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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended July 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 No. 0-11399
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COYNE INTERNATIONAL ENTERPRISES CORP.
BLUE RIDGE TEXTILE MANUFACTURING, INC.
OHIO GARMENT RENTAL, INC.
_______________________________________________________________________________
(Exact name of Registrants as specified in their respective charters)
New York 16-6040758
Georgia 58-2018333
Ohio 34-1261376
________________________________________ ___________________________________
(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
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Page
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PART I. Financial Information:
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 Consolidated Financial Statements (Unaudited).......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources................................................................. 9
Results of Operations for the Third Quarter of Fiscal 2000 Compared to
the Third Quarter of Fiscal 1999.......................................................... 10
PART II. Other Information
Signatures...................................................................................... 11
</TABLE>
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PART I. Financial Information
Item 1. Financial Statements
Coyne International Enterprises Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31, October 31,
Assets 2000 1999
---------------------- --------------------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 164,390 $ 213,407
Receivables, principally trade 18,304,944 16,768,958
Inventories 10,702,906 7,371,395
Uniforms and other rental items in service, net 30,634,126 27,838,084
Prepaid expense and other assets 555,532 796,094
---------------------- --------------------
Total current assets 60,361,898 52,987,938
Property, plant and equipment, net 44,887,860 46,553,709
Purchased routes and acquisition intangibles, net 17,398,251 17,062,547
Deferred financing cost, net 2,358,453 2,606,593
Deferred income taxes 3,411,000 2,190,000
Other assets 533,282 444,795
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$ 128,950,744 $ 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>
July 31, October 31,
Liabilities and Shareholder's Equity (Deficit) 2000 1999
-------------------- ---------------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 2,988,150 $ 3,214,908
Accounts payable 4,568,744 5,378,142
Accrued expenses:
Salaries and employee benefits 4,069,039 5,297,557
Accrued Interest 1.703,019 3,903,155
Other 7,850,798 5,067,695
Deferred income taxes 11,000,000 10,000,000
------------------ -------------------
Total current liabilities 32,179,750 32,861,457
Long-term obligations:
Capital lease and other loan obligations, net of current maturities 27,749,553 19,332,429
Senior subordinated notes 75,000,000 75,000,000
Other liabilities 2,838,032 3,083,507
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Total liabilities 137,767,335 130,277,393
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Shareholders' equity (deficit):
Preferred stock - 5% non-cumulative, non-voting, callable at par: Class
A - $100 par value; 30,000 shares authorized, 23,107 shares issued
and outstanding. 2,310,700 2,310,700
Class B - $500 par value; 5,000 shares authorized, 4,991 shares issued,
2,991 shares outstanding 2,495,500 2,495,500
Common stock - $.01 par value:
Class A - voting, 100,000 shares authorized, 2,923 shares issued and
outstanding 29 29
Class B - non-voting; 99,000 shares authorized; 74,030 shares issued and
outstanding 740 740
Additional paid-in capital 849,512 849,512
Retained earnings (deficit) (12,401,814) (12,030,087)
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(6,745,333) (6,373,606)
Treasury stock, 2,000 shares of Class B preferred
stock at cost (166,667) (166,667)
Shareholder receivable (1,904,591) (1,891,538)
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Total shareholders' equity (deficit) (8,816,591) (8,431,811)
-------------------- ---------------------
Total liabilities and shareholders' equity (deficit) $ 128,950,744 $ 121,845,582
==================== =====================
</TABLE>
See notes to consolidated financial statements
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Coyne International Enterprises Corp. and Subsidiaries
Consolidated Statements of Operations and Retained Earnings (Deficit)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
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2000 1999 2000 1999
----------------- ----------------- ---------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue:
Rental operations $ 35,033,398 33,714,740 105,144,625 101,387,834
Direct sales 2,929,139 2,708,631 7,504,908 7,654,136
---------------- ---------------- --------------- --------------
37,962,537 36,423,371 112,649,533 109,041,970
---------------- ---------------- --------------- --------------
Operating expenses:
Cost of rental operations 27,051,592 26,184,849 80,646,974 78,172,598
Cost of direct sales 1,941,785 1,791,930 4,839,907 5,042,707
Selling, general and administrative 6,495,897 6,649,462 18,910,606 19,501,556
---------------- ---------------- --------------- --------------
35,489,274 34,626,241 104,397,487 102,716,861
---------------- ---------------- --------------- --------------
Income from operations 2,473,263 1,797,130 8,252,046 6,325,109
Interest expense 2,786,605 2,689,992 8,450,773 7,889,405
---------------- ---------------- --------------- --------------
Loss before income taxes (313,342) (892,862) (198,727) (1,564,296)
Income tax expense (benefit) (50,000) (282,000) 173,000 (368,000)
---------------- ---------------- --------------- --------------
Net loss (263,342) (610,862) (371,727) (1,196,296)
Retained earnings (deficit), beginning of the period (12,138,472) (11,664,257) (12,030,087) (11,078,823)
---------------- ---------------- --------------- --------------
Retained Earnings (deficit), End of Period $ (12,401,814) (12,275,119) (12,401,814) (12,275,119)
================ ================ =============== ==============
</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 Nine Months Ended July 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
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(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (371,727) $ (1,196,296)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization of plant and equipment 4,128,955 3,781,485
Amortization of acquisition intangibles 561,311 508,243
Amortization of deferred financing 263,140 266,437
Provision for deferred income taxes (221,000) (376,000)
Changes in operating assets and operating liabilities:
Accounts receivable (1,535,986) (1,137,895)
Inventories (3,331,511) (1,009,505)
Uniforms and other rental items in service (2,796,042) 769,608
Prepaid expenses and other assets 152,075 211,372
Accounts payable and other liabilities (1,700,424) (2,359,619)
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Net cash used in operating activities (4,851,209) (542,170)
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Cash flows used in investing activities:
Purchases of property, plant and equipment (2,463,106) (6,330,171)
Acquisition of business, net of cash acquired (897,015) (1,582,451)
------------------- -------------------
Net cash used in investing activities (3,360,120) (7,912,622)
------------------- -------------------
Cash flows from financing activities:
Proceeds from long-term borrowings 35,287,411 34,651,471
Payments under long-term borrowings (27,097,045) (26,452,615)
Increase in shareholder receivable (13,053) (188,510)
Deferred financing costs incurred (15,000) (50,675)
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Net cash provided by financing activities 8,162,313 7,959,671
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Net decrease in cash (49,017) (495,121)
Cash and cash equivalents:
Beginning of period 213,407 1,073,496
------------------- -------------------
End of the period $ 164,390 $ 578,375
=================== ===================
Supplemental disclosure of cash flow information:
Interest paid $ 10,385,173 $ 9,016,491
Income taxes paid (refunded) 55,317 (239,274)
</TABLE>
See notes to consolidated financial statements
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Coyne International Enterprises Corp. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
1. Basis of Presentation
The accompanying consolidated financial statements of Coyne International
Enterprises Corp. and Subsidiaries, (the Company), 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 Company uses a fifty-two/fifty-three week fiscal year ending on the last
Saturday of October, with quarterly interim periods of thirteen weeks. For
convenience, the dating of the accompanying financial statements, and notes,
herein, have been labeled as of and for the periods ending July 31, 1999,
October 31, 1999 and July 31, 2000 rather than the actual period-end dates.
Operating results for the nine-month period ended July 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
October 31, 2000.
2. Long-term Obligations
At July 31, 2000 the Company was not in compliance with certain bank financial
covenants. Subsequent to July 31, 2000 the Company obtained waivers of such non-
compliance. In addition, in August 2000, the Company amended a certain financial
covenant.
3. 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 non-deductible items include the amortization of certain
intangible assets and a portion of certain meals and entertainment expenses.
4. 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)
5. Summarized Financial Information for Subsidiaries
The following table presents summarized 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:
July 31, October 31,
2000 1999
(Unaudited)
Balance sheets:
Current assets $ 6,296,193 $ 6,376,826
Noncurrent assets 3,662,192 3,815,243
Current liabilities 3,602,973 3,419,888
Noncurrent liabilities 159,000 175,000
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
July 31 July 31,
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2000 1999 2000 1999
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Statement of operations:
Revenues $ 3,877,809 $ 4,066,875 11,531,657 $ 12,338,495
Operating expenses 3,656,785 3,884,482 10,870,719 11,374,897
Operating income 221,024 182,393 660,938 963,598
Net income (loss) 27,887 (3,848) 74,451 239,137
</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 and
Results of Operations
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 for the nine months ended July 31, 2000
increased $4.3 million from the comparable period in 1999. This increase is
primarily attributable to inventory purchased for the Company's new contract
with its largest customer.
The Company's primary source of liquidity has been borrowings under its
revolving credit facilities described below. At of the end of July 31, 2000, the
Company had approximately $5.4 million available under its revolving credit line
and up to an additional $24.3 million available under other revolving bank
credit facilities for capital expenditures and acquisitions. At July 31, 2000,
the Company was not in compliance with certain financial covenants under these
facilities. Subsequent to July 31, 2000, the Company obtained waivers of such
noncompliance. In addition, in August 2000, the Company amended certain of its
financial covenants. 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 $3.4 million and $7.9 million for the nine
months ended July 31, 2000 and 1999, respectively. In fiscal 2000, these
expenditures consist primarily of investments in route trucks, information
systems, plant construction projects 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.
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Coyne International Enterprises Corp. and Subsidiaries
Results of Operations for the Third Quarter of Fiscal 2000 Compared to the Third
Quarter of Fiscal 1999
Revenues for the quarter of $38.0 million are $1.5 million or 4.2% higher than
the same period last year. Year-to-date revenues of $112.6 million are $3.6
million or 3.3% 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 $0.9 million to $27.1 million for the third
quarter of fiscal 2000 from $26.2 million in the third quarter of fiscal 1999.
As a percent of rental revenue, cost of rental operations for the quarter
decreased to 77.2% in 2000 from 77.7% last year. The decrease is primarily due
to lower merchandise costs as a result of improved purchasing and inventory
control. Year-to-date cost of rental operations for fiscal years 2000 and 1999
are 76.7% and 77.1%, respectively.
Selling, general and administrative expenses decreased 2.3% to $6.5 million in
the third quarter of fiscal 2000 from $6.6 million in the third quarter of
fiscal 1999. This decrease is primarily a result of lower corporate
administrative and payroll expenses. Year-to-date expenses, as a percent of
revenue for fiscal years 2000 and 1999, are 16.8% and 17.9%, respectively.
Income from operations increased 37.6% to $2.5 million in the third quarter of
2000 from $1.8 million in the same period last year. Year-to-date income from
operations has increased 30.5% compared to the same period last year.
Interest expense increased 3.6% to $2.8 million in the third quarter of 2000
from $2.7 million in the third quarter of 1999, due to higher average
outstanding borrowings for the nine-month period in fiscal 2000.
PART II. Other Information
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None
SIGNATURES
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: September 12, 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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