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 December 31, 1994, 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 December 31, 1994 - 562,429
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]
Total Number of pages in Exhibit
this report: 20 Index: Not Applicable
<PAGE>
TABLE OF CONTENTS
JERRY'S, INC. AND SUBSIDIARIES
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS........................... 3
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS..................................... 7
CONSOLIDATED STATEMENT OF CASH FLOWS.................. 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............ 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................... 17
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
DECEMBER 31, 1994 AND 1993
ASSETS: 1994 1993
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Items $ 54,630 $ 216,084
Customers Accounts Receivable
Less - Allowance for Doubtful Accounts:
$356,000 in 1994 and $217,000 in 1993 2,496,805 2,364,040
Inventories (Note A-2) 463,346 489,667
Deferred Income Taxes 295,530 82,209
Prepaid Expenses and Other Current Assets 550,212 451,743
---------------- ----------------
Total Current Assets $ 3,860,523 $ 3,603,743
---------------- ----------------
INVESTMENTS:
Land Held for Investment $ 87,000 $ 87,000
Other Investments 497,403 502,699
---------------- ----------------
Total Investments $ 584,403 $ 589,699
---------------- ----------------
PROPERTY, PLANT AND EQUIPMENT:
Cost $ 15,512,795 $ 15,246,764
Less: Accumulated Depreciation 9,480,138 8,585,970
---------------- ----------------
Net Book Value $ 6,032,657 $ 6,660,794
---------------- ----------------
OTHER ASSETS:
Cash (Restricted) $ 467,565 $ 407,694
Leasehold Rights and Other Intangible
Assets (Note A-4) 11,277 11,323
Cash Surrender Value of Insurance 35,861 73,933
Deposits and Miscellaneous 278,122 321,773
Employee Loans Receivable (Net of
$10,000 Allowance in 1994 and 1993) 31,897 50,480
Other Receivables - Non-Current Portion
(Net of $18,000 Allowance in 1994 and
$20,000 in 1993) 107,992 237,976
Deferred Income Taxes Non-Current Portion 406,524 57,574
---------------- ----------------
Total Other Assets $ 1,339,238 $ 1,160,753
---------------- ----------------
TOTAL ASSETS: $ 11,816,821 $ 12,014,989
================ ================
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994 AND 1993
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
---------------- ----------------
CURRENT LIABILITIES:
Notes Payable to Bank and
Others (Note D) $ 1,859,914 $ 1,836,618
Current Portion of Long-Term Debt (Note E) 993,008 937,801
Accounts Payable 2,324,663 2,256,368
Accrued Expenses 936,829 802,258
Income Tax Payable 93,381 -
---------------- ----------------
Total Current Liabilities $ 6,207,795 $ 5,833,045
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current
Portion (Note E) 4,166,345 4,423,086
---------------- ----------------
TOTAL LIABILITIES $ 10,374,140 $ 10,256,131
---------------- ----------------
STOCKHOLDERS' EQUITY:
Capital Stock -
Common Stock of $.04 par value -
Authorized 4,000,000 shares;
622,377 Shares Issued
in 1994 and 1993 $ 24,895 $ 24,895
Capital in Excess of Par Value 116,178 116,178
Retained Earnings 1,468,665 1,770,405
---------------- ----------------
Subtotal: $ 1,609,738 $ 1,911,478
Less: Shares Reacquired and Held
in Treasury (59,948 shares
in 1994 and 54,206 shares
in 1993 at Cost) 167,057 152,620
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY: $ 1,442,681 $ 1,758,858
---------------- ----------------
Commitments, Contingencies and Subsequent
Events (Note G) -- --
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $ 11,816,821 $ 12,014,989
================ ================
See accompanying Notes to Consolidated Financial Statements
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994 AND 1993
ASSETS 1994 1993
---------------- ----------------
CURRENT ASSETS:
Cash and Cash Items (Note E) $ 464,953 $ 745,004
Customer Accounts Receivable
Less Allowance for Doubtful Accounts:
$276,000 in 1994 and $192,000 in 1993 2,240,553 1,914,628
Inventories (Note A-2) 410,865 455,819
Deferred Income Taxes 295,530 82,209
Prepaid Expenses and Other Current
Assets (Note G)
(Net of $5,000 Allowance In 1994) 457,158 247,981
---------------- ----------------
Total Current Assets $ 3,869,059 $ 3,445,641
---------------- ----------------
INVESTMENTS:
Land Held for Investment $ 87,000 $ 87,000
Other Investments 495,174 503,038
---------------- ----------------
Total Investments $ 582,174 $ 590,038
---------------- ----------------
PROPERTY, PLANT AND EQUIPMENT:
Cost $ 15,426,570 $ 15,188,904
Less: Accumulated Depreciation 9,118,785 8,198,353
---------------- ----------------
Net Book Value $ 6,307,785 $ 6,990,551
---------------- ----------------
OTHER ASSETS:
Cash (Restricted) $ 467,565 $ 390,955
Leasehold Rights and Other Intangible Assets
Less Accumulated Amortization of $6,312 in
1994 and $4,188 in 1993 15,265 11,784
Cash Surrender Value of Insurance 35,861 73,933
Deposits and Miscellaneous 278,201 321,177
Employee Loans Receivable (Net of $10,000
Allowance In 1994 and 1993) 33,858 41,436
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1994 and
$20,000 In 1993) 120,327 288,462
Deferred Income Taxes - Non-Current
Portion 406,524 57,574
---------------- ----------------
Total Other Assets $ 1,357,601 $ 1,185,321
---------------- ----------------
TOTAL ASSETS $ 12,116,619 $ 12,211,551
================ ================
See accompanying notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994 AND 1993
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
------------------ -----------------
CURRENT LIABILITIES:
Notes Payable to Bank and Others $ 1,723,040 $ 1,431,952
Current Portion of Long-Term Debt 899,752 970,793
Accounts Payable 2,602,980 2,189,188
Income Taxes Payable 109,381 144,733
Accrued Expenses 940,503 811,481
------------------ -----------------
Total Current Liabilities $ 6,275,656 $ 5,548,147
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current Portion 4,303,541 4,585,463
------------------ -----------------
TOTAL LIABILITIES $ 10,579,197 $ 10,133,610
------------------ -----------------
STOCKHOLDERS' EQUITY:
Capital Stock -
Common Stock of $.04 par value - Authorized
4,000,000 Shares; 622,377 Shares Issued in
1994 and 1993 $ 24,895 $ 24,895
Capital In Excess of Par Value 116,178 116,178
Retained Earnings 1,561,760 2,061,962
------------------ -----------------
Subtotal $ 1,702,833 $ 2,203,035
Less: Shares Reacquired and Held in
Treasury (59,381 Shares in 1994
and 40,533 Shares in 1993 at Cost) 165,411 125,094
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY $ 1,537,422 $ 2,077,941
------------------ -----------------
Commitments, Contingencies, and Subsequent
Events --- ---
------------------ -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 12,116,619 $ 12,211,551
================== =================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
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<TABLE>
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
----------------- -----------------
<S> <C> <C>
NET SALES:
(A substantial portion of which is
attributable to four customers (Note B)
and a substantial portion which will be
discontinued) (Note G-6) $ 6,608,057 $ 6,566,346
----------------- -----------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 4,046,322 $ 4,065,356
Selling and Administrative Expenses 2,691,835 2,990,427
Airline Port Fees (Income) (184,239) (205,399)
Interest (Income) (4,015) (5,308)
Interest Expense 188,780 181,279
(Earnings) of Joint Ventures (2,229) -
Loss On Disposition of Assets - -
Other (Income) (19,302) (11,452)
----------------- -----------------
Total Costs, Expenses and Other Items $ 6,717,152 $ 7,014,903
----------------- -----------------
Income (Loss) Before Provision for
Income Taxes $ (109,095) $ (448,557)
----------------- -----------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federal $ (14,000) $ (134,000)
State (2,000) (23,000)
----------------- -----------------
Total Provision (Credit) for
Income Taxes $ (16,000) $ (157,000)
----------------- -----------------
Net Income (Loss) $ (93,095) $ (291,557)
RETAINED EARNINGS, BEGINNING OF PERIOD: 1,561,760 2,061,962
----------------- -----------------
RETAINED EARNINGS, END OF PERIOD: $ 1,468,665 $ 1,770,405
================= =================
NET INCOME (LOSS) PER COMMON SHARE: $ (.17) $ (.51)
================= =================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: 562,764 574,364
================= =================
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
1994 1993
------------------ ---------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (93,095) $ (291,557)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 365,341 388,078
Provision for Losses on Accounts
Receivable 50,000 25,000
Equity In (Earnings) Loss of
Joint Ventures (2,229) -
Loss on Sale of Assets - -
Change in Assets and Liabilities:
(Increase)Decrease in Accounts Receivable (301,252) (474,412)
(Increase)Decrease in Inventories (52,481) (33,848)
(Increase)Decrease in Prepaid Expenses
and Other (25,284) (154,075)
(Increase)Decrease in Deposits and
Miscellaneous 9,375 (9,640)
Increase(Decrease) in Accounts Payable (278,317) 67,180
Increase(Decrease) in Income Taxes Payable (16,000) (144,733)
Increase(Decrease) in Accrued Expenses (3,674) (9,223)
------------------ ---------------
Net Cash Provided By (Used in)
Operating Activities: $ (347,616) $ (637,230)
------------------ ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Property and
Equipment $ - $ -0-
Payments Received on Notes from Sale of
Property and Equipment - 63,768
Payments Received - Investments - 339
Additions to Investments - -
Purchase of Property and Equipment (86,225) (57,860)
------------------ ---------------
Net Cash Provided (Used In)
Investing Activities: $ (86,225) $ 6,247
------------------ ---------------
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
(Continued)
1994 1993
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Line-of-Credit and
Long-Term Borrowings $ 159,182 $ -
Increase in Restricted Cash - (16,739)
Principal Payments Under Line-of Credit
and Long-Term Borrowings (66,248) 159,610
Payments to Acquire Treasury Stock (1,646) (27,526)
Additions to Intangible Assets - -
Additions to Other Receivables (67,770) (13,282)
--------------- ---------------
Net Cash Provided by Financing
Activities $ 23,518 $ 102,063
--------------- ---------------
Net Increase (Decrease) in Cash and Cash
Equivalents $ (410,323) $ (528,920)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 464,953 745,004
--------------- ---------------
Cash and Cash Equivalents at the End
of the Period $ 54,630 $ 216,084
=============== ===============
ADDITIONAL CASH FLOW INFORMATION:
Cash Paid During the Year for:
Interest (Non-Capitalized) $ 188,780 $ 184,001
=============== ===============
Income Taxes $ - $ -0-
=============== ===============
Non-Cash Investing and Financing Activities:
Purchase of Assets
(Net of Cash Paid) for Notes $ - $ 49,687
=============== ===============
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
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JERRY'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1994 AND 1993
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 businesses.
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:
1994 1993
-------- --------
Finished Goods $ 63,992 $ 61,056
Raw Materials 399,354 428,611
-------- --------
Total $463,346 $489,667
======== ========
3. PROPERTY, PLANT, AND EQUIPMENT -
Property, plant, and equipment are carried at cost. The Company calculates
depreciation on the straight-line and accelerated methods at annual rates
based upon the estimated service lives of the property which generally are
as follows:
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 7 years
Assets with an original cost of approximately $3,000,000 have been fully
depreciated at September 30, 1994.
4. INTANGIBLES -
The Company amortizes mortgage costs over the life of the mortgage using the
straight line method.
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Jerry's, Inc. And Subsidiaries December 31, 1994
Notes to Consolidated Financial Statements (Continued)
5. INCOME TAXES -
Effective January 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 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 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. As of September 30, 1994, approximately 67% of the recorded
trade receivables were concentrated with 9 airlines. Receivables arising
from these sales are not collateralized and, as a result, management
continually monitors the financial condition of these companies.
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Jerry's, Inc. And Subsidiaries December 31, 1994
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:
PERCENT OF TOTAL SALES
----------------------
THREE MONTHS ENDED DECEMBER 31, AIR CANADA CONTINENTAL U.S. AIR KIWI
- ------------------------------- ---------- ----------- -------- ----
1994 7% 4% 21% 7%
1993 7% 6% 23% 7%
A substantial portion of the Company's revenues will be terminated during
fiscal 1995 (Note G-6).
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
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
DESCRIPTION 1994 1993
----------- ------------- -------------
<S> <C> <C>
Notes payable to financial institution,
of up to $3,000,000 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. $ 1,831,448 $ 1,796,651
Insurance premium financing plan 28,466 39,967
---------------- ----------------
TOTAL $ 1,859,914 $ 1,836,618
================ ================
</TABLE>
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Jerry's, Inc. And Subsidiaries December 31, 1994
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>
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DECEMBER 31, DECEMBER 31,
DESCRIPTION 1994 1993
----------- ---------------- ----------------
<S> <C> <C>
Chattel mortgage notes on equipment,
aircraft, automotive equipment, payable
in monthly installments of approximately
$30,000 (including interest), with varying
maturities through 2002. $ 2,218,989 $ 2,033,711
5-7/8% to 12 1/2% notes payable, collateralized by
land and buildings, payable in monthly
installments of approximately $13,000
(including interest), with varying
maturities through 2018. 1,021,363 1,061,615
8 3/4% (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 $159,451
due January 28, 1995. 161,118 181,118
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 with a final
payment due November 7, 1995 of $250,000. 87,500 237,500
Non-interest bearing note, due in 36 monthly
installments of $5,278 commencing November 1,
1991 with an additional payment of $20,000
due February 1, 1992. The original face
amount of the note is $178,403 (net of
discount based on imputed interest rate of
11 1/4%). This note is guaranteed by the
Company's officers. -- 54,734
</TABLE>
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<CAPTION>
Jerry's, Inc. And Subsidiaries December 31, 1994
Notes to Consolidated Financial Statements (Continued)
DECEMBER 31, DECEMBER 31,
DESCRIPTION 1994 1993
----------- --------------- ----------------
<S> <C> <C>
10% note due 1996 to former owner of acquired
company, collateralized by the capital stock
and assets of Meiner's Catering Service, Inc.,
payable in quarterly installments of $19,918,
including interest, for 10 years. 128,005 204,315
18% note payable collateralized by equipment,
improvements and interests at the Company's
Pensacola, Florida facilities along with the
personal guaranty of the Company's President,
payable in monthly installments of $15,763
(including interest) through 1999 528,911 614,314
18% note payable secured by the personal
guaranty of the Company's president, payable
in monthly installments of $8,407 (including
interest) through 2000. 556,834 390,153
9% (prime plus 3 points) note payable
to bank collateralized by improvements and
interests at the Company's Daytona Beach,
Florida facilities and the personal
guaranty of the Company's president,
payable in monthly installments of $14,531
(including interest) through 1997. 456,633 583,427
---------------- -----------------
TOTAL $ 5,159,353 $ 5,360,887
Less payments due within one year 993,008 937,801
---------------- -----------------
Long-Term Debt, less current portion $ 4,166,345 $ 4,423,086
================ =================
</TABLE>
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 2003.
Rental expense included in continuing operations is as follows:
1994 1993
--------- ---------
Rent $758,509 $759,899
Contingent rentals are generally calculated as a percentage of gross sales
and vary from three percent (3%) to forty percent (40%).
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<PAGE>
Jerry's, Inc. And Subsidiaries December 31, 1994
Notes to Consolidated Financial Statements (Continued)
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 $1,700,000
for improvements and equipment at one location. The Company has expended
$1,580,000 to fulfill this obligation.
The approximate minimum rental commitments for the years subsequent to
September 30, 1994 are as follows:
FINANCING OTHER
TOTAL LEASES LEASES
----------- ----------- -----------
1995 $ 1,871,045 $ -- $ 1,871,045
1996 1,693,437 -- 1,693,437
1997 1,237,174 -- 1,237,174
1998 1,033,552 -- 1,033,552
1999 529,715 -- 529,715
2000-2003 637,077 -- 637,077
----------- ----------- -----------
TOTAL $ 7,002,000 $ -- $ 7,002,000
=========== =========== ===========
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 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, 1994 for all open years is approximately $310,000. The
Company's carrier has estimated the claim exposure at September 30, 1994 for all
open years to be only $60,000 which has been accrued for.
-15-
<PAGE>
Jerry's, Inc. And Subsidiaries December 31, 1994
Notes to Consolidated Financial Statements (Continued)
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. During February 1995, the Company sold its airline catering operations
at Miami, Florida and Orlando, Florida to Alpha Flight Services Florida, Inc. At
the closing, the Company received $4,000,000 in cash, and $1,000,000 was
deposited in escrow for a period of 90 days. The Company received this amount in
the summer of 1995. In addition, the buyer assumed and paid $1,000,000 of the
Company's liabilities. The approximate gain was $5,000,000 before taxes. 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 3 years. This contingent consideration is subject to a
limitation of $1,000,000 per year. The approximate sales that were discontinued
at the Company's Miami and Orlando facilities effective February 1995 amounted
to:
SALES DISCONTINUED % TO TOTAL SALES
------------------ ----------------
Year Ended 9/30/94 $9,400,000 32%
Year Ended 9/30/93 8,000,000 28%
Three Months Ended 12/31/94 2,156,900 33%
Three Months Ended 12/31/93 2,033,000 31%
7. During February 1995, the Company's bank debt collateralized by
equipment, leasehold and real estate at the Company's facilities in Melbourne,
Florida was extended providing for monthly principal payments of $1,667 plus
interest at 1.5% plus prime with a final payment of $62,700 due January 28,
2000.
8. During April 1995, the Company disposed of certain property in West Palm
Beach, Florida for $160,000 resulting in an approximate gain of $8,000 before
taxes.
9. During April 1995, the Company entered into a 5 year concession
agreement with St. Lucie County, Florida to operate food, beverage, merchandise,
and other concessions at 5 recreational facilities of the County.
10. During April 1995, the Company entered into a 10 year concession
agreement with the County of Pinellas. The agreement requires initial capital
improvements of $400,000 plus $100,000 for removable furnishing and equipment.
11. The Company's purchases of improvements, equipment and vehicles
amounted to approximately $174,000 during the subsequent period.
-16-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER OF 1995 FISCAL YEAR COMPARED TO FIRST
QUARTER OF 1994 FISCAL YEAR
NET SALES
The Company's net sales for the three months ended December 31, 1994 were
$6,608,000 compared with $6,566,000 for the same period of the prior year. The
sales for airline catering increased during these periods due to increased
business from international carriers. Sales from restaurants, lounges, gift
shops and private catering also increased due to higher passenger volumes at
airports served by the Company.
COST OF SALES
Cost of sales in the first three months of the 1995 fiscal year were
$4,046,000 compared with $4,065,000 in 1994. The Company's gross margin
increased during this period from 38.1% in the first three months of 1994 fiscal
year to 38.8% in 1995. This increase is due to the increased sales to
international airlines and a higher percentage of restaurant and lounge sales.
SELLING AND ADMINISTRATIVE EXPENSES
The Company's selling and administrative expenses decreased from $2,990,000
in the first three months of 1994 fiscal year to $2,692,000 in 1995, primarily
due to lower promotional costs.
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 $205,000 in the first three months of 1994 fiscal
year, compared with $184,000 in the first three months of 1995. It is directly
offset by rental expense paid by the Company. The decline reflects lower airline
catering sales at airports which charge a port fee.
NET INCOME
Due to the factors described above, the Company's net loss for the first
three months of the 1995 fiscal year was $93,000, compared with a loss of
$292,000 for the prior year's period.
-17-
<PAGE>
FINANCIAL CONDITION AT DECEMBER 31, 1994
On December 31, 1994, the Company's current assets and current liabilities
were $3,861,000 and $6,208,000, respectively, compared with $3,604,000 and
$5,833,000 on December 31, 1994. The Company's current ratio (current assets
divided by current liabilities) remained constant at .62 on both December 31,
1994 and September 30, 1994.
The Company's financial condition declined during the first three months of
the 1995 fiscal year. The principal reason for this decline was the Company's
net loss for the period. The Company's investing activities used only $86,000 in
cash during the first three months of 1995 fiscal year, which reflects the
Company's low level of capital expenditures. Finally, the Company's financing
activities provided approximately $23,000 in cash flow during the first three
months of 1995 fiscal year. This amount represents the borrowings under the
Company's line of credit based on a higher level of receivables. The Company's
liquidity generally declines during the first quarter of the fiscal year due to
the substantial increase in passengers to Florida during this period (which
results in higher accounts receivable).
SALE TO ALPHA
The Company sold its Miami and Orlando airline catering operations to Alpha
Flight Services Florida, Inc. in February 1995. See Note G-6 to the Consolidated
Financial Statements.
-18-
<PAGE>
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed for the three months ended December
31, 1994.
-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: July 7, 1997 /S/ GERALD J. PENDERGAST, JR.
-----------------------------
Gerard J. Pendergast, Jr.,
President and Chief Executive Officer
Date: July 7, 1997 /S/ KAREN P. RHODES
-------------------
Karen P. Rhodes,
Chief Financial Officer
-20-
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> SEP-30-1994
<PERIOD-END> DEC-31-1994
<CASH> 54
<SECURITIES> 0
<RECEIVABLES> 2,497
<ALLOWANCES> 356
<INVENTORY> 463
<CURRENT-ASSETS> 3,861
<PP&E> 6,033
<DEPRECIATION> 9,480
<TOTAL-ASSETS> 11,817
<CURRENT-LIABILITIES> 6,208
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 1,418
<TOTAL-LIABILITY-AND-EQUITY> 11,817
<SALES> 6,608
<TOTAL-REVENUES> 6,608
<CGS> 4,046
<TOTAL-COSTS> 6,717
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 189
<INCOME-PRETAX> (109)
<INCOME-TAX> (16)
<INCOME-CONTINUING> (93)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
