-----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, KwQySbqNcJEnATv5W4ebfu+3Ta+3vRjeErY3+HbFrnBAAm7OOdRhaqAVYltkwc2o OGeaTuLNpgU87hASw+m46w== 0001036050-01-000393.txt : 20010315 0001036050-01-000393.hdr.sgml : 20010315 ACCESSION NUMBER: 0001036050-01-000393 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010131 FILED AS OF DATE: 20010314 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: SEC FILE NUMBER: 333-60247 FILM NUMBER: 1568141 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 10-Q 1 0001.txt 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, 2001 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 Incorporation (IRS Employer Identification No.) 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 ............................................... 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 and Results of Operations........................................................ 16 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 ............................................................................................... 18
2 PART I. Financial Information Item 1. Financial Statements Coyne International Enterprises Corp. and Subsidiaries Consolidated Balance Sheets ================================================================================
January 31, October 31, Assets 2001 2000 ------ ------------------ ------------------ (unaudited) Current Assets: Cash and cash equivalents $ 693,312 $ 909,340 Accounts receivable, less allowance for doubtful accounts of $381,000 in January and $341,000 in October 17,544,437 16,929,975 Inventories 11,762,422 12,725,141 Rental merchandise in service 33,118,843 32,712,967 Prepaid expenses and other assets 642,469 698,768 ------------- ------------- Total current assets 63,761,483 63,976,191 Property, plant and equipment, at cost: Land 2,432,180 2,432,180 Buildings and improvements 41,412,438 39,829,930 Machinery and equipment 41,521,592 42,729,434 Vehicles 11,573,483 11,420,295 Construction in process 1,519,560 1,505,965 ------------- ------------- 98,459,253 97,917,804 Less: Accumulated depreciation (55,465,017) (54,100,700) ------------- ------------- Total property, plant and equipment 42,994,236 43,817,104 Other assets: Purchased routes and acquisition intangibles, net 17,044,767 17,239,942 Deferred financing costs, net 2,236,076 2,322,568 Deferred income taxes 4,324,623 3,724,623 Other 148,944 202,521 ------------- ------------- Total other assets 23,754,410 23,489,654 ------------- ------------- $ 130,510,129 $ 131,282,949 ============= =============
See notes to unaudited consolidated financial statements 3 Coyne International Enterprises Corp. and Subsidiaries Consolidated Balance Sheets - --------------------------------------------------------------------------------
January 31, October 31, Liabilities and Shareholders' Equity (Deficit) 2001 2000 ---------------------------------------------- ------------------ ----------------- (unaudited) Current Liabilities: Current maturities of long-term obligations $ 3,294,841 $ 3,385,619 Accounts payable 11,789,742 8,934,685 Accrued expenses: Salaries and employee benefits 3,832,298 4,714,396 Accrued interest 1,586,839 3,655,175 Other 3,103,567 2,268,201 Deferred income taxes 12,108,370 12,032,060 ----------------- ---------------- Total current liabilities 35,715,657 34,990,136 Long-term obligations, net of current maturities 102,288,944 102,811,292 Other liabilities 2,243,825 2,170,095 ----------------- ---------------- Total liabilities 140,248,426 139,971,523 ----------------- ---------------- Shareholders' equity (deficit): Preferred stock - 5% non-cumulative, non-voting, callable at par: Class A - $100 par value; 30,000 shares authorized, 23,107 Shares issued and outstanding. 2,310,700 2,310,700 Class B - $500 par value; 5,000 shares authorized, 4,991 Shares issued, 2,991 shares outstanding. 2,495,500 2,495,500 Common stock - $.01 par value: Class A - voting; 100,000 shares authorized, 2,923 shares Issued and outstanding. 29 29 Class B - non-voting; 99,000 shares authorized, 74,030 shares Issued and outstanding. 740 740 Additional paid-in capital 849,512 849,512 Retained earnings (deficit) (13,101,190) (12,212,139) Accumulated other comprehensive loss (138,599) ----------------- ---------------- (7,583,308) (6,555,658) Less: Treasury stock, 2,000 shares of Class B preferred stock at cost (166,667) (166,667) Shareholder receivables (1,988,322) (1,966,249) ----------------- ---------------- Total shareholders' equity (deficit) (9,738,297) (8,688,574) ----------------- ---------------- $ 130,510,129 $ 131,282,949 ================= ================
See notes to unaudited consolidated financial statements 4 Coyne International Enterprises Corp. and Subsidiaries Consolidated Statements of Operations Three Months Ended January 31, ------------------------------------ 2001 2000 ---------------- --------------- (Unaudited) Revenue: Rental operations $ 35,521,305 $ 34,789,711 Direct sales 2,622,199 2,349,296 --------------- --------------- 38,143,504 37,139,007 --------------- --------------- Operating expenses: Cost of rental operations 26,935,442 25,241,081 Cost of direct sales 1,636,903 1,576,042 Selling, general and administrative 6,407,881 5,858,518 Depreciation and amortization 1,558,073 1,525,673 --------------- --------------- 36,538,299 34,201,314 --------------- --------------- Income from operations 1,605,205 2,937,693 Interest expense 2,995,256 2,793,313 --------------- --------------- Income (loss) before income taxes (1,390,051) 144,380 Income tax expense (benefit) (501,000) 150,000 --------------- --------------- Net Loss $ (889,051) $ (5,620) ======== ====== See notes to unaudited consolidated financial statements 5 Coyne International Enterprises Corp. and Subsidiaries Consolidated Statements of Cash Flows - --------------------------------------------------------------------------------
Three Months Ended January 31, ------------------------------------ 2001 2000 ------------------------------------ (unaudited) Cash flows from operating activities: Net loss $ (889,051) $ (5,620) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation of property, plant and equipment 1,095,967 1,081,964 Amortization of capitalized leases 268,350 268,350 Amortization of acquisition intangibles 195,175 185,791 Amortization of deferred financing costs 86,492 88,813 Provision for deferred income taxes (523,690) 41,000 Changes in operating assets and operating liabilities: Accounts receivable (614,462) (1,012,224) Inventories 962,719 (1,322,101) Rental merchandise in service (405,876) 269,009 Prepaid expenses and other assets 109,876 149,380 Accounts payable, accrued expenses, and other liabilities 813,719 (1,712,567) ----------------- --------------- Net cash provided by (used in) operating activities 1,099,219 (1,968,205) ----------------- --------------- Cash flows from investing activities: Purchase of property, plant and equipment (541,449) (1,392,279) Acquisition of business, net of cash acquired 0 (221,938) ----------------- --------------- Net cash used in investing activities (541,449) (1,614,217) ----------------- --------------- Cash flows from financing activities: Proceeds from long-term borrowings 11,243,933 13,770,643 Payments under long-term obligations (11,857,059) (10,328,240) Other (160,672) (15,198) ----------------- --------------- Net cash provided by (used in) financing activities (773,798) 3,427,205 ----------------- --------------- Net decrease in cash (216,028) (155,217) Cash and cash equivalents: Beginning of period 909,340 213,407 ----------------- --------------- End of period $ 693,312 $ 58,190 ================= =============== Supplemental disclosure of cash flow information: Interest paid $4,975,391 $ 4,786,959 Income taxes paid 27,232 11,734
See notes to unaudited consolidated financial statements 6 Coyne International Enterprises Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 1. Basis of Presentation The accompanying 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. 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, 2000. 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, herein, have been labeled as of and for the periods ending January 31, 2001, October 31, 2000 and January 31, 2000 rather than the actual period-end dates. Operating results for the three-month period ended January 31, 2001 are not necessarily indicative of the results that may be expected for the year ended October 31, 2001. 2. Long-term Obligations At January 31, 2001 the Company was not in compliance with certain bank financial covenants. Subsequent to January 31, 2001 the Company obtained waivers of such non-compliance. In addition, in March 2001, the Company amended certain of its financial covenants. Under the terms of the amendment the maximum credit available under the Company's bank revolving credit facility has been increased by $8,198,000 to $38,198,000, subject to certain collateral limitations. In addition, credit available under the bank acquisition facility has been reduced by $8,198,000 thereby eliminating all future availability under this acquisition facility. As of January 31, 2001, after giving consideration to the March 13, 2001 amendment, the Company had approximately $5.5 million available under its revolving credit facility. Other bank credit facilities totaling $21.7 million are in place and become available based on eligible collateral and other limitations. 3. 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 non-deductible items include the amortization of certain intangible assets and a portion of certain meals and entertainment expenses. 7 4. Derivative Instruments and Hedging Activities The Company maintains an interest-rate risk-management strategy that uses interest rate swaps to minimize significant, unanticipated earnings fluctuations caused by interest-rate volatility. The Company's specific goals are (1) to manage interest-rate sensitivity by modifying the repricing or maturity characteristics of certain of its debt and (2) to lower, (where possible), the cost of its borrowed funds. The Company uses interest-rate swaps to convert a portion of its variable-rate debt to fixed rates. At January 31, 2001, the notional amount of such debt was $5,204,170. The Company adopted Statement of Financial Accounting Standards No. 133, (SFAS 133), Accounting for Derivative Instruments and Hedging Activities, on November 1, 2000. Under SFAS 133, the Company's existing interest rate swaps have been designated as highly effective cash flow hedges. In accordance with the transition provisions of SFAS 133, the Company recorded a net-of-tax cumulative-effect-type adjustment of $138,599 in other comprehensive income to recognize this cash flow hedge at fair value. 5. Reclassification Certain amounts have been reclassified to conform with the fiscal 2001 presentation. 6. Comprehensive Income The components of comprehensive income (loss) were as follows: Three Months Three Months ended ended January 31, 2001 January 31, 2000 ---------------- ---------------- Net loss ($ 889,051) ($ 5,620) Other comprehensive loss: Unrealized holding losses (138,599) 0 Comprehensive loss ($1,027,650) ($ 5,620) ============ ========== 8 Coyne International Enterprises Corp. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 7. 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. 9 Coyne International Enterprises Corp. And Subsidiaries
Consolidating Balance Sheets January 31, 2001 -------------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Assets Company Guarantors Adjustments Totals ------ --------------- ---------------- --------------- ----------------- Current Assets: Cash and cash equivalents $ 739,022 $ (45,710) $ 693,312 Accounts receivable 15,714,756 1,829,681 17,544,437 Inventories 9,485,571 2,276,851 11,762,422 Rental merchandise in service 30,448,526 2,670,317 33,118,843 Prepaid expenses and other assets 9,026,821 60,368 (8,444,720) 642,469 --------------- ---------------- --------------- ----------------- Total current assets 65,414,696 6,791,507 (8,444,720) 63,761,483 Property, plant and equipment, at cost: 89,574,937 8,884,316 98,459,253 Less: Accumulated depreciation (49,823,429) (5,641,588) (55,465,017) --------------- ---------------- --------------- ----------------- Total property, plant and equipment 39,751,508 3,242,728 0 42,994,236 Other assets: Purchased routes and acquisition intangibles, net 16,776,379 268,388 17,044,767 Deferred financing costs, net 2,236,076 0 2,236,076 Deferred income taxes 4,324,623 0 4,324,623 Other 148,944 0 148,944 --------------- ---------------- --------------- ----------------- Total other assets 23,486,022 268,388 0 23,754,410 --------------- ---------------- --------------- ----------------- $ 128,652,226 $ 10,302,623 $ (8,444,720) $ 130,510,129 =============== ================ =============== ================= Liabilities and Shareholders' Equity (Deficit) ---------------------------------------------- Current Liabilities: Current maturities of long-term obligations $ 3,294,841 $ 3,294,841 Accounts payable 10,745,079 1,044,663 11,789,742 Accrued expenses: Salaries and employee benefits 3,754,560 77,738 3,832,298 Accrued interest 1,586,839 0 1,586,839 Other 2,368,065 735,502 3,103,567 Deferred income taxes 12,108,370 0 12,108,370 --------------- ---------------- --------------- ----------------- Total current liabilities 33,857,754 1,857,903 0 35,715,657 Long-term obligations, net of current maturities 102,288,944 102,288,944 Other liabilities 2,243,825 2,407,812 (2,407,812) 2,243,825 --------------- ---------------- --------------- ----------------- Total liabilities 138,390,523 4,265,715 (2,407,812) 140,248,426 --------------- ---------------- --------------- ----------------- Shareholders' equity (deficit): Preferred stock 4,806,200 4,806,200 Common stock 769 1,250,019 (1,250,019) 769 Additional paid-in capital 849,512 298,981 (298,981) 849,512 Retained earnings (deficit) (13,101,190) 4,487,908 (4,487,908) (13,101,190) Accumulated other comprehensive loss (138,599) (138,599) --------------- ---------------- --------------- ----------------- (7,583,308) 6,036,908 (6,036,908) (7,583,308) Less: Treasury stock, 2,000 shares of Class B preferred stock at cost (166,667) (166,667) Shareholder receivables (1,988,322) (1,988,322) --------------- ---------------- --------------- ----------------- Total shareholders' equity (deficit) (9,738,297) 6,036,908 (6,036,908) (9,738,297) --------------- ---------------- --------------- ----------------- 128,652,226 $ 10,302,623 $ (8,444,720) $ 130,510,129 =============== ================ =============== =================
10 Coyne International Enterprises Corp. and Subsidiaries
Consolidating Balance Sheets October 31, 2000 ------------------------------------------------------------------ Parent Subsidiary Consolidating Consolidated Assets Company Guarantors Adjustments Totals ------ ------------- -------------- -------------- --------------- Current Assets: Cash and cash equivalents $ 955,728 $ (46,388) $ 909,340 Accounts receivable 15,243,854 1,686,121 16,929,975 Inventories 9,487,201 3,237,940 12,725,141 Rental merchandise in service 30,643,937 2,069,030 32,712,967 Prepaid expenses and other assets 10,035,907 14,628 (9,351,767) 698,768 ------------- -------------- -------------- --------------- Total current assets 66,366,627 6,961,331 (9,351,767) 63,976,191 Property, plant and equipment, at cost: 89,059,067 8,858,737 97,917,804 Less: Accumulated depreciation (48,572,337) (5,528,363) (54,100,700) ------------- -------------- -------------- --------------- Total property, plant and equipment 40,486,730 3,330,374 0 43,817,104 Other assets: Purchased routes and acquisition intangibles, net 16,968,910 271,032 17,239,942 Deferred financing costs, net 2,322,568 0 2,322,568 Deferred income taxes 3,724,623 0 3,724,623 Other 202,521 0 202,521 ------------- -------------- -------------- --------------- Total other assets 23,218,622 271,032 0 23,489,654 ------------- -------------- -------------- --------------- $ 130,071,979 $ 10,562,737 $ (9,351,767) $ 131,282,949 ============= ============== ============== =============== Liabilities and Shareholders' Equity (Deficit) ---------------------------------------------- Current Liabilities: Current maturities of long-term obligations $ 2,707,503 $ 678,116 $ 3,385,619 Accounts payable 8,934,685 8,934,685 Accrued expenses: Salaries and employee benefits 4,635,123 79,273 4,714,396 Accrued interest 3,655,175 3,655,175 Other 1,814,620 453,581 2,268,201 Deferred income taxes 12,032,060 12,032,060 ------------- -------------- -------------- --------------- Total current liabilities 33,779,166 1,210,970 0 34,990,136 Long-term obligations, net of current maturities 102,811,292 102,811,292 Other liabilities 2,170,095 3,242,883 (3,242,883) 2,170,095 ------------- -------------- -------------- --------------- Total liabilities 138,760,553 4,453,853 (3,242,883) 139,971,523 ------------- -------------- -------------- --------------- Shareholders' equity (deficit): Preferred stock 4,806,200 4,806,200 Common stock 769 1,250,019 (1,250,019) 769 Additional paid-in capital 849,512 298,981 (298,981) 849,512 Retained earnings (deficit) (12,212,139) 4,559,884 (4,559,884) (12,212,139) ------------- -------------- -------------- --------------- (6,555,658) 6,108,884 (6,108,884) (6,555,658) Less: Treasury stock, 2,000 shares of Class B preferred stock at cost (166,667) (166,667) Shareholder receivables (1,966,249) (1,966,249) ------------- -------------- -------------- --------------- Total shareholders' equity (deficit) (8,688,574) 6,108,884 (6,108,884) (8,688,574) ------------- -------------- -------------- --------------- $ 130,071,979 $ 10,562,737 $ (9,351,767) $ 131,282,949 ============= ============== ============== ===============
11 Coyne International Enterprises Corp. and Subsidiaries Consolidating Statements of Operations
Three Months Ended January 31, 2001 ----------------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals ----------------- ----------------- ---------------- --------------- Revenue: Net rentals $ 33,207,510 $ 2,313,795 $ $ 35,521,305 Net sales 1,177,481 3,919,672 (2,474,954) 2,622,199 ----------------- ----------------- ---------------- --------------- 34,384,991 6,233,467 (2,474,954) 38,143,504 ----------------- ----------------- ---------------- --------------- Operating expenses: Cost of rentals 24,970,862 1,964,580 26,935,442 Cost of sales 786,896 3,312,961 (2,462,954) 1,636,903 Selling, general and administrative 5,563,967 975,875 (131,961) 6,407,881 Depreciation and amortization 1,458,061 100,012 1,558,073 ----------------- ----------------- ---------------- --------------- 32,779,786 6,353,428 (2,594,915) 36,538,299 ----------------- ----------------- ---------------- --------------- Income (loss) from operations 1,605,205 (119,961) 119,961 1,605,205 Interest expense 2,995,256 2,995,256 ----------------- ----------------- ---------------- --------------- Income (loss) before income taxes (1,390,051) (119,961) 119,961 (1,390,051) Income taxes (501,000) (47,984) 47,984 (501,000) ----------------- ----------------- ---------------- --------------- Net income (loss) (889,051) (71,977) 71,977 (889,051) ================= ================= ================ ===============
12 Coyne International Enterprises Corp. and Subsidiaries Consolidating Statements of Operations
Three Months Ended January 31, 2000 ----------------------------------------------------------------------- Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals ----------------- ----------------- ---------------- --------------- Revenue: Net rentals $ 32,469,503 $ 2,320,208 $ 34,789,711 Net sales 817,927 4,184,884 (2,653,515) 2,349,296 ----------------- ----------------- ---------------- --------------- 33,287,430 6,505,092 (2,653,515) 37,139,007 ----------------- ----------------- ---------------- --------------- Operating expenses: Cost of rentals 23,402,871 1,838,210 25,241,081 Cost of sales 545,458 3,622,099 (2,591,515) 1,576,042 Selling, general and administrative 4,960,638 898,931 (1,051) 5,858,518 Depreciation and amortization 1,440,770 84,903 1,525,673 ----------------- ----------------- ---------------- --------------- 30,349,737 6,444,143 (2,592,566) 34,201,314 ----------------- ----------------- ---------------- --------------- Income from operations 2,937,693 60,949 (60,949) 2,937,693 Interest expense 2,793,313 0 2,793,313 ----------------- ----------------- ---------------- --------------- Income (loss) before income taxes 144,380 60,949 (60,949) 144,380 Income taxes 150,000 24,380 (24,380) 150,000 ----------------- ----------------- ---------------- --------------- Net income (loss) (5,620) 36,569 (36,569) (5,620) ================= ================= ================ ===============
13 Coyne International Enterprises Corp. and Subsidiaries
----------------------------------------------------------------- Three Months ended January 31, 2001 ----------------------------------------------------------------- Consolidating Statements of Cash Flows Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals --------------- --------------- ----------------- --------------- Cash flows from operating activities: Net income (loss) $ (889,051) $ (71,977) $ 71,977 $ (889,051) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation of property, plant and equipment 995,955 100,012 1,095,967 Amortization of capitalized leases 268,350 268,350 Amortization of acquisition intangibles 192,530 2,645 195,175 Amortization of deferred financing costs 86,492 0 0 86,492 Provision for deferred income taxes (523,690) 0 0 (523,690) Changes in operating assets and operating liabilities: Accounts receivable (470,902) (143,560) 0 (614,462) Inventories 1,630 961,089 0 962,719 Rental merchandise in service 195,411 (601,287) 0 (405,876) Prepaid expenses and other assets 1,062,664 (45,740) (907,048) 109,876 Accounts payable, accrued expenses, and other liabilities 166,786 (188,138) 835,071 813,719 --------------- --------------- ----------------- --------------- Net cash provided by (used in) operating activities 1,086,175 13,044 0 1,099,219 --------------- --------------- ----------------- --------------- Cash flows from investing activities: Purchase of property, plant and equipment (529,083) (12,366) (541,449) Acquisition of business, net of cash acquired 0 0 --------------- --------------- ----------------- --------------- Net cash used in investing activities (529,083) (12,366) 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 (160,672) (160,672) --------------- --------------- ----------------- --------------- Net cash provided by (used in) financing activities (773,798) 0 0 (773,798) --------------- --------------- ----------------- --------------- Net increase in cash (216,706) 678 0 (216,028) Cash and cash equivalents: Beginning of period 955,728 (46,388) 0 909,340 --------------- --------------- ----------------- --------------- End of period $ 739,022 $ (45,710) $ - $ 693,312 =============== =============== ================= ===============
14 Coyne International Enterprises Corp. and Subsidiaries
Three Months ended January 31, 2000 ----------------------------------------------------------------- Consolidating Statements of Cash Flows Parent Subsidiary Consolidating Consolidated Company Guarantors Adjustments Totals --------------- --------------- ----------------- --------------- Cash flows from operating activities: Net income (loss) $ (5,620) $ 36,569 $ (36,568) $ (5,620) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation of property, plant and equipment 997,061 84,903 1,081,964 Amortization of capitalized leases 268,350 268,350 Amortization of acquisition intangibles 183,147 2,644 185,791 Amortization of deferred financing costs 88,813 0 0 88,813 Provision for deferred income taxes 41,000 0 0 41,000 Changes in operating assets and operating liabilities: Accounts receivable (2,926,714) 1,914,490 0 (1,012,224) Inventories (1,300,311) (21,790) 0 (1,322,101) Rental merchandise in service 236,119 32,890 0 269,009 Prepaid expenses and other assets 2,272,174 (14,334) (2,108,460) 149,380 Accounts payable, accrued expenses, and other liabilities (1,941,865) (1,915,731) 2,145,028 (1,712,567) --------------- --------------- ----------------- --------------- Net cash provided by (used in) operating activities (2,087,846) 119,641 0 (1,968,205) --------------- --------------- ----------------- --------------- Cash flows from investing activities: Purchase of property, plant and equipment (1,381,253) (11,026) (1,392,279) Acquisition of business, net of cash acquired (221,938) (221,938) --------------- --------------- ----------------- --------------- Net cash used in investing activities (1,603,191) (11,026) 0 (1,614,217) --------------- --------------- ----------------- --------------- Cash flows from financing activities: Proceeds from long-term borrowings 13,770,643 13,770,643 Payments under long-term obligations (10,328,240) (10,328,240) Other (15,198) 0 0 (15,198) --------------- --------------- ----------------- --------------- Net cash provided by (used in) financing activities 3,427,205 0 0 3,427,205 --------------- --------------- ----------------- --------------- Net increase in cash (263,832) 108,615 0 (155,217) Cash and cash equivalents: Beginning of period 309,648 (96,241) 0 213,407 --------------- --------------- ----------------- --------------- End of period $ 45,816 $ 12,374 $ - $ 58,190 =============== =============== ================= ===============
15 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 for the First Quarter of Fiscal 2001 Compared to the First Quarter of Fiscal 2000 Total revenues increased 2.7% for the three months ended January 31, 2001 over the same period in fiscal 2000. Income from operations decreased 45.3% for the three months ended January 31, 2001 versus the same period in fiscal 2000. Factors contributing to this decrease, include increased merchandise and installation costs associated with new business and re-garmenting existing accounts; increases in natural gas and vehicle fuel costs; and increased spending to train and develop the professional sale force and improve the customer service program. Interest expense increased 7.2% for the three months ended January 31, 2001 over the same period in fiscal 2000 as a direct result of increased average outstanding debt for the comparable periods. Liquidity and Capital Resources Net cash provided by operating activities increased $3.1 million for the three months ended January 31, 2001 over the same period in fiscal 2000. This increase is primarily attributed to large inventory purchases in 2000. Net cash used in financing activities increased by $4.1 million for the three months ended January 31, 2001 over the same period in fiscal 2000 as a result of decreased borrowing needs for inventory purchases in 2001. 16 The Company's primary source of liquidity has been borrowings under its revolving credit facilities. Giving consideration to collateral eligibility formulae, the Company had approximately $5.5 million available under its revolving credit line at January 31,2001. Other bank credit facilities totaling $21.7 million are in place and become available based on eligible collateral and other limitations. As discussed above, the operating results of the Company for the three months ended January 31,2001 were adversely impacted by increased operating costs. The Company has responded by implementing an action plan that includes reduction in workforce, revenue enhancements and improved merchandise spending controls. The fiscal 2001 plan has been revised to reflect the anticipated impact of these actions on operating results. Based on the revised plan, and the impact of the revised credit facility, the Company expects that it will be able to meet its obligations as they become due for the next twelve months. 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 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: March 13, 2001 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 18 -----END PRIVACY-ENHANCED MESSAGE-----