SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED COMMISSION FILE
SEPTEMBER 30, 1995 NO. 0-4766-3
JERRY'S, INC.
A Florida Corporation - I.R.S. No. 59-1060780
1500 North Florida Mango Road
Suite 19
West Palm Beach, Florida 33409
Registrant's Telephone Number:
(407) 689-9611
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.04 PER SHARE
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to the
filing requirements for the past 90 days:
Yes [ ] No [X]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
State the aggregate market value of the voting stock (which consists solely of
shares of common stock) held by non-affiliates of the registrant: The registrant
is unable to calculate this amount because there is no established trading
market for its common stock.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date (September 30, 1995): 562,422
shares of Common Stock, par value $.04 per share.
TABLE OF CONTENTS
PAGE
PART I
ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 9
ITEM 3. LEGAL PROCEEDINGS 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE 12
OF SECURITY HOLDERS
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON 15
EQUITY AND RELATED STOCKHOLDER
MATTERS
ITEM 6. SELECTED FINANCIAL DATA 16
ITEM 7. MANAGEMENT'S DISCUSSION AND 17
ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL
CONDITION
ITEM 8. FINANCIAL STATEMENTS AND SUPPLE- 21
MENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS 21
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS 22
OF THE REGISTRANT
Incorporated by reference to Registrant's
1996 Information Statement to be filed
with the Securities and Exchange Commission
ITEM 11. EXECUTIVE COMPENSATION 22
Incorporated by reference to Registrant's
1996 Information Statement to be filed
with the Securities and Exchange Commission
ITEM 12. SECURITY OWNERSHIP OF CERTAIN 22
BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to Registrant's
1996 Information Statement to be filed
with the Securities and Exchange Commission
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 22
TRANSACTIONS
Incorporated by reference to Registrant's
1996 Information Statement to be filed
with the Securities and Exchange Commissions
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT 23
SCHEDULES AND REPORTS ON FORM 8-K
PART I
ITEM 1. BUSINESS
GENERAL.
JERRY'S, INC., a Florida corporation, and its subsidiaries
(collectively, the "Company"), cater airline flights and operate coffee shops,
lounges and gift shops at airports and other facilities located in Florida,
Alabama and Georgia. For the 1995 fiscal year, the Company's airline catering
sales were approximately $13,401,000 compared to $8,126,000 in sales for the
Company's restaurants, coffee shops, lounges, gift shops and other facilities.
The Company's airline catering services include the preparation of
meals in kitchens located at or adjacent to airports and the distribution of
meals and beverages for service on commercial airline flights. The Company also
provides certain ancillary services, including, among others, the preparation of
beverage service carts, the unloading and cleaning of plates, utensils and other
accessories arriving on incoming aircraft, and the inventory management and
storage of airline-owned dining service equipment.
SALE OF MIAMI AND ORLANDO OPERATIONS.
In February 1995, the Company sold its Miami and Orlando airline
catering operations. These operations represented a significant percentage of
the Company's revenues. See "Item 7-Management's Discussion and Analysis of
Results of Operations and Financial Condition."
THE AIRLINE CATERING INDUSTRY.
GENERAL. Almost all commercial airline flights that exceed 60 minutes
offer some form of food or beverage service. Two distinct groups of caterers
supply airlines with the food and beverages served on such flights. Independent
caterers such as the Company, which are not affiliated with any airline and
offer to serve all airlines, and captive caterers, which are owned by an airline
and which serve primarily that airline at selected locations.
Airlines generally enter into commitments for catering services
covering one or more airports rather than on a system-wide basis. Accordingly, a
caterer typically competes for the business of all airlines at the airports
where the caterer is located. The principal independent caterers have kitchens
at most of the major U.S. airports, and, in general, two or more caterers
compete for
-1-
the non-captive business at most airports.
Most catering contracts are short-term and typically have termination
clauses that allow cancellation for nonperformance and other reasons. The
Company believes that, in practice, catering contracts generally are rescinded
only for material breaches or repeated failure to provide adequate service.
Although no assurances can be given that existing airline contracts will not be
terminated or will be renewed, the Company's experience has been that airlines
typically maintain stable relationships with their caterers. Favorable
experience on prior contracts, capacity constraints at airports and the cost of
changing caterers are among the factors contributing to the continuity of a
caterer's business.
OPERATING PERFORMANCE DISTINCT FROM AIRLINE PROFITABILITY. The
Company's revenues are dependent upon the number of passengers who travel on
airlines, the number of airline flights serviced by the Company and the level of
meal service provided by the airlines to their passengers. Factors that may
affect the profitability of an airline carrier, such as fare wars and high fixed
costs, generally do not adversely affect the Company's catering revenues, unless
the cumulative effect of such factors is to cause the airline to reduce its
level of meal service to its passengers or to curtail or cease flight
operations.
The Company's airline catering operations have been supported for many
years by the consistent growth in airline passengers to the Florida market. This
growth is expected to continue for at least another decade. The positive impact
of this growth has been offset by the adverse effect of losses incurred by
airlines during the last few years, largely as a result of high fixed-costs and
excess capacity. As a result of these losses, U.S. airlines have implemented
modifications to in-flight service levels, such as downgrading of food service
and changing airline policies regarding flight segments that are eligible for
food service. Downgrading of food service has included, among other things,
switching from hot meal service to a snack service and eliminating individual
tray service in favor of "bulk" meal service.
PRINCIPAL CUSTOMERS.
The Company's airline catering customers consist of a wide variety of
U.S. and international carriers. During the 1995 fiscal year, the Company's
major customers were U.S. Air (which accounted for 24% of total sales), Air
Canada (which accounted for 5% of total sales), KIWI (which accounted for 6%),
and Continental (which accounted for 5% of total sales). No other customer
represented more than 5% of the Company's total sales during 1995.
-2-
CATERING OPERATIONS.
GENERAL. The Company's catering operations are conducted out of flight
kitchens located at or near to airports. The right to construct and operate the
kitchens typically is obtained through concession or lease agreements with local
airport authorities. The Company's flight kitchens essentially are large
processing and storage facilities in which bulk foods are prepared and assembled
into individual meals in accordance with airline specifications and loaded onto
the Company's trucks, which transport the meals to outgoing aircraft. Ancillary
services include the preparation of beverage service carts, the unloading and
cleaning of plates, utensils and other accessories arriving on incoming aircraft
and the inventory management and storage of airline-owned dining service
equipment. Some of the Company's kitchens also service restaurants and coffee
shops located in the airline terminals.
The terms of food service contracts with airlines vary. In general, an
airline specifies a menu and the Company purchases and prepares the food in
accordance with the airline's specifications. The prepared food is then
delivered to the aircraft designated by the airline, along with plates, utensils
and other accessories owned by the airline.
In general, the kitchens owned or operated by the Company are managed
on a day-to-day basis by general managers, who report to the Company's
president.
KITCHEN FACILITIES. The size and structure of the Company's kitchens
vary depending upon the number of meals to be produced by each kitchen. Kitchens
and related facilities generally range in size from 7,000 to 25,000 square feet
and operate 20 to 24 hours a day.
In general, approximately half of the space in a kitchen is utilized
for the storage of food, beverages and airline-owned equipment. The remaining
space is used for the preparation of meals and related purposes. A kitchen
typically is equipped with ovens, steam kettles, exhaust equipment,
refrigerators, freezers, ice machines, holding tanks for maintaining the
temperature of prepared meals, rolling stock used to move food and equipment
during the production process and other miscellaneous equipment.
PURCHASE OF FOOD AND BEVERAGES. The Company purchases its food,
beverages and supplies in bulk. In connection with such purchases, the Company
typically receives a volume discount and believes that it can obtain food and
beverages at comparable prices from other sources.
-3-
The Company generally does not purchase liquor for the flights it
serves. The airlines ordinarily purchase the liquor, which the Company stores
until used. In addition, airlines sometimes purchase non-alcoholic beverages for
the Company to store and use.
The Company orders non-perishable food and beverages approximately two
to three weeks in advance of expected use. Although U.S. airlines may change
menus as often as every seven days according to a pre-determined seasonal cycle,
these changes usually are known in advance. This allows the Company to keep its
inventory (including its inventory of canned goods) at a low level and to
minimize waste.
PREPARATION OF MEALS. Approximately 24 hours in advance of a scheduled
flight, the airline provides a preliminary count of the number of meals required
to service the flight. At this time, depending on the menu items, production of
the meals may begin. A revised count is submitted three to eight hours before
the scheduled departure, and the final order is placed two to four hours before
departure. Entrees are usually prepared 24 hours in advance and are prepared to
meet applicable FDA requirements. Salads and other items generally are prepared
three to eights hours in advance. Most food is placed on board the plane in a
chilled state and then, if necessary, heated in a convection oven on board.
DELIVERY TO AIRCRAFT. Food and beverages are dispatched to aircraft in
special purpose catering vehicles shortly before the scheduled departure. The
number and size of vehicles dispatched and the lead time depend upon the number
of meals to be loaded, the galley equipment design and the extent of congestion
in the loading areas. The vehicles are designed to elevate the trunk box to the
appropriate level of the aircraft being serviced. The Company may dispatch as
many as three vehicles for a large aircraft, while short flights are usually
serviced by one vehicle. Sometimes a vehicle may carry food and beverages for
two to three flights if narrow-bodied airplanes are being serviced.
COMPETITION.
The Company confronts strong competition in the airline catering
business. Several large caterers, as well as a number of small caterers
operating at one or more locations, compete for airline catering contracts. The
Company competes primarily with other independent caterers. The Company's
principal independent competitors in its market area are CaterAir International
(formerly Marriott In-Flight Services), Sky Chefs, Inc. and Dobbs International
Services, Inc.
-4-
PRINCIPAL COMPETITORS AS OF 9/30/95
THE FOLLOWING TABLE SETS FORTH THE COMPANY'S PRINCIPAL COMPETITORS:
PRINCIPAL
AIRPORT COMPETITORS
- ------- -----------
Mobile, AL Sky Chefs
Montgomery, AL None
Daytona Beach, FL None
Ft. Lauderdale, FL CaterAir, Dobbs
Ft. Walton Beach, FL None
Gainesville, FL None
Melbourne, FL None
West Palm Beach, FL CaterAir
Pensacola, FL None
Sarasota, FL Dobbs
St. Petersburg, FL CaterAir
Tallahassee, FL None
Tampa, FL CaterAir, Dobbs
Augusta, GA None
- -----------------------
Note: CaterAir was subsequently acquired by Sky Chefs.
-5-
OTHER AIRPORT BUSINESS.
In addition to airline catering, the Company operates restaurants,
coffee shops, lounges, restaurants and gift shops at 16 airports. It also
provides private catering from some of its flight kitchens. The Company's
restaurants, coffee shops, lounges and gift shops are all located in airline
terminals.
The Company's revenues for these facilities is directly dependent on
the number of airline passengers who pass through each of the airports. Although
the airline industry has suffered significant losses since 1990, the number of
passengers has continued to increase at most of the airports served by the
Company. The principal exception is Tallahassee, which has suffered a decline in
traffic due to cutbacks in travel spending by the State of Florida.
SUMMARY OF CURRENT AIRPORT OPERATIONS.
The table on the following page summarizes the Company's airport
operations as of September 30, 1995:
-6-
DESCRIPTION OF AIRPORT OPERATIONS
SEPTEMBER 30, 1995
COFFEE COCKTAIL GIFT IN-FLIGHT
AIRPORT RESTAURANT SHOP(S) LOUNGE(S) SHOP CATERING
------- ---------- ------- --------- ---- ---------
Mobile, AL X X X
Montgomery, AL X X X X
Daytona Beach, FL X X X
Ft. Lauderdale, FL X
Ft. Myers, FL X X X
Ft. Walton Beach, FL X X X X
Gainesville, FL X X X X
Melbourne, FL X X X X
West Palm Beach, FL X
Pensacola, FL X X X
Sarasota, FL X
St. Petersburg, FL X X X
Sanford, FL (1) X X
Tallahassee, FL (2) X X X
Tampa, FL X
Augusta, GA X X X X
- -----------------------
(1) This facility opened in the spring of 1996.
(2) The Company discontinued operations in Tallahassee in the fall
of 1996.
-7-
BARBECUE RESTAURANT.
The Company operates a barbecue restaurant in the Royal Palm Beach
Shopping Plaza, Royal Palm Beach, Florida.
SEASONALITY.
The Company's sales are directly related to the number of airline
passengers in Florida. Sales ordinarily reach their peak during the winter
tourism season (December through April).
FINANCIAL INFORMATION WITH RESPECT TO INDUSTRY SEGMENTS.
Specific financial information with respect to the Company's industry
segments is provided in Note F to the Consolidated Financial Statements.
EMPLOYEES.
At September 30, 1995, the Company employed 370 persons, of whom 340
were kitchen employees and 35 were managerial and administrative personnel. The
Company believes that it provides working conditions and wages which compare
favorably with those offered by its competitors and by businesses which compete
with the Company for labor in the geographic areas in which it operates. The
Company believes that its relations with its employees are satisfactory.
The Company has a profit-sharing plan (covering its employees who meet
certain length of service requirements). The aggregate amount set aside for all
employees, including officers, for the 1995 fiscal year was $25,000. The Company
has a group term life and hospitalization insurance plan available to all
salaried employees and certain hourly employees. None of the Company's employees
are covered by a collective bargaining agreement.
GOVERNMENT REGULATION.
GENERAL. Each of the Company's catering kitchens is subject to federal,
state and local laws and regulations governing health, sanitation, safety,
customs and security. In addition, the design and construction of new kitchens
are affected by federal, state and local laws and regulations regarding food and
health matters, environmental matters, zoning and land use. None of these laws
and regulations has had a significant adverse effect on the Company's
operations, and the Company has not experienced any significant difficulties in
obtaining licenses and approvals necessary to its operations.
-8-
FEDERAL REGULATION OF FOOD SERVICES. In addition to applicable state
and local regulations, the Company's kitchens are subject to regulation and
inspection by the FDA. Every U.S. kitchen must meet the FDA's minimum standards
relating to the handling, preparation and delivery of food, including
requirements relating to the temperature of food and the cleanliness of the
kitchen and the hygiene of its personnel. Leftover and discarded food arriving
in the United States on incoming international flights must be disposed of in
accordance with requirements established by the U.S. Department of Agriculture
("USDA"), which has the right to inspect the Company's food disposal procedures.
Kitchens also may be subject to USDA inspection.
CUSTOMS AND SECURITY. The Company and its operations are subject to
certain federal laws and regulations which are designed to prevent certain
criminal activities, primarily smuggling and terrorism. In an effort to prevent
such activities, the Federal Aviation Administration requires a five-year
background investigation of all employees of the Company who have access to the
airport ramps and loading docks from which meals are delivered and boarded onto
aircraft. The United States Customs Service, in addition to requiring a similar
background investigation, has the right to inspect all items removed from
incoming international flights, including food trays and related equipment.
LABOR LAWS. The Company is subject to the Fair Labor Standards Act,
which governs matters such as minimum wages, overtime and other working
conditions. The Company currently pays the majority of its employees excess of
the minimum wage. Accordingly, the Company should not be affected significantly
by any reasonably foreseeable changes in the current minimum wage, although it
might find it necessary to upgrade its hourly pay structure in order to maintain
an attractive wage scale.
ITEM 2. PROPERTIES
GENERAL.
At September 30, 1995, the Company operated 14 flight
kitchens, which served airports in Florida, Georgia and Alabama. The Company
also operated 14 restaurants and coffee shops, 12 lounges and 5 gift shops. The
kitchens are located on or near major airports. The restaurants, coffee shops,
lounges and gift shops are all located at airport terminals, except for one
restaurant. With the exception of its facility located in Ft. Lauderdale,
Florida, all of the Company's facilities are leased. Most leases are under
long-term lease agreements. The Company's leasehold improvements with respect to
these properties revert to
-9-
the lessors upon termination of the leases. The leases generally require that
the consent of landlords prior to any assignment. In the most cases, the Company
has not experienced any significant difficulty in renewing leases for kitchen
properties on satisfactory terms, and the Company does not anticipate any
significant problems with respect to renewing leases expiring in the near
future.
Nearly all of the Company's leases on airport properties require the
Company to pay a minimum base rent, plus percentage rent generally ranging from
3% to 40% of gross receipts.
The Company leases approximately 1,500 square feet at Suite
19, 1500 North Florida Mango Road, West Palm Beach, Florida, as the
Company's corporate headquarters.
The following table summarizes information regarding the Company's
facilities as of September 30, 1995:
NATURE AND
LOCATION OF EXPIRATION DATE RENEWAL
FACILITY (FISCAL YEAR) OPTION(S)
----------- --------------- ---------
Executive Offices and 2005 None
Catering Kitchen
West Palm Beach, Florida
Catering Kitchen, Coffee Shop, 1997 None
Gift Shop and Lounge,
Gainesville, Florida
Catering Kitchen, Coffee Shop, 2000 None
Lounge and Gift Shop
Melbourne, Florida
Barbecue Restaurant 1998 None
Royal Palm Beach, Florida
Catering Kitchen Coffee Shop, 2000 None
and Cocktail Lounge,
Pensacola, Florida
Catering Kitchen Owned --
Ft. Lauderdale, Florida
Catering Kitchen, Coffee Shop, 2005 One Option
Lounge and Gift Shop of
Ft. Walton Beach, Florida Five Years
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Coffee Shop and Lounge 2006 None
Sanford, Florida
[Opened in Spring of 1996]
Catering Kitchen, Coffee Shop, 1999 Two Options
and Lounge, of
Tallahassee, Florida Five Years
[Closed in Fall of 1996]
Catering Kitchen, 2005 None
Coffee Shop and Lounge
St. Petersburg, Florida
Catering Kitchen 1998 None
Tampa, Florida
Catering Kitchen, Coffee Shop and 2002 One Option
Lounge, Daytona Beach, Florida of
Five Years
Catering Kitchen 2003 One Option
Sarasota, Florida of
Five Years
Restaurant, Coffee Shop 1998 None
and Lounge
Ft. Myers, Florida
Catering Kitchen, Coffee Shop, Month None
Lounge and Gift Shop to Month
Augusta, Georgia
Catering Kitchen, Coffee Shop, 1997 None
and Lounge,
Mobile, Alabama
Catering Kitchen, Coffee Shop, 1999 One Option
Gift Shop and Lounge of Five
Montgomery, Alabama Years Each
- -----------------------
At September 30, 1995, the Company owned or leased and operated a fleet
of approximately 25 special purposes catering vehicles to deliver its catering
services to airplanes.
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RESIDENTIAL PROPERTIES AND RELATED FACILITIES.
The Company owns homes located near several of the airports where the
Company maintains flight catering and other food service operations. These homes
are primarily used by the Company to house the managers in charge of such
operations. The Company also owns several condominiums which are located near
the Company's former operations. During 1987, the Company entered into a ten
year license for a skybox located at the Joe Robbie Stadium in Miami, Florida.
The Company utilized this facility for entertaining customers, suppliers and
others. The license for this facility was not renewed in 1996.
INVESTMENT PROPERTIES.
The Company owns various investment properties, including the
following: 10 acres and a subdivision lot in Dade County, Florida; a 21%
interest in a joint venture which owns undeveloped property in Dade County; a
25% interest in a joint venture which owns undeveloped property in Dade County;
and two residential lots in Franklin, North Carolina. See Note H to the
Consolidated Financial Statements.
SERVICE MARKS.
The Company utilizes the name "Jerry's Caterers" in connection with its
business. The Company regards its service mark and logo as important to its
business and reputation, and believes that they have significant value.
ITEM 3. LEGAL PROCEEDINGS
In the fall of 1993, the Company filed a complaint in the
Circuit Court of Leon County, Florida against the City of Tallahassee. In its
complaint, the Company alleged that the City had violated the terms of the
Company's concession agreement with the City by permitting other vendors to sell
food, by opening a game room and certain other actions. The litigation was
settled in the fall of 1996. Under the settlement, the Company was released from
any future liability under the lease (which was terminated as of September 30,
1996) and the City repurchased $22,000 in inventory from the Company. The
Company incurred a loss of $241,000 from the writeoff of leasehold improvements
and equipment at this facility.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the name and age of each director and
executive officer of the Company, as well as their positions and offices held
and the period of service with the Company. Directors have been elected to serve
until the next annual meeting of shareholders of the Company and until their
successors are elected and qualified. The executive officers serve at the
discretion of the directors.
IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS.
AGE AT
NAME AND POSITION SEPTEMBER
WITH THE COMPANY 30, 1995 SINCE
----------------- --------- -----
Gerard J. Pendergast, Jr., 62 1964
President and Chairman
of the Board
Laura L. Pendergast, Director 32 1986
Karen P. Rhodes, Chief Financial
Officer, Vice-President,
Secretary, Treasurer and
Director 36 1986
Paula Pendergast, Vice-President 65 1978
of Public Relations
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS.
GERARD J. PENDERGAST, JR. has been the Chairman of the Board of
Directors of the Company for the past 26 years and has been employed as
President of the Company since August 1967.
PAULA PENDERGAST has served as Vice-President of Public relations of
the Company since January 1978. During the five years prior to her appointment
as Vice-President, Mrs. Pendergast was employed by the Company in the promotion
and sales area.
KAREN P. RHODES was elected a director of the Company and appointed
Secretary and Treasurer in May 1986. In March 1991, she became a Vice-President
of the Company and in 1992 she was appointed Chief Financial Officer of the
Company. From 1984 to 1991, Ms. Rhodes was a practicing Certified Public
Accountant with Mosher Seifert & Co. in Pasadena, Texas. From 1983 to 1984, Ms.
Rhodes was employed as an accountant by the Company.
-13-
LAURA L. PENDERGAST was elected a director of the Company in February
1986. Ms. Pendergast has been employed by the Company in various positions since
1985. She currently serves as the manager of the Company's Melbourne operations.
FAMILY RELATIONSHIPS.
Paula Pendergast, Vice President of Public Relations, is the wife of
Gerard J. Pendergast, Jr., President and Chairman of the board of Directors of
the Company. Karen P. Rhodes, Director, Chief Financial Officer, Secretary and
Treasurer, and Laura L. Pendergast, Director, are the daughters of Paula and
Gerard J. Pendergast, Jr.
-14-
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded sporadically in the
over-the-counter market. The following table represents the high and low bid and
ask prices for the common stock for each fiscal quarter during the fiscal years
ended September 30, 1995 and 1996:
BID PRICES ASK PRICES
1994 HIGH LOW HIGH LOW
- ---- --------------------- ---------------------
OCT. 3
THRU $3 1/2 $2 1/2 $5 1/2 $4 1/2
DEC. 30
1995
- ----
JAN. 3
THRU $3 1/2 $2 1/2 $5 1/2 $4 1/2
MAR. 31
CLOSING BID CLOSING ASK
HIGH LOW HIGH LOW
--------------------- ---------------------
APR. 3
THRU $3 1/2 $3 1/2 $4 1/2 $4 1/4
JUNE 30
JULY 3
THRU $3 1/2 $3 $4 1/2 $4
SEPT. 29
CLOSING BID CLOSING ASK
1995 HIGH LOW HIGH LOW
- ---- --------------------- ---------------------
OCT. 2
THRU $3 1/2 $3 $4 1/2 $4
DEC. 29
1996
- ----
JAN. 2
THRU $3 1/2 $3 1/2 $4 1/2 $4 1/4
MAR. 29
(EXCLUDING JAN. 8TH)
-15-
APR. 1
THRU $3 1/2 $3 1/2 $4 1/4 $4 1/4
JUNE 28
JULY 1
THRU $3 1/2 $3 1/2 $4 1/4 $4
SEPT. 30
The foregoing information was provided by National Quotation Bureau,
Inc. The above quotations represent prices between dealers and do not include
retail markups, markdowns, or other commissions.
They do not represent actual transactions.
There were approximately 680 holders of record of the Company's common
stock as of September 30, 1995.
The Company has not paid any dividends since 1984. The Company's loan
agreement with its principal lender prohibits the payment of any dividends. The
Company does not anticipate that it will pay any dividends in the foreseeable
future.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data has been taken from the
Consolidated Financial Statements of the Company. The selected financial data
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the Consolidated Financial
Statements.
SELECTED FINANCIAL DATA
(Amounts in 1,000's, Except Per Share Data)
FISCAL YEAR: 1995 1994 1993 1992 1991
- ----------- -------- -------- -------- -------- --------
Net Sales from $ 21,527 $ 29,465 $ 28,167 $ 29,913 $ 29,375
Continuing
Operations
Income (loss)
from Continuing
Operations $ 1,804 $ (642) $ (729) $ 799 $ (446)
Income (loss) from
Continuing Operations
per Common Share $ 3.20 $ (1.13) $ (1.25) $ 1.26 $ (.76)
Total Assets $ 8,774 $ 12,117 $ 12,212 $ 13,156 $ 13,073
Total Long-Term
Debt $ 3,074 $ 4,304 $ 4,585 $ 4,185 $ 3,110
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS.
The following table sets forth, for the periods indicated, the relative
percentage which items of income and expense bear to net sales for the fiscal
years ended September 30, 1995, 1994 and 1993.
YEARS ENDED SEPTEMBER 30,
---------------------------
1995 1994 1993
----- ----- -----
Net sales .................... 100.0% 100.0% 100.0%
Cost of sale (expenses) ...... (58.7) (59.3) (58.6)
----- ----- -----
Gross profit ................. 41.7 40.7 41.4
Selling, general and
administrative (expenses)* . (50.9) (42.2) (43.3)
----- ----- -----
Income from operations ....... (9.6) (1.5) (1.9)
Interest (expense) ........... (2.6) (2.5) (2.7)
Other income (expense) ....... 1.0 .5 1.7
Gain or (loss) from
disposition
Income (loss) before income .. 25.4 -- (.3)
----- ----- -----
tax benefit ................ 14.2 (3.5) (3.2)
Income tax benefit (expense) . (5.8) 1.3 .6
Extraordinary gain ........... -- .5 --
----- ----- -----
Net income (loss) ............ 8.4 (1.7) (2.6)
===== ===== =====
(* Net of Airline Port Fees)
1995 COMPARED TO 1994.
NET SALES. The Company's net sales from continuing operations in 1995
were $21,527,000 compared with $29,465,000 in 1994, or 26.9% lower. The drop in
sales was primarily due to the sale of the Company's Miami and Orlando airline
catering operations to Alpha Flight Services, Inc. ("Alpha") in February 1995.
The airline catering sales at these locations were $3,008,000 in 1995, compared
to $9,400,000 in 1994. The airline catering sales at other locations were
$10,393,000 in 1995, compared to $11,662,000 in 1994. This decrease was
primarily due to lower sales to U.S. Air, which has reduced the level of meal
sources on most of its flights to Florida. The sales from restaurants, coffee
shops, lounges, gift shops and private catering were $8,125,000 in 1995,
compared to $8,402,000 in 1994. This decrease reflects the following trends: (i)
the cancellation of the Company's contract for Dade School Lunch Program (which
resulted in a loss of $1,000,000 in revenues); and (ii) improved food and
beverage sales at restaurants and lounges at
-17-
airports served by the Company.
COST OF SALES. Cost of sales in 1995 decreased 27.8% to $12,632,000
from $17,472,000 in 1994. This drop corresponded to the decrease in sales. The
Company's gross margin percentage improved slightly from 40.7% in 1994 to 41.3%
in 1995. This improvement was due to a higher proportion of sales from
restaurants, lounges and gift shops (which have higher margins than airline
catering).
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company's selling,
general and administrative expenses decreased from $13,290,000 in 1994 to
$11,587,000 in 1995, due to the sale of the Miami and Orlando operations.
Expenses (net of port fees) represented 50.9% of the Company's net sales in
1995, compared with 42.2% in 1994. The increase in this percentage reflects
difficulties encountered by the Company in reducing such expenses in proportion
to the decline in the Company's sales. Many of these expenses (such as corporate
overhead) are relatively difficult to reduce in a short period of time.
AIRLINE PORT FEES. The Company charges each of its airline catering
customers a port fee equal to the amount of percentage rent which the Company
must pay to each airport authority. The amount of this income was $867,000 in
1994 and $620,000 in 1995. The decline parallels the decrease in airline
catering sales.
DISPOSITION OF ASSETS. In 1995, the Company recognized a gain of
$5,448,000 from the disposition of assets to Alpha. See Note D to the
Consolidated Financial Statement. Such revenues were insignificant in 1994.
NET EARNINGS. The Company had a net loss of $500,000 in 1994 compared
with net income of $1,804,000 in 1995. As described above, the net income in
1995 was primarily due to the sale of assets to Alpha.
The Company's income (before taxes) for 1995 was $3,062,000, compared
with a loss (before taxes and accounting changes) of $1,014,000 for 1994. The
comparability of these amounts, however, was significantly impacted by the gain
of $5,478,000 earned by the Company in 1995 from the sale of the Miami and
Orlando flight catering kitchens to Alpha (and other asset sales). After
eliminating this gain, the income for 1995 before income taxes would decline to
a loss of $2,416,000. The principal reason for this loss was the combined effect
of the lost sales from Miami and Orlando and the Company's inability to reduce
its selling, general and administrative expenses in proportion to such lost
sales. During 1995, the Company attempted to modify its selling, general and
administrative expenses to reflect the reduced size of its
-18-
operations. Many of these expenses, however, will require a relatively long
period to reduce. Accordingly, it is likely the Company will continue to incur
significant losses from operations in the future.
1994 COMPARED TO 1993.
NET SALES. The Company's net sales from continuing operations in 1994
were $29,465,000, compared with $28,167,000 in 1993. Sales for airline catering
increased .7% from $20,900,000 in 1993 to $21,062,000 in 1994, while sales from
restaurants, lounges, gift shops and private catering increased 20.5% from
$6,970,000 in 1993 to $8,402,000 in 1994. The increase in airline catering was
primarily due to acquisition of several new airline catering accounts, including
KIWI and VASP, which offset decreased sales from several major customers such as
U.S. Air, Air Canada, KLM and American. Sales to these customers was adversely
affected by continuing cut-backs in meal service as well as declines in the
number of flights to airports served by the Company. The increase in other sales
was primarily due to a $866,000 increase in private catering related to the
Company's operation of the summer school lunch program in Dade County, Florida.
COST OF SALES. Costs of sales in 1994 increased to $17,472,000,
compared with $16,498,000 in 1993, which roughly corresponded to the increase in
sales. The Company's gross margin percentage decreased from 41.4% in 1993 to
40.7% in 1994. This decrease was caused smaller margins on airline catering, due
to increasing competition for customers.
SELLING AND ADMINISTRATIVE EXPENSES. The Company's selling and
administrative expenses increased from $13,112,000 in 1993 to $13,290,000 in
1994. Expenses in 1994 (net of port fees) represented 42.2% of the Company's net
sales, compared with 43.3% in 1993. The increase in selling and administrative
expenses was primarily the result of a general increase in almost all the
Company's expenses, including depreciation, property insurance and rent. These
items more than offset declines certain expense items, such as bad debt expense,
advertising and promotion and health insurance expense.
AIRLINE PORT FEES. The Company charges each of its airline catering
customers a port fee equal to the amount of percentage rent which the Company
must pay to each airport authority. The amount of this income was $927,000 in
1993, compared with $867,000 in 1994. The decline parallels the decrease in
airline catering sales at airports where port fees were charged.
DISPOSITION OF ASSETS. In 1993, the Company recognized a loss
-19-
of $94,000 from the disposition of assets. This loss was primarily a result of
the closing of the Company's former flight catering kitchen in Daytona Beach,
Florida.
RECOVERY FROM DEFALCATION. In 1993, the Company recovered approximately
$300,000 from its insurance carrier and others in connection with two
embezzlements by former employees of the Company.
NET EARNINGS. The Company had a net loss of $729,000 in 1993, compared
with a net loss of $500,000 in 1994. As described above, the loss in 1994 was
primarily due to a poorer margins of the Company's airline catering business and
increased selling and administrative expenses.
FINANCIAL CONDITION.
On September 30, 1995, the Company's current assets and current
liabilities were $2,432,000 and $2,361,000, respectively, compared with
$3,864,000 and $6,276,000 on September 30, 1994. The Company's current ratio
(current assets divided by current liabilities) was 1.03 to 1 on September 30,
1995 and .62 to 1 on September 30, 1994.
The Company's financial condition during 1995 was dramatically affected
by the sale of the Miami and Orlando operations to Alpha. At the closing, the
Company received $4,000,000 in cash and Alpha paid $1,000,000 of the Company's
accounts payable. The Company received an additional $1,000,000 three months
after the closing. The Company utilized these amounts to reduce its accounts
payable (which declined by $1,432,000), its accrued expenses (which declined by
$283,000), and its indebtedness to lenders (which declined by $3,448,000). Due
to the sale of Alpha, the Company's working capital increased by $294,000 for
the year, despite the loss from continuing operations.
As discussed above, the Company incurred a loss of $2,416,000 from
continued operations (after eliminating the gain from the Alpha transaction).
The primary reason for this loss was the Company's inability to reduce its
selling, general and administrative expenses in proportion to the lost sales
caused by the transaction with Alpha. The Company anticipates that it will
continue to incur losses from operations until it is able to reduce expenses
and/or increase sales. The Company also hopes to expand its sales in other
locations. In this connection, the Company hopes to generate significant sales
from its new facilities in Sanford, Florida (which opened in the spring of
1996).
If the Company is unable to reduce the level of its selling, general
and administrative expenses to a level which is consistent
-20-
with its current level of sales, the Company will continue to incur significant
losses, which will undermine its working capital position. To address this
problem, the Company would need to seek financing from additional outside
lenders. If such funds were not available, the Company would need to sell
additional operations in order to raise cash.
TRANSACTION WITH ALPHA FLIGHT SERVICES, INC..
In February 1995, the Company sold its Miami and Orlando airline
catering operations to Alpha. At the closing, the Company received $4,000,000 in
cash and Alpha assumed and paid $1,000,000 of the Company's liabilities.
In the summer of 1995, the Company received an additional $1,000,000
from Alpha. The agreement with Alpha originally provided that the Company would
receive up to an additional $3,000,000 (over a period of three years) depending
on the results of Alpha's operations in Miami and Orlando.
In the fall of 1996, Alpha requested the Company to modify the original
Alpha agreement. Alpha needed the Company's consent to the proposed sale of the
Miami and Orlando catering kitchens by Alpha to Flying Food Fair, Inc. ("FFF").
Under the terms of the modification, Alpha agreed to make the following payments
to the Company: (i) a payment of $1,000,000 to the Company upon the sale of the
catering kitchens to FFF; (ii) an additional payment of up to $1,000,000 upon
the six-month anniversary of the sale of the business to FFF (contingent upon
sales generated by FFF at the Miami and Orlando catering kitchens); and (iii) a
payment of $1,000,000 on March 2, 1998.
The transaction with FFF closed in November, 1996 and the Company
received the initial payment of $1,000,000.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements are attached to this
Form 10-K. Supplementary data is not required.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-21-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
This information is incorporated by reference from the
Company's 1996 Information Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14C.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference from the
Company's 1996 Information Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14C.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
This information is incorporated by reference from the
Company's 1996 Information Statement to be filed with the securities and
Exchange Commission pursuant to Regulation 14C.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference from the
Company's 1996 Information Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14C.
-22-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
PAGE NO.
--------
(a)(1) Financial Statements. The following
financial statements are filed as part
of this report:
i) Report of Independent Certified 26
Public Accountants
ii) Consolidated Balance Sheets 28
at September 30, 1995 and 1994
iii) Consolidated Statement of Operations 30
for the three years ended
September 30, 1995, 1994 and 1993
iv) Statement of Consolidated 32
Shareholders' Equity for
the three years ended
September 30, 1995, 1994 and 1993
v) Consolidated Statement of Cash 33
Flows for the three years ended
September 30, 1995, 1994 and 1993
vi) Notes to Consolidated Financial 36
Statements
(a)(2) FINANCIAL STATEMENT SCHEDULES. The following
financial statements schedules are filed as a
part of this report:
i) Schedule V - Property, Plant and 54
Equipment
ii) Schedule VI - Accumulated Depreciation 55
and Amortization of Property, Plant
and Equipment
iii) Schedule VIII - Valuation and Qualifying 56
Accounts
iv) Schedule X - Supplementary Income 57
Statement Information
-23-
(a)(3) EXHIBITS. The Exhibits set forth in the
following Index of the Exhibits are filed
as a part of this report:
(3) Articles of Incorporation and By-Laws:
(a) Articles of Incorporation are incorporated by
reference from the Company's Form 10-K for the fiscal
year ended September 30, 1982.
(b) By-Laws are incorporated by reference from the
Company's Form 10-K for the fiscal year ended
September 30, 1988.
(10) Material Contracts:
(a) Material contracts incorporated by reference from
the Company's Form l0-K for the fiscal year ended
September 30, 1982:
(i) Profit Sharing Plan.
(b) Material contracts incorporated by reference from the
Company's Report on Form 8-K dated December 28, 1989:
(i) Right of First Refusal Agreement, by and
between Marriott Corporation, Jerry's, Inc.,
Jerry's Caterers, Inc. and Gerard J.
Pendergast, Jr.
(c) Material contracts incorporated by reference from the
Company's Report on Form 8-K dated February 2, 1995:
(i) Asset Purchase Agreement dated February 2,
1995 by and among Jerry's, Inc., Jerry's
Caterers, Inc., Meiner's Catering Service,
Inc., Gerard J. Pendergast, Jr., Alpha
Flight Services, Inc. and Alpha Flight
Services Florida, Inc.
(d) Agreement dated September 1996 by and among Jerry's,
Inc., Jerry's Caterers, Inc., Meiner's Catering
Service, Inc., Gerard J. Pendergast, Jr., Alpha
Flight Services, Inc., Alpha Flight Services Florida,
Inc., and Alpha Overseas Holdings, Ltd.
(22) A list of the Company's subsidiaries is incorporated by
reference from the Company's Form 10-K for the fiscal year
ended September 30, 1986.
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were
filed for the quarter ended September 30, 1995.
-24-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JERRY'S, INC.
Dated: July 7, 1997 By: /s/ Gerard J. Pendergast, Jr.
--------------------------
Gerard J. Pendergast, Jr.,
President
Dated: July 7, 1997 By: /s/ Karen P. Rhodes
--------------------------------
Karen P. Rhodes,
Chief Financial and Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Dated: July 7, 1997 By: /s/ Gerard J. Pendergast, Jr.
-------------------------
Gerard J. Pendergast, Jr.
Director
Dated: July 7, 1997 By: /s/ Laura L. Pendergast
-----------------------------
Laura L. Pendergast, Director
Dated: July 7, 1997 By: /s/ Karen P. Rhodes
-------------------------
Karen P. Rhodes, Director
-25-
Independent Auditor's Report
Shareholders and Board of Directors
Jerry's Inc.
West Palm Beach, Florida
I have audited the consolidated financial statements and related
schedules of Jerry's, Inc. and subsidiaries listed in the accompanying index to
financial statements (items 14(a) and (2)). These financial statements and
related schedules are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements and
related schedules based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements listed in the accompanying
index to financial statement (item 14(a)(1)) present fairly, in all material
respects, the consolidated financial position of Jerry's Inc. at September 30,
1995 and 1994 and the consolidated results of their operations and their cash
flows for each of the three years in the period ending September 30, 1995 in
conformity with generally accepted accounting principles.
-26-
Shareholders and Board of Directors
Jerry's, Inc.
West Palm Beach, Florida Page 2
Further, it is my opinion that the schedules listed in the
accompanying index to financial statements (Items 14(a)(2)) present fairly the
information set forth therein in compliance with the applicable accounting
regulations of the Securities and Exchange Commission.
As discussed, in Note A-5 to the financial statements, in fiscal
1994 the Company changed its method of accounting for income taxes. As discussed
in Note B to the financial statements, during February, 1995, the Company sold
the assets of its Miami, Florida and Orlando, Florida airline catering
operations. These facilities represent a significant portion of the Company's
total assets, sales, and operations.
/s/ Larry Wolfe
-------------------------------
LARRY WOLFE
Certified Public Accountant
Miami, Florida
May 2, 1996
-27-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
ASSETS 1995 1994
---------- -----------
CURRENT ASSETS:
Cash and Cash Items (Note E) $ 759,133 $ 464,953
Customer Accounts Receivable
Less Allowance for Doubtful Accounts:
$230,000 in 1995 and $276,000 in 1994 807,857 2,240,553
Inventories (Note A-2) 311,648 410,865
Deferred Income Taxes (Note M) 105,109 295,530
Prepaid Expenses and Other Current Assets (Note G)
(Net of $5,000 Allowance In 1995 and 1994) 449,078 457,158
---------- ----------
Total Current Assets 2,432,825 3,869,059
---------- ----------
INVESTMENTS:
Land Held for Investment (Note H-1) 87,000 87,000
Other Investments (Note H-2) 265,528 495,174
---------- ----------
Total Investments 352,528 582,174
---------- ----------
PROPERTY, PLANT AND EQUIPMENT: (NOTE I)
Cost 13,857,557 15,426,570
Less: Accumulated Depreciation 9,420,655 9,118,785
----------- -----------
Net Book Value 4,436,902 6,307,785
----------- -----------
OTHER ASSETS:
Cash (Restricted) (Note E) 580,297 467,565
Leasehold Rights and Other Intangible Assets
Less Accumulated Amortization of $13,482 in
1995 and $6,312 in 1994 8,096 15,265
Cash Surrender Value of Insurance 39,393 35,861
Deposits and Miscellaneous 219,529 278,201
Employee Loans Receivable (Net of $20,000 Allowance
In 1995 and $10,000 in 1994) 79,840 33,858
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1995 and
1994) 95,376 120,327
Deferred Income Taxes - Non-Current Portion (Note M) 528,764 406,524
----------- -------------
Total Other Assets 1,551,295 1,357,601
----------- -------------
TOTAL ASSETS $ 8,773,550 $12,116,619
=========== =============
See accompanying notes to Consolidated Financial Statements.
-28-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
---------------- ----------------
CURRENT LIABILITIES:
Notes Payable to Bank and Others (Note J) $ -- $ 1,723,040
Current Portion of Long-Term Debt (Note K) 519,490 899,752
Accounts Payable 1,171,228 2,602,980
Income Taxes Payable 12,307 109,381
Accrued Expenses (Note L) 657,504 940,503
---------------- ----------------
Total Current Liabilities 2,360,529 6,275,656
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current Portion (Note K) 3,073,603 4,303,541
---------------- ----------------
TOTAL LIABILITIES 5,434,132 10,579,197
---------------- ----------------
STOCKHOLDERS' EQUITY (NOTE N):
Capital Stock -
Common Stock of $.04 par value - Authorized
4,000,000 Shares; 622,377 Shares Issued in
1995 and 1994 24,895 24,895
Capital In Excess of Par Value 116,178 116,178
Retained Earnings 3,365,427 1,561,760
---------------- ----------------
Subtotal 3,506,500 1,702,833
Less: Shares Reacquired and Held in Treasury
(59,955 Shares in 1995 and
59,381 Shares in 1994 at Cost) 167,082 165,411
---------------- ----------------
TOTAL STOCKHOLDERS' EQUITY 3,339,418 1,537,422
---------------- ----------------
Commitments, Contingencies, and Subsequent Events -- --
---------------- ----------------
(Notes O, Q, and R)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 8,773,550 $ 12,116,619
================ ================
See accompanying notes to Consolidated Financial Statements.
-29-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE YEARS ENDING SEPTEMBER 30, 1995
1995 1994 1993
--------------- ----------------- ---------------
NET SALES:
(A substantial portion of
which is attributable to four
customers and a substantial
portion of which have been
discontinued (Note B) $ 21,526,532 $ 29,464,898 $ 28,167,003
--------------- ----------------- ---------------
COSTS, EXPENSES AND OTHER ITEMS:
Costs of Sales 12,631,936 17,471,955 16,497,510
Selling and Administrative Expenses 11,587,365 13,289,568 13,112,248
Airline Port Fees (Income) (619,815) (866,845) (926,791)
Interest (Income) (96,320) (26,104) (34,877)
Interest Expense 556,236 735,221 765,095
(Gain) or Loss on Disposition
of Assets (5,478,266) (6,062) 94,416
Equity in (Earnings) Loss of
Joint Ventures (2,229) (12,417) (61,394)
Other (Income) (112,166) (105,061) (93,709)
Defalcations (Recoveries) (Note S) (1,900) (1,800) (300,411)
--------------- ----------------- ---------------
Total Costs, Expenses and
Other Items 18,464,841 30,478,455 29,052,087
--------------- ----------------- ---------------
Income (Loss) Before Provision
for Income Taxes 3,061,691 (1,013,557) (885,084)
--------------- --------------- ---------------
PROVISION (CREDIT) FOR INCOME TAXES
(Note M)
Federal 1,103,313 (296,379) (155,697)
State 154,711 (74,882) --
--------------- ----------------- ---------------
Total Provision (Credit) For
Income Taxes 1,258,024 (371,261) (155,697)
--------------- --------------- ---------------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGES 1,803,667 (642,296) (729,387)
Cumulative Effect To October, 1993 of
Change In Accounting For Income Taxes
(Note A-5) -- 142,094 --
--------------- ----------------- ---------------
Net Income (Loss) $ 1,803,667 $ (500,202) $ (729,387)
=============== ================= ===============
-30-
NET INCOME (LOSS) PER COMMON SHARE
Before Extraordinary Gain and
Cumulative Effect of Change In
Accounting Principal $ 3.20 $ (1.13) $ (1.25)
Cumulative Effect To October,
1993 Of Change In Accounting
For Income Taxes -- .25 --
--------------- ----------------- ---------------
Net Income (Loss) Per Common Share $ 3.20 $ (.88) $ (1.25)
=============== ================= ===============
AVERAGE SHARES OF COMMON STOCK
Outstanding 562,512 567,877 581,844
=============== ================= ===============
See accompanying notes to Consolidated Financial Statements.
-31-
JERRY'S, INC. AND SUBSIDIARIES
STATEMENT OF CONSOLIDATED STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
COMMON STOCK
TOTAL --------------------- CAPITAL IN
STOCKHOLDERS' NUMBER EXCESS OF RETAINED TREASURY
EQUITY OF SHARES AMOUNT PAR VALUE EARNINGS STOCK
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1992 $ 2,807,328 622,377 $ 24,895 $ 116,178 $ 2,791,349 $ (125,094)
Net (Loss) (729,387) -- -- -- (729,387) --
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1993 2,077,941 622,377 24,895 116,178 2,061,962 (125,094)
Acquisition of 18,848 Shares of
Treasury Stock (40,317) -- -- -- -- (40,317)
Net (Loss) (500,202) -- -- -- (500,202) --
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1994 1,537,422 622,377 24,895 116,178 1,561,760 (165,411)
Acquisition of 614 Shares of
Treasury Stock (1,671) -- -- -- -- (1,671)
Net Income 1,803,667 -- -- -- 1,803,667 --
----------- ----------- ----------- ----------- ----------- -----------
Balance at September 30, 1995 $ 3,339,418 622,377 $ 24,895 $ 116,178 $ 3,365,427 $ (167,082)
=========== =========== =========== =========== =========== ===========
See accompanying notes to Consolidated Financial Statements.
-32-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE YEARS ENDED SEPTEMBER 30, 1995
1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 1,803,667 $ (500,202) $ (729,387)
Adjustments to Reconcile Net Income
To Net Cash Provided by Operating
Activities:
Depreciation and Amortization 1,474,244 1,651,915 1,927,656
Provision for Losses on
Accounts 46,151 162,659 209,902
Provision for Losses on Employee
Loans and Other Receivables 75,029 65,029 49,500
Deferred Income Tax Provision 68,181 (562,271) 5,735
Equity in (Earnings) Loss of
Joint Ventures (2,229) (12,417) (61,394)
Loss (Gain) on Sale of Assets (5,478,266) (6,062) 94,416
Change in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable 1,386,545 (448,584) 430,279
(Increase) Decrease in Inventory 99,217 44,954 29,943
(Increase) Decrease in Prepaid
Expenses and Other (83,211) (169,784) (38,165)
(Increase) Decrease in Other
Assets (12,489) 76,979 (11,204)
Increase (Decrease) in Accounts
Payable (1,431,752) 413,792 506,546
Increase (Decrease) in Accrued
Expenses (282,999) 129,022 (105,196)
Increase (Decrease) in Income
Taxes Payable (97,074) (35,352) (405,846)
----------- ----------- -----------
Net Cash Provided by (Used in) Operating
Activities (2,434,986) 769,678 1,902,785
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Property
and Equipment 6,331,781 14,132 58,080
Payments Received on Note from
Sale of Property & Equipment 62,860 62,860 10,102
Proceeds from Investments 231,875 20,281 --
Purchase of Property & Equipment (449,707) (506,891) (1,482,282)
Additions to Investments -- -- (37)
----------- ----------- -----------
Net Cash Provided by (Used in Investing)
Activities $ 6,176,809 $ (409,618) $(1,414,137)
----------- ----------- -----------
See accompanying notes to Consolidated Financial Statements.
-33-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
(Continued)
1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Line-of-Credit and
Long-Term Borrowings $ 415,790 $ 321,805 $ 1,292,268
Decrease (Increase) in Other
Receivables -- -- (31,769)
Principal Payments Under Line-of-
Credit and Long-Term Debt (3,749,030) (839,383) (1,419,641)
Payments to Acquire Treasury Stock (1,671) (40,317) --
Decrease (Increase) in Restricted
Cash (112,732) (76,610) (95,955)
Additions to Intangible Assets -- (5,606) (7,487)
----------- ----------- -----------
Net Cash Provided (Used) by
Financing Activities (3,447,643) (640,111) (262,584)
----------- ----------- -----------
Net Increase (Decrease) in Cash
and Cash Equivalents 294,180 (280,051) 226,064
CASH AND CASH EQUIVALENTS
at Beginning of Year 464,953 745,004 518,940
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
End of Year $ 759,133 $ 464,953 $ 745,004
=========== =========== ===========
See accompanying notes to Consolidated Financial Statements.
-34-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
(Continued)
1995 1994 1993
----------------- -------------- --------
Additional Cash Flow Information:
Cash Paid During the Year for:
Interest (Non-Capitalized) $ 572,649 $ 749,027 $783,300
================= ============== ========
Income Taxes $ 1,286,916 $ 84,268 $322,102
================= ============== ========
Non-Cash Activities:
Purchase of Property, Plant and
Equipment (net of Cash Paid
For Notes) $ -- $ 468,203 $ --
================= ============== ========
Sale of Property, Plant and
Equipment (Net of Cash Received
for assumption of Note Payable
to a Bank) $ -- $ -- $ 83,000
================= ============== ========
See accompanying notes to Consolidated Financial Statements.
-35-
JERRY'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. CONSOLIDATION -
The consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are wholly-owned and all of which are
engaged in the food and beverage service and/or the gift shop business.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
2. INVENTORIES -
Inventories are valued at the lower of cost or market, with cost
generally determined on a first-in, first-out basis and market-based upon the
lower of replacement cost or realizable value.
Inventories consisted of the following amounts:
1995 1994 1993
------------ ---------------- ---------------
Finished Goods $ 63,085 $ 61,397 $ 69,779
Raw Materials 248,563 349,468 386,040
------------ ---------------- ---------------
Total $ 311,648 $ 410,865 $ 455,819
============ ================ ===============
3. PROPERTY, PLANT, AND EQUIPMENT -
Property, plant and equipment are carried at cost. The Company
calculates depreciation under the straight-line and accelerated methods at
annual rates based upon the estimated service lives of each type of asset. These
service lives are generally as follows:
Buildings and Improvements 7 to 35 years
Equipment and Furniture 5 to 7 years
Aircraft and Automotive 3 to 7 years
Leasehold Improvements and Other 5 to 7 years
Assets with an original cost of approximately $4,300,000 have been fully
depreciated at September 30, 1995.
-36-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
4. INTANGIBLES -
The Company has recorded as goodwill the difference between the cost of
its investment in Meiner's Catering Service, Inc. and the underlying fair value
of the acquired net assets on the acquisition date. Meiner's exclusively catered
private functions prior to acquisition, and continued to cater private functions
after acquisition as well as providing in-flight catering services to the
Orlando, Florida airport. During July 1993, Meiner's ceased catering private
functions and the Company reduced the amortization period of the goodwill from
40 years to 7 years. See Note T.
The Company amortizes mortgage costs over the life of the mortgage using
the straight-line method.
5. INCOME TAXES -
Effective October 1, 1993, the Company adopted SFAS No. 109, "Accounting
for Income Taxes." It requires an asset and liability approach for financial
accounting and reporting for deferred income taxes. The cumulative effect of
this accounting change was a one-time non-cash increase to net income of
$142,094 or $.25 per share. Prior year financial statements have not been
restated to apply the provisions of SFAS No. 109.
Under SFAS 109, deferred tax assets or liabilities are computed based on
the difference between the financial statement and income tax basis of assets
and liabilities using the enacted marginal tax rate applicable when the related
asset or liability is expected to be realized or settled. Deferred income tax
expenses or benefits are based on the changes in the asset or liability from
period to period. If available evidence suggests that it is more likely than not
that some portion or all of the deferred tax assets will not be realized, a
valuation allowance is required to reduce the deferred tax assets to the amount
that is more likely than not to be realized. Future changes in such a valuation
allowance would be included in the provision for deferred taxes in the period of
change.
6. INCOME PER SHARE -
Income per share is computed based upon the weighted average number of
common shares outstanding during each year.
7. CASH -
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
8. CONCENTRATIONS OF CREDIT RISK -
The Company is subject to credit risk arising from the concentration of
its temporary cash investments and trade receivables. Most of the Company's
temporary cash investments are concentrated with a single financial institution.
This institution, however, has a high credit rating. The Company's trade
receivables are concentrated with a small number of airlines. In particular, the
Company primarily sells its products to about 60 airlines or aviation related
companies in the States of Florida, Georgia and Alabama, and extends credit
based on an evaluation of the customer's financial condition, generally without
requiring collateral. Exposure to losses on receivables is principally dependent
on each customer's financial condition. The Company monitors its exposure
-37-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
for credit losses and maintains allowances for anticipated losses. As of
September 30, 1995, approximately 71% of the recorded trade receivables were
concentrated with 6 airlines. As of September 30, 1994 approximately 67% of the
receivables were concentrated with 9 airlines.
9. REVENUE RECOGNITION -
Revenue is recognized upon shipment of goods to customers and upon
performance of services.
10. ADVERTISING COSTS -
Advertising costs are generally charged to operations in the year
incurred and totaled $332,000 in 1995, $344,000 in 1994 and $380,000 in 1993.
11. ENVIRONMENTAL EXPOSURES -
The Company accrues environmental costs when it is possible that a
liability has been incurred and the amount can be reasonably estimated.
NOTE B - SALES
A substantial portion of the Company's revenues have been derived from
catering flights of four airlines, as follows:
PERCENT OF TOTAL SALES
-----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30, AIR CANADA CONTINENTAL U.S. AIR KIWI
----------------------- ---------- ----------- -------- ----
1995 5% 5% 24% 6%
1994 7% 5% 23% 6%
1993 8% 6% 26% 3%
During February 1995, the Company sold its airline catering operations
in Miami, Florida and Orlando, Florida to Alpha Flight Services Florida, Inc.
The sales that were discontinued during February 1995 amounted to:
SALES PERCENTAGE OF
DISCONTINUED TOTAL SALES
------------ -------------
Year Ended 9/30/95 $ 3,008,000 14%
Year Ended 9/30/94 9,400,000 32%
Year Ended 9/30/93 8,000,000 28%
NOTE C - RIGHT OF FIRST REFUSAL
On May 1, 1990, the Company entered into a right of first refusal
agreement with a competing airline caterer. Under the agreement, the Company
granted the purchaser a 10-year right of first refusal with respect to the sale
of any airline catering business owned by the Company. The purchaser agreed to
pay the Company $385,000 in 24 quarterly installments commencing on May 31,
1994. The income will be recorded pro rata over the 10-year term of the
agreement.
-38-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
NOTE D - SALES OF ASSETS AND DISPOSITIONS
During 1995, the Company sold its airline catering operation at Miami,
Florida and Orlando, Florida for $6,000,000 ($5,000,000 cash and the assumption
by the Buyer of $1,000,000 of the Company's liabilities). The approximate
pre-tax gain on the sale was $5,400,000 ($3,000,000 post-tax). The Company is
also entitled to receive up to $3,000,000 if the Buyer's gross revenues at the
Miami and Orlando facilities exceed certain annual base sales amounts over the
next 3 years. This contingent consideration is subject to a limitation of
$1,000,000 per year in the first two years.
During 1995, the Company sold real estate and equipment for
approximately $332,000 in cash which resulted in a pre-tax gain of approximately
$78,000 ($50,000 post-tax).
During 1994, the Company sold automotive equipment for approximately
$14,000 resulting in a pre-tax gain of $6,000 ($4,000 post-tax).
During 1993, the Company sold land, building, equipment and automotive
equipment for approximately $150,000 resulting in a pre-tax loss of $94,000
($77,000 post-tax loss).
NOTE E - CASH AND CASH ITEMS
Cash and cash items consisted of the following:
SEPTEMBER 30,
------------------------------
1995 1994
------------- -------------
Cash Funds and Checking accounts $ 759,000 $ 464,953
Certificates of Deposit 580,297 467,565
------------- -------------
TOTAL 1,339,430 932,518
Portion Restricted and Shown as Other Assets 580,297 467,565
------------- -------------
Portion Shown as Current Assets $ 759,133 $ 464,953
============= =============
Certificates of deposit in the amount of $351,669 have been pledged as
collateral for performance bonds at five locations of the Company. Certificates
of deposits in the amounts of $50,000 and $178,627 have been pledged as
collateral for a customs bond and for additional debt, respectively.
NOTE F - SEGMENT INFORMATION
During 1995, 1994 and 1993, the Company operated in two industry
segments: food and beverage, and gift shop. The Company operates only in the
continental United States.
Operations in the food and beverage segment involve the production and
sale of foods and beverages through in-flight catering, restaurants, cafeterias,
lounges and vending machines. Operations in the gift shops segment include the
sale of gifts, clothing, souvenirs, supplies, accessories, novelties, sundries,
and tobacco products.
-39-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
BUSINESS SEGMENT DATA FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993
The Company has not reported any segment information for the 1995, 1994
and 1993 fiscal years because the food and beverage segment consisted of more
than 90% of the Company's combined revenue, profits and assets for these
periods.
NOTE G - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following:
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
-------------- -----------------
Other Receivables $ 271,500 $ 131,278
Unexpired Insurance Premiums 75,435 211,291
Prepaid Rental and Concession Fees 23,559 8,914
Deferred Taxes and Licenses 50,889 58,017
Escrow Accounts and Other 27,695 47,658
-------------- -----------------
TOTAL $ 449,078 $ 457,158
============== =================
Included in the Other Receivables on September 30, 1995 is a $125,000 advance to
a related party (See Note U3).
NOTE H - INVESTMENTS
1. LAND HELD FOR INVESTMENT -
Land held for investment consisted of the following:
SEPTEMBER 30 SEPTEMBER 30
1995 1994
----------- ----------
10 acres - Dade County, Florida, at cost $ 40,000 $ 40,000
Lot - Dade County, Florida, at cost 22,000 22,000
Lots - Holly Springs Golf Course,
Franklin, North Carolina, at cost 25,000 25,000
----------- ----------
TOTAL $ 87,000 $ 87,000
=========== ==========
-40-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
2. OTHER INVESTMENTS -
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1993
-------------- -------------- --------------
a. Investment in unincorporated
Joint Venture - 20.8333%
Interest in acreage in Dade
County, Florida
(Equity Method)
The unaudited financial
information of the
unincorporated Joint
Venture at December 31,
1994, 1993 and 1992
follows:
Total Assets: $ 717,469 $ 719,279 $ 716,059
Total Liabilities -- -- 1,430
-------------- -------------- --------------
Joint Venture
Capital Account $ 717,469 $ 719,279 $ 714,629
============== ============== ==============
Revenues $ 14,599 $ 21,926 $ 314,936
Expenses 16,542 18,709 45,196
-------------- -------------- --------------
Net Income (Loss) $ (1,943) $ 3,217 $ 269,740
============== ============== ==============
Jerry's, Inc. Share
of Capital Account $ 149,446 $ 149,851 $ 149,181
Jerry's, Inc. Advances
To (Distributions
From) the Joint
Venture January 1
to September 30 (231,875) -- --
-------------- -------------- --------------
Total $ (82,429) $ 149,851 $ 149,181
============== ============== ==============
Jerry's, Inc. Share
of Net Income (Loss) $ (405) $ 670 $ 56,196
============== ============== ==============
-41-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1993
-------------- -------------- --------------
b. Investment in unincorporated
Joint Venture - 25% interest
in 80 acres of land in Dade
County, Florida
(Equity Method)
The unaudited financial
information of the
unincorporated Joint
Venture at December 31,
1994, 1993 and 1992
follows:
Total Assets $ 1,350,745 $ 1,368,171 $ 1,376,763
Total Liabilities -- -- --
-------------- -------------- --------------
Joint Venture
Capital Account $ 1,350,745 $ 1,368,191 $ 1,376,763
============== ============== ==============
Revenues $ 30,000 $ 29,590 $ 29,990
Expenses 17,436 8,162 9,098
-------------- -------------- --------------
Net Income $ 12,564 $ 21,428 $ 20,892
============== ============== ==============
Jerry's, Inc. Share
of Capital Account $ 337,686 $ 342,045 $ 344,188
Jerry's, Inc. Advances
To (Distributions
From) the Joint
Venture January 1
to September 30 (7,500) --
-------------- ------------- ------------
Total $ 337,686 $ 334,545 $ 344,188
============== ============= ============
Jerry's, Inc. Share
of Net Income $ 3,141 $ 5,357 $ 5,224
============== ============= ============
-42-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1993
-------------- -------------- --------------
c. Investment in working
interest in and to oil
and gas leases.
Jerry's Inc.
Carrying Value $ -- $ -- $ 150
============== ============= ============
Jerry's Inc.
share of
Net Income (Loss) $ -- $ 4,706 $ (137)
============== ============= ============
d. Investment in .71%
interest in Red
Berry's Baseball
World, Ltd.
(Equity Method) $ 10,271 $ 10,778 $ 9,519
============== ============= ============
Jerry's Inc. share of
Income (Loss) $ (507) $ 1,684 $ 111
============== ============= ============
Equity in Earnings (Loss)
of Joint Ventures $ 2,229 $ 12,417 $ 61,394
============== ============= ============
Total Other
Investments $ 265,528 $ 495,174 $ 503,038
============== ============= ============
-43-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
NOTE I - PROPERTY, PLANT, AND EQUIPMENT (SUBSTANTIALLY PLEDGED)
The following is a summary of cost and accumulated depreciation:
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
-------------- --------------
Cost -
Land $ 149,281 $ 192,981
Buildings and Building
Improvements 1,431,686 1,891,830
Equipment and Furniture 3,820,593 4,310,698
Aircraft and Automotive Equipment 3,057,724 3,294,370
Leasehold Improvements
and Other 5,398,273 5,736,691
-------------- --------------
Total Cost 13,857,557 15,426,570
Less: Accumulated Depreciation 9,420,655 9,118,785
-------------- --------------
Net Book Value $ 4,436,902 $ 6,307,785
============== ==============
NOTE J - NOTES PAYABLE-BANK AND OTHERS
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
----------- ------------
Note payable to financial institution
of up to $3,000,000 bearing interest at
3-1/4% plus prime and collateralized
by receivables, inventory, equipment,
leasehold rights, and real estate, and
the personal guarantee of the Company's
President. $ -- $ 1,723,040
=========== ============
NOTE K - LONG-TERM DEBT
Principal balances outstanding and details of long-term debt are
summarized as follows:
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
DESCRIPTION
-----------
Chattel mortgage notes on equipment,
improvements, aircraft and automotive
equipment, payable in monthly installments
of approximately $40,000 (including interest),
with varying maturities through 2004. A
chattel mortgage on automotive equipment is
further collateralized by a certificate of
deposit in the amount of $100,000. $ 2,354,224 $ 2,318,048
-44-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
------------- -------------
DESCRIPTION
-----------
7% to 12-1/2% notes payable, collateralized
by mortgages on land and buildings, payable
in monthly installments of approximately $8,000
(including interest), with varying maturities
through 2018. 743,688 1,034,232
11% (3-1/4% above prime) note
payable to financial institution, collateralized
by equipment, leaseholds, and real estate,
payable in monthly installments of $12,500
plus interest with a final payment due
November 7, 1995. -0- 125,000
10-1/4% (1-1/2 % above prime) note
payable to bank, collateralized by equipment,
leasehold and real estate at the Company's
facilities in Melbourne, Florida, along with
the personal guaranty of the Company's
President, payable in monthly installments
of $1,667 plus interest with a final payment
of $52,995 due January 28, 2000. 141,328 166,118
-45-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
---------------- ---------------
DESCRIPTION
-----------
Non-interest bearing note, due in 36 monthly
installments of $5,278 commencing November 1,
1991 with an additional payment of $20,000 due
February 1, 1992. The original face amount of the
note is $178,403 (net of discount based on imputed
interest rate of 11-1/4%). This note is guaranteed
by the Company's officers. -- 10,209
10% note due in 1996 to former owner of
acquired company, collateralized by the capital
stock and assets of Meiner's Catering Service, Inc.
payable in quarterly installments of $19,918 including
interest for ten years. -- 142,816
18% note payable collateralized by equipment
and leasehold improvements and interests at the
Company's facilities in Pensacola, Florida, along with
the personal guarantee of the Company's President,
payable in monthly installments of $15,763 (including
interest) through 1999. -- 551,712
18% note payable secured by the personal
guarantee of the President, payable in monthly
installments of $8,407 (including interest) through 2000. -- 365,730
9% note payable collateralized by leasehold
improvements at the Company's facilities in Daytona
Beach, Florida, along with a certificate of deposit of
$75,000 and the personal guarantee of the
Company's President, payable in monthly
installments of $14,531 (including interest)
through 1997. 353,853 489,428
---------------- ---------------
TOTAL 3,593,093 5,203,293
Less payments due within one year 519,490 899,752
---------------- ---------------
Long-Term Debt, less current portion $ 3,073,603 $ 4,303,541
================ ===============
-46-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
Payments of principal required on the foregoing long-term debt are as
follows:
FISCAL YEAR ENDING
------------------
1997 1998 1999 2000 THEREAFTER TOTAL
---- ---- ---- ---- ---------- -----
Amount $562,990 $472,983 $272,898 $290,166 $1,474,566 $3,073,603
======== ======== ======== ======== ========== ==========
Substantially all of the Company's property, plant and equipment are
pledged as collateral for these debts.
NOTE L - ACCRUED EXPENSES
Accrued expenses consisted of the following:
SEPTEMBER 30, SEPTEMBER 30,
1995 1994
-------------- --------------
Payroll $ 91,394 $ 108,727
Interest 10,444 26,858
Rent 88,728 142,737
Taxes, Other than Income 142,824 183,613
Other 324,114 478,568
-------------- --------------
Total $ 657,504 $ 940,503
============== ==============
The Company does not accrue any amounts for compensated absences
because the amounts cannot be reasonably estimated and the accrual would not
have a material adverse effect on the financial condition of the Company.
NOTE M - INCOME TAXES
The provision for income taxes consists of the following:
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------
1995 1994 1993
-------------- -------------- --------------
Federal $ 1,103,313 $ (296,379) $ (155,697)
State 154,711 (74,882) --
-------------- -------------- --------------
Total $ 1,258,024 $ (371,261) $ (155,697)
============== ============== ==============
Current $ 1,189,842 $ 48,916 $ (161,432)
Deferred 68,182 (420,177) 5,735
-------------- -------------- --------------
Total $ 1,258,024 $ (371,261) $ (155,697)
============== ============== ==============
-47-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
Deferred income taxes arise primarily due to temporary differences in
recognizing certain revenues and expenses for tax purposes, the required use of
extended lives for calculation of depreciation for tax purposes, and the
expected use of tax loss carryforwards in future periods. The components of the
net deferred tax asset at September 30, 1995 and 1994 are as follows:
1995 1994
---- ----
Properties and Equipment
principally due to depreciation $ 528,764 $ 406,524
Accounts Receivable, principally due
to allowance for doubtful accounts 101,037 113,881
Inventories, principally due to additional costs
inventoried for tax purposes pursuant to the
Tax Reform Act of 1986 4,072 4,659
Accrued Bonuses -- 56,173
Net Operating Loss Carryforwards 82,856 103,545
Charitable Contribution Carryforwards -- 33,014
Tax Credit Carryforwards -- 48,906
---------- ----------
Total gross deferred tax assets $ 716,729 $ 766,702
Less - Valuation allowance 82,856 64,648
---------- ----------
Net deferred tax assets $ 633,873 $ 702,054
========== =========
A valuation allowance is provided to reduce the deferred tax assets to
a level which, more likely than not, will be realized. The net deferred assets
reflects management's assessment of the amount which will be realized from
future taxable earnings or alternative tax strategies. The valuation allowance
was increased by approximately $18,000 during fiscal 1995.
At September 30, 1995, the Company has net operating loss carryforwards
for state income tax purposes of $1,586,000 which are available to offset future
state taxable income through 2010.
-48-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
Total federal tax expense (credit) for years ended September 30, 1995,
1994 and 1993 differed from the amount computed by applying the U.S. federal
income tax rates of 34%, to income (loss) from continuing operations before
income tax for the following reasons:
1995 1994 1993
------------------------ -------------------- -------------------
PERCENT PERCENT PRECENT
OF OF OF
PRE-TAX PRE-TAX PRE-TAX
------------------------ -------------------- -------------------
AMOUNT INCOME AMOUNT INCOME AMOUNT INCOME
------ ------ ------ ------ ------ ------
Income (Loss) before
Provision (Credit)
for Income Taxes $ 3,061,691 100% $(1,013,557) 100% $885,084 100%
---------- ---- ------------ --- -------- ---
Computed Expected 1,040,975 34% (344,609) (34%) (300,929) (34%)
Tax Expense (Credit)
Alternative Minimum
Tax in Excess of
Regular Tax
(Regular Tax in
Excess of Alternative
Minimum Tax) -- -- -- -- 123,829 14
Increases in taxes
resulting from:
Non-deductible
items and other 129,661 4 54,768 6 21,403 2
Federal tax (benefit)
-State Income Taxes (67,323) (2) 15,139 1 -- --
Change in Valuation
Allowance -- (21,677) (2) -- --
---------- ---- ----------- --- --------- ---
Actual Federal Income
Tax Expense (Credit) $1,103,313 36% $(296,379) (29%) $(155,697) (18%)
========== ==== =========== === ========= ===
The Company's 1993 tax return was examined by the Internal Revenue Service.
The Internal Revenue Service accepted the return as filed.
-49-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
NOTE N - CAPITAL STOCK, CAPITAL IN EXCESS OF PAR VALUE, TREASURY STOCK
During 1995, the Company acquired 574 shares of treasury stock.
During 1994, the Company acquired 18,848 shares of treasury stock.
NOTE O - LEASE AND ROYALTY COMMITMENTS
The Company and its subsidiaries, under non-capitalized leases, lease
certain facilities and equipment used primarily for catering kitchens,
cafeterias, dining rooms, coffee shops, cocktail lounges, gift shops,
warehouses, and a promotional facility. These leases expire at various dates
through the year 2006.
Rental expenses included in continuing operations are as follows:
YEAR ENDED SEPTEMBER 30,
-------------------------------------------
1995 1994 1993
----------- ----------- -----------
Financing Leases $ -- $ -- $ --
=========== =========== ===========
Other Leases:
Base Rental Expense $ 1,682,938 $ 2,075,790 $ 1,907,291
Contingent Rental Expense 1,098,689 1,358,273 1,317,997
Less Sublease Rental (49,275) (38,302) (31,663)
----------- ----------- -----------
Total Rentals - Other Leases $ 2,732,352 $ 3,395,761 $ 3,193,625
----------- ----------- -----------
Contingent rentals and royalties are generally calculated as a
percentage of gross sales and vary from three (3%) percent to forty (40%)
percent.
Most leases contain renewal options for five to ten year periods at
negotiated rates approved by both parties.
The Company's leases required the Company to spend approximately
$1,400,000 for improvements and equipment at four locations. The Company has
expended $223,000 to fulfill these obligations.
-50-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
The approximate minimum rental commitments for the years subsequent to
September 30, 1995, are as follows:
FINANCING OTHER
TOTAL LEASES LEASES
1996 $ 1,385,130 $ --- $ 1,385,130
1997 1,130,918 --- 1,130,918
1998 994,105 --- 994,105
1999 878,800 --- 878,800
2000 815,916 --- 815,916
2001-2003 3,042,755 --- 3,042,755
--------------- ----------------
TOTAL $ 8,247,624 $ --- $ 8,247,624
=============== ============== ================
NOTE P - PROFIT SHARING PLAN
The Company provides a profit sharing plan which covers all full-time
employees (as defined) who have at least three months of continuous service with
the Company. Contributions to the plan are limited to a maximum of 15% of the
participating employee's yearly salary. The Company contributed $25,000 each
year for 1995, 1994 and 1993 to the Plan.
NOTE Q - SUBSEQUENT EVENTS
1. After September 30, 1995, the Company recognized a gain of $82,000 due to the
sale of land by a joint venture in which the Company has an interest.
2. Since September 30, 1995, the Company has spent about $124,000 to improve its
facilities at the Tampa Bay Airport near St. Petersburg, Florida. The Company
expects to spend a total of approximately $1,000,000 at this location.
3. Since September 30, 1995, the Company has spent $70,000 and $13,000 to
improve its facilities at the Pensacola Airport and at Royal Palm Beach,
respectively.
4. On March 6, 1996, the Company refinanced its note payable collateralized by
leasehold improvements at its facilities in Daytona Beach. The new note bears
interest at 3% over prime and is payable monthly for a 60 month period ending
March 6, 2001. The principal of the new note is $700,000 and the approximate net
loan proceeds amounted to $384,000.
5. On April 1, 1996, the Company opened a food and beverage concession at the
Orlando-Sanford Airport.
6. After September 30, 1995, the Company renewed its leases at the Tallahassee,
Florida Airport for a 5 year period; the Tampa Bay, Florida Airport for a 9 year
period; the Cape Kennedy, Florida Airport for a 5 year period; and the Okaloosa,
Florida Air Terminal for a 10 year period.
7. The Company is negotiating to borrow $500,000 in the form of an unsecured
note personally guaranteed by the President of the Company. The note will bear
interest at 18% and will be payable in 36 equal monthly installments of
principal and interest.
-51-
Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
NOTE R - COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
1. Effective July 1, 1988, the Company entered into an incentive compensation
agreement with a key employee under which the Company agreed to purchase a life
insurance policy for the employee. The employee will forfeit the policy if his
employment terminates prior to July 1, 1996. The annual premium is $20,000 for
the first 9 years and decreases to $9,723 in 1996. No premiums are payable after
1996.
2. Effective January 1, 1989, the Company entered into a consulting agreement
with a partnership under the control of a retired director of the Company in
recognition of his services to the Company. The agreement provides for monthly
payments $1,800 for a 10-year period.
3. The Company is involved in various legal actions arising in the normal course
of business. After taking into consideration legal counsel's evaluation of such
actions, management is of the opinion that their outcome will not have a
significant effect on the Company's financial position.
4. The Company is self-insured for a portion of its workers compensation
insurance in the state of Florida. The Company's maximum self-insured exposure
at September 30, 1995 for all open years is approximately $553,000.
5. During November 1994, the Company agreed to repurchase 11,000 shares of its
stock held by a key employee at any time during the next two years at the
current market price upon the request of the key employee.
6. The Florida Department of Revenue is in the process of conducting an
examination of the books and records for 12 locations of the Company for the
period January 1, 1989 through December 31, 1993, with respect to state sales
and use tax. The examination is in process at this time and has not been
completed. Preliminary schedules indicate a potential assessment of
approximately $163,000 plus interest. Included in the preliminary potential
assessment is tax on port fees and certain supplies used in the airline catering
business. The Company has taken the position that both items are not subject to
sales tax because they are "passed-through" to other parties. The Company
intends to vigorously defend its position, and is unable, at this time, to
predict the ultimate settlement of this matter.
NOTE S - DEFALCATIONS/RECOVERIES
The Company recovered approximately $1,900 and $1,800 during fiscal
1995 and fiscal 1994, respectively, from a former employee. During fiscal 1993,
the Company recovered approximately $300,000 from its insurance company and a
former employee with respect to defalcations that were discovered in prior years
of approximately $782,000. Additional amounts recovered by the Company, if any,
will be recorded as income at the time of receipt.
NOTE T - CHANGE IN ACCOUNTING ESTIMATE
As explained in Note A-4, during July 1993, the Company revised the
amortization schedule of the goodwill with respect to the acquisition of
Meiner's Catering Services, Inc. to coincide with the cessation and abandonment
of the private catering operations. The effect of this change in accounting
estimate was to increase the 1993 amortization expense by approximately $398,000
or about $.68 per share.
NOTE U - RELATED PARTY TRANSACTIONS
1. The Company purchased equipment and services from a supplier that is
considered to be a related party for fiscal years 1995, 1994 and 1993 in the
approximate amounts of $15,000, $6,500 and $23,000, respectively.
2. The Company rents on a month-to-month basis, certain real estate from its
President who is also the principal stockholder of the Company. During fiscal
1995, 1994 and 1993 the Company paid rent of
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Jerry's Inc. and Subsidiaries September 30, 1995
Notes to Consolidated Financial Statements
approximately $11,900, $9,000 and $11,000 respectively, for the use of the real
estate.
3. Included in Other Receivables for September 30, 1995 is a $125,000 advance to
a related party. Employee Loans Receivable include advances to an employee
considered to be a related party of $46,000 and $19,000 at September 30, 1995
and 1994, respectively.
4. A related party holds the snack bar concession and the gift shop concession
at two separate locations. The Company also operates a concession at these
locations. The related party pays to the Company facilities rent, equipment
rent, and management fees. During fiscal 1995, 1994 and 1993 the related party
was charged the following:
1995 1994 1993
-------- -------- ------
Facilities Rent $ 50,397 $ 38,302 $ 15,933
Equipment Rent 18,156 16,330 15,593
Management Fees 24,000 18,000 11,500
The related party owed the Company approximately $83,000, $38,000 and
$31,000 at September 30, 1995, 1994 and 1993.
-53-
SCHEDULE V
JERRY'S, INC. AND SUBSIDIARIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
OTHER CHANGES BALANCE
BEGINNING ADDITIONS RETIREMENTS DEBIT/AND AT END
DESCRIPTION OF YEAR AT COST OR SALES OR (CREDIT) OF YEAR
- ----------- ----------- ----------- ----------- ----------- -----------
YEAR ENDED SEPTEMBER 30, 1995:
Land $ 192,981 $ -- $ 43,700 $ -- $ 149,281
Building and Building Improvements 1,891,830 -- 460,144 -- 1,431,686
Equipment and Furniture 4,310,698 139,818 629,923 -- 3,820,593
Aircraft and Automotive Equipment 3,294,370 227,011 463,657 -- 3,057,724
Leasehold Improvements and Other 5,736,691 90,500 428,918 -- 5,398,273
----------- ----------- ----------- ----------- -----------
$15,426,570 $ 457,329 $ 2,026,342 $ -- $13,857,557
=========== =========== =========== =========== ===========
YEAR ENDED SEPTEMBER 30, 1994:
Land $ 192,981 $ -- $ -- $ -- $ 192,981
Buildings and Building Improvements 1,866,358 25,472 -- -- 1,891,830
Equipment and Furniture 4,101,030 209,668 -- -- 4,310,698
Aircraft and Automotive Equipment 3,469,258 1,601,623 1,776,511 -- 3,294,370
Leasehold Improvements and Other 5,559,277 177,414 -- -- 5,736,691
----------- ----------- ----------- ----------- -----------
$15,188,277 $ 2,014,177 $ 1,776,511 $ -- $15,426,570
=========== =========== =========== =========== ===========
YEAR ENDED SEPTEMBER 30, 1993:
Land $ 219,981 $ -- $ 27,000 $ -- $ 192,981
Building and Building Improvements 2,020,419 -- 154,061 -- 1,866,358
Equipment and Furniture 3,721,594 752,147 372,711 -- 4,101,030
Aircraft and Automotive Equipment 3,249,956 241,675 22,373 -- 3,469,258
Leasehold Improvements and Other 5,353,820 488,459 283,002 -- 5,559,277
----------- ----------- ----------- ----------- -----------
$14,565,770 $ 1,482,281 $ 859,147 $ -- $15,188,904
=========== =========== =========== =========== ===========
The annual provisions for depreciation have been computed principally in
accordance with the following range of estimated useful lives:
Buildings 25 - 35 years
Building Improvements 7 - 20 years
Equipment and Furniture 5 - 7 years
Aircraft and Automotive 3 - 7 years
Leasehold Improvements 5 - 7 years
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SCHEDULE VI
JERRY'S, INC. AND SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
BALANCE AT ADDITIONS CHARGED BALANCE
BEGINNING CHARGED TO TO OTHER OTHER AT END
DESCRIPTION OF YEAR INCOME ACCOUNTS RETIREMENTS CHARGES OF YEAR
- ----------- ---------- ---------- ---------- ---------- ---------- ----------
YEAR ENDED SEPTEMBER 30, 1995:
Buildings and Building Improvements $ 926,033 $ 56,498 $ -- $ 196,813 $ -- $ 785,718
Equipment and Furniture 2,975,151 359,954 -- 324,847 -- 3,010,258
Aircraft and Automotive Equipment 1,475,027 458,177 -- 324,643 -- 1,608,561
Leasehold Improvements and Other 3,742,574 592,446 -- 318,902 -- 4,016,118
---------- ---------- ---------- ---------- ---------- ----------
$9,118,785 $1,467,075 $ -- $1,165,205 $ -- $9,420,655
========== ========== ========== ========== ========== ==========
YEAR ENDED SEPTEMBER 30, 1994:
Buildings and Building Improvements $ 854,320 $ 71,713 $ -- $ -- $ -- $ 926,033
Equipment and Furniture 2,548,910 426,241 -- -- -- 2,975,151
Aircraft and Automotive Equipment 1,687,132 517,253 -- 729,358 -- 1,475,027
Leasehold Improvements and Other 3,107,991 634,583 -- -- -- 3,742,574
---------- ---------- ---------- ---------- ---------- ----------
$8,198,353 $1,649,790 $ -- $ 729,358 $ -- $9,118,785
========== ========== ========== ========== ========== ==========
YEAR ENDED SEPTEMBER 30, 1993:
Buildings and Building Improvements $ 817,092 $ 74,203 $ -- $ 36,975 $ -- $ 854,320
Equipment and Furniture 2,531,296 363,704 -- 346,090 -- 2,548,910
Aircraft and Automotive Equipment 1,183,372 526,133 -- 22,373 -- 1,687,132
Leasehold Improvements and Other 2,774,285 551,920 -- 218,214 -- 3,107,991
---------- ---------- ---------- ---------- ---------- ----------
$7,306,045 $1,515,960 $ -- $ 623,652 $ -- $8,198,353
========== ========== ========== ========== ========== ==========
-55-
SCHEDULE VIII
JERRY'S, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
ADDITIONS
(DELETIONS) ADDITIONS
BALANCE AT CHARGED CHARGED TO
BEGINNING (CREDIT) OTHER BALANCE AT
DESCRIPTION OF PERIOD TO INCOME ACCOUNTS DEDUCTIONS END OF PERIOD
----------- ----------- ----------- ----------- ---------- -------------
YEAR ENDED SEPTEMBER 30, 1995
DEDUCTED FROM ASSET ACCOUNTS
Allowance for Doubtful Accounts $304,100 $ 56,151 $ -- $ 91,750 $268,501
======== ======== ========= ======== ========
YEAR ENDED SEPTEMBER 30, 1994
DEDUCTED FROM ASSET ACCOUNTS
Allowance for Doubtful Accounts $222,100 $227,688 $ -- $145,688 $304,100
======== ======== ========= ======== ========
YEAR ENDED SEPTEMBER 30, 1993
DEDUCTED FROM ASSET ACCOUNT
Allowance for Doubtful Accounts $185,000 $259,402 $ -- $222,302 $222,100
======== ======== ========= ======== ========
-56-
SCHEDULE X
JERRY'S, INC AND SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE THREE YEARS ENDED SEPTEMBER 30, 1995
1995 1994 1993
---- ---- ----
Maintenance and Repairs $ 400,533 $ 518,961 $ 553,553
============ ============ ===========
Depreciation and Amortization of
Intangible Assets (See Notes A-4, U) $ 7,169 $ 2,124 $ 411,696
============ ============ ===========
Real Estate, Personal Property,
License and Other Taxes
(excluding Payroll and
Income Taxes) $ 232,076 $ 234,521 $ 211,621
============ ============ ===========
Advertising $ 332,405 $ 344,059 $ 379,966
============ ============ ===========
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EXHIBIT INDEX
EXHIBIT DESCRIPTION PAGE
- ------- ----------- ----
10.(d) Agreement dated September 1996 by and among Jerry's,
Inc., Jerry's Caterers, Inc., Meiner's Catering
Service, Inc., Gerard J. Pendergast, Jr., Alpha
Flight Services, Inc., Alpha Flight Services Florida,
Inc., and Alpha Overseas Holdings, Ltd.
27 Financial Data Schedule