-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SIk9hbCGJ4pnXHRCQbtu9ZfIQg2QGc4mDdO4GQasrj6gZtfRj36KkEYBSUcOrdPc /c5G2+fBl0pK6+m8ChJy2A== 0000913906-98-000102.txt : 19980910 0000913906-98-000102.hdr.sgml : 19980910 ACCESSION NUMBER: 0000913906-98-000102 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980726 FILED AS OF DATE: 19980909 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHEFS INTERNATIONAL INC CENTRAL INDEX KEY: 0000201424 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 222058515 STATE OF INCORPORATION: DE FISCAL YEAR END: 0128 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08513 FILM NUMBER: 98705919 BUSINESS ADDRESS: STREET 1: 62 BROADWAY STREET 2: PO BOX 1332 CITY: POINT PLEASANT BEACH STATE: NJ ZIP: 08742 BUSINESS PHONE: 9082950350 MAIL ADDRESS: STREET 1: 62 BROADWAY STREET 2: PO BOX 1332 CITY: POINT PLEASANT BEACH STATE: NJ ZIP: 08742 10-Q 1 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended JULY 26, 1998 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________________ to _______________ Commission file number 0-8513 CHEFS INTERNATIONAL, INC. - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) DELAWARE 22-2058515 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 62Broadway, Point Pleasant Beach, NJ 08742 (Address of principal executive offices) (Registrant's telephone number, including area code) (732) 295-0350 -------------------- - ------------------------------------------------------------------------------ (Former name, former address and former fiscal year, if changes since last report.) 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 such filing requirements of the past 90 days. Yes X No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class Outstanding Shares at September 2, 1998 - -------------------------------- --------------------------------------- Common Stock, $.01 par value 4,488,444 CHEFS INTERNATIONAL, INC. I N D E X PART I FINANCIAL INFORMATION PAGE NO. Consolidated Balance Sheets - 1 - 2 July 26, 1998 and January 25, 1998 Consolidated Statements of Operations - 3 Six Months Ended July 26, 1998 and July 27, 1997 Consolidated Statements of Cash Flows - 4 Six Months Ended July 26, 1998 and July 27, 1997 Notes to Consolidated Financial Statements 5 Management's Analysis of Six Months' Income 6 - 7 Statement PART II OTHER INFORMATION 8 PART I - FINANCIAL INFORMATION CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONSOLIDATED BALANCE SHEETS - ------------------------------------------------------------------------------ July 26, 1998 January 25, 1998 Assets: (Unaudited) Current Assets: Cash and Cash Equivalents $ 1,510,763 $ 1,136,063 Investments 250,000 196,000 Miscellaneous Receivables 113,210 66,228 Inventories 1,025,772 1,039,203 Due on Sale of Discontinued Operations from Related Party - Current 278,523 297,441 Prepaid Expenses 113,248 98,547 ----------- ------------ Total Current Assets 3,291,516 2,833,482 ---------- ---------- Property, Plant and Equipment - At Cost 19,280,616 18,591,633 Less: Accumulated Depreciation 7,707,438 7,234,384 ---------- ---------- Property, Plant and Equipment - Net 11,573,178 11,357,249 ----------- ---------- Other Assets: Investments 535,000 685,000 Goodwill - Net 516,276 529,972 Liquor Licenses - Net 690,637 702,979 Due on Sale of Discontinued Operations from Related Party - Long-Term 98,949 222,866 Surrender Value of Life Insurance 406,438 406,438 Due from Related Party 4,190 4,702 Other 33,840 62,144 ------------- ------------- Total Other Assets 2,285,330 2,614,101 ----------- ----------- Total Assets $17,150,024 $16,804,832 =========== ===========
The accompanying notes are an integral part of these financial statements. 1 CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONSOLIDATED BALANCE SHEETS - ------------------------------------------------------------------------------ July 26, 1998 January 25, 1998 Liabilities and Stockholders' Equity: (Unaudited) Current Liabilities: Accounts Payable $ 956,825 $ 945,067 Accrued Payroll 158,351 120,470 Accrued Expenses 572,024 305,688 Notes and Mortgages Payable to Banks 554,800 630,000 Capital Lease Obligations - Current 67,634 85,727 Other Liabilities 177,159 281,435 ----------- ----------- Total Current Liabilities 2,486,793 2,368,387 ----------- ----------- Long-Term Debt: Notes and Mortgages Payable to Banks 741,398 819,998 Capital Lease Obligations - Long-Term --- 23,916 ----------- ----------- Total Long-Term Debt 741,398 843,914 ----------- ----------- Other Liabilities 450,893 457,806 ----------- ----------- Stockholders' Equity: Capital Stock - Common, $.01 Par Value, Authorized 15,000,000 Shares; Issued and Outstanding 4,488,444 and 4,488,347 Respectively 44,884 44,883 Additional Paid-in Capital 32,304,485 32,304,486 Accumulated [Deficit] (18,878,429) (19,214,644) ----------- ----------- Total Stockholders' Equity 13,470,940 13,134,725 ---------- ----------- Total Liabilities and Stockholders' Equity $17,150,024 $16,804,832 =========== ===========
The accompanying notes are an integral part of these financial statements. 2 CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - ------------------------------------------------------------------------------ Six Months Ended Three Months Ended July 26, 1998July 27, 1997 July 26, 1998 July 27, 1997 Sales $ 9,994,270 $ 9,838,524 $ 5,465,852 $ 5,484,207 Cost of Goods Sold 3,256,357 3,211,733 1,801,341 1,790,726 ----------- ----------- ----------- ----------- Gross Profit 6,737,913 6,626,791 3,664,511 3,693,481 ----------- ----------- ----------- ----------- Operating Expenses: Payroll and Related Expenses 2,909,310 2,841,626 1,548,237 1,539,736 Other Operating Expenses 2,100,166 2,083,599 1,071,130 1,106,969 Depreciation and Amortization 506,081 496,605 254,562 249,698 General and Administrative Expenses 890,361 879,527 425,257 441,716 ----------- ----------- ----------- ----------- Total Operating Expenses 6,405,918 6,301,357 3,299,186 3,338,119 ----------- ----------- ----------- ----------- Income from Operations 331,995 325,434 365,325 355,362 ----------- ----------- ----------- ----------- Other Income [Expense]: Interest Expense (62,287) (49,274) (32,320) (21,694) Interest Income 66,507 66,678 32,065 33,408 ----------- ----------- ----------- ----------- Other Income (Expense) - Net 4,220 17,404 (255) 11,714 ----------- ----------- ----------- ----------- Income from Operations Before Income Taxes 336,215 342,838 365,070 367,076 Provision for Income Taxes - - - - ----------- ----------- ----------- ----------- Net Income $ 336,215 $ 342,838 $ 365,070 $ 367,076 =========== =========== =========== =========== Basic Per Common Share $ .07 $ .08 $ .08 $ .08 =========== =========== =========== =========== Weighted Average Shares 4,488,444 4,488,347 4,488,444 4,488,347
The accompanying notes are an integral part of these financial statements. 3 CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - ------------------------------------------------------------------------------ Six Months Ended July 26, 1998 July 27, 1997 Operating Activities: Income from Operations $ 336,215 $ 342,838 ----------- ----------- Cash Provided by Operating Activities: Depreciation and Amortization 506,081 496,605 Change in Assets and Liabilities: [Increase] Decrease in: Inventories 13,431 (90,798) Prepaid Expenses (14,701) (86,655) Other Assets 28,817 687 Miscellaneous Receivable (46,982) (78,960) Increase [Decrease] in: Accounts Payable 11,758 79,229 Accrued Expenses and Other Liabilities 193,027 93,001 ----------- ------------ Total Adjustments 691,431 413,109 ----------- ----------- Net Cash from Operations 1,027,646 755,947 ---------- ----------- Investing Activities Capital Expenditures (695,972) (289,555) Sale or Redemption of Investments 96,000 (50,000) Due on Sale of Discontinued Operations - Payments Received 142,835 638,788 Net Cash - Investing Activities (457,137) 299,233 Financing Activities: Repayment of Debt (319,809) (876,705) Proceeds from Debt 124,000 50,000 ---------- ------------ Net Cash - Financing Activities (195,809) (826,705) ---------- ---------- Net Increase [Decrease] in Cash and Cash Equivalents 374,700 228,475 Cash and Cash Equivalents - Beginning of Periods 1,136,063 951,668 Cash and Cash Equivalents - End of Periods $1,510,763 $1,180,143 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid during the years for: Interest $ 55,939 $ 47,416
The accompanying notes are an integral part of these financial statements. 4 CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - ------------------------------------------------------------------------------ NOTE 1: BASIS OF PRESENTATION The financial information included herein is unaudited, however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results of the interim period. The results of operations for the six month periods ended July 26, 1998 and July 27, 1997 are not necessarily indicative of the results to be expected for the full year. NOTE 2: EARNINGS PER SHARE Earnings per share have been computed based on the weighted average of outstanding common shares. (See note 4.) NOTE 3: INCOME TAXES Effective January 1, 1993, the Company adopted FAS 109 "Accounting for Income Taxes." The Company has a deferred tax asset of approximately $4,347,100 arising from net operating loss carry forwards. However, due to the uncertainty that the Company will generate income in the future sufficient to fully or partially utilize these carry forwards, an allowance of $4,347,100 has been established to offset this asset. The effect of adoption on current and prior financial statements is immaterial. NOTE 4: CAPITAL STRUCTURE On November 7, 1996, the Company's stockholders approved a one-for-three reverse stock split of the outstanding shares of the Company's Common Stock, $.01 par value, without changing the par value of the Common Stock. The one-for-three reverse split was effected at the close of business on November 22, 1996. All share data has been adjusted to reflect this change. NOTE 5: DISCONTINUED OPERATIONS On February 20, 1997 (as of January 26, 1997), the Company sold 95% of the Common Stock of Mister Cookie Face, Inc. (MCF), its ice cream production segment to a director for an aggregate purchase price of $1,600,000, consisting of a $500,000 cash payment and three notes totaling $1,100,000. The notes are secured by a first lien on all of MCF's assets, however, the Company has agreed to subordinate its lien to any liens subsequently granted by MCF to its Senior Bank or Institutional Lender but only with respect to a maximum aggregate $1,750,000 of indebtedness. Based on the estimated present value of the payments, management set the original aggregate value of the consideration at $998,950. An additional amount of $188,797 was due from MCF representing the balance due on two capital leases which the Company will continue to pay. MCF agreed to reimburse the Company for the payments. The equipment subject to the lease was transferred by the Company as part of the sale. The total net amount due from MCF at July 26, 1998 was $377,472. The 5% of MCF capital stock retained by the Company is valued at $35,000. 5 CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ MANAGEMENT'S ANALYSIS OF SIX MONTH INCOME STATEMENT - ------------------------------------------------------------------------------ RESULTS OF OPERATIONS Company sales were $9,994,300 for the six months and $5,465,800 for the second quarter ended July 26, 1998 compared to $9,838,500 and $5,484,200 for the comparable periods in fiscal 1998. The number of customers served during this year's six month period was slightly less than last year while this year's average check paid per customer was approximately 2% higher. The Company operated the same nine restaurants during the comparable periods. The Company had net earnings of $336,200 for the six months this year compared to $342,800 for the same period last year. For the second quarter ended July 26, 1998 net earnings were $365,100 compared to net earnings of $367,100 for last year's second quarter. Gross profit was 67.4% of sales for the six month period and 67% for the quarter compared to 67.4% and 67.3% respectively for the fiscal 1998 periods. The lower gross profit during this year's second quarter can be attributed to increases in the cost of liquor. Management instituted a modest liquor price increase in the first week of August in an attempt to offset the higher costs. Payroll and related expenses were 29.1% of sales for the six months and 28.3% for the quarter compared to 28.9% and 28.1% respectively for the fiscal 1998 periods. The slight increases resulted from higher direct labor costs in the restaurants. Other operating expenses were 21% for the six months and 19.6% for the quarter versus 21.2% and 20.2% last year. Depreciation and amortization expenses were higher by $9,500 and $4,900 respectively for the six months and quarter compared to last year, primarily due to capital expenditures of approximately $650,000 for renovations at the Vero Beach, Florida and Toms River, New Jersey restaurants during the last three quarters. General and administrative expenses were $10,800 higher for the six months and $16,400 lower for the quarter versus last year. Increases in training and recruiting expenses, and legal fees account for the year to date increase while the second quarter decrease resulted primarily from lower group health insurance costs. Interest expense was $13,000 and $10,600 higher for the comparable periods this year primarily as a result of the interest expenses associated with a December 1997 loan used to partially fund the Toms River restaurant renovation and with a May 1998 loan used to purchase a property next to the Toms River restaurant. Interest income was approximately the same as last year for both the year to date and second quarter comparisons. Liquidity and Capital Resources The ratio of current assets to current liabilities was 1.32:1 at July 26, 1998, compared to 1.20:1 at the year ended January 25, 1998. Working capital increased by $339,600 primarily due to operational profits. The primary components of the six month cash flow statement were an increase in accrued expenses of $193,000 due primarily to an increase in accrued legal expenses, capital expenditures of $696,000, primarily at the Toms River, New Jersey restaurant, debt repayment of $319,800, new debt of $124,000 used for the purchase of the property adjacent to the Toms River restaurant, and payments of $142,800 on notes receivable from the sale of Mister Cookie Face ("MCF"), the Company's former subsidiary which was sold on February 20, 1997 (as of January 26, 1997). During the corresponding six month period in fiscal 1998 working capital increased by $352,200. The major components of last year's cash flow were operational profits, capital expenditures of $289,500, debt repayment of $876,700 and payments of $638,800 received from MCF. 6 During the second quarter of the current fiscal year the Company's bank line of credit was renewed for another year and was increased from $350,000 to $500,000. Subsequent to the quarter ended July 26, 1998, the Company paid down the outstanding balance on the line of credit leaving the entire $500,000 available for future use. Additionally, on August 31, 1998, the Company announced that the United States Bankruptcy Court for the District of New Jersey accepted the Company's $1,100,000 bid to purchase the Vero Beach, Florida real property where it currently operates a Lobster Shanty restaurant from the Chapter 11 Trustee of the Bankruptcy Estate of Robert E. Brennan. The Company's primary bank, First Union National Bank, has committed to fund $880,000 of the Vero Beach property purchase price. Management anticipates that funds from operations and the line of credit will be sufficient to meet obligations for the balance of fiscal 1999, including routine capital expenditures. Inflation It is not possible for the Company to predict with any accuracy the effect of inflation upon the results of its operations in future years. The price of food is extremely volatile and projections as to its performance in the future vary and are dependent upon a complex set of factors. 7 CHEFS INTERNATIONAL, INC. AND SUBSIDIARIES - ------------------------------------------------------------------------------ PART II - OTHER INFORMATION Item 5. Other Information (a) Listing of Common Stock on NASDAQ - On August 20, 1998, the Company announced that its common stock would continue to be listed on The Nasdaq SmallCap Market pursuant to an exception from the minimum $1 closing bid price requirement. While the Company failed to meet this requirement at May 28, 1998, it was granted a temporary exception subject to its meeting certain conditions. The exception will expire on October 30, 1998. There can be no assurance that the Company will be able to meet all of the conditions of the exception. If the Company's common stock should cease to be listed on The Nasdaq SmallCap Market, it may continue to be listed on the OTC Bulletin Board. (b) Potential Change of Control - At the conclusion of competitive bidding conducted in Trenton, New Jersey on August 31, 1998 at the United States Bankruptcy Court for the District of New Jersey, the Court ordered the sale of the 1,766,557 shares of the Company's common stock owned by the Bankruptcy Estate of Robert E. Brennan (comprising approximately 39% of the Company's outstanding common stock) to the highest bidder, JES Management Corp. ("JES"). The successful bid was $2.5625 per share or $4,526,802.30 in the aggregate. JES is a Florida corporation whose president and sole stockholder is Sheldon Maschler. The purchase of the shares is expected to be completed in mid-September 1998. (c) Purchase of Vero Beach Property - Also on August 31, 1998, the Court ordered acceptance of the Company's bid of $1,100,000 to purchase the Vero Beach, Florida real property where it currently operates a Lobster Shanty restaurant from the Chapter 11 Trustee of the Bankruptcy Estate of Robert E. Brennan. The Company has received an $880,000 mortgage loan commitment from its principal lending bank to apply towards the purchase which is expected to be completed on or before September 30, 1998. 8 SIGNATURE 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. CHEFS INTERNATIONAL, INC. /s/ Anthony C. Papalia ANTHONY C. PAPALIA Principal Financial Officer DATED: September 9, 1998 9 EX-27 2 FDS --
5 This schedule contains summary financial information extracted from the consolidated balance sheet and the consolidated statement of operations and is qualified in its entirety by reference to such schedules. 6-Mos Jan-25-1998 Jul-26-1998 1,510,763 785,000 113,210 0 1,025,772 3,291,516 19,280,616 7,707,438 17,150,024 2,486,793 0 0 0 44,884 13,426,056 17,150,024 9,994,270 9,994,270 3,256,357 3,256,357 6,405,918 0 62,287 336,215 0 336,215 0 0 0 336,215 .07 .07
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