10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q : QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended April 30, 2000 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. 0-11399 ------- 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 (IRS Employer Identification No.) Incorporation or Organization) 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 1
TABLE OF CONTENTS Page PART I. Financial Information: ---- Item 1. Financial Statements Consolidated Balance Sheets ....................................................................3 Unaudited Consolidated Statements of Operations and Retained Earnings (Deficit).................5 Unaudited Consolidated Statements of Cash Flows.................................................6 Notes to Unaudited Consolidated Financial Statements............................................7 Item 2. Management's Discussion and Analysis of Financial Condition.....................................9 Liquidity and Capital Resources.................................................................9 Results of Operations for the Second Quarter of Fiscal 2000 Compared to the Second Quarter of Fiscal 1999........................................................10 PART II. Other Information Signatures.....................................................................................11
2 PART I. Financial Information ITEM 1. Financial Statements Coyne International Enterprises Corp. and Subsidiaries Consolidated Balance Sheets
April 30, October 31, ASSETS 2000 1999 ---------- ---------------------- -------------------- (Unaudited) Current Assets: Cash and cash equivalents $ 273,891 $ 213,407 Receivables, principally trade 17,327,842 16,768,958 Inventories 10,326,609 7,371,395 Uniforms and other rental items in service, net 28,782,019 27,838,084 Prepaid expense and other assets 392,186 796,094 ---------------------- -------------------- Total current assets 57,102,547 52,987,938 Property, plant and equipment, net 45,847,410 46,553,709 Purchased routes and acquisition intangibles, net 16,941,256 17,062,547 Deferred financing cost, net 2,430,553 2,606,593 Deferred income taxes 1,800,000 2,190,000 Other assets 459,949 444,795 ---------------------- -------------------- $ 124,581,715 $ 121,845,582 ====================== ====================
See notes to consolidated financial statements 3 Coyne International Enterprises Corp. and Subsidiaries Consolidated Balance Sheets (continued)
April 30, October 31, LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 2000 1999 ---------------------------------------------- -------------------- --------------------- (Unaudited) Current Liabilities: Current maturities of long-term debt $ 3,340,501 $ 3,214,908 Accounts payable 4,411,129 5,378,142 Accrued expenses: Salaries and employee benefits 5,522,496 5,297,557 Accrued Interest 3,911,687 3,903,155 Other 5,853,642 5,067,695 Deferred income taxes 9,765,000 10,000,000 -------------------- ------------------- Total current liabilities 32,804,455 32,861,457 Long-term debt obligations: Long-term debt, net of current maturities 22,512,551 19,332,429 Senior subordinated notes 75,000,000 75,000,000 Other liabilities 2,825,048 3,083,507 -------------------- ------------------- Total liabilities 133,142,054 130,277,393 -------------------- ------------------- Shareholders' equity (deficit): Preferred stock - 5% non-cumulative, non-voting, callable at par: Class A - $100 par value; authorized 30,000; issued and outstanding 23,107 2,310,700 2,310,700 Class B - $500 par value; authorized 5,000; issued 4,991, outstanding 2,991 2,495,500 2,495,500 Common stock - $.01 par value: Class A - voting; authorized 100,000 shares, issued and outstanding 2,923 29 29 Class B - non-voting; authorized 99,000; issued and outstanding 74,030 740 740 Additional paid-in capital 849,512 849,512 Retained earnings (deficit) (12,138,471) (12,030,087) -------------------- ------------------- (6,481,990) (6,373,606) Less: Cost of 2,000 shares of Class B preferred stock held in treasury (166,667) (166,667) Shareholder receivable (1,911,682) (1,891,538) -------------------- ------------------- Total shareholders' equity (deficit) (8,560,339) (8,431,811) -------------------- ------------------- Commitments and contingencies $ 124,581,715 $ 121,845,582 ==================== ===================
See notes to consolidated financial statements 4 Coyne International Enterprises Corp. and Subsidiaries Consolidated Statements Of Operations And Retained Earnings (Deficit) For the Periods Ended April 30,
Three Months Ended Six Months Ended April 30, April 30, -------------------------------------- ------------------------------------ 2000 1999 2000 1999 ----------------- ----------------- ---------------- ---------------- (Unaudited) (Unaudited) Revenue: Net rentals $ 35,321,515 $ 34,020,597 $ 70,111,227 $ 67,673,094 Net sales 2,226,473 2,546,540 4,575,769 4,945,505 ----------------- ----------------- ---------------- ---------------- 37,547,988 36,567,137 74,686,996 72,618,599 ----------------- ----------------- ---------------- ---------------- Operating expenses: Cost of rentals 27,018,256 26,313,575 53,595,382 51,987,749 Cost of sales 1,322,079 1,689,261 2,898,121 3,250,777 Selling, general and administrative 6,366,562 6,571,994 12,414,709 12,852,094 ----------------- ----------------- ---------------- ---------------- 34,706,897 34,574,830 68,908,212 68,090,620 ----------------- ----------------- ---------------- ---------------- Income from operations 2,841,091 1,992,307 5,778,784 4,527,979 Interest expense 2,870,855 2,620,801 5,664,168 5,199,413 ----------------- ----------------- ---------------- ---------------- Income (loss) before income taxes (29,764) (628,494) 114,616 (671,434) Income tax provision 73,000 (172,000) 223,000 (86,000) ----------------- ----------------- ---------------- ---------------- NET LOSS (102,764) (456,494) (108,384) (585,434) Retained deficit, beginning of the period (12,035,707) (11,207,763) (12,030,087) (11,078,823) ----------------- ----------------- ---------------- ---------------- RETAINED DEFICIT, END OF PERIOD $ (12,138,471) $ (11,664,257) $ (12,138,471) $ (11,664,257) ================= ================= ================ ================
See notes to consolidated financial statements 5 Coyne International Enterprises Corp. and Subsidiaries Consolidated Statements of Cash Flows For the Six Months Ended April 30,
2000 1999 ------------------- ------------------- (Unaudited) (Unaudited) Cash flows from operating activities: Net loss $ (108,384) $ (585,433) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation of plant and equipment 2,700,621 2,491,529 Amortization of acquisition intangibles 372,798 333,999 Amortization of deferred financing 176,040 177,624 Provision for deferred income taxes 155,000 56,000 Changes in operating assets and operating liabilities: Accounts receivable (558,884) (552,656) Inventories (2,955,214) (784,055) Uniforms in service (943,936) 926,163 Prepaid expenses and other assets 388,755 252,825 Accounts payable and other liabilities 206,055) (3,597,591) ------------------- ------------------- Net cash used in operating activities (979,259) (1,281,595) ------------------- ------------------- Cash flows used in investing activities: Purchases of property, plant and equipment (1,994,322) (4,578,986) Acquisition of business, net of cash acquired (251,506) (1,561,355) ------------------- ------------------- Net cash used in investing activities (2,245,828) (6,140,341) ------------------- ------------------- Cash flows from financing activities: Proceeds from long-term borrowings 21,247,993 22,781,715 Payments under long-term debt obligations (17,942,278) (15,759,264) Increase in shareholder receivable (20,144) Deferred financing costs incurred (50,675) ------------------- ------------------- Net cash provided by financing activities 3,285,571 6,971,776 ------------------- ------------------- Net increase (decrease) in cash 60,484 (450,160) Cash and cash equivalents: Beginning of the period 213,407 1,073,496 ------------------- ------------------- End of the period $ 273,891 $ 623,336 =================== =================== Supplemental disclosure of cash flow information: Interest paid $ 5,479,597 $ 4,382,540 Income taxes paid (refunded) 11,734 (263,075)
See notes to consolidated financial statements 6 Coyne International Enterprises Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States 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. For further information, refer to the consolidated financial statements and notes included in the Company's annual report on Form 10-K for the year ended October 31, 1999. The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All material intercompany transactions have been eliminated in consolidation. Operating results for the six-month period ended April 30, 2000 are not necessarily indicative of the results that may be expected for the year ended October 31, 2000. Note B - Income Taxes The Company's effective tax rate differs from the federal statutory rate of 34% due to state taxes and certain expenses that are not deductible for tax purposes. These include the amortization of certain intangible assets and the non-deductible portion of certain meals and entertainment expenses. Note C - Reclassification Certain amounts have been reclassified to conform with the fiscal 2000 presentation. 7 Coyne International Enterprises Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note D - Summarized Financial Information for Subsidiaries The following table presents financial information for the wholly-owned subsidiaries of Coyne International Enterprises Corp: Blue Ridge Textile Manufacturing, Inc. and Ohio Garment Rental, Inc., on a combined basis: April 30, October 31, 2000 1999 (Unaudited) Balance sheets: Current assets $ 6,136,228 $6,376,826 Noncurrent assets 3,692,341 3,815,243 Current liabilities 3,488,774 3,419,888 Noncurrent liabilities 159,000 175,000
Three Months Ended Six Months Ended April 30, April 30, ----------------------------------- ---------------------------------- 2000 1999 2000 1999 (Unaudited) (Unaudited) Statement of operations: Revenues $ 3,802,272 $4,266,804 7,653,848 $8,271,620 Operating expenses 3,509,867 3,879,674 7,213,934 7,490,415 Operating income 292,405 387,130 439,914 781,205 Net income (loss) 64,508 119,353 46,564 242,985
The Company has not provided separate financial statements and other disclosures for its wholly-owned subsidiaries because management has determined that such information is not material to investors. 8 ITEM 2. Management's Discussion and Analysis of the Financial Condition Coyne International Enterprises Corp. and Subsidiaries Management's Discussion and Analysis of the 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. Liquidity and Capital Resources Cash used in operating activities of approximately $1.0 million and $1.3 million for the six months ended April 30, 2000 and 1999, respectively, results from higher levels of inventory and accounts receivable due largely to growth in rental revenue. The Company's primary source of liquidity has been borrowings under the revolving credit facilities described below. The Company's working capital was $24.3 million at April 30, 2000 as compared to $20.1 million at October 31, 1999. The increase in working capital of $4.2 million reflects an increase in inventories and receivables. At of the end of April 2000, the Company had approximately $11.0 million available under its revolving credit line and up to an additional $24.2 million available under bank credit facilities for capital expenditures and acquisitions. Management believes that its operations and bank credit facilities will provide sufficient cash to meet the requirements for operations, acquisitions and capital expenditure for the next twelve months. Cash used in investing activities was $2.2 million and $6.1 million for the six months ended April 30, 2000 and 1999 respectively. In fiscal 2000, these expenditures consist primarily of investments in route trucks, information systems and route acquisitions. The Company anticipates that capital expenditures will be approximately $4.0 million for fiscal 2000, compared with $7.7 million in fiscal 1999. 9 Coyne International Enterprises Corp. and Subsidiaries Results of Operations for the Second Quarter of Fiscal 2000 Compared to the Second Quarter of Fiscal 1999 Revenues for the quarter of $37.5 million are $1.0 million or 2.7% higher than the same period last year. Year-to-date revenues of $74.7 million are $2.1 million or 2.9% higher than the same period last year. This increase is attributable to new business written and increases in revenue at existing accounts. Cost of rental operations increased $.7 million to $27.0 million for the second quarter of fiscal 2000 from $26.3 million in the second quarter of fiscal 1999. As a percent of rental revenue, cost of rental operations decreased to 76.5% in 2000 from 77.4% last year. The decrease is primarily due to improved merchandise controls at the plant level. Year-to-date expenses for fiscal years 2000 and 1999 are 76.5% and 76.9% respectively. Selling, general and administrative expenses decreased 3.2% to $6.4 million in the second quarter of fiscal 2000 from $6.6 million in the second quarter of fiscal 1999. This decrease is primarily a result of lower selling expenses due to a reduction in head count. Year-to-date expenses, as a percent of revenue for fiscal years 2000 and 1999 are 16.7% and 17.7%, respectively. Income from operations increased 42.6% to $2.8 million in the second quarter of 2000 from $2.0 million in the same period last year. Year-to-date income from operations has increased 27.7% compared to the same period last year. Interest expense increased 9.6% to $2.9 million in the second quarter of 2000 from $2.6 million in the second quarter of 1999. This increase is attributable to higher average balances on the companies bank credit facilities when compared to last year. Net loss decreased to $103,000 in the second quarter of 2000 from $456,000 in the second quarter of 1999. The decrease is primarily attributable to improved operating performance offset in part by increased interest expense. 10 PART II. Other Information None SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. COYNE INTERNATIONAL ENTERPRISES CORP. Date: June 13, 2000 By: /S/ Thomas E. Krebbeks ----------------------------------------------- Thomas E. Krebbeks VP of Finance and Chief Financial Officer By: /S/ Thomas C. Crowley ----------------------------------------------- Thomas C. Crowley Chief Operating Officer 11