<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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 NUMBER 1-13495
-------
MAC-GRAY CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3361982
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) Identification No.)
22 WATER STREET, CAMBRIDGE, MASSACHUSETTS 02141
(Address of principal executive offices) (Zip Code)
617-492-4040
(Registrant's telephone number, including area code)
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
----- -----
The number of shares outstanding of each of the issuer's classes of
common stock as of the close date of business on May 12, 2000:
Class Number of shares
----- ----------------
Common Stock, $.01 Par Value 12,633,228
<PAGE>
INDEX
-----
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at March 31, 2000
(unaudited) and December 31, 1999
Condensed Consolidated Income Statements (unaudited) for the
Three Months Ended March 31, 2000 and 1999
Condensed Consolidated Statement of Stockholders' Equity for
the Three Months Ended March 31, 2000 (unaudited)
Condensed Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements
(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signature
2
<PAGE>
Item 1. Financial Statements
MAC-GRAY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,566 $ 6,970
Trade receivables, net of allowance for doubtful accounts 8,551 8,038
Inventory of finished goods 6,521 3,581
Prepaid expenses and other current assets 9,496 9,206
-------- --------
Total current assets 31,134 27,795
Property, plant and equipment, net 78,581 77,472
Intangible assets, net 55,533 54,481
Prepaid route rent and other assets 15,717 15,641
-------- --------
Total assets $180,965 $175,389
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital lease
obligations $ 2,408 $ 2,409
Trade accounts payable and accrued expenses 14,905 11,103
Accrued route rent 8,354 8,672
Deferred revenues and deposits 3,354 2,066
-------- --------
Total current liabilities 29,021 24,250
Long-term debt and capital lease obligations 84,421 82,370
Deferred income taxes 10,406 11,075
Deferred retirement obligation 853 827
Other liabilities 125 98
Commitments and contingencies (Note 4) - -
Stockholders' equity:
Preferred stock of Mac-Gray Corporation ($.01 par value,
5 million shares authorized, no shares outstanding) - -
Common stock of Mac-Gray Corporation ($.01 par value,
30 million shares authorized, 13,443,754 issued and
12,627,753 outstanding at December 31, 1999, and
13,443,754 issued and 12,630,874 outstanding at
March 31, 2000) 134 134
Additional capital 68,540 68,518
Retained earnings (deficit) (2,935) (2,320)
-------- --------
65,739 66,332
Less common stock in treasury, at cost (9,600) (9,563)
-------- --------
Total stockholders' equity 56,139 56,769
-------- --------
Total liabilities and stockholders' equity $180,965 $175,389
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
<PAGE>
MAC-GRAY CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENTS (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------
1999 2000
---- ----
<S> <C> <C>
Revenue:
Route revenue 27,825 27,174
Sales revenue 7,510 8,206
Other 2,044 1,833
------- -------
Total revenue $37,379 $37,213
------- -------
Cost of revenue:
Route related expenses 19,007 18,643
Depreciation and amortization 4,292 4,729
Cost of product sales 4,849 5,522
------- -------
Total cost of revenue 28,148 28,894
------- -------
Gross margin 9,231 8,319
------- -------
Selling, general and administration 5,423 5,562
------- -------
Income from operations 3,808 2,757
Interest and other expense, net (1,448) (1,581)
------- -------
Income before provision for income taxes 2,360 1,176
Provision for income taxes 985 561
------- -------
Net income $ 1,375 $ 615
------- -------
Net income per common share - basic $0.11 $0.05
======= =======
Weighted average common shares outstanding 12,751 12,630
======= =======
Net income per common share - diluted $0.11 $0.05
======= =======
Weighted average common shares outstanding - diluted 12,776 12,630
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE>
MAC-GRAY CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
(In thousands, except share data)
<TABLE>
<CAPTION>
Common stock Treasury Stock
Number Additional Retained Number
of shares Value capital earnings of shares Cost Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 12,627,753 $134 $68,540 ($2,935) 816,001 ($9,600) $56,139
Net income 615 615
Stock granted 3,121 (22) (3,121) 37 15
--------------------------------------------------------------------------------------
Balance, March 31, 2000 12,630,874 $134 $68,518 ($2,320) 812,880 ($9,563) $56,769
======================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
MAC-GRAY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 2000
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,375 $ 615
Adjustments to reconcile net income to net cash
flows provided by operating activities:
Depreciation and amortization 4,525 5,048
Loss (gain) on sale of assets (44) (45)
Deferred income taxes 451 461
Decrease in accounts receivable 1,721 513
Decrease (increase) in inventory (1,443) 2,940
Decrease (increase) in prepaid expenses and other
assets (2,552) 167
Increase (decrease) in accounts payable, accrued
route rent and accrued expenses 613 (3,484)
Increase in deferred revenues and customer deposits (1,453) (1,288)
------- -------
Net cash flows provided by operating activities 3,193 4,927
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (3,327) (2,566)
Proceeds from sale of property and equipment 146 194
------- -------
Net cash flows used in investing activities (3,181) (2,372)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt and capital lease
obligations (595) (497)
Advances (payments) on line-of-credit, net 11,206 (1,654)
Purchase of redeemable common stock (7,645) -
Repurchase of common stock (1,042) -
------- -------
Net cash flows provided by (used for) financing
activities 1,924 (2,151)
------- -------
Increase in cash and cash equivalents 1,936 404
Cash and cash equivalents, beginning of period 6,181 6,566
------- -------
Cash and cash equivalents, end of period 8,117 6,970
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE>
MAC-GRAY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except per share data)
1. BASIS OF PRESENTATION
In the opinion of the management of Mac-Gray Corporation (the "Company" or
"Mac-Gray"), the accompanying unaudited condensed consolidated financial
statements contain all adjustments (consisting of only normal, recurring
adjustments) which are necessary to present fairly the Company's financial
position as of March 31, 2000 and December 31, 1999 and the results of its
operations and cash flows for the three month periods ended March 31, 2000 and
1999. The unaudited interim condensed consolidated financial statements do not
include all information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles.
These unaudited condensed consolidated financial statements should be read in
conjunction with the Company's fiscal 1999 audited consolidated financial
statements filed with the Securities and Exchange Commission in its Annual
Report on Form 10-K. The results for interim periods are not necessarily
indicative of the results to be expected for the full year.
The Company generates the majority of its revenue from card and coin-
operated laundry and reprographics equipment located in the Northeastern,
Midwestern and Southeastern United States. A large portion of its revenue is
also derived from the sale and lease of the Company's MicroFridge(R) product
lines. The Company's principal customer base is the multi-housing market, which
consists of apartments, condominium units, colleges and universities. The
Company also sells, services and leases commercial laundry equipment to
commercial laundromats and institutions. The majority of the Company's purchases
of laundry equipment is from one supplier.
2. LONG TERM DEBT
The 1998 Credit Facility provides for borrowings under a revolving line of
credit of up to $90,000.
The 1998 Credit Facility restricts payments of dividends and other
distributions, restricts the Company from making certain acquisitions and
incurring indebtedness, and requires it to maintain certain financial ratios.
The Company was in compliance with the terms of the credit agreement as of
March 31, 2000. The balance outstanding under the 1998 Credit Facility was
$79,452 at March 31, 2000. Long term debt also includes various notes payable
totaling $2,955 at December 31, 1999 and $2,824 at March 31, 2000 and various
unsecured notes payable to former shareholders totaling $987 at December 31,
1999 and $809 at March 31, 2000.
3. DEFERRED RETIREMENT OBLIGATION
The deferred retirement obligation at March 31, 2000 and December 31, 1999
relates to payments due to a former shareholder of the Company in connection
with a retirement agreement which provides for annual payments of $104 until the
death of the former shareholder. The liability at March 31, 2000 and
December 31, 1999 has been estimated based upon the life expectancy of the
former shareholder utilizing actuarial tables.
4. COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation proceedings arising in the
normal course of business. In the opinion of management, the Company's ultimate
liability, if any, under pending litigation would not materially affect its
financial condition or the results of its operations.
7
<PAGE>
MAC-GRAY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except per share data)
5. EARNINGS PER SHARE
A reconciliation of the weighted average number of common shares
outstanding is as follows:
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 2000
-------------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------------- ------------------- -------------
<S> <C> <C> <C>
Net income available to common stockholders - basic $615 12,630 $0.05
================= =================== =============
Effect of dilutive securities:
Stock options 0
-------------------
Net income available to common stockholders - diluted $615 12,630 $0.05
================= =================== =============
<CAPTION>
For the Three Months Ended March 31, 1999
-------------------------------------------------------------
Income Shares Per-Share
(Numerator) (Denominator) Amount
----------------- ------------------- -------------
<S> <C> <C> <C>
Net income available to common stockholders - basic $1,375 12,751 $0.11
================= =================== =============
Effect of dilutive securities:
Stock options 25
-------------------
Net income available to common stockholders - diluted $1,375 12,776 $0.11
================= =================== =============
</TABLE>
6. REPURCHASE OF COMMON STOCK
Included in treasury stock are 600,026 shares of common stock purchased
under a redemption agreement related to a 1997 acquisition. The total cost of
these shares amounted to $7,645.
7. SEGMENT INFORMATION
The Company operates three business units which are based on the Company's
different product and service categories: Laundry, MicroFridge(R) and
Reprographics. These three business units have been aggregated into two
reportable segments ("Laundry and Reprographics" and "MicroFridge(R)"). The
Laundry and Reprographics business units have been aggregated into one
reportable segment (Laundry and Reprographics) since the long-term financial
performance of these divisions are affected by similar economic conditions. The
Laundry segment provides coin and card-operated laundry equipment to multiple
housing facilities such as apartment buildings, colleges and universities and
public housing complexes. The Laundry business unit also operates as a
distributor of and provides service to commercial laundry equipment in public
laundromats, as well as institutional purchasers, including hospitals,
restaurants and hotels, for use in their own on-premise laundry facilities. The
Reprographics business unit
8
<PAGE>
MAC-GRAY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except per share data)
provides coin and card-operated reprographics equipment to academic and public
libraries. The MicroFridge(R) segment sells and leases its own proprietary line
of refrigerator/freezer/microwave oven combinations to a customer base which
includes colleges and universities, government, hotel, motel and assisted living
facilities.
There are no intersegment revenues.
The table below presents information about the reported operating income of
Mac-Gray for the three months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Three months ended March 31, 2000
------------------------------------------------
Laundry and
Reprographics MicroFridge(R) Total
------------- -------------- -----
<S> <C> <C> <C>
Revenues $31,122 $6,091 $37,213
Gross margin 6,286 2,033 8,319
<CAPTION>
Three months ended March 31, 1999
------------------------------------------------
Laundry and
Reprographics MicroFridge(R) Total
------------- -------------- -----
<S> <C> <C> <C>
Revenues $30,688 $6,691 $37,379
Gross margin 6,852 2,379 9,231
</TABLE>
The following are reconciliations to corresponding totals in the accompanying
consolidated financial statements:
<TABLE>
<CAPTION>
1999 2000
----- -----
<S> <C> <C>
Income
Total gross margin for reportable segments $ 9,231 $ 8,319
Operating expenses (5,423) (5,562)
Interest expense, net (1,407) (1,580)
Other expense, net (41) (1)
-------- --------
Income before provision for income taxes $ 2,360 $ 1,176
======== ========
<CAPTION>
December 31, March 31,
1999 2000
---- ----
<S> <C> <C>
Assets
Laundry $131,700 $128,986
MicroFridge(R) 16,863 14,236
-------- --------
Total for reportable segments 148,563 143,222
Corporate (1) 31,765 31,324
Deferred income taxes 637 843
-------- --------
Total assets $180,965 $175,389
======== ========
</TABLE>
(1) Principally cash, prepaid expenses and property, plant & equipment.
9
<PAGE>
MAC-GRAY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(In thousands, except per share data)
8. COMPREHENSIVE INCOME
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130. "Reporting Comprehensive Income" (SFAS 130) in
June 1997. The Company adopted SFAS 130 for fiscal 1998. SFAS 130 requires
presentation of certain information related to comprehensive income. For the
three months ended March 31, 2000 and 1999, the Company had no other
comprehensive income as defined by SFAS 130, therefore there is no impact on the
Company's balance sheet and income statement.
9. RECENT ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues clarifies
the following: the definition of an employee for purposes of applying APB
Opinion No. 25; the criteria for determining whether a plan qualifies as a non
compensatory plan; the accounting consequence of various modifications to the
terms of previously fixed stock options or awards; and the accounting for an
exchange of stock compensation awards in a business combination. FIN 44 is
effective July 1, 2000, but certain conclusions in FIN 44 cover specific events
that occurred after either December 15, 1998 or January 12, 2000. The Company
does not expect the application of FIN 44 to have a material impact on the
Company's financial position or results of operations.
10
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This report contains, in addition to historical information, forward-
looking statements that involve risks and uncertainties. The Company's actual
results could differ significantly from the results discussed in the forward-
looking statements. Factors that could cause or contribute to such differences
include: implementation of acquisition strategy; integration of acquired
businesses; ability to meet future capital requirements; dependence upon certain
suppliers; lease renewals; retention of senior executives; market acceptance of
new products and services; and those factors discussed in Mac-Gray's filings
with the Securities and Exchange Commission ("SEC"). The historical financial
information presented herein represents the consolidated results of Mac-Gray.
The following discussion and analysis should be read in conjunction with the
financial statements and related notes thereto presented elsewhere in this
report and with the annual financial statements and related notes previously
filed by Mac-Gray with the SEC on its Annual Report on Form 10-K.
OVERVIEW
Mac-Gray derives its revenue principally through the operation and
maintenance of amenities in multiple housing units, including laundry and
MicroFridge products. Mac-Gray also operates card and coin-operated
reprographics equipment in academic and public libraries. Mac-Gray operates
laundry rooms, reprographics equipment and MicroFridge equipment under long-term
leases with property owners, colleges and universities and governmental
agencies. Mac-Gray's laundry services business consists of laundry equipment
located in 32 states. Mac-Gray's reprographics business is concentrated in the
northeast, Florida and Texas. Mac-Gray's MicroFridge business consists of leased
units located throughout the United States as well as sales of its MicroFridge
product line.
Mac-Gray also derives revenue as a distributor and servicer of commercial
laundry equipment manufactured by Maytag Corporation, and sells laundry
equipment manufactured by American Dryer Corp., The Dexter Company, and
Whirlpool Corporation. Additionally, the Company sells or rents laundry
equipment to restaurants, hotels, health clubs and similar institutional users
that operate their own on-premise laundry facilities.
The MicroFridge services division derives revenue through the sale and
rental of its MicroFridge products to colleges and universities, military bases,
assisted living facilities and the hotel and motel market.
REDEEMABLE COMMON STOCK
In January 1999 the Company repurchased all of the remaining redeemable
common stock outstanding at the end of 1998. The redeemable common stock was
issued in April 1997 in conjunction with the Company's acquisition of Sun
Services of America, Inc. and R. Bodden Coin-Op Laundry, Inc. The redemption
amounted to 600,026 shares and a total cash outlay of $7.6 million. The shares
have been placed in treasury by the Company.
11
<PAGE>
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999.
Revenue. Revenue decreased by $166 to $37,213 for the three months ended
March 31, 2000 from the three months ended March 31, 1999. This decrease is
related to a decrease in route revenue, which is made up of money collected
through coin- and card-operated equipment in the laundry and reprographics
divisions. Laundry route revenue decreased by $651 as compared to 1999 due
primarily to changes in operating procedures designed to improve that division's
overall efficiency. These changes included improvements to the collection,
service and other procedures. The Company believes that these changes have
created operating expense savings, greater customer satisfaction and more
predictable collection cycles. The reprographics division also generated less
route revenue than a year ago due primarily to less volume at existing accounts,
caused by the availability of free laser printer copies at many college
libraries. Sales revenue increased $696, or 9%, from the three months ended
March 31, 1999, due primarily to an increase in sales by the laundry division.
Route Related Expenses. Route related expenses include rent paid to route
customers as well as those costs associated with installing and servicing
machines and the costs of collecting, counting and depositing route revenue.
Route related expenses decreased $364, or 2% for the three months ended March
31, 2000 from the three months ended March 31, 1999. This decrease was
primarily the net effect of the decrease in expenses associated with the
decrease in route revenue, and an increase in expenses associated with the
increase in the number of machines in service on March 31, 2000 as compared to
March 31, 1999.
Depreciation and Amortization. Depreciation and amortization increased by
$437, or 10%, to $4,729 for the three months ended March 31, 2000 from the three
months ended March 31, 1999. The increase was primarily attributable to
machines associated with new laundry route contracts and machines used to
replace existing equipment. Also affecting depreciation and amortization was
the acquisitions of businesses during the latter half of 1999.
Selling, General and Administration. Selling, general and administration
expenses increased by $139, or 3%, to $5,562 for the three months ended March
31, 2000 from the three months ended March 31, 1999. The increase was the net
of several changes in selling, general and administration spending, including
increases in salaries, associated taxes and benefits, reserves for doubtful
accounts, and decrease in marketing expenses.
Interest and Other Expense. Interest and other expense, net of interest and
other income, increased by $133, or 9%, to $1,581 for the three months ended
March 31, 2000 from the three months ended March 31, 1999. This increase is
primarily related to an increase in the average outstanding borrowings caused by
internal growth and business acquisitions, which occurred in the second half of
1999, and an increase in the average interest rates charged the Company in the
period ended March 31, 2000 as compared to a year ago.
Provision for Income Taxes. The provision for income taxes decreased by
$424, or 43%, to $561 for the three months ended March 31, 2000 from the three
months ended March 31, 1999. This decrease is due to the corresponding decrease
in taxable income from $2,360 for the three months ended March 31, 1999 to
$1,176 for the first quarter of 2000. The effective tax rate for the period
ended March 31, 2000 is 48% as compared to 42% for the same period in 1999 due
to non-deductible expenses, primarily amortization of intangible assets
associated with acquired businesses, making up a larger portion of total taxable
income.
SEASONALITY
The Company experiences moderate seasonality as a result of its significant
operations in the college and university market. Revenues derived from the
college and university market represent approximately 25% of the Company's total
revenue. Route and rental revenues are derived substantially during the school
year which includes the first, second and fourth calendar quarters. Conversely,
the Company increases its
12
<PAGE>
operating expenditures during the third calendar quarter when colleges and
universities are not in session as a result of Mac-Gray's increased product
installation activities. Product sales, principally MicroFridge(R), to this
market are also higher during the third calendar quarter.
LIQUIDITY AND CAPITAL RESOURCES (DOLLARS IN THOUSANDS)
Mac-Gray's primary sources of cash since December 31, 1999 have been
operating activities and bank borrowings. The Company's primary uses of cash
have been the purchase of new laundry equipment, MicroFridge equipment,
reprographics equipment and smart card based payment systems. The Company
anticipates that it will continue to use cash flow from its operating activities
to finance working capital needs, including interest payments on any outstanding
indebtedness, as well as capital expenditures. To help mitigate the effect of
possible higher interest rates in the future, on February 18, 2000, the Company
negotiated interest rate swaps which fixed the interest rates on $20,000 of
outstanding borrowings for 3 years and $20,000 of outstanding borrowings for
5 years.
Cash flows provided by operations were $4,927 and $3,193 for the three
months ended March 31, 2000 and 1999, respectively. Cash flow from operations
consists primarily of route revenue, product sales, laundry equipment service
revenue, and rental revenue, offset by route rent, route expenditures, cost of
product sales, cost of rental revenue, general and administration expenses and
sales and marketing expenses. The increase from 1999 to 2000 is primarily
attributable to an overall improvement in the Company's financial performance
that is further enhanced by an increase in depreciation and amortization which
is a non-cash expense.
Cash used in investing activities was $2,372 and $3,181 for the three
months ended March 31, 2000 and 1999, respectively. Capital expenditures were
$2,566 and $3,327 for the three months ended March 31, 2000 and 1999,
respectively. The decrease in capital expenditures was due to the average cost
of equipment placed in service decreasing in the first quarter of 2000 as
compared to the same period a year ago.
Net cash flows from financing activities consist primarily of proceeds from
and repayments of bank borrowing, netting to a reduction of the revolving line
of credit and other debt of $2,141 for the three months ended March 31, 2000.
This decrease was due to improved overall management of working capital, in
particular operating practices which led to inventory reductions of $2,940 since
December 31, 1999. For the period ended March 31, 1999 financing activities
consisted primarily of proceeds from and repayment of bank borrowing and capital
stock transactions. Capital stock transactions in the period ended March 31,
1999 included the use of $7,645 of borrowings to purchase redeemable common
stock.
The Company's current loan agreement provides for maximum borrowing of
$90,000. As of March 31, 2000 the available balance was $9,844. Although the
Company expects to fund its operations, debt service obligations, internal
growth, and acquisitions through cash generated from operations and the
available loan balance, it may be necessary to postpone some capital spending or
acquisitions until adequate cash is generated from operations or a new credit
facility is obtained. In April 2001, the Company's current loan agreement
converts to a term loan, payable over two years. Currently the Company is
investigating alternatives to its current loan agreement in order to replace it
prior to its conversion to a term loan. The Company was in compliance with the
terms of the credit agreement as of March 31, 2000. The blended interest rate in
effect at March 31, 2000 was approximately 8.0%.
13
<PAGE>
Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company is exposed to a variety of risks, including changes in interest
rates on its borrowings. There have been no material changes in market risk
exposures from the information disclosed in the Form 10-K for the year ended
December 31, 1999.
14
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following exhibits are being filed as part of this Form 10-Q:
EXHIBIT NO. DESCRIPTION
----------- -----------
27.1 Financial Data Schedule for the three months ended March 31, 2000
(b) Reports on Form 8-K
None
15
<PAGE>
SIGNATURE
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 thereunder duly authorized.
MAC-GRAY CORPORATION
May 15, 2000 /s/ Michael J. Shea
--------------------
Michael J. Shea
Executive Vice President, Chief
Financial Officer and Treasurer
(On behalf of registrant and as principal
financial officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,970
<SECURITIES> 0
<RECEIVABLES> 8,766
<ALLOWANCES> 728
<INVENTORY> 3,581
<CURRENT-ASSETS> 27,795
<PP&E> 151,443
<DEPRECIATION> 73,971
<TOTAL-ASSETS> 175,389
<CURRENT-LIABILITIES> 24,250
<BONDS> 84,779
0
0
<COMMON> 134
<OTHER-SE> 56,635
<TOTAL-LIABILITY-AND-EQUITY> 175,389
<SALES> 8,206
<TOTAL-REVENUES> 37,213
<CGS> 5,522
<TOTAL-COSTS> 28,894
<OTHER-EXPENSES> 5,562
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,580
<INCOME-PRETAX> 1,176
<INCOME-TAX> 561
<INCOME-CONTINUING> 615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 615
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
