<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: May 14, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from: [ ] to [ ]
Commission file number: 0-16368
Skyline Chili, Inc.
(Exact name of small business issuer as specified in its charter)
Ohio 31-0717287
- - -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4180 Thunderbird Lane, Fairfield, Ohio 45014
- - -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(513) 874-1188
- - -------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
[X] YES [ ] NO
There were 3,345,040 shares of the issuer's no par value common stock
outstanding as of June 26, 1995.
Transitional Small Business Disclosure Format (check one):
[ ] YES [X] NO
1
<PAGE> 2
SKYLINE CHILI, INC.
INDEX
FORM 10-QSB
MAY 14, 1995
PAGE
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . . 3
Consolidated Statements of Income . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . . 5
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders. . . . . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2
<PAGE> 3
<TABLE>
Item 1
SKYLINE CHILI, INC.
-------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF MAY 14, 1995 & OCTOBER 30, 1994
-------------------------------------
<CAPTION>
1995 1994
(UNAUDITED)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $1,688,000 $2,709,000
ACCOUNTS RECEIVABLE 992,000 726,000
INVENTORIES 1,074,000 1,043,000
PREPAID EXPENSES 79,000 213,000
DEFERRED INCOME TAXES 198,000 198,000
----------- -----------
TOTAL CURRENT ASSETS 4,031,000 4,889,000
PROPERTY AND EQUIPMENT, AT COST:
LAND 888,000 698,000
BUILDINGS AND IMPROVEMENTS 10,960,000 10,556,000
EQUIPMENT AND FIXTURES 7,092,000 6,753,000
CONSTRUCTION IN PROGRESS 52,000
----------- -----------
18,940,000 18,059,000
LESS ACCUMULATED DEPRECIATION 5,950,000 5,183,000
----------- -----------
NET PROPERTY AND EQUIPMENT 12,990,000 12,876,000
INTANGIBLE ASSETS 1,409,000 1,391,000
ACCUMULATED AMORTIZATION 892,000 857,000
----------- -----------
517,000 534,000
OTHER ASSETS 112,000 124,000
----------- -----------
$17,650,000 $18,423,000
=========== ===========
<CAPTION>
1995 1994
(UNAUDITED)
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $1,049,000 $1,406,000
ACCRUED LIABILITIES:
SALARIES AND WAGES 478,000 1,032,000
INTEREST 90,000 117,000
OTHER 407,000 398,000
----------- -----------
975,000 1,547,000
LONG-TERM DEBT DUE WITHIN ONE YEAR 350,000 340,000
----------- -----------
TOTAL CURRENT LIABILITIES 2,374,000 3,293,000
DEFERRED INCOME TAXES 387,000 387,000
LONG-TERM DEBT DUE AFTER ONE YEAR 6,280,000 6,459,000
SHAREHOLDERS' EQUITY:
COMMON STOCK, NO PAR VALUE;
5,400,000 SHARES AUTHORIZED;
3,345,000 SHARES ISSUED AND
OUTSTANDING 5,267,000 5,267,000
ADDITIONAL PAID-IN CAPITAL 19,000 19,000
RETAINED EARNINGS 3,323,000 2,998,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 8,609,000 8,284,000
----------- -----------
$17,650,000 $18,423,000
=========== ===========
<FN>
SEE ACCOMPANYING NOTES
</TABLE>
3
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<TABLE>
SKYLINE CHILI, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
TWELVE WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
--------------------------------- --------------------------------
May 14, May 15, May 14, May 15,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
SALES:
COMMISSARY $2,234,000 $2,289,000 $5,512,000 $5,575,000
RESTAURANT 3,192,000 2,887,000 7,245,000 6,370,000
FRANCHISE FEES AND ROYALTIES 284,000 269,000 649,000 593,000
---------- ---------- ---------- ----------
5,710,000 5,445,000 13,406,000 12,538,000
COSTS AND EXPENSES:
COST OF SALES - COMMISSARY 1,665,000 1,826,000 4,021,000 4,316,000
RESTAURANT OPERATING COSTS:
COST OF FOOD AND PAPER PRODUCTS 868,000 840,000 2,037,000 1,851,000
PAYROLL COSTS 979,000 805,000 2,250,000 1,856,000
OCCUPANCY AND OTHER EXPENSES 731,000 659,000 1,677,000 1,463,000
SELLING, GENERAL AND ADMINISTRATIVE 1,157,000 1,106,000 2,651,000 2,604,000
---------- ---------- ---------- ----------
5,400,000 5,236,000 12,636,000 12,090,000
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 310,000 209,000 770,000 448,000
OTHER INCOME (EXPENSE):
INTEREST INCOME 21,000 21,000 47,000 46,000
INTEREST EXPENSE (129,000) (134,000) (305,000) (317,000)
OTHER INCOME (EXPENSE) (6,000) (3,000) (4,000) (1,000)
---------- ---------- ---------- ----------
(114,000) (116,000) (262,000) (272,000)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 196,000 93,000 508,000 176,000
PROVISION FOR INCOME TAXES 72,000 34,000 183,000 64,000
---------- ---------- ---------- ----------
NET INCOME $124,000 $59,000 $325,000 $112,000
========== ========== ========== ==========
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $0.04 $0.02 $0.10 $0.04
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON & COMMON
EQUIVALENT SHARES 3,430,000 3,391,000 3,412,000 3,384,000
========== ========== ========== ==========
SEE ACCOMPANYING NOTES
</TABLE>
4
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<TABLE>
SKYLINE CHILI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
TWENTY-EIGHT WEEKS ENDED TWENTY-EIGHT WEEKS ENDED
------------------------ -------------------------
May 14, May 15, May 14, May 15,
1995 1994 1995 1994
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES: FINANCING ACTIVITIES:
NET INCOME $325,000 $112,000 PAYMENTS OF LONG-TERM DEBT (169,000) (157,000)
ADJUSTMENTS TO RECONCILE NET INCOME ----------- ----------
TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
DEPRECIATION AND AMORTIZATION 804,000 751,000 NET CASH USED BY
DECREASE (INCREASE) IN: FINANCING ACTIVITIES (169,000) (157,000)
ACCOUNTS RECEIVABLE (266,000) 300,000 ----------- ----------
INVENTORIES (31,000) (279,000)
PREPAID EXPENSES 134,000 62,000
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE (357,000) 116,000 NET INCREASE (DECREASE) IN
ACCRUED LIABILITIES (572,000) 4,000 CASH AND CASH EQUIVALENTS (1,021,000) 827,000
OTHER - NET 26,000 (31,000)
--------- --------- CASH AND CASH EQUIVALENTS AT
NET CASH PROVIDED BY BEGINNING OF PERIOD 2,709,000 1,048,000
OPERATING ACTIVITIES 63,000 1,035,000 ----------- ----------
CASH AND CASH EQUIVALENTS AT
INVESTING ACTIVITIES: END OF PERIOD $1,688,000 $1,875,000
CAPITAL EXPENDITURES (897,000) (598,000) =========== ==========
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT 552,000
ADDITIONS TO INTANGIBLE ASSETS (18,000) (5,000)
--------- --------- CASH PAID FOR:
NET CASH USED BY INTEREST $282,000 $225,000
INVESTING ACTIVITIES ($915,000) ($51,000) INCOME TAXES $104,000 $92,000
<FN>
SEE ACCOMPANYING NOTES
</TABLE>
5
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SKYLINE CHILI, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for fair presentation have been included.
Operating results for the twelve and twenty-eight week periods ended May 14,
1995 are not necessarily indicative of the results that may be expected for the
year ended October 29, 1995. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB for the year ended October 30, 1994.
RECLASSIFICATIONS
Certain fiscal 1994 amounts have been reclassified to conform to the fiscal
1995 presentation.
Weighted average common and common equivalent shares outstanding have been
restated for the period ending May 15, 1994 to reflect the issuance of 232,000
shares of stock in the fourth quarter of fiscal 1994 in an acquisition treated
as a pooling of interests.
6
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SKYLINE CHILI, INC.
-------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Total revenues for the second quarter ended May 14, 1995 of $5.7 million
increased 5% over the same period last year. Fiscal 1995 first half total
revenues of $13.4 million were 7% higher than last year's first half. These
increases were principally due to higher revenue from Company-owned restaurants
and increased franchise fees and royalties which offset lower revenues from the
Company's commissary operations.
Commissary revenues for the fiscal 1995 second quarter and first half decreased
below last year by 2% and 1%, respectively. Revenues from the sale of chili and
related food products to the franchised Skyline Chili restaurants were 9% lower
in this year's second quarter compared to last year's second quarter
principally because the Company adjusts its prices for its chili products based
on the market price of beef. Shipments of the Company's frozen grocery
products for the first half increased 6% over the same period last year.
Same-store sales for Company-owned restaurants were 4% and 6% over the same
period last year for the fiscal 1995 second quarter and first half,
respectively. A 2% menu price increase, implemented in the fourth quarter last
year, accounted for a significant portion of that increase. The Company has
seen a trend of smaller same-store increases over the last quarter. The
same-store increases, a full two quarter's sales from locations opened last
year, and one new unit opened this year in downtown Columbus, Ohio accounted
for the first half's 14% overall increase in revenues.
The Company opened one new restaurant in the second quarter which brings the
number of Company-owned units to 31, an increase of one unit over the end of
fiscal 1994. The Company franchised two new units in Cincinnati, Ohio in the
first half and currently has 52 franchised units, an increase of two units
compared to the end of fiscal 1994.
Franchise fees and royalties increased 6% and 9% in the second quarter and
first half, respectively, over the same periods last year due to the initial
franchise fee from the franchised units opened this half and increased
shipments of chili to the franchisees, which includes royalties as part of the
selling price.
7
<PAGE> 8
COST OF SALES - COMMISSARY
Cost of sales for the second quarter was 74.5% of the corresponding revenue
figures compared to 79.8% for the same period last year. Cost of sales for
the first half was 72.9% of the corresponding revenue figures compared to 77.4%
for the first half last year. A lower average beef price was the principal
reason for the improved cost of sales rate. The Company's cost of sales rate
is heavily influenced by beef prices which can fluctuate significantly.
RESTAURANT OPERATING EXPENSES
Cost of food and paper products were 27.2% and 28.1% for the second quarter and
first half, respectively, of the corresponding revenue figures compared to
29.1% for the same periods last year, thanks to lower average beef prices.
Labor costs for the second quarter of 30.7% and for the first half of 31.1%
increased over a rate of 27.8% for the second quarter last year and 29.1% for
the first half last year. The Company has experienced increases in hourly wage
rates and increased restaurant crew turnover as a result of a tightening labor
market. Occupancy and other expenses for the first quarter and first half have
increased over the same periods last year due to a full two quarters of
operations of units opened last year and one new unit opened this year.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were 4.6% higher for the second quarter
compared to last year. For the first half, this cost category was 1.8% higher
than the prior year. This was due to increased recruiting, training and
selling expenses which were partially offset by reductions in officer
compensation.
INCOME FROM OPERATIONS
Income from operations for the fiscal 1995 second quarter and first half were
48% and 72% higher than the same periods last year because of revenue increases
and lower beef prices.
OTHER INCOME (EXPENSE)
Interest expense for the second quarter and the first half was lower than the
same periods in the prior year because of lower debt levels resulting from
scheduled principal payments.
LIQUIDITY AND CAPITAL RESOURCES
Cash levels dropped from their fiscal 1994 year end level by $1,021,000 because
of decreased accounts payable and accrued liabilities and an increase in
accounts receivable from a promotion of the Company's frozen products that
extended to the end of the fiscal 1995 second quarter. Working capital as of
May 14, 1995 of $1,657,000 was approximately $61,000 over the prior fiscal year
end level.
8
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During the first half of fiscal year 1995, the Company spent $311,000 to finish
construction of a new restaurant location in downtown Columbus. This
restaurant began operations in the second quarter. The Company purchased land
in the greater Cincinnati area for $187,000 to be used as a future restaurant
location. The Company spent $218,000 in the first half to remodel various
Company-owned restaurant locations throughout the system. All of these
activities were funded by cash from operations. The Company intends to spend
approximately $605,000 for the purchase of land in the greater Cincinnati area
to be used for future restaurant development. Also, the Company intends to
spend $350,000 to relocate an existing strip center unit to a free-standing
unit in the greater Cincinnati area. The Company believes that cash provided
by operations and its $4 million unsecured bank line of credit will be adequate
to fund currently planned expansion and new equipment purchases.
The Company maintains a compensating balance of $400,000 with the bank that has
issued a letter of credit guaranteeing payment of the principal and related
interest on the City of Fairfield, Ohio Adjustable Rate Demand Industrial
Development Revenue Bonds issued in 1990 to fund in part the construction of
the Company's new commissary, warehouse and office facility. There are no
legal restrictions on the use of those compensating balance funds.
9
<PAGE> 10
SKYLINE CHILI, INC.
FORM 10-QSB
MAY 14, 1995
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The 1995 Annual Meeting of the Shareholders of Skyline Chili,
Inc. (the "Meeting") was held on March 15, 1995. The holders
of 2,981,765 shares of the Company's outstanding common stock
(approximately 89%) were present at the Meeting in person or
by proxy.
(b) At such Meeting, the following eight individuals were duly
nominated and properly elected as directors of the Company to
serve until the 1996 Annual Meeting and until their successors
are elected and qualified. The number of votes cast for and
against each nominee for office are indicated below.
<TABLE>
<CAPTION>
Votes
Votes For Against
-----------------------
<S> <C> <C>
Lambert N. Lambrinides 2,975,250 6,515
Christie N. Lambrinides 2,975,250 6,515
William N. Lambrinides 2,975,250 6,515
Lawrence R. Burtschy 2,975,900 5,865
William G. Kagler 2,976,250 5,515
David A. Kohnen 2,976,350 5,415
Joseph E. Madigan 2,976,280 5,485
Kevin R. McDonnell 2,976,350 5,415
</TABLE>
(c) At such Meeting, a proposal to ratify the appointment of Ernst
& Young LLP as the Company's independent auditors for fiscal
1995 was approved. The number of votes cast for, against and
to abstain on the proposal and broker non-votes are indicated
below.
<TABLE>
<CAPTION>
Broker
Votes For Votes Against Abstentions Non-Votes
--------------------------------------------------------------- ---------
<S> <C> <C> <C>
2,974,285 3,260 4,220 0
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- - -------
(a) Exhibits filed with this Report
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None.
10
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SIGNATURE
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Skyline Chili, Inc.
-------------------
Registrant
by: /s/Kevin R. McDonnell
----------------------
Kevin R. McDonnell
President and Chief Executive
Officer (Duly Authorized Officer)
by: /s/Jeffry W. Shelton
---------------------
Jeffry W. Shelton
Vice President and Chief Financial
Officer (Principal Financial and
Principal Accounting Officer)
Date: June 27, 1995
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AS OF
AND FOR THE SIX MONTHS (TWENTY-EIGHT WEEKS) ENDED MAY 14, 1995 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000803497
<NAME> SKYLINE CHILI, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-29-1995
<PERIOD-START> OCT-31-1994
<PERIOD-END> MAY-14-1995
<CASH> 1,688
<SECURITIES> 0
<RECEIVABLES> 992
<ALLOWANCES> 0
<INVENTORY> 1,074
<CURRENT-ASSETS> 4,031
<PP&E> 18,940
<DEPRECIATION> 5,950
<TOTAL-ASSETS> 17,650
<CURRENT-LIABILITIES> 2,374
<BONDS> 6,280
<COMMON> 5,267
0
0
<OTHER-SE> 3,342
<TOTAL-LIABILITY-AND-EQUITY> 17,650
<SALES> 12,757
<TOTAL-REVENUES> 13,406
<CGS> 6,058
<TOTAL-COSTS> 12,636
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 258
<INCOME-PRETAX> 508
<INCOME-TAX> 183
<INCOME-CONTINUING> 325
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 325
<EPS-PRIMARY> .10
<EPS-DILUTED> 0
</TABLE>
