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 September 30, 1995
---------------------------------------------
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.
- ---------------------------------------------------------------------------
(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
- ---------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code 908-707-1800
---------------------------
NONE
- ---------------------------------------------------------------------------
(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
------ ------
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 November 1, 1995
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Common Stock, $.01 par Value 1,692,476
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED SEPTEMBER 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 operating 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>
September 30, December 31,
1995 1994
---------------- ------------------
(unaudited) (see note
below)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 391,188 $ 25,178
--------------- ---------------
Marketable securities 2,794,494 2,412,169
--------------- ---------------
Receivables:
Trade accounts 5,020,574 4,143,326
Other 50,797 49,061
--------------- ---------------
5,071,371 4,192,387
Less: allowance for doubtful
accounts 89,858 118,759
--------------- ---------------
4,981,513 4,073,628
--------------- ---------------
Inventories:
Raw materials 2,750,729 2,812,716
Finished goods 1,245,193 1,062,639
--------------- ---------------
3,995,922 3,875,355
--------------- ---------------
Prepaid income taxes - 83,686
Prepaid expenses and other 181,076 318,043
--------------- ---------------
Total current assets 12,344,193 10,788,059
--------------- ---------------
Property, plant and equipment 16,309,466 15,344,766
Less: accumulated depreciation
and amortization 6,587,161 5,933,940
--------------- ---------------
Net property, plant and
equipment 9,722,305 9,410,826
--------------- ---------------
Acquisition escrow fund 342,980 1,060,083
--------------- ---------------
Other assets 366,773 312,785
--------------- ---------------
Total assets $ 22,776,251 $ 21,571,753
=============== ==============
<FN>
Note: The balance sheet at December 31, 1994 has been taken from
the audited financial statements at that date.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
September 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 7,132 7,312
Accounts payable-trade 2,946,408 1,615,931
Accrued expenses 839,651 973,995
Income taxes payable 5,220 -
--------------- ---------------
Total current liabilities 4,138,411 2,937,238
--------------- ---------------
Long-term debt, excluding current
maturities 4,400,000 4,637,274
--------------- ---------------
Capitalized lease obligations,
excluding current portion 9,143 15,013
--------------- ---------------
Deferred income taxes 527,796 580,596
--------------- ---------------
Total liabilities 9,075,530 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 6,820,965 6,521,876
Less:Cost of 11,200 shares of
common stock held in treasury (31,530) (31,530)
--------------- ---------------
Total stockholders' equity 13,700,721 13,401,632
--------------- ---------------
Total liabilities and
stockholders' equity $ 22,776,251 $ 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
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Net sales $ 30,065,150 $ 25,758,053
Cost of sales 24,375,052 19,639,301
--------------- ---------------
Gross profit 5,690,098 6,118,752
Selling, general and administrative
expenses 5,268,409 4,921,662
--------------- ---------------
Operating income 421,689 1,197,090
--------------- ---------------
Other income (expense):
Interest income 100,502 190,396
Interest expense (247,898) (302,455)
Other 205,294 345,407
--------------- ---------------
57,898 233,348
--------------- ---------------
Income before income taxes 479,587 1,430,438
--------------- ---------------
Income tax expense (benefit):
Current 233,300 595,722
Deferred (52,800) (40,800)
--------------- ---------------
180,500 554,922
--------------- ---------------
Net income $ 299,087 $ 875,516
=============== ===============
Net income per share-primary
and fully diluted $ .18 $ .51
=============== ===============
Weighted average number of common
and common equivalent shares 1,692,476 1,725,104
=============== ===============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Net sales $ 10,096,938 $ 9,142,790
Cost of sales 8,213,801 6,919,166
--------------- ---------------
Gross profit 1,883,137 2,223,624
Selling, general and administrative
expenses 1,839,451 1,699,191
--------------- ---------------
Operating income 43,686 524,433
--------------- ---------------
Other income (expense):
Interest income 13,473 59,952
Interest expense (73,678) (84,546)
Other 78,811 81,624
--------------- ---------------
18,606 57,030
--------------- ---------------
Income before income taxes 62,292 581,463
--------------- ---------------
Income tax expense (benefit):
Current 44,856 259,368
Deferred (25,600) (36,586)
--------------- ---------------
19,256 222,782
--------------- ---------------
Net income $ 43,036 $ 358,681
=============== ===============
Net income per share-primary
and fully diluted $ .03 $ .21
=============== ===============
Weighted average number of common
and common equivalent share 1,692,476 1,730,957
============== ===============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 299,087 $ 875,516
--------------- ---------------
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities-
Depreciation and amortization 714,028 747,354
Loss on sale of equipment 33,425 -
Provision for doubtful accounts 22,400 14,000
Deferred income tax expense (benefit) (52,800) 8,987
Changes in assets and liabilities -
(Increase) decrease in -
Accounts receivable, trade (947,877) (474,297)
Accounts receivable, other (1,736) -
Inventories (120,567) (136,048)
Prepaid income taxes 83,686 -
Prepaid expenses and other 82,979 (5,728)
(Decrease) increase in -
Accounts payable 1,330,476
Accrued expenses (134,338) 451,422
Income taxes payable (78,395)
--------------- ---------------
Total adjustments 1,009,676 527,295
--------------- ---------------
Net cash provided by (used in)
operating activities 1,308,763 1,402,811
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (1,128,125) (1,911,471)
Proceeds from sale of equipmen 130,000
Proceeds from the issue of common
stock - 8,500
Sale (purchase) of marketable securities (382,325) 1,564,453
--------------- ---------------
Net cash provided by (used in)
investing activities (1,380,450) (338,518)
--------------- ---------------
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(unaudited)
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Cash flows from financing activities:
Principal payments under borrowing
agreements $ (237,274) $ (1,954,034)
Principal payments under capital
lease obligations (5,870) (8,444)
Utilization of acquisition escrow
fund 717,103 521,508
Borrowings 17,726 -
Decrease (increase) in other assets (53,988) (16,075)
--------------- ---------------
Net cash provided by (used in)
financing activities 437,697 (1,457,045)
--------------- ---------------
Net increase (decrease) in cash and
cash equivalents 366,010 (392,752)
Cash and cash equivalents, beginning
of year 25,178 816,188
--------------- ---------------
Cash and cash equivalents, September 30 $ 391,188 $ 423,436
=============== ===============
Supplemental disclosure of cash flow
information:
Cash paid during the nine months for
Interest $ 189,028 $ 302,455
Income taxes 83,686 618,046
--------------- ---------------
$ 272,714 $ 920,501
=============== ===============
<FN>
See accompanying notes.
</TABLE>
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 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 September 30, 1995, The results of
operations for the nine and three months ended September 30, 1995 and 1994 and
cash flows for the nine months ended September 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 September 30, 1995,
total proceeds of approximately $4,982,000 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 SEPTEMBER 30, 1995 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30,1994.
Sales for the three months ended September 30, 1995 were $10,096,938 as
compared with $9,142,790 in 1994, an increase of 10.4%. The increase resulted
from stronger sales in all operating divisions.
Cost of sales for the three months ended September 30, 1995 increased to 81.3%
of sales compared with 75.7% in 1994. The increase is primarily due to higher
raw material costs, particularly pulp and corrugated packaging.
As a result of the escalating raw material costs mentioned above and price
resistance in the highly competitive market place, gross profit decreased to
18.7% of sales in 1995 compared to 24.3% in 1994.
Selling, general and administrative expenses for the third quarter of 1995
totalled $1,839,451 or 18.2% of sales compared to $1,699,199 or 18.6% in 1994.
The other income (expense) category decreased in the third quarter to $18,606
from $57,030 in 1994. Reduced short term rental income and interest income
accounted for the difference.
The pre-tax profit earned in the third quarter of 1995 amounted to $62,292
compared to $581,463 in 1994, a decrease of 89.3%.
Net income for the three months ended September 30, 1995 amounted to $43,036
compared to $358,681 for 1994, a decrease of 88%. Net income per share was
$.03 in 1995 compared with $.21 in 1994 and reflects a weighted average of
1,692,476 shares outstanding in the 1995 period and 1,730,957 shares
outstanding in 1994.
<PAGE>
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1994.
Sales were $30,065,150 in the nine months ended September 30, 1995 as compared
with $25,758,053 in 1994. The increase of 16.7% was achieved across all
business segments.
Cost of sales for the nine months ended September 30, 1995 increased to 81.1%
of sales compared with 76.2% in 1994. The increase resulted from higher raw
material costs.
Gross profit decreased to 18.9% of sales for the nine months ended September
30, 1995 as compared to 23.8% in 1994.
Selling, general and administrative expenses for the nine months ended
September 30, 1995 amounted to $5,268,409 or 17.5% of sales compared to
$4,921,662 or 19.1% in 1994.
The pre-tax profit earned for the nine months ended September 30, 1995
amounted to $479,587 compared to $1,430,438 in 1994, a decrease of 66.5%.
Net income for the nine months ended September 30, 1995 amounted to $299,087
compared to $875,516 in 1994, a decrease of 65.8%. Net income per share was
$.18 in 1995 compared with $.51 in 1994 and reflects a weighted average of
1,692,476 shares outstanding in 1995 and 1,725,104 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 September 30, 1995 total proceeds of approximately $4,982,000 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. At September 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.
President and
Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 391188
<SECURITIES> 2794494
<RECEIVABLES> 5071371
<ALLOWANCES> 89858
<INVENTORY> 3995922
<CURRENT-ASSETS> 12344193
<PP&E> 16309466
<DEPRECIATION> 6587161
<TOTAL-ASSETS> 22776251
<CURRENT-LIABILITIES> 4138411
<BONDS> 4400000
<COMMON> 17037
0
0
<OTHER-SE> 13683684
<TOTAL-LIABILITY-AND-EQUITY> 22776251
<SALES> 30065150
<TOTAL-REVENUES> 30065150
<CGS> 24375052
<TOTAL-COSTS> 5268409
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 247898
<INCOME-PRETAX> 479587
<INCOME-TAX> 180500
<INCOME-CONTINUING> 299087
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 299087
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
