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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 January 31, 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 February 28, 1995
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<TABLE>
<S> <C>
Membership Common Stock 582
Store Common Stock 5695
</TABLE>
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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 January 31, 1995 and 1994 3
Condensed Consolidated Balance Sheets
January 31, 1995 and October 31, 1994 4
Consolidated Statements of Cash Flows
Three months ended January 31, 1995 and 1994 5
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
Part II - Other Information
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Item 4 Submission of Matters to a Vote of Security - Holders 8
Item 6 Exhibits and Reports on Form 8-K 8
Signatures 9
</TABLE>
2
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Part I - Financial Information
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Item 1. Financial Statements
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Expenses
For the three months ended January 31, 1995 and 1994
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net sales $ 133,249,195 121,615,950
Cost of goods sold
130,081,173 118,767,513
Gross profit
3,168,022 2,848,437
Selling, general and administrative expenses 2,655,907 2,377,399
Provision for losses on receivables 39,148 177,268
Other income (expenses):
Service charges 23,547 84,478
Interest income 70,113 33,752
Interest expense (73,780) (80,101)
Miscellaneous 36,654 4,292
56,534 42,421
Income before patronage
dividend and income taxes 529,501 336,191
Patronage dividend 235,498 169,639
Income before income taxes 294,003 166,552
Provision for income taxes 84,040 71,361
Net income $ 209,963 95,191
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
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KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
January 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
Assets January 31, October 31,
1995 1994
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,942,152 614,450
Accounts receivable, less allowance for
losses of $1,152,833 at January 31, 1995 32,183,765 35,503,417
Inventories:
Food and packaging inventories 1,235,313 1,379,814
Equipment 2,223,171 2,820,846
3,458,484 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 17,905 49,220
Prepaid expenses and other current assets 101,690 117,196
Current portion of deferred income taxes 542,228 593,000
Total Current Assets 42,349,583 41,181,302
Office equipment, net 836,380 896,501
Note receivable from related party, excluding current portion 295,136 319,101
Deferred income taxes, excluding current portion 171,089 113,088
Other assets 230,709 258,254
$43,882,897 42,768,246
Liabilities and Member's Equity
Current Liabilities:
Short-term borrowings $ 867,844 533,966
Accounts payable 22,470,770 19,625,427
Accrued expenses 1,754,992 4,266,270
Premium deposits 375,398 375,028
Patronage dividend 804,374 568,876
Total Current Liabilities 26,273,378 25,369,567
Long-term note payable 3,000,000 3,000,000
Commitments and Contingencies
Members' Equity:
Membership common stock 5,820 5,850
Store common stock 1,553,245 1,542,886
Retained earnings 13,097,399 12,887,436
Currency translation adjustment (46,945) (37,493)
14,609,519 14,398,679
$43,882,897 42,768,246
</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 Statements of Cash Flows
For the three months ended January 31, 1995 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 209,963 95,191
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 144,633 137,326
Provision for losses on receivables 39,148 177,268
Deferred income tax benefit (7,229) (54,801)
Changes in operating assets and liabilities:
Decrease in accounts receivable 3,280,504 4,770,415
Decrease in inventories 742,176 955,389
Decrease in refundable income taxes 0 83,546
(Increase) decrease in prepaid expenses
and other current assets 15,506 (13,372)
Increase (decrease) in accounts payable 2,845,343 (1,585,640)
Decrease in accrued expenses (2,511,278) (98,701)
Increase (decrease) in premium deposits 370 (9,530)
Increase in patronage dividend 235,498 169,639
Net cash provided by operating activities 4,994,634 4,626,730
Cash Flows from Investing Activities:
Decrease in note receivable from related party 23,965 24,243
Decrease in notes receivable, net 31,315 450,911
Decrease in other assets, net 0 15,503
Additions to office equipment (56,967) (33,118)
Net cash provided by (used in) investing activities (1,687) 457,539
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings 333,878 (5,178,810)
Proceeds from sale of stock, net of costs 15,969 225,796
Retirement of stock (5,640) (33,800)
Net cash provided by (used in) financing activities 344,207 (4,986,814)
Effect of exchange rate changes on cash and cash equivalents (9,452) (1,094)
Net increase in cash and cash equivalents 5,327,702 96,361
Cash and cash equivalents, net of checks drawn in excess of bank
balance - beginning of year 614,450 (61,361)
Cash and cash equivalents - end of period $ 5,942,152 35,000
Supplemental information:
Income taxes paid $ 0 0
Interest paid $ 73,780 80,013
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
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NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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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 three months ended January 31, 1995, are not necessarily
indicative of the operating results for the entire year.
Results of Operations
First Three Months of Fiscal 1995 Compared to the First Three Months of Fiscal
1994.
A comparison of material changes between the three months ended January 31,
1995, and the comparable period for the previous year shows:
Net sales for the first quarter of 1995 increased by $11,633,245 or 9.57% from
the first quarter of 1994. The increase in sales volume was primarily
attributable to KFC, both U.S. and Canada, and Dairy Queen sales. The increase
in sales was primarily food and paper products. A significant portion of the
increase was from items associated with the "Mega Meal" promotion for KFC
operators in the U.S. Taco Bell equipment sales also resulted in an increase
over the prior year, while KFC equipment sales were below the first quarter of
1994.
Gross profit as a percentage of sales for the first three months of 1995
increased to 2.38% 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 $278,508 from 1994 to
1995. The added expenses are attributable to staffing requirements for the
development of new concepts. Management is constantly monitoring costs to
provide the required service at the lowest cost to the stockholder members.
The provision for losses on uncollectible accounts was increased normally.
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 concepts and their relative
contribution to income before patronage dividend and taxes.
6
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Financial Condition at January 31, 1995 Compared to Financial Condition at
October 31, 1994.
Net working capital at January 31, 1995, was $16,076,205, which is a modest
increase of $264,470 since October 31, 1994. Cash and cash equivalents
increased by $5,327,702, accrued expenses decreased by $2,511,278. This was
offset by a decrease in accounts receivable of $3,319,652 and inventories of
$742,176, and an increase in accounts payable by $2,845,343 and short-term
borrowings by $333,878. Patronage dividend also reflected an increase of
$235,498. The significant cash position at January 31, 1995 was attributable
to collection of receivables associated with promotional items for which the
Cooperative acquired letters of credit. These letters of credit were paid on
February 1, 1995, reducing the cash position to normal levels.
7
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Part II - Other Information
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Item 4. Submission of Matters to a Vote of Security - Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K - None
8
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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.
Date: March 15, 1995 KFC National Purchasing Cooperative, Inc.
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By: /s/ Thomas D. Henrion
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Thomas D. Henrion, President
Date: March 15, 1995 By: /s/ William V. Holden
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William V. Holden,
Vice President/Chief
Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JAN-31-1995
<CASH> 5,942,152
<SECURITIES> 0
<RECEIVABLES> 33,336,598
<ALLOWANCES> 1,152,833
<INVENTORY> 3,458,484
<CURRENT-ASSETS> 42,349,583
<PP&E> 3,116,190
<DEPRECIATION> 2,279,810
<TOTAL-ASSETS> 43,882,897
<CURRENT-LIABILITIES> 26,273,378
<BONDS> 3,000,000
<COMMON> 1,559,065
0
0
<OTHER-SE> 13,050,454
<TOTAL-LIABILITY-AND-EQUITY> 43,882,897
<SALES> 133,249,195
<TOTAL-REVENUES> 133,249,195
<CGS> 130,081,173
<TOTAL-COSTS> 130,081,173
<OTHER-EXPENSES> 2,655,907
<LOSS-PROVISION> 39,148
<INTEREST-EXPENSE> 73,780
<INCOME-PRETAX> 529,501
<INCOME-TAX> 84,040
<INCOME-CONTINUING> 209,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 209,963
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
