<PAGE> 1
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, 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 .
--- ---
Number of shares of common stock outstanding as of May 31, 1996
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Membership Common Stock 583
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Store Common Stock 5803
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1
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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)
--------
<S> <C>
Item 1 Financial Statements
Condensed Consolidated Statements of Income
and Expenses
Three months ended April 30, 1996 and 1995 3
Condensed Consolidated Statements of Income
and Expenses
Six months ended April 30, 1996 and 1995 4
Condensed Consolidated Balance Sheets
April 30, 1996 and October 31, 1995 5
Consolidated Statements of Cash Flows
Six months ended April 30, 1996 and 1995 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
<PAGE> 3
Part I - Financial Information
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Expenses
For the three months ended April 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net sales $135,233,350 121,592,775
Cost of goods sold 131,527,552 118,671,467
------------ ------------
Gross profit 3,705,798 2,921,308
Selling, general and administrative expenses 2,727,441 2,654,723
Provision for losses on receivables 96,475 37,989
Other income (expenses):
Service charges 11,757 30,025
Interest income 145,558 77,644
Interest expense (64,229) (71,515)
Miscellaneous 16,558 19,905
------------ ------------
109,644 56,059
Income before patronage ------------ ------------
dividend and income taxes 991,526 284,655
Patronage dividend 572,096 75,239
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Income before income taxes 419,430 209,416
Provision for income taxes 162,985 49,545
------------ ------------
Net income $ 256,445 159,871
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
Part I - Financial Information
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Income and Expenses
For the six months ended April 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Net sales $272,191,385 254,841,898
Cost of goods sold 264,990,551 248,752,640
------------ ------------
Gross profit 7,200,834 6,089,258
Selling, general and administrative expenses 5,393,287 5,310,628
Provision for losses on receivables 162,959 77,139
Other income (expenses):
Service charges 38,512 53,572
Interest income 251,330 147,757
Interest expense (131,398) (145,295)
Miscellaneous 34,249 56,631
------------ ------------
192,693 112,665
Income before patronage ------------ ------------
dividend and income taxes 1,837,281 814,156
Patronage dividend 1,035,164 310,737
------------ ------------
Income before income taxes 802,117 503,419
Provision for income taxes 314,944 133,585
------------ ------------
Net income $ 487,173 369,834
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
April 30, 1996
(Unaudited)
<TABLE>
<CAPTION>
Assets April 30 October 31,
------ 1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 6,562,889 2,443,168
Accounts receivable, less allowance for
losses of $1,343,290 at April 30, 1996 32,022,085 35,365,297
Inventories:
Food and packaging inventories 3,093,615 1,610,106
Equipment 1,715,847 1,329,790
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4,809,462 2,939,896
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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 101,073 80,683
Current portion of deferred income taxes 673,525 618,341
----------- -----------
Total Current Assets 44,267,034 41,545,385
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Office equipment, net 689,328 756,142
Note receivable from related party, excluding current portion 218,705 253,148
Deferred income taxes, excluding current portion 118,857 124,624
Other assets 114,668 151,547
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$45,408,592 42,830,846
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Liabilities and Member's Equity
- -------------------------------
Current Liabilities:
Short-term borrowings $ 840,311 876,804
Accounts payable 21,303,492 19,759,311
Accrued expenses 3,035,618 2,238,610
Premium deposits 352,327 361,741
Patronage dividend 1,035,164 1,245,602
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Total Current Liabilities 26,566,912 24,482,068
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Long-term note payable 3,000,000 3,000,000
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Commitments and Contingencies
Members' Equity:
Membership common stock 5,830 5,860
Store common stock 1,590,963 1,581,663
Retained earnings 14,283,056 13,795,883
Currency translation adjustment (38,169) (34,628)
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15,841,680 15,348,778
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$45,408,592 42,830,846
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
KFC NATIONAL PURCHASING COOPERATIVE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the six months ended April 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 487,173 369,834
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization 217,865 232,891
Disposal of assets 531 0
Provision for losses on receivables 162,959 77,139
Deferred income tax benefit (49,417) (15,234)
Changes in operating assets and liabilities:
Decrease in accounts receivable 3,180,253 5,727,779
Increase in inventories (1,869,566) 1,269,039
Decrease in refundable income taxes 0 0
(Increase) decrease in prepaid expenses and other current assets (20,390) 60,690
Increase in accounts payable 1,544,181 (4,965,909)
Increase (decrease) in accrued expenses 797,008 (2,833,058)
Decrease in premium deposits (9,414) (3,121)
Decrease in patronage dividend (210,438) (258,138)
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Net cash provided by (used in) operating activities 4,230,745 (338,088)
Cash Flows from Investing Activities:
Decrease in note receivable from related party 34,443 33,858
Decrease in notes receivable, net 0 46,414
Decrease in other assets, net 343 53,438
Additions to office equipment (115,046) (113,361)
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Net cash provided by investing activities (80,260) 20,349
Cash Flows from Financing Activities:
Increase (decrease) in short-term borrowings (36,493) 493,080
Proceeds from sale of stock, net of costs 22,070 31,260
Retirement of stock (12,800) (18,143)
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Net cash provided by (used in) financing activities (27,223) 506,197
Effect of exchange rate changes on cash and cash equivalents (3,541) 210
----------- -----------
Net decrease in cash and cash equivalents 4,119,721 188,668
Cash and cash equivalents, net of checks drawn in excess of bank
balance - beginning of period 2,443,168 614,450
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Cash and cash equivalents - end of period $ 6,562,889 803,118
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Supplemental information:
Income taxes paid $ 249,074 124,900
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Interest paid $ 139,956 134,254
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</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
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, 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 six months ended April 30, 1996, are not necessarily
indicative of the operating results for the entire year.
Results of Operations
First Six Months of Fiscal 1996 Compared to the First Six Months of Fiscal
1995.
A comparison of material changes between the six months ended April 30, 1996
and the comparable period for the previous year shows:
Net sales increased by $17,349,487, or 6.8% from the first six months of fiscal
1995. The increase in sales volume was driven by increases in KFC and Dairy
Queen concepts. New business developed through the Fazoli's concept
represented 1.8% of the total sales for the first six months of 1996. Fiscal
1996 sales associated with Taco Bell and Long John Silver's concepts fell below
the volumes for fiscal 1995.
Gross profit as a percentage of sales for the first six months of fiscal 1996
increased to 2.65% from 2.39% in 1995. Pricing strategies remained consistent
with prior years and the increase in margin is primarily associated with market
fluctuations in some of the commodity driven items.
Selling, general and administrative expenses increased by $82,659 from 1995 to
1996. The small increase is reflective of the Cooperative's focus on expenses,
while at the same time increasing services to our customers.
The provision for losses on uncollectible accounts increased by $85,820.
Management believes the current provision 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 calculated based on membership concepts and their relative
contribution to income before patronage dividend and taxes.
7
<PAGE> 8
Second Quarter Fiscal 1996 Compared to Second Quarter Fiscal 1995
Net sales for the second quarter of fiscal 1996 reflect an increase of
$13,640,575 over the second quarter of 1995. Both KFC and Dairy Queen concepts
show increases while Taco Bell concept was below 1995 volumes. New business
related to the Fazoli's concepts also added sales for the quarter. Gross
margin for the quarter in 1996 was 2.74% compared to 2.40% for 1995. Expenses
for the quarter were 2.02% for the second quarter of fiscal 1996 compared to
2.18% for fiscal 1995.
Financial Condition at April 30, 1996 Compared to Financial Condition at
October 31, 1995.
Net working capital at April 30, 1996 was $17,700,122, which is an increase of
$636,805 since October 31, 1995. Accounts receivable decreased by $3,343,212
while inventories increased by $1,869,566, and accounts payable increased by
$1,544,181. The equity in the Cooperative increased by $492,902 since October
31, 1995.
8
<PAGE> 9
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 Friday,
March 15, 1996, at 10:00 a.m., at the Cooperative headquarters at 950
Breckenridge Lane in Louisville, Kentucky.
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>
J II Edward Henriquez
B II Robert P. Peck
C II James G. Cocolin
D II Calvin G. White
G II Dean M. Sorgdrager
Independent II Edward W. Rhawn
</TABLE>
The following persons are Class II and III Directors whose terms of office will
end either at the 1997 or 1998 Annual Meeting of Stockholders:
<TABLE>
<CAPTION>
Series Class Director Term
------ ----- -------- ----
<S> <C> <C> <C>
A III Jack M. Richards 1997
E III David Neal 1997
F III William E. Allen 1997
H III Leon W. Harman 1997
M III Ronald J. Young 1997
I III Paul A. Houston 1998
L I James B. Royster 1998
L I John Marsella 1998
N I Darrell M. Dunafon 1998
O I Grover Moss 1998
K II Vacant (A)
K II 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.
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
9
<PAGE> 10
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 10, 1996 By: /s/ Thomas D. Henrion
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Thomas D. Henrion, President
Date: June 10, 1996 By: /s/ William V. Holden
--------------------------- --------------------------------------
William V. Holden,
Vice President/Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> APR-30-1996
<CASH> 6,562,889
<SECURITIES> 0
<RECEIVABLES> 33,365,375
<ALLOWANCES> 1,343,290
<INVENTORY> 4,809,462
<CURRENT-ASSETS> 44,267,034
<PP&E> 3,390,753
<DEPRECIATION> 2,701,425
<TOTAL-ASSETS> 45,408,592
<CURRENT-LIABILITIES> 26,566,912
<BONDS> 3,000,000
0
0
<COMMON> 1,596,793
<OTHER-SE> 14,244,887
<TOTAL-LIABILITY-AND-EQUITY> 45,408,592
<SALES> 272,191,385
<TOTAL-REVENUES> 272,191,385
<CGS> 264,990,551
<TOTAL-COSTS> 264,990,551
<OTHER-EXPENSES> 5,393,287
<LOSS-PROVISION> 162,959
<INTEREST-EXPENSE> 131,398
<INCOME-PRETAX> 802,117
<INCOME-TAX> 314,944
<INCOME-CONTINUING> 487,173
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 487,173
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
