<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
/X/ THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 28, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-22252
CATTLEMAN'S, INC.
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C>
DELAWARE 38-3012740
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer
Identification Number)
1825 SCOTT STREET
DETROIT, MICHIGAN 48207
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 833-2700
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
</TABLE>
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to
this Form 10-K. / /
<PAGE> 2
At June 30, 1996, 3,289,983 shares of Common Stock were outstanding. The
aggregate market value of the voting stock held by non-affiliates on June 30,
1996 (367,933 shares) was approximately $599,731.
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Documents Incorporated by Reference
Portions of the Registrant's definitive 1996 Information Statement
are incorporated by reference into Part III.
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
GENERAL
CATTLEMAN'S, INC. ("Cattleman's"), a Delaware corporation, through its
wholly-owned subsidiary, Cattleman's Meat Company ("Cattleman's Meat"), a
Michigan corporation, conducts wholesale beef processing and fresh food outlet
sales operations. All references to Cattleman's includes Cattleman's Meat,
unless otherwise disclosed. Beef processing involves the conversion of
carcasses of fresh beef into boxed beef, which is marketed primarily in the
United States to hotel, restaurant and institutional distributors, retail
distributors and other beef fabrication processors. Five retail outlets sell
fresh wholesale cuts of beef, retail cuts of beef, pork, poultry and fresh
produce to the general public under the name "Cattleman's Farmers' Markets."
Cattleman's is organized to take advantage of the vertical integration
opportunities available pursuant to its outlet / processing structure. Among
other things, benefits include product availability, inventory management,
pricing support and elimination of the middleman.
Cattleman's sales office and beef processing fabrication plant are located
at corporate headquarters at 1825 Scott Street, Detroit, Michigan 48207.
Cattleman's retail outlets are located in Detroit, Farmington, Hamtramck, Oak
Park and Taylor, Michigan. Cattleman's retail distribution center is located
in the Eastern Market area of Detroit, Michigan. Cattleman's telephone number
is (313) 833-2700.
HISTORY OF CATTLEMAN'S BUSINESS
Cattleman's is the successor of Arrow Point Resources, Inc. ("Arrow
Point"), a Utah non-operating shell corporation incorporated in 1984.
Cattleman's Meat was originally organized as Eastern Market Beef Processing
Corp. ("Eastern Market"). From its inception in 1972, Eastern Market has
conducted business as a wholesale beef fabricator.
Pursuant to an Agreement and Plan of Reorganization dated June 1991 (the
"Plan"), Arrow Point changed its name to Cattleman's, Inc. ("Cattleman's Inc. -
Utah"), approved a ten for one reverse stock split of the then issued and
outstanding shares and, in consideration of the issuance of 2,832,000 shares of
its common stock to the shareholders of Eastern Market, acquired all of the
issued and outstanding common stock of Eastern Market. As a result of the
acquisition, Cattleman's - Utah had a total of 3,191,982 shares of common stock
issued and outstanding. Following the reverse acquisition, the officers and
directors of Cattleman's - Utah were replaced with the officers and directors
of Eastern Market.
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In connection with the Plan, Cattleman's Inc. was organized under the laws
of the State of Delaware ("Cattleman's Inc. - Delaware) as a wholly-owned
subsidiary of Cattleman's - Utah in July 1991 in order to change the domicile
of Cattleman's Utah to Delaware. In August 1991, Cattleman's Inc. - Utah and
Cattleman's Inc. - Delaware merged, with Cattleman's - Delaware as the
surviving corporation. In November 1991, Eastern Market changed its name to
Cattleman's Meat.
Effective August 30, 1993, Cattleman's acquired substantially all of the
assets of Oak Farms Market, Inc. and Oak Farms Market - Farmington, Inc.
(collectively, "Oak Farms") in exchange for 90,000 shares of Cattleman's stock.
Oak Farms owned and operated two fruit markets in Oak Park and Farmington,
Michigan, respectively. See "Facilities" below.
OPERATIONS
PROCESSING.
Cattleman's converts beef carcasses into "boxed beef" (packing house style
wholesale cuts of beef) and trimmings (used primarily for hamburger and beef
sausage) at its Scott Street plant. Cattleman's does not raise cattle and it
does not reduce live cattle to dressed carcasses. Cattleman's purchases the
carcass beef by the "swinging trailer load" (e.g., in quarters on hooks)
primarily from what it believes are the three largest slaughtering companies in
the country: (i) Iowa Beef Processors; (ii) Monfort, Inc., a subsidiary of
ConAgra, Inc.; and (iii) Excel, a subsidiary of Cargill, Inc. In the
aggregate, these suppliers have demonstrated the ability, throughout the
history of Cattleman's, to supply Cattleman's with substantially all of its
needs for carcass beef. Cattleman's believes that these suppliers will
continue to supply its demands for carcass beef and that the Scott Street plant
has sufficient capacity to grow to match anticipated increased demand for its
products.
PRODUCTS.
Cattleman's product line includes a variety of grades and sizes of beef.
The beef carcasses received from the suppliers have generally already been
graded by the suppliers. The suppliers generally have exact specifications
that all their carcass beef must satisfy for automated processing in their
plants. These specifications include size, shape, fat cover and color.
Cattleman's is an outlet for these suppliers of carcass beef which does not
satisfy their exact specifications. Because of the variety, size and different
needs of its customers, Cattleman's fills an industry niche.
Cattleman's believes that its retail outlets are unique to Michigan.
Outlet customers shop in a "no frills" temperature controlled environment,
where both packing house style and retail cuts of fresh meat along with deli
lunch meat and dairy products are displayed. The outlets, which are generally
open seven days a week, sell wholesale cuts of beef, retail cuts of beef, pork,
poultry, produce, deli and dairy.
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PURCHASES AND SALES.
During the fiscal year ended April 28, 1996, Cattleman's bought
approximately 97,000,000 pounds of carcass beef and 9,200,000 pounds of boxed
beef. There are no purchase contracts with suppliers. Cattleman's provides
letters of credit to certain of its suppliers. The standard practice in the
industry requires payment by Cattleman's for its carcass beef purchases within
eight (8) days after receipt. As a result, the payment terms with the
customers of the beef fabricating wholesale operations require payment no later
than twelve (12) days after delivery. Consequently, there are essentially no
backlog orders as Cattleman's inventory balance of carcass beef generally
equals the sales volume over a period of one week. Periodically, however, when
beef supply is high and prices are low, Cattleman's will purchase extra beef in
order to attempt to take advantage of the market opportunity. The beef is
inventoried for sale in the spring when prices are anticipated to be higher.
Accordingly, after this type of purchasing, the inventory balance of
Cattleman's can rise to a level equaling the sales volume over a period of 2 to
2 1/2 weeks.
The beef industry is subject to price fluctuations and to market
conditions as they affect supply and demand. Although the quick turnaround
between the time of purchase and the time of sale of the carcass beef and boxed
beef, respectively, generally permits some stability in price, there are times
when significant fluctuations in price in a short period of time can have a
significant effect on profitability as it relates to transactions during those
periods.
CUSTOMERS.
The customers of the beef fabricating wholesale operation are primarily
hotel, restaurant and institutional distributors, retail distributors and other
processors. Sales are conducted by Cattleman's salesmen located at the
corporate headquarters. Cattleman's customer niche is its ability to offer a
wide variety of grades, sizes and shapes of beef (including custom ordered
cuts) and to deliver its products to most of its customers overnight and on
short notice. Products are distributed to its domestic customers and to export
trading companies for delivery to foreign countries primarily by common
carrier.
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Cattleman's sells its boxed beef nationally and to certain foreign
countries (generally, countries in the Caribbean basin, Canada, Mexico and
Taiwan) in approximately the percentages set forth in the following table:
<TABLE>
<CAPTION>
AREA PERCENTAGE OF SALES BY AREA
- --------------------- ----------------------------------------
1996 1995 1994
- ---------------------------------------------------------------
<S> <C> <C> <C>
Cattleman's Outlets 3.3% 3.6% 2.9%
- ---------------------------------------------------------------
Michigan 22.7% 25.7% 30.1%
- ---------------------------------------------------------------
Midwest 19.2% 18.1% 16.8%
- ---------------------------------------------------------------
East 28.5% 32.3% 32.1%
- ---------------------------------------------------------------
South 19.8% 13.8% 11.7%
- ---------------------------------------------------------------
West 5.0% 5.0% 5.4%
- ---------------------------------------------------------------
Foreign 1.5% 1.5% 1.0%
</TABLE>
Outlets sell products to the general public at lower than traditional
retail prices for meat. The customer base is drawn not only from metropolitan
Detroit, but from Canada as well. Cattleman's markets its products through
substantial advertising in newspapers and radio. Retail outlets promote the
quality of the products and the savings available for the purchase of packing
house style cuts of beef which are obtained through Cattleman's beef
fabrication operations. Cattleman's outlets also sell regular retail packages
of fresh and smoked meats at prices traditionally 10%-40% below meat markets
and supermarkets. In addition, produce is sold at prices lower than
supermarkets and competitive with larger produce markets. The design of the
outlets promotes their lower than traditional retail price image as the retail
customer shops in the "no frills" controlled atmosphere.
FACILITIES.
The beef processing operations of Cattleman's are located at the Scott
Street plant at 1825 Scott Street, Detroit, Michigan. The Scott Street plant
is situated in Detroit's Eastern Market, a local wholesale food distribution
area near downtown Detroit, and consists of a building of approximately 56,500
sq. ft. Cattleman's owns the property which serves as collateral under the
Company's financing arrangements. Cattleman's considers the Scott Street
plant to be in good condition. Cattleman's anticipates cash expenditures of
approximately $1,000,000 for additional processing equipment and plant
additions in fiscal year 1997 for the Scott Street Plant to be funded from
operations.
Cattleman's currently operates five outlets in metropolitan Detroit
(Detroit, Hamtramck, Taylor, Farmington and Oak Park). The Taylor, Farmington
and Oak Park outlets are leased from third parties. The Farmington and Oak
Park outlets were acquired from Oak Farms effective August 30, 1993. See
"History of Cattleman's Business" above. The Farmington outlet was converted
to a Cattleman's outlet in November 1993. The Oak Park outlet was converted to
a Cattleman's outlet in
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December 1994. The five outlets range in size from approximately 4,000
to 18,000 square feet. In November, 1993, Cattleman's leased a warehouse
located in Detroit, Michigan from an unaffiliated party. The warehouse handles
produce and grocery distribution to the outlets.
When reasonable and in accordance with business plans, goals and
requirements, Cattleman's may expand its retail outlets through acquisitions
and establishment of new outlets in the metropolitan Detroit area, and
eventually in other market areas.
EMPLOYEES.
Cattleman's employs approximately 340 full time employees, consisting
mostly of hourly wage employees who are represented by the United Food and
Commercial Workers Union of the AFL-CIO. The term of the present labor
contract with its retail employees is scheduled to expire in November 1998.
The contract with its processing division employees was renegotiated in
December 1994 and is scheduled to expire in November 1998. Cattleman's
considers its relations with its employees to be good.
PATENTS, TRADEMARKS AND LICENSES
Cattleman's presently does not own or have any interest in any patents,
trademarks, licenses or franchises.
REGULATORY MATTERS
Cattleman's is subject to various laws and regulations relating to its
facilities, production standards and pollution controls which are administered
by federal, state and other governmental agencies, including the United States
Department of Agriculture (USDA), the Environmental Protection Agency, the
Michigan Department of Natural Resources, the Michigan Department of
Agriculture and the Occupational Safety and Health Administration. The Scott
Street plant is inspected by the USDA on a continuous basis. Cattleman's
believes that it is in compliance with all health, environmental and other laws
in all material respects and that continued compliance with existing standards
will not have a material effect on its earnings, financial condition or its
competitive position.
COMPETITION
Cattleman's believes that its processing / outlet structure provides it
with a competitive edge with respect, among other things, to product
availability, inventory management, pricing support and elimination of the
middleman. Cattleman's believes this is an important edge in light of the
small margins characterizing the industry.
Cattleman's believes that its beef processing operations fill a niche in
which there are only a few competitors located in Illinois, Michigan, and
Wisconsin. In addition, although Cattleman's suppliers are the largest
slaughtering and beef
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processing companies in the country, Cattleman's believes that they are not in
direct competition because, as previously disclosed, Cattleman's acts more as an
outlet for such suppliers. Cattleman's competes on the basis of its reputation,
product variety, continued quality and service, price and customer base.
There are principally two categories of competitors of Cattleman's retail
outlets: (i) chain supermarkets; and (ii) independent operators. Cattleman's
intends to continue to compete through its unique store design and its discount
pricing structure. Cattleman's believes that these are significant competitive
advantages and will continue to highlight these differences in its newspaper
and radio advertisements.
ITEM 3. LEGAL PROCEEDINGS
From time to time, Cattleman's is a party to legal proceedings arising out
of its general business activities. However, there are no pending legal
proceedings to which Cattleman's is a party, or to which any of its properties
is subject, which, if determined adversely to Cattleman's, would have a
material adverse effect on its consolidated financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
Cattleman's fourth quarter ended April 28, 1996.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
MARKET INFORMATION
The shares of Common Stock of Cattleman's are quoted on the NASDAQ Small
Cap Market under the symbol "CTLO." The range of high and low bid quotations
for each of the quarters for the years ended December 31, 1993, 1994, 1995 and
for the first two quarters of 1996 are provided below. (Prior to November,
1993, the shares of Common Stock of Cattleman's were traded on the National
Daily Quotation Sheets, the "Pink Sheets.") The quotations reflect
inter-dealer prices without retail markup, markdown or commissions and may not
represent actual transactions. In addition, the quotations should not be
deemed to reflect an established public trading market. The shares of Common
Stock are thinly traded.
<TABLE>
<CAPTION>
QUARTERS ENDING HIGH LOW
--------------- ------ -----
<S> <C> <C>
March 31, 1993 $2 3/8 $1 5/8
-----------------------------------------------
June 30, 1993 $2 1/2 $1 1/2
-----------------------------------------------
September 30, 1993 $3 3/8 $2 1/4
-----------------------------------------------
December 31, 1993 $5 1/4 $2 1/2
-----------------------------------------------
March 31, 1994 $3 1/8 $2 1/2
-----------------------------------------------
June 30, 1994 $3 $2 1/4
-----------------------------------------------
September 30,1994 $2 1/8 $1 3/4
-----------------------------------------------
December 31, 1994 $1 3/4 $1
-----------------------------------------------
March 31, 1995 $1 1/4 $1
-----------------------------------------------
June 30, 1995 $1 1/4 $1 1/8
-----------------------------------------------
September 30, 1995 $1 3/4 $1 1/4
-----------------------------------------------
December 31, 1995 $1 1/4 $1
-----------------------------------------------
March 31, 1996 $1 7/8 $1 1/4
-----------------------------------------------
June 30, 1996 $1 1/8 $1
-----------------------------------------------
</TABLE>
HOLDERS
At June 30, 1996, there were 290 holders of record of Cattleman's shares
of Common Stock.
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DIVIDENDS
During the last two fiscal years, Cattleman's has not paid any cash or
other dividends on its Common Stock. Pursuant to its loan agreement with
Comerica Bank, Cattleman's may not declare any dividends on its Common Stock.
In addition, the declaration by Cattleman's, and the amount of any cash
dividends, will depend on circumstances existing at the time, including
Cattleman's earnings, financial condition and capital requirements, the cash
available to pay such dividends as well as such other factors as the Board of
Directors may deem relevant. There can be no assurance that any dividends on
Cattleman's Common Stock will be paid in the future.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data shown below has been derived from the consolidated
financial statements of the Company for the years shown.
<TABLE>
<CAPTION>
52/53 WEEKS ENDED (1) APRIL 28, APRIL 30, APRIL 30, APRIL 24, APRIL 25,
1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales $125,279,271 $126,342,937 $143,750,874 $134,377,532 $123,818,486
- -------------------------------------------------------------------------------------------------
Cost of Goods Sold 120,109,380 121,838,830 137,781,848 128,049,928 119,449,587
- -------------------------------------------------------------------------------------------------
Selling, General and
Administrative Expenses 4,741,217 4,457,359 5,458,922 4,018,640 3,133,930
- -------------------------------------------------------------------------------------------------
Income from Operations 428,674 46,748 510,104 2,308,964 1,234,969
- -------------------------------------------------------------------------------------------------
Net Income (Loss) (161,159) (353,761) 47,532 1,307,296 499,921
- -------------------------------------------------------------------------------------------------
Net Income (Loss) per
Share (2) (3) (0.05) (0.11) 0.01 0.41 0.16
- -------------------------------------------------------------------------------------------------
Total Assets 18,367,853 18,602,253 19,056,673 14,605,593 14,646,610
- -------------------------------------------------------------------------------------------------
Long-Term Obligations,
Long-Term Debt and
Capital Leases 8,052,479 7,081,786 5,457,762 1,133,564 1,411,660
- -------------------------------------------------------------------------------------------------
Less Current Portion 636,715 623,802 126,960 395,000 366,000
- -------------------------------------------------------------------------------------------------
Long-Term Portion $ 7,415,764 $ 6,457,984 $ 5,330,802 $ 738,564 $ 1,045,660
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has changed its fiscal year end from the last Saturday in April
to the last Sunday in April starting in fiscal 1995.
(2) Due to the reorganization of Cattleman's in fiscal 1992, the calculations
of earnings per share are based on the total number of shares of the common
capital stock of Cattleman's outstanding after the reorganization.
(3) No dividends have been declared during any of the periods indicated. See
"Shareholder Information."
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
GENERAL
Cattleman's, Inc. was originally incorporated in 1972. In 1991, the Company
changed its name from Eastern Market Beef to Cattleman's. Cattleman's is
currently incorporated in the state of Delaware.
The Company sells its beef production throughout the United States, Canada,
Mexico and the Caribbean with some sales to the Far East. The Company sells to
approximately 380 customers, mainly fresh meat distributors, hotel, restaurant
& institutional suppliers and large retailers. No customer or group of
customers account for a disproportionate share of Company sales.
The Company also sells its products through five outlets in the Metropolitan
Detroit area. These sales, which include a complete-line of fresh foods,
accounted for 17.4% of Company sales in fiscal 1996. Outlet sales totaled
16.0% of Cattleman's total sales in fiscal 1995.
FINANCIAL CONDITION
The Company keeps lines of credit in excess of the immediate needs of its
business. Borrowings on the line normally increase during the fall and peak in
December when the premium cuts of meat are inventoried. The line is paid down
during each Spring, the industry's strong selling period.
CASH USED IN OPERATING ACTIVITIES during fiscal 1996 totaled $.7 million. Cash
used in operations occurred primarily due to a net loss ($.2 million), an
increase in inventories ($.4 million), a decrease in accounts payable, accrual
expenses and deferred taxes ($1.1 million) offset by depreciation ($1.0
million).
CASH USED IN INVESTING ACTIVITIES during fiscal 1996 and 1995 totaled $.6
million and $1.7 million respectively. Fiscal 1996 activity resulted primarily
from renovations at our processing plant while 1995 activity resulted primarily
from expenditures on remodeling projects in our retail outlets.
CASH PROVIDED BY FINANCING ACTIVITIES during fiscal 1996 and 1995 totaled $1.0
million and $1.4 million, respectively. In fiscal 1996, long term borrowings
increased $1.0 million, used primarily for capital expenditures, inventory
purchases and accounts payable reduction.
OTHER In 1995, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 121, Accounting for the Impairment of
Long-Lived Assets and for Assets to be Disposed of, which requires impairment
losses to be recorded on long-lived assets used in operations when indicators
of impairment are present. Statement 121 also addresses the accounting for
assets that are expected to be disposed of. The Company will adopt Statement
121 in fiscal year 1997 and does not believe that the effect of adoption will
be material.
Also in 1995, FASB issued Statement No. 123, Accounting for Stock-Based
Compensation, which introduces a fair-value based method of accounting for
stock-based compensation. Under the standard, companies may choose to continue
to apply the existing accounting rules contained in Accounting Principles Board
Opinion No. 25, while adopting the disclosure provisions of Statement 123. The
Company will adopt Statement 123 in fiscal year 1997 and plans to continue to
apply the existing accounting rules contained in Accounting Principles Board
Opinion No. 25.
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RESULTS OF OPERATIONS
COMPARISON OF FISCAL 1996 TO FISCAL 1995
SALES for fiscal year ending April 28, 1996 were $125.3 million compared to
fiscal year ending April 30, 1995 sales of $126.3 million. Sales decreased
slightly due to lower average selling prices for boxed beef.
Gross tonnage of product sold increased approximately 6.0%. Outlet sales
increased 8.3%. Outlet sales represented 17.4% of total sales in fiscal 1996
compared to 16.0% for the fiscal 1995.
COST OF GOODS SOLD for fiscal 1996 was $120.1 million compared to $121.8
million for fiscal 1995, a decrease of $1.7 million. Costs as a percent of
sales in our processing operations remained flat while margins in our retail
outlets improved by approximately one percent.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) for fiscal 1996 and fiscal
1995 were $4.7 million and $4.5 million, respectively. As a percent of sales,
SG&A totaled 3.8% for fiscal 1996 and 3.6% for fiscal 1995. The increase of
$200,000, or 4.4%, resulted primarily from increased payroll and payroll
related costs, one-time expenses associated with terminating a lease agreement
for a future, additional retail outlet plus the cost of consulting services
related to our retail operations.
NET INTEREST EXPENSE increased $143,000 to $624,000 during fiscal 1996 compared
with fiscal 1995. The increase resulted from greater utilization of the
revolving line-of-credit on average throughout the period, plus higher average
interest rates in fiscal 1996.
NET LOSS for fiscal 1996 was $160,000 compared to $350,000 for fiscal 1995 due,
primarily, to improved performance in our retail outlets.
COMPARISON OF FISCAL 1995 TO FISCAL 1994
SALES for fiscal year ending April 30, 1995 were $126.3 million compared to
fiscal year ending April 30, 1994 sales of $143.8 million. Sales decreased
$17.5 million or 12.2% in fiscal 1995 versus the comparable 1994 period. The
sales decrease resulted primarily from a 7.1% decrease in the wholesale selling
price plus a 9.6% decrease in gross tonnage sold.
The gross tonnage decline was due to a management decision to reduce production
in order to maintain acceptable margin levels. Outlet sales increased 30.3%.
Revenues were generated by five locations versus three in the prior year.
Although outlet sales represented 16.0% of total sales in fiscal 1995 compared
to 11.7% for the fiscal 1994, results were below management's expectations.
COST OF GOODS SOLD for fiscal 1995 was $121.8 million compared to $137.8
million for fiscal 1994, a decrease of $16.0 million. This represents a
decrease of 11.7% compared to the 12.2% sales decrease for the same period.
Costs as a percent of sales increased by .6% primarily from lower than expected
margins at the outlets. Prices were discounted to bring customers back into
the outlets after negative media coverage. Retail margins were significantly
less than management's expectations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (SG&A) for fiscal 1995 and fiscal
1994 were $4.5 million and $5.5 million, respectively. As a percent of sales,
SG&A totaled 3.6% for fiscal 1995 and 3.8% for fiscal 1994. The decrease of
$1.0 million, or 18.2%, resulted primarily from one-time costs incurred in
fiscal year 1994 related to acquiring Oak Farms, registering with the
Securities and Exchange Commission and obtaining new financing. Also, payroll
costs were lower in fiscal 1995.
NET INTEREST EXPENSE increased $126,000 to $481,000 during fiscal 1995 compared
with fiscal 1994. The increase resulted from greater utilization of the
revolving line-of-credit on average throughout the period, additional long-term
debt, plus higher average interest rates in fiscal 1995.
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NET LOSS for fiscal 1995 was $350,000 compared to net income of $48,000 for
fiscal 1994 due to lower sales levels, higher borrowing costs and poor
performance in our retail outlets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of the independent accountants and the consolidated financial
statements and schedule thereto follow the disclosure under "Item 14.
Exhibits, Financial Statement Schedule and Reports on Form 8-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to directors and executive officers of the
Registrant is included in the definitive Information Statement in the section
subtitled "Election of Directors," which is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information regarding executive compensation is included in the
definitive Information Statement in the section subtitled "Executive
Compensation," which is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information with respect to the security ownership of certain
beneficial owners and management is included in the definitive Information
Statement in the section subtitled "Principal Shareholders," which is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information regarding certain relationships and related transactions
is included in the definitive Information Statement in the section subtitled
"Indebtedness of Management," which is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
PAGE
----
(a) (1) FINANCIAL STATEMENTS:
Report of Independent Accountants....................................... F-1
Consolidated Balance Sheet At April 28, 1996 and April 30, 1995......... F-2
Consolidated Statement of Operations for the Years Ended
April 28, 1996, April 30, 1995 and April 30, 1994................. F-3
Consolidated Statement of Stockholders' Equity for the Years
Ended April 28, 1996, April 30, 1995 and April 30, 199............ F-3
Consolidated Statement of Cash Flows for the Years Ended
April 28, 1996, April 30, 1995 and April 30, 1994................. F-4
Notes to Consolidated Financial Statements.............................. F-5
(a) (2) FINANCIAL STATEMENT SCHEDULE:
Schedule II - Consolidated Schedule of Valuation and Qualifying Accounts
for the Years Ended April 28,1996 and April 30, 1995............. F-11
(a) (3) EXHIBITS
EXHIBIT NUMBER DOCUMENT
(2) (i) Agreement and Plan of Reorganization*...............................
(2) (ii) Certificate of Ownership and Merger*................................
(3) (i) Certificate of Incorporation*.......................................
(3) (ii) Bylaws*.............................................................
(3) (iii) Amendment to Bylaws***..............................................
(3) (iv) Amendment to the Certificate of Incorporation****...................
(4) Specimen of Common Stock Certificate*...............................
(10) (i) Lease of Taylor Outlet*.............................................
(10) (ii) Loan Agreement - Comerica Bank***...................................
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<PAGE> 16
(a) (3) EXHIBITS
EXHIBIT NUMBER DOCUMENT
(10) (iii) Lease of Oak Park Outlet**..........................................
(10) (iv) Lease of Farmington Outlet**........................................
(10) (v) Lease of Roseville Outlet**.........................................
(10) (vi) Amendment to Oak Park Lease***......................................
(10) (vii) Employment Agreement - Matthew Martin***............................
(10) (viii) Non-competition and Non-disclosure Agreement - Matthew Martin***....
(10) (ix) Employment Agreement - Timothy Collins*** .........................
(10) (x) Non-competition and Non-disclosure Agreement - Timothy Collins***...
(10) (xi) Incentive Stock Option Plan***......................................
(10) (xii) Executive Incentive Stock Option Plan*** ..........................
________________________________________________________________________________
* Incorporated by reference to the original filing on Form 10 on August 13,
1993
** Incorporated by reference to Amendment No. 1 to Form 10 on October 12,
1993
*** Incorporated by reference to the Annual Report on Form 10K for the fiscal
year ended April 30, 1994 filed on July 29, 1994
**** Incorporated by reference to the Annual Report on Form 10K for the fiscal
year ended April 30, 1995 filed on July 28, 1995
(b) REPORTS ON FORM 8-K
None
(c) EXHIBITS
See (a) (3) above
(d) FINANCIAL STATEMENT SCHEDULE
See (a) (2) above
Page 16
<PAGE> 17
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Cattleman's, Inc.:
We have audited the consolidated financial statements and the financial
statement schedule of Cattleman's, Inc. and subsidiary listed in the index on
page 15 of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 Cattleman's, Inc.
and subsidiary as of April 28, 1996 and April 30, 1995 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended April 28, 1996 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic financial
statements taken as a whole, presents fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND L.L.P.
Detroit, Michigan
June 23, 1996 (except for the fourth paragraph of note 6, as to which the date
is July 18, 1996)
F-1
<PAGE> 18
FINANCIAL REPORTS
CATTLEMAN'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
April 28, April 30,
ASSETS 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash (note 6) $ 737,658 $ 1,147,835
Account receivable
less allowance for doubtful accounts of $150,000 in 1996 and $175,000 in 1995 4,700,314 4,694,687
Inventories (note 2) 4,999,966 4,587,157
Prepaid expenses 579,558 466,174
Income tax refundable 333,549 261,069
Deferred income tax (note 7) 113,000 216,000
- ---------------------------------------------------------------------------------------------------------------------
11,464,045 11,372,922
- ---------------------------------------------------------------------------------------------------------------------
Property, plant and equipment: (note 2)
Land 147,166 138,321
Buildings and improvements 5,288,205 5,013,814
Equipment 5,436,474 5,129,736
Vehicles 166,244 161,807
- ---------------------------------------------------------------------------------------------------------------------
11,038,089 10,443,678
Less accumulated depreciation 4,984,191 4,022,887
- ---------------------------------------------------------------------------------------------------------------------
Net property, plant and equipment 6,053,898 6,420,791
- --------------------------------------------------------------------------------------------------------------------
Other Assets:
Goodwill (note 2) 329,399 374,666
Loans receivable, officers (note 3) 294,554 267,470
Other 225,957 166,404
- ---------------------------------------------------------------------------------------------------------------------
$18,367,853 $18,602,253
=====================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current portion of long-term debt (note 6) $ 636,715 $ 623,802
Accounts payable (note 6) 4,219,886 4,753,037
Accrued expenses and other current liabilities 876,003 1,187,336
- ---------------------------------------------------------------------------------------------------------------------
5,732,604 6,564,175
- ---------------------------------------------------------------------------------------------------------------------
Long-term debt (note 6) 7,415,764 6,457,984
Deferred income tax (note 7) 181,000 384,000
- ---------------------------------------------------------------------------------------------------------------------
Total Liabilities 13,329,368 13,406,159
- ---------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock (note 5, 8)
$.001 par value; authorized, 4,500,000 shares; issued and outstanding:
3,289,983 shares in 1996 and 3,279,583 shares in 1995 3,292 3,280
Capital in excess of par value 791,036 787,498
Retained earnings 4,244,157 4,405,316
- ---------------------------------------------------------------------------------------------------------------------
5,038,485 5,196,094
- ---------------------------------------------------------------------------------------------------------------------
$18,367,853 $18,602,253
=====================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE> 19
FINANCIAL REPORTS
CATTLEMAN'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED APRIL, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
April 28, April 30, April 30,
1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES $125,279,271 $126,342,937 $143,750,874
Cost of goods sold, including plant and distribution 120,109,380 121,838,830 137,781,848
Selling, general and administrative 4,741,217 4,457,359 5,458,922
- ---------------------------------------------------------------------------------------------------------------------------
124,850,597 126,296,189 143,240,770
===========================================================================================================================
Income from operations 428,674 46,748 510,104
Interest expense, net 623,833 480,509 354,572
- ---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAX $ (195,159) $ (433,761) $ 155,532
===========================================================================================================================
INCOME TAX (BENEFIT):
- ---------------------------------------------------------------------------------------------------------------------------
Current 66,000 (189,000) 204,000
Deferred (100,000) 109,000 (96,000)
- ---------------------------------------------------------------------------------------------------------------------------
$ (34,000) ($80,000) $ 108,000
===========================================================================================================================
NET INCOME (LOSS) $ (161,159) $ (353,761) $ 47,532
===========================================================================================================================
EARNINGS (LOSS) PER SHARE OF COMMON STOCK ($0.05) $ (0 .11) $ 0.01
===========================================================================================================================
</TABLE>
CATTLEMAN'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
CAPITAL IN TOTAL
COMMON STOCK EXCESS OF RETAINED STOCKHOLDERS'
SHARES AMOUNT PAR VALUE EARNINGS EQUITY
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 25, 1993 3,177,583 $3,178 $521,290 $4,711,545 $5,236,013
Issuance of common stock 90,000 90 258,660 258,750
Fiscal Year 1994 Net Income 47,532 47,532
===========================================================================================================================
BALANCE, APRIL 30, 1994 3,267,583 $3,268 $779,950 $4,759,077 $5,542,295
Issuance of common stock 12,000 12 7,548 7,560
Fiscal Year 1995 Net Loss (353,761) (353,761)
===========================================================================================================================
BALANCE, APRIL 30, 1995 3,279,583 3,280 787,498 4,405,316 5,196,094
Issuance of common stock 12,000 12 6,738 6,750
Purchase and retirement of common stock (1,600) (3,200) (3,200)
Fiscal Year 1996 Net Loss (161,159) (161,159)
===========================================================================================================================
===========================================================================================================================
BALANCE, APRIL 28, 1996 3,289,983 3,292 791,036 4,244,157 5,038,485
===========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 20
FINANCIAL REPORTS
CATTLEMAN'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED APRIL, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
April 28, April 30, April 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income (Loss) $ (161,159) $ (353,761) $ 47,532
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 1,006,571 849,332 614,458
Deferred income taxes (100,000) 109,000 (96,000)
Loss on disposal of property, plant and equipment - - 209,093
Stock issued as compensation 3,550 7,560 -
Changes in operating assets and liabilities:
Accounts receivable (5,627) 1,495,098 81,494
Inventories (412,809) 480,282 (1,436,258)
Prepaid expenses (113,384) (13,180) 264
Accounts payable (533,151) (1,686,779) 2,135,357
Accrued expenses and other current liabilities (311,333) (180,464) 410,061
Income taxes (72,480) (179,069) (458,000)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ (699,822) $ 528,019 $ 1,508,001
===================================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------------------------------
Decrease (increase) in loans to officers (27,084) 8,172 (275,642)
Purchase of property, plant and equipment (594,411) (1,680,556) (2,508,414)
Increase in other assets (59,553) (42,830) (45,514)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES $ (681,048) $(1,715,214) $(2,829,570)
===================================================================================================================================
CASH FLOWS FROM FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------------------------------
Net borrowings (payments) on revolving line of credit, bank 1,548,902 (150,508) 1,909,939
Borrowings on long-term debt 50,031 2,413,272 -
Payments on long-term debt (628,240) (876,820) (536,436)
- -----------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES $ 970,693 $ 1,385,944 $ 1,373,503
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash (410,177) 198,749 51,934
Cash, beginning of year 1,147,835 949,086 897,152
- -----------------------------------------------------------------------------------------------------------------------------------
CASH, END OF YEAR $ 737,658 $ 1,147,835 $ 949,086
===================================================================================================================================
SUPPLEMENTAL INFORMATION:
- -----------------------------------------------------------------------------------------------------------------------------------
Interest paid $ 647,433 $ 487,283 $ 348,260
- -----------------------------------------------------------------------------------------------------------------------------------
Income taxes paid 210,000 - 661,000
- -----------------------------------------------------------------------------------------------------------------------------------
NONCASH INVESTING AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term debt incurred for purchase of property, plant and equipment $ 50,031 $ 238,080 -
===================================================================================================================================
IN CONJUNCTION WITH THE ACQUISITION OF OAK FARMS,
LIABILITIES WERE ASSUMED AS FOLLOWS:
- -----------------------------------------------------------------------------------------------------------------------------------
Fair value of assets acquired - - $ 774,763
Common stock issued - - 258,750
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES ASSUMED - - $ 516,013
===================================================================================================================================
</TABLE>
F-4
<PAGE> 21
NOTES
1. BUSINESS OPERATIONS:
NATURE OF OPERATIONS
The Company converts beef carcasses into boxed beef and operates fresh food
retail outlets in the metropolitan area of Detroit, Michigan. Beef
production is sold throughout the United States, Canada, Mexico and the
Caribbean with some sales to the Far East. The Company purchases its beef
primarily from the three of the largest slaughtering companies in the
country: Iowa Beef Processors, Monfort and Excel.
The Company sells the majority of its beef production to restaurant &
institutional suppliers, fresh meat distributors, hotels and restaurants
and through its five retail outlets.
FISCAL YEAR
The Company's fiscal year end is the last Sunday in April. Fiscal years
ended April 28, 1996 and April 30, 1995 consisted of 52 weeks. The fiscal
year ended April 30, 1994 consisted of 53 weeks.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Cattleman's Meat Company. All significant
intercompany accounts and transactions have been eliminated.
INVENTORIES
Inventories consist principally of finished goods and are stated at the
lower of cost (first-in, first-out method) or market. Merchandise
inventories are stated at the lower of cost or market, using the retail
method for store inventories.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Capitalized amounts
include expenditures which materially extend the useful lives of existing
property, plant and equipment. Gains or losses from the disposal of
property, plant and equipment are included in the determination of income
for the period and the assets and corresponding accumulated depreciation
are eliminated from the accounts. Maintenance and repair expenditures are
charged to expense when incurred. Depreciation is computed on the
straight-line method over the estimated useful lives of the assets.
GOODWILL
Goodwill represents the excess of cost over the fair value of net assets
acquired and is amortized on a straight-line basis over 15 years.
EARNINGS PER SHARE OF COMMON STOCK
Earnings per share of common stock are based on the weighted average number
of common shares outstanding during each year. The weighted average number
of shares outstanding was 3,286,783, 3,270,583 and 3,267,583 for 1996, 1995
and 1994, respectively. The potential dilution from shares issuable under
the employee stock option plan and warrants granted are excluded from the
computation of weighted average number of common shares outstanding since
they are not material.
F-5
<PAGE> 22
NOTES
2. SIGNIFICANT ACCOUNTING POLICIES: CONTINUED
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of 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.
3. LOANS RECEIVABLE, OFFICERS:
The loans receivable, officers, are due April 30, 1999, including
interest at seven percent. Interest income amounted to approximately
$17,000, $26,000 and $13,000 in 1996, 1995, and 1994, respectively.
4. RETIREMENT PLANS:
The Company maintains two defined contribution pension plans that cover
substantially all hourly employees. Contributions are based on eligible
compensation and hours worked. Pension expense approximated $126,000,
$110,000 and $81,000 in 1996, 1995 and 1994, respectively.
The Company also has a profit-sharing and 401(k) plan in which all salaried
employees are eligible to participate. The plan provides for discretionary
and required contributions by the Company and allows participants to make
pre-tax contributions. Company contributions approximated $33,000,
$38,000, $39,000 in 1996, 1995 and 1994, respectively.
5. STOCK OPTIONS:
In connection with the acquisition of Oak Farms, the Company granted three
key employees options to purchase a total of 150,000 shares of the
Company's common stock at $4.00 per share. The options vest over four
years and expire October 31, 1997. At April 28, 1996, 75,000 options were
vested.
Effective October 1993, the Company adopted an executive incentive stock
option plan, authorizing the Company to grant up to 417,000 shares of the
Company's common stock to key employees. In 1994, the Company granted
options to purchase 417,000 shares at $4.00 per share. The options vest
over five years and expire October 31, 1998. At April 28, 1996, 166,800
options were vested.
6. FINANCING ARRANGEMENTS:
Effective June 23, 1994, the Company entered into an $11,700,000 loan
agreement with a bank. Under the terms of the agreement, the Company may
borrow up to $7,700,000 in revolving credit loans, and $4,000,000 in term
loans.
Borrowings under the revolving credit loan are due June 1, 1997 and bear
interest at one and three-quarters percent above the bank's prime rate
(8.25% at April 28, 1996). Average interest rates for fiscal 1996 and
1995 were 10.3% and 9.7%, respectively.
Borrowings under the term loan are due in equal monthly installments for 60
months and include interest at one and three-quarters percent above the
bank's prime rate. Borrowings are
F-6
<PAGE> 23
NOTES
6. FINANCING ARRANGEMENTS, CONTINUED
collateralized by substantially all of the Company's assets and are limited
by formulas based upon eligible accounts receivable and inventory.
Under the terms of the agreement, the Company is subject to certain
financial and nonfinancial covenants, including a restriction against
paying dividends. At April 28, 1996 the Company was not in compliance with
a certain financial covenant. At the Company's request the lender has
provided a waiver for this covenant and amended it for fiscal 1997.
Long-term debt consists of the following at April 28, 1996 and April 30,
1995:
<TABLE>
<CAPTION>
LONG-TERM DEBT FISCAL YEAR 1996 FISCAL YEAR 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revolving credit loans $6,118,094 $4,569,192
- -------------------------------------------------------------------------------------------------------
Term loan, bank, due in monthly installments of $40,000, plus interest
at 1.75 percent over the bank's prime rate until July 1, 1999 1,560,000 2,040,000
- -------------------------------------------------------------------------------------------------------
Equipment note payable, due in monthly installments of $5,000, no
stated interest (interest imputed at 9.5 percent), until
October 14, 2000, collateralized by a cogeneration system 219,015 238,080
- -------------------------------------------------------------------------------------------------------
Capitalized lease obligations, due in monthly installments, including
interest at various rates from 9.9 to 12.3 percent, until February 1,
1998, collateralized by equipment 100,211 203,194
- -------------------------------------------------------------------------------------------------------
Notes payable, due in monthly installments, including interest at
various interest rates from 7.8 to 10.5 percent, until February 29,
2000, collateralized by vehicles 55,159 31,320
- -------------------------------------------------------------------------------------------------------
Total Long-term Debt $8,052,479 $7,081,786
- -------------------------------------------------------------------------------------------------------
Less current portion 636,715 623,802
- -------------------------------------------------------------------------------------------------------
LONG-TERM PORTION $7,415,764 $6,457,984
- -------------------------------------------------------------------------------------------------------
</TABLE>
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of debt
approximates its carrying value.
The annual maturities of long-term debt during the next five years
(excluding the capital lease obligations) are as follows:
FISCAL YEAR ANNUAL MATURITIES
----------- -----------------
1997 $ 539,666
----------- -----------------
1998 $6,658,169
----------- -----------------
1999 $ 544,874
----------- -----------------
2000 $ 180,547
----------- -----------------
2001 $ 29,195
----------- -----------------
F-7
<PAGE> 24
6. FINANCING ARRANGEMENTS, CONTINUED:
Outstanding letters of credit amounted to $1,050,000 at April 28, 1996.
The Company's banking arrangement provides that substantially all of its
cash receipts are wire transferred on a daily basis to the bank as payment
against the revolving credit facility. Disbursements are funded on a daily
basis by borrowing against the revolving credit facility. Accounts
payable, as reflected on the consolidated balance sheet, includes
disbursements to be funded by transfers from the bank, in accordance with
the banking arrangement. This amounted to $800,000 at April 28, 1996 and
$1,800,000 at April 30, 1995, respectively. Substantially all cash, as
reflected on the consolidated balance sheet, will be applied to the
outstanding balance on the revolving credit facility in the following week.
The equipment note payable was issued in connection with the purchase of
certain equipment. Under the terms of the purchase, the Company has
reserved 250,000 shares of its common stock which the vendor may acquire
for nominal consideration in the event the Company defaults on the
equipment note payable.
Property under capital leases, included in property, plant and equipment,
consists of the following at April 28, 1996 and April 30, 1995:
PROPERTY UNDER CAPITAL LEASE 1996 1995
----------------------------------------------------------------
Equipment $461,165 $461,165
----------------------------------------------------------------
Less accumulated depreciation 192,047 144,502
----------------------------------------------------------------
TOTAL PROPERTY UNDER CAPITAL LEASE $269,118 $316,663
----------------------------------------------------------------
Future minimum rents for property under capital leases are as follows:
PROPERTY RENT UNDER CAPITAL LEASE
----------------------------------------------------------------
1997 100,716
----------------------------------------------------------------
1998 4,640
----------------------------------------------------------------
Total minimum lease obligation $105,356
----------------------------------------------------------------
Less amount representing interest 5,328
----------------------------------------------------------------
PRESENT VALUE OF TOTAL MINIMUM LEASE OBLIGATIONS $100,028
----------------------------------------------------------------
F-8
<PAGE> 25
NOTES
7. INCOME TAXES:
Deferred income taxes, on an SFAS No. 109 basis, reflect the estimated
future tax effect of temporary differences between the basis of assets and
liabilities for financial reporting purposes and such basis as measured by
tax laws and regulations. The components of deferred income tax assets and
liabilities as of April 28, 1996 and April 30, 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------- ----------------------------- -----------------------------
DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX DEFERRED TAX
DEFERRED INCOME TAX ASSETS LIABILITIES ASSETS LIABILITIES ASSETS LIABILITIES
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Depreciation $226,000 $297,000 $271,000
- -----------------------------------------------------------------------------------------------------------------------------
Prepaid bonuses 54,000 79,000
- -----------------------------------------------------------------------------------------------------------------------------
Vacation expense 65,000 66,000 66,000
- -----------------------------------------------------------------------------------------------------------------------------
Bad Debts 51,000 68,000 51,000
- -----------------------------------------------------------------------------------------------------------------------------
Medical expenses 34,000 42,000 34,000
- -----------------------------------------------------------------------------------------------------------------------------
Other 62,000 32,000 61,000
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL DEFERRED TAXES $212,000 $280,000 $208,000 $376,000 $212,000 $376,000
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Major differences between the income tax expense at the federal statutory
rate of 34 percent and the Company's provision for taxes on income are as
follows:
<TABLE>
<CAPTION>
TAX DIFFERENCES APRIL 28, 1996 APRIL 30, 1995 APRIL 30, 1994
----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory rate ($61,000) $ (146,000) $ 53,000
----------------------------------------------------------------------------------------------
Officers' life insurance expense 3,000 20,000 18,000
----------------------------------------------------------------------------------------------
Meals and entertainment 15,000 16,000 9,000
----------------------------------------------------------------------------------------------
Amortization of goodwill 9,000 9,000 4,000
----------------------------------------------------------------------------------------------
Other 0 21,000 24,000
----------------------------------------------------------------------------------------------
PROVISION (BENEFIT) FOR TAXES ON
INCOME ($34,000) $($80,000) $108,000
----------------------------------------------------------------------------------------------
</TABLE>
F-9
<PAGE> 26
8. COMMITMENTS:
The Company is obligated under noncancelable operating leases through
November 30, 2004. The lease agreements include payment of real property
tax as well as operating expenses. Approximate annual minimum future
lease payments are as follows:
MINIMUM FUTURE LEASE PAYMENTS
--------------------------------------
1997 319,000
--------------------------------------
1998 340,000
--------------------------------------
1999 357,000
--------------------------------------
2000 342,000
-------------------------------------
2001 308,000
--------------------------------------
Thereafter 765,000
--------------------------------------
TOTAL $2,431,000
--------------------------------------
Rent expense amounted to approximately $391,000, $395,000 and $237,000
during 1996, 1995 and 1994, respectively.
During fiscal 1994, the Company entered into noncompetition agreements with
three individuals. Under the terms of the agreements, the Company will
issue a total of 12,000 shares of its common stock each year through fiscal
1999. Accordingly, 12,000 shares of the company's common stock were issued
in fiscal 1996; 36,000 shares remain in an escrow account for these
individuals at April 28, 1996.
9. BUSINESS COMBINATIONS:
Effective August 30, 1993, the Company acquired substantially all the
assets of Oak Farms Fruit Market, Inc. and Oak Farms Market -
Farmington, Inc. (collectively "Oak Farms") in exchange for 90,000 shares
of the Company's common stock. In connection with the acquisition of Oak
Farms, the Company granted warrants to a financial institution to purchase
up to 35,226 shares of the Company's common stock at approximately $2.92
per share. The warrants expire August 30, 2003.
10. CONTINGENCIES:
The Company may from time to time, be involved in routine litigation and
various legal efforts incidental to the normal operations of its business.
In management's opinion, none of these matters presently will result in a
material liability.
F-10
<PAGE> 27
CATTLEMAN'S
Schedule II
Consolidated Schedule of Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Balance at Balance at
Beginning End of
For the year ended Description of Period Additions Deductions Period
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
April 28, 1996 Allowance for Doubtful
Accounts Receivable $175,000 $96,401 $121,401 $150,000
-----------------------------------------------------------------------------------
April 30, 1995 Allowance for Doubtful
Accounts Receivable $150,000 $48,413 $23,413 $175,000
-----------------------------------------------------------------------------------
</TABLE>
F-11
<PAGE> 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CATTLEMAN'S, INC.,
a Delaware corporation
By:/s/ David S. Rohtbart
---------------------------
David S. Rohtbart
Its: President and
Chief Executive Officer
Date: July 26, 1996
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.
/s/ Markus Rohtbart /s/ David S. Rohtbart
--------------------------------------- ------------------------------
(Markus Rohtbart, Chairman of the Board (David S. Rohtbart, President,
and Treasurer) Chief Executive Officer
and Director)
/s/ Steven L. Karas /s/ Samuel Feig
--------------------------------------- ------------------------------
(Steven L. Karas, Director) (Samuel Feig, Director)
/s/ Matthew G. Martin
---------------------------------------
(Matthew G. Martin, Chief Operating and
Financial Officer)
