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 MarchDecember 31, 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 February 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
INDEXIndex
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - MarchDecember 31, 1998
(Unaudited) and June 30, 1997 31998 . . . . . . . . . . . .3
Consolidated Condensed Statements of Operations
-
NineSix months ended MarchDecember 31, 1998 and 1997
(Unaudited) 5. . . . . . . . . . . . . . . . . . . . .5
Consolidated Condensed Statements of Operations
-
Three months ended MarchDecember 31, 1998 and 1997
(Unaudited) 6. . . . . . . . . . . . . . . . . . . . .6
Consolidated Condensed Statements of Cash Flows
-
NineSix months ended MarchDecember 31, 1998 and 1997
(Unaudited) 7. . . . . . . . . . . . . . . . . . . . .7
Notes to Consolidated Condensed Financial Statements 8Statements. . . .8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10. . . . . . . . .9
PART II - OTHER 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
MarchDECEMBER 31, 1998 and JuneAND JUNE 30, 1997
MARCH1998
DECEMBER 31, JUNE 30,
1998 1997
(UNAUDITED)1998
(Unaudited)
CURRENT ASSETS
Cash $249,299 $141,657
Receivables,$ 335,004 $ 161,093
Trade receivables,
net of allowance 78,793 83,579110,453 94,514
Income tax receivable -- 24,710
Inventories:
Finished goods 39,520 89,7259,834 47,397
Goods in process 9,509 3,5604,421 3,633
Raw materials 78,464 92,97564,371 81,377
Packaging materials 77,884 115,25190,169 79,006
Prepaid expense 20,728 39,7911,824 35,549
Prepaid income taxes 4,404 5,996-- 1,000
Total current assets 558,601 572,534616,076 528,279
PROPERTY AND EQUIPMENT
- AT COST 1,003,814 985,3971,023,603 1,016,799
Less accumulated
depreciation (758,580) 721,060800,853 774,080
Total property and
equipment 245,234 264,337222,750 242,719
TOTAL ASSETS $ 803,835838,826 $ 836,871770,998
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCHDECEMBER 31, JUNE 30,
1998 1997
(UNAUDITED)1998
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 32,87425,664 $ 59,162
Notes payable, Series B
current maturities - 6,29459,194
Accrued expense 34,752 38,68316,572 34,928
Estimated liability for
income taxes 45,273 --
Total current liabilities 67,626 104,13987,509 94,122
LONG-TERM LIABILITIES
Notes payable, Series B less current maturities
above162,672 185,305 207,659
Total liabilities 252,931 311,798250,181 279,427
STOCKHOLDERS' EQUITY
Capital stock issued
and outstanding:
Prior cumulative
preferred stock,
$5 par value:
Series A (liquidation
preference $1,177,500$1,200,000
and $1,155,000$1,185,000
respectively) 500,000 500,000
Series B (liquidation
preference $1,132,500$1,155,000
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$2,882,750
and $2,794,951$2,853,484
respectively) 1,170,660 1,170,660
Series B (liquidation
preference $462,642$469,796
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)(5,877,351) (5,974,425)
Total stockholders'
equity 550,904 525,073588,645 491,571
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 803,835838,826 $ 836,871770,998
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE(Unaudited)
SIX MONTHS ENDED
MARCHDECEMBER 31
1998 1997
NET SALES $1,773,026 $2,054,847$1,481,011 $1,532,910
COST OF SALES 1,389,744 1,531,8561,106,689 1,149,005
Gross profit on sales 383,282 522,991374,322 383,905
OPERATING EXPENSES
Selling expense 214,364 243,333151,021 170,514
General and administrative expense 129,437 119,48977,155 88,582
Total operating expenses 343,801 362,822
Net income228,176 259,096
Income from operations 39,481 160,169146,146 124,809
OTHER INCOME (EXPENSE) (7,218) (9,009)
Net income(2,799) (4,944)
Income before income taxes 32,263 151,160143,347 119,865
PROVISION FOR INCOME TAXES 6,432 47,22246,273 36,748
NET INCOME $ 25,83197,074 $ 103,93883,117
EARNINGS (LOSS) PER SHARE $ (.07).03 $ .01.02
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)(Unaudited)
THREE MONTHS ENDED
MARCHDECEMBER 31
1998 1997
NET SALES $240,116 $258,894$1,089,310 $1,055,758
COST OF SALES 240,739 253,526801,641 782,343
Gross profit (loss) on sales (623) 5,368287,669 273,415
OPERATING EXPENSES
Selling expense 43,850 43,52596,262 102,361
General and administrative expense 40,855 41,55638,961 43,793
Total operating expenses 84,705 85,081
Net loss135,223 146,154
Income from operations (85,328) (79,713)152,446 127,261
OTHER INCOME (EXPENSE) (2,274) (2,812)
Net loss(2,152) (2,772)
Income before income taxes (87,602) (82,525)150,294 124,489
PROVISION (CREDIT) FOR INCOME TAXES (30,316) (34,748)47,659 37,670
NET LOSS $(57,286) $(47,777)
LOSSINCOME $ 102,635 $ 86,819
EARNINGS PER SHARE $ (.09).07 $ (.08).06
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
]
NINE(Unaudited)
SIX MONTHS ENDED
MARCHDECEMBER 31
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 25,831 $103,93897,074 $ 83,117
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 46,955 39,65826,773 30,454
Provision for bad debts 4,815 4,815doubtful accounts 3,210 3,210
Effects of changes in operating
assets and liabilities:
Accounts receivables (29) 1,343Trade accounts receivable (19,149) (32,381)
Income taxes receivable 24,710 --
Inventory 42,618 61,647
Prepaid expenses 34,725 43,357
Accounts payable (26,288) 23,498
Inventories 96,134 (65,568)
Prepaid expenses 20,655 15,409(33,530) (10,188)
Accrued expense (3,931) (12,763)
Estimated liability for
income taxes - 31,892liabilities 26,917 10,944
Net cash provided by
operating activities 164,142 142,222203,348 190,160
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and
equipment (27,852) (30,301)(6,804) (24,498)
Net cash used in
investing activities (6,804) (24,498)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on
long-term debt (22,633) (28,648)
(38,703)Net cash used in
financing activities (22,633) (28,648)
NET INCREASE IN CASH 107,642 73,218173,911 137,014
CASH, BEGINNING OF PERIOD 161,093 141,657 236,316
CASH, END OF PERIOD $ 249,299 $309,534
SUPPLEMENTAL DISCLOSURES
Interest paid $ 14,098 $ 16,214
Income taxes paid $ 4,840 $ 17,494335,004 $278,671
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)(Unaudited)
NOTE 1 - 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'sCompany'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 and six months ended December 31, 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 MarchDecember 31, 1998 and June
30, 1997,1998 and the results of its operations for the ninesix months and
three months ended MarchDecember 31, 1998 and 1997, and its cash flows
for the ninesix months ended MarchDecember 31, 1998 and 1997.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - EARNINGS (LOSS) PER SHARE
The earnings (loss) per share was computed on the weighted average of
outstanding common shares during the years as follows:
NINESIX MONTHS ENDED THREE MONTHS ENDED
MARCHDECEMBER 31 MARCHDECEMBER 31
1998 1997 1998 1997
Net income (loss) $25,831 $103,938 $(57,286) $(47,777)$97,074 $83,117 $102,635 $86,819
Preferred dividend
requirements:
6% Prior Cumulative
Preferred, $5 par value 45,000 45,00030,000 30,000 15,000 15,000
5% Convertible Cumulative
Preferred, $20 par value 51,054 51,05434,036 34,036 17,018 17,018
Total dividend
requirements 96,054 96,05464,036 64,036 32,018 32,018
NET INCOME (LOSS) COMMON
STOCKHOLDERS $(70,223)Net income common
shareholders $33,038 $19,081 $ 7,884 $(89,304) $(79,795)
WEIGHTED AVERAGE OF OUTSTANDING
COMMON SHARES70,617 $54,801
Weighted average of
outstanding common
shares 969,834 969,834 969,834 969,834
EARNINGS (LOSS) PER SHAREEarnings per share $ (.07).03 $ .01.02 $ (.09).07 $ (.08).06
No computation was made on common stock equivalents outstanding because
earnings (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
NineSix Months ended MarchDecember 31, 1998 and 1997
Sales:
The Company had no unusual transactions for the ninesix months ended
MarchDecember 31, 1998. The Company realized a gross profit margin of
21.62%25.27% for the ninesix months ended MarchDecember 31, 1998 as compared to
25.45%25.04% for the same period ended a year ago. Consolidated net
sales for the six months ended December 31, 1998 of $1,481,011,
were 3% under the $1,532,910 in 1998's first six months. No
major customer was lost during this first six months.
Expenses:
Selling, general and administrative expenses were 15.4% of sales
in the six months ended December 31, 1998 compared to 16.9% in
the first six months of 1997. Interest expense continues to
decrease because of debt retirement.
Inventories at December 31, 1998 were $42,000 lower than at June
30, 1998 since the Company is entering their slow season of the
year. In addition, accounts payable is $33,500 lower at December
31, 1998 compared to June 30, 1998, which also reflects the
entrance into the Company's slower business cycle.
Three Months ended December 31, 1998 and 1997
Sales:
The Company realized a gross profit margin of 26.4% and 25.9% for
the three months ended December 31, 1998 and 1997, respectively.
Net sales decreased 14%increased 3% over the same period a year ago as a
result of non-recurring sales to customers. However, noone customer ordering $20,000 - $25,000 of product in
the current quarter of 1998 rather than the first quarter of the
Company's fiscal year. No major customers have beenwere lost during this
nine month period.
The
reduced gross profit margin is dueExpenses:
Reduced brokerage activity for three months ended December 31,
1998 resulted in selling expenses decreasing 6% compared to
increased depreciation and
indirect labor costs.
Expenses:
Sellingselling expenses as a percentage of sales were consistent for both periods.the three months ended December 31, 1997.
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.
Inventories at March 31, 1998 were $96,000 lower than at June
30, 1997 due to decreased finished goods on hand. Accounts
payable are $26,300 lower than at June 30, 199711% as a result of
decreased inventory on hand at March 31, 1998.
Three Months Ended March 31, 1998lower professional and 1997
Sales:
Net sales decreased 7% over the same period a year ago. This
three month period is normally the Company's slowest 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.insurance costs.
LIQUIDITY AND CAPITAL RESOURCES
As of MarchDecember 31, 1998, the Company has no commitments for
capitalized expenditures. Cash increased $107,642$173,911 during the
current ninesix month period as a result of completing the busy
season and controlling overhead
costs.overhead. Working capital also increased
approximately $23,000$94,400 for the current ninesix month period.
The officers of the corporation and legal counsel continue to
discuss liquidity and capital resource options to resolve the
$5$5.7 million cumulative preferred stock dividends in arrears.
PART II. OTHER INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
Item 3. DEFAULTS UPON SENIOR SECURITIES
a. None
b. The total cumulative preferred stock dividendsdividend in
arrears at MarchDecember 31, 1998 is $5,611,492$5,707,546.
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,October, November, and
December, 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, 1998 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial
Officer