FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDERPERSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 1997
Commission File Number 2-5916
CHASE GENERAL CORPORATION
(Exact name of registrant as specified in its Charter)
Missouri 36-2667734
State incorporation I.R.S. Employer Identification Number
3600 Leonard Road, St. Joseph, Missouri 64503
(Address of principal executive offices) (Zip Code)
(816) 279-1625
(Registrant's telephone number, including area code)
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,
and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
NumberIndicate the number of shares outstanding of the issuer's Common
Stock:
Class Outstanding at April 30, 1997
Common Stock, $1as of the latest practicable date: 969,834 shares of the
Company's common stock ($1.00 par value 969,834value) were outstanding.
CHASE GENERAL CORPORATION
INDEXIndex
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - March 31,September 30, 1997
(Unaudited) and June 30, 19961997 3
Consolidated Condensed Statements of Operations -
Nine monthsFirst quarter ended March 31, 1997 and 1996
(Unaudited) 4
Consolidated Condensed Statements of Operations -
Three months ended March 31,September 30, 1997 and
1996 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows -
Nine monthsFirst quarter ended March 31,September 30, 1997 and
1996 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 89
Part II - Other Information
Item 3. Defaults Upon Senior Securities 10
Item 6. Exhibits and Reports on Form 8-K 10
PART I.I FINANCIAL INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31,September 30, 1997 and June 30, 1996
March 31,1997
ASSETS
September 30, June 30,
1997 19961997
(Unaudited)
CURRENT ASSETS
Cash $ 309,534 $ 236,31685,266 $141,657
Receivables, net of allowance 68,596 74,754196,109 83,579
Inventories:
Finished goods 29,244 51,204241,091 89,725
Goods in process 4,053 2,02411,921 3,560
Raw materials 127,771 42,18958,720 92,975
Packaging materials 104,482 104,56595,406 115,251
Prepaid expense 27,250 42,6598,614 39,791
Prepaid income taxes 6,918 5,996
Total current assets 670,930 553,711704,045 572,534
PROPERTY AND EQUIPMENT - AT COST 956,313 942,011985,997 985,397
Less accumulated depreciation 703,427 679,768736,288 721,060
Total property and equipment 252,886 262,243249,709 264,337
TOTAL ASSETS $ 923,816 $ 815,954$953,754 $836,871
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1997 1997
(Unaudited)
CURRENT LIABILITIES
Accounts payable $161,995 $ 70,441 $ 46,94359,162
Notes payable, Series B,
current maturities 9,676 9,6766,294 6,294
Accrued expense 28,693 41,456
Estimated liability for
income taxes 31,892 -expenses 56,435 38,683
Total current liabilities 140,702 98,075224,724 104,139
LONG-TERM LIABILITIES
Notes payable, Series B,
204,277 242,980less current maturities
above 207,659 207,659
Total liabilities 344,979 341,055432,383 311,798
STOCKHOLDERS' EQUITY
Capital stock 3,331,274 3,331,274issued and outstanding:
Prior cumulative preferred
stock, $5 par value:
Series A (liquidation
preference $1,162,500
and $1,155,000
respectively) 500,000 500,000
Series B (liquidation
preference $1,117,500
and $1,110,000
respectively) 500,000 500,000
Cumulative preferred
stock, $20 par value:
Series A (liquidation
preference $2,809,584
and $2,794,951
respectively) 1,170,660 1,170,660
Series B (liquidation
preference $457,872 and
$455,487 respectively) 190,780 190,780
Common stock, $1 par value 969,834 969,834
Paid-in capital in excess
of par 3,134,722 3,134,722
Retained earnings (deficit) (5,887,159) (5,991,097)(5,944,625) (5,940,923)
Total stockholders' equity 578,837 474,899521,371 525,073
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 923,816953,754 $ 815,954836,871
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months(UNAUDITED)
First Quarter Ended
March 31September 30
1997 1996
NET SALES $2,054,847 $1,992,396$477,152 $532,263
COST OF SALES 1,531,856 1,514,911366,662 400,395
Gross profit on sales 522,991 477,485110,490 131,868
OPERATING EXPENSES
Selling expense 243,333 241,70268,153 59,798
General and administrative expense 119,489 124,15844,789 36,853
Total operating expenses 362,822 365,860
Net income112,942 96,651
Income (loss) from operations 160,169 111,625(2,452) 35,217
OTHER INCOME (EXPENSE) (9,009) (8,936)
Net income(2,172) (2,944)
Income (loss) before income taxes 151,160 102,689(4,624) 32,273
PROVISION (CREDIT) FOR INCOME TAXES 47,222 26,963(922) 6,435
NET INCOME (LOSS) $ 103,938 $ 75,726
EARNINGS (LOSS) PER SHARE $ .01 $ (.02)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31
1997 1996
NET SALES $ 258,894 $ 282,300
COST OF SALES 253,526 305,900
Gross profit (loss) on sales 5,368 (23,600)
OPERATING EXPENSES
Selling expense 43,525 57,412
General and administrative expense 41,556 46,188
Total operating expenses 85,081 103,600
Net loss from operations (79,713) (127,200)
OTHER INCOME (EXPENSE) (2,812) (2,394)
Net loss before income taxes (82,525) (129,594)
PROVISION FOR INCOME TAXES (REFUND) (34,748) (54,418)
NET LOSS $ (47,777) $ (75,176)(3,702) $25,838
LOSS PER SHARE $ (.08)(.04) $ (.11)(.01)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months(UNAUDITED)
First Quarter Ended
March 31September 30
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $103,938(loss) for the quarter $ 75,726(3,702) $ 25,838
Adjustments to reconcile net
income to net cash provided byused in
operating activities:
Depreciation and amortization 39,658 42,40515,228 12,660
Provision for bad debts 4,815 7,200doubtful accounts 1,605 1,605
Effects of changes in
operating assets and liabilities:
Accounts receivables 1,343 (23,920)receivable (114,135) (169,902)
Inventory (105,627) (199,163)
Prepaid expenses 30,255 33,603
Accounts payable 23,498 (20,800)
Inventories (65,568) (15,973)
Prepaid expenses 15,409 17,242102,833 181,374
Accrued expense (12,763) (21,323)
Estimated liability for income
taxes 31,892 13,931liabilities 17,752 14,577
Net cash provided byused in operating
activities 142,222 74,488(55,791) (99,408)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and
equipment (30,301) (91,721)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (38,703) (35,146)(600) (7,557)
NET INCREASE (DECREASE)DECREASE IN CASH 73,218 (52,379)(56,391) (106,965)
CASH, BEGINNING OF PERIODQUARTER 141,657 236,316 300,570
CASH, END OF PERIOD $309,534 $248,191
SUPPLEMENTAL DISCLOSURES
Interest paidQUARTER $ 16,214 $ 17,718
Income taxes paid $ 17,494 $ 13,03285,266 $129,351
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated condensed financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. Interim results are not necessarily indicative of
results for a full year.
A summary of the company's significant accounting policies is
presented on page 8 (not shown) of its 1997 Annual Report to
Shareholders. Users of financial information produced for
interim periods are encouraged to refer to the footnotes
contained in the Annual Report to Shareholders when reviewing
interim financial results. There has been no material change in
the accounting policies followed by the Company during the
quarter ended September 30, 1997.
In the opinion of management, the accompanying unaudited and
auditedinterim
consolidated condensed financial statements contain all
adjustments necessary to present fairly Chase General
Corporation's financial position as of March 31,September 30, 1997 and
June 30, 1996,1997 and the results of its operations for the nine months and
three months ended March 31, 1997 and 1996, and its cash
flows for the nine monthsfirst quarter ended March 31,September 30, 1997 and 1996.
While the Company believes that the disclosures presented are
adequate to make the information not misleading, it is suggested
that these consolidated condensed financial statements be read in
conjunction with the financial statements and the notes included
in the Company's annual report for June 30, 1996, Form 10-K. All
adjustments made during the period ended March 31, 1997 were of a
normal recurring nature.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - EARNINGS (LOSS)LOSS PER SHARE
The earnings (loss)Loss per share was computed on the weighted average of
outstanding common shares during the years as follows:
Nine MonthsFirst Quarter Ended
Three Months Ended
March 31 March 31
1997 1996September 30
1997 1996
Net income (loss) $103,938 $ 75,726(3,702) $ (47,777) $ (75,176)25,838
Preferred dividend requirements:
6% Prior Cumulative Preferred,
$5 par value 45,000 45,000 15,000 15,000
5% Convertible Cumulative
Preferred, $20 par value 51,054 51,054 17,018 17,018
Total dividend requirements 96,054 96,054 32,018 32,018
NET INCOME (LOSS) COMMON
STOCKHOLDERSLoss - common shareholders $ 7,884(35,720) $ (20,328) $ (79,795) $(107,194)
WEIGHTED AVERAGE OF
OUTSTANDING COMMON
SHARES(6,180)
Weighted average of outstanding
common shares 969,834 969,834
969,834 969,834
EARNINGS (LOSS) PER
SHARELoss per share $ .01(.04) $ (.02) $ (.08) $ (.11)(.01)
No computation was made on common stock equivalents outstanding
because earnings (loss)loss per share would be anti-dilutive.
ITEM 2
CHASE GENERAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Chase General and its wholly-owned subsidiary are engaged in the
manufacture of confectionery products which are sold primarily to
wholesale houses, grocery accounts, vendors, and repackers.
RESULTS OF OPERATIONS
First Quarter ended September 30, 1997 and 1996
Sales - The Company had no unusual transactions for the first
quarter ended September 30, 1997. The Company realized a gross
profit percentage of 23.16% and 24.77% for the first quarter
ended September 30, 1997 and 1996, respectively. Consolidated
net sales for the quarter ended September 30, 1997, of $477,152
were 10% under the $532,263 in 1996's first quarter. No major
customer was lost during this period. However, due to a dispute
on delivery from a year ago, a customer whose sales were $25,000
last year was not given the opportunity to reorder this year. In
addition, another customer overbought candy a year ago and 28% of
the order was returned in a subsequent period. This year their
order reflected the reduced quantity.
Expenses - Selling, general and administrative were 23.67% of
sales in the quarter ended September 30 1997 compared to 18.16%
in the first quarter of 1996. The percentage increase in 1997
resulted primarily from increase in office wages, professional
fees and commissions.
Inventories and accounts payable are higher than at June 30, 1997
since the Company is entering their busy cycle of the year.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31,September 30, 1997, the Company has a $12,940 commitmentno commitments for
capitalized expenditures. Cash increased $73,218 during the
current nine month period. Working capital increased
approximately $75,000amounted to $479,000 at
September 30, 1997 versus $468,000 at June 30, 1997. Cash
decreased $56,391 as a result of a profitable busy season.an increase in inventories
caused by the seasonal build-up.
The officers of the CorporationCompany and legal counsel continue to discuss
liquidity and capital resource options to resolve the $5 million
cumulative preferred stock dividends in arrears.
RESULTS OF OPERATIONS
Nine Months ended March 31, 1997
The Company had no unusual transactions for the nine months ended
March 31, 1997. The Company realized a gross profit percentage
of 25.45% and 23.97% for the nine months ended March 31, 1997 and
1996, respectively. The gross profit increased as a result of
improved labor costs. Net sales increased 3.13% over the same
period a year ago as a result of more regional sales activity.
Selling expenses are $1,600 higher than the same period a year
ago. General and administrative expenses are $4,700 lower than
same period a year ago as a result of monitoring fixed overhead
costs and not outsourcing proxy costs. Interest expense
continues to decrease from reduced debt outstanding.
Inventories at March 31, 1997 are $66,000 higher than at June 30,
1996 as a result of anticipated orders for spring product lines
and taking advantage of price savings on raw materials.
(Continued)
ITEM 2
CHASE GENERAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Three months ended March 31, 1997
Net sales decreased $23,000 over the same period a year ago.
However gross profit was a positive 2.07% as compared to a
negative 8.36% for the same period ended a year ago. This three
month period is normally the Company's slowest season. Sales are
usually weak and plant maintenance is performed in anticipation
of the next six months increased activity.
Selling expense decreased $14,000 over the same period a year ago
from reducing promotion and advertising costs. General and
administrative expense also decreased by $4,600 over the same
period a year ago as a result of monitoring fixed overhead.
Accounts payable are $23,500 higher than at June 30, 1996 as a
result of increased inventory on hand at March 31, 1997.
PART II.II OTHER INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEMItem 3. DEFAULTS UPON SENIOR SECURITIES
a. None
b. The total cumulative preferred stock dividends in
arrears at March 31,September 30, 1997 is $5,483,420.
ITEM$5,547,456.
Item 6. EXHIBITS AND REPORTS ON FORM 8.K.
a. Exhibits - None
b. Reports on Form 8-K: There were no reports on Form 8-K
filed by the Company during the quarter
ended March 31,July, August, September, 1997.
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.
CHASE GENERAL CORPORATION
Registrant
May 12,December 1, 1997 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial
Officer