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, 1995, 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, 1995 - 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: 21 Index: Not Applicable
<PAGE>
TABLE OF CONTENTS
JERRY'S, INC. AND SUBSIDIARIES
PART I.
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <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>
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Items $ 1,093,541 $ 533,406
Customers Accounts Receivable
Less - Allowance for Doubtful Accounts:
$433,000 in 1995 and $267,000 in 1994 664,788 2,624,241
Inventories (Note A-2) 337,059 464,829
Refundable Income Taxes - 35,535
Deferred Tax Assets - Current Portion 295,530 103,647
Prepaid Expenses and Other Current Assets 643,896 356,352
----------------- ----------------
Total Current Assets $ 3,034,814 $ 4,118,010
----------------- ----------------
INVESTMENTS:
Land Held for Investment $ 87,000 $ 87,000
Other Investments 497,403 497,921
----------------- ----------------
Total Investments $ 584,403 $ 584,921
----------------- ----------------
PROPERTY, PLANT AND EQUIPMENT:
Cost $ 13,880,880 $ 15,234,006
Less: Accumulated Depreciation 9,133,884 8,713,099
----------------- ----------------
Net Book Value $ 4,746,996 $ 6,520,907
----------------- ----------------
OTHER ASSETS:
Cash (Restricted) $ 469,087 $ 561,582
Leasehold Rights and Other Intangible
Assets (Note A-4) 10,511 11,849
Cash Surrender Value of Insurance 35,861 22,333
Deposits and Miscellaneous 322,810 375,393
Employee Loans Receivable (Net of
$10,000 Allowance in 1995 and 1994) 44,010 87,109
Other Receivables - Non-Current Portion
(Net of $18,000 Allowance in 1995
and $20,000 in 1994) 93,321 227,558
Deferred Tax Assets - Non Current 406,524 382,747
----------------- ----------------
Total Other Assets $ 1,382,124 $ 1,668,571
----------------- ----------------
TOTAL ASSETS: $ 9,748,337 $ 12,892,409
================= ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-3-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995 AND 1994
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ----------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES:
Notes Payable to Bank and
Others (Note D) $ 10,550 $ 1,920,434
Current Portion of Long-Term Debt (Note E) 495,526 1,030,757
Accounts Payable 1,286,050 2,500,063
Income Taxes Payable 184,475 -
Accrued Expenses 746,718 811,012
Loan Payable - Officer - 129,991
----------------- ----------------
Total Current Liabilities $ 2,723,319 $ 6,392,257
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current
Portion (Note E) $ 2,874,419 $ 4,344,793
----------------- ----------------
TOTAL LIABILITIES $ 5,597,738 $ 10,737,050
----------------- ----------------
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 4,176,583 2,179,697
----------------- ----------------
Subtotal: $ 4,317,656 $ 2,320,770
Less: Shares Reacquired and Held
in Treasury (59,948 shares
in 1995 and 59,381 shares
in 1994 at Cost) 167,057 165,411
----------------- ----------------
TOTAL STOCKHOLDERS' EQUITY: $ 4,150,599 $ 2,155,359
----------------- ----------------
Commitments, Contingencies and Subsequent
Events (Note G) - -
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $ 9,748,337 $ 12,892,409
================= ================
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
------ ----------------- ----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Items $ 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
(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
================= ================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-5-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1994 AND 1993
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1993
------------------ ------------------
<S> <C> <C>
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.
-6-
<PAGE>
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED JUNE 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------------- ------------------
<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) (Note G-6) $ 17,500,995 $ 22,092,089
----------------- ------------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 10,510,944 $ 13,246,553
Selling and Administrative Expenses 8,688,588 9,368,904
Airline Port Fees (Income) (515,457) (683,679)
Interest (Income) (68,480) (15,981)
Interest Expense 524,257 558,056
(Gain) Loss on Disposition of Assets (5,489,115) (6,062)
Equity in (Earnings) of Joint Ventures (2,229) (7,711)
Other (Income) (43,336) (43,115)
----------------- ------------------
Total Costs, Expenses and Other Items $ 13,605,172 $ 22,416,965
Income (Loss) Before Provision
for Income Taxes $ 3,895,823 $ (324,876)
----------------- ------------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federa $ 1,054,000 $ (82,000)
State 227,000 (14,000)
----------------- ------------------
Total Provision for Income Taxes $ 1,281,000 $ (96,000)
----------------- ------------------
Earnings (Loss) Before Cumulative Effect
of Change in Accounting Principle $ 2,614,823 $ (228,876)
Cumulative Effect of Change in
Accounting Principle (Note H) - 346,611
----------------- ------------------
Net Income $ 2,614,823 $ 117,735
RETAINED EARNINGS, BEGINNING OF PERIOD: 1,561,760 2,061,962
----------------- ------------------
RETAINED EARNINGS, END OF PERIOD: $ 4,176,583 $ 2,179,697
================= ==================
Earnings (Loss) Per Common Share Before
Cumulative Effect of Change in
Accounting Principle $ 4.65 $ (.40)
Cumulative Effect of Change in Accounting
Principle - .61
----------------- ------------------
Net Income Per Common Share: $ 4.65 $ (.21)
================= ==================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: $ 562,542 $ 568,839
================= ==================
</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, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------------- ------------------
<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 (Note G-6) $ 4,587,764 $ 7,396,142
----------------- ------------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 2,787,485 $ 4,571,374
Selling and Administrative Expenses 3,078,186 3,100,200
Airline Port Fees (Income) (135,766) (221,986)
Interest (Income) (61,314) (6,852)
Interest Expense 155,976 193,125
(Gain) or Loss on Disposition of Assets (40,845) (1,100)
Other (Income) (7,188) (15,409)
----------------- ------------------
Total Costs, Expenses and Other Items $ 5,776,534 $ 7,619,352
----------------- ------------------
Income (Loss) Before Provision for
Income Taxes $ (1,188,770) $ (223,210)
----------------- ------------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federal $ (351,000) $ (84,200)
State (60,000) (14,400)
----------------- ------------------
Total Provision (Credit) for
Income Taxes $ (411,000) $ (98,600)
----------------- ------------------
Net Income (Loss) $ (777,770) $ (124,610)
RETAINED EARNINGS, BEGINNING OF PERIOD: 4,954,353 2,304,307
----------------- ------------------
RETAINED EARNINGS, END OF PERIOD: $ 4,176,583 $ 2,179,697
================= ==================
NET INCOME (LOSS) PER COMMON SHARE: $ (1.38) $ (.22)
================= ==================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: 562,429 564,002
================= ==================
</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, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,614,823 $ 117,735
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 1,145,055 1,239,307
Provision for Losses on Accounts
Receivable 150,000 75,000
Equity In (Earnings) Loss of
Joint Ventures (2,229) (7,711)
Loss (Gain) on Sale of Assets (5,489,115) (6,062)
Cumulative Effect of Change in
Accounting Principle - (346,611)
Change in Assets and Liabilities:
(Increase)Decrease in Accounts Receivable 1,430,765 (784,613)
(Increase)Decrease in Inventories 73,806 (9,010)
(Increase)Decrease in Prepaid Expenses
and Other (267,740) (51,099)
(Increase)Decrease in Deposits and
Miscellaneous (32,755) (21,030)
Increase(Decrease) in Accounts Payable (1,316,930) 310,875
Increase(Decrease) in Income Taxes Payable 75,094 (180,268)
Increase(Decrease) in Accrued Expenses (193,785) (469)
------------------ -----------------
Net Cash Provided by (Used By)
Operating Activities: $ (1,813,011) $ 336,044
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Property and
Equipment $ 6,071,782 $ 14,132
Payments Received on Notes from Sale of
Property and Equipment - 63,768
Payments Received - Investments - 12,768
Additions to Investments - -
Purchase of Property and Equipment (196,418) (365,405)
------------------ -----------------
Net Cash Provided by (Used In) Investing
Activities: $ 5,875,364 $ (274,677)
------------------ -----------------
</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, 1995 AND 1994
(Continued)
<TABLE>
<CAPTION>
1995 1994
------------------ -----------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Line-of-Credit and
Long-Term Borrowings $ 159,182 $ -
Increase in Restricted Cash (1,522) (170,627)
Principal Payments Under Line-of Credit
and Long-Term Borrowings (3,589,779) (167,614)
Additions to Other Receivables - (22,949)
Additions to Intangible Assets - (1,449)
Payments to Acquire Treasury Stock (1,646) (40,317)
Proceeds from Officer Loans - 190,871
Payments of Officer Loan - (60,880)
------------------ -----------------
Net Cash Provided (Used) by Financing
Activities $ (3,433,765) $ (272,965)
------------------ -----------------
Net Increase in Cash and Cash
Equivalents $ 628,588 $ (211,598)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 464,953 745,004
------------------ -----------------
CASH AND CASH EQUIVALENTS AT THE END OF
THE PERIOD $ 1,093,541 $ 533,406
================== =================
ADDITIONAL CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (Non-Capitalized) $ 523,053 $ 579,090
================== =================
Income Taxes $ 1,205,906 $ 91,228
================== =================
Non-Cash Investing and Financing Activities:
Purchase of Assets (Net of Cash Period)
for Notes $ - $ 475,390
================== =================
Assets Received in Settlement of
Notes Receivable $ - $ 12,500
================== =================
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, 1995 AND 1994
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:
1995 1994
--------- ------
Finished Goods $ 71,021 $ 84,323
Raw Materials 266,038 380,506
--------- ---------
Total $ 337,059 $ 464,829
========= =========
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:
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
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.
-11-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1995
Notes to Consolidated Financial Statements (Continued)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 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. 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.
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
1995 6% 5% 24% 6%
1994 7% 6% 23% 6%
A substantial portion of the Company's revenues were terminated. See Note G-6.
-12-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1995
Notes to Consolidated Financial Statements (Continued)
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>
DESCRIPTION June 30, June 30,
1995 1994
--------------- --------------
<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. Terminated June 19, 1995. $ - $ 1,910,335
Insurance premium financing plan $ 10,550 10,099
--------------- --------------
TOTAL $ 10,550 $ 1,920,434
=============== ==============
</TABLE>
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 1995 1994
----------- ---------- ---------
<S> <C> <C>
Chattel mortgage notes on equipment,
aircraft, automotive equipment, payable
in monthly installments of approximately
$29,000 (including interest), with varying
maturities through 2002. $2,071,771 $2,337,371
6% to 12 1/2% notes payable, collateralized
by land and buildings, payable in monthly
installments of approximately $9,000
(including interest), with varying
maturities through 2018. 779,912 1,035,651
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 $62,731
due January 28, 2000. 151,694 171,118
</TABLE>
-13-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1995
Notes to Consolidated Financial Statements (Continued)
NOTE E - LONG TERM DEBT (CONTINUED)
June 30, June 30,
1995 1994
----------- ---------
DESCRIPTION
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. - 162,500
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. - 25,468
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. - 174,325
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. - 573,517
18% note payable secured by the personal
guaranty of the Company's President, payable
in monthly installments of $8,407 (including
interest) through 2000. - 374,237
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. 366,568 521,363
---------- ----------
TOTAL $3,369,945 $5,375,550
Less payments due within one year 495,526 1,030,757
---------- ----------
Long-Term Debt, less current portion $2,874,419 $4,344,793
========== ==========
-14-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1995
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 expire at various dates through the year 2003.
Rental expenses included in continuing operations are as follows:
1995 1994
--------- ------
Rent $2,157,523 $2,604,105
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
$1,700,000 for improvements and equipment at one location. The Company has
expended $1,580,000 to fulfill these obligations.
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 -- 1,529,715
2000-2003 637,077 -- 637,077
---------- ---------- ----------
TOTAL $7,002,000 $ -- $7,002,000
========== ========== ==========
NOTE G - COMMITMENTS, CONTINGENCIES, AND OTHER MATTERS
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.
-15-
<PAGE>
Jerry's, Inc. and Subsidiaries June 30, 1995
Notes to Consolidated Financial Statements (Continued)
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.
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:
PERCENTAGE OF
SALES DISCONTINUED TOTAL SALES
------------------ -------------
Year Ended 9/30/94 $9,400,000 32%
Year Ended 9/30/94 8,000,000 28%
Nine Months Ended 6/30/95 2,998,000 17%
Nine Months Ended 6/30/94 6,003,174 27%
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 prime plus 1.5%, 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 5 year concession
agreements 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 Pinellas County, Florida. The agreement requires initial capital
improvements of $400,000 plus $100,000 for removable furnishing and equipment.
NOTE H - CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," and recognized a
cumulative effect to that date of the change of $346,611 ($.60 per share).
-16-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST THREE QUARTERS OF 1995 FISCAL YEAR COMPARED TO
FIRST THREE QUARTERS OF 1994 FISCAL YEAR
SALES
The Company's net sales for the nine months ended June 30, 1995 were
$17,501,000 compared with $22,092,000 for the same period of 1994. The decrease
in net sales is primarily due to the sale of the Company's Miami and Orlando
operations. Sales from continuing operations were $14,503,000 in 1995 and
$16,089,000 in 1994. The decrease was due to a significant decline in airline
catering sales at airports served by the Company. 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 nine months of the 1995 fiscal year were
$10,511,000 compared with $13,247,000 in 1994. The Company's gross margin
remained constant at 40% during both periods.
SELLING AND ADMINISTRATIVE EXPENSES
The Company's selling and administrative expenses decreased from
$9,369,000 in the first nine months of 1994 fiscal year to $8,689,000 in 1995.
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 $684,000 in the first nine months of
1994 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-6 to
the Consolidated Financial Statements.
NET INCOME
Due to the factors described above, the Company's net income for the
first nine months of 1995 fiscal year was $2,615,000, compared to net income of
$118,000 for 1994. After deducting the gain from the Alpha sale, the Company
incurred a net loss (before taxes) of $1,593,000 in 1995, compared with a net
loss (before taxes and change of accounting principle) of $325,000 for 1994.
-17-
<PAGE>
FINANCIAL CONDITION AT JUNE 30, 1995
On June 30, 1995, the Company's current assets and current liabilities
were $3,035,000 and $2,723,000 respectively, compared with $4,118,000 and
$6,392,000 on June 30, 1994. The Company's current ratio (current assets divided
by current liabilities) improved to 1.1 on June 30, 1995, compared with .64 on
June 30, 1994.
The Company's operations used $1,813,000 of cash during the first nine
months of the 1995 fiscal year due to a significant reduction in the Company's
accounts payable and an increase in prepaid expenses (which were primarily
related to the Alpha sale). The Company's investing activities generated
$5,875,000 in cash (almost all of which is attributable to the Alpha sale).
Finally, the Company's financing activities utilized approximately $3,434,000 in
cash. This amount primarily represents the payoff of the Company's line of
credit and certain other loans in connection with the sale of the Miami and
Orlando operations.
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
There were no reports on Form 8-K filed for the three months ended June
30, 1995.
-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>
EXHIBIT INDEX
EXHIBIT
- -------
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> MAR-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,094
<SECURITIES> 0
<RECEIVABLES> 665
<ALLOWANCES> 433
<INVENTORY> 337
<CURRENT-ASSETS> 3,035
<PP&E> 4,747
<DEPRECIATION> 9,134
<TOTAL-ASSETS> 9,748
<CURRENT-LIABILITIES> 2,723
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 4,126
<TOTAL-LIABILITY-AND-EQUITY> 9,748
<SALES> 17,501
<TOTAL-REVENUES> 17,501
<CGS> 10,511
<TOTAL-COSTS> 13,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 524
<INCOME-PRETAX> 3,896
<INCOME-TAX> 1,281
<INCOME-CONTINUING> 2,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,615
<EPS-PRIMARY> 4.65
<EPS-DILUTED> 4.65
</TABLE>
