UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number
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PERFORMANCE INDUSTRIES, INC., AND SUBSIDIARIES
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(Exact name of registrant as specified in its charter)
Ohio 34-1334199
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2425 E. Camelback Road, Suite 620
Phoenix, Arizona 85016
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (602) 912-0100
Indicate by checkmark 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 (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15d of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES X NO
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Number of shares outstanding of each of the issuer's classes of common stock as
of May 2, 1995, 9,958,115 shares.
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
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PART I. FINANCIAL INFORMATION (Unaudited):
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 3
Consolidated Statements of Operations -
Three Months Ended March 31, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II. OTHER INFORMATION:
Item I. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits 11
Signatures 12
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
March 31, 1995 December 31, 1994
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Current Assets:
Cash and cash equivalents ...................................................... $ 1,382 $ 1,142
Restricted cash ................................................................ 2,900 2,900
Accounts and other receivables, net of allowance ............................... 506 584
Receivable from sale of businesses, net of allowance ........................... 1,011 1,024
Factored accounts receivable, net of allowance (Note 3) ........................ 2,083 4,311
Inventories .................................................................... 282 276
Prepaid expenses and other current assets ...................................... 369 201
Assets held for sale ........................................................... 231 231
Deferred income taxes .......................................................... 254 254
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Total current assets ...................................................... 9,018 10,923
Real estate under development ........................................................ 6,398 6,014
Deferred income taxes ................................................................ 1,829 1,829
Property and equipment, net .......................................................... 4,917 4,265
Other assets ......................................................................... 1,045 1,077
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Total assets .............................................................. $ 23,207 $ 24,108
========= =========
Current Liabilities:
Current portion of long-term debt .............................................. $ 4,556 $ 4,394
Accounts payable ............................................................... 907 1,208
Accrued employment costs ....................................................... 441 401
Accrued health & accident costs (Note 4) ....................................... 614 902
Accrued expenses and other current liabilities ................................. 925 982
Factored receivables reserve (Note 3) .......................................... 399 889
Liabilities subject to compromise .............................................. 1,573 1,573
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Total current liabilities ................................................. 9,415 10,349
Long-term debt, less current portion ................................................. 1,825 1,849
Commitments and contingencies
Minority interest .................................................................... 435 416
Shareholders' Equity:
Preferred stock, par value $1.00 per share; authorized
100,000 shares; none issued ............................................... -- --
Common stock, no par value; authorized 20,000,000
shares; 12,629,326 shares issued .......................................... 31,202 31,202
Accumulated deficit ............................................................ (16,719) (16,710)
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14,483 14,492
Treasury stock (2,671,211 and 2,796,211 shares
respectively), at cost .................................................... (2,951) (2,998)
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Total shareholders' equity ........................................... 11,532 11,494
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Total liabilities and shareholders' equity ........................... 23,207 $ 24,108
========= =========
See accompanying notes to consolidated financial statements.
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994
March 31, 1995 March 31, 1994
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Net revenues ............................................................... $ 4,617 $ 4,634
Cost of revenues ........................................................... (3,999) (4,105)
Selling general and administrative expense ................................. (853) (940)
Interest expense ........................................................... (86) (21)
Other, net ................................................................. 333 249
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Earnings (losses) before minority interest ................................. 12 (183)
Minority interest .......................................................... (19) - 0 -
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Income (loss) before income taxes .......................................... (7) (183)
Income taxes ............................................................... (2) 7
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Net Income (loss) .......................................................... ($9) ($190)
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Net income (loss) per common share ......................................... ($0.00) ($0.02)
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Average number of shares outstanding ....................................... 9,958,115 12,072,900
============ ============
See accompanying notes to consolidated financial statements.
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTH PERIODS ENDING MARCH 31, 1994 AND 1993
For the Three Months Ended March 31
1994 1993
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Cash Provided By (Used In) Operating Activities:
Net (loss) ................................................................................... ($ 9) ($190)
Adjustments to reconcile net (loss) to net cash provided by (used in) operating
activities:
Depreciation ............................................................................... 145 64
Amortization of land lease ................................................................. 6 0
(Decrease) in accounts and notes receivable ................................................ 78 (109)
(Increase) in inventories .................................................................. (6) (2)
(Increase) in prepaid and other expenses ................................................... (168) (2)
(Decrease) in accounts payable ............................................................. (301) (29)
Increase (decrease) in accrued employment costs ............................................ 40 (263)
(Decrease) in accrued health and accident costs ............................................ (288) (25)
Increase (decrease) in accrued expenses and other current assets ........................... (25) 346
Increase in minority interest .............................................................. 19 0
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Net cash provided by (used in) operating activities ................................. (509) (210)
Cash Flows from Investing Activities:
Decrease in receivables from sale of businesses, net ....................................... 13 1,093
(Increase) decrease in investment of factored receivables, net ............................. 1,738 (661)
Decrease (increase) assets held for sale ................................................... 0 271
Additions to property and equipment ........................................................ (797) (338)
Increase in real estate under development .................................................. (390) 0
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Net cash provided by (used in) investing activities ................................. 564 365
Cash Flows from Financing Activities:
Repayment of debt .......................................................................... (24) (178)
Proceeds from borrowings ................................................................... 162 0
(Increase) decrease in treasury stock ...................................................... 47 (1,697)
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Net cash provided by (used in) financing activities ................................. 185 (1,875)
Net increase (decrease) in cash and cash equivalents ......................................... 240 (1,720)
Cash and cash equivalents at beginning of period ............................................. 1,142 5,011
Cash and cash equivalents, end of period ..................................................... $ 1,382 $ 3,291
========== ==========
See accompanying notes to consolidated financial statements.
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
(1) Basis of Presentation:
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31, 1995
are not necessarily indicative of the results that may be expected for the year
ended December 31, 1995. For further information, refer to the consolidated
financial statements and footnotes thereto contained herein.
(2) Inventories:
The components of inventories were as follows (in thousands):
March 31, 1995 December 31, 1994
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Restaurant Inventory .............. 282 276
(3) Factored Accounts Receivables:
During the three month period ended March 31, 1995, the Company's factoring
subsidiary had two of its customers, representing almost 50% of its year end
business, obtain alternative financing. Some of the funds have been used by the
Company to invest in its other subsidiary.
(4) Accrued Health and Accident Costs:
Several product liability cases were settled during the three month period ended
March 31, 1995. These were lawsuits from the automotive parts business. The
settlements and related costs were approximately $288,000, which was charged
against a reserve, which had been established for these suits.
(5) Minority Interest
The Company, through its development subsidiary, owns a 71.6% interest in a
limited liability company. The minority interest represents the other 28.4%
ownership in this company.
(6) Contingencies:
An investigation of environmental matters related to facilities and property
owned and leased by the Company was performed to determine contingencies that
could affect the Company's emergence from Chapter 11. Certain reports received
by the Company identified areas of environmental contamination and potential
environmental contamination. Until the completion of testing and evaluation with
respect to all affected sites, the full extent of the contamination and required
clean-up will not be known. Management believes that certain
predecessors-in-interest may bear either full or partial liability for
remediation of affected areas. Certain predecessors-in-interest and governmental
agencies have been notified by the Company of the related possible liabilities.
In addition, the Company has notified its insurance carriers of potential claims
under its general liability and property insurance coverage from prior years.
The Company has not yet determined whether any coverage of these claims exist or
the amount of the coverage.
a. Manufacturing Facility in California
This facility housed the manufacturing plant of the Wheel business. All assets
at this facility have been sold and the buyer vacated the premises in 1993. The
Company has filed a closure plan with the State of California for this facility.
An environmental survey was conducted in the fall of 1991. Two areas for further
investigation were identified. Further investigation in the Spring of 1992
disclosed ground contamination and possible seepage into groundwater. Management
believes the contamination to have existed prior to its purchase of the business
in 1982 and has notified its predecessor-in-interest. The Company has accrued
the estimated minimum remediation cost.
All appropriate county, state, and federal agencies have been notified regarding
contamination at this site. The Company has received request for further
information from a state agency. The Company may, at a later date, be ordered to
undertake further testing and/or remediation at the location.
b. Warehousing and Office Facility in Ohio ("The Facility")
In 1990, potential contamination was discovered at this location. Consultants
were retained to perform testing and investigation of the site to determine the
extent of the contamination. In compliance with bankruptcy statutes, rules and
regulations regarding the dischargeability of claims, in January, 1993, the
Company notified the Ohio Environmental Protection Agency (EPA) of contamination
at the site.
Environmental studies performed determined that the contamination is confined to
the site with no evidence of migration to groundwater or surrounding properties.
The Company believed that a former owner/operator of the site, which is a
Fortune 500 company, caused the contamination. The Company negotiated an
agreement with the former owner/operator regarding indemnification for the costs
of remediation. The agreement required that remediation costs be shared by the
Company, the Fortune 500 company and Echlin. The Company's responsibility with
respect to the agreement was to pay remediation costs and to guarantee payment
of costs by Echlin related to specific clean-up areas pursuant to a "Final
Closure Plan" approved by the Ohio EPA. The "Closure Plan" was approved by Ohio
EPA in February, 1995. The Company incurred approximately $170,000 of costs
related to this clean-up in 1994 and has accrued approximately $100,000 for any
remaining costs at December 31, 1994.
Dissenting Shareholders
The Company filed an appraisal action in the Superior Court for the State of
Arizona County of Maricopa to determine the fair cash value of shares held by
shareholders who dissented to the sale of assets approved at the first
shareholder meeting. Holders of approximately 461,500 shares have appeared in
the appraisal action. The Company believes the fair cash value of the stock to
be the median of the bid and ask price of the stock on the day before the annual
meeting. This was $.685 per share. There has been no reserve established for the
purchase of these shares.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Quarter Ended March 31, 1994 Compared to Quarter Ended March 31, 1995.
PERFORMANCE INDUSTRIES, INC.
The Company's consolidated results of operations for the three months ended
March 31, 1995 were significantly better than for the same period last year. The
net loss in 1995 was only $9,000 as compared to a loss of $190,000 in 1994 on
substantially the same gross revenues. The improvement is a result of reductions
in costs and overhead. Cost of sales was 2.6% better in 1995 than 1994. Selling,
General & Administrative expenses were 9.3% lower this period as compared to the
same period in 1994.
Interest expense more than quadrupled from $21,000 in 1994 to $86,000 in 1995.
The increasing interest expense is related to the real estate development and
long term debt resulting from certain settlements of disputed prior period
liabilities. Some of this interest expense was offset by rents from the
Company's new retail development facility and expanded leases at the facility in
Mexicali, Mexico.
PERFORMANCE RESTAURANTS GROUP, INC.
Revenues
Revenues for the quarter ending March 26, 1995 were $128,000 less than the same
period in 1994. The decrease is attributed primarily to the floods that
devastated California during February and March. The Company also experienced
revenue disruptions caused by its continuing remodeling efforts.
Cost and Expenses
As a percentage of sales, cost of food and beverage decreased to 26.5% for the
quarter ending March 26, 1995 from 27.5% for the same period of 1994. The
continued improvement is attributed to reformulated menus.
Restaurant and administrative expenses were $56,000 less for the three months
ending March 26, 1995 as compared to the same period in 1994. As a percentage of
sales, these expenses for the three months were 73.3% and 72.4% in 1995 and 1994
respectively. The percentage increase is a direct result of lower revenues.
Net Income
Net income was $7,000 more for the three months ending March 26, 1995 as
compared to the same period in 1994.
The sixth Bobby McGee's was remodeled during the quarter, which caused some
disruptions and required temporary closure of the property. Considering the
effect of the construction and the adverse impact of heavy flooding, the ability
to maintain profitability is significant and suggests stronger earnings when
revenues return to previous levels.
Earnings Outlook
The company has substantially completed remodeling the six McGee's restaurants
and continues its efforts to increase customer counts through a commitment to
providing quality food, beverage, service, and entertainment.
On March 16, 1995, the Company acquired its first new restaurant since the Bobby
McGee's acquisition in December of 1993. The restaurant operates under the trade
name Buster's Restaurant Bar & Grill in Scottsdale, Arizona.
PERFORMANCE RESTAURANTS GROUP, INC.
(In Thousands of Dollars)
First Quarter ( ) Unfavorable
variance
1995 1994 1995 vs 1994
---- ---- ------------
Revenues ............................... $4,313 $4,441 ($ 128)
Cost and Expenses:
Cost of Sales .......................... 1,142 1,221 79
Restaurant Expenses .................... 2,848 2,878 30
Administrative Expenses ................ 313 339 26
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Total Cost and Expenses ................ 4,303 4,438 135
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Earnings Before Income Taxes ........... 10 3 7
Provision for Income Taxes ............. 0 0 0
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Net Income ............................. $ 10 $ 3 $ 7
====== ====== ======
Percentage of Total Revenues
First Quarter
1995 1994 1995 vs 1994
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Revenues .................................. 100.0% 100.0% -2.9%
Cost and Expenses:
Cost of Sales ............................. 26.5% 27.5% -1.0%
Restaurant Expenses ....................... 66.0% 64.8% 1.2%
Administrative Expenses ................... 7.3% 7.6% -0.3%
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Total Cost and Expenses ................... 99.8% 99.9% -0.1%
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Earnings Before Income Taxes .............. 0.2% 0.1% 0.1%
Provision for Income Taxes ................ 0.0% 0.0% 0.0%
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Net Income ................................ 0.2% 0.1% 0.1%
===== ===== ===
PERFORMANCE FUNDING
Net revenues and net income for the three months period ended March 31, 1995
were $297,000 and $251,000 respectively. This compares to revenues and net
income of approximately $193,000 and $162,000 for the three months ended March
31, 1994.
The Company's subsidiary had two customers, representing approximately 50% of
its year end invested funds, obtain alternative financing. During the first
three months of 1995, these funds were repaid to the Company for investment in
other subsidiaries. The subsidiary is actively seeking a rediscount line of
credit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's anticipated growth in new restaurants and increased investment in
factoring has been hampered by delays in the completion of its retail
development project. The delay has caused more funds to be invested and for a
longer period of time. This project was expected to be completed by the end of
last year. Two of the five tenants are open and paying rents. The other three
are not expected to open before September. The Company is reviewing offers from
two entities to purchase the entire project.
The Company has been seeking outside financing to fund its restaurant and
factoring short and long term growth. There has recently been interest shown
from several institutions regarding factoring financing. The subsidiary is
almost two years old and has demonstrated gross and net earnings growth every
quarter. Some of this subsidiary's assets have been repaid to the Company, which
will reduce earnings in the next quarter.
The Company continues to market its former manufacturing facility in Mexicali,
Mexico. Within the past few months, new leases and exercises of options from
current tenants puts the facility at almost 100% occupancy.
Management believes short term cash flows from notes receivable and rents from
the Mexicali facility and the retail project, plus earnings from factoring, will
be sufficient to support the Company's normal day-to-day cash needs for the
balance of the fiscal year, but there can be no assurance that it will be.
Long term cash requirements for the Company must be met from outside financing
or the sale of one or both the real estate developments.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
In February, 1995 the Superior Court for the State of Arizona denied the
defendant, Murray & Murray, motion to dismiss for lack of jurisdiction in the
appraisal action brought by the Company as discussed in the Company's report on
Form 10-K for the period ending December 31, 1993.
In April, 1995 the defendants filed a petition for a special action in the Court
of Appeals, Division I, State of Arizona to review the lower court's decision on
the jurisdiction issue. The Court of Appeals will consider this matter on May 9,
1995.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
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.
PERFORMANCE INDUSTRIES, INC. and SUBSIDIARIES
Date: May 12, 1995 /s/ Joe Hrudka
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Joe Hrudka
Chairman of the Board
(Principal Executive Officer)
/s/ James W. Brown
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James W. Brown
Chief Financial Officer
(Principal Accounting Officer)