UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
Form 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended December 31, 1995, or
[ ] Transition report pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
Commission File Number 0-4766
JERRY'S, INC.
State of Florida I.R.S. No. 59-1060780
1500 North Florida Mango Road, Suite 19
West Palm Beach, Florida 33409
Telephone Number: (407) 689-9611
Common Stock, $.04 Par Value
Outstanding Shares at December 31, 1995 - 562,422
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
twelve (12) months and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES _______ NO X
TABLE OF CONTENTS
JERRY'S, INC. AND SUBSIDIARIES
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS..............................3-6
CONSOLIDATED STATEMENTS OF INCOME AND
RETAINED EARNINGS..........................................7
CONSOLIDATED STATEMENT OF CASH FLOWS.....................8-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............10-16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.......................17
PART II.
OTHER INFORMATION
ITEMS 1 THROUGH 6...........................................................19
-2-
PART I. FINANCIAL INFORMATION
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1994
ASSETS 1995 1994
------ ---------------- ------------------
CURRENT ASSETS:
Cash and Cash Items $ 497,050 $ 54,630
Customers Accounts Receivable
Less - Allowance for Doubtful Accounts:
$252,000 in 1995 and $356,000 in 1994 1,075,804 2,496,805
Inventories (Note A-2) 342,827 463,346
Deferred Income Taxes 105,109 295,530
Income Tax Refunds Receivable 81,693 --
Prepaid Expenses and Other Current Assets 511,825 550,212
(Net of $5,000 Allowance in 1995
and $0 in 1994)
---------------- ------------------
Total Current Assets $ 2,614,308 $ 3,860,523
---------------- ------------------
INVESTMENTS:
Land Held for Investment $ 87,000 $ 87,000
Other Investments 349,119 497,403
---------------- ------------------
Total Investments $ 436,119 $ 584,403
---------------- ------------------
PROPERTY, PLANT AND EQUIPMENT:
Cost $ 13,856,182 $ 15,512,795
Less: Accumulated Depreciation 9,702,224 9,480,138
---------------- ------------------
Net Book Value $ 4,153,958 $ 6,032,657
---------------- ------------------
OTHER ASSETS:
Cash (Restricted) $ 580,297 $ 467,565
Leasehold Rights and Other Intangible
Assets (Note A-4) 7,635 11,277
Cash Surrender Value of Insurance 2,191 35,861
Deposits and Miscellaneous 221,529 278,122
Employee Loans Receivable (Net of
$20,000 Allowance in 1995 and
$10,000 Allowance in 1994) 79,616 31,897
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1995
and $18,000 in 1994) 88,391 107,992
Deferred Income Taxes Non-Current Portion 528,764 406,524
---------------- ------------------
Total Other Assets $ 1,508,423 $ 1,339,238
---------------- ------------------
TOTAL ASSETS: $ 8,712,808 $ 11,816,821
================ ==================
See accompanying Notes to Consolidated Financial Statements.
-3-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1994
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------------------------------ ----------------- -----------------
CURRENT LIABILITIES:
Notes Payable to Bank and
Others (Note D) $ 39,063 $ 1,859,914
Current Portion of Long-Term Debt (Note E) 519,490 993,008
Accounts Payable 1,292,448 2,324,663
Accrued Expenses 799,632 936,829
Income Tax Payable -- 93,381
----------------- -----------------
Total Current Liabilities $ 2,650,633 $ 6,207,795
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current
Portion (Note E) 2,963,257 4,166,345
----------------- -----------------
TOTAL LIABILITIES $ 5,613,890 $ 10,374,140
----------------- -----------------
STOCKHOLDERS' EQUITY:
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 3,124,927 1,468,665
----------------- -----------------
Subtotal: $ 3,266,000 $ 1,609,738
Less: Shares Reacquired and Held
in Treasury (59,955 shares
in 1995 and 59,948 shares
in 1994 at Cost) 167,082 167,057
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY: $ 3,098,918 $ 1,442,681
----------------- -----------------
Commitments, Contingencies and Subsequent
Events (Note G) -- --
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY: $ 8,712,808 $ 11,816,821
================= =================
See accompanying Notes to Consolidated Financial Statements
-4-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995 AND 1994
ASSETS 1995 1994
----------------- -----------------
CURRENT ASSETS:
Cash and Cash Items $ 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 311,648 410,865
Deferred Income Taxes 105,109 295,530
Prepaid Expenses and Other Current Assets
(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 $ 87,000 $ 87,000
Other Investments 265,528 495,174
----------------- -----------------
Total Investments $ 352,528 $ 582,174
----------------- -----------------
PROPERTY, PLANT AND EQUIPMENT:
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) $ 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 Allowance
In 1994) 79,840 33,858
Other Receivables - Non-Current Portion
(Net of $13,000 Allowance in 1995 and
$13,000 In 1994) 95,376 120,327
Deferred Income Taxes - Non-Current Portion 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.
-5-
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 $ -- $ 1,723,040
Current Portion of Long-Term Debt 519,490 899,752
Accounts Payable 1,171,228 2,602,980
Income Taxes Payable 12,307 109,381
Accrued Expenses 657,504 940,503
------------------ -----------------
Total Current Liabilities $ 2,360,529 $ 6,275,656
LONG-TERM LIABILITIES:
Long-Term Debt, Less Current Portion 3,073,603 4,303,541
------------------ -----------------
TOTAL LIABILITIES $ 5,434,132 $ 10,579,197
------------------ -----------------
STOCKHOLDERS' EQUITY:
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 -- --
------------------ -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 8,773,550 $ 12,116,619
================== =================
See accompanying notes to Consolidated Financial Statements.
-6-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
----------------- -------------------
NET SALES:
(A substantial portion of which is
attributable to four customers (Note B)
and a substantial portion which have
been discontinued) (Note B) $ 4,324,508 $ 6,608,057
----------------- -------------------
COSTS, EXPENSES, AND OTHER ITEMS:
Costs of Sales $ 2,583,009 $ 4,046,322
Selling and Administrative Expenses 2,257,770 2,691,835
Airline Port Fees (Income) (118,812) (184,239)
Interest (Income) (7,846) (4,015)
Interest Expense 70,125 188,780
(Earnings) of Joint Ventures (83,591) (2,229)
(Gain) Loss On Disposition of Assets (25,632) --
Other (Income) (16,015) (19,302)
----------------- -------------------
Total Costs, Expenses and Other Items $ 4,659,008 $ 6,717,152
----------------- -------------------
Income (Loss) Before Provision for
Income Taxes $ (334,500) $ (109,095)
----------------- -------------------
PROVISION (CREDIT) FOR INCOME TAXES:
Federal $ (80,000) $ (14,000)
State (14,000) (2,000)
----------------- -------------------
Total Provision (Credit) for
Income Taxes $ (94,000) $ (16,000)
----------------- -------------------
Net Income (Loss) $ (240,500) $ (93,095)
RETAINED EARNINGS, BEGINNING OF PERIOD: 3,365,427 1,561,760
----------------- -------------------
RETAINED EARNINGS, END OF PERIOD: $ 3,124,927 $ 1,468,665
================= ===================
NET INCOME (LOSS) PER COMMON SHARE: $ (.43) $ (.17)
================= ===================
AVERAGE SHARES OF COMMON STOCK OUTSTANDING: 562,422 574,764
================= ===================
See accompanying Notes to Consolidated Financial Statements.
-7-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
------------------ ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (240,500) $ (93,095)
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 341,854 365,341
Provision for Losses on Accounts
Receivable 25,000 50,000
Equity In (Earnings) Loss of
Joint Ventures (83,591) (2,229)
(Gain) Loss on Sale of Assets (25,632) -
Change in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (292,947) (301,252)
(Increase) Decrease in Inventories (31,179) (52,481)
(Increase) Decrease in Prepaid Expenses
and Other (62,747) (25,284)
(Increase)Decrease in Deposits and
Miscellaneous 26,161 9,375
Increase(Decrease) in Accounts Payable 121,220 (278,317)
Increase(Decrease) in Income Taxes Payable (94,000) (16,000)
Increase(Decrease) in Accrued Expenses 142,128 (3,674)
------------------ ----------------
Net Cash Provided By (Used in)
Operating Activities: $ (174,233) $ (347,616)
------------------ ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Property and
Equipment $ 25,632 $ -
Payments Received on Notes from Sale of
Property and Equipment 16,250 -
Purchase of Property and Equipment (58,449) (86,225)
------------------ ----------------
Net Cash Provided (Used In)
Investing Activities: $ (16,567) $ (86,225)
------------------ ----------------
See accompanying Notes to Consolidated Financial Statements.
-8-
JERRY'S, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Continued)
1995 1994
----------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Line-of-Credit and
Long-Term Borrowings $ 39,063 $ 159,182
Principal Payments Under Line-of Credit
and Long-Term Borrowings (110,346) (66,248)
Payments to Acquire Treasury Stock -- (1,646)
Additions to Other Receivables
(Used In) Financing $ -- (67,770)
----------------- ----------------
Net Cash Provided by (Used In)
Financing Activities $ (71,283) $ 23,518
----------------- ----------------
Net Increase (Decrease) in Cash and Cash
Equivalents $ (262,083) $ (410,323)
CASH AND CASH EQUIVALENTS AT THE BEGINNING
OF THE PERIOD 759,133 464,953
----------------- ----------------
Cash and Cash Equivalents at the End
of the Period $ 497,050 $ 54,630
================= ================
ADDITIONAL CASH FLOW INFORMATION:
Cash Paid During the Year for:
Interest (Non-Capitalized) $ 70,125 $ 188,780
================= ================
Income Taxes $ -- $ --
================= ================
Non-Cash Investing and Financing Activities:
Purchase of Assets
(Net of Cash Paid) for Notes $ -- $ --
================= ================
See accompanying Notes to Consolidated Financial Statements.
-9-
JERRY'S, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
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
businesses. 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:
1995 1994
--------------- ---------------
Finished Goods $ 56,779 $ 63,992
Raw Materials 286,048 399,354
--------------- ---------------
Total $ 342,827 $ 463,346
=============== ===============
3. PROPERTY, PLANT, AND EQUIPMENT -
Property, plant, and equipment are carried at cost. The Company
calculates depreciation on the straight-line and accelerated methods at
annual rates based upon the estimated service lives of the property
which generally are as follows:
Buildings and Improvements 7 to 35 years
Equipment and Furniture 5 to 7 years
Aviation 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.
-10-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
4. INTANGIBLES -
The Company amortizes mortgage costs over the life of the mortgage
using the straight line method.
5. INCOME TAXES -
Effective January 1994, 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.
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 income 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,
-11-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
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 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 period
incurred and totaled $85,000 in 1995, and $115,000 in 1994 (three
months ended December 31).
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
The Company derives a substantial portion of its revenues from catering
flights of four airlines, as follows:
PERCENT OF TOTAL SALES
----------------------
THREE MONTHS ENDED
DECEMBER 31, AIR CANADA CONTINENTAL U.S. AIR KIWI
- ------------------ ---------- ----------- -------- ----
1995 4% 6% 9% 6%
1994 7% 4% 21% 7%
During February 1995, the Company sold its airline catering operations at
Miami, Florida and Orlando Florida to Alpha Flight Services Florida, Inc.
The sales that were discontinued during February, 1995 amounted to:
-12-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
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%
Three Months Ended 12/31/95 $ -- --
Three Months Ended 12/31/94 2,157,000 33%
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.
NOTE D - NOTES PAYABLE - BANKS AND OTHERS
DECEMBER 31, DECEMBER 31,
DESCRIPTION 1995 1994
----------- ---------------- -------------------
Notes 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 guaranty of the Company's
president. $ -- $ 1,831,448
Insurance premium financing plan 39,063 28,466
---------------- -------------------
TOTAL $ 39,063 $ 1,859,914
================ ===================
-13-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
NOTE E - LONG TERM DEBT
The principal balances outstanding and details of long-term debt
are summarized as follows:
DECEMBER 31, DECEMBER 31,
DESCRIPTION 1995 1994
----------- ------------ ------------
Chattel mortgage notes on equipment,
aircraft, 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. $ 2,303,901 $ 2,218,989
7% to 12 1/2% notes payable, collateralized by
land and buildings, payable in monthly
installments of approximately $8,000
(including interest), with varying
maturities through 2018. 736,508 1,021,363
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. 136,328 161,118
9 1/4% (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 of $250,000. -- 87,500
10% note due 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 10 years. -- 128,005
-14-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
DECEMBER 31, DECEMBER 31,
DESCRIPTION 1995 1994
----------- ------------ ------------
18% note payable collateralized by equipment,
improvements and interests at the Company's
Pensacola, Florida facilities along with the
personal guaranty of the Company's President,
payable in monthly installments of $15,763
(including interest) through 1999. -- 528,911
18% note payable secured by the personal
guaranty of the Company's president, payable
in monthly installments of $8,407 (including
interest) through 2000. -- 556,834
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. 306,010 456,633
------------ ------------
TOTAL $ 3,482,747 $ 5,159,353
Less payments due within one year 519,490 993,008
------------ ------------
Long-Term Debt, less current portion $ 2,963,257 $ 4,166,345
============ ============
NOTE F - LEASE COMMITMENTS
The Company and its subsidiaries, under non-capitalized leases, lease
certain facilities and equipment used primarily for catering kitchens, dining
rooms, coffee shops, cocktail lounges, gift shops, warehouses, and a promotional
facility. These leases expired at various dates through the year 2006.
Rental expense included in continuing operations is as follows:
1995 1994
--------- ------
Rent $ 602,487 $ 758,509
-15-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
Contingent rentals are generally calculated as a percentage of gross sales
and vary from three percent (3%) to forty percent (40%).
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.
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 G - COMMITMENTS, CONTINGENCIES, OTHER MATTERS AND SUBSEQUENT EVENTS
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 of $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.
-16-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
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 in 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
industry. 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.
7. During February 1995, the Company sold its airline catering operations
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 three years. This contingent consideration is subject to a
limitation of $1,000,000 per year in the first two years.
8. 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.
9. On April 1, 1996, the Company opened a food and beverage concession at
the Orlando-Sanford Airport.
-17-
Jerry's, Inc. And Subsidiaries December 31, 1995
Notes to Consolidated Financial Statements (Continued)
10. After September 30, 1995, the Company renewed its leases at the
Tallahassee, Florida Airport for a five year period, the Tampa Bay, Florida
Airport for a nine year period, the Cape Kennedy, Florida Airport for a five
year period, and the Okaloosa, Florida Air Terminal for a ten year period.
11. During May, 1996, the Company borrowed $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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER OF 1996 FISCAL YEAR COMPARED TO FIRST
QUARTER OF 1995 FISCAL YEAR
NET SALES
The Company's net sales for the three months ended December 31, 1995 were
$4,325,000 compared with $6,608,000 for the same period of the prior year. The
sales decreased due to the sale of the Miami and Orlando operations to Alpha
Flight Services, Inc. See Note B to Financial Statements.
COST OF SALES
Cost of sales in the first three months of the 1996 fiscal year were
$2,583,000 compared with $4,046,000 in 1995. The Company's gross margin
increased during this period from 38.8% in the first three months of 1995 fiscal
year to 40.3% in 1996. This increase is due to the increased sales to
international airlines and a higher percentage of restaurant and lounge sales.
SELLING AND ADMINISTRATIVE EXPENSES
The Company's selling and administrative expenses decreased from $2,692,000
in the first three months of 1995 fiscal year to $2,258,000 in 1996, primarily
due to the sale to Alpha.
AIRLINE PORT FEES
The Company charges each of its airline catering customers a port fee equal
to the amount of percentage rent the Company pays to each airport authority. The
amount of this income was $184,000 in the first three months of 1995 fiscal
year, compared with $119,000 in the first three months of 1996. It is directly
offset by rental expense paid by the Company. The decline reflects the Alpha
sale.
NET INCOME
Due to the factors described above, the Company's net loss for the first
three months of the 1996 fiscal year was $241,000, compared with a loss of
$93,000 for the same period of the prior year.
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FINANCIAL CONDITION AT DECEMBER 31, 1995
On December 31, 1995, the Company's current assets and current liabilities
were $2,614,000 and $2,651,000, respectively, compared with $3,861,000 and
$6,208,000 on December 31, 1994. The Company's current ratio (current assets
divided by current liabilities) was at .99 on December 31, 1994 compared to 1.03
at September 30, 1995.
The Company's financial condition declined slightly during the first three
months of the 1996 fiscal year. The principal reason for this decline was the
Company's net loss for the period. The Company's investing activities used only
$17,000 in cash during the first three months of 1996 fiscal year, which
reflects the Company's low level of capital expenditures. Finally, the Company's
financing activities used approximately $71,000 in cash flow during the first
three months of 1996 fiscal year (primarily due to repayment of the Company's
bank debt). The Company's liquidity generally declines during the first quarter
of the fiscal year due to the substantial increase in passengers to Florida
during this period (which results in higher accounts receivable).
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PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBITS
27.1 Financial Data Schedule
There were no reports on Form 8-K filed for the three months ended December
31, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JERRY'S, INC.
Date: September 30, 1997 /s/GERARD J. PENDERGAST, JR.
----------------------------
Gerard J. Pendergast, Jr.
President and Chief Executive
Officer
Date: September 30, 1997 /s/KAREN P. RHODES
------------------
Karen P. Rhodes
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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27.1 Financial Data Schedule