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 quarterly period ended June 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number
PERFORMANCE INDUSTRIES, INC., AND SUBSIDIARIES
(Exact name of registrant as specified in its charter)
Ohio 34-1334199
--------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2425 E. Camelback Road, Suite 620
Phoenix, Arizona 85016
--------------------------------------- ------------------------------------
(Address of principal executive offices (Zip Code)
Registrant's telephone number including area code: (602) 912-0100
Indicate by checkmark whether the registrant: (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15d of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO
--- ---
Number of shares outstanding of each of the issuer's classes of common stock as
of August 2, 1995, 9,833,115 shares.
<PAGE>
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
PART I. FINANCIAL INFORMATION (Unaudited):
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations (Unaudited) -
Three Month Period Ended June 30, 1995 and 1994 4
Consolidated Statements of Operations (Unaudited) -
Six Month Period Ended June 30, 1995 and 1994 5
Consolidated Statements of Cash Flow (Unaudited) -
Six Month Period Ended June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements (Unaudited) 7 - 8
Management's Discussion and Analysis of Financial 9 - 11
Condition and Results of Operations
PART II. OTHER INFORMATION:
Item I. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matte13 to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(Unaudited)
June 30, 1995 December 31, 1994
------------- -----------------
Current Assets:
Cash and cash equivalents $ 167 $ 1,142
Restricted cash 2,262 2,900
Accounts and other receivables,
net of allowance 541 584
Receivable from sale of businesses,
net of allowance 833 1,024
Factored accounts receivable,
net of allowance (Note 3) 2,428 4,311
Inventories 26 276
Prepaid expenses and other current assets 657 201
Assets held for sale 212 231
Deferred income taxes 254 254
--------- ---------
Total current assets 7,619 10,923
Real estate under development (Note 5) 8,158 6,014
Deferred income taxes 1,829 1,829
Property and equipment, net 4,880 4,265
Other assets 89 1,077
--------- ---------
Total assets $ 23,376 $ 24,108
========= =========
Current Liabilities:
Current portion of long-term debt (Note 7) $ 5,689 $ 4,394
Accounts payable 1,031 1,208
Accrued employment costs 418 401
Accrue health & accident costs (Note 6) 566 902
Accrued expenses and other
current liabilities 1,141 982
Factored receivables reserve (Note 3) 466 889
Liabilities subject to comprise 817 1,573
--------- ---------
Total current liabilities 10,128 10,349
Long-term debt, less current portion (Note 7) 1,849 1,356
Commitments and continge
Minority interest 451 416
Shareholder's Equity:
Preferred stock, par value $1.00 per share;
authorized 100,000 shares; none issued -- --
Common stock, no par value; authorized
20,000,000 shares; 12,629,326 shares issued 31,202 31,202
Accumulated deficit (16,810) (16,710)
--------- ---------
14,392 14,492
Treasury stock (2,671,211 and 2,796,211
shares respectively), (2,951) (2,998)
--------- ---------
Total shareholders 11,441 11,494
--------- ---------
Total liabilities and shareholders'
equity $ 23,376 $ 24,108
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED JUNE 30,1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
Three Months Ended June 30
1995 1994
------- ------
Net revenues $ 5,211 $ 4,529
Cost of revenues (4,750) (4,058)
Selling ggeneral and administrative
expense (775) (965)
Interest income 82 91
Other income 159 133
Gain on sale of assets -- 93
------------ ------------
Loss from continuing operations
before income taxes and minority
interest (73) (177)
Provision for income taxes (3) (7)
Minority interest in earnings (15) --
------------ ------------
Loss from continuing operations (91) (184)
Income from discontinued operations (--) 90
------------ ------------
Net loss $ (91) $ (94)
============ ============
Income loss per common share:
Continuing operations $ (.01) $ (.02)
Discontinued operations -- .01
------------ ------------
Net income loss per common share $ (.01) $ (.01)
============ ============
Average number of shares outstanding 9,958,115 10,986,557
See accompanying notes to consolidated financial statements.
<PAGE>
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
Six Months Ended June 30
1995 1994
-------- --------
Net revenues $ 9,828 $ 9,163
Cost of revenues (8,749) (8,163)
Selling general and administrative expense (1,628) (1,905)
Interest (expense) income (4) 108
Other income 492 344
Gain on sale of assets -- 93
------------ ------------
Loss from continuing operations before income
taxes and minority interest (61) (360)
Provision for income taxes (5) (14)
Minority interest in earnings (34) --
------------ ------------
Earnings (losses) before income tax (100) (374)
Income from discontinued operations (--) 90
------------ ------------
Net losses (100) (284)
------------ ------------
Loss per common share:
-------- ------------
Continuing operations $ (.01) $ (03)
Discontinued operations -- --
------------ ------------
Net loss per common share $ (.01) $ (.03)
============ ============
Average number of share outstanding 9,958,115 10,986,557
See accompanying notes to consolidated financial statements.
<PAGE>
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1995 AND 1994
(Unaudited)
Six months Ended June 30
------------------------
1995 1994
--------- ---------
Net cash (used in) operating activities $( 1,123) $( 1,683)
Cash Flows from Investing Activities:
Decrease in restricted cash 638 --
Decrease in receivables from sale of businesses,
net 417 3,218
(Increase) decrease in investment of factored
receivables, net 1,460 ( 977)
Decrease (increase) assets held for sale 19 2,812
Additions to property and equipment ( 1,091) ( 1,295)
Increase in real estate ( 2,144) --
-------- --------
Net cash provided by (used in) investing
activities ( 701) 3,758
Cash Flows from Financing Activities:
Repayment of debt ( 42) ( 1,006)
Proceeds from borrowings 844 --
(Increase) decrease in treasury stock 47 ( 1,765)
-------- --------
Net cash provided by (used in) financing
activities 849 ( 2,771)
Net (decrease) in cash and cash equivalents ( 975) ( 696)
Cash and cash equivalents at beginning of period 1,142 5,011
-------- --------
Cash and cash equivalents at end of perios $ 167 $ 4,315
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnote disclosure required by generally accepted accounting principles for
complete financial statements. These interim consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes included in the Company's 1994 Form 10-K filing. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six month period ended June 30, 1995 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1995. For further
information, refer to the consolidated financial statements and footnotes
thereto contained herein.
(2) Inventories:
The components of inventories were as follows (in thousands):
June 30, 1995 December 31, 1994
------------- -----------------
Restaurant Inventory 265 241
(3) Factored Accounts Receivables:
During the six month period ended June 30, 1995, the Company's factoring
subsidiary had two of its customers, representing almost 50% of its year end
business, obtain alternative financing. Some of the funds have been used by the
Company to invest in its other subsidiaries.
(4) Prepaid Expenses:
Prepaid expenses at June 30, 1995 include payments for commissions for new
leases negotiated for the Company's Mexicali facility and fees incurred to
obtain a line of credit for the Company's factoring subsidiary. These prepaid
expenses will be amortized over the life of the leases and credit line
respectively.
(5) Real Estate Under Development:
The Company has two projects under development.
Camelback Plaza, a 50,000 square foot commercial retail center, should be
complete this fall. It is expected to cost an additional $1,300,000 which will
come from restricted cash.
The Company has land in Ixtapa, Mexico in which design work to build condos has
been completed. This project has been put on hold, however, until the Mexican
economy becomes settled.
(6) Accrued Health and Accident Costs:
During the six months ending June 30, 1995, the Company settled two product
liability suits. The settlement amounts were not materially different from that
which was accrued for at year end.
(7) Long Term Debt:
The Company obtained construction and mini-perm financing in the amount of
$4,900,000 from Caliber Bank. Caliber was acquired by Norwest Bank early in
1995. The loan officers with Norwest wish to change the terms of the original
financing. The Company has been negotiating with Norwest to prepare new
documents. Until these new documents are final, all debt due under this
financing has been classified as short term for both periods ending December 31,
1994 and June 30, 1995.
(8) Liabilities Subject to Compromise:
The Company agreed to a settlement of one of the remaining disputed debts
related to its former operation of a manufacturing facility in California. The
$750,000 settlement was not materially different from that which was reserved
for at year end. Some cash was paid during the three months ended June 30, 1995
and the balance was reclassified to other current liabilities. This settlement
requires a July payment of $100,000 and $50,000 a month thereafter for eight
months.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PERFORMANCE INDUSTRIES, INC. - CONSOLIDATED
Results of Operations - Consolidated
The Company's results of operations for the three and six months ending June 30,
1995 continue to show improvement over the same periods last year. Losses from
continuing operations were only $91,000 for the three month period ending June
30, 1995 compared to $184,000 in 1994. Gross revenues increased 15% from
$4,529,000 to $5,211,000. Selling, general and administrative expenses decreased
$190,000, or approximately 20%. Some of the decrease can be attributed to
reduced legal fees and the sale of the Company's suite at America West Arena.
Losses from continuing operations for the six month period ending June 30, 1995
were $100,000 compared to $374,000 for the same period last year. The
improvement is primarily from a reduction of selling, general and administrative
expenses of $277,000.
Earnings Outlook
The Company has significantly invested in advertising and promotions in the
restaurant group which is expected to increase earnings during the remainder of
the year. However, this improvement to earnings may be reduced in the third
quarter due to the seasonality of Buster's Restaurant Bar & Grill.
The factoring subsidiary has obtained a $2,000,000 line of credit which will
allow it to become aggressive in seeking new accounts while financing charges
will reduce the percentage of net income to revenues; volume of revenues will
increase as quality clients are found.
The Mexico facility, which is owned by a wholly owned Mexican corporation, has
been fully leased with gross rents beginning in September of 1995 to be
approximately $730,000 a year. The Company has been marketing this property for
sale and has recently received offers. Management expects this property to be
sold in the current year.
The Company's development subsidiary consists of a soon to be completed
commercial retail center in Phoenix and raw land in Ixtapa, Mexico. The Company
has received an offer to purchase the retail center. While the project is fully
leased and will generate significant cash flows it is tying up working capital
intended for investment in the restaurant subsidiary.
Revenues
Revenues for the quarter ended June 25, 1995 were $617,000 more than the same
period in 1994. Revenues for the six months ended June 25, 1995 were $489,000
more than the same period in 1994. The increase is the result of the acquisition
of a new restaurant operating under the trade name Buster's Restaurant Bar &
Grill.
Cost and Expenses
As a percentage of sales cost of goods sold was 28.6% and 26.6% for the three
and six months ended June 25, 1995, as compared to 26.6% and 27.0% for the same
periods last year.
The percentage increase is attributed primarily to the menu items offered at
Buster's Restaurant. The restaurant sells primarily certified Black Angus beef
and fresh seafood of the highest quality available. This menu mix yields a
higher food cost percentage than a Bobby McGee's restaurant.
Restaurant and general administrative expenses for the three and six months
ended June 25, 1995 were $477,000 and $421,000 more than the same periods in
1994. The increase is a direct result of the acquisition of Buster's, and of an
advertising campaign launched in the second quarter to promote the grand
re-opening o the Bobby McGee's in San Bernardino, California.
Net Income
The restaurant division recorded a net loss of $121,000 and $111,000 for the
three and six months ended June 25, 1995, as compared to net income of $4,000
and $7,000 for the same periods in 1994. The losses are attributable to an
aggressive advertising campaign and costs associated with the acquisition of
Buster's Restaurant.
Buster's is located in Scottsdale, Arizona, which is a very seasonal city for
the restaurant industry. Under the prior ownership, Buster's historically
realized losses in April through September.
Earnings Outlook
The Company has significantly invested in advertising and promotions which is
expected to increase earnings during the remainder of the year. However, this
improvement to earnings may be reduced in the third quarter due to the
seasonality of Buster's.
(Dollars in $1,000)
Six Months Ended June 25, 1995
------------------------------
( ) Unfavorable variance
1995 1994 1995 vs 1994
---- ---- ------------
Revenues $ 9,255 $ 8,766 $ 489
Cost and Expenses:
-----------------
Cost of Sales 2,557 2,370 (187)
Restaurant Expenses 6,177 5,777 (400)
Administrative Expenses 632 611 (21)
------- ------- -------
Total Cost and Expenses 9,366 8,758 (608)
------- ------- -------
Earnings before Income Taxes (111) 8 (119)
Provision for Income Taxes 0 1 1
------- ------- -------
Net Income $ (111) $ 7 ($ 118)
======= ======= =======
Percentage of Total Revenues
Six Months Ended June 25, 1995
------------------------------
( ) Unfavorable variance
1995 1994 1995 vs 1994
------ ------ ------------
Revenues 100.0% 100.0% 5.6%
Cost and Expenses:
------------------
Cost of Sales 27.6% 27.0% 0.6%
Restaurant Expenses 66.7% 65.9% 0.8%
Administrative Expenses 6.8% -- 0.2%
----- ----- ---
Total Cost and Expenses 101.2% 99.9% 1.3%
----- ----- ---
Earnings before Income Taxes (2.2%) 0.2% (2.4%)
Provision for Income Taxes 0.0% 0.0% 0.0%
----- ---- ---
Net Income (2.2%) 0.2% (2.4%)
===== ==== ===
PERFORMANCE FUNDING
Net revenues and income for the six month period ending June 30, 1995 were
$518,000 and $361,000 respectively. This compares to revenues of $397,000 and
earnings of $314,000 for the same period in 1994. The percentage of earnings to
gross revenues was 79% in 1994 and only 70% in 1995. This decrease in net
earnings is attributed to the subsidiary being charged interest by the parent in
1995. The interest charged for the six months ended June 30, 1995 was $70,000.
In July of 1995, Performance Funding negotiated a $2,000,000 line of credit
which is guaranteed by the parent. The term is for two years and the primary
covenant is that net equity in the subsidiary will equal or exceed $1,000,000.
At June 30, 1995, the subsidiary's equity was $1,198,000. In addition, the
Company had an intercompany loan to Performance Funding of $798,000 at June 30,
1995. According to terms of the loan agreement, this debt may be paid by loan
proceeds.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995, the Company's unrestricted cash was $167,000. During the six
month period ending June 30, 1995, the Company used $1,123,000 to fund operating
activities and $701,000 to fund investments, some of which was offset by
borrowing against the development construction loans. The net decrease in cash
for the six month period was $975,000.
During the six month period ended June 30, 1995, the Company invested over
$2,000,000 in real estate under development and the acquisition of a new
restaurant and completion of remodeling of existing restaurants. Any additional
investments in the retail center are expected to be provided from restricted
cash.
The Company's factoring subsidiary obtained a two year $2,000,000 line of credit
on July 19, 1995. This agreement provides funds for growth in the factoring
subsidiary, as well as making available almost $1,000,000 to the Company for the
working capital needs of its other subsidiaries.
Management believes, but there is no assurance, that with the proceeds from the
repayment of debt from its factoring subsidiary the eventual sale of one or both
of the rental properties (Mexicali and/or the retail center), plus cash flows
from future operations, will meet its current capital requirements for the
remainder of the year.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
In the matter of Performance Industries, Inc. v. Murray & Murray et al.,
previously discussed in the report on Form 10-Q for the period ending March 31,
1995, the defendants have appealed to the Arizona Supreme Court, the Court of
Appeals, Division I, ruling upholding the trial court's finding of personal
jurisdiction. It is anticipated that this appeal will be decided by January,
1996
An action was filed by the Richter Family Trust against the Company and
unrelated third party defendants in the U.S. District Court for the Central
District of California. For the costs of environmental remediation of the
property at 19007 Reyes Avenue, Compton, formerly used by the Company as the
Cragar Wheel manufacturing plant, under federal statutes. The action also seeks
damages under common law tort theories for the alleged environmental
contamination of the property. The Company has filed an answer to the action, as
well as cross complaint against its predecessors-in-interest at the location.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its annual meeting on June 5, 1995 at which the Board of
Directors was reelected to serve for one year and employment of Toback CPA's as
auditors was approved.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<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.
PERFORMANCE INDUSTRIES, INC. and SUBSIDIARIES
Date: August 11, 1995 /s/ Joe Hrudka
----------------------------------------------
Joe Hrudka
Chairman of the Board
(Principal Executive Officer)
/s/ James W. Brown
-----------------------------------------------
James W. Brown
Chief Financial Officer
(Principal Accounting Officer)
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
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<CASH> 167
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<RECEIVABLES> 4,781
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<COMMON> 31,202
0
0
<OTHER-SE> (19,761)
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