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UNITED STATES
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 Quarterly period ended April 30, 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 No. 0-11399
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COYNE INTERNATIONAL ENTERPRISES CORP.
BLUE RIDGE TEXTILE MANUFACTURING, INC.
OHIO GARMENT RENTAL, INC.
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(Exact name of Registrants as specified in their respective charters)
New York 16-6040758
Georgia 58-2018333
Ohio 34-1261376
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
140 Cortland Avenue, Syracuse, New York 13221
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (315) 475-1626
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Securities Registered Pursuant to Section 12(b) of the Act: NONE
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Securities Registered Pursuant to Section 12(g) of the Act: NONE
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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
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TABLE OF CONTENTS
Page
PART I. Financial Information: ----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets ....................................................................3
Unaudited Consolidated Statements of Operations and Retained Earnings (Deficit).................5
Unaudited Consolidated Statements of Cash Flows.................................................6
Notes to Unaudited Consolidated Financial Statements............................................7
Item 2. Management's Discussion and Analysis of Financial Condition.....................................9
Liquidity and Capital Resources.................................................................9
Results of Operations for the Second Quarter of Fiscal 2000 Compared to
the Second Quarter of Fiscal 1999........................................................10
PART II. Other Information
Signatures.....................................................................................11
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PART I. Financial Information
ITEM 1. Financial Statements
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
April 30, October 31,
ASSETS 2000 1999
---------- ---------------------- --------------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 273,891 $ 213,407
Receivables, principally trade 17,327,842 16,768,958
Inventories 10,326,609 7,371,395
Uniforms and other rental items in service, net 28,782,019 27,838,084
Prepaid expense and other assets 392,186 796,094
---------------------- --------------------
Total current assets 57,102,547 52,987,938
Property, plant and equipment, net 45,847,410 46,553,709
Purchased routes and acquisition intangibles, net 16,941,256 17,062,547
Deferred financing cost, net 2,430,553 2,606,593
Deferred income taxes 1,800,000 2,190,000
Other assets 459,949 444,795
---------------------- --------------------
$ 124,581,715 $ 121,845,582
====================== ====================
</TABLE>
See notes to consolidated financial statements
3
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Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
April 30, October 31,
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) 2000 1999
---------------------------------------------- -------------------- ---------------------
(Unaudited)
<S> <C> <C>
Current Liabilities:
Current maturities of long-term debt $ 3,340,501 $ 3,214,908
Accounts payable 4,411,129 5,378,142
Accrued expenses:
Salaries and employee benefits 5,522,496 5,297,557
Accrued Interest 3,911,687 3,903,155
Other 5,853,642 5,067,695
Deferred income taxes 9,765,000 10,000,000
-------------------- -------------------
Total current liabilities 32,804,455 32,861,457
Long-term debt obligations:
Long-term debt, net of current maturities 22,512,551 19,332,429
Senior subordinated notes 75,000,000 75,000,000
Other liabilities 2,825,048 3,083,507
-------------------- -------------------
Total liabilities 133,142,054 130,277,393
-------------------- -------------------
Shareholders' equity (deficit):
Preferred stock - 5% non-cumulative, non-voting, callable at par:
Class A - $100 par value; authorized 30,000; issued and
outstanding 23,107 2,310,700 2,310,700
Class B - $500 par value; authorized 5,000; issued 4,991, outstanding
2,991 2,495,500 2,495,500
Common stock - $.01 par value:
Class A - voting; authorized 100,000 shares, issued
and outstanding 2,923 29 29
Class B - non-voting; authorized 99,000; issued and
outstanding 74,030 740 740
Additional paid-in capital 849,512 849,512
Retained earnings (deficit) (12,138,471) (12,030,087)
-------------------- -------------------
(6,481,990) (6,373,606)
Less:
Cost of 2,000 shares of Class B preferred stock
held in treasury (166,667) (166,667)
Shareholder receivable (1,911,682) (1,891,538)
-------------------- -------------------
Total shareholders' equity (deficit) (8,560,339) (8,431,811)
-------------------- -------------------
Commitments and contingencies
$ 124,581,715 $ 121,845,582
==================== ===================
</TABLE>
See notes to consolidated financial statements
4
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Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements Of Operations And Retained Earnings (Deficit)
For the Periods Ended April 30,
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<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
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2000 1999 2000 1999
----------------- ----------------- ---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Net rentals $ 35,321,515 $ 34,020,597 $ 70,111,227 $ 67,673,094
Net sales 2,226,473 2,546,540 4,575,769 4,945,505
----------------- ----------------- ---------------- ----------------
37,547,988 36,567,137 74,686,996 72,618,599
----------------- ----------------- ---------------- ----------------
Operating expenses:
Cost of rentals 27,018,256 26,313,575 53,595,382 51,987,749
Cost of sales 1,322,079 1,689,261 2,898,121 3,250,777
Selling, general and administrative 6,366,562 6,571,994 12,414,709 12,852,094
----------------- ----------------- ---------------- ----------------
34,706,897 34,574,830 68,908,212 68,090,620
----------------- ----------------- ---------------- ----------------
Income from operations 2,841,091 1,992,307 5,778,784 4,527,979
Interest expense 2,870,855 2,620,801 5,664,168 5,199,413
----------------- ----------------- ---------------- ----------------
Income (loss) before income taxes (29,764) (628,494) 114,616 (671,434)
Income tax provision 73,000 (172,000) 223,000 (86,000)
----------------- ----------------- ---------------- ----------------
NET LOSS (102,764) (456,494) (108,384) (585,434)
Retained deficit, beginning of the period
(12,035,707) (11,207,763) (12,030,087) (11,078,823)
----------------- ----------------- ---------------- ----------------
RETAINED DEFICIT, END OF PERIOD $ (12,138,471) $ (11,664,257) $ (12,138,471) $ (11,664,257)
================= ================= ================ ================
</TABLE>
See notes to consolidated financial statements
5
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Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended April 30,
<TABLE>
<CAPTION>
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (108,384) $ (585,433)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation of plant and equipment 2,700,621 2,491,529
Amortization of acquisition intangibles 372,798 333,999
Amortization of deferred financing 176,040 177,624
Provision for deferred income taxes 155,000 56,000
Changes in operating assets and operating liabilities:
Accounts receivable (558,884) (552,656)
Inventories (2,955,214) (784,055)
Uniforms in service (943,936) 926,163
Prepaid expenses and other assets 388,755 252,825
Accounts payable and other liabilities 206,055) (3,597,591)
------------------- -------------------
Net cash used in operating activities (979,259) (1,281,595)
------------------- -------------------
Cash flows used in investing activities:
Purchases of property, plant and equipment (1,994,322) (4,578,986)
Acquisition of business, net of cash acquired (251,506) (1,561,355)
------------------- -------------------
Net cash used in investing activities (2,245,828) (6,140,341)
------------------- -------------------
Cash flows from financing activities:
Proceeds from long-term borrowings 21,247,993 22,781,715
Payments under long-term debt obligations (17,942,278) (15,759,264)
Increase in shareholder receivable (20,144)
Deferred financing costs incurred (50,675)
------------------- -------------------
Net cash provided by financing activities 3,285,571 6,971,776
------------------- -------------------
Net increase (decrease) in cash 60,484 (450,160)
Cash and cash equivalents:
Beginning of the period 213,407 1,073,496
------------------- -------------------
End of the period $ 273,891 $ 623,336
=================== ===================
Supplemental disclosure of cash flow information:
Interest paid $ 5,479,597 $ 4,382,540
Income taxes paid (refunded) 11,734 (263,075)
</TABLE>
See notes to consolidated financial statements
6
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Coyne International Enterprises Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note A - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management,
quarterly results include all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation. For further information,
refer to the consolidated financial statements and notes included in the
Company's annual report on Form 10-K for the year ended October 31, 1999.
The unaudited consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany transactions have been
eliminated in consolidation.
Operating results for the six-month period ended April 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
October 31, 2000.
Note B - Income Taxes
The Company's effective tax rate differs from the federal statutory rate of 34%
due to state taxes and certain expenses that are not deductible for tax
purposes. These include the amortization of certain intangible assets and the
non-deductible portion of certain meals and entertainment expenses.
Note C - Reclassification
Certain amounts have been reclassified to conform with the fiscal 2000
presentation.
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Coyne International Enterprises Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
Note D - Summarized Financial Information for Subsidiaries
The following table presents financial information for the wholly-owned
subsidiaries of Coyne International Enterprises Corp: Blue Ridge Textile
Manufacturing, Inc. and Ohio Garment Rental, Inc., on a combined basis:
April 30, October 31,
2000 1999
(Unaudited)
Balance sheets:
Current assets $ 6,136,228 $6,376,826
Noncurrent assets 3,692,341 3,815,243
Current liabilities 3,488,774 3,419,888
Noncurrent liabilities 159,000 175,000
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
----------------------------------- ----------------------------------
2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Statement of operations:
Revenues $ 3,802,272 $4,266,804 7,653,848 $8,271,620
Operating expenses 3,509,867 3,879,674 7,213,934 7,490,415
Operating income 292,405 387,130 439,914 781,205
Net income (loss) 64,508 119,353 46,564 242,985
</TABLE>
The Company has not provided separate financial statements and other disclosures
for its wholly-owned subsidiaries because management has determined that such
information is not material to investors.
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ITEM 2. Management's Discussion and Analysis of the Financial Condition
Coyne International Enterprises Corp. and Subsidiaries
Management's Discussion and Analysis of the Financial Condition and Results of
Operations
Certain statements included in this Part I, Item 2, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
Quarterly Report on Form 10-Q which are not statements of historical fact are
intended to be, and are hereby identified as, "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Without limiting the foregoing, the words "believe," "anticipate," "plan,"
"expect," "estimate," "intend" and other similar expressions are intended to
identify forward-looking statements. The Company cautions readers that
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievement expressed or implied by such forward-looking statements. Such
factors include, among others, the following: the success or failure of the
Company in implementing its current business and operational strategies;
availability, terms and access to capital and customary trade credit; general
economic and business conditions; competition; changes in the Company's business
strategy; labor relations; the outcome of pending or yet-to-be instituted legal
proceedings; labor and employee benefit costs; and availability and terms of
necessary or desirable financing or refinancing.
Liquidity and Capital Resources
Cash used in operating activities of approximately $1.0 million and $1.3 million
for the six months ended April 30, 2000 and 1999, respectively, results from
higher levels of inventory and accounts receivable due largely to growth in
rental revenue.
The Company's primary source of liquidity has been borrowings under the
revolving credit facilities described below.
The Company's working capital was $24.3 million at April 30, 2000 as compared to
$20.1 million at October 31, 1999. The increase in working capital of $4.2
million reflects an increase in inventories and receivables.
At of the end of April 2000, the Company had approximately $11.0 million
available under its revolving credit line and up to an additional $24.2 million
available under bank credit facilities for capital expenditures and
acquisitions. Management believes that its operations and bank credit facilities
will provide sufficient cash to meet the requirements for operations,
acquisitions and capital expenditure for the next twelve months.
Cash used in investing activities was $2.2 million and $6.1 million for the six
months ended April 30, 2000 and 1999 respectively. In fiscal 2000, these
expenditures consist primarily of investments in route trucks, information
systems and route acquisitions. The Company anticipates that capital
expenditures will be approximately $4.0 million for fiscal 2000, compared with
$7.7 million in fiscal 1999.
9
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Coyne International Enterprises Corp. and Subsidiaries
Results of Operations for the Second Quarter of Fiscal 2000 Compared to the
Second Quarter of Fiscal 1999
Revenues for the quarter of $37.5 million are $1.0 million or 2.7% higher than
the same period last year. Year-to-date revenues of $74.7 million are $2.1
million or 2.9% higher than the same period last year. This increase is
attributable to new business written and increases in revenue at existing
accounts.
Cost of rental operations increased $.7 million to $27.0 million for the second
quarter of fiscal 2000 from $26.3 million in the second quarter of fiscal 1999.
As a percent of rental revenue, cost of rental operations decreased to 76.5% in
2000 from 77.4% last year. The decrease is primarily due to improved merchandise
controls at the plant level. Year-to-date expenses for fiscal years 2000 and
1999 are 76.5% and 76.9% respectively.
Selling, general and administrative expenses decreased 3.2% to $6.4 million in
the second quarter of fiscal 2000 from $6.6 million in the second quarter of
fiscal 1999. This decrease is primarily a result of lower selling expenses due
to a reduction in head count. Year-to-date expenses, as a percent of revenue for
fiscal years 2000 and 1999 are 16.7% and 17.7%, respectively.
Income from operations increased 42.6% to $2.8 million in the second quarter of
2000 from $2.0 million in the same period last year. Year-to-date income from
operations has increased 27.7% compared to the same period last year.
Interest expense increased 9.6% to $2.9 million in the second quarter of 2000
from $2.6 million in the second quarter of 1999. This increase is attributable
to higher average balances on the companies bank credit facilities when compared
to last year.
Net loss decreased to $103,000 in the second quarter of 2000 from $456,000 in
the second quarter of 1999. The decrease is primarily attributable to improved
operating performance offset in part by increased interest expense.
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PART II. Other Information
None
SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) 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.
COYNE INTERNATIONAL ENTERPRISES CORP.
Date: June 13, 2000 By: /S/ Thomas E. Krebbeks
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Thomas E. Krebbeks
VP of Finance and Chief Financial Officer
By: /S/ Thomas C. Crowley
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Thomas C. Crowley
Chief Operating Officer
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