-----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, IqMdtujc8QUgwz9n2vhztEyDnFijWqkra7JmJYGOL6w0F+RxKQ97D+bfqqoIzdMJ VRCKelqV9CK8tLzUgeetvQ== 0000722642-97-000007.txt : 19970520 0000722642-97-000007.hdr.sgml : 19970520 ACCESSION NUMBER: 0000722642-97-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97606495 BUSINESS ADDRESS: STREET 1: 4301 U.S. HWY ONE CITY: MONMOUTH JUNCTION STATE: NJ ZIP: 08852 BUSINESS PHONE: 9082463011 MAIL ADDRESS: STREET 1: 720 U S HIGHWAY ONE 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 March 31, 1997 Commission File #1-11955 =============================================================================== =============================================================================== 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) 4301 U.S. Highway One 08852 Monmouth Junction, New Jersey (Zip code) (Address of principal executive offices) Registrants telephone number and area code 609-514-9696 =============================================================================== =============================================================================== 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 March 31, 1997 was 6,179,288 shares. Page 2 Part 1 GUEST SUPPLY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in Thousands March 31, September 30, 1997 1996* ------------- ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 2,313 $ 2,591 Accounts receivable 26,397 28,084 Inventories: Raw materials 8,341 10,441 Finished goods 23,248 22,921 Deferred income taxes 1,937 1,557 Prepaid expenses and other current assets 1,837 1,822 - ------------------------------------------------------------------------------- Total current assets 64,073 67,416 Equipment and leasehold improvements 32,299 29,810 Other assets 131 134 Excess of cost over net assets acquired 5,344 5,528 - ------------------------------------------------------------------------------- $101,847 $102,888 =============================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 27,064 $28,320 Current maturities of long-term debt 3,800 3,873 - ------------------------------------------------------------------------------- Total current liabilities 30,864 32,193 =============================================================================== Long-term debt 24,953 24,972 Deferred income taxes 3,484 3,320 - ------------------------------------------------------------------------------- Total long-term liabilities 28,437 28,292 =============================================================================== 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 6,179,288 shares at March 31, 1997 and 6,156,075 at September 30, 1996 545 543 Additional paid-in capital 35,227 35,042 Retained earnings 6,829 6,929 Cumulative foreign currency translation adjustments (55) (111) - ------------------------------------------------------------------------------- Total shareholders' equity 42,546 42,403 - ------------------------------------------------------------------------------- $101,847 $102,888 * 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 Dollars in Thousands, except per share amounts (Unaudited) Six Months Ended Three Months Ended March 31, March 31, ------------------- --------------------- 1997 1996 1997 1996 --------- --------- ---------- ---------- Sales $ 91,942 $ 78,995 $ 44,287 $ 37,281 Cost of sales 73,948 62,866 37,364 30,647 - ------------------------------------------------------------------------------- Gross profit 17,994 16,129 6,923 6,634 Selling, general & administrative expenses 17,003 14,982 8,505 7,457 - ------------------------------------------------------------------------------- Operating income (loss) 991 1,147 (1,582) (823) Interest expense, net 1,027 873 501 454 - ------------------------------------------------------------------------------- Income (loss) before income taxes (36) 274 (2,083) (1,277) Income tax expense (benefit) 64 154 (764) (453) - ------------------------------------------------------------------------------- Net income (loss) ($ 100) $ 120 ($ 1,319) ($ 824) =============================================================================== Earnings (loss) per common share ($ 0.01) $ 0.02 ($ 0.21) ($ 0.13) =============================================================================== Weighted average shares outstanding 6,766,000 6,816,000 6,179,000 6,149,000 =============================================================================== The accompanying notes are an integral part of these consolidated condensed financial statements. Page 4 GUEST SUPPLY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Dollars in Thousands (Unaudited) Six Months Ended March 31, --------------------- 1997 1996 -------- -------- Net income (loss) ($100) $120 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,952 1,590 Provision for losses on accounts receivable 203 (107) Deferred income tax expense (216) 475 Gain on sale of fixed assets (125) Changes in assets and liabilities: Decrease in accounts receivable 1,484 5,878 (Increase) decrease in inventories 1,773 (5,068) Increase in prepaid expenses and other current assets (15) (509) (Increase) decrease in other assets 3 (35) Decrease in accounts payable and accrued expenses (1,256) (5,277) - ------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 3,703 (2,933) - ------------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (4,286) (2,270) Proceeds from sale of fixed assets 154 - ------------------------------------------------------------------------------- Net cash used in investing activities (4,132) (2,270) - ------------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from revolving credit agreement 24,635 30,545 Repayment on revolving credit agreement (22,779) (33,620) Repayment of long-term debt (1,948) (1,711) Proceeds from issuance of long-term debt 10,500 Proceeds from issuance of common stock 187 49 - ------------------------------------------------------------------------------- Net cash provided by financing activities 95 5,763 Foreign currency translation adjustments 56 36 - ------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (278) 596 Cash and cash equivalents at beginning of period 2,591 1,825 - ------------------------------------------------------------------------------- Cash and cash equivalents at end of period $2,313 $2,421 =============================================================================== 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 manage ment, 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, 1996 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 (Loss) Per Common Share Earnings (loss) 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 modified 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. Page 6 GUEST SUPPLY, INC. AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Dollars in Thousands Six months ended March 31, 1997 vs. Six months ended March 31, 1996 - ------------------------------------------------------------------- Sales for the six months ended March 31, 1997 increased by $12,947 or 16.4% to $91,942 from $78,995 for the six months ended March 31, 1996. Revenues generated from our hotel customers increased $7,592 or 11.1% to $76,295. 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 were $15,647 for the six months ended March 31, 1997 compared to $10,292 for the six months ended March 31, 1996. The increase of $5,355 or 52% was due to increased sales to an existing customer. Gross profit for the six months ended March 31, 1997 was $17,994 or 19.6% of sales compared to $16,129 or 20.4% of sales for the six months ended March 31, 1996. The decrease in gross profit as a percentage of sales was due primarily to a charge to cost of sales in the second quarter of $2,187 to write-off damaged, obsolete and sub-standard inventory offset by increased sales to consumer product companies, as well as improved efficiencies at the Company's manufacturing facility. Excluding this charge, gross profit increased by $4,052 or 25.1% to $20,181 or 21.9% of sales compared to $16,129 or 20.4% for the prior period. Selling, general and administrative expenses were $17,003 or 18.5% of sales for the six months ended March 31, 1997 compared to $14,982 or 19.0% of sales for the six months ended March 31, 1996. The increase of $2,021 or 13.5% was due primarily to increased payroll and payroll related costs, warehousing and delivery costs associated with the Company's sales growth, and non-recurring expenses of $426 in connection with the consolidation of seven warehouses which included moving expenses, redundant rents, taxes, occupancy expenses, equipment and labor costs. Interest expense was $1,027 for the six months ended March 31, 1997 compared to $873 for the six months ended March 31, 1996. The increase in interest of $154 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 were capitalized to the cost of the project. Income tax expense was $64 for the six months ended March 31, 1997 compared with $154 for the prior period. This decrease was primarily the result of a decrease in pre-tax income of $310 as compared to prior year for the six months ended March 31, 1997. Page 7 GUEST SUPPLY, INC. AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Dollars in Thousands Three months ended March 31, 1997 vs. Three months ended March 31, 1996 - ----------------------------------------------------------------------- Sales for the three months ended March 31, 1997 increased by $7,006 or 18.8% to $44,287 from $37,281 for the three months ended March 31, 1996. Revenues generated from our hotel customers increased $4,977 or 14.4% to $39,484. 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 were $4,803 for the three months ended March 31, 1997 compared to $2,774 for the three months ended March 31, 1996. The increase of $2,029 or 73.1% was due to increased sales to an existing customer. Gross profit for the three months ended March 31, 1997 was $6,923 or 15.6% of sales compared to $6,634 or 17.8% of sales for the three months ended March 31, 1996. The decrease in gross profit as a percentage of sales was due primarily to a charge to cost of sales of $2,187 to write off damaged, obsolete and sub-standard inventory offset by increased sales to consumer product companies as well as improved efficiencies at the Company's manufacturing facility. Excluding this charge, gross profit increased by $2,476 or 37.3% to $9,110 or 20.6% of sales compared to $6,634 or 17.8% for the prior period. Selling, general and administrative expenses were $8,505 or 19.2% of sales for the three months ended March 31, 1997 compared to $7,457 or 20.0% of sales for the three months ended March 31, 1996. The increase of $1,048 or 14.1% was due primarily to increased payroll and payroll related costs, warehousing costs associated with the Company's sales growth, and non- recurring expenses of $426 in connection with the consolidation of seven warehouses which includes moving expenses, redundant rents, taxes, occupancy expenses, equipment and labor costs. Excluding this non-recurring charge, selling, general and administrative expenses increased by $622 or 8.3% to $8,079 or 18.2% of sales compared to $7,457 or 20.0% for the prior period. Interest expense was $501 for the three months ended March 31, 1997 compared to $454 for the three months ended March 31, 1996. The increase in interest of $47 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 were capitalized to the cost of the project. Income tax benefit was $764 for the three months ended March 31, 1997 compared with $453 for the prior period. This increase was primarily the result of an increase in pre-tax loss of $806 for the three months ended March 31, 1997 as compared to the prior year. Page 8 GUEST SUPPLY, INC. AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued Liquidity and Capital Resources at March 31, 1997 - ------------------------------------------------- At March 31, 1997, the Company had $33,209 of working capital compared to $35,223 at September 30, 1996. The decrease of $2,014 is primarily the result of a decrease in accounts receivable and inventory of $1,687 and $1,773 respectively, offset by reductions in current liabilities of $1,329. On October 31, 1995, the Company entered into a credit facility with two banks for a seven-year $10,500 term loan and a $22,000 revolving credit facility. The term loan is payable in equal monthly installments of $125 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% to 1.5%, the bank's prime rate or a fixed rate, as selected by the Company and matures in October, 1998. 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 which remained outstanding. The loans, which are payable in equal monthly installments, mature in February, 1999. In February, 1997, the Company amended its revolving credit facility with the banks to allow for additional availability of $3,500 through July 31, 1997 and to modify a 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. Recently Issued Accounting Standards - ------------------------------------ The Financial Accounting Standards Board issued Statement No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). Under this new standard, a new fair value based method of accounting for stock-based compensation arrangements with employees is established. Entities may continue to use the Opinion 25 method or adopt the SFAS No. 123 fair value based method. If the Company continues to use the Opinion 25 method, SFAS No. 123 requires footnote disclosure of proforma net income and earnings per share information as if the fair value based method had been adopted. The Company has not yet determined which method it will use. This Statement is effective for financial statements for fiscal years beginning after December 15, 1995, or for the fiscal year for which the Statement is initially adopted for recognizing compensation expense, whichever comes first. Page 9 GUEST SUPPLY, INC. AND SUBSIDIARIES ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS continued Recently Issued Accounting Standards, continued - ----------------------------------------------- The Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed (SFAS No. 121). This new standard requires the assessment of the recoverability of long-lived assets and certain intangi bles and related goodwill and recognition of any impairment losses. The Company does not believe the adoption of SFAS No. 121 will have a material effect on the Company's consolidated financial statements. This Statement is effective for fiscal years beginning after December 15, 1995. Cautionary Statement - -------------------- This quarterly report on Form 10-Q may contain forward-looking information about the Company. The Company is hereby setting forth statements identifying important factors that may cause the Company's actual results to differ materially from those set forth in any forward-looking statements made by the Company. Some of the most significant factors include an unanticipated slowdown in the lodging industry or in contract manufacturing (or both) resulting in lower demand for the Company's products, unforeseen inefficiencies at the Company's manufacturing or distribution facilities, an increase in price pressures or the loss of, or a decline in sales to, a major customer. Accordingly, there can be no assurances that any antici pated future results will be achieved. 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 three month period ended March 31, 1997. 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: 5/14/97 By: s/Clifford W. Stanley ------------------------ ---------------------------------- Clifford W. Stanley President & Chief Executive Officer Dated: 5/14/97 By: s/Paul T. Xenis ------------------------ ---------------------------------- Paul T. Xenis Vice President, Finance Page 12 INDEX TO EXHIBITS Exhibit No. Description Page - ----------- ------------------------------------- ---------- 27 Financial Data Schedule 13 EX-27 2
5 6-MOS SEP-30-1997 MAR-31-1997 2,313,000 0 26,397,000 0 31,589,000 64,073,000 52,411,000 (20,112,000) 101,847,000 30,864,000 0 0 0 545,000 42,001,000 101,847,000 91,942,000 91,942,000 73,948,000 73,948,000 17,003,000 0 1,027,000 (36,000) 64,000 0 0 0 0 (100,000) (.01) 0
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