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, 1997
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
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
Index
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets - September 30, 1997
(Unaudited) and June 30, 1997 3
Consolidated Condensed Statements of Operations -
First quarter ended September 30, 1997 and
1996 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows -
First quarter ended September 30, 1997 and
1996 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements 7
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 10
Item 6. Exhibits and Reports on Form 8-K 10
PART I FINANCIAL INFORMATION
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
September 30, 1997 and June 30, 1997
ASSETS
September 30, June 30,
1997 1997
(Unaudited)
CURRENT ASSETS
Cash $ 85,266 $141,657
Receivables, net of allowance 196,109 83,579
Inventories:
Finished goods 241,091 89,725
Goods in process 11,921 3,560
Raw materials 58,720 92,975
Packaging materials 95,406 115,251
Prepaid expense 8,614 39,791
Prepaid income taxes 6,918 5,996
Total current assets 704,045 572,534
PROPERTY AND EQUIPMENT - AT COST 985,997 985,397
Less accumulated depreciation 736,288 721,060
Total property and equipment 249,709 264,337
TOTAL ASSETS $953,754 $836,871
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, June 30,
1997 1997
(Unaudited)
CURRENT LIABILITIES
Accounts payable $161,995 $ 59,162
Notes payable, Series B,
current maturities 6,294 6,294
Accrued expenses 56,435 38,683
Total current liabilities 224,724 104,139
LONG-TERM LIABILITIES
Notes payable, Series B,
less current maturities
above 207,659 207,659
Total liabilities 432,383 311,798
STOCKHOLDERS' EQUITY
Capital stock issued and outstanding:
Prior cumulative preferred
stock, $5 par value:
Series A (liquidation
preference $1,162,500
and $1,155,000
respectively) 500,000 500,000
Series B (liquidation
preference $1,117,500
and $1,110,000
respectively) 500,000 500,000
Cumulative preferred
stock, $20 par value:
Series A (liquidation
preference $2,809,584
and $2,794,951
respectively) 1,170,660 1,170,660
Series B (liquidation
preference $457,872 and
$455,487 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)
Total stockholders' equity 521,371 525,073
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 953,754 $ 836,871
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
First Quarter Ended
September 30
1997 1996
NET SALES $477,152 $532,263
COST OF SALES 366,662 400,395
Gross profit 110,490 131,868
OPERATING EXPENSES
Selling expense 68,153 59,798
General and administrative expense 44,789 36,853
Total operating expenses 112,942 96,651
Income (loss) from operations (2,452) 35,217
OTHER INCOME (EXPENSE) (2,172) (2,944)
Income (loss) before income taxes (4,624) 32,273
PROVISION (CREDIT) FOR INCOME TAXES (922) 6,435
NET INCOME (LOSS) $ (3,702) $25,838
LOSS PER SHARE $ (.04) $ (.01)
See notes to consolidated condensed financial statements.
CHASE GENERAL CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
First Quarter Ended
September 30
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) for the quarter $ (3,702) $ 25,838
Adjustments to reconcile net
income to net cash used in
operating activities:
Depreciation and amortization 15,228 12,660
Provision for doubtful accounts 1,605 1,605
Effects of changes in
operating assets and liabilities:
Accounts receivable (114,135) (169,902)
Inventory (105,627) (199,163)
Prepaid expenses 30,255 33,603
Accounts payable 102,833 181,374
Accrued liabilities 17,752 14,577
Net cash used in operating
activities (55,791) (99,408)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and
equipment (600) (7,557)
NET DECREASE IN CASH (56,391) (106,965)
CASH, BEGINNING OF QUARTER 141,657 236,316
CASH, END OF QUARTER $ 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 page 8 (not shown) of its 1997 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.
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, 1997 and
June 30, 1997 and the results of its operations and its cash
flows for the first quarter ended September 30, 1997 and 1996.
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
September 30
1997 1996
Net income (loss) $ (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 $ (35,720) $ (6,180)
Weighted average of outstanding
common shares 969,834 969,834
Loss per share $ (.04) $ (.01)
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, 1997 and 1996
Sales - The Company had no unusual transactions for the first
quarter ended September 30, 1997. The Company realized a gross
profit percentage of 23.16% and 24.77% for the first quarter
ended September 30, 1997 and 1996, respectively. Consolidated
net sales for the quarter ended September 30, 1997, of $477,152
were 10% under the $532,263 in 1996's first quarter. No major
customer was lost during this period. However, due to a dispute
on delivery from a year ago, a customer whose sales were $25,000
last year was not given the opportunity to reorder this year. In
addition, another customer overbought candy a year ago and 28% of
the order was returned in a subsequent period. This year their
order reflected the reduced quantity.
Expenses - Selling, general and administrative were 23.67% of
sales in the quarter ended September 30 1997 compared to 18.16%
in the first quarter of 1996. The percentage increase in 1997
resulted primarily from increase in office wages, professional
fees and commissions.
Inventories and accounts payable are higher than at June 30, 1997
since the Company is entering their busy cycle of the year.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, 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 as a result of an increase in inventories
caused by the seasonal build-up.
The officers of the Company and legal counsel continue to discuss
liquidity and capital resource options to resolve the $5 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 dividends in
arrears at September 30, 1997 is $5,547,456.
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, September, 1997.
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, 1997 /s/ Barry M. Yantis
Date Barry M. Yantis
President and Chief Financial
Officer