FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PERSUANT TOUNDER SECTION 13 OR 15(d)15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998March 31, 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 As of November 1, 1998 indicate the number_____
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 - September 30, 1998March 31, 1999
(Unaudited) and June 30, 1998. . . . . . . . . . . . .31998 ........................ 3
Consolidated Condensed Statements of Operations -
First quarterNine months ended September 30,March 31, 1999 and 1998
(Unaudited)........................................... 5
Consolidated Condensed Statements of Operations -
Three months ended March 31, 1999 and 19971998
(Unaudited). . . . . . . . . . . . . . . . . . . . . .5........................................... 6
Consolidated Condensed Statements of Cash Flows -
First quarterNine months ended September 30,March 31, 1999 and 1998
and 1997
(Unaudited). . . . . . . . . . . . . . . . . . . . . .6........................................... 7
Notes to Consolidated Condensed Financial Statements. . . .7Statements.... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . .9
Part............. 10
PART II - Other InformationOTHER INFORMATION
Item 3. Defaults Upon Senior Securities. . . . . . . . . 10Securities ................. 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 10................ 12
PART II. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1998MARCH 31, 1999 AND JUNE 30, 1998
ASSETS
SeptemberMARCH 31, JUNE 30,
June 30,
19981999 1998
(Unaudited)
CURRENT ASSETS
Cash $ 70,368278,164 $ 161,093
Trade receivables, net of allowance 163,83870,542 94,514
Income tax receivable 26,096receivables -- 24,710
Inventories:
Finished goods 207,03465,874 47,397
Goods in process 17,7454,628 3,633
Raw materials 107,12772,544 81,377
Packaging materials 92,523104,632 79,006
Prepaid expense 8,29720,018 35,549
Prepaid income taxes 1,000-- 1,000
Total current assets 694,028616,402 528,279
PROPERTY AND EQUIPMENT - AT COST 1,023,1891,023,603 1,016,799
Less accumulated depreciation 787,547814,646 774,080
Total property and equipment 235,642208,957 242,719
TOTAL ASSETS $ 929,670825,359 $ 770,998
LIABILITIES AND STOCKHOLDERS' EQUITY
SeptemberMARCH 31, JUNE 30,
June 30,
19981999 1998
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 218,65454,726 $ 59,194
Accrued expenses 39,701expense 31,282 34,928
Income taxes payable 19,750 --
Total current liabilities 258,355105,758 94,122
LONG-TERM LIABILITIES
Notes payable, Series B, 185,305less current
maturities above 162,672 185,305
Total liabilities 443,660268,430 279,427
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred stock,
$5 par value:
Series A (liquidation preference
$1,192,500$1,207,500 and $1,185,000
respectively) 500,000 500,000
Series B (liquidation preference
$1,147,500$1,162,500 and $1,140,000
respectively) 500,000 500,000
Cumulative preferred stock,
$20 par value:
Series A (liquidation preference
$2,868,116$2,897,383 and $2,853,484
respectively) 1,170,660 1,170,660
Series B (liquidation preference
$467,412$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) (5,979,986)(5,909,067) (5,974,425)
Total stockholders' equity 486,010556,929 491,571
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 929,670825,359 $ 770,998
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
FIRST QUARTERNINE MONTHS ENDED
SEPTEMBER 30MARCH 31,
1999 1998 1997
NET SALES $ 391,7011,753,469 $ 477,1521,773,026
COST OF SALES 305,048 366,6621,351,032 1,389,744
Gross profit 86,653 110,490on sales 402,437 383,282
OPERATING EXPENSES
Selling expense 54,759 68,153194,045 214,364
General and administrative expense 38,194 44,789118,049 129,437
Total operating expenses 92,953 112,942
Loss312,094 343,801
Net income from operations (6,300) (2,452)90,343 39,481
OTHER INCOME (EXPENSE) (647) (2,172)
Loss(4,235) (7,218)
Net income before income taxes (6,947) (4,624)86,108 32,263
PROVISION (CREDIT) FOR INCOME TAXES (1,386) (922)20,750 6,432
NET LOSSINCOME $ (5,561)65,358 $ (3,702)25,831
LOSS PER SHARE $ (.04)(.03) $ (.04)(.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)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FIRST QUARTERNINE MONTHS ENDED
SEPTEMBER 30MARCH 31,
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss for the quarterincome $ (5,561)65,358 $ (3,702)25,831
Adjustments to reconcile net
income to net cash used inprovided by
operating activities:
Depreciation and amortization 13,467 15,22840,566 46,955
Provision for doubtful accounts 1,605 1,605bad debts 4,815 4,815
Effects of changes in operating
assets and liabilities:
Trade accounts receivable (70,929) (114,135)
Income tax receivable (1,386) --Accounts receivables 43,867 (29)
Accounts payable (4,468) (26,288)
Inventories (213,016) (105,627)(36,265) 96,134
Prepaid expenses 27,252 30,255
Accounts16,531 20,655
Accrued expense (3,646) (3,931)
Income taxes payable 159,460 102,833
Accrued liabilities 4,773 17,75219,750 --
Net cash used inprovided by
operating activities (84,335) (55,791)146,508 164,142
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (6,390) (600)(6,804) (27,852)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (22,633) (28,648)
NET DECREASEINCREASE IN CASH (90,725) (56,391)117,071 107,642
CASH, BEGINNING OF QUARTERPERIOD 161,093 141,657
CASH, END OF QUARTERPERIOD $ 70,368278,164 $ 85,266249,299
SUPPLEMENTAL DISCLOSURES
Interest paid $ 12,109 $ 14,098
Income taxes paid (received) $ (24,710) $ 4,840
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 necessarilynecessary indicative of
results for a full year.
A summary of the company'sCompany's significant accounting policies is
presented on pagespage 8 and 9 (not shown) of its 1998 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 September 30, 1998.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 September 30, 1998March 31, 1999 and June
30, 1998, 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 first quarternine months ended September 30, 1998March 31, 1999 and 1997.1998.
CHASE GENERAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - LOSS PER SHARE
LossThe loss per share was computed on the weighted average of
outstanding common shares during the years as follows:
FIRST QUARTER ENDED
SEPTEMBER 30
1998 1997
Net loss $ (5,561) $ (3,702)
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)
Weighted average of outstanding
common shares 969,834 969,834
Loss per share $ (.04) $ (.04)
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) $ (.09)
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,NINE MONTHS ENDED MARCH 31, 1998 andAND 1997
Sales -Sales:
The Company had no unusual transactions for the first
quarternine months ended
September 30, 1998.March 31, 1999. The Company realized a gross profit percentagemargin of
22.12% and 23.16%22.95% for the first quarternine months ended September 30, 1998 and 1997, respectively.March 31, 1999 as compared to
21.62% for the same period ended a year ago. Consolidated net
sales for the quarternine months ended September 30, 1998March 31, 1999 of $391,701,$1,753,469,
were 18% under1% below the $477,152$1,773,026 in 1997's1998's first quarter.nine months. No
major customer wascustomers were lost during the current quarter. However,this nine month period. The
1999 improved gross profit margin is due to a customer whose sales range from $20,000 to $25,000 ordered for
delivery to bedecrease in the quarter ending December 31, 1998 rather
than as in prior years, for the current quarter ending September
30, 1998.
Expenses -direct
and indirect labor costs.
Expenses:
Selling, general and administrative expenses were 23.73%17.8% of sales
in the quarternine month period ended September 30 1998March 31, 1999 compared to 23.67%19.4%
in the first quarternine months of 1997, which is consistent with last year.1998. Interest expense continues to
decrease because of debt retirement.
Inventories at September 30, 1998 are $213,000March 31, 1999 were $36,000 higher than at June
30, 1998 sincedue to increased non-seasonal sales orders from a major
customer. Accounts payable are $4,500 lower than at June 30,
1998.
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Sales:
The Company's net sales increased 13% over net sales for the
Companythree months ended March 31, 1998. This three month period is
presently entering their fall
busynormally the Company's slowest season. In addition accounts payable is $159,460However, due to new sales
from a major customer, sales were significantly higher at
September 30, 1998for 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 June 30, 1998 which also reflects35.3%
in the entrance intosame period a year ago. The improved percentage is a
result of increased sales for the Company's fall busy season.current period.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1998,March 31, 1999, the Company has no commitments for
capitalized expenditures. Cash decreased $90,725increased $117,000 during the
current nine month period as a result of controlling overhead
costs. Working capital also increased approximately $76,500 for
the increased seasonal build-up of inventories.current nine month period.
The officers of the Companycorporation and legal counsel continue to
discuss liquidity and capital resource options to resolve the
$5.6$5.7 million cumulative preferred stock dividends that are in
arrears.
PART IIII. OTHER INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
a. None
b. The total cumulative preferred stock dividends in
arrears at September 30, 1998 are $5,675,528.March 31, 1999 is $5,739,564.
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 July, August, and September 1998.the quarter
ended March 31, 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
November 19, 1998May 11, 1999 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial Officer