-----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, ChjI6aNhrJW+4O+JHiyoGV4ekzhAL2XaV2vfaHW49oKhmtvXpdZRjijakyWTXkNV fPUkV+9mcpi9FVbEPH9UtA== 0001036050-99-001895.txt : 19990915 0001036050-99-001895.hdr.sgml : 19990915 ACCESSION NUMBER: 0001036050-99-001895 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990914 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: 99711176 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BLUE RIDGE TEXTILE MANUFACTURING INC CENTRAL INDEX KEY: 0001066243 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-60247-01 FILM NUMBER: 99711177 BUSINESS ADDRESS: STREET 1: 1130 ADA STREET STREET 2: P O BOX 1299 CITY: BLUE RIDGE STATE: CA ZIP: 30513 BUSINESS PHONE: 3154759978 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OHIO GARMENT RENTAL INC CENTRAL INDEX KEY: 0001066244 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-60247-02 FILM NUMBER: 99711178 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDWAY CTS BUFFALO LTD CENTRAL INDEX KEY: 0001066245 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: NY FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-60247-03 FILM NUMBER: 99711179 BUSINESS ADDRESS: STREET 1: 140 CORTLAND AVENUE CITY: SYRACUSE STATE: NY ZIP: 13221 BUSINESS PHONE: 3154759978 10-Q 1 COYNE INTERNATIONAL ENTERPRISES CORP. 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 July 31, 1999 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. MIDWAY-CTS BUFFALO, LTD. - -------------------------------------------------------------------------------- (Exact name of Registrants as specified in their respective charters) New York 16-6040758 Georgia 58-2018333 Ohio 34-1261376 New York 16-1469155 - ----------------------------------------- -------------------------------------- (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: Consolidated Balance Sheets - July 31, 1999 (unaudited) and October 31, 1998....................................... 3 Unaudited Consolidated Statements of Operations and Retained Earnings (Deficit) - Three Months Ended July 31, 1999 and 1998; Nine Months Ended July 31, 1999 and 1998.. 5 Unaudited Consolidated Statements of Cash Flows - Nine Months Ended July 31, 1999 and 1998............................................. 6 Notes to unaudited Consolidated Financial Statements..................................... 7 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................. 9 PART II. Other Information Signatures............................................................................... 12
2 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES Consolidated Balance Sheets July 31, 1999 and October 31, 1998
ASSETS 1999 1998 ------ --------------------- -------------------- (Unaudited) Current Assets: Cash and cash equivalents $ 578,375 $ 1,073,496 Receivables, principally trade 15,770,894 14,444,489 Inventories 7,855,898 6,846,393 Uniforms and other rental items in service, net 27,567,694 28,337,302 Prepaid expense and other assets 684,095 931,978 --------------------- -------------------- Total current assets 52,456,956 51,633,658 Property, plant and equipment, net 46,483,276 43,934,590 Purchased routes and acquisition intangibles, net 17,381,128 16,306,920 Deferred financing cost, net 2,655,411 2,871,172 Deferred income tax 2,586,000 2,435,000 Other assets 454,064 417,553 --------------------- -------------------- $ 122,016,835 $ 117,598,893 ===================== ====================
See notes to consolidated financial statements 3
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 1999 1998 ---------------------------------------------- -------------------- -------------------- (Unaudited) Current Liabilities: Current maturities of long-term debt $ 2,259,070 $ 2,380,406 Accounts payable 7,034,502 7,005,212 Accrued expenses: Salaries and employee benefits 5,637,685 5,195,374 Other 6,983,649 9,385,038 Deferred income taxes 10,145,000 10,370,000 ------------------ ------------------ Total current liabilities 32,059,906 34,336,030 Long-term debt obligations: Long-term debt, net of current maturities 19,477,440 11,157,247 Senior subordinated notes 75,000,000 75,000,000 Other liabilities 3,521,313 3,951,145 ------------------ ------------------ Total liabilities 130,058,659 124,444,422 ------------------ ------------------ 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 2923 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) (12,275,118) (11,078,823) ------------------ ------------------ (6,618,637) (5,422,342) Less: Cost of 2,000 shares of Class B preferred stock held in treasury (166,667) (166,667) Shareholder note receivable (1,256,520) (1,256,520) ------------------ ------------------ Total shareholders' equity (deficit) (8,041,824) (6,845,529) ------------------ ------------------ Commitments and contingencies $ 122,016,835 $ 117,598,893 ================== ==================
4 COYNE INTERNATIONAL ENTERPRISES CORP AND SUBSIDIARIES Consolidated Statements of Operations and Retained Earnings (Deficit)
Three Months Ended Nine Months Ended July 31, July 31, ----------------------------------- ----------------------------------- 1999 1998 1999 1998 ----------------- ---------------- ----------------- ---------------- (Unaudited) (Unaudited) Revenue: Net rentals $ 33,714,740 $ 31,522,530 $ 101,387,834 $ 93,538,396 Net sales 2,708,631 2,448,675 7,654,136 7,461,018 ---------------- --------------- ---------------- ---------------- 36,423,371 33,971,205 109,041,970 100,999,414 ---------------- --------------- ---------------- ---------------- Operating expenses: Cost of rentals 26,184,849 24,086,387 78,172,598 71,563,071 Cost of sales 1,791,930 1,825,701 5,042,707 5,202,041 Selling, general and administrative 6,649,462 5,358,700 19,501,556 16,555,040 ---------------- --------------- ---------------- ---------------- 34,626,241 31,270,788 102,716,861 93,320,152 ---------------- --------------- ---------------- ---------------- Income from operations 1,797,130 2,700,417 6,325,109 7,679,262 Interest expense 2,689,992 1,984,840 7,889,405 5,380,447 Redemption of stock warrants 17,256,914 ---------------- --------------- ---------------- ---------------- 2,689,992 1,984,840 7,889,405 22,637,361 ---------------- --------------- ---------------- ---------------- Income (loss) before income taxes (892,862) 715,577 (1,564,296) (14,958,099) Income tax provision (credit) (282,000) 405,900 (368,000) 642,900 ---------------- --------------- ---------------- ---------------- Income (loss) before extraordinary item (610,862) 309,677 (1,196,296) (15,600,999) Extraordinary loss on debt retirement, net of tax of $365,188 939,055 939,055 ---------------- --------------- ---------------- ---------------- NET LOSS (610,862) (629,378) (1,196,296) (16,540,054) Retained earnings (deficit), beginning of the year (11,664,257) (10,246,908) (11,078,823) 5,663,768 ---------------- --------------- ---------------- ---------------- RETAINED DEFICIT, END OF PERIOD $ (12,275,119) $ (10,876,286) $ (12,275,119) $ (10,876,286) ================ =============== ================ ================
See notes to consolidated financial statements 5 COYNE INTERNATIONAL ENTERPRISES CORP AND SUBSIDIARIES Consolidated Statements of Cash Flows For Nine Months Ended July 31,
1999 1998 ------------------- ------------------ (Unaudited) Cash flows from operating activities: Net (loss) income $ (1,196,296) $ (16,540,054) Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation of plant and equipment 3,781,485 3,250,271 Amortization of acquisition intangibles 508,243 543,776 Amortization of deferred financing 266,437 415,309 Extraordinary loss on retirement of debt, net 939,055 Provision for deferred income taxes (376,000) 544,619 Changes in operating assets and operating liabilities: Accounts receivable (1,326,405) (1,406,671) Inventories (1,009,505) (1,484,699) Uniforms in service 769,608 (3,392,402) Prepaid expenses and other assets 211,372 35,449 Accounts payable and other liabilities (2,359,619) (1,420,129) ----------------- ------------------ Net cash provided by (used in) operating activities (730,680) (18,515,476) ----------------- ------------------ Cash flows from investing activities: Purchases of property, plant and equipment (6,330,171) (4,188,465) Acquisition of business, net of cash acquired (1,582,451) (238,844) ----------------- ------------------ Net cash used in investing activities (7,912,622) (4,427,309) ----------------- ------------------ Cash flows from financing activities: Proceeds from long-term borrowings 34,651,472 170,282,000 Payments under long-term debt obligations (26,452,615) (141,216,396) Decrease in bank overdrafts (1,700,982) Redemption of common stock warrants (1,743,086) Deferred financing costs incurred (50,675) (2,864,078) ----------------- ------------------ Net cash provided by (used in) financing activities 8,148,181 22,757,458 ----------------- ------------------ Net (decrease) increase in cash (495,121) (185,327) Cash and cash equivalents: Beginning of the period 1,073,496 1,272,192 ----------------- ------------------ End of the period $ 578,375 $ 1,086,865 ================= ================== Supplemental disclosure of cash flow information: Interest paid $ 9,016,491 $ 5,034,420 Income taxes paid (refunded) (239,274) 129,158 Seller financed debt 500,000
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 generally accepted accounting principles 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 have been included. 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, 1998. 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 nine-month period ended July 31, 1999 are not necessarily indicative of the results that may be expected for the year ended October 31, 1999. Note B - Long-term Debt In connection with the Company's issuance, in June 1998 of 11.25% subordinated notes, the Company retired $12 million of senior subordinated notes and redeemed all outstanding common stock warrants held by its senior subordinated noteholders. The warrants were redeemed under a settlement agreement requiring the payment of $19,000,000 comprised of $6,000,000 for the warrants, $11,000,000 for an early termination fee and $2,000,000 for a management fee. The excess of this settlement over the book value of the common stock warrants was reported as a charge of $17,257,000 in the second quarter of fiscal 1998. In connection with the debt retirement the Company recognized an extraordinary loss of $939,055, net of tax, for the write-off of certain unamortized deferred financing and debt discount costs. At July 31, 1999 the Company was not in compliance with certain bank financial covenants. Subsequent to July 31, 1999 the Company obtained waivers of such noncompliance. Note C - 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. 7 COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note D - Reclassification Certain amounts have been reclassified to conform to 1999 presentation. Note E - Summarized Financial Information for Subsidiaries The following table presents financial information for the wholly-owned subsidiaries of Coyne International Enterprises: Blue Ridge Textile Manufacturing, Inc., Ohio Garment Rental, Inc., and Midway-CTS Buffalo, LTD on a combined basis: July 31, October 31, 1999 1998 (Unaudited) Balance sheets: Current assets $ 6,303,000 $ 5,934,000 Noncurrent assets 3,811,000 3,317,000 Current liabilities 3,513,000 2,702,000 Noncurrent liabilities 195,000 182,000
Three Months Ended Nine Months Ended July 31, July 31, ---------------------------- ---------------------------- 1999 1998 1999 1998 (Unaudited) (Unaudited) Statement of operations: Revenues $ 4,067,000 $ 4,113,000 $ 12,338,000 $ 12,448,000 Operating expenses 3,884,000 3,730,000 11,375,000 11,197,000 Operating income 182,000 383,000 964,000 1,251,000 Net income (loss) (4,000) (2,415,000) 239,000 (2,419,000)
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 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; unexpected costs of year 2000 compliance or failure by the Company or other entities with which it does business to achieve compliance; 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 was $731 thousand for the nine month period ended July 31, 1999 versus $18.6 million for the same period last year. Cash used in operating activities in 1998 included $17.3 million for the redemption of common stock warrants in connection with the retirement of subordinated debt obligations. The Company's working capital was $20.4 million at July 31, 1999 as compared to $17.3 at October 31, 1998. The increase in working capital of $3.1 million reflects a decrease in current liabilities through utilization of the Company's revolving credit facility. At of the end of July 1999, the Company had approximately $11.2 million available under its working capital line and up to an additional $28 million available under bank credit facilities for capital expenditures and acquisitions. At July 31, 1999 the Company was not in compliance with certain financial covenants under these facilities. Subsequent to July 31, 1999 the Company obtained waivers of such noncompliance. Management believes that its operations and bank credit facilities will provide sufficient cash to meet the requirements for operations, acquisitions and capital expenditures for the next twelve months. Cash used in investing activities was $7.9 million for the nine months ended July 31, 1999, as compared to $4.4 million for the same period in 1998. The increase is attributable to higher capital expenditures and route acquisitions. Capital expenditures relate primarily to investments in new information systems, route trucks and laundry plant facilities. The Company anticipates that capital expenditures will be approximately $8 million for fiscal 1999, an increase of approximately $1.3 million over fiscal 1998. 9 Results of Operations for the Third Quarter of Fiscal 1999 Compared to the Third Quarter of Fiscal 1998 Revenues for the quarter of $36.4 million are $2.5 million or 7.2% greater than the same period last year. Year-to-date revenues of $109.0 million are $8.0 million or 8.0% higher than the same period last year. This increase is attributable primarily to new rental revenue generated by the Company's expanded sales organization. Cost of rental operations increased as a percent of rental revenue to 77.7% for the third quarter of 1999 and 77.1% year-to-date 1999 versus 76.4% in the third quarter of 1998 and 76.5% year-to-date 1998. The increase is attributable to upfront costs associated with the growth in rental business and lower benefit costs in 1998 as a result of favorable workers compensation retroactive premium adjustments. Selling, general and administrative expenses for the third quarter and year-to- date 1999 increased by approximately $1.3 million and $2.9 million respectively compared to 1998. The increase is attributable to the expansion of the sales organization, uncapitalizable costs associated with the implementation of its new computer systems, Year 2000 preparation and investment in plant and corporate management teams. The personnel investment has enabled the Company to produce continued revenue growth and improve the quality and depth of its management team. The increase in selling expense includes certain one time training costs and sales commissions. These costs and other one-time contract costs reduce the margin on new sales in the first year of the service. The Company anticipates that margins will increase in the second year of the rental contracts. Income from operations for the third quarter of 1999 is approximately $903 thousand lower than the same period last year. Increases in selling expenses and investments associated with growth have exceeded the benefits of the additional revenue during the quarter. In addition, the third quarter of 1998 benefited from approximately $250 thousand of favorable insurance adjustments. Excluding the effect of the stock warrant redemption completed in the third quarter of 1998, interest expense increased $705 thousand and $2.5 million for the third quarter and year-to-date, respectively. The increase is due to higher principal balances in connection with the issuance of 11.25% Senior Subordinated Notes in June of 1998. The proceeds of this offering were used to retire existing senior and subordinated debt and to repurchase outstanding common stock warrants. For the three months ending July 31 there was a net loss of $611 thousand in 1999 as compared to a loss of $630 thousand in 1998. The 1998 results include an extraordinary loss, not of taxes, of $939 thousand associated with debt retirement. Information Systems; Year 2000 In order to enhance the Company's information management capabilities and achieve Year 2000 compliance (Y2K), the Company is implementing new software for Billing, Route Accounting, Purchasing, Accounts Payable and Financial Reporting. The installation and implementation of the Billing and Route Accounting system is now complete in 15 of the Company's 17 plants with the remaining plants expected to be complete by October 31, 1999. The Company believes that the new Billing System has achieved all project objectives and is Y2K compliant. 10 The Company will use third party application software that is Y2K compliant to replace or upgrade its remaining management information systems. The Company has completed an upgrade of its payroll and financial reporting systems to a version represented by third party vendors to be Y2K compliant. The replacement of the Purchasing and Accounts Payable system is in progress and expected to be complete by November 1999. The Company has completed inventory and assessment phases in connection with Y2K compliance for its physical plant systems and production equipment. Based on the Company's assessment, management believes that these systems will be Y2K compliant by December 1999. The Company continues to contact suppliers and customers regarding their state of readiness. All critical suppliers and customers have assured the Company that their systems are Y2K compliant or that they are in the process of repairing or replacing their systems to make them Y2K compliant. The Company estimates the total capital cost of its Y2K project and related systems upgrades will be approximately $3.7 million. As of July 31, 1999 the Company had spent approximately $2.7 million. The majority of these costs represent capital expenditures for replacement software and hardware. In the interest of further protecting the Company from Y2K exposure, contingency plans have been developed for certain systems that are critical to the Company's business operations. Although the Company does not anticipate the need to do so, arrangements have been made to convert software applications developed in-house to allow for execution after December 31, 1999. 11 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. September 13, 1999 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 12 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF COYNE INTERNATIONAL ENTERPRISES CORP. AND SUBSIDIARIES FOR THE QUARTER ENDED JULY 31,1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0001066242 COYNE INTERNATIONAL ENTERPRISES CORP. 3-MOS OCT-31-1999 MAY-01-1999 JUL-31-1999 578,375 0 15,770,894 0 7,855,898 52,456,956 94,539,580 48,056,304 122,016,835 32,059,906 96,736,510 0 4,806,200 769 (12,848,793) 122,016,835 2,708,631 36,423,371 1,791,930 34,626,241 0 0 2,689,992 (892,862) (282,000) (610,862) 0 0 0 (610,862) 0 0
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