<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
------------------------
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF SECURITIES
EXCHANGE ACT OF 1943
For the transition period from _____________ to ________________
Commission file number 000-23121
-------------------
U.S.A. Floral Products, Inc.
----------------------------
Delaware 52-2030697
- --------------------------------------------------------------------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
1025 Thomas Jefferson Street, N.W., Suite 600 West Washington, DC 20007
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (202) 333-0800
----------------------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Indicate by check 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
------ ------
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the registrant's Common Stock, par value
$.001 per share (which is the only outstanding class of the registrant's common
stock) was 14,350,028 shares at May 6, 1998.
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
----------------------------
INDEX
-----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Balance Sheet at March 31, 1998
Statement of Operations for the Three Months Ended
March 31, 1998
Statement of Stockholders'Equity
Statement of Cash Flows for the Three Months Ended March 31, 1998.
Notes to Financial Statements
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition
Signatures
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
<TABLE>
<CAPTION>
March 31,1998 December 31, 1997
------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 13,392 $ 15,582
Accounts receivable, net of reserve
of $1,498 and $599 respectively 41,985 18,505
Inventory 9,867 4,937
Due from related parties - 1,153
Prepaid income taxes - 52
Prepaid expenses 2,346 959
------------- -----------------
Total current assets 67,590 41,188
Property and equipment, net 15,497 8,726
Due from related parties - 994
Deferred income taxes 698 394
Goodwill, net 141,842 52,569
Restricted cash 3,526 -
Deferred financing expense 1,676 1,696
Other assets 1,728 1,681
------------ ----------------
Total assets $ 232,557 $ 107,248
============ ================
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ 47,915 $ 290
Accounts payable and accrued
expenses 28,196 12,734
Due to stockholders 11,927 6,060
Income taxes payable 3,170 1,008
Due to related parties - 36
------------- -----------------
Total current liabilities 91,208 20,128
Long-term debt 383 309
Deferred income taxes 6 97
Other 991 549
------------- -----------------
Total liabilities 92,588 21,083
Commitments and contingencies
Stockholders' equity
Common stock, $0.001 par value; 100,000 shares authorized;
12,606 and 9,594 shares issued and outstanding 13 9
Additional paid-in-capital 135,588 85,740
Retained earnings 4,368 416
------------- -----------------
Total stockholders' equity 139,969 86,165
------------- -----------------
Total liabilities and
stockholders' equity $ 232,557 $ 107,248
============= =================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share amounts)
Three Months Ended
March 31, 1998
--------------
Net revenues $ 100,520
Cost of sales 74,056
----------
Gross profit 26,464
Selling, general and administrative 18,540
Goodwill amortization 746
----------
Income from operations 7,178
Other income (expense):
Interest income 270
Interest expense (681)
Other 315
----------
Income before for income taxes 7,082
Provision for income taxes 3,130
----------
Net income $ 3,952
==========
Net income per share
Basic $ 0.32
Diluted $ 0.31
Weighted average shares outstanding:
Basic 12,360
Diluted 12,927
The accompanying notes are an integral part of these financial statements.
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Common Stock
----------------------- Additional Total
Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
------ ------ ------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 9,594 $ 9 $ 85,740 $ 416 $ 86,165
Issuance of 3,012 share of Common
Stock for business acquisitions 3,012 4 49,848 49,852
Net Income 3,952 3,952
-----------------------------------------------------------
Balance at March 31, 1998 12,606 $ 13 $ 135,588 $ 4,368 $ 139,969
===========================================================
</TABLE>
The accompanying notes are an intregral part of these financial statements.
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the three months ended March 31, 1998
(in thousands)
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income $ 3,952
Adjustments to reconcile net income to cash used in
operating activities:
Depreciation and amortization 568
Amortization of goodwill 746
Amortization of deferred financing costs 90
Loss on disposal of property and equipment (16)
Deferred income taxes (163)
Change in operating assets and liabilities:
Accounts receivable (7,121)
Inventory (1,272)
Due from other related parties 3,323
Prepaid expenses and other current assets (477)
Other assets 484
Income taxes payable 1,757
Other liabilities 253
Accounts payable and accrued expenses 1,111
-------------
Net cash provided by operating activities: 3,235
-------------
Cash flows from investing activities:
Purchases of property and equipment (585)
Payment for purchase of January 1998 Class, net of cash acquired (47,332)
Deferred acquisition costs 199
Increase in restricted cash (3,526)
-------------
Net cash used in investing activities (51,244)
-------------
Cash flows from financing activities
Increase in deferred financing costs (70)
Repayments on long-term debt (1,611)
Proceeds from credit facility, net 47,500
-------------
Net cash provided by financing activities 45,819
-------------
Net decrease in cash and cash equivalents (2,190)
Cash and cash equivalents - beginning of the period 15,582
-------------
Cash and cash equivalents - end of the period $ 13,392
=============
</TABLE>
See Note 7 for supplemental cash flow information.
The accompanying notes are integral part of these financial statements
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. Financial Statements
<PAGE>
U.S.A. FLORAL PRODUCTS, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(in thousands)
NOTE 1--GENERAL
U.S.A. Floral Products, Inc., a Delaware corporation, ("USA Floral" or the
"Company") was founded in April 1997 to create a nationwide distributor of
floral products. USA Floral acquired eight U.S. businesses in the floral
industry (the "Founding Companies") subsequent to the initial public offering
("IPO") of its Common Stock in October 1997 and acquired six U.S. businesses
in the floral industry (the "January 1998 Class") in January 1998 (together, the
"Acquisitions"). These financial statements include the results of operations
of USA Floral, the Founding Companies and the January 1998 Class subsequent to
their acquisition. The Company intends to continue to acquire, through merger
or purchase, similar companies to expand its national operations. See Note 8 for
companies purchased subsequent to March 31, 1998.
The unaudited condensed consolidated financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented. All such adjustments
are of a normal recurring nature.
The unaudited interim financial information contained in the consolidated
financial statements should be read in conjunction with the consolidated
financial statements contained in the Company's 1997 Annual Report on Form 10-K.
NOTE 2--ACQUISITIONS
As discussed in Note 3 to the consolidated financial statements included
in the Company's 1997 Annual Report on Form 10-K, USA Floral acquired all the
outstanding stock of the Founding Companies effective October 16, 1997.
Additionally, in January 1998, USA Floral consummated the acquisition of the
following six companies (referred to collectively as the "January 1998
Class"):
Continental Farms Limited ("Continental Farms") and Atlantic Bouquet
Company Limited ("Atlantic Bouquet"), each a Florida limited partnership
headquartered in Miami, Florida. Prior to their acquisition, Continental Farms
and Atlantic Bouquet were under common ownership. Continental Farms is an
importer and broker of floral products from South America and Central America
and Atlantic Bouquet is a bouquet manufacturer. Both companies distribute
their products throughout the United States and Canada.
XL Group, Inc. ("XL Group") imports fresh cut floral products from farms
located primarily in Costa Rica, Ecuador and Columbia and distributes these
products to wholesale florists and supermarkets throughout the United States.
XL Group is located in Miami, Florida.
<PAGE>
Koehler & Dramm, Inc. ("Koehler & Dramm") is a regional wholesale florist
company serving retailers throughout the upper Midwest United States. Koehler
& Dramm is headquartered in Minneapolis, Minnesota and has a branch operation
in Kansas City, Missouri.
Everflora, Inc. ("Everflora") and Everflora Miami, Inc. ("Everflora
Miami") are importers/brokers of perishable floral products. Everflora,
headquartered in Creskill, New Jersey, sells various types of flowers to
wholesalers across the United States. Everflora Miami, headquartered in Miami,
Florida, sells various types of flowers and bouquets, primarily imported from
Central America and South America.
H&H Flowers, Inc. d/b/a/ La Fleurette ("La Fleurette"), which does business
under the name of "La Fleurette" assembles and sells floral bouquets and
other arrangements to the supermarket industry primarily throughout the
eastern United States. H&H Flowers is headquartered in Miami, Florida. A
member of the board of directors of USA Floral was a stockholder in H&H
Flowers.
Ultraflora Corporation ("Ultraflora") imports and sells floral bouquets
and other arrangements to mass markets throughout the United States and
Canada. Ultraflora is headquartered in Miami, Florida. A member of the Board
of Directors of USA Floral was a stockholder in Ultraflora.
The following table sets forth the consideration paid (the "Purchase
Consideration") (a) in cash and (b) in shares of Common Stock to the common
stockholders of each of the January 1998 Class, the estimated fair value of the
net assets acquired and resulting goodwill. For purposes of computing the
purchase price for accounting purposes, the value of shares is based upon an
average share price calculated using the purchase contract formula, which
incorporates the share price at the date of the letter of intent, the date of
the definitive agreement and the average daily share price between the two
aforementioned events. The total purchase consideration also reflects the
contingent consideration related to earn-out arrangements included in the
definitive agreement for Ultraflora, which provides for the Company to pay
additional consideration, based on 1997 earnings before interest and taxes, of
approximately $5,892 in shares of Common Stock, calculated by reference to the
average closing price of the Common Stock for each trading day during the thirty
calendar day period ending December 31, 1997. The estimated resultant 359,487
shares will be issued when all amounts have been finalized.
The contingent consideration related to earn-out arrangements included in the
definitive agreement for XL Group has not been included in the purchase
consideration. This arrangement provides for the Company to pay additional
consideration, based on 1998 earnings before interest and taxes, of up to $4,000
in shares of Common Stock, calculated by reference to the average closing price
of the Common Stock for each trading day during the thirty calendar day period
ending December 31, 1998. The contingent consideration related to earn-out
arrangements included in the definitive agreement for La Fleurette also has not
been included in the purchase consideration. This arrangement provides for the
Company to pay additional consideration, without limit, based on earnings before
interest and taxes for the twelve month period ending June 30, 1998, in shares
of Common Stock, calculated by reference to the average closing price of the
Common Stock for each trading day during the thirty calendar day period ending
June 30, 1998.
The purchase price has been allocated to each company's assets and liabilities
based on their respective carrying values, with the exception of acquired
properties at one of the entities, as these carrying values are deemed to
represent
<PAGE>
fair market value of these assets and liabilities. The fair market
value of acquired properties was estimated and will be determined via an
independent valuation by a third party. The allocation of the purchase price is
preliminary, but the Company does not anticipate that the final allocation of
purchase price will differ significantly from that as described above.
<TABLE>
<CAPTION>
SHARES OF NET
----------- -----------
COMMON VALUE OF TOTAL ASSETS
----------- --------- --------------- -----------
CASH STOCK SHARES CONSIDERATION ACQUIRED GOODWILL
--------- ----------- --------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CONTINENTAL FARMS AND ATLANTIC
BOUQUET....................................... $27,500 1,642,672 $27,500 $55,000 $5,359 $49,641
XL GROUP...................................... 11,250 660,938 11,000 22,250 5,525 16,725
KOEHLER & DRAMM............................... 5,000 298,596 5,000 10,000 3,544 6,456
EVERFLORA AND EVERFLORA, MIAMI................ 4,000 246,654 4,000 8,000 2,889 5,111
LA FLUERETTE.................................. 1,600 -- -- 1,600 (710) 2,310
ULTRAFLORA.................................... 2,750 522,768 8,642 11,392 1,559 9,833
------- --------- ------- -------- ------- -------
TOTAL......................................... $52,100 3,371,628 $56,142 $108,242 $18,166 $90,076
======= ========= ======= ======== ======= =======
</TABLE>
The following unaudited pro forma summary presents the combined results of
operations of the Company, the January 1998 Class and the Founding Companies, as
if the acquisitions and USA Floral's IPO occurred at January 1, 1997. The pro
forma amounts give effect to certain adjustments including amortization of
intangibles, reduction in salary, bonuses and benefits in connection with the
transactions, anticipated compensation of USA Floral's management, associated
costs of being a public company and income taxes. The pro forma summary does not
purport to represent what USA Floral's results of operations would actually have
been if such transactions in fact had occurred on January 1, 1997 and are not
necessarily representative of USA Floral's results of operations for any future
period. Since the January 1998 Class and the Founding Companies were not under
common control or management, historical combined results may not be comparable
to, or indicative of, future performance.
THREE MONTHS ENDED
YEAR ENDED ------------------
December 31, 1997 MARCH 31, 1998 MARCH 31, 1997
----------------- ------------------ ------------------
Net sales............ $360,241 $109,020 $108,527
Operating income..... 18,432 6,794 7,965
Net income........... 8,805 3,556 4,240
Net income per share
Basic $ 0.66 $ 0.27 $ 0.32
Diluted $ 0.66 $ 0.26 $ 0.32
NOTE 3 -- CREDIT FACILITY
On October 16, 1997 the Company entered into a Credit Agreement ("Agreement")
with various lending institutions and Bankers Trust Company, as agent, (the
"Bank") for a $100,000 credit facility (the "Credit Facility"). The Agreement
provides for a revolving credit facility with a $85,000 sub-limit for permitted
acquisitions and a $15,000 sub-limit for working capital loans and letters of
credit. The proceeds of the Credit Facility will be used to finance acquisitions
and fund related working capital requirements. Amounts outstanding under the
<PAGE>
Agreement bear interest, at the Company's option, at either the Bank's base rate
plus an applicable margin of up to 0.625% or a Eurodollar rate plus an
applicable margin of up to 1.875%. The Company paid on closing a financing fee
of $1,769, which has been deferred and will be amortized over the life of the
credit agreement. In addition, a commitment fee of 0.25% is charged on the
unused portion of the revolving credit facility on a quarterly basis. At March
31, 1998, borrowings of $47,500 at interest rates varying from 6.5% to 7.25%
were outstanding under the Credit Agreement, which expires October 16, 2002. At
March 31, 1998, a letter of credit of $4,300 was outstanding.
The Credit Facility is collateralized by receivables, inventories, equipment
and certain real property. Under the terms of the Agreement, the Company is
required to maintain certain financial ratios and other financial conditions.
The Agreement prohibits the Company from incurring additional indebtedness,
limits certain investments, advances or loans and restricts substantial asset
sales, capital expenditures and cash dividends. At March 31, 1998 the Company
was in compliance with all loan covenants.
In connection with the acquisitions consummated in April 1998 (see Note 8--
Subsequent Events), the Company borrowed an additional $25,000 under the
revolving credit facility. The interest rate on the additional borrowing was
7.3125%.
NOTE 4 INVENTORY
Inventory consists of the following finished goods:
March 31,
----------
1998
----------
Perishables $1,662
Hardgoods.... 8,205
------
$9,867
======
NOTE 5--EARNINGS PER SHARE
The shares used in computing net income per share for the three months
ended March 31, 1998 is calculated as follows:
<TABLE>
<CAPTION>
Actual
-------------- Weighted
Shares Average Shares
-------------- ------------------
<S> <C> <C>
Shares outstanding at 12/31/97 9,594,050
Shares due to the owners of Founding Companies
under earn-out arrangements 318,934
Shares issued to the owners of the
January 1998 Class 3,012,141
Shares due to owners of the owners of UltraFlora
under an earn-out arrangement 359,487
----------
Shares outstanding- Basic 13,284,612 12,359,761
Dilution attributable to options 567,004
----------
Shares outstanding Diluted 12,926,765
==========
</TABLE>
The above calculations do not include shares which may be issued under
earn-out arrangements for XL Group and La Fleurette as discussed in Note 2.
<PAGE>
NOTE 6--COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal proceedings that have arisen in the
ordinary course of business. The Company does not believe that any of these
proceedings will have a material adverse effect on the financial position or
results of operations of the Company.
NOTE 7 SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information:
<TABLE>
<CAPTION>
Three months ended
March 31, 1998
------------------------
<S> <C>
Cash paid during the period for interest $ 152
--------
Cash paid during the period for income taxes $ 772
========
Supplemental disclosure of non-cash transactions:
Business acquisitions:
Cash paid for business acquisitions $ 52,100
Less: cash acquired 4,768
--------
Cash paid for business acquisitions, net 47,332
Issuance of common stock for business acquisitions 56,142
--------
103,474
Fair value of net assets acquired, net of cash 13,398
--------
$ 90,076
========
</TABLE>
NOTE 8 SUBSEQUENT EVENT
In April 1998, USA Floral consummated the acquisition of the following eight
companies (referred to collectively as the "April 1998 Class"):
. David L. Jones Wholesale, Ltd., one of the largest wholesale floral and
import companies in Canada with offices in Vancouver, Edmonton, Calgary and
Winnipeg.
. Edfrancar, Inc., d/b/a Florafresh International, is a Miami-based bouquet
manufacturer, distributor and importer servicing major retail chains such as
Albertson's, Winn-Dixie, Food Lion and K-Mart;
. AFB Marketing Inc. d/b/a Allan Stanley Greenhouses, headquartered in
Carlsbad, California, is a bouquet manufacturer and distributor serving
California Nevada, Arizona, New Mexico and Colorado;
. Pacific Floral Wholesale, Inc. and Rose City Floral, Inc., are regional
floral distributors serving the Portland, Oregon area;
. Master Flowers Inc., d/b/a Sabana Farms, is a Miami-based regional importer
of fresh cut floral products serving over 300 national wholesale accounts;
. Maxima Farms, Inc. is an importer and broker of fresh cut flowers to over 450
customers in the United States, Europe and Canada with offices in Florida and
California;
. Selecta Farms, Inc. and Saint Ann Trading Corporation are a Miami-based
importer of fresh cut flowers from international growers serving over 450
customers nationwide;
<PAGE>
. Elite Farms, Talent, Inc. and Anvacu, Inc., are importers of fresh cut
flowers located in Miami serving over 200 customers on a nationwide basis.
Aggregate consideration paid for the acquisition of the April 1998 Class was
approximately $44 million (excluding potential additional consideration under
earn-out arrangements of $19 million), comprising cash of $20 million and
approximately 1,065,500 shares of Common Stock with a value of $24 million.
Revenues for the eight companies for their latest respective fiscal year end
aggregated approximately $102 million. Goodwill arising from these
acquisitions, which will be accounted for as purchases, is expected to
approximate $35 million, excluding earn-out arrangements. Also, options to
purchase 99,600 shares were granted to management and employees of the
companies acquired in the April 1998 Class at market prices prevailing at the
date of grant ($22.188 to $22.50).
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
- ---------------------
Three Months Ended March 31, 1998
Net Sales. Net sales for the three months ended March 31, 1998 were $100.5
million.
Cost of Sales. Cost of sales for the three months ended March 31, 1998 were
$74.1 million. Cost of sales as a percentage of sales were 73.7%, resulting in a
gross profit margin of 26.3%.
Selling, General and Administrative. Selling general and administrative
expenses were $18.5 million in the three months ended March 31, 1998. Selling,
general and administrative expenses for the period were 18.4% as a percentage of
sales.
Pro Forma Combined Results of Operations
- ----------------------------------------
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
The following unaudited pro forma information presents the combined results of
operations of the Company, the January 1998 Class and the Founding Companies, as
if the acquisitions and the IPO occurred on January 1, 1997. The information
does not include financial results of the April 1998 Class. The pro forma
amounts give effect to certain adjustments, including amortization of intangible
assets, reduction in salary, bonuses and benefits in connection with the
transactions, anticipated compensation of the Company's management and
associated costs of being a public company, and income taxes.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED ------------------
December 31,1997 MARCH 31, 1998 MARCH 31, 1997
------------------- ----------------- -----------------
<S> <C> <C> <C>
Net sales $360,241 $109,020 $108,527
Cost of Sales 260,560 80,353 80,054
Selling, General and
Administrative Expenses 77,676 20,980 19,615
Goodwill amortization 3,573 893 893
-------- -------- --------
Operating income $ 18,432 $ 6,794 $ 7,965
======== ======== ========
</TABLE>
The pro forma information does not purport to represent what the Company's
results of operations actually would have been if such transactions had occurred
on January 1, 1997 and is not necessarily representative of the Company's
results of operations for any future period. Because the January 1998 Class and
the Founding Companies were not under common control or management, historical
combined results may not be comparable to, or indicative of, future,
performance.
<PAGE>
Net Sales. Net sales increased to $109.0 million in the three months ended
March 31, 1998 from $108.5 million for the three months ended March 31, 1997, an
increase of $0.5 million or 0.5%. The increase in sales was attributable to an
increased volume of flowers sold during the Valentine's Day holiday primarily at
the companies involved in bouquet manufacturing and distribution. The increased
sales were partially offset by a loss in sales associated with the shift of the
Easter holiday from the first quarter 1997 to the second quarter 1998.
Cost of Sales. Cost of sales increased to $80.3 million in the three months
ended March 31, 1998 from $80.0 million in the three months ended March 31,
1997, an increase of $0.3 million or 0.4%, primarily as a result of increased
sales. As a percentage of sales, cost of sales was 73.7% for the three months
ended March 31, 1998 and 73.8% for the three months ended March 31, 1997.
Selling General and Administrative. Selling general and administrative
expenses increased to $21.0 million in the three months ended March 31, 1998
from $19.6 million for the three months ended March 31, 1997, an increase of
$1.4 million or 7.0%. The increase is a result of increased selling, commissions
and other costs associated with the increased sales at the companies involved in
bouquet manufacturing and distribution, as well as increased expenses incurred
at the Company.
Operating Income. As a result of the factors discussed above, operating
income decreased to $6.8 million in the three months ended March 31, 1998 from
$8.0 million in the three months ended March 31, 1997, a decrease of $1.2
million, or 14.7%. As a percentage of net sales, operating income decreased to
6.2% in the three months ended March 31, 1998 from 7.3% in the three months
ended March 31, 1997.
Liquidity and Capital Resources
- -------------------------------
The Operating Companies' principal sources of liquidity have historically been
cash flows from operating activities and, to a lesser extent, borrowings. To
date, approximately $116.2 million has been used to fund the cash portion of the
consideration paid in connection with the Acquisitions, including the April 1998
Class.
The capital expenditures of the Company for the three months ended March
31, 1998 were approximately $0.6 million. These capital expenditures were
primarily for machinery, office equipment and computers, building additions and
facility upgrades. The Company currently does not have any commitments to make
significant capital expenditures in the next twelve months. Excluding capital
requirements for future acquisitions, if any, which the Company cannot currently
predict, the Company believes that funds generated from operations, together
with borrowings under the Credit Facility, will be sufficient to finance its
current operations and planned capital expenditure requirement at least through
1998. To the extent that the Company is successful in consummating future
acquisitions, if any, it may be necessary to finance such acquisitions through
the issuance of additional equity securities, incurrence of indebtedness, or a
combination of both.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
The Company is not a party to any material legal proceedings.
Item 2. Changes in Securities
On October 9, 1997, the Commission declared effective the Company's initial
public offering registration statement of Form S-1 (File No. 333-33131). On
October 16, 1997, the Company sold to the underwriters 5,750,000 shares of
Common Stock for aggregate consideration of $74,750,000, less underwriting
discounts and commissions of $5,232,000 and other expenses of $2,941,000, for
net proceeds to the Company of $66,750,000. The other expenses of $2,941,000
were paid to third parties not affiliated with the Company. From the amount of
net proceeds, and amounts drawn under the Company's credit facility,
approximately $88,500,000 in cash was paid by the Company to third parties
(previously unrelated to the Company) through March 31, 1998 in connection with
the acquisitions of the Founding Companies and the January 1998 Class, and S
Corporation distributions related to certain of these acquisitions. After the
acquisitions of the Founding Companies, a principal of each of the Founding
Companies was elected to the Company's Board of Directors and after the
acquisition of Continental Farms and Atlantic Bouquet, a former principal of
Continental Farms and Atlantic Bouquet was elected to the Company's Board of
Directors.
Item 3. Defaults under Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
During the period covered by this report, the Company filed the following
reports on Form 8-K:
i. Form 8-K dated January 28, 1998 and filed with the Commission on
February 9, 1998, reporting information under Items 2,5 and 7.
Financial Statement filed:
a. Financial statements of Continental Farms Limited and Atlantic Bouquet
Company Limited as of December 31, 1996 and 1997 and for each of the three
years in the period ended December 31, 1997
b. Financial statements of XL Group, Inc. as of December 31, 1997 and for the
year then ended.
c. Financial statement of Koehler & Dramm, Inc. as of July 31, 1997 and for
the year then ended.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S.A. FLORAL PRODUCTS, INC.
Date: May 14, 1998 By: /s/ Raymond C. Anderson
------------------------------------
Raymond C. Anderson, Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM USA FLORAL
PRODUCTS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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0
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