SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 19862-8740
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HOSPOSABLE PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
New York 11-2236837
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
100 Readington Road Somerville, New Jersey 08876
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 908-707-1800
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NONE
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(Former name, former address and former fiscal year, if changed since last
report.)
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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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the latest practicable date.
Class Outstanding at July 20, 1995
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Common Stock, $.01 par Value 1,692,476
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1995
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The attached unaudited consolidated financial statements of Hosposable
Products, Inc.("Hosposable") and Subsidiaries reflect all adjustments which
are, in the opinion of management, necessary to present a fair statement of
the operation results for the interim periods.
Consolidated balance sheets 3-4
Consolidated statements of operations 5-6
Consolidated statements of cash flows 7-8
Notes to consolidated financial statements 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1995 1994
--------------- ------------------
(unaudited) (see note
below)
<S> <C> <C>>
Current assets:
Cash and cash equivalents (deficiency) $ (184,173) $ 25,178
--------------- ---------------
Marketable securities 2,190,596 2,412,169
--------------- ---------------
Receivables:
Trade account 4,207,011 4,143,326
Other 50,797 49,061
--------------- ---------------
4,257,808 4,192,387
Less: allowance for doubtful
accounts 89,500 118,759
--------------- ---------------
4,168,308 4,073,628
--------------- ---------------
Inventories:
Raw materials 4,031,659 2,812,716
Finished goods 1,061,180 1,062,639
--------------- ---------------
5,092,839 3,875,355
--------------- ---------------
Prepaid income taxes 45,651 83,686
Prepaid expenses and other 215,034 318,043
--------------- ---------------
Total current assets 11,528,255 10,788,059
--------------- ---------------
Property, plant and equipment 16,022,612 15,344,766
Less: accumulated depreciation
and amortization 6,347,660 5,933,940
--------------- ---------------
Net property, plant and
equipment 9,674,952 9,410,826
--------------- ---------------
Acquisition escrow fund 448,340 1,060,083
--------------- ---------------
Other assets 380,669 312,785
--------------- ---------------
Total assets $ 22,032,216 $ 21,571,753
=============== ==============
<FN>
Note: The balance sheet at December 31, 1994 has been taken from
the audited financial statements at that date.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
1995 1994
-------------- ---------------
(unaudited) (See note
below)
<S> <C> <C>
Current liabilities:
Current maturities of
long-term debt $ 340,000 $ 340,000
Current portion of capitalized
lease obligations 7,312 7,312
Accounts payable-trade 2,165,439 1,615,931
Accrued expenses 812,827 973,995
Total current liabilities 3,325,578 2,937,238
--------------- ---------------
Long-term debt, excluding current
maturities 4,485,000 4,637,274
--------------- ---------------
Capitalized lease obligations,
excluding current portion 10,557 15,013
--------------- ---------------
Deferred income taxes 553,398 580,596
--------------- ---------------
Total liabilities 8,374,533 8,170,121
--------------- ---------------
Stockholders' equity:
Common stock, par value
$.01 per share 17,037 17,037
Additional paid-in capital 6,894,249 6,894,249
Retained earnings 6,777,927 6,521,876
Less:Cost of 11,200 shares of
common stock held in treasury (31,530) (31,530)
--------------- ---------------
Total stockholders' equity 13,657,683 13,401,632
--------------- ---------------
Total liabilities and
stockholders' equity $ 22,032,216 $ 21,571,753
=============== ===============
<FN>
Note: The balance sheet at December 31, 1994 has been taken from
the audited financial statements at that date.
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Net sales $ 19,968,212 $ 16,615,264
Cost of sales 16,161,251 12,720,135
--------------- ---------------
Gross profit 3,806,961 3,895,129
Selling, general and administrative
expenses 3,428,958 3,222,473
--------------- ---------------
Operating income 378,003 672,656
--------------- ---------------
Other income (expense):
Interest income 87,029 130,444
Interest expense (174,220) (217,909)
Other 126,483 263,784
--------------- ---------------
39,292 176,319
--------------- ---------------
Income before income taxes 417,295 848,975
--------------- ---------------
Income tax expense (benefit):
Current 188,444 336,354
Deferred (27,200) (4,214)
--------------- ---------------
161,244 332,140
--------------- ---------------
Net income $ 256,051 $ 516,835
=============== ===============
Net income per share-primary
and fully diluted $ 0.15 $ 0.30
=============== ===============
Weighted average number of common
and common equivalent shares. 1,692,476 1,721,714
=============== ===============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Net sales $ 10,339,650 $ 8,217,383
Cost of sales 8,533,681 6,336,506
--------------- ---------------
Gross profit 1,805,969 1,880,877
Selling, general and administrative
expenses 1,737,587 1,666,406
--------------- ---------------
Operating income 68,382 214,471
--------------- ---------------
Other income (expense):
Interest income 42,638 58,230
Interest expense (100,753) (101,998)
Other 80,548 131,813
--------------- ---------------
22,433 88,045
--------------- ---------------
Income before income taxes 90,815 302,516
--------------- ---------------
Income tax expense (benefit):
Current 45,934 117,984
Deferred (13,600) (2,106)
--------------- ---------------
32,334 115,878
--------------- ---------------
Net income $ 58,481 $ 186,638
=============== ===============
Net income per share-primary
and fully diluted $ 0.03 $ 0.11
=============== ===============
Weighted average number of common
and common equivalent shares 1,692,476 1,728,784
=============== ===============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 256,051 $ 516,835
--------------- ---------------
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities
Depreciation and amortization 483,367 482,238
Loss on sale of equipment 33,425 -
Provision for doubtful accounts 5,700 6,000
Deferred income tax expense (benefit) (27,200) (4,215)
Changes in assets and liabilities -
(Increase) decrease in -
Accounts receivable, trade (75,306) (18,625)
Accounts receivable, othe (1,736) -
Inventories (1,217,484) (262,923)
Prepaid income taxes 38,035 -
Prepaid expenses and other 103,009 (94,488)
(Decrease) increase in -
Accounts payable 549,508 162,376
Accrued expenses (161,168) (90,932)
Income taxes payable - (162,333)
--------------- ---------------
Total adjustments (269,850) 17,098
--------------- ---------------
Net cash provided by (used in)
operating activities (13,799) 533,933
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (934,254) (1,628,044)
Proceeds from sale of equipment 130,000 -
Proceeds from the issue of common
stock - 8,500
Sale of marketable securities 221,573 1,980,268
--------------- ---------------
Net cash provided by (used in)
investing activities (582,681) 360,724
--------------- ---------------
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
-------------- ---------------
<S> <C> <C>
Cash flows from financing activities:
Utilization of acquisition escrow
fund $ 611,743 $ 226,386
Borrowings 17,726 -
Decrease (increase) in other assets (67,884) 5,752
Principal payments under borrowing
agreements (170,000) (1,792,885)
Principal payments under capital
lease obligations (4,456) (5,597)
--------------- ---------------
Net cash provided by (used in)
financing activities 387,129 (1,566,344)
--------------- ---------------
Net increase (decrease) in cash and
cash equivalents (209,351) (671,687)
Cash and cash equivalents, beginning
of year 25,178 816,188
--------------- ---------------
Cash and cash equivalents, June 30 $ (184,173) $ 144,501
=============== ===============
Supplemental disclosure of cash flow
information:
Cash paid during the six months for
Interest $ 148,498 $ 215,353
Income taxes 38,035 503,046
--------------- ---------------
$ 186,533 $ 718,399
=============== ===============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1995 AND 1994
NOTE 1 - 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
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, the
accompanying consolidated financial statements contain all adjustments,
consisting only of normal recurring accruals, considered necessary to present
fairly the financial position as of June 30, 1995, and 1994 and cash flows for
the six months ended June 30, 1995 and 1994. For further information, refer
to the financial statements and notes thereto included in the Company's annual
report for the year ended December 31, 1994.
NOTE 2 - LONG-TERM DEBT:
In December 1993, the Company entered into a loan agreement with the New
Jersey Economic Development Authority (the "Authority") and a bank, whereby
the Authority issued Economic Development Bonds with an aggregate principal
amount of $5,325,000 to be loaned to the Company to finance the acquisition of
a building and the land on which it is situated, as well as to purchase
machinery and equipment to add a production line. As of June 30, 1995, total
proceeds of approximately $4,877,000 had been distributed to the Company in
order to complete its purchase of the above mentioned land and building and
machinery and equipment. The remaining balance is held in escrow, as indicated
in the accompanying consolidated balance sheets, and will be distributed to
the Company as machinery and equipment is purchased.
The bonds are secured by a letter of credit provided by a bank which has
obtained: (i) a first mortgage and security interest on the building and the
land that was acquired; (ii) an assignment of all of the Company's right,
title and interest in and to all leases with respect to the building and the
land; and (iii) a security interest in any machinery and equipment purchased
with a portion of the bond proceeds.
The agreement contains several restrictive financial covenants which
include: (i) minimum net worth requirement; (ii) maximum leverage ratio; (iii)
minimum debt service coverage ratio; (iv) minimum current ratio; and (v)
maximum amount of annual capital expenditures.
The remaining bond maturity dates range from December 1, 1995 to
December 1, 2013, and bear interest at fixed rates from 3.6% to 5.7%. The
bonds mature at various amounts throughout this period ranging from $140,000
to $940,000. The bonds maturing December 1, 2007, 2009 and 2013 are to be
redeemed commencing December 1, 2005 and on each December 1 thereafter through
sinking fund payments ranging from $165,000 to $255,000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following information should be read in conjunction with the accompanying
unaudited financial statements and the notes thereto included in Item I of
this quarterly report, and the financial statements and the notes thereto and
management's discussion and analysis of financial condition and results of
operations contained in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 COMPARED WITH THREE MONTHS ENDED JUNE
30,1994.
Sales for the three months ended June 30, 1995 were $10,339,650 as compared
with $8,217,383 in 1994, an increase of 25.8%. The increase resulted from
stronger sales in all operating divisions.
Cost of sales for the three months ended June 30, 1995 increased to 82.5% of
sales compared with 77.1% in 1994. The increase resulted principally from
higher raw material costs particularly for paper pulp.
Gross profit decreased to 17.5% of sales in the second quarter of 1995 as
compared to 22.9% in 1994.
Selling, general and administrative expenses for the second quarter of 1995
totaled $1,737,587 or 16.8% of sales compared to $1,666,406 or 20.3% in 1994.
The other income (expense) category decreased in the second quarter of 1995 to
$22,433 from $88,045 in 1994. Short term rental income in 1994 accounted for
the difference.
The pre-tax profit earned in the second quarter of 1995 amounted to $90,815
compared to $302,516 in 1994, a decrease of 70.0%
Net income for the three months ended June 30, 1995 amounted to $58,481
compared to $186,638 for 1994 a decrease of 68.7%. Net income per share was
$.03 in 1995 compared with $.11 in 1994 and reflects a weighted average of
1,692,476 shares outstanding in the 1995 period and 1,728,784 shares
outstanding in 1994.
<PAGE>
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1994.
Sales for the six months ended June 30, 1995 were $19,968,212 as compared with
$16,615,264 in 1994. The increase of 20.2% resulted from increases in all
business sectors.
Cost of sales for the six months ended June 30, 1995 increased to 80.9% of
sales compared with 76.6% in 1994. The increase resulted from increased raw
material costs.
Gross profit decreased to 19.1% of sales for the six months ended June 30,
1995 as compared to 23.4% in 1994.
Selling, general and administrative expenses for the six months ended June 30,
1995 amounted to $3,428,958 or 17.2% of sales compared to $3,222,473 or 19.4%
in 1994.
The pre-tax profit earned for the six months ended June 30, 1995 amounted to
$417,295 compared to $848,975 in 1994 a decrease of 50.8%
Net income for the six months ended June 30, 1995 amounted to $256,051
compared to $516,835 in 1994, a decrease of 50.5%. Net income per share was
$.15 in 1995 compared with $.30 in 1994 and reflects a weighted average of
1,692,476 shares outstanding in 1995 and 1,721,714 shares outstanding in 1994.
LIQUIDITY AND CAPITAL RESOURCES
In December 1993, the Company entered into a loan agreement with the New
Jersey Economic Development Authority (the "Authority") and a bank, whereby
the Authority issued Economic Development Bonds with an aggregate principal
amount of $5,325,000 to be loaned to the Company to finance the acquisition of
a building and the land on which it is situated (the "Branchburg Property"),
as well as to purchase machinery and equipment to add a production line. As
of June 30, 1995 total proceeds of approximately $4,877,000 had been
distributed to the Company in order to complete its purchase of the Branchburg
Property and machinery and equipment. The remaining balance is held in
escrow, as indicated in the accompanying consolidated balance sheets, and will
be distributed to the Company as machinery and equipment is purchased. The
bonds are secured by a letter of credit provided by a bank which has obtained:
(i) a first mortgage and security interest on the building and the land that
was acquired; (ii) an assignment of all of the Company's right, title and
interest in and to all leases with respect to the building and the land; and
(iii) a security interest in any machinery and equipment purchased with a
portion of the bond proceeds.
The agreement contains several restrictive financial covenants which
include: (i) minimum net worth requirement;(ii) maximum leverage ratio; (iii)
minimum debt service coverage ratio; (iv) minimum current ratio; and (v)
maximum amount of annual capital expenditures.
The remaining bond maturity dates range from December 1, 1995 to
December 1, 2013, and bear interest at fixed rates from 3.6% to 5.7%. The
bonds mature at various amounts throughout this period ranging from $140,000
to $940,000. The bonds maturing December 1, 2007, 2009 and 2013 are to be
redeemed commencing December 1, 2005 and on each December 1 thereafter through
sinking fund payments ranging from $165,000 to $255,000.
Funds for the Company's current operations are derived from the sale of
its products and the ability, when necessary, to borrow on a secured line of
credit with First Fidelity Bank, N.A., New Jersey. As June 30, 1995, none of
the above credit line was utilized.
The Company believes that it has adequate funds available to conduct and
continue to expand its business and that of its subsidiaries. In addition, the
Company believes that, if necessary, it will be able to make favorable
financial arrangements for any future capital requirements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not involved in any material legal proceedings.
ITEMS 2 - 5
Not applicable
ITEM 6 - EXHIBITS
a. EXHIBITS
Exhibit 27. Financial Data Schedule
<PAGE>
HOSPOSABLE PRODUCTS, INC.
SIGNATURES
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 thereunto duly authorized.
HOSPOSABLE PRODUCTS, INC.
(Registrant)
Date: SIGNATURE: Joseph H. Weinkam Jr.
---------------- -------------------------------------
Joseph H. Weinkam Jr.
President and
Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> (184173)
<SECURITIES> 2190596
<RECEIVABLES> 420701
<ALLOWANCES> (89500)
<INVENTORY> 5092839
<CURRENT-ASSETS> 11528255
<PP&E> 16022612
<DEPRECIATION> (6347660)
<TOTAL-ASSETS> 22032216
<CURRENT-LIABILITIES> 3325578
<BONDS> 4485000
<COMMON> 17037
0
0
<OTHER-SE> 13672176
<TOTAL-LIABILITY-AND-EQUITY> 22032216
<SALES> 19968212
<TOTAL-REVENUES> 19968212
<CGS> 16161251
<TOTAL-COSTS> 3428958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174220
<INCOME-PRETAX> 417295
<INCOME-TAX> 161244
<INCOME-CONTINUING> 256051
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 256051
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
