FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 19971998
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
IndicateAs 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
IndexINDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - September 30, 19971998
(Unaudited) and June 30, 1997 31998. . . . . . . . . . . . .3
Consolidated Condensed Statements of Operations -
First quarter ended September 30, 1998 and 1997
and
1996 (Unaudited) 5. . . . . . . . . . . . . . . . . . . . . .5
Consolidated Condensed Statements of Cash Flows -
First quarter ended September 30, 1998 and 1997
and
1996 (Unaudited) 6. . . . . . . . . . . . . . . . . . . . . .6
Notes to Consolidated Condensed Financial Statements 7Statements. . . .7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9. . . . . . .9
Part II - Other Information
Item 3. Defaults Upon Senior SecuritiesSecurities. . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 10
PART I FINANCIAL INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
SeptemberSEPTEMBER 30, 1997 and June1998 AND JUNE 30, 19971998
ASSETS
September 30, June 30,
1997 19971998 1998
(Unaudited)
CURRENT ASSETS
Cash $ 85,266 $141,657
Receivables,70,368 $ 161,093
Trade receivables, net of allowance 196,109 83,579163,838 94,514
Income tax receivable 26,096 24,710
Inventories:
Finished goods 241,091 89,725207,034 47,397
Goods in process 11,921 3,56017,745 3,633
Raw materials 58,720 92,975107,127 81,377
Packaging materials 95,406 115,25192,523 79,006
Prepaid expense 8,614 39,7918,297 35,549
Prepaid income taxes 6,918 5,9961,000 1,000
Total current assets 704,045 572,534694,028 528,279
PROPERTY AND EQUIPMENT - AT COST 985,997 985,3971,023,189 1,016,799
Less accumulated depreciation 736,288 721,060787,547 774,080
Total property and equipment 249,709 264,337235,642 242,719
TOTAL ASSETS $953,754 $836,871$ 929,670 $ 770,998
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1997 19971998 1998
(Unaudited)
CURRENT LIABILITIES
Accounts payable $161,995 $ 59,162
Notes payable, Series B,
current maturities 6,294 6,294218,654 $ 59,194
Accrued expenses 56,435 38,68339,701 34,928
Total current liabilities 224,724 104,139258,355 94,122
LONG-TERM LIABILITIES
Notes payable, Series B less current maturities
above 207,659 207,659185,305 185,305
Total liabilities 432,383 311,798443,660 279,427
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock,
$5 par value:
Series A (liquidation preference
$1,162,500$1,192,500 and $1,155,000$1,185,000
respectively) 500,000 500,000
Series B (liquidation preference
$1,117,500$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
$2,809,584$2,868,116 and $2,794,951$2,853,484
respectively) 1,170,660 1,170,660
Series B (liquidation preference
$457,872$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) (5,944,625) (5,940,923)(5,979,986) (5,974,425)
Total stockholders' equity 521,371 525,073486,010 491,571
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 953,754929,670 $ 836,871770,998
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
First Quarter Ended
SeptemberFIRST QUARTER ENDED
SEPTEMBER 30
1998 1997 1996
NET SALES $477,152 $532,263$ 391,701 $ 477,152
COST OF SALES 305,048 366,662 400,395
Gross profit 86,653 110,490 131,868
OPERATING EXPENSES
Selling expense 54,759 68,153 59,798
General and administrative expense 38,194 44,789 36,853
Total operating expenses 92,953 112,942
96,651
Income (loss)Loss from operations (6,300) (2,452) 35,217
OTHER INCOME (EXPENSE) (647) (2,172)
(2,944)
Income (loss)Loss before income taxes (6,947) (4,624) 32,273
PROVISION (CREDIT) FOR INCOME TAXES (1,386) (922)
6,435
NET INCOME (LOSS)LOSS $ (5,561) $ (3,702) $25,838
LOSS PER SHARE $ (.04) $ (.01)(.04)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
First Quarter Ended
SeptemberFIRST QUARTER ENDED
SEPTEMBER 30
1998 1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)loss for the quarter $ (3,702)(5,561) $ 25,838(3,702)
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 13,467 15,228 12,660
Provision for doubtful accounts 1,605 1,605
Effects of changes in operating
assets and liabilities:
AccountsTrade accounts receivable (70,929) (114,135)
(169,902)
InventoryIncome tax receivable (1,386) --
Inventories (213,016) (105,627) (199,163)
Prepaid expenses 27,252 30,255 33,603
Accounts payable 159,460 102,833 181,374
Accrued liabilities 4,773 17,752 14,577
Net cash used in operating
activities (84,335) (55,791) (99,408)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6,390) (600) (7,557)
NET DECREASE IN CASH (90,725) (56,391) (106,965)
CASH, BEGINNING OF QUARTER 161,093 141,657 236,316
CASH, END OF QUARTER $ 70,368 $ 85,266 $129,351
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 necessarily 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 the
quarter ended September 30, 1997.1998.
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 September 30, 19971998 and
June 30, 19971998 and the results of its operations and its cash
flows for the first quarter ended September 30, 19971998 and 1996.1997.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - LOSS PER SHARE
Loss per share was computed on the weighted average of
outstanding common shares as follows:
First Quarter Ended
SeptemberFIRST QUARTER ENDED
SEPTEMBER 30
1998 1997
1996
Net income (loss)loss $ (5,561) $ (3,702) $ 25,838
Preferred dividend requirements:
6% Prior Cumulative Preferred,
$5 par value 15,000 15,000
5% Convertible Cumulative Preferred,
$20 par value 17,018 17,018
Total dividend requirements 32,018 32,018
Loss - common shareholders $(37,579) $ (35,720) $ (6,180)
Weighted average of outstanding
common shares 969,834 969,834
Loss per share $ (.04) $ (.01)(.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
First Quarter ended September 30, 19971998 and 19961997
Sales - The Company had no unusual transactions for the first
quarter ended September 30, 1997.1998. The Company realized a gross
profit percentage of 23.16%22.12% and 24.77%23.16% for the first quarter
ended September 30, 19971998 and 1996,1997, respectively. Consolidated
net sales for the quarter ended September 30, 1997,1998 of $477,152$391,701,
were 10%18% under the $532,263$477,152 in 1996's1997's first quarter. No major
customer was lost during this period.the current quarter. However, due to a dispute
on delivery from a year ago, a
customer whose sales wererange from $20,000 to $25,000 last year was not givenordered for
delivery to be in the opportunity to reorder this year. In
addition, another customer overbought candy a year ago and 28% ofquarter ending December 31, 1998 rather
than as in prior years, for the order was returned in a subsequent period. This year their
order reflected the reduced quantity.current quarter ending September
30, 1998.
Expenses - Selling, general and administrative were 23.67%23.73% of
sales in the quarter ended September 30 19971998 compared to 18.16%23.67%
in the first quarter of 1996. The percentage increase in 1997, resulted primarily from increase in office wages, professional
fees and commissions.which is consistent with last year.
Inventories and accounts payableat September 30, 1998 are $213,000 higher than at
June 30, 19971998 since the Company is presently entering their fall
busy cycle ofseason. In addition accounts payable is $159,460 higher at
September 30, 1998 compared to June 30, 1998 which also reflects
the year.entrance into the Company's fall busy season.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997,1998, the Company has no commitments for
capitalized expenditures. Working capital amounted to $479,000 at
September 30, 1997 versus $468,000 at June 30, 1997. Cash decreased $56,391$90,725 as a result of
an increase in inventories
caused by the increased seasonal build-up.build-up of inventories.
The officers of the Company 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 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 September 30, 1997 is $5,547,456.
Item1998 are $5,675,528.
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 during July, August, and September 1997.1998.
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
December 1, 1997November 19, 1998 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial Officer