-----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, Gyz6y3PvRL1HKwFkaNVLMDS4zxghBc9QAC8r8Ca97qDkL9Fwe1vO4L5NDjQX0LB/ BXVG6gaBlnZ1ZSXyenKA5A== 0000930661-02-000691.txt : 20020415 0000930661-02-000691.hdr.sgml : 20020415 ACCESSION NUMBER: 0000930661-02-000691 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020131 FILED AS OF DATE: 20020312 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COYNE INTERNATIONAL ENTERPRISES CORP CENTRAL INDEX KEY: 0001066242 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-60247 FILM NUMBER: 02573487 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 10-Q 1 d10q.txt COYNE INTERNATIONAL FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended January 31, 2002 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 No. 333-60247 --------- COYNE INTERNATIONAL ENTERPRISES CORP. BLUE RIDGE TEXTILE MANUFACTURING, INC. OHIO GARMENT RENTAL, INC. ________________________________________________________________________________ (Exact name of Registrants as specified in their respective charters) New York 16-6040758 Georgia 58-2018333 Ohio 34-1261376 ________________________________________________ ___________________________ (State or Other Jurisdiction of Incorporation (IRS Employer or Organization) Identification No.) 140 Cortland Avenue, Syracuse, New York 13221 - -------------------------------------------- --------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: (315) 475-1626 -------------- Securities Registered Pursuant to Section 12(b) of the Act: NONE ---- Securities Registered Pursuant to Section 12(g) of the Act: NONE ---- 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 for the past 90 days. YES X NO TABLE OF CONTENTS
Page ---- PART I. Financial Information: Item 1. Financial Statements Condensed Consolidated Balance Sheet ........................................................... 3 Condensed Consolidated Statement of Operations ................................................. 5 Condensed Consolidated Statement of Cash Flows.................................................. 6 Notes to Condensed Consolidated Financial Statements............................................ 7 Item 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations......................................................... 15 PART II. Other Information Item 1. Legal Proceedings............................................................................... 17 Item 2. Changes in Securities and Use of Proceeds....................................................... 17 Item 3. Defaults Upon Senior Securities................................................................. 17 Item 4. Submission of Matters to a Vote of Security Holders............................................. 17 Item 5. Other Information............................................................................... 17 Item 6. Exhibits and Reports on Form 8-K................................................................ 17 Signatures
2 PART I. Financial Information Item 1. Financial Statements Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidated Balance Sheet - --------------------------------------------------------------------------------
January 31, October 31, Assets 2002 2001 -------------- --------------- (unaudited) Current Assets: Cash and cash equivalents $ 673,937 $ 119,519 Accounts receivable 16,390,630 15,453,339 Inventories 6,421,400 6,697,698 Rental merchandise in service 28,225,362 31,401,376 Prepaid expenses and other assets 1,467,304 547,284 -------------- --------------- Total current assets 53,178,633 54,219,216 Property, plant and equipment, net 40,579,271 41,635,179 Other assets: Purchased routes and acquisition intangibles, net 16,400,676 16,512,266 Other 6,838,886 6,614,091 -------------- --------------- Total other assets 23,239,562 23,126,357 -------------- --------------- Total Assets $ 116,997,466 $ 118,980,752 ============== ===============
See notes to unaudited condensed consolidated financial statements 3 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidated Balance Sheet - --------------------------------------------------------------------------------
January 31, October 31, Liabilities and Shareholders' Equity (Deficit) 2002 2001 --------------- --------------- (unaudited) Current Liabilities: Accounts payable $ 3,133,609 $ 5,152,582 Cash overdrafts 1,949,266 1,488,087 Accrued interest 1,386,912 3,503,660 Other 21,829,445 21,345,972 --------------- --------------- Total current liabilities 28,299,232 31,490,301 Long-term obligations, net of current maturities 97,391,264 96,102,469 Other liabilities 3,065,043 3,173,083 --------------- --------------- Total liabilities 128,755,539 130,765,853 --------------- --------------- Shareholders' equity (deficit): Retained earnings (deficit) (14,775,589) (14,767,786) Other 3,017,516 2,982,685 --------------- --------------- Total shareholders' equity (deficit) (11,758,073) (11,785,101) --------------- --------------- Total Liabilities and Shareholders' Equity (Deficit) $ 116,997,466 $ 118,980,752 =============== ===============
See notes to unaudited condensed consolidated financial statements 4 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidated Statement of Operations - --------------------------------------------------------------------------------
Three Months Ended January 31, ------------------------------ 2002 2001 ------------- ----------- (unaudited) Revenue $ 36,965,343 $38,143,504 Operating expenses: Cost of operations 27,507,526 29,351,382 Selling and administrative expenses 6,832,450 7,186,917 ------------- ----------- 34,339,976 36,538,299 ------------- ----------- Income from operations 2,625,367 1,605,205 Interest expense 2,580,172 2,995,256 ------------- ----------- Income (loss) before income taxes 45,195 (1,390,051) Income tax expense (benefit) 52,998 (501,000) ------------- ----------- Net loss $ (7,803) $ (889,051) ============= ===========
See notes to unaudited condensed consolidated financial statements 5 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidated Statement of Cash Flows - --------------------------------------------------------------------------------
Three Months Ended January 31, ----------------------------- 2002 2001 --------------- ------------ (unaudited) Net cash provided by (used in) operating activities $ (259,256) $ 1,099,219 Net cash used in investing activities (390,902) (541,449) Cash flows from financing activities: Proceeds from long-term borrowings 12,391,600 11,243,933 Payments under long-term obligations (11,178,126) (11,857,059) Other financing activities (8,898) (160,672) --------------- ------------ Net cash provided by (used in) financing activities 1,204,576 (773,798) --------------- ------------ Net increase (decrease) in cash 554,418 (216,028) Cash and cash equivalents: Beginning of period 119,519 909,340 --------------- ------------ End of period $ 673,937 $ 693,312 =============== ============ Supplemental disclosure of cash flow information: Interest paid $ 4,607,795 $ 4,975,391 Income taxes paid 55,936 27,232
See notes to unaudited condensed consolidated financial statements 6 Coyne International Enterprises Corp. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- 1. Basis of Presentation The accompanying condensed consolidated financial statements of Coyne International Enterprises Corp. and Subsidiaries, (the Company), 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 footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, quarterly results include all adjustments, (consisting of normal recurring accruals), considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The balance sheet as of October 31, 2001 has been derived from the audited balance sheet included in the Company's annual report filed on Form 10- K. For further information, refer to the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended October 31, 2001. The Company uses a fifty-two/fifty-three week fiscal year ending on the last Saturday of October, with quarterly interim periods of thirteen weeks. For convenience, the dating of the accompanying financial statements and notes have been labeled as of and for the periods ending January 31, 2002, October 31, 2001 and January 31, 2001 rather than the actual period-end dates. Operating results for the three month period ended January 31, 2002 are not necessarily indicative of the results that may be expected for the year ending October 31, 2002. 2. Reclassification Certain amounts have been reclassified to conform with the fiscal 2002 presentation. 3. Comprehensive Income The components of comprehensive income (loss) were as follows:
Three Months ended Three Months ended January 31, 2002 January 31, 2001 ---------------- ---------------- Net loss ($ 7,083) ($ 889,051) Other comprehensive income (loss): Change in fair value of cash flow hedge net of tax expense of $55,368 in 2002 and a tax benefit of $92,399 in 2001. 83,053 (138,599) -------- ----------- Comprehensive income (loss) $ 75,970 ($1,027,650) ======== ===========
7 Coyne International Enterprises Corp. and Subsidiaries Notes to Condensed Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- 4. Condensed Consolidating Financial Statements On June 26, 1998, the Company sold $75,000,000 of 11-1/4% Senior Subordinated Notes due 2008, (the Notes). The Notes are jointly and severally guaranteed by the following wholly-owned subsidiaries of the Company, (the Subsidiary Guarantors): Blue Ridge Textile Manufacturing, Inc. and Ohio Garment Rental, Inc. The following consolidating financial statements for the Company segregate the financial information of Coyne International Enterprises Corp. (the Parent Company) and the Subsidiary Guarantors. 8 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidating Balance Sheet - --------------------------------------------------------------------------------
January 31, 2002 ----------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Assets Company Guarantors Adjustments Totals -------------- ------------ ------------- -------------- Current Assets: Cash and cash equivalents $ 759,571 $ (85,634) $ 673,937 Accounts receivable 13,977,755 2,412,875 16,390,630 Inventories 4,634,827 1,786,573 6,421,400 Rental merchandise in service 25,144,032 3,081,330 28,225,362 Prepaid expenses and other assets 10,686,909 149,842 (9,369,447) 1,467,304 -------------- ------------ ------------ ------------ Total current assets 55,203,094 7,344,986 (9,369,447) 53,178,633 Property, plant and equipment, net 37,564,538 3,014,733 40,579,271 Other assets: Purchased routes and acquisition intangibles, net 16,142,864 257,812 16,400,676 Other 6,838,886 6,838,886 -------------- ------------ ------------ ------------ Total other assets 22,981,750 257,812 0 23,239,562 -------------- ------------ ------------ ------------ $ 115,749,382 $ 10,617,531 $ (9,369,447) $116,997,466 ============== ============ ============ ============ Liabilities and Shareholders' Equity (Deficit) - ---------------------------------------------- Current Liabilities: Accounts payable 4,830,982 251,893 5,082,875 Accrued interest 1,386,912 1,386,912 Other 20,833,254 996,191 21,829,445 -------------- ------------ ------------ ------------ Total current liabilities 27,051,148 1,248,084 0 28,299,232 Long-term obligations, net of current maturities 97,391,264 97,391,264 Other liabilities 3,065,043 4,098,120 (4,098,120) 3,065,043 -------------- ------------ ------------ ------------ Total liabilities 127,507,455 5,346,204 (4,098,120) 128,755,539 -------------- ------------ ------------ ------------ Shareholders' equity (deficit): Retained earnings (deficit) (14,775,589) 3,722,327 (3,722,327) (14,775,589) Other 3,017,516 1,549,000 (1,549,000) 3,017,516 -------------- ------------ ------------ ------------ Total shareholders' equity (deficit) (11,758,073) 5,271,327 (5,271,327) (11,758,073) -------------- ------------ ------------ ------------ 115,749,382 $ 10,617,531 $ (9,369,447) $116,997,466 ============== ============ ============ ============
9 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidating Balance Sheet - --------------------------------------------------------------------------------
October 31, 2001 --------------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Assets Company Guarantors Adjustments Totals - ------ -------------- ------------ ------------- ----------------- Current Assets: Cash and cash equivalents $ 335,682 $ (216,163) $ 119,519 Accounts receivable 13,470,773 1,982,566 15,453,339 Inventories 4,353,668 2,344,030 6,697,698 Rental merchandise in service 27,707,131 3,694,245 31,401,376 Prepaid expenses and other assets 9,766,827 70,282 (9,289,825) 547,284 -------------- ------------ ------------ ------------- Total current assets 55,634,081 7,874,960 (9,289,825) 54,219,216 Property, plant and equipment, net 38,485,663 3,149,516 0 41,635,179 Other assets: Purchased routes and acquisition intangibles, net 16,251,810 260,456 16,512,266 Other 6,614,091 6,614,091 -------------- ------------ ------------ ------------- Total other assets 22,865,901 260,456 0 23,126,357 -------------- ------------ ------------ ------------- $ 116,985,645 $ 11,284,932 $ (9,289,825) $ 118,980,752 ============== ============ ============ ============= Liabilities and Shareholders' Equity (Deficit) - ---------------------------------------------- Current Liabilities: Accounts payable 4,623,596 528,986 5,152,582 Accrued interest 3,503,660 3,503,660 Other 21,367,938 1,466,121 22,834,059 -------------- ------------ ------------ ------------- Total current liabilities 29,495,194 1,995,107 0 31,490,301 Long-term obligations, net of current maturities 96,102,469 96,102,469 Other liabilities 3,173,083 3,984,102 (3,984,102) 3,173,083 -------------- ------------ ------------ ------------- Total liabilities 128,770,746 5,979,209 (3,984,102) 130,765,853 -------------- ------------ ------------ ------------- Shareholders' equity (deficit): Retained earnings (deficit) (14,767,786) 3,756,723 (3,756,723) (14,767,786) Other 2,982,685 1,549,000 (1,549,000) 2,982,685 -------------- ------------ ------------ ------------- Total shareholders' equity (deficit) (11,785,101) 5,305,723 (5,305,723) (11,785,101) -------------- ------------ ------------ ------------- 116,985,645 $ 11,284,932 $ (9,289,825) $ 118,980,752 ============== ============ ============ =============
10 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidating Statement of Operations - --------------------------------------------------------------------------------
Three Months Ended January 31, 2002 ------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals ------------------------------------------------------------- Revenue: $ 33,052,513 $ 5,450,674 $(1,537,844) $ 36,965,343 Operating expenses: Cost of operations 24,433,192 4,573,047 (1,498,712) 27,507,526 Selling, general and administrative 5,993,955 726,785 111,710 6,832,450 ------------ ----------- ----------- ------------ 30,427,146 5,299,832 (1,387,002) 34,339,976 ------------ ----------- ----------- ------------ Income (loss) from operations 2,625,367 150,842 (150,842) 2,625,367 Interest expense 2,580,172 208,168 (208,168) 2,580,172 ------------ ----------- ----------- ------------ Income (loss) before income tax 45,195 (57,326) 57,326 45,195 Income tax expense (benefit) 52,998 (22,930) 22,930 52,998 ------------ ----------- ----------- ------------ Net income (loss) $ (7,803) $ (34,396) $ 34,396 $ (7,803) ============ =========== =========== ============
11 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidating Statement of Operations - --------------------------------------------------------------------------------
Three Months Ended January 31, 2001 ------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals ------------ ----------- ------------- ------------ Revenue $ 34,384,991 $ 6,233,467 $ (2,474,954) $38,143,504 Operating expenses: Cost of operations 26,505,242 5,333,094 (2,486,954) 29,351,382 Selling, general and administrative 6,274,544 808,836 103,537 7,186,917 ------------ ----------- ----------- ----------- 32,779,786 6,141,930 (2,383,417) 36,538,299 ------------ ----------- ----------- ----------- Income (loss) from operations 1,605,206 91,537 (91,537) 1,605,206 Interest expense 2,995,256 195,118 (195,118) 2,995,256 ------------ ----------- ----------- ----------- Income (loss) before income tax (1,390,051) (103,581) 103,581 (1,390,051) Income tax expense (benefit) (501,000) (41,433) 41,433 (501,000) ------------ ----------- ----------- ----------- Net income (loss) $ (889,051) $ (62,148) $ 62,148 $ (889,051) ============ =========== =========== ===========
12 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidating Statement of Cash Flows - --------------------------------------------------------------------------------
Three Months Ended January 31, 2002 ---------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals --------------- ---------------- --------------- -------------- Net cash provided by (used in) operating activities $ (1,662,843) $ 1,403,587 0 $ (259,256) Net cash used in investing activities (383,854) (7,048) 0 (390,902) Cash flows from financing activities: Proceeds from long-term borrowings 12,391,600 12,391,600 Payments under long-term obligations (11,178,126) (11,178,126) Other Financing Activities (8,898) (8,898) ------------- ----------- ------- ------------ Net cash provided by financing activities 1,204,576 0 0 1,204,576 ------------- ----------- ------- ------------ Net decrease in cash (842,121) 1,396,539 0 554,418 Cash and cash equivalents: Beginning of period 335,682 (216,163) 119,519 ------------- ----------- ------- ------------ End of period $ (506,439) $ 1,180,376 $ 0 $ 673,937 ============= =========== ======= ============
13 Coyne International Enterprises Corp. and Subsidiaries Condensed Consolidating Statement of Cash Flows - --------------------------------------------------------------------------------
Three Months Ended January 31, 2001 ----------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals --------------- -------------- --------------- -------------- Net cash provided by operating activities $ 677,030 $ 422,189 0 $ 1,099,219 Net cash used in investing activities (515,870) (25,579) 0 (541,449) Cash flows from financing activities: Proceeds from long-term borrowings 11,243,933 11,243,933 Payments under long-term obligations (11,857,059) (11,857,059) Other financing activities (160,672) (160,672) ------------- ----------- ----- ------------ Net cash used in financing activities (773,798) 0 0 (773,798) ------------- ----------- ----- ------------ Net increase (decrease) in cash (612,638) 396,610 0 (216,028) Cash and cash equivalents: Beginning of period 955,728 (46,388) 909,340 ------------- ----------- ----- ------------ End of period $ 343,090 $ 350,222 $ 0 $ 693,312 ============= =========== ===== ============
14 ITEM 2. Management's Discussion and Analysis of the Financial Condition and Results of Operations Coyne International Enterprises Corp. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Certain statements included in this Part I, Item 2, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Quarterly Report on Form 10-Q, which are not statements of historical fact, are intended to be, and are hereby identified as, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Without limiting the foregoing, the words "believe," "anticipate," "plan," "expect," "estimate," "intend" and other similar expressions are intended to identify forward-looking statements. The Company cautions readers that forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward-looking statements. Such factors include, among others, the following: the success or failure of the Company in implementing its current business and operational strategies; availability, terms and access to capital and customary trade credit; general economic and business conditions; competition; changes in the Company's business strategy; labor relations; the outcome of pending or yet-to-be instituted legal proceedings; labor and employee benefit costs; and availability and terms of necessary or desirable financing or refinancing. Results of Operations Total revenues decreased $1.2 million, (3.1%), for the three months ended January 31, 2002 versus the three months ended January 31, 2001. This decrease is the result of reduced business activity, driven by customer workforce reductions and increasing competition. Cost of $1.8 million, operations decreased (6.3%), for the three months ended January 31, 2002 versus the three months ended January 31, 2001. These decreases are a result of lower energy and other production costs as well as lower merchandise spending resulting from tighter controls implemented in 2001. Selling, general and administrative expenses decreased $0.4 million,(4.9%), for the three months ended January 31, 2002 versus the three months ended January 31, 2001. These decreases were primarily the result of a $0.3 million decrease in corporate overhead costs and a $0.1 million decrease in wages for the Company's sales force. Interest expense decreased $0.4 million, (13.9%), for the three months ended January 31, 2002 versus the three months ended January 31, 2001, primarily as a result of a decline in outstanding debt, from $105.6 million at January 31, 2001 to $101.0 million at January 31, 2002. 15 Liquidity and Financial Resources The Company is highly leveraged with total indebtedness of $101.0 million and a shareholder deficit of $11.8 million at January 31, 2002. In addition, the Company has incurred net losses for the last four fiscal years, is required to maintain certain financial covenants as part of its existing credit facility (the Facility), and is dependant on operations for a major portion of its liquidity and working capital needs. These facts create an uncertainty about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company's primary source of liquidity has been cash flows from borrowings under the Facility, which was amended in fiscal 2001. For the three months ended January 31, 2002, the Company has experienced a net increase in cash and cash equivalents of $0.6 million. The Company used $0.3 million in cash and cash equivalents from operating activities for the three months ended January 31, 2002, which included a $3.5 million liquidation of inventory and rental merchandise in service and also included total interest payments of $4.6 million. The maximum credit available under the Company's revolving credit facility, (the Revolver), subject to collateral availability, is $30 million. At January 31, 2002, the Company had approximately $2.8 million available under the Revolver. Management is pursuing alternative senior credit facilities from other lenders, with the goal of providing additional liquidity. Over the next twelve months, the Company will continue to focus on improving utilization of new inventory and merchandise in service as well as controlling overall costs and capital expenditures to improve liquidity and to meet its financial covenants. The Company does not anticipate the need to increase levels of inventory or capital expenditures in 2002. 16 PART II. Other Information Item 1. Legal Proceedings The Company is involved in certain claims and litigation arising in the ordinary course of business, which are not considered material to the financial operations or cash flow of the Company. Item 2. Changes in Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K Not applicable. 17 -----END PRIVACY-ENHANCED MESSAGE-----