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Previous: ROTONICS MANUFACTURING INC/DE, 10-K, 1996-09-18 |
Next: DEFINED ASSET FUNDS MUNICIPAL INVT TR FD MON PYMT SER 510, 485BPOS, 1996-09-18 |
<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: August 4, 1996
--------------
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
incorporation or organization) No.)
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 3,386,023 shares of the issuer's no par value common stock
outstanding as of September 16, 1996.
Transitional Small Business Disclosure Format (check one):
[ ] YES [X] NO
<PAGE> 2
SKYLINE CHILI, INC.
-------------------
INDEX
Form 10-QSB
August 4, 1996
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 6. Exhibits and Reports on
Form 8-K . . . . . . . . . . . . . . . . 9
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 10
2
<PAGE> 3
Item 1 SKYLINE CHILI, INC.
CONSOLIDATED BALANCE SHEETS
AS OF AUGUST 4, 1996 & OCTOBER 29, 1995
<TABLE>
<CAPTION>
1996 1995
(UNAUDITED) (AUDITED)
-------------------------- --------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $834,000 $1,910,000
ACCOUNTS RECEIVABLE 1,296,000 1,074,000
INVENTORIES 1,183,000 1,224,000
PREPAID EXPENSES 114,000 121,000
DEFERRED INCOME TAXES 206,000 206,000
-------------------------- --------------------------
TOTAL CURRENT ASSETS 3,633,000 4,535,000
PROPERTY AND EQUIPMENT, AT COST:
LAND 1,920,000 1,469,000
BUILDINGS AND IMPROVEMENTS 12,642,000 11,512,000
EQUIPMENT AND FIXTURES 8,416,000 7,409,000
-------------------------- --------------------------
22,978,000 20,390,000
LESS ACCUMULATED DEPRECIATION 7,830,000 6,565,000
-------------------------- --------------------------
NET PROPERTY AND EQUIPMENT 15,148,000 13,825,000
INTANGIBLE ASSETS 771,000 755,000
ACCUMULATED AMORTIZATION 305,000 254,000
-------------------------- --------------------------
466,000 501,000
OTHER ASSETS 128,000 152,000
-------------------------- --------------------------
$19,375,000 $19,013,000
========================== ==========================
</TABLE>
<TABLE>
<CAPTION>
1996 1995
(UNAUDITED) (AUDITED)
-------------------------- --------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $1,209,000 $1,505,000
INCOME TAXES $79,000 101,000
ACCRUED LIABILITIES:
SALARIES AND WAGES 784,000 664,000
INTEREST 73,000 65,000
OTHER 501,000 485,000
LONG-TERM DEBT DUE WITHIN ONE YEAR 379,000 360,000
--------------------------- ---------------------------
TOTAL CURRENT LIABILITIES 3,025,000 3,180,000
DEFERRED INCOME TAXES 469,000 469,000
LONG-TERM DEBT DUE AFTER ONE YEAR 5,811,000 6,100,000
SHAREHOLDERS' EQUITY:
COMMON STOCK, NO PAR VALUE;
5,400,000 SHARES AUTHORIZED;
3,386,000 SHARES ISSUED AND
OUTSTANDING (3,345,000 IN 1995) 5,367,000 5,267,000
ADDITIONAL PAID-IN CAPITAL 19,000 19,000
RETAINED EARNINGS 4,684,000 3,978,000
-------------------------- ------------------------
TOTAL SHAREHOLDERS' EQUITY 10,070,000 9,264,000
-------------------------- ------------------------
$19,375,000 $19,013,000
========================== ========================
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE> 4
<TABLE>
SKYLINE CHILI, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
TWELVE WEEKS ENDED FORTY WEEKS ENDED
--------------------------------------------- ----------------------------------------
August 4, August 6, August 4, August 6,
1996 1995 1996 1995
------------------ -------------------- ----------------- ----------------
<S> <C> <C> <C> <C>
REVENUES:
SALES:
COMMISSARY $2,613,000 $2,288,000 $8,816,000 $7,800,000
RESTAURANT 3,716,000 3,359,000 11,484,000 10,605,000
FRANCHISE FEES AND ROYALTIES 348,000 289,000 1,009,000 937,000
------------------ ---------------- ------------------ -----------------
6,677,000 5,936,000 21,309,000 19,342,000
COSTS AND EXPENSES:
COST OF SALES - COMMISSARY 1,956,000 1,672,000 6,438,000 5,688,000
RESTAURANT OPERATING COSTS:
COST OF FOOD AND PAPER PRODUCTS 1,045,000 917,000 3,230,000 2,954,000
PAYROLL COSTS 1,129,000 1,020,000 3,487,000 3,253,000
OCCUPANCY AND OTHER EXPENSES 799,000 738,000 2,504,000 2,429,000
SELLING, GENERAL AND ADMINISTRATIVE 1,258,000 1,158,000 4,286,000 3,815,000
-------------------- ---------------- --------------- ----------------
6,187,000 5,505,000 19,945,000 18,139,000
-------------------- ---------------- --------------- ----------------
INCOME FROM OPERATIONS 490,000 431,000 1,364,000 1,203,000
OTHER INCOME (EXPENSE):
INTEREST INCOME 16,000 25,000 61,000 73,000
INTEREST EXPENSE (88,000) (131,000) (294,000) (437,000)
OTHER INCOME (EXPENSE) (1,000) (5,000) (6,000)
-------------------- ----------------- --------------- ----------------
(73,000) (106,000) (238,000) (370,000)
-------------------- ---------------- --------------- ----------------
INCOME BEFORE INCOME TAXES 417,000 325,000 1,126,000 833,000
PROVISION FOR INCOME TAXES 155,000 116,000 420,000 299,000
-------------------- ----------------- ---------------- ----------------
NET INCOME $262,000 $209,000 $706,000 $534,000
==================== ================= =============== ================
EARNINGS PER COMMON SHARE AND
COMMON EQUIVALENT SHARE $0.08 $0.06 $0.20 $0.16
==================== ================= =============== ================
WEIGHTED AVERAGE COMMON & COMMON
EQUIVALENT SHARES 3,477,000 3,439,000 3,458,000 3,419,000
==================== ================= =============== ================
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE> 5
<TABLE>
SKYLINE CHILI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<CAPTION>
FORTY WEEKS ENDED
--------------------------------------------------------------------
August 4, August 6,
1996 1995
-------------------------- --------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
NET INCOME $706,000 $534,000
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 1,311,000 1,165,000
DECREASE (INCREASE) IN:
ACCOUNTS RECEIVABLE (222,000) (154,000)
INVENTORIES 41,000 (167,000)
PREPAID EXPENSES 7,000 79,000
INCREASE (DECREASE) IN:
ACCOUNTS PAYABLE (296,000) (275,000)
ACCRUED LIABILITIES 144,000 (577,000)
OTHER - NET 19,000
-------------------------- --------------------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 1,710,000 605,000
INVESTING ACTIVITIES:
CAPITAL EXPENDITURES (2,806,000) (1,149,000)
PROCEEDS FROM SALE OF PROPERTY
AND EQUIPMENT 206,000
ADDITIONS TO INTANGIBLE ASSETS (16,000) (18,000)
-------------------------- --------------------------
NET CASH USED BY
INVESTING ACTIVITIES ($2,616,000) ($1,167,000)
</TABLE>
<TABLE>
<CAPTION>
FORTY WEEKS ENDED
------------------------------------------------------------------
August 4, August 6,
1996 1995
-------------------------- -------------------------
<S> <C> <C>
FINANCING ACTIVITIES:
PAYMENTS OF LONG-TERM DEBT (270,000) (254,000)
PROCEEDS FROM EXERCISE OF STOCK OPTIONS 100,000
-------------------------- -------------------------
NET CASH USED BY
FINANCING ACTIVITIES (170,000) (254,000)
NET DECREASE IN CASH AND
CASH EQUIVALENTS (1,076,000) (816,000)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,910,000 2,709,000
-------------------------- -------------------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $834,000 $1,893,000
========================== =========================
CASH PAID FOR:
INTEREST $234,000 $390,000
INCOME TAXES $527,000 $222,000
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE> 6
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 forty week periods ended August 4, 1996 are not necessarily
indicative of the results that may be expected for the year ended October 27,
1996. 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 29, 1995.
RECLASSIFICATIONS
Certain fiscal 1995 amounts have been reclassified to conform to the fiscal 1996
presentation.
6
<PAGE> 7
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 third quarter ended August 4, 1996 of $6.7 million
increased 13% over the same period last year. Total year-to-date revenues of
$21.3 million increased 10% over the first three quarters of last year.
Commissary revenues for the fiscal 1996 third quarter and fiscal year-to-date
periods were 14% and 13% over the same periods last year, respectively. Revenues
from the sale of chili and related food products to the franchised Skyline Chili
restaurants were 17% above the third quarter last year and 10% above the first
three quarters of fiscal 1995. Shipments of the Company's frozen grocery
products for the third quarter and year-to-date periods were 6% and 13% higher
than the same periods last year, respectively. Additional price promotions were
largely responsible for this year's increases in frozen grocery product
shipments.
Same-store sales for Company-owned restaurants increased 4% and 5% for the third
quarter and year-to-date periods compared to the same periods last year,
respectively. The same-store increases, a full year-to-date period of sales from
a location opened last year, the opening of two new locations and the relocation
of two strip center sites to free-standing locations accounted for the 8%
increase in year-to-date restaurant sales over the same period last year.
The Company franchised two new units in Cincinnati during the third quarter
bringing the total number of franchised units to 56, an increase of four over
the end of fiscal 1995. The Company opened one new unit during the third quarter
and one earlier in the year bringing the total of Company-owned units to 33.
Franchise fees and royalties increased 20% for the third quarter and 7% for the
first three quarters over the same periods last year. These increases reflect
increased chili shipments to franchisees, which includes royalties as part of
the selling price, and the initial franchise fees from the four new franchised
locations opened this year compared to two new franchised units opened during
the same period last year.
Cost of Sales - Commissary
- --------------------------
Cost of sales for the third quarter was 75% of the corresponding revenue figures
compared to 73% for the same period last year principally due to unfavorable
overhead absorption from lower production levels of the Company's frozen retail
products. The year-to-date cost of sales rate was 73% of the corresponding
revenue figures for fiscal 1996 and fiscal 1995.
7
<PAGE> 8
Restaurant Operating Expenses
- -----------------------------
Cost of food and paper products for the third quarter and year-to-date periods
were 28% of restaurant revenues compared to 27% and 28% for the third quarter
and year-to-date periods of fiscal 1995, respectively. Higher cheese prices have
caused fiscal 1996 food costs to increase. Labor costs of 30% for the third
quarter and fiscal year-to-date periods were an improvement over the fiscal 1995
rate of 31%. This improvement is principally due to decreases in restaurant crew
turnover. Occupancy and other expenses for the third quarter and fiscal
year-to-date periods have increased over the same periods last year due to a
full three quarters of operations for a unit opened last year and two new units
opened this year.
General and Administrative Expenses
- -----------------------------------
General and administrative expenses for the third quarter and year-to-date
periods increased 9% and 12% over the same periods last year, respectively.
These increases were principally due to increased bonus levels, increased travel
related to our Columbus, Ohio market and additional promotional spending.
Income from Operations
- -----------------------
Income from operations for the third quarter and year-to-date periods of fiscal
1996 were 14% and 13% higher than the same periods of fiscal 1995, respectively.
This can be attributed to higher total revenues and lower beef prices.
Other Income (Expense)
- ----------------------
Interest expense for the third quarter and year-to-date periods was lower than
the same periods last year because of lower debt levels resulting from scheduled
principal payments and a reduction in the interest rate occurring late in fiscal
1995 on the Company's City of Fairfield, Ohio Adjustable Rate Demand Industrial
Development Revenue Bonds.
Liquidity and Capital Resources
-------------------------------
Cash levels decreased from their fiscal 1995 year end levels by $1 million
because of increased capital spending. Cash provided by operating activities for
the first three quarters of fiscal 1996 was $1.7 million compared to $605,000
for the same period last year. Working capital as of August 4, 1996 of $608,000
was approximately $747,000 below the prior fiscal year end level due to the
increased levels of capital spending.
During the first three quarters of fiscal year 1996, the Company spent $2
million to complete construction of four free-standing restaurant locations in
Cincinnati and Columbus. Two of the locations are in new trade areas. The other
two are relocations of existing strip-center locations in the Cincinnati market.
During the third quarter, the Company spent approximately $24,000 towards
construction of a new free-standing restaurant in a new trade area in Columbus.
The Company spent approximately $771,000 in the first three quarters of fiscal
1996 on equipment replacements and ongoing maintenance. All of these activities
were funded by existing cash and cash from operations. The Company intends to
spend approximately $545,000 to complete the new Columbus location which is
expected to begin operations around the end of fiscal 1996. The Company believes
that cash provided by operations and its $4 million unsecured bank line of
credit will be adequate to fund 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.
8
<PAGE> 9
SKYLINE CHILI, INC.
FORM 10-QSB
August 4, 1996
PART II. OTHER INFORMATION
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.
9
<PAGE> 10
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 - Finance,
Chief Financial Officer and Treasurer
(Principal Financial and Principal Accounting
Officer)
Date: September 18, 1996
<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 FOR THE
NINE MONTHS (FORTY WEEKS) ENDED AUGUST 4, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000803497
<NAME> SKYLINE CHILI, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-START> OCT-30-1995
<PERIOD-END> AUG-04-1996
<CASH> 834
<SECURITIES> 0
<RECEIVABLES> 1,296
<ALLOWANCES> 0
<INVENTORY> 1,183
<CURRENT-ASSETS> 3,633
<PP&E> 22,978
<DEPRECIATION> 7,830
<TOTAL-ASSETS> 19,375
<CURRENT-LIABILITIES> 3,025
<BONDS> 5,811
<COMMON> 5,367
0
0
<OTHER-SE> 4,703
<TOTAL-LIABILITY-AND-EQUITY> 19,375
<SALES> 20,300
<TOTAL-REVENUES> 1,009
<CGS> 6,438
<TOTAL-COSTS> 19,945
<OTHER-EXPENSES> 238
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 294
<INCOME-PRETAX> 1,126
<INCOME-TAX> 420
<INCOME-CONTINUING> 706
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 706
<EPS-PRIMARY> $0.20
<EPS-DILUTED> 0
</TABLE>
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