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 March 31, 1996
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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 May 10, 1996
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Common Stock, $.01 par Value 1,692,476
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED MARCH 31, 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
Consolidated statements of cash flows 6-7
Note to consolidated financial statements 8
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>
March 31, December 31,
1996 1995
---------------- ---------------
(unaudited) (see note
below)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,385,761 $ 2,919,469
--------------- ---------------
Marketable securities 1,181,163 1,362,233
--------------- ---------------
Receivables:
Trade accounts 5,175,312 5,396,185
Other 61,157 40,000
--------------- ---------------
5,236,469 5,436,185
Less: allowance for doubtful
accounts 155,851 133,048
--------------- ---------------
5,080,618 5,303,137
--------------- ---------------
Inventories:
Raw materials 2,880,768 2,308,121
Finished goods 1,355,170 1,098,959
--------------- ---------------
4,235,938 3,407,080
--------------- ---------------
Prepaid income taxes 286,424 286,424
Prepaid expenses and other 157,196 196,659
--------------- ---------------
Total current assets 13,327,100 13,475,002
--------------- ---------------
Property, plant and equipment 16,605,941 16,332,756
Less: accumulated depreciation
and amortization 7,149,669 6,887,558
--------------- ---------------
Net property, plant and
equipment 9,456,272 9,445,198
--------------- ---------------
Acquisition escrow fund 351,509 347,346
--------------- ---------------
Other assets 301,636 263,888
--------------- ---------------
Total assets $ 23,436,517 $ 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>
March 31, 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 4,128,220 4,016,185
Accrued expenses 817,932 1,158,599
Income taxes payable 118,700 -
--------------- ---------------
Total current liabilities 5,414,852 5,524,784
--------------- ---------------
Long-term debt, excluding current
maturities 4,292,500 4,389,805
--------------- ---------------
Deferred income taxes 398,019 424,419
--------------- ---------------
Total liabilities 10,105,371 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 6,451,390 6,312,670
Less:Cost of 11,200 shares of
common stock held in treasury (31,530) (31,530)
--------------- ---------------
Total stockholders' equity 13,331,146 13,192,426
--------------- ---------------
Total liabilities and
stockholders' equity $ 23,436,517 $ 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
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Net sales $ 11,180,969 $ 9,628,562
Cost of sales 9,041,351 7,627,570
--------------- ---------------
Gross profit 2,139,618 2,000,992
Selling, general and administrative
expenses 2,005,703 1,691,371
--------------- ---------------
Operating income 133,915 309,621
--------------- ---------------
Other income (expense):
Interest income 51,688 44,391
Interest expense (40,001) (73,467)
Other 85,418 45,935
--------------- ---------------
97,105 16,859
--------------- ---------------
Income before income taxes 231,020 326,480
--------------- ---------------
Income tax expense (benefit):
Current 118,700 142,510
Deferred (26,400) (13,600)
--------------- ---------------
92,300 128,910
--------------- ---------------
Net income $ 138,720 $ 197,570
=============== ===============
Net income per share-primary
and fully diluted $ .08 $ .12
=============== ===============
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
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 138,720 $ 197,570
--------------- ---------------
Adjustments to reconcile net
income to net cash provided by
(used in) operating activities-
Depreciation and amortization 262,111 258,732
Loss on sale of equipment - 33,425
Provision for doubtful accounts 23,500 5,700
Deferred income tax expense (benefit) (26,400) (13,600)
Changes in assets and liabilities -
(Increase) decrease in -
Accounts receivable, trade 220,009 (52,161)
Accounts receivable, other (21,157) (34,492)
Inventories (828,858) (572,806)
Prepaid income taxes - 83,686
Prepaid expenses and other 39,463 (61,364)
Other assets (37,748) -
(Decrease) increase in -
Accounts payable/Accrued expenses (228,465) 306,492
Income taxes payable 118,700 56,861
--------------- ---------------
Total adjustments (478,845) 10,473
--------------- ---------------
Net cash provided by (used in)
operating activities (340,125) 208,043
--------------- ---------------
Cash flows from investing activities:
Capital expenditures (273,185) (382,494)
Proceeds from sale of equipment - 130,000
Sale of marketable securities 181,070 263,111
--------------- ---------------
Net cash provided by (used in)
investing activities (92,115) 10,617
--------------- ---------------
</TABLE>
<PAGE>
<TABLE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Cash flows from financing activities:
Principal payments under borrowing
agreements $ (97,305) $ (85,000)
Utilization of acquisition escrow
fund (4,163) 243,867
--------------- ---------------
Net cash provided by (used in)
financing activities (101,468) 158,867
--------------- ---------------
Net increase (decrease) in cash and
cash equivalents (533,708) 377,527
Cash and cash equivalents, beginning
of year 2,919,469 25,178
--------------- ---------------
Cash and cash equivalents, March 31 $ 2,385,761 $ 402,705
=============== ===============
Supplemental disclosure of cash flow
information:
Cash paid during the three months for-
Interest $ 19,973 $ 63,447
Income taxes - 1,966
--------------- ---------------
$ 19,973 $ 65,413
=============== ===============
<FN>
See accompanying note.
</TABLE>
<PAGE>
HOSPOSABLE PRODUCTS, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 March 31, 1996. The results of operations
for the months ended March 31, 1996 and 1995 and cash flows for the three
months ended March 31, 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 MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1995.
Sales for the three months ended March 31, 1996 were $11,180,969 as compared
with $9,628,562 in 1995, an increase of 16.1%. The increase resulted from
stronger revenues in both the healthcare and airlaid nonwoven segments of the
business.
Cost of sales for the three months ended March 31, 1996 was 80.9% of sales
compared with 79.2% of sales in 1995. This slight increase in the cost of
sales was due to higher raw material costs, particularly pulp, which had been
purchased in late 1995 and early 1996. After the first month of the quarter,
raw material costs began to decrease.
Gross profit decreased to 19.1% of sales in the first quarter of 1996 compared
to 20.8% in 1995. This was due to higher raw material costs.
Selling, general and administrative expenses for the first quarter of 1996
totalled $2,005,703 or 17.9% of sales compared to $1,691,371 or 17.6% in 1995.
The other income (expense) category increased in the first quarter to $97,105
from $16,859, a change of $80,246. The principal components of this change
were lower interest expense due to the retirement of long-term debt, and
higher other income due to a non-recurring loss on the sale of fixed assets
in 1995.
The pre-tax income earned in the first quarter of 1996 amounted to $231,020
compared to $326,480 in 1995, a decrease of $95,460. This change was
primarily due to reduced gross profit margin performance in 1996 partially
offset by increased other income.
Net income for the three months ended March 31, 1996 amounted to $138,720
compared to $197,570 in 1995, a decrease of 29.8%. Net income per share was
$.08 in 1996 compared with $.12 in 1995 and reflects a weighted average of
1,692,476 shares outstanding in both years.
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 March 31, 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 5
Mr Gerald W. Wyant chose to relinquish the position of Chairman of the Board
of Directors, but to remain active as a director. Accordingly, Mr. Donald C.
MacMartin was appointed Chairman of the Board of Directors on March 25, 1996
to serve out the remainder of the term. (See 1996 Proxy Statement).
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2385761
<SECURITIES> 1181163
<RECEIVABLES> 5236469
<ALLOWANCES> 155851
<INVENTORY> 4235938
<CURRENT-ASSETS> 13327100
<PP&E> 16605941
<DEPRECIATION> 7149669
<TOTAL-ASSETS> 23436517
<CURRENT-LIABILITIES> 5414852
<BONDS> 4292500
<COMMON> 17037
0
0
<OTHER-SE> 13331146
<TOTAL-LIABILITY-AND-EQUITY> 23436517
<SALES> 11180969
<TOTAL-REVENUES> 11180969
<CGS> 9041351
<TOTAL-COSTS> 2005703
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40001
<INCOME-PRETAX> 231020
<INCOME-TAX> 92300
<INCOME-CONTINUING> 138720
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 138720
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
