UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1997
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number __________________
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
---------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1334199
- ------------------------------- ----------------------------
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
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
---------------
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 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 May 12, 1997, is 2,481,264 shares.
1
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
INDEX
PART 1 FINANCIAL INFORMATION (Unaudited) Page
--------------------------------- ----
Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Operations (Unaudited) -
Three Month Period Ended March 31, 1997 and 1996 4
Consolidated Statements of Cash Flows (Unaudited) -
Three month Period Ended March 31, 1997 and 1996 5
Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
PART II OTHER INFORMATION 9
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Item 1 Legal Proceedings
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Item 2 Changes in Securities
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Item 3 Defaults upon Senior Securities
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Item 4 Submission of Matters to a Vote of Security Holders
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Item 5 Other Information
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Item 6 Exhibits and Reports on Form 8-K
- ------------------------------------------
Signatures 10
2
PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(Unaudited)
March 31, 1997 December 31,1996
-------------- ----------------
ASSETS
Current assets:
- ---------------
Cash and equivalents, unrestricted $ 1,146 $ 1,136
Cash, restricted 156 409
Securities available for sale 703 727
Accounts and other receivables,
less allowance for doubtful accounts 632 503
Current Portion of Receivables from sale of businesses,
net of allowance 1,269 1,356
Factored accounts receivable, net of allowance for doubtful accounts 1,254 1,139
Inventories 330 328
Prepaid expenses and other current assets 202 192
Other assets held for sale 206 206
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Total current assets 5,898 5,996
Receivables from sales of businesses, less current portion,
net of allowance 0 119
Investment in real estate 9,391 9,481
Deferred income taxes 1,464 1,460
Property and equipment, net 3,116 3,084
Other assets 1,811 1,831
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TOTAL ASSETS $ 21,680 $ 21,971
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
- --------------------
Current portion of long-term debt $ 548 $ 547
Accounts payable 937 1,000
Accrued employment costs 624 491
Accrued expenses and other current liabilities 1,125 1,339
Factored receivables reserve 327 286
Liabilities subject to compromise 749 754
Foreign tax liability 250 250
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Total current liabilities 4,560 4,667
Long-term debt, less current portion 8,280 8,403
Minority interest 352 371
Shareholders' equity:
- ---------------------
Preferred Stock, par value $1.00 per share; authorized
100,000 shares; none issued 0 0
Common stock, no par value; authorized 5,000,000 shares;
3,157,332 issued; outstanding 2,481,264 and 2,489,530, respectively 31,202 31,202
Accumulated deficit (20,159) (20,139)
Unrealized appreciation on securities available for sale
net of income taxes 421 443
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11,464 11,506
Treasury stock at cost (670,784 and 667,802 shares, respectively) (2,976) (2,976)
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Total shareholders' equity 8,488 8,530
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 21,680 $ 21,971
======== ========
3
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
Three Months Ended March 31
---------------------------
1997 1996
---- ----
Revenues $ 5,821 $ 5,226
Cost of revenues (5,332) (4,709)
Selling, general and administrative expenses (506) (737)
Interest income (expense) (161) (148)
Other income (expenses), net 120 268
Income (loss) on sale of assets 20 (4)
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Gain (loss) from continuing operations before
income taxes and minority interest (38) (104)
Provision for income taxes (1) 7
Minority interest in loss from subsidiary 19 3
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Net Income (loss) $ (20) $ (94)
=========== ===========
Net income (loss) per common share $ (.01) $ (.04)
=========== ===========
Average number of shares outstanding 2,481,264 2,489,530
4
PERFORMANCE INDUSTRIES, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
Three Months Ended March 31
---------------------------
1997 1996
---- ----
Net cash provided by (used in) operating activities $ (151) $ (765)
Cash flows from investing activities:
Decrease (increase) in restricted cash 253 497
Decrease (increase) in receivables from sale of businesses, 206 (13)
net
Purchase of property and equipment (196) (253)
Proceeds from the sale of property and equipment 20 0
Increase in real estate under development 0 (175)
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Net cash provided by (used in) investing activities 283 56
Cash flows from financing activities:
Proceeds from borrowings 0 614
Repayments of borrowings (122) (296)
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Net cash provided by (used in) financing activities (122) 318
Net increase (decrease) in cash and cash equivalents 10 (391)
Cash and cash equivalents at beginning of period 1,136 411
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Cash and cash equivalents at end of period $ 1,146 $ 20
======= =======
Certain reclassifications have been made to the consolidated
statements of cash flows for the three-month periods ended
March, 1996 to conform to the consolidated financial statement
classifications for 1997.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
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PERFORMANCE INDUSTRIES, INC. - CONSOLIDATED
- -------------------------------------------
Revenues increased 11% to $5,821,000 in 1997 from $5,226,000 in 1996. Revenues
reflect the operation of the company's Restaurant and Funding subsidiaries only.
Rental income from the companies investment in real property is reported as
"Other income (expenses), net."
Cost of revenue increased by 13% from $4,709,000 in the first quarter of 1996 to
$5,332,000 for the first quarter of 1997. Cost of revenue as reported includes
only expenses related to the operation of restaurants and is more fully
discussed below.
Selling, general and administrative expenses decreased by 31% from $737,000 for
the first quarter of 1996 to $506,000 for the same period in 1997. This is
attributable to the reduction of management staffing in the Restaurant
subsidiary, a reduction in travel related expenses and a general decrease in
expenses throughout the company.
Interest expense increased by $25,000 for the first three months of 1997 as
compared to the same period the previous year. The increase is a result of the
arranging of third party financing for the LLC managed by the Development
subsidiary. The amount of the third party financing has increased from the
previous year resulting in higher interest costs. This was partially offset by a
decrease in the Company's borrowing and lower interest expense associated
therewith.
Other income (expenses), net decreased by 38% from the first quarter of 1996 to
the comparable period of 1997. This is attributed to the sale of the Company's
Mexicali property in the summer of 1996 and the subsequent reduction of rental
income.
The Company had on a consolidated basis a net loss of $20,000 for the first
quarter of 1997 as compared to a net loss of $94,000 for the same period last
year. The entire loss is attributable to the Company's Development subsidiary as
more fully discussed below.
For accounting purposes on a consolidated basis all of the loss or income from
the Company's Development subsidiary and the Limited Liability Company it
manages are reported on the statement of earnings. There are other members of
the Limited Liability Company owning approximately 28% of the Limited Liability
Company. Their share of the loss or income from the Limited Liability Company is
reflected on the statement of operations as minority interest.
6
Performance Restaurants Group, Inc. (Restaurants)
The total revenue for the Restaurant Group for the first quarter of 1997 was
$5,730,000 as compared to total revenue of $5,044,000 for the same period last
year. The increase is attributable to the net addition of one restaurant unit
for the period as well as a 3% increase in sales for stores open for at least
one year.
Cost of revenues increased for the three month period ending March 31, 1997 to
$5,332,000 from $4,709,000 for the same period last year. Part of the increase
is attributable to the increase in sales. Certain costs are variable with the
amount of sales such as food costs and labor. On a percentage basis these costs
did not materially increase or decrease. There was also a net increase in the
number of stores open during the period increasing the rents paid during the
period.
Restaurants reported net income of $221,067 for the first quarter of 1997 as
compared to a loss of $11,000 for the same period last year. The increase is
attributable to a rise in sales and better cost control measures instituted
during the year.
Management believes that the cost control measures it has instituted as well as
the addition of new stores will allow the Restaurant division to show greater
profit throughout the year, however, there can be no assurance that the
Restaurant division will continue to generate net profits on a quarterly or
annual basis.
Performance Funding, Corp. (Funding)
Gross revenues and net income for the first quarter of 1997 were $95,000 and
$46,000 respectively as compared to $168,000 and $78,000 for the same period
last year. A decrease of 43% and 39% respectively.
Gross revenues were down as a result of a decrease in the amount of funds
invested in the factoring of accounts. Due to increased competition from banks
and other factoring companies, Funding has a decrease in the number of clients
and accounts receivable financed. Funding has lost a major account after the end
of the first quarter which will result in lower gross and net revenues for the
second quarter of 1997. The company is seeking new clients.
Performance Camelback Development, Inc. (Development)
Revenue for Development decreased 14% for the first quarter of 1997 as compared
to the same period last year. The decrease is attributable to a decrease in
percentage rent paid by one tenant based on its gross sales.
Interest expense for the Development increased by $45,000 for the first quarter
of 1997 as compared to the same period the previous year. The increase is a
result of increased borrowing from a third party to provide longer term
financing for the project. The funds were used to repay the parent company loans
made to the subsidiary as well as to pay off previous financing.
7
The Development subsidiary had a net loss of $66,000 for the first quarter of
1997 as compare to a net loss of $10,000 for the same period last year. Most of
the increase in the loss is attributable to third party financing costs.
LIQUIDITY AND CAPITAL RESOURCES -
The Company has sufficient cash reserves for operations through the rest of the
year. Management believes, but there can be no assurance, that Restaurants will
generate sufficient cash flow for day to day operations. If additional
restaurant units are to be added, the Company would have to provide any cash
required for the purchase.
Management believes that the Development subsidiary will need additional cash to
meet expenses over the balance of the year. The short fall is expected to be
approximately $150,000.
The restriction of sale of the securities in Western Pacific Airlines, Inc.
owned by the Company, should soon be released. This stock could be sold to raise
additional funds if necessary for continuing operations.
The Company has not accrued for the cost of purchasing the dissenting
shareholders' stock. The court has appointed two appraisers to determine the
fair market value of the stock as of December 2, 1993, the day before the
transaction from which they dissented. The court has asked for a report from the
appraisers on or before June 30, 1997. Assuming the appraisals are received in
time, the court could issue an order determining the value of the shares in the
third quarter of 1997. The company would be required to pay for the shares
within 30 days of the order. The dissenting shareholders own approximately
460,000 pre-split shares. The company believes the fair market value of said
shares to be approximately $350,000.
8
Part II Other Information
Item 1 Legal Proceedings
On May 5, 1997, the Superior Court for the County of Maricopa
State of Arizona appointed two appraisers to prepare a market
valuation report for Performance Industries, Inc. stock as of
December 2, 1993, to determine the fair market value of the
stock of the dissenting shareholders who are parties in the
Action Performance Industries, Inc. v. Ecco Sales, et. al,. as
previously reported.
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
9
SIGNATURES
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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 13, 1997 /s/ Joe Hrudka
-----------------------------
Joe Hrudka
Chairman of the Board
(Principal Executive Officer)
/s/ Ed Fochtman
-----------------------------
Ed Fochtman
Chief Financial Officer
(Principal Accounting Officer)
10