-----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, FvT3wlFiRK9FKkZILHMzPlIjN5gL7K1zDdCGvlJY/6pv9Lv8NOdCw7U0YAvsrxxp I9oqaUVf1rV0SgS09kcP6A== 0000722642-96-000013.txt : 19960816 0000722642-96-000013.hdr.sgml : 19960816 ACCESSION NUMBER: 0000722642-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GUEST SUPPLY INC CENTRAL INDEX KEY: 0000722642 STANDARD INDUSTRIAL CLASSIFICATION: PERFUMES, COSMETICS & OTHER TOILET PREPARATIONS [2844] IRS NUMBER: 222320483 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11955 FILM NUMBER: 96613743 BUSINESS ADDRESS: STREET 1: 720 U S HWY ONE CITY: NORTH BRUNSWICK STATE: NJ ZIP: 08902 BUSINESS PHONE: 9082463011 MAIL ADDRESS: STREET 2: 720 U S HIGHWAY ONE CITY: NORTH BRUNSWICK STATE: NJ ZIP: 08902 10-Q 1 FORM 10Q 1 of 12 pages Index to Exhibits is on Page 12 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 quarter ended June 30, 1996 Commission File #0-12567 ======================================================================= ======================================================================= GUEST SUPPLY, INC. (Exact name of registrant as specified in its charter) State of New Jersey 22-2320483 (State or other jurisdiction of (Identification number) incorporation or organization) 720 U.S. Highway One 08902 North Brunswick, New Jersey (Zip Code) (Address of principal executive offices) Registrants telephone number and area code 908-246-3011 ======================================================================= ======================================================================= Indicate by check mark whether the registrant (1) has filed all reports 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 The number of shares of common stock, without par value, outstanding as of June 30, 1996 was 6,150,724 shares. Page 2 Part 1 GUEST SUPPLY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, September 30, 1996 1995* ------------- ------------- (UNAUDITED) Assets Current assets: Cash and cash equivalents $2,244,000 $1,825,000 Accounts receivable 27,142,000 28,663,000 Inventories 33,432,000 28,269,000 Deferred income taxes 1,583,000 1,434,000 Prepaid expenses and other current assets 1,345,000 916,000 - -------------------------------------------------------------------------- Total current assets 65,746,000 61,107,000 Equipment and leasehold improvements 29,644,000 28,507,000 Other assets 127,000 97,000 Excess of cost over net assets acquired 5,620,000 5,896,000 - -------------------------------------------------------------------------- $101,137,000 $95,607,000 ========================================================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses $26,584,000 $31,226,000 Current maturities of long-term debt 3,896,000 2,406,000 - -------------------------------------------------------------------------- Total current liabilities 30,480,000 33,632,000 ========================================================================== Long-term debt 26,957,000 20,990,000 Deferred income taxes 2,941,000 1,876,000 - -------------------------------------------------------------------------- Total long-term liabilities 29,898,000 22,866,000 ========================================================================== Commitments and contingencies Shareholders' equity: Preferred stock - without par value; authorized 1,000,000 shares, outstanding none Common stock - without par value; authorized 20,000,000 shares, issued and outstanding 6,150,724 shares at June 30, 1996 and 6,146,335 at September 30, 1995 542,000 542,000 Additional paid-in capital 34,975,000 34,922,000 Retained earnings 5,338,000 3,778,000 Cumulative foreign currency translation adjustments (96,000) (133,000) - --------------------------------------------------------------------------- Total shareholders' equity 40,759,000 39,109,000 - --------------------------------------------------------------------------- $101,137,000 $95,607,000 =========================================================================== * From audited financial statements. The accompanying notes are an integral part of these consolidated condensed financial statements. Page 3 GUEST SUPPLY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Nine Months Ended Three Months Ended June 30, June 30, -------------------------- ------------------------- 1996 1995 1996 1995 ------------ ------------ ----------- ------------ Sales $126,858,000 $111,018,000 $47,863,000 $44,062,000 Cost of sales 99,976,000 84,902,000 37,111,000 33,749,000 - --------------------------------------------------------------------------- Gross profit 26,882,000 26,116,000 10,752,000 10,313,000 Selling, general & administrative expense 22,903,000 21,028,000 7,920,000 7,896,000 - --------------------------------------------------------------------------- Operating income 3,979,000 5,088,000 2,832,000 2,417,000 Interest expense, net 1,298,000 765,000 425,000 327,000 - --------------------------------------------------------------------------- Income before income taxes 2,681,000 4,323,000 2,407,000 2,090,000 Income tax expense 1,121,000 1,456,000 967,000 731,000 - --------------------------------------------------------------------------- Net income $1,560,000 $2,867,000 $1,440,000 $1,359,000 =========================================================================== Earnings per common share $0.22 $0.40 $0.20 $0.19 =========================================================================== Weighted average shares outstanding 6,990,000 7,205,000 7,341,000 7,305,000 =========================================================================== Page 4 GUEST SUPPLY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended June 30, ------------------------- 1996 1995 ---------- ---------- Cash flows from operating activities: Net income $1,560,000 $2,867,000 - -------------------------------------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,220,000 2,097,000 Provision for losses on accounts receivable (104,000) 356,000 Deferred income taxes 916,000 195,000 Changes in assets and liabilities: (Increase) decrease in accounts receivable 1,625,000 (5,755,000) Increase in inventory (5,163,000) (3,944,000) Increase in prepaid expenses and other current assets (429,000) (549,000) (Increase) decrease in other assets (30,000) 5,000 Increase (decrease) in accounts payable and accrued expenses (4,642,000) 8,947,000 Foreign currency translation adjustments 37,000 (52,000) - --------------------------------------------------------------------------- Net cash provided by (used in) operating activities (4,010,000) 4,167,000 - --------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (3,081,000) (7,904,000) - --------------------------------------------------------------------------- Net cash used in investing activities (3,081,000) (7,904,000) - --------------------------------------------------------------------------- Cash flows from financing activities: Net borrowings (payments) on revolving credit agreement (360,000) 4,674,000 Proceeds from issuance of long-term debt 10,500,000 Repayment of long-term debt (2,683,000) (1,699,000) Proceeds from issuance of common stock 53,000 520,000 - --------------------------------------------------------------------------- Net cash provided by financing activities 7,510,000 3,495,000 - --------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents 419,000 (242,000) Cash and cash equivalents at beginning of period 1,825,000 1,782,000 - --------------------------------------------------------------------------- Cash and cash equivalents at end of period $2,244,000 $1,540,000 =========================================================================== The accompanying notes are an integral part of these consolidated condensed financial statements. Page 5 GUEST SUPPLY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 1: Basis of Presentation The unaudited consolidated condensed financial statements have been prepared from the books and records of Guest Supply, Inc. and subsidiaries (the Company) in accordance with generally accepted accounting principles for interim financial information. 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, all adjustments (consisting only of normal and recurring adjustments) considered necessary for a fair presentation have been included. It is suggested that the consolidated condensed financial statements be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended September 30, 1995 included in the Company's annual report on Form 10-K. Interim results are not necessarily indicative of the results that may be expected for the full year. Note 2: Earnings Per Common Share Earnings per common share is based on the weighted average number of common and common equivalent shares outstanding during each period. When stock options and warrants are dilutive, they are included as share equivalents using the treasury stock method. Where the effect of the assumed exercise on net income would be anti-dilutive, primary and fully diluted earnings per common share are stated the same. On September 18, 1995, the Board of Directors of the Company declared a three-for-two stock split to be paid in the form of a 50% stock dividend. The additional 2,048,739 shares of common stock were issued on October 24, 1995 to the shareholders of record on October 3, 1995. Distribution offractional shares was paid in cash based on the closing price on the record date. The par value ofthe new shares issued totaled $205,000 which was transferred from additional paid-in-capital tocommon stock. Note 3: Revolving Credit Facility On October 31, 1995, the Company entered into a credit facility with two banks for a seven-year $10,500,000 term loan and a two-year $22,000,000 revolving credit facility. The term loan is payable in equal monthly installments of $125,000 which will commence in December, 1995 and bearsinterest at a rate equal to 7.0% per annum. The revolving credit loans under the credit facility bear interest at a rate equal to LIBOR plus 1.0% the bank's prime rate or a fixed rate, as selected by the Company. The proceeds under this credit facility were used to repay the outstanding balance under the existing revolving credit facility and for future working capital needs. At the time of this agreement, the Company had existing term loans totaling $7,500,000 which remained outstanding. These loans, which are payable in equal monthly installments, mature in February, 1999. On April 30, 1996, the banks amended its existing credit facility to allow for additional availability of $3,500,000 through July 31, 1996 and to modify its financial covenants. All of the Company's loans with the banks are secured by substantially all of its assets and are subject to certain financial covenants. Page 6 GUEST SUPPLY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued) (Unaudited) Note 4: Long Term Incentive Plan On March 6, 1996, the shareholders of Guest Supply ratified the 1996 Long Term Incentive Plan. Under the incentive plan, up to 400,000 shares of Common Stock will be available for issuance of awards to officers and employees of the Company. Directors of the Company who are not employees of the Company are eligible for stock options under this plan. Awards are exercisable at 100% of the fair market value at the date of grant and vest within a period fixed by the Stock Option Committee of the Board of Directors. Note 5: Common Stock On March 6, 1996, the shareholders of Guest Supply approved an increase in the number of authorized shares of Common Stock from 10,000,000 to 20,000,000. Page 7 GUEST SUPPLY, INC. AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Nine months ended June 30, 1996 vs. Nine months ended June 30, 1995 - ------------------------------------------------------------------- Sales for the nine months ended June 30, 1996 increased by $15,840,000 or 14.3% from $111,018,000 to $126,858,000 for the nine months ended June 30, 1995. Revenues generated from our hotel customers increased $13,810,000 or 14.4% to $109,948,000. This increase is primarily due to selling additional products to existing customers and the addition of new customers. During this period, increased room demand also contributed to the Company's growth. Sales to consumer product companies and retailers were $16,910,000 for the nine months ended June 30, 1996 compared to $14,880,000 for the nine months ended June 30, 1995. The increase of $2,030,000 or 13.6% was due to increased sales to existing customers. Gross profit for the nine months ended June 30, 1996 was $26,882,000 or 21.2% of sales compared to $26,116,000 or 23.5% of sales for the nine months ended June 30, 1995. The decrease in gross profit as a percentage of sales was due primarily to a sudden and temporary decline in our secondquarter sales to consumer product companies. The timing and temporary nature of this unanticipated decrease in sales volume limited the Company's ability to lower its operating costs or to seek replacement business. The continued sales growth of textiles, which have a lower gross margin thanmost of the company's other products, also reduced the overall gross margin rate. Interest expense was $1,298,000 for the nine months ended June 30, 1996 compared to $765,000 for the nine months ended June 30, 1995. The increase in interest of $533,000 can be attributed to an increase in borrowings to fund our capital expansion program. Interest costs incurred on borrowings during the construction and installation period are capitalized to the cost of the project. Selling, general and administrative expenses were $22,903,000 or 18.1% of sales for the nine months ended June 30, 1996 compared to $21,028,000 or 18.9% of sales for the nine months ended June 30, 1995. The increase of $1,875,000 or 8.9% was due primarily to increased payroll and payroll related costs, warehousing and delivery costs associated with the Company's sales growth. The decrease in selling, general and administrative costs as a percentage of sales was the result of increased sales volume combined with the effects of the Company's cost containment program. Income tax expense was $1,121,000 for the nine months ended June 30, 1996 compared with $1,456,000 for the prior period. This decrease was primarily the result of a decrease in pretax income of $1,642,000 as compared to prior year for the nine months ended June 30, 1996. The income tax rate for the nine months ended June 30, 1996 and June 30, 1995 was 41.8% and 33.7% respectively. This increase is the result of a reduction in the utilization of net operating loss carryforwards available for the nine months ended June 30, 1996. Page 8 Three months ended June 30, 1996 vs. Three months ended June 30, 1995 - --------------------------------------------------------------------- Sales for the three months ended June 30, 1996 increased by $3,801,000 or 8.6% from $44,062,000 to $47,863,000 for the three months ended June 30, 1995. Revenues generated from our hotel customers increased $2,600,000 or 6.7% to $41,245,000. This increase is primarily due to selling additional products to existing customers and the addition of new customers. Sales to consumer product companies and retailers increased $1,201,000 or 22.2% to $6,618,000 for the three months ended June 30, 1996 compared to $5,417,000 for the three months ended June 30, 1995. Gross profit for the three months ended June 30, 1996 was $10,752,000 or 22.5% of sales compared to $10,313,000 or 23.4% of sales for the three months ended June 30, 1995. The decrease in gross profit as a percentage of sales was due primarily to inefficiencies experienced at the Company's manufacturing facility. The addition of textiles to the Company's product line also contributed to the decrease as a result of a lower gross profit associated with these products when compared with the Company's other products. Selling, general and administrative expenses increased slightly by .3% to $7,920,000 or 16.5% of sales for the three months ended June 30, 1996 compared to $7,896,000 or 17.9% of sales for the three months ended June 30, 1995. Interest expense was $425,000 for the three months ended June 30, 1996 compared to $327,000 for the three months ended June 30, 1995. The increase in interest of $98,000 can be primarily attributed to an increase in borrowings to fund our capital expansion program. Interest costs incurred on borrowings during the construction and installation period are capitalized to the cost of the project. During the three months ended June 30, 1996, the Company recorded an income tax expense of $967,000 as compared to income tax expense of $731,000 in the prior year quarter. This difference is due to an increase in pretax income incurred in the three months ended June 30, 1996 of $317,000. The income tax rate for the quarters ended June 30, 1996 and June 30, 1995 was 40.2% and 35.0% respectively. This increase is the result of a reduction in the utilization of net operating loss carryforwards available for the three months ended June 30, 1996. Page 9 GUEST SUPPLY, INC. AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources at June 30, 1996 - ------------------------------------------------ At June 30, 1996, the Company had $35,266,000 of working capital compared to $27,475,000 at September 30, 1995. The increase of $7,791,000 is primarily the result of an increase in long term borrowings for inventory and to reduce trade payables to agreed upon payment terms. On October 31, 1995, the Company entered into a credit facility with two banks for a seven-year $10,500,000 term loan and a two-year $22,000,000 revolving credit facility. The term loan is payable in equal monthly installments of $125,000 which commenced in December, 1995 and bears interest at a rate equal to 7.0% per annum. The revolving credit loans under the credit facility bear interest at a rate equal to LIBOR plus 1.0% the bank's prime rate or a fixed rate, as selected by the Company. The proceeds under this credit facility were used to repay the outstanding balance under the existing revolving credit facility and for future working capital needs. At the time of this agreement, the Company had existing term loans totaling $7,500,000 which remained outstanding. The loans, which are payable in equal monthly installments, mature in February, 1999. On April 30, 1996, the banks amended its existing credit facility to allow for additional availability of $3,500,000 through July 31, 1996 and to modify its financial covenant. All of the Company's loans with the banks are secured by substantially all of its assets and are subject to certain financial covenants. The Company believes that the amount available under its revolving credit facility together with the cash flow from operations will be sufficient to meet the Company's short-term working capital requirements and identifiable long-term capital needs. The Company also believes that, if necessary, additional financing will be available to it on commercially reasonable terms. During 1995, the cost of pulp, cotton, tallow and plastic resins increased. This resulted in the Company experiencing cost increases in cartons, bottles, textiles, paper and soap base. While most of these cost increases were passed through to the Company's customers, these cost increases had a slight impact on the financial results of the Company. Page 10 GUEST SUPPLY, INC. AND OTHER SUBSIDIARIES PART II - OTHER INFORMATION Item 6: Exhibits and Reports on Form 8-K a) The exhibits filed as part of this report are listed on the index to the exhibits. b) No reports on Form 8-K have been filed during the nine month period ended June 30, 1996. Page 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934. The Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GUEST SUPPLY, INC. Dated: 8/14/96 By: s/Clifford W. Stanley ------------------ -------------------------- Clifford W. Stanley President & Chief Executive Officer Dated: 8/14/96 By: s/Paul T. Xenis ------------------ ----------------------------------- Paul T. Xenis Vice President, Finance Page 12 INDEX TO EXHIBITS Exhibit Number Description Page - ------------- ----------------------------------- ------------ 27 Financial Data Schedule 13 EX-27 2
5 9-MOS SEP-30-1996 JUN-30-1996 2244000 0 27142000 0 33432000 65746000 29644000 0 101137000 30480000 0 0 0 542000 40759000 101137000 126858000 126858000 0 99976000 22903000 0 1298000 2681000 1121000 0 0 0 0 1560000 .22 0
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