-----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, EulW324XZQ00q5Xv9zK83/c+DIM/zcITd19qii/TIbFw+RidtKZ9SGM0lteZ9fqM cXbP2PxhWUs2vcoKIGVPpw== 0000912057-97-018077.txt : 19970520 0000912057-97-018077.hdr.sgml : 19970520 ACCESSION NUMBER: 0000912057-97-018077 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA CULINARY ACADEMY INC CENTRAL INDEX KEY: 0000858915 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-EDUCATIONAL SERVICES [8200] IRS NUMBER: 943042862 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-21932 FILM NUMBER: 97608931 BUSINESS ADDRESS: STREET 1: 625 POLK ST CITY: SAN FRANCISCO STATE: CA ZIP: 94102 BUSINESS PHONE: 4157713536 MAIL ADDRESS: STREET 1: 625 POLK ST CITY: SAN FRANCISCO STATE: CA ZIP: 94102 10QSB 1 FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark One) [X] Quarterly report pursuant section 13 or 15(d) of the Securities and Exchange Act of 1934 for the quarterly period ended March 31, 1997. [ ] Transition report pursuant to section 13 or 15(d) of the Securities and Exchange Act of 1934 for the transition period from ____________ to ________________. COMMISSION FILE NUMBER: 0-21932 CALIFORNIA CULINARY ACADEMY, INC. (Exact name of small business issuer in its charter) California 94-3042862 (State or other jurisdiction of incorporation (I.R.S. Employer Identification or organization) Number) 625 Polk Street San Francisco, CA 94102 (Address of principal executive offices) (Zip Code) Issuer's Telephone Number: (415) 771-3536 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 . ------- ------- The number of shares outstanding of the registrant's Common Stock as of April 30, 1997, was 3,352,569. Transitional Small Business Disclosure Format. Yes No X . -------- ------- CALIFORNIA CULINARY ACADEMY, INC. BALANCE SHEET
ASSETS (Unaudited) (Unaudited) (Unaudited) March 31, June 30, March 31, 1996 1996 1997 ----------- ----------- ----------- Current Assets: Cash and cash equivalents $ 1,674,000 $ 3,283,000 $ 2,845,000 Accounts receivable, net 2,638,000 2,786,000 2,904,000 Inventories 190,000 208,000 310,000 Prepaid expenses and other assets 324,000 160,000 211,000 Deferred tax asset 254,000 145,000 ----------- ----------- ----------- Total Current Assets 5,080,000 6,582,000 6,270,000 ----------- ----------- ----------- Property and equipment, net 4,243,000 4,117,000 4,799,000 Intangible assets, net 577,000 546,000 451,000 Long-term investments - restricted 646,000 Other assets 489,000 967,000 553,000 ----------- ----------- ----------- TOTAL ASSETS $10,389,000 $12,858,000 $12,073,000 ----------- ----------- ----------- ----------- ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 510,000 $ 749,000 $ 347,000 Accrued liabilities 334,000 477,000 548,000 Deferred revenue 3,607,000 3,795,000 3,696,000 Student prepayments 270,000 258,000 342,000 Current portion of notes payable 250,000 292,000 50,000 Current portion of capital lease o 84,000 76,000 66,000 Other current liabilities 26,000 ----------- ----------- ----------- Total Current Liabilities 5,055,000 5,647,000 5,075,000 ----------- ----------- ----------- Notes payable 104,000 500,000 4,000 Capital lease obligations 230,000 215,000 165,000 Other non-current liabilities 72,000 441,000 436,000 Subordinated convertible notes payable 1,400,000 Shareholders' Equity: Convertible Preferred stock, no par value, 5,000,000 shares authorized, 254,541 shares issued and outsta 967,000 Common stock, no par value, 20,000,000 shares authorized, 3,352,319 shares issued and outs 8,377,000 8,741,000 9,289,000 Accumulated deficit (3,449,000) (4,086,000) (3,863,000) ----------- ----------- ----------- Total Shareholders' Equity 4,928,000 4,655,000 6,393,000 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,389,000 $12,858,000 $12,073,000 ----------- ----------- ----------- ----------- ----------- -----------
2 CALIFORNIA CULINARY ACADEMY, INC. STATEMENTS OF OPERATIONS FOR THE QUARTER AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited) (Unaudited) Three Months Ended Nine Months Ended March 31, March 31, ------------------------- -------------------------- 1997 1996 1997 1996 ---------- ---------- ----------- ----------- Revenues: Culinary arts education $3,401,000 $3,413,000 $ 9,433,000 $ 9,243,000 Restaurants & catering 623,000 465,000 1,700,000 1,521,000 Retail, media and other 97,000 120,000 306,000 427,000 ---------- ---------- ----------- ----------- Total revenues 4,121,000 3,998,000 11,439,000 11,191,000 Cost of sales Food & beverage 478,000 446,000 1,263,000 1,290,000 Program supplies 256,000 127,000 612,000 490,000 Scholarships & grants 50,000 67,000 159,000 137,000 Merchandise & other 110,000 130,000 375,000 416,000 ---------- ---------- ----------- ----------- 894,000 770,000 2,409,000 2,333,000 ---------- ---------- ----------- ----------- Gross Margin 3,227,000 3,228,000 9,030,000 8,858,000 Fixed costs Occupancy 432,000 435,000 1,307,000 1,307,000 Repairs & maintenance 107,000 92,000 294,000 326,000 Telephone, security & other 100,000 139,000 283,000 344,000 Depreciation & amortization 314,000 270,000 878,000 788,000 ---------- ---------- ----------- ----------- Total fixed costs 953,000 936,000 2,762,000 2,765,000 Operating expenses Compensation & benefits 1,586,000 1,573,000 4,225,000 4,614,000 Outside services 76,000 167,000 378,000 529,000 Advertising & promotion 141,000 158,000 409,000 535,000 Legal & other 292,000 290,000 805,000 917,000 ---------- ---------- ----------- ----------- 2,095,000 2,188,000 5,817,000 6,595,000 Interest income (expense) 13,000 (4,000) 26,000 (18,000) ---------- ---------- ----------- ----------- Income (loss) before provision for income taxes 192,000 100,000 477,000 (520,000) Income tax provision (benefit) 77,000 42,000 191,000 (158,000) ---------- ---------- ----------- ----------- Net income (loss) $115,000 $58,000 $286,000 $(362,000) ---------- ---------- ----------- ----------- ---------- ---------- ----------- ----------- Net income (loss) per share $0.03 $0.02 $0.08 $(0.11) ---------- ---------- ----------- ----------- ---------- ---------- ----------- ----------- Weighted average common shares and equivalents 3,698,791 3,318,958 3,654,156 3,294,630 ---------- ---------- ----------- ----------- ---------- ---------- ----------- -----------
3 CALIFORNIA CULINARY ACADEMY, INC. STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited) NINE MONTHS ENDED MARCH 31, -------------------------- 1997 1996 ----------- ---------- Cash flows from operating activities: Net income (loss) $ 286,000 $ (362,000) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 878,000 784,000 Tax provision 191,000 (158,000) Provision for losses on accounts receivable 9,000 (48,000) Gain on disposal of property 2,000 Deferred rent 7,000 Stock issued for services 13,000 Changes in assets and liabilities: Accounts receivable (126,000) 726,000 Inventories (102,000) 68,000 Prepaid expenses and other assets (100,000) (254,000) Accounts payable (402,000) (291,000) Accrued and other liabilities 59,000 (115,000) Deferred revenues (99,000) (752,000) Student prepayments 84,000 39,000 Other non-current liabilities (15,000) ----------- ---------- Net cash provided by (used in) operating activities 687,000 (365,000) ----------- ---------- Cash flows from investing activities: Acquisition of property and equipment (1,465,000) (158,000) Decrease in long-term investments 646,000 ----------- ---------- Net cash used in investing activities (819,000) (158,000) ----------- ---------- Cash flows from financing activities: Principal payments on term loan agreements (738,000) (188,000) Principal payments on capital lease obligations (59,000) (57,000) Proceeds from exercise of stock options and warrants 1,265,000 83,000 Repurchase of common stock (717,000) Payment of Preferred Stock dividends (37,000) Cost of Offering - Preferred Stock (20,000) ----------- ---------- Net cash used in financing activities (306,000) (162,000) ----------- ---------- Net decrease in cash and cash equivalents (438,000) (685,000) Cash and cash equivalents, beginning of period 3,283,000 2,359,000 ----------- ----------- Cash and cash equivalents, end of period $ 2,845,000 $1,674,000 ----------- ----------
4 CALIFORNIA CULINARY ACADEMY, INC. STATEMENTS OF CASH FLOWS Supplemental disclosure of cash paid for: FOR THE NINE MONTHS ENDED MARCH 31, 1997 1996 ------- ------- Interest $43,000 $64,000 Income taxes 10,000 9,000 Supplemental disclosure of non-cash investing and financing activities: The Academy issued 254,541 shares of Series A Preferred Stock upon conversion of $1,400,000 of Convertible Subordinated Debt for the nine months ended March 31, 1997. The Academy issued a promissory note of approximately $157,000 for the repurchase of Common Stock for the nine months ended March 31, 1997. The Academy entered into a capital lease obligation for approximately $190,000 for the nine months ended March 31, 1996. 5 CALIFORNIA CULINARY ACADEMY, INC. CONDENSED NOTES TO FINANCIAL STATEMENTS NOTE 1 -- BASIS OF PRESENTATION The accompanying unaudited, condensed financial statements and related footnotes have been prepared in accordance with generally accepted accounting principles. The balance sheet as of March 31, 1997 and related statements of operations and cash flows for the three and nine months ended March 31, 1997 and 1996 are unaudited, but have been prepared on substantially the same basis as the annual audited financial statements. In the opinion of management, the unaudited financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position, operating results and cash flows for those periods presented. The unaudited results for the three and nine months ended March 31, 1997 are not necessarily indicative of results to be expected for the entire year. Certain prior year amounts have been reclassified to conform to current year presentation. NOTE 2 -- INCOME TAXES Deferred taxes are recorded based upon differences between the financial statement and tax basis of assets and liabilities and available tax carryforwards. The principal temporary differences that result in deferred tax assets and liabilities are certain expenses accrued for financial reporting purposes not deductible for tax purposes until paid, depreciation for income tax purposes in excess of depreciation for financial reporting purposes and unused net operating losses. As of March 31, 1997 the Academy has federal and California net operating loss carryforwards, for tax return purposes, of approximately $2,205,000 and $989,000, respectively, which are available to offset future taxable income, if any. Federal and California net operating loss carryforwards, if unused, are scheduled to expire as follows: Year ended Federal California ---------- ---------- -------- 6/30/1997 $337,000 6/30/2001 $652,000 6/30/2004 $ 290,000 6/30/2005 1,360,000 6/30/2011 555,000 ---------- -------- $2,205,000 $989,000 ---------- -------- A valuation allowance has been provided for that portion of net operating losses and deferred tax assets where it is more likely than not that the future tax benefits of these items will not realized. 6 NOTE 3 -- NET INCOME PER SHARE Net income per share is based on the weighted average number of shares outstanding during each of the respective periods, including the dilutive effect of stock options, warrants and any other common stock equivalents using the treasury stock method. NOTE 4 -- BANK DEBT As of March 31, 1997, the Academy had no outstanding loans with banks. The Academy had a term loan with a bank which provided for borrowings up to $750,000 with interest at 1% above the prime rate of the bank, the proceeds of which were used to finance the purchase of new equipment. The financing agreement contained various affirmative covenants including certain covenants and ratios which the Academy was required to maintain. As of September 30, 1996, the Academy was in violation of certain covenants as follows: other indebtedness not to exceed $250,000 at anytime; net income not less than $1.00 on a cumulative quarterly basis beginning with the quarter ended 12/31/95; and EBITDA Coverage Ratio not less than 2.00 . "EBITDA" is defined as net profit before interest expense, income tax expense, depreciation and amortization expense. "EBITDA Coverage Ratio" is defined as EBITDA divided by the aggregate of total interest expense plus prior period current maturity of long-term debt and the prior period maturity of subordinated debt. The term loan was repaid during October 1996. In June 1996, the Academy obtained a term loan from a bank in the amount of $500,000, the proceeds of which were used for working capital requirements. The line of credit was collateralized by a certificate of deposit at the same bank in the amount of $500,000. The term loan was repaid during October 1996. NOTE 5 -- PREFERRED STOCK During March 1996 and July 1996, the Board of Directors and shareholders, respectively, authorized the Academy to issue up to 5,000,000 shares of Preferred Stock in one or more series to be determined by the Board of Directors from time to time. An amendment to the Articles of Incorporation authorizing the issuance of Preferred Stock was filed with the California Secretary of State in August 1996. On August 23, 1996, the Academy became legally authorized to issue up to 700,000 shares of Series A Preferred Stock. On the same date, the entire issue of Convertible Subordinated Notes in the aggregate principal amount of $1,400,000 automatically converted to 254,541 shares of Series A Preferred Stock. The preferred stock was recorded net of $433,000 of issuance costs. 7 if declared by the Board of Directors, with a liquidation preference of $5.50 per share, plus accrued dividends. Although the Series A Preferred Stock is nonvoting, in the event the Academy fails to pay a quarterly dividend, a meeting of the Board of Directors can be called at which the holders of the Series A Preferred Stock will be entitled to elect one-third of the Academy's Board of Directors. Upon payment of the missed dividend(s), the right to elect one-third of the Board will be rescinded. Each share of Series A Preferred Stock is convertible at the option of the holder into the Academy's Common Stock at the conversion price of $5.50 per share. After February 23, 1997, each share of Series A Preferred Stock will convert automatically if the closing price of the Common Stock equals or exceeds $8.00 for 20 consecutive trading days. Certain provisions for price protection are set forth in the terms of the Series A Preferred Stock, but in no event will the conversion price be less than $3.50. In connection with the offer and sale of the convertible subordinated notes, the Academy granted certain registration rights. Certain penalties are payable to the Preferred shareholders in an amount equal to one percent of the principal per month in the event that a registration statement covering the resale of the Common Stock issuable upon conversion is not effective within 90 days of (i) the date on which the Academy became legally authorized to issue the Series A Preferred Stock and the Notes automatically convert into Preferred Stock, or (ii) the date on which 100% of the Notes have been converted to Common Stock. The penalty became payable as of November 23, 1996 unless the Academy used its best efforts to have the registration statement for the resale of Common Stock issuable upon conversion of the Series A Preferred Stock was declared effective by the Securities and Exchange Commission. Management believes it has used its best efforts in this regards. On April 15, 1997, the registration statement to register for resale the Common Stock underlying the Series A Preferred Stock was declared effective by the Securities and Exchange Commission. NOTE 6 -- PROMISSORY NOTES In July 1996, a prior executive officer of the Academy elected to exercise approximately 112,000 vested stock options. The Academy subsequently entered into a transaction with this prior officer, wherein the Academy purchased and retired this stock in exchange for approximately $717,000, which approximated fair market value and was comprised of approximately $560,000 in cash and $157,000 in promissory notes bearing an interest rate of 8.75%. As of March 31, 1997, the outstanding balance of these notes was approximately $38,000. Interest is to be paid monthly on the notes until January 1, 1998, when the note is due. NOTE 7 -- RELATED-PARTY TRANSACTIONS In July 1996, the Academy entered into a five-year lease for an approximately 3,800 square foot facility in Salinas, California. The lessor is a partnership controlled by the principal shareholder, Chief Executive Officer and Chairman of the Board of Directors and another individual who is a principal shareholder and former member of the Board of Directors. The new facility is an extension campus, which opened in October 1996. The monthly rent for the facility is the greater of $3,900 or 8% of gross sales plus a share of common area and exterior maintenance charges. The Academy paid a lease acquisition fee of $150,000 upon execution of the lease 8 agreement. The lease acquisition fee will be amortized over the 10-year term of the lease. The lease agreement includes a termination clause subject to revenue performance at the extension campus during the first twelve months of operations and a termination fee should the Academy invoke the termination clause. In July 1992 and from time to time prior to August 1, 1991, the Chairman of the Board and two other individuals who were then members of the Board of Directors, all principal shareholders, made unsecured loans to the Academy. These loans were evidenced by promissory notes and subsequently repaid. The loans carried interest at then prevailing interest rates and called for warrants to be issued that entitled the holders thereof to purchase an aggregate of 94 shares of the Academy's then-existing Series A Preferred Stock. Warrants issued in conjunction with these loans were converted, concurrently with the completion of the Initial Public Offering in July 1993, into warrants to purchase 102,770 shares of common stock at an exercise price of $4.18 per share. In August 1996, all warrants were exercised to purchase 102,770 shares of common stock. In August 1992, the Academy issued warrants to a shareholder who is related to the Chairman of the Board of Directors to purchase 20 shares of its then-existing Series A preferred stock at $8,000 per share. These warrants were converted, concurrently with the completion of the Initial Public Offering in July 1993, into warrants to purchase 23,900 shares of common stock at an exercise price of $4.18. In August 1996, all warrants were exercised to purchase 23,900 shares of common stock. In June 1996, the Academy issued 25,454 warrants at $6.625 per share to the company serving as the selling agent of Convertible Subordinated Notes ("Notes"). The Chairman and President of the selling agent company is a member of the Academy's Board of Directors. As selling agent of the Notes, the company was paid $189,000 for commission and fees and was entitled to warrants to purchase Common Stock equal to 10% of the number of shares issued upon conversion of the Notes to Series A Preferred Stock. NOTE 8 -- NEW ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share". The Company is required to adopt SFAS No. 128 in the second quarter of fiscal 1998 and will restate at that time earnings per share (EPS) data for prior periods to conform with SFAS No. 128. Earlier application is not permitted. SFAS No. 128 replaces current EPS reporting requirements and requires a dual presentation of basic and diluted EPS. Basic EPS excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted in to common stock. Pro-forma amounts for basic and diluted EPS assuming SFAS No. 128 had been in effect for the quarter and year-to-date periods are as follows: FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED 3/31/97 3/31/96 3/31/97 3/31/96 ----------- ----------- ----------- ----------- Basic $0.03 $0.02 $0.07 $(0.11) Diluted $0.03 $0.02 $0.07 $(0.11) During fiscal 1997, the Academy will adopt SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets Disposed of." SFAS No. 121 establishes recognition and measurement criteria for impairment losses when the Company no longer expects to recover the carrying value of a long-lived asset. The effect on the financial statements of adopting SFAS No. 121 has not been determined. The Company is required to adopt SFAS No. 123, "Accounting for Stock-based Compensation" during fiscal 1997. SFAS No. 123 establishes accounting and disclosure requirements using a fair value based method of accounting for stock-based employee compensation plans. Under SFAS No. 123, the Company may either adopt the new fair value based accounting method or continue the intrinsic value method and provide pro-forma disclosures of net income and earnings per share as if the accounting provisions of SFAS No. 123 had been adopted. The Company will adopt the disclosure requirement of SFAS No. 123 and will include such information in its financial statements for the fiscal year ending June 30, 1997. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The Academy's revenues are derived primarily from culinary arts education and incidentally from restaurant, retail and media operations. Culinary arts education primarily consists of the A.O.S. Culinary Arts Degree Program, the 30-week Baking & Pastry Arts Certificate Program, College of Food Culinary Skills and Baking and Pastry Skills, continuing professional education programs and consumer education classes. Starting in June 1996, the A.O.S. Culinary Arts Degree Program began enrollment on a two week cycle. The program can accommodate up to 29 students per enrollment period. Previously the A.O.S. Degree Program enrolled an average of approximately 80 students per enrollment period with six enrollments per year. The 30-week Baking & Pastry Arts Certificate Program enrolled classes ranging from 15 to 20 students. As of March 31, 1997, there were 574 A.O.S. students and 76 Baking & Pastry students enrolled in the Academy. The change in class size and the change in the enrollment cycle for the A.O.S. program from every two months to every two weeks was made to enable student enrollments to be managed more effectively. With an increased number of choices of start dates for students, the Academy is better able to manage individual student start dates to optimize class sizes. Additionally, the Academy is able to manage faculty labor costs and other program costs due to more predictable class sizes. Consumer education consists of avocational and team building programs. The Academy's team building programs offer groups the use of the Academy's professional kitchens under the guidance of a chef instructor. This form of team building is an alternative to other forms of combined business and social interaction such as river rafting and sporting event outings. Restaurant and retail operations include two restaurants and two private dining rooms generally open to the public six days per week, banquet services generally offered seven days per week and a small on-site retail shop offering student prepared foods, beverages, cookbooks, video tapes, kitchen wares and selected clothing. Media operations primarily consist of the marketing of the "Cooking at the Academy" television series and the licensing of the Academy's name and cookbook content for use in a series of cookbooks. The Academy believes that manageable growth is achievable through the addition of remote training facilities such as its College of Food campus at Salinas, California (opened in October 1996) and by the addition of programs to be offered to the food industry such as contract training and research and development in the areas of product development, menu development, and restaurant design. In order to facilitate this revised strategy, the Academy formed the CCA Development Company whose mission is to develop programs and knowledge-based products which complement the education which the Academy already provides. 10 While management believes that this revised strategy will enable it to significantly increase revenues by providing additional educational, training and consultative resources to the food industry, there can be no assurance that management will be able to successfully implement such a strategy or that it will increase revenues significantly or at all. Except for historical information contained herein this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The forward-looking statements contained herein are based upon current expectations, and actual results may differ materially. Forward-looking statements contained in this Report involve numerous risks and uncertainties, including those discussed in this Report and the Academy's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996, that could cause actual results to differ materially from those projected. The primary risks and uncertainties that could affect future results include, without limitation, (i) the event of a net loss of $999,000 for the year ended June 30, 1996 from which there can be no assurance that the recent efforts will be successful in achieving profitable operations, or if achieved, that profitability can be sustained in future periods; (ii) the inability of management to successfully implement and manage the Academy's new growth strategy of adding more remote training facilities and new programs to be offered to the foodservice industry; (iii) uncertainties associated with overhauling the structure of the A.O.S. degree program enrollment process and the inability of the Academy to make appropriate adjustments in a timely manner; (iv) the increased competition from both for-profit and non-profit culinary arts education institutions; (v) the continued dependence on financial aid programs to fund a majority of Academy's students' education, thereby providing a significant portion of the Academy's revenues, together with the uncertainty that budgetary constraints or other factors in the future could impact the availability and amount of both public and private sources of financial aid; (vi) increase of the Academy's cohort default rate, the percentage of Academy students who have defaulted on repayment of government student loans, which could in the future impair or limit the Academy's participation in government financial aid programs; and (vii) the possibility that regulatory agencies that directly or indirectly impact aspects of the Academy's business could revise regulations in such a way that the Academy would not be able to comply with new regulations in a timely manner. Investors are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date hereof. The Academy undertakes no obligation to publicly release the results of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. RESULTS OF OPERATIONS The Academy had net income of $115,000 or $0.03 per share for the quarter ended March 31, 1997 compared to net income of $58,000 or $0.02 per share for the quarter ended March 31, 1996. The Academy had net income of $286,000 or $0.08 per share for the nine months ended March 31, 1997 compared to net loss of $362,000 or $(0.11) for the nine months ended March 31, 1996. 11 Net income for the quarter and the nine months ended March 31, 1997 reflects continuing operations of the Academy's main campus in San Francisco and the opening in October 1996 of the College of Food campus in Salinas, California. FOR THE QUARTER ENDED FOR THE NINE MONTHS ENDED 3/31/97 3/31/96 3/31/97 3/31/96 -------- ------- --------- --------- NET INCOME (LOSS): Main Campus $160,000 $58,000 $ 401,000 $(362,000) College of Food (45,000) (115,000) -------- ------- --------- --------- $115,000 $58,000 $ 286,000 $(362,000) -------- ------- --------- --------- -------- ------- --------- --------- PRIMARY EARNINGS PER SHARE DATA: Main Campus $ 0.04 $0.02 $ 0.11 $(0.11) College of Food (0.01) (0.03) -------- ------- --------- --------- $ 0.03 $0.02 $ 0.08 $(0.11) -------- ------- --------- --------- -------- ------- --------- --------- Management believes improved operating results at the Main Campus are a result of the changes to the enrollment program and restructuring implemented in the last quarter of fiscal 1996. The results from the College of Food reflect the opening of the first extension campus in Salinas in October 1996 and the initial cost of operations. Management believes these costs are an investment in the development and growth of the College of Food concept. Total revenues for the quarter were $4,121,000 compared to $3,998,000 for the same quarter last year, an increase of $123,000 or 3.1%. Total revenues for the nine months ended March 31, 1997 were $11,439,000, an increase of $248,000 or 2.2% from the same period in the prior year. Revenues from culinary arts education, which typically account for approximately 80% of total revenues, for the quarter were $3,401,000 compared to $3,413,000 for the same quarter last year, a decrease of $12,000 or 0.4%. The decrease during the quarter was due primarily to Christmas break schedule changes resulting in fewer revenue recognition days in the third quarter of 1997 compared to the same quarter in the prior year. Culinary arts education revenues for the nine months ended March 31, 1997 were $9,433,000 compared to $9,243,000 for the same period last year, an increase of $190,000 or 2.1%. The increase is due primarily to higher program fees and lower student attrition rate. Enrollment in the A.O.S. Culinary Arts Degree Program and Baking & Pastry Certificate Program totaled 650 students as of March 31, 1997 compared to 659 students as of March 31, 12 1996, a decrease of 9 students or 1.4%. The decrease in ending enrollments was expected due to the change in the A.O.S. Culinary Arts Degree Program enrollment structure wherein smaller class sizes are enrolled with greater frequency. Due to the fact that classes graduating had been higher in size than starting classes for a period of time, ending enrollment count was depressed. Management believes that this depressive effect is substantially over by the end of the third quarter of 1997. New student enrollments totaled 472 for the nine months ended March 31, 1997 compared to 442 students for the same period in the prior year, an increase of 6.8%. Management believes the increase is the result of changes to improve A.O.S. Degree Program curriculum; change in the enrollment cycle to admit smaller classes with greater frequency; and improvements to the enrollment management process and the restructuring of its Admissions Department. Management believes the increased enrollment activity is evidence that the actions taken to correct prior declining enrollments have proven successful. There can be no assurance, however, that management's corrective actions will be continue to be successful or that enrollments or revenues will increase in the future. Restaurant and catering revenues for the quarter ended March 31, 1997 were $623,000 compared to $465,000 for the same quarter last year, an increase of $158,000 or 34.0%. Restaurant and catering revenues for the nine months ended March 31, 1997 were $1,700,000 compared to $1,521,000 for the same period last year, an increase of $179,000 or 11.8% from the same period in the prior year. The increase is primarily due to higher banquet sales. Retail, media and other revenues for the quarter were $97,000 compared to $120,000 for the same quarter last year, a decrease of $23,000 or 19.2%. Retail, media and other revenues for the nine months ended March 31, 1997 were $306,000 compared to $427,000 for the same period in the prior year, a decrease of $121,000 or 28.3%. The decrease is due primarily to lower sales in the Academy's retail store, which was relocated within the San Francisco facility during December 1996 and the conversion of the former store into a kitchen, offset by higher book royalty revenue. Total cost of sales for the quarter ended March 31, 1997 were $894,000 compared to $770,000 for the same quarter last year, a increase of $124,000 or 16.1%. Total cost of sales for the nine months ended March 31, 1997 were $2,409,000 compared to $2,333,000 for the same period last year, an increase of $76,000 or 3.3%. The increase is primarily related to higher program supplies cost as a result of higher number of enrolling students, offset by lower cost of food and beverage resulting from purchasing and inventory management efficiencies. Total fixed costs for the quarter ended March 31, 1997 were $953,000 compared to $936,000 for the same quarter last year, an increase of $17,000 or 1.8%. The increase is due primarily to higher depreciation and amortization expense related to additional capital expenditures, including equipment and leasehold improvements for the Academy's first extension campus during the nine months ended March 31, 1997, offset by reductions in telephone, security and other costs. Total fixed costs for the nine months ended March 31, 1997 were $2,762,000, a decrease of $3,000 or 0.1% from the same period in the prior year. The decrease is due primarily to lower telephone, security and other costs as well as lower repair and maintenance costs, offset by higher depreciation and amortization expense. 13 Total operating expenses for the quarter ended March 31, 1997 were $2,095,000 compared to $2,188,000 for the same quarter last year, a decrease of $93,000 or 4.3%. Total operating expense for the nine months ended March 31, 1997 were $5,817,000 compared to $6,594,000 for the same period last year, a decrease of $777,000 or 11.8% from the same period in the prior year. The decrease is primarily related to lower compensation and benefits expense, reduction in outside services and lower advertising and promotion expense resulting from the Academy's restructuring plan implemented during the fourth quarter of fiscal year 1996. LIQUIDITY AND CAPITAL RESOURCES Historically, the Academy financed its growth from the issuance of equity securities in private and public transactions, borrowings from related parties, lease and debt financing obligations and through cash flow provided by operations. At March 31, 1997, the Academy's principal sources of liquidity included cash and cash equivalents of $2,845,000 and net accounts receivable of $2,904,000 compared to $3,284,000 and $2,787,000 as of June 30, 1996, respectively. The decrease in cash and cash equivalents is due primarily to the Academy's using cash and cash flow from operations to fund capital expenditures. The increase in net accounts receivable is due primarily to increase enrollments. The Academy has long-term obligations of $605,000 and working capital of $1,195,000 at March 31, 1997 compared to $2,556,000 and $935,000 as of June 30, 1996. The decrease in long-term obligations is due primarily to the conversion of $1,400,000 of subordinated debt to Series A Preferred Stock in August 1996. As of March 31, 1997, the Academy had no outstanding loans with banks. Other term loans aggregate in the amount of $54,000. As of June 30, 1996, the Academy had $792,000 of outstanding term loans with banks and $24,000 in other term loans. 14 PART II ITEM 1. LEGAL PROCEEDINGS There are various legal claims and lawsuits pending by and against the Academy that, in the opinion of management, after consultation with legal counsel, are not expected to have in any material adverse effect on the results of operations or financial position of the Academy. ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a). The annual meeting of the shareholders' was held on March 15, 1997. Five directors were elected. The vote was as follows: NUMBER OF SHARES NAME FOR AGAINST ABSTAIN --------------------- --------- ------- ------- Theodore G. Crocker 3,089,869 None 130,205 W. Bruce G. Bailey 2,957,366 None 130,205 James D. Cockman 2,949,766 None 137,805 Frederick L. Dame 2,949,766 None 137,805 Grover T. Wickersham 2,957,366 None 130,205 All directors were elected to one year terms. (b.) The shareholders' ratified the appointment of Deloitte & Touche, LLP as the Academy's independent public accountants. The vote was as follows: NUMBER OF SHARES FOR AGAINST ABSTAIN --------- ------- ------- 2,954,316 127,285 5,970 ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a.) EXHIBITS EXHIBIT NO. DESCRIPTION ----------- ------------------------------------------------------ 11.0 Statement re: Computation of Earnings per Share 27.0 Financial Data Schedule (b.) REPORTS ON FORM 8-K None 15 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CALIFORNIA CULINARY ACADEMY, INC. May 15, 1997 By: /s/ Robert A. Stoffregen ------------------------------------ Robert A. Stoffregen Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) 16 EX-11 2 EX 11 CALIFORNIA CULINARY ACADEMY, INC. STATEMENT RE: EARNINGS PER SHARE
QUARTER ENDED MARCH 31, ---------------------------------------------------- 1997 1996 Primary Fully Diluted Primary Fully Diluted ---------- ------------- ---------- ------------- Net earnings (loss) $ 115,000 $ 115,000 $ 58,000 $ 58,000 ---------- ------------- ---------- ------------- Weighted average common shares outstanding: Common shares 3,323,752 3,323,752 3,318,958 3,318,958 Common equivalent shares: Stock options and warrants 120,498 120,498 Convertible Preferred shares 254,541 254,541 ---------- ------------- ---------- ------------- Weighted average common and common equivalent shares outstanding 3,698,791 3,698,791 3,318,958 3,318,958 ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- Earnings (loss) per share $0.03 $0.03 $0.02 $0.02 ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- NINE MONTHS ENDED MARCH 31, ---------------------------------------------------- 1997 1996 Primary Fully Diluted Primary Fully Diluted ---------- ------------- ---------- ------------- Net earnings (loss) $ 286,000 $ 286,000 $ (362,000) $ (362,000) ---------- ------------- ---------- ------------- Weighted average common shares outstanding: Common shares 3,289,734 3,289,734 3,294,630 3,294,630 Common equivalent shares: Stock options and warrants 109,881 109,881 Convertible Preferred shares 254,541 254,541 ---------- ------------- ---------- ------------- Weighted average common and common equivalent shares outstanding 3,654,156 3,654,156 3,294,630 3,294,630 ---------- ------------- ---------- ------------- ---------- ------------- ---------- ------------- Earnings (loss) per share $0.08 $0.08 $(0.11) $(0.11) ---------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
EX-27 3 EX 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF MARCH 31, 1997 AND THE STATEMENT OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS JUN-30-1997 JAN-01-1997 MAR-31-1997 2845 0 3184 280 310 6270 9452 4653 12073 5075 0 0 967 9289 (3863) 12073 33 4121 24 870 3048 0 (13) 192 77 115 0 0 0 115 0.03 0.03
-----END PRIVACY-ENHANCED MESSAGE-----