FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 19981999
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 _____
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, 19981999
(Unaudited) and June 30, 19971998 ........................ 3
Consolidated Condensed Statements of Operations -
Nine months ended March 31, 1999 and 1998
and 1997
(Unaudited)........................................... 5
Consolidated Condensed Statements of Operations -
Three months ended March 31, 1999 and 1998
and 1997
(Unaudited)........................................... 6
Consolidated Condensed Statements of Cash Flows -
Nine months ended March 31, 1999 and 1998
and 1997
(Unaudited)........................................... 7
Notes to Consolidated Condensed Financial StatementsStatements.... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............. 10
PART II - OTHER INFORMATION
Item 3. Defaults Upon Senior Securities ................. 12
Item 6. Exhibits and Reports on Form 8-K ................ 12
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
MarchMARCH 31, 1998 and June1999 AND JUNE 30, 19971998
MARCH 31, JUNE 30,
1999 1998
1997
(UNAUDITED)(Unaudited)
CURRENT ASSETS
Cash $249,299 $141,657
Receivables,$ 278,164 $ 161,093
Trade receivables, net of allowance 78,793 83,57970,542 94,514
Income tax receivables -- 24,710
Inventories:
Finished goods 39,520 89,72565,874 47,397
Goods in process 9,509 3,5604,628 3,633
Raw materials 78,464 92,97572,544 81,377
Packaging materials 77,884 115,251104,632 79,006
Prepaid expense 20,728 39,79120,018 35,549
Prepaid income taxes 4,404 5,996-- 1,000
Total current assets 558,601 572,534616,402 528,279
PROPERTY AND EQUIPMENT - AT COST 1,003,814 985,3971,023,603 1,016,799
Less accumulated depreciation (758,580) 721,060814,646 774,080
Total property and equipment 245,234 264,337208,957 242,719
TOTAL ASSETS $ 803,835825,359 $ 836,871770,998
LIABILITIES AND STOCKHOLDERS' EQUITY
MARCH 31, JUNE 30,
1999 1998
1997
(UNAUDITED)(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 32,87454,726 $ 59,162
Notes payable, Series B
current maturities - 6,29459,194
Accrued expense 34,752 38,68331,282 34,928
Income taxes payable 19,750 --
Total current liabilities 67,626 104,139105,758 94,122
LONG-TERM LIABILITIES
Notes payable, Series B, less current
maturities above 162,672 185,305 207,659
Total liabilities 252,931 311,798268,430 279,427
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock,
$5 par value:
Series A (liquidation preference
$1,177,500$1,207,500 and $1,155,000$1,185,000
respectively) 500,000 500,000
Series B (liquidation preference
$1,132,500$1,162,500 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$2,897,383 and $2,794,951$2,853,484
respectively) 1,170,660 1,170,660
Series B (liquidation preference
$462,642$472,181 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)(5,909,067) (5,974,425)
Total stockholders' equity 550,904 525,073556,929 491,571
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 803,835825,359 $ 836,871770,998
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 1997
NET SALES $1,773,026 $2,054,847$ 1,753,469 $ 1,773,026
COST OF SALES 1,351,032 1,389,744 1,531,856
Gross profit on sales 402,437 383,282 522,991
OPERATING EXPENSES
Selling expense 194,045 214,364 243,333
General and administrative expense 118,049 129,437 119,489
Total operating expenses 312,094 343,801 362,822
Net income from operations 90,343 39,481 160,169
OTHER INCOME (EXPENSE) (4,235) (7,218) (9,009)
Net income before income taxes 86,108 32,263 151,160
PROVISION FOR INCOME TAXES 20,750 6,432 47,222
NET INCOME $ 65,358 $ 25,831
$ 103,938
EARNINGS (LOSS)LOSS PER SHARE $ (.07)(.03) $ .01(.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 1997
NET SALES $240,116 $258,894$ 272,458 $ 240,116
COST OF SALES 244,343 240,739 253,526
Gross profit (loss) on sales 28,115 (623) 5,368
OPERATING EXPENSES
Selling expense 43,024 43,850 43,525
General and administrative expense 40,894 40,855 41,556
Total operating expenses 83,918 84,705 85,081
Net loss from operations (55,803) (85,328) (79,713)
OTHER INCOME (EXPENSE) (1,436) (2,274) (2,812)
Net loss before income taxes (57,239) (87,602)
(82,525)
PROVISION (CREDIT)CREDIT FOR INCOME TAXES (25,523) (30,316) (34,748)
NET LOSS $(57,286) $(47,777)$ (31,716) $ (57,286)
LOSS PER SHARE $ (.09)(.07) $ (.08)(.09)
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 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 65,358 $ 25,831 $103,938
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 40,566 46,955 39,658
Provision for bad debts 4,815 4,815
Effects of changes in operating
assets and liabilities:
Accounts receivables 43,867 (29) 1,343
Accounts payable (4,468) (26,288)
23,498
Inventories (36,265) 96,134 (65,568)
Prepaid expenses 16,531 20,655 15,409
Accrued expense (3,646) (3,931)
(12,763)
Estimated liability for
incomeIncome taxes - 31,892payable 19,750 --
Net cash provided by
operating activities 146,508 164,142 142,222
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6,804) (27,852) (30,301)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (22,633) (28,648) (38,703)
NET INCREASE IN CASH 117,071 107,642 73,218
CASH, BEGINNING OF PERIOD 161,093 141,657 236,316
CASH, END OF PERIOD $ 278,164 $ 249,299 $309,534
SUPPLEMENTAL DISCLOSURES
Interest paid $ 14,09812,109 $ 16,21414,098
Income taxes paid (received) $ (24,710) $ 4,840 $ 17,494
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(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 necessary indicative of
results for a full year.
A summary of the company'sCompany's significant accounting policies is
presented on page 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 nine months ended March 31, 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, 19981999 and June
30, 1997,1998, the results of its operations for the nine months and
three months ended March 31, 1998199 and 1997,1998, and its cash flows for
the nine months ended March 31, 19981999 and 1997.1998.
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 MONTHS ENDED THREE MONTHS ENDED
MARCH 31 MARCH 31
1998 1997 1998 1997
Net income (loss) $25,831 $103,938 $(57,286) $(47,777)
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) $ 7,884 $(89,304) $(79,795)
WEIGHTED AVERAGE OF OUTSTANDING
COMMON SHARES 969,834 969,834 969,834 969,834
EARNINGS (LOSS)
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31
1999 1998 1999 1998
Net income (loss) $ 65,358 $ 25,831 $ (31,716) $ (57,286)
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 - COMMON
STOCKHOLDERS $ (30,696) $ (70,223) $ (63,734) $ (89,304)
WEIGHTED AVERAGE OF OUTSTANDING
COMMON SHARES 969,834 969,834 969,834 969,834
LOSS PER SHARE $ (.03) $ (.07) $ (.07) $ .01 $ (.09)
$ (.08)
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 Months ended MarchNINE MONTHS ENDED MARCH 31, 1998 andAND 1997
Sales:
The Company had no unusual transactions for the nine months ended
March 31, 1998.1999. The Company realized a gross profit margin of
21.62%22.95% for the nine months ended March 31, 19981999 as compared to
25.45%21.62% for the same period ended a year ago. NetConsolidated net
sales decreased 14% overfor the same period a year ago as a resultnine months ended March 31, 1999 of non-recurring sales to customers. However, no$1,753,469,
were 1% below the $1,773,026 in 1998's first nine months. No
major customers have beenwere lost during this nine month period. The
reduced1999 improved gross profit margin is due to increased depreciationa decrease in direct
and indirect labor costs.
Expenses:
Selling, expenses as a percentage of sales were consistent for
both periods. Generalgeneral and administrative expenses were 8%
higher than17.8% of sales
in the samenine month period a year ago dueended March 31, 1999 compared to increased office
salaries and professional fees.19.4%
in the first nine months of 1998. Interest expense continues to
decrease because of debt retirement.
Inventories at March 31, 1999 were $36,000 higher than at June
30, 1998 were $96,000due to increased non-seasonal sales orders from a major
customer. Accounts payable are $4,500 lower than at June 30,
1997 due 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 at1998.
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.
Three Months Ended March 31, 1998 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. DueHowever, due to the reduced volume of production, the labor force was
used to perform plant maintenance which causednew sales
from a negative gross
margin of $623 as compared to a positive gross margin of $5,368major customer, sales were significantly higher for the
same period a year ago.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 remained constantwere 30.8% of sales
in the three month period ended March 31, 1999 compared withto 35.3%
in the same period a year ago, while general and administrative expenses decreased
2% compared withago. The improved percentage is a
result of increased sales for the same period a year ago.current period.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998,1999, the Company has no commitments for
capitalized expenditures. Cash increased $107,642$117,000 during the
current nine month period as a result of controlling overhead
costs. Working capital also increased approximately $23,000$76,500 for
the current nine 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 that are 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 March 31, 19981999 is $5,611,492
Item$5,739,564.
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, 1998.1999.
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 12, 199811, 1999 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial Officer