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, 1998
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
NumberAs of November 1, 1998 indicate the number of shares outstanding
of the issuer's Common Stock, as of the latest practicable date:
969,834 shares of the Company's common stock ($1.00 par value)
were outstanding.
CHASE GENERAL CORPORATION
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - March 31,September 30, 1998
(Unaudited) and June 30, 1997 31998. . . . . . . . . . . . .3
Consolidated Condensed Statements of Operations -
Nine monthsFirst quarter ended March 31,September 30, 1998 and 1997
(Unaudited) 5
Consolidated Condensed Statements of Operations -
Three months ended March 31, 1998 and 1997
(Unaudited) 6. . . . . . . . . . . . . . . . . . . . . .5
Consolidated Condensed Statements of Cash Flows -
Nine monthsFirst quarter ended March 31,September 30, 1998 and 1997
(Unaudited) 7. . . . . . . . . . . . . . . . . . . . . .6
Notes to Consolidated Condensed Financial Statements 8Statements. . . .7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART. . . . . . .9
Part II - OTHER INFORMATIONOther Information
Item 3. Defaults Upon Senior Securities 12Securities. . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K 12. . . . . . . . 10
PART I.I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31,SEPTEMBER 30, 1998 and June 30, 1997
MARCH 31,AND JUNE 30, 1998
1997
(UNAUDITED)ASSETS
September 30, June 30,
1998 1998
(Unaudited)
CURRENT ASSETS
Cash $249,299 $141,657
Receivables,$ 70,368 $ 161,093
Trade receivables, net of allowance 78,793 83,579163,838 94,514
Income tax receivable 26,096 24,710
Inventories:
Finished goods 39,520 89,725207,034 47,397
Goods in process 9,509 3,56017,745 3,633
Raw materials 78,464 92,975107,127 81,377
Packaging materials 77,884 115,25192,523 79,006
Prepaid expense 20,728 39,7918,297 35,549
Prepaid income taxes 4,404 5,9961,000 1,000
Total current assets 558,601 572,534694,028 528,279
PROPERTY AND EQUIPMENT - AT COST 1,003,814 985,3971,023,189 1,016,799
Less accumulated depreciation (758,580) 721,060787,547 774,080
Total property and equipment 245,234 264,337235,642 242,719
TOTAL ASSETS $ 803,835929,670 $ 836,871770,998
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, JUNESeptember 30, June 30,
1998 1997
(UNAUDITED)1998
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 32,874218,654 $ 59,162
Notes payable, Series B
current maturities - 6,29459,194
Accrued expense 34,752 38,683expenses 39,701 34,928
Total current liabilities 67,626 104,139258,355 94,122
LONG-TERM LIABILITIES
Notes payable, Series B less current maturities
above 185,305 207,659185,305
Total liabilities 252,931 311,798443,660 279,427
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock,
$5 par value:
Series A (liquidation preference
$1,177,500$1,192,500 and $1,155,000$1,185,000
respectively) 500,000 500,000
Series B (liquidation preference
$1,132,500$1,147,500 and $1,110,000$1,140,000
respectively) 500,000 500,000
Cumulative preferred stock,
$20 par value:
Series A (liquidation preference
$2,838,850$2,868,116 and $2,794,951$2,853,484
respectively) 1,170,660 1,170,660
Series B (liquidation preference
$462,642$467,412 and $455,487$465,026
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) (5,915,092) (5,940,923)(5,979,986) (5,974,425)
Total stockholders' equity 550,904 525,073486,010 491,571
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 803,835929,670 $ 836,871770,998
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHSFIRST QUARTER ENDED
MARCH 31SEPTEMBER 30
1998 1997
NET SALES $1,773,026 $2,054,847$ 391,701 $ 477,152
COST OF SALES 1,389,744 1,531,856305,048 366,662
Gross profit on sales 383,282 522,99186,653 110,490
OPERATING EXPENSES
Selling expense 214,364 243,33354,759 68,153
General and administrative expense 129,437 119,48938,194 44,789
Total operating expenses 343,801 362,822
Net income92,953 112,942
Loss from operations 39,481 160,169(6,300) (2,452)
OTHER INCOME (EXPENSE) (7,218) (9,009)
Net income(647) (2,172)
Loss before income taxes 32,263 151,160
PROVISION FOR INCOME TAXES 6,432 47,222
NET INCOME $ 25,831 $ 103,938
EARNINGS (LOSS) PER SHARE $ (.07) $ .01
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31
1998 1997
NET SALES $240,116 $258,894
COST OF SALES 240,739 253,526
Gross profit (loss) on sales (623) 5,368
OPERATING EXPENSES
Selling expense 43,850 43,525
General and administrative expense 40,855 41,556
Total operating expenses 84,705 85,081
Net loss from operations (85,328) (79,713)
OTHER INCOME (EXPENSE) (2,274) (2,812)
Net loss before income taxes (87,602) (82,525)(6,947) (4,624)
PROVISION (CREDIT) FOR INCOME TAXES (30,316) (34,748)(1,386) (922)
NET LOSS $(57,286) $(47,777)$ (5,561) $ (3,702)
LOSS PER SHARE $ (.09)(.04) $ (.08)(.04)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
]
NINE MONTHSFIRST QUARTER ENDED
MARCH 31SEPTEMBER 30
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net incomeloss for the quarter $ 25,831 $103,938(5,561) $ (3,702)
Adjustments to reconcile net
income to net cash provided
byused in
operating activities:
Depreciation and amortization 46,955 39,65813,467 15,228
Provision for bad debts 4,815 4,815doubtful accounts 1,605 1,605
Effects of changes in operating
assets and liabilities:
Accounts receivables (29) 1,343Trade accounts receivable (70,929) (114,135)
Income tax receivable (1,386) --
Inventories (213,016) (105,627)
Prepaid expenses 27,252 30,255
Accounts payable (26,288) 23,498
Inventories 96,134 (65,568)
Prepaid expenses 20,655 15,409159,460 102,833
Accrued expense (3,931) (12,763)
Estimated liability for
income taxes - 31,892liabilities 4,773 17,752
Net cash provided byused in operating
activities 164,142 142,222(84,335) (55,791)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (27,852) (30,301)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (28,648) (38,703)(6,390) (600)
NET INCREASEDECREASE IN CASH 107,642 73,218(90,725) (56,391)
CASH, BEGINNING OF PERIODQUARTER 161,093 141,657 236,316
CASH, END OF PERIODQUARTER $ 249,299 $309,534
SUPPLEMENTAL DISCLOSURES
Interest paid70,368 $ 14,098 $ 16,214
Income taxes paid $ 4,840 $ 17,49485,266
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(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 necessarynecessarily indicative of
results for a full year.
A summary of the company's significant accounting policies is
presented on pagepages 8 and 9 (not shown) of its 19971998 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 fiscal
1997.the
quarter ended September 30, 1998.
In the opinion of management, the accompanying interim
consolidated condensed financial statements contain all
adjustments necessary to present fairly Chase General
Corporation's financial position as of March 31,September 30, 1998 and
June 30, 1997,1998 and the results of its operations for the nine months and
three months ended March 31, 1998 and 1997, and its cash
flows for the nine monthsfirst quarter ended March 31,September 30, 1998 and 1997.
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
1998 1997SEPTEMBER 30
1998 1997
Net income (loss) $25,831 $103,938 $(57,286) $(47,777)loss $ (5,561) $ (3,702)
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
STOCKHOLDERS $(70,223)Loss - common shareholders $(37,579) $ 7,884 $(89,304) $(79,795)
WEIGHTED AVERAGE OF OUTSTANDING
COMMON SHARES(35,720)
Weighted average of outstanding
common shares 969,834 969,834
969,834 969,834
EARNINGS (LOSS) PER SHARELoss per share $ (.07)(.04) $ .01 $ (.09) $ (.08)(.04)
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
Nine MonthsFirst Quarter ended March 31,September 30, 1998 and 1997
Sales:Sales - The Company had no unusual transactions for the nine monthsfirst
quarter ended March 31,September 30, 1998. The Company realized a gross
profit marginpercentage of 21.62%22.12% and 23.16% for the nine monthsfirst quarter
ended MarchSeptember 30, 1998 and 1997, respectively. Consolidated
net sales for the quarter ended September 30, 1998 of $391,701,
were 18% under the $477,152 in 1997's first quarter. No major
customer was lost during the current quarter. However, a
customer whose sales range from $20,000 to $25,000 ordered for
delivery to be in the quarter ending December 31, 1998 rather
than as in prior years, for the current quarter ending September
30, 1998.
Expenses - Selling, general and administrative were 23.73% of
sales in the quarter ended September 30 1998 compared to 25.45% for23.67%
in the same period ended a year ago. Net
sales decreased 14% over the same period a year ago as a resultfirst quarter of non-recurring sales to customers. However, no major
customers have been lost during this nine month period. The
reduced gross profit margin1997, which is due to increased depreciation and
indirect labor costs.
Expenses:
Selling expenses as a percentage of sales were consistent for
both periods. General and administrative expenses were 8%
higher than the same period a year ago due to increased office
salaries and professional fees. Interest expense continues to
decrease because of debt retirement.with last year.
Inventories at March 31,September 30, 1998 were $96,000 lowerare $213,000 higher than at
June 30, 1997 due1998 since the Company is presently entering their fall
busy season. In addition accounts payable is $159,460 higher at
September 30, 1998 compared to decreased finished goods on hand. Accounts
payable are $26,300 lower than at June 30, 1997 as a result of
decreased inventory on hand at March 31, 1998.
Three Months Ended March 31, 1998 and 1997
Sales:
Net sales decreased 7% overwhich also reflects
the same period a year ago. This
three month period is normallyentrance into the Company's slowestfall busy season.
Due to the reduced volume of production, the labor force was
used to perform plant maintenance which caused a negative gross
margin of $623 as compared to a positive gross margin of $5,368
for the same period a year ago.
(Continued)
ITEM 2
CHASE GENERAL CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Expenses:
Selling expenses remained constant compared with the same period
a year ago, while general and administrative expenses decreased
2% compared with the same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31,September 30, 1998, the Company has no commitments for
capitalized expenditures. Cash increased $107,642 during the
current nine month perioddecreased $90,725 as a result of
controlling overhead
costs. Working capital alsothe increased approximately $23,000 for
the current nine month period.seasonal build-up of inventories.
The officers of the corporationCompany and legal counsel continue to discuss
liquidity and capital resource options to resolve the $5$5.6
million cumulative preferred stock dividends in arrears.
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, 1998 is $5,611,492
Itemare $5,675,528.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.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, and September 1998.
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,November 19, 1998 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial Officer