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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, 1996 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 29, 1996
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Membership Common Stock 582
Store Common Stock 5806
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KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
INDEX TO QUARTERLY REPORT FORM 10-Q
<TABLE>
<CAPTION>
Part 1 - Financial Information
Page (s)
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<S> <C>
Item 1 Financial Statements
Condensed Consolidated Statements of Income
and Expenses
Three months ended January 31, 1996 and 1995 3
Condensed Consolidated Balance Sheets
January 31, 1996 and October 31, 1995 4
Consolidated Statements of Cash Flows
Three months ended January 31, 1996 and 1995 5
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-7
Part II - Other Information
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
Item 1Financial Statements
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Expenses
For the three months ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
NET SALES $136,958,035 133,249,195
Cost of goods sold 133,462,999 130,081,173
Gross profit 3,495,036 3,168,022
Selling, general and administrative expenses 2,665,846 2,655,907
Provision for losses on receivables 66,484 39,148
Other income (expenses):
Service charges 26,755 23,547
Interest income 105,772 70,113
Interest expense (67,169) (73,780)
Miscellaneous 17,692 36,654
83,050 56,534
Income before patronage
dividend and income taxes 845,756 529,501
Patronage dividend 463,068 235,498
Income before income taxes 382,688 294,003
Provision for income taxes 151,959 84,040
Net income $ 230,729 209,963
</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, 1996
(Unaudited)
<TABLE>
<CAPTION>
Assets January 31, October 31,
1996 1995
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 5,338,514 2,443,168
Accounts receivable, less allowance for
losses of $1,246,124 at January 31, 1996 29,220,909 35,365,297
Inventories:
Food 2,267,641 1,610,106
Equipment 1,168,461 1,329,790
3,436,102 2,939,896
Refundable income taxes 38,000 38,000
Current portion of note receivable from related party 60,000 60,000
Prepaid expenses and other current assets 43,869 80,683
Current portion of deferred income taxes 674,873 618,341
Total Current Assets 38,812,267 41,545,385
Office equipment, net 756,531 756,142
Note receivable from related party, excluding current portion 233,604 253,148
Deferred income taxes, excluding current portion 85,766 124,624
Other assets 124,413 151,547
$40,012,581 42,830,846
Liabilities and Member's Equity
Current Liabilities:
Short-term borrowings $ 718,862 876,804
Accounts payable 16,325,667 19,759,311
Accrued expenses 2,325,998 2,238,610
Premium deposits 353,303 361,741
Patronage dividend 1,708,670 1,245,602
Total Current Liabilities 21,432,500 24,482,068
Long-term note payable 3,000,000 3,000,000
Commitments and Contingencies
Members' Equity:
Membership common stock 5,810 5,860
Store common stock 1,588,403 1,581,663
Retained earnings 14,026,612 13,795,883
Currency translation adjustment (40,744) (34,628)
15,580,081 15,348,778
$40,012,581 42,830,846
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the three months ended January 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 230,729 209,963
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 120,303 144,633
Provision for losses on receivables 66,484 39,148
Deferred income tax benefit (17,674) (7,229)
Changes in operating assets and liabilities:
Decrease in accounts receivable 6,077,904 3,280,504
(Increase) decrease in inventories (496,206) 742,176
Decrease in prepaid expenses and other current assets 36,814 15,506
Increase (decrease) in accounts payable (3,433,644) 2,845,343
Increase (decrease) in accrued expenses 87,388 (2,511,278)
Increase (decrease) in premium deposits (8,438) 370
Increase in patronage dividend 463,068 235,498
Net cash provided by operating activities 3,126,728 4,994,634
Cash Flows from Investing Activities:
Decrease in note receivable from related party 19,544 23,965
Decrease in notes receivable, net 0 31,315
Additions to office equipment (93,558) (56,967)
Net cash used in investing activities (74,014) (1,687)
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings (157,942) 333,878
Proceeds from sale of stock, net of costs 12,650 15,969
Retirement of stock (5,960) (5,640)
Net cash provided by (used in) financing activities (151,252) 344,207
Effect of exchange rate changes on cash and cash equivalents (6,116) (9,452)
Net increase in cash and cash equivalents 2,895,346 5,327,702
Cash and cash equivalents - beginning of period 2,443,168 614,450
Cash and cash equivalents - end of period $ 5,338,514 5,942,152
Supplemental information:
Income taxes paid $ 38,000 0
Interest paid $ 67,169 73,780
</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, 1995, 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, 1995, 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, 1995, Form 10-K. The results of
operations for the three months ended January 31, 1996, are not necessarily
indicative of the operating results for the entire year.
Results of Operations
First Three Months of Fiscal 1996 Compared to the First Three Months of Fiscal
1995.
A comparison of material changes between the three months ended January 31,
1996, and the comparable period for the previous year shows:
Net sales for the first quarter of 1996 increased by $3,708,840 or 2.78% from
the first quarter of 1995. The increase in sales volume was primarily
attributable to KFC - U.S., Dairy Queen and Fazoli's sales. The sales increase
was reflected in both food and paper products and equipment. Sales results
from Taco Bell and Long John Silver's were down from last year.
Gross profit as a percentage of sales for the first three months of 1996
increased to 2.55% from 2.38% in 1995. The small increase between the two
periods demonstrates the continuity of pricing strategies from 1995 to 1996.
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 $9,939 from 1995 to
1996. Management is constantly monitoring costs to provide the required
service to the stockholder members and other customers.
Management believes the current provision for losses on uncollectible accounts
to be adequate.
The provision for patronage dividend for 1996 has been calculated and accrued
on a formula approved by the Board of Directors. Patronage dividends for
fiscal 1996 will be apportioned based on stockholder concepts and their
relative contribution to income before patronage dividend and taxes.
6
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Financial Condition at January 31, 1996 Compared to Financial Condition at
October 31, 1995.
Net working capital at January 31, 1996, was $17,379,767, which is a modest
increase of $316,450 since October 31, 1995. Cash and cash equivalents
increased by $2,895,346, and inventories increased by $496,206, while accounts
payable decreased by $3,433,644 and short-term borrowings decreased by
$157,942. These positive working capital items were offset by a decrease in
accounts receivable of $6,144,388 and an increase in patronage dividend of
$463,068.
Trademarks
"Fazoli's," "Domino's Pizza," "Long John Silver's," "Dairy Queen," "Taco Bell,"
and "KFC," are registered trademarks of Seed Restaurant Group Inc., Domino's
Pizza Inc., Long John Silver's Inc., American Dairy Queen Corporation, Taco
Bell Corporation and KFC Corporation, respectively, and are used in these
materials for identification purposes only. KFC National Purchasing
Cooperative, Inc. is an independent provider of products and is not affiliated
with the Seed Restaurant Group Inc., Domino's Pizza Inc., Long John Silver's
Inc., American Dairy Queen Corporation, Taco Bell Corporation or KFC
Corporation, except that KFC Corporation is a stockholder member of the
Cooperative.
7
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Part II - Other Information
Item 4. Submission of Matters to a Vote of Security - Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - 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 8, 1996 KFC National Purchasing Cooperative, Inc.
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By: /s/ Thomas D. Henrion
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Thomas D. Henrion, President
Date: March 8, 1996 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-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 5,338,514
<SECURITIES> 0
<RECEIVABLES> 30,467,033
<ALLOWANCES> 1,246,124
<INVENTORY> 3,436,102
<CURRENT-ASSETS> 38,812,267
<PP&E> 3,383,566
<DEPRECIATION> 2,627,035
<TOTAL-ASSETS> 40,012,581
<CURRENT-LIABILITIES> 21,432,500
<BONDS> 3,000,000
0
0
<COMMON> 1,594,213
<OTHER-SE> 13,985,868
<TOTAL-LIABILITY-AND-EQUITY> 40,012,581
<SALES> 13,958,035
<TOTAL-REVENUES> 136,958,035
<CGS> 133,462,999
<TOTAL-COSTS> 133,462,999
<OTHER-EXPENSES> 2,665,846
<LOSS-PROVISION> 66,484
<INTEREST-EXPENSE> 67,169
<INCOME-PRETAX> 382,688
<INCOME-TAX> 151,959
<INCOME-CONTINUING> 230,729
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 230,729
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
