-----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, H39r5sp8Yz+50jlO6UGbwaaNrQPbDjWoNMDybxEXqMK8dFsYesIuy/5jIY54dIHA 0IoRTkEGtGfjCBp6IhPROA== 0000950131-96-004435.txt : 19960910 0000950131-96-004435.hdr.sgml : 19960910 ACCESSION NUMBER: 0000950131-96-004435 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960728 FILED AS OF DATE: 19960909 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITOG CO CENTRAL INDEX KEY: 0000101909 STANDARD INDUSTRIAL CLASSIFICATION: APPAREL & OTHER FINISHED PRODS OF FABRICS & SIMILAR MATERIAL [2300] IRS NUMBER: 440529828 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-06643 FILM NUMBER: 96627646 BUSINESS ADDRESS: STREET 1: 101 WEST 11TH STREET CITY: KANSAS CITY STATE: MO ZIP: 64105 BUSINESS PHONE: 8164747000 MAIL ADDRESS: STREET 1: 101 W 11TH STREET CITY: KANSAS CITY STATE: MO ZIP: 64105 10-Q 1 FORM 10-Q 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 July 28, 1996. 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: 0-6643 UNITOG COMPANY ---------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 44-0529828 - --------------------------------------- --------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 101 W. 11th Street, Kansas City, MO 64105 - ---------------------------------------- --------------------------------- (Address of principal executive offices) (Zip Code) (816) 474-7000 - ----------------------------------------------------------------------------- (Registrant's telephone number, including area code) Not applicable - ----------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of July 28, 1996, the registrant had 9,636,307 shares of common stock, par value $.01 per share, outstanding. TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE NUMBER ITEM 1. Financial Statements (1) Condensed Consolidated Financial Statements (unaudited): Condensed Consolidated Balance Sheets as of July 28, 1996 and January 28, 1996. 3 Condensed Consolidated Statements of Earnings for the Three Months ended July 28, 1996 and July 30, 1995. 4 Condensed Consolidated Statements of Earnings for the Six Months ended July 28, 1996 and July 30, 1995. 5 Condensed Consolidated Statements of Cash Flows for the Six Months ended July 28, 1996 and July 30, 1995. 6 (2) Notes to Condensed Consolidated Financial Statements. 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 11 ITEM 4. Submission of Matters to a Vote of Security Holders 11 ITEM 6. Exhibits and Reports on Form 8-K 12
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JULY 28, 1996 AND JANUARY 28, 1996 (UNAUDITED)
ASSETS JULY 28, 1996 JANUARY 28, 1996 ------------- ---------------- Current assets: Cash and cash equivalents $ 53,176 $ 28,321 Accounts receivable, less allowance for doubtful receivables of $970,000 and $760,000, respectively 24,924,880 25,012,073 Inventories (note 2) 17,047,098 15,333,981 Rental garments in service, net 38,085,900 36,774,298 Prepaid expenses 1,555,232 1,233,948 ------------ ------------ Total current assets 81,666,286 78,382,621 ------------ ------------ Property, plant and equipment, at cost 150,881,755 140,834,624 Less accumulated depreciation 63,140,802 58,542,615 ------------ ------------ Net property, plant and equipment 87,740,953 82,292,009 ------------ ------------ Other assets, net 37,510,586 30,848,817 Excess cost over net assets of businesses acquired, net 36,321,829 32,045,645 ------------ ------------ $243,239,654 $223,569,092 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 758,055 $ 481,087 Accounts payable 12,095,895 15,300,599 Accrued expenses 11,419,539 13,399,851 Income taxes payable (206,266) 498,860 Deferred income taxes 11,401,000 10,788,000 ------------ ------------ Total current liabilities 35,468,223 40,468,397 ------------ ------------ Long-term debt, less current installments 101,911,301 83,731,099 Other liabilities, noncurrent 763,452 1,200,878 Deferred income taxes, noncurrent 12,016,011 12,044,011 Stockholders' equity: Common stock of $.01 par value. Authorized 30,000,000 shares; issued and outstanding 9,636,307 shares 96,363 92,793 Additional paid-in capital 41,040,789 39,200,675 Retained earnings 51,943,515 46,831,239 ------------ ------------ Total stockholders' equity 93,080,667 86,124,707 ------------ ------------ $243,239,654 $223,569,092 ============ ============
See accompanying notes to condensed consolidated financial statements. 3 UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS THREE MONTHS ENDED JULY 28, 1996 AND JULY 30, 1995 (UNAUDITED)
JULY 28, 1996 JULY 30, 1995 ------------- ------------- Revenues: Rental operations $ 51,234,701 $ 37,822,136 Direct sales 14,005,119 12,999,109 ------------- ------------- Total revenues 65,239,820 50,821,245 ------------- ------------- Operating costs and expenses: Cost of rental operations 41,812,240 30,389,135 Cost of direct sales 11,329,991 10,805,721 Depreciation and amortization 3,868,786 2,658,426 General and administrative 2,031,152 2,063,113 ------------- ------------- Total costs and expenses 59,042,169 45,916,395 ------------- ------------- Operating income 6,197,651 4,904,850 Interest expense 1,499,480 691,606 Other expense, net (26,197) 4,125 ------------- ------------- Earnings before income taxes 4,724,368 4,209,119 Income taxes 1,795,000 1,642,000 ------------- ------------- Net earnings $ 2,929,368 $ 2,567,119 ============= ============= Net earnings per common share $ .30 $ .27 ============= ============= Weighted average common and common equivalent shares outstanding 9,645,196 9,365,733 ============= ============= Dividends per common share (note 3) $ .06 $ .05 ============= =============
See accompanying notes to condensed consolidated financial statements. 4 UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS SIX MONTHS ENDED JULY 28, 1996 AND JULY 30, 1995 (UNAUDITED)
July 28, 1996 July 30, 1995 -------------- -------------- Revenues: Rental operations $ 99,665,263 $ 73,792,950 Direct sales 29,509,420 27,621,255 -------------- -------------- Total revenues 129,174,683 101,414,205 -------------- -------------- Operating costs and expenses: Cost of rental operations 81,705,720 59,559,248 Cost of direct sales 23,770,946 22,723,754 Depreciation and amortization 7,519,170 5,183,117 General and administrative 4,207,599 4,086,474 -------------- -------------- Total costs and expenses 117,203,435 91,552,593 -------------- -------------- Operating income 11,971,248 9,861,612 Interest expense 2,843,076 1,322,169 Other expense, net (49,274) 8,685 -------------- -------------- Earnings before income taxes $ 9,177,446 $ 8,530,758 Income taxes 3,487,000 3,327,000 -------------- -------------- Net earnings $ 5,690,446 $ 5,203,758 ============== ============== Net earnings per common share $ .60 $ .56 ============== ============== Weighted average common and common equivalent shares outstanding 9,540,145 9,350,880 ============== ============== Dividends per common share (note 3) $ .06 $ .05 ============== ==============
See accompanying notes to condensed consolidated financial statements. 5 UNITOG COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JULY 28, 1996 AND JULY 30, 1995 (UNAUDITED)
July 28, 1996 July 20, 1995 ------------- ------------- Cash flows from operating activities: Net earnings $ 5,690,446 $ 5,203,758 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 7,519,170 5,183,117 Provision for deferred income taxes 585,000 1,331,000 Disposal of equipment, net of gains and losses -- 39,793 Changes in assets and liabilities: Accounts receivable 1,057,851 (521,830) Inventories (1,713,117) (333,774) Rental garments in service 1,651,301 (1,281,304) Prepaid expenses (321,284) (301,898) Other noncurrent assets 400,599 (14,603) Accounts payable (3,204,704) 86,014 Accrued expenses (2,939,883) 409,775 Income taxes payable (705,126) 793,633 Other noncurrent liabilities (437,426) 35,088 ------------ ------------ Net cash provided by operating activities 7,582,827 10,628,769 ------------ ------------ Cash flows from investing activities: Acquisition of rental operations (17,385,686) (11,331,244) Purchase of property, plant and equipment (8,784,851) (10,328,984) ------------ ------------ Net cash used by investing activities (26,170,537) (21,660,228) ------------ ------------ Cash flows from financing activities: Proceeds from exercise of stock options, net 1,843,684 16,617 Dividends paid (578,171) (463,605) Increase (decrease) in long-term debt 17,347,052 4,291,436 ------------ ------------ Net cash provided (used) by financing activities 18,612,565 3,844,448 ------------ ------------ Net increase (decrease) in cash and cash equivalents 24,855 (7,187,011) Cash and cash equivalents at beginning of period 28,321 7,717,999 ------------ ------------ Cash and cash equivalents at end of period $ 53,176 $ 530,988 ============ ============ Supplemental disclosure of cash flows information: Cash paid during the period for: Interest $ 3,004,000 $ 1,411,000 ============ ============ Income taxes $ 3,091,000 $ 1,201,000 ============ ============
See accompanying notes to condensed consolidated financial statements. 6 UNITOG COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED JULY 28, 1996 AND JULY 30, 1995 Note 1 - ------ In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position of the Company as of July 28, 1996, and the results of its operations and its cash flows for the six months ended July 28, 1996 and July 30, 1995 and the results of its operations for the three months ended July 28, 1996 and July 30, 1995. The results of operations for the six months ended July 28, 1996 are not necessarily indicative of the results to be expected for the full year. Note 2 Inventories - ------------------- The following is a summary of inventories at July 28, 1996 and January 28, 1996:
July 28, 1996 January 28, 1996 ------------- ---------------- Raw materials $ 4,367,883 $ 4,135,131 Work in progress 2,281,440 2,503,558 Finished goods 14,277,244 12,501,732 ------------ ----------- 20,926,567 19,140,421 Less LIFO allowance (3,879,469) (3,806,440) ------------ ----------- $17,047,098 $15,333,981 ============ ===========
Note 3 Cash Dividend - -------------------- At its May 23, 1996 Board of Directors meeting the Board declared a $.06 per share cash dividend payable on June 24, 1996 to stockholders of record on June 7, 1996. The $.06 per share dividend was a 20% increase over the prior year. Note 4 Acquisitions: - -------------------- During the first quarter of fiscal 1997 the Company acquired a portion of the assets of Central Quality Services Corporation headquartered in Farmington Hills, Michigan for approximately $17 million in cash. The assets acquired were primarily industrial uniform routes and production facilities in central and northern Michigan and eastern Illinois. The acquisition was accounted for as a purchase. During the first quarter of fiscal 1997 the Company also acquired American Dust Control Co., Inc. in Philadelphia, Pennsylvania in exchange for Unitog common stock. The acquisition was accounted for as a pooling-of-interests. Prior period financial statements were not restated due to immateriality. The operating results of these acquisitions have been included in the consolidated results of the Company since their acquisition with an insignificant effect on revenues and net earnings. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. LIQUIDITY AND CAPITAL RESOURCES Cash provided by operating activities was $7.6 million for the six months ended July 28, 1996, a decrease of $3.0 million or 29% below last year. The decrease was principally due to an increase in inventories and reductions in trade accounts payable and accrued expenses resulting from the timing of certain acquisition related liabilities and vendor payments. Cash and cash equivalents were $53,000 at July 28, 1996. At July 28, 1996, the Company had $30.5 million in borrowings outstanding under its bank credit facility. The amount of borrowings available under the Company's bank credit facility was $19 million at July 28, 1996. The Company's capitalization ratio was 52% at July 28, 1996 compared to 49% at January 28, 1996. Working capital was $46.2 million at July 28, 1996 compared to $37.9 million at January 28, 1996. Acquired working capital from purchased rental operations coupled with reduced acquisition related liabilities and trade payables to increase working capital. Capital expenditures were $8.8 million through July 28, 1996, 15% less than last year. Capital expenditures for fiscal 1996 are expected to approximate $20 million. During the first quarter of fiscal 1997, the Company issued $4.5 million in variable rate tax-exempt Industrial Revenue Bonds which mature in 2020. The bonds bear interest at floating rates based upon market conditions for tax- exempt issues. The bond proceeds were used to repay bank debt which had been incurred to finance facility construction. During the first quarter of fiscal 1997 the Company acquired a portion of the assets of Central Quality Services Corporation headquartered in Farmington Hills, Michigan for approximately $17 million in cash. The assets acquired were primarily industrial uniform routes and production facilities in central and northern Michigan and eastern Illinois. The acquisition was accounted for as a purchase and the operating results of this acquisition have been included in the consolidated results of the Company since its purchase with an insignificant effect on revenues and net earnings. The acquisition will add approximately $15 million in annual rental revenues. During the first quarter of fiscal 1997 the Company acquired American Dust Control Co., Inc. in Philadelphia, Pennsylvania in exchange for Unitog common stock. The acquisition was accounted for as a pooling-of-interests. The operating results of this acquisition have been included in the consolidated results of the Company since its purchase with an insignificant effect on revenues and net earnings. The acquisition will add approximately $3 million in annual rental revenues. Prior period financial statements were not restated due to immateriality. On June 24, 1996 the Company paid a $.06 per share cash dividend to stockholders of record on June 7, 1996. The $.06 per share dividend was 20% greater than the semi-annual dividend paid in the second quarter of last year. Management believes that cash generated from operations, and its bank credit facility will be sufficient to meet its cash requirements for acquisitions and capital expenditures in the foreseeable future. 8 RESULTS OF OPERATIONS Second quarter fiscal 1997 compared to second quarter fiscal 1996 - ----------------------------------------------------------------- Revenues for the second quarter of fiscal 1997 were $65.2 million, an increase of $14.4 million or 28% over the comparable period last year. Rental revenues for the quarter were $51.2 million, an increase of $13.4 million or 35% over last year. Revenues from the Michigan acquisitions in March 1996 and November 1995 added $11 million in rental revenues during the quarter. The balance of the increase came from growth within our existing network of locations. Direct sales for the second quarter of fiscal 1997 were $14.0 million, an increase of $1.0 million or 8% over the comparable period last year. The increase in Direct sales was principally due to new image programs with new and existing customers. Depreciation and amortization was $3.9 million, and increase of $1.2 million or 46% over the comparable period last year. Depreciation from our acquired rental operations combined with increased amortization of acquisition related intangible assets to create the increase. Operating income for the second quarter of fiscal 1997 was $6.2 million an increase of $1.3 million or 26% over the comparable period last year. The improvement over last year was created by higher operating profits from both the Rental and Direct sales businesses. Interest expense for second quarter of fiscal 1997 was $1.5 million, an increase of $808,000 over the comparable period last year. Higher debt levels related to our fiscal 1996 and fiscal 1997 rental acquisitions created the increase in interest expense. Net earnings for the second quarter of fiscal 1997 were $2.9 million, an increase of $362,000 or 14% over the comparable period last year. Improved operating profits from both our business segments offset additional depreciation, amortization and interest costs related to our acquisitions. Net earnings per common share for the second quarter of fiscal 1997 were $.30 per share, an increase of $.03 per share or 11% over the comparable period last year. Six months fiscal 1997 compared to six months fiscal 1996 - --------------------------------------------------------- Revenues for the six months ended July 28, 1996 were $129.2 million, an increase of $27.8 million or 27% over the comparable period last year. Rental revenues for the six months ended July 28, 1996 were $99.7 million. Acquired revenues and internal growth within our existing locations created the $25.9 million or 35% increase in Rental revenues over last year. Direct sales for the first six months of fiscal 1997 were $29.5 million, an increase of $1.9 million or 7% over the comparable period last year. The increase in Direct sales was principally due to new image programs. Depreciation and amortization was $7.5 million, an increase of $2.3 million or 45% over the comparable period last year. Depreciation from our acquired rental operations combined with increased amortization of acquisition related intangible assets to create the increase. Operating income for the six months ended July 28, 1996 was $12.0 million, an increase of $2.1 million or 21% over last year. Improved operating profits from both the Rental and Direct sales business segments offset higher depreciation and amortization costs to generate the increase in operating income. Interest expense for the six months ended July 28, 1996 was $2.8 million, an increase of $1.5 million over the comparable period last year. Higher debt levels related to our fiscal 1996 and fiscal 1997 rental acquisitions created the increase in interest expense. 9 Net earnings for the six months ended July 28, 1996 were $5.7 million, an increase of $487,000 or 9% higher than the comparable period last year. Increased profitability from our business segments offset additional depreciation, amortization and interest costs related to our acquisitions. As expected, acquisition related costs have slowed growth in net earnings. Net earnings per share were $.60 for the six months ended July 28, 1996, an increase of $.04 per share or 7% over the comparable period last year. The average shares outstanding have increased due to the shares issued to acquire American Dust Control Co., Inc. and the exercise of employee stock options. FORWARD LOOKING STATEMENTS -------------------------- Forward-looking statements appear in this quarterly report, including in Management's Discussion and Analysis. These statements reflect Management's current expectations for future revenues from acquired operations. Actual results may differ materially from those expectations. Factors that could cause results to differ materially include labor-related events, and particularly strikes and labor disputes and changes in the general economy, including unemployment levels. 10 PART II - OTHER INFORMATION --------------------------- Item 1. Legal Proceedings As discussed in the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 1996, volatile organic compound contamination has been detected in the soil and groundwater at the Company's Whittier, California rental plant. The plant is located in the Suburban Operable Unit of the San Gabriel Valley Superfund Site. The Company has cleaned up the soil at the plant and, based on groundwater testing performed to date, does not believe groundwater clean up will be required. In August 1996, the Company received correspondence from the United States Environmental Protection Agency ("EPA") stating that EPA has made an "initial determination" that the Company is a potentially responsible party for the Suburban Operable Unit. The EPA indicates that it may seek reimbursement of costs spent by EPA at the Suburban Operable Unit from the Company and three other entities. At EPA's request, the Company entered into a Tolling Agreement that stops the running of any statute of limitations to give the parties time to discuss issues related to the claim. The Company believes it has meritorious defenses to the EPA claim and intends to vigorously defend itself. Also, see the discussion of certain environmental matters in Part I, Item 1 of the Company's Annual Report on Form 10-K for the fiscal year ended January 28, 1996. Item 4. Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on May 23, 1996 at the Kansas City Club, 1228 Baltimore, Kansas City, Missouri. The following directors were elected at the Annual Meeting: Randolph K. Rolf William D. Thomas The term of office of the following other directors continued after the Annual Meeting: G. Kenneth Baum John W. Caffry D. Patrick Curran Robert F. Hagans David B. Sharrock At the Annual Meeting, a total of 7,728,508 shares voted for and 12,700 shares were withheld with respect to the election of Randolph K. Rolf as a director of the Company. There were no broker non-votes. At the Annual Meeting, a total of 7,740,408 shares voted for and 800 shares were withheld with respect to the election of William D. Thomas as a director of the Company. There were no broker non-votes. 11 At the Annual Meeting, a total of 7,730,399 shares voted for, 6,635 voted against and 4,174 shares abstained from approval of KPMG Peat Marwick, as independent auditors of the Company for fiscal 1997. There were no broker non-votes. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. 27 Financial Data Schedule for the Six Months ended July 28, 1996. (b) Reports on Form 8-K. Unitog Company has not filed any reports on Form 8-K during the quarter ended July 28, 1996. 12 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. Unitog Company Dated: September 6, 1996 By: /S/ J. Craig Peterson --------------------------- J. Craig Peterson Senior Vice-President of Finance and Administration, Chief Financial Officer (Duly Authorized Officer) 13 EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS JAN-26-1997 JUL-28-1996 53,176 0 24,924,880 970,000 17,047,098 81,666,286 150,881,755 63,140,802 243,239,654 35,468,223 101,911,301 96,363 0 0 92,984,304 243,239,654 29,509,420 129,174,683 23,770,946 112,995,836 0 0 2,843,076 9,177,446 3,487,000 5,690,446 0 0 0 5,690,446 0.60 0.60
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