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 March 31, 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 March 31, 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
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TABLE OF CONTENTS
JERRY'S, INC. AND SUBSIDIARIES
PART I.
FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS..................................................................3-6
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS............................................................................7-8
CONSOLIDATED STATEMENT OF CASH FLOWS.........................................................9-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................................11-16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.........................................................17-19
PART II.
OTHER INFORMATION
ITEMS 1 THROUGH 6................................................................................................19
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PART I. FINANCIAL INFORMATION
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996 AND 1995
ASSETS 1996 1995
------ ------------------ -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 933,757 $ 2,286,123
Customers Accounts Receivable
Less - Allowance for Doubtful Accounts:
$281,000 in 1996 and $382,000 in 1995 1,183,968 1,776,550
Inventories (Note A-2) 359,749 352,648
Deferred Tax Assets - Current Portion 105,109 295,530
Income Tax Refunds 80,693 --
Prepaid Expenses and Other Current Assets 532,792 1,797,375
(Net of $5,000 Allowance in 1996 and
$0 in 1995)
------------------ -----------------
Total Current Assets $ 3,196,068 $ 6,508,226
------------------ -----------------
INVESTMENTS:
Land Held for Investment $ 87,000 $ 87,000
Other Investments 376,619 497,403
------------------ -----------------
Total Investments $ 463,619 $ 584,403
------------------ -----------------
PROPERTY, PLANT AND EQUIPMENT:
Cost $ 13,970,772 $ 14,147,536
Less: Accumulated Depreciation 10,039,524 8,938,434
------------------ -----------------
Net Book Value $ 3,931,248 $ 5,209,102
------------------ -----------------
OTHER ASSETS:
Cash (Restricted) $ 505,281 $ 467,565
Leasehold Rights and Other Intangible
Assets (Note A-4) 10,295 10,894
Cash Surrender Value of Insurance 2,191 35,861
Deposits and Miscellaneous 220,529 368,652
Employee Loans Receivable (Net of
$20,000 Allowance in 1996, $10,000
Allowance in 1995) 105,844 52,544
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1996
and $18,000 in 1995) 81,767 100,656
Deferred Income Taxes 528,764 406,524
------------------ -----------------
Total Other Assets $ 1,454,671 $ 1,442,696
------------------ -----------------
TOTAL ASSETS: $ 9,045,606 $ 13,744,427
================== =================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1996 AND 1995
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
------------------------------------ ------------------- -----------------
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CURRENT LIABILITIES:
Notes Payable to Bank and
Others (Note D) $ 24,630 $ 1,336,229
Current Portion of Long-Term Debt (Note E) 488,541 589,402
Accounts Payable 1,425,070 1,447,231
Accrued Expenses 685,715 1,314,381
Income Tax Payable -- 957,697
------------------- -----------------
Total Current Liabilities $ 2,623,956 $ 5,644,940
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current
Portion (Note E) 3,283,241 3,171,118
------------------- -----------------
TOTAL LIABILITIES $ 5,907,197 $ 8,816,058
------------------- -----------------
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 3,164,418 4,954,353
------------------- -----------------
Subtotal: $ 3,305,491 $ 5,095,426
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: $ 3,138,409 $ 4,928,369
------------------- -----------------
Commitments, Contingencies and Subsequent
Events (Note G) -- --
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $ 9,045,606 $ 13,744,427
=================== =================
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See accompanying Notes to Consolidated Financial Statements
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
ASSETS: 1995 1994
------ ----------------- -------------------
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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 Allowance
In 1994) 79,840 33,858
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1995 and
$13,000 In 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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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
(Continued)
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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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
----------------- -------------------
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NET SALES:
(A substantial portion of which is
attributable to four customers (Note B)
and a substantial portion of which have
been discontinued) $ 9,892,024 $ 12,913,231
----------------- -------------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 5,643,135 $ 7,723,459
Selling and Administrative Expenses 4,833,151 5,610,402
Airline Port Fees (Income) (268,667) (379,691)
Interest (Income) (16,697) (7,166)
Interest Expense 138,544 368,281
(Gain) Loss on Disposition of Assets (25,632) (5,448,270)
Equity in (Earnings) of Joint Ventures (83,591) (2,229)
Other (Income) (34,210) (36,148)
----------------- -------------------
Total Costs, Expenses and $ 10,186,033 $ 7,828,638
Other Items ----------------- -------------------
Income (Loss) Before Provision
for Income Taxes $ (294,009) $ 5,084,593
----------------- -------------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federal $ (79,000) $ 1,405,000
State (14,000) 287,000
----------------- -------------------
Total Provision for Income Taxes $ (93,000) $ 1,692,000
----------------- -------------------
Net Income (Loss) $ (201,009) $ 3,392,593
RETAINED EARNINGS, BEGINNING OF PERIOD: 3,365,427 1,561,760
----------------- -------------------
RETAINED EARNINGS, END OF PERIOD: $ 3,164,418 $ 4,954,353
================= ===================
Net Income (Loss) Per Common Share: $ (.36) $ 6.03
================= ===================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: 562,422 562,598
================= ===================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
---------------- ----------------
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NET SALES:
(A substantial portion of which is
attributable to four customers (Note B)
and a substantial portion of which has
been discontinued) $ 5,567,516 $ 6,305,174
---------------- ----------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 3,060,126 $ 3,677,137
Selling and Administrative Expenses 2,575,381 2,918,567
Airline Port Fees (Income) (149,855) (195,452)
Interest (Income) (8,851) (3,151)
Interest Expense 68,419 179,501
(Gain) or Loss on Disposition of Assets -- (5,448,270)
(Earnings) of Joint Ventures -- --
Other (Income) (18,195) (16,846)
---------------- ----------------
Total Costs, Expenses and Other Items $ 5,527,025 $ 1,111,486
---------------- ----------------
Income Before Provision for
Income Taxes $ 40,491 $ 5,193,688
---------------- ----------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federal $ 1,000 $ 1,419,000
State -- 289,000
---------------- ----------------
Total Provision Income Taxes $ 1,000 $ 1,708,000
---------------- ----------------
Net Income (Loss) $ 39,491 $ 3,485,688
RETAINED EARNINGS, BEGINNING OF PERIOD: 3,124,927 1,468,665
---------------- ----------------
RETAINED EARNINGS, END OF PERIOD: $ 3,164,418 $ 4,954,353
================ ================
NET INCOME PER COMMON SHARE: $ .07 $ 6.20
================ ================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: 562,422 562,429
================ ================
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See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
----------------- ------------------
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ (201,009) $ 3,392,593
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 679,676 748,409
Provision for Losses on Accounts Receivable 50,000 100,000
Equity In (Earnings) Loss of
Joint Ventures (83,591) (2,229)
Loss (Gain) on Sale of Assets (25,632) (5,448,270)
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (426,111) 369,003
(Increase) Decrease in Inventories (48,101) 58,217
(Increase) Decrease in Prepaid Expenses
and Other (83,714) (363,040)
(Increase) Decrease in Deposits and
Miscellaneous (8,693) (94,466)
Increase (Decrease) in Accounts Payable 253,842 (1,155,749)
Increase (Decrease) in Income Tax Payable (93,000) 1,205,000
Increase (Decrease) Accrued Expenses 28,211 17,194
----------------- ------------------
Net Cash Provided By (Used By)
Operating Activities: $ 41,878 $ (1,173,338)
----------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Property Sales
and Equipment $ 25,632 $ 5,000,000
Payments Received on Notes from Sale of
Property and Equipment 32,500 --
Payments Received - Investments -- --
Additions to Investments (27,500) --
Purchase of Property and Equipment (173,100) (174,262)
------------------ ------------------
Net Cash Provided by (Used In)
Investing Activities: $ (142,468) $ 4,825,738
----------------- ------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1996 AND 1995
(Continued)
1996 1995
----------------- ------------------
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Line-of-Credit and
Long-Term Borrowings $ 441,990 $ 159,182
Decrease in Restricted Cash 75,016 --
Principal Payments Under Line-of Credit
and Long-Term Borrowings (238,671) (1,988,766)
Additions to Other Receivables (3,121) --
Additions to Intangible Assets -- --
Payments to Acquire Treasury Stock -- (1,646)
----------------- ------------------
Net Cash provided by (Used in)
Financing Activities $ 275,214 $ (1,831,230)
----------------- ------------------
Net Increase in Cash and Cash
Equivalents $ 174,624 $ 1,821,170
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD $ 759,133 $ 464,953
----------------- ------------------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $ 933,757 $ 2,286,123
================= ==================
ADDITIONAL CASH FLOW INFORMATION:
Cash Paid During the Year for:
Interest (Non-Capitalized) $ 138,543 $ 368,281
================= ==================
Income Taxes $ -- $ 487,000
================= ==================
Non-Cash Investing and Financing Activities:
Purchase of Assets (Net of Cash Paid)
for Notes $ -- $ --
================= ==================
Sales of Assets
(Net of Cash Paid) for Notes $ -- $ 1,000,000
================= ==================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED MARCH 31, 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:
1996 1995
---------- ----------
Finished Goods $ 67,041 $ 69,815
Raw Materials 292,708 282,833
---------- ----------
Total $ 359,749 $ 352,648
========== ==========
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 properties which generally are as follows:
Buildings and Improvements 7 to 35 years
Equipment and Furniture 5 to 10 years
Aviation and Automotive 3 to 7 years
Leasehold Improvements and Other 5 to 15 years
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 January 1, 1994, 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 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
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Jerry's, Inc. And Subsidiaries March 31, 1996
Notes to Consolidated Financial Statements (Continued)
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 that 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 the 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 $171,000 in 1996, and $245,000 in 1995 (six months
ended March 31).
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.
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<PAGE>
Jerry's, Inc. And Subsidiaries March 31, 1996
Notes to Consolidated Financial Statements (Continued)
NOTE B - SALES
The Company derives a substantial portion of its revenues from catering
flights of four airlines, as follows:
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PERCENT OF TOTAL SALES
----------------------
SIX MONTHS ENDED MARCH 31, AIR CANADA CONTINENTAL U.S. AIR KIWI
- ------------------------- ---------- ----------- -------- ----
<S> <C> <C> <C> <C>
1996 5% 6% 20% 6%
1995 7% 4% 23% 7%
</TABLE>
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%
Six Months Ended 3/31/96 $ -- --%
Six Months Ended 3/31/95 3,000,000 23%
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
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MARCH 31, MARCH 31,
DESCRIPTION 1996 1995
----------- ------------------ -----------------
<S> <C> <C>
Notes payable to financial institution,
of up to $3,000,00 bearing interest at
3 1/4% plus prime and collateralized by
receivables, inventory, equipment,
leasehold rights and real estate, and
the personal guaranty of the Company's
president. $ -- $ 1,322,996
Insurance premium financing plan 24,630 13,233
------------------ -----------------
TOTAL $ 24,630 $ 1,336,229
================== =================
</TABLE>
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<PAGE>
Jerry's, Inc. And Subsidiaries March 31, 1996
Notes to Consolidated Financial Statements (Continued)
NOTE E - LONG TERM DEBT
The principal balance outstanding and details of long-term debt
are summarized as follows:
MARCH 31, MARCH 31,
DESCRIPTION 1996 1995
----------- ----------- ---------
Chattel mortgage notes on equipment,
aircraft, automotive equipment, payable
in monthly installments of approximately
$40,000 (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. $ 2,221,939 $ 2,120,311
6% to 12 1/2 notes payable, collateralized
by land and buildings, payable in monthly
installments of approximately $8,000
(including interest), with varying maturities
through 2018. 729,213 1,009,403
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 $1,667 plus
interest with a final payment of $52,995
due January 28, 2000. 131,328 157,785
9 1/4% (3 1/4% above prime) note payable
to financial institution, collateralized by
equipment, leaseholds and real estate,
payable in monthly installments of
$12,500 plus interest. -- 50,000
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. 689,302 423,021
-------------- --------------
TOTAL $ 3,771,782 $ 3,760,520
Less payments due within one year 488,541 589,402
-------------- --------------
Long-Term Debt, less current portion $ 3,283,241 $ 3,171,118
============== ==============
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<PAGE>
Jerry's, Inc. And Subsidiaries March 31, 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 $1,305,639 $1,578,679
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
$330,000 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
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
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<PAGE>
Jerry's, Inc. And Subsidiaries March 31, 1996
Notes to Consolidated Financial Statements (Continued)
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 TWO QUARTERS OF 1996 FISCAL YEAR COMPARED TO FIRST
TWO QUARTERS OF 1995 FISCAL YEAR
SALES
The Company's net sales for the six months ended March 31, 1996 were
$9,892,000 compared with $12,913,000 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 in February 1995. Sales from continuing operations were $9,913,000 in
1995. The decrease was due to a decline in airline catering sales at airports
served by the Company (other than Miami and Orlando). These sales have decreased
due to reductions in meal service and number of flights at these airports.
COST OF SALES
Cost of sales in the first six months of the 1996 fiscal year were
$5,643,000 compared with $7,723,000 in 1995. The Company's gross margin improved
from 40.2% in 1995 to 42.9% in 1996, due to a higher proportion of sales at
restaurants, lounges and gift shops.
SELLING AND ADMINISTRATIVE EXPENSES
The Company's selling and administrative expenses decreased from $5,610,000
in the first six months of 1995 fiscal year to $4,833,000 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 $380,000 in the first six months of 1995 fiscal year,
compared with $269,000 in the first six months of 1996. 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"). The Company recorded a gain
of $5,448,000 from this transaction. See Note G-7 to the Consolidated Financial
Statements.
NET INCOME
Due to the factors described above, the Company incurred a net loss of
$201,000 for the first six months compared to net income of $3,393,000 for 1995.
The comparability of these amounts is affected by the gain of $5,448,000
recorded in 1995 from the Alpha sale. If the gain from the Alpha sale were
deducted, the Company incurred a net loss (before taxes) of $364,000 in 1995,
which is comparable to the net loss (before taxes) of $294,000 for 1996.
FINANCIAL CONDITION AT MARCH 31, 1996
The Company's working capital improved during the first six months of the
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<PAGE>
1996 fiscal year by $175,000. This increase was due to the cumulative effect of:
(i) $41,000 in cash provided by operating activities (due in part to relatively
modest operating loss and high depreciation expense); (ii) $142,000 in cash used
by investing activities (due primarily to $173,000 in purchases of property and
equipment); and (iii) $275,000 provided by financing activities (due primarily
to additional loans from third parties).
On March 31, 1996, the Company's current assets and current liabilities
were $2,433,000 and $2,360,000, respectively, compared with $3,869,000 and
$6,276,000 on March 31, 1995. The Company's current ratio (current assets
divided by current liabilities) improved to 1.03 on March 31, 1996, compared
with .62 on March 31, 1995.
-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 March
31, 1996.
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<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
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<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> SEP-30-1995
<PERIOD-END> MAR-31-1996
<CASH> 934
<SECURITIES> 0
<RECEIVABLES> 1,465
<ALLOWANCES> 281
<INVENTORY> 360
<CURRENT-ASSETS> 3,196
<PP&E> 13,971
<DEPRECIATION> 10,040
<TOTAL-ASSETS> 9,046
<CURRENT-LIABILITIES> 2,624
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 3,113
<TOTAL-LIABILITY-AND-EQUITY> 9,046
<SALES> 9,892
<TOTAL-REVENUES> 9,892
<CGS> 5,643
<TOTAL-COSTS> 5,643
<OTHER-EXPENSES> 10,186
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 139
<INCOME-PRETAX> (294)
<INCOME-TAX> (93)
<INCOME-CONTINUING> (201)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (201)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
