<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant section 13 or 15(d) of the Securities and
Exchange Act of 1934 for the quarterly period ended March 31, 1998.
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
and Exchange Act of 1934 for the transition period from to .
COMMISSION FILE NUMBER: 0-21932
CALIFORNIA CULINARY ACADEMY, INC.
(Exact name of small business issuer in its charter)
California 94-3042862
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
625 Polk Street
San Francisco, CA 94102
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (415) 771-3536
Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 .
----- -----
The number of shares outstanding of the registrant's Common Stock as of March
31, 1998, was 3,814,430.
Transitional Small Business Disclosure Format. Yes No X .
----- -----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CALIFORNIA CULINARY ACADEMY, INC.
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, June 30, March 31,
1998 1997 1997
----------- -------- -----------
(unaudited) (Note 1) (unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $713 $2,308 $2,845
Accounts receivable 4,574 2,847 2,904
Inventories 425 341 310
Prepaid expenses and other assets 1,065 531 211
----------- -------- -----------
Total Current Assets 6,777 6,027 6,270
----------- -------- -----------
Property and equipment, net 6,901 4,965 4,799
Other assets 655 634 1,004
----------- -------- -----------
TOTAL ASSETS $14,333 $11,626 $12,073
----------- -------- -----------
----------- -------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $562 $1,188 $895
Deferred revenue 4,415 3,212 3,696
Current portion of long term debt 84 117 458
Other current liabilities 1,212 444 26
----------- -------- -----------
Total Current Liabilities 6,273 4,961 5,075
----------- -------- -----------
Long term debt 1,304 148 169
Other non-current liabilities 436
Convertible Preferred stock 0 953 967
Common stock 11,276 9,649 9,289
Accumulated deficit (4,520) (4,085) (3,863)
----------- -------- -----------
Total Shareholders' Equity 6,756 6,517 6,393
----------- -------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $14,333 $11,626 $12,073
----------- -------- -----------
----------- -------- -----------
</TABLE>
2
<PAGE>
CALIFORNIA CULINARY ACADEMY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Culinary arts education $3,623 $3,401 $10,137 $9,433
Restaurants & catering and other 594 720 2,198 2,006
-------- -------- -------- --------
Total revenues 4,217 4,121 12,335 11,439
Cost of sales
Food & beverage 467 478 1,353 1,263
Other cost of sales 338 416 1,139 1,146
-------- -------- -------- --------
805 894 2,492 2,409
-------- -------- -------- --------
Gross Margin 3,412 3,227 9,843 9,030
Operating expenses
Occupancy 528 432 1,486 1,307
Depreciation & amortization 290 314 841 878
Compensation & benefits 1,693 1,586 4,998 4,225
Outside services 197 76 582 378
Advertising & promotion 215 141 610 409
Legal & other 645 499 1,851 1,382
-------- -------- -------- --------
3,568 3,048 10,368 8,579
Interest income (expense) 0 13 5 26
-------- -------- -------- --------
Income (loss) before provision for income taxes (156) 192 (520) 477
Income tax provision (benefit) (38) 77 (107) 191
-------- -------- -------- --------
Net income (loss) $(118) $115 $(413) $286
-------- -------- -------- --------
-------- -------- -------- --------
Basic earnings per share $(0.03) $0.03 $(0.11) $0.08
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
3
<PAGE>
CALIFORNIA CULINARY ACADEMY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(413) $286
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 841 878
Tax provision (benefit) (107) 191
Provision for losses on accounts receivable 84 9
Deferred rent 107 7
Stock issued for services 31 0
Gain on disposal of property 0 2
Changes in assets and liabilities:
Accounts receivable (1,600) (126)
Inventories (84) (102)
Prepaid expenses and other assets 70 (100)
Notes Receivable (496) 0
Accounts payable and accrued and other liabilities 132 (259)
Deferred revenue 799 (99)
---------- ----------
Net cash provided by (used in) operating activities (636) 687
---------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (2,682) (1,465)
Decrease in long-term investments 0 646
---------- ----------
Net cash used in investing activities (2,682) (819)
---------- ----------
Cash flows from financing activities:
Borrowings under long term debt agreements 1,230
Principal payments on long term debt (16) (797)
Proceeds from exercise of stock options and warrants 590 1,265
Repurchase of common stock 0 (717)
Payment of Preferred Stock dividends (78) (37)
Cost of offering - preferred stock (3) (20)
---------- ----------
Net cash provided by (used in) financing activities 1,723 (306)
---------- ----------
Net decrease in cash and cash equivalents (1,595) (438)
Cash and cash equivalents, beginning of period 2,308 3,283
---------- ----------
Cash and cash equivalents, end of period $713 $2,845
---------- ----------
---------- ----------
</TABLE>
4
<PAGE>
CALIFORNIA CULINARY ACADEMY, INC.
CONDENSED STATEMENT OF CASH FLOWS
Supplemental disclosure of cash paid for:
<TABLE>
<CAPTION>
For the Nine Months Ended
March 31,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
Interest $66,000 $43,000
Income Taxes $1,000 $10,000
</TABLE>
Supplemental disclosure of non-cash investing and financing activities:
The Academy issued 254,541 shares of Series A Preferred Stock upon conversion
of $1,400,000 of Convertible Subordinated Debt for the nine months ended
March 31, 1997.
The Academy issued a promissory note of approximately $157,000 for the
repurchase of Common Stock for the nine months ended March 31, 1997.
The Academy received promissory notes of approximately $529,000 in exchange for
the exercise of stock options for the nine months ended March 31, 1998. Of
these notes, a director paid in full a $62,000 promissory note in March, 1998.
On February 4, 1998, the closing price of the Common stock equaled or exceeded
$8.00 for 20 consecutive trading days. Pursuant to the automatic conversion
provisions of the Series A Preferred Stock, 23,580 shares of Series A Preferred
Stock, representing all the remaining Series A Preferred Stock outstanding, was
automatically converted to 23,580 shares of Common stock.
5
<PAGE>
CALIFORNIA CULINARY ACADEMY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared from the
records of the California Culinary Academy, Inc. (the "Academy") without audit
and, in the opinion of management, include all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position at
March 31, 1998, and the interim results of operations and cash flows for the
nine months ended March 31, 1998 and March 31, 1997. The balance sheet at June
30, 1997, presented herein, has been derived from the audited financial
statements of the Academy for the fiscal year then ended.
Accounting policies followed by the Academy are described in Note 1 to the
audited financial statements for the fiscal year ended June 30, 1997. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted for the purposes of the interim condensed financial
statements. The interim condensed financial statements should be read in
conjunction with the audited financial statements including notes thereto, for
the year ended June 30, 1997.
The results of operations for the three months and nine months presented herein
are not necessarily indicative of the results to be expected for the full year.
Certain prior year amounts have been reclassified to conform to current year
presentation.
NOTE 2 -- PREFERRED STOCK
During March 1996 and July 1996, the Board of Directors and shareholders,
respectively, authorized the Academy to issue up to 5,000,000 shares of
Preferred Stock in one or more series to be determined by the Board of Directors
from time to time. An amendment to the Articles of Incorporation authorizing
the issuance of Preferred Stock was filed with the California Secretary of State
in August 1996. On August 23, 1996, the Academy became legally authorized to
issue up to 700,000 shares of Series A Preferred Stock. On the same date, the
entire issue of Convertible Subordinated Notes in the aggregate principal amount
of $1,400,000 automatically converted to 254,541 shares of Series A Preferred
Stock. The preferred stock was recorded net of $447,000 of issuance costs.
6
<PAGE>
The Academy granted certain registration rights to the holders of the
Convertible Notes (and subsequently, the Preferred shareholders). Certain
penalties were payable to the holders of the Series A Preferred Stock if the
Academy did not use its best efforts to file a registration statement to
register for resale the Common Stock underlying the Series A Preferred Stock
conversion right with an effective date not later than November 23, 1996. Such
registration statement was declared effective on April 15, 1997. Penalties
payable to the Series A Preferred shareholders were accrued as of June 30, 1997
and paid in July 1997. A total of 6,300 shares of Series A Preferred Stock and
$35,000 in cash was distributed in connection with this penalty.
Each share of Series A Preferred Stock is convertible at the option of the
holder into the Academy's Common Stock at the conversion price of $5.50 per
share. After February 23, 1997, each share of Series A Preferred Stock was to
convert automatically if the closing price of the Common Stock equals or
exceeds $8.00 for 20 consecutive trading days. Certain provisions for price
protection are set forth in the terms of the Series A Preferred Stock, but in
no event was the conversion price be less than $3.50.
During the nine months ended March 31, 1998, certain Series A Preferred Stock
shareholders elected to convert approximately 237,000 shares into Common Stock.
As of February 4, 1998, the Common stock closing price had exceeded $8.00 for 20
consecutive trading days. Consequently, 23,580 shares, representing all the
remaining outstanding shares of Series A Preferred Stock, were automatically
converted into 23,580 shares of Common Stock effective February 4, 1998.
NOTE 3 -- MASTER LEASE AGREEMENT
On July 21, 1997, the Academy entered into a master lease agreement for a 68
room hotel in San Francisco. This lease commenced on September 1, 1997 and
expires August 31, 2012, and requires initial monthly payments of $27,083
with a step rent clause increasing payments to $33,333 by the end of the
lease. The master lease also requires payment of a pro-rata share of common
area maintenance.
NOTE 4 -- RELATED PARTY TRANSACTIONS
On December 15, 1997, the Chairman of the Board and another member of the Board
elected to exercise approximately 108,000 and 15,000 vested stock options,
respectively. In exchange, as permitted by the Academy's 1992 Stock Option
Plan, each director delivered to the Academy a promissory note for the value of
the stock options in the amount of approximately $465,000 and $62,000,
respectively. The notes bear an interest rate of 9.5% and are due no later than
June 30, 1998. On March 12, 1998, the $62,000 note was paid.
NOTE 5 - ACQUISITION OF PROPERTY
On October 3, 1997, the Academy purchased for approximately $1,900,000 a 70 room
residential hotel adjacent to the Academy's main campus in San Francisco to
provide student housing. In connection with this purchase, the Academy issued a
promissory note of $1,200,000 with principal and interest payments due monthly.
The initial monthly payment of $10,434
7
<PAGE>
commenced on December 1, 1997. The note bears interest at a variable rate
based on the LIBOR index rate plus 4.15% (9.75% as of March 31, 1998) and
mature on November 1, 2007.
NOTE 6 -- EARNINGS PER SHARE
The components of basic and diluted earnings per share are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997 1998 1997
------- ------ ------- ------
<S> <C> <C> <C> <C>
Net Income ($118) $115 ($413) $286
Less: preferred stock dividends (2) (23) (37)
Less: convertible note interest expense (9)
------- ------ ------- ------
Income available to common shareholders (120) 115 (436) 240
Weighted average shares outstanding 3,814 3,324 3,814 3,290
------- ------ ------- ------
BASIC EARNINGS PER SHARE ($0.03) $0.03 ($0.11) $0.07
------- ------ ------- ------
------- ------ ------- ------
EFFECT OF DILUTIVE SECURITIES
Add: preferred stock dividends 2 23 37
Add: convertible note interest expense 9
------- ------ ------- ------
Income available to common shareholders (118) 115 (413) 286
Weighted average shares outstanding 3,814 3,324 3,814 3,290
Add: stock options and warrants 120 110
Add: convertible preferred stock 254 254
------- ------ ------- ------
Weighted average shares outstanding 3,814 3,698 3,814 3,654
------- ------ ------- ------
DILUTIVE EARNINGS PER SHARE ($0.03) $0.03 ($0.11) $0.08
------- ------ ------- ------
------- ------ ------- ------
</TABLE>
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with the financial
statements and notes thereto.
The Academy's revenues are derived primarily from culinary arts education as
well as restaurant, retail and media operations. Culinary arts education
primarily consists of the AOS Program, the B&P Certificate program, the
College of Food Basic Professional Culinary Skills Program, and weekend
professional skills program offerings. The AOS Program enrolls students on a
two-week cycle. The program can accommodate up to 25 students per class, with
646 students enrolled as of March 31, 1998. The 30-week B&P Program enrolls
classes on a five week cycle typically ranging in size from 15 to 20 students
with 82 students enrolled as of March 31, 1998. The College of Food programs
commenced October 14, 1996 at the Academy's prototype facility in Salinas,
California and opened its second College of Food facility on the campus of
San Diego State University in February 1998. The College of Food enrolls
students every three to four weeks. As of March 31, 1998, approximately 62
and 42 students were enrolled in the Basic Professional Culinary Skills
program in Salinas and San Diego, respectively. Weekend professional programs
are currently offered every eight or fourteen weeks. As of March 31, 1998,
the Academy had 93 students enrolled in various weekend professional programs.
Consumer education consists of programs oriented to a part-time audience. The
course length and content address the interests of food industry professionals,
home cooks and career changers. These courses include single topic classes and
various three or four class series current topics and basic skills.
Restaurant and retail operations include two restaurants and a private dining
room which is generally open to the public seven days per week, banquet services
generally offered seven days per week and a small on-site retail shop offering
student-prepared foods, beverages, cookbooks, video tapes, kitchen wares and
selected clothing. Media operations primarily consist of the marketing of the
"COOKING AT THE ACADEMY" television series and cookbook royalties. Certain
expenses such as food costs and costs of goods sold related to both educational
services and retail restaurant operations.
Revenues from the Academy's AOS Program and the B&P Program rely exclusively on
enrollments in those programs. Tuition is initially recorded as deferred
revenue at the commencement of each enrollment period and recognized over the
length of program as students complete course work required for graduation.
The Academy has available housing for students enrolled in the AOS and B&P
programs. In July 1997, the Academy entered into a master lease of a 68-room
hotel in San Francisco, approximately one block from the main campus, to provide
student housing. In October 1997, the Academy purchased for approximately
$1,900,000 a hotel building in San Francisco, across the street from its main
campus, which it intends to use for student housing. Management
9
<PAGE>
believes available student housing will have a favorable impact on new
student enrollments and student retention rates.
The Academy believes that manageable growth is achievable through the addition
of extension campuses offering selected courses from the AOS Program at training
facilities such as its Colleges of Food at Salinas and San Diego, California and
by the addition of contract training programs offered to the food industry.
While management believes that this strategy will enable it to significantly
increase revenues by providing additional educational and training resources to
the food industry, there can be no assurance that management will be able to
successfully implement such a strategy.
Except for historical information contained herein, this report contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The
forward-looking statements contained herein are based upon current expectations,
and actual results may differ materially. Forward-looking statements contained
in this Report involve numerous risks and uncertainties, including those
discussed in this Report and the Academy's Annual Report on Form 10-KSB for the
fiscal year ended June 30, 1997, that could cause actual results to differ
materially from those projected. Investors are cautioned not to place undue
reliance on these forward-looking statements, which reflect management's
analysis only as of the date hereof. The Academy undertakes no obligation to
publicly release the results of any revision to these forward-looking statements
that may be made to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events.
The primary risks and uncertainties that could affect future results include,
without limitation: (i) the inability of management to successfully implement
and manage the Academy's new growth strategy of adding more remote training
facilities and new programs to be offered to the foodservice industry; (ii)
uncertainties associated with overhauling the structure of the A.O.S. degree
program enrollment process and the inability of the Academy to make
appropriate adjustments in a timely manner; (iii) the increased competition
from both for-profit and non-profit culinary arts education institutions; (iv)
the continued dependence on financial aid programs to fund a majority of
Academy's students' education, thereby providing a significant portion of the
Academy's revenues, together with the uncertainty that budgetary constraints
or other factors in the future could impact the availability and amount of
both public and private sources of financial aid; (v) increase of the
Academy's cohort default rate to 25%, the percentage of Academy students who
have defaulted on repayment of government student loans, which could in the
future impair or limit the Academy's participation in government financial
aid programs; and (vi) the possibility that regulatory agencies that
directly or indirectly impact aspects of the Academy's business could revise
regulations in such a way that the Academy would not be able to comply with
new regulations in a timely manner.
10
<PAGE>
RESULTS OF OPERATIONS
REVENUES
Culinary arts education revenue increased 6.5% to $3,623,000 for the quarter
ended March 31, 1998 from $3,401,000 reported in the same period last year.
Culinary arts education revenue increased 7.5% to $10,137,000 for the nine
months ended March 31, 1998 from $9,433,000 reported in the same period last
year. The increase in culinary arts education revenue is due primarily to
increases in student enrollment in all education programs.
Restaurant & catering and other revenue decreased 17.5% to $594,000 for the
quarter ended March 31, 1998 from $720,000 in the same period last year.
Restaurant & catering and other revenue increased 9.6% to $2,198,000 for the
nine months ended March 31, 1998 from $2,006,000 in the same period last year.
The increase for the nine month period is due primarily to increased banquet and
catering activity in the Academy's two restaurants. The decrease for the quarter
is primarily due to reduced media revenues for the quarter and reduced
restaurant revenues during the quarter, consistent with reduced restaurant
patronage in the region due to unusually wet weather.
COST OF SALES
Food and beverage cost decreased 2.3% to $467,000 for the quarter ended March
31, 1998 from $478,000 reported in the same period last year. Food and beverage
cost increased 7.0% to $1,353,000 for the nine months ended March 31, 1998 from
$1,263,000 reported in the same period last year. Food and beverage cost
increased in dollar amounts for the nine month period as the Academy incurred
higher costs primarily associated with an increase in culinary arts education
revenue and restaurant and catering revenue. The reduction of food and beverage
cost during the quarter is attributable to the decrease in restaurant and
catering revenue and is partially offset by increased costs relating to
increased culinary arts education enrollment. The food and beverage cost as a
percent of related culinary arts education and restaurant revenue is consistent
with the comparable periods last year.
Other costs of sales decreased 18.8% to $338,000 for the quarter ended March 31,
1998 from $416,000 reported in the same period last year. Other costs of sales
decreased 0.6% to $1,139,000 for the nine months ended March 31, 1998 from
$1,146,000 for the same period last year. The decrease for the quarter ended
March 31, 1998 is attributed to lower cost of merchandise associated with
student supply packages.
OPERATING EXPENSES
Occupancy cost increased 22.2% to $528,000 for the quarter ended March 31, 1998
from $432,000 for the same period last year. Occupancy cost increased 13.7 % to
$1,486,000 for the
11
<PAGE>
nine months ended March 31, 1998 from $1,307,000 in the same period last
year. The increase is due primarily to the lease of a 68 room residential
hotel in September 1997 and the purchase of a 70 room residential hotel in
October 1997; these increases were partially offset by a reduction in rent
for the Academy's main campus facility as a result of lease renegotiation
completed in May 1997.
Depreciation and amortization decreased 7.6% to $290,000 for the quarter ended
March 31, 1998 from $314,000 for the same period last year. Depreciation and
amortization decreased 4.2% to $841,000 for the nine months ended March 31, 1998
from $878,000 for the same period last year. The decrease is due primarily to
lower expense as a result of the renegotiated lease for the Academy's main
campus facility offset by the depreciation expense associated with the purchase
of a 70 room residential hotel in October 1997, and continued investment to
improve kitchen facilities and information systems.
Compensation and benefits cost increased 7.1% to $1,693,000 for the quarter
ended March 31, 1998 from $1,586,000 for the same period last year.
Compensation and benefits cost increased 18.5% to $4,998,000 for the nine
months ended March 31, 1998 from $4,225,000 for the same period last year.
The increase is due primarily to significant temporary cost reductions during
Q1 and Q2 of 1997, relating to restructuring of the curriculum schedule and
administrative functions, which returned to pre-reduction levels in the
current year; addition of staff in the College of Food to support increased
enrollment and the opening of a second campus in San Diego in February 1998;
addition of administrative and marketing staff to support growth in
enrollments and revenue; and normal cost increases for wages.
Outside services cost increased 143% to $197,000 for the quarter ended March 31,
1998 from $76,000 for same period last year. Outside services cost increased
51.1% to $582,000 for the nine months ended March 31, 1998 from $378,000 for
same period last year. The increase is due primarily to increased board of
directors fees begun in June 1997 and retention of consultants to update MIS
systems, for filing with Federal Department of Education and State regulatory
agencies and to fill interim management positions.
Advertising and promotion cost increased 58.0% to $215,000 for the quarter ended
March 31, 1998 from $141,000 for the same period last year. Advertising and
promotion cost increased 51.7% to $610,000 for the nine months ended March 31,
1998 from $409,000 for the same period last year. The increase is due primarily
to additional expenditures for magazine and print advertising, convention and
conferences participation to promote enrollments, promotion of consumer
education programs at the Academy's main campus, promotion of the new San Diego
College of Food, opened in February, 1998, and the sponsorship of a week-end
street fair at the San Francisco campus to celebrate the academy's twentieth
anniversary.
Legal and other cost increased 28.2% to $645,000 for the quarter ended March 31,
1998 from $499,000 for the same period last year. Legal and other cost increased
33.2% to $1,851,000 for the nine months ended March 31, 1998 from $1,382,000 for
the same period last year. The increase is primarily due to legal
representation and settlement costs related to a wrongful termination lawsuit,
which was settled in September 1997, and for legal and professional services
12
<PAGE>
relating to exploration of strategic corporate alternatives and the
resolution of matters relating to property improvements at the main campus
facility.
INTEREST INCOME (EXPENSE), NET
Interest income (expense), net consists primarily of interest earned on cash
equivalents and short-term investments and interest expense incurred on a
$1,200,000 promissory note issued in connection with the Academy's purchase of a
70 room residential hotel in October 1997.
INCOME TAX PROVISION (BENEFIT)
The Academy has provided for federal and state income taxes at 20% for the
quarter and nine months ended March 31, 1998 and compared to a effective tax
rate of 40% for the same comparable periods last year. The decrease in
effective tax rate is the result of net operating losses incurred though March
31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Academy financed its growth from the issuance of equity
securities in private and public transactions, borrowings from related parties,
lease and debt financing obligations and through cash flow provided by
operations.
At March 31, 1998, the Academy's principal sources of liquidity included cash
and cash equivalents of $713,000, net accounts receivable of $4,574,000 compared
to $2,308,000 and $2,847,000 as of June 30, 1997, respectively, and $496,000
notes receivable due June 1998 compared to no notes receivable as of June 30,
1997. The decrease in cash and cash equivalents is due primarily to the
Academy's using cash and cash flow from operations to fund capital expenditures
and the acquisition of a hotel to be used for student housing. The increase in
net accounts receivable is due primarily to increased enrollments. The Academy
has long-term obligations of $1,304,000 and working capital of $504,000 at March
31, 1998 compared to $148,000 and $1,066,000 as of June 30, 1997, respectively.
As of March 31, 1998, the Academy had $1,191,000 outstanding loans with banks.
As of June 30, 1997, the Academy had no outstanding term loans with banks and
$50,000 in other term loans.
THE YEAR 2000
The Year 2000 Issue is the result of computer programs using two digits rather
than four to define the applicable year. The Company's programs that have
time-sensitive software may recognize a date using "00" as the calendar year
1900 rather than the calendar year 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
As a result of an ongoing review of its internal computer systems to identify
the systems that could be affected by the Year 2000 issue the Company
presently believes that the only potential system that may be affected is a
licensed product which is covered by vendor support. The vendor has
communicated to all of its customers that they are working on this issue and
will supply appropriate modifications in a timely manner. The Company
therefore believes that the Year 2000 issue will have minimal or no impact on
the Company.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are various legal claims and lawsuits pending by and against the
Academy that, in the opinion of management, after consultation with legal
counsel, are not expected to have in any material adverse effect on the
results of operations or financial position of the Academy.
Item 2. Changes in Securities None
Item 3. Defaults upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K None
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CALIFORNIA CULINARY ACADEMY, INC.
May 15, 1998 By: /s/ Charles E. White
-------------------------------------
Chief Financial Officer
(Principal Financial and
Accounting Officer)
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET AS OF MARCH 31, 1998 AND THE STATEMENT OF OPERATIONS FOR THE
NINE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000858915
<NAME> CALIFORNIA CULINARY ACADEMY, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 713
<SECURITIES> 0
<RECEIVABLES> 4,986
<ALLOWANCES> 412
<INVENTORY> 425
<CURRENT-ASSETS> 6,777
<PP&E> 12,545
<DEPRECIATION> 5,644
<TOTAL-ASSETS> 14,333
<CURRENT-LIABILITIES> 6,273
<BONDS> 1,304
0
0
<COMMON> 11,276
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,756
<SALES> 594
<TOTAL-REVENUES> 4,217
<CGS> 338
<TOTAL-COSTS> 805
<OTHER-EXPENSES> 3,558
<LOSS-PROVISION> 10
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (156)
<INCOME-TAX> (38)
<INCOME-CONTINUING> (118)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (118)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
