U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (FEE REQUIRED)
For the fiscal year ended May 30, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 0-1744
Ambassador Food Services Corporation
(Name of small business issuer in its charter)
Delaware 44-0656199
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3269 Roanoke Road, Kansas City, Missouri 64111
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 816 561-6474
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (Par Value $1)
(Title of Class)
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.
YES X NO
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year are $20,462,465.
At October 7, 1996 there were 767,856 shares of the Registrant's common stock
outstanding. Based on the average of the highest bid and lowest asked prices
reported on the national over-the-counter market (NASDAQ Symbol AMBF), the
aggregate market value of the shares held by non-affiliates of the Registrant
was $959,820.
Exhibit Index is on page 34.
Transitional Small Business Disclosure Format: YES NO X
PART I
Item 1. Description of Business
(a) Business Development
The Registrant (hereinafter "Company" or "Ambassador") is a Delaware
corporation incorporated in 1963. It is engaged, through divisions and a
subsidiary, in the food service and janitorial industries in Illinois,
Iowa, Kansas, New York, Texas, New Jersey, Missouri, and Oklahoma.
The principal business activity of the Company is the servicing of its
customer accounts, primarily factories, offices, hospitals, schools, and social
service agencies, through the use of vending machines, cafeterias, and
prepared meals delivered from Company commissaries.
On August 1, 1989, the name of the Company was changed from Automatique,
Incorporated to Ambassador Food Services Corporation.
(b) Business of Issuer
(1) Description of Business Done by the Registrant in its Food Segment
(i and ii)The vending and cafeteria segment of the Company's business
consists of contracting to distribute beverages and food products
to customer locations consisting of factories, offices,
hospitals, and schools. The Company conducts surveys of
potential customer locations, determines profitability of the
location, and submits a proposal offering to provide the vending
and/or cafeteria service for the customer location. Business
with local government social service agencies and not-for-profit
agencies is obtained through competitive bidding and is
serviced by producing meals in a central commissary and
delivering them to various designated points for consumption.
(iii) No new products have been developed by this segment. The
Company, in general, markets the product developed by its
suppliers.
(iv) The vending food service business, made up of a few large
companies and many small independently owned local and
regional enterprises, is highly competitive. The practice in the
industry is to operate under written agreements with the
locations served. In the market areas where the Company is
located, it has national, regional, and local competition, some of
which have substantially greater total sales and assets.
Competition for locations in the food service industry
normally comes in the form of pricing and in quality of
service and product.
(v) Raw materials, consisting of packaged products and commodities, are
purchased from manufacturers and purveyors and are warehoused
or processed by the Company in the local market. There is an
adequate supply of raw materials from normal sources; which
include Midwest Food Distributors, Inc., Kraft Food Services of
New York, and Loeb and Mayer.
(vi) During the year ended May 30, 1996, this segment had no single
customer whose sales were equal to 10 percent or more of the
Company's consolidated revenues.
Because the Company's customers are primarily the employees and
students of the various schools, colleges, factories, offices, and
hospitals at which it has its vending and cafeteria services, the
Company normally experiences a seasonal decline in sales during the
summer months and around holidays, during which times many of these
customers vacation and many locations close completely.
(vii) The distinctive logo associated with the Company has been
registered under the laws of the United States relating to
trade names and trademarks. The Company regards such logo as
valuable and will maintain the registration in effect for
continuing use in connection with the Company's business. In
addition, the segment is a party to the following labor
agreements:
<TABLE>
<S> <C> <C>
Bargaining Unit Market Expiration Date
Teamsters Local #838 Kansas City 1/1/00
Teamsters Local #688 St. Louis 2/1/97
Teamsters Local #90 Des Moines 4/30/98
United Service Employees
Union #377 New York 12/31/96
</TABLE>
(viii) The Company does not have a material portion of its business
subject to renegotiation or termination at the election of
the Government.
(ix) The Company does not believe that existing or probable government
regulations have a material effect on its operation.
(b) (2) Description of Business Done by the Registrant in its
Janitorial Segment
(i and ii) The janitorial and maintenance service division of the
Company's business consists primarily of contracting
various types of routine cleaning services for
customers on a weekly, monthly, or as-needed basis.
Customers currently include grocery stores, apartment
complexes, and office buildings. The Company had
previously provided this kind of service to a few
customers incidental to its food service. However,
with the acquisition of the assets of Squire
Maintenance Service in 1988, the Company decided to
establish and operate this part of its business as a
separately identifiable division.
In fiscal 1990, four additional acquisitions were made that increased
the Company's market share and potential market area. During
fiscal year 1995, the Company sold its operations in the Connecticut
market but continued its janitorial services in New York and New
Jersey.
(iii) No new products have been introduced by this segment.
(iv) The janitorial segment is limited to the New Jersey and New York
metropolitan areas. Competition for janitorial contracts comes in
the form of pricing and quality of service. Competition in
general is from regional and local companies.
(v) The sources and availability of raw materials for this segment are
adequate. Sources of raw materials include Graco Manufacturing,
Thorsen Distributors, Inc., and Malone Chemical.
(vi) During fiscal 1996, this segment had no single customer whose
sales were equal to 10 percent or more of the Company's
consolidated revenues.
This segment is not subject to material fluctuations in sales volume
due to seasonality.
Sales in this segment are on open accounts receivable. Inventory
levels are not significant.
(vii) This segment is operating without registered trademarks or
patents. The segment is a party to a labor agreement with
the United Service Employees Union #377 in New York that expires
December 31, 1996.
(viii) The Company does not have a material portion of its business
subject to renegotiation or termination at the election of the
Government.
(ix) The Company does not believe that existing or probable government
regulations have a material effect on its operations.
(b) (x) Through (xii) with Respect to the Registrant's Business in
General
(x) The Company has not incurred any expense for research and
development activities during any of its last two (2)
fiscal years.
(xi) Compliance with federal, state, and local laws and
regulations involving the protection of the environment
will not have a material effect.
(xii) As of May 30, 1996, the Company and its subsidiary employed
approximately 350 persons.
Item 2. Description of Properties
The Company leased all real estate for office, warehouse, garage, repair
shops, and commissaries in each of its market areas throughout fiscal 1996,
except for the property located at 3269 Roanoke Road, which was
purchased in July 1990. The property was encumbered by a mortgage in the
amount of $282,937 at May 30, 1996. Annual rentals were approximately
$244,272 less $6,630 of sublease income. The suitability of the leased
properties is adequate; such properties are described below:
<TABLE>
<S> <C> <C> <C>
Size Expiration
Location Type of Property (Sq. Ft.) Date
3269 Roanoke Rd., Kansas City, MO Office/Whse 13,600 Owned
208 E. Aurora, Des Moines, IA Office/Whse 9,200 6/96
10745 Midwest Indust Dr., St.Louis, MO Office/Whse 15,800 9/95
5-30 54th Ave., Long Island City, NY Office/Whse 8,000 Mo/Mo
41-43 24th St., Long Island City, NY Office/Whse 2,500 3/01
9100 Santa Fe Dr., Overland Park, KS Restaurant-
Discontinued 1,800 2005
162 Closter Dock Rd., Closter, NJ Office/Whse 1,200 Mo/Mo
900 West 8th St., Kansas City, MO Warehouse 300 Mo/Mo
36 Clark St., Des Moines, IA Office/Whse 10,600 3/01
</TABLE>
The major portion of the physical properties used by the Company is made up
of automatic vending equipment and food service and production equipment.
Equipment is primarily owned by the Company. In several instances, the
cafeteria and vending equipment is owned by the account to which food
services are rendered by the Company. The Company operates
approximately 100 vehicles in the conduct of its business, approximately
25% of which are leased and the balance owned. The annual rentals on
all such leased real estate properties, equipment, and vehicles are
approximately $750,000.
Item 3. Legal Proceedings
In December 1991, a suit was filed on behalf of the United States
Department of Agriculture under the False Claims Act Title 31 U.S.C. 3730
and 28 U.S.C. 1345. The suit was based on alleged overcharges for food
services provided for certain government-sponsored projects in New York.
Based upon extensive investigation, the Company concluded that it had not
overcharged for food services provided for these projects and that the
Company had no liability with respect to the government's claim.
The Company therefore contested the government's claim.
The government initiated settlement negotiations, which the Company joined
with a view to effecting a disposition of the case and avoiding further
litigation expense. These negotiations led to a settlement agreement
during fiscal year 1995, pursuant to which the government's case was
dismissed with prejudice. Terms of the agreement included payment by the
Company to the government of $164,000, of which $89,000 was paid in 1995
and $75,000 was paid in 1996.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year of the Company.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Price Range of Common Stock
The principal market in which the common stock of the Company is traded is
the national over-the-counter market (NASDAQ symbol AMBF).
The bid quotation for the Company's common stock for each quarter during
fiscal years ended May 30, 1996 and June 1, 1995 are shown below:
<TABLE>
1996 1995
Bid Quotation Bid Quotation
<S> <C> <C> <C> <C>
High Low High Low
First Quarter 3/4 3/4 5/8 5/8
Second Quarter 3/4 3/4 3/4 5/8
Third Quarter 1 3/4 3/4 3/4
Fourth Quarter 1 3/8 15/16 3/4 3/4
</TABLE>
The quotations above reflect inter-dealer prices without retail mark-up,
mark-down, or commission and may not represent actual transactions.
(b) Number of Equity Security Holders
As of May 30, 1996, there were 612 record holders of the Company's common
stock.
(c) Dividends
The Company has never paid cash dividends on its common stock. Payment of
dividends will be within the discretion of the Company's Board of
Directors and will depend, among other factors, on earnings, debt
agreements, capital requirements, and the operating and financial
condition of the Company.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Continuing Operations
Income from continuing operations declined from the 1995 level despite
increased sales of $836,773 during the year ended May 30, 1996. These
earnings were $50,224 in fiscal 1996, down from $180,052 in 1995. A
change in the reserve relating to the Company's discontinued restaurant
operations brought the net result to a loss of $42,076.
This disappointing result reflects continued deterioration in margins in
the Company's vending and cafeteria operations. While management
implemented price increases throughout the year, food costs continued to
rise at a substantial rate resulting in a decline in margins during the
year. Price increases and improved controls and purchasing are being
implemented to address this problem. It is imperative that margins
improve for the Company to return to profitability.
All other cost areas combined remained near 1995 levels in relation to
sales. Operating costs were lower as a percentage of sales due to lower
operating payroll; however, increased administrative payroll and
interest costs offset these decreases.
Liquidity and Capital Resources
Working Capital improved from a deficit of $561,543 to a deficit of
$238,371. This improvement was due entirely to the negotiation of a
committed line of credit facility. This agreement expires in August
1997, therefore the full amount of the agreement will again be classified
as current at the end of the first quarter of fiscal 1997, resulting in
a significant change in working capital. Total liabilities increased
to $6,254,130 from $4,925,282, while stockholders' equity remained nearly
the same as in 1995.
While sales increased substantially during the later part of the fiscal
year, so did the Company's obligations. This makes it extremely
important for the Company to improve its food cost and return to
profitability so that it can provide adequate capital for continued growth.
Financing continues to be available for the purchase of necessary
capital equipment.
Item 7. Consolidated Financial Statements
Index to Consolidated Financial Statements
Page
Report of Independent Certified Public Accountants 9
Consolidated Balance Sheets as of May 30, 1996 and June 1, 1995 10-11
Consolidated Statements of Operations for the Years Ended
May 30, 1996 and June 1, 1995 12
Consolidated Statement of Changes in Stockholders' Equity for the
Years Ended May 30, 1996 and June 1, 1995 13
Consolidated Statements of Cash Flows for the Years Ended May 30, 1996
and June 1, 1995 14-15
Notes to Consolidated Financial Statements 16
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Ambassador Food Services Corporation and Subsidiary
We have audited the accompanying consolidated balance sheets of Ambassador Food
Services Corporation and Subsidiary as of May 30, 1996 and June 1, 1995 and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ambassador Food
Services Corporation and Subsidiary as of May 30, 1996 and June 1, 1995 and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Kansas City, Missouri
August 2, 1996
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS
May 30, 1996 and June 1, 1995
<TABLE>
<S> <C> <C>
ASSETS 1996 1995
CURRENT ASSETS
Cash (including change funds of $291,505 in 1996
and $226,680 in 1995) (note C) $ 402,768 $ 321,471
Trade accounts receivable (notes A11, B, D, and E) 1,768,211 1,703,152
Income taxes receivable 17,042 21,562
Inventories (note A4) 593,820 483,283
Prepaid expenses 248,916 100,596
Current portion of note receivable (note O) 114,182 -
Deferred income taxes (note J) 30,033 62,793
Total current assets 3,174,972 2,692,857
PROPERTY AND EQUIPMENT - at cost (notes A5 and E)
Vending equipment 5,044,062 4,601,459
Cafeteria, commissary, and restaurant equipment 1,171,549 1,133,489
Building and leasehold improvements 649,877 563,395
Other 1,056,859 918,009
7,922,347 7,216,352
Less accumulated depreciation and amortization 5,792,683 5,199,388
Total property and equipment 2,129,664 2,016,964
OTHER ASSETS
Location contracts (note A6) 1,242,656 1,088,049
Note receivable, less current portion (note O) 481,961 -
Unrecognized prior service costs (notes A7 and H) 222,932 258,500
Excess of purchase price over net assets acquired
(note A6) 93,771 94,790
Deferred expenses 58,012 11,404
Miscellaneous 273,398 163,431
Total other assets 2,372,730 1,616,174
$7,677,366 $6,325,995
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED BALANCE SHEETS - CONTINUED
May 30, 1996 and June 1, 1995
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
CURRENT LIABILITIES
Trade accounts payable (note C) $2,131,857 $1,760,915
Accrued expenses (note C) 679,549 627,591
Current maturities of long-term debt (note E) 601,937 372,515
Line of credit (note D) - 493,379
Total current liabilities 3,413,343 3,254,400
LONG-TERM LIABILITIES
Line of credit (note D) 618,798 -
Deferred income taxes (note J) 297,102 329,862
Projected benefit obligation (note H) 337,342 391,748
Other long-term liabilities 68,522 32,070
Subordinated note payable to stockholder
(note F) 250,000 -
Long-term debt, less current maturities
(note E) 1,124,817 779,657
Reserve for disposal of restaurant operations
(note K) 97,612 52,447
Reserve for litigation and sales tax obligations
(note L) 46,594 85,098
Total long-term liabilities 2,840,787 1,670,882
COMMITMENTS AND CONTINGENCIES
(notes G, I, K, L, and O) - -
STOCKHOLDERS' EQUITY (notes F and I)
Common stock, par value $1.00 per share;
authorized, 2,000,000 shares; issued,
1,009,230 shares 1,009,230 1,009,230
Additional paid-in capital 718,291 718,291
Retained earnings (accumulated deficit) (20,380) 21,696
1,707,141 1,749,217
Less treasury stock - 241,374 shares in 1996
and 305,973 shares in 1995 - at cost (283,905) (348,504)
Total stockholders' equity 1,423,236 1,400,713
$7,677,366 $6,325,995
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended May 30, 1996 and June 1, 1995
<TABLE>
<S> <C> <C>
1996 1995
Net sales
Food $18,807,080 $17,672,028
Janitorial 1,655,385 1,953,664
20,462,465 19,625,692
Cost and expenses
Cost of food products sold 8,300,394 7,810,858
Operating (note M) 8,300,729 8,036,539
Selling and administrative 2,930,109 2,774,169
Depreciation and amortization 636,343 627,430
Interest 244,666 196,644
Total cost and expenses 20,412,241 19,445,640
Earnings from continuing operations
before income taxes 50,224 180,052
Income tax benefit (note J) - 30,000
Net earnings from continuing
operations 50,224 210,052
Discontinued operations
Change in estimate of loss on
disposal of restaurants (note K) (92,300) -
Net earnings (loss) $ (42,076) $ 210,052
Earnings (loss) per common share:
Earnings from continuing
operations $ .07 $ .30
Loss on disposal of restaurants (.13) -
Net earnings (loss) per
common share $ (.06) $ .30
Weighted average common shares
outstanding (note A9) 719,207 700,781
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS' EQUITY
Years ended May 30, 1996 and June 1, 1995
<TABLE>
Retained
Additional Earnings Total
Paid-In (Accumulated Stockholders'
Common Stock Capital Deficit) Equity
Issued Treasury Stock
Shares Amount Shares Cost
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
June 2,
1994 1,009,230 $1,009,230 315,873 $355,317 $717,665 $(188,356) $1,183,222
Net
earnings - - - - - 210,052 210,052
Sale of
treasury
stock - - (10,000) (6,875) 626 - 7,501
Purchase of
treasury
stock - - 100 62 - - (62)
Balance at
June 1,
1995 1,009,230 1,009,230 305,973 348,504 718,291 696 1,400,713
Net loss - - - - - (42,076) (42,076)
Sale of
treasury
stock - - (77,267) (77,267) - - 77,267
Purchase of
treasury
stock - - 12,668 12,668 - - (12,668)
Balance at
May 30,
996 1,009,230 $1,009,230 241,374 $283,905 $718,291 $(20,380) $1,423,236
</TABLE>
Ambassador Food Services Corporation and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 30, 1996 and June 1, 1995
<TABLE>
<S> <C> <C>
1996 1995
Cash Flows From Operating Activities
Net earnings (loss) $(42,076) $210,052
Adjustments to reconcile net earnings (loss)
to net cash provided by (used in)
operations
Depreciation and amortization 636,343 627,430
Gain on sale of property and equipment (1,342) (25,304)
Provision for bad debts 9,589 9,600
Change in net pension obligation (24,061) (13,502)
Change in reserves for disposal of
restaurant operations and for
litigation and sales tax
obligations (63,033) (116,986)
Changes in operating assets and
liabilities:
Trade accounts receivable (74,648) 590
Income taxes receivable 4,520 (982)
Miscellaneous - other assets (180,374) (36,119)
Inventories (110,537) (38,337)
Prepaid expenses (148,320) 35,461
Trade accounts payable and
accrued expenses 433,667 (633,260)
Deferred income taxes - (30,000)
Net cash provided by
(used in) operating
activities 439,728 (11,357)
5
Cash Flows From Investing Activities
Purchase of property and equipment (638,663) (881,597)
Proceeds from sale of property and
equipment 12,174 48,410
Issuance of note receivable (600,000) -
Collections on note receivable 3,857 -
Net cash used in investing activities (1,222,632) (833,187)
Cash Flows From Financing Activities
Proceeds from issuance of long-term debt 1,179,648 811,829
Principal payments on long-term obligations (606,068) (572,250)
Treasury stock transactions 64,599 (62)
Net increase in checks outstanding in excess
of bank balances 58,927 36,814
Other financing activities 41,675 (11,897)
Net borrowings under line of credit 125,420 493,379
Net cash provided by financing
activities 864,201 757,813
Net Increase (Decrease) in Cash 81,297 (86,731)
Cash, Beginning of Year 321,471 408,202
Cash, End of Year $ 402,768 $ 321,471
Supplementary Schedule of Cash Flow Information:
Cash paid during year for:
Income taxes $ 6,553 $ 6,688
Interest $ 250,436 $ 208,260
Noncash investing and financing activities:
Purchase of Bassman Vending, Inc.
assets with long-term debt $ 251,000 $ -
</TABLE>
Ambassador Food Services Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended May 30, 1996 and June 1, 1995
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The financial statements include the accounts of Ambassador Food Services
Corporation and its wholly-owned subsidiary, Ambassador Fast Services, Inc.
All material intercompany balances and transactions have been eliminated.
2. Nature of Business
The Company and its subsidiary are engaged in two segments: food service
(vending, cafeteria and catering) and janitorial service. The Company's
customers are principally located in the Midwest and Northeast United States.
3. Reporting Periods
The Company has a fiscal year (52 or 53 weeks) ending on the Thursday nearest
May 31. Both fiscal years 1996 and 1995 contained 52 weeks.
4. Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
5. Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are
provided in amounts sufficient to relate the cost of depreciable assets to
operations over their estimated useful lives on the straight-line method.
6. Location Contracts and Excess of Purchase Price Over Net Assets
Acquired
Location contracts and excess of purchase price over net assets acquired arise
from the purchase of various companies and are carried at cost. Location
contracts represent the amount paid for customer vending relationships in
existence at the time of acquisition which were generally cancelable by either
party with limited notice. Amounts resulting from acquisitions prior to
November 1, 1970 ($1,064,787) are not being amortized and relate mainly to St.
Louis operations. Acquisitions of $568,173 expended subsequent to November
1, 1970 are being amortized on a straight-line basis over 5 to 40 years.
6. Location Contracts and Excess of Purchase Price Over Net Assets
Acquired - Continued
The Company's management continually evaluates the carrying value of
their intangible assets based upon local market and economic conditions, and, in
their opinion, there has been no diminution in the value of these assets.
7. Unrecognized Prior Service Costs
Unrecognized prior service costs, related to the defined benefit pension plan
discussed in Note H, are being amortized straight-line over the average
remaining service period of the participants included in the plan.
8. Costs and Expenses
Preopening costs associated with new vending and cafeteria accounts are expensed
as incurred.
9. Earnings (Loss) Per Common Share
Earnings (loss) per share has been computed using the weighted average common
shares outstanding during the period. In addition to these shares, certain
common stock equivalents exist that were outstanding during the reporting
periods. These common stock equivalents were not considered in the net
earnings (loss) per share calculation for fiscal year 1996 and 1995 as they
did not effect the calculation.
In addition, during fiscal year 1996, the Company issued convertible debt. The
possible conversion of such debt was not considered in the net earnings (loss)
per share calculation for 1996 as its effect is antidilutive (See Note F).
10. Statements of Cash Flows
For purposes of reporting cash flows, cash includes cash on hand, in banks, and
in change funds.
11. Concentration of Credit Risk
The majority of the Company's accounts receivable, approximately $1,500,000 in
1996 and 1995, respectively, are with customers located in the Northeast
United States. The Company grants credit to customers; which includes
businesses, schools, and governmental agencies. Collateral is generally not
required.
12. Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
13. Reclassifications
Certain items in the 1995 consolidated financial statements have been
reclassified to conform to the 1996 presentation.
14. Financial Instruments
The carrying value of the Company's financial instruments, including cash,
accounts and notes receivable, accounts payable, line of credit, and
long-term debt, approximate fair value.
B. ACCOUNTS RECEIVABLE
Accounts receivable includes the following:
<TABLE>
<S> <C> <C>
1996 1995
Trade accounts receivable $1,790,385 $1,734,914
Less allowance for doubtful accounts 22,174 31,762
$1,768,211 $1,703,152
</TABLE>
C. CURRENT LIABILITIES
Trade accounts payable includes checks outstanding in excess of bank
balances of $567,769 and $508,842 for 1996 and 1995, respectively.
Accrued expenses include the following:
<TABLE>
<S> <C> <C>
1996 1995
Legal fees $108,874 $ 77,314
Vacation pay 97,376 137,841
Commissions 61,674 12,799
Taxes 47,622 90,000
Salaries 245,070 112,151
Current portion of pension benefit
obligation (Note H) 60,638 60,638
Reserve for discontinued operations (Note K) 16,388 11,082
Reserve for litigation and sales tax obligations
(Note L) 29,000 104,000
Other 12,907 21,766
$679,549 $627,591
</TABLE>
D. LINE OF CREDIT AGREEMENT
During fiscal year 1995, the Company entered into a line of credit
agreement with a financing company that carries interest at the publicly
announced prime rate (8.25% at May 30, 1996) plus 3.5%. The amount drawn
cannot exceed 80% of eligible accounts receivable and is collateralized by
the Company's accounts receivable. At May 30, 1996 and June 1, 1995,
amounts outstanding were $618,798 and $493,379, respectively. Interest
is payable monthly and amounts outstanding were due upon demand.
Subsequent to May 30, 1996, terms of the agreement were revised whereby the
maturity date is August 1997.
E. LONG-TERM DEBT
<TABLE>
<S> <C> <C>
1996 1995
Note payable - bank, payable in monthly installments
of $2,848, including interest at prime rate
(8.25% at May 30, 1996) plus 2.0%, due July 1998,
collateralized by building $282,937 $286,776
Notes payable - equipment, payable in monthly
installments of $51,746, including interest at
rates ranging from 10% to 19.25%, due through
December 2000, collateralized by equipment 817,467 758,703
Note payable to Bassman Vending, Inc. payable in
monthly installments of $5,150, including interest
at 8.5%, due through March 2001, collateralized by
certain location contracts and equipment
(See Note O). 244,232 -
Note payable - equipment, payable in monthly
installments of $9,723 plus interest at the
publicly announced prime rate (8.25% at
May 30, 1996) plus 3.5%, due August 1997,
collateralized by equipment. 330,554 -
Note payable - bank, payable in monthly
installments of $2,000 plus interest at 9.0%,
due December 1995, collateralized by
accounts receivable - 14,000
Notes payable - other 51,564 92,693
1,726,754 1,152,172
Less current maturities 601,937 372,515
$1,124,817 $ 779,657
</TABLE>
Aggregate annual principal payments applicable to long-term debt due
subsequent to May 30, 1996 are as follows:
<TABLE>
<S> <C>
Fiscal Year
Ending Amount
1997 $ 601,937
1998 519,465
1999 423,496
2000 114,351
2001 67,505
$1,726,754
</TABLE>
F. SUBORDINATED NOTE PAYABLE TO STOCKHOLDER
During fiscal year 1996, the Company borrowed $250,000 from a stockholder and
officer. The note calls for interest at 10%, payable quarterly with quarterly
principal payments of $12,500 beginning June 30, 2001, with a final payment
June 30, 2006.
The note is subordinate to all other indebtedness of the Company.
From April 30, 1998 to May 1, 2006, the note is convertible to shares of the
Company's stock at a price of $1.25 per share. In the event any payments
are made on the note, the Company will issue warrants to the stockholder
which will entitle the stockholder to purchase an equivalent number of shares
during the same period. The conversion terms may be adjusted upon certain
events to prevent dilution of the stockholder conversion rights.
G. LEASES
Future minimum lease payments under all noncancellable operating leases as
of May 30, 1996 are as follows
<TABLE>
<S> <C> <C> <C>
Fiscal year
ending Real estate Equipment Total
1997 $ 278,005 $ 470,375 $ 748,380
1998 284,392 436,352 720,744
1999 220,921 370,494 591,415
2000 156,606 314,231 470,837
2001 135,580 39,678 175,258
$1,075,504 $1,631,130 $2,706,634
</TABLE>
Rental expense charged to operations was as follows:
<TABLE>
<S> <C> <C>
1996 1995
Minimum rentals $499,703 $380,263
Less sublease rentals (6,630) (34,065)
$493,073 $346,198
</TABLE>
H. EMPLOYEE BENEFIT PLANS
The Company has a nonqualified defined benefit pension plan covering two key
employees and three former officers of the Company. Under the terms of the
plan, each individual will receive a fixed monthly payment for ten years
after retirement. The benefit does not vest until the employee reaches age
65. If the individual dies, either during employment or after retirement, the
beneficiary is entitled to receive benefits as specified in the agreement.
The plan is unfunded.
The following table sets forth the status and amounts recognized in the
Company's consolidated financial statements for 1996 and 1995:
<TABLE>
<S> <C> <C>
1996 1995
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including
vested benefits of $302,806 in 1996 and
$368,777 in 1995 $ 397,980 $ 452,386
Projected benefit obligation for service
rendered to date $ 397,980 $ 452,386
Plan assets at fair value - -
Projected benefit obligation in excess of
plan assets 397,980 452,386
Additional minimum liability recorded 222,932 258,500
Prior service cost not yet recognized in net
periodic pension cost (222,932) (258,500)
Net accrued pension cost $ 397,980 $ 452,386
Net accrued pension cost is included in the accompanying consolidated financial
statements as follows:
1996 1995
Current portion included in accrued
expenses $ 60,638 $ 60,638
Long-term portion of obligation 337,342 391,748
$ 397,980 $ 452,386
</TABLE>
The weighted-average discount rate used in determining the actuarial
present value of the projected benefit obligation was 8.0% in 1996 and 1995.
Net pension cost for 1996 and 1995 includes the following components:
<TABLE>
<S> <C> <C>
1996 1995
Service cost - benefits earned
during the period $ 5,085 $ 5,347
Interest cost on projected benefit
obligation 35,363 39,950
Amortization of prior service cost 37,745 37,745
Net periodic pension cost $78,193 $83,042
The Company contributed approximately $83,000 and $85,000 in fiscal years
1996 and 1995, respectively, to several multi-employer pension plans for
employees covered by collective bargaining agreements. These plans are not
administered by the Company, and contributions are determined in accordance
with provisions of negotiated labor contracts.
The Company has a defined contribution plan that covers all permanent
nonunion employees. Under the terms of the plan, employees can contribute
up to a maximum of 15% of their gross annual salary. Company contributions
to the Plan are at the discretion of the Board of Directors. The Company made
no contributions to this plan during fiscal year 1996 or 1995.
I. STOCK OPTIONS
On November 18, 1992, the Board of Directors approved the granting of
nonstatutory options for 40,000 shares to an officer and certain key
employees. The exercise price of the options is $.688 per share, which
approximated the fair market value of the shares on the date of grant of the
option. The option can be exercised at any time within five years of the
date of grant. As of May 30, 1996, none of these options had been exercised.
On November 9, 1994, the Board of Directors approved the granting of
nonstatutory options for 10,000 shares to an officer. The exercise price of
the options was $.75 per share, which approximated the fair market value of
the shares on the date of grant of the option. The options were exercised during
fiscal year 1995.
On February 23, 1996, the Board of Directors approved the granting of
nonstatutory options for 65,000 shares to certain key employees. The
exercise price of the options was $1 per share, which approximated the fair
market value of the shares on the date of grant of the option. The options were
exercised during fiscal year 1996.
Stock option transactions for the two years are summarized below:
</TABLE>
<TABLE>
<S> <C> <C>
Option Shares
1996 1995
Outstanding, beginning of year 40,000 40,000
Granted 65,000 10,000
Exercised (65,000) (10,000)
Expired - -
Outstanding, end of year 40,000 40,000
</TABLE>
J. INCOME TAXES
The net deferred tax liability in the accompanying consolidated balance sheets
includes the following amounts of deferred tax assets and liabilities:
<TABLE>
<S> <C> <C>
1996 1995
Deferred tax liability $ 528,337 $ 526,723
Deferred tax asset (693,295) (680,922)
Less: Valuation allowance 432,027 421,268
Net deferred tax liability $ 267,069 $ 267,069
</TABLE>
The net deferred tax liability is included in the accompanying consolidated
financial statements as follows:
<TABLE>
<S> <C> <C>
1996 1995
Deferred income taxes - long-term
liability $297,102 $329,862
Deferred income taxes - short-term
asset (30,033) (62,793)
$267,069 $267,069
</TABLE>
The approximate tax effect of each temporary difference giving rise to the
deferred tax liability and asset was as follows at May 30, 1996 and June 1,
1995:
<TABLE>
<S> <C> <C>
1996 1995
Amortization of location contracts $ 297,069 $ 297,069
Accelerated depreciation 231,268 229,654
$ 528,337 $ 526,723
Reserve for contingencies $ (60,681) $ (98,524)
Amortization of pension costs (69,118) (75,616)
Vacation accrual (37,977) (53,758)
Other (8,648) (11,612)
Net operating loss carryforward (243,834) (176,448)
AMT credit carryforward (108,716) (99,868)
Investment tax credit carryforward (164,321) (165,096)
$(693,295) $(680,922)
</TABLE>
The valuation allowance was established to reduce the deferred tax asset to the
amount that will more likely than not be realized. The reduction is necessary
due to prior operating losses and uncertainty as to the Company's ability to
utilize tax credit and net operating loss carryforwards before they expire.
The valuation allowance was increased (decreased) $10,759 and ($127,517) in
fiscal years 1996 and 1995, respectively.
The income tax benefit reflected in the consolidated statements of operations
differs from the amounts computed at federal statutory income tax rates. The
principal differences are as follows:
<TABLE>
<S> <C> <C>
1996 1995
Federal income tax expense (benefit)
computed at statutory rate $(14,000) $ 60,000
State income tax expense (benefit) (2,000) 9,000
Tax effect of nondeductible expenses 12,000 15,000
Increase (decrease) in valuation allowance 11,000 (127,000)
Other, net (7,000) 13,000
$ - $ (30,000)
</TABLE>
The Company had available for income tax purposes the following investment
credit carryforwards at May 30, 1996:
<TABLE>
<S> <C>
Year of Expiration Amount
1997 $ 4,217
1998 59,630
1999 25,168
2000 49,551
2001 25,755
$164,321
</TABLE>
In addition, the Company had the following net operating loss carryforwards
available at May 30, 1996:
<TABLE>
<S> <C>
Year of Expiration Amount
2008 $362,643
2009 76,572
2010 15,626
2011 152,319
$607,160
</TABLE>
K. RESERVE FOR DISPOSAL OF RESTAURANT OPERATIONS
During fiscal year 1988, management decided to cease operations of its
final restaurant due to operating losses. The Company reduced the carrying
value of assets relative to the restaurant to zero and provided a reserve for
estimated losses from disposal. The remaining reserve represents estimated
losses, net of anticipated sublease rentals, to terminate the Company's
obligation under the property lease.
During fiscal year 1996, management revised its estimate to reflect a
decrease in potential sublease rentals. This change increased the reserve
$92,300. If anticipated sublease rentals significantly change in the future,
the estimate may again need to be revised.
An analysis of the reserve for discontinued operations is presented
below:
<TABLE>
<S> <C> <C>
1996 1995
Balance, beginning of year $ 63,529 $ 89,691
Additions to reserves 92,300 -
Expenses paid during the year (41,829) (26,162)
Balance, end of year $114,000 $ 63,529
</TABLE>
The reserve is included in the accompanying consolidated financial
statements as follows:
<TABLE>
<S> <C> <C>
1996 1995
Current portion included in accrued
expenses $ 16,388 $11,082
Reserve included in long-term
liabilities 97,612 52,447
$114,000 $63,529
</TABLE>
L. RESERVE FOR LITIGATION AND SALES TAX OBLIGATIONS
At May 30, 1996, the Company has $75,594 reserved relating to a New
York state sales tax audit performed in 1988. The amount is a total of the
sales tax assessed plus interest and penalties, less total payments.
In addition, during fiscal year 1994, the Company established a
reserve relating to a lawsuit filed by the federal government on behalf of
the United States Department of Agriculture (USDA). The suit was based on
alleged overcharges for food services provided for certain
government-sponsored projects in New York. The Company contested the
government's claim on the basis of extensive investigation and a resulting
conclusion that the Company had not overcharged for food services provided for
such projects, and that the Company had no liability with respect to the
government's claim. During fiscal year 1995, the government initiated
settlement negotiations. The Company joined with a view to effect a
disposition of the case and avoid further litigation expenses. Following these
negotiations, an agreement for settlement was reached. Terms of the
agreement included payment by the Company to the government of $164,000, of
which $89,000 was paid in 1995 and $75,000 was paid in 1996.
An analysis of the reserve for these obligations is as follows:
<TABLE>
<S> <C> <C>
1996 1995
Balance, beginning of year $ 189,098 $279,922
Additions to reserves - 5,246
Payments (113,504) (96,070)
Balance, end of year $ 75,594 $189,098
</TABLE>
The reserves are included in the accompanying consolidated financial statements
as follows:
<TABLE>
<S> <C> <C>
1996 1995
Current portion included in accrued expenses $29,000 $104,000
Reserve included in long-term liabilities 46,594 85,098
$75,594 $189,098
</TABLE>
M. OPERATING EXPENSES
Operating expenses in the accompanying consolidated statements of operations are
composed of the following:
<TABLE>
<S> <C> <C>
1996 1995
Payroll and related costs $6,198,208 $6,178,781
Equipment rental 255,431 192,528
Other 1,847,090 1,665,230
$8,300,729 $8,036,539
</TABLE>
N. BUSINESS SEGMENT INFORMATION
The Company is engaged in two different business segments: food and janitorial.
Segment information is as follows:
<TABLE>
<S> <C> <C> <C>
Consolidated
Food Janitorial Total
Year ended May 30, 1996
Sales $18,807,080 $1,655,385 $20,462,465
Earnings from continuing
operations before
income taxes 47,066 3,158 50,224
Depreciation and
amortization 601,833 34,510 636,343
Capital expenditures 724,337 4,326 728,663
Identifiable assets 7,332,248 345,118 7,677,366
Year ended June 1, 1995
Sales $17,672,028 $1,953,664 $19,625,692
Earnings (loss) from
continuing
operations
before income taxes 190,290 (10,238) 180,052
Depreciation and
amortization 570,628 56,802 627,430
Capital expenditures 841,531 40,066 881,597
Identifiable assets 5,944,005 381,990 6,325,995
</TABLE>
O. ACQUISITION
During fiscal year 1996, the Company acquired certain location contracts, parts
inventory and equipment from Bassman Vending, Inc. (BVI) for $251,000 allocated
as follows:
<TABLE>
<S> <C>
Location contracts (in and around Des Moines, Iowa) $161,000
Parts inventory 30,000
Equipment 60,000
$251,000
</TABLE>
The purchase price was financed with a $251,000 note payable to BVI, which is
described in Note E.
In addition, the Company has entered into noncancellable operating leases with
BVI whereby the Company will lease certain equipment and real estate for $6,000
and $24,500 per month, respectively, from March 1996 through March 2001.
Additionally, the Company lent BVI $600,000 which is payable in monthly
installments of $12,300, including interest at 8.5% through April 2001. The
note is collateralized by the real estate and equipment being leased above.
P. ADJUSTMENTS TO QUARTERLY RESULTS (UNAUDITED)
As discussed in Note K, the Company revised its estimated loss on the
disposal of restaurant operations. The effect of this restatement for the
first quarter of fiscal 1996 is as follows:
<TABLE>
<S> <C>
Three Months Ended
August 31, 1995
Net earnings (loss):
As originally reported $ 14,717
Effect of restatement (92,300)
As restated $(77,583)
</TABLE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no disagreements of the type described in paragraph (a) or any
reportable event as described in paragraph (b) of Item 304 of Regulation SB
during the two most recent fiscal years.
Part III
Item 9. Directors and Executive Officers of the Registrant; Compliance with
16 (a) of the Exchange Act.
(a), (b) The Executive Officers and Directors of the Company are:
<TABLE>
<S> <C> <C> <C>
Name Age Principal Occupation Director
Since
George F. Crawford (1) 71 Partner in the law firm of Morrison
& Hecker Attorneys at Law,General
Counsel for Ambassador, Secretary of
Ambassador (2) 1974 (3)
Arthur D. Stevens (1) 71 Chairman of the Board of Directors,
Executive Officer, and Treasurer of
Ambassador (4) 1963
George T. Terris 74 Investor (5) 1966
Robert A. Laudicina 55 Executive Vice-President and
General Manager of Ambassador's
New York Operations (6) 1986
Richard A. Mitchell 32 Assistant Secretary, Vice President
ofOperations (7) N/A
Ann W. Stevens 55 1996
</TABLE>
(1) Member of Executive Committee of Board of Directors
(2) Mr. Crawford has been Secretary of Ambassador since June 28, 1979;
he served as Assistant Secretary prior to that time beginning in
January 1972. He was also the first Secretary of Ambassador,
serving from April 1963 to October 1968, inclusive. Throughout the
entire period he has been a partner in Morrison & Hecker
Attorneys at Law, the firm which serves as general counsel to
Ambassador. Mr. Crawford resigned from the Board effective
August 22, 1996.
(3) Member of Board of Directors 1963-67.
(4) Mr. Stevens has been Chairman of the Board of Directors of
Ambassador since February 15, 1963, Chief Executive Officer
since April 11, 1963, and Treasurer since January 26, 1972. He was
also the first President and Treasurer of Ambassador beginning
on April 19, 1963, relinquishing those positions in April 1978
and October 1969, respectively. He again assumed the position of
President on January 1, 1987 upon the retirement of Mr. George
Terris from that position.
(5) Mr. Terris, until his retirement January 1, 1987, was President and
Chief Operations Officer of Ambassador.
(6) Mr. Laudicina was elected Executive Vice President February 22,
1989. He served as Vice President prior to that time, beginning
in January 1982. He was New York Sales and Marketing Director
from December 1977 to January 1979 and has been divisional
President of Ambassador's New York operations since January 1979.
(7) Mr. Mitchell served as Manager of Operating Systems from August
1991 through November 1994 and has served as Assistant Secretary
since November 1991. In November 1994, he was appointed to the
position of Vice President of Operations.
(c) No family relationship exists between any of the Executive Officers
listed above.
Each Officer holds his office at the pleasure of the Board of Directors
until the next annual meeting of the Directors and until his successor
is duly elected and qualified.
(d) The Executive Officers and Directors listed above were not involved
or a part of any legal proceedings as described in Item 401(d).
Item 10. Executive Compensation
(a), (b) The following table sets forth information as to the remuneration
accrued by Ambassador Food Services Corporation and its
subsidiary during the fiscal year ended May 30, 1996, for each
Director and Officer whose aggregate remuneration for the year
exceeded $100,000.
<TABLE>
<S> <C> <C>
Names of Individuals,
Number of Persons in Group Fiscal Base
and Capacities in which Served Year Salary
Arthur D. Stevens, 1996 $188,428
Chairman of the Board, President, Chief Executive 1995 161,100
Officer and Treasurer of Ambassador and Officer 1994 141,000
and Director of its Subsidiary
Robert A. Laudicina, 1996 $169,597
Executive Vice President and 1995 140,446
General Manager of New York Operations 1994 110,631
</TABLE>
Executive Retirement Program
An executive retirement program was adopted during the 1990 fiscal year to
provide a target annual retirement benefit at age 65 or upon retirement, if
later, in an amount equal to approximately 40-45% of annual salary, payable
for 10 years, for certain salaried employees, including the following officer:
Robert A. Laudicina. This target retirement benefit will be provided through
the combination of (1) discretionary annual cash retirement bonus payments in
the amount of $2,000, which must be invested in an individual retirement
account or a universal life insurance policy, and (2) a nonqualified (for tax
purposes) supplemental retirement agreement from the Company. The nonqualified
retirement agreements will pay the estimated portion of the target retirement
benefit which cannot be funded by the executive through the annual cash
retirement bonus payments. The nonqualified retirement arrangements will
also provide a pre-retirement death benefit in the event of the executive's
death prior to age 65.
These annual retirement benefits of the above named Officer, are estimated
to be as follows:
<TABLE>
<S> <C> <C> <C> <C>
Name of Executive Age Estimated Benefit Supplemental Target
From Cash Retirement Retirement
Retirement Benefit Benefit
Robert A. Laudicina 55 $9,123 $46,227 $55,350
</TABLE>
*based upon contributions of $2,000 per year until age 65 and interest at
8% annum.
The Company maintains insurance policies on the lives of the executives in
amounts estimated to be sufficient to reimburse it for most of the supplemental
retirement and/or death benefit payments.
(d) Stock Options
There were no stock options held by any Officer or Director whose
remunerations exceeded $100,000 as of May 30, 1996.
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
The following table sets forth, as of May 30, 1996, the information with
respect to common stock ownership of each person known by the Company to own
beneficially more than 5% of the shares of the Company's common stock, and of
all Officers and Directors as a group.
<TABLE>
<S> <C> <C>
Amount Percent of
Beneficially Outstanding
Name and Address of Beneficial Owner(s) Owned Shares
Arthur D. Stevens
1901 W. 69th Street
Mission Hills, KS 66205 181,444 (1) 23.3%
Thomas G. Berlin
800 Superior Avenue, Suite 2100
Cleveland, Ohio 44114 124,218 (3) 16.0%
George T. Terris
936 West Shaker Circle
Nequon, WI 53092 50,000 (2) 6.4%
George F. Crawford
10110 Fontana Lane
Overland Park, KS 66207 52,597 6.8%
</TABLE>
(1) Does not include 60,000 shares beneficially owned by Mr. Stevens'
adult children, in which shares he disclaims any beneficial
interest. Additionally, does not include 200,000 shares which may
be issued in the event of conversion of certain debt under its
conversion provisions which are effective from April 30, 1998 to
May 1, 2006.
(2) Does not include 4,000 shares owned by Mr. Terris' immediate
family, in which shares he disclaims any beneficial interest.
(3) Includes 12,800 shares owned by Mr. Berlin's wife.
(b) Security Ownership of Management
<TABLE>
<S> <C> <C>
Shares of Stock
Beneficially Owned
May 30, 1996
Name Number Percent
of Shares of Stock
George F. Crawford
10110 Fontana Lane
Overland Park, KS 66207 52,597 6.8%
Arthur D. Stevens
1901 W. 69th Street
Mission Hills, KS 66205 181,444 (1) 23.3%
George T. Terris
936 West Shaker Circle
Nequon, WI 53092 50,000 (2) 6.4%
Robert A. Laudicina
303 Cedar Court
Norwood, NJ 07648 24,375 3.1%
Ann W. Stevens
1901 W. 69th Street
Mission Hills, KS 66205 1,000 0.1%
All Directors and Officers
as a Group (5 persons) 337,416 (3) 43.4%
</TABLE>
(1) Does not include 60,000 shares beneficially owned by Mr. Stevens'
adult children, in which shares he disclaims any beneficial
interest. Additionally, does not include 200,000 shares which may
be issued in the event of conversion of certain debt under its
conversion provisions which are effective from April 30, 1998
to May 1, 2006.
(2) Does not include 4,000 shares owned by Mr. Terris' immediate
family, in which shares he disclaims any beneficial interest.
(3) Includes 10,000 shares which could be purchased by certain Officers
and Directors under stock options.
(c) Changes in Control
The Company knows of no contractual arrangements which may, at a subsequent
date, result in a change in control of the Company.
Item 12. Certain Relationships and Related Transactions
(a) Certain Business Relationships
George F. Crawford, a Director and Officer of Ambassador, is a partner of
Morrison & Hecker Attorneys at Law, which firm serves as general counsel
to the Company. Mr. Crawford resigned from the Board effective August
22, 1996.
There were no other transactions with any member of management during
fiscal 1996 which exceeded $60,000.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibit No.:
3A Articles of Incorporation of the Registrant (1)
3B By-Laws of the Registrant (1)
6 1984 Incentive Stock Option Plan Dated January 31, 1984(2)
10 Material Contracts Agreement with Paul F. Leathers (1)
17 Letter on Director Resignation (3)
22 Subsidiary of the Registrant (3)
(1) This exhibit was filed with the Ambassador's 10-K for the fiscal
year ended May 28, 1981. A copy of the Certificate of Amendment
of Certificate of Incorporation changing the Company's name was
filed as a supplement to said exhibit for the fiscal year ended
June 1, 1989.
(2) This exhibit was filed with the Company's 10-K for the fiscal year
ended May 31, 1984.
(3) Exhibit attached as part of filing.
Exhibit No. 22
Subsidiary of the Registrant
Ambassador Food Services Corporation (a Delaware Corporation), the parent
Company, has the following subsidiary, which is included in the consolidated
financial statements.
Name of Subsidiary State of Incorporation % of Voting
Securities Owned
Ambassador Fast
Services, Inc.
d/b/a Squire Maintenance
Services New York 100%
Note: The Company will provide, on the written request of any stockholder, a
copy of any exhibit to this Form 10-KSB at a rate of $.15 per page.
The minimum fee is $5.00. Requests should be directed to Arthur
D. Stevens, President, Ambassador Food Services Corporation, P.O. Box
419586, Kansas City, Missouri 64141-6586.
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
AMBASSADOR FOOD SERVICES CORPORATION
(Registrant)
/s/ Athrur D. Stevens Date October 17, 1996
Arthur D. Stevens
Chairman of the Board
/s/ Richard Mitchell Date October 17, 1996
Richard Mitchell
Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Chairman of the Board
President, Treasurer and
/s/ Arthur D. Stevens Chief Executive Officer October 17, 1996
Arthur D. Stevens Title Date
/s/ Robert A. Laudicina Vice-President/Director October 17, 1996
Robert A. Laudicina Title Date
/s/ Ann W. Stevens Director October 17, 1996
Ann W. Stevens Title Date
/s/ George T. Terris Director October 17, 1996
George T. Terris Title Date
EXHIBIT 17
October 16, 1996
Mr. Arthur D. Stevens
President
Ambassador Food Services Corporation
3269 Roanoke Road
Kansas City, MO 64111
Dear Arthur:
I have been advised by management of our firm that, because of our firm's
general policy against having its members serve as directors or officers of
publicly held corporations for which the firm serves as legal counsel, and
in light of recent developments in the position of the American Bar Association
and other bar associations in this regard, which have been well publicized and
of which you are probably aware, I should terminate my status as a director
and officer of Ambassador Food Services Corporation. Accordingly, I hereby
resign as a director and as an officer of the corporation, as well as any
subsidiary or subsidiaries of which I may be listed as a director or officer,
effective immediately.
Very truly yours,
/s/ George F. Crawford
George F. Crawford
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-30-1996
<PERIOD-END> MAY-30-1996
<CASH> 402,768
<SECURITIES> 0
<RECEIVABLES> 1,768,211
<ALLOWANCES> 22,174
<INVENTORY> 593,820
<CURRENT-ASSETS> 3,174,972
<PP&E> 7,922,347
<DEPRECIATION> 5,792,683
<TOTAL-ASSETS> 7,677,366
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0
0
<OTHER-SE> 697,911
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<SALES> 20,462,465
<TOTAL-REVENUES> 20,462,465
<CGS> 16,601,123
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<INTEREST-EXPENSE> 244,666
<INCOME-PRETAX> 50,224
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<INCOME-CONTINUING> 50,224
<DISCONTINUED> (92,300)
<EXTRAORDINARY> 0
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<NET-INCOME> (42,076)
<EPS-PRIMARY> 0.06
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</TABLE>
