-----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, N1LLzGRL1FinA698SyUewTQkzOuQ28KD3UZsUXoK8E9yYm6lsycd/sznNqbCz3rp YN0qss62fkWOJpf8tawgnQ== 0000722642-97-000009.txt : 19970815 0000722642-97-000009.hdr.sgml : 19970815 ACCESSION NUMBER: 0000722642-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97660918 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 13 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, 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 June 30, 1997 was 6,179,288 shares. Page 2 Part 1 GUEST SUPPLY, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Dollars in Thousands June 30, September 30, 1997 1996* ------------ ------------ (UNAUDITED) Assets Current assets: Cash and cash equivalents $ 2,338 $ 2,591 Accounts receivable 29,034 28,084 Raw materials 8,037 10,441 Finished goods 24,883 22,921 Deferred income taxes 2,028 1,557 Prepaid expenses and other current assets 2,119 1,822 - --------------------------------------------------------------------------- Total current assets 68,439 67,416 Equipment and leasehold improvements 32,423 29,810 Other assets 148 134 Excess of cost over net assets acquired 5,251 5,528 - --------------------------------------------------------------------------- $106,261 $102,888 =========================================================================== Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses $ 29,150 $ 28,320 Current maturities of long-term debt 3,763 3,873 - --------------------------------------------------------------------------- Total current liabilities 32,913 32,193 =========================================================================== Long-term debt 24,938 24,972 Deferred income taxes 4,223 3,320 - --------------------------------------------------------------------------- Total long-term liabilities 29,161 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 June 30, 1997 and 6,156,075 at September 30, 1996 545 543 Additional paid-in capital 35,227 35,042 Retained earnings 8,447 6,929 Cumulative foreign currency translation adjustments (32) (111) - --------------------------------------------------------------------------- Total shareholders' equity 44,187 42,403 - --------------------------------------------------------------------------- $106,261 $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 BALANCE SHEETS In Thousands except per share amount (Unaudited) Nine Months Ended Three Months Ended June 30, June 30, ------------------ ------------------ 1997 1996 1997 1996 -------- -------- -------- -------- Sales $144,514 $126,858 $ 52,571 $ 47,863 Cost of sales 114,776 99,976 40,827 37,111 - ----------------------------------------------------------------------------- Gross profit 29,738 26,882 11,744 10,752 Selling, general & administrative expenses 25,529 22,903 8,526 7,920 - ----------------------------------------------------------------------------- Operating income 4,209 3,979 3,218 2,832 Interest expense, net 1,531 1,298 504 425 - ----------------------------------------------------------------------------- Income before income taxes 2,678 2,681 2,714 2,407 Income tax expense 1,160 1,121 1,096 967 - ----------------------------------------------------------------------------- Net income $1,518 $1,560 $1,618 $1,440 ============================================================================= Earnings per common share $0.22 $0.22 $0.23 $0.20 ============================================================================= Weighted average shares outstanding 6,897 6,990 7,160 7,341 ============================================================================= 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) Nine Months Ended June 30, ----------------------- 1997 1996 -------- -------- Net income $ 1,518 $ 1,560 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,951 2,392 Provision for losses on accounts receivable 729 (104) Deferred income tax expense 432 916 Gain on sale of fixed assets (138) Changes in assets and liabilities: (Increase) decrease in accounts receivable (1,679) 1,625 (Increase) decrease in inventories 442 (5,163) Increase in prepaid expenses and other current assets (298) (429) Increase in other assets (14) (30) Increase (decrease) in accounts payable and accrued expenses 830 (4,642) - ----------------------------------------------------------------------------- Net cash provided by (used in) operating activities 4,773 (3,875) - ----------------------------------------------------------------------------- Cash flows from investing activities: Capital expenditures (5,316) (3,253) Proceeds from sale of fixed assets 168 - ----------------------------------------------------------------------------- Net cash used in investing activities (5,148) (3,253) - ----------------------------------------------------------------------------- Cash flows from financing activities: Proceeds from revolving credit agreement 37,743 44,025 Repayment on revolving credit agreement (34,964) (44,385) Repayment of long-term debt (2,923) (2,683) Proceeds from issuance of long-term debt 10,500 Proceeds from issuance of common stock 187 53 - ----------------------------------------------------------------------------- Net cash provided by financing activities 43 7,510 Foreign currency translation adjustments 79 37 - ----------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (253) 419 Cash and cash equivalents at beginning of period 2,591 1,825 - ----------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 2,338 $ 2,244 ============================================================================= The accompanying notes are an integral part of these consolidated condensed financial statements. Page 5 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, 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 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 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 Nine months ended June 30, 1997 vs. Nine months ended June 30, 1996 - ------------------------------------------------------------------- Sales for the nine months ended June 30, 1997 increased by $17,656 or 13.9% to $144,514 from $126,858 for the nine months ended June 30, 1996. Revenues generated from our hotel customers increased $13,688 or 12.4% to $123,636. This increase is primarily due to selling additional products to existing customers and the addition of new customers. Sales to consumer products companies and retailers were $20,878 for the nine months ended June 30, 1997 compared to $16,910 for the nine months ended June 30, 1996. The increase of $3,968 or 23.5% was due to increased sales to an existing customer. Gross profit for the nine months ended June 30, 1997 was $29,738 or 20.6% of sales compared to $26,882 or 21.2% of sales for the nine months ended June 30, 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 products companies, as well as improved efficiencies at the Company's manufacturing facility. Excluding this charge, gross profit increased by $5,043 or 18.8% to $31,925 or 22.1% of sales compared to $26,882 or 21.2% for the prior period. Selling, general and administrative expenses were $25,529 or 17.7% of sales for the nine months ended June 30, 1997 compared to $22,903 or 18.1% of sales for the nine months ended June 30, 1996. The increase of $2,626 or 11.5% 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. Excluding the non-recurring charge, selling general and administrative expenses increased by $2,200 or 9.6% to $25,103 or 17.4% of sales compared to $22,903 or 18.1% for the prior period. Interest expense was $1,531 for the nine months ended June 30, 1997 compared to $1,298 for the nine months ended June 30, 1996. The increase in interest of $233 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 $1,160 for the nine months ended June 30, 1997 compared with $1,121 for the prior period. 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 June 30, 1997 vs. Three months ended June 30, 1996 - --------------------------------------------------------------------- Sales for the three months ended June 30, 1997 increased by $4,708 or 9.8% to $52,571 from $47,863 for the three months ended June 30, 1996. Revenues generated from our hotel customers increased $6,095 or 14.8% to $47,340. This increase is primarily due to selling additional products to existing customers and the addition of new customers. Sales to consumer products companies and retailers were $5,231 for the three months ended June 30, 1997 compared to $6,618 for the three months ended June 30, 1996. The decrease of $1,387 or 21% was due to a decrease in sales to two existing customers. Gross profit for the three months ended June 30, 1997 was $11,744 or 22.3% of sales compared to $10,752 or 22.5% of sales for the three months ended June 30, 1996. The decrease in gross profit as a percentage of sales was due primarily to lower sales to consumer products companies. Selling, general and administrative expenses were $8,526 or 16.2% of sales for the three months ended June 30, 1997 compared to $7,920 or 16.5% of sales for the three months ended June 30, 1996. The increase of $606 or 7.7% was due primarily to increased payroll, payroll related costs and warehousing costs associated with the Company's sales growth. Interest expense was $504 for the three months ended June 30, 1997 compared to $425 for the three months ended June 30, 1996. The increase in interest of $79 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 $1,096 for the three months ended June 30, 1997 compared with $967 for the prior period. This increase was primarily the result of an increase in pre-tax income of $307 for the three months ended June 30, 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 June 30, 1997 - ------------------------------------------------ At June 30, 1997, the Company had $35,526 of working capital compared to $35,223 at September 30, 1996. The increase of $303 is primarily the result of an increase in accounts receivable and deferred income taxes of $950 and $471 respectively, offset by increases in accounts payable and accrued expenses of $830. 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 1.5%, 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 intangibles 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 anticipated 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 June 30, 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: 8/14/97 By: /s/Clifford W. Stanley ------------------------- ----------------------------------- Clifford W. Stanley President & Chief Executive Officer Dated: 8/14/97 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 9-MOS SEP-30-1997 JUN-30-1997 2,338,000 0 29,034,000 0 32,920,000 68,439,000 53,441,000 (21,018,000) 106,261,000 32,913,000 0 0 0 545,000 43,642,000 106,261,000 144,514,000 144,514,000 114,776,000 114,776,000 25,529,000 0 1,531,000 2,678,000 1,160,000 0 0 0 0 1,518,000 .22 0
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