SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 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 March 31, 1995
Commission file number 19862-8740
HOSPOSABLE PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
New York 11-2236837
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Readington Road Somerville, New Jersey 08876
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 908-707-1800
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 [ ]
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 May 11, 1995
Common Stock, $.01 par Value 1,692,476
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HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
Part I - F inancial 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 operating results for the interim periods.
Consolidated balance sheets 3-4
Consolidated statements of operations 5
Consolidated statements of cash flows 6-7
Notes to consolidated financial statements 8-9
Item 2. Management's discussion and analysis of financial condition and
results of operations.
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<TABLE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
March 31, December 31,
1995 1994
(unaudited) (See note
below)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 402,705 $ 25,178
Marketable securities 2,149,058 2,412,169
Receivables:
Trade accounts 4,148,328 4,143,326
Other 83,553 49,061
4,231,881 4,192,387
Less: allowance for doubtful
accounts 77,300 118,759
4,154,581 4,073,628
Inventories:
Raw materials 3,274,890 2,812,716
Finished goods 1,173,271 1,062,639
4,448,161 3,875,355
Prepaid income taxes - 83,686
Prepaid expenses and other 361,580 318,043
Total current assets 11,516,085 10,788,059
Property, plant and equipment 15,470,201 15,344,766
Less: accumulated depreciation
and amortization 6,093,319 5,933,940
Net property, plant and
equipment 9,376,882 9,410,826
Acquisition escrow fund 816,216 1,060,083
Other assets 325,525 312,785
Total assets $ 22,034,708 $ 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>
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<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
March 31, December 31,
1995 1994
(unaudited) (See note
below)
<S> <C> <C>
Current liabilities:
Current maturity of
long-term debt $ 340,000 $ 340,000
Current portion of capitalized
lease obligations 7,312 7,312
Accounts payable-trade 1,940,565 1,615,931
Accrued expenses 958,922 973,995
Income taxes payable 56,861 -
Total current liabilities 3,303,660 2,937,238
Long-term debt, excluding current
maturity 4,552,907 4,637,274
Capitalized lease obligations,
excluding current portion 11,944 15,013
Deferred income taxes 566,996 580,596
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 6,719,445 6,521,876
Less:Cost of 11,200 shares of
common stock held in treasury (31,530) (31,530)
Total stockholders' equity 13,599,201 13,401,632
Total liabilities and
stockholders' equity $ 22,034,708 $ 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
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Net sales $ 9,628,562 $ 8,397,880
Cost of sales 7,627,570 6,383,629
Gross profit 2,000,992 2,014,251
Selling, general and administrative
expenses 1,691,371 1,556,065
Operating income 309,621 458,186
Other income (expense):
Interest income 44,391 72,214
Interest expense (73,467) (115,911)
Other 45,935 131,970
16,859 88,273
Income before income taxes 326,480 546,459
Income tax expense (benefit):
Current 142,510 218,370
Deferred (13,600) (2,108)
128,910 216,262
Net income $ 197,570 $ 330,197
Net income per share-primary
and fully diluted $ .12 $ .19
Weighted average number of common
and common equivalent shares 1,692,476 1,714,073
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(unaudited)
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 197,570 $ 330,197
Adjustments to reconcile net
income to net cash provided by (used
in) operating activities -
Depreciation and amortization 258,732 241,758
Loss on sale of equipment 33,425 -
Provision for doubtful accounts 5,700 3,000
Deferred income tax (benefit) (13,600) (2,108)
Changes in assets and liabilities-
(Increase) decrease in-
Accounts receivable, trade (52,161) (705,471)
Other accounts receivable (34,492) 8,782
Inventories (572,806) (555,635)
Prepaid income taxes 83,686 -
Prepaid expenses and other (61,364) (99,860)
Increase (decrease) in -
Accounts payable and accrued
expenses 309,561 709,367
Income taxes payable 56,861 90,793
Total adjustments 13,542 (309,374)
Net cash provided by
operating activities 211,112 20,823
Cash flows from investing activities:
Capital expenditures (382,494) (506,337)
Proceeds from sale of equipment 130,000 -
Sale of marketable securities 263,111 276,448
Net cash provided by(used in)
investing activities 10,617 (229,889)
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from financing activities:
Utililization of acquisition escrow $ 243,867 $ -
fund
Principal payments under borrowing
agreements (85,000) (252,784)
Principal payments under capital lease
obligations (3,069) (2,761)
Net cash provided by (used in)
financing activities 155,798 (255,545)
Net increase(decrease)in cash
and cash equivalents 377,527 (464,611)
Cash and cash equivalents, beginning of
year 25,178 816,188
Cash and cash equivalents,
March 31 $ 402,705 $ 351,577
Supplemental disclosure of cash flow
information:
Cash paid during the three months for -
Interest $ 63,447 $ 106,416
Income taxes 1,966 136,046
$ 65,413 $ 242,462
See accompanying notes.
</TABLE>
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 state-
ments. 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 March 31, 1995, the results of operations
for the three months ended March 31, 1995 and 1994 and cash flows for
the three months ended March 31, 1995 and 1994. Operating results for
the three months ended March 31, 1995 are not necessarily indicative
of the results which may be expected for the year ending December 31,
1995. 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 March 31, 1995, total proceeds of approxi-
mately $4,444,000 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 new machinery and equipment is
purchased.
<PAGE>
HOSPOSABLE PRODUCTS, INC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1995 AND 1994
Note 2 - Long-Term Debt (continued):
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.
During June 1994, the Company repaid the remaining balance of
its revolving debt with First Fidelity Bank, N.A., New Jersey. The
outstanding debt of $1,315,417 was secured by essentially all of the
assets of the Company's wholly owned subsidiary, IFC Disposables, Inc.
("IFC").
<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 accompany-
ing unaudited financial statements and the notes thereto included in Item 1
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 March 31, 1995 Compared With Three Months Ended March
31,1994
Sales for the three months ended March 31,1995 were $9,628,562 as compared
with $8,397,880 in 1994. The increase of 14.7% resulted from stronger
sales in all operating divisions.
Cost of sales for the three months ended March 31, 1995 increased to 79.2%
of sales compared with 76.0% in 1994. The increase resulted mainly from
higher raw material costs, particularly for paper pulp.
Gross profit decreased to 20.8% of sales in the first quarter of 1995 as
compared to 24.0% in 1994.
Selling, general and administrative expenses for the first quarter of 1995
amounted to $1,691,372 or 17.6% of sales compared to $1,556,065 or 18.5% in
1994.
The pre-tax profit earned in the first quarter of 1995 amounted to $326,480
compared to $546,459 in 1994, a decrease of 40.3%.
The other income (expense) category decreased in the first quarter of 1995
to $16,859 from $88,273 in 1994. Interest expense decreased to $73,467 in
1995 from $115,911 in 1994 as a result of revolving debt repayments during
1994 (see Liquidity and Capital Resources). Other income decreased from
$131,970 in 1994 to $45,935 in 1995 due to short-term rental income of
$59,274 in 1994 and loss on sale of equipment of $33,425 in 1995.
Net income for the three months ended March 31, 1995 amounted to $197,570
as compared with $330,197 in 1994, a decrease of 40.2%. Net income per
share was $.12 in 1995 compared with $.19 in 1994 and reflects a weighted
average of 1,692,476 shares outstanding in the 1995 period and 1,714,073
shares outstanding in 1994.
<PAGE>
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 the purchase of
machinery and equipment to add a production line. As of March 31,
1995 total proceeds of approximately $4,444,000 had been distributed
to the Company in order to purchase 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 new 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 on
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.
During June 1994, the Company repaid the remaining balance of
its revolving debt with First Fidelity Bank, N.A., New Jersey. The
outstanding debt of $1,315,417 was secured by essentially all of the
assets of the Company's wholly owned subsidiary, IFC.
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
of March 31, 1995, none of the above credit line was utilized.
As a result, 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 - 6
Not applicable
<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: May 11, 1995 SIGNATURE: Leonard Schramm
Leonard Schramm
President and
Chief Executive Officer
