FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDERPERSUANT TO SECTION 13 OR 15(D)15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31,September 30, 1999
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, 1999 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, 1999
(Unaudited) and June 30, 1998 ........................1999. . . . . . . . . . . . . . . 3
Consolidated Condensed Statements of Operations -
Nine monthsFirst quarter ended March 31,September 30, 1999 and
1998
(Unaudited)...........................................1998(Unaudited). . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Condensed Statements of Operations -
Three months ended March 31, 1999 and 1998
(Unaudited)........................................... 6
Consolidated Condensed Statements of Cash Flows -
Nine monthsFirst quarter ended March 31,September 30, 1999 and
1998
(Unaudited)........................................... 71998(Unaudited). . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Condensed Financial
Statements.... 8Statements . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 10
PARTOperations. . . . . . . 9
Part II - OTHER INFORMATIONOther Information
Item 3. Defaults Upon Senior Securities ................. 12. . . . . . . . . . . . .10
Item 6. Exhibits and Reports on Form 8-K ................ 128-K. . . . . . . . . . . . .10
PART I.I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1999 AND JUNE 30, 1998
MARCH 31, JUNESeptember 30, 1999 1998
(Unaudited)
CURRENTand June 30, 1999
(UNAUDITED)
ASSETS
Cash $ 278,164 $ 161,093
Trade receivables, net of allowance 70,542 94,514
Income tax receivables -- 24,710
Inventories:
Finished goods 65,874 47,397
Goods in process 4,628 3,633
Raw materials 72,544 81,377
Packaging materials 104,632 79,006
Prepaid expense 20,018 35,549
Prepaid income taxes -- 1,000
Total current assets 616,402 528,279
PROPERTY AND EQUIPMENT - AT COST 1,023,603 1,016,799
Less accumulated depreciation 814,646 774,080
Total property and equipment 208,957 242,719
TOTAL ASSETS $ 825,359 $ 770,998
September 30, June 30,
1999 1999
CURRENT ASSETS
Cash $ 66,072 $ 206,609
Trade receivables, net of
allowance 257,645 138,959
Inventories:
Finished goods 266,176 73,106
Goods in process 17,910 3,243
Raw materials 66,248 52,930
Packaging materials 84,703 70,878
Prepaid expense 9,232 35,469
Total current assets 767,986 581,194
PROPERTY AND EQUIPMENT - AT COST 1,044,272 1,036,457
Less accumulated depreciation 831,683 818,690
Total property and
equipment 212,589 217,767
TOTAL ASSETS $ 980,575 $ 798,961
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, JUNE 30,
1999 1998
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 54,726 $ 59,194
Accrued expense 31,282 34,928
Income taxes payable 19,750 --
Total current liabilities 105,758 94,122
LONG-TERM LIABILITIES
Notes payable, Series B, less current
maturities above 162,672 185,305
Total liabilities 268,430 279,427
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock,
$5 par value:
Series A (liquidation preference
$1,207,500 and $1,185,000
respectively) 500,000 500,000
Series B (liquidation preference
$1,162,500 and $1,140,000
respectively) 500,000 500,000
Cumulative preferred stock,
$20 par value:
Series A (liquidation preference
$2,897,383 and $2,853,484
respectively) 1,170,660 1,170,660
Series B (liquidation preference
$472,181 and $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) (5,909,067) (5,974,425)
Total stockholders' equity 556,929 491,571
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 825,359 $ 770,998
September 30, June 30,
1998 1998
CURRENT LIABILITIES
Accounts payable $ 208,746 $ 48,383
Accrued expenses 54,623 47,073
Notes payable, Series B,
current maturities 6,066 6,066
Total current
liabilities 269,435 101,522
LONG-TERM LIABILITIES
Notes payable, Series B,
less current maturities
shown above 156,606 156,606
Total liabilities 426,041 258,128
STOCKHOLDERS' EQUITY
Capital stock issued and
outstanding:
Prior cumulative preferred
stock, $5 par value:
Series A (liquidation
preference
$1,222,500
and $1,215,000
respectively) 500,000 500,000
Series B (liquidation
preference $1,177,500
and $1,170,000
respectively) 500,000 500,000
Cumulative preferred
stock, $20 par value:
Series A (liquidation
preference $2,926,650
and $2,912,017
respectively) 1,170,660 1,170,660
Series B (liquidation
preference $476,950
and $474,565
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) (5,911,462) (5,925,163)
Total stockholders'
equity 554,534 540,833
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 980,575 $ 798,961
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1999 1998
NET SALES $ 1,753,469 $ 1,773,026
COST OF SALES 1,351,032 1,389,744
Gross profit on sales 402,437 383,282
OPERATING EXPENSES
Selling expense 194,045 214,364
General and administrative expense 118,049 129,437
Total operating expenses 312,094 343,801
Net income from operations 90,343 39,481
OTHER INCOME (EXPENSE) (4,235) (7,218)
Net income before income taxes 86,108 32,263
PROVISION FOR INCOME TAXES 20,750 6,432
NET INCOME $ 65,358 $ 25,831
LOSS PER SHARE $ (.03) $ (.07)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1999 1998
NET SALES $ 272,458 $ 240,116
COST OF SALES 244,343 240,739
Gross profit (loss) on sales 28,115 (623)
OPERATING EXPENSES
Selling expense 43,024 43,850
General and administrative expense 40,894 40,855
Total operating expenses 83,918 84,705
Net loss from operations (55,803) (85,328)
OTHER INCOME (EXPENSE) (1,436) (2,274)
Net loss before income taxes (57,239) (87,602)
CREDIT FOR INCOME TAXES (25,523) (30,316)
NET LOSS $ (31,716) $ (57,286)
LOSS PER SHARE $ (.07) $ (.09)
First Quarter Ended
September 30
1999 1998
NET SALES $453,521 $391,701
COST OF SALES 337,768 305,048
Gross profit 115,753 86,653
OPERATING EXPENSES
Selling expense 55,981 54,759
General and administrative
expense 41,088 38,194
Total operating expenses 97,069 92,953
Income (loss) from
operations 18,684 (6,300)
OTHER INCOME (EXPENSE) (1,571) (647)
Income (loss)
before income taxes 17,113 (6,947)
PROVISION (CREDIT) FOR INCOME
TAXES 3,412 (1,386)
NET INCOME (LOSS) $ 13,701 $ (5,561)
LOSS PER SHARE $ (.02) $ (.04)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
MARCH 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 65,358 $ 25,831
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 40,566 46,955
Provision for bad debts 4,815 4,815
Effects of changes in operating
assets and liabilities:
Accounts receivables 43,867 (29)
Accounts payable (4,468) (26,288)
Inventories (36,265) 96,134
Prepaid expenses 16,531 20,655
Accrued expense (3,646) (3,931)
Income taxes payable 19,750 --
Net cash provided by
operating activities 146,508 164,142
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6,804) (27,852)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (22,633) (28,648)
NET INCREASE IN CASH 117,071 107,642
CASH, BEGINNING OF PERIOD 161,093 141,657
CASH, END OF PERIOD $ 278,164 $ 249,299
SUPPLEMENTAL DISCLOSURES
Interest paid $ 12,109 $ 14,098
Income taxes paid (received) $ (24,710) $ 4,840
First Quarter Ended
September 30
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the quarter $ 13,701 $ (5,561)
Adjustments to reconcile net
income to net cash
used in operating activities:
Depreciation and amortization 12,994 13,467
Provision for doubtful accounts 1,605 1,605
Effects of changes in operating
assets and liabilities:
Trade accounts receivable (120,291) (70,929)
Income tax receivable -- (1,386)
Inventories (234,880) (213,016)
Prepaid expenses 26,237 27,252
Accounts payable 160,363 159,460
Accrued liabilities 7,550 4,773
Net cash used in
operating
activities (132,721) (84,335)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and
equipment (7,816) (6,390)
NET DECREASE IN CASH (140,537) (90,725)
CASH, BEGINNING OF QUARTER 206,609 161,093
CASH, END OF QUARTER $ 66,072 $ 70,368
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 page 8pages 19 and 920 (not shown) of its 19981999 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 and nine months ended March 31,September 30, 1999.
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, 1999 and
June 30, 1998,1999 and the results of its operations for the nine months and
three months ended March 31, 199 and 1998, and its cash
flows for the nine monthsfirst quarter ended March 31,September 30, 1999 and 1998.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - LOSS PER SHARE
The lossLoss per share was computed on the weighted average of
outstanding common shares during the years as follows:
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31
1999 1998First Quarter Ended
September 30
1999 1998
Net income (loss) $ 65,35813,701 $ 25,831 $ (31,716) $ (57,286)(5,561)
Preferred dividend requirements:
6% Prior Cumulative Preferred,
$5 par value 45,000 45,000 15,000 15,000
5% Convertible Cumulative
Preferred,$20 $20 par value 51,054 51,054 17,018 17,018
Total dividend
requirements 96,054 96,054 32,018 32,018
NET LOSSNet loss -
COMMON
STOCKHOLDERScommon shareholders $ (30,696) $ (70,223) $ (63,734) $ (89,304)
WEIGHTED AVERAGE OF OUTSTANDING
COMMON SHARES(18,317) $(37,579)
Weighted average of
outstanding common
shares 969,834 969,834
969,834 969,834
LOSS PER SHARELoss per share (.02) $ (.03) $ (.07) $ (.07) $ (.09)(.04)
No computation was made on common stock equivalents outstanding
because 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 MONTHS ENDED MARCH 31,First Quarter ended September 30, 1999 and 1998
AND 1997
Sales:Sales - The Company had no unusual transactions for the nine monthsfirst
quarter ended March 31,September 30, 1999. The Company realized a gross
profit marginpercentage of 22.95%25.52% and 22.12% for the nine monthsfirst quarter
ended March 31,September 30, 1999 as compared to
21.62% for the same period ended a year ago.and 1998, respectively. Consolidated
net sales for the nine monthsquarter ended March 31,September 30, 1999 of $1,753,469,$453,521,
were 1% below16% above the $1,773,026$391,701 in 1998's first nine months.quarter. No major
customers were lost during this nine month period.the current quarter. The 1999
improved gross profit margin is due to a decreasevolume increase in direct
and indirect labor costs.
Expenses:sales.
Expenses - Selling, general and administrative expenses were 17.8%21.4% of
sales in the nine month periodquarter ended March 31,September 30 1999 compared to 19.4%23.73%
in the first nine monthsquarter of 1998. Interest expense continues to
decrease because of debt retirement.1998, which is consistent with last year.
Inventories at March 31,September 30, 1999 were $36,000are $235,000 higher than at
June 30, 1998 due to increased non-seasonal sales orders from a major
customer. Accounts1999 since the Company is presently in their fall busy
season. In addition accounts payable are $4,500 lower thanis $160,363 higher at
JuneSeptember 30,
1998.
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Sales:
The Company's net sales increased 13% over net sales for the
three months ended March 31, 1998. This three month period is
normally the Company's slowest season. However, due to new sales
from a major customer, sales were significantly higher for the
March 1999 quarter.
(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, general and administrative expenses were 30.8% of sales
in the three month period ended March 31, 1999 compared to 35.3%
inJune 30, 1999 which also reflects
the same period a year ago. The improved percentage is a
result of increased sales forentrance into the current period.Company's fall busy season.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31,September 30, 1999, the Company has no commitments for
capitalized expenditures. Cash increased $117,000 during the
current nine month perioddecreased $140,537 as a result of
controlling overhead
costs. Working capital alsothe increased approximately $76,500 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 $5.7$5.8
million cumulative preferred stock dividends that are 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, 1999 is $5,739,564.
ITEMare $5,803,600.
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,
1999.
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 11, 199911/16/99 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief
Financial Officer