UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
Form 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d)of
the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1996, or
[ ] Transition report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
Commission File Number 0-4766
JERRY'S, INC.
State of Florida I.R.S. No. 59-1060780
1500 North Florida Mango Road, Suite 19
West Palm Beach, Florida 33409
Telephone Number: (407) 689-9611
Common Stock, $.04 Par Value
Outstanding Shares at June 30, 1996 - 562,422
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 twelve (12) months and (2) has been
subject to such filing requirements for the past ninety (90) days.
YES ____ NO X
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
JERRY'S, INC. AND SUBSIDIARIES
PART I.
FINANCIAL INFORMATION
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS............................................................3
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS......................................................................7
CONSOLIDATED STATEMENT OF CASH FLOWS...................................................9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................................11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................................................17
PART II.
OTHER INFORMATION
ITEMS 1 THROUGH 6................................................................................................19
</TABLE>
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<PAGE>
PART I. FINANCIAL INFORMATION
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
------ ------------------ --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Items $ 1,168,863 $ 1,093,541
Customers Accounts Receivable
Less - Allowance for Doubtful Accounts:
$292,000 in 1996 and $433,000 in 1995 955,025 664,788
Inventories (Note A-2) 401,706 337,059
Refundable Income Taxes 301,684 -
Deferred Tax Assets - Current Portion 105,109 295,530
Prepaid Expenses and Other Current Assets 406,224 643,896
------------------ -----------------
Net of $5,000 Allowance in 1996 and
-0- in 1995
Total Current Assets $ 3,338,611 $ 3,034,814
------------------ -----------------
INVESTMENTS:
Land Held for Investment $ 87,000 $ 87,000
Other Investments 388,519 497,403
------------------ -----------------
Total Investments $ 475,519 $ 584,403
------------------ -----------------
PROPERTY, PLANT AND EQUIPMENT:
Cost $ 14,028,257 $ 13,880,880
Less: Accumulated Depreciation 10,380,852 9,133,884
------------------ -----------------
Net Book Value $ 3,647,405 $ 4,746,996
------------------ -----------------
OTHER ASSETS:
Cash (Restricted) $ 674,884 $ 469,087
Leasehold Rights and Other Intangible
Assets (Note A-4) 9,834 10,511
Cash Surrender Value of Insurance 2,191 35,861
Deposits and Miscellaneous 233,257 322,810
Employee Loans Receivable (Net of
$20,000 Allowance in 1996,
$10,000 Allowance in 1995) 107,376 44,010
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1996
and $18,000 in 1995) 75,140 93,321
Deferred Tax Assets - Non Current 528,764 406,524
------------------ -----------------
Total Other Assets $ 1,631,446 $ 1,382,124
------------------ -----------------
TOTAL ASSETS: $ 9,092,981 $ 9,748,337
================== =================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-3-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996 AND 1995
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------------------------------ ------------------ --------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes Payable to Bank and
Others (Note D) $ 14,673 $ 10,550
Current Portion of Long-Term Debt (Note E) 488,541 495,526
Accounts Payable 1,598,900 1,286,050
Income Taxes Payable - 184,475
Accrued Expenses 619,797 746,718
----------------- ----------------
Total Current Liabilities $ 2,721,911 $ 2,723,319
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current
Portion (Note E) $ 3,642,069 $ 2,874,419
----------------- ----------------
TOTAL LIABILITIES $ 6,363,980 $ 5,597,738
----------------- ----------------
STOCKHOLDERS' EQUITY:
Capital Stock -
Common Stock of $.04 par value -
Authorized 4,000,000 shares;
622,377 Shares Issued
in 1996 and 1995 $ 24,895 $ 24,895
Capital in Excess of Par Value 116,178 116,178
Retained Earnings 2,755,010 4,176,583
----------------- ----------------
Subtotal: $ 2,896,083 $ 4,317,656
Less: Shares Reacquired and Held
in Treasury (59,955 shares
in 1996 and 59,948 shares
in 1995 at Cost) 167,082 167,057
----------------- ----------------
TOTAL STOCKHOLDERS' EQUITY: $ 2,729,001 $ 4,150,599
----------------- ----------------
Commitments, Contingencies and Subsequent
Events (Note G) -- --
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $ 9,092,981 $ 9,748,337
================= ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ------------------ --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Items $ 759,133 $ 464,953
Customer Accounts Receivable
Less Allowance for Doubtful Accounts:
$230,000 in 1995 and $276,000 in 1994 807,857 2,240,553
Inventories 311,648 410,865
Deferred Income Taxes 105,109 295,530
Prepaid Expenses and Other Current Assets
(Net of $5,000 Allowance In 1995 and 1994) 449,078 457,158
----------------- -------------------
Total Current Assets $ 2,432,825 $ 3,869,059
----------------- -------------------
INVESTMENTS:
Land Held for Investment $ 87,000 $ 87,000
Other Investments 265,528 495,174
----------------- -------------------
Total Investments $ 352,528 $ 582,174
----------------- -------------------
PROPERTY, PLANT AND EQUIPMENT:
Cost $ 13,857,557 $ 15,426,570
Less: Accumulated Depreciation 9,420,655 9,118,785
----------------- -------------------
Net Book Value $ 4,436,902 $ 6,307,785
----------------- -------------------
OTHER ASSETS:
Cash (Restricted) $ 580,297 $ 467,565
Leasehold Rights and Other Intangible Assets
Less Accumulated Amortization of $13,482 in
1995 and $6,312 in 1994 8,096 15,265
Cash Surrender Value of Insurance 39,393 35,861
Deposits and Miscellaneous 219,529 278,201
Employee Loans Receivable (Net of $20,000
Allowance In 1995 and $10,000 in 1994) 79,840 33,858
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1995 and 1994) 95,376 120,327
Deferred Income Taxes - Non-Current
Portion 528,764 406,524
----------------- -------------------
Total Other Assets $ 1,551,295 $ 1,357,601
----------------- -------------------
TOTAL ASSETS $ 8,773,550 $ 12,116,619
================= ===================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
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<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------ --------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes Payable to Bank and Others $ -- $ 1,723,040
Current Portion of Long-Term Debt 519,490 899,752
Accounts Payable 1,171,228 2,602,980
Income Taxes Payable 12,307 109,381
Accrued Expenses 657,504 940,503
------------------- -------------------
Total Current Liabilities $ 2,360,529 $ 6,275,656
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current Portion 3,073,603 4,303,541
------------------- -------------------
TOTAL LIABILITIES $ 5,434,132 $ 10,579,197
------------------- -------------------
STOCKHOLDERS' EQUITY:
Capital Stock -
Common Stock of $.04 par value - Authorized
4,000,000 Shares; 622,377 Shares Issued in
1995 and 1994 $ 24,895 $ 24,895
Capital In Excess of Par Value 116,178 116,178
Retained Earnings 3,365,427 1,561,760
------------------- -------------------
Subtotal $ 3,506,500 $ 1,702,833
Less: Shares Reacquired and Held in
Treasury (59,975 Shares in 1995
and 59,381 Shares in 1994 at Cost) 167,082 165,411
------------------- -------------------
TOTAL STOCKHOLDERS' EQUITY $ 3,339,418 $ 1,537,422
------------------- -------------------
Commitments, Contingencies, and Subsequent
Events -- --
------------------- -------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,773,550 $ 12,116,619
=================== ===================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
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<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------------ --------------
<S> <C> <C>
NET SALES:
(A substantial portion of which is
attributable to four customers (Note B)
and a substantial portion of which has
been discontinued) $ 14,770,842 $ 17,500,995
----------------- ------------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 8,716,565 $ 10,510,944
Selling and Administrative Expenses 7,302,515 8,688,588
Airline Port Fees (Income) (384,534) (515,457)
Interest (Income) (24,869) (68,480)
Interest Expense 225,618 524,257
(Gain) Loss on Disposition of Assets (25,632) (5,489,115)
Equity in (Earnings) of Joint Ventures (83,591) (2,229)
Other (Income) (47,813) (43,336)
------------------ ------------------
Total Costs, Expenses and Other Items $ 15,678,259 $ 13,605,172
Income (Loss) Before Provision
for Income Taxes $ (907,417) $ 3,895,823
----------------- ------------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federal $ (254,000) $ 1,054,000
State (43,000) 227,000
----------------- ------------------
Total Provision for Income Taxes $ (297,000) $ 1,281,000
----------------- ------------------
Net Income (Loss) $ (610,417) $ 2,614,823
RETAINED EARNINGS, BEGINNING OF PERIOD: $ 3,365,427 $ 1,561,760
----------------- ------------------
RETAINED EARNINGS, END OF PERIOD: $ 2,755,010 $ 4,176,583
================= ==================
Net Income (Loss) Per Common Share: $ (1.08) $ 4.65
================= ==================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: 562,422 562,542
================= ==================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-7-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------------ ------------------
<S> <C> <C>
NET SALES:
(A substantial portion of which is
attributable to four customers (Note B)
and a substantial, portion of which has
been discontinued) $ 4,878,818 $ 4,587,764
----------------- ------------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 3,073,430 $ 2,787,485
Selling and Administrative Expenses 2,469,430 3,078,186
Airline Port Fees (Income) (115,867) (135,766)
Interest (Income) (8,172) (61,314)
Interest Expense 87,074 155,976
(Gain) or Loss on Disposition of Assets -- (40,845)
Other (Income) (13,603) (7,188)
----------------- ------------------
Total Costs, Expenses and Other Items $ 5,492,226 $ 5,776,534
----------------- ------------------
Income (Loss) Before Provision for
Income Taxes $ (613,408) $ (1,188,770)
----------------- ------------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federal (175,000) $ (351,000)
State (29,000) (60,000)
----------------- ------------------
Total Provision (Credit) for
Income Taxes $ (204,000) $ (411,000)
----------------- ------------------
Net Income (Loss) $ (409,408) $ (777,770)
----------------- ------------------
RETAINED EARNINGS, BEGINNING OF PERIOD: 3,164,418 4,954,353
----------------- ------------------
RETAINED EARNINGS, END OF PERIOD: $ 2,755,010 $ 4,176,583
================= ==================
NET INCOME (LOSS) PER COMMON SHARE: $ (.73) $ (1.38)
================= ==================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: 562,422 562,429
================= ==================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-8-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ (610,417) $ 2,614,823
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 1,019,038 1,145,055
Provision for Losses on Accounts
Receivable 60,000 150,000
Equity In (Earnings) Loss of
Joint Ventures (83,591) (2,229)
Loss (Gain) on Sale of Assets (25,632) (5,489,115)
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (207,168) 1,430,765
(Increase) Decrease in Inventories (90,058) 73,806
(Increase) Decrease in Prepaid Expenses
and Other 42,854 (267,740)
(Increase) Decrease in Deposits and
Miscellaneous (32,576) (32,755)
Increase (Decrease) in Accounts Payable 427,672 (1,316,930)
Increase (Decrease) in Income Taxes Payable (313,991) 75,094
Increase (Decrease) in Accrued Expenses (37,707) (193,785)
------------------ -----------------
Net Cash Provided by (Used By)
Operating Activities: $ 148,424 $ (1,813,011)
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Property and
Equipment $ 25,632 $ 6,071,782
Payments Received on Notes from Sale of
Property and Equipment 48,750 --
Payments Received - Investments -- --
Additions to Investments (39,400) --
Purchase of Property and Equipment (228,158) (196,418)
------------------ -----------------
Net Cash Provided by (Used In) Investing
Activities: $ (193,176) $ 5,875,364
------------------ -----------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-9-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(Continued)
<TABLE>
<CAPTION>
1996 1995
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Line-of-Credit and
Long-Term Borrowings $ 1,299,307 $ 159,182
Increase in Restricted Cash (94,587) (1,522)
Principal Payments Under Line-of Credit
and Long-Term Borrowings (747,117) (3,589,779)
Additions to Other Receivables -- --
Additions to Intangible Assets (3,121) --
Payments to Acquire Treasury Stock -- (1,646)
Proceeds from Officer Loans -- --
Payments of Officer Loan -- --
------------------ -----------------
Net Cash Provided (Used) by Financing
Activities $ 454,482 $ (3,433,765)
------------------ -----------------
Net Increase in Cash and Cash
Equivalents $ 409,730 $ 628,588
CASH AND CASH EQUIVALENTS AT THE BEGINNING
of the Period 759,133 464,953
------------------ -----------------
CASH AND CASH EQUIVALENTS AT THE END OF
the Period $ 1,168,863 $ 1,093,541
================== =================
ADDITIONAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (Non-Capitalized) $ 225,618 $ 523,053
================== =================
Income Taxes $ 7,623 $ 1,205,906
================== =================
Non-Cash Investing and Financing Activities:
Purchase of Assets (Net of Cash Period)
for Notes $ -- $ --
================== =================
Assets Received in Settlement of
Notes Receivable $ -- $ --
================== =================
Sale of Assets (net of cash paid) for Notes $ -- $ 76,264
================== =================
Sale of Assets (net of cash paid)
for assumption of Notes Payable $ -- $ 115,241
================== =================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-10-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. CONSOLIDATION -
The Consolidated Financial Statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned and all of
which are engaged in the food and beverage service and/or the gift shop
business. Significant intercompany accounts and transactions have been
eliminated in consolidation.
2. INVENTORIES -
Inventories are valued at the lower of cost or market, with cost
generally determined on a first-in, first-out basis and market based
upon the lower of replacement cost or realizable value. Inventories
consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Finished Goods $ 121,175 $ 71,021
Raw Materials 280,531 266,038
------------- -------------
Total $ 401,706 $ 337,059
============= =============
</TABLE>
3. PROPERTY, PLANT, AND EQUIPMENT -
Property, plant, and equipment are carried at cost. The Company
utilizes the straight-line and accelerated methods to calculate
depreciation. Such calculations are made at annual rates based upon the
estimated service lives of the Company's property which generally are
as follows:
<TABLE>
<S> <C>
Buildings and Improvements 7 to 35 years
Equipment and Furniture 5 to 7 years
Aviation and Automotive 3 to 7 years
Leasehold Improvements and Other 5 to 15 years
</TABLE>
Assets with an original cost of approximately $4,300,000 have been
fully depreciated at September 30, 1995.
4. INTANGIBLES -
The Company amortizes mortgage costs over the life of the mortgage
using the straight line method.
5. INCOME TAXES -
Effective October 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes." It requires an asset and liability
approach for financial accounting and reporting for deferred income
taxes. Under SFAS 109, deferred tax assets or liabilities are computed
based on the difference between the financial statement and income tax
basis of assets
-11-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1996
Notes to Consolidated Financial Statements (Continued)
and liabilities using the enacted marginal tax rate applicable when the
related asset or liability is expected to be realized or settled.
Deferred income tax expenses or benefits are based on the changes in
the asset or liability from period to period. If available evidence
suggests that it is more likely than not that some portion or all of
the deferred tax assets will not be realized, a valuation allowance is
required to reduce the deferred tax assets to an amount that is more
likely than not to be realized. Future changes in such a valuation
allowance would be included in the provision for deferred income taxes
in the period of change.
6. INCOME PER SHARE -
Income per share is computed based upon the weighted average number of
common shares outstanding during each year.
7. CASH -
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
8. CONCENTRATIONS OF CREDIT RISK -
The Company is subject to credit risk arising from the concentration of
its temporary cash investments and trade receivables. Most of the
Company's temporary cash investments are concentrated with a single
financial institution. This institution, however, has a high credit
rating. The Company's trade receivables are concentrated with a small
number of airlines. In particular, the Company primarily sells its
products to about 60 airlines or aviation related companies in the
States of Florida, Georgia and Alabama, and extends credit based on an
evaluation of the customer's financial condition, generally without
requiring collateral. Exposure to losses on receivables is principally
dependent on each customer's financial condition. The Company monitors
its exposure for credit losses and maintains allowances for anticipated
losses. As of September 30, 1995, approximately 71% of the recorded
trade receivables were concentrated with 6 airlines. As of September
30, 1994, approximately 67% of the receivables were concentrated with 9
airlines.
9. REVENUE RECOGNITION -
Revenue is recognized upon shipment of goods to customers and upon
performance of services.
10. ADVERTISING COSTS -
Advertising costs are generally charged to operations in the period
incurred and totaled $268,000 in 1996, and $394,000 in 1995 (nine
months ended June 30).
-12-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1996
Notes to Consolidated Financial Statements (Continued)
11. ENVIRONMENTAL EXPOSURES -
The Company accrues environmental costs when it is possible that a
liability has been incurred and the amount can be reasonably estimated.
NOTE B - SALES
The Company derives a substantial portion of its revenues from catering
flights of four airlines, as follows:
PERCENT OF TOTAL SALES
----------------------
NINE MONTHS ENDED JUNE 30, AIR CANADA CONTINENTAL U.S. AIR KIWI
- -------------------------- ---------- ----------- -------- ----
1996 5% 6% 21% 5%
1995 6% 5% 24% 6%
During February 1995, the Company sold its airline catering operations
at Miami, Florida and Orlando Florida to Alpha Flight Services Florida, Inc. The
sales that were discontinued during February, 1995 amounted to:
SALES PERCENTAGE OF
DISCONTINUED TOTAL SALES
------------ -----------
Year Ended 9/30/95 $3,008,000 14%
Year Ended 9/30/94 9,400,000 32%
Year Ended 9/30/93 8,000,000 28%
Nine Months Ended 6/31/96 $ -- -%
Nine Months Ended 6/31/95 3,000,000 17%
NOTE C - RIGHT OF FIRST REFUSAL
On May 1, 1990, the Company entered into a right of first refusal
agreement with a competing airline caterer. Under the Agreement, the Company
granted the purchaser a 10-year right of first refusal with respect to the sale
of any airline catering business owned by the Company. The purchaser agreed to
pay the Company $385,000 in 24 quarterly installments commencing on May 31,
1994. The income will be recorded pro-rata over the 10 year term of the
agreement.
NOTE D - NOTES PAYABLE - BANKS AND OTHERS
DESCRIPTION JUNE 30, JUNE 30,
1996 1995
--------------- --------------
Insurance premium financing plan $ 14,673 $ 10,550
=============== ==============
-13-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1996
Notes to Consolidated Financial Statements (Continued)
NOTE E - LONG TERM DEBT
The principal balances outstanding and details of long-term debt are
summarized as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
DESCRIPTION 1996 1995
----------- ------------ ----------
<S> <C> <C>
Chattel mortgage notes on equipment, aircraft, automotive
equipment, payable in monthly installments of approximately
$42,000 (including interest), with varying maturities
through 2004. A chattel mortgage note on automotive
equipment is further collateralized by a certificate
of deposit in the amount of $100,000. $2,133,937 $2,071,771
6% to 12 1/2 notes payable, collateralized by land and
buildings, payable in monthly installments of approximately
$10,000 (including interest), with varying maturities
through 2018. 721,738 779,912
10 1/4% (1 1/2% above prime) note payable to bank,
collateralized by equipment, leasehold and real estate at
the Company's facilities in Melbourne, Florida, along with
the personal guaranty of the Company's president, payable in
monthly installments of $2,744 (including interest) with a
final payment of $52,995 due January 28, 2000. 126,328 151,694
18% note payable secured by the personal guaranty of the
Company's President, payable in monthly installments of
$18,000 (including interest through 1999). 489,424 --
9% note payable collateralized by leasehold improvements
at the Company's facilities in Daytona Beach, Florida, along
with a certificate of deposit of $93,000 and the personal
guarantee of the Company's President, payable in monthly
installments of $15,302 (including interest) through 2001. 659,183 366,568
---------- ----------
TOTAL $4,130,610 $3,369,945
Less payments due within one year 488,541 495,526
---------- ----------
Long-Term Debt, less current portion $3,642,069 $2,874,419
========== ==========
</TABLE>
-14-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1996
Notes to Consolidated Financial Statements (Continued)
NOTE F - LEASE COMMITMENTS
The Company and its subsidiaries, under non-capitalized leases, lease
certain facilities and equipment used primarily for catering kitchens, dining
rooms, coffee shops, cocktail lounges, gift shops, warehouses, and a promotional
facility. These leases expired at various dates through the year 2006.
Rental expense included in continuing operations are as follows:
1996 1995
---------- ----------
Rent $1,920,408 $2,157,523
Contingent rentals are generally calculated as a percentage of gross
sales and vary from three percent (3%) to forty percent (40%).
Most leases contain renewal options for five to ten year periods at
negotiated rates approved by both parties.
The Company's leases required the Company to spend approximately
$1,400,000 for improvements and equipment at four locations. The Company has
expended $364,000 to fulfill these obligations.
The approximate minimum rental commitments for the years subsequent to
September 30, 1995 are as follows:
FINANCING OTHER
TOTAL LEASES LEASES
----------- ----------- -----------
1996 $ 1,385,130 -- $ 1,385,130
1997 1,130,918 -- 1,130,918
1998 994,105 -- 994,105
1999 878,800 -- 878,800
2000 815,916 -- 815,916
2001-2003 3,042,755 -- 3,042,755
------------ ----------- ------------
TOTAL $ 8,247,624 $ -- $ 8,247,624
=========== =========== ===========
NOTE G - COMMITMENTS, CONTINGENCIES, OTHER MATTERS AND SUBSEQUENT EVENTS
1. Effective July 1, 1988, the Company entered into an incentive
compensation agreement with a key employee under which the Company agreed to
purchase a life insurance policy for the employee. The employee will forfeit the
policy if his employment terminates prior to July 1, 1996. The annual premium is
$20,000 for the first 9 years and decreases to $9,723 in 1996. No premiums are
payable after 1996.
2. Effective January 1, 1989, the Company entered into a consulting
agreement with a partnership under the control of a retired director of the
-15-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1996
Notes to Consolidated Financial Statements (Continued)
Company in recognition of his services to the Company. The agreement provides
for monthly payments of $1,800 for a 10-year period.
3. The Company is involved in various legal actions arising in the
normal course of business. After taking into consideration legal counsel's
evaluation of such actions, management is of the opinion that their outcome will
not have a significant effect on the Company's financial position.
4. The Company is self-insured for a portion of its workers
compensation insurance in the state of Florida. The Company's maximum
self-insured exposure at September 30, 1995 for all open years is approximately
$553,000.
5. During November 1994, the Company agreed to repurchase 11,000 shares
of its stock held by a key employee at any time in the next two years at the
current market price upon the request of the key employee.
6. The Florida Department of Revenue is in the process of conducting an
examination of the books and records for 12 locations of the Company for the
period January 1, 1989 through December 31, 1993, with respect to state sales
and use tax. The examination is in process at this time and has not been
completed. Preliminary schedules indicate a potential assessment of
approximately $118,000 plus interest. Included in the preliminary potential
assessment is tax on port fees and certain supplies used in the airline catering
industry. The Company has taken the position that both items are not subject to
sales tax because they are "passed-through" to other parties. The Company
intends to vigorously defend its position, and is unable, at this time, to
predict the ultimate settlement of this matter.
7. During February 1995, the Company sold its airline catering
operations at Miami, Florida and Orlando, Florida for $6,000,000 ($5,000,000
cash and the assumption by the Buyer of $1,000,000 of the Company's
liabilities). The approximate pre-tax gain on the sale was $5,400,000
($3,000,000 post-tax). The Company is also entitled to receive up to $3,000,000
if the Buyer's gross revenues at the Miami and Orlando facilities exceed certain
annual base sales amounts over the next three years. This contingent
consideration is subject to a limitation of $1,000,000 per year in the first two
years.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST THREE QUARTERS OF 1996 FISCAL YEAR COMPARED TO
FIRST THREE QUARTERS OF 1995 FISCAL YEAR
SALES
The Company's net sales for the nine months ended June 30, 1996 were
$14,771,000 compared with $17,501,000 for the same period of 1995. The decrease
in net sales is primarily due to the sale of the Company's Miami and Orlando
operations. Sales from continuing operations were $14,771,000 in 1996 and
$14,501,000 in 1995. The increase in sales from continuing operations was
primarily due to higher sales at the Company's new operations at Sanford,
Florida.
COST OF SALES
Cost of sales in the first nine months of the 1996 fiscal year were
$8,717,000 compared with $10,511,000 in 1995. The Company's gross margin
improved from 40% in 1995 to 41% in 1996 due to a higher proportion of sales at
restaurant and lounges, which generate a higher margin than airline catering
sales.
SELLING AND ADMINISTRATIVE EXPENSES
The Company's selling and administrative expenses decreased from
$8,689,000 in the first nine months of 1995 fiscal year to $7,303,000 in 1996,
primarily due to the sale of the Miami and Orlando operations.
AIRLINE PORT FEES
The Company charges each of its airline catering customers a port fee
equal to the amount of percentage rent the Company pays to each airport
authority. The amount of this income was $385,000 in the first nine months of
1996 fiscal year, compared with $515,000 in the first nine months of 1995. It is
directly offset by rental expense paid by the Company.
SALE OF ASSETS
In February 1995, the Company sold its Miami and Orlando airline
catering operations to Alpha Flight Services, Inc. ("Alpha"). See Note G-7 to
the Consolidated Financial Statements.
NET INCOME
Due to the factors described above, the Company incurred a net loss of
$610,000 for the first nine months of 1996 fiscal year, compared to net income
of $2,615,000 for 1995. After deducting the gain from the Alpha sale, the
Company incurred a net loss (before taxes) of $1,552,000 in 1995, compared with
a net loss (before taxes) of $907,000 for 1996.
-17-
<PAGE>
FINANCIAL CONDITION AT JUNE 30, 1995
On June 30, 1996, the Company's current assets and current liabilities
were $3,339,000 and $2,722,000 respectively, compared with $3,035,000 and
$2,723,000 on June 30, 1995. The Company's current ratio (current assets divided
by current liabilities) improved to 1.23 on June 30, 1996, compared with 1.11 on
June 30, 1995.
The Company's operations provided $148,000 in cash during the first
nine months of the 1996 fiscal year due to a significant increase in the
Company's accounts payable. The Company's investing activities used $193,000 in
cash (almost all of which is attributable to the purchase of new equipment).
Finally, the Company's financing activities provided approximately $454,000 in
cash. This amount primarily represents increases in the Company's borrowings.
The improvement in the Company's financial condition was due to the
sale of the Miami and Orlando operations. The Company currently has sufficient
working capital to meet its short term working capital needs. However, the
Company is incurring significant losses from its continuing operations because
the Company's cost structure has not yet been adjusted to reflect the
disposition of the Miami and Orlando operations. For this reason, the Company
needs to take steps to substantially increase revenues and/or decrease expenses
in order to meet its long term working capital requirements.
-18-
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27.1 Financial Data Schedule
There were no reports on Form 8-K filed for the three months ended June
30, 1996.
-19-
<PAGE>
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.
JERRY'S, INC.
Date: September 30, 1997 /S/ GERARD J. PENDERGAST, JR.
-----------------------------
Gerard J. Pendergast, Jr.
President and Chief Executive Officer
Date: September 30, 1997 /S/ KAREN P. RHODES
-------------------
Karen P. Rhodes
Chief Financial Officer
-20-
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> JUN-30-1996
<CASH> 1,169
<SECURITIES> 0
<RECEIVABLES> 1,247
<ALLOWANCES> 292
<INVENTORY> 402
<CURRENT-ASSETS> 3,339
<PP&E> 14,028
<DEPRECIATION> 10,380
<TOTAL-ASSETS> 9,093
<CURRENT-LIABILITIES> 2,722
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 2,704
<TOTAL-LIABILITY-AND-EQUITY> 9,093
<SALES> 14,771
<TOTAL-REVENUES> 14,771
<CGS> 8,717
<TOTAL-COSTS> 8,717
<OTHER-EXPENSES> 6,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 225
<INCOME-PRETAX> (907)
<INCOME-TAX> (297)
<INCOME-CONTINUING> (610)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (616)
<EPS-PRIMARY> (1.08)
<EPS-DILUTED> (1.08)
</TABLE>
