FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 -------------- 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) Telephone: (816) 279-1625 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 [ ] As of April 30, 2002 there were 969,834 shares outstanding of the Registrant's ($1.00 par value) common stock. CHASE GENERAL CORPORATION Index PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Condensed Balance Sheets - March 31, 2002 (Unaudited) and June 30, 2001 ................................ 3 Consolidated Condensed Statements of Operations - Three months ended March 31, 2002 and 2001 (Unaudited) ....... 5 Consolidated Condensed Statements of Operations - Nine months ended March 31, 2002 and 2001 (Unaudited) ........ 6 Consolidated Condensed Statements of Cash Flows - Nine months ended March 31, 2002 and 2001 (Unaudited) ........ 7 Notes to Consolidated Condensed Financial Statements ............. 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .......................... 9 PART II - OTHER INFORMATION Item 3. Defaults Upon Senior Securities ............................. 11 Item 4. Submission of matters to a vote of security holders ......... 11 Item 6. Exhibits and Reports on Form 8-K ............................ 11 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED CONDENSED BALANCE SHEETS March 31, 2002 and June 30, 2001 (Unaudited) ASSETS March 31, June 30, 2002 2001 --------- -------- CURRENT ASSETS Cash $ 238,856 $ 117,114 Trade receivables, net of allowance 103,756 100,494 Other receivables 7,053 7,053 Inventories: Finished goods 19,283 73,138 Goods in process 6,218 1,943 Raw materials 61,802 80,592 Packaging materials 64,003 64,536 Prepaid expense 8,587 34,606 Prepaid income taxes -- 11,220 ---------- ---------- Total current assets 509,558 490,696 ---------- ---------- PROPERTY AND EQUIPMENT - AT COST 1,121,853 1,117,639 Less accumulated depreciation 926,358 893,434 ---------- ---------- Total property and equipment 195,495 224,205 ---------- ---------- TOTAL ASSETS $ 705,053 $ 714,901 ========== ========== 3 LIABILITIES AND STOCKHOLDERS' EQUITY (Unaudited) March 31, June 30, 2002 2001 --------- -------- CURRENT LIABILITIES Accounts payable $ 29,284 $ 46,002 Accrued expense 38,576 35,301 Notes payable, Series B, current maturities 51,010 -- ----------- ----------- Total current liabilities 118,870 81,303 LONG-TERM LIABILITIES Notes payable, Series B, less current maturities above -- 77,672 ----------- ----------- Total liabilities 118,870 158,975 ----------- ----------- STOCKHOLDERS' EQUITY Capital stock issued and outstanding: Prior cumulative preferred stock, $5 par value: Series A (liquidation preference $1,297,500 and $1,275,000 respectively) 500,000 500,000 Series B (liquidation preference $1,252,500 and $1,230,000 respectively) 500,000 500,000 Cumulative preferred stock, $20 par value Series A (liquidation preference $3,072,982 and $3,029,083 respectively) 1,170,660 1,170,660 Series B (liquidation preference $500,798 and $493,643 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) (5,879,813) (5,910,070) ----------- ----------- Total stockholders' equity 586,183 555,926 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 705,053 $ 714,901 =========== =========== The accompanying notes are an integral part of these consolidated condensed financial statements. 4 CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31 -------------------- 2002 2001 ---- ---- NET SALES $240,665 $ 217,524 COST OF SALES 237,317 237,980 -------- --------- Gross profit (loss) on sales 3,348 (20,456) -------- ---------- OPERATING EXPENSES Selling expense 48,401 49,119 General and administrative expense 53,567 51,613 -------- --------- Total operating expenses 101,968 100,732 -------- --------- Net loss from operations (98,620) (121,188) OTHER INCOME (EXPENSE) (501) (1,411) -------- --------- Net loss before income taxes (99,121) (122,599) CREDIT FOR INCOME TAXES (33,689) (41,943) -------- --------- NET LOSS (65,432) (80,656) Preferred dividends 32,018 32,018 -------- --------- Net loss applicable to common shareholders $(97,450) $(112,674) ======== ========= LOSS PER SHARE OF COMMON STOCK $ (.10) $ (.12) ======== ========= The accompanying notes are an integral part of these consolidated condensed financial statements. 5 CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended March 31 ----------------- 2002 2001 ---- ---- NET SALES $1,532,114 $1,711,307 COST OF SALES 1,147,340 1,333,944 ---------- ---------- Gross profit on sales 384,774 377,363 ---------- ---------- OPERATING EXPENSES Selling expense 187,569 194,840 General and administrative expense 157,749 148,084 ---------- ---------- Total operating expenses 345,318 342,924 ---------- ---------- Net income from operations 39,456 34,439 OTHER INCOME (EXPENSE) (1,664) (4,007) ---------- ---------- Net income before income taxes 37,792 30,432 PROVISION FOR INCOME TAXES 7,535 6,068 ---------- ---------- NET INCOME 30,257 24,364 Preferred dividends 96,054 96,054 ---------- ---------- Net loss applicable to common shareholders $ (65,797) $ (71,690) ========== ========== LOSS PER SHARE OF COMMON STOCK $ (.07) $ (.07) ============ ========== The accompanying notes are an integral part of these consolidated condensed financial statements. 6 CHASE GENERAL CORPORATION AND SUBSIDIARY CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended March 31 -------------------- 2002 2001 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 30,257 $ 24,364 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 32,925 32,082 Provision for bad debts 4,815 4,815 Effects of changes in operating assets and liabilities: Accounts receivables (8,077) 25,800 Accounts payable (16,718) 1,621 Inventories 68,903 90,112 Prepaid expense 26,019 9,044 Prepaid income taxes 11,220 -- Accrued expense 3,275 (5,463) ----------- ----------- Net cash provided by operating activities 152,619 182,375 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (4,215) (53,925) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term debt (26,662) (50,000) ----------- ----------- NET INCREASE IN CASH 121,742 78,450 CASH, BEGINNING OF PERIOD 117,114 146,779 ----------- ----------- CASH, END OF PERIOD $ 238,856 $ 225,229 =========== =========== SUPPLEMENTAL DISCLOSURES Interest paid $ 6,161 $ 8,710 =========== =========== Income taxes paid $ -- $ 7,525 =========== =========== The accompanying notes are an integral part of these consolidated condensed financial statements. 7 CHASE GENERAL CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF PRESENTATION In the opinion of management, the accompanying unaudited interim consolidated condensed financial statements include all adjustments (consisting only of normal adjustments) necessary for a fair presentation of the financial position of Chase General Corporation as of March 31, 2002 and June 30, 2001 and the results of its operations for the nine months and three months ended March 31, 2002 and 2001, and its cash flows for the nine months ended March 31, 2002 and 2001. 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 fully year. A summary of the Company's significant accounting policies is presented on pages 19 and 20 (not shown) of its 2001 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 nine months ended March 31, 2002. NOTE 2 - EARNINGS (LOSS) PER SHARE The earnings (loss) per share was computed on the weighted average of outstanding common shares as follows: Nine Months Ended Three Months Ended March 31 March 31 ----------------------- ----------------------- 2002 2001 2002 2001 ---- ---- ---- ---- Net income (loss) $ 30,257 $ 24,364 $(65,432) $ (80,656) -------- -------- -------- --------- 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 loss applicable to common shareholders $(65,797) $(71,690) $(97,450) $(112,674) ======== ======== ======== ========= Weighted average of outstanding common shares 969,834 969,834 969,834 969,834 ======== ======== ======== ========= Loss per share $ (.07) $ (.07) $ (.10) $ (.12) ======== ======== ======== ========= No computation was made on common stock equivalents outstanding because loss per share would be anti-dilutive. 8 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 Three Months Ended March 31, 2002 and 2001 - ------------------------------------------ Sales: The Company's net sales of $240,665 for period ended March 31, 2002 increased 11% over net sales of $217,524 for the three months ended March 31, 2001. This three month period is normally the Company's slowest season. The Company gained net sales due to a major customer increasing distribution sites of the mini mash bar. Expenses: Selling expenses decreased 1.46% compared to selling expenses for the three months ended March 31, 2001. General and administrative expenses increased 3.78% compared to these expenses for the three months ended March 31, 2001, as a result of website maintenance costs and increased health insurance premiums. Nine Months ended March 31, 2002 and 2001 - ----------------------------------------- Sales: The Company had no unusual transactions for the nine months ended March 31, 2002. The Company realized a gross profit margin of 25.11% for the nine months ended March 31, 2002 as compared to 22.05% for the same period ended a year ago. Consolidated net sales for the nine months ended March 31, 2001 of $1,5352,114, $1,532,114 were 10% below the $1,711,307 in 2001's first nine months. The improved gross profit was due to lower labor costs, equipment repairs and utilities. The loss in net sales was due to less repeat sales from one customer who closed several retail outlets in Chase's territory. Expenses: Selling, general and administrative expenses were 22.5% of sales in the nine month period ended March 31, 2002 compared to 20% in the first nine months of 2001. Additional costs for a computer consultant maintaining the Company's website and health insurance premiums caused the increase in administrative costs for 2002. Inventories at March 31, 2002 were $68,900 lower than at June 30, 2001 due to the Company being in its slower business cycle. In addition, accounts payable and prepaid expenses were reduced $54,000 during this period. 9 ITEM 2 CHASE GENERAL CORPORATION AND SUBSIDIARY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2002, the Company has no commitments for capitalized expenditures. Cash increased $121,700 during the current nine month period as a result of completing the busy season and controlling overhead. 10 PART II. OTHER INFORMATION CHASE GENERAL CORPORATION AND SUBSIDIARY Item 3. DEFAULTS UPON SENIOR SECURITIES a. None b. The total cumulative preferred stock dividends contingency at March 31, 2002 is $6,123,780. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. The annual meeting of shareholders scheduled for January 14, 2002 was not held due to the lack of receiving the required number of proxies to hold the meeting. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. a. Exhibits - None required b. Reports on Form 8-K: There were no reports on Form 8-K filed during January, February, and March, 2002. 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 5-14-02 /s/ Barry M. Yantis - -------------------- -------------------------------- Date Barry M. Yantis President and Chief Financial Officer 11