0000950147-95-000122.txt : 19950815 0000950147-95-000122.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950147-95-000122 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PERFORMANCE INDUSTRIES INC/OH/ CENTRAL INDEX KEY: 0000724967 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 341334199 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11331 FILM NUMBER: 95563209 BUSINESS ADDRESS: STREET 1: 2425 E CAMELBACK RD STREET 2: STE 620 CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6029120100 MAIL ADDRESS: STREET 1: 2425 E CAMELBACK RD STE 620 STREET 2: 2425 E CAMELBACK RD STE 620 CITY: PHOENIX STATE: AZ ZIP: 85016 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended June 30, 1995 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number PERFORMANCE INDUSTRIES, INC., AND SUBSIDIARIES (Exact name of registrant as specified in its charter) Ohio 34-1334199 --------------------------------------- ------------------------------------ (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 2425 E. Camelback Road, Suite 620 Phoenix, Arizona 85016 --------------------------------------- ------------------------------------ (Address of principal executive offices (Zip Code) Registrant's telephone number including area code: (602) 912-0100 Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15d of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. YES X NO --- --- Number of shares outstanding of each of the issuer's classes of common stock as of August 2, 1995, 9,833,115 shares. PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES INDEX Page PART I. FINANCIAL INFORMATION (Unaudited): Consolidated Balance Sheets - June 30, 1995 and December 31, 1994 3 Consolidated Statements of Operations (Unaudited) - Three Month Period Ended June 30, 1995 and 1994 4 Consolidated Statements of Operations (Unaudited) - Six Month Period Ended June 30, 1995 and 1994 5 Consolidated Statements of Cash Flow (Unaudited) - Six Month Period Ended June 30, 1995 and 1994 6 Notes to Consolidated Financial Statements (Unaudited) 7 - 8 Management's Discussion and Analysis of Financial 9 - 11 Condition and Results of Operations PART II. OTHER INFORMATION: Item I. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults upon Senior Securities 12 Item 4. Submission of Matte13 to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 13 PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) (Unaudited) June 30, 1995 December 31, 1994 ------------- ----------------- Current Assets: Cash and cash equivalents $ 167 $ 1,142 Restricted cash 2,262 2,900 Accounts and other receivables, net of allowance 541 584 Receivable from sale of businesses, net of allowance 833 1,024 Factored accounts receivable, net of allowance (Note 3) 2,428 4,311 Inventories 26 276 Prepaid expenses and other current assets 657 201 Assets held for sale 212 231 Deferred income taxes 254 254 --------- --------- Total current assets 7,619 10,923 Real estate under development (Note 5) 8,158 6,014 Deferred income taxes 1,829 1,829 Property and equipment, net 4,880 4,265 Other assets 89 1,077 --------- --------- Total assets $ 23,376 $ 24,108 ========= ========= Current Liabilities: Current portion of long-term debt (Note 7) $ 5,689 $ 4,394 Accounts payable 1,031 1,208 Accrued employment costs 418 401 Accrue health & accident costs (Note 6) 566 902 Accrued expenses and other current liabilities 1,141 982 Factored receivables reserve (Note 3) 466 889 Liabilities subject to comprise 817 1,573 --------- --------- Total current liabilities 10,128 10,349 Long-term debt, less current portion (Note 7) 1,849 1,356 Commitments and continge Minority interest 451 416 Shareholder's Equity: Preferred stock, par value $1.00 per share; authorized 100,000 shares; none issued -- -- Common stock, no par value; authorized 20,000,000 shares; 12,629,326 shares issued 31,202 31,202 Accumulated deficit (16,810) (16,710) --------- --------- 14,392 14,492 Treasury stock (2,671,211 and 2,796,211 shares respectively), (2,951) (2,998) --------- --------- Total shareholders 11,441 11,494 --------- --------- Total liabilities and shareholders' equity $ 23,376 $ 24,108 ========= ========= See accompanying notes to consolidated financial statements. PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED JUNE 30,1995 AND 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (Unaudited) Three Months Ended June 30 1995 1994 ------- ------ Net revenues $ 5,211 $ 4,529 Cost of revenues (4,750) (4,058) Selling ggeneral and administrative expense (775) (965) Interest income 82 91 Other income 159 133 Gain on sale of assets -- 93 ------------ ------------ Loss from continuing operations before income taxes and minority interest (73) (177) Provision for income taxes (3) (7) Minority interest in earnings (15) -- ------------ ------------ Loss from continuing operations (91) (184) Income from discontinued operations (--) 90 ------------ ------------ Net loss $ (91) $ (94) ============ ============ Income loss per common share: Continuing operations $ (.01) $ (.02) Discontinued operations -- .01 ------------ ------------ Net income loss per common share $ (.01) $ (.01) ============ ============ Average number of shares outstanding 9,958,115 10,986,557 See accompanying notes to consolidated financial statements. PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1995 AND 1994 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (Unaudited) Six Months Ended June 30 1995 1994 -------- -------- Net revenues $ 9,828 $ 9,163 Cost of revenues (8,749) (8,163) Selling general and administrative expense (1,628) (1,905) Interest (expense) income (4) 108 Other income 492 344 Gain on sale of assets -- 93 ------------ ------------ Loss from continuing operations before income taxes and minority interest (61) (360) Provision for income taxes (5) (14) Minority interest in earnings (34) -- ------------ ------------ Earnings (losses) before income tax (100) (374) Income from discontinued operations (--) 90 ------------ ------------ Net losses (100) (284) ------------ ------------ Loss per common share: -------- ------------ Continuing operations $ (.01) $ (03) Discontinued operations -- -- ------------ ------------ Net loss per common share $ (.01) $ (.03) ============ ============ Average number of share outstanding 9,958,115 10,986,557 See accompanying notes to consolidated financial statements. PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (DOLLARS IN THOUSANDS) FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1995 AND 1994 (Unaudited) Six months Ended June 30 ------------------------ 1995 1994 --------- --------- Net cash (used in) operating activities $( 1,123) $( 1,683) Cash Flows from Investing Activities: Decrease in restricted cash 638 -- Decrease in receivables from sale of businesses, net 417 3,218 (Increase) decrease in investment of factored receivables, net 1,460 ( 977) Decrease (increase) assets held for sale 19 2,812 Additions to property and equipment ( 1,091) ( 1,295) Increase in real estate ( 2,144) -- -------- -------- Net cash provided by (used in) investing activities ( 701) 3,758 Cash Flows from Financing Activities: Repayment of debt ( 42) ( 1,006) Proceeds from borrowings 844 -- (Increase) decrease in treasury stock 47 ( 1,765) -------- -------- Net cash provided by (used in) financing activities 849 ( 2,771) Net (decrease) in cash and cash equivalents ( 975) ( 696) Cash and cash equivalents at beginning of period 1,142 5,011 -------- -------- Cash and cash equivalents at end of perios $ 167 $ 4,315 ======== ======== See accompanying notes to consolidated financial statements. PERFORMANCE INDUSTRIES, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (Unaudited) (1) Basis of Presentation: The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosure required by generally accepted accounting principles for complete financial statements. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company's 1994 Form 10-K filing. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 1995 are not necessarily indicative of the results that may be expected for the year ended December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto contained herein. (2) Inventories: The components of inventories were as follows (in thousands): June 30, 1995 December 31, 1994 ------------- ----------------- Restaurant Inventory 265 241 (3) Factored Accounts Receivables: During the six month period ended June 30, 1995, the Company's factoring subsidiary had two of its customers, representing almost 50% of its year end business, obtain alternative financing. Some of the funds have been used by the Company to invest in its other subsidiaries. (4) Prepaid Expenses: Prepaid expenses at June 30, 1995 include payments for commissions for new leases negotiated for the Company's Mexicali facility and fees incurred to obtain a line of credit for the Company's factoring subsidiary. These prepaid expenses will be amortized over the life of the leases and credit line respectively. (5) Real Estate Under Development: The Company has two projects under development. Camelback Plaza, a 50,000 square foot commercial retail center, should be complete this fall. It is expected to cost an additional $1,300,000 which will come from restricted cash. The Company has land in Ixtapa, Mexico in which design work to build condos has been completed. This project has been put on hold, however, until the Mexican economy becomes settled. (6) Accrued Health and Accident Costs: During the six months ending June 30, 1995, the Company settled two product liability suits. The settlement amounts were not materially different from that which was accrued for at year end. (7) Long Term Debt: The Company obtained construction and mini-perm financing in the amount of $4,900,000 from Caliber Bank. Caliber was acquired by Norwest Bank early in 1995. The loan officers with Norwest wish to change the terms of the original financing. The Company has been negotiating with Norwest to prepare new documents. Until these new documents are final, all debt due under this financing has been classified as short term for both periods ending December 31, 1994 and June 30, 1995. (8) Liabilities Subject to Compromise: The Company agreed to a settlement of one of the remaining disputed debts related to its former operation of a manufacturing facility in California. The $750,000 settlement was not materially different from that which was reserved for at year end. Some cash was paid during the three months ended June 30, 1995 and the balance was reclassified to other current liabilities. This settlement requires a July payment of $100,000 and $50,000 a month thereafter for eight months. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS PERFORMANCE INDUSTRIES, INC. - CONSOLIDATED Results of Operations - Consolidated The Company's results of operations for the three and six months ending June 30, 1995 continue to show improvement over the same periods last year. Losses from continuing operations were only $91,000 for the three month period ending June 30, 1995 compared to $184,000 in 1994. Gross revenues increased 15% from $4,529,000 to $5,211,000. Selling, general and administrative expenses decreased $190,000, or approximately 20%. Some of the decrease can be attributed to reduced legal fees and the sale of the Company's suite at America West Arena. Losses from continuing operations for the six month period ending June 30, 1995 were $100,000 compared to $374,000 for the same period last year. The improvement is primarily from a reduction of selling, general and administrative expenses of $277,000. Earnings Outlook The Company has significantly invested in advertising and promotions in the restaurant group which is expected to increase earnings during the remainder of the year. However, this improvement to earnings may be reduced in the third quarter due to the seasonality of Buster's Restaurant Bar & Grill. The factoring subsidiary has obtained a $2,000,000 line of credit which will allow it to become aggressive in seeking new accounts while financing charges will reduce the percentage of net income to revenues; volume of revenues will increase as quality clients are found. The Mexico facility, which is owned by a wholly owned Mexican corporation, has been fully leased with gross rents beginning in September of 1995 to be approximately $730,000 a year. The Company has been marketing this property for sale and has recently received offers. Management expects this property to be sold in the current year. The Company's development subsidiary consists of a soon to be completed commercial retail center in Phoenix and raw land in Ixtapa, Mexico. The Company has received an offer to purchase the retail center. While the project is fully leased and will generate significant cash flows it is tying up working capital intended for investment in the restaurant subsidiary. Revenues Revenues for the quarter ended June 25, 1995 were $617,000 more than the same period in 1994. Revenues for the six months ended June 25, 1995 were $489,000 more than the same period in 1994. The increase is the result of the acquisition of a new restaurant operating under the trade name Buster's Restaurant Bar & Grill. Cost and Expenses As a percentage of sales cost of goods sold was 28.6% and 26.6% for the three and six months ended June 25, 1995, as compared to 26.6% and 27.0% for the same periods last year. The percentage increase is attributed primarily to the menu items offered at Buster's Restaurant. The restaurant sells primarily certified Black Angus beef and fresh seafood of the highest quality available. This menu mix yields a higher food cost percentage than a Bobby McGee's restaurant. Restaurant and general administrative expenses for the three and six months ended June 25, 1995 were $477,000 and $421,000 more than the same periods in 1994. The increase is a direct result of the acquisition of Buster's, and of an advertising campaign launched in the second quarter to promote the grand re-opening o the Bobby McGee's in San Bernardino, California. Net Income The restaurant division recorded a net loss of $121,000 and $111,000 for the three and six months ended June 25, 1995, as compared to net income of $4,000 and $7,000 for the same periods in 1994. The losses are attributable to an aggressive advertising campaign and costs associated with the acquisition of Buster's Restaurant. Buster's is located in Scottsdale, Arizona, which is a very seasonal city for the restaurant industry. Under the prior ownership, Buster's historically realized losses in April through September. Earnings Outlook The Company has significantly invested in advertising and promotions which is expected to increase earnings during the remainder of the year. However, this improvement to earnings may be reduced in the third quarter due to the seasonality of Buster's. (Dollars in $1,000) Six Months Ended June 25, 1995 ------------------------------ ( ) Unfavorable variance 1995 1994 1995 vs 1994 ---- ---- ------------ Revenues $ 9,255 $ 8,766 $ 489 Cost and Expenses: ----------------- Cost of Sales 2,557 2,370 (187) Restaurant Expenses 6,177 5,777 (400) Administrative Expenses 632 611 (21) ------- ------- ------- Total Cost and Expenses 9,366 8,758 (608) ------- ------- ------- Earnings before Income Taxes (111) 8 (119) Provision for Income Taxes 0 1 1 ------- ------- ------- Net Income $ (111) $ 7 ($ 118) ======= ======= ======= Percentage of Total Revenues Six Months Ended June 25, 1995 ------------------------------ ( ) Unfavorable variance 1995 1994 1995 vs 1994 ------ ------ ------------ Revenues 100.0% 100.0% 5.6% Cost and Expenses: ------------------ Cost of Sales 27.6% 27.0% 0.6% Restaurant Expenses 66.7% 65.9% 0.8% Administrative Expenses 6.8% -- 0.2% ----- ----- --- Total Cost and Expenses 101.2% 99.9% 1.3% ----- ----- --- Earnings before Income Taxes (2.2%) 0.2% (2.4%) Provision for Income Taxes 0.0% 0.0% 0.0% ----- ---- --- Net Income (2.2%) 0.2% (2.4%) ===== ==== === PERFORMANCE FUNDING Net revenues and income for the six month period ending June 30, 1995 were $518,000 and $361,000 respectively. This compares to revenues of $397,000 and earnings of $314,000 for the same period in 1994. The percentage of earnings to gross revenues was 79% in 1994 and only 70% in 1995. This decrease in net earnings is attributed to the subsidiary being charged interest by the parent in 1995. The interest charged for the six months ended June 30, 1995 was $70,000. In July of 1995, Performance Funding negotiated a $2,000,000 line of credit which is guaranteed by the parent. The term is for two years and the primary covenant is that net equity in the subsidiary will equal or exceed $1,000,000. At June 30, 1995, the subsidiary's equity was $1,198,000. In addition, the Company had an intercompany loan to Performance Funding of $798,000 at June 30, 1995. According to terms of the loan agreement, this debt may be paid by loan proceeds. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1995, the Company's unrestricted cash was $167,000. During the six month period ending June 30, 1995, the Company used $1,123,000 to fund operating activities and $701,000 to fund investments, some of which was offset by borrowing against the development construction loans. The net decrease in cash for the six month period was $975,000. During the six month period ended June 30, 1995, the Company invested over $2,000,000 in real estate under development and the acquisition of a new restaurant and completion of remodeling of existing restaurants. Any additional investments in the retail center are expected to be provided from restricted cash. The Company's factoring subsidiary obtained a two year $2,000,000 line of credit on July 19, 1995. This agreement provides funds for growth in the factoring subsidiary, as well as making available almost $1,000,000 to the Company for the working capital needs of its other subsidiaries. Management believes, but there is no assurance, that with the proceeds from the repayment of debt from its factoring subsidiary the eventual sale of one or both of the rental properties (Mexicali and/or the retail center), plus cash flows from future operations, will meet its current capital requirements for the remainder of the year. Part II - OTHER INFORMATION Item 1. Legal Proceedings In the matter of Performance Industries, Inc. v. Murray & Murray et al., previously discussed in the report on Form 10-Q for the period ending March 31, 1995, the defendants have appealed to the Arizona Supreme Court, the Court of Appeals, Division I, ruling upholding the trial court's finding of personal jurisdiction. It is anticipated that this appeal will be decided by January, 1996 An action was filed by the Richter Family Trust against the Company and unrelated third party defendants in the U.S. District Court for the Central District of California. For the costs of environmental remediation of the property at 19007 Reyes Avenue, Compton, formerly used by the Company as the Cragar Wheel manufacturing plant, under federal statutes. The action also seeks damages under common law tort theories for the alleged environmental contamination of the property. The Company has filed an answer to the action, as well as cross complaint against its predecessors-in-interest at the location. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders The Company held its annual meeting on June 5, 1995 at which the Board of Directors was reelected to serve for one year and employment of Toback CPA's as auditors was approved. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PERFORMANCE INDUSTRIES, INC. and SUBSIDIARIES Date: August 11, 1995 /s/ Joe Hrudka ---------------------------------------------- Joe Hrudka Chairman of the Board (Principal Executive Officer) /s/ James W. Brown ----------------------------------------------- James W. Brown Chief Financial Officer (Principal Accounting Officer) EX-27 2 FOR 2ND QUARTER 10-Q
5 1,000 U.S. DOLLARS 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 1 167 0 4,781 979 265 7,619 14,676 1,638 23,376 10,128 0 31,202 0 0 (19,761) 23,376 9,828 9,828 8,749 9,885 34 0 4 (95) 5 (100) 0 0 0 (100) (.01) (.01)