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, 1996
---------------------------------------------
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
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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 June 30, 1996
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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, 1996
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
Note to consolidated financial statements 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
June 30, December 31,
1996 1995
---------------- ------------------
(unaudited) (see note
below)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 806,454 $ 2,919,469
--------------- ---------------
Marketable securities 1,168,190 1,362,233
--------------- ---------------
Receivables:
Trade accounts 5,146,579 5,396,185
Other 21,094 40,000
--------------- ---------------
5,167,673 5,436,185
Less: allowance for doubtful
accounts 170,351 133,048
--------------- ---------------
4,997,322 5,303,137
--------------- ---------------
Inventories:
Raw materials 3,438,402 2,308,121
Finished goods 1,473,159 1,098,959
--------------- ---------------
4,911,561 3,407,080
--------------- ---------------
Prepaid income taxes 312,024 286,424
Prepaid expenses and other 255,517 196,659
--------------- ---------------
Total current assets 12,451,068 13,475,002
--------------- ---------------
Property, plant and equipment 17,037,638 16,332,756
Less: accumulated depreciation
and amortization 7,418,836 6,887,558
--------------- ---------------
Net property, plant and
equipment 9,618,802 9,445,198
--------------- ---------------
Acquisition escrow fund 93,348 347,346
--------------- ---------------
Other assets 296,782 263,888
--------------- ---------------
Total assets $ 22,460,000 $ 23,531,434
=============== ===============
<FN>
Note: The balance sheet at December 31, 1995 has been taken from
the audited financial statements at that date.
See accompanying note.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
1996 1995
-------------- ---------------
(unaudited) (See note
below)
<S> <C> <C>
Current liabilities:
Current maturities of
long-term debt $ 350,000 $ 350,000
Accounts payable-trade 3,337,076 4,016,185
Accrued expenses 1,090,269 1,158,599
--------------- ---------------
Total current liabilities 4,777,345 5,524,784
--------------- ---------------
Long-term debt, excluding current
maturities 4,180,000 4,389,805
--------------- ---------------
Deferred income taxes 398,019 424,419
--------------- ---------------
Total liabilities 9,355,364 10,339,008
--------------- ---------------
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 6,224,880 6,312,670
Less:Cost of 11,200 shares of
common stock held in treasury (31,530) (31,530)
--------------- ---------------
Total stockholders' equity 13,104,636 13,192,426
--------------- ---------------
Total liabilities and
stockholders' equity $ 22,460,000 $ 23,531,434
=============== ===============
<FN>
Note: The balance sheet at December 31, 1995 has been taken from
the audited financial statements at that date.
See accompanying note.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Net sales $ 21,337,655 $ 19,968,212
Cost of sales 17,543,515 16,161,251
--------------- ---------------
Gross profit 3,794,140 3,806,961
Selling, general and administrative
expenses 4,065,306 3,428,958
--------------- ---------------
Operating income (loss) (271,166) 378,003
--------------- ---------------
Other income (expense):
Interest income 86,238 87,029
Interest expense (119,070) (174,220)
Other 163,988 126,483
--------------- ---------------
131,156 39,292
--------------- ---------------
Income (loss) before income taxes (140,010) 417,295
--------------- ---------------
Income tax expense (benefit):
Current (25,600) 188,444
Deferred (26,400) (27,000)
--------------- ---------------
(52,000) 161,244
--------------- ---------------
Net income (loss) $ (88,010) $ 256,051
=============== ===============
Net income (loss) per share-primary
and fully diluted $ (.05) $ .15
=============== ===============
Weighted average number of common
and common equivalent shares 1,692,476 1,692,476
=============== ===============
<FN>
See accompanying note.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Net sales $ 10,156,687 $ 10,339,650
Cost of sales 8,502,168 8,533,681
--------------- ---------------
Gross profit 1,654,519 1,805,969
Selling, general and administrative
expenses 2,059,607 1,737,587
--------------- ---------------
Operating income (loss) (405,088) 68,382
--------------- ---------------
Other income (expense):
Interest income 34,280 42,638
Interest expense (79,069) (100,753)
Other 79,067 80,548
--------------- ---------------
34,278 22,433
--------------- ---------------
Income (loss) before income taxes (370,810) 90,815
--------------- ---------------
Income tax expense (benefit):
Current (144,300) 45,934
Deferred - (13,600)
--------------- ---------------
(144,300) 32,334
--------------- ---------------
Net income (loss) $ (226,510) $ 58,481
=============== ===============
Net income (loss) per share-primary
and fully diluted $ (.13) $ .03
=============== ===============
Weighted average number of common
and common equivalent shares 1,692,476 1,692,476
=============== ===============
<FN>
See accompanying note.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (88,010) $ 256,051
--------------- ---------------
Adjustments to reconcile net
income (loss) to net cash provided by
(used in) operating activities-
Depreciation and amortization 531,278 483,367
Loss on sale of equipment - 33,425
Provision for doubtful accounts 37,303 5,700
Deferred income tax expense (benefit) (26,400) (27,200)
Changes in assets and liabilities -
(Increase) decrease in -
Accounts receivable, trade 249,606 (75,306)
Accounts receivable, other 18,906 ( 1,736)
Inventories (1,504,481) (1,217,484)
Prepaid income taxes (25,600) 38,035
Prepaid expenses and other (58,858) 103,009
Other assets (32,894) -
(Decrease) increase in -
Accounts payable/Accrued expenses (747,219) 388,340
--------------- ---------------
Total adjustments (1,558,359) (269,850)
--------------- ---------------
Net cash (used in)
operating activities (1,646,369) (13,799)
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (704,882) (934,254)
Proceeds from sale of equipment - 130,000
Sale of marketable securities 194,043 221,573
--------------- ---------------
Net cash (used in)
investing activities (510,839) (582,681)
--------------- ---------------
<FN>
See accompanying note.
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(unaudited)
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from financing activities:
Utilization of acquisition escrow
fund $ 253,998 $ 611,743
Borrowings - 17,726
Decrease (increase) in other assets - (67,884)
Principal payments under borrowing
agreements (209,805) (170,000)
Principal payments under capital
lease obligations - (4,456)
--------------- ---------------
Net cash provided by
financing activities 44,193 387,129
--------------- ---------------
Net increase (decrease) in cash and
cash equivalents (2,113,015) (209,351)
Cash and cash equivalents, beginning
of year 2,919,469 25,178
--------------- ---------------
Cash and cash equivalents, June 30 $ 806,454 $ (184,173)
=============== ===============
Supplemental disclosure of cash flow
information:
Cash paid during the six months for-
Interest $ 119,068 $ 148,498
Income taxes - 38,035
--------------- ---------------
$ 119,068 $ 186,533
=============== ===============
<FN>
See accompanying note.
</TABLE>
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
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, 1996, the results of operations
for the six months and three months ended June 30, 1996 and 1995 and cash
flows for the six months ended June 30, 1996 and 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, 1995.
<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 note 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, 1995.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1995.
Sales for the three months ended June 30, 1996 were $10,156,687 as compared
with $10,339,650 in 1995. The decrease resulted from lower sales of the
airlaid roll goods product line, partially offset by increased sales in the
health care and airlaid wiper segments of the business.
Cost of sales for the three months ended June 30, 1996 increased to 83.7%
of sales compared with 82.5% in 1995. The increase was due to operational
issues including downtime associated with the installation of machine
enhancements, resulting in unfavorable labor and overhead spending and
higher training costs.
Gross profit decreased to 16.3% in the second quarter of 1996 compared to
17.5% in 1995. The decrease was due to operational issues.
Selling, general and administrative expenses for the second quarter of 1996
totaled $2,059,607 or 20.3% of sales compared to $1,737,587 or 16.8% of
sales in 1995. This change is principally due to increased research and
development spending and higher professional and consulting fees.
Net other income increased in the second quarter of 1996 to $34,278 from
$22,433 in 1995, mainly as a result of lower interest expense in 1996.
The pre-tax loss of $370,810 incurred in the second quarter compared with a
profit of $90,815 in 1995, a decline of $461,625. This adverse pre-tax
change resulted from a reduced gross profit margin performance in 1996 and
higher selling, general and administrative expenses.
The net loss for the three months ended June 30, 1996 amounted to $226,510
compared to net income of $58,481 in 1995. The net loss per share was $.13
in 1996 compared with net income per share of $.03 in 1995. The per share
calculation reflects a weighted average of 1,692,476 shares outstanding in
both 1996 and 1995.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995.
Sales for the six months ended June 30, 1996 were $21,337,655 compared with
$19,968,212 in 1995. The increase of 6.9% resulted from increases in the
health care and airlaid wiper segments of the business, partially offset by
lower sales in the airlaid roll goods product line.
Cost of sales for the six months ended June 30, 1996 increased to 82.2% of
sales compared with 80.9% of sales in 1995. The increase was due to
operational issues in the second quarter, principally downtime and
unfavorable labor and overhead spending associated with the installation of
machine enhancements and to higher raw material costs in the first quarter
which moderated in the second quarter.
Gross profit decreased to 17.8% of sales for the six months ended
June 30, 1996 as compared to 19.1% in 1995. The decrease was due to
operational issues and higher raw material costs during the first quarter.
Selling, general and administrative expenses for the six months ended
June 30, 1996 amounted to $4,065,306 or 19.1% of sales compared to
$3,428,958 or 17.2% of sales in 1995. The increase was due to higher
research and development expenditures as well as higher professional and
consulting fees.
The pre-tax loss incurred for the six months ended June 30, 1996 amounted
to $140,010 compared to a pre-tax profit of $417,295 in 1995. This adverse
change was principally due to the gross profit shortfall in the second
quarter and higher selling, general and administrative expenses.
The net loss for the six months ended June 30, 1996 amounted to $88,010
compared with net income of $256,051 in 1995. The net loss per share was
$.05 in 1996 compared with net income per share of $.15 in 1995. The per
share calculation reflects a weighted average of 1,692,476 shares
outstanding in both 1996 and 1995.
LIQUIDITY AND CAPITAL RESOURCES
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 June 30, 1996,
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 2,3, & 4
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 806454
<SECURITIES> 1168190
<RECEIVABLES> 5167673
<ALLOWANCES> 170351
<INVENTORY> 4911561
<CURRENT-ASSETS> 12451068
<PP&E> 17037638
<DEPRECIATION> 7418836
<TOTAL-ASSETS> 22460000
<CURRENT-LIABILITIES> 4777345
<BONDS> 4180000
<COMMON> 17037
0
0
<OTHER-SE> 13087599
<TOTAL-LIABILITY-AND-EQUITY> 22460000
<SALES> 21337655
<TOTAL-REVENUES> 21337655
<CGS> 17543515
<TOTAL-COSTS> 4065306
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119070
<INCOME-PRETAX> (140010)
<INCOME-TAX> (52000)
<INCOME-CONTINUING> (88010)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (88010)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
