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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended April 30, 1995 Commission file number 0-23496
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KFC National Purchasing Cooperative, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 61-0946155
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
950 Breckenridge Lane, Louisville, KY 40207
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(address of principal executive offices) (zip code)
Registrant's telephone number, including area code (502) 896-5900
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Former name, former address and former fiscal year,
if changed 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 for the past 90 days. Yes X No .
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Number of shares of common stock outstanding as of May 31, 1995
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Membership Common Stock 579
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Store Common Stock 5708
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KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT FORM 10-Q
<TABLE>
<CAPTION>
Part 1 - Financial Information
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Page (s)
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<S> <C>
Item 1 Financial Statements
Condensed Consolidated Statements of Income
and Expenses
Three months ended April 30, 1995 and 1994 3
Condensed Consolidated Statements of Income
and Expenses
Six months ended April 30, 1995 and 1994 4
Condensed Consolidated Balance Sheets
April 30, 1995 and October 31, 1994 5
Consolidated Statements of Cash Flows
Six months ended April 30, 1995 and 1994 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-8
Part II - Other Information
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Item 4 Submission of Matters to a Vote of Security - Holders 9
Item 6 Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
2
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Part I - Financial Information
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Expenses
For the three months ended April 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net sales $121,592,775 123,840,615
Cost of goods sold 118,671,467 120,935,350
Gross profit 2,921,308 2,905,265
Selling, general and administrative expenses 2,654,723 2,644,791
Provision for losses on receivables 37,989 36,867
Other income (expenses):
Service charges 30,025 67,595
Interest income 77,644 29,542
Interest expense (71,515) (47,783)
Miscellaneous 19,905 (19,330)
56,059 30,024
Income before patronage
dividend and income taxes 284,655 253,631
Patronage dividend 75,239 97,858
Income before income taxes 209,416 155,773
Provision for income taxes 49,545 78,878
Net income $ 159,871 76,895
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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Part I - Financial Information
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Expenses
For the six months ended April 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net sales $254,841,898 245,456,565
Cost of goods sold 248,752,640 239,702,863
Gross profit 6,089,258 5,753,702
Selling, general and administrative expenses 5,310,628 5,022,190
Provision for losses on receivables 77,139 214,135
Other income (expenses):
Service charges 53,572 152,073
Interest income 147,757 63,294
Interest expense (145,295) (127,884)
Miscellaneous 56,631 (15,039)
112,665 72,444
Income before patronage
dividend and income taxes 814,156 589,821
Patronage dividend 310,737 267,497
Income before income taxes 503,419 322,324
Provision for income taxes 133,585 150,239
Net income $ 369,834 172,085
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
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KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Assets April 30, October 31,
1995 1994
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 803,118 614,450
Accounts receivable, less allowance for
losses of $1,052,993 at April 30, 1995 29,698,499 35,503,417
Inventories:
Food and packaging inventories 1,750,328 1,379,814
Equipment 1,181,293 2,820,846
2,931,621 4,200,660
Refundable income taxes 43,359 43,359
Current portion of note receivable from related party 60,000 60,000
Current portion of notes receivable 2,806 49,220
Prepaid expenses and other current assets 56,506 117,196
Current portion of deferred income taxes 554,386 593,000
Total Current Assets 34,150,295 41,181,302
Office equipment, net 776,971 896,501
Note receivable from related party, excluding current portion 285,243 319,101
Deferred income taxes, excluding current portion 166,936 113,088
Other assets 204,816 258,254
$35,584,261 42,768,246
Liabilities and Member's Equity
Current Liabilities:
Short-term borrowings $ 1,027,046 533,966
Accounts payable 14,659,518 19,625,427
Accrued expenses 1,433,212 4,266,270
Premium deposits 371,907 375,028
Patronage dividend 310,738 568,876
Total Current Liabilities 17,802,421 25,369,567
Long-term note payable 3,000,000 3,000,000
Commitments and Contingencies
Members' Equity:
Membership common stock 5,790 5,850
Store common stock 1,556,063 1,542,886
Retained earnings 13,257,270 12,887,436
Currency translation adjustment (37,283) (37,493)
14,781,840 14,398,679
$35,584,261 42,768,246
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended April 30, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 369,834 172,085
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 232,891 255,758
Provision for losses on receivables 77,139 214,135
Deferred income tax benefit (15,234) (61,755)
Changes in operating assets and liabilities:
Decrease in accounts receivable 5,727,779 1,041,785
Decrease in inventories 1,269,039 2,265,296
Decrease in refundable income taxes 0 83,546
(Increase) decrease in prepaid expenses and other current assets 60,690 (7,578)
Decrease in accounts payable (4,965,909) (673,688)
Increase (decrease) in accrued expenses (2,833,058) 55,559
Decrease in premium deposits (3,121) (11,144)
Decrease in patronage dividend (258,138) (620,585)
Net cash provided by (used in) operating activities (338,088) 2,713,414
Cash Flows from Investing Activities:
Decrease in note receivable from related party 33,858 36,148
Decrease in notes receivable, net 46,414 680,577
Decrease in other assets, net 53,438 44,560
Additions to office equipment (113,361) (84,828)
Net cash provided by investing activities 20,349 676,457
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings 493,080 (3,433,438)
Proceeds from sale of stock, net of costs 31,260 229,026
Retirement of stock (18,143) (34,210)
Net cash provided by (used in) financing activities 506,197 (3,238,622)
Effect of exchange rate changes on cash and cash equivalents 210 (9,236)
Net decrease in cash and cash equivalents 188,668 142,013
Cash and cash equivalents, net of checks drawn in excess of bank
balance - beginning of period 614,450 (61,361)
Cash and cash equivalents - end of period $ 803,118 80,652
Supplemental information:
Income taxes paid $ 124,900 25,750
Interest paid $ 134,254 127,884
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
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NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements are presented in accordance with the
requirements of Form 10-Q and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the registrant's annual Form 10-K filing. Accordingly,
the reader of this Form 10-Q may wish to refer to the registrant's Form 10-K
for the year ended October 31, 1994, for further information in this regard.
The accompanying financial statements for comparative purposes have been made
to conform to the format of the registrant's Form 10-K for the year ended
October 31, 1994, and have been prepared in accordance with the registrant's
customary accounting practices and have not been audited. In the opinion of
management, all adjustments (consisting of only normal recurring accruals)
necessary for fair presentation of this information have been made.
Item 2. Management's Discussion and Analysis of Financial Position and Results
of Operation.
The following discussion and analysis of financial condition and the condensed
consolidated results of operations should be read in conjunction with
management's discussion and analysis of financial condition and results of
operations in the company's October 31, 1994, Form 10-K. The results of
operations for the six months ended April 30, 1995, are not necessarily
indicative of the operating results for the entire year.
Results of Operations
First Six Months of Fiscal 1995 Compared to the First Six Months of Fiscal
1994.
A comparison of material changes between the six months ended April 30, 1995
and the comparable period for the previous year shows:
Net sales increased by $9,385,333 or 3.8% from the first six months of 1995
compared to 1994. The increase in sales volume was primarily attributable to
increased food and paper sales to KFC and Dairy Queen concepts. Equipment sales
for the period are lagging behind 1994 volumes, primarily with the KFC concept.
Gross profit as a percentage of sales for the first six months of 1995
increased to 2.39% from 2.34% in 1994. The small increase between the two
periods demonstrates the continuity of pricing strategies from 1994 to 1995.
Gross margins are constantly being evaluated to provide competitive prices to
our customers while maintaining the level of service required to fulfill the
Cooperative's mission.
Selling, general and administrative expenses increased by $288,438 from 1994 to
1995. The added expenses are attributable to staffing requirements needed to
meet the demand of additional services to our base business as well as the
diversification of sales and product lines associated with the development of
new concepts business.
The provision for losses on uncollectible accounts decreased by $136,996.
Management believes the current provision to be adequate.
The provision for Patronage Dividend for 1995 has been calculated and accrued
on a formula approved by the Board of Directors. Patronage dividends for
fiscal 1995 will be calculated based on membership concepts and their relative
contribution to income before patronage dividend and taxes.
7
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Second Quarter Fiscal 1995 Compared to Second Quarter Fiscal 1994
Sales for the second quarter of 1995 reflects an decrease of $2,247,840 over
the second quarter of 1994, primarily driven by lower equipment volumes. This
decrease was mitigated by the increase in KFC, both US and Canada, food and
paper sales for the quarter. Gross margin for 1995 was 2.40%, an increase from
2.35% in 1994.
Financial Condition at April 30, 1995 Compared to Financial Condition at
October 31, 1994.
Net working capital (current assets less current liabilities) at April 30,
1995, was $16,347,874, which is an increase of $536,139 since October 31, 1994.
Accounts receivables decreased by $5,804,918, as did inventories by $1,269,039,
and short-term borrowings increased by $493,080. These were offset by a
decrease in accounts payable by $4,965,909, accrued expenses by $2,833,058 and
patronage dividend by $258,138.
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Part II - Other Information
Item 4. Submission of Matters to a Vote of Security - Holders
The annual meeting of the stockholder members (the "Annual Meeting") of the KFC
National Purchasing Cooperative, Inc. ("The Cooperative") was held on Tuesday,
February 28, 1995, at 4:45 p.m., at the MGM Grand Hotel, Las Vegas, Nevada.
At the Annual Meeting, the following Class I, II and III Directors were elected
by stockholder members:
<TABLE>
<CAPTION>
Series Class Director
------ ----- --------
<S> <C> <C>
L I James B. Royster
L I Kenneth E. Monroe
N I Darrell M. Dunafon
O I Grover Moss
I III Ian A. Mackay
</TABLE>
The following persons are Class II and III Directors whose terms of office will
end either in 1996 or 1997 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
Series Director Term
------ -------- ----
<S> <C> <C>
J Edward Henriquez 1996
A Jack M. Richards 1997
E David Neal 1997
F William E. Allen 1997
H Leon W. Harman 1997
M Ronald J. Young 1997
B Robert P. Peck 1996
C Ronald Giles 1996
D Calvin G. White 1996
G Charles Buckner 1996
Independent Edward W. Rhawn 1996
K Vacant (A)
K Vacant (A)
</TABLE>
(A) No nominations were received from KFC National Management
Company to fill the Class II vacancies created with the
Series K Directors resignation during 1989.
(B) Mr. Giles was elected to complete the remainder of the
unexpired term of J. George Freide upon Mr. Friede's
retirement.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - Exhibit 27 Financial Data Schedule (For SEC Use
Only)
(b) Reports on Form 8-K - None
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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.
KFC National Purchasing Cooperative, Inc.
Date: June 14, 1995 By: /s/ Thomas D. Henrion
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Thomas D. Henrion, President
Date: June 14, 1995 By: /s/ William V. Holden
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William V. Holden,
Vice President/Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> APR-30-1995
<CASH> 803,118
<SECURITIES> 0
<RECEIVABLES> 30,751,492
<ALLOWANCES> 1,052,993
<INVENTORY> 2,931,621
<CURRENT-ASSETS> 34,150,295
<PP&E> 3,175,829
<DEPRECIATION> 2,398,858
<TOTAL-ASSETS> 35,584,261
<CURRENT-LIABILITIES> 17,802,421
<BONDS> 3,000,000
<COMMON> 1,561,853
0
0
<OTHER-SE> 13,219,987
<TOTAL-LIABILITY-AND-EQUITY> 35,584,261
<SALES> 254,841,898
<TOTAL-REVENUES> 254,841,898
<CGS> 248,752,640
<TOTAL-COSTS> 248,752,640
<OTHER-EXPENSES> 5,310,628
<LOSS-PROVISION> 77,139
<INTEREST-EXPENSE> 145,295
<INCOME-PRETAX> 503,419
<INCOME-TAX> 133,585
<INCOME-CONTINUING> 369,834
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 369,834
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
