had 1994 sales of $314,600 and
$68,100 respectively. For the eight restaurants that operated during the
comparative periods, sales were $167,600 lower for the more recent nine month
period and $39,300 lower for the quarter ended October 29, 1995.
Restaurant operations had net earnings of $467,600 for the nine months ended
October 29, 1995 compared to net earnings of $809,300 for the same period in
1994. The primary reasons for the decline in net earnings were higher cost of
sales, increased payroll costs, and increased general and administrative costs.
In 1994 earnings included a gain on the sale of a restaurant. For the quarter,
net earnings were $163,900 in 1995 compared to $263,800 last year.
Gross profit was 67% of sales for the nine month period and 66.8% for the
quarter compared to 67.2% for both 1994 periods. The slight decrease is due
primarily to increases in the cost of seafood. Management did raise menu prices
modestly to offset some of the higher costs.
Payroll and related expenses were 29% of sales for nine months and 28.4% for
the quarter compared to 28.3% for both periods last year. The increase resulted
from wage increases, higher payroll taxes and workers compensation rates, and
the effect of lower sales at restaurants that operated during the comparable
periods. Other operating expenses were 20.5% of sales for nine months and 20.4%
for the quarter compared to 19.6% and 19.2% last year. The major components of
the increase were higher advertising and promotional expenses, higher paper and
packaging costs resulting from nationwide paper increases, and increased
occupancy costs primarily attributed to Belmar. Depreciation and amortization
costs increased by $43,700 and $15,800 respectively for the nine months and
quarter compared to last year, primarily as a result of asset purchases and
restaurant improvements. General and administrative costs were $139,200 higher
for the nine months and $6,000 lower for the quarter than last year's
comparable periods. The main components of the increase included an increase in
group health insurance costs of $70,000 resulting from a year of higher medical
claims versus premiums paid, increased payrolls and related expenses of $47,500
resulting from wage increases and increased property and liability insurance
costs of $21,600. The 1994 gain on the sale of assets of $77,000 resulted from
the sale of the Company's Quakerbridge, New Jersey restaurant.
Interest expenses were lower for both periods compared to 1994 due to debt
reduction. Interest income was higher for both periods in the current year due
to higher interest rates available for short-term investments.
Mister Cookie Face ("MCF")
MCF sales were $12,878,700 for the nine months and $3,216,400 for the quarter
ended October 29, 1995 compared to $14,131,600 and $3,639,300 last year. The
primary reason for the sales decrease was increased competition from several new
novelty ice cream products vying for the limited space available in supermarket
display cases. Additionally, the Company spent less funds on slotting fees
needed to introduce MCF products into new markets and new MCF products into
existing markets.
MCF had net earnings of $208,400 for the nine months and a loss of $237,000
for the quarter ended October 29, 1995 compared to losses of $135,000 and
$316,300 last year.
Gross profit was 35.8% of sales for the nine months and 33.5% for the quarter
ended October 29, 1995 versus 33.4% and 34% last year. Lower ice cream costs
and modest price increases in selective markets more than offset increased
packaging costs and higher promotional price discounts given to supermarket
chains.
Other operating costs were 24.6% and 29% of sales for the nine and three month
periods ended October 29, 1995 compared to 27.3% and 33.7% last year. The
improvement is largely due to a $400,000 decrease in slotting fees for the nine
months and approximately $369,000 less in advertising and promotion expenses.
The 1994 expenses included a radio advertising campaign which was not repeated
this year. Depreciation and amortization costs increased by $61,200 and $21,000
for the two periods versus last year due to plant capital expenditures and
equipment purchases and improvements incurred at the Mister Cookie Face
restaurant. General and administrative costs were $47,800 higher for the 9
months and $21,000 higher for the third quarter this year primarily due to
increased payroll and plant utility costs offset by lower bad debt costs.
In May, the Mister Cookie Face restaurant was opened. However, due to
disappointing sales, the restaurant was closed in September. MCF net earnings
for nine months ended October 29, 1995 include a loss of $142,700 at the
restaurant.
Interest expense increased by $15,700 compared to 1994 due to borrowings on
the two-year revolving line of credit secured in February 1994 to fund MCF in
lieu of a public offering which was halted by the SEC in September 1993, and to
interest charges on a six month $500,000 bank note secured during the first
quarter ended April 30, 1995.
Liquidity and Capital Resources
The Company's ratio of current assets to current liabilities was 1.17:1 at
October 29, 1995, compared to 1.45:1 at January 29, 1995. Despite profits of
$676,000, working capital decreased by $512,100 due to capital expenditures of
$656,100 and an increase in short-term debt of $1,023,500. Capital expenditures
included $358,100 for restaurants and $298,000 for MCF operations. The largest
component of the debt increase is the reclassification of the two-year,
$2,000,000 revolving line of credit, which matures in February 1996, from
long-term to short-term. Discussions with bank officials have been favorable
concerning a conversion of a substantial portion of the line to a term loan
payable over several years.
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 October
29, 1995, the available balance was $350,000. Available funds remaining under
the $2,000,000 revolving line of credit were $875,000 at October 29, 1995.
Subsequent to the period ended October 29, 1995, management executed an
agreement giving the Company the right to develop Mexican themed restaurants
under the trade name "Garcias". Additionally, the Company entered into a new
lease for the Eatontown, New Jersey, LaCrepe restaurant. The restaurant will be
closed and renovated and will open in the spring of 1996 as the Company's first
"Garcias" restaurant.
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 and paper cost increases due to supply shortages.
CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES
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: December 12, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-END> OCT-29-1995
<CASH> 1,581,326
<SECURITIES> 0
<RECEIVABLES> 679,262
<ALLOWANCES> 61,059
<INVENTORY> 2,090,331
<CURRENT-ASSETS> 4,642,411
<PP&E> 19,716,741
<DEPRECIATION> 6,976,021
<TOTAL-ASSETS> 22,241,048
<CURRENT-LIABILITIES> 3,959,374
<BONDS> 0
<COMMON> 134,595
0
0
<OTHER-SE> 17,807,065
<TOTAL-LIABILITY-AND-EQUITY> 22,241,048
<SALES> 26,686,422
<TOTAL-REVENUES> 26,686,422
<CGS> 12,846,745
<TOTAL-COSTS> 13,069,738
<OTHER-EXPENSES> 93,984
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 675,955
<INCOME-TAX> 0
<INCOME-CONTINUING> 675,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 675,955
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
