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 Commission File Number
Ended April 30, 1995 2-96510-N.Y.
DRUG GUILD DISTRIBUTORS, INC.
(Exact name of Registrant as specified in its Charter)
New Jersey 11-2269958
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 Meadowland Parkway, Secaucus, N.J. 07096
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 201-348-3700
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 of 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 / /
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock as of the most recent practicable date:
As of April 30, 1995 there were outstanding 9,952,488 shares of the Registrant's
Common Stock, par value $1. and 36,762.76 shares of the Registrant's Preferred
Stock $100 par value.
Page 1 of 9 Pages
Part 1 - Financial Information
Item 1. Financial Statements
DRUG GUILD DISTRIBUTORS INC.
BALANCE SHEET
ASSETS April 30, July 31,
1995 1994
CURRENT ASSETS:
Cash $ 3,288 1,959,061
Trade Receivables-Stockholders 26,867,951 26,055,791
Nonstockholders 37,799,303 31,845,966
Allowance for doubtful accounts (1,733,940) (1,256,391)
Merchandise Inventory 41,341,620 34,862,779
Deferred income tax benefit 854,000 680,000
Prepaid expense and other current assets 405,287 1,237,062
------------ ------------
Total Current Assets 105,537,509 95,384,268
PROPERTY AND EQUIPMENT:
Property and equipment 12,961,476 12,001,701
Less: Accumulated depreciation and
amortization 9,738,711 9,034,811
------------ ------------
Depreciated Cost 3,222,765 2,966,890
------------ ------------
OTHER ASSETS:
Trade Receivables-noncurrent
portion-Stockholders 1,839,675 2,178,947
Nonstockholders 2,588,156 2,663,158
Allowance for doubtful accounts (110,000) (110,000)
Deferred income tax benefit 296,035 362,035
Various other assets 215,165 223,600
------------ ------------
Total Other Assets 4,829,031 5,317,740
------------ ------------
TOTAL ASSETS $113,589,305 $103,668,898
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable, bank $ 50,668,890 $ 37,317,093
Notes payable 784,025 990,541
Accounts payable 39,968,705 41,977,608
Accrued expenses and taxes 1,442,734 1,179,485
------------ ------------
Total Current Liabilities 92,864,354 81,464,727
------------ ------------
LONG TERM LIABILITIES
Notes payable 685,281 885,875
Deferred compensation payable 635,472 672,323
------------ ------------
Total Long-Term Liabilities 1,320,753 1,558,198
------------ ------------
TOTAL LIABILITIES 94,185,107 83,022,925
------------ ------------
REDEEMABLE PREFERRED STOCK, $100 PAR VALUE
Authorized-250,000 shares
Issued and outstanding-36,762.76
and 52.228.74 shares 3,676,276 5,222,874
Subscribed and unissued 10,500 10,500
------------ ------------
Total before subscriptions
receivable 3,686,776 5,233,374
Less: Subscription receivable 10,125 10,500
------------ ------------
Total Redeemable Preferred 3,676,651 5,222,871
------------ ------------
STOCKHOLDERS' EQUITY-NOTE 2
Common stock- $1 par value
Authorized 25,000,000 shares
Issued and outstanding-9,952,488
and 9,883,114 shares 9,952,488 9,883,114
Subscribed and unissued 469,936 671,107
Additional paid-in capital 3,861,948 3,927,030
Retained earnings 2,506,925 2,446,248
------------ ------------
Total, before subscriptions
receivable 16,791,297 16,297,499
Less: Subscriptions receivable 1,063,750 1,504,400
------------ ------------
Total Stockholders' Equity 15,727,547 15,423,099
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $113,589,305 $103,668,898
============ ============
See accompanying Notes to the Financial Statement
Page 2 of 9 Pages
DRUG GUILD DISTRIBUTORS, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
April 30, April 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES
Stockholders $ 51,514,613 $ 42,231,700 $161,402,379 $131,702,432
Nonstockholders 67,190,793 55,083,039 207,047,950 168,948,680
------------- ------------ ------------ ------------
TOTAL NET SALES 118,705,406 97,314,739 368,450,329 300,651,112
------------- ------------ ------------ ------------
COST OF SALES
Inventory, beginning of period 46,307,142 20,592,904 34,862,779 39,936,840
Purchases 106,731,827 90,910,394 353,502,245 260,566,017
------------- ------------ ------------ ------------
153,038,969 111,503,298 388,365,024 300,502,857
Less: Inventory, end of period 41,341,620 20,471,212 41,341,620 20,471,212
------------- ------------ ------------ ------------
COST OF SALES 111,697,349 91,032,086 347,023,404 280,031,645
------------- ------------ ------------ ------------
GROSS PROFIT 7,008,057 6,282,653 21,426,925 20,619,467
------------- ------------ ------------ ------------
OPERATING EXPENSES 5,548,005 5,418,000 17,496,575 17,177,390
INTEREST EXPENSE 1,446,548 607,379 3,829,223 2,129,035
------------- ------------ ------------ ------------
TOTAL EXPENSES 6,994,553 6,025,379 21,325,798 19,306,425
------------- ------------ ------------ ------------
INCOME BEFORE CORPORATE TAXES 13,504 257,274 101,127 1,313,042
------------- ------------ ------------ ------------
PROVISION (CREDIT) FOR CORPORATE TAXES:
Current 41,400 139,000 148,450 633,000
Deferred (36,000) (36,000) (108,000) (108,000)
------------- ------------ ------------ ------------
Total Provision for Corporate Taxes 5,400 103,000 40,450 525,000
------------- ------------ ------------ ------------
NET INCOME 8,104 154,274 60,677 788,042
Less: Stock Dividend on Preferred Stock (A) 71,711 91,871 220,576 283,543
------------- ------------ ------------ ------------
NET INCOME (LOSS) ATTRIBUTABLE
TO COMMON SHAREHOLDERS $(63,607) $62,403 $(159,899) $504,499
============= ============ ============ ============
EARNINGS (LOSS) PER COMMON SHARE ($0.02) $0.01 ($0.02) $0.05
============= ============ ============ ============
AVERAGE NUMBER OF SHARES OF 9,934,810 9,767,473 9,883,080 9,647,961
COMMON STOCK OUTSTANDING ------------- ------------ ------------ ------------
</TABLE>
(A) Gives effect to pro-rata portion of 8% Preferred dividend payable each
July 31.
See accompanying Notes to the Financial Statement
Page 3 of 9
DRUG GUILD DISTRIBUTORS, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
April 30 April 30
-------- --------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 8,104 $154,274 $ 60,677 $ 788,042
-------------- ------------ ------------ ------------
Adjustment to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 231,300 293,236 703,900 981,436
Deferred compensation payable (12,370) 7,752 (36,851) 99,270
(Increase) decrease in:
Deferred income taxes (36,000) (36,000) (108,000) (108,000)
Trade receivables, net 2,632,299 (508,263) (6,828,189) (10,989,805)
Merchandise inventory 4,965,522 121,692 (6,478,841) 19,465,628
Prepaid expenses and other current assets 131,019 167,906 831,775 (51,525)
Increase (decrease) in:
Accounts payable (12,756,007) 4,685,967 (2,008,903) 4,338,723
Accrued expenses and taxes 319,385 (216,690) 282,843 (506,365)
-------------- ------------ ------------ ------------
Total adjustments (4,524,852) 4,515,600 (13,642,266) 13,229,362
-------------- ------------ ------------ ------------
Net Cash Provided by (Used In)
Operating Activities (4,516,748) 4,669,874 (13,581,589) 14,017,404
-------------- ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposal of Fixed Assets -- -- -- 102,463
Addition to property and equipment (326,892) (146,074) (959,775) (428,460)
Decrease (increase) in other assets 2,000 (10,975) 8,435 (2,060)
-------------- ------------ ------------ ------------
Net Cash Used In Investing Activities (324,892) (157,049) (951,340) (328,057)
-------------- ------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable (62,504) (301,743) (424,703) (2,360,258)
Net increase (decrease) in short-term bank debt 4,785,513 (4,458,543) 13,351,797 (13,155,706)
Collections on common stock 122,900 226,299 444,050 722,789
Common stock redeemed (24,785) -- (24,785) --
Payment of preferred stock -- 20,250 375 59,988
Preferred stock redeemed -- -- (769,578) (66,085)
Net Cash Provided By (Used In)
-------------- ------------ ------------ ------------
Financing Activities 4,821,124 (4,513,737) 12,577,156 (14,799,272)
-------------- ------------ ------------ ------------
NET DECREASE IN CASH (20,516) (912) (1,955,773) (1,109,925)
CASH:
Beginning of period 23,804 8,267 1,959,061 1,117,280
-------------- ------------ ------------ ------------
End of period $ 3,288 $ 7,355 $ 3,288 $ 7,355
============== ============ =========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid in the period for:
Interest $1,447,548 $607,379 $3,830,223 $2,129,035
Income taxes -- $70,000 -- $717,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING & FINANCING ACTIVITIES:
Reduction of accrued expenses due to
issuance of notes payable $6,010 $5,343 $19,594 $16,468
Accounts receivable reduced for
redemptions of common stock -- -- $177,495 $21,718
Accounts receivable reduced for
redemptions of preferred stock $45,354 -- $777,020 --
</TABLE>
See accompanying Notes to Financial Statements
Page 4 of 9
DRUG GUILD DISTRIBUTORS, INC.
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS:
These Financial Statements should read in conjunction with the July 31, 1994
financial statements which describe all accounting policies.
NOTE 2 - REGISTERED PUBLIC OFFERING:
On June 10, 1991, the Company's Registration Statement on Form S-2 filed with
the United States Securities and Exchange Commission (the "Registration
Statement") became effective. Pursuant to the Registration Statement, the
company will offer up to 4,500,000 shares of its common stock, $1 par value. A
Post-Effective Amendment was filed on August 31, 1994. The offering price of
the common stock being sold will be its FIFO book value (book value adjusted for
inventory and tax liabilities, stated as if the inventory was valued at the
lower first-in, first-out cost or market) as of the close of the fiscal quarter
immediately preceding the sale. As of April 30, 1995, the FIFO book value was
$2.28 per share. The outstanding subscribed shares are included in the
accompanying financial statements based on the purchase price at that date. The
difference between the par value and the purchase price of subscribed common
shares has been credited to additional paid-in capital. Additional paid-in
capital at April 30, 1995 includes $595,480 on such uncollected subscriptions.
INFORMATION SUBJECT TO ADJUSTMENT:
While the information shown above is subject to adjustments on audit at the end
of the fiscal year, all adjustments on audit at the end of the fiscal year, all
adjustments which are in the opinion of Management necessary for a fair
statement of the results for the interim period have been made.
Page 5 of 9
DRUG GUILD DISTRIBUTORS, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition at April 30, 1995 Compared to Financial Condition at
July 31, 1994.
From July 31, 1994 to April 30, 1995, the Company's current assets
increased to $105,537,509 from $95,384,268 and its current liabilities increased
to $92,864,354 from $81,464,727. Such increase was attributable to the
Company's higher inventory purchases based upon anticipated price increases in
pharmaceuticals. Inventory as well as receivables increased as a result of
higher volume customers. The Company's ratio of current assets to current
liabilities remained substantially the same during the period, decreasing to
1.14:1 from 1.17:1.
The Company has an accounts receivable and inventory financing arrangement
with a bank under which it can borrow up to 70% of its eligible accounts
receivable and up to 50% of its eligible inventory, as defined.
As of April 30, 1995, there were $53,649,000 of such eligible accounts
receivable out of a total of $60,189,000 or 89% and $49,680,000 of eligible Fifo
inventory, an amount in excess of 99% of total inventory. The maximum amount of
borrowing with respect to its inventory pursuant to such Agreements is
$30,000,000. The combined borrowing limit for accounts receivable and inventory
is $80,000,000. Such limit is determined by the bank and may be raised or
lowered by the bank at its discretion.
Total borrowings upon the line of credit equaled $50,669,000 on April 30,
1995. On such date the interest rate with respect to such financing was the
prime rate plus 1 1/4% (10 1/4%).
Inflation. The Company attempts to pass along price increases from its
suppliers as soon as it is notified of those increases so as to preserve its
gross profit margin and, subject to competitive pressures on particular
products, is generally successful in doing so. Accordingly, the historical
effect of inflation has been to increase the Company's revenues and profits.
Page 6 of 9
Three Months Ended April 30, 1995 Compared to Three Months Ended April 30, 1994.
Sales for the three months ended April 30, 1995 increased by 21.9% over
those for the 1994 period. Approximately 25% of this increase was attributable
to price increases and the balance to an increase in volume.
Gross profit for the period increased bv 11.5% from gross profit for the
1994 period. Gross profit as a percentage of sales decreased to 5.9% from 6.5%
as a result of competitive pressures.
Total expenses for 1995 increased by 16.1% over such expenses for 1994.
Operating expenses (excluding interest expense) for the 1995 period were up
approximately 2.4% as compared to the 1994 period. Increased warehouse and
delivery expenses were offset by reduced general and administrative expenses.
Interest expense increased 138% on higher average borrowings for higher
sales volume requring higher receivables and inventory. In addition, interest
rates were significantly higher.
The effect of the foregoing factors was that the Company's income before
corporate taxes for the three months ended April 30, 1995 experienced a 94.7%
decrease from the same period in 1994. Income taxes were 94.7% lower than the
same period in 1994 resulting from the lower income.
Nine Months Ended April 30, 1995 Compared to Nine Months Ended April 30, 1994.
Sales for the nine months ended April 30, 1995 increased by 22.6% over
those for the 1994 period. Approximately 25% of this increase was attributable
to price increases and the balance to an increase in volume. The number of
stores serviced increased 15% to approximately 800.
Gross profit for the nine months increased by 3.9% from the gross profit
for the 1994 period as a result of higher volume. Gross profit as a percentage
of sales decreased to 5.8% from 6.8% as a result of competitive pressures.
Page 7 of 9
Total expenses for 1995 increased by 10.5% over such expenses for 1994.
Operating expenses (excluding interest expense) for the 1995 period were up 1.9%
as compared to 1994.
Interest expenses increased 79.9% due to higher interest rates as well as
borrowing for higher receivables and inventory due to increased volume.
The effect of the foregoing factors was that the Company's income before
corporate taxes for the nine months ended April 30, 1995 experienced a 92%
decrease from the same period in 1994. Income taxes were 92% lower than the
same period in 1994 resulting from the lower income.
Page 8 of 9
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be executed
on its behalf by the undersigned, thereunto duly authorized.
Date: June 13, 1995
DRUG GUILD DISTRIBUTORS, INC.
By /s/ Jay Reba
--------------------------------------
Jay Reba, Vice President of Finance
(Duly authorized officer and principal
financial officer)
Page 9 of 9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from balance
sheet and statements of operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> APR-30-1995
<CASH> 3,288
<SECURITIES> 0
<RECEIVABLES> 69,095,085
<ALLOWANCES> 1,743,940
<INVENTORY> 41,341,620
<CURRENT-ASSETS> 105,537,509
<PP&E> 12,961,476
<DEPRECIATION> 9,738,711
<TOTAL-ASSETS> 113,589,305
<CURRENT-LIABILITIES> 92,864,354
<BONDS> 784,025
<COMMON> 9,952,488
3,676,651
0
<OTHER-SE> 5,775,059
<TOTAL-LIABILITY-AND-EQUITY> 113,589,305
<SALES> 368,450,329
<TOTAL-REVENUES> 368,450,329
<CGS> 347,023,404
<TOTAL-COSTS> 347,023,404
<OTHER-EXPENSES> 17,496,575
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,829,223
<INCOME-PRETAX> 101,127
<INCOME-TAX> 40,450
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 159,899
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
