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 September 30, 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
----------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1334199
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2425 E. Camelback Road, Suite 620
Phoenix, Arizona 85016
- --------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (602) 912-0100
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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
---- ----
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
---- ----
Number of shares outstanding of each of the issuer's classes of common stock as
of October 2, 1995, 9,958,115 shares.
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
Page
----
PART I. FINANCIAL INFORMATION (Unaudited):
---------------------------------
Consolidated Balance Sheets -
September 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations (Unaudited) -
Nine Month Period Ended September 30, 1995 and 1994 4
Consolidated Statements of Operations (Unaudited) -
Three Month Period Ended September 30, 1995 and 1994 5
Consolidated Statements of Cash Flow (Unaudited) -
Nine Month Period Ended September 30, 1995 and 1994 6
Notes to Consolidated Financial Statements (Unaudited) 7 - 8
Management's Discussion and Analysis of Financial 9 - 12
Condition and Results of Operations
PART II. OTHER INFORMATION:
-----------------
Item I. Legal Proceedings 13
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Item 2. Changes in Securities 13
- -----------------------------
Item 3. Defaults upon Senior Securities 13
- ---------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders 13
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Item 5. Other Information 13
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Item 6. Exhibits and Reports on Form 8-K 13
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Signatures 14
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(Unaudited)
Sept. 30, 1995 Dec. 31, 1994
-------------- -------------
Current Assets:
- --------------
Cash and cash equivalents $ 238 $ 1,142
Restricted cash (Note 3) 1,790 2,900
Accounts and notes receivables, net 524 584
Receivable from sale of businesses, net 718 1,024
Factored receivables (Note 4) 2,107 4,311
Inventories 256 276
Prepaid expenses (Note 5) 633 201
Other current assets 466 485
--------- ---------
Total current assets 6,732 10,923
Deferred income taxes 1,829 1,829
Property and equipment, net 4,879 4,265
Real Estate under development (Note 6) 8,725 6,014
Other assets, net 891 1,077
--------- ---------
TOTAL $ 23,056 $ 24,108
========= =========
Current Liabilities:
- -------------------
Current portion of long-term debt (Note 8) $ 5,718 $ 4,394
Accounts payable 825 1,208
Factored receivables reserve 515 889
Accrued employment costs 413 401
Accrued product liability (Note 7) 531 902
Accrued expenses and other
current liabilities 1,263 982
Liabilities subject to compromise (Note 9) 486 1,573
--------- ---------
Total current liabilities 9,751 10,349
Long-term debt, less current portion 1,635 1,849
Commitments and contingencies -- --
Minority interest 465 416
Shareholder's Equity:
- --------------------
Common stock, no par value; authorized
20,000,000 shares; issued 12,629,326 shares 31,202 31,202
Accumulated deficit (17,046) (16,710)
--------- ---------
14,156 14,492
Treasury stock (2,671,211 and 2,796,211 shares) (2,951) (2,998)
--------- ---------
Total shareholders' equity 11,205 11,494
--------- ---------
$ 23,056 $ 24,108
========= =========
See accompanying notes to consolidated financial statements.
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
Nine Months Ended Sept. 30,
---------------------------
1995 1994
---- ----
Net revenues $ 14,607 $ 13,577
Cost of revenues (13,257) (11,938)
Selling, general, and administrative expense (2,421) (2,791)
Interest (expense) income 285 323
Other income 509 369
Gain (loss) on sale of assets (2) 93
------------ ------------
Loss before income taxes and minority interest (279) (367)
Provision for income taxes (9) (20)
Minority interest in earnings (48) --
------------ ------------
Earnings (losses) before income tax (336) (387)
Income from discontinued operations -- 90
------------ ------------
Net loss $ (336) $ (297)
============ ============
Loss per common share:
- ---------------------
Continuing operations $ (.03) $ (.04)
Discontinued operations -- .01
------------ ------------
Net loss per common share (.03) $ (.03)
============ ============
Average number of shares outstanding 9,958,115 10,635,845
============ ============
See accompanying notes to consolidated financial statements.
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 1995 AND 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
Three Months Ended Sept. 30,
----------------------------
1995 1994
---- ----
Net revenues $ 4,779 $ 4,414
Cost of revenues (4,508) (3,775)
Selling general and administrative expense (793) (886)
Interest income 289 215
Other income 17 25
Gain loss on sale of assets (2) --
----------- -----------
Loss before income taxes and minority interest (218) (7)
Provision for income taxes (4) (6)
Minority interest in earnings (14) --
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Loss from continuing operations (236) (13)
Income from discontinued operations -- --
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Net loss $ (236) $ (13)
=========== ===========
Loss per common share:
- ---------------------
Continuing operations $ (.02) $ (--)
Discontinued operations -- --
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Loss per common share $ (.02) $ (--)
=========== ===========
Average number of shares outstanding 9,958,115 9,821,190
=========== ===========
See accompanying notes to consolidated financial statements.
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(DOLLARS IN THOUSANDS)
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
Nine Months Ended Sept. 30
--------------------------
1995 1994
---- ----
Net cash (used in) operating activities $ (1,682) $ (1,280)
Cash Flows from Investing Activities:
- ------------------------------------
Decrease in restricted cash 1,110 --
Decrease in receivables from sale of businesses, net 539 3,326
(increase) decrease in investment of factored
receivables, net 1,830 (2,282)
Decrease (increase) assets held for sale 19 2,812
Additions to property and equipment (1,166) (1,095)
Increase in real estate under development (2,711) (4,499)
--------- ---------
Net cash provided by (used in) investing activities (379) (1,738)
Cash Flows from Financing Activities:
Repayment of debt (140) (1,032)
Proceeds from borrowings 1,250 3,206
(Increase) decrease in treasury stock 47 (1,765)
--------- ---------
Net cash provided by (used in) financing activities 1,157 409
Net (decrease) in cash and cash equivalents (904) (2,609)
Cash and cash equivalents at beginning of period 1,142 5,011
--------- ---------
Cash and cash equivalents at end of period $ 238 $ 2,402
========= =========
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
footnote disclosure required by generally accepted accounting principles for
complete financial statements. These interim consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes included in the Company's 1994 Form 10-K filing. 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
nine month period ended September 30, 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):
September 30, 1995 December 31, 1994
------------------ -----------------
Restaurant Inventory 256 241
(3) Restricted Cash:
---------------
The $1,110,000 decrease from year end is a result of construction draws for the
Hard Rock Cafe. Another $790,000 will be distributed to Hard Rock during the 4th
quarter. The remaining $1,000,000 is collateral being held by Norwest Bank,
which will be released over the next nine to twelve months based upon formulas
negotiated with the lending officers.
(4) Factored Accounts Receivables:
-----------------------------
During the six month period ended June 30, 1995, the Company's factoring
subsidiary had two of its customers, representing almost 50% of its year end
business, obtain alternative financing. During the three month period ended
September 30, 1995, customer funding decreased an additional $321,000. Some of
these funds have been used by the Company to invest in its other subsidiaries.
(5) Prepaid Expenses:
----------------
Prepaid expenses at September 30, 1995 include payments for commissions for new
leases negotiated for the Company's Mexicali facility and fees incurred to
obtain a line of credit for the Company's factoring subsidiary. These prepaid
expenses will be amortized over the life of the leases and credit line
respectively.
(6) Real Estate Under Development:
-----------------------------
The Company has two projects under development.
Camelback Plaza, a 50,000 square foot commercial retail center, will be
completed this year. Completion costs in addition to the $790,000 from
restricted cash are estimated to be $300,000.
The Company has land in Ixtapa, Mexico and has completed design work to build
condominiums. This project has been put on hold, however, until the Mexican
economy becomes settled.
(7) Accrued Product Liability:
-------------------------
During the nine months ending September 30, 1995, the Company settled several
product liability cases. The settlement amounts have not been materially
different from that which was accrued for at year end.
(8) Long Term Debt:
--------------
The Company obtained construction and mini-perm financing in the amount of
$4,900,000 from Caliber Bank. Caliber was acquired by Norwest Bank early in
1995. The loan officers with Norwest wish to change the terms of the original
financing. The Company has been negotiating with Norwest to prepare new
documents. Until these new documents are final, all debt due under this
financing has been classified as short term for both periods ending December 31,
1994 and September 30, 1995.
(9) Liabilities Subject to Compromise:
---------------------------------
The Company agreed to a settlement of one of the remaining disputed debts
related to its former operation of a manufacturing facility in California. The
$750,000 settlement was not materially different from that which was reserved
for at year end. Some cash was paid during the six months ended September 30,
1995 and the balance was reclassified to other current liabilities. This
settlement requires $50,000 a month payments through March 1996.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
PERFORMANCE INDUSTRIES, INC. - CONSOLIDATED
- -------------------------------------------
Results of Operations - Consolidated
- ------------------------------------
The Company's results of operation for the three months ended September 30, 1995
were a loss of $236,000 versus a loss of only $13,000 for the same period in
1994. Revenues increased $365,000 or 8% while cost of revenues increased
$733,000, a 19% increase. The revenues increase and some of the cost increases
are a result of the purchase of Buster's Restaurant Bar and Grill in March of
1995. The remaining increase in cost of revenue is related to continued heavy
advertising and a renewed commitment to training restaurant unit personnel.
Corporate selling, general, and administrative expenses continues to show
improvement. These expenses were $93,000 and $370,000 less for the three and
nine month periods ended September 30, 1995 as compared to the same periods in
1994. The percentage improvement is 10% and 15% respectively.
Earnings Outlook
- ----------------
Over the next six to nine months, earnings from the Company's restaurant and
factoring subsidiaries should absorb administrative expenses related to the
parent. The Company does not expect either significant earnings or losses from
period to period.
The Company plans to open its first new Bobby McGee's in Las Vegas, Nevada early
in 1996. A lease has been signed and some remodeling work begun. Depending upon
the results from the opening of this new restaurant and provided funds are
available from the pending sale of the Camelback Plaza project, the Company
plans to open other restaurants in cities where the Bobby McGee's concept has
never been.
PERFORMANCE RESTAURANT GROUP, INC.
- ---------------------------------
Revenues
- --------
Revenues for the quarter ended September 24, 1995 were $443,000 more than the
same period in 1994. Revenues for the nine months ended September 24, 1995 were
$993,000 more than the same period in 1994. The increase is the result of the
acquisition of a new restaurant operating under the trade name Buster's
Restaurant Bar & Grill.
Cost and Expenses
- -----------------
As a percentage of sales cost of goods sold was 27.7% and 27.7% for the three
and nine months ended September 24, 1995, as compared to 25.2% and 26.5% for the
same period last year.
The percentage increase is attributed to current beverage promotions and the
upgrading of our meat specifications to ensure the highest quality of steak and
beef products throughout the entire chain.
Restaurant and general administrative expenses as a percentage of sales was
77.0% and 74.7% for the three and nine months ended September 24, 1995, as
compared to 72.5% and 72.8% for the same periods last year. The percentage
increase is a result of several factors including an increase in depreciation
expense, labor, and advertising cost. Depreciation is up due to the extensive
reinvestment in the physical plant and decor of the restaurants. Labor increases
are a result of the company's renewed commitment to training unit level
personnel and hiring experienced management staff. The company is also
conducting several aggressive advertising campaigns aimed at exposing customers
to the "New Bobby McGee's".
Net Income
- ----------
The restaurant division recorded a net loss of $219,000 and $331,000 for the
three and nine months ended September 24, 1995, as compared to net income of
$93,000 and $100,000 for the same periods in 1994. The losses are attributable
to the reinvestment in the facilities, training, advertising, and to the
seasonality of Buster's Restaurant Bar & Grill located in Scottsdale, Arizona.
Earnings Outlook
- ----------------
The Company has made a substantial commitment to training personnel,
advertising, and maintaining beautiful facilities, all of which are expected to
increase the long term profitability of the organization.
Performance Restaurant Group, Inc. (Dollars in $1,000)
Third Quarter
-----------------
( ) Unfavorable variance
1995 1994 1995 vs 1994
------ ------ ------------
Revenues $ 4,574 $ 4,131 $ 443
Cost and Expenses:
- -----------------
Cost of Sales 1,269 1,041 (228)
Restaurant Expenses 3,226 2,728 (498)
Administrative Expenses 298 269 (29)
--------- --------- -------
Total Cost and Expenses 4,793 4,038 (755)
--------- --------- -------
Earnings before Income Taxes (219) 93 (312)
Provision for Income Taxes 0 0 0
--------- --------- -------
Net Income $ (219) $ 93 $ (312)
========= ========= =======
Percentage of Total Revenues
Third Quarter
----------------------------
( ) Unfavorable variance
1995 1994 1995 vs 1994
------ ------ ------------
Revenues 100.0% 100.0% 10.7%
Cost and Expenses:
- -----------------
Cost of Sales 27.7% 25.2% 2.5%
Restaurant Expenses 70.5% 66.0% 4.5%
Administrative Expenses 6.5% 6.5% 0.0%
--------- --------- ----
Total Cost and Expenses 104.8% 97.7% 7.1%
--------- --------- ----
Earnings before Income Taxes (4.8%) 2.3% (7.1%)
Provision for Income Taxes 0.0% 0.0% 0.0%
--------- --------- ----
Net Income (4.8%) 2.3% (7.1%)
========= ========= ====
Performance Restaurant Group, Inc. (Dollars in $1,000)
Nine Months Ended September 24, 1995
------------------------------------
( ) Unfavorable variance
1995 1994 1995 vs 1994
------ ------ ------------
Revenues $ 13,829 $ 12,896 $ 933
Cost and Expenses:
- -----------------
Cost of Sales 3,827 3,411 (416)
Restaurant Expenses 9,402 8,505 (897)
Administrative Expenses 931 879 (52)
--------- --------- --------
Total Cost and Expenses 14,160 12,795 (1,365)
--------- --------- --------
Earnings before Income Taxes (331) 101 (432)
Provision for Income Taxes 0 1 1
--------- --------- --------
Net Income $ (331) $ 100 $ (431)
========= ========= ========
Percentage of Total Revenues
Nine Months Ended September 24, 1995
------------------------------------
( ) Unfavorable variance
1995 1994 1995 vs 1994
------ ------ ------------
Revenues 100.0% 100.0% 7.2%
Cost and Expenses:
- -----------------
Cost of Sales 27.7% 26.5% 1.2%
Restaurant Expenses 68.0% 66.0% 2.0%
Administrative Expenses 6.7% 6.8% (0.1%)
--------- --------- ----
Total Cost and Expenses 102.4% 99.2% 3.2%
--------- --------- ----
Earnings before Income Taxes (7.2%) 2.4% (9.6%)
Provision for Income Taxes 0.0% 0.0% 0.0%
--------- --------- ----
Net Income (7.2%) 2.4% (9.6%)
========= ========= ====
PERFORMANCE FUNDING
- -------------------
Net revenues and income for the nine month period ending September 30, 1995 were
$716,000 and $452,000 respectively. This compares to revenues of $681,000 and
earnings of $554,000 for the same period in 1994. The percentage of earnings to
gross revenues was 81% in 1994 and only 60% in 1995. This decrease in net
earnings is attributed to the subsidiary being charged interest by the parent in
1995. The interest charged for the nine months ended September 30, 1995 was
$101,000.
In July of 1995, Performance Funding negotiated a $2,000,000 line of credit
which is guaranteed by the parent. The term is for two years and the primary
covenant is that net equity in the subsidiary will equal or exceed $1,000,000.
At September 30, 1995, the subsidiary's equity was $1,290,000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the nine month period ended September 30, 1995, the Company's cash
decreased $904,000. Short term liabilities, net of the short term portion of
long term debt, were reduced by $1,500,000. Significantly about $1,200,000 or
80% of these liabilities were non-recurring pre-petition claims settled during
the period.
The Company has been focusing its attention upon expanding and improving its
financing and restaurant business segments. The efforts have been hampered by
the Company's investment in its Camelback Plaza retail development. The project
has taken more time and cash investment than management originally anticipated.
At September 30, 1995 the Company had more than $4,000,000 invested in the
project, over $3,000,000 of which is a loan from the Company to the development
subsidiary. As of this filing, the subsidiary has signed a letter of intent to
sell the project and is working on a definitive purchase agreement with a
closing to be on or before December 31, 1995. As a backup to the sale, the
Company is attempting to obtain a long term financing commitment, which would
return most of the capital invested in the project.
In May of 1994, the Company invested $250,000 to buy 125,000 shares of a new
airline operation, Western Pacific Air, Inc. Western Pacific Air plans to go
public this year. The Company is offering to sell up to 50,000 of its shares in
the initial offering.
Throughout 1994 and the first nine months of 1995 the Company has been
reinvesting rental income from its Mexicali, Mexico facilities in environmental
cleanup and tenant improvements at the site. The current rent roll provides for
gross rents of over $700,000 and net income of approximately $550,000 per year.
While the Company has been actively marketing the property for sale, management
is reconsidering a sale and may decide to further develop the property until
Mexico's economy recovers. The Company has also been seeking financing using the
facility as collateral.
Management believes, but there can be no assurance, that one or more of the
above opportunities will take place before year end, any one of which will
finance the Company's capital requirements well into next year. In the unlikely
event none are completed by year end, the Company may face a liquidity concern.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
- -------------------------
As previously discussed in the report on Form 10-Q for the period ending June
30, 1995, the defendant in the matter entitled Performance Industries, Inc. v.
Murray & Murray, et al filed an appeal to the Supreme Court of the State of
Arizona appealing the Court of Appeals' decision upholding the lower court's
finding of jurisdiction over the defendants. The Supreme Court summarily decided
to appeal upholding the Court of Appeals' decision in October 1995.
The defendants have filed a petition seeking a stay of proceedings in State
Court while they petition the United States Supreme Court for a Writ of
Certiorari. A stay of 30-90 days is expected to be granted.
The parties in the action filed by the Richter Family Trust against the Company
and unrelated third parties, as reported in the Company's report on form 10-Q
for the period ending June 30, 1995, has been stayed by stipulations of the
parties. The stay will allow for further testing at the site to determine the
extent of possible remediation prior to proceeding with discovery in the action.
Item 2. Changes in Securities
- -----------------------------
None
Item 3. Defaults upon Senior Securities
- ---------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
The Company held its annual meeting on June 5, 1995 at which the Board of
Directors was reelected to serve for one year and employment of Toback CPA's as
auditors was approved.
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: November 13, 1995 /s/ Joe Hrudka
-----------------------------
Joe Hrudka
Chairman of the Board
(Principal Executive Officer)
/s/ James W. Brown
-----------------------------
James W. Brown
Chief Financial Officer
(Principal Accounting Officer)